Week in Review

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Week in Review

11/19/2016

For the week 11/14-11/18

[Posted 11:30 PM ET, Friday]

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.  Special thanks this week to Vince V. and Mark R.  [And enjoy retirement, M.R.]

Edition 919

Post-Election...Washington

I’m not going to waste any time discussing the pace of the ‘transition.’  It’s fine, and certainly heated up rapidly at week’s end.  Has it been a mess as described the media?  Hardly.

It’s also not about who was seen in Trump Tower, but who is actually selected for the top spots and I think most of us are rather curious to see what happens Sunday with Mitt Romney and his meeting with The Donald.

The official Trump team began to take shape last Sunday with the appointment of Reince Priebus, chairman of the Republican National Committee, to be the chief of staff, while Stephen Bannon, Trump’s campaign chairman, will serve as chief strategist and chief counsellor.  I’m as anxious as anyone to see how these two work together.  [I don’t expect it to go well.]

President-elect Trump then made three key moves in assembling his national security and law enforcement team on Thursday and Friday, formally tabbing retired Lt. Gen. Michael Flynn to be his national security adviser, Alabama Republican Sen. Jeff Sessions for attorney general, and Kansas Republican Rep. Mike Pompeo to head the CIA.  All have hardline credentials.

Flynn is a decorated military intelligence officer and former head of the Defense Intelligence Agency, with deep experience to draw upon.  He is obviously smart as hell but he’s about the last guy I’d want to have a beer with.  He has cozied up to the likes of Vladimir Putin and Turkey’s Erdogan.

Sessions is a four-term senator, who served two years as a federal prosecutor and was appointed by President Ronald Reagan in 1981 to serve as US attorney for the Southern District of Alabama.

Five years later, Reagan tapped Sessions for a seat on the federal judiciary in Alabama, but the nomination was withdrawn amid criticisms over his comments about the NAACP, ACLU and KKK – which were seen as racially insensitive.

Sessions was elected attorney general of Alabama, and then he moved on to the U.S. Senate in 1997.  He’s been a fierce partisan in Washington, and a staunch opponent of President Obama’s agenda, including on healthcare and immigration.  I like the guy.

Pompeo is a 52-year-old graduate of the United States Military Academy at West Point, and, according to his official biography, “served as a cavalry officer patrolling the Iron Curtain before the fall of the Berlin Wall.”  He graduated from Harvard Law School and worked at a law firm before returning to Kansas to enter the corporate world, where he was founder and CEO of Thayer Aircraft, a parts supplier.

In the House, he has served on the intelligence committee and was a big opponent of ObamaCare and the closing of Guantanamo Bay.  I like him too.

So with these selections the ‘base’ is being appeased.  Secretary of State, Defense and Treasury to follow.

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President Obama bailed on the 12-nation Trans-Pacific Partnership, or TPP, recognizing nothing would get done in a lame-duck session of Congress.

Editorial / Wall Street Journal

“White House officials finally gave up on (TPP), after weeks of insisting they had the votes to pass it.  This failure was inevitable given the left-right protectionism of the 2016 campaign, but let’s hope it’s not the first thunder crash of a new era of trade wars that a shaky world economy can ill afford.

“Both Donald Trump and Hillary Clinton ran against (it), and at least the president-elect’s opposition was sincere.  The TPP has always lacked a majority in the House and maybe even the Senate, and votes weren’t lost merely because both candidates fanned sentiment against ‘globalism.’  The details included too many non-trade provisions like labor and environmental rules that inspired defections by free traders....

“The immediate economic costs to the U.S. are minimal, because U.S. tariffs are already low on most products.  Instead, the U.S. is giving up the best opportunity in decades to liberalize countries where barriers to trade and investment are high, like Vietnam and Malaysia....

“The strategic damage is far more considerable. The TPP would have been a geopolitical counterweight to China’s growing influence in the Asia-Pacific, and it would have strengthened U.S. regional relationships.  Now China will strike its own trade deals one by one or across the region.  Authoritarian governments are bidding to displace America as dominant powers in their regions, and Mr. Trump will be tested by this alarming trend....

“Mr. Trump promised to undo ‘the rape of our country’ that he called TPP even if Congress had decided to pass it, and the political reality is that he won the election.  But the President-elect will have to resolve the tension between his pro-growth proposals, like tax reform and deregulation, and his protectionist impulses.”

I’ve been writing about China filling the void for a while now.  They’ll act quickly.

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Meeting with Chancellor Angela Merkel in Germany, President Obama warned that any weakening of the trans-Atlantic alliance could lead to a “meaner, harsher, more troubled world,” directing the comment to Donald Trump.

Editorial / Wall Street Journal

“It has been vintage Obama on the President’s final overseas trip this week.  Speaking in Greece, he announced that the process of globalization needs a ‘course correction’ because the benefits aren’t being spread broadly.

“Well, maybe, but this is a little much to hear from the man who has been nominally the leader of the globalizing world’s course for eight years.  The President spent his years stressing income redistribution over economic growth, and the result has been less growth and more inequality. That’s a major reason for the West’s political anxiety over foreign trade and immigration.  Those anxieties were muted in the booming 1980s and 1990s.

“From Greece it was onto Germany and a meeting with Chancellor Angela Merkel, where Mr. Obama next lectured President-elect Donald Trump on making deals with Vladimir Putin out of convenience, ‘even if it violates international norms, or even if it leaves smaller countries vulnerable or creates long-term problems in regions like Syria.’  He added that if Chancellor Merkel chooses re-election next year, ‘she will have big burdens. I wish I could be there to lighten her load.’

“Mrs. Merkel’s load is an overwhelming flow of refugees into Germany out of Syria and Mr. Putin’s aggressions to her east.  Both problems resulted in large part from Mr. Obama’s reluctance to support the Syrian opposition until it was too late and reluctance to send Ukraine military support as Mr. Putin’s armed surrogates invaded. What Chancellor Merkel and Europe need most is a U.S. President more willing to lead the West than talk about it.”

I couldn’t agree with the above more.  I watched both President Obama’s press conference before he left on his trip and his presser with Merkel, and both times I could only shake my head.  Obama’s preoccupation with shaping his legacy, which started early this year, is beyond being out of control.  He’s just such a pompous ass.  His legacy begins and ends with Syria, as I have documented all these years.  From which all else, all other chaos, flowed.  And for which future presidents will be paying a heavy price.

Finally, regarding the Obama legacy, consider this.

Reid Wilson / The Hill

“The Democratic Party will hit a new nadir in state legislative seats after suffering more losses in November’s elections, highlighting the devastation up and down the party across the nation.

“Republicans will control 4,170 state legislative seats after last week’s elections, while Democrats will control 3,129 seats in the nation’s 98 partisan legislative chambers.  Republicans picked up a net gain of 46 seats in Tuesday’s elections, while Democrats lost 46 seats, according to the latest vote counts from the Associated Press.  [Ed. The entire Nebraska Senate is nonpartisan, and a dozen seats nationwide remain too close to call.]

“The results cement a dubious legacy of Republican gains in state legislatures during President Obama’s tenure.  Republicans gained more than 700 seats in the 2010 midterm elections and nearly 300 in the 2014 midterms as Obama’s approval ratings suffered.  Democrats clawed back more than 100 seats in 2012, when Obama won reelection.

“In total, Republicans control nearly 1,000 more legislative seats than they did when Obama took office. The Republican share of state legislative seats has grown more than just under 44 percent in 2009 to 56 percent after Tuesday’s election.

“After the latest losses, Democrats will hold just 42  percent of legislative seats in the nation.

“Beginning next year, Republicans will control 67 of the 98 partisan legislative chambers, after winning new majorities in the Kentucky House, the Iowa Senate and the Minnesota Senate.  Democrats picked up control of both the state Assembly and Senate in Nevada, and the New Mexico state House....

“The GOP now controls the most legislative seats it has held since the founding of the party....

[Where Democrats have made gains is in states where Hispanic voters play a significant role, like Nevada, New Mexico and Texas.]

“When the new year dawns, Republicans will control both chambers of the state legislature and governorships in 24 states. Democrats will hold total control in only five states – Hawaii, California, Oregon, Connecticut and Rhode Island.”

Is it any wonder then that Ohio Democratic Rep. Tim Ryan is challenging House Minority Leader Nancy Pelosi?

Check this out...the Democratic House leadership, including Steny Hoyer and Jim Clyburn, is 76, 77 and 76 years of age.  The Republican leadership team of Paul Ryan, Kevin McCarthy and Steve Scalise is 46, 51 and 51.  [Tim Ryan is 43.]

Wall Street

All the talk surrounding Donald Trump and his economic policy continues to center around  infrastructure spending, tax cuts and regulatory reform.  Spend and borrow.  Bond yields rise.  Ditto stocks, for now.

The Atlanta Fed’s GDPNow forecast for fourth-quarter growth is up to 3.6%, which is rather healthy,* and certainly the data on the week was largely positive, with October retail sales coming in +0.8%, ditto ex-autos, with September revised to +1.0%.  October industrial production was unchanged, but housing starts in the month soared to an annualized pace of 1.323 million, far above expectations.

