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12/16/2017

For the week 12/11-12/15

[Posted 11:30 PM ET, Friday]

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Edition 975

Trump World...Tax Reform...Roy Moore

President Trump, after months, and then weeks, of haggling, is finally truly on the verge of a major legislative triumph...a huge national tax rewrite that is the biggest legislation of its kind since the 1986 Reagan tax cuts.  He will deserve credit, and he will remind us of this every day for the rest of his presidency, of this you can be sure (assuming it has the impact Republicans, and he, have long talked of).

This is an important moment.  I have my doubts that it will be as impactful as projected beyond the first year or so, because I’m worried about the long-term impact on deficits.  But then I’ve been crying wolf on this topic for years (though not the last two) and I should have wasted my time, and yours, on other issues it turns out.

For now we move on, understanding Congress still has to pass a spending bill this week...or another CR (continuing resolution).

During the past week the tax bill was being hashed out between the Senate and House versions, without input from Democrats, and then late Friday afternoon a final text of the Republican bill was released.  The timetable is for the House to vote on it Tuesday, and then the Senate, with the president signing it before Christmas. 

Among the key items, the top individual tax rate is 37%, lower than today’s 39.6%, with seven individual brackets, while the top corporate rate has been reduced from 35% to 21%. 

The deduction in high-tax states like California, New York and New Jersey for state and local taxes will be capped at $10,000, with filers allowed to combine them.*

*According to Moody’s Analytics, 12 of the 20 counties expected to suffer the biggest drop in home prices as a result of this provision are in New Jersey.

The bill also increases the child tax credit from $1,000 to $2,000, and increases the maximum amount that is refundable to $1,400, up from $1,100 in the original Senate measure, which was enough to gain the vote of Florida Republican Sen. Marco Rubio.

Several popular tax preferences that were eliminated in the House bill have been preserved, such as the deduction for medical expenses, the deduction for student-loan interest, and the exclusion for graduate students’ tuition waivers.

But the bill does not repeal the estate tax or the alternative minimum tax for individuals, both long-time goals for Republicans, though it does increase the exemption amounts.  The corporate alternative minimum tax is eliminated, which will please the business community no doubt.

I won’t begin to explain the tax relief to pass-through businesses – entities such as small businesses whose income is taxed at individual rates – until I have time to read more on it, and I’m not sure on the repatriation rates for offshore earnings as yet.

But the legislation does repeal ObamaCare’s individual insurance mandate starting in 2018 and allows for drilling in a portion of the Arctic National Wildlife Refuge.

Under the process of reconciliation that prevents a filibuster from Democrats in the Senate, bills can’t add to the deficit after 10 years, so the legislation’s tax cuts for individuals expire after eight years, while the corporate tax changes and individual mandate repeal are permanent.

Previous estimates have suggested the tax bill would add about $1.5 trillion to the deficit over ten years, but this is totally dependent on the rate of growth over that time and I get a kick out of those who view such budget analysis as hard and fast because the deficits are dependent not just on how fast the economy grows, but also interest rates and geopolitics, to state two obvious items that factor into the final equation.  Like a war with North Korea or Iran would explode the deficit further, or a bout of inflation that forces the Federal Reserve to raise rates far quicker than initially projected.

And as for passage next week, while Senators Rubio and Corker are now in the ‘yes’ camp, Sens. Susan Collins (Maine) and Jeff Flake (Ariz.) haven’t officially announced how they’ll vote as I go to post tonight.

And while Sens. John McCain (Ariz.) and Thad Cochran (Miss.) are expected to return to the Senate for the final vote, currently they are both in the hospital and missed votes this week.

Democrats will remain firmly in opposition as they stake the 2018 mid-term election on framing the tax bill as a tax cut for the rich, while Republicans will be able to say that they delivered on their primary campaign promise.

President Trump said earlier this week, “We want to give you the American people a giant tax cut for Christmas. And when I say giant, I mean giant.  Our current tax code is burdensome, complex and profoundly unfair.”

As for the Federal Reserve, it isn’t buying the argument that the tax cut package will lead to a significantly stronger, sustainable expansion of the economy; instead viewing it as a modest boost for the short term.

Chair Janet Yellen said of the legislation in her post-FOMC press conference after the Fed hiked interest rates this week, “It’s not a gigantic increase in growth.”  And when asked about the president’s remark, “We stand on the verge of a new economic miracle,” Yellen twice said that it would be a “challenge” to achieve the talked about growth rates of 4 percent or higher.  [More on the Fed below.]

Opinion....

Robert J. Samuelson / Washington Post

“When historians examine President Trump’s tax program, they will surely be struck by a large and momentous contradiction.  Although the nation faces endless budget deficits – and although the president purports to speak about the future – his tax program does little or nothing to curb long-term deficits and, arguably, might make them worse.

“It is said that the tax gap of the Trump-Republican program – the net amount of the tax cut – is somewhere between zero (the administration’s position – the tax cut will pay for itself through stronger economic growth) and $1.5 trillion over a decade (the position of many economists who doubt much of a boost to economic growth).

“Wrong, on both counts. A more realistic estimate of the tax gap is somewhere between $7 trillion and $12 trillion, again over a decade.

“How do I get these fantastic figures? The answer is that I ignore Trump’s program altogether and simply deal with existing deficits, as estimated by the Congressional Budget Office (CBO).  It’s not that I believe that Trump’s program will work as promised. I don’t. My real point is that, in many ways, it’s too small to matter.

“Even if it works, it won’t cure chronic deficits. And neither party is pretending it will.  Both find it more convenient to argue over the plan’s distributional effects – are the rich and well-to-do unfairly favored? – than to close the gaping deficits.

“Here’s some basic arithmetic that reinforces my point. Although it’s a bit tricky stick with me.

“Our economy – the annual production of goods and services, or gross domestic product (GDP) – is now approaching $20 trillion. So every 1 percent of GDP is worth about $200 billion.  In fiscal 2017, the deficit was 3.5 percent of GDP, or almost $700 billion.  Over a decade, and assuming unrealistically that the deficit doesn’t rise, taxes would need to increase by $7 trillion in today’s dollars to balance the budget. But what if the deficit does rise? By the late 2030s, the CBO estimates that annual deficits will reach 6 percent of GDP, almost doubling from their present level. The increase mainly reflects the growing number of elderly drawing Social Security, Medicare and Medicaid, in addition to swelling interest payments on the existing debt. To balance the budget would require annual tax increases averaging $1.2 trillion, or $12 trillion over a decade, both in today’s dollars.

“Either way, the required tax increases would be enormous, ranging from about a fifth of today’s tax burden to about a third. If instead Congress tried to balance the budget by cutting spending, the reductions – including defense – would be huge....

“Plausible rates of economic growth aren’t fast enough to eliminate massive deficits, though they would help. The required growth to do more than Trump has already proposed is simply too high. The present and estimated-future deficits are so large that they can be reduced only through the politically painful process of raising taxes or cutting spending.

“The presumption of politicians of both parties, despite some loud rhetoric to the contrary, is that large deficits and growing federal debt do not now pose a serious threat to the economy.  It’s easier to defer major changes – to hope that something will come along to cope with the deficits – rather than wade into the quagmire of substantially higher taxes or lower spending.

“If this optimistic assumption about deficits – call it ‘benign neglect’ of deficits – turns out to be wrong, the U.S. economy faces a serious jolt somewhere in the future.

“What’s clear is that, regardless of the fate of Trump’s tax program, it’s not the be-all and end-all in economic policy that both friend and foe suppose it to be.”

Meanwhile, Republican lawmakers have to be a bit concerned at some of the polls on the tax package.  A CBS News survey from last week found that 53 percent of people nationwide disapprove of the bill and only 35 percent approve.  [52 percent of independents disapprove.]

Sen. Marco Rubio warned that the Republican Party cannot become identified with the “country-club-big business image.

Much more next week.

Roy Moore and Steve Bannon....

Takeaways from Alabama’s big election.

Democrat Doug Jones 49.9 percent
Republican Roy Moore 48.4
Write-ins 1.7

Alabama hadn’t elected a Democrat to the Senate in 25 years.

President Trump’s approval rating in an exit poll had him down to 48%, 48% disapproving, after he won the state with 62% in 2016. That is the single most worrisome figure of the ‘Bama vote for Republicans nationwide.  If this is a trend for other states in the region that gave Trump 60%, like Georgia, Tennessee and West Virginia, that would spell trouble.

Whites went to Moore, 68-30.

Blacks went to Jones, 96-4.*

Republicans voted 91-8 for Moore.

Democrats voted 98-2 for Jones.

Independents went 51-43 for Jones.

Women 58-41 for Jones.

*Republicans need to take note of the potential trends going forward in the African-American vote. 98 percent of black women voters supported Jones. And the share of the black electorate, 30 percent, was higher than the share in 2008 and 2012, when Obama was on the ballot.  Us elephants ignore this at our peril.

However, in terms of the mid-terms, of the 60-some House seats said to be in play, only three are apparently in majority-black districts.

But while prominent black politicians such as Rep. John Lewis (D-Ga.) and Sen. Cory Booker (D-NJ) campaigned for Moore, I believe former NBA / Auburn Univ. star Charles Barkley had a bigger impact with his blunt talk:

“We’ve got to stop looking like idiots to the nation.”  [I like Sir Charles.]

Trump tweet the morning after: “The reason I originally endorsed Luther Strange (and his numbers went up mightily), is that I said Roy Moore will not be able to win the General Election. I was right!  Roy worked hard but the deck was stacked against him!”

Sen. Jeff Flake (R-Ariz.) tweet: “Decency wins.” [No exclamation point.]

Opinion....

Gerald F. Seib / Wall Street Journal

“The Donald Trump / Steve Bannon takeover of the Republican Party will have to be put on hold.

“Tuesday’s Senate race in Alabama represented an attempt by the president and Mr. Bannon, his foremost political strategist, to show that they weren’t only in control of the party but could use their rebellious, antiestablishment message to drive their new version of the GOP to victory.

“Instead, Roy Moore, the candidate Messrs. Trump and Bannon fully supported, lost in a state Republicans had controlled comfortably for most of the past two decades. ...(though) much of the loss to Democrat Doug Jones will be laid at the candidate’s feet.

“Still, the loss is a huge blow to Mr. Trump personally. He now has backed three straight candidates for statewide office who have lost.  He backed the loser in the Virginia governor’s race. He backed the loser in the Alabama Republican Senate runoff. And, in the past two weeks, he threw his full support behind the man who lost in the Alabama Senate general election.

“The implications are enormous. If Mr. Trump’s message and personal power aren’t enough to win a state in the deep-red South, then mainstream Republicans will have little reason to think they can rely on those factors elsewhere. Nor will they think they are compelled to follow the lead of their own president on matters political.

“That, in turn, will drive a further wedge between the president and Republican leaders – particularly Senate Majority Leader Mitch McConnell – who never wanted the party to throw its support behind Mr. Moore in the first place.

“Similarly, Mr. Bannon’s pledge to field and fund nationalist, rabble-rousing Republicans to challenge a whole series of Republican senators up for re-election next year will strike less fear in the hearts of the party’s mainstream. His ability to act as a kind of Pied Piper leading a long string of candidates formed in his image to the front ranks of the party now is in doubt and will be resisted with new vigor by party regulars who fear he could lead the party to a broader disaster....

“For Democrats, the victory in a state they never dreamed of winning just a few months ago delivers a jolt of energy – and, perhaps as important, could encourage balky donors who have left the party’s national machinery seriously underfunded this year.  Heading into a crucial midterm election year, that combination of energy and dollars – and a belief in actually being able to win races in what last year was Trump country – is essential for Democratic hopes.

“Perhaps most encouraging for Democrats, the same coalition of voters that propelled the party to victory in Virginia last month also emerged in Alabama. Exit polls showed that women made up a slight majority of the electorate and went for the Democrat Mr. Jones over the Republican Mr. Moore 58% to 41%.  Nonwhite voters, principally African-Americans, made up one-third of the electorate and went for the Democrat 88% to 11%....

“Another key question Alabama’s results bring to the fore is whether Democrats can take control of the House of Representatives next year.  (That) remains an uphill climb.

“The key numbers to keep in mind as Democrats approach that challenge are 24, 23 and 12.

“Democrats need to turn 24 House seats from Republican to Democrat to take control. Their best chance at winning that number starts with the 23 House seats held by Republicans from congressional districts that Hillary Clinton won in last year’s presidential election.

“They will have to pick off most of those to win the House.

“Meantime, they have to defend the seats of 12 Democratic House members from districts Mr. Trump carried last year.

“In short, it’s still a tough task for Democrats in the contest that really will determine the contours of Washington in the era of Mr. Trump....

“The results in Alabama certainly don’t guarantee such a wave. But they do suggest it’s possible.”

George F. Will / Washington Post

“The first time ended badly, so when, 156 years later, Alabamians were incited to again try secession, this time from the national consensus that America is a pretty nice place, they said: No.

“No, that is, to rubbish like this:

“Interviewer: ‘[Ronald Reagan] said that Russia was the focus of evil in the modern world.’

“Roy Moore: ‘You could say that very well about America, couldn’t you?’

“Interviewer: ‘You think?’

“Moore: ‘Well, we promote a lot of bad things, you know.’

“Interviewer: ‘Like?’

“Moore: ‘Same-sex marriage.’

“Interviewer: ‘That’s the very argument that Vladimir Putin makes.’

“Moore: ‘Well, then, maybe Putin is right, maybe he’s more akin to me than I know.’

“In April, Alabama’s Republican governor, Robert Bentley, resigned one step ahead of impeachment proceedings arising from his consensual affair with an adult woman. Eight months later, Alabamians spurned presidential pleas that they send to the U.S. Senate a man credibly accused of child molestation. But the dispiriting truth is this: Behavior that reportedly got Moore banned from the Gadsen, Ala., mall was, for most Alabama Republicans, not a sufficient reason to deny him a desk in the U.S. Capitol.

“Although the president is not invariably a stickler for precision when bandying factoids, he said the Everest of evidence against Moore did not rise to his standards of persuasiveness. This fleeting swerve into fastidiousness about facts came hard on the heels of his retweeting of a video of a Muslim immigrant in the Netherlands beating a young man holding crutches. Except the villain was born and raised in the Netherlands.  Undaunted, Trump’s remarkably pliant spokesperson, Sarah Huckabee Sanders, defended her employer from the nitpickers: What matters, she said, is not that the video is unreal but that ‘the threat’ (of turbulent Dutchmen?) is real.

“Moore was such a comprehensive caricature – Sinclair Lewis could not have imagined this Elmer Gantry – that the acid rain of reports about his sexual predations, and his dissembling about them, almost benefited him by distracting attention from: the remunerative use he made of a ‘charitable’ foundation. And his actions as a public official that by themselves sufficed to disqualify him from any public office.  He is an anti-constitutional recidivist, twice removed from Alabama’s highest court for his theocratic insistence that his religious convictions take precedence over U.S. Supreme Court decisions, so he could not have sincerely sworn to ‘support and defend the Constitution’ and to ‘bear true faith and allegiance to the same.’....

“Elation is in order because a gross national embarrassment has been narrowly avoided. But curb your enthusiasm because nationally, as in Alabama, most Republicans still support the president who supported the credibly accused child molester.”

Thomas L. Friedman / New York Times

“There are so many things I could say right now after watching Doug Jones defeat Roy Moore...but for me it comes down to just two words: ‘Thank you.’

“Thank you to the majority of Alabamians for loving our country more than you hated Democrats.  Thank you for voting as citizens, not as members of a tribe. Thank you for understanding that sending a credibly accused child molester to represent Alabama in the U.S. Senate would not only have denigrated your state, it would have denigrated that whole legislative body....

“But even with Jones’ victory in Alabama I worry that technology – social networks in particular – and archaic laws that prevent new players from entering politics work against the emergence of such national leaders. I worry that irreversible damage is being done to our norms and institutions by this poisonous cocktail of Trump, Twitter and tribalism.

“I was not surprised to hear former Facebook executive Chamath Palihapitiya* tell CNBC on Tuesday that social media is creating a society that confuses ‘popularity’ with ‘truth.’ The tools we’ve created, he explained, ‘are starting to erode the social fabric of how society works.’....

“But maybe...the narrow majority in Alabama has sent both Trump and the country a message. We are fed up with your cynicism, we are fed up with your effort to break us into tribes, we want a president who is a uniter not a divider, because we have big hard work to do as a country right now – and it can only be done together.”

*Palihapitiya, a co-owner of the Golden State Warriors, also told Axios’ Mike Allen, “God only knows what it’s doing to our children’s brains.” Facebook issued a statement rebutting their former colleague, talking about all the resources they are spending on outside experts and academics “to understand the effects of our service on well-being, and we’re using it to inform our product development.”

Yeah, so you go ahead and launch Messenger Kids, the first app for children under the age of 13.

Marc A. Thiessen / Washington Post

“Stephen K. Bannon and his alt-right movement have helped accomplish something no one in a quarter-century has been able to do: get a Democrat elected in the state of Alabama.

“Alabama is one of the most reliably Republican states in the country. The last time a Democrat was elected was in 1992, and no Democrat has won more than 40 percent of the vote in a Senate race there since 1996. The closest election in recent memory was in 2002, when Jeff Sessions won reelection by a razor-thin margin of 19 points. Sen. Richard Shelby has won his last three elections by 35 points, 30 points and 28 points, respectively. So it takes a special kind of stupid to pick a candidate who can lose to a Democrat in Alabama....

“Jones’ victory also put the Democrats within striking distance of taking back control of the Senate in 2018. If that happens, the Trump presidency is over. The ‘resistance’ will control Congress, and Trump’s ability to pass conservative legislation and continue appointing conservative judges – especially another Supreme Court justice – will be gone.  Moreover, Democrats will run the Russia investigation and Charles E. Schumer (D-N.Y.), as majority leader, will have unbridled subpoena power. Trump could face impeachment proceedings.

“That is the future if Trump does not learn the lessons of Alabama and tell Bannon to back off. The goal in 2018 should be to expand Trump’s governing majority, not lose it. Instead of targeting vulnerable Democrats and strengthening the Trump presidency, Bannon is busy destroying the Trump presidency. Trump may want to suggest he stop.”

John Podhoretz / New York Post

“Truth to tell, Doug Jones didn’t really win it. Roy Moore lost it. The possibility of this despicable goon serving Alabama in Washington was so horrifying to so many Alabamians that Republicans stayed home in droves and Democrats who probably couldn’t have picked Jones out of a lineup on Election Day stampeded to the polls.

