Week in Review

---

Week in Review

10/05/2019

For the week 9/30-10/4

[Posted 10:30 PM ET]

Note: StocksandNews has significant ongoing costs and your support is greatly appreciated.  Please click on the gofundme link, or send a check to PO Box 990, New Providence, NJ 07974.

Edition 1,068

Trump World

First off, I would like to thank President Donald J. Trump for saving me a ton of work.  I had a pile of stories an inch thick on the issue of quid pro quo that I was going to have to wade through and then on Thursday, he walked out onto the South Lawn driveway and doubled down, calling on both Ukraine and China to investigate former vice president Joe Biden and his son, Hunter.  I immediately picked up virtually all of the stories on the July 25 phone call between Trump and Ukrainian President Zelensky that precipitated the House’s impeachment inquiry and tossed them in the trash.

When asked by reporters what he had sought as a “favor” from Zelensky, a question he had avoided a day earlier, Trump responded: “Well, I would think that if they were honest about it, they’d start a major investigation into the Bidens.  It’s a very simple answer.

“They should investigate the Bidens,” he said.

And then, startlingly: “Likewise, China should start an investigation into the Bidens because what happened to China is just about as bad as what happened with Ukraine.”

Trump also suggested again without offering any evidence that Biden had “scammed” other countries and was responsible for China’s “sweetheart” trade relationship with the U.S.

The head of the Federal Election Commission responded by tweeting a reminder that it is illegal for anyone to solicit anything of value from a foreign national in connection with a U.S. election.

It doesn’t matter to Mr. Trump.  His brazen and direct appeal to the Chinese, a week before the resumption of trade talks in Washington, not only made a mockery of the charge that he abused the power of his office by pressing Zelensky to examine unfounded allegations of corruption, it was a blatant middle finger to the American people, the historic norms of this country, and his constitutional oath.

Trump was signaling to all other foreign countries that one way to curry favor with him was to dig up dirt on his political opponents.

The president is abusing his power in order to stay in power.

Trump, in further statements made today, is now attempting to normalize this behavior, or as he tweeted later on Thursday:

“As the President of the United States, I have an absolute right, perhaps even a duty, to investigate, or have investigated, CORRUPTION, and that would include asking, or suggesting, other Countries to help us out!”

But asked today if he had ever asked another country to investigate corruption, the president couldn’t come up with any.

Earlier, Geng Shuang, a spokesman for China’s ministry of foreign affairs, called the allegation that Chinese government business gave Hunter Biden $1.5 billion “totally groundless.”

We are just getting started.  There are going to be far more revelations and witnesses.  Personally, I can’t wait for former ambassador Yovanovitch to testify before the House.

I want to see transcripts on the 11 phone calls Trump has held with Vladimir Putin.  The American people also still deserve the truth on what the two discussed in Helsinki over two hours.

I’m sorry to repeat myself but I told you since day one of the Trump presidency that to me it is all about foreign policy.  This nation is headed for tragic times, in more ways than one.  Our foreign policy is in tatters.  The nation is also divided unlike any time since the 1960s.

I told you a few weeks ago, before all the latest revelations and self-inflicted wounds, that it was clear where we were headed in terms of the election cycle.  I said that Trump will start revving up the election-fraud machine in the event he loses a close vote next November, at which point he’ll be screaming that the election was rigged.

But now we have a situation where it’s also clear that he’s not only openly soliciting election interference from foreign nations, he’s going to be making moves that will trouble far more than his political opponents.

Vast numbers of American lives are increasingly at risk by the actions of our reckless leader.

And we have a large number who just don’t know their own country’s history, let alone that of the world.  We are careening towards a ‘first-ever’ moment, to be elaborated on next time.

Folks, Thursday changed everything.

---

The early polling on impeachment is irrelevant.  Wait a few weeks.

But for the archives, a poll of 1,006 adults taken Tuesday and Wednesday by USA TODAY/Ipsos found that by a 45%-38% margin, Americans now support a vote by the House of Representatives to impeach the president.

But while 74% of Democrats support impeachment, just 17% of Republicans agree.  Independents are split, 37%-37%.

Earlier polling by a number of firms and news organizations showed splits of 50/50 but largely didn’t include this week’s titanic developments.

Editorial / Los Angeles Times

“You’ve got to hand it to President Trump – when he says he doesn’t see anything wrong with asking a foreign leader to go after his political rivals, he really means it....

“ ‘I would think if they were honest about it, they’d start a major investigation into the Bidens,’ Trump said.... ‘So I would say that President Zelensky, if it were me, I would recommend that they start an investigation into the Bidens because nobody has any doubt that they weren’t crooked. That was a crooked deal, a hundred percent.’

“Actually, Yuri Lutsenko, Ukraine’s former top prosecutor, told the L.A. Times that he’d found no evidence that either Biden had violated Ukrainian law, although he believed Hunter Biden may have had a conflict of interests.  Lutsenko replaced Viktor Shokin, who was fired by the Ukrainian parliament at the urging of Joe Biden and numerous European leaders – not because Shokin was threatening the energy company that hired Hunter Biden (he wasn’t), but because they believed Shokin had not been aggressive enough in prosecuting corruption cases.

“That’s not the story Trump has been advancing.  On Thursday, Trump said of Hunter Biden: ‘He had no knowledge of energy, didn’t know the first thing about it, all of a sudden he’s getting $50,000 a month plus a lot of other things.’  And Joe Biden’s offense?  ‘Nobody has any doubt and they got rid of a prosecutor who was a very tough prosecutor.  They got rid of him.’

“When a reporter asked Trump whether he’d urged President Xi Jinping of China to investigate the Bidens, Trump replied, ‘I haven’t, but it’s certainly something we can start thinking about because I’m sure that President Xi does not like being under that kind of scrutiny where billions of dollars is taken out of his country by a guy that just got kicked out of the Navy.  He got kicked out of the Navy, all of a sudden he’s getting billions of dollars.  You know what they call that?  They call that a payoff.’

“Hunter Biden was discharged from the Navy Reserve in 2014 for testing positive for drugs.

“So in summary, Trump on Thursday explicitly asked two countries – one that’s heavily dependent on U.S. military aid to keep Russia at bay, the other that’s locked in negotiations with the United States to end a bitter trade war – to investigate a leading Democratic challenger for the presidency in 2020 and his son.

“The president has famously said that he’s not sorry about anything.  He means that too.”

Editorial / New York Times

“Federal law expressly states that it is illegal for ‘a person to solicit, accept, or receive’ anything of value from a foreign national in connection with a United States election.

“Yet there stood President Trump outside the White House on Thursday, openly soliciting help from a foreign government for his re-election prospects by declaring to the assembled press that ‘China should start an investigation into the Bidens.’ This, of course, after Mr. Trump has already become subject to an impeachment inquiry after implicating himself in a scheme to seek foreign help for his campaign in a conversation with the Ukrainian president, Volodymyr Zelensky.

“This might seem self-defeating – ‘self-impeaching,’ even.  A United States president urging a foreign government to investigate his political rival would seem to be flagrantly violating the law, along with American notions of fair play and decency.

“But this president is a master at what Senator Daniel Patrick Moynihan called defining deviancy down.  One baldfaced presidential lie, once exposed, is an outrage; a thousand such lies is a statistic....

“Ergo, the more governments that Mr. Trump urges to do the same thing, the more normal, if not public-spirited, such aberrant presidential behavior will seem.  The cynical marketing calculation – Mr. Trump’s favorite form of math – would seem to be that, as with previous administration outrages, the news media will grow weary, the public will grow numb, the Democratic inquisitors will appear ineffectual.  Mr. Trump is also, of course, seeking to drag former Vice President Joe Biden and his son, Hunter, down to this level and implicate them in the same kind of self-dealing that he and his own family stand accused of.”

