Week in Review

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Week in Review

07/01/2017

For the week 6/26-6/30

[Posted 11:00 PM ET, Friday]

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Edition 951

The other day, I was thinking of how most of us grew up, after watching the reaction to President Trump’s tweets against MSNBC’s Mika Brzezinski and Joe Scarborough, similar to other attacks of Mr. Trump’s, whether it was disparaging “Little Marco,” or “Lyin’ Ted,” or Lyin’ Ted’s wife’s looks, and these were his fellow Republicans.  Why? I mused in these pages at the time.  What makes him do this?

So I was reminiscing about my home town of Summit, N.J., and how our elementary schools were mostly named after presidents and Founding Fathers, as I’m sure most of yours were.  In Summit we had (some have closed over the years) Roosevelt, Wilson, Franklin, Jefferson and Washington.

We all had the same photos to admire, portraits of Washington and Lincoln in the classroom; maybe a timeline of the presidents.  And we’d do the Pledge of Allegiance, which I’m assuming everyone in the country of a certain age still does today.  It was all part of basic civics, learning what it is to be an American. 

I was in elementary school from 1964 to 1970 and we didn’t have too many immigrants at my particular school, Brayton, but when one showed up, like an old friend Nuri from Romania, you saw how uncomfortable they were initially and most of us were brought up the right way...we did what we could to make them feel welcome.  I hope I did I good job in this area. I know I was raised to treat people with respect, particularly adults and people of authority, like policemen, and for all the turmoil that was going on in our nation in the 60s and early ‘70s, for most of us these life lessons carried through to the rest of our days.

So I was more than a bit disheartened to see President Trump once again get down in the gutter for absolutely zero reason. It is beyond unfathomable he can’t just ignore the kind of criticism from certain segments of the population and media that, yes, all presidents have faced.... Republican and Democrat.  But never have we had a president act like this.

I am sick and tired of Trump’s surrogates who say this is “just Trump fighting back.”  Why? Why does he even have to acknowledge the critics?  He’s the freakin’ president!  But he keeps acting like Donald Trump, bully New York real estate developer.

Here’s my bottom line, though.  I know Trump will keep his base, but this is only about 35%, and  I’ve said this countless times before, watch what happens with Independents.  Republicans can’t win without them and since last November the percentage supporting him has been shrinking consistently.

I know Donald Trump isn’t going to change.  I just wish someone could explain to me why I’m supposed to think, just because I’m a Republican, that this is good or acceptable.

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I have to get down for the archives some of the latest coverage of the tweetstorm and Republican reaction, both here and in “Random Musings.”

Editorial / Washington Post

“After his latest execrable tweets, it’s obvious that there is no point in urging President Trump to act with greater dignity, respect for his office or, for that matter, self-respect.  It isn’t going to happen.  That makes it all the more urgent for the rest of us to think about how to safeguard civility and democratic values until his presidency ends.

“It would be wrong to say that Mr. Trump’s attacks on Mika Brzezinski and Joe Scarborough Thursday were shocking, because his boorishness no longer can shock. But the hateful insults directed at the MSNBC co-hosts (and, in Mr. Scarborough’s case, Post columnist) did seem to take the capital city’s collective breath away....

“What gives us hope is the conviction that the American people are better than the misogyny and rudeness we see spewing from the White House.  Our politics have always been rough-and-tumble, but most of us don’t want to see this kind of ugliness become the dominant trait. We should all be focused on preserving a little flame of decency so that, whenever the Trump era ends, that flame can be rekindled into the kind of discourse that would make the country proud again.”

Mika Brzezinski and Joe Scarborough / Washington Post

“President Trump launched personal attacks against us Thursday, but our concerns about his unmoored behavior go far beyond the personal. America’s leaders and allies are asking themselves yet again whether this man is fit to be president. We have our doubts, but we both are certain that the man is not mentally equipped to continue watching our show, ‘Morning Joe.’

“The president’s unhealthy obsession with our show has been in the public record for months, and we are seldom surprised by his posting nasty tweets about us.  During the campaign, the Republican nominee called Mika ‘neurotic’ and promised to attack us personally after the campaign ended. This year, top White House staff members warned that the National Enquirer was planning to publish a negative article about us unless we begged the president to have the story spiked.  We ignored their desperate pleas....

“For those lucky enough to miss Thursday’s West Wing temper tantrum, the president continued a year-long habit of lashing out at ‘Morning Joe’ while claiming to never watch it....

“During the height of the 2016 presidential campaign, Joe often listened to Trump staff members complain about their boss’s erratic behavior, including a top campaign official who was as close to the Republican candidate as anyone.

“We, too, have noticed a change in his behavior over the past few years. Perhaps that is why we were neither shocked nor insulted by the president’s personal attack. The Donald Trump we knew before the campaign was a flawed character but one who still seemed capable of keeping his worst instincts in check.” [The National Enquirer angle has legs if true.]

[Ed. note: I’m trying to follow long-time reader Richard H.’s suggestion this week to highlight the longer quotes to distinguish them from everything else I’m writing.  Enjoy C.R., Richard.]

The New York Post issued its shortest editorial ever. Simply this:

“Stop.  Just stop.”

Republicans Delay Vote on Healthcare Reform

Senate Majority Leader Mitch McConnell (R-Ky.) vowed to bring the Senate’s version of repealing and replacing ObamaCare to a vote on Thursday, but with a slim 52-48 margin to begin with, Republicans couldn’t afford more than two ‘no’ votes and soon there were five, for starters, against, and McConnell was forced to table it Tuesday until after the Senate returns from its Fourth of July recess.

But after a meeting with all the Republican senators at the White House that day, McConnell said the “status quo is not acceptable or sustainable.”

[It didn’t help that the Congressional Budget Office on Monday released its score of the Senate plan and it would result in 22 million more people uninsured, though cut the cumulative federal deficit by $321 billion in the next decade compared with the current Affordable Care Act.  The $321 billion figure was then used by leadership to try to entice more Republicans into supporting the plan.   But the CBO’s projections are always way off compared to reality. See below on their federal budget deficit projection.]

The battle in the Senate is between moderate and conservative Republicans* and making significant changes to the Senate’s rollback of Medicaid, or at least restricting its rate of growth.  The debate wasn’t helped by a different CBO estimate Thursday that showed the Republican plan would result in 35 percent less spending on Medicaid than under current law by 2036, compared with a 26 percent decrease in the first decade.

*Some conservatives believe the initial proposal left too much of ObamaCare in place.

McConnell is attempting to rewrite his original proposal to placate the moderates by providing tens of billions more for opioid treatment and assistance to low- and moderate-income Americans, and by Thursday afternoon, Senate leaders had agreed to dedicate $45 billion to opioid funding to placate the likes of Ohio’s Rob Portman and West Virginia’s Shelly Moore Capito.  Last week’s draft included only $2 billion.

[An analysis put out by the Blue Cross Blue Shield Association this week revealed that an analysis of millions of medical claims shows opioid-use disorder surged nearly 500% over the past seven years.]

Republicans are also now looking at keeping a 3.8 percent tax on individuals making over $200,000 a year, and married couples earning more than $250,000. Repealing it, as was the plan, would cost the federal government $172 billion in revenue over the next 10 years, according to the CBO.

Medicaid is a bigger part of the debate in the Senate than it was in the House because 20 Republican senators represent states that accepted the expansion of it as part of ObamaCare, and the concern is over how any cuts to expected levels of funding would impact constituents.  Many of these senators advocated a seven-year phaseout of the extra federal funds for Medicaid expansion, while the House bill ended the expansion in 2020.

So what of the levels of Medicaid funding?  In 2017, the federal government spent $393 billion on Medicaid and if no change is made to existing law, that spending will be $624 billion by 2026, according to the CBO, which is estimating more states would expand Medicaid, though it gives no real specifics.

