Week in Review

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Week in Review

08/06/2016

For the week 8/1-8/5

[Posted 11:00 PM ET, Friday]

Note: StocksandNews has significant ongoing costs.  Your support is appreciated.  Please click on the gofundme link or send a check to PO Box 990, New Providence, NJ 07974. Special thanks to Bob P.

Edition 904

Washington and Wall Street

This was a horrible week for Donald Trump and a rough one for the Republican Party.  Talk about a man who violates my “24-hour rule” about six times a day.  What was going through his head in attacking the Khan family, in failing to endorse some party leaders, in making nonsensical comments on Ukraine and Vladimir Putin?

A Fox News poll, for instance, found that 70% of the respondents who were aware of Trump’s comments about the parents of a Muslim-American soldier killed in combat said they found them to be “out of bounds.”  [I want to know what the 19% who said they weren’t are thinking... actually, I don’t.]

Trump got so off message this week, totally unhinged, that I don’t see how he comes back because ‘unfiltered Trump’ will keep exposing himself.  He seems capable of staying on message for all of six hours and then it’s back to the Gong Show.

And this was a week where Hillary Clinton simply couldn’t stop lying about and mischaracterizing FBI Director James Comey’s comments on her email issue.  She lied to Chris Wallace in a weekend interview and just kept lying all week, right up to post time, last I checked.

Trump had the opportunity to excoriate her, and to talk about the failed Obama/Clinton foreign policy in great detail, and how the Democratic National Committee is imploding, but instead, Trump was Trump.  He had to be the story.

My job here is to continue with the single-best, one-of-its-kind, running history of our times.  Some issues require extensive documentation, items like Brexit, or the coup attempt in Turkey.  Both the Republican and Democratic conventions were other examples.  It’s been a busy stretch.

But I thought August would be relatively quiet, and then Trump kept spewing bile.  He’s not treated kindly down below.  It is what it is.

I know some of you who are Trump supporters won’t be happy.  I’ve received some notes to the effect, ‘Well, the media is biased and why aren’t they giving Hillary the same treatment?’

True, the media is biased.  We’ve known that since we were kids.  If you’re a candidate you learn to deal with it.  But much of what Donald Trump has been doing since he won the nomination, when many of us thought he would finally get ‘presidential,’ has been inexcusable.

But you know what I did Wednesday night?  I watched Gary Johnson and William Weld in a CNN town hall.  Two grownups with real ideas and a grasp of the issues.  How refreshing.

--Polls....they begin to really matter, especially in terms of how national parties allocate resources.

The above-mentioned Fox News poll found Hillary Clinton with a commanding 10-point lead over Donald Trump, 49%-39%.

A Wall Street Journal/NBC News poll released late Thursday showed Clinton leading Trump 47-38, up five points from before the conventions in July.

Clinton leads Trump among white voters with four-year college degrees by 7 percentage points, 47-40.  Mitt Romney won among this group by 14 points, according to the Journal (another source says Romney won by 12).  Before the conventions, the two candidates were tied with this set.

A CNN/ORC poll has Clinton topping Trump 52-43, and in a four-way race it is Clinton 45%, Trump 37%, Gary Johnson 9% and Jill Stein 5%.

In this one, Trump loses college-educated white voters by 10 points.

Tim Kaine’s favorability rating among registered voters rose from 31% before the Democratic convention to 39% after, but Mike Pence’s increased from 26% to 39% following the Republican convention.

Prior to both conventions, a poll from CBS and the New York Times had the race tied at 40 percent.  Now it’s 46-39 Clinton.

And a McClatchy-Marist poll released Thursday is rather startling.  Prior to both conventions, this national survey had Clinton leading 42-39.  Now it’s 48-33.  45-31 if you add in Gary Johnson (10%) and Jill Stein (6%).

But then Friday night, a Reuters/Ipsos poll shockingly, given all the other above surveys, has Clinton leading just 42-39.  Right after the Democratic convention, Hillary led by 8 points, so this is a head scratcher.

Continuing....

A CBS News Battleground Tracker Poll of 11 battleground states, post-DNC, had Clinton with a 43-41 lead over Trump in all 11 combined.  In the same poll the prior week, post-RNC, Trump led 42-41.

But in three later polls of some of the states included in the 11, Clinton’s lead is far higher.

New Hampshire: Clinton 47%, Trump 32% [WBUR]  *In this one, Trump only receives 2/3s of Republicans, which is awful.  Ditto in Pennsylvania.

Pennsylvania: Clinton 49-38 [Franklin & Marshall]

Michigan: Clinton 41-32 [Detroit News]

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I watched President Obama’s Thursday press conference from the Pentagon after he was briefed by his National Security Council on the battle against ISIS and of course I just wanted to scream once he started talking, cavalierly, about Syria.  Yup, we’re making progress.  ISIS will be defeated, he said.

But reporters never ask the simple question, “Mr. President, President Erdogan of Turkey was begging for U.S. support for a no-fly zone in Syria back in the summer of 2012.  Why didn’t you cooperate?  There would be no ISIS today.  No 400,000 dead and millions displaced.  No migrant crisis, at least to the extent we have today.”

How would he answer that?  He can’t possibly begin to.

And so while the following is exactly what I wrote last week, and have for the better part of the past few years, Mr. Hiatt, editorial page editor of the Washington Post, posted this a few days after my last WIR and I will continue hammering away at this theme not only through the rest of Obama’s presidency, but well beyond that.  The record must be set straight.  There is no way President Obama should be garnering a 54% approval rating (CNN/ORC), though Donald Trump now has something to do with that.

Fred Hiatt / Washington Post

“(It) would be hard for any fair-minded observer to say the world is in better shape today than it was eight years ago.

“Iraq, which was unified and mostly peaceful in 2009, is in flames again, and Syria is in even worse shape. The Islamic State has achieved what al-Qaeda never could, controlling territory from which it launches destabilizing attacks in France, Belgium and elsewhere. It is establishing outposts in Afghanistan, Northern Africa and beyond.

“Chaos in the Middle East has spun off millions of refugees who have proved so traumatizing to Europe that the continent’s great accomplishment of the past half-century, political union, is in jeopardy.  In a stunning violation of post-World War II norms, one European country has invaded and occupied part of another, and no one expects Crimea or eastern Ukraine to be restored anytime soon.

“Meanwhile, democracy is in retreat.  Repression has intensified inside Russia and China, and both countries are spreading their models of intolerant authoritarianism.  Formerly democratic allies such as Turkey and Thailand are moving or have moved into the camp of dictatorships.  U.S. engagement has not moderated Iran’s support for terrorism or Cuba’s squelching of dissent.  North Korea’s nuclear weapons program is advancing.

“Obama is no isolationist, and of course this isn’t all his fault. But his policies of retrenchment contributed: ending the U.S. presence in Iraq, standing aside as Syria dissolved, failing to enforce the red line he had drawn, abandoning Libya after overthrowing its dictator, tamping down U.S. support for democracy and human rights in many parts of the world.

“Rather than make the case to the American people that U.S. leadership is in their longtime interest, he reassured them that it was safe to pivot to nation-building at home.  As Syria descended into a humanitarian catastrophe unlike any since Rwanda, the president justified inaction by insisting with increasing vehemence on America’s inability to influence overseas events for the better....

“History may show Obama’s retrenchment to have been one more dip in the traditional Cold War cycle between assertiveness and retreat – or the beginning of a longer turning inward that could end up making the world a far more dangerous place.”

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As for the U.S. markets and the economy, a strong jobs report for July, released today, helped propel Wall Street to new highs.

The economy created a better than expected 255,000 jobs last month, while June was revised up to 292,000 and May to 24,000.  So for the first seven months of 2016, the average monthly job gain is now 186,000, quite an improvement from just two months ago, which compares to an average of 229,000 for 2015.

The unemployment rate ticked up to 4.9%, while the underemployed index (U6) rose to 9.7% from 9.6%.

Average hourly earnings increased 0.3% in July, with this figure now up a respectable 2.6% year over year, well above the consumer price index of 1.1%.  This is good, sports fans.

Earlier, the government reported the July ISM reading on manufacturing was 53.0 (50 being the dividing line between growth and contraction), while the services index was 55.9.  Both solid.

Not so solid were readings on June construction spending, -0.6%, and factory orders, -1.5%.

But consumption for June saw another solid gain, 0.4%, same as May and after April’s big 1.0% advance.  June personal income came in a tick less than expected at 0.2%.

Add it all up and while the economy was putrid in the first half, just 1.0% annualized growth as measured by the GDP data, economists are calling for a rebound in the third quarter of 2.2%, while the Atlanta Fed’s GDPNow indicator is forecasting robust 3.8% growth in Q3, though as often happens with this barometer, it tends to come down as the quarter moves along.