“Yes, these were special circumstances indeed. But what happened in Alabama last night is a dark portent indeed for Republicans in 2018....

“What might this tell us about what Republicans will face in 2018, when all 436 House seats and 34 of 100 Senate seats will be decided on Election Day?

“As Clubber Lang says in ‘Rocky 3,’ I predict pain. If a Democrat can win in Alabama and Democrats can win 14 House of Delegates seats in Virginia, few Republicans can be absolutely sure they are safe going into 2018.

“The latest Marist poll gives Democrats a 13-point margin when voters are asked whether they would prefer to vote for a Democrat or a Republican next year.

“At this stage in 2009, with the 2010 elections coming up in 11 months, Democrats and Republicans were effectively tied.  It took Republicans until the end of August in 2010 to get anywhere near the 13-point generic margin. Democrats are there now.

“More important, perhaps, they’re setting themselves up for victory by recruiting candidates to run in races against Republicans in so-called safe seats – 209 of them, according to 539.com. This is important because if a nationwide wave breaks for Democrats they will have bodies everywhere that can ride the wave.”

Karl Rove / Wall Street Journal

“Mr. Moore is the most recent in a too-long line of cranks and nuts who threw away almost-certain Republican victories in Senate races.  It started in 2010 with Nevada’s Sharron Angle and Delaware’s Christine O’Donnell, continued in 2012 with Missouri’s Todd Akin and Indiana’s Richard Mourdock, and reached its low point Tuesday night with the former judge from Gadsden, Ala.

“Weirdly, Mr. Moore’s defeat was the most impressive, given Alabama’s affinity for the GOP. Since 2002, Republicans have won 42 out of 50 contested statewide races, by an average of 16 percentage points – and, in contests since 2010, by 20 percentage points.  That doesn’t include the 14 races in which Democrats didn’t field a candidate.  It takes a very special Republican to lose in Alabama.

“Not surprisingly, Mr. Moore doesn’t hold himself responsible for his defeat. He told supporters Tuesday that ‘part of the problem with this campaign is that we’ve been painted in an unfavorable and unfaithful light. We’ve been put in a hole.’  Actually, it’s Mr. Moore who for decades painted himself in those unflattering colors....

“(Such as) Mr. Moore’s Foundation for Moral Law, a classic money grab cloaked in evangelical garb. Most of the funds it raised through telemarketing appeals for support of traditional values were spent on fundraising costs.  What remained largely went to salaries for the principals, Mr. Moore and his wife, and his advisers. Then (surprise) it turned out he had grossly misled the public about his compensation from the enterprise....

“Democrats were quick to call Mr. Moore’s defeat a referendum on President Trump. That isn’t quite true. Mr. Trump remains relatively popular in Alabama and his agenda even more so.  The president can be faulted for many things, but he brought Mr. Moore close to victory. The former judge was simply too toxic.  Nevertheless, Mr. Trump is a huge victim of the Alabama defeat, since losing a Republican vote in the Senate guarantees harder sledding for virtually every administrative initiative.

“Democrats have concluded that their victory Tuesday portends a rout for Republicans in 2018. That will surely happen if the GOP nominates other Roy Moores.  A normal conservative would have won Alabama easily; the alt-right populist Mr. Moore could not. Therein lies the most important lesson for Republicans.

“ ‘If last night’s election proved anything, it proved that we need to put up GREAT Republican candidates,’ the president tweeted Wednesday morning. That’s absolutely correct.  So don’t put Steve Bannon in charge of recruitment.  If his kind of kook can lose in the Heart of Dixie, it won’t do any better in any House or Senate battleground.”

Editorial / Wall Street Journal

“The good news is that Mr. Moore’s loss may give the GOP a better chance of holding the Senate majority next year.  Democrats were primed to make Mr. Moore a national symbol of sexual harassment to drive turnout among women.  GOP incumbents would have been asked about Mr. Moore every day....

“The Alabama result (also) shows that Mr. Bannon cares less about conservative policy victories than he does personal king-making. He wants to depose Mitch McConnell as Majority Leader even if it costs Republicans Senate control. GOP voters, take note: Mr. Bannon is for losers.

“The Moore defeat should also be a lesson to the Republican Party, and President Trump, that many GOP voters are still at heart character voters. They will only accept so much misbehavior in a politician, no matter the policy stakes....The GOP voters who ignored Mr. Trump and rejected Mr. Moore also want a President who acts presidential.”

New York Republican Rep. Peter King unleashed a blistering attack on Bannon Wednesday, calling him a “phony” and a “disheveled drunk” who does not deserve a role in national politics.

“I don’t think Steve Bannon adds anything positive at all to the dialogue in the country,” King said on MSNBC.  “I don’t know who can identify with him, and to see him on the stage this week with a big American flag behind him, he looked like a disheveled drunk that wandered onto the national stage,” referring to Bannon’s appearance with Roy Moore.

King added Bannon should be kicked out of the GOP because of his declaration of war on the Republican establishment. And he accused Bannon of purposely stoking racial divisions to fire up the white nationalist wing of the party.

Trumpets....

Daniel Henninger / Wall Street Journal

“Americans were forced this Tuesday morning to take time from their holiday preparation to scroll through these exchanges between the president of the United States, Sen. Kirsten Gillibrand and other members of the U.S. Senate, known in more innocent times as the World’s Greatest Deliberative Body.

“A Trump tweet: ‘Lightweight Senator Kirsten Gillibrand, a total flunky for Chuck Schumer and someone who would come to my office ‘begging’ for campaign contributions not so long ago (and would do anything for them), is now in the ring fighting against Trump. Very disloyal to Bill & Crooked-USED!’

“Sen. Gillibrand, whose aides made sure reporters would note she was in a Bible study meeting at the moment of the tweet, replied: ‘It was a sexist smear attempting to silence my voice, and I will not be silenced on this issue. Neither will the women who stood up to the president yesterday.’

“Sen. Elizabeth Warren joined the colloquy: ‘Are you really trying to bully, intimidate and slut-shame @SenGillibrand?’

“And then Sen. Mazie Hirono: ‘The only way to stop this president who has a narcissistic need for attention, he’s a misogynist and an admitted sexual predator and a liar, the only thing that will stop him from attacking us is his resignation.’

“American politics is dividing now into a series of concentric circles, not unlike Dante’s circles of Hell.

“The innermost circle is occupied by political professionals who soak in the toxic political intrigues of Democrats and Republicans in the Trump era.

“Outside this inner circle stands the general public whose members continuously chant the two truisms of their time: They have never seen a more polarized political environment, and have never struggled so hard to make sense of what is going on....

“Forget your political biases, which impair comprehension in direct proportion to their intensity....

“The fulcrum political event is of course Donald Trump’s victory in the 2016 presidential election. A Kirsten Gillibrand would look at this and simply say: He won, we lost. Now we have to win.  How we do that is irrelevant....

“With Democrats themselves admitting they have no coherent message that could win a presidential election, the opposition strategy has been built around Mr. Trump’s personality, his alleged collusion with Russia to disable Hillary Clinton, and now the return of the same accusations of sexual harassment that did not cause him to lose the election.

“To be clear about the strategy: If the U.S. was being bombarded by killer asteroids, you would be hearing nonstop of Mr. Trump’s failure to protect us from the asteroids. Whatever works. As Hyman Roth told Michael Corleone: ‘This is the business we’ve chosen.’

“In the past week, the Democrats may finally have hit upon the Achilles’ heel that will fell or weaken this president: his tweets.

“The tweets have worried Republicans and Trump supporters since they started. Mr. Trump rejects this criticism.  He said, with a tweet, that they energize his base. But Roy Moore just lost in Alabama.

“At the level of political chess, the Democrats of late have been masterful against their opponent. The biggest nonpolitical story for months has been sexual abuse, starting with Harvey Weinstein.  “It was only a matter of time before the politicians would figure out how to manipulate harassment for their own purposes.

“The Democrats forced both John Conyers and Al Franken to resign last week. They took their harassers off the table, which left Mr. Trump self-aligned with the one alleged harasser on the board – Roy Moore.

“Then on Monday, the day before the Alabama election, came the following: Three women repeated sexual harassment accusations they’d made against Mr. Trump during the campaign... and Sen. Gillibrand called on the president to resign.

“On display here is how Democrats have learned to exploit one reality, which is that Mr. Trump’s political orbit of interest radiates about two feet beyond him. They have discovered how to make his tweets their weapon.

“On election day, Mr. Trump’s candidate, Roy Moore, was on the bubble with voters, especially among women.  No matter. Mr. Trump’s Tuesday-morning tweet suddenly elevated a B-level New York senator, and the media instantly recycled the Trump sexual-harassment details. Doug Jones defeated Roy Moore by just 1.5%, and the Republicans’ Senate majority fell to 51.  By day’s end, Sen. Gillibrand was soliciting funds via email for her 2018 election. They figured out how to make the Trump side lose. It’s the president’s move now.  Checkmate awaits.”

--The Russia probe...Editorial / Wall Street Journal

“Democrats and the media are accusing anyone who criticizes special counsel Robert Mueller as Trumpian conspirators trying to undermine his probe.  But who needs critics when Mr. Mueller’s team is doing so much to undermine its own credibility?

“Wednesday’s revelations...include the Justice Department’s release of 2016 text messages to and from Peter Strzok, the FBI counterintelligence agent whom Mr. Mueller demoted this summer. The texts, which he exchanged with senior FBI lawyer Lisa Page, contain expletive-laced tirades against Mr. Trump. Such Trump hatred is no surprise and not by itself disqualifying.  More troubling are texts that suggest that some FBI officials may have gone beyond antipathy to anti-Trump plotting.

“ ‘I want to believe the path you threw out for consideration in Andy’s office – that there’s no way [Trump] gets elected – but I’m afraid we can’t take that risk,’ Mr. Strzok wrote Ms. Page in an Aug. 15, 2016 text. He added: ‘It’s like an insurance policy in the unlikely event you die before you’re 40.’

“What ‘policy’ would that be? The ‘Andy’ in question is Andrew McCabe, the deputy FBI director. FBI officials are allowed to have political opinions, but what kind of action were they discussing that would amount to anti-Trump ‘insurance’?...

“The McCabe meeting came on the heels of the FBI’s launch of its counterintelligence probe into Trump-Russia ties. July is also when former British spook Christopher Steele briefed the FBI on his Clinton-financed dossier of salacious allegations against Mr. Trump. The texts explain why Mr. Mueller would remove Mr. Strzok, though a straight shooter wouldn’t typically resist turning those messages over to Congress for as long as Mr. Mueller did.

“Meanwhile, we’re learning more about the political motives of Mr. Mueller’s lieutenant, Andrew Weissmann. Judicial Watch last week released an email in which Mr. Weissmann expressed his ‘awe’ and praise for Sally Yates, after the then acting AG and Obama holdover refused to implement Mr. Trump’s travel ban.

“This should trouble anyone who cares about the integrity of the Justice Department. Ms. Yates had every right to resign at the time if she felt she couldn’t implement Mr. Trump’s order. But she had no authority as an executive branch official to defy a legitimate presidential order.  Mr. Weissmann’s support for her insubordination was a declaration that he is part of the ‘resistance.’ This should be unacceptable in a ranking FBI official, much less someone charged with conducting a fair-minded investigation.

“Public confidence isn’t helped by the continuing Justice and FBI refusal to cooperate with Congress. Deputy Attorney General Rod Rosenstein, who supervises Mr. Mueller, toed the Mueller-FBI line on Wednesday before the House Oversight Committee.  He repeated FBI Director Christopher Wray’s preposterous excuse that he can’t answer questions because of an Inspector General probe.  And he wouldn’t elaborate on the news that Nellie Ohr, the wife of senior Justice official Bruce Ohr, worked for Fusion GPS, which hired Mr. Steele to gin up his dossier.

“The man who should be most disturbed by all this is Mr. Mueller, who wants his evidence and conclusion to be credible with the public. Evidence is building instead that some officials at the FBI – who have worked for him – may have interfered in an American presidential election. Congress needs to insist on its rights as a co-equal branch of government to discover the truth.”

Kimberley A. Strassel / Wall Street Journal

“Congress persists in its effort to pry the real story of the 2016 election out of the Federal Bureau of Investigation, an agency notoriously reluctant to share secrets. The trick is telling the difference between legitimate secrets and self-serving ones.

“The FBI – and the Department of Justice – would rather blur that distinction.  In recent congressional appearances, FBI Director Christopher Wray and Deputy Attorney General Rod Rosenstein tossed around the word ‘classified’ like confetti.  Neither man answered a single substantive question, citing their obligation to protect the ‘integrity’ of investigations, safeguard ‘sensitive’ information, and show deference to an ‘independent’ and ‘internal’ inspector general reviewing the FBI’s handling of the 2016 election.

“True, the FBI has plenty of things it needs to keep secret regarding national security and law enforcement.  Let’s even acknowledge the bureau may be rightly concerned about turning some information over to today’s leak-prone Congress. Even so, in the specific case of its 2016 election behavior, the FBI is misusing its secrecy powers to withhold information whose disclosure is in the public interest....

“Special Counsel Robert Mueller’s team is emphasizing its ejection of FBI agent Peter Strzok immediately upon learning about anti-Trump texts he exchanged with another FBI employee, Lisa Page, before the 2016 election. But when did the FBI learn of the messages? The inspector general’s investigation began in mid-January. The letter explains that the FBI was asked for text messages of certain key employees based on search terms, which turned up ‘a number of politically-oriented’ Strzok-Page texts. The inspector general then demanded all of the duo’s text messages, which the FBI began producing on July 20.

“But when did the FBI dig up and turn over that very first tranche?  How long has the bureau known one of its lead investigators was exhibiting such bias? Was it before Mr. Mueller was even appointed? Did FBI leaders sit by as the special counsel tapped Mr. Strzok?  In any case, we know from the letter that the inspector general informed both Messrs. Rosenstein and Mueller of the texts on July 27, and that both men hid that explosive information from Congress for four months.  The Justice Department, pleading secrecy, defied subpoenas that would have produced the texts. It refused to make Mr. Strzok available for an interview. It didn’t do all this out of  fear of hurting national security, obviously.  It did it to save itself and the FBI from embarrassment....

“Congress and the public have a right to know what went on in the Comey investigation, and the FBI and Justice Department seem to be attempting desperately to hide their actions.

“Yes, the FBI has secrets the public needs it to keep.  But don’t let the agency and its defenders muddy the difference between necessary secrecy and evasion of responsibility.”

David Ignatius / Washington Post

“President Trump’s recent denunciations of the Russia investigation recall the famous legal advice: ‘If the facts are against you, argue the law.  If the law is against you, argue the facts.  If the law and the facts are against you, pound the table and yell like hell.’

“Trump shouted out his defense earlier this month: ‘What has been shown is no collusion, no collusion!’ he told reporters over the whir of his helicopter on the White House lawn. Since then, Trump’s supporters have been waging a bitter counterattack against special counsel Robert S. Mueller III, alleging bias and demanding: ‘Investigate the investigators.’

“But what do the facts show? There is a growing, mostly undisputed body of evidence describing contacts between Trump associates and Russia-linked operatives. Trump partisans have claimed that Mueller’s investigation is biased because some members of this staff supported Trump’s rival, Hillary Clinton. But Deputy Attorney General Rod J. Rosenstein disagreed Wednesday, arguing that Mueller ‘is running his office appropriately.’

“As Republicans seek to discredit the investigation, it’s useful to remember just what we’ve learned so far about how the Trump campaign sought harmful information about Clinton from sources that, according to U.S. intelligence, were linked to Moscow. This isn’t a fuzzy narrative where the truth is obscured; in the Trump team’s obsessive pursuit of damaging Clinton emails and other negative information, the facts are hiding in plain sight.

“From the start of the campaign, Trump spoke of his affinity for Russian President Vladimir Putin, and Trump’s aides followed his lead.  In March 2016, a young adviser named George Papadopoulos met a London professor who introduced him to a Russian woman described as ‘Putin’s niece.’  This began months of efforts by Papadopoulos to broker Trump-Russia contacts, described in the plea agreement that Mueller announced in October.

“Russian operatives by that March had already hacked the computers of the Democratic National Committee and Clinton campaign chairman John Podesta. Through cutouts, the Russians over the next eight months allegedly spooled out damaging information about Clinton to the media, sometimes egged on by Trump and his associates.

“Papadopoulos got the first hint the Russians might share Clinton emails in a late-April meeting with the professor, who told him ‘the Russians had emails of Clinton...thousands of emails,’ according to the plea agreement.”

Mr. Ignatius goes on at length, including Don Jr.’s June 9 meeting with Russian lawyer Natalia Veselnitskaya, the activities of Trump friend Roger Stone, and WikiLeaks, etc., and Ignatius concludes:

“The next time Trump demands a probe of Mueller’s investigation or the FBI’s handling of Clinton emails, remember that he isn’t arguing the facts or the law about collusion with Russia.  He’s pounding the table.”

[If you saw Trump this morning outside the White House, he was pounding the table anew.]

Tuesday, President Trump signed a $700 billion defense policy bill Tuesday, saying the United States military “has got to be perfecto.”  OK. I watched this little ceremony. All well and good.

But then hours later we learned the president had pointed out some of the bill’s imperfections in a signing statement that presidents sometimes attach to legislation explaining any misgivings they might have, and among the ones Trump had with this policy bill were a variety of provisions lawmakers included to force a more aggressive U.S. policy toward Russia.

Trump said in the statement that he had constitutional concerns and there were provisions that “could potentially dictate the position of the United States in external military and foreign affairs” and interfere with his ability to conduct diplomacy.

As noted in USA TODAY: “The bill passed by Congress contains several provisions specifically targeting Russia. It restricts military cooperation with Russia, prohibits the United States from recognizing Russia’s legal right to the disputed Crimea peninsula, and requires the military to ‘develop and implement a comprehensive strategy to counter threats by the Russian Federation’ – including Russia’s use of disinformation, social media and support for political parties.”

Trump’s signing statement contained objections to more than 40 provisions in the bill. His love affair with Vlad the Impaler continues.

Thursday, in Putin’s annual yearend press conference, he said that accusations that Trump’s team colluded with the Kremlin are an invention of the American president’s opposition that has sparked “spymania” in Washington.

“You know all of this has been invented, made up by people who are in opposition to President Trump with a view to shedding a negative light on what Trump is doing,” Putin said.

Regarding meetings between Russian diplomats and Trump’s campaign team before the election, these were routine and normal, Putin observed.