Under the Senate bill, however, the CBO estimates Medicaid spending in 2016 would be $464 billion, or a reduction of $772 billion over 10 years, from 2017 to 2016.

But spending still increases, though you can see why many call the Senate bill a “cut.”  Yes, it’s a cut relative to current law and projections.

As for the polls and how Americans feel about GOP efforts to repeal and replace ObamaCare, a Quinnipiac University national poll released Wednesday found disapproval of various versions of the Republican plan ranges from 56-21 percent to 62-17 percent.

Republican approval is 37-23, but every other listed party, gender, education, age or racial group is overwhelmingly opposed.

And American voters oppose 71-24, including 53-39 among Republicans, decreasing federal funding for Medicaid.

A new USA Today/Suffolk University Poll finds that just 12% of Americans support the Senate Republican health care plan.  53% say Congress should either leave ObamaCare alone or work to fix its problems while keeping its framework intact.

But eight in 10 Republicans support repeal, and close to a third say the law should be repealed even if a replacement health care plan isn’t ready yet.  Just 11% of independents and 2% of Democrats feel that way.

For the GOP, the problem is just 26% of Republicans support the Senate bill; 17% oppose it.  52% say they need more information.

[Friday, Trump tweeted Republican senators should immediately repeal ObamaCare and replace it later, if they can’t strike a deal, which is a total reversal of the president’s earlier position.  This came after one of my faves, Nebraska Sen. Ben Sasse, floated the idea on “Fox and Friends” Friday morning, though this has also been the position of Kentucky Sen. Rand Paul.]

Opinion....

The National Retail Federation’s Neil Trautwein, in an op-ed for USA Today:

“To suggest that Congress must choose between fixing the Affordable Care Act and passing the Senate’s Better Care Reconciliation Act misses a key point: Even if the Senate bill becomes law, we will still need to fix the ACA....

“Reconciliation will affect the ACA unevenly because it allows only a partial repeal. With either party able to block the other’s priorities, the need for bipartisan legislation becomes acute. Only by working together can lawmakers surmount the filibuster bar to pass the additional changes needed.”

The NRF has long opposed passage of ObamaCare and has sought its repeal while working with Congress to mitigate the impact of its most onerous provisions.

Editorial / Wall Street Journal

“With the Senate health-care bill delayed for now, the conservative and more centrist GOP wings need to bridge a philosophical gap to succeed. The outcome of this debate will define what the Republican Party stands for – and whether the problems of America’s entitlement state can ever be solved.

“The biggest policy divide concerns the future of Medicaid, and here the problem is the moderates who are acting like liberals.  Despite their campaign rhetoric, some Senators now want to ratify ObamaCare’s Medicaid expansion as an unrepeatable and unreformable welfare program.

“Most of the Affordable Care Act’s insurance coverage gains have come from opening Medicaid eligibility beyond its original goal of helping the poor and disabled to include prime-age, able-bodied adults. The federal-state program has become the world’s single largest insurer by enrollment, covering more people than Medicare or the British National Health Service.  Total spending grew 18% in 2015 and 17% in 2016 in the 29 states that expanded....

‘The Senate bill attempts to arrest this unsustainable surge by moving to per capita spending caps from an open-ended entitlement. When states spend more now, they generate an automatic payment from the feds. The goal is to contain costs and give Governors the incentive and flexibility to manage their programs.

“Meanwhile, four long years from now, the bill would start to phase-down the state payment formula for old and new Medicaid beneficiaries to equal rates. Governors ought to prioritize the most urgent needs.

“This would be the largest entitlement reform ever while still protecting the most vulnerable. The bill is carefully designed to avoid overreach and would save taxpayers $772 billion compared with what Medicaid would otherwise spend under current law, according to the Congressional Budget Office.  This does not ‘cut’ spending; it merely slows the rate of increase....

“(But) some Senators would like to see more generous growth rates, while others favor waiting six or seven years, rather than four, to start the phase-down of the expansion.

“The danger is that both approaches could dilute reform to the point where it’s not worth the political trouble and wouldn’t improve the federal fisc.  Postponing change until after 2020 means waiting a political eternity, and a formula that on paper says the government will cut spending in the future is already uncertain enough fiscal discipline.  It certainly doesn’t qualify as cruel, barbaric, or any of the other adjectives the bill’s critics are abusing....

“Some 65% of the federal budget is mandatory spending, meaning Social Security and the health-care entitlements. Interest on the debt is 6% and more than half of the discretionary budget flows to defense.  The GOP can’t meaningfully reform government or increase defense spending without fixing Medicaid and replacing ObamaCare....

“If Republicans fail to pass a bill or weaken the Senate bill so much that it won’t make a difference, the result will be a calamity of a different kind. GOP Governors who declined to join ObamaCare’s new Medicaid will conclude that the expansion is permanent and the political pressure will rise to take the federal bribe. Medicaid costs will soar, and national Republicans will show that they’re incapable of doing what voters sent them to Washington to do.”

Needless to say, I agree with every single word of the above.

Yes, once people have a benefit (like Medicaid), you can’t take it away, which is the very definition of an entitlement.

Democratic Minority Leader Sen. Charles Schumer (N.Y.) said it would be easy to gain Democrats’ support.  Just abandon all cuts to Medicaid.

We are so screwed.

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On another big issue, President Trump’s controversial travel ban, Monday, the Supreme Court issued a ruling upholding the temporary ban, a major triumph for the president.

But the judges provided a major exception, for those who have “a credible claim of bona fide relationship” with someone in the U.S.

So citizens of the six mainly Muslim countries and all refugees with a close relative in the U.S., such as a spouse, parent, child or sibling, will potentially be allowed in.

Grandparents, aunts, uncles, nephews and nieces are not considered to be “bona fide” relations.

Reminder, the six countries are Iran, Libya, Syria, Somalia, Sudan and Yemen, as well as all refugees.

As for the looming debt ceiling debate, the new drop-dead deadline for lawmakers to increase the government’s borrowing limit is early to mid-October.

At the same time, the CBO predicted the federal budget deficit will spike to $693 billion this year, $134bn more than it predicted in January, mostly because of slipping tax revenue projections.

Finally, the Group of 20 summit is in Germany next week and the White House announced on Thursday that President Trump will meet with Russian President Vladimir Putin on the sidelines, with no agenda set as yet for what will be the first meeting of the two.  I do wish Trump at some point in the next few years would criticize Russia and engage Putin on his interference in our elections, but I’m not holding my breath.

I am, however, expecting Trump to stick his foot in his mouth in Hamburg and move the markets, not for the better.

Opinion, on the overall Trump agenda....

Editorial / The Economist

“July 4th ought to bring Americans together.  It is a day to celebrate how 13 young colonies united against British rule to begin their great experiment in popular government.  But this July 4th Americans are riven by mutual incomprehension: between Republicans and Democrats, yes, but also between factory workers and university students, country folk and city-dwellers.  And then there is President Donald Trump, not only a symptom of America’s divisions but a cause of them, too.

“Mr. Trump won power partly because he spoke for voters who feel that the system is working against them. He promised that, by dredging Washington of the elites and lobbyists too stupid or self-serving to act for the whole nation, he would fix America’s politics.

“His approach is not working. Five months into his first term, Mr. Trump presides over a political culture that is even more poisonous that when he took office.  His core votes are remarkably loyal.  Many businesspeople still believe that he will bring tax cuts and deregulation.  But their optimism stands on ever-shakier ground. The Trump presidency has been plagued by poor judgment and missed opportunities. The federal government is already showing the strain.  Sooner or later, the harm will spread beyond the beltway and into the economy....

“In a federal system, the states and big cities can be islands of competence amid the dysfunction. America’s economy is seemingly in rude health, with stock markets near their all-time highs. The country dominates global tech and finance, and its oil and gas producers have more clout than at any time since the 1970s.