Editorial / Washington Post

“It’s hard to know where to begin in describing the gross impropriety of Mr. Trump’s behavior.  But we’ll start with facts: The allegations that the president is suggesting Ukraine and China should investigate are manifestly false.  Abundant evidence disproves the charge that Mr. Biden, as vice president, sought the dismissal of a Ukrainian prosecutor to protect his son Hunter, who was then on the board of a Ukrainian gas company.  And Mr. Trump’s claim that Hunter Biden took ‘billions of dollars’ out of China is even more ludicrous.  Hunter Biden joined the advisory board of an investment fund with Chinese partners, but, his lawyer said, has earned no return or compensation. 

“Mr. Trump is seeking to call attention to Hunter Biden’s business involvement with foreign partners who were probably hoping to trade on his family name. That’s unseemly – but no more so than the business favors obtained by Mr. Trump’s own children from China and other countries.  If there were actual evidence of wrongdoing in these relationships, it should be investigated not by foreign authorities but by the Justice Department, which could properly ask other governments for cooperation, if any were needed.

“That a request for a foreign investigation of a U.S. citizen would come directly from the president, in the absence of any legitimate U.S. probe, is a blatant violation of that citizen’s rights and of the U.S. rule of law.  That Mr. Trump does it in front of television cameras makes it no less egregious: In doing so, he is attempting to normalize what should be utterly unacceptable presidential behavior.

“Historian Robert Kagan recently described in The Post what the consequences would be if Mr. Trump’s actions went unpunished.  ‘Sending the signal that other governments can curry favor with a U.S. president by helping to dig up dirt on his or her political opponents would open our political system and foreign policy to intervention and manipulation on a global scale,’ he wrote.  ‘Every government in the world wishing to influence U.S. foreign policy will have an incentive to come to a sitting president with information on his or her potential political opponents.’”

Uri Friedman / Defense News (The Atlantic)

“The Russians are ‘doing it as we sit here, and they expect to do it during the next campaign,’ Special Counsel Robert Mueller warned Congress in July, wrapping up his two-year investigation into Russian interference in the 2016 U.S. election.  ‘Many more countries are developing [the] capability to replicate what’ the Kremlin did.

“Aware of these dangers, U.S. officials spent hundreds of millions of dollars to harden the country’s election infrastructure.  New organizations sprang up to protect political campaigns from getting hacked like Hillary Clinton’s operation.  Twitter and Facebook publicized their election ‘war rooms’ and purges of disinformation campaigns originating from countries such as Iran and Venezuela.  Donald Trump was chastised for not taking the threat seriously, as he refused to acknowledge Russia’s help for his campaign and even suggested that he would consider accepting a foreign government’s offer of damaging information about an opponent.  Given the stakes of the 2020 presidential election, one expert on foreign-influence operations in the United States told me he expected to witness an ‘election-interference food fight between foreign countries.’*

 “The focus was on preventing nefarious actors around the world from once more disrupting the lifeblood of American democracy.  But instead the biggest vulnerability was from the White House itself, and specifically from the president.

“The whistle-blower complaint about Trump’s dealings with Ukraine – and specifically his phone conversation the day after Mueller’s testimony with Ukrainian President Volodymyr Zelensky, about opening a corruption investigation into a man challenging Trump for the presidency – shows that Trump has no qualms about asking a foreign leader for political favors.

“The question of whether there’s clear evidence of a quid pro quo – a probe into Joe Biden and his son in exchange for the continuation of U.S. military aid to Ukraine – is less important than it might seem in part because such a bargain would have been implicit in the communication.  Here was the commander in chief of the world’s most powerful military speaking with the leader of a smaller country reliant on American support to fend off Russia, not to mention a commander in chief who had long been ambivalent about backing Ukraine and whose personal lawyer had, for months prior to the call, been on a quasi-official crusade to get the Ukrainian government to scrutinize the Bidens.  In the phone call, Trump notes that ‘the United States has been very, very good to Ukraine’ shortly before urging Zelensky to work with the U.S. attorney general to ‘look into’ the former U.S. vice president. The quid and the quo were, if nothing else, the background noise of the call.

“Yet the debate about the existence of a trade-off also distracts from the gravity of what Trump was up to, even if the matter of defense assistance is set aside: the president of the United States apparently exploiting his vast powers in foreign affairs to compel law-enforcement authorities in another country (along with his own) to manufacture dirt on a political rival and thus intercede in the 2020 presidential election.  The whistle-blower acted out of concern that the president’s behavior presented risks not only to national security, but also to the ‘U.S. government’s efforts to deter and counter foreign interference in U.S. elections.’”

“As for Secretary of State Mike Pompeo, ‘In one TV appearance after another, he has inexplicably argued that Biden’s efforts as vice president in 2016 to remove a Ukrainian prosecutor who was investigating a Ukrainian energy company that Biden’s son was on the board of – the basis of the so far unsubstantiated claim that Biden and his son engaged in wrongdoing – constituted ‘interference’ in that year’s U.S. presidential election, which Biden did not run in.  It’s a bewildering response from a man who, as a congressman, accused Vladimir Putin of ‘trying to make America look like a Third World country’ with his meddling in the 2016 election and argued that Barack Obama’s sanctions were insufficient retaliation for Russia’s seizure of Ukrainian territory and attempted ‘reordering of Europe.’

“It was only three days ago that Trump was standing before the United Nations General Assembly, proclaiming that ‘freedom and democracy must be constantly guarded and protected, both abroad and from within.’  In a sign that he was bracing for a storm, he warned that one of the internal threats was ‘a faceless bureaucracy [that] operates in secret and weakens democratic rule.’  Now the charge from a faceless bureaucrat that the president secretly undermined American democracy from within is imperiling his presidency.”

*Ed. Today, Microsoft announced it had observed an ‘intrusion’ by an outfit, Phosphorus, believed to be tied to the Iranian government, that attempted to identify, attack and breach email accounts belonging to a U.S. presidential campaign, government officials and journalists.  Microsoft said Phosphorus made more than 2,700 attempts to identify personal email addresses that belonged to the company’s customers over a 30-day period between August and September.  Reuters and other news media outlets reported the hackers targeted the Trump campaign.  The hackers were largely unsuccessful.

Editorial / Washington Post

“Secretary of State Mike Pompeo claims to be defending the ‘dedicated professionals’ at the State Department and the policy they have pursued in Ukraine.  The truth is pretty much the opposite.  Mr. Pompeo stood by while President Trump and his personal lawyer twisted Ukraine policy to their own ends, and he enabled their vicious attack on the State Department’s ambassador in Kiev.  Now he is trying to obstruct her and other professionals from telling their stories to Congress.

“Mr. Pompeo made two accurate statements at a news conference in Rome on Wednesday. Ending days of dissembling, he confirmed that he was a participant in the July 25 phone call during which Mr. Trump pushed Ukraine’s president to undertake political investigations, including of Joe Biden.  And Mr. Pompeo said, accurately, that U.S. policy toward Ukraine has been ‘consistent’ for some time in seeking to counter ‘the threat that Russia poses’ to the country and in helping the Ukrainians get ‘graft...and corruption [out] of their government.’

“What the secretary of state did not acknowledge is that he allowed Mr. Trump and lawyer Rudolph Giuliani to trash that policy.  Mr. Pompeo did nothing to stop Mr. Giuliani from allying himself with some of Ukraine’s most corrupt figures to peddle false stories about Mr. Biden, as well as conspiracy theories about Ukraine’s role in the 2016 presidential election.  One of those tales – that the hacking of the Democratic National Committee was done not by Russia but by Ukrainians – is a classic piece of disinformation that serves Vladimir Putin’s campaign to undermine Ukraine’s pro-Western government.

“Mr. Pompeo listened on July 25 while Mr. Trump pressed Ukrainian President Volodymyr Zelensky to investigate that theory as well as the false story that Mr. Biden sought the removal of a Ukrainian prosecutor to protect his son.  He listened while Mr. Trump slandered the former U.S. ambassador to Ukraine, Marie Yovanovitch – a dedicated Foreign Service professional – whose tour in Kiev Mr. Pompeo had cut short.  Ms. Yovanovitch boldly campaigned against Ukrainian government corruption.  Her reward was a humiliating recall and a promise by Mr. Trump that ‘she is going to go through some things.’  Meanwhile, according to the rough transcript released by the White House, Mr. Trump never mentioned ‘graft’ or ‘corruption’ to Mr. Zelensky, much less ‘the threat that Russia poses.’  Mr. Pompeo’s claim that the conversation was ‘in the context’ of longstanding U.S. policy is demonstrably false.”