“For me, it’s very bizarre.  I don’t’ understand what someone saw there that was out of place in those meetings, and why all this should turn into a kind of ‘spymania.’”

Separately, Putin noted the strong U.S. economy and President Trump thanked him in a phone call Thursday for “acknowledging America’s strong economic performance,” the White House said.

The two also discussed ways to work together to address North Korea.  Putin warned the U.S. against using force in his press conference.

Finally, in a very extensive report from the Washington Post’s Greg Miller, Greg Jaffe and Philip Rucker on Trump and Russia, we have this:

“Nearly a year into his presidency, Trump continues to reject the evidence that Russia waged an assault on a pillar of American democracy and supported his run for the White House.

“The result is without obvious parallel in U.S. history, a situation in which the personal insecurities of the president – and his refusal to accept what even many in his administration regard as objective reality – have impaired the government’s response to a national security threat. The repercussions radiate across the government.

“Rather than search for ways to deter Kremlin attacks or safeguard U.S. elections, Trump has waged his own campaign to discredit the case that Russia poses any threat and he has resisted or attempted to roll back efforts to hold Moscow to account.

“His administration has moved to undo at least some of the sanctions the previous administration imposed on Russia for its election interference, exploring the return of two Russian compounds in the United States that President Barack Obama had seized – the measure that had most galled Moscow.  Months later, when Congress moved to impose additional penalties on Moscow, Trump opposed the measures fiercely.

“Trump has never convened a Cabinet-level meeting on Russian interference or what to do about it, administration officials said. Although the issue has been discussed at lower levels at the National Security Council, one former high-ranking Trump administration official said there is an unspoken understanding within the NSC that to raise the matter is to acknowledge its validity, which the president would see as an affront.

“Trump’s stance on the election is part of a broader entanglement with Moscow that has defined the  first year of his presidency. He continues to pursue an elusive bond with Putin, which he sees as critical to dealing with North Korea, Iran and other issues.  ‘Having Russia in a friendly posture,’ he said last month, ‘is an asset to the world and an asset to our country.’

“His position has alienated close American allies and often undercut members of his Cabinet – all against the backdrop of a criminal probe into possible ties between the Trump campaign and the Kremlin.”

--Manhattan dodged a bullet Monday when a Bangladeshi native failed in his ISIS-inspired attack to successfully detonate a pipe bomb fully that ended up wounding him (moderately) and four others (slightly) in a passageway between the Port Authority bus terminal and a major subway hub.

President Trump said later in the day: “Today’s attempted mass murder attack in New York City – the second terror attack in New York in the last two months – once again highlights the urgent need for Congress to enact legislative reforms to protect the American people....

“First and foremost, as I have been saying since I first announced my candidacy for President, America must fix its lax immigration system, which allows far too many dangerous, inadequately vetted people to access our country,” he said.

Then he lashed out at “chain migration,” which gives preference to individuals who are related to immigrants who are already here legally.

“Today’s terror suspect entered our country through extended-family chain migration, which is incompatible with national security.

“My Executive action to restrict the entry of certain nationals from eight countries, which the Supreme Court recently allowed to take effect, is just one step forward in securing our immigration system. Congress must end chain migration,” he said.

What ticked me off was the family of Akayed Ullah had the gall to say they were upset at the way the investigation was being handled.  This could have been a catastrophe if the guy had put together a more sophisticated device and knew how to deploy it. 

--Ousted White House aide Omarosa Manigault Newman rejected reports she had to be dragged out of the White House on Wednesday kicking and screaming after being fired by chief of staff John Kelly, while saying she is preparing a tell-all after seeing things in the administration that made her “very uncomfortable,” Omarosa being the only African-American high-level aide, whose stated job was “outreach.”

This is a vile woman. Good riddance.  [But, yes, the White House should be scared as to what Omarosa might say from the outside.]

Wall Street

For starters, we had the release of the November inflation data and the producer price index was 0.4%, 3.1% year-over-year.  On core, ex-food and energy, the figures were 0.3% and 2.4%.

Consumer prices rose 0.4%, 0.1% ex-food and energy, with the year-over-year figures at 2.2% and 1.7%, respectively.

November retail sales were up a strong 0.8%, 1.0% ex-autos, while November industrial production rose 0.2%.

Wednesday afternoon, the Federal Reserve hiked its short-term lending rate a third time this year, fifth since late 2015, voting 7-2 to do so, and it stuck with its projection for three more rate hikes in 2018.

The Fed also raised its growth forecast to 2.5% from 2.1% for 2018, while projecting the unemployment rate, currently 4.1%, will tick down to 3.9%.

The thing is the Fed’s preferred inflation barometer, the personal consumption expenditures index, PCE, remains stuck at 1.6%, below its 2% target, while wages, up 2.5% the last 12 months, still lag the historic average of 3.%+ for a robust economy, which we now have after years of stupor.

The Atlanta Fed’s GDPNow barometer for the current quarter is back up to 3.3%, while most economists are forecasting about 2.8% growth for Q4.

The National Retail Federation also said this week that the holiday shopping season appears to be on track for its projected 4% growth, which would be the best since 2014.

In her last press conference before leaving, Chair Janet Yellen said of the move to raise rates and the overall outlook:

“This change highlights that the committee expects the labor market to remain strong, with sustained job creation, ample opportunities for workers and rising wages.”

The accompanying statement from the FOMC said monetary policy would help the labor market “remain strong.”

Yellen added: “The growth that we’re seeing, it’s not built on, for example, an unsustainable buildup of debt.  The global economy is doing well.  We’re in a synchronized expansion.  This is the first time in many years we’ve seen this...I feel good about the economic outlook.”

Yup, I’ve been talking about global growth ad nauseam, with more good news from Europe below, and as the Wall Street Journal editorializes:

“The rising growth is touching most industries and parts of the country.  Manufacturing is healthy – note to Donald Trump and Commerce Secretary Wilbur Ross – thanks to growth abroad and rising exports. The housing market is doing well overall, and consumer confidence is high.

“The best news may be the surge in small business optimism that began with the election and has persisted, as measured by the National Federation of Independent Business. Small business confidence has been depressed compared with the typical economic expansion, but NFIB’s hiring index reached an all-time high in November, and the sentiment is making a difference in the labor market.”

But rising interest rates will be a threat to the expansion, not just here but abroad.  The day of reckoning I now believe will be sooner than expected, even if recession is not in the forecast.

I’ll get into that as part of my yearend review and outlook in two weeks.  I won’t be calling for gains in the equity markets in 2018, for starters.

For now...from a separate Journal editorial:

“The Federal Open Market Committee on Wednesday raised its target interest rate for the third time year this year to a range of 1.25% to 1.5%....

“The rate increase was widely anticipated, and markets took it in stride. More notable is that the FOMC’s statement and economic predictions seemed oblivious to the news across town Wednesday that the House and Senate have struck a final tax reform deal.

“The tax bill is the most significant reform since 1986 and will reduce the cost of capital with 100% immediate business expensing and a cut in the U.S. top corporate tax rate to 21% from 35%.  The Germans and Chinese are fretting that capital might flow to the U.S.  yet the Fed gave no indication that it thinks this will have much effect on the economy.

“Reporters tried mightily to coax Ms. Yellen to declare at her post-FOMC presser that the tax cut is dangerous demand-side stimulus amid full employment, including a comically tendentious question from the CNN reporter.  To her credit Ms. Yellen said that fiscal policy is for Congress and the Administration, and she said the reform would increase both economic demand and productive supply.

“Yet the Fed’s predictions of economic growth budged only a little.  The median forecast of the board and Fed presidents moved up a tick to 2.5% this year form 2.4% in September.  And it moved to 2.5% in 2018...Beyond that the Fed’s fearless forecasters have the economy falling back to near 2% and even lower in the ‘longer run.’

“Presumably one of those forecasters it the Fed Chair apparent Jerome Powell, now a regular board member. The challenge for Mr. Powell and the Fed will come if their forecasts are wrong and they are underestimating the growth effects of tax reform, deregulation and the rest of the Trump-Congress policy mix....

“Mr. Powell is taking the job when the Fed will have to decide how fast to raise interest rates and unwind the unprecedented buildup in its balance sheet. ...the unwinding could be bumpy.”

Europe and Asia

Some economic news before the Brexit discussion.  Markit issued its flash readings for December for the eurozone, with manufacturing at 60.6 (50 being the dividing line between growth and contraction), with services at 56.5 and a composite reading of 58.0, an 82-month high.

Recall the flash readings break down just Germany and France individually, with Germany’s manufacturing PMI at a robust 63.3 and services 55.8; 59.3 on manufacturing for France, 59.4 on services.

Just great numbers, befitting a surging economy for the EA19.

Chris Williamson, Chief Economist, IHS Markit

“The eurozone economy is picking up further momentum as the year comes to a close, ending its best quarter since the start of 2011. The PMI is signaling an impressive 0.8% GDP increase in the fourth quarter, with accelerating growth seen in both Germany* and France...

“France has been the big surprise this year, rapidly pulling out of its malaise to help shift the eurozone expansion into a higher gear....

“Although price pressures abated slightly in December, the robust growth of demand and tightening labor market hint at rising core inflationary pressures as we move through 2018.”

*Separately, the Ifo institute is forecasting growth in the German economy at 2.6% next year, up from its prior estimate of 2.0%. That kind of says it all about the state of the continent’s economy overall.

It was an important week for the European Central Bank as chief Mario Draghi and his band of merry pranksters held the line on its benchmark lending rate at zero at the ECB’s final monetary policy meeting of the year, as well as leaving its stimulus program unchanged, though Draghi said the ECB’s revised inflation forecast is still at just 1.7 percent all the way out to 2020, but he didn’t say whether this would qualify for meeting the bank’s 2 percent target.

[Inflation is due to be 1.4 percent next year, up from 1.2 percent.]

Draghi did say the bank’s governing council had “increasing confidence” that inflation was turning up.

The ECB also raised its growth outlook for next year to 2.3 percent from 1.3 percent in the last set of forecasts issued in September.

The bank said it would reduce its bond purchase to 30bn euros ($35 billion) a month from 60 billion euros and would extend the program through at least September, or longer if necessary if the inflation picture remains punk. The ECB has consistently said the stimulus would be withdrawn slowly so to not disrupt the economy.

Brexit: Today, in a huge win for British Prime Minister Theresa May, European leaders at a critical EU summit gave a formal green light to opening a new phase of negotiations with the U.K. over Brexit. 

Mrs. May was able to say that Britain and the EU will begin talks on their future relationship straight away after the bloc agreed to move discussions onto the next stage, adding talks about the “implementation (transition) period that will give certainty to businesses and individuals” is a key part as May reiterated Britain is leaving the EU on March 29, 2019.

EU summit chair Donald Tusk said today the bloc would start “exploratory contacts” with Britain on what London wants in a future trade relationship, as well as starting discussion on a post-Brexit transition.

EU chief executive Jean-Claude Juncker praised the prime minister for a deal on divorce terms (exit tab) last week and called her a “tough, smart, polite and friendly negotiator.”

French President Emmanuel Macron said that in moving forward the EU had maintained its unity, protected the integrity of the single market and ensured “compliance with our own rules.”

Phase two of the negotiations, including discussion on future economic cooperation, is not likely to begin until March.

The three-page document from today says the U.K. will remain under the jurisdiction of the European Court of Justice and be required to permit freedom of movement during any transition period.

Agreements on the Irish border, the so-called divorce bill and the rights of EU and U.K. citizens, agreed to by Mrs. May last Friday, must be “respected in full and translated faithfully into legal terms as quickly as possible.”

And: “As the U.K. will continue to participate in the customs union and the single market during the transition, it will have to continue to comply with EU trade policy.”

While the EU is willing to engage in “preliminary and preparatory discussions” on trade as part of building a “close partnership” after the U.K.’s departure, this means any formal agreement “can only be finalized and concluded once the U.K. has become a third country.”

It’s always been important for both sides to get a deal done, but it was never going to be easy, and there is a ton of hard negotiating to take place in the future.  The outlines of a final deal are to be negotiated between March and October of next year, in order to allow time for translations, debate in 27 member states and other issues to be cleared up before the March 2019 exit.  In other words, next summer could be hairy.

But we should have a little respite from the discussion, at least through the holidays.  Lord knows Theresa May needs some time to catch her breath.

The prime minister is to deliver her vision of the “end state” for Britain outside the EU at a cabinet meeting on Tuesday, having suffered her first Commons Brexit defeat earlier this week.

May was defeated after she rejected calls by rebels in her Conservative party and opposition lawmakers to amend a parliamentary bill to allow a binding vote to enshrine the terms of Brexit in legislation.

May said the amendment, by requiring the EU withdrawal agreement to become law before other Brexit-related legal changes are enacted, could prolong the process, “which could mean that we are not able to have the orderly and smooth exit from the European Union that we wish to have.”

So the government side narrowly lost a key vote, 309-305, with MPs voting to give Parliament a legal guarantee of a vote on the final Brexit deal struck with Brussels.

But given that the process is now moving forward, parliament’s move is for another day, plus many wonder if in the big picture it really matters.

*Two economic notes on the U.K.  Inflation ran at a 3.1% annualized pace in November, the Bank of England having raised its short-term lending rate for the first time in a decade last month.  It will be difficult to avoid another increase in the near future.

November retail sales, aided by Black Friday, were up a strong 1.6 percent, compared with a decline in October, as reported by the Office for National Statistics.

Germany: It was a good week for German Chancellor Angela Merkel too as the Social Democrats agreed to open exploratory talks on forming a government with Merkel’s center-right conservatives, raising hopes for an end to political deadlock.

The SPD had initially said they would go into opposition after suffering heavy losses in September’s election, though now formal talks between the two sides won’t be taking place until January, while forming a government could take months after.

Many SPD members are nervous at the prospect of a renewed “grand coalition” after the previous one proved so costly.  The SPD is going to vote at a special congress on Jan. 14.

Winning over the SPD is Merkel’s only chance at securing a fourth term. But she is going to have to make some major concessions and that will be the issue post-Jan. 14 and beyond. As I’ve noted before, immigration will be the toughest item.

Eurobits....

--Austria’s conservative People’s Party has agreed to a coalition with the far-right Freedom Party tonight, the deal coming two months after a parliamentary election that saw the People’s Party win but without an overall majority.

So this means the People’s Party’s leader, Sebastian Kurz, all of 31, is set to become the world’s youngest head of government.  31!!!

Assuming the coalition is ratified, this would also mean that Austria would become the only western European state with a governing far-right party.

The campaign was dominated by Europe’s immigration crisis, something the anti-immigration Freedom Party (think the late Jorg Haider) has long championed, but then this year, Sebastian Kurz coopted many of the Freedom Party’s planks but managed to meld in some moderate positions to gain the most votes overall, which pissed off the Freedom Party to no end at the time.

This is fascinating.  I have some stories from my trips to Vienna (and riding the rails outside the city) that certainly exposed me to the Nazi element in the country that has never left.  The story behind “The Sound of Music” and Captain von Trapp isn’t far from the truth, even if it was gussied up a bit.

By the way, I once found Mozart’s grave, until I learned it wasn’t...but I digress....

--Catalonia’s big vote is Dec. 21.  There was literally zero real news on the topic this week, but this is huuuuge.  It’s still supposed to be about 50/50.

--The Italian bond market took it on the chin a bit this week, with the yield on the 10-year rising from 1.64% to 1.80% on word new elections are to be held in March, not May as first expected, meaning president Sergio Mattarella will dissolve parliament towards the end of this month.  The timing may have surprised international investors.

Turning to Asia... China’s wholesale prices (PPI) rose 0.5%, 5.8% year-over-year, according to the National Bureau of Statistics.  The CPI was 1.7% annualized, with the government having a 3% target on consumer prices.

November exports rose 12.3% yoy vs. October’s 6.9% clip, while imports increased 17.7%, though a cooling property market will eventually weigh on commodities, a prime import.

Exports were more a function of increased global demand, a good thing.

November industrial production rose 6.1% year-over-year, while November retail sales gained 10.2%, which met expectations.

Fixed-asset investment (big projects, like roads, airports and rails) for large state firms rose 11% in the Jan.-Nov. period, while the figure was up 5.7% for smaller private investment.

In another key metric for the overall state of the economy, China generated power at a rate that was up 2.4% over the same period last year in November.

Coal output has been increasing (which the government doesn’t really want to see from a pollution standpoint, but it’s necessary) as the country’s heating season kicked off.  Many homes not only now use coal for heating due to natural gas shortages, but many are also using electric heaters that draw on power from coal-fired power plants.  This is the time of year that China suffers from its worst smog, owing largely to the preceding, as well as auto emissions.

Lastly, Japan’s flash reading on manufacturing for December was a solid 54.2.

Street Bytes

--The major averages all closed at record highs on news the House-Senate conferees had reached a final agreement on the tax bill, and seemingly had the votes for passage. The Dow Jones finished up 1.3% to 24651, the S&P 500 rose 0.9% to 2675, and Nasdaq registered a 1.4% gain to 6936 after losses the previous two weeks.

Separately, investors plowed more than $600 billion into exchange-traded funds globally in the first 11 months of the year, according to a London-based researcher (ETFGI LLP).  Assets in ETFs world-wide rose to $4.7 trillion at the end of November, up from $3.6 trillion at the end of last year.

BlackRock and Vanguard alone attracted a combined $376 billion of net new cash in the period.  [Sarah Krouse / WSJ]

--U.S. Treasury Yields

6-mo. 1.46% 2-yr. 1.84%  10-yr. 2.35%  30-yr. 2.69%

Nine straight weeks where Friday’s closing yield on the 10-year was between 2.33% and 2.41%. And despite the three rate hikes in 2017, the 10-year is still below the 12/31/16 close of 2.44%.

--On the oil front...according to the International Energy Agency, U.S. shale oil companies will help production from outside OPEC grow faster than initially expected next year, with global supply and demand now not forecast to balance until late 2018, per the IEA’s monthly report.

U.S. drilling and well completion rates have picked up as prices have rebounded solidly above $50.

For its part, OPEC announced November production fell a fourth consecutive month to 32.4m b/d.  OPEC also noted in its latest report:

“Higher-than-expected supply growth in the U.S., Canada and Kazakhstan have been the key contributors to the upward revisions (in non-OPEC growth), particularly U.S. tight oil (shale).”