“Those are huge strengths.  But they only mitigate the damage being done in Washington. Health-care reform affects a sixth of the economy. Suspicion and mistrust corrode all they touch.  If the ablest Americans shun a career in public service, the bureaucracy will bear the scars.  Besides, a bad president also imposes opportunity costs. The rising monopoly power of companies has gone unchallenged.  Schools and training fall short even as automation and artificial intelligence are about to transform the nature of work.  If Mr. Trump serves a full eight years – which, despite attacks from his critics, is possible – the price of paralysis and incompetence could be huge....

“July 4th is a time to remember that America has renewed itself in the past; think of Theodore Roosevelt’s creation of a modern, professional state, FDR’s New Deal, and the Reagan revolution.  In principle it is not too late for Mr. Trump to embrace bipartisanship and address the real issues.  In practice, it is ever clearer that he is incapable of bringing about such a renaissance.  That will fall to his successor.”

Wall Street

As the quarter wrapped up, there was some economic news to report.  May durable goods came in worse than expected, -1.1%, while May personal income was a tick better than forecast, 0.4%, with consumption (consumer spending) in line, 0.1%.  The Fed’s preferred inflation barometer, the personal consumption expenditure index, on core, was 0.1%, 1.4% year-over-year; i.e., still very tame.

But the Chicago purchasing managers index for June, expected to come in at 58.1 (50 being the dividing line between growth and contraction), was 65.7, the highest score since May 2014.

And we had the final look at first-quarter GDP and it ticked up from a previous 1.2% annualized pace to 1.4%.

As for the second quarter, the Atlanta Fed’s GDP Now indicator ticked down this week to 2.7%, which is generally near consensus.  Should we hit this number, President Trump will crow for months.

[The IMF lowered its U.S. GDP forecast to 2.1% this year, down from 2.3%, and reduced 2018 to 2.1% from 2.5% due to the failure to deliver on the Trump growth agenda, including the failure of a healthcare plan, as well as having to deal with the ongoing Russia investigation. The IMF also cited the administration’s “extremely optimistic” budget projections as being unrealistic.]

Separately, the Federal Reserve gave the green light to the biggest U.S. banks to pay out almost all their earnings to shareholders this year in a sign of confidence in the health of the financial system.  All 34 institutions passed the second part of the Fed’s annual stress test, although the Fed did call out Capital One for weaknesses in capital planning, which the bank will have to address.

The big six – Bank of America, Citigroup, Goldman Sachs, Morgan Stanley, JPMorgan Chase and Wells Fargo – are set to return about $95 billion over the next four quarters, 50 percent more than they were able to hand out after last year’s exam.

Immediately after the clean bill of health, the banks set about disclosing their proposed payouts for the year.  For example, JPMorgan announced it intended to boost its quarterly common stock dividend to 56 cents a share from 50 cents, while buying back up to $19.4bn in shares between June 1, 2017 and June 30, 2018. Bank of America is boosting its dividend 60 percent to 12 cents a share, while buying back $12 billion in stock.

Overall, the 34 banks are holding onto $1.25 trillion in capital cushions as of the first quarter – more than double what they held in 2009.

Europe and Asia

Eurozone bond yields soared and the euro hit a seven-month high after European Central Bank chief Mario Draghi opened the door to tweaks in the bank’s ultra-easy monetary policy as the economy recovers.

Draghi said deflationary forces had been replaced by inflationary ones.  But he emphasized any change in the bank’s stance, including massive bond purchases, should be gradual as “considerable” monetary support is still needed.

But while he issued words of caution, the market chose to ignore those and ran wild, with the yield on the German 10-year Bund rising from 0.24% on Monday to 0.46% Friday, a huge percentage move.

European stocks took it on the chin because of the euro’s strength, which is then felt by major exporters, who have had a highly favorable pricing environment with the weak currency from which to sell their goods.  At least for one week, that theory reversed itself.

But while the ECB expresses optimism on inflation, Eurostats published its flash estimate of inflation in the eurozone for June and it showed prices increased at an annualized rate of 1.3%, vs. 1.4% in May and 2.0% in February.

Separately, Spain’s consumer prices were flat in June, bringing the country’s annual inflation rate down from 2.0% to 1.6% as lower fuel prices helped immensely.

Eurobits....

--French President Emmanuel Macron rolled out his new government’s plans to reform the country’s decades-old labor regulations, with Macron seeking to revise more than 3,000 pages of labor rules that hamstring employers by making it complicated and financially risky to lay off workers.  Macron, for one, would like to see companies have more flexibility in dealing with the unions.

The proposals will be worked on over the summer and the government is to unveil them in September.

As I noted the other day, one big thing in Macron’s favor is the state of the French economy, which is in much stronger shape than in recent years.

But I’ve also warned real reform will not be looked on favorably by the entrenched unions.

French companies thus far are laying low, not wanting to be targeted yet as the debate inevitably heats up.  There will be massive protests and violence at some point this year.

--British car production fell almost 10 percent in May, the second month of sliding output amid weaker demand both domestically and abroad.  Exports fell 9 percent, with production for the U.K. market slipping 12.8 percent, according to figures from the Society of Motor Manufacturers and Traders.  Car production in April fell 18.2 percent.

The Brexit issue is also impacting the future of the business.  BMW, for one, said it may decide not to make the Mini in the U.K. because of uncertainty over the future relationship with the EU.

So speaking of Brexit, Prime Minister Theresa May’s vow that the estimated 3.2 million European Union nationals living in the U.K. would enjoy the same entitlements as British people after Brexit was less than convincing to the EU, with its chief negotiator, Michel Barnier, tweeting: “More ambition, clarity and guarantees needed than in today’s U.K. position.”  The bloc’s goal is for the “same level of protection as in EU law.”

When it comes to receiving state education, health care, benefits and pensions, Mrs. May said the 3.2 million expats would be treated as if they were British, though the proposal would force EU nationals to hold an identity document post-Brexit.  The prime minister is calling for a reciprocal agreement for the one million Brits living in other EU countries.

May has to make quick progress on the citizens’ rights issue before she can move ahead to trade negotiations.

What seems to be a major sticking point in the rights debate, though, is the ability of nationals of EU countries to bring in family members, with nationals of EU countries currently having few restrictions, compared with British citizens.

British businesses also want greater certainty regarding their current employees and the ability to hire foreign labor in the future.

Mrs. May’s government is insisting any disputes on enforcing the rights of EU nationals living in the U.K. must be decided only in British courts, not in the European Court of Justice.

German Chancellor Merkel did say May’s initial offer was “a good start but certainly no breakthrough.”

Merkel said it seemed clear that Britain would no longer allow EU citizens freedom of movement after the U.K. leaves the bloc.  Freedom to live and work in other countries is one of the four pillars, four basic principles, of the EU; along with guaranteeing the free movement of capital, goods and services.

Separately, Theresa May finally reached an agreement with the Democratic Unionists of Northern Ireland, wherein the DUP will support her minority government, including on all Brexit and security legislation.  In exchange, Northern Ireland will receive over $1.4 billion extra over the next two years, to be spent on infrastructure, health and education.

And Scotland dropped immediate plans for a second independence referendum until after the terms of Britain’s exit from the EU are clear.

But Theresa May’s government continues to get hit hard over the investigation into the Grenfell Tower blaze, the death toll officially rising to at least 80, as it is increasingly clear, government, at all levels, fell woefully short in regulating the building’s renovation and materials used, with many pointing to May’s budget cuts for failing to properly inspect Grenfell and scores of other towers like it.

Last weekend, five tower blocks in north London were evacuated at short notice to allow “urgent fire safety works” to take place as the blocks were covered in cladding similar to the material used on Grenfell Tower.  By week’s end, a staggering 120 tower blocks had failed fire tests.  [More below on the manufacturer involved.]