Then you had the weekly jobless claims figure, the lowest level in 43 years.

*Economists are now looking for GDP growth of 2.2% in 2017, which would be an improvement over the 1.5% pace of the past 12 months.  But it could be much higher.

On the inflation front, for last month, the producer price index was unchanged, -0.2% ex-food and energy, while year over year the PPI was 0.8%, 1.2% on core.  The consumer price index was up 0.4% for October, 0.1% on core, and year over year the CPI is 1.6%, 2.1% ex-food and energy, or actually down a tick from September’s 2.2%.

Add it all up and with the ongoing rally in the stock market, it’s a certainty the Federal Reserve is raising its key funds rate come Dec. 13-14, when Chair Janet Yellen and her band of merry pranksters next gather in D.C.

This week, appearing before Congress’ Joint Economic Committee, Yellen noted that an “increase (in rates) could well become appropriate relatively soon if incoming data provide some further evidence of continued progress toward the committee’s objectives.”

She also said: “Were the [Federal Open Market Committee] to delay increases in the federal funds rate for too long, it could end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of the committee’s longer-run policy goals.”

And: “Moreover, holding the federal funds rate at its current level for too long could also encourage excessive risk-taking and ultimately undermine financial stability.”

Meanwhile, the dollar is surging, and that means U.S. exports become less competitive, while goods from the likes of China are cheaper, exactly the opposite of what incoming President Trump had wanted.

For example, China buys only 7% of the United States’ exports, according to a report by Wells Fargo, while roughly 12% of goods bought by U.S. consumers are imported from China.  So to slap tariffs on Chinese goods, as Trump has threatened, means U.S. consumers lose the benefit of lower prices.

But we have a ways to go before Inauguration Day and there is no way a President Trump is taking aggressive trade action as his first order of business.  [Global markets would totally crash were this to be the case.]

Plus remember...the likes of China and Japan will be needed to buy all the debt the new administration is going to be issuing to finance the planned domestic spending such as for infrastructure.

Europe and Asia

Lots of Brexit talk this week, with British Prime Minister Theresa May attempting to assure German Chancellor Angela Merkel that preparations for the U.K.’s exit from the European Union were on track and that the legal process of leaving would be triggered by the end of March.

But German Finance Minister Wolfgang Schauble told the Financial Times that his country would set out a tough line on EU divorce talks, and that the U.K. would be bound by tax rules that would restrict it from granting incentives to keep investors in the country.  [Like the U.K.’s recent move with Nissan....offering guarantees of some sort to keep production in country.]

“Until the U.K.’s exit is complete, Britain will certainly have to fulfil its commitments,” he said.  “Possibly there will be some commitments that last beyond the exit...even, in part, to 2030.”

French President Francois Hollande has been lobbying Germany hard to be tough on Britain, because Hollande is concerned an easy exit could encourage anti-EU political forces in France.

And I have to keep repeating a key point in terms of the Brexit negotiations.  The U.K.is not going to get any special treatment on migration if it wants to remain in the EU’s common market; freedom of movement being at the core of the union.  As Schauble reiterated, and you’ll keep hearing, “There is no a la carte menu.  There is only the whole menu or none,” in arguing that British restrictions on immigration would end financial services companies’ free access to EU markets under so-called passporting rules, which all the major investment banks are now scrambling to find ways around.

The potential costs to the U.K.’s financial sector was highlighted in a report by EY this week which estimates London could lose 83,000 jobs over the next seven years if euro-clearing alone moved to the continent.

Meanwhile, according to a memo leaked to The (London) Times, Britain has no overall strategy for leaving the EU yet as a split in Prime Minister May’s cabinet has delayed a clear negotiating position for six months.  May is trying to control key Brexit negotiating questions herself while her senior ministers are divided and the civil service is in turmoil.

The Cabinet is split between Foreign Secretary Boris Johnson, Trade Minister Liam Fox and Brexit Minister David Davis – who all campaigned to leave the EU – on one side and Finance Minister Philip Hammond and Business Secretary Greg Clark – who wanted to remain – on the other, according to the memo.  May’s priority, it said, is survival and keeping her ruling Conservative Party together, rather than business or economic considerations.

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The Euro bond market has been roiled, with Italian borrowing costs having their biggest two-week rise since the 2012 debt crisis, with the 10-year bond yield touching 2.12%, up from the 11/4 close of 1.75% (before finishing the week at 2.09%), but up over 40 basis points intraday over this period.  The Italian 10-year had a yield of just 1.18% on Sept. 30. 

Italy is bearing the brunt of the bond rout owing to the big referendum coming up Dec. 4 that could further destabilize a country already dealing with a banking crisis, huge debt levels, and a moribund economy.

But bonds across the continent are suffering over fears of rising U.S. inflation that have pushed our Treasury yields to new highs, none of which is good for Europe.

Portugal is another example, suffering with emerging political fragility. Wednesday, the European Commission warned Portugal’s 2017 draft budget was at risk of “non-compliance” with its deficit limits, though the EC didn’t hit the country with sanctions that would freeze regional aid to it.  The yield on its 10-year nonetheless climbed from 3.26% to 3.82% the past two weeks.

Greece’s bonds, on the other hand, have been rallying amid optimism that a review of the nation’s bailout program will soon be completed, and also talk of some form of debt relief, with President Obama weighing in while he was in Athens on Tuesday.  Debt relief was “crucial” said Obama, as Greeks needed “hope that their lives would get better.”  The yield on the Greek 10-year has declined from 8.21% on Oct. 28 to 6.93% today.

Meanwhile, the European Central Bank is hinting it will keep pumping record amounts of stimulus into the eurozone beyond March 2017, but ECB President Mario Draghi’s talk is just that these days, talk.  The market is running away from him.  He’s becoming irrelevant.

As for the euro, it has fallen against the U.S. dollar 10 consecutive days, closing at $1.058, the lowest level since the end of 2015, as it could reach parity with the greenback for the first time in 14 years, as expectations diverge when it comes to growth and inflation.

The yield on the U.S. 10-year, 2.35%, is over 2 percentage points higher than the German 10-year bund yield of 0.27%, the first time there has been such a spread since the fall of the Berlin Wall.  [Wall Street Journal]

On the economic data front, third-quarter GDP for the eurozone (EA19) was up 0.3%, matching the second-quarter pace, and down from the 0.5% quarter over quarter figure for Q1.  Year over year, GDP in the EA19 is running at a 1.6% clip.  Most economists peg the Q4 number at 0.4%.

In specific countries, GDP was just 0.2% in Germany for the third quarter, down from 0.7% back in the first, but up 1.7% year over year.  France came in at 0.2% (1.1% yoy); Spain 0.7% (3.2% yoy); Italy 0.3% (0.9% yoy); and Greece 0.5% (1.5% yoy).

In the U.K., GDP was up 0.5% in Q3 (2.3% yoy).

Euro area annualized inflation was 0.5% in October, up from 0.4% in September.  In October 2015 the rate was 0.1%.  Slowly inching up.

Germany’s inflation is running at a 0.7% pace, France 0.5%, Italy -0.1%, and Spain 0.5%.

Industrial production for the eurozone was down 0.8% in September over August, up 1.2% year over year.

Eurobits....

In the U.K., core inflation for October was 0.9% year over year, with the overall inflation rate at 1.2% in October, though producer or factory gate prices rose 2.1% last month, the fastest pace since 2012.  The Bank of England sees inflation running at a 4% clip at some point next year due to the falling pound.

Meanwhile, Italian Prime Minister Matteo Renzi faces his aforementioned constitutional reform referendum on Dec. 4, and the opinion polls show him losing, Renzi having said he would then resign, with no plans on trying to form a technocratic government.

Next year, political uncertainty looks to play a major role in the pace of economic growth with key elections in the Netherlands (March), France (April/May) and Germany (September).

On the migration front, German police carried out nationwide raids on an Islamic educational organization they said was a front for the recruitment of jihadists to fight for ISIS in Syria.  The long-held fears of German intelligence agencies are being realized.  They have a real problem.

Turning to Asia...China is wondering what a President Trump will bring, what with his talk during the campaign of punitive tariffs.  I note down below that Trump held his first phone talk with Chinese President Xi.

On the data front, industrial production in China for the month of October rose 6.1% year over year.  Retail sales rose 10% yoy, while fixed asset investment is up 8.3% for the first ten months.

Alibaba’s Singles’ Day took in a record $17.8 billion, but it’s believed consumption overall is slowing.

On the property front, China’s National Bureau of Statistics reported that month-on-month prices rose in 62 out of 70 major cities last month, with Wuxi, in coastal Jiangsu province, retaining the top spot for a second month with growth of 4.9%.  But price growth in top cities was slower, such as in Beijing, which reported a rise of only 0.5% from the previous month, compared to 4.9% in September.

In year over year terms, prices rose in 65 cities and fell in five; with prices in Hefei up 48.6% and Xiamen up 45.9%.