So what will the Federal Reserve do?  A few economists are calling for a September rate hike, which I have said is not a possibility so close to the election, and it’s not as if 1% growth warrants it (the third-quarter numbers not being available before the Fed next convenes), plus you have all the other central banks around the world continuing to ease, including the Bank of England this week, and the Fed isn’t about to go counter to this...at least not yet.

However, I have also said that when it comes to inflation, the Fed will get caught with its pants down.  Inflation is simmering.  Yes, the Fed’s preferred personal consumption expenditures index is running at only a 1.6% core rate, still below its 2% target, and there seems little doubt the Fed will allow inflation to run a little hot once the PCE hits 2%, but my point has been, hey, we’re already at 2%+ when it comes to core CPI and wages.  It’s just that global factors are getting in the way as much as the Fed’s stubbornness. 

Finally, third-quarter earnings are coming in slightly better than expected, but still down 3%ish, after a forecast of -5% before the reports started rolling in.  Revenues for the S&P 500 are also now expected to be flat, when it’s all tallied up, which while an improvement it’s not like this figure is +3 or 4%.

And the price/earnings multiple, trailing, for the S&P is a very robust 25+, but, yeah, I know, with ultra-low interest rates (negative in some parts of the world), where else are you going to put your money.

Europe

Before I get to the aforementioned Bank of England’s move, there was a slew of data on the eurozone’s (EA19) manufacturing and services sectors, courtesy of Markit.

The EA19 manufacturing reading for July was 52.0 vs. 52.8 in June.

Germany 53.8
France 48.6 [4-mo. high]
Italy 51.2 [18-mo. low]
Spain 51.0 [31-mo. low]
Greece 48.7

The EA19 services reading for last month was 52.9 vs. 52.8, a 17-mo. low.

Germany 54.4
France 50.5
Italy 52.0
Spain 54.1

Separately, producer (factory gate) prices in the eurozone rose 0.7% in June over May, the fastest pace in almost 4 years...very encouraging...though still down 3.1% from June 2015, while retail trade in the EA19 in June was unchanged over May.

[Germany also reported a highly disappointing industrial production figure for June, -3.1%, but the July PMIs augur for better data in the third quarter.]

As for the UK, the early impacts of the June 23 vote to leave the EU have been awful.  The manufacturing PMI for July was just 48.2 vs. 52.4 in June, the lowest reading since Feb. 2013, with the output subcomponent at 47.8 vs. 53.6, while the services reading was 47.4 last month vs. 52.3 the prior one; just big declines all around.  In the case of the services reading, the fastest pace of decline for the sector since the financial crisis, March 2009...services comprising 80% of UK economic activity.

One other...a reading on construction for July was just 45.9.

Plus I’ve been writing about the various business confidence indexes in Britain and they continue to plummet.

You get the picture.  Add it all up and Markit is forecasting a decline in GDP of 0.4% for the third quarter.  Economists are, however, still calling for some growth, albeit minimal, in 2017, with projections of around 0.5%.

So, with all the above in mind, as expected, on Thursday the Bank of England lowered its benchmark interest rate from 0.5% to 0.25%, the first rate cut in seven years, while launching its biggest stimulus package since the financial crisis, with BoE Governor Mark Carney saying he was prepared to do more.

“Indicators have all fallen sharply, in most cases to levels last seen in the financial crisis, and in some cases to all-time lows,” Carney told reporters.

There was a “clear case for stimulus, and stimulus now” after much of the above data suggested Britain was heading into recession because of the uncertainty created by Brexit.

The BoE also announced an “exceptional package of measures,” including nearly $90 billion in bond-buying, as well as a new $130bn funding (lending) scheme for banks, which was more than the market had expected.

British government bond yields plummeted to new all-time lows, with the 10-year Gilt rate dropping to just 0.63% on Thursday, before finishing the week at 0.67%.  On June 23, referendum day, the yield was 1.37%.

Addressing criticism he had been talking down the UK economy, Mr. Carney said he believed Britain was open and resilient enough to bounce back from the Brexit shock.

“By acting early and comprehensively, the [bank] can reduce uncertainty, bolster confidence, blunt the slowdown and support the necessary adjustments in the UK economy,” he said.

But while Carney offered he was prepared to do more if necessary, he did add multiple times in the news conference that he is “not a fan of negative interest rates.”

On the fiscal side, Chancellor of the Exchequer Philip Hammond said he was also willing to take “any necessary steps to support the economy” and that he would outline his plans in the fall.  [Financial Times; Bloomberg]

One other tidbit on the UK...retail investors redeemed $4.7 billion from UK investment funds in the month of June, more than at any other time since the global financial crisis as folks were rattled by the referendum and switched out of riskier assets.

Prime Minister Theresa May, by the way, reiterated she is in no hurry to trigger Article 50 of the EU’s Lisbon Treaty, which begins the negotiating process.  It is up to London to decide.  Aside from wanting to have all their ducks in a row (what they want, what is achievable) before triggering Article 50, understand that once the UK does, it is then shut out of all the EU’s workings.

Chancellor Philip Hammond has suggested it could take up to six years for the UK to complete the exit.  Remember also that the entire deal needs to be ratified in each of the member states.

As for last weekend’s stress tests on 51 of Europe’s largest banks, some of them saw their shares soar on strong earnings, such as from ING and the UK’s Standard Chartered, but early in the week there was a wide-ranging sell-off, led by troubled Italian lender Monte dei Paschi, which finished last in the stress tests (the only bank with a negative capital ratio) despite a private-sector rescue plan.

But despite the turmoil in European banking shares this week, the stress tests were largely a non-event...for now.  Individual countries’ regulators will use the results to calculate each bank’s capital requirements later in the year, with underperforming ones, say Ireland’s Allied Irish Banks, being guided to hold more capital, and/or they may be required to improve risk controls.

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Meanwhile, relations between the EU and Turkey have worsened, post-failed coup attempt in the latter.  Austria’s chancellor, Christian Kern, signaled the EU should consider ending negotiations for accession to the Union with Turkey, as EU leaders step up criticism of Turkish President Erdogan’s crackdown since the coup was crushed.  Kern called the EU’s current talks a “diplomatic fiction” given Turkey’s lack of democratic standards.

Germany is another none too pleased by recent developments in Ankara, saying it will not be “blackmailed” after Turkey threatened to renounce the March migrant treaty unless the bloc granted visa-free travel to Turkish citizens, per the agreement, where Turkey was to take back thousands of migrants into Greece in exchange for 3bn euro in cash and short-term travel rights to Europe’s Schengen area (as well as reopening EU accession talks).

“We are the ones who are protecting the European Union by sheltering three million Syrians and Iraqis,” Erdogan said during a speech in Ankara.  “They promised 3bn; this money still hasn’t arrived.  (And) the visa issue still hasn’t been brought about...Sorry, but we are not a country that you can boss about.” 

But the EU said it laid out 72 conditions for Turkey to adhere to, including changing its anti-terrorism laws, and Turkey has yet to comply.

Last weekend, as many as 30,000 Turks took to the streets of Cologne, Germany, in support of Turkish President Erdogan, but Turkey is fuming because German authorities would not let Erdogan address the rally by video link.

I mean think about that.  Picture a large pro-Putin rally in New York City, with Putin addressing the crowd.  This whole episode is so emblematic of how Europe is being convulsed these days.

And it all started with a certain U.S. president’s failure in Syria the summer of 2012.

Related to the above, Italy is investigating whether ISIL is involved in organizing the passage of tens of thousands of migrants across the Mediterranean.  Italy’s justice minister said the other day that while the Turkey to Greece migration route has been largely shut down, at least for now, hundreds of people are arriving in Italy every day, mostly from Libya (see below and story on Sirte).

“From the information available, there is an investigation underway focused on whether representatives of ISIL have crucial roles in controlling and managing migrant flows,” said Justice Minister Andrea Orlando.

Orlando added the suspicion is ISIS is trying to place the migrants in specific locations in Italy.  The government significantly beefed up security at major tourist spots this past week.

More than 257,000 migrants and refugees have entered Europe by sea this year.

Separately, the EU reported that of 88,245 unaccompanied minors that sought asylum in the European Union last year, as many as 10,000 are missing (officials having no clue where they are).

Lastly, German Chancellor Angela Merkel’s approval rating plunged 12 points to 47 percent in July following the series of attacks that forced her to defend her refugee policy.  This is the second-lowest of her third term that started in 2013.  According to the Infratest poll for ARD public television, 2/3s also say they opposed the chancellor’s handling of the refugee crisis, while support for Bavarian Prime Minister Horst Seehofer, one of her biggest political adversaries and a hardliner on refugees, rose 11 points to 44 percent.