--Greece said it is on target to tap bond markets by the end of this year and exit its bailout program next summer.

Greece was locked out of the bond market in 2010, requiring it to be bailed out, as investors were asking for sky-high interest rates in return for money.  Without the money then provided by the EU, Greece would have gone bankrupt.

But today, in a sign of renewed confidence, the yield on the Greek 10-year bond has fallen from 7.21% as recently as this past March 24 to 5.30% today.

[My good friend Dr. W. just got back from Greece where he took his family on a tour of Athens and three islands.  He notes that while they had an outstanding time, “I think their economy is screwed for decades.”  Among his observations, “The young people are leaving (half a million in the past 10 years), and the government is too fractured (both politically and geographically) to ever pull it together....Each little town thinks only of itself and not the greater whole of Greece which makes collective decision making really difficult and the opportunity for local graft and tax evasion really easy.”]

--Italy’s government announced it would wind down two failed banks and spend up to $19 billion of taxpayers’ money to cover any losses in a move designed to restore confidence in the country’s banking sector.  But the taxpayers are on the hook.

--The German parliament voted Friday to legalize same-sex marriage, joining many other western European countries and the United State.  The vote was 393-226, with German Chancellor Angela Merkel voting against the measure.  “For me, marriage is marriage between man and woman,” she said.

But she allowed the vote to take place as a “question of conscience,” freeing her own party members to vote in favor.

Gay marriage is still prohibited in Austria, the Czech Republic and Italy – where only civil partnerships are open to gay couples.

Street Bytes

--The three major indexes fell on the week, which ended up being Nasdaq’s worst of the year, -2.0%.  The Dow Jones lost 0.2% and the S&P 500 fell 0.6%.

But for the first half, the Dow gained 8.0%, the S&P had its best first half since 2013, 8.2%, and Nasdaq had its best first six months since 2009, 14.1%.

I have to note that my 2017 predictions made back on 12/31/16, and not deviated from since, had the Dow and S&P rising 10% and Nasdaq 7%.  I stand by these.

I also said the Federal Reserve would hike interest rates four times and today it is looking more like three.

--U.S. Treasury Yields

6-mo. 1.13%  2-yr. 1.38%  10-yr. 2.30%  30-yr. 2.83%

The yield on the 10-year rose a solid 16 basis points from 2.14%, but we are essentially where we started the year, which was 2.27%, for all the angst in the bond pits this week.  It’s Europe where the major action, and future carnage, is.

--On Tuesday, the American Petroleum Institute reported that U.S. crude inventories increased by 851,000 barrels last week, while analysts expected a decline.  So this suggested global supplies are still ample despite OPEC’s efforts to cut output by 1.8 million barrels per day from January 2017.

But then the U.S. Energy Information Administration said crude stocks rose 118,000 barrels during the period, while weekly production declined 100,000 bpd to 9.3 million.  That was the biggest decline in weekly output since July 2016. The prior 9.4 million figure was the highest U.S. output since Aug. 2015.

The result?  Oil rallied for the first time in six weeks to $46.33.

--According to Ukrainian law enforcement, a vulnerability within an obscure piece of Ukrainian accounting software was the root cause of the massive global cyberattack this week, hitting Ukrainian utilities, airline services and banks particularly hard (ATMs being inaccessible at least the first 24-48 hours).  U.S.-based Merck, Russian energy giants Rosneft and Gazprom, Danish transportation giant Maersk, FedEx’s TNT Express unit, and even operators at the Chernobyl nuclear power plant had to scramble to address the problem.

The software, MeDOC, ran an automatic  update on the software, and that connected every version of Me.Doc on every computer on which it had been installed (so long as it was online...which is why you heard firms like British advertising and marketing giant WPP tell their employees to immediately get off their computers). 

As Patrick Tucker / Defense One wrote:  “As the Ukrainian police’s cyber division explained in a Facebook post on Tuesday, updates from Me.doc are usually rather small, about 300 bytes. The update on Tuesday morning ran 333 kilobytes, orders of magnitude larger.

“Once host computers download the update – becoming infected – the malware creates a new file called RundII32.exe.  Next it contacts a different network.  It then starts running new commands,  taking advantage of a particular Windows vulnerability, the same Microsoft vulnerability targeted by the WannaCry randomware in May.”  [“Petya” is another name being used to identify the ransomware.]

NATO chief Jens Stoltenberg warned the alliance must step up its defense against cyberattacks, saying they could potentially trigger their Article 5 mutual defense commitment.

Stoltenberg said the “attack in May and this week just underlines the importance of strengthening our cyber defenses and that is what we are doing.”

Last year, NATO leaders agreed that cyber is to be a NATO domain, on par with traditional air, sea and land arms to become part of overall alliance planning and resource allocation.

There are Russian fingerprints all over the hack, according to Ukrainian security officials and others around the world.

I thought tech maven Roger McNamee (the only $billionaire I’ve ever personally had drinks with) had a good point on CNBC the other day.  The cyber threat is so serious, and the U.S. so vulnerable, we must start rethinking our defense budgets and spend far more on cyber defense and securing key structures, and less on fighter jets.

--The European Commission levied a massive $2.7 billion fine against Google for anti-competitive behavior, the EC saying the company abused its power by promoting its own shopping comparison service at the top of search results.

The ruling also orders Google to end its anti-competitive practices within 90 days or face a further penalty.  The company said it would appeal.

Margrethe Vestager, the EU’s Competition Commissioner, said “(Google) has denied other companies the chance to compete on their merits and to innovate, and most importantly it has denied European consumers the benefits of competition, genuine choice and innovation.”

Alphabet, parent of Google, has $172bn of assets so the penalty isn’t a problem if it had to pay anything close to that amount in the end.   [Late Friday, the company said profits would be cut by the $2.7bn amount when it next reports earnings, but this doesn’t mean it is not appealing.]

Editorial / Bloomberg News

“The European Commission accused Google of putting sites that compare prices for goods and services at an unfair disadvantage on its search pages.  Years of wrangling preceded the finding, and they aren’t over: The company is likely to appeal, and this is only one in a series of pending disputes between Google and the EU.

“On the face of it, there’s something strange about the EU’s charge that Google is ‘anti-competitive.’  Its search technology has empowered consumers, raising competition among suppliers of goods and services to new levels of efficiency. As a marketplace in its own right, the firm has plenty of rivals and is a small player next to Amazon.  One might ask, what’s the problem?

“It’s this: Google’s success in search has plainly given it forms of monopoly power. The same goes for other mega-companies in the new digital economy. Driving competitors out of business doesn’t necessarily hurt consumers; in the first instance, it may do the opposite. But later, once a monopolist is secure, efforts to gouge consumers can follow....

“(The) idea that Google’s market power is or soon will be unassailable is hard to accept. The digital economy welcomes newcomers, whether incumbents like it or not.  Google can be displaced in the future just as its predecessor (Yahoo!) was.  If it starts failing to give users what they want, it had better watch out....

“Europe is entitled to set its own rules, and time will tell whether U.S. or European consumers gain more from the digital revolution.  In the meantime, though, it’s vital to stop disagreements in this area infecting other aspects of U.S.-EU trade policy....

“As these cases go forward, Europe’s regulators should strive to prove their even-handedness. If they can negotiate reasonable remedies based on conduct, rather than grab headlines with enormous fines, that would help too.”

--Sycamore Partners, a private equity firm, said on Wednesday it would acquire office supplies chain Staples for $6.9 billion, a rare bet on the U.S. retail sector these day. It could be an example of distinguishing between mall-based fashion retailers that are particularly vulnerable to changing consumer tastes, from retailers such as Staples that do have a niche and substantial cash flow. Sycamore seems to be attracted to Staples’ delivery unit, which supplies businesses directly.  Sycamore is retaining Shira Goodman as Staples CEO.