--As for Vice President Mike Pence, ever the tool, he defended the president’s demand for dirt on Biden, saying on Thursday:

“As people take time to read the transcript of the President’s call and reflect on these facts, they’ll come to realize this is more of the same of what we’ve seen from Democrats in the last two and a half years....

“The American people have a right to know whether or not the vice president of the United States or his family profited from his position,” he added.

Remember when Biden got in trouble for calling Pence a ‘good man’?

--The impeachment inquiry has been a total boon for fundraising for Donald Trump, with the campaign raising $8.5 million in the first 48 hours, helping fuel a $125 million haul in the third quarter for both the campaign and the Republican National Committee.

The RNC is running ads with unsubstantiated allegations of misconduct by Joe Biden.

Trump spent $2.1 million on Facebook and $500,000 on Google and YouTube last week, the most in any week in at least a year, according to those who track such matters.

--Wednesday, Trump dismissed concerns about the need to shield a whistleblower at the center of allegations.  “I don’t care....He either got it totally wrong, made it up, or the person giving the information to the whistleblower was dishonest,” Trump told reporters. “And this country has to find out who that person was, because that person is a spy, in my opinion.”

Trump, speaking alongside the president of Finland, added, “A whistleblower should be protected if the whistleblower’s legitimate.”

--Because it’s part of my job, I watched Tucker Carlson’s and Sean Hannity’s entire Thursday night shows to see how they handled Trump’s appearance in the White House driveway, asking for both Ukraine and China’s help.  Neither showed a clip of it.  Neither pointed out how egregious this was.  What small people they are.

--Trump tweets:

“As I learn more and more each day, I am coming to the conclusion that what is taking place is not an impeachment, it is a COUP, intended to take away the Power of the....

“...People, their VOTE, their Freedoms, their Second Amendment, Religion, Military, Border Wall, and their God-given rights as a Citizen of The United States of America!”

“There wasn’t ANYTHING said wrong in my conversation with the Ukrainian President.  This is a Democrat Scam!”

“ ‘Adam Schiff’s connection to the Whistleblower is coming to light.’ @FoxNews These facts, and others, make it impossible for the ridiculous impeachment ‘scam’ to go forward!  Schiff has also committed a crime, perhaps treason, in making up a horrible statement and reading....

“....it to Congress, and the American people, as though it was the statement of the President of the United States, me.  He did it to fool Congress and the public in order to make me look BAD.  He is a sick puppy!”

“Massive sections of The Wall are being built at our Southern Border.  It is going up rapidly, and built to the highest standards and specifications of the Border Patrol experts.”

Whatever you say, Mr. President.  Oops, poor choice of words.

Wall Street and the China Trade War

Stocks finished mixed on the week, recovering most of the early losses suffered on the heels of dismal manufacturing data.  Today’s ‘Goldilocks’ jobs report, not too hot, not too cold, helped bigly.

Before I get to this week’s economic data, though, I want to review that of the prior week, since I missed it while I was away.

We had a strong number on August new home sales, 713,000 annualized, with the best 3-month showing, 703,000, since October 2007. Sales surged 16.5% in the West.

August durable goods were better than expected, 0.2%.

August personal income was in line, 0.4%, but consumption less than forecast at just 0.1%, not good as this is consumer spending.  A subset of this data was a core reading on the Fed’s favored personal consumption expenditures index, 1.8% year-over-year.

And we had our final look at second quarter GDP, unrevised at 2.0%, which is down from Q1’s 3.1% pace.  The consumption component on the second quarter was a strong 4.6%.

On to this week, or PMI week, across the globe...purchasing managers’ indices on both manufacturing and services.

First up the Chicago PMI for September, which came in far worse than expected at 47.1, 50.0 representing the dividing line between growth and contraction.  50.4 was expected.

The next day we had the national ISM manufacturing figure for September, and this too was far short of forecasts, 47.8, with the new export orders component a putrid 41.0.  The stock market cratered when it saw a print well below 50.

A few days later we had the September ISM reading on the service sector and it too was well below expectations at just 52.6.  Yes, still expansion but far less than recent figures.  Was manufacturing beginning to bleed into services?  As we’ll see this is the case overseas.

Separately, August readings on factory orders, -0.1%, and construction, 0.1%, were less than forecast.  So poor data across the board.

Which set up today’s jobs report for September, and while the figure, 136,000, was a little below consensus, with upward revisions to July and August we have a three-month average of 157,000, which is solid, especially given where we are in the cycle.

That said the average for the first nine months of the year, 158,000, is down sharply from 223,000 in 2018.

But...this is reflective of full employment, and, indeed, the September unemployment rate fell to 3.5%, the lowest since 1969.  [U6, the underemployment rate, is 6.6%.]

There was one major fly in the ointment, however, that being average hourly earnings last month edged down a penny, pushing the annual gain to 2.9% from 3.2%.  Not good.

Add all the above up and the Atlanta Fed’s GDPNow barometer for the third quarter is pegging growth of just 1.8%.

In brief remarks at the Federal Reserve today as part of an event, Fed Chairman Jerome Powell said of the economy, “While not everyone fully shares economic opportunities and the economy faces some risks, overall it is, as I like to say, in a good place.  Our job is to keep it there as long as possible.”

The market expects another rate cut before yearend.

We now head into earnings season, with S&P 500 companies expected to show a decline year-over-year of about 3% on the bottom line.

On the trade front...we will learn a lot more this coming week after negotiators for China and the U.S. meet.  White House economic adviser Larry Kudlow said on Friday that the U.S. was “open-minded” about the outcome, while declining to make any predictions but saying there had been a “softening of the psychology on both sides” in the past month, with the United States delaying some tariff increases and China making some modest farm purchases.

For its part, China’s Vice Commerce Minister Wang Shouwen said on Sunday that he hoped Beijing and Washington will resolve their dispute “with a calm and rational attitude.”

Meanwhile, the Treasury Department denied rumors that there were plans to stop Chinese companies from listing on U.S. exchanges.

Separately, President Trump hailed a “nice victory” on Thursday after the United States got the green light to place tariffs on European Union goods in a dispute over EU aircraft subsidies for Airbus.

But Wednesday’s decision by the WTO left Scottish whisky makers, Spanish winemakers and French cheesemakers among those fuming as the U.S. tariffs targeted products from countries in the Airbus consortium.  Germany is worried the dispute over subsidies was leading to “a table tennis match” over trans-Atlantic tariffs, and France and Germany signaled retaliatory moves.

The WTO decision gave the United States the go-ahead to impose tariffs on $7.5 billion worth of EU goods annually in the long-running case. 

Needless to say this isn’t good given the global economic outlook, and the U.S.-China trade war.

Washington said after 15 years of litigation, it would impose 10% tariffs on Airbus planes, a move that will hurt U.S. airlines, and 25% duties on French wine, Scotch and Irish whiskies, and cheese from across the EU.

White House trade adviser Peter Navarro warned Europe against any retaliatory measures since the tariffs were approved by the WTO.  “There’s going to be no tit-for-tat retaliation,” Navarro told Fox Business Network.

But France and Germany are preparing to do just that.

And early next year, the WTO is set to rule on Boeing’s subsidies, at which point the EU may be authorized to strike back with tariffs of its own.

And other tariffs loom, with President Trump poised to decide by Nov. 13 on whether to tax cars and auto parts from Europe, which would be a major escalation that could have devastating effects.

Lastly, the World Trade Organization slashed its forecast for trade growth to just 1.2% for 2019, the weakest since 2009.  Six months ago the WTO forecast growth of 2.6%.

Europe and Asia

We had tons of economic data from the eurozone, EA19.

For starters we had all the PMI data, with the composite reading for September coming in at just 50.1 vs. 51.9 in August, nearly outright contraction.  The manufacturing number was just 45.7, vs. 47.0 in August, while the service sector reading fell to 51.6 vs. 53.5.