Merkel’s chief of staff said in an interview on Friday, “We won’t allow terrorists and violent criminals to change our European-western way of life....We need to check security measures but the fact remains that Germany will also fulfill its humanitarian obligations in the future.”

Asia

In Japan, Prime Minister Shinzo Abe launched a fiscal stimulus plan of $275 billion, in yet another attempt to jumpstart the Japanese economy, but it was met with a yawn.

Consumers will get some of the largesse (virtually helicopter money for low-income earners), and there will be some infrastructure spending, the package being approved by parliament in the coming months, but there is less than meets the eye, with substantial amounts of the total figure for low-cost loans and private-sector initiatives that are not direct government outlays and thus may not provide an immediate boost to growth.

Plus it doesn’t attack what Japan’s main issue is these days, bringing about real reform, including policies to accept large-scale immigration.

In China, the National Bureau of Statistics reported that the official manufacturing PMI for July was 49.9 vs. 50.0 in June, but the Caixin private sector reading was 50.6 vs. 48.6, the first ‘expansion’ in 17 months.  [The government figure is for large state-owned enterprises; Caixin surveys small- and medium-sized businesses.]

The NBS reported a strong services reading of 53.9 last month vs. 53.7 in June. The Caixin services figure was 51.9 vs. 50.3.

Some other manufacturing PMIs in the region...India 51.8 (51.7 in June); Taiwan 51.0 (50.5); South Korea 50.1 (50.5).

Street Bytes

--Nasdaq has been the story these days as it is on a six-week winning streak, with 1%+ advances each of the six, an 11% gain over that time that has carried the index to a new all-time high of 5221, finally besting the 5218 closing high of 7/20/15.  Nasdaq has been powered by the likes of Amazon, Google, Facebook and Microsoft as tech rules.

The S&P 500 also hit a new high of 2182 on Friday, up 0.4% on the week, while the Dow Jones added 0.6% to 18543, about 52 points from its record level.

--U.S. Treasury Yields

6-mo. 0.43%  2-yr. 0.72%  10-yr. 1.59%  30-yr. 2.31%

Yields rose at week’s end on the strong employment data.

In his latest monthly investment outlook letter, Bill Gross of Janus wrote: “I don’t like bonds; I don’t like most stocks; I don’t like private equity.  Real assets such as land, gold and tangible plant and equipment at a discount are favored assets categories.”

I’m guessing there is now a run on widget factories.

Gross added in a separate statement: “Sovereign bond yields at record lows aren’t worth the risk and are therefore not top of my shopping list right now; it’s too risky.  Low yields mean bonds are especially vulnerable because a small increase can bring a large decline in price.”

--Crude oil inventories continued to rise, according to the Energy Department, but gasoline inventories dropped sharply.

So the mixed report roiled the price of crude, though at the end of the week it was largely unchanged, $41.98.  National pump prices remain at their lowest levels for this time of year since 2004.

--Canada’s economy lost 31,200 jobs in July, according to Statistics Canada, as the unemployment rate ticked up to 6.9%.  The wildfires in northern Alberta where so much of the nation’s oil production lies is hurting growth.

--The biggest European banks have been slashing costs and the cuts have run deep on Wall Street.  Barclays PLC, Deutsche Bank, and Credit Suisse have been shedding assets here and reducing their brokerage units; citing in some cases stricter regulations.

The above three have cut by 26% to 43%, while their American rivals such as JPMorgan Chase and Citigroup have reduced by an average of 8% over the past two years.

--July auto sales in the U.S. offered further proof that the light-vehicle market is leveling off at or near last year’s record 17.5 million pace after six years of growth, rising just 0.7% in July vs. a year ago, according to Autodata, at 17.88 million.

Ford last week predicted an end to the auto boom, and on Tuesday, Ford reported its light-vehicle sales fell 3% last month over a year earlier.  Sales at General Motors declined 2%, and Fiat Chrysler’s rose a meager 0.3%.

Volkswagen, still struggling from the emissions scandal, reported July sales were down 8%.  Toyota’s were down 1.4%.  Honda reported an increase of 4.4% in the U.S., while Nissan’s sales were up 1%.

--Tesla Motors Inc.’s loss widened in Q2 with higher costs, but Elon Musk and crew tell us not to worry.  They will still produce 80,000 cars in 2016 and 500,000 by 2018.

Musk also announced a firm deal for SolarCity at $2.6 billion.

Tesla is growing at a far faster pace than, say, the Big Three, selling 25% more cars in the second quarter vs. a year ago, and the company said it had reached a steady output of 2,000 vehicles a week, which it said would rise 20% by the end of the year.

But whereas the other automakers are booking $billions in profits, Tesla continues to lose gobs of money; $293 million in the quarter (vs. $184m the year before), burning through cash like there is no tomorrow, including on its massive battery plant under construction in Nevada and a Model 3 entry sedan that is under development.

Revenue did rise 33% to $1.27 billion, with the company delivering 14,400 vehicles, which once again missed its estimates, in this instance 17,000.

But wait...there’s more!  Late Friday, in a classic maneuver when you want to hide bad news, Tesla released a filing that said the cost of building and operating the Gigafactory could exceed the company’s current expectations, which of course means it will by a mile.

This company hasn’t come close to being honest on anything when it comes to costs, period.

--Ferrari’s second-quarter profit beat expectations, $175 million, with revenue rising 5.9%.  The shares rose in response.

Sales in China rose 26% as Ferrari shipped 4,096 vehicles in the first half, with the company aiming to sell about 8,000 supercars this year.

--Speaking of China, ride-hailing company Uber announced its intention to offload its money-losing Chinese operation to Didi Chuxing, the dominant ride-share service in China.

Analysts applauded the move, saying there was no reason for Uber to keep sinking $millions into a battle it wasn’t about to win.

But, this represents a significant U-turn for the company.  Last fall, Uber was touting that 30% of its total trips occurred in China and that it was determined to make the economics work there.

Uber seems to have hit a wall in its valuation at $62.5 billion, following its most recent investment from a Saudi Arabian public investment fund.  Once Didi kicks in $1 billion, Uber’s lifetime fundraising haul will rise above $12 billion.  [Bloomberg]

The thing is investors are getting antsy to cash out (by going public).

As for U.S. companies operating in China, well whaddya know.  Uber learned a lesson I’ve been writing about for a long time.

David Pierson / Los Angeles Times

“Uber’s abrupt decision to sell its China operations to chief rival Didi Chuxing on Monday adds to a growing list of U.S. technology firms that have failed to flourish in the world’s second largest economy.

“The list, which reads like a corporate all-star team, includes Google, EBay, Amazon and Facebook.  Each company set out to seize on China’s breathtaking size and potential.  Each has been disappointed....

“For the foreign companies that do make it in, they are often pitted against local companies as the non-China option – no small detail against a backdrop of heightening nationalism.  Just last month, Chinese Internet users were posting pictures of their smashed iPhones to protest Washington’s objections to Beijing’s territorial claims in the South China Sea.  And that was for Apple, considered the most successful foreign tech brand in China.”

Yup, you, dear readers, learned this long ago.  And as long as President Xi Jinping is in charge, it is only going to get harder for U.S. corporations.

--Airline stocks fell after Delta Air Lines Inc. reported a key revenue figure fell sharply in July, as average ticket prices continued to decline.  Passenger revenue for every seat flown one mile fell 7% last month compared with a year earlier.

Average ticket prices have been sliding since last year as airlines added more seats than the growth in demand.  Last month, Delta announced it would grow more slowly to combat the issue.

But shares in U.S. airlines were also battered Tuesday not just because of Delta’s announcement, but also because of the travel warning related to the Zika virus in Miami, raising concerns about revenue at a critical time of year.  The Centers for Disease Control and Prevention advised pregnant women to avoid a section of Miami where officials believe mosquitoes may be transmitting Zika, with at last 15 suspected cases where people contracted the virus locally.

Airlines with the greatest exposure to South Florida include American, JetBlue and Spirit Airlines, with Delta and Southwest also having an exposure to the market.

--Attendance at SeaWorld Entertainment parks dropped sharply during the second quarter, down 7.6% across its 12 sites, with the company blaming the decline on far fewer tourists from Latin America.  Overall revenue fell 5% and the company lowered its outlook for the remainder of the year.

But big efforts to rehabilitate SeaWorld’s image appear to paying off in San Diego, where revenues dropped only 2%.