To help finance the buyout, Sycamore would split the company into three separate entities: U.S. retail; Canadian retail; and corporate-supply businesses, all falling under the Staples corporate umbrella. This is supposed to make securing bond and loan investors easier.

Staples previously tried to merge with Office Depot but the government thwarted this on antitrust grounds...an incredibly stupid decision.

--Samsung announced plans to create 954 jobs in the U.S. by investing up to $380 million in a new home appliances factory in South Carolina.  The Korean electronics giant already employs about 18,500 people in the U.S.  Samsung said the move had nothing to do with the Trump administration’s “America First” agenda, rather the plans for the S.C. plant were long in the works prior to the election.

Samsung will be turning out washing machines by the end of the year at the new facility in Newberry County, which is being built at a shuttered Caterpillar plant.

[I am totally against the Trump administration’s potential plan to levy tariffs on South Korean (and others’, like China’s) steel.  It would boomerang on us in a very bad way.]

--South Carolina, a state on a roll (right, Dr. W?), also received good news from BMW, which plans to invest $600 million and add 1,000 workers through 2021 at its existing Spartanburg plant as it prepares for production of X models, including a redesigned X3.

Spartanburg, already the company’s largest plant globally, produced an all-time record 411,000 vehicles in 2016 after 23 years of operation.  The facility has more than 9,000 employees and exports about 70% of the cars it made last year.

[Someone please tell the tweeter in the White House that his focus on trade deficits is all wrong.  He isn’t close to having his facts straight as to the true impact.]

--General Motors Co. expects industry vehicle sales in 2017 to fall short of its original forecast for the year; the “low” 17-million range vs. an original estimate of roughly 17.55 million, the 2016 record.  Others are calling for a figure this year of between 16.5 and 17 million.

--Facebook announced on Tuesday it now has 2bn people using its apps and services every month, which means it has doubled its audience in under five years, after surpassing 1bn in Oct. 2012.

Founder Mark Zuckerberg said: “We’re making progress connecting the world, and now let’s bring the world closer together.  It’s an honor to be on this journey with you.”

Earlier, he said Facebook’s mission statement will now include: “Give people the power to build community and bring the world closer together.”

“It’s not enough to simply connect the world, we must also work to bring the world closer together,” he said.

Zuckerberg is hopelessly naïve on his belief Facebook can bring progress to the world.  Quite the opposite.

--Shares in Arconic, a U.S. company, fell as much as 11% on Monday following weekend reports it had knowingly supplied flammable cladding panels that were fitted to Grenfell Tower, the London high-rise noted above.

Reuters said over the weekend it had obtained six emails sent between Arconic’s U.K. sales office and executives with the contractor working on Grenfell that raised questions as to why the flammable cladding was being used.

Arconic makes three variants of the Reynobond cladding panels that were on the tower block, including one with a flammable polyethylene (PE) core.  The other two are either fire retardant or non-combustible.

So if you’re confused why you would ever use a flammable material, beats the hell out of me, but Arconic put out a brochure in 2016 that said the PE panels were suitable for buildings up to 30 feet, and Grenfell Tower stood 200 feet.

I guess, then, that everyone at 30 feet should be able to escape a fire.  Yeah, if you had to jump from that distance, you’d break your arms, legs and pelvis, but you’d otherwise live a full, happy life; which would be a Sarconic response, just being sarcastic.

According to the Financial Times, “there is still no requirement for the core of the panels to be fire-resistant in the U.K....This runs counter to regulations in other countries, such as the U.S. and Germany.”

--Nike reported strong earnings, as the company also confirmed an earlier report that said the footwear maker was seeking to directly sell its products on Amazon, rather than through third-party and unlicensed dealers.  CEO Mark Parker said he expected revenue could increase by $300 million to $500 million in the United States, or 1 percent in global sales over time.

Nike’s adjusted earnings of $0.60 handily beat expectations of $0.50.

--Olive Garden’s parent company, Darden Restaurants, bucked the recent trend of restaurant chains in the casual dining sector with same-store sales up a solid 3.3%, better than expected for the quarter ending May 28.  Olive Garden itself saw its comp sales rise 4.4%.  LongHorn Steakhouse was up 3.5%.

Darden shares rose 2% on the news, even as earnings declined.

--Nestle, the target of activist investor Third Point LLC, fast-tracked shareholder friendly plans slated for September in announcing it would launch a $20.8bn share buyback, while focusing capital spending on categories like coffee and pet care.  The company, under pressure from other investors aside from Third Point, also said it would look for consumer healthcare acquisitions.  Third Point founder Daniel Loeb published a letter days before requesting the share buyback as well as a sale of Nestle’s stake in French cosmetics giant L’Oreal SA.

Loeb owns 1.25% of the company, making him Nestle’s fourth-biggest shareholder.

Recently, Nestle announced it was selling its U.S. confectionery business.  [I have a little blurb on this in my new “Wall Street History” piece, mainly about Chicago’s candy business.]

--Meal delivery service company Blue Apron went public on Thursday, after cutting its offering price substantially. It had sought $15 to $17 a share, as it hoped to raise as much as $586 million, but now the raise is around $380 million at $10.  The company overall would have a value of about $2 billion.

I don’t know about this one; Blue Apron being one of the first prominent purveyors of fresh ingredients for customers to prepare their meals at home.

Certainly intensified competition from the likes of Amazon, with its agreement to buy Whole Foods Market, doesn’t bode well for APRN (it’s stock symbol).

The stock closed at $10.00 the first day, its IPO price, and $9.30 Friday, which is hideous.

--The state of Illinois’ finances are in such bad shape, it was forced to turn off one of its most lucrative spigots, selling Powerball tickets.  By today, the state was also stopping the sale of Mega Millions tickets – unless and until lawmakers and the governor cut a deal on how the lottery is allowed to pay out prizes.

Illinois’ annual profit from the two games is about $90 million, most of which is used to help pay for schools. The state is on the verge of becoming the first in U.S. history to receive a ‘junk’ bond rating.

--In the television network world, Fox News has hired Rep. Jason Chaffetz as a contributor, as the Utah Republican previously announced he was resigning from Congress to pursue other opportunities.  He’ll be appearing, beginning Saturday, on various Fox and Fox Business shows.

In an interview this week as he prepared to leave Congress, he said that members of Congress should get housing stipends to supplement their $174,000 salaries to cover the high cost of Washington housing.  Chaffetz was long known as a member of the rollout-sofa caucus (those members who crash in their offices rather than shell out money for rent).  Many other members room together.  I have no problem giving members a special stipend.  You and I aren’t asked to pay rents and mortgages in two places as a rule.

Also, Greta Van Susteren is out at MSNBC after just six months, replaced by MSNBC’s chief legal correspondent, Ari Melber, in the 6pm hour.  Greta tweeted on Thursday afternoon, “I am out at MSNBC.”  MSNBC President Phil Griffin told staff simply that the two “have decided to part ways.”

Greta wasn’t getting it done from a ratings standpoint, it would seem.

Foreign Affairs

Iraq / Syria: The Iraqi military was mopping up the last ISIS strongholds in Mosul at week’s end, having taken the area around the historic Grand al-Nuri Mosque that the militants destroyed last week, its last major redoubt in the city.  An Iraqi military spokesman declared, “Their fictitious state has fallen.”

CNN had a terrific report from inside Mosul and it’s destroyed, just like every other urban area ISIS has occupied in Iraq and Syria.  Thousands of civilians have been fleeing to refugee camps, but there were still potentially tens of thousands trapped with little food or water.  I doubt we’ll ever know the final death toll from the battle, including what by all indications has been a staggering civilian loss of life.