Germany 41.7 manufacturing, a 123-month low, June 2009; services down sharply to 51.4 from 54.8 in August.  Awful stuff.

France 50.1 mfg; 51.1 services
Italy 47.8 mfg; 51.4 services
Spain 47.7 mfg, a 77-mo. low; 53.3 services
Ireland 48.7 mfg; 53.1 services

Greece remains a bright spot with a 53.6 manufacturing number.

The U.K., meanwhile, with all the Brexit uncertainty, was at 48.3 mfg; 49.5 services, the latter a big negative surprise.  [All the above courtesy of IHS Markit]

Separately, a flash estimate on September inflation for the EA19 was at just 0.9% vs. 2.1% Sept. 2018; ex-food and energy 0.3% vs. 1.1% year-over-year.

Retail trade in the eurozone for August was up 0.3% over July, 2.1% year-over-year.

Finally, the EA19 unemployment rate for August was 7.4% vs. 8.0% a year earlier, the lowest since May 2008.

Germany 3.1%, France 8.5%, Netherlands 3.5%, Spain 13.8%, Italy 9.5%, Ireland 5.2%.

Chris Williamson / IHS Markit

“The eurozone economy ground to a halt in September, the PMI surveys painting the darkest picture since the current period of expansion began in mid-2013. GDP looks set to rise by 0.1% at best in the third quarter [Ed. quarter-over-quarter], with signs of further momentum being lost as we head into the fourth quarter, meaning the risk of recession is now very real.  Inflows of new business are falling at the fastest rate for over six years and employment growth has hit the lowest since early 2016.  Companies are increasingly looking to reduce overheads and tighten belts in the face of falling demand and an uncertain outlook.

“The downturn also shows further signs of spreading from manufacturing to services.  While the goods-producing sector is stuck in its deepest downturn since 2012, the service sector has also seen its growth rate slow sharply to one of the weakest for six years.

“The deteriorating picture is being led by a downturn in Germany, but France and Italy are also close to stalling and Spain has seen growth slow to the joint-lowest in around six years.

“The growing risk of recession, coupled with a further moderation of inflationary pressures, will add to expectations that the ECB will need to do more to stimulate the economy in coming months.”

Brexit: British Prime Minister Boris Johnson  presented his new Brexit plan to the European Union and the EU said it is “open but not convinced” by his proposals, as Donald Tusk, president of the European Council said.

The plan would keep Northern Ireland in the EU single market for goods but see it leave the customs union.

But what happens to the border between Northern Ireland the Ireland remains the central sticking point.

Irish Prime Minister Leo Varadkar said the new plans were welcome, but “fall short in a number of aspects.”

The EU’s chief negotiator, Michel Barnier, has said he still has plenty of questions about Johnson’s proposal for replacing the Irish backstop – the measure designed to avoid a hard border.

On Thursday, Johnson said he had made a “genuine attempt to bridge the chasm” with the EU before the Oct. 31 deadline.  The UK government has said it wants to reach an agreement before the critical EU summit of Oct. 17-18.

The EU is trying to figure out if Johnson is looking for deeper negotiations, which would almost certainly involve another extension, or if he is setting himself up for a possible snap election.

Johnson has vowed to leave Oct. 31, deal or no deal, but reality is about to hit him in the face.

Again, when it comes to the backstop, which is designed to keep trade flowing freely on the island of Ireland, Johnson and his supporter are afraid it will bind the UK in EU trading rules indefinitely.

Johnson’s latest plan seeks to address this with some of the following:

Northern Ireland would remain aligned with the EU’s single market rules for trade in animal, food and manufactured goods.

Northern Ireland’s legislative assembly would have the right to decide every four years if it wants to continue to apply EU legislation to traded goods.  [This is a non-starter.]

Northern Ireland would leave the EU’s customs union alongside the rest of the UK in 2021 (after the transition period).

For his part, Prime Minister (Taoiseach) Varadkar still questions how Johnson’s proposal can avoid physical checkpoints, given that Northern Ireland and Ireland would be operating under different customs systems.

I had dinner in Ireland last Friday night with a very learned, long-time friend from my 20+ trips there and Martin agreed with me.  Any kind of hard border will lead to a return of The Troubles, and that is what the EU, let alone Ireland, must avoid.

And so with time running out, once again, in this now 3+ year saga, Parliament has approved legislation to force Boris Johnson to request a Brexit extension if he cannot get an agreement, while denying him a general election until he does so.

It is nonetheless possible he could somehow cobble together a majority to approve his latest proposal, but you need a unanimous vote out of the European Union and European Parliament.

And if Johnson at the last minute makes too many concessions to the EU to gain their approval, he could lose his own support back home.

13 days until the summit.

Austria: The party of former Chancellor Sebastian Kurz won an election months after his government collapsed, with antiestablishment populists suffering a significant decline in their vote share.

Kurz’s conservative People’s Party took 38.4% of Sunday’s vote, up more than six points from 2017, while the nationalist Freedom Party slumped eight points to 17.3%.

Kurz had lost a vote of confidence in May after the leader of the Freedom Party, then junior partner in his administration, was shown promising public contracts for political support in a hidden-camera video.

But now Kurz faces long and complex coalition negotiations.  He may yet attempt to reboot his failed alliance with the Freedom Party.  Kurz has rejected any coalition with the Social Democrats, who came in second with 21.5%.

Turning to Asia... China’s official manufacturing PMI was 49.8 in September vs. 49.5 in August, another month of contraction, slight as  it may be, while the government’s non-manufacturing reading was a decent 53.7.

The private Caixin reading on manufacturing was a more robust 51.4 last month vs. 50.4 in August.

Japan’s manufacturing PMI for September was just 48.9, with the service sector at 52.8.  Japan’s key “tankan” manufacturing survey shows business sentiment at a six-year low.  Sentiment among non-manufacturers also deteriorated on the potential impact of the new sales tax hike, Oct. 1, from 8% to 10%.

South Korea’s September manufacturing PMI was 48.0, the 11th month in a row below 50.  Sept. exports fell 11.7%, the tenth consecutive month of declines.

Taiwan saw some stabilization as its manufacturing PMI rose to 50.0.

Street Bytes

--Stocks finished mixed, with the Dow Jones and S&P 500 falling for a third consecutive week, down 0.9% and 0.3%, respectively, while Nasdaq rose 0.5%, helped in no small part by a story that demand for Apple’s new iPhone may be greater than expected.

With the third quarter ending Monday, the first nine months’ return for the S&P, up 19%, was its  best start since 1997, though the benchmark index was up only 1.2% in Q3.

--U.S. Treasury Yields

6-mo.  1.64%  2-yr. 1.40%  10-yr. 1.53%  30-yr. 2.02%

--In an important first look at the coming holiday shopping season, the National Retail Federation said on Thursday that sales should rise between 3.8% and 4.2% over last year, which would be very solid, even as the retail group cited uncertainty fueled by the trade war. 

So we’ll see how the NRF forecast holds up.  I’m guessing it is slightly below this range, 3.5%.  It also bears noting that with Thanksgiving on Nov. 28, it will be the shortest holiday season since 2013.

The NRF also estimated seasonal hiring by retailers to be between 530,000 and 590,000 workers, compared with 554,000 in 2018.

--Oil prices have been falling ever since the Saudis reassured the world that the Iranian attack on its refinery facilities was not going to be as disruptive as first feared, the market now worried again about oversupply.  After the price of West Texas Intermediate soared from $54 to $61 in the day following the attack, WTI has settled back to $53.01 by the close today.

Right now, it’s about fears the ongoing trade war will continue to weaken global demand, while the Energy Information Administration reported inventories in the U.S. rose 3.1 million barrels during the week ended Sept. 27, far larger than expected.

At the same time, the U.S. continues to produce record amounts, which only adds to fears of another global glut, which OPEC’s production cuts had been having a positive impact on.

Separately, appearing on CBS’ “60 Minutes” last Sunday, Saudi Crown Prince Mohammed bin Salman warned that oil prices could rise to “unimaginably high numbers” if the world does not act to deter Iran.