The Florida parks are being hit hard and you can see with financially troubled Brazil being a source of visitors in the past, the company isn’t just blowing smoke when it talks of its Latin American exposure.

--Gaming revenues in Macau fell only 4.5% year on year in July, continuing the improvement in this market, as they were up about 12% over June, according to the territory’s Gaming commission.

The year to date decline is 10.5% compared to the previous year, which is better than the 11.5% pace for January through June.

Wynn reported its second-quarter revenues in Macau, its largest division, rose 3.6% to $639.3m, even as net revenues at its Las Vegas operations fell 1.1% from a year ago to $419m.  [Financial Times]

--Editorial / Wall Street Journal

“Health insurers have been taking a financial beating for the ages on ObamaCare, but Aetna was always more bullish than the rest of the industry – until now.  The entitlement’s keenest corporate patron announced Tuesday that it is cancelling its ObamaCare expansion plans for 2017 and may withdraw altogether.

“Aetna posted fabulous second-quarter earnings, though the exception is its Affordable Care Act line of business that the company expects will lose more than $300 million this year....

“Beyond Aetna, most insurers including nonprofit Blue Cross Blue Shield plans are hemorrhaging cash amid rising costs, disappointing enrollment and the failing ObamaCare co-ops.”

--Shares in Bristol-Myers Squibb plunged 16% on Friday as one of its cancer-fighting drugs, Opdivo, failed in a clinical trial as it wasn’t significantly better than chemotherapy in a study of patients with newly diagnosed lung cancer.

Bristol-Myers had been counting on a positive result to help widen its lead in the market for cancer immunotherapies.

The drugs have showed some promise in previous trials.  Merck has a skin-cancer drug that seemed to extend lives in up to 40% of patients taking it.

But many simply don’t benefit from the immunotherapies.

Merck’s shares rose 8% on the Opdivo news, however, because it has an immunotherapy, Keytruda, that has prolonged survival in a separate study of patients with newly diagnosed lung cancer. Today, the U.S. Food and Drug Administration approved expanding Keytruda’s use to include the treatment of head and neck cancers.  [Wall Street Journal]

--Berkshire Hathaway reported earnings after the close on Friday and Warren Buffett’s conglomerate benefited from improvement in its insurance empire, including at Geico, which benefited from a 7% year-over-year increase in average premiums.  A weakness for Berkshire was its railroad business, BNSF, where revenues declined 15%.  The division has been hit by falling freight volumes, with revenues from transporting coal down 41%.

But overall, revenues across all of Berkshire rose 6% to $54.5bn, with the company’s book value, Buffett’s preferred measure for shareholders, up 6.9% vs. a year ago.

--Procter & Gamble beat estimates for revenue in the quarter but missed on earnings per share.

Revenue fell 3% to $16.1bn in Q2, though excluding the impact from currency fluctuations, and Venezuela, where P&G is unwinding operations, sales increased 2% on rising volumes.

P&G previously said it was selling off most of its beauty brands to Coty as it narrow its focus to a smaller number of brands.

--Wal-Mart Stores Inc. said it is in talks to buy e-commerce startup Jet.com, the latter having begun a year ago as a challenger to Amazon.com.

Some are saying Wal-Mart will end up just making a strategic investment, not a full acquisition.

Jet is looking to close substantial funding rounds this fall, though this apparently hasn’t been easy.

Wal-Mart’s e-commerce operations have been showing slower growth in recent quarters, though CEO Doug McMillon maintains it is a big priority.  Last year, Wal-Mart’s online sales were about $14 billion, just 3% of its global revenue.

--Trump Taj Mahal announced it would close its doors after Labor Day weekend following weeks of union workers picketing the casino, which has reportedly been losing millions of dollars a month.

The Atlantic City property was purchased by billionaire investor Carl Icahn in 2015 in bankruptcy court.

Trump Taj Mahal was opened by Donald Trump in 1990, but he had long given up control.

Most importantly for A.C., it is the fifth casino to shut down in recent years.

--Nike Inc. is taking a big step, announcing it would stop selling golf equipment, including clubs, golf balls and bags.  Instead, Nike said it would accelerate innovation in golf footwear and its apparel business and on partnering with more golfers.  Nike didn’t announce a timeline for exiting the sector.

Earlier this year, Adidas announced it was selling its loss-making golf business as interest in the sport, especially in the U.S., wanes.

A Nike-sponsored golfer hasn’t won any of the last eight major championships and competitors like Under Armour have been signing up new talent such as Jordan Spieth.

Golf as a sport peaked in 2000, when Tiger Woods was captivating the nation.

Sales in Nike’s golf business fell 8% in Nike’s latest fiscal year ended May 31, with golf contributing just 3% of its total revenue.  [I’ll have far more on this topic in my next Bar Chat.]

--Time Inc. announced it was laying off another 110 people across all areas as its reorganization continues.

Time is continuing to deal with print-advertising declines and has challenges on the digital side from the likes of Facebook and Google.  The company is forecasting revenue growth of 5% or less this year, which would be an uptick from the past five years.

--Bitcoin plunged after one of its largest exchanges in Hong Kong was hacked to the tune of $65 million.

--That was absolutely incredible all 300 were able to evacuate the Emirates Airlines crash at Dubai Airport before the aircraft went up in flames; even as passengers were grabbing their bags on the way out. 

There’s no doubt tremendous safety measures have been put in place over the years, including seats that don’t produce toxic fumes, as was the case pre-1990s, while seats are bolted to the floor much better than before.

Foreign Affairs

Iraq/Syria/ISIS/Russia: Syrian government forces, backed by Russian airstrikes, have been taking territory in the southwest suburbs of Aleppo, following some short-lived gains by the rebels as the latter sought to ease a two-week government siege of the area.  Barrel bomb attacks have been frequent.  Groups such as Save the Children and Oxfam have been urging implementation of a UN call for a weekly 48-hour humanitarian pause to get aid into an estimated 250,000 living under the siege.

Aleppo is truly hell.  Tires are being burned to create smoke cover from warplanes, so imagine the air quality, on top of everything else the innocents have to deal with.  This battle has been going on for two years. 

The Syrian government and Russia claim they are opening up corridors to allow those willing to lay down their arms to leave, but some experts say this is a scheme meant to legitimize the eventual levelling of the city, by claiming all those remaining are enemy combatants; a tactic the Russians employed in Grozny during the Second Chechen War of 1999-2000.  [Moscow Times]

Separately, Danish warplanes bombed Syria for the first time, its military said Friday, with Denmark extending its fight against ISIS from neighboring Iraq.  Four F-16s bombed the stronghold of Raqqa, Defense Command Denmark said.

Russia announced five of its soldiers were killed when a military helicopter was shot down over Idlib province, the single deadliest incident for Russia since its intervention began.

In Iraq, there are reports ISIS fighters may have captured up to 3,000 fleeing Iraqi villagers Thursday and subsequently executed some of them, according to the UN refugee agency.

Earlier, the Iraqi Observatory for Human Rights said about 1,900 civilians had been captured by an estimated 100-120 ISIS fighters, who were using people as human shields.  Tens of civilians had been executed.

The UNHCR has begun building sites near Mosul in preparation for the tens of thousands who will flee once the expected offensive against the ISIS stronghold begins.

Tens of thousands who fled Fallujah after that city was recaptured from ISIS in June have still not returned.  Monday, three volunteers helping to clear Fallujah of rubble and explosives died while clearing a house.  The Iraqi government says it may take another three months before Fallujah is safe for large scale returns.

Libya: Forces loyal to Libya’s unity government said they were advancing inside the ISIS stronghold of Sirte, following the first U.S. airstrikes on the city.  Located just across the Mediterranean from Europe, Sirte has been controlled by ISIS since June 2015.

“ISIS has transformed the city into a training camp for Libyan and foreign militants, terrifying residents with public amputations and executions.” [AFP]

The scope of the U.S. airstrikes is unclear, and there are still major leadership issues in Libya.  You have the U.N.-formed government, but also a rival administration in the country’s far east that refuses to cede power to the other, while both battle ISIS.

Since the start of the Sirte offensive, at least 300 government troops have been killed and over 1,500 wounded. 

Turkey: U.S. officials don’t believe Turkey has supplied them with hard evidence proving Fethullah Gulen masterminded the failed coup, thus Gulen won’t be extradited from his headquarters in Pennsylvania.

As the Wall Street Journal puts it: “The more Turkish officials, including the president and prime minister, talk publicly about Mr. Gulen’s alleged role in the coup and demand his immediate transfer, the less likely such a transfer becomes, the people said.  Such comments raise questions about the potential fairness of Mr. Gulen’s treatment in Turkey, they said.”