Overall, the property market is slowing a bit, along with credit growth, which is a must to avoid a debt crisis...that still may be in the offing.

In Japan, third-quarter GDP was up 0.5%, far better than expected and up 2.2% annualized due to higher exports.  Since the election of Donald Trump, the yen has fallen vs. the dollar which makes Japanese goods even cheaper abroad.

[I have comments on Prime Minister Shinzo Abe’s meeting with Trump in New York on Thursday down below.]

But while the GDP report was good, consumption in the country is still lagging badly, though the Abe government is preparing to launch a new stimulus program.  [Past ones have failed.]

Street Bytes

--The Dow Jones hit a new all-time high of 18923 before closing the week at 18867, +0.1%, while the S&P 500 fell just short of its high-water mark of 2190, finishing at 2181, +0.8%, and Nasdaq was also just shy, +1.6% to 5321, with its all-time high at 5339.

--U.S. Treasury Yields

6-mo. 0.60%   2-yr. 1.07%  10-yr. 2.35%  30-yr. 3.03%

Here I talked about the Euro bond market being roiled, but the yield on the U.S. 10-year Treasury note had its biggest two-week gain in 15 years, from 1.78% to 2.35%.  The 12/31/15 close was 2.27% and it had dropped below 1.4% this year.

I think it’s official.  We’re now in the midst of the inflation scare I was auguring since the summer.  But I thought it would roil the equity market.  It’s because it wasn’t a single data point or two, that I had been calling for, but instead an election result and the forecast for deficit spending that stocks and bonds have diverged, at least since Nov. 8.

The rate on a 30-year fixed mortgage hit 4.125% on Friday, according to MortgageNewsDaily.com, more than half a percentage point higher from the average on Election Day.

--Mexico’s central bank raised interest rates on Thursday as it attempts to grapple with the collapsing peso and the uncertainty over the country’s future trade relationship with a United States under Donald Trump.  Mexico sends 80% of its exports to the U.S. market and Trump has threatened to blow up the North American Free Trade Agreement.

Some firms in Mexico are already selling assets and cutting capital expenditures.

A weaker peso pushes up prices of imports and thus inflation, which now sits above the central bank’s 3% target.

--The International Energy Agency’s World Energy Outlook 2016 report, while predicting “broad transformations” in the global energy landscape out to 2040,  notes the era of fossil fuels appears to be “far from over.”

The outlook says renewables and natural gas are the “big winners” in the race to meet rising energy demands, but coal and oil will continue to play a role.

But the report includes an analysis of the pledges to reduce emissions, from parties to the Paris Climate Agreement, and warns the current proposals are too weak and that warming will increase by 2.7C by 2100, with some scientists saying 2C is the tipping point.

Meanwhile, in the here and now, oil staged its biggest one-day percentage gain since April on Tuesday, 5.7% to $45.81 on light, sweet crude (WTI), with all eyes on the OPEC meeting Nov. 30 in which the group aims to agree to a production cut to between 32.5m and 33m barrels a day from the record 33.8m barrels pace in October. [WTI finished the week at $45.58.]

--Owing to a rising US dollar, the currency in which gold is denominated, gold prices slid to their lowest weekly close since February at $1207.

--No surprise here.  Samsung suffered a brutal quarter in smartphone sales after the disastrous launch of the Note 7, with Samsung losing almost a fifth of its market share, according to research firm Gartner.

Samsung’s global share of smartphone sales fell to 19.2% in Q3, compared to 23.6% in the same period last year.  Sales declined 14.2% year on year, the biggest decline on record.

But Apple didn’t benefit from Samsung’s problems as its sales and market share continued to fall.

Instead, China’s Huawei, Oppo and BBK Communication Equipment all gained market share.

Meanwhile, global smartphone sales growth was just 5.4%, but this compares with growth of 14% in 2015.  It is expected to continue to decline.

Separately, Samsung announced it was acquiring Harman International Industries for $8bn, its largest takeover on record; Samsung looking to expand its reach in the market for connected technologies.  Harman is known for its Harman/Kardon audio products, with the company drawing 65% of its revenue from the automotive industry.

--In the home improvement sector, Lowe’s Cos. said it has seen a slowdown in shopper visits, leading the company to cut its forecast for the year.  CEO Robert Niblock said, “It’s still a very healthy industry but not to the extent that we would’ve seen the numbers supporting a year ago.”

During the recent quarter, same-store sales grew 2.7% (2.6% in the U.S.), with the number of transactions up just 0.5%.

Rival Home Depot Inc. reported a 5.7% increase in existing stores, including a 5.5% jump in the U.S.  HD was far more optimistic and didn’t see the slowdown in housing that Lowe’s sees.

Home Depot continues to benefit from its emphasis on the profitable contractor market as the housing industry recovers.  Total sales rose 6.1% and the company maintained its sales guidance for the full year.

--Dick’s Sporting Goods reported solid results but said its earnings outlook for the current quarter isn’t as good.  Same-store sales jumped 5.2% in the third quarter, eclipsing analysts’ estimates for 2.8% growth.  However, Dick’s, following its purchase of the assets of Golfsmith (which went bankrupt), said same-store sales in its golf business fell 3.3%.

But overall sales rose 10% as Dick’s continues to gain market share following the bankruptcy of rival Sports Authority.

--Wal-Mart reported same-store sales in the U.S. rose 1.2% in its third quarter, the ninth straight increase, with foot traffic rising 0.7%, while e-commerce sales were up 21%, boosted by Wal-Mart’s purchase of online retailer Jet.com in September.

Overall revenue edged up 0.7% to $118.2 billion.

Heading into the holiday season, the company said its optimistic consumer spending will be relatively solid.  “Business as usual would be my summation,” said U.S. chief Greg Foran on a call with reporters.

Wal-Mart continues to invest heavily in items such as online grocery pickup locations, while slowing the pace of new store openings, instead investing in improving existing locations.

According to a recent estimate from Citi, Amazon currently has about 3% of total U.S. retail sales compared with 7% for Wal-Mart.

--Target Corp. reported a higher-than-expected quarterly profit and raised its fiscal-year forecast after it benefited from strong back-to-school and online sales.  The shares rallied sharply in response.

CEO Brian Cornell said digital sales increased 26%, though same-store sales dipped 0.2%, which was still slightly better than expected.

--Best Buy saw its shares rise after the electronics retailer reported better-than-expected sales and profit during the past quarter, with online sales growing amid higher demand for consumer electronics, computers and mobile phones.  Comp sales grew 1.8%, thanks in part to a 24% increase in domestic revenue from online customers.

But the issues with Samsung and the Note 7 smartphone could crimp Best Buy’s sales during the holiday season.

--Struggling Staples reported same-store sales declined 3% in the quarter, though this was in line with analysts’ estimates.  Overall sales for Q3 fell 4% as it shutters 50 stores in North America this year. The company projected another fall in sales in the current quarter.

--Twitter announced on Tuesday it was banning a slew of accounts linked to white nationalists and leaders of the alt-right movement.  While the company didn’t identify which accounts were banned now, among recently banned Twitter users are Richard Spencer, head of the alt-right think tank National Policy Institute, and other alt-right leaders I frankly never heard of.

So will the likes of Twitter, Facebook and Snapchat go too far in killing speech?  Facebook CEO Mark Zuckerberg wrote, “We must be extremely cautious about becoming arbiters of truth ourselves.”

The New York Times had a story on the topic, quoting a professor at American University, Susan Benesch, director of the Dangerous Speech Project, and I kind of like what she said:

“Even in the U.S., where we have the most speech protective law, some acts of speech are illegal. Nobody has suggested that to fulfill freedom of expression every act of speech has to be allowed.  It doesn’t mean you can post absolutely anything.  Everyone is figuring out how to draw the lines.”

According to a Pew Research Center poll, 44% of Americans ge their news from Facebook, whereas only 2 in 10 U.S. adults get news from print newspapers.

--So on a related topic, Facebook said it has uncovered several more flawed metrics related to how consumers interact with content, which marketers lean on to decide whether to buy ads on the site.

But Facebook also seems to have an issue with video views, including both on-demand views and live viewing, in working with Nielsen’s Digital Content Ratings metric.

Not that all of this is that important, but on their metrics for marketers’, exposure to ‘organic posts’, meaning regular posts that weren’t paid ads, the number could be as much as 33% lower for a seven-day period, as reported by the Wall Street Journal.

--Russia has blacklisted LinkedIn, requiring Russian internet providers to block access to the site, according to Russia’s communication watchdog, Roscomnadzor.  This is all just part of the ongoing internet crackdown occurring in Russia, China and elsewhere.

--Volkswagen AG reached an agreement with workers to cut as many as 30,000 jobs globally and save $3.9 billion in expenses as it tries to get its house back in order after the emissions scandal.

But the job cuts will come through attrition and in return, the automaker agreed to refrain from layoffs until 2025.  Of the reductions, 23,000 will be in Germany.

--Wells Fargo & Co. reported Thursday that it opened about 300,000 new checking accounts last month, the first full month since the bank’s sales scandal came to light, down 27% from September and down 44% from October 2015. 