“If the world does not take a strong and firm action to deter Iran, we will see further escalations that will threaten world interests.

“Oil supplies will be disrupted and oil prices will jump to unimaginably high numbers that we haven’t seen in our lifetimes.”

MBS said the Middle East region “represents about 30% of the world’s energy supplies, about 20% of global trade passages, about 4% of the world GDP.”

“Imagine all of these three things stop. This means a total collapse of the global economy, and not just Saudi Arabia or the Middle East countries,” the prince said.

--General Motors Co.’s U.S. auto sales rose 6.3% in the third quarter on higher pickup-truck sales and continued strong demand for its SUVs, GM’s U.S. factories now shut down due to the ongoing strike by the UAW.

GM is benefiting from redesigned pickup trucks that started hitting dealer lots in large supplies in the third quarter.  Despite the work stoppage, there are no dealer shortages to speak of, yet.  Pickup production was completely suspended this week when GM idled its truck plant in Mexico because of a lack of parts.

By contrast, Fiat Chrysler’s sales for the quarter were flat, while Ford Motor Co.’s were down 5.1%.

For the first nine months of 2019, GM’s U.S. sales fell less than 1%, Ford’s declined 3.8%, and Fiat Chrysler reported a 1% fall.

Among the Japanese car companies, Toyota Motor reported a 2.5% drop in the U.S. for the first three quarters, while Honda Motor’s were off less than 1%.  Nissan Motor Co.’s dropped 7.1% in the first nine months compared with the same year-ago period.

[All three reported double-digit losses for the third quarter ranging from 14% to 18%.]

According to Cox Automotive, U.S. auto-industry sales were down 1.4% thus far this year.  Most analysts still expect a full-year total of slightly shy of 17 million, which would be the first time they’ve dipped below that level in five years, but is still strong.  So the sector is far from being in a dive.  BUT, it bears watching as all the other economic indicators slip.

As for the GM/UAW strike, the two sides have exchanged contract proposals but many issues remained unresolved.  That said, you would think by the exchange of proposals, progress is being made, though the UAW said the union’s goals on health care, wages, job security and the use of temporary workers had not been met.

Both sides are feeling the impact of the longest walkout in half a century.  GM is losing $10s of millions per day.

--Tesla shares fell after the electric car maker announced nearly flat deliveries for the third quarter.

Deliveries of the Model 3, on which Tesla’s future depends, were up 2.6% over the second quarter, to a total of 79,600.  That’s 42% higher than the 56,065 Model 3s delivered in the third quarter of 2018, though slightly below analysts’ estimates of 80,200 deliveries.

Deliveries of Tesla’s higher-priced, higher-margin older models – models S and X – dropped by 250 vehicles from the second to the third quarter, to 17,400; down 37% from a year earlier.

Overall, Tesla produced 96,155 vehicles at its Fremont, Calif., factory in the third quarter, making it a long way from the 500,000 vehicles a year pace promised by CEO Elon Musk early this year when he gave a 2019 forecast.  Musk, at one point, talked of a million vehicles by the end of 2020.

The company reports actual earnings for the quarter in about a month.  But the bottom line is the company continues to miss one Musk target after another.

--Deere & Co. on Tuesday announced indefinite layoffs for 163 manufacturing workers at plants in Illinois and Iowa that make agricultural and construction equipment, citing decreased customer demand.  Deere and Caterpillar are obviously two big bellwethers, re the impact of the U.S.-China trade war and slowing purchases of U.S. farm products.

--Charles Schwab Corp. said it will eliminate commissions on online stock trades, in yet another dramatic move in a price-war crimping profitability across the financial sector.

Schwab – the largest publicly-traded e-broker, with 12 million brokerage customers – has once again rattled online brokers, already squeezed by investors’ expectations of reduced fees or no fees at all.

Schwab, though, is less reliant on commissions for its revenues, 7%, whereas TD Ameritrade derives one-quarter of its revenues from trading, E*Trade 20%.  [Wall Street Journal]

--Johnson & Johnson announced Tuesday that it had reached a $20.4 million settlement with two Ohio counties on the eve of a huge federal trial to determine responsibility for the opioid epidemic.

J&J is paying the two $10 million in cash, while reimbursing legal fees and directing $5.4 million to nonprofits for opioid-related programs in those communities.

The deal thus winnows down the number of defendants scheduled to stand trial this month to six, from the lawsuit brought by more than 2,500 counties, cities and Native American tribes.  All of these were consolidated before a federal judge in Cleveland, the trial starting soon.

--The three major U.S. pharmacy chains are removing versions of the heartburn drug Zantac from store shelves as health regulators investigate a probable carcinogen detected in the popular stomach drug.

Walgreens Boots Alliance Inc. and Rite Aid Corp. announced they were following CVS Health Corp.’s lead in stopping the sale of Zantac as well as its store-brand products.

Novartis AG’s Sandoz unit recalled generic prescriptions for ranitidine (the generic form of Zantac) in the U.S. last week after detecting elevated levels of the carcinogen NDMA.  This is the same carcinogen that sparked a recall in about 30 countries of millions of blood-pressure pills called angiotensin II receptor blockers.

The FDA is evaluating whether low levels of NDMA in ranitidine pose a risk to patients.  Thus far, according to CVS, preliminary tests show the levels barely exceed amounts found in common foods.

--Juul Labs said it will stop supporting a ballot measure to overturn an anti-vaping law in San Francisco, effectively killing the campaign.

The number of vaping-related deaths across the U.S. has risen to 19.

--The Federal Aviation Administration ordered new inspections of Boeing 737 Next Generation airliners after “structural cracks” were found in parts of some planes, further bad news for the aircraft giant, which has been dealing with the grounding of the 737 MAX models following two fatal crashes.

The cracks were small and found in only a few planes, but it impacts the “pickle fork,” which helps connect the wings to the planes.  Seeing as a bird can’t fly without its pickle fork, I’m guessing it’s kind of useful to have them in top shape on an aircraft.

--Wells Fargo named Bank of New York Mellon Corp. CEO Charles Scharf as its new CEO, ending a six-month search for a leader capable of restoring Wells’ shattered reputation and improving its standing with regulators.  Scharf succeeds C. Allen Parker, Wells Fargo’s general counsel, who has been serving as interim chief since Timothy Sloan resigned in late March.

Scharf served four years as the CEO of Visa Inc. before taking the top job at BNY Mellon two years ago.  His appointment had to be approved by Wells’ prime regulator, the Office of the Comptroller of the Currency. Needless to say he has a tough job ahead.

Taking over at BNY Mellon on an interim basis is longtime exec Todd Gibbons, who said of the announcement Scharf was leaving, “This was a surprise.”

Todd is the prime reason I attended Wake Forest University, the two of us becoming friends in high school.  When he was a freshman, I went down to visit and interview at the school as a high school senior and first thing he does when he picks me up at Greensboro Airport is take me to a Chicago concert, this being fall 1975 and the rock group a huge hit then.  I hadn’t even been to the campus yet and I’m thinking, ‘Hey, this is alright.’

--Lazard Ltd. is cutting up to 7% of its employees in its asset-management division, Lazard employing 850 people globally overseeing $213.6 billion in assets.  It is also culling funds in several regions. 

--HP Inc. announced it is slashing as much as 16% of its workforce as part of a broad restructuring meant to cut costs and boost sales growth.

The personal computer giant will cut between 7,000 and 9,000 positions through layoffs and voluntary early retirement.  The job reductions are expected to result in savings of $1 billion by the end of 2022.  HP had 55,000 employees as of a year ago.

--Shares in Bed Bath & Beyond fell sharply following another poor earnings report.  The company reported revenue of $2.72 billion for its latest quarter, with same-store sales falling a whopping 6.7% in the period.  For the full year, BBBY sees revenue of $11.4 billion.

Activist investors targeted the company earlier this year, calling out Bed Bath for years of mismanagement.

Separately, the company announced it will close 60 stores in the fiscal year, up 20 from the April estimate of 40 stores; most of the closings expected after the holiday shopping season.