But extradition discussions are expected to go on for months. Turkish officials say they haven’t presented all the evidence.

Meanwhile, President Recep Tayyip Erdogan is trying to rebuild the military, post-coup, and analysts say this is a task fraught with danger, including for Turkey’s own security at a most uncertain time.

The armed forces have imploded after the arrest of nearly 200 top officers, generals and admirals.  [Over 8,000 officers in all...3,000 of which were formally discharged.]  What is becoming clearer is that the coup leaders, while in some instances amateurish, were nonetheless able to commandeer 35 planes, 37 helicopters, 36 tanks and 246 armored vehicle, inflicting heavy damage on the Turkish parliament, while at least 200 were killed.  [Financial Times]

Separately, Turkey’s army killed 35 Kurdish militants after they attempted to storm a base in the southeast last weekend.

Iran: The Wall Street Journal’s Jay Solomon and Carol Lee reported an explosive story; that on the day the U.S. hostages came home from Iran, an unmarked cargo plane landed in Tehran with cash amounting to $400 million of euros, Swiss francs and other currencies.  U.S. law forbids direct dollar transactions with Iran, and the $400 million wasn’t disclosed to Congress.  Justice Department officials objected but were overruled.

From an Editorial in the Journal: The Administration “had already paid a high price by freeing seven Iranians charged or convicted of U.S. crimes and dropping extradition requests for 14 others.  But the Iranians weren’t satisfied.”

As the Journal reports, “U.S. officials also acknowledge that Iranian negotiators on the prisoner exchange said they wanted the cash to show they had gained something tangible.”

Editorial / WSJ: “The Administration is pretending this money is being used for strictly kosher purposes....

“Supreme Leader Ali Khamenei this week complained that the U.S. isn’t living up to the nuclear bargain and Iranians hadn’t seen anything ‘tangible.’  The Ayatollah is clearly angling for additional payments for these new hostages. Iran also knows it can threaten to walk away from the nuclear deal if its new cash demands aren’t met.”

Yes, Obama did announce back in January as part of the nuclear deal with Tehran that he’d agreed to settle an old Iranian claim for $400 million, plus $1.3 billion in interest.  But the American people were never given the details.

Press Secretary Josh Earnest called the timing of the cash airlift a coincidence.

The above was prior to Obama’s press conference on Thursday.  Then....

Editorial / Wall Street Journal

“President Obama often seems to reside in his own private Idaho on foreign affairs.  So it was no surprise that at his Pentagon press conference Thursday he forcefully denied that his Administration had paid $400 million in cash as ransom in January for the return of five Americans in Iran.

“ ‘We do not pay ransom for hostages,’ he said.  ‘We didn’t here, and we won’t in the future, precisely because if we did we’d start encouraging Americans to be targeted.’....

“But the hard reality of geopolitics is about more than what a U.S. president chooses to believe. And if Mr. Obama is right that he paid no ransom, then how does he explain that Iran has taken three more Americans as hostages since those January payments?  An unhappy coincidence?

“What matters to American credibility is what the mullahs of Iran believe. And it’s obvious they believe that arresting and holding Americans in Iran is a useful way to extract money and other concessions from the United States.  Their latest demand is for the U.S. to hand over $2 billion in Iranian funds that have been frozen for the victims of Iranian-sponsored terrorism. The thugs of the world don’t care what Mr. Obama believes. They care only that he shows them the money – then they’ll release their hostages.”

Editorial / New York Post

“Now that we know President Obama paid Iran $1.7 billion - $400 million in cold hard cash loaded on a secret flight – to ransom four American captives, comes an obvious question: What did Tehran do with all that money?

“To hear Team Obama tell it, Iran’s windfall went for strictly benign purposes.

“Just last week, CIA Director John Brennan claimed the money Iran is getting under Obama’s nuclear deal ‘is being used to support its currency’ and ‘build up its infrastructure.’

“We doubt that’s true of all the hundred-billion-plus in sanctions relief – and we know it’s not true of the ransom payout.

“As Bloomberg’s Eli Lake reported in June, the money – a settlement of Iranian legal claims dating back to 1981 – is going straight to the military.

“The Foundation for the Defense of Democracies uncovered an item in Iran’s 2017 national budget ordering the Central Bank ‘to give the money from the legal settlement...of up to $1.7 billion to the defense budget’ – which then rose 90 percent over the prior year’s.

“In other words, the cash is being used to arm Iran’s terrorist clients, like Hizbullah, and to fund its war for Syria’s Bashar al-Assad.

“And that won’t be the last of it.  Iran has already taken several more U.S. hostages since releasing the last batch.  Expect fresh ransom demands to follow.”

Russia / Ukraine: Last month was the deadliest eastern Ukraine has seen in over a year, as there are growing fears the conflict is re-escalating to its previous intensity.

The United Nations reported that eight died and 65 were injured in July, with the death toll in the conflict since it began in April 2014 at 10,000.

In Moscow, the issue of Ukraine has largely vanished from Russian television, with the propaganda machine switching to Russian forces fighting in Syria.  But there are still 40,000 Russian troops on standby on Ukraine’s border (with an unknown number inside Ukraine).

China/South Korea/Japan: South Korea’s Ministry of Defense said it would share with Japan the information on North Korean missiles gathered via a U.S.-supplied anti-missile system, which Beijing views as a dangerous step in bringing Tokyo and Seoul closer to military cooperation down the road.

Seoul has always been reluctant to engage in bilateral military cooperation with Tokyo because of past territorial disputes and wartime atrocities suffered by Koreans, which is why Thursday’s announcement is highly significant.  An actual military alliance, though, isn’t in the immediate cards.

That said, China will view this week’s developments as the start of a real three-party alliance (with the United States).

China is so infuriated with South Korea for allowing the U.S. to deploy an anti-missile system there (THAAD), whose stated purpose is to counter North Korea’s missile threat, though it could also be used to watch China, that Beijing told its television stations to stop airing new shows with South Korean stars.

North Korea: Pyongyang keeps firing ballistic missiles and this week, one of them came within 125 miles of Japan’s northwest coast, or as one expert put it, only 20 or 30 seconds flight time from Japan itself.  The medium-range Rodong missile reportedly flew 620 miles, which would be the furthest for a missile of this kind.  [Another Rodong apparently blew up shortly after launch.]

The bottom line is North Korea continues to make steady progress and that will only embolden it.

Random Musings

--Turmoil in the Republican Party has been escalating as Trump flails, “with an extraordinary week of self-inflicted mistakes, gratuitous attacks and missed opportunities.” [Philip Rucker and Dan Balz / Washington Post]

In the past week, Trump was blasted by both Democrats and Republicans for his remarks about the parents of U.S. Army Capt. Humayun Khan, who was killed by a car bomb in 2004 in Iraq.  Senator John McCain said in a strongly worded statement that Mr. Trump did not have “unfettered license to defame the best among us.”

Gov. Chris Christie said criticisms of the Khan family were “inappropriate.”

Trump accused the Khans of “viciously” attacking him, causing more controversy when he suggested Ghazala Khan had been prevented from speaking alongside her husband, a hit on Muslims and women that only made Trump look worse later when Mrs. Khan said she didn’t speak of her son without breaking down.

Asked by ABC’s George Stephanopoulos last weekend what sacrifices he, Trump, has made for his country, after Khizr Khan had said Trump had made none, Trump appeared to compare the Khan’s loss to job creation.

“I think I’ve made a lot of sacrifices.  I’ve created thousands and thousands of jobs, tens of thousands of jobs.” Stephanopoulos responded: “Those are sacrifices?”  Trump answered: “Oh sure, I think they’re sacrifices.”

James Taranto / Wall Street Journal...speaking of the Khan-Trump dustup.

“We think Trump has handled it appallingly, but we also find plenty of fault with the Democrat-media narrative that has arisen around it.

“Take Khan’s j’accuse, ‘You have sacrificed nothing,’ and Stephanopoulos’ question, ‘What sacrifice have you made for your country?’  Do these not apply equally well to Mrs. Clinton?  She didn’t serve in the military, nor did her husband, and their daughter has lived quite a pampered life.  As David French – an Army Reserve major, Iraq veteran and Nevertrump stalwart – observes:

“Hillary Clinton hasn’t sacrificed – she’s lived the progressive dream. And she’s certainly not a ‘public servant’ – she’s a cynical, grasping, and ambitious politician.  Her accomplishments are meager, and her one guiding star is her own self-advancement.”

But Trump also suggested the November election could be “rigged,” telling a rally in Columbus, Ohio, that he had heard “more and more” that the contest would be unfair, but he offered no evidence.  Later, “I hope the Republicans are watching closely or it’s going to be taken away from us.”