The number of applications for credit cards fell 35% compared with September and 50% compared with a year ago.

--JPMorgan Chase will pay $264 million to settle a U.S. probe into its employment of well-connected Chinese “princelings” to win business.  The bank will pay $130m to the SEC, $72m to the Department of Justice and $62m to the Federal Reserve.

The SEC said JPM hired 100 employees and interns at the request of foreign government officials during a seven-year period, which paid off with $100m in revenue.

The settlement was part of the SEC’s inquiry into bank hiring practices and the U.S. Foreign Corrupt Practices Act, a 1977 law that bans companies from paying bribes to overseas officials to win business.

--Securities and Exchange Commission Chairman Mary Jo White plans to step down in January, which will lead to a Republican-appointed leader who could move to loosen rules on Wall Street.  That would be quite a change from the emphasis of the past six years to tighten them as required by the 2010 Dodd-Frank Act, which was championed by Democrats.

In the long run, this is big.  Short term, the SEC will be operating with just two of the five commissioner seats filled after White leaves, which creates some issues when actual rulings are to be made.

--Cisco Systems Inc. announced fiscal first-quarter net income fell 4.4%, largely because of restructuring charges, while revenue declined 2.6%.  The shares then declined primarily because the company projected revenue would fall again in the current quarter. CEO Chuck Robbins citing weak demand from communications-service providers.

Fact is, many companies are turning away from Cisco’s network-equipment and turning to external cloud services, with Robbins also citing the reluctance by customers to upgrade the switching gear used on their campuses.   Revenue from Cisco’s largest business, switching hardware, declined 7%.

--Snap, owner of Snapchat, has filed for an initial public offering in what is expected to be one of the largest IPOs in recent years, as early as March, with the parent company seeking a valuation of between $20bn and $25bn.  The filing is confidential, which is allowed because it has revenue of less than $1bn.

Snap’s last valuation was at least $15bn when it raised $1.8bn from investors including Sequoia Capital, General Atlantic and T Rowe Price, as well as existing shareholders such as Kleiner Perkins, Benchmark, Alibaba, Yahoo and Fidelity.  [New York Times]

Snapchat has at least 150m daily active users across the world, with advertisers liking that its young audience on average spends about 25 minutes a day on the app.

--It’s been nothing but bad news for Abercrombie & Fitch for years now.  The shares fell hard again after the youth apparel retailer delivered third quarter results that badly missed forecasts on all fronts as the company warned that the environment would remain “challenging” for the remainder of the year.  Same-store sales for the three months ending October 29 fell 6%.

--Back to fake news, Trump supporters are calling for a boycott of PepsiCo over fabricated comments circulating on the Net.

It is being alleged CEO Indra Nooyi told supporters of the boycott, “We don’t want your business” – a remark she never made.

But Nooyi did make it clear that her employees were upset about Trump’s win while at a conference in New York on Thursday.

“I had to answer a lot of questions from my daughters, from our employees,” Nooyi said.  “They are all in mourning. All of our employees were all crying.”  Goodness gracious.

So supporters of Trump took to Twitter and YouTube, with one writing, “Indra Nooyi just made a multi-million dollar mistake!  I for one will be boycotting Pepsi products until she resigns.”  [New York Post]  What a screwed up country we live in. 

--United Continental announced it would slash deliveries planned for next year from 65 to 4 of the Boeing narrow body 737-700 aircraft, while converting the remaining 61 into the more fuel efficient 737 MAX, though the airline gave no date for deliveries of these.  United is looking for $4.8bn in earnings improvement by 2020, with the company also announcing a plan to boost its share of low-fare air traffic with a new no-frills fare class, which would limit passengers to only one under-seat bag.

Earlier, shares in United rose after a regulatory filing from Warren Buffett’s Berkshire Hathaway showed he had taken a $238m stake in United, as of September 30, after previously famously calling airlines “a death trap for investors.”

--It’s been a tough stretch for actively managed mutual funds, which continue to lose assets to passively managed index funds and exchange-traded funds.  I see where Putnam announced it was cutting about 8% of its workforce, with fee income tumbling 19% in the third quarter.

--Sotheby’s fall auction saw sales far better than expected at $277 million, the bulk of it on the contemporary side after a disappointing opening night for its lineup of Impressionist and modern art.  A work by Gerhard Richter sold for $33.9 million (Sotheby’s sold the same work for $264,000 a quarter-century earlier).  Another Richter work sold for $22.7 million, while two Willem de Koonings went for $10.4 million and $9.8 million.

And an Andy Warhol ‘self-portrait’ sold for $24.4 million.

Meanwhile, Christie’s Impressionist and modern art evening sale brought in $246.3 million, a 69% jump from the similar auction a year ago, with Claude Monet’s grain stack painting fetching a record $81.4 million after a 14-minute bidding war. This work (which I don’t like compared to Monet’s other stuff) sold for $12 million at a 1999 auction.

--Many of the Fifth Avenue retailers in the shadow of Trump Tower are scared to death that this will be the worst holiday-shopping season ever. The tight ring of security surrounding Trump’s headquarters between 56th and 57th streets is creating more of an environment of fear than anything else.

In order to avert a retail disaster, the NYPD and Secret Service are still trying to come up with a viable plan, but the ring of security could last at least until Trump’s inauguration on Jan. 20.

One major high-profile retailer, Tiffany, is located next door to Trump Tower and it has seen a major falloff in customers.

Foreign Affairs

Iraq/Syria/ISIS/Russia/Turkey: As noted in a recent piece by Andrew Tilghman in Military Times, once Mosul falls, “the campaign’s next phase will likely get more complicated, require more American troops on the ground and result in a long-term commitment of U.S. forces to Iraq.”

U.S. officials expect that once victory is declared there, “ISIS will shift to guerilla warfare and the fight will continue as a counter-insurgency mission.”

And in Syria you have the ISIS stronghold of Raqqa. Once both fall, the U.S. is going to have to remain engaged, conducting airstrikes and providing tactical assistance.

Bottom line, as former Pentagon official Anthony Cordesman says, “This is not something that is going to have a quick, easy end.  One way or other, the foreign fighters who affiliated themselves with ISIS are still going to be around in significant numbers.”

Then you have the politics of Syria and the problems between Turkey and the Syrian Kurds.  The U.S. military believes the only fighting force in Syria that is capable of battling ISIS in Raqqa is the Syrian Democratic Forces, or SDF, a network of militias dominated by the Syrian Kurds.

But Turkey – a NATO ally – strongly opposes U.S. support for the Kurds.

So what is going on in the respective battlefields today?  Mosul is proving to be a slog for the Iraqi forces thus far. Poor weather stalled an advance this week, with ISIS fighters continuing to put up a stiff resistance.  But by Friday there were reports the U.S.-backed forces were making some progress, even as ISIS pledged to mount more suicide attacks on their offensive.

Civilians have been seen streaming out of each sector that is taken, though militants have been retreating from the outskirts into the city center since the battle started on Oct. 17.  Iraqi military leaders concede the advance is slow due to the civilians.

The estimate of ISIS fighters in Mosul is still at around 5,000. Facing them is a coalition some 100,000-strong, including Kurdish fighters and Shiite paramilitary units.  Iraqi authorities now concede the battle is likely to last for months.

Thus far an estimated 59,000 have been displaced, moving from villages and towns from around Mosul to government-held areas, according to the U.N.

As to casualties thus far, it’s impossible to know, though Human Rights Watch said Thursday that more than 300 former police officers were likely killed last month and buried in  a mass grave south of Mosul.

As for ISIS leader Abu Bakr al-Baghdadi, he is believed to have withdrawn to a remote area near the Syrian border.

In Syria, the battle for Aleppo raged on, with Russian and Syrian government airstrikes pounding the rebel-held eastern part of the city, killing scores* and hitting a water pumping station.  It seems the goal is to take Aleppo’s rubble and reduce it to sand.

*An estimated 45 Monday-Wednesday, with 360+ wounded, according to health officials there and Reuters.  The Syrian Observatory for Human Rights said last Saturday, that since an offensive was launched in western Aleppo by rebel fighters in an attempt to break the siege, 508 had been killed, including 90 foreign fighters, while the government had lost 83 troops, Hizbullah 28, and 41 other fighters from Iran and Iraq, the rest civilians.

In one area obliterated by airstrikes, volunteer first responders dug through rubble for four hours before pulling out a six-year-old child who was still alive.  The child’s mother had been killed.

Air strikes on Wednesday struck Aleppo’s central blood bank and a children’s hospital.  According to the World Health Organization, 126 times this year, Syria has struck medical facilities.

The Oxfam aid group said more than 250,000 residents of eastern Aleppo had limited food and clean water with winter approaching.

No U.N. aid has reached eastern Aleppo since July, with the U.N. warning supplies will run out this week.  Monday, Vladimir Putin and Donald Trump spoke by phone about Syria and agreed on “the need to work together in the struggle against the No. 1 common enemy – international terrorism and extremism,” according to a Kremlin statement.  Hours later, Russia and Syria launched a massive wave of bombing, against rebels.  There is no ISIS presence in Aleppo.