In Syria, the United States said it had observed chemical warfare personnel visiting known production facilities, suggesting President Bashar al-Assad’s government was preparing fresh strikes on the rebel-held north.

The White House issued a stark warning late Monday that the Assad government would pay a “heavy price” for any such strikes.  By week’s end, it appears Assad postponed any plans he may have had.

The importance of the intelligence is that it seems clear Syria still has significant stockpiles of chemical weapons.

In Moscow, Kremlin spokesman Dmitry Peskov told reporters that Russia has no information about an impending attack and warned that any retaliation against the Assad government would be “unacceptable.”

Separately, a representative of Iranian Supreme Leader Ayatollah Ali Khamenei was quoted by Iran’s state news agency as saying, “Terrorist Baghdadi is definitely dead.”  Russia said on June 17 its forces might have killed the ISIS leader in an air strike in Syria.  The Pentagon, responding to Iran’s claim on Thursday, said it had no information to corroborate either Russia’s or Iran’s pronouncements.

Israel: Last week I told you of growing concerns in Israel over the presence of ISIS and the Syrian army in the Golan Heights, and Sunday, Israeli Prime Minister Benjamin Netanyahu warned Iran that Israel “views gravely” Tehran’s attempts to set up a military presence in Syria and to arm Hizbullah with advanced weaponry via Syria and Lebanon.

The Israeli military attacked Syrian army targets across the border last weekend after there was mortar fire from Syria.

Netanyahu said: “Our policy is clear. We will not accept any kind of drizzle, not of mortars, rockets, or spillover fire [from the Syrian Civil War].  We respond with force to every attack on our territory and against our citizens.”

Yemen: The country is facing the worst cholera outbreak anywhere in the world, the United Nations warned this week, with the number of suspected cases exceeding 200,000!

A statement by Unicef and the World Health Organization said at least 1,300 have already died – one quarter of them children; a toll that will keep rising. There are an estimated 5,000 new cases every day as Yemen’s health, water and sanitation systems collapse after two years of intense war.

Yemen was already facing severe food shortages that continue to worsen.

Pakistan: A day after three Pakistani cities were hit by a series of terror attacks that left at least 61 dead, an overturned oil tanker burst into flames on Sunday, killing over 150.  People had rushed to the scene of the highway accident to gather leaking fuel, an official said.  Scores were seriously burned.  The country is reeling.

[Pakistan is the sleeper nightmare the balance of the year.  Waking up to the news terrorists have control of a military base and nukes.]

China: President Xi Jinping was in Hong Kong this week for the first time as part of celebrations commemorating the 20th anniversary of the city’s return to China.  Upon his arrival, Xi said he was committed to keeping Hong Kong’s semiautonomous status, though Beijing has been doing nothing but tightening its grip on the city of seven million.  Officials have also been cracking down on activists China says are pushing for independence.

Friday, Xi said there have been “new issues” and “new challenges” in Hong Kong’s implementation of the “one country, two systems” principle that guarantees the city a high degree of autonomy.  Kind of cryptic.  Hong Kong is so screwed.

Also this week, China’s legislature passed a new intelligence law that gives new powers to monitor suspects, raid premises and seize vehicles and devices.  President Xi has said he is overseeing a slew of measures to bolster national security against perceived threats from both inside and outside.  Yet while this new law went into effect Wednesday, there were no details.

So analysts are relying on a prior draft that called for “administration detention” of up to 15 days for those who obstruct officials’ work, or leak state secrets.  China already had broad laws on state secrets and security but the new law allows intelligence officials to use “technological reconnaissance measures” when required, and essentially everything can be seized during intelligence gathering efforts.

Well you can see the problem.  Western governments have spoken out against the measures as defining China national interests too broadly, warning the tools can obviously be used to stifle dissent.

Meanwhile, the Trump administration notified Congress that it approved sales of $1.42 billion in weapons to Taiwan, a move coinciding with China’s rejection of a U.S. Senate bill that would allow U.S. Navy vessels to make regular ports of call to the island.

In a statement, Taiwan’s National Defense Ministry said such sales were crucial for maintaining stability in the region.

China isn’t happy.  I am.  Go Taiwan.

North Korea: Pyongyang said on Wednesday it had issued a standing order for the execution of former South Korean President Park Geun-hye and her spy chief for what it said was a plot to assassinate its leader.  Japan’s Asahi Shimbun newspaper reported on Monday that Park had signed off on a plot to remove Kim Jong Un in 2015 and the plan was orchestrated by the South’s spy agency.

Separately, North Korea’s U.N. ambassador warned the United States and the rest of the world that his country will keep building up its nuclear arsenal, regardless of sanctions or a military attack.

Kim In Ryong told the U.N. Security Council that the North and U.S. came closer to the brink of nuclear war than ever before when the U.S. held its largest-ever “aggressive” joint military exercises with South Korea in April and May.

He also said the United States is modernizing its nuclear weapons but other countries aren’t allowed “to test or launch any object which goes with the words of nuclear or ballistic.”

“This is really the height of shameless arrogance, self-righteousness and double standards,” said Kim.

Meanwhile, the Trump administration accused a Chinese bank of helping North Korea launder money.  The Bank of Dandong was cut off from the U.S. financial system, in a major step aimed at convincing China to put more pressure on Pyongyang.

The U.S. Treasury designated the institution as a “foreign bank of primary money laundering concern” and also imposed sanctions on two Chinese individuals and one Chinese company.

Russia: A court on Thursday convicted five men of murdering Russian opposition leader Boris Nemtsov, more than two years after he was shot dead near the Kremlin.  After eight months of hearings, a jury trial convicted the five, including the man prosecutors said pulled the trigger, Zaur Dadayev, a former soldier in Chechnya.  The other four were accomplices.  They had been promised a bounty of about $250,000, according to the state.

But Nemtsov’s allies say the trial was a cover-up and that the people who ordered his killing remained at large.  Nemtsov’s supporters say the five convicted were low-level operatives, including Dadayev.  The supporters feel that one of the real masterminds was a close associate of Chechen strongman Ramzan Kadyrov.  Kadyrov has long called himself “Putin’s foot soldier” and Nemtsov’s daughter, Zhanna, wants him to be questioned.

The Kremlin has called Nemtsov’s killing a mere “provocation” designed to cause problems for Russian authorities.

CCTV footage, clearly in existence given the location, was never made public, nor was a murder weapon recovered or key witnesses called for the trial.

Separately, Russia recalled its ambassador to the United States, Sergey Kislyak, amid the growing investigations into Russia’s meddling in the 2016 election.

On a different issue, some 1,600 Russians were asked to name ten of the world’s greatest personalities as part of a survey by the independent pollster, the Levada Center.  Guess who came out on top?

Why if it wasn’t daffy Josef Stalin, named by Russians as the world’s most outstanding public figure.  He captured 38 percent, followed by Russian poet Alexander Pushkin and President Putin at 34 percent.  Vladimir Lenin was on 32 percent of the ballots, with Peter the Great fifth at 29 percent.

Only three non-Russian figures were in the top 20.  Napoleon (14th place), Albert Einstein (16th) and Isaac Newton (19th).

The last time this survey was conducted, 2012, Putin received 22 percent of the vote.

India: President Trump appears to have had a good meeting with Indian Prime Minister Narendra Modi as they both took pains to stress the importance of a  strong U.S.-Indian relationship.

Trump did urge Modi to relax Indian trade barriers in order to reduce the U.S. trade deficit between the two.

For his part, Modi referred to Trump’s “Make America Great Again” slogan, saying, “I am sure that the convergence of my vision for ‘New India’ and President Trump’s vision for making America great again will add new dimensions to our cooperation.”

Trump said: “The future of our partnership has never looked brighter,” ignoring differences on immigration and the Paris climate accord.