Separately, from the Wall Street Journal:

“The U.S. and Japan have urged Saudi Arabia to pursue an international listing for oil giant Aramco, fearing the possible sale of a stake to China would give Beijing too much sway in the Middle East, people familiar with the matter said.

“Saudi Arabian Oil Co., or Aramco, was slated to become the world’s largest-ever public offering, with a domestic and international listing next year.  More recently, Riyadh has instead considered selling a private placement to a Chinese consortium of state-held entities, people familiar with the matter said.

“U.S. and Japanese concerns come amid increased tensions in the region, where Saudi Arabia and its allies are facing off against Iran and Riyadh is dealing with domestic political turbulence.

“The U.S. is concerned that a Chinese stake in Aramco would create a close bond between Beijing and Riyadh, a longstanding American ally, by cementing China’s status as a big and steady consumer of Saudi Arabian oil, one of the people familiar with the matter said.

“China is the world’s top oil importer and is looking to secure a steady supply of crude as its economy continues to race ahead.  Aramco holds around 16% of the world’s proven crude reserves and is one of the biggest oil exporters.” [Sarah McFarland, Summer Said and Mayumi Negishi / WSJ]

Planning for the IPO is on hold amid Crown Prince Mohammed bin Salman’s effort to consolidate power in the kingdom.

--Walt Disney Co. announced Thursday it has agreed to buy 21st Century Fox, Inc., including the Twentieth Century Fox Film and Television Studios, along with cable and international TV businesses, for approximately $52.4 billion in stock.

Immediately prior to the acquisition, 21st Century Fox will receive 0.2745 Disney shares for each 21st Century Fox share they hold. Disney is also assuming nearly $14 billion of net debt of 21st Century Fox.

So here’s how it breaks down. Rupert Murdoch retains Fox News Channel, the FS1 sports network and the Fox broadcast network in the U.S., including Fox Business. Disney CEO Bob Iger said he will remain in his role through 2021.

Fox is to complete its planned acquisition of the 61 percent of European broadcaster Sky it doesn’t already own, which then ends up with Disney. Iger said he would discuss a possible role at Disney with Murdoch’s son James, Fox’s CEO. While this doesn’t seem to be the case, Murdoch, 45, could be in line to succeed Iger, 66.

On the movie side, Fox has rights to the X-Men and Fantastic Four franchises, while Disney would have control of the Avatar franchise. 

Fox’s TV studio (over to Disney) produces several of the biggest hits, such as This Is Us, Modern Family, Empire and Homeland.  [And “The Simpsons,” which I watched for the first time in years last Sunday, as it’s always conflicting with football and “60 Minutes,” and it has held up well.]

But as for sports, while Fox is retaining Fox Sports, and the FS1 and FS2 networks and the Big Ten Network, Disney is acquiring Fox Sports’ 22 regional sports networks (RSNs), which ESPN will be able to slap its name on and this is huge.

The RSNs control the local cable rights for 17 NBA teams (including the Pistons, T’Wolves, Cavs, Thunder and Spurs), 15 MLB teams (including the Cardinals and Yankees), 12 NHL teams and other college football and basketball not part of the Big Ten.

CNBC’s David Faber estimates the RSNs alone would be valued at $20bn out of the total $52.4bn price tag.

In major markets such as St. Louis and Detroit – both served by Fox RSNs – the local RSN ranked higher in importance to cable customers than broadcast networks such as NBC, CBS, ABC and Fox. According to Nielsen, the local RSN ranked as the fifth-most-important cable channel in their lineups, ahead of ESPN itself.

So the point is, ESPN’s recent financial issues have stemmed from cord-cutting customers, with the network losing more than 13 million subscribers from its 100 million peak in 2013.

But now customers may think twice about dropping their cable packages if it meant losing the RSN, which now falls under the ESPN domain.

As for Rupert Murdoch, 86, he is downsizing an empire he spent his life putting together. [Estate planning no doubt plays a role.] 

But the deal, in giving Disney $2 billion of cost savings, will result in the loss of hundreds, if not thousands, of jobs, especially in the integration of Disney and Fox studios, which have tremendous overlap.

Fox’s film studio, for example, employs about 3,200 people and both have teams that handle film distribution, marketing and back-end business operations – divisions ripe for reduction.

The Justice Department, which has sued to block the AT&T / Time Warner Inc. deal, could block Disney’s move because it brings so many media assets under one roof.  But execs at Fox and Disney should take heart in the fact President Trump called Rupert Murdoch to congratulate him on the deal...@foxandfriends.

--The U.S. Federal Communications Commission voted along party lines Thursday to repeal landmark 2015 rules aimed at ensuring a free and open internet, setting up a court fight.

By a 3-2 vote, the approval of FCC Chairman Ajit Pai’s proposal marks a victory for internet service providers like AT&T, Comcast and Verizon, handing them power over what content consumers can access.

Companies such as Google (Alphabet) and Facebook urged Pai, a Republican appointed by President Trump, to keep the Obama-era rules barring service providers from blocking, slowing access to or charging more for certain content.

Opponents argue, such as FCC Commissioner Mignon Clyburn, a Democrat, that the vote was “handing the keys to the internet” to a “handful of multibillion-dollar corporations.”

Pai has argued the current rules stifle competition and innovation among service providers.

Consumers won’t see immediate changes, but over time smaller startups worry that the lack of restrictions could drive up costs or lead to their content being blocked.

The Internet service providers have said they wouldn’t block legal content but they may engage in paid prioritization.

--Israeli pharmaceutical giant Teva announced it would lay off 25% of its employees, 14,000 workers worldwide, about 3,400 in Israel, which is a huge deal there, with Prime Minister Benjamin Netanyahu telling the CEO he was worried about the state of the company, while asking him to limit the damage to Israeli workers.

Most of the losses overall, however, will be felt in the U.S., as the world’s biggest seller of generic drugs has been hit hard by declining generic prices in the U.S. and increased competition for its blockbuster multiple-sclerosis drug, while it struggles with a heavy debt load.

--Oracle Corp. forecast current-quarter cloud revenue growth that missed Street expectations and the shares fell about 7% in the aftermarket Thursday (before recovering some today); the company saying it now forecasts growth in the cloud business will grow 21% to 25% in the fiscal third quarter, down from 44% in the preceding one.  [By comparison, Amazon’s cloud sales in the quarter to September rose 42%, while Microsoft’s Azure services surged 90% in the same period.]

Oracle also forecast current-quarter earnings that were below Street forecasts.

Total revenue rose 6% to $9.63 billion, beating expectations, while revenue in the company’s traditional software licensing business, by far still its largest, was up 3%.

--According to an analysis from Moody’s, big tech is projected to boost revenue by 3.5% to 4.5% next year, led by Apple and Microsoft. The two could account for half of all profits from Moody’s basket of 24 tech stocks.

Apple and Microsoft had a combined $74 billion of reported net income for their respective most recent fiscal years.

--On the trade front....from the Associated Press:

“Canada has ditched a plan to buy 18 Super Hornet jet fighters from U.S.-based Boeing Co. and will instead buy 18 used F-18 fighters from Australia.

“Prime Minister Justin Trudeau had previously warned that Canada would stop doing business with Boeing if the company doesn’t drop a trade complaint against Canadian plane maker Bombardier, and the government warned again on Tuesday that Boeing would have little chance of winning a new contract for 88 additional fighter jets under the status quo.”  #TrumpTradePolicy

--Mattel warned of weak holiday sales, even with Barbie at the top of girls’ holiday wish lists.  [Barbie equipped with a smartphone, I assume, so she can message on Facebook.  Actually, Barbie looks like she’s older than 13....I better move on....]

Mattel, in an SEC filing, expects 2017 full-year gross sales to decline by mid-to-high single digits compared with the previous year when they fell 3 percent.

The company is suffering as the industry becomes more fragmented with outfits like Spin Masters, MGA Entertainment and the likes of Moose Toys, plus children are opting for games on their devices like iPads.

--Have we hit bottom in the market for malls?  On Tuesday, the European property company Unibail-Rodamco said it had agreed to acquire the Westfield Corporation for $15.7 billion, giving the former a significant foothold in the United States – with Westfield having such trophy properties as Westfield Century City on the west side of Los Angeles and the shopping center at the World Trade Center in Lower Manhattan.

Earlier, GGP, the rebranded General Growth Properties, turned down a $14.8 billion bid from Brookfield Property Partners for the shares of GGP it didn’t already own.

--Subway has seen its traffic plummet 25% over the past five years with fierce price competition and a slew of scandals, with Subway’s owners promising a cash infusion of $25 million to boost marketing.

The issue is the image of the product, and the erosion of traffic after public-relations nightmares such as a suit claiming the company’s foot-long sandwiches were only 11 inches (a case recently dismissed by a judge), the revelation Subway’s bread contained a chemical that’s used to make yoga mats, and the whole Jared deal (the pitchman now serving 15 years in prison on child-porn charges). And there was the Canadian TV network story that Subway’s chicken was mostly soy filler, for which Subway was forced to sue the station.

--From the Wall Street Journal:

“Behind bitcoin’s stunning rise lies a new force in global financial markets: millions of individual Asian investors.

“Despite the attention focused on the launch of bitcoin futures in the U.S. last weekend, the center of gravity for trading the virtual currency, measured by volumes, has been in the East – starting in China, before shifting earlier this year to Japan and recently to South Korea as the latest hot spot.”

Regulators clamped down inside China, which had represented the bulk of trading, but by end of November, Japan, South Korea and Vietnam accounted for nearly 80% of bitcoin trading activity globally, according to research firm CryptoCompare.

But the Journal piece doesn’t mention what I first wrote of months ago...that some bitcoin exchanges in Asia, such as in Hong Kong, are run by top organized crime bosses.  I told you of the guy who had left prison after a lengthy sentence and immediately went into the bitcoin business.  It’s stories like this that leave me shaking my head on the whole topic. As traders say, “Yours.”

The first week of futures trading, though, went reasonably well, I guess.  Talk died down a bit.

--I’m officially tired of all the folks being outed for sexual harassment, including the likes of Dustin Hoffman and Mario Batali....Tavis Smiley of PBS.

--This story made every paper in America it seems. The Chronicle of Higher Education released its annual survey of presidents’ compensation from private colleges and universities, looking at tax forms from 2015, the latest available year, filed by 500 private colleges across the nation with the largest endowments, and the highest-paid private college president was....

Nathan Hatch at Wake Forest ($4 million). Go Deacs!  [This included a hefty bonus for sticking around ten years, so otherwise $1 million.]

The average compensation for the 500 was $570,000, including salary, bonuses and benefits.

Foreign Affairs

Syria: Russian President Putin on Monday ordered “a significant part” of Moscow’s military contingent to start pulling out of Syria, declaring their work largely done.

Putin made the announcement during a surprise visit to the Russian Hmeymim air base in Syria, where he met President Assad and addressed Russian forces.

Kremlin spokesman Dmitry Peskov said: “Thanks to the fact that the operation to save Syria and the liberation of Syrian land from terrorists have been completed, there is no longer a need for broad-scale combat strength.”

But Russia, as I long wrote of, said it will keep its naval base at the port of Tartous, as well as the Hmeymim air base, both capable of carrying out strikes against insurgents if required after a partial military pull-out, the Kremlin said.

The announcement of supposed Russian success is designed to give Putin a boost for his re-election.

The official death toll for Russian forces killed in Syria is 38, according to Reuters, though there were more deaths, unannounced as yet, borne by private military contractors working with the military.

A few days after Putin’s announcement of a withdrawal of forces, the U.S. said it has not observed any meaningful one.

Anshel Pfeffer / Haaretz...perfect analysis....

“Twenty-seven months since the Russian deployment to Syria began, no one has any illusions that, as far as the Kremlin is concerned, this has been a resounding success.  There were expectations that this foreign intervention in a Mideast war would end in tears, as so many previous ones had. But not this time.

“Questions were raised over whether Russia’s military – still undergoing a transition from its old and unwieldy Soviet Red Army version – could carry out a prolonged and long-range deployment of this scale.  But despite a few mishaps, which included the smoke-shrouded arrival of the ineffective aircraft carrier Admiral Kuznetsov last year, the modernized Russian army pulled it off.

“Of course, this was nothing like the interventions of the United States and its allies in recent years.  Putin’s aims were not to bring democracy and freedom to Syria.  On the contrary, he set out to keep a blood-soaked dictator in place, and did so by indiscriminately bombing civilian targets that were held by rebel forces.

“Putin plays by Moscow rules, and by those rules this has indeed been a resounding success.  He has kept an ally in place, cemented a strategic regional alliance that includes Iran, ensured Russia has long-term rights for air and sea bases in the Mediterranean and established himself as the only world leader with real influence in the region.

“Putin did all this despite Russia’s faltering economy, hit by plunging oil prices and Western sanctions over Ukraine, and despite the threat of Islamist terror attacks on Russian soil in retaliation.  He did it because he identified a historic opportunity during the presidency of Barack Obama, with the United States in retreat from the region, to assert Russian power instead. Obama opened the door for Russia, and President Donald Trump is now keeping it wide open.

“It is important to keep Putin’s achievement in focus. He hasn’t rebuilt Syria and has no intention of doing so.  Unlike the United States, which poured hundreds of billions of dollars in civilian aid into Iraq and Afghanistan, Putin’s approach is a much more instrumental one. To the victor go the spoils, and he certainly has no intention of picking up any tabs.

“Syria will remain a ruined nation for decades to come, over half of its population uprooted and a quarter living outside the country as refugees.  Putin never intended to save Syria, just the mass murderer who is still its president.  For other countries in the region, including Israel, this means that for the time being at least, they have to deal with Putin regarding any postwar arrangements.”

And Iran is staying.  As Mr. Pfeffer adds in this regard, “Russia, for the time being at least, is happy for Iran’s proxies, Hizbullah and other Shia militias, to provide the ‘boots on the ground’ to continue pacifying the country, parts of which are still under rebel control.”

Putin also seems to be willing to listen to Israel’s concerns over Iran’s entrenchment in Syria, though Vlad hasn’t put any real pressure on Iran as yet. The Golan Heights is the ultimate test case.

Meanwhile, the negotiator for the Bashar al-Assad government in UN-sponsored peace talks accused Western countries and Saudi Arabia of sabotage and blackmail at the end of a round of discussions in Geneva on Thursday, adding Damascus did not want to see the political process fail.  “Nobody can exert pressure on us,” Bashar al-Ja’afari said. Needless to say, talks are going nowhere.

UN Special Envoy for Syria Staffan de Mistura urged Russia to convince the Syrian government of the need to clinch a peace deal to end the nearly seven-year-old war, saying failure to do so would lead to the “fragmentation of Syria.”  De Mistura said “there has to be a new constitution and new elections, through the United Nations.”

Israel: The leaders of 57 Muslim nations have called on the world to recognize East Jerusalem as ‘the occupied capital of a Palestinian state.’

Saudi Foreign Minister Adel al-Jubeir, a former ambassador to the United States, said the U.S. administration is serious about getting a peace deal between Israelis and Palestinians, but the plan is still being put together.

President Trump’s decision to recognize Jerusalem as Israel’s capital and eventually move the U.S. Embassy there has angered Palestinians, who question America’s role as an ‘honest broker.’ The Palestinians want the eastern part of the city as a capital of a future independent state of their own.

The Trump administration argues that any credible peace plan would put the Israeli capital in Jerusalem, and that moving past the question can unblock a peace process frozen since 2014. The White House insists Trump’s decision does not affect Jerusalem’s borders or future status which can still be decided in talks.

The U.S. is looking to release a peace plan early next year with Jubeir emphasizing that Riyadh continues to support a two-state solution.

But Jubeir denied the Sunni Muslim kingdom had any relations with Israel despite sharing Israel’s concern about the regional influence of Shiite Iran. [Reuters]

Meanwhile, on Wednesday the Palestinians said they would reject efforts by the U.S. to act as a peacemaker.

“The United States has chosen to lose its qualifications as a mediator... We will no longer accept that it has a role in the political process,” Palestinian Authority President Mahmoud Abbas.

Vice President Pence, depending on the fate of the tax bill in Washington, is due in the region at some point next week.  Abbas has said he would not meet with him.

Christian leaders in the Middle East, such as the head of Egypt’s Coptic Church, which is the largest Christian community in the Arab world, also announced he would be boycotting Pence.

Israeli Prime Minister Benjamin Netanyahu urged Palestinians “to recognize reality and to work for peace, not for radicalization, and to recognize another fact about Jerusalem: Not only is it Israel’s capital, but we also maintain freedom of religion in Jerusalem for all faiths and we are the ones who keep this promise in the Middle East like none others do, and they often fail disgracefully.”

Can’t disagree with this.

As for the post-U.S. announcement violence that was forecast, little has unfolded, especially when considering the region, but terrorist groups now feel unleashed...again....such as the Salafis in Gaza that Hamas is trying to control.

But you still have rhetoric from the likes of Turkish President Erdogan, who on Monday said the U.S. has become a “partner in bloodshed” with their decision to recognize Jerusalem. He said he believes the Organization of Islamic Cooperation meeting would be a turning point.  Erdogan also called Israeli forces “terrorists,” while accusing Israel of having no values other than “occupation and plunder.”

Netanyahu responded: “Mr. Erdogan has attacked Israel.  I’m not used to receiving lectures about morality from a leader who bombs Kurdish villages in his native Turkey.”

Iraq: Prime Minister Haider al-Abadi announced that the war on Islamic State was over, telling a conference in Baghdad that Iraqi troops were now in complete control of the Iraqi-Syrian border.

It’s a proud moment for Abadi, but it doesn’t mean the battle against the group’s ideology or its ability to stage an insurgency or massive terror attack is finished, whether here, Syria or around the world.

Iran: On Thursday, the U.S. publicly displayed for the first time evidence of what it says represents Iran’s growing military influence in the Middle East.

The evidence, some of which was wreckage that had been reassembled, was presented by Nikki Haley, the U.S. ambassador to the UN, who said the debris pointed to Iran’s threat to the region.

Iran’s mission to the UN, in a Twitter post responding to Haley, said the evidence unveiled by the U.S. was fabricated and denounced her accusations as “irresponsible, provocative and destructive.”

Among the items Haley displayed was a purported missile fired by Iranian-backed Houthi rebels in Yemen at an airport in Saudi Arabia last month.

North Korea: President Trump and Secretary of State Rex Tillerson are once again at odds. Tillerson said on Tuesday that the United States was ready to open talks with Pyongyang “without precondition.”

Hours later the White House distanced itself, with press secretary Sarah Sanders saying President Trump’s position on North Korea had not changed – meaning talks were pointless if Kim Jong-un continued to threaten his neighbors.