Meanwhile, Syrian rebels backed by Turkish forces are pressing an offensive against the ISIS stronghold of Al-Bab, about 20 miles from the Turkish border, meaning Turkey is deep into Syria.

At the same time, the Kurdish-led Syrian Democratic Forces are fighting an operation to capture Raqqa, ISIS’ Syrian stronghold, but Ankara is upset with U.S. support for the Kurds and Turkish President Erdogan has vowed to target Raqqa with his own troops and allied rebels.  Yes, it’s complicated in this theater.

Separately, the U.N. reported that with farmers in Syria abandoning land, food production has dropped to an all-time low with millions about to struggle through their sixth winter in a war zone.  Wheat output has dropped from an average 3.4 million metric tons before the war began in 2011 to 1.5 million this year.  Government-controlled areas are receiving imported wheat from Russia.  Livestock is also down 30-40 percent and poultry down 60 percent.  Staggering.  More than 7 million in Syria are classified as “food insecure,” meaning in U.N. parlance, they are not sure where their next meal is coming from.

Iran: Jay Solomon / Wall Street Journal

“Donald Trump as president will be positioned to swiftly pull the U.S. out of the Obama administration’s landmark nuclear agreement with Iran, as he suggested during his campaign.

“A much harder task for Mr. Trump, however, is to convince other global powers to join him and dismantle a deal that President Barack Obama says has diminished the threat of another war in the Mideast and opened a path for reduced tensions in the region....

“Tehran has been found to have briefly violated its pledges twice since the deal was reached in mid-2015, according to U.S. and European officials.  Yet international commitment to the agreement remains strong, and the parties who negotiated it – China, Russia, France, Germany, the U.K. and the U.S. – have pledged to promote it.

“European Union foreign ministers are set to reiterate on Monday their strong support for the full implementation of the accord.

“The Iran deal isn’t a treaty, wasn’t formally signed, and wasn’t ratified by the U.S. Congress. It was approved by the United Nations Security Council, but not under procedures that obligate member states to observe its terms under threat of penalty.

“Any partner – including Iran – could summarily cease to stick to the agreement, which resulted in Tehran scaling back its nuclear capabilities in return for the lifting of most international sanctions.

“ ‘The agreement is valid only as long as all parties uphold it,’ State Department spokesman Mark Toner said Wednesday.”

My point has been since Trump started talking about dismantling the accord that it would never happen because the other five players wouldn’t agree to do so.  I certainly stand by that.  Yes, the U.S. could unilaterally pull out, but the others would continue to expand their already growing commercial partnerships with Iran.  [CIA-designate Pompeo does want to shred the agreement, ditto Michael Flynn.]

Libya: After six months of heavy fighting, Libyan forces have reduced the Islamic State fighting force to just a few in the strategic city of Sirte...victory being imminent.  But it took six months and was at a heavy cost...some 660 Libyan fighters have been killed and 3,000 wounded, as reported by Reuters, with ISIS holding out far longer than expected.  It’s a lesson for U.S. backed forces trying to take back Mosul and Raqqa.

The Libyan command also learned it is important to trap as many ISIS fighters as possible because they believe 400 have escaped Sirte and are now staging attacks behind frontlines.

Meanwhile, none of the 80,000 residents have returned.

Afghanistan: A suicide bomber killed four Americans inside Bagram airbase, the largest U.S. military facility in Afghanistan, with two being members of the armed services and the other two contractors.  A further 16 U.S. service members (and one Polish soldier) were injured.  The Taliban said one of their fighters was responsible, which represented a major security breach; the first time a bomb has exploded inside one of the best protected places in the country.  It seems the attacker had entered the base early in the morning and was among Afghan laborers reporting for duty when he detonated his vest.

A day before, a Taliban suicide bomber attacked a German consulate in northern Afghanistan, killing six civilians and wounding 120 others.

A suicide bomber on a motorbike on Wednesday killed four in an attack on a vehicle carrying security officials in Kabul, with Islamic State claiming responsibility, adding to the security crisis in the capital; both ISIS and the Taliban targeting it.  Reportedly, there is also just a total breakdown in law and order as the government falters. This is not good.

Pakistan: ISIS carried out a suicide bomb attack on a remote Sufi Muslim shrine in Pakistan’s Balochitstan region that killed at least 52 people.  Sufism is a tolerant practice of Islam, but it’s opposed by extremists.

Russia: Lithuania warned that President Vladimir Putin may test NATO in the weeks before Donald Trump becomes president.  Foreign Minister Linas Linkevicius said he was “very afraid” for the Baltics, as well as for the Syrian city of Aleppo.  Linkevicius told the BBC: “Russia is not a superpower, it’s a super problem.”

Lithuania, which has good reason to be concerned, has been noting the Russian buildup in Kaliningrad.

Meanwhile, Russia’s economy minister Alexei Ulyukaev was arrested on allegations of corruption in the sale of a state company, a case expected to reveal more detail of power struggles in the administration of Vladimir Putin.

The Investigative Committee said Mr. Ulyukaev had received a $2 million bribe in a sting operation for giving a positive evaluation of the proposed acquisition of state oil company Bashneft by Rosneft; a deal that ran counter to the original goal of privatizing the asset.

Prime Minister Dmitry Medvedev had opposed the sale to Rosneft, but then Putin said Rosneft could not be barred from the acquisition.  Remember, Rosneft is run by Igor Sechin, who is not only one of the most influential people in the country, and a long-time Putin crony, but I have written many times over the years that I saw a “dark force,” a “third force,” that will one day take down Putin.  And Sechin will do it.

Ulyukaev is the highest-ranking Russian official held since the 1991 coup attempt in what was then the USSR.  Talk about palace intrigue.

Separately, Moscow’s Supreme Court unexpectedly scrapped opposition leader Alexei Navalny’s criminal conviction, and sent his case for a retrial.  Convicting Navalny was the Kremlin’s way of stopping him from taking part in any national elections.

What was once unthinkable is suddenly possible.  Putin could face serious opposition in 2018.  But why did the court do this?

Back in 2013, Navalny was charged with stealing timber from a state-owned corporation in a trial that was condemned as politically motivated.  Just two months earlier, Navalny had won 30% of the vote in a race for mayor of Moscow.

Then a year later, Navalny and his brother were accused of embezzling money, with Navalny receiving a suspended sentence while his brother was sent away for 3 ½ years in prison.  But it was the earlier conviction that prevented Navalny from running for office.

That said there is no guarantee Navalny will run, nor be allowed to, in 2018.

Finally, Sen. John McCain said this week that any attempt on the part of Donald Trump to “reset” relations with Russia is unacceptable.

“With the U.S. presidential transition underway, Vladimir Putin has said in recent days that he wants to improve relations with the United States,” McCain said in a statement.

“We should place as much faith in such statements as any other made by a former KGB agent who has plunged his country into tyranny, murdered his political opponents, invaded his neighbors, threatened America’s allies and attempted to undermine America’s elections,” said the senator.

China: President Xi Jinping spoke on the phone with President-elect Trump, with Xi pointing out that “the facts prove that cooperation is the only correct choice for China and the U.S.,” according to Chinese sources. According to Trump’s transition office, the two “established a clear sense of mutual respect for one another.”

I have posted various editorials from a Chinese government mouthpiece on both my “Hot Spots” and “Wall Street History” links, if you’re interested.  China has criticized President Obama for being stuck in a Cold War mentality, viewing the administration’s “pivot” to Asia as an attempt to contain China’s rise to global prominence.

In Hong Kong, the high court has ruled that two pro-independence lawmakers are disqualified from taking their seats in the Legislative Council.

Sixtus Leung and Yau Wai-ching refused to pledge allegiance to China when being sworn in last month.

Last week, Beijing preempted the court’s ruling by saying the two could not take their seats for refusing to take the oath.  Thousands then protested.

But there have been counter-protests against further independence for Hong Kong.

While Hong Kong is semi-autonomous under the “one country, two systems” framework in place since it was returned to China in 1997, its mini constitution, the Basic Law, gives Beijing the final say in interpreting the laws.

South Korea: Hundreds of thousands of South Koreans filled central Seoul on Saturday to demand the resignation of President Park Geun-hye, whose administration is paralyzed by a scandal involving an unofficial presidential adviser, who it is alleged manipulated Park and extorted large sums from Korean companies.  Park’s efforts to stem the crisis, including countless apologies, have failed thus far.

The main opposition party, though, has yet to call for Park’s resignation, preferring to see her power reduced to that of a figurehead with her five-year term not ending until early 2018.

Japan: Prime Minister Shinzo Abe was the first foreign leader to meet with President-elect Donald Trump on Thursday and Abe said he was confident of building trust with Trump as Abe sought clarity on campaign rhetoric from the president-elect that cast doubt on longstanding alliances.