--Soybean purchases from China have resumed in the past few weeks, the largest in over a year, and the price has been rising, back to July levels.  China’s move is part of the lead-up to next week’s trade negotiations in Washington and we’ll see how the talks impact further farm purchases after.

The U.S. exported $14.2 billion of soybeans to China in 2016 and only $3.1 billion last year, according to data from the International Trade Commission.

--PepsiCo Inc. reported sales growth of 4.3% for the latest quarter and said it expects growth of at least 4% for the year.  The company has topped 4% for five straight quarters.

PepsiCo’s results exceeded expectations, as net revenue at its North American beverage division – the company’s biggest contributor – rose 3.4%.

CEO Ramon Laguarta singled out sales growth in the mid-single digits for Gatorade, which the company has been trying to bolster.  The efforts are paying off.

--The median sale price of a Manhattan home dipped below $1 million during the past three months amid the imposition of new taxes on high-end properties, according to CORE Real Estate said.

“The third quarter  of 2019 was undoubtedly the most challenging quarter in recent memory, especially for condo sales,” said Garrett Derderian, CORE’s managing director of market analysis.

As reported by the New York Post: “Appraiser Jonathan Miller, who prepared a quarterly market analysis for Douglas Elliman Real Estate, said his data showed the median sales price for a Manhattan townhouse fell a staggering 45.8%, to $3.5 million.”

On July 1, the 1% “mansion tax” on city homes that sell for $1 million or more was replaced by a series of rates ranging as high as 4.15% under terms of the 2019-20 state budget signed by Gov. Andrew Cuomo.

This tax, and others, are on top of the $10,000 limit on federal deductions for State and Local Taxes (SALT) that went into effect last year.

Meanwhile, the states of New York, New Jersey, Connecticut and Maryland lost a legal challenge to SALT.

U.S. District Judge J. Paul Oetken threw out a lawsuit over the cap, saying the federal government has the “exhaustive” power to impose and collect income taxes and that the states can enact their own tax policies as they wish.

“To be sure, the SALT cap, like any other feature of federal law, makes certain state and local policies more attractive than others as a practical matter,” Oetken said.  “But the bare fact that an otherwise valid federal law necessarily affects the decisional landscape within which states must choose how to exercise their own sovereign authority hardly renders the law an unconstitutional infringement of state power.”

--Europe’s top court said on Thursday that an individual country can order Facebook to take down posts, photographs and videos and restrict global access to that material, in a major ruling with implications for whether countries can expand content bans beyond their borders.

The European Court of Justice’s decision came after a former Austrian politician sought to have Facebook remove disparaging comments about her that had been posted on an individual’s personal page, as well as ‘equivalent’ messages posted by others.  The politician was a member of the Green Party.

The ruling thus requires Facebook and the like to more actively patrol their sites for content ruled illegal.  Needless to say there are potential ripple effects for regulating internet content in general.  But the court’s decision essentially requires uniform standards between countries to govern a borderless web and then enforce them.

--Nike CEO Mark Parker was briefed on numerous occasions by Nike-backed-running coach Alberto Salazar on his experiments to manipulate the use of performance-enhancing drugs for track and field athletes, according to emails published by the U.S. Anti-Doping Agency; Salazar being issued a four-year ban from the sport, a Nike-sponsored doctor, Jeffrey Brown, also receiving the same penalty.

The reports allege that at least one of the Salazar’s experiments was conducted in a laboratory at Nike’s headquarters.

One of the email exchanges is particularly damning, with Parker telling Brown: “Jeff, thanks for the update on the tests.  It will be interesting to determine the minimal amount of topical male hormone required to create a positive test....”

--WeWork’s parent company pulled its disastrous initial public stock offering on Monday – the latest signal that Wall Street is losing its appetite for overhyped startups that continue to bleed cash.

The We Company, which owns office subletter WeWork, withdrew the IPO after recently firing partyboy CEO Adam Neumann and about 20 other executives aligned with him.  The company lsot $900 million in the first half of the year amid accusations of self-dealing.

Tonight, there are rumors of mass layoffs coming at the company.

--Low-price fashion chain Forever 21, a one-time hot destination for teen shoppers, has filed for Chapter 11 bankruptcy protection, having fallen victim to its ow rapid expansion and changing consumer tastes. 

The privately held company based in Los Angeles announced it would close up to 178 stores, the chain once having 800 in 57 countries.

57 countries?  Eegads.  What were they thinking?  I mean there are only about 30 decent countries in the entire world.

Foreign Affairs

China / Hong Kong: President Trump tweeted this week: “Congratulations to President Xi and the Chinese people on the 70th Anniversary of the People’s Republic of China!”

Yippee!  70 years of Communism and repression! 

President Xi Jinping, in his main speech to the nation and the world from Tiananmen Square in Beijing, said, “There is no force that can shake the foundation of this great nation.

“No force can stop the Chinese people and the Chinese nation forging ahead,” he told the jubilant crowds during just an eight-minute address.

Xi, dressed in a dark grey Mao suit, tried to steer the domestic and international narrative to the triumph of Chinese nationalism that had lifted the nation of 1.4 billion from the “humiliation” of colonialism.

Briefly addressing the situation in Hong Kong, Xi stressed that China was committed to “long-term stability” and “to strive for the complete unification of our country.”

Xi also said China would stay on the path of “peaceful development,” but stressed the military would resolutely safeguard the country’s sovereignty and security, shouting to his troops, as he went to review them: “Follow the party. Fight to win.”

And then there was an amazing three-hour display of China’s modern weaponry, which spoke louder than Xi’s words, some of it truly scary stuff, like a hypersonic-glide missile, the DF-17, which experts agree is currently difficult for the U.S. to counter; as in it is capable of flying at more than five times the speed of sound – and the first such weapon deployed anywhere in the world, defense experts said.

Also on display was the DF-41 ICBM, a road-mobile intercontinental ballistic missile, whose estimated range of 7,500 miles allows it to conduct a nuclear strike on any part of the U.S.  It can also carry multiple re-entry vehicles, which are designed to evade missile defense systems.

Much of the weaponry on display, such as stealth fighter jets, was meant as much for Taiwan as it was for the region and the United States.

Taiwan has a huge presidential election in three months and Beijing has had it with Taipei’s ruling Democratic Progressive Party and its adherence to an independence agenda.  This week, 100,000 marched in Taipei in solidarity with Hong Kong.

So as Beijing and the Communist Party celebrated on Tuesday, police were firing about 1,800 volleys of tear gas, 900 rubber bullets and six live bullets – one of which hit an 18-year-old in the chest – in Hong Kong.

The student, 18-year-old Tony Tsang, was shot at close range as he fought an officer with what appeared to be a white pole.  He has been charged with rioting, which carries a maximum 10-year sentence, and assaulting an officer.  Tsang, last we heard, was in stable condition.

Embattled leader Carrie Lam invoked colonial-era emergency powers today for the first time in more than 50 years in a dramatic move intended to quell escalating violence in the Chinese-ruled city.

Speaking at a press conference, Lam said a ban on face masks would take effect Saturday under the emergency laws that allow authorities to “make any regulations whatsoever” in whatever they deem to be in the public interest.

Protesters, for obvious reason, wear masks to hide their identity due to fears employers could face pressure to take action against them.  Let alone the government, through its growing use of facial recognition, down the road could just start knocking on doors and hauling people away.

It’s not known how the mask ban will be implemented in a city where many of its 7.4 million residents wear them every day to protect against infection following the outbreak of the deadly SARS virus going back to 2003.  In all my trips to Hong Kong, I was tempted to wear one myself because of the heavy air pollution most days.

The new law is said to entail a jail term of up to one year and or a hefty fine, and would apply to lawful assemblies as well.

Editorial / Wall Street Journal

“China’s Communist Party on Tuesday marks the 70th anniversary of its 1949 revolution, and the fireworks and military parades will celebrate the country’s rise to become the world’s second largest economy.  Yet there is no denying that this anniversary comes with a paradoxical unease about China’s place in the world.  China is more powerful but less free than it was a decade ago and the world views its external aggression with growing concern....