“North Korea is acting in an unsafe way not only toward Japan, China, and South Korea, but the entire world,” Sanders said.  “North Korea’s actions are not good for anyone and certainly not good for North Korea.”

But then today, addressing a meeting of the UN Security Council, Sec. Tillerson backtracked, urging North Korea to carry out a “sustained cessation” of weapons testing to allow the two countries to hold talks.

“North Korea must earn its way back to the table. The pressure campaign must and will continue until denuclearization is achieved.”

Tillerson didn’t specify how long the lull should last.

For his part, Kim promised to develop more nuclear weapons while he personally decorated scientists and officials who contributed to the development of Pyongyang’s most advanced intercontinental ballistic missile, according to state media.

Meanwhile, South Korean President Moon Jae-in arrived in Beijing with 200 business people amid a thaw in frosty relations with its major trading partner, and then Moon and President Xi agreed to “normalize” relations on multiple fronts to free up trade and tourism. Chinese tourism to South Korea, for example, had plunged 70 percent this year.

Beijing had banned travel agencies selling group tours in retaliation for South Korea installing the U.S. anti-missile system, THAAD, to protect it from North Korea; China claiming THAAD can be used to spy deep into Chinese territory.  Giant South Korean retailer Lotte was forced to close stores after failing “fire safety” inspections at the time.

But Friday, China’s Premier Li Keqiang, standing alongside Moon, said “We should say, springtime is expected.  We also all want China and South Korea relations to move forward in a stable and healthy manner.”

Separately, the Washington Post’s Joby Warrick reported that North Korea is bent on acquiring machinery for a biological weapons program – including factories to produce deadly microbes and labs that specialize in genetic modification.

Pyongyang has sent scientists abroad to earn advanced degrees in microbiology, and is offering to sell biotechnology services to developing nations, U.S. and Asian intelligence officials told Warrick. But there is no hard evidence the North has ordered the production of any weapons as yet.

Then again, the work is no doubt taking place in civilian factories that produce agricultural and pharmaceutical products, so unless you had a defector or informant, you’ll never know.

Lastly, the PyeongChang Winter Olympics are fast approaching and North Korea has been relatively quiet on the missile testing front since September, as pointed out by the Wall Street Journal’s Gerald Seib, vs. the first eight months of the year.

Up thru August, Pyongyang conducted 23 nuclear or missile tests for the year, but it has staged only three such tests since September, including the impressive one on Nov. 28.

But now we have the Olympics in February, followed by the Paralympic Winter Games in March.

“South Korea clearly wants the Olympics to go smoothly, so it is unlikely to sanction any joint pre-emptive military actions with the U.S. until after the Games are finished,” Seib writes.

“It’s harder to determine how North Korea will behave during the Olympics.  A clear signal will come when Pyongyang reveals whether two North Korean athletes who have qualified are allowed to travel to South Korea to take part.”

China: Related to the above topic of trade, the Beijing mouthpiece, Global Times, editorialized that claims of Chinese infiltration in Australia had spread to New Zealand and Germany like an “infectious disease.

The paper warned: “The esteem with which Chinese regard certain Western countries will be downsized, as it becomes necessary for Beijing to retaliate. China needs to figure out tactics that can silently make Western institutions and individuals truly feel the pain.”

Australia is under fire from a comment made by Prime Minister Malcolm Turnbull that China was infiltrating not just the government, but business.  With China’s threat of retaliation, Aussie cattle ranchers, commodities firms and others are shuddering.

Josh Roggin / Washington Post

“Washington is waking up to the huge scope and scale of Chinese Communist Party influence operations inside the United States, which permeate American institutions of all kinds. China’s overriding goal is, at the least, to defend its authoritarian system from attack and at most to export it to the world at America’s expense.

“The foreign influence campaign is part and parcel of China’s larger campaign for global power, which includes military expansion, foreign direct investment, resource hoarding, and influencing international rules and norms. But this part of China’s game plan is the most opaque and least understood. Beijing’s strategy is first to cut off critical discussion of China’s government, then to co-opt American influencers in order to promote China’s narrative.

“Countries such as Australia, New Zealand and even Canada have been rocked by recent revelations of Chinese-sponsored efforts to corrupt their politicians, universities, think tanks and businesses.  U.S. political and thought leaders are just beginning to understand the problem and come together to devise responses....

“All countries seek influence abroad, pursue soft power and spread propaganda. But the Chinese combination of technology, coercion, pressure, exclusion and economic incentives is beyond anything this country has faced before. The sooner the United States acknowledges that reality, the better chance we have of responding.”

Separately, China is planning to build refugee camps on its border with North Korea in what is being seen as an indication that Beijing is preparing for a conflict, as first reported by the Financial Times, which reviewed a document from the Chinese internet that has since been deleted.

Russia: What a whirlwind week for Vladimir Putin. After going to Syria on Monday, the same day he stopped in Turkey and Egypt.

In Cairo, Putin and Abdel Fattah el-Sissi reached a deal on a nuclear power plant at a cost of $21 billion, as the two nations enter a new era of close ties, reminiscent of the previous Soviet sphere of influence during the Cold War.

Farid Farid / Sydney Morning Herald

“As Yemen’s civil war worsens and Saudi Arabia assumes a more dominant regional role, American allies such as Egypt and Israel, as well as foes including Iran, are turning to Russia as a more reliable partner to push their diplomatic and foreign agendas.

“The military pomp and parade on display for Putin in Cairo on his flash visit on Monday was a graphic indicator of how both autocratic leaders are attracted to exuding political might rather than necessarily acknowledging the terminal economic calamities gripping their countries....

“Although Arab regimes still rely heavily on U.S. security patronage, the Russia appeal lies in Moscow’s willingness to aggressively put its hands up as an international power that is concerned about regime stability and unencumbered by lip service to human rights.

“ ‘The message Russia is sending to other Arab countries by supporting [Syrian President Bashar] Assad is that if you are facing domestic trouble we are going to stick by our allies,’ Karim Bitar, a Middle East expert at the Paris-based Institute for Strategic International Relations told Fairfax Media.

“ ‘We are not like the U.S., we are not going to sell you weapons and then abandon you when you face problems.’

“ ‘So when Sissi flirts with Russia he’s just sending a signal to the U.S. that we might explore alternatives.’”

On a totally different topic, in his annual yearend press conference, Putin asserted that the key whistleblower who uncovered Russia’s state-sponsored doping scheme is working for U.S. intelligence agencies.

“What drugs do they give him (Rodchenkov) to make him say what he says?  It’s a joke.”

Putin also said he would run for a new term for president as an independent candidate while hoping for support from more than one party.  Putin told the press that the opposition lacked a strong candidate to challenge him because his opponents had very little to offer the nation.

Saudi Arabia: After a 35-year ban on cinemas, the kingdom announced movies could once again be shown, another reform from Crown Prince Mohammed bin Salman, MBS. The minister of culture said, “Opening cinemas will act as a catalyst for economic growth and diversification.”

No word from conservative clerics who have long supported the ban (and were the cause of it).

Personally, I’d recommend “Ben-Hur,” “Lawrence of Arabia,” “Animal House,” “Airplane,” and the “Lord of the Rings” trilogy. 

Venezuela: “A-hole of the Year” contender, Venezuelan President Nicolas Maduro, said the country’s main opposition parties are banned from taking part in next year’s presidential election.

The three most prominent parties boycotted last weekend’s mayoral elections, saying the electoral system is rigged.  So Maduro said they couldn’t take part in the national vote.

Random Musings

--Presidential tracking polls....

Gallup:  35% approve of Trump’s job performance, 60% disapprove
Rasmussen: 40% approve, 57% disapprove

Quinnipiac: 37% approve, 57% disapprove
Monmouth: 32% approve, 56% disapprove

In the Monmouth survey, only 24% of women approve of Trump’s performance, 68% disapprove (this had been 36/55 in Sept.), while among men, 40% approve, 44% disapprove (44/42 in September).

--As for the polling before the Doug Jones-Roy Moore vote, the Washington Post showed Jones ahead by 3 points, a CBS News/YouGov survey showed Moore up by 6, and a Fox News poll had Jones up 10 points.

--House Speaker Paul Ryan is rumored to be mulling retirement after the 2018 elections, as first reported by Politico.  “Ryan has made it known to some of his closest confidants that this will be his final term as speaker,” the report stated. “In recent interviews with three dozen people who know the speaker...not a single person believed Ryan will stay in Congress past 2018.”

Asked by a reporter earlier on Thursday if he was quitting, Ryan responded: “I’m not, no.”

Of course he is leaving. Wouldn’t you? Why deal with this s---show.

Of course Speaker Ryan will one day run for president.  He’d also be a helluva secretary of state (under anyone but Trump).

--Minnesota Gov. Mark Dayton (D) named Lt. Gov. Tina Smith (D) to fill Sen. Al Franken’s soon-to-be-vacated seat.

Smith said she intends to run in November 2018 to complete the remaining two years of Franken’s term.

I still haven’t seen a formal date for Franken’s departure, as the least funny so-called comedian bids us adieu.

It has been reported that Minnesota Rep. Keith Ellison won’t run for the Senate in 2018, has had been rumored.

Minnesota’s other Democratic senator, Amy Klobuchar, is also up for reelection in November. Ergo, Republicans feel like they have a shot at picking one off.

--From an interview by Jason Willick of the Wall Street Journal of Arkansas Republican Sen. Tom Cotton, Cotton addressing a U.S. foreign policy that he feels has been adrift for a quarter-century:

“The coalitions of the Cold War rapidly began to break down as soon as the Soviet Union dissolved,” Cotton said.  That first became clear during the debate over the Balkan wars of the Clinton years. “You had some Cold War hawks that were all of a sudden sounding like doves,” referring to conservatives who’d been staunchly anti-Soviet but were wary of U.S. involvement in what was then Yugoslavia.  “You had Cold War doves” – including the liberal humanitarians of the Clinton administration – “that were beginning to sound like Teddy Roosevelt, ready to charge up the hill.  That pattern consistently repeated itself” in subsequent years.

As for Cotton’s current view, and America’s many challenges – from Iran to North Korea, China to Russia, Syria to Ukraine – he is squarely on Team Roosevelt.  “There is always a military option. That is the case everywhere in the world.”

But today there is the lack of a clear organizing principle for how and when to use that power, which is knocking our global strategy off kilter.

Cotton will certainly be running for president in 2024, if not sooner.  [Or a Ryan-Cotton ticket would be unbeatable.]

--Trump tweet: “Another false story, this time in the Failing @nytimes, that I watch 4-8 hours of television a day – Wrong! Also, I seldom, if ever, watch CNN or MSNBC, both of which I consider Fake News. I never watch Don Lemon, who I once called the ‘dumbest man on television!’ Bad reporting.”

He’s of course lying.  It’s at least 8 hours.

By the way, I watch about 14 hours of television a day!!!  [Had to get my own exclamation points in.]

As for the story Trump drinks 12 Diet Cokes a day, can’t say I’ve ever had one in my life.  Really.  As for the number of Coors Lights I’ve consumed....that’s classified.

Actually, the Times piece on Trump had this nugget: “Before taking office, Mr. Trump told top aides to think of each presidential day as an episode in a television show in which he vanquishes rivals.”

If true, that’s kind of a loaded statement. As Chris Cillizza of the Washington Post observed:

“The secret strategy is that there is no secret strategy. Trump acts and reacts. He says stuff. He parries and jabs. He tries to win the minute-by-minute news cycle with little concern about any sort of long-range plan. That’s it.”

--Skiing superstar Lindsey Vonn said she was stunned by the responses she received since commenting last week that if she were to win a gold medal in the PyeongChang Olympics she would not visit President Trump’s White House.

In an Instagram post, Vonn wrote that the reaction “opened my eyes” to divisions in the country and said “it is hurtful to read comments where people are hoping I break my neck or that God is punishing me for being ‘anti-Trump.’”

“I am proud to be an American, and I want our country to continue to be a symbol of hope, compassion, inclusion and world unity.  My travels around the world have recently made clear that this is no longer how people view the United States.  You cannot pick up a newspaper or turn on the TV in Europe without noticing how people are questioning our direction.  It seems to me that we must lead with understanding and strive for unity in our relationships throughout the world....

“All of this is much bigger than skiing and the Olympics.  I am going to take the next two months to focus on what I can do and right now that is competing for my country.  In doing that, I will be hoping that we Americans can still be that ‘shining city on a hill.’”

Go Lindsey!  Ms. Vonn is my early pick for American Female Athlete of the Century, though U.S. phenom Mikaela Shiffrin will give her a run for the money and the coveted award from StocksandNews.   [Oops, gotta throw Serena Williams in there too.]

Vonn is once again suffering from injury issues but she has won 77 World Cup races and Ingemar Stenmark’s record of 86 is within reach should she decide to continue beyond PyeongChang.

--Back to Omarosa, according to reporter April Ryan, “Gen. Kelly kicked her out with high drama with the Minister offering vulgarities and curse words as she was escorted out of the building and off campus.”

During the altercation, Omarosa told Kelly that she had brought the black vote to Trump, Ryan said, but he snapped: “No, that is not the case!”

Omarosa then tried to walk over to Trump’s office – but was stopped by Secret Service agents who physically removed her from the premises, Ryan said.

No one ever understood what exactly it was that Omarosa did. She just wandered around looking for photo ops, including bringing her wedding party over to the White House, without permission.

---

Gold $1258
Oil $57.36

Returns for the week 12/11-12/15

Dow Jones  +1.3%  [24651]
S&P 500  +0.9%  [2675]
S&P MidCap  -0.2%
Russell 2000  +0.6%
Nasdaq  +1.4%  [6936]

Returns for the period 1/1/17-12/15/17

Dow Jones  +24.7%
S&P 500  +19.5%
S&P MidCap  +13.6%
Russell 2000  +12.8%
Nasdaq  +28.9%

Bulls 61.9
Bears 15.2 [Source: Investors Intelligence]

Have a great week.

Brian Trumbore



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Week in Review

12/16/2017

For the week 12/11-12/15

[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.

Edition 975

Trump World...Tax Reform...Roy Moore

President Trump, after months, and then weeks, of haggling, is finally truly on the verge of a major legislative triumph...a huge national tax rewrite that is the biggest legislation of its kind since the 1986 Reagan tax cuts.  He will deserve credit, and he will remind us of this every day for the rest of his presidency, of this you can be sure (assuming it has the impact Republicans, and he, have long talked of).

This is an important moment.  I have my doubts that it will be as impactful as projected beyond the first year or so, because I’m worried about the long-term impact on deficits.  But then I’ve been crying wolf on this topic for years (though not the last two) and I should have wasted my time, and yours, on other issues it turns out.

For now we move on, understanding Congress still has to pass a spending bill this week...or another CR (continuing resolution).

During the past week the tax bill was being hashed out between the Senate and House versions, without input from Democrats, and then late Friday afternoon a final text of the Republican bill was released.  The timetable is for the House to vote on it Tuesday, and then the Senate, with the president signing it before Christmas. 

Among the key items, the top individual tax rate is 37%, lower than today’s 39.6%, with seven individual brackets, while the top corporate rate has been reduced from 35% to 21%. 

The deduction in high-tax states like California, New York and New Jersey for state and local taxes will be capped at $10,000, with filers allowed to combine them.*

*According to Moody’s Analytics, 12 of the 20 counties expected to suffer the biggest drop in home prices as a result of this provision are in New Jersey.

The bill also increases the child tax credit from $1,000 to $2,000, and increases the maximum amount that is refundable to $1,400, up from $1,100 in the original Senate measure, which was enough to gain the vote of Florida Republican Sen. Marco Rubio.

Several popular tax preferences that were eliminated in the House bill have been preserved, such as the deduction for medical expenses, the deduction for student-loan interest, and the exclusion for graduate students’ tuition waivers.

But the bill does not repeal the estate tax or the alternative minimum tax for individuals, both long-time goals for Republicans, though it does increase the exemption amounts.  The corporate alternative minimum tax is eliminated, which will please the business community no doubt.

I won’t begin to explain the tax relief to pass-through businesses – entities such as small businesses whose income is taxed at individual rates – until I have time to read more on it, and I’m not sure on the repatriation rates for offshore earnings as yet.

But the legislation does repeal ObamaCare’s individual insurance mandate starting in 2018 and allows for drilling in a portion of the Arctic National Wildlife Refuge.

Under the process of reconciliation that prevents a filibuster from Democrats in the Senate, bills can’t add to the deficit after 10 years, so the legislation’s tax cuts for individuals expire after eight years, while the corporate tax changes and individual mandate repeal are permanent.

Previous estimates have suggested the tax bill would add about $1.5 trillion to the deficit over ten years, but this is totally dependent on the rate of growth over that time and I get a kick out of those who view such budget analysis as hard and fast because the deficits are dependent not just on how fast the economy grows, but also interest rates and geopolitics, to state two obvious items that factor into the final equation.  Like a war with North Korea or Iran would explode the deficit further, or a bout of inflation that forces the Federal Reserve to raise rates far quicker than initially projected.

And as for passage next week, while Senators Rubio and Corker are now in the ‘yes’ camp, Sens. Susan Collins (Maine) and Jeff Flake (Ariz.) haven’t officially announced how they’ll vote as I go to post tonight.

And while Sens. John McCain (Ariz.) and Thad Cochran (Miss.) are expected to return to the Senate for the final vote, currently they are both in the hospital and missed votes this week.

Democrats will remain firmly in opposition as they stake the 2018 mid-term election on framing the tax bill as a tax cut for the rich, while Republicans will be able to say that they delivered on their primary campaign promise.

President Trump said earlier this week, “We want to give you the American people a giant tax cut for Christmas. And when I say giant, I mean giant.  Our current tax code is burdensome, complex and profoundly unfair.”

As for the Federal Reserve, it isn’t buying the argument that the tax cut package will lead to a significantly stronger, sustainable expansion of the economy; instead viewing it as a modest boost for the short term.

Chair Janet Yellen said of the legislation in her post-FOMC press conference after the Fed hiked interest rates this week, “It’s not a gigantic increase in growth.”  And when asked about the president’s remark, “We stand on the verge of a new economic miracle,” Yellen twice said that it would be a “challenge” to achieve the talked about growth rates of 4 percent or higher.  [More on the Fed below.]

Opinion....