The United States has become the leading supplier of defense equipment to India, some $15 billion worth since 2008.  One of India’s airlines, budget carrier SpiceJet, also recently ordered 205 new planes from Boeing, worth up to $22 billion, which the Department of Commerce says would sustain up to 132,000 jobs.

Brazil: President Michel Temer was charged with corruption by Brazil’s prosecutor general Monday, accused of taking a $152,000 bribe.  Days earlier, a poll showed Temer’s approval rating at 7...7 percent.  76 percent thought he should resign, and 47 percent felt ashamed to be Brazilian (really).

Elections are looming next year, but for now Temer’s fate is in the hands of Congress. If two-thirds of the Chamber of Deputies, the lower house, votes to accept the charges, or any others that are coming (and there are a slew of them), and the Supreme Court agrees, he would then be suspended 180 days and put on trial.

Temer has an aggressive legislative agenda, a package of measures designed to revive the economy that financial markets have viewed favorably (and the people hate because it involves austerity and an overhaul of the generous pension system).

Venezuela: In a bizarre incident that now appears staged for the benefit of President Nicolas Maduro, a police helicopter was stolen, which then fired on the country’s Supreme Court in what Maduro called a “terrorist attack.”

The ‘attack’ included the firing of grenades, which Maduro said didn’t all explode.

“It could have caused  a tragedy with several dozen dead and injured,” Maduro told a group of journalists he was meeting with as the attack took place.

There were no injuries and the pilot, Oscar Perez, was being sought, with the government saying he was working under instructions from the CIA and the U.S. Embassy in Caracas.

But most believed after that it was all a ruse to justify a crackdown by Maduro against the opposition and controversial plans to rewrite the constitution.

I’ve been shocked there hasn’t been a coup against Maduro.  He literally is an idiot with the brain of a turnip.

Random Musings

--Gallup’s presidential tracking poll this week shows President Trump with a 38% approval rating; Rasmussen’s tracking poll has him at 46% approval.

--President Trump escalated his war with the media, with spokeswoman Sarah Huckabee Sanders citing a hidden camera video that called CNN’s coverage of the Russia controversy “bullshit.”

The video from conservative sting artist James O’Keefe showed a CNN producer questioning the network’s coverage and suggesting important stories had been buried to keep the focus on Trump and Russia. Ms. Sanders encouraged viewers to watch the O’Keefe video, calling it “a disgrace to all of media, all of journalism.”

She also said the sensationalism and disregard for the facts was “coming directly from the top.”

CNN is standing by the producer, John Bonifield, saying in a statement “diversity of personal opinion is what makes CNN strong.”

But the video came at a difficult moment for CNN after they were forced to retract a story alleging that Trump associate Anthony Scaramucci had improper dealings with a Kremlin-backed bank. Three CNN reporters were forced to resign over the matter but the episode reinforced the notion among many conservatives that the network is determined to take Trump down.

On a Tuesday morning conference call with CNN officials, President Jeff Zucker stressed the network had to “play error-free ball” going forward, as all their mistakes will be magnified.

President Trump tweeted over the issue: “Fake News CNN is looking at big management changes now that they got caught falsely pushing their phony Russian stories. Ratings way down!”

In actuality, CNN’s ratings are up 10 percent year-over-year in prime time and 25 percent overall, according to Nielsen’s second quarter ratings.

Trump tweeted Tuesday: “So they caught Fake News CNN cold, but what about NBC, CBS & ABC? What about the failing @nytimes & @washingtonpost?  They are all Fake News!”

So then Thursday, Trump out of nowhere assailed Joe Scarborough and Mika Brzezinski.  The president tweeted about “low I.Q. Crazy Mika” and said she was “bleeding badly from a face-lift” when she visited Mar-a-Lago with Joe over New Year’s.

MSNBC’s communications office said on Twitter: “It’s a sad day for America when the president spends his time bullying, lying and spewing petty personal attacks instead of doing his job.”

Republican Sen. Lindsay Graham (S.C.): “Mr. President, your tweet was beneath the office and represents what is wrong with American politics, not the greatness of America.”

Republican Sen. Ben Sasse (Neb.) tweeted: “Please just stop. This isn’t normal and it’s beneath the dignity of your office.”

Republican Sen. John McCain (Ariz.): “It’s hard to understand, and not presidential.  I’m just embarrassed...I just regret it.”

Republican Rep. Carlos Curbelo (Fla.): “Personal attacks & character assassination yield a culture of social & political violence in which people can become radicalized & dangerous.”

Republican Sen. Susan Collins (Maine): “This has to stop – we all have a job – 3 branches of gov’t and media.  We don’t have to get along, but we must show respect and civility.”

Democratic Sen. Amy Klobuchar (Minn.): “The U.S. economy (health care) is up in the air & the president is focused on this?  Each tweet squanders American leadership.”

Sarah Huckabee Sanders on Fox News Channel: “I don’t think that the president has ever been someone that gets attacked and doesn’t push back...This is a president who fights fire with fire and certainly will not be allowed to be bullied by liberal media and the liberal elites within the media, or Hollywood or anywhere else.”

Sanders also said in response to a question about what was supposed to be a cooling of political rhetoric post the shooting at a Republican congressional baseball practice: “The president in no way, form or fashion has ever promoted or encouraged violence. If anything, quite the contrary.”

You can stop laughing.

--Supreme Court Justice Anthony Kennedy did not announce his retirement as the high court broke for its summer recess Monday. It was thought if he was going to do so, he would have made the announcement then.

But he can still do it any time, though he hasn’t said anything publicly to suggest he’s ready to hang it up at 80.

Kennedy has been a critical swing vote on the bench and a more conservative justice would dramatically change the makeup of the court.

--In a new Pew Research Center survey of 37 countries, the favorable ratings of the United States have decreased from 64 percent of people across all nations surveyed at the end of Barack Obama’s presidency to 49 percent this spring, though these are similar to those at the end of President George W. Bush’s administration.

But Trump himself fares far worse.  A median 22 percent are confident that Trump will do the right thing in global affairs, down from 64 percent who had confidence in Obama.

55% do believe Trump is a strong leader, yet 62% feel he is “dangerous.”

--An FBI investigation into bank fraud allegations against Sen. Bernie Sanders’ wife could provide Republicans with ammunition for 2020, Sanders not having ruled out another presidential bid.

The ongoing probe of Jane Sanders centers around a loan she secured while president of a Vermont college.

The investigation has been going on for a year but has largely stayed off the front pages.  But it seems Sanders inflated the amount of donations the college had received for a land deal by $2 million, which helped the college secure a $6.7 million loan for the property.

--Early reporting, and a report from the Philippine cargo ship, ACX Crystal, which collided with the U.S. Destroyer Fitzgerald, killing seven U.S. sailors, shows apparent gross negligence on the part of the crew of the Fitzgerald, including seemingly having no lookouts on watch at 1:30 a.m. on a Saturday two weeks ago.

Radar officers working both on the bridge and in the combat information center also should have spotted the freighter’s image on their screens as it drew steadily closer. And under standard protocol, the Fitzgerald’s captain, Cmdr. Bryce Benson, should have been awakened and summoned to the bridge.

None of this happened....at least early reporting shows.

The crew of the Fitzgerald is under strict orders not to talk while the U.S. and Japan conduct investigations (along with the Crystal’s insurers).

There will be no whitewash of the investigation by the Navy, you can be sure.

As for what was going on with the crew of the Crystal, it seems probable the crew was asleep, as one expert told the New York Times it seems “likely the computer was driving” as the ship headed to Tokyo.

--Only one thing being discussed these days in Australia, and Rome, the case of Cardinal George Pell, Australia’s highest ranking Catholic and the third most senior official at the Vatican, where he is responsible for the church’s finances.