He called Hillary Clinton “the devil,” in saying Bernie Sanders capitulated in the Democratic race because he “made a deal with the devil.  She’s the devil.”

Republican National Committee Chairman Reince Priebus has been described as everything from “very frustrated” to “apoplectic,” depending on the news source; Priebus no longer able to defend Trump when it comes to other party leaders and donors.

At the same time, Trump’s campaign team is desperately trying to rein the candidate in and instill some discipline.

It is beyond absurd Trump has allowed the controversy with the Muslim parents of dead Army Capt. Humayun Khan to fester.

And then you had his refusal to endorse two of the GOP’s top elected officials – House Speaker Paul Ryan and Sen. John McCain – ahead of their looming primary elections.  [Trump finally endorsed Ryan late Friday.]

If you were totally clueless the past week to ten days, all you’d need to know is that former House Speaker Newt Gingrich, Trump’s No. 1 surrogate (Chris Christie 1A), is furious.  Among Gingrich’s comments the past few days:

“The current race is which of these two is the more unacceptable, because right now, neither of them is acceptable.  Trump is helping her to win by proving he is more unacceptable than she is.”

Gingrich told the Washington Post, that Trump has only a matter of weeks to reverse course.  “Anybody who is horrified by Hillary should hope that Trump will take a deep breath and learn some new skills.  He cannot win the presidency operating the way he is now. She can’t be bad enough to elect him if he’s determined to make this many mistakes.”

Trump on Wednesday claimed his campaign is “doing really well” and has “never been this well united.”

But then Mike Pence strongly endorsed Paul Ryan.  There was talk of an “intervention,” with the likes of Priebus, Gingrich and Rudy Giuliani confronting the candidate to change his ways.  Gingrich, though, said that’s not happening; at least he wouldn’t be part of it.

Campaign manager Paul Manafort says ‘not to worry.’  The campaign is just fine.

But defections are starting to flow in, such as that of Rep. Adam Kinzinger (Ill.), an Iraq War veteran and frequent Republican surrogate on cable news outlets, who said  on CNN he is unlikely to vote for Trump because The Donald was “beginning to cross a lot of red lines of the unforgivable in politics.”

Gingrich: “You cannot allow yourself to be drawn into fights that aren’t relevant to winning the presidency.”

At least on one front, Trump is performing well, that being fundraising. The campaign raised $82 million in July, including for the RNC, which was only slightly behind Clinton’s $90 million, and ended with $74 million on hand, which is solid.

--Meanwhile, President Obama said this of Trump on Tuesday, when asked at a press conference about his comments on Khizr and Ghazala Khan.

“The notion that he would attack a Gold Star family that had made such extraordinary sacrifices on behalf of our country, the fact that he doesn’t appear to have basic knowledge around critical issues in Europe, in the Middle East, in Asia means that he’s woefully unprepared to do this job.”

Obama said, “Yes, I think the Republican nominee is unfit to serve as president.  I said so last week, and he keeps on proving it.”

Speaking of Paul Ryan, Mitch McConnell and John McCain, who have criticized Trump for his comments but stood by their endorsements of him, Obama said:

“The question I think that they have to ask themselves is, if you are repeatedly having to say in very strong terms that what he has said is unacceptable: Why are you still endorsing him?”

Tuesday, Trump was given a Purple Heart by a veteran and in holding it up at a rally, he told the crowd, he has “always wanted to get the Purple Heart.”

“I said to him, ‘Is that, like, the real one or is that a copy?’” Trump recounted.

“And he said, ‘That’s my real Purple Heart.  I have such confidence in you.’  And I said, ‘Man! That’s like, that’s like big stuff.’

“I always wanted to get the purple heart. This was much easier,” Trump said.

--Opinions on Trump

Daniel Henninger / Wall Street Journal

“Donald Trump’s statement Tuesday that he can’t endorse the re-elections of House Speaker Pal Ryan or 2008 Republican presidential candidate John McCain or New Hampshire Sen. Kelly Ayotte means that Mr. Trump has separated himself from the party that nominated him.  He is essentially running for president the way he ran for the nomination – as an independent candidate inside the shell of one of the two major parties (as did Bernie Sanders). The election’s importance for Supreme Court nominations or control of Congress still holds.  But every Republican candidate in a tough race, such as Wisconsin’s Sen. Ron Johnson, is on his own. The party’s nominee has abandoned them.

“One now must ask: Will Donald Trump also abandon the voters who have supported him for the past year by failing or even refusing to run a respectable campaign? Will he desert the people who put him in a position to compete for the American presidency?

“In his Cleveland acceptance speech, Mr. Trump said: ‘These are the forgotten men and women of our country.  People who work hard but  no longer have a voice.  I am your voice.’  Since Cleveland, Mr. Trump has forgotten the forgotten men and women who stuck with him.

“Mr. Trump rose to prominence with an appealing message, make America great again.  What he has done since becoming a presidential nominee has had virtually nothing to do with making America great again. Instead, it has been about him, his controversies and his critics....

“Donald Trump isn’t turning out new voters.  He’s turning them down. Every day, he’s giving voters who might vote for his candidacy reason to abandon both him and the 2016 election....

“The past two weeks have revived the notion that while Mr. Trump doesn’t want the humiliation of a loss, he doesn’t want to be president either. His assertion that the election ‘is going to be rigged’ sounds like someone who is retreating to a personal island, where he’ll spend a lifetime trying to justify what he didn’t do.

“ ‘I am your voice.’  Millions believed Donald Trump.  That line is close to standing for the biggest sellout of a candidate’s supporters in the history of America’s presidential politics.”

Rich Lowry / New York Post

“Donald Trump got sound advice the other day. At a rally at Davenport, Iowa, he told the crowd that a prominent supporter had called and urged him not to sweat all the attacks at the Democratic National Convention.

“ ‘Don’t hit down, the supporter urged, according to Trump.  ‘You have one person to beat.  It’s Hillary Rodham Clinton.’

“By Trump’s account, he conceded the good sense of this, although he noted how he always prefers hitting back – ‘it makes me feel good.’

“If so, he must have enjoyed his weekend.  He spent it attacking not just Khizr Kahn, the Muslim father of a soldier killed in Iraq who spoke at the DNC, but his wife.

“In other words, roughly 48 hours after publicly sharing the advice he had gotten not to punch down, Trump delivered a flurry of downward blows the likes of which we haven’t seen from a presidential candidate in memory.

“The old political and media rule is unassailable. When you are the bigger, more famous figure, you only draw more attention to a less-prominent critic by engaging....

“In subsequently trying to tamp down the controversy, Trump stoked it further by saying Khizr Khan had ‘no right’ to criticize him as he had and complaining about his viciousness.

“The Trump response predictably fueled an all-out media blitz by the Khans.  It validated one of the main lines of criticism of him at the DNC – that he is so thin-skinned that he can’t be entrusted with the awesome powers of the presidency.

“And his religiously fraught slap at Khan’s wife and his rhetorical manhandling of a family who had sacrificed so much for the country reinforced the sense that he refuses to honor basic political norms....

“Trump believes, from his decades in the public eye in the media capital of the world, that it always pays to be on the attack.  This isn’t true anymore.

“The question no longer is whether he can garner headlines, but whether he can demonstrate his suitability to becoming commander-in-chief.  The only one he’s hurt by his assault on the Khans is himself.”

Robert Kagan / Washington Post

“One wonders if Republican leaders have begun to realize that they may have hitched their fate and the fate of their party to a man with a disordered personality....

“Why denigrate the parents of a soldier who died serving his country in Iraq?  And why keep it going for four days? Why assail the record of a decorated general who commanded U.S. forces in Afghanistan?  Why make fun of the stature of a popular former mayor of New York?  Surely Trump must know that at any convention, including his own, people get up and criticize the opposition party’s nominee.  They get their shots in, just as your party got its shots in. And then you move on to the next phase of the campaign.  You don’t take a crack at every single person who criticized you.  And you especially don’t pick fights that you can’t possibly win, such as against a grieving Gold Star mother or a general.”

Editorial / Wall Street Journal

“Donald Trump seems thrilled that Democrats are trying to make the election about his favorite subject – Donald J. Trump.  Were he as shrewd a politician as he claims to be a businessman, he’d explain how Clinton-Obama policies have failed and why his would be superior.  Above all, he’d work overtime to reassure undecided voters that he is a risk worth taking.  He can’t tap into dissatisfaction with the status quo if Americans can’t imagine him sitting in the Oval Office.

“But that’s not the Trump way, and he can’t seem to help himself.  The New Yorker is as easy to read as the giant Trump signs he puts on his buildings, and Democrats have figured out they can bait him into self-destructive behavior.