“Most horrifying has been the effort to eliminate the culture and religion of the Uighur Muslim population in the western region of Xinjiang.  The use of AI and facial recognition to control the public calls to mind Orwell’s nightmare of state control.

“Then there is China’s attempt to dominate the Asia-Pacific, often by bullying its weaker neighbors. It has illegally occupied islands in the South China Sea and turned them into de facto military bases.  Its burgeoning navy harasses foreign ships in international waters.  The attempt to renege on China’s promise of autonomy for Hong Kong fits the pattern.  Even its use of soft power via its Belt and Road initiative comes with the catch of excessive debt that has left China in control of foreign ports....

“The U.S. needs to co-exist with a rising China, cooperating when it makes sense but pushing back when China violates global norms. This will be the great test of statesmanship for a generation or more.

“Yet how this drama turns out will depend more on how China’s ruling Communist Party behaves. The Party’s legitimacy depends on economic growth that will be harder to sustain as it must innovate to prosper.  The rest of the world will no longer let China steal its way to dominance, and it will not passively allow the Indo-Pacific to become part of a modern Chinese dynasty.  China will prosper more if it plays by the rules of world order....

“No one should assume that the Party’s fall is imminent. But we also know from history that authoritarians often seem stronger than they are.  The Party’s insistence on total political control may be the seed of its undoing.”

North Korea: The UN Security Council is slated to meet behind closed doors next week after Pyongyang announced it had successfully test-fired a new submarine-launched ballistic missile ahead of fresh nuclear talks with Washington.  It was clearly the most provocative act by North Korea since it resumed dialogue with the United States last year, yet President Trump tweeted nothing on the matter, nor did he address it during any of this week’s press sprays.

The launch came a day after North Korea announced the resumption of working-level talks with the U.S. on ending its nuclear program.  Yet another brazen move by Kim Jong Un, that was immediately condemned by Japanese Prime Minister Shinzo Abe as being a violation of UN Security Council resolutions.

Pyongyang’s last submarine launched ballistic missile (SLBM) was thought to have taken place in August 2016, prior to President Trump taking office.

Meanwhile, former national security adviser John Bolton, in his first public appearance since he was ousted, and prior to the North Korean missile launch, challenged Trump’s foreign policy without directly addressing the president in a speech to the Center for Strategic and International Studies.

Kim Jong Un, Bolton said, has made a “strategic decision” to do whatever he can to keep his country’s nuclear weapons, and that is an “unacceptable” threat to the world.

Bolton warned that there is a danger not just from North Korea’s own weapons but the potential that it could sell missiles or technology to other states.

Bolton also stressed that time might be running out.

“Every day that goes by makes North Korea a more dangerous country.  You don’t like their behavior today?  What do you think it will be when they have nuclear weapons that can be delivered to American cities?  You want to wait until then to act or do you want to act now?”

Yes, Bolton is advocating regime change.

Iraq: In yet another highly-worrisome development when it comes to geopolitics, the death toll in Iraq has been soaring as unrest across the country accelerates.  This morning Reuters reported 46 had died in the past few days as the country’s most powerful cleric placed the blame squarely on Baghdad’s politicians.

Grand Ayatollah Ali al-Sistani, in a rare move, his word being law for most of Iraq’s majority Shiites, called on protesters and security forces to avoid violence. But he also ordered political factions to respond to protest demands.

“It is sorrowful that there have been so many deaths, casualties and destruction,” Sistani said in a letter read out by his representative during a sermon.  “The government and political sides have not answered the demands of the people to fight corruption or achieved anything on the ground,” he said.  “Parliament holds the biggest responsibility for what is happening.”

In an address to the nation, Prime Minister Adel Abdul Mahdi said he understood the frustration of the public but there was no “magic solution” to Iraq’s problems.  He pledged reforms, but offered no specifics.  In other words, a pathetic effort.

The protests, which started over the issues of jobs, services, and government corruption, will no doubt rage on. The people want Abdul Mahdi to resign.  And in the background is Iran, its tentacles in the country growing by the day.

Iran: President Hassan Rouhani kept open the door to diplomacy this week, broadly agreeing with a French proposal under which the U.S. would lift sanctions in return for Iran’s full compliance with all terms of the nuclear pact and its guarantee for the security of navigation in the Persian Gulf.

“The road has not ended,” Rouhani said in his weekly cabinet meeting.  “The Europeans are still making efforts.”

But with the U.S. accusing Iran of orchestrating several attacks on oil tankers in the region and on Saudi Arabia’s oil facilities, the Trump administration is hardly about to change its tune.

Speaking on the same day on national television, Supreme Leader Ali Khamenei said the U.S. had by now realized that its “maximum-pressure” campaign had backfired.

“The Americans lately, in order to make it look like Iran is surrendering and to force our president to negotiate, resorted to begging and made their European friends mediate.”

The two sides failed to connect by phone at the UN General Assembly, despite the best efforts of French President Emmanuel Macron, with Trump then tweeting last week:

“Iran wanted me to lift the sanctions imposed on them in order to meet. I said, of course, NO!”

Syria: Turkey announced on Thursday that it did not think its efforts with the United States to form a “safe zone” in northeast Syria will yield the results it is looking for and is ready to take action itself, Foreign Minister Mevlut Cavusoglu was quoted as saying on Thursday. 

Ankara and Washington have agreed to create a safe zone on the Syrian border that Turkey says should stretch 30km into Syria and be cleared of the Syrian Kurdish YPG militia which it considers a terrorist organization.  Turkey has accused the United States, which supports the YPG-led force that defeated ISIS in Syria, of moving too slowly to set up the zone.  The two sides disagree also over how far the zone should extend into Syria and who should control it.

Turkey has said it wants to settle up to 2 million Syrian refugees in the zone, and Ankara continues to talk of taking unilateral military action if it is not satisfied with the progress.  President Tayyip Erdogan said on Tuesday that Turkey had no choice but to act alone given the lack of progress made with the U.S.

The United States cannot let the Kurds down yet again, but that is exactly what we will do if Turkey mounts a major incursion.  The Trump administration will withdraw all remaining U.S. forces in the country to avoid a conflict.

As the Wall Street Journal reported today, one U.S. official said, “It’s a perfect storm, it’s really ugly. There may just be no choice but to leave.”

That would be a tremendous tragedy and further cement the U.S. reputation in the region as one whose word can’t be trusted.

Israel: As Prime Minister Benjamin Netanyahu attempts to stave off his criminal prosecution in various corruption investigations, he is struggling to hold onto power after last month’s election that resulted in deadlock.  Netanyahu’s lawyers are trying to convince Attorney General Avichai Mandelblit to abandon fraud and breach of trust charges and a bribery allegation.  The prime minster has denied the charges and called the probes a political witch hunt.

So his political rival, Benny Gantz, announced that he would not meet with Netanyahu’s team for the purposes of working on a governing coalition, Gantz’ Kahol Lavan (Blue and White) party stating that a one-on-one meeting between the two leaders is unlikely, at least for now.

Gantz’s party continues to refuse to accept the unity government proposed by President Reuven Rivlin whereby there would be a rotation at the top between Netanyahu and Gantz.  Netanyahu needs this kind of arrangement to stave off prosecution.

Afghanistan: Last weekend’s presidential election went off with minimal disruption, though there had been a wave of violence beforehand, which limited voter turnout in a big way.

Hundreds of thousands, perhaps millions, of potential voters had been disenfranchised as the national election commission said back in August that 1,993 planned polling stations wouldn’t open because Afghan security officials decided they couldn’t be protected against attacks by insurgents.  By election day, the number had grown to nearly 2,500.

The government said about 75,000 soldiers and police were deployed to guard the polling sites, but the threats of violence were enough to keep voters away.

It also doesn’t help that the people are jaded by past election fraud and, sure enough, last Saturday there were reports of names omitted from voter-registration lists and of malfunctioning portable biometric devices used to verify voters’ identities.

Preliminary results are not expected before Oct. 19 and final results not until Nov. 7.