Robert J. Samuelson / Washington Post

“When historians examine President Trump’s tax program, they will surely be struck by a large and momentous contradiction.  Although the nation faces endless budget deficits – and although the president purports to speak about the future – his tax program does little or nothing to curb long-term deficits and, arguably, might make them worse.

“It is said that the tax gap of the Trump-Republican program – the net amount of the tax cut – is somewhere between zero (the administration’s position – the tax cut will pay for itself through stronger economic growth) and $1.5 trillion over a decade (the position of many economists who doubt much of a boost to economic growth).

“Wrong, on both counts. A more realistic estimate of the tax gap is somewhere between $7 trillion and $12 trillion, again over a decade.

“How do I get these fantastic figures? The answer is that I ignore Trump’s program altogether and simply deal with existing deficits, as estimated by the Congressional Budget Office (CBO).  It’s not that I believe that Trump’s program will work as promised. I don’t. My real point is that, in many ways, it’s too small to matter.

“Even if it works, it won’t cure chronic deficits. And neither party is pretending it will.  Both find it more convenient to argue over the plan’s distributional effects – are the rich and well-to-do unfairly favored? – than to close the gaping deficits.

“Here’s some basic arithmetic that reinforces my point. Although it’s a bit tricky stick with me.

“Our economy – the annual production of goods and services, or gross domestic product (GDP) – is now approaching $20 trillion. So every 1 percent of GDP is worth about $200 billion.  In fiscal 2017, the deficit was 3.5 percent of GDP, or almost $700 billion.  Over a decade, and assuming unrealistically that the deficit doesn’t rise, taxes would need to increase by $7 trillion in today’s dollars to balance the budget. But what if the deficit does rise? By the late 2030s, the CBO estimates that annual deficits will reach 6 percent of GDP, almost doubling from their present level. The increase mainly reflects the growing number of elderly drawing Social Security, Medicare and Medicaid, in addition to swelling interest payments on the existing debt. To balance the budget would require annual tax increases averaging $1.2 trillion, or $12 trillion over a decade, both in today’s dollars.

“Either way, the required tax increases would be enormous, ranging from about a fifth of today’s tax burden to about a third. If instead Congress tried to balance the budget by cutting spending, the reductions – including defense – would be huge....

“Plausible rates of economic growth aren’t fast enough to eliminate massive deficits, though they would help. The required growth to do more than Trump has already proposed is simply too high. The present and estimated-future deficits are so large that they can be reduced only through the politically painful process of raising taxes or cutting spending.

“The presumption of politicians of both parties, despite some loud rhetoric to the contrary, is that large deficits and growing federal debt do not now pose a serious threat to the economy.  It’s easier to defer major changes – to hope that something will come along to cope with the deficits – rather than wade into the quagmire of substantially higher taxes or lower spending.

“If this optimistic assumption about deficits – call it ‘benign neglect’ of deficits – turns out to be wrong, the U.S. economy faces a serious jolt somewhere in the future.

“What’s clear is that, regardless of the fate of Trump’s tax program, it’s not the be-all and end-all in economic policy that both friend and foe suppose it to be.”

Meanwhile, Republican lawmakers have to be a bit concerned at some of the polls on the tax package.  A CBS News survey from last week found that 53 percent of people nationwide disapprove of the bill and only 35 percent approve.  [52 percent of independents disapprove.]

Sen. Marco Rubio warned that the Republican Party cannot become identified with the “country-club-big business image.

Much more next week.

Roy Moore and Steve Bannon....

Takeaways from Alabama’s big election.

Democrat Doug Jones 49.9 percent
Republican Roy Moore 48.4
Write-ins 1.7

Alabama hadn’t elected a Democrat to the Senate in 25 years.

President Trump’s approval rating in an exit poll had him down to 48%, 48% disapproving, after he won the state with 62% in 2016. That is the single most worrisome figure of the ‘Bama vote for Republicans nationwide.  If this is a trend for other states in the region that gave Trump 60%, like Georgia, Tennessee and West Virginia, that would spell trouble.

Whites went to Moore, 68-30.

Blacks went to Jones, 96-4.*

Republicans voted 91-8 for Moore.

Democrats voted 98-2 for Jones.

Independents went 51-43 for Jones.

Women 58-41 for Jones.

*Republicans need to take note of the potential trends going forward in the African-American vote. 98 percent of black women voters supported Jones. And the share of the black electorate, 30 percent, was higher than the share in 2008 and 2012, when Obama was on the ballot.  Us elephants ignore this at our peril.

However, in terms of the mid-terms, of the 60-some House seats said to be in play, only three are apparently in majority-black districts.

But while prominent black politicians such as Rep. John Lewis (D-Ga.) and Sen. Cory Booker (D-NJ) campaigned for Moore, I believe former NBA / Auburn Univ. star Charles Barkley had a bigger impact with his blunt talk:

“We’ve got to stop looking like idiots to the nation.”  [I like Sir Charles.]

Trump tweet the morning after: “The reason I originally endorsed Luther Strange (and his numbers went up mightily), is that I said Roy Moore will not be able to win the General Election. I was right!  Roy worked hard but the deck was stacked against him!”

Sen. Jeff Flake (R-Ariz.) tweet: “Decency wins.” [No exclamation point.]

Opinion....

Gerald F. Seib / Wall Street Journal

“The Donald Trump / Steve Bannon takeover of the Republican Party will have to be put on hold.

“Tuesday’s Senate race in Alabama represented an attempt by the president and Mr. Bannon, his foremost political strategist, to show that they weren’t only in control of the party but could use their rebellious, antiestablishment message to drive their new version of the GOP to victory.

“Instead, Roy Moore, the candidate Messrs. Trump and Bannon fully supported, lost in a state Republicans had controlled comfortably for most of the past two decades. ...(though) much of the loss to Democrat Doug Jones will be laid at the candidate’s feet.

“Still, the loss is a huge blow to Mr. Trump personally. He now has backed three straight candidates for statewide office who have lost.  He backed the loser in the Virginia governor’s race. He backed the loser in the Alabama Republican Senate runoff. And, in the past two weeks, he threw his full support behind the man who lost in the Alabama Senate general election.

“The implications are enormous. If Mr. Trump’s message and personal power aren’t enough to win a state in the deep-red South, then mainstream Republicans will have little reason to think they can rely on those factors elsewhere. Nor will they think they are compelled to follow the lead of their own president on matters political.

“That, in turn, will drive a further wedge between the president and Republican leaders – particularly Senate Majority Leader Mitch McConnell – who never wanted the party to throw its support behind Mr. Moore in the first place.

“Similarly, Mr. Bannon’s pledge to field and fund nationalist, rabble-rousing Republicans to challenge a whole series of Republican senators up for re-election next year will strike less fear in the hearts of the party’s mainstream. His ability to act as a kind of Pied Piper leading a long string of candidates formed in his image to the front ranks of the party now is in doubt and will be resisted with new vigor by party regulars who fear he could lead the party to a broader disaster....

“For Democrats, the victory in a state they never dreamed of winning just a few months ago delivers a jolt of energy – and, perhaps as important, could encourage balky donors who have left the party’s national machinery seriously underfunded this year.  Heading into a crucial midterm election year, that combination of energy and dollars – and a belief in actually being able to win races in what last year was Trump country – is essential for Democratic hopes.

“Perhaps most encouraging for Democrats, the same coalition of voters that propelled the party to victory in Virginia last month also emerged in Alabama. Exit polls showed that women made up a slight majority of the electorate and went for the Democrat Mr. Jones over the Republican Mr. Moore 58% to 41%.  Nonwhite voters, principally African-Americans, made up one-third of the electorate and went for the Democrat 88% to 11%....

“Another key question Alabama’s results bring to the fore is whether Democrats can take control of the House of Representatives next year.  (That) remains an uphill climb.

“The key numbers to keep in mind as Democrats approach that challenge are 24, 23 and 12.

“Democrats need to turn 24 House seats from Republican to Democrat to take control. Their best chance at winning that number starts with the 23 House seats held by Republicans from congressional districts that Hillary Clinton won in last year’s presidential election.

“They will have to pick off most of those to win the House.

“Meantime, they have to defend the seats of 12 Democratic House members from districts Mr. Trump carried last year.

“In short, it’s still a tough task for Democrats in the contest that really will determine the contours of Washington in the era of Mr. Trump....

“The results in Alabama certainly don’t guarantee such a wave. But they do suggest it’s possible.”

George F. Will / Washington Post

“The first time ended badly, so when, 156 years later, Alabamians were incited to again try secession, this time from the national consensus that America is a pretty nice place, they said: No.

“No, that is, to rubbish like this:

“Interviewer: ‘[Ronald Reagan] said that Russia was the focus of evil in the modern world.’

“Roy Moore: ‘You could say that very well about America, couldn’t you?’

“Interviewer: ‘You think?’

“Moore: ‘Well, we promote a lot of bad things, you know.’

“Interviewer: ‘Like?’

“Moore: ‘Same-sex marriage.’

“Interviewer: ‘That’s the very argument that Vladimir Putin makes.’

“Moore: ‘Well, then, maybe Putin is right, maybe he’s more akin to me than I know.’

“In April, Alabama’s Republican governor, Robert Bentley, resigned one step ahead of impeachment proceedings arising from his consensual affair with an adult woman. Eight months later, Alabamians spurned presidential pleas that they send to the U.S. Senate a man credibly accused of child molestation. But the dispiriting truth is this: Behavior that reportedly got Moore banned from the Gadsen, Ala., mall was, for most Alabama Republicans, not a sufficient reason to deny him a desk in the U.S. Capitol.

“Although the president is not invariably a stickler for precision when bandying factoids, he said the Everest of evidence against Moore did not rise to his standards of persuasiveness. This fleeting swerve into fastidiousness about facts came hard on the heels of his retweeting of a video of a Muslim immigrant in the Netherlands beating a young man holding crutches. Except the villain was born and raised in the Netherlands.  Undaunted, Trump’s remarkably pliant spokesperson, Sarah Huckabee Sanders, defended her employer from the nitpickers: What matters, she said, is not that the video is unreal but that ‘the threat’ (of turbulent Dutchmen?) is real.

“Moore was such a comprehensive caricature – Sinclair Lewis could not have imagined this Elmer Gantry – that the acid rain of reports about his sexual predations, and his dissembling about them, almost benefited him by distracting attention from: the remunerative use he made of a ‘charitable’ foundation. And his actions as a public official that by themselves sufficed to disqualify him from any public office.  He is an anti-constitutional recidivist, twice removed from Alabama’s highest court for his theocratic insistence that his religious convictions take precedence over U.S. Supreme Court decisions, so he could not have sincerely sworn to ‘support and defend the Constitution’ and to ‘bear true faith and allegiance to the same.’....

“Elation is in order because a gross national embarrassment has been narrowly avoided. But curb your enthusiasm because nationally, as in Alabama, most Republicans still support the president who supported the credibly accused child molester.”

Thomas L. Friedman / New York Times

“There are so many things I could say right now after watching Doug Jones defeat Roy Moore...but for me it comes down to just two words: ‘Thank you.’

“Thank you to the majority of Alabamians for loving our country more than you hated Democrats.  Thank you for voting as citizens, not as members of a tribe. Thank you for understanding that sending a credibly accused child molester to represent Alabama in the U.S. Senate would not only have denigrated your state, it would have denigrated that whole legislative body....

“But even with Jones’ victory in Alabama I worry that technology – social networks in particular – and archaic laws that prevent new players from entering politics work against the emergence of such national leaders. I worry that irreversible damage is being done to our norms and institutions by this poisonous cocktail of Trump, Twitter and tribalism.

“I was not surprised to hear former Facebook executive Chamath Palihapitiya* tell CNBC on Tuesday that social media is creating a society that confuses ‘popularity’ with ‘truth.’ The tools we’ve created, he explained, ‘are starting to erode the social fabric of how society works.’....

“But maybe...the narrow majority in Alabama has sent both Trump and the country a message. We are fed up with your cynicism, we are fed up with your effort to break us into tribes, we want a president who is a uniter not a divider, because we have big hard work to do as a country right now – and it can only be done together.”

*Palihapitiya, a co-owner of the Golden State Warriors, also told Axios’ Mike Allen, “God only knows what it’s doing to our children’s brains.” Facebook issued a statement rebutting their former colleague, talking about all the resources they are spending on outside experts and academics “to understand the effects of our service on well-being, and we’re using it to inform our product development.”

Yeah, so you go ahead and launch Messenger Kids, the first app for children under the age of 13.

Marc A. Thiessen / Washington Post

“Stephen K. Bannon and his alt-right movement have helped accomplish something no one in a quarter-century has been able to do: get a Democrat elected in the state of Alabama.

“Alabama is one of the most reliably Republican states in the country. The last time a Democrat was elected was in 1992, and no Democrat has won more than 40 percent of the vote in a Senate race there since 1996. The closest election in recent memory was in 2002, when Jeff Sessions won reelection by a razor-thin margin of 19 points. Sen. Richard Shelby has won his last three elections by 35 points, 30 points and 28 points, respectively. So it takes a special kind of stupid to pick a candidate who can lose to a Democrat in Alabama....

“Jones’ victory also put the Democrats within striking distance of taking back control of the Senate in 2018. If that happens, the Trump presidency is over. The ‘resistance’ will control Congress, and Trump’s ability to pass conservative legislation and continue appointing conservative judges – especially another Supreme Court justice – will be gone.  Moreover, Democrats will run the Russia investigation and Charles E. Schumer (D-N.Y.), as majority leader, will have unbridled subpoena power. Trump could face impeachment proceedings.

“That is the future if Trump does not learn the lessons of Alabama and tell Bannon to back off. The goal in 2018 should be to expand Trump’s governing majority, not lose it. Instead of targeting vulnerable Democrats and strengthening the Trump presidency, Bannon is busy destroying the Trump presidency. Trump may want to suggest he stop.”

John Podhoretz / New York Post

“Truth to tell, Doug Jones didn’t really win it. Roy Moore lost it. The possibility of this despicable goon serving Alabama in Washington was so horrifying to so many Alabamians that Republicans stayed home in droves and Democrats who probably couldn’t have picked Jones out of a lineup on Election Day stampeded to the polls.

“Yes, these were special circumstances indeed. But what happened in Alabama last night is a dark portent indeed for Republicans in 2018....

“What might this tell us about what Republicans will face in 2018, when all 436 House seats and 34 of 100 Senate seats will be decided on Election Day?

“As Clubber Lang says in ‘Rocky 3,’ I predict pain. If a Democrat can win in Alabama and Democrats can win 14 House of Delegates seats in Virginia, few Republicans can be absolutely sure they are safe going into 2018.

“The latest Marist poll gives Democrats a 13-point margin when voters are asked whether they would prefer to vote for a Democrat or a Republican next year.

“At this stage in 2009, with the 2010 elections coming up in 11 months, Democrats and Republicans were effectively tied.  It took Republicans until the end of August in 2010 to get anywhere near the 13-point generic margin. Democrats are there now.

“More important, perhaps, they’re setting themselves up for victory by recruiting candidates to run in races against Republicans in so-called safe seats – 209 of them, according to 539.com. This is important because if a nationwide wave breaks for Democrats they will have bodies everywhere that can ride the wave.”

Karl Rove / Wall Street Journal

“Mr. Moore is the most recent in a too-long line of cranks and nuts who threw away almost-certain Republican victories in Senate races.  It started in 2010 with Nevada’s Sharron Angle and Delaware’s Christine O’Donnell, continued in 2012 with Missouri’s Todd Akin and Indiana’s Richard Mourdock, and reached its low point Tuesday night with the former judge from Gadsden, Ala.

“Weirdly, Mr. Moore’s defeat was the most impressive, given Alabama’s affinity for the GOP. Since 2002, Republicans have won 42 out of 50 contested statewide races, by an average of 16 percentage points – and, in contests since 2010, by 20 percentage points.  That doesn’t include the 14 races in which Democrats didn’t field a candidate.  It takes a very special Republican to lose in Alabama.

“Not surprisingly, Mr. Moore doesn’t hold himself responsible for his defeat. He told supporters Tuesday that ‘part of the problem with this campaign is that we’ve been painted in an unfavorable and unfaithful light. We’ve been put in a hole.’  Actually, it’s Mr. Moore who for decades painted himself in those unflattering colors....

“(Such as) Mr. Moore’s Foundation for Moral Law, a classic money grab cloaked in evangelical garb. Most of the funds it raised through telemarketing appeals for support of traditional values were spent on fundraising costs.  What remained largely went to salaries for the principals, Mr. Moore and his wife, and his advisers. Then (surprise) it turned out he had grossly misled the public about his compensation from the enterprise....

“Democrats were quick to call Mr. Moore’s defeat a referendum on President Trump. That isn’t quite true. Mr. Trump remains relatively popular in Alabama and his agenda even more so.  The president can be faulted for many things, but he brought Mr. Moore close to victory. The former judge was simply too toxic.  Nevertheless, Mr. Trump is a huge victim of the Alabama defeat, since losing a Republican vote in the Senate guarantees harder sledding for virtually every administrative initiative.

“Democrats have concluded that their victory Tuesday portends a rout for Republicans in 2018. That will surely happen if the GOP nominates other Roy Moores.  A normal conservative would have won Alabama easily; the alt-right populist Mr. Moore could not. Therein lies the most important lesson for Republicans.

“ ‘If last night’s election proved anything, it proved that we need to put up GREAT Republican candidates,’ the president tweeted Wednesday morning. That’s absolutely correct.  So don’t put Steve Bannon in charge of recruitment.  If his kind of kook can lose in the Heart of Dixie, it won’t do any better in any House or Senate battleground.”

Editorial / Wall Street Journal

“The good news is that Mr. Moore’s loss may give the GOP a better chance of holding the Senate majority next year.  Democrats were primed to make Mr. Moore a national symbol of sexual harassment to drive turnout among women.  GOP incumbents would have been asked about Mr. Moore every day....

“The Alabama result (also) shows that Mr. Bannon cares less about conservative policy victories than he does personal king-making. He wants to depose Mitch McConnell as Majority Leader even if it costs Republicans Senate control. GOP voters, take note: Mr. Bannon is for losers.

“The Moore defeat should also be a lesson to the Republican Party, and President Trump, that many GOP voters are still at heart character voters. They will only accept so much misbehavior in a politician, no matter the policy stakes....The GOP voters who ignored Mr. Trump and rejected Mr. Moore also want a President who acts presidential.”

New York Republican Rep. Peter King unleashed a blistering attack on Bannon Wednesday, calling him a “phony” and a “disheveled drunk” who does not deserve a role in national politics.