“Mr. Trump is so thin-skinned that he can’t let any criticism pass without lashing back in ad hominem fashion.  Thus Mr. Trump has spent the last three days trading insults with Khizr and Ghazala Khan, whose son was an Army captain killed in Iraq in 2004; Mr. Khan spoke against Mr. Trump at the Democratic convention.  Mr. Trump could have shown statesmanship and made an expression of sympathy and gratitude for the Khans’ sacrifice.  If he had to make a political point, he could have mentioned that Mrs. Clinton voted for the Iraq war and then turned against it when the going got tough.

“Instead, Mr. Trump made himself look small and hurt his own claim to be Commander-in-Chief.  Mitch McConnell and Paul Ryan were compelled to issues statements distancing themselves from Mr. Trump by commending Humayun Khan’s service to the nation.  John McCain was even blunter.  Memo to Trump Tower: Hillary Clinton isn’t trying to rebut Patricia Smith, who blamed the Democrat at the GOP convention for her son’s death at the U.S. mission in Benghazi.

“Mrs. Clinton’s other advantage is that Mr. Trump knows little about the world and can’t be bothered to learn.  In an interview with ABC’s George Stephanopoulos on the weekend, Mr. Trump seemed to suggest that Russian proxies had not invaded Crimea.  ‘He’s not going to go into Ukraine, all right?  You can mark it down.  You can put it down,’ Mr. Trump blustered.  Last week he floated the prospect of officially recognizing Russia’s annexation.

“A two-page briefing document could have acquainted Mr. Trump with the Crimean reality, but that would require doing a high schooler’s amount of homework.  Maybe it could have even instructed him that a Republican who wants to win an election can’t let a Democrat look more hawkish toward U.S. adversaries like Vladimir Putin.

“Mr. Trump’s indiscipline managed to drown out Friday’s dismal economic report and another burst of Clinton dissembling about the classified material on her private email server.  In rookie candidate school, they’d called this political malpractice.”

Bret Stephens / Wall Street Journal

“What makes Mr. Trump’s remarks so foul is their undisguised sadism. He took a woman too heartbroken and anxious to speak of her dead son before an audience of millions and painted a target on her.  He treated her silence as evidence that she was either a dolt or a stooge.  He degraded her.  ‘She was standing there. She had nothing to say,’ Mr. Trump told ABC’s George Stephanopoulos.  ‘She probably, maybe she wasn’t allowed to have anything to say.  You tell me.’

“In this comment there was the full unmasking of Mr. Trump, in case he needed further unmasking.  He has, as Humayun’s father Khizr put it, a ‘black soul.’  His problem isn’t a lack of normal propriety but the absence of basic human decency. He is morally unfit for any office, high or low.

“This is the point that needs to dawn – and dawn soon – on Republican officeholders who pretend to endorse Mr. Trump while also pretending, via wink-and-nod, that they do not.  Paul Ryan has tried to walk this razor’s edge by stressing how much he disagrees with Mr. Trump’s ‘ideas.’  On Sunday the speaker issued a flabby statement extolling the Khan family’s sacrifice and denouncing religious tests for immigrants without mentioning Mr. Trump by name.

“Mr. Ryan is doing his personal reputation and his party’s fortunes no favors with these evasions. The central issue in this election isn’t Mr. Trump’s ideas, such as they are.  It’s his character, such as it is. The sin, in this case, is the sinner.”

Charles Krauthammer / Washington Post

“Of course we all try to protect our own dignity and command respect.  But Trump’s hypersensitivity and unedited, untampered Pavlovian responses are, shall we say, unusual in both ferocity and predictability.

“This is beyond narcissism. I used to think Trump was an 11-year-old, an undeveloped schoolyard bully.  I was off by about 10 years.  His needs are more primitive, an infantile hunger for approval and praise, a craving that can never be satisfied. He lives in a cocoon of solipsism where the world outside himself has value – indeed exists – only insofar as it sustains and inflates him.

“Most politicians seek approval.  But Trump lives for the adoration.  He doesn’t even try to hide it, boasting incessantly about his crowds, his standing ovations, his TV rating, his poll numbers, his primary victories.  The latter are most prized because they offer empirical evidence of how loved and admired he is.

“Prized also because, in our politics, success is self-validating. A candidacy that started out as a joke, as a self-aggrandizing exercise in xenophobia, struck a chord in a certain constituency and took off. The joke was on those who believed that he was not a serious man and therefore would not be taken seriously.  They – myself emphatically included – were wrong.

“Winning – in ratings, polls and primaries – validated him.  Which brought further validation in the form of endorsements from respected and popular Republicans....

“But this may all now be jeopardized by the Gold Star gaffe....It has put a severe strain on the patched-over relationship between the candidate and both Republican leadership and Republican regulars....

“When a Pulitzer Prize-winning liberal columnist (Eugene Robinson) and a major conservative foreign policy thinker and former speechwriter for George Schultz under Ronald Reagan (Robert Kagan) simultaneously question Trump’s psychological stability, indeed sanity, there’s something going on (as Trump would say).”

Michael J. Morell / New York Times

“During a 33-year career at the Central Intelligence Agency, I served presidents of both parties – three Republicans and three Democrats.  I was at President George W. Bush’s side when we were attacked on Sept. 11; as deputy director of the agency, I was with President Obama when we killed Osama bin Laden in 2011.

“I am neither a registered Democrat nor a registered Republican.  In my 40 years of voting, I have pulled the lever for candidates of both parties.  As a government official, I have always been silent about my preference for president.

“No longer.  On Nov. 8, I will vote for Hillary Clinton. Between now and then, I will do everything I can to ensure that she is elected as our 45th president.

“Two strongly held beliefs have brought me to this decision. First, Mrs. Clinton is highly qualified to be commander-in-chief.  I trust she will deliver on the most important duty of a president – keeping the nation safe.  Second, Donald J. Trump is not only unqualified for the job, but he may well pose a threat to our national security....

“In sharp contrast to Mrs. Clinton, Mr. Trump has no experience on national security. Even more important, the character traits he has exhibited during the primary season suggest he would be a poor, even dangerous, commander-in-chief.

“These traits include his obvious need for self-aggrandizement, his overreaction to perceived slights, his tendency to make decisions based on intuition, his refusal to change his views based on new information, his routine carelessness with the facts, his unwillingness to listen to others and his lack of respect for the rule of law.

“The dangers that flow from Mr. Trump’s character are not just risks that would emerge if he became president.  It is already damaging our national security.

“President Vladimir V. Putin of Russia was a career intelligence officer, trained to identify vulnerabilities in an individual and to exploit them.  That is exactly what he did early in the primaries.  Mr. Putin played upon Mr. Trump’s vulnerabilities by complimenting him.  He responded just as Mr. Putin had calculated.

“Mr. Putin is a great leader, Mr. Trump says, ignoring that he has killed and jailed journalists and political opponents, has invaded two of his neighbors and is driving his economy to ruin....

“In the intelligence business, we would say that Mr. Putin had recruited Mr. Trump as an unwitting agent of the Russian Federation.”

--More from Sen. John McCain’s statement on Donald Trump:

“In the end, I am morally bound to speak only to the things that command my allegiance, and to which I have dedicated my life’s work: the Republican Party, and more importantly, the United States of America...

“It is time for Donald Trump to set the example for our country and the future of the Republican Party. While our Party has bestowed upon him the nomination, it is not accompanied by unfettered license to defame those who are the best among us.”

--Retired U.S. Army general and former chairman of the Joint Chiefs of Staff, Martin Dempsey, on Ret. Gen. John Allen’s endorsement of Hillary Clinton.

“We must not compromise our military’s special role in democracy, nor hinder those who come after us.

“The relationship between elected leaders and the military is established in the Constitution and built on trust.

“As a matter of law, we follow the orders of the duly elected commander-in-chief unless those orders are illegal or immoral. This is our non-negotiable commitment to our fellow citizens.  They elect. We support.

“From my personal experience across several administrations, the commander-in-chief will value our military advice only if they believe that it is given without political bias or personal agenda....

“Unquestionably, retired admirals and generals are free to speak to those seeking elected office.  But they should speak privately, where it will not be interpreted that they are speaking for us all.

“Publicly, they can speak to their experiences with the issues.  Not about those seeking office.  Not about who is more suited to be elected. That will be decided by the voters, and they have an obligation to learn about the candidates before casting their vote.

“But not from us.”

--Actor/director Clint Eastwood, while not endorsing Donald Trump, said that if he had to pick between Trump and Clinton, “I’d have to go for Trump.”