Saudi Arabia: Crown Prince Mohammed bin Salman (MBS) told “60 Minutes” that with regards to the killing of journalist Jamal Khashoggi: “I take full responsibility as a leader in Saudi Arabia, especially since it [the killing] was committed by individuals working for the Saudi government.”

But MBS denied ordering the killing of Khashoggi directly, or having knowledge of it at the time.

Saudi authorities have since blamed a “rogue” operation for his murder and put 11 men on trial.

Russia: Today, the Kremlin hailed its special relationship with China as Moscow and Beijing discussed building an early warning system for China to detect missile attacks, employing Russian expertise in the process.  Currently, only Russia and the United States possess such an early warning system to spot intercontinental ballistic missile launches.

Russian President Vladimir Putin said: “This is a very serious thing that will radically increase China’s defense capability.”

Nonetheless, the two remain wary of each other and some in Russia are concerned about Chinese influence in the country’s sparsely populated mineral-rich east, with the two countries sharing a 2,600-mile border.

Random Musings

--Presidential tracking polls....

Gallup: 40% approval of President Trump’s job performance, 56% disapproval; 87% of Republicans approve, 36% independents (Sept. 16-30)
Rasmussen: 48% approval, 50% disapproval (Friday)

A new Quinnipiac University national poll among registered voters has President Trump’s approval rating at 41%, 53% disapproving.  88% of Republicans approve of his job performance, 38% of independents.  Trump’s approval rating has been between 38% and 41% all year in this survey.

In a Monmouth University national poll, just 39% of registered voters believe that Trump should be reelected in 2020, while 57% say it is time to have someone new in the Oval Office.  These are identical to Monmouth’s August poll.

But in approximately 300 “swing” counties across the country, accounting for about one-fifth of the total U.S. electorate, only 31% back the incumbent’s reelection compared with 64% who want a new occupant in the White House

--Sen. Bernie Sanders had a medical procedure Tuesday night in Las Vegas that involved the insertion of stents to open an artery blockage, after the Democratic presidential candidate experienced chest pain following a heavy day of campaigning.

Sanders’ events and appearances were canceled until further notice, and then this afternoon, he left the hospital and returned to Vermont.  But it’s then we learned he had suffered a heart attack, which changes everything.

Needless to say, should Sanders have to pull off the campaign trail for any extended period that spells the end of his candidacy, and is nothing but a huge plus for Elizabeth Warren.

Sanders’ campaign maintained he will be on the Oct. 15 debate stage, but we’ll see.

--A Quinnipiac University national poll of Democratic voters and independents who lean Democratic has Elizabeth Warren getting 27% of the vote, Joe Biden 25% and Bernie Sanders 16%.  Pete Buttigieg is at 7%, Kamala Harris 3%.

In an August national poll, Quinnipiac had Biden at 32%, Warren 19% and Sanders 15%.

The above-referenced Monmouth University poll of Democrats and Democratic-leaning voters across the country has Warren at 28%, Biden 25% and Sanders 15%.  [In August it was Warren 20%, Biden 19%, and Sanders 20%.]

In the latest Economist/YouGov weekly tracking survey, Warren leapfrogged Biden and leads by 4 points, 26% to 22%.  Sanders is at 14% in this one.  [Buttigieg 7%, Harris 5%]

--In a CNN/Des Moines Register/Mediacom poll of likely Iowa caucusgoers, Elizabeth Warren stands at 22%, Biden 20%, Sanders just 11%, Buttigieg 9% and Harris 6%.  Sens. Cory Booker and Amy Klobuchar each take 3%.

--In a new Public Policy Institute of California poll, California voters continue to abandon one of their own, Kamala Harris.  In a survey of state Democrats and those identifying themselves as Democratic-leaning independents, Elizabeth Warren gets 23%, Biden 22%, Sanders 21% and Harris just 8%, down from 19% in July.  That month, Warren was at 15%, Sanders 12% and Biden 11%.

As in the new results are more than a bit humiliating for the woman who served as the state’s attorney general and is now California’s junior senator.

As in she should be worried about a primary challenge in 2022.

--In a new UC Berkeley Institute of Governmental Studies poll, conducted for the Los Angeles Times, just 29% of likely California voters say they plan to vote for Trump, compared with 67% who say they do not.  Trump lost the state to Hillary Clinton by 30 points in 2016.

In the 2018 midterm election, Republicans lost seven contested congressional seats in the state, including in onetime GOP strongholds in Orange County.

--On the fundraising front, Bernie Sanders raised $25.3 million in the third quarter, with Elizabeth Warren yet to reveal her fundraising total.  Joe Biden’s haul fell from $22 million for the first two months of his campaign through the end of June to $15.2 million in the last three months.

--Republican Rep. Chris Collins of New York resigned from the House and pleaded guilty to charges related to an insider-trading case involving his son and an Australian biotechnology company.

And Texas Republican Rep. Mac Thornberry is retiring at the end of his term, joining a growing list of House Republicans who are leaving Congress after Democrats reclaimed control of the chamber in 2018.

Thornberry, the top Republican on the House Armed Services Committee, is the 19th Republican in the House this year to announce plans to retire, and the sixth from Texas.  He’s one of the good guys.

--The Wall Street Journal had a piece on the University of Pennsylvania, where there have been a sickening 14 student suicides in the past six years.  There are no easy answers.

--I’m sorry, but it is totally inexcusable that the World War II-era B-17 bomber was allowed to operate, ferrying tourists, only to have it crash Wednesday at Bradley International Airport in Hartford, Ct., killing seven of the 13 on board.

From the news report I saw, the aircraft had been involved in two prior crashes, and then patched up after each one so it could resume operation. That’s nuts for a plane like this.

--Some towns in eastern Australia are expected to hit ‘day zero’ next year...as in the day they officially run out of water.  Water is being trucked in daily at this point.  Australia’s Bureau of Meteorology says the drought is being driven, in part, by warmer sea-surface temperatures impacting rainfall patterns.  Air temperatures have also warmed over the past century, increasing the ferocity of droughts and fires.

British naturalist David Attenborough is among those blasting Australia’s conservative government for supporting new coal mines, as it argues stronger environmental action would cripple the economy.

--Meanwhile, parts of the Western U.S., particularly Montana, were hit with up to 3 feet of snow last weekend, smashing records with record low temperatures and blizzard conditions. The town of Browning, near Glacier National Park, recorded 40 inches of snow on Sunday...and it was still snowing.  AccuWeather Dan Pydynowski told USA TODAY, “You have higher terrain where you will never know how much snow fell because there is no one there to measure it.  There will be areas over 4 feet, measured or not.”

--And then you have Hurricane Lorenzo, which became the largest and most powerful hurricane that has made it so far east in the Atlantic, before slamming the British Isles as a strong tropical storm.  At one point, tropical-storm force winds extended over 265 miles, which is simply unheard of.

For example, the length of New Jersey, tip to bottom, is 166 miles, as I just looked up.

--I loved that the Finnish president, standing alongside Donald Trump, mentioned that he had gone to a number of museums in Washington to learn more about our democracy.  I wish Mr. Trump would go to a few himself.

---

Pray for the men and women of our armed forces...and all the fallen.

God bless America.

---

[I did post last week’s returns Sunday.  Click on ‘archives’ if you are keeping score at home.]

Gold $1510
Oil $53.01

Returns for the week 9/30-10/4

Dow Jones  -0.9%  [26573]
S&P 500  -0.3%  [2952]
S&P MidCap  -1.0%
Russell 2000  -1.3%
Nasdaq  +0.5%  [7982]

Returns for the period 1/1/19-10/4/19

Dow Jones  +13.9%
S&P 500  +17.8%
S&P MidCap  +14.5%
Russell 2000  +11.3%
Nasdaq  +20.3%

Bulls 55.3
Bears 17.1

Have a great week.

*I hinted cryptically there was a family issue I needed to rush home for from overseas in my brief note of last week.  Thankfully my flight was on time and I was able to join other family members in spending some final moments with my mother.  She died about 12 hours later.

RIP, Mom.

Brian Trumbore

---