“I don’t think Steve Bannon adds anything positive at all to the dialogue in the country,” King said on MSNBC.  “I don’t know who can identify with him, and to see him on the stage this week with a big American flag behind him, he looked like a disheveled drunk that wandered onto the national stage,” referring to Bannon’s appearance with Roy Moore.

King added Bannon should be kicked out of the GOP because of his declaration of war on the Republican establishment. And he accused Bannon of purposely stoking racial divisions to fire up the white nationalist wing of the party.

Trumpets....

Daniel Henninger / Wall Street Journal

“Americans were forced this Tuesday morning to take time from their holiday preparation to scroll through these exchanges between the president of the United States, Sen. Kirsten Gillibrand and other members of the U.S. Senate, known in more innocent times as the World’s Greatest Deliberative Body.

“A Trump tweet: ‘Lightweight Senator Kirsten Gillibrand, a total flunky for Chuck Schumer and someone who would come to my office ‘begging’ for campaign contributions not so long ago (and would do anything for them), is now in the ring fighting against Trump. Very disloyal to Bill & Crooked-USED!’

“Sen. Gillibrand, whose aides made sure reporters would note she was in a Bible study meeting at the moment of the tweet, replied: ‘It was a sexist smear attempting to silence my voice, and I will not be silenced on this issue. Neither will the women who stood up to the president yesterday.’

“Sen. Elizabeth Warren joined the colloquy: ‘Are you really trying to bully, intimidate and slut-shame @SenGillibrand?’

“And then Sen. Mazie Hirono: ‘The only way to stop this president who has a narcissistic need for attention, he’s a misogynist and an admitted sexual predator and a liar, the only thing that will stop him from attacking us is his resignation.’

“American politics is dividing now into a series of concentric circles, not unlike Dante’s circles of Hell.

“The innermost circle is occupied by political professionals who soak in the toxic political intrigues of Democrats and Republicans in the Trump era.

“Outside this inner circle stands the general public whose members continuously chant the two truisms of their time: They have never seen a more polarized political environment, and have never struggled so hard to make sense of what is going on....

“Forget your political biases, which impair comprehension in direct proportion to their intensity....

“The fulcrum political event is of course Donald Trump’s victory in the 2016 presidential election. A Kirsten Gillibrand would look at this and simply say: He won, we lost. Now we have to win.  How we do that is irrelevant....

“With Democrats themselves admitting they have no coherent message that could win a presidential election, the opposition strategy has been built around Mr. Trump’s personality, his alleged collusion with Russia to disable Hillary Clinton, and now the return of the same accusations of sexual harassment that did not cause him to lose the election.

“To be clear about the strategy: If the U.S. was being bombarded by killer asteroids, you would be hearing nonstop of Mr. Trump’s failure to protect us from the asteroids. Whatever works. As Hyman Roth told Michael Corleone: ‘This is the business we’ve chosen.’

“In the past week, the Democrats may finally have hit upon the Achilles’ heel that will fell or weaken this president: his tweets.

“The tweets have worried Republicans and Trump supporters since they started. Mr. Trump rejects this criticism.  He said, with a tweet, that they energize his base. But Roy Moore just lost in Alabama.

“At the level of political chess, the Democrats of late have been masterful against their opponent. The biggest nonpolitical story for months has been sexual abuse, starting with Harvey Weinstein.  “It was only a matter of time before the politicians would figure out how to manipulate harassment for their own purposes.

“The Democrats forced both John Conyers and Al Franken to resign last week. They took their harassers off the table, which left Mr. Trump self-aligned with the one alleged harasser on the board – Roy Moore.

“Then on Monday, the day before the Alabama election, came the following: Three women repeated sexual harassment accusations they’d made against Mr. Trump during the campaign... and Sen. Gillibrand called on the president to resign.

“On display here is how Democrats have learned to exploit one reality, which is that Mr. Trump’s political orbit of interest radiates about two feet beyond him. They have discovered how to make his tweets their weapon.

“On election day, Mr. Trump’s candidate, Roy Moore, was on the bubble with voters, especially among women.  No matter. Mr. Trump’s Tuesday-morning tweet suddenly elevated a B-level New York senator, and the media instantly recycled the Trump sexual-harassment details. Doug Jones defeated Roy Moore by just 1.5%, and the Republicans’ Senate majority fell to 51.  By day’s end, Sen. Gillibrand was soliciting funds via email for her 2018 election. They figured out how to make the Trump side lose. It’s the president’s move now.  Checkmate awaits.”

--The Russia probe...Editorial / Wall Street Journal

“Democrats and the media are accusing anyone who criticizes special counsel Robert Mueller as Trumpian conspirators trying to undermine his probe.  But who needs critics when Mr. Mueller’s team is doing so much to undermine its own credibility?

“Wednesday’s revelations...include the Justice Department’s release of 2016 text messages to and from Peter Strzok, the FBI counterintelligence agent whom Mr. Mueller demoted this summer. The texts, which he exchanged with senior FBI lawyer Lisa Page, contain expletive-laced tirades against Mr. Trump. Such Trump hatred is no surprise and not by itself disqualifying.  More troubling are texts that suggest that some FBI officials may have gone beyond antipathy to anti-Trump plotting.

“ ‘I want to believe the path you threw out for consideration in Andy’s office – that there’s no way [Trump] gets elected – but I’m afraid we can’t take that risk,’ Mr. Strzok wrote Ms. Page in an Aug. 15, 2016 text. He added: ‘It’s like an insurance policy in the unlikely event you die before you’re 40.’

“What ‘policy’ would that be? The ‘Andy’ in question is Andrew McCabe, the deputy FBI director. FBI officials are allowed to have political opinions, but what kind of action were they discussing that would amount to anti-Trump ‘insurance’?...

“The McCabe meeting came on the heels of the FBI’s launch of its counterintelligence probe into Trump-Russia ties. July is also when former British spook Christopher Steele briefed the FBI on his Clinton-financed dossier of salacious allegations against Mr. Trump. The texts explain why Mr. Mueller would remove Mr. Strzok, though a straight shooter wouldn’t typically resist turning those messages over to Congress for as long as Mr. Mueller did.

“Meanwhile, we’re learning more about the political motives of Mr. Mueller’s lieutenant, Andrew Weissmann. Judicial Watch last week released an email in which Mr. Weissmann expressed his ‘awe’ and praise for Sally Yates, after the then acting AG and Obama holdover refused to implement Mr. Trump’s travel ban.

“This should trouble anyone who cares about the integrity of the Justice Department. Ms. Yates had every right to resign at the time if she felt she couldn’t implement Mr. Trump’s order. But she had no authority as an executive branch official to defy a legitimate presidential order.  Mr. Weissmann’s support for her insubordination was a declaration that he is part of the ‘resistance.’ This should be unacceptable in a ranking FBI official, much less someone charged with conducting a fair-minded investigation.

“Public confidence isn’t helped by the continuing Justice and FBI refusal to cooperate with Congress. Deputy Attorney General Rod Rosenstein, who supervises Mr. Mueller, toed the Mueller-FBI line on Wednesday before the House Oversight Committee.  He repeated FBI Director Christopher Wray’s preposterous excuse that he can’t answer questions because of an Inspector General probe.  And he wouldn’t elaborate on the news that Nellie Ohr, the wife of senior Justice official Bruce Ohr, worked for Fusion GPS, which hired Mr. Steele to gin up his dossier.

“The man who should be most disturbed by all this is Mr. Mueller, who wants his evidence and conclusion to be credible with the public. Evidence is building instead that some officials at the FBI – who have worked for him – may have interfered in an American presidential election. Congress needs to insist on its rights as a co-equal branch of government to discover the truth.”

Kimberley A. Strassel / Wall Street Journal

“Congress persists in its effort to pry the real story of the 2016 election out of the Federal Bureau of Investigation, an agency notoriously reluctant to share secrets. The trick is telling the difference between legitimate secrets and self-serving ones.

“The FBI – and the Department of Justice – would rather blur that distinction.  In recent congressional appearances, FBI Director Christopher Wray and Deputy Attorney General Rod Rosenstein tossed around the word ‘classified’ like confetti.  Neither man answered a single substantive question, citing their obligation to protect the ‘integrity’ of investigations, safeguard ‘sensitive’ information, and show deference to an ‘independent’ and ‘internal’ inspector general reviewing the FBI’s handling of the 2016 election.

“True, the FBI has plenty of things it needs to keep secret regarding national security and law enforcement.  Let’s even acknowledge the bureau may be rightly concerned about turning some information over to today’s leak-prone Congress. Even so, in the specific case of its 2016 election behavior, the FBI is misusing its secrecy powers to withhold information whose disclosure is in the public interest....

“Special Counsel Robert Mueller’s team is emphasizing its ejection of FBI agent Peter Strzok immediately upon learning about anti-Trump texts he exchanged with another FBI employee, Lisa Page, before the 2016 election. But when did the FBI learn of the messages? The inspector general’s investigation began in mid-January. The letter explains that the FBI was asked for text messages of certain key employees based on search terms, which turned up ‘a number of politically-oriented’ Strzok-Page texts. The inspector general then demanded all of the duo’s text messages, which the FBI began producing on July 20.

“But when did the FBI dig up and turn over that very first tranche?  How long has the bureau known one of its lead investigators was exhibiting such bias? Was it before Mr. Mueller was even appointed? Did FBI leaders sit by as the special counsel tapped Mr. Strzok?  In any case, we know from the letter that the inspector general informed both Messrs. Rosenstein and Mueller of the texts on July 27, and that both men hid that explosive information from Congress for four months.  The Justice Department, pleading secrecy, defied subpoenas that would have produced the texts. It refused to make Mr. Strzok available for an interview. It didn’t do all this out of  fear of hurting national security, obviously.  It did it to save itself and the FBI from embarrassment....

“Congress and the public have a right to know what went on in the Comey investigation, and the FBI and Justice Department seem to be attempting desperately to hide their actions.

“Yes, the FBI has secrets the public needs it to keep.  But don’t let the agency and its defenders muddy the difference between necessary secrecy and evasion of responsibility.”

David Ignatius / Washington Post

“President Trump’s recent denunciations of the Russia investigation recall the famous legal advice: ‘If the facts are against you, argue the law.  If the law is against you, argue the facts.  If the law and the facts are against you, pound the table and yell like hell.’

“Trump shouted out his defense earlier this month: ‘What has been shown is no collusion, no collusion!’ he told reporters over the whir of his helicopter on the White House lawn. Since then, Trump’s supporters have been waging a bitter counterattack against special counsel Robert S. Mueller III, alleging bias and demanding: ‘Investigate the investigators.’

“But what do the facts show? There is a growing, mostly undisputed body of evidence describing contacts between Trump associates and Russia-linked operatives. Trump partisans have claimed that Mueller’s investigation is biased because some members of this staff supported Trump’s rival, Hillary Clinton. But Deputy Attorney General Rod J. Rosenstein disagreed Wednesday, arguing that Mueller ‘is running his office appropriately.’

“As Republicans seek to discredit the investigation, it’s useful to remember just what we’ve learned so far about how the Trump campaign sought harmful information about Clinton from sources that, according to U.S. intelligence, were linked to Moscow. This isn’t a fuzzy narrative where the truth is obscured; in the Trump team’s obsessive pursuit of damaging Clinton emails and other negative information, the facts are hiding in plain sight.

“From the start of the campaign, Trump spoke of his affinity for Russian President Vladimir Putin, and Trump’s aides followed his lead.  In March 2016, a young adviser named George Papadopoulos met a London professor who introduced him to a Russian woman described as ‘Putin’s niece.’  This began months of efforts by Papadopoulos to broker Trump-Russia contacts, described in the plea agreement that Mueller announced in October.

“Russian operatives by that March had already hacked the computers of the Democratic National Committee and Clinton campaign chairman John Podesta. Through cutouts, the Russians over the next eight months allegedly spooled out damaging information about Clinton to the media, sometimes egged on by Trump and his associates.

“Papadopoulos got the first hint the Russians might share Clinton emails in a late-April meeting with the professor, who told him ‘the Russians had emails of Clinton...thousands of emails,’ according to the plea agreement.”

Mr. Ignatius goes on at length, including Don Jr.’s June 9 meeting with Russian lawyer Natalia Veselnitskaya, the activities of Trump friend Roger Stone, and WikiLeaks, etc., and Ignatius concludes:

“The next time Trump demands a probe of Mueller’s investigation or the FBI’s handling of Clinton emails, remember that he isn’t arguing the facts or the law about collusion with Russia.  He’s pounding the table.”

[If you saw Trump this morning outside the White House, he was pounding the table anew.]

Tuesday, President Trump signed a $700 billion defense policy bill Tuesday, saying the United States military “has got to be perfecto.”  OK. I watched this little ceremony. All well and good.

But then hours later we learned the president had pointed out some of the bill’s imperfections in a signing statement that presidents sometimes attach to legislation explaining any misgivings they might have, and among the ones Trump had with this policy bill were a variety of provisions lawmakers included to force a more aggressive U.S. policy toward Russia.

Trump said in the statement that he had constitutional concerns and there were provisions that “could potentially dictate the position of the United States in external military and foreign affairs” and interfere with his ability to conduct diplomacy.

As noted in USA TODAY: “The bill passed by Congress contains several provisions specifically targeting Russia. It restricts military cooperation with Russia, prohibits the United States from recognizing Russia’s legal right to the disputed Crimea peninsula, and requires the military to ‘develop and implement a comprehensive strategy to counter threats by the Russian Federation’ – including Russia’s use of disinformation, social media and support for political parties.”

Trump’s signing statement contained objections to more than 40 provisions in the bill. His love affair with Vlad the Impaler continues.

Thursday, in Putin’s annual yearend press conference, he said that accusations that Trump’s team colluded with the Kremlin are an invention of the American president’s opposition that has sparked “spymania” in Washington.

“You know all of this has been invented, made up by people who are in opposition to President Trump with a view to shedding a negative light on what Trump is doing,” Putin said.

Regarding meetings between Russian diplomats and Trump’s campaign team before the election, these were routine and normal, Putin observed.

“For me, it’s very bizarre.  I don’t’ understand what someone saw there that was out of place in those meetings, and why all this should turn into a kind of ‘spymania.’”

Separately, Putin noted the strong U.S. economy and President Trump thanked him in a phone call Thursday for “acknowledging America’s strong economic performance,” the White House said.

The two also discussed ways to work together to address North Korea.  Putin warned the U.S. against using force in his press conference.

Finally, in a very extensive report from the Washington Post’s Greg Miller, Greg Jaffe and Philip Rucker on Trump and Russia, we have this:

“Nearly a year into his presidency, Trump continues to reject the evidence that Russia waged an assault on a pillar of American democracy and supported his run for the White House.

“The result is without obvious parallel in U.S. history, a situation in which the personal insecurities of the president – and his refusal to accept what even many in his administration regard as objective reality – have impaired the government’s response to a national security threat. The repercussions radiate across the government.

“Rather than search for ways to deter Kremlin attacks or safeguard U.S. elections, Trump has waged his own campaign to discredit the case that Russia poses any threat and he has resisted or attempted to roll back efforts to hold Moscow to account.

“His administration has moved to undo at least some of the sanctions the previous administration imposed on Russia for its election interference, exploring the return of two Russian compounds in the United States that President Barack Obama had seized – the measure that had most galled Moscow.  Months later, when Congress moved to impose additional penalties on Moscow, Trump opposed the measures fiercely.

“Trump has never convened a Cabinet-level meeting on Russian interference or what to do about it, administration officials said. Although the issue has been discussed at lower levels at the National Security Council, one former high-ranking Trump administration official said there is an unspoken understanding within the NSC that to raise the matter is to acknowledge its validity, which the president would see as an affront.

“Trump’s stance on the election is part of a broader entanglement with Moscow that has defined the  first year of his presidency. He continues to pursue an elusive bond with Putin, which he sees as critical to dealing with North Korea, Iran and other issues.  ‘Having Russia in a friendly posture,’ he said last month, ‘is an asset to the world and an asset to our country.’

“His position has alienated close American allies and often undercut members of his Cabinet – all against the backdrop of a criminal probe into possible ties between the Trump campaign and the Kremlin.”

--Manhattan dodged a bullet Monday when a Bangladeshi native failed in his ISIS-inspired attack to successfully detonate a pipe bomb fully that ended up wounding him (moderately) and four others (slightly) in a passageway between the Port Authority bus terminal and a major subway hub.

President Trump said later in the day: “Today’s attempted mass murder attack in New York City – the second terror attack in New York in the last two months – once again highlights the urgent need for Congress to enact legislative reforms to protect the American people....

“First and foremost, as I have been saying since I first announced my candidacy for President, America must fix its lax immigration system, which allows far too many dangerous, inadequately vetted people to access our country,” he said.

Then he lashed out at “chain migration,” which gives preference to individuals who are related to immigrants who are already here legally.

“Today’s terror suspect entered our country through extended-family chain migration, which is incompatible with national security.

“My Executive action to restrict the entry of certain nationals from eight countries, which the Supreme Court recently allowed to take effect, is just one step forward in securing our immigration system. Congress must end chain migration,” he said.

What ticked me off was the family of Akayed Ullah had the gall to say they were upset at the way the investigation was being handled.  This could have been a catastrophe if the guy had put together a more sophisticated device and knew how to deploy it. 

--Ousted White House aide Omarosa Manigault Newman rejected reports she had to be dragged out of the White House on Wednesday kicking and screaming after being fired by chief of staff John Kelly, while saying she is preparing a tell-all after seeing things in the administration that made her “very uncomfortable,” Omarosa being the only African-American high-level aide, whose stated job was “outreach.”

This is a vile woman. Good riddance.  [But, yes, the White House should be scared as to what Omarosa might say from the outside.]

Wall Street

For starters, we had the release of the November inflation data and the producer price index was 0.4%, 3.1% year-over-year.  On core, ex-food and energy, the figures were 0.3% and 2.4%.

Consumer prices rose 0.4%, 0.1% ex-food and energy, with the year-over-year figures at 2.2% and 1.7%, respectively.

November retail sales were up a strong 0.8%, 1.0% ex-autos, while November industrial production rose 0.2%.

Wednesday afternoon, the Federal Reserve hiked its short-term lending rate a third time this year, fifth since late 2015, voting 7-2 to do so, and it stuck with its projection for three more rate hikes in 2018.

The Fed also raised its growth forecast to 2.5% from 2.1% for 2018, while projecting the unemployment rate, currently 4.1%, will tick down to 3.9%.