Victoria Police confirmed Pell has been charged on at least three sex assault charges, including at least one count of rape.  He has been summoned to appear in court on July 18 and Cardinal Pell immediately took a leave of absence from the Vatican to go home and fight the charges.

During a press conference announcing that charges were served on Pell’s legal representatives in Melbourne, police did not take any questions nor did they detail what the allegations were.  [They may do so this coming week.]

Pell was first questioned by Victoria Police in Rome last year and he has repeatedly and emphatically denied all allegations, but said he would cooperate with the investigation. At the Vatican, he told a news conference: “I’m looking forward finally to having my day in court.  I am innocent of these charges, they are false. The whole idea of sexual abuse is abhorrent to me.”

He had served as a priest in Ballarat before becoming Archbishop of Melbourne and then being elevated to Cardinal.

--John Podhoretz / New York Post

“Our public-transportation woes are the key marker that New York City has become a ‘catastrophic success’ – something so popular, it outstrips its own capacity to serve the people flocking to it.

“The city’s quarter-century comeback from the muck of disorder into which it had descended – from its near-collapse in 1975 through the crime wave of the early 1990s – has been one of the wonders of our time. But it has strained the city’s infrastructure to the breaking point.

“If this were 1982 and the A train had derailed of its own bizarre accord near the 125th Street station at 9:50 a.m., as it did on Tuesday, it would’ve been far less meaningful. Why?  Because so many fewer people were riding the subway in 1982.

“In 1982, the system logged 899 million rides.  Last year, it was 1.7 billion rides. The busiest station in the system, Times Square, had 37 million riders annually in 1975 – and 66.4 million in 2015.

“This is of a piece with the population numbers.  In 1980, the census found 7.07 million living in New York City. That grew to 8.5 million in 2016.  The number of commuters coming into Manhattan has grown dramatically.

“How about tourism?  Thirteen million out-of-towners visited New York in 1990.  In 2016, it was 60 million.

“It’s right and proper that the politicians who run the transportation system – especially Gov. Cuomo – are getting raked over the coals. Cuomo is always ready to cut a ribbon.  What needs to happen to save the city’s transportation network is the opposite of that.

“We have a decades-old maintenance deficit....

“(But) in the end, it all comes back to the rails. Those 850 miles of subway track constitute the life’s blood of the most economically powerful city in the world....

“We’ve created a political dynamic in the region that is designed to shift blame....

“The buck has been passed forever.   Now it’s judgment time.

“Chris Christie will end his governorship as a failure in part because of the horrific managerial hash he was made of his transportation responsibilities. And any national ambitions Andrew Cuomo may have will stand or fall now on how he handles this state of crisis.”

The day after Podhoretz’s opinion piece, Gov. Cuomo announced a state of emergency Thursday morning, on top of earmarking an additional $1 billion to fix the beleaguered MTA system.

“I’ve asked local government to contribute more, and thus far they haven’t.”

This was a direct shot at Mayor de Blasio in their ongoing feud over who controls the troubled MTA.

The $1 billion will be added to the MTA’s capital plan to help it make repairs to its aging infrastructure – which Cuomo has likened to a “heart attack.”

--Robin Givhan / Washington Post

“Serena Williams is pregnant.  In case anyone hadn’t heard the news, or missed the breathless tale of how Williams won the Australian Open during the early weeks of her pregnancy, the fact is made plain on the August cover of Vanity Fair which features the tennis champion in the buff.

“One hand cups her breasts and the other is positioned in the small of her back. The body posture suggests confidence, but it also captures a hint of nonchalant impatience.  Come on, take the picture!  Williams is wearing a waist chain, a flesh-colored thong and a single twinkling stud in her ear. That’s it.

“The photograph, by Annie Leibovitz, is lovingly lit, elegantly framed and deeply admiring of its subject....

“But really, it would have been fine to skip this strange celebrity ritual, this complicated stew of personal indulgence, brand tending and sociopolitical me-too-ism.  Yes, pregnancy is beautiful  and powerful and worthy of celebration.  You are womanly.  You are phenomenal.  God bless.  But it has become virtually impossible for a celebrity to go through a pregnancy without getting naked for the cameras, her fans and – presumably – herself....

“(To) place those photos on the cover of a major magazine or insert them into an Instagram feed that reaches 100 million fans suggests not only that one’s pregnancy is of interest to the public but that it is also meaningful in some uniquely grand and sweeping way.

“Most likely, however, it is not....

“No one, of course, has been pregnant better than Beyonce. From her Madonna-with-flowers Instagram announcement to the Madonna-with-chair performance at the Grammy Awards, Beyonce elevated pregnancy into an art house film starring...Beyonce....

“But even if a woman is a celebrity, that doesn’t make her pregnancy newsworthy.”

Hear hear!

--The Weather Underground says that Thursday’s temperature in southwest Iran, the city of Ahvaz, 129.2 F, matched the hottest temperature ever measured on Earth in modern times, equaling Mitribah, Kuwait on July 21, 2016, and Death Valley, Calif., on June 30, 2013.

Officially, Death Valley set the record for the hottest temperature ever recorded on Earth on July 10, 1913, 134 degrees.  But the Weather Underground’s historian, Christopher Burt, concluded in October 2016 it was “essentially not possible from a meteorological perspective,” and that the weather observer committed errors.  [Washington Post]

--Growing up as a kid I read all the Paddington the Bear books, along with Stuart Little (my favorite of this genre) and so we note the passing of British author Michael Bond, 91.

Bond lived in London in a section not far from Paddington Station, where his fictional creation’s story began.

“Mr. and Mrs. Brown first met Paddington on a railway platform” were the first words of “A Bear Called Paddington,” published in Britain in 1958.  Paddington, a small brown bear, was seated on an old leather suitcase and wearing a tag that reads: “Please look after this bear. Thank you.”

The Browns would learn that Paddington had emigrated from “darkest Peru,” where his mother had gone into a home for retired bears in Lima.

So the Browns took him home to 32 Windsor Gardens and gave him a new life that included their children, Judy and Jonathan; their housekeeper, Mrs. Bird; a grouchy neighbor, Mr. Curry; and a Hungarian-born antiques dealer, Mr. Gruber.

Michael Bond imbued Paddington with a strong sense of morality.

As noted in an obit for the New York Times, “For Mr. Bond, the story began on Christmas Eve 1956, when he was working as a BBC TV camera operator. On his way home, he stopped by Selfridges department store and spotted a toy bear alone on a shelf.  ‘It looked rather forlorn,’ he told the Sunday Telegraph in 2007.  He took the bear home as a stocking stuffer for his wife and soon began writing a story about it.”

Ten days later the book was finished and he sold it for 75 quid.

Of course these days, Paddington would have been tranquilized on the train platform and relocated to some distant woods, where he would have starved to death.  Also, Mr. Gruber, the Hungarian, would be rather concerned about his EU rights being respected in the U.K., post-Brexit.

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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 $1241
Oil $46.33...up $3+ on the week

Returns for the week 6/26-6/30

Dow Jones  -0.2%  [21349]
S&P 500  -0.6%  [2423]
S&P MidCap  +0.2%
Russell 2000  +0.04%
Nasdaq  -2.0%  [6140]

Returns for the period 1/1/17-6/30/17

Dow Jones  +8.0%
S&P 500  +8.2%
S&P MidCap  +5.2%
Russell 2000  +4.3%
Nasdaq  +14.1%

Bulls 54.9
Bear 18.6  [Source: Investors Intelligence]

Dr. Bortrum posted a new column.

Happy Birthday, America!  Have a hot dog and a burger.  Watch a ballgame. 

And Happy Canada Day, to our great neighbors to the north!  It is the 150th anniversary of the country’s unification today.

Ah, yes.  Canada, where all the ‘domestic’ is ‘premium.’  #beer

Brian Trumbore

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