Continuing: “You know, ‘cause she’s declared that she’s gonna follow in Obama’s footsteps. There’s been just too much funny business on both sides of the aisle.  She’s made a lot of dough out of being a politician.”

As for Trump: “He’s just saying what’s on his mind,” Eastwood told Esquire magazine.  “And sometimes it’s not so good. And sometimes it’s...I mean, I can understand where he’s coming from, but I don’t always agree with it.”

And: “Secretly everybody’s getting tired of political correctness, kissing up.  That’s the kiss-ass generation we’re in right now.  Everybody’s walking on eggshells.  We see people accusing people of being racist and all kinds of stuff.  When I grew up, those things weren’t called racist.”

--Meanwhile, the Democrats, as noted earlier, have a slew of problems of their own but Trump keeps stepping on what should be the lead.

Three more top Democratic National Committee officials are leaving, including the chief executive and the finance head; this following the departure of Chairwoman Debbie Wasserman Schultz, who resigned after hacked emails were released that showed staffers at the DNC conspiring against Bernie Sanders late in the primaries.

The DNC is preparing for the release of more internal emails, as WikiLeaks as inferred.

--Once again, U.S. District Judge Gonzalo Curiel, a target of Donald Trump’s repeated criticism he isn’t being treated fairly in the Trump University fraud case, has made a ruling in Trump’s favor.

Judge Curiel has blocked the release of videos of Trump testifying in the lawsuit about the now-defunct university, saying although there was legitimate public interest in viewing Trump’s demeanor in recent depositions, there was a greater potential for harm because of the media scrutiny it would generate.

Earlier, Curiel had ruled that Trump didn’t have to testify in any formal court proceedings until after the election, but Trump stepped all over Curiel when the judge allowed some unrelated documents in the class-action lawsuit to be released.  It was at this moment I knew The Donald was an idiot.  The judge had just done him a huge favor and Trump instead blew it by questioning Curiel’s heritage...and you know what happened from there.

--Maureen Dowd / New York Times...looking back at the 2008 campaign.

“Making the case against Hillary, (Obama) said that America deserved more than triangulating and poll-driven positions and ‘the same old Washington textbook campaign,’ more than a candidate answering questions whatever way she thought would be popular and ‘trying to sound or vote like Republicans, when it comes to national security issues.’

“What about principles, he asked, what about a higher purpose?....

“The Clintons, infuriated by the raft of Democrats who deserted them during the 2008 campaign, sneered at Obama’s hope and change message.  Hillary protested, ‘We don’t need to be raising the false hopes of our country.’  Bill groused, ‘This whole thing is the biggest fairy tale I’ve ever seen.’

“Voters, however, were starved for the fairy tale.  For many, the line in an Obama ad rang true: ‘Hillary Clinton.  She’ll say anything and change nothing.  It’s time to turn the page.’

“Evidently, President Obama folded the corner of that page over so he could go back to it later.  Remarkably, he brought us our return ticket to the past, rolling out the red carpet for the restoration of the Clinton blurred-lines White House....

“Before he died, Beau Biden told his father he wanted him to run partly because he didn’t want the White House to fall back into the miasma of Clinton family values.

“The president made his vote-for-Hillary-or-face-doom convention speech only 22 days after his FBI director painted Hillary as reckless and untruthful.

“He argued that there is no choice but to support Hillary against a ‘self-declared savior’ like Donald Trump, perhaps forgetting that Obama was once hailed as such a messiah that Oprah introduced him in 2007 as ‘the one,’ and it became his moniker.

“In the end, Obama didn’t overthrow the Clinton machine.  He enabled it.

“It turns out, who we choose is not really about our souls.  It’s just politics, man.”

--Sorry...one more Trump bit.  This is the kind of thing that drives me nuts.  George Stephanopoulos is asking him about Michael Bloomberg, post-Bloomberg’s DNC speech excoriating Trump.

Stephanopoulos: You played golf together.

Trump: Maybe once.  And I –

Stephanopoulos: Here’s what he hit you on in the speech.

Trump: - and I hit the ball – and I hit the ball a lot longer, a lot better.

Stephanopoulos: He hit you for hypocrisy in the speech.....

The very definition of a narcissist. 

Yes, Donald, you’re great.  I bow before you.

--A longtime FBI employee pleaded guilty on Monday to acting as an agent for the Chinese government.  Kun Shan Chun, 46, worked at the FBI’s New York field office as an electronics technician and had been granted top-secret security clearance for almost two decades.

On Monday, Chun admitted to feeding sensitive information to a Chinese government official.  Some of the information he took photos of contained details of FBI surveillance methods.  Chun sent the material from his personal cellphone, including details on the identity and potential travel patterns of an FBI special agent.

Because of the plea bargain, it appears he will only face two years in prison, though the charge carries a maximum sentence of 10 years.

Chun met the Chinese government official in 2011 during a trip to Italy and France, with the official knowing he worked for the FBI and asking him to provide sensitive information, which Chun did, according to his attorneys, for financial gain.

Chinese espionage, including of the economic kind, is a huge problem and a heightened focus for the Justice Department.

But as the Wall Street Journal has reported, the Chinese-American community says the U.S. government is racially profiling them.

What the FBI learned in the Chun case is that he had a network of associates in China.

--New York City Police Commissioner William Bratton first said he was leaving sometime in 2017, and then a few days later that turned into today, as Bratton announced he was moving into the private sector to work with management consulting firm Teneo Holdings, to start up a new risk division, which will advise companies and CEOs on a range of issues, including cyber security and terrorism.

Bratton will be replaced by James O’Neill, the department’s top chief, who has been in the NYPD for over 30 years, starting out as a patrolman in the transit system.  He has been chief of department, the NYPD’s highest uniformed position, since November 2014.

Bratton has an unmatched career in law enforcement, beginning as a patrolman in Boston in 1970 and going on to lead the police departments of Boston, Los Angeles and New York (twice).

--In a new Quinnipiac poll of New York City voters, Mayor Bill de Blasio, facing re-election next year, continues to have the overwhelming support of African-Americans, 72%, while only 23% of white voters feel he deserves a second term.

--Jim Carlton had a piece on travel to America’s national parks this summer.  For example, I haven’t been to Yosemite National Park since I was a kid, way back in the 1960s, and I remember that it was springtime and relatively uncrowded.  Almost 50 years later, I can’t imagine the scene Mr. Carlton describes.  Just consider that Yosemite is expecting “as many as 400,000 more people than last year’s record-breaking crowd of 4.2 million.  Overall, the National Parks had a record 307 million visitors in 2015 – up 5% from the year before....

“Those who escaped urban centers for America’s wide-open spaces now find themselves in longer-than-usual traffic jams, packed shuttle buses and epic bathroom lines.  On the busiest days, the Grand Canyon alone is going through a mile of toilet paper a day, per stall, in some of its restroom.”

Good lord! 

“Overflow campers at Yosemite are pitching tents anywhere they can, including off a state highway outside the park.”

I’ve been fortunate over the years.  When I was traveling heavily, especially from about 1999-2012, you noticed I went to places like my favored Black Hills region in the fall, while my bigger European trips were never in the summer.  But I know families can’t do that.  [Back when I was in fifth grade, my parents pulled me out of school for a week for a California trip, which I imagine Mom caught some heat on, she being in charge of such matters.]

--Finally, NASA is launching a probe in September, Osiris-Rex, to track one of those pesky asteroids, Bennu, that threatens to postpone a baseball season or two.

Bennu is the one that in 2135 is due to fly between the moon and Earth – which you all know is nothing in space terms.  Dante Lauretta, a professor of planetary science at Arizona University, told the New York Post that Bennu in 2135 will be so close that gravity from the Earth could “potentially (put) it on course for the Earth later that century.”  [2175 is the best guess.]

Granted, this is 2135 so I apologize for unnecessarily worrying you.  But if you’re a Cubs fan and you don’t win it all this year, I’m just saying, the clock will really be ticking.

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

God bless America. 

Win some gold in Rio!

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Gold $1341
Oil $41.98

Returns for the week 8/1-8/5

Dow Jones  +0.6%  [18543]
S&P 500  +0.4%  [2182...all-time mark]
S&P MidCap  +0.2%
Russell 2000  +0.9%
Nasdaq  +1.1%  [5221...all-time mark]

Returns for the period 1/1/16-8/5/16

Dow Jones  +6.4%
S&P 500  +6.8%
S&P MidCap  +11.7%
Russell 2000  +8.4%
Nasdaq  +4.3%

Bulls 53.9
Bears 21.6  [Source: Investors Intelligence]

Have a great week.

Dr. Bortrum posted a new column.

Brian Trumbore

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