The thing is the Fed’s preferred inflation barometer, the personal consumption expenditures index, PCE, remains stuck at 1.6%, below its 2% target, while wages, up 2.5% the last 12 months, still lag the historic average of 3.%+ for a robust economy, which we now have after years of stupor.

The Atlanta Fed’s GDPNow barometer for the current quarter is back up to 3.3%, while most economists are forecasting about 2.8% growth for Q4.

The National Retail Federation also said this week that the holiday shopping season appears to be on track for its projected 4% growth, which would be the best since 2014.

In her last press conference before leaving, Chair Janet Yellen said of the move to raise rates and the overall outlook:

“This change highlights that the committee expects the labor market to remain strong, with sustained job creation, ample opportunities for workers and rising wages.”

The accompanying statement from the FOMC said monetary policy would help the labor market “remain strong.”

Yellen added: “The growth that we’re seeing, it’s not built on, for example, an unsustainable buildup of debt.  The global economy is doing well.  We’re in a synchronized expansion.  This is the first time in many years we’ve seen this...I feel good about the economic outlook.”

Yup, I’ve been talking about global growth ad nauseam, with more good news from Europe below, and as the Wall Street Journal editorializes:

“The rising growth is touching most industries and parts of the country.  Manufacturing is healthy – note to Donald Trump and Commerce Secretary Wilbur Ross – thanks to growth abroad and rising exports. The housing market is doing well overall, and consumer confidence is high.

“The best news may be the surge in small business optimism that began with the election and has persisted, as measured by the National Federation of Independent Business. Small business confidence has been depressed compared with the typical economic expansion, but NFIB’s hiring index reached an all-time high in November, and the sentiment is making a difference in the labor market.”

But rising interest rates will be a threat to the expansion, not just here but abroad.  The day of reckoning I now believe will be sooner than expected, even if recession is not in the forecast.

I’ll get into that as part of my yearend review and outlook in two weeks.  I won’t be calling for gains in the equity markets in 2018, for starters.

For now...from a separate Journal editorial:

“The Federal Open Market Committee on Wednesday raised its target interest rate for the third time year this year to a range of 1.25% to 1.5%....

“The rate increase was widely anticipated, and markets took it in stride. More notable is that the FOMC’s statement and economic predictions seemed oblivious to the news across town Wednesday that the House and Senate have struck a final tax reform deal.

“The tax bill is the most significant reform since 1986 and will reduce the cost of capital with 100% immediate business expensing and a cut in the U.S. top corporate tax rate to 21% from 35%.  The Germans and Chinese are fretting that capital might flow to the U.S.  yet the Fed gave no indication that it thinks this will have much effect on the economy.

“Reporters tried mightily to coax Ms. Yellen to declare at her post-FOMC presser that the tax cut is dangerous demand-side stimulus amid full employment, including a comically tendentious question from the CNN reporter.  To her credit Ms. Yellen said that fiscal policy is for Congress and the Administration, and she said the reform would increase both economic demand and productive supply.

“Yet the Fed’s predictions of economic growth budged only a little.  The median forecast of the board and Fed presidents moved up a tick to 2.5% this year form 2.4% in September.  And it moved to 2.5% in 2018...Beyond that the Fed’s fearless forecasters have the economy falling back to near 2% and even lower in the ‘longer run.’

“Presumably one of those forecasters it the Fed Chair apparent Jerome Powell, now a regular board member. The challenge for Mr. Powell and the Fed will come if their forecasts are wrong and they are underestimating the growth effects of tax reform, deregulation and the rest of the Trump-Congress policy mix....

“Mr. Powell is taking the job when the Fed will have to decide how fast to raise interest rates and unwind the unprecedented buildup in its balance sheet. ...the unwinding could be bumpy.”

Europe and Asia

Some economic news before the Brexit discussion.  Markit issued its flash readings for December for the eurozone, with manufacturing at 60.6 (50 being the dividing line between growth and contraction), with services at 56.5 and a composite reading of 58.0, an 82-month high.

Recall the flash readings break down just Germany and France individually, with Germany’s manufacturing PMI at a robust 63.3 and services 55.8; 59.3 on manufacturing for France, 59.4 on services.

Just great numbers, befitting a surging economy for the EA19.

Chris Williamson, Chief Economist, IHS Markit

“The eurozone economy is picking up further momentum as the year comes to a close, ending its best quarter since the start of 2011. The PMI is signaling an impressive 0.8% GDP increase in the fourth quarter, with accelerating growth seen in both Germany* and France...

“France has been the big surprise this year, rapidly pulling out of its malaise to help shift the eurozone expansion into a higher gear....

“Although price pressures abated slightly in December, the robust growth of demand and tightening labor market hint at rising core inflationary pressures as we move through 2018.”

*Separately, the Ifo institute is forecasting growth in the German economy at 2.6% next year, up from its prior estimate of 2.0%. That kind of says it all about the state of the continent’s economy overall.

It was an important week for the European Central Bank as chief Mario Draghi and his band of merry pranksters held the line on its benchmark lending rate at zero at the ECB’s final monetary policy meeting of the year, as well as leaving its stimulus program unchanged, though Draghi said the ECB’s revised inflation forecast is still at just 1.7 percent all the way out to 2020, but he didn’t say whether this would qualify for meeting the bank’s 2 percent target.

[Inflation is due to be 1.4 percent next year, up from 1.2 percent.]

Draghi did say the bank’s governing council had “increasing confidence” that inflation was turning up.

The ECB also raised its growth outlook for next year to 2.3 percent from 1.3 percent in the last set of forecasts issued in September.

The bank said it would reduce its bond purchase to 30bn euros ($35 billion) a month from 60 billion euros and would extend the program through at least September, or longer if necessary if the inflation picture remains punk. The ECB has consistently said the stimulus would be withdrawn slowly so to not disrupt the economy.

Brexit: Today, in a huge win for British Prime Minister Theresa May, European leaders at a critical EU summit gave a formal green light to opening a new phase of negotiations with the U.K. over Brexit. 

Mrs. May was able to say that Britain and the EU will begin talks on their future relationship straight away after the bloc agreed to move discussions onto the next stage, adding talks about the “implementation (transition) period that will give certainty to businesses and individuals” is a key part as May reiterated Britain is leaving the EU on March 29, 2019.

EU summit chair Donald Tusk said today the bloc would start “exploratory contacts” with Britain on what London wants in a future trade relationship, as well as starting discussion on a post-Brexit transition.

EU chief executive Jean-Claude Juncker praised the prime minister for a deal on divorce terms (exit tab) last week and called her a “tough, smart, polite and friendly negotiator.”

French President Emmanuel Macron said that in moving forward the EU had maintained its unity, protected the integrity of the single market and ensured “compliance with our own rules.”

Phase two of the negotiations, including discussion on future economic cooperation, is not likely to begin until March.

The three-page document from today says the U.K. will remain under the jurisdiction of the European Court of Justice and be required to permit freedom of movement during any transition period.

Agreements on the Irish border, the so-called divorce bill and the rights of EU and U.K. citizens, agreed to by Mrs. May last Friday, must be “respected in full and translated faithfully into legal terms as quickly as possible.”

And: “As the U.K. will continue to participate in the customs union and the single market during the transition, it will have to continue to comply with EU trade policy.”

While the EU is willing to engage in “preliminary and preparatory discussions” on trade as part of building a “close partnership” after the U.K.’s departure, this means any formal agreement “can only be finalized and concluded once the U.K. has become a third country.”

It’s always been important for both sides to get a deal done, but it was never going to be easy, and there is a ton of hard negotiating to take place in the future.  The outlines of a final deal are to be negotiated between March and October of next year, in order to allow time for translations, debate in 27 member states and other issues to be cleared up before the March 2019 exit.  In other words, next summer could be hairy.

But we should have a little respite from the discussion, at least through the holidays.  Lord knows Theresa May needs some time to catch her breath.

The prime minister is to deliver her vision of the “end state” for Britain outside the EU at a cabinet meeting on Tuesday, having suffered her first Commons Brexit defeat earlier this week.

May was defeated after she rejected calls by rebels in her Conservative party and opposition lawmakers to amend a parliamentary bill to allow a binding vote to enshrine the terms of Brexit in legislation.

May said the amendment, by requiring the EU withdrawal agreement to become law before other Brexit-related legal changes are enacted, could prolong the process, “which could mean that we are not able to have the orderly and smooth exit from the European Union that we wish to have.”

So the government side narrowly lost a key vote, 309-305, with MPs voting to give Parliament a legal guarantee of a vote on the final Brexit deal struck with Brussels.

But given that the process is now moving forward, parliament’s move is for another day, plus many wonder if in the big picture it really matters.

*Two economic notes on the U.K.  Inflation ran at a 3.1% annualized pace in November, the Bank of England having raised its short-term lending rate for the first time in a decade last month.  It will be difficult to avoid another increase in the near future.

November retail sales, aided by Black Friday, were up a strong 1.6 percent, compared with a decline in October, as reported by the Office for National Statistics.

Germany: It was a good week for German Chancellor Angela Merkel too as the Social Democrats agreed to open exploratory talks on forming a government with Merkel’s center-right conservatives, raising hopes for an end to political deadlock.

The SPD had initially said they would go into opposition after suffering heavy losses in September’s election, though now formal talks between the two sides won’t be taking place until January, while forming a government could take months after.

Many SPD members are nervous at the prospect of a renewed “grand coalition” after the previous one proved so costly.  The SPD is going to vote at a special congress on Jan. 14.

Winning over the SPD is Merkel’s only chance at securing a fourth term. But she is going to have to make some major concessions and that will be the issue post-Jan. 14 and beyond. As I’ve noted before, immigration will be the toughest item.

Eurobits....

--Austria’s conservative People’s Party has agreed to a coalition with the far-right Freedom Party tonight, the deal coming two months after a parliamentary election that saw the People’s Party win but without an overall majority.

So this means the People’s Party’s leader, Sebastian Kurz, all of 31, is set to become the world’s youngest head of government.  31!!!

Assuming the coalition is ratified, this would also mean that Austria would become the only western European state with a governing far-right party.

The campaign was dominated by Europe’s immigration crisis, something the anti-immigration Freedom Party (think the late Jorg Haider) has long championed, but then this year, Sebastian Kurz coopted many of the Freedom Party’s planks but managed to meld in some moderate positions to gain the most votes overall, which pissed off the Freedom Party to no end at the time.

This is fascinating.  I have some stories from my trips to Vienna (and riding the rails outside the city) that certainly exposed me to the Nazi element in the country that has never left.  The story behind “The Sound of Music” and Captain von Trapp isn’t far from the truth, even if it was gussied up a bit.

By the way, I once found Mozart’s grave, until I learned it wasn’t...but I digress....

--Catalonia’s big vote is Dec. 21.  There was literally zero real news on the topic this week, but this is huuuuge.  It’s still supposed to be about 50/50.

--The Italian bond market took it on the chin a bit this week, with the yield on the 10-year rising from 1.64% to 1.80% on word new elections are to be held in March, not May as first expected, meaning president Sergio Mattarella will dissolve parliament towards the end of this month.  The timing may have surprised international investors.

Turning to Asia... China’s wholesale prices (PPI) rose 0.5%, 5.8% year-over-year, according to the National Bureau of Statistics.  The CPI was 1.7% annualized, with the government having a 3% target on consumer prices.

November exports rose 12.3% yoy vs. October’s 6.9% clip, while imports increased 17.7%, though a cooling property market will eventually weigh on commodities, a prime import.

Exports were more a function of increased global demand, a good thing.

November industrial production rose 6.1% year-over-year, while November retail sales gained 10.2%, which met expectations.

Fixed-asset investment (big projects, like roads, airports and rails) for large state firms rose 11% in the Jan.-Nov. period, while the figure was up 5.7% for smaller private investment.

In another key metric for the overall state of the economy, China generated power at a rate that was up 2.4% over the same period last year in November.

Coal output has been increasing (which the government doesn’t really want to see from a pollution standpoint, but it’s necessary) as the country’s heating season kicked off.  Many homes not only now use coal for heating due to natural gas shortages, but many are also using electric heaters that draw on power from coal-fired power plants.  This is the time of year that China suffers from its worst smog, owing largely to the preceding, as well as auto emissions.

Lastly, Japan’s flash reading on manufacturing for December was a solid 54.2.

Street Bytes

--The major averages all closed at record highs on news the House-Senate conferees had reached a final agreement on the tax bill, and seemingly had the votes for passage. The Dow Jones finished up 1.3% to 24651, the S&P 500 rose 0.9% to 2675, and Nasdaq registered a 1.4% gain to 6936 after losses the previous two weeks.

Separately, investors plowed more than $600 billion into exchange-traded funds globally in the first 11 months of the year, according to a London-based researcher (ETFGI LLP).  Assets in ETFs world-wide rose to $4.7 trillion at the end of November, up from $3.6 trillion at the end of last year.

BlackRock and Vanguard alone attracted a combined $376 billion of net new cash in the period.  [Sarah Krouse / WSJ]

--U.S. Treasury Yields

6-mo. 1.46% 2-yr. 1.84%  10-yr. 2.35%  30-yr. 2.69%

Nine straight weeks where Friday’s closing yield on the 10-year was between 2.33% and 2.41%. And despite the three rate hikes in 2017, the 10-year is still below the 12/31/16 close of 2.44%.

--On the oil front...according to the International Energy Agency, U.S. shale oil companies will help production from outside OPEC grow faster than initially expected next year, with global supply and demand now not forecast to balance until late 2018, per the IEA’s monthly report.

U.S. drilling and well completion rates have picked up as prices have rebounded solidly above $50.

For its part, OPEC announced November production fell a fourth consecutive month to 32.4m b/d.  OPEC also noted in its latest report:

“Higher-than-expected supply growth in the U.S., Canada and Kazakhstan have been the key contributors to the upward revisions (in non-OPEC growth), particularly U.S. tight oil (shale).”

Separately, from the Wall Street Journal:

“The U.S. and Japan have urged Saudi Arabia to pursue an international listing for oil giant Aramco, fearing the possible sale of a stake to China would give Beijing too much sway in the Middle East, people familiar with the matter said.

“Saudi Arabian Oil Co., or Aramco, was slated to become the world’s largest-ever public offering, with a domestic and international listing next year.  More recently, Riyadh has instead considered selling a private placement to a Chinese consortium of state-held entities, people familiar with the matter said.

“U.S. and Japanese concerns come amid increased tensions in the region, where Saudi Arabia and its allies are facing off against Iran and Riyadh is dealing with domestic political turbulence.

“The U.S. is concerned that a Chinese stake in Aramco would create a close bond between Beijing and Riyadh, a longstanding American ally, by cementing China’s status as a big and steady consumer of Saudi Arabian oil, one of the people familiar with the matter said.

“China is the world’s top oil importer and is looking to secure a steady supply of crude as its economy continues to race ahead.  Aramco holds around 16% of the world’s proven crude reserves and is one of the biggest oil exporters.” [Sarah McFarland, Summer Said and Mayumi Negishi / WSJ]

Planning for the IPO is on hold amid Crown Prince Mohammed bin Salman’s effort to consolidate power in the kingdom.

--Walt Disney Co. announced Thursday it has agreed to buy 21st Century Fox, Inc., including the Twentieth Century Fox Film and Television Studios, along with cable and international TV businesses, for approximately $52.4 billion in stock.

Immediately prior to the acquisition, 21st Century Fox will receive 0.2745 Disney shares for each 21st Century Fox share they hold. Disney is also assuming nearly $14 billion of net debt of 21st Century Fox.

So here’s how it breaks down. Rupert Murdoch retains Fox News Channel, the FS1 sports network and the Fox broadcast network in the U.S., including Fox Business. Disney CEO Bob Iger said he will remain in his role through 2021.

Fox is to complete its planned acquisition of the 61 percent of European broadcaster Sky it doesn’t already own, which then ends up with Disney. Iger said he would discuss a possible role at Disney with Murdoch’s son James, Fox’s CEO. While this doesn’t seem to be the case, Murdoch, 45, could be in line to succeed Iger, 66.

On the movie side, Fox has rights to the X-Men and Fantastic Four franchises, while Disney would have control of the Avatar franchise. 

Fox’s TV studio (over to Disney) produces several of the biggest hits, such as This Is Us, Modern Family, Empire and Homeland.  [And “The Simpsons,” which I watched for the first time in years last Sunday, as it’s always conflicting with football and “60 Minutes,” and it has held up well.]

But as for sports, while Fox is retaining Fox Sports, and the FS1 and FS2 networks and the Big Ten Network, Disney is acquiring Fox Sports’ 22 regional sports networks (RSNs), which ESPN will be able to slap its name on and this is huge.

The RSNs control the local cable rights for 17 NBA teams (including the Pistons, T’Wolves, Cavs, Thunder and Spurs), 15 MLB teams (including the Cardinals and Yankees), 12 NHL teams and other college football and basketball not part of the Big Ten.

CNBC’s David Faber estimates the RSNs alone would be valued at $20bn out of the total $52.4bn price tag.

In major markets such as St. Louis and Detroit – both served by Fox RSNs – the local RSN ranked higher in importance to cable customers than broadcast networks such as NBC, CBS, ABC and Fox. According to Nielsen, the local RSN ranked as the fifth-most-important cable channel in their lineups, ahead of ESPN itself.

So the point is, ESPN’s recent financial issues have stemmed from cord-cutting customers, with the network losing more than 13 million subscribers from its 100 million peak in 2013.

But now customers may think twice about dropping their cable packages if it meant losing the RSN, which now falls under the ESPN domain.

As for Rupert Murdoch, 86, he is downsizing an empire he spent his life putting together. [Estate planning no doubt plays a role.] 

But the deal, in giving Disney $2 billion of cost savings, will result in the loss of hundreds, if not thousands, of jobs, especially in the integration of Disney and Fox studios, which have tremendous overlap.

Fox’s film studio, for example, employs about 3,200 people and both have teams that handle film distribution, marketing and back-end business operations – divisions ripe for reduction.

The Justice Department, which has sued to block the AT&T / Time Warner Inc. deal, could block Disney’s move because it brings so many media assets under one roof.  But execs at Fox and Disney should take heart in the fact President Trump called Rupert Murdoch to congratulate him on the deal...@foxandfriends.

--The U.S. Federal Communications Commission voted along party lines Thursday to repeal landmark 2015 rules aimed at ensuring a free and open internet, setting up a court fight.

By a 3-2 vote, the approval of FCC Chairman Ajit Pai