Abe told reporters after, “The talks made me feel sure that we can build a relationship of trust,” describing his conversation as “candid” and held in a “warm atmosphere.”  [Reuters]

Philippines: Estimates on the number of dead in official police operations since president Rodrigo Duterte launched his antidrug crackdown June 30 now range to as high as 4,000.  And there are reports the wacko leader is contemplating martial law across the country.

Duterte is also backing the idea of a new world order led by China and Russia, adding that he might follow Moscow’s lead and withdraw from the International Criminal Court after western criticism of his war on drugs.

The president, on his way to the Asia-Pacific summit in Peru, deplored the “endless” killings suffered in conflicts around the world, declaring that “just because it’s America, it does not mean it’s good.”  [Michael Peel / Financial Times]

France: With the election of Donald Trump, there were a slew of articles on French far-right leader Marine Le Pen and her presidential bid.  Le Pen has been outspoken in her praise and congratulations for Trump, and, along with the Brexit vote, Le Pen is riding a wave of momentum for her ‘outsider’ candidacy.

All of France’s main pollsters are projecting Le Pen’s National Front party (FN) will take one of the top two spots in April’s first round, but that she would then lose in the run-off to the center-right Republicans’ candidate by a wide margin, now projected as 30 percentage points in a BVA poll if the race is between her and Alain Juppe.  If it’s former President Nicolas Sarkozy, the margin drops to 12 points, but still very wide.

There are growing fears of interference in next spring’s votes, however, from Russia.  Le Pen has borrowed from a Russian bank to fund FN and has promised closer ties with the Kremlin if elected.

Russia has long had an incentive in sowing “chaos” in Europe and a weakened NATO and EU, but to what extent will it, and can it, go regarding the vote?

Le Pen argues that French banks won’t lend to the National Front, “it’s a way they have found to stifle democracy,” she says.

Finland’s former ambassador in Moscow, Rene Nyberg, as said there was a “very sinister Russian connection” within the Front Nationale.

Colombia: The government and the country’s largest rebel group, FARC, announced a revised peace plan on Saturday, five weeks after the defeat of the original deal in a national referendum on Oct. 2.  But details were vague.

Random Musings

--As noted by Karl Rove in an op-ed for the Wall Street Journal, the number of ballots cast this year increased only 1.5% to 131.2 million from 129.2 million in 2012 (another million or so mostly from the West Coast still to be counted), even as the pool of eligible voters rose 5.5% to 227 million, according to the Census Bureau.

“In 2012 the Republicans and Democrats took 126.9 million votes. This year?  Only 123.7 million.  Third-party candidates grabbed their biggest share since 1996: 5.5%, which translates into 7.5 million votes.

“This is the fifth time in history that the winner of the Electoral College also lost the popular vote.  It is the 14th time that the winner didn’t receive 50% of ballots.  So far Mr. Trump has 61.3 million votes, or 46.8%, to Mrs. Clinton’s 62.4 million, or 47.7%.  Her popular-vote lead will likely grow as ballots trickle in from predominantly blue states.

“How do those figures compare with 2012?  Mr. Trump received about 317,000 more ballots than Mitt Romney, but also a slightly smaller – 0.5% - percentage of voters.  Mrs. Clinton received 3.5 million fewer ballots and 3.4% less than President Barack Obama.  Both candidates this year won fewer white votes – Mr. Trump 1.6 million and Mrs. Clinton 2.3 million – than four years ago.

“In other words, Mr. Trump didn’t win because he greatly expanded the GOP, but because Mrs. Clinton lost a significant chunk of the Obama coalition.  Compared with 2012 she dropped 1.8 million African-Americans, one million voters age 18-29, 1.8 million voters aged 30-44, 2.6 million Catholics, and nearly 4.5 million voters with family income of $30,000 or less.

“Because the Hispanic share of the electorate rose from 10% to 11%, Mrs. Clinton received nearly 9.4 million Latino votes, up 180,000 from Mr. Obama’s total in 2012.  But because Mr. Trump won 29% of Hispanics, up from Mr. Romney’s 27%, the president-elect won 4.2 million Latino votes, roughly 690,000 more than Mr. Romney.

“The dominant narrative is that Mr. Trump rode a wave of blue-collar, working-class support, created in large part by concerns about globalization.  The former interpretation, with caveats, is largely accurate; the latter less so.

“Working-class voters have been deserting the Democratic Party since the late 1960s.”

--A Washington Post-Schar School national poll found that more than 7 in 10 say the campaign made them angry and more than half feel stressed out by campaign news.

Nationally, just 3 in 10 Americans – 29 percent – say Trump has a mandate to carry out the agenda he presented during the campaign, while 59 percent say he should compromise with Democrats.

The 29 percent figure is sharply lower than the 50 percent who said the same for President Obama after his first election in 2008.

But 54 percent say they are optimistic about the coming year.

--A Washington Post-ABC News poll conducted immediately after Election Day, found 74 percent of all Americans say they accept the election of Trump as legitimate while 18 percent do not.

A 58 percent majority of Clinton supporters say they accept Trump’s election, while 33 percent do not.

Only 18 percent of whites who supported Clinton say Trump is not the legitimate winner, identical to the public overall, but fully 51 percent of black, Hispanic and other nonwhite Clinton supporters say Trump’s victory was illegitimate.

Nearly all of Trump’s supporters say he was elected legitimately, 99 percent.

--In a speech in Washington on Wednesday, Hillary Clinton urged supporters not to “lose heart, don’t give up on the values we share.”

“I know this isn’t easy.  I know that over the past week a lot of people have asked themselves whether America is the country we thought it was,” she said. “The division laid bare by the election runs deep.... But please listen to me when I say this: America is worth it.....I ask you to stay engaged...That’s how we get through this.”

Last Saturday, in a call with donors, Hillary cast blame for her loss on the announcement by the FBI director, James Comey, that he had revived the inquiry into her use of a private email server.

“There are lots of reasons why an election like this is not successful,” Mrs. Clinton said, according to a donor who relayed the remarks.  But, she added, “Our analysis is that Comey’s letter raising doubts that were groundless, baseless, proven to be, stopped our momentum.”

Clinton said the second letter from Comey, clearing her once again, two days before Election Day, was even more damaging, especially among white suburban women, who Clinton aides say, broke decidedly in Trump’s favor the last few weeks.

--Bernie Sanders / New York Times

“Millions of Americans registered a protest vote on Tuesday, expressing their fierce opposition to an economic and political system that puts wealthy and corporate interests over their own. I strongly supported Hillary Clinton, campaigned hard on her behalf, and believed she was the right choice on Election Day.  But Donald J. Trump won the White House because his campaign rhetoric successfully tapped into a very real and justified anger, an anger that many traditional Democrats feel.

“I am saddened, but not surprised, by the outcome.  It is no shock to me that millions of people who voted for Mr. Trump did so because they are sick and tired of the economic, political and media status quo.

“Working families watch as politicians get campaign financial support from billionaires and corporate interests – and then ignore the needs of ordinary Americans.  Over the last 30 years, too many Americans were sold out by their corporate bosses.  They work longer hours for lower wages as they see decent paying jobs go to China, Mexico or some other low-wage country.  They are tired of having chief executives make 300 times what they do, while 52 percent of all new income goes to the top 1 percent.  Many of their once beautiful rural towns have depopulated, their downtown stores are shuttered, and their kids are leaving home because there are no jobs – all while corporations suck the wealth out of their communities and stuff them into offshore accounts.

“Working Americans can’t afford decent, quality child care for their children.  They can’t send their kids to college, and they have nothing in the bank as they head into retirement.  In many parts of the country they can’t find affordable housing, and they find the cost of health insurance much too high.  Too many families exist in despair as drugs, alcohol and suicide cut life short for a growing number of people.

“President-elect Trump is right:  The American people want change.  But what kind of change will he be offering them?  Will he have the courage to stand up to the most powerful people in this country who are responsible for the economic pain that so many working families, feel, or will he turn the anger of the majority against minorities, immigrants, the poor and the helpless?....

“When my presidential campaign came to an end, I pledged to my supporters that the political revolution would continue.  And now, more than ever, that must happen.  We are the wealthiest nation in the history of the world.  When we stand together and don’t let demagogues divide us up by race, gender or national origin, there is nothing we cannot accomplish.  We must go forward, not backward.”

--Editorial / Wall Street Journal...on how we select presidents....

“One feature of the Electoral College is that it picks a decisive winner as early as possible.  Mr. Trump’s victory across the Midwest gave him a solid majority in the Electoral College that everyone acknowledged.  There was no waiting for absentee ballots or recounts.  If you think a recount in one state like Florida in 2000 was corrosive, imagine a tight popular vote with contested results in 50 states and thousands of counties. The opportunities for fraud, or claims of fraud, would be endless.

“The system also tends to narrow the field to two candidates who have a plausible path to 270 electoral votes.  This is a weakness when the major parties produce two unpopular nominees, but that is an argument for the parties choosing better candidates.  The Electoral College reduces that relevance of fringe candidates who could otherwise force themselves into importance in a national poll.  Most voters in the end abandon third-party candidates so they won’t ‘waste’ their vote. That’s what happened this year as voters moved away from Gary Johnson or Jill Stein.

“Democrats gripe that their candidate won the popular vote in six of the past seven presidential elections but won only four.  Yet before Tuesday they were saying Mrs. Clinton had the Electoral College advantage even if she lost the popular vote.  They could be right in the future. The point for the country is whether the Electoral College helps elect a clear and legitimate winner, and this year it did so again.

“The Founders selected the system in part to moderate the worst impulses of a concentrated majority.  Even after last week’s political earthquake.  Alexander Hamilton’s words for the Electoral College in Federalist No. 68 hold up: ‘If the manner of it be not perfect, it is at least excellent.’”

--As expected, Senate Democrats elected New York Sen. Charles Schumer as their next leader, with Schumer saying he was bringing in more lawmakers to leadership, including Sen. Bernie Sanders, as well as centrist Sen. Joe Manchin (W. Va.).

Manchin has been rumored to be switching to the Republican side and he’s up for re-election in 2018.  Others Schumer is looking to are aimed at amplifying the coalition of minority and younger voters who elected Barack Obama, as well as the working-class white voters who defected to the GOP.

And among others tabbed for a leadership slot is Sen. Elizabeth Warren (Mass.).  Oh joy.

Republicans re-elected Sen. Mitch McConnell (Ky.) as their majority leader by acclamation.

--Meanwhile, House Speaker Paul Ryan was re-elected for the top leadership post and nominated in a unanimous voice vote, with Rep. Kevin McCarthy (R-Calif.) unanimously reelected to another two-year term as majority leader, while Rep. Steve Scalise (R-La.) was reelected majority whip.

The full House still has to approve of Ryan on Jan. 3, but he needs just a simple majority.

Pretty quick turnaround from just about ten days ago when some rank-and-file Republicans were saying Ryan’s future was in jeopardy.

--Following Louisiana’s Senate run-off in January, Republicans will hold a 52-48 advantage, so attention immediately turns to 2018 and whereas the 2016 Senate map favored the Democrats, which they failed to take advantage of, picking up just two seats, 2018, today, favors Republicans, with the GOP defending just eight seats, while Democrats fight for 23 – plus another two held by independents who caucus with Democrats. 

--Jonathan Swan / The Hill

“Former Breitbart New executive Stephen Bannon is poised to play a significant role in foreign policy and national security in the Trump administration (after being named chief strategist, with RNC Chairman Reince Priebus serving as chief of staff).

“Bannon is best known for his domestic positions, particularly his populist nationalist views on trade and immigration.  His detractors accuse him of trafficking in racism and anti-Semitism, which he denies; his defenders believe he has a rare gift for identifying and channeling the nationalist and populist energy building through America and around the world.

“Less discussed is Bannon’s fascination with the military and global affairs.  Sources who know Bannon say he’s likely to be an influential adviser to Trump in the international arena....

“Bannon admires right-wing nationalist and hardline illegal immigration opponents in Europe and elsewhere. He wants to work more closely with them and sees them as part of a worldwide movement to overthrow the ‘globalists,’ according to multiple sources familiar with his thinking....

“The new Breitbart Paris website will campaign aggressively to help (Marine) Le Pen get elected as the next president of France, according to a source....

“Former Breitbart employees interviewed by The Hill – including those who strongly dislike Bannon – level all manner of charges against him.

“They say he’s extreme, dictatorial and verbally abusive. They say he’s got a short attention span and urges his reporters to go ‘buck wild,’ meaning to take their attacks on ideological enemies to extremes not accepted in conventional journalism  They say he uses Breitbart as a tool to gain power.

“None of them recalls hearing Bannon make an anti-Semitic remark. One source recalls feeling uncomfortable, listening to Bannon ranting about black rioters in Ferguson, Mo.  These sources criticize Bannon for binding himself to a movement that they say has virulent anti-Semitism and racism within it.

“ ‘While he might be playing footsie with the alt-right, and he doesn’t have a problem engaging anti-Semites...he is not himself an anti-Semite,’ said a former Breitbart employee who fell out with Bannon....

“Bannon admires what Sens. Bernie Sanders and Elizabeth Warren have done on the left in generating populist energy and stoking opposition to trade deals.  And he’s a big fan of Rep. Tulsi Gabbard, the Hawaii Democrat who frustrates progressives due to her more right-leaning stances on guns, refugees and Islamic extremism.”  [Ed. I am a fan of Gabbard’s as well.]

Editorial / Wall Street Journal

“We’ve never met Mr. Bannon, and we don’t presume to know his character, but maybe one lesson of 2016 is that deciding that Americans who disagree with you are bigots is a losing strategy.  Politics would be healthier if accusations of racism in the country that twice elected the first black President were reserved for more serious use....

“(Bannon) called Breitbart ‘the platform for the alt-right’ in July, referring to the online movement that sometimes trafficks in racism and anti-Semitism.  Breitbart continues to prosecute an especially ugly campaign against the Chobani yogurt company and founder Hamdi Ulukaya for employing Iraqi and Afghan refugees who have qualified to live in the U.S.

“Then again, a yellow press is not a new phenomenon and the obligation of the mainstream media is to maintain credibility so readers don’t turn to other options.  That so many reporters and editors treated Trump voters like Martian invaders hasn’t helped.  But the key point is that Mr. Trump’s political opponents have an interest in exaggerating the alt-right’s influence – which is marginal at best – for the purposes of guilt-by-association.  Breitbart publishes offensive items, but we doubt the site will inform the State of the Union address.  Internet trolls yearn for their targets to respond so they seem influential, but the best response is usually not to take the bait.”

--Donna Brazile is ticked off at CNN for ripping her “a new one” instead of letting her defend herself against leaked emails showing she gave Hillary Clinton a sneak peek at debate questions.

Too bad, Donna.  [She remains interim chair of the Democratic National Committee.]

--Andrea Peyser / New York Post

“There will be a politically leftist woman named Clinton in the highest reaches of government, Democratic wags are roaring.  Just not the one we all might have expected.

“It’s Chelsea’s turn.

“She’ll make a move sooner rather than later,’ a heavy hitter in New York state Democratic politics assures me.  ‘What a great way to avenge her mother.’

“In the age of The Donald, Chelsea’s lack of a law degree or political experience could propel her all the way to the White House, the thinking goes.”

Noooo!!!!

--From the New York Post: “The president of the university founded by Thomas Jefferson is being asked to stop quoting Thomas Jefferson.

“A Friday letter signed by 469 students and professors objected to University of Virginia President Theresa Sullivan quoting the third U.S. president and Declaration of Independence author in a campus email because Jefferson owned slaves, The Cavalier Daily reported.

“ ‘I think that Jefferson is often celebrated for his accomplishments with little or no acknowledgement of the atrocities he committed against hundreds of human beings,’ said assistant psychology professor Noelle Hurd, who drafted the letter....

“The trouble started for Sullivan with a Nov. 9 email she sent to try to urge unity following the presidential election.

“ ‘Thomas Jefferson wrote to a friend that University of Virginia students ‘are not of ordinary significance only: they are exactly the persons who are to succeed to the government of our country, and to rule its future enmities, its friendships and fortunes,’’ Sullivan wrote.  ‘I encourage today’s U.Va students to embrace that responsibility.’....

“Politics professor Lawrie Balfour, who signed the letter, said Jefferson’s words have often troubled her during her 15-year tenure at the university.

“ ‘Again and again, I have found that at moments when the community needs reassurance and Jefferson appears, it undoes I think the really important work the administrators and others are trying to do,’ Balfour said.”

Yeesh. 

--Rich Lowry / New York Post

“Pity the anti-Trump protesters thronging the streets of American cities.

“Apparently, no one ever told them that they live in a geographically, economically and ideologically varied nation and that about half of its inhabitants might support a Republican candidate for president.  They mistook the country for the campus of Oberlin College.

“The news that it actually isn’t arrived with the force of a thunderclap on election night.  The shock of Donald Trump’s election has occasioned tears, rending of garments and days of protests showcasing the rank infantilism of the American Left....

“When was the last time that GOP protesters ran out of control and burned down local business establishments? Tea Party rallies were famous for their orderliness – participants in a massive rally on the Mall in Washington, D.C., even picked up their own trash.

“It is left-wing protests that invariably devolve into law-breaking and so it was that the same kids who think Donald Trump is too divisive were soon smashing windows and throwing projectiles at police on behalf of their supposedly more open-minded vision of America.  (The left’s street protesters act as if there is no social or political problem that can’t be addressed by hurling things at cops.)

“The same media that would’ve denounced pro-Trump protests as a threat to democracy has treated the anti-Trump protests as a natural symptom of a divided country. Erupting in rage at the result of an election went from a grave offense against our system to the latest front in the battle for social justice right around the time that the Upper Midwest was called for Trump....

“A party that considers it forbidden to say ‘All lives matter’ because it will offend the enforcers of political correctness is a party that is going to have trouble appealing to Middle America.

“One anti-Trump protester was seen the other day holding a sign reading, ‘Your vote was a hate crime.’ It’s hard to imagine a better distillation of the coercive small-mindedness that prevails on college campuses.”

--Amy Schumer on the election result: “People who voted for him (Trump) you are weak.  You are not just misinformed.  You didn’t even attempt information...[Hillary] was fighting to take care of you kicking and screaming babies.”

Really, she said that.

“West Wing” creator Aaron Sorkin wrote a letter to his daughter and ex-wife, which he published on Vanity Fair’s website.

“Well, the world changed last night in a way I couldn’t protect us from.” 

As the New York Post’s Maureen Callahan observed, “Nothing smug or sexist about that.”

--Maureen Dowd / New York Times

“How can it be that in the end, Barack Obama did not understand the Obama revolution?

“He came away from that elated whoosh in 2008 not comprehending that many voters viewed him as the escape hatch from Clinton Inc.  It never would have occurred to anyone then – even the Clintons – that President Obama would be the one to brush away any aversions and objections, take us by the elbow, and firmly steer us back to Clinton Inc.

“Voters waited in line for hours at those early Obama rallies because they wanted thunderous change.  They wanted a newcomer who didn’t look like the old dudes on our money, someone who would bust up the incestuous system and give us, as the poster said, hope.

“But Obama lost touch with his revolutionary side and settled comfortably into being an Ivy League East Coast cerebral elitist who hung out with celebrities, lectured Congress and scorned the art of political persuasion.

“He was cozy with Silicon Valley and dismissive of working-class voters anxious about globalization, shrugging that ‘We’re part of an interconnected global economy now, and there’s no going back from that.’  He was dismissive of Americans anxious about terrorism after the Paris attacks, noting that you’d be more likely to die from a bathtub fall....

“[Meanwhile]...As she cuddled up to Wall Street, Hillary forgot about the forgotten man – and woman. Bill complained in meetings that campaign manager Robby Mook was ignoring white working-class voters, according to Politico, but his concern was waved off as the plea of ‘a talented but aging politician who simply refused to accept the new Democratic map.’

“They should have listened. Bill ousted the first President Bush by focusing on ‘you’ rather than ‘I,’ what the voters wanted.  Hillary’s campaign message boiled down to ‘It’s my turn, dammit.’

“President Obama, trying to hoist Hillary over the finish line, offered a solipsistic message, saying it would be ‘a personal insult’ if African-Americans did not vote for Hillary, and an accusatory message, suggesting that sexism was stopping men from voting for Hillary.

“In September, Hillary stumbled when she dismissed half of Trump supporters as a ‘basket of deplorables.’  Tellingly, the snooty remarks were made at a high-dollar fund-raiser hosted by Barbra Streisand and other sparklies at Cipriani Wall Street.

“Hillary should have spent less time collecting money on Wall Street and more time collecting votes in Wisconsin.”

--Donald Trump agreed late Friday to pay $25 million to settle fraud lawsuits over his Trump University real estate seminars, in what New York Attorney General Eric Schneiderman called a “stunning reversal” for the president-elect.  Trump had denied any wrongdoing during the campaign.  I was waiting for a “60 Minutes” piece this fall.  Plus you had Trump’s claim the judge overseeing two of the cases (Judge Curiel) was biased because he was of Mexican ancestry, which was about the final straw for me, because Trump was such an idiot about it.  He couldn’t see that at the time, the judge was doing him a huge favor by postponing any trial or hearings until after the election.

Trump will not admit any wrongdoing under the agreement. 

The settlement comes as Trump was set to go to trial later this month over civil claims filed by a number of students.

--Los Angeles Police Chief Charlie Beck said he did not intend to change the LAPD’s approach to immigration enforcement, despite pledges by President-elect Trump to toughen federal immigration laws and increase deportations.

For decades, the LAPD has distanced itself from federal immigration guidelines, with officers prohibited from initiating contact with someone solely to determine whether they are in the country legally, mandated since 1979 by then-chief Daryl Gates.  Other cities are following L.A.’s lead.

--Through October, New York City had 286 murders, while Chicago had recorded 625 (and now 656 through Monday), despite having a population one-third the size of New York’s.

New York police officials say their success is largely attributable to the city’s targeting deployment of cops on foot patrol.  A source told the New York Post: “Most cities only place foot posts in business districts.  We put our foot posts in the most violent areas of the city, as well as our business district.  It’s not a fun assignment, but it’s critical to keeping people safe.”

As the Chicago Tribune has been reporting, what’s even more worrisome there is that the violence is beginning to creep into the better-off neighborhoods.

--Comedian Dave Chappelle made a rare appearance on “Saturday Night Live” last week and his opening monologue was interesting, and much discussed in certain circles afterwards.  Having printed out a transcript, I can’t help but cite, for the record, his conclusion.

Concerning a BET sponsored party at the White House he had attended, where “everybody in there was black – except for Bradley Cooper, for some reason....

“And on the walls were pictures of all the presidents, of the past.  Now, I’m not sure if this is true, but to my knowledge the first black person that was officially invited to the White House was Frederick Douglass. They stopped him at the gates.  Abraham Lincoln had to walk out himself and escort Frederik Douglass into the White House, and it didn’t happen again, as far as I know, until Roosevelt was president.  Roosevelt was president, he had a black guy over and got so much flack from the media that he literally said, ‘I will never have a n----r in this house again.’

“I thought about that, and I looked at that black room, and saw all those black faces, and Bradley, and I saw how happy everybody was. These people who had been historically disenfranchised. It made me feel hopeful and it made me feel proud to be an American and it made me very happy about the prospects of our country.

“So, in that spirit, I’m wishing Donald Trump luck. And I’m going to give him a chance, and we, the historically disenfranchised, demand that he give us one too.”

On a lighter note:

“All my black friends who have money said the same thing when Trump got elected: ‘That’s it, bro, I’m out.  I’m leaving the country, you coming with us?’  Nah, I’m good dog, I’m going to stay here and get this tax break, see how it works out.”

And....

“I watched a white riot in Portland, Ore., on television the other night. News said they did a million dollars’ worth of damage. Every black person was watching that like, ‘amateurs.’”

--Officials have confirmed to a local newspaper that the engineer operating the commuter train that plowed into Hoboken (N.J.) Terminal in September, killing a woman, had sleep apnea, which can lead to daytime drowsiness.  The NTSB, though, has not released its findings.

--The World Health Organization declared an end to its global health emergency over the spread of the Zika virus, which is rather strange as many officials are still wrestling with the epidemic.

The WHO said it ended the emergency because Zika is now shown to be another dangerous mosquito-borne disease like malaria or yellow fever and should be treated as such...an ongoing problem and not an emergency.  I think this is a big mistake.

--I just have to note a story I saw in the November issue of The Smithsonian, concerning “the newest wonder of the world – the 35.4 mile Gotthard Base Tunnel (in the Swiss Alps), the longest tunnel on earth, a $12 billion marvel that took 17 years to dig and will begin full operation on Dec. 11.”

Here’s what got me.

“Drill heads fitted with 58 seventeen-inch rock-chomping steel ‘roller cutters’ pushed against the stone with a 26-ton force, progressing at 130 feet or so per day. When the north and south tunnels finally met in the middle, after roughly 18 miles of drilling from either direction, they were off by only a few centimeters.”

A few centimeters?!  Wow.  And if you’re wondering what happened to all the rock excavated, some 28 million tons, “it was reportedly reused, much of it to form the tunnels’ concrete lining.”

The tunnel will whisk up to 15,000 passengers per day at 155 miles per hour, cutting the ride from Zurich to Milan from four hours to three.  But the real boom will be in moving goods, as it will accommodate 260 cargo trains per day.

--Finally, according to Stephen Hawking, now 74 (incredibly), if humanity survives the rise of artificial intelligence, the ravages of climate change and the threat of nuclear terrorism in the next century, it doesn’t mean we’re home free.

The renowned theoretical physicist said we have 1,000 years to colonize another planet.  Remaining on Earth any longer risks encountering mass extinction.

Heck, 1,000 years?  Realistically, make that 100.  Or 10.

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

God bless America.

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Gold $1207
Oil $45.58

Returns for the week 11/14-11/18

Dow Jones  +0.1%  [18867]
S&P 500  +0.8%  [2181]
S&P MidCap  +2.8%
Russell 2000  +2.6%
Nasdaq  +1.6%  [5321]

Returns for the period 1/1/16-11/18/16

Dow Jones  +8.3%
S&P 500  +6.8%
S&P MidCap  +14.8%
Russell 2000  +15.8%
Nasdaq  +6.3%

Bulls 51.0
Bears 23.5 [Source: Investors Intelligence...reminder, contrarian indicator.  You should grow concerned if Bull figure rises above 56 or so, and ‘Sell, sell, sell!’ when it hits 60.  Half-kidding.]

Have a great week.  Happy Thanksgiving!  When the dinner talk turns to the Election and begins to get heated, just point to the window and go, “Omigod! A meteor!”

Brian Trumbore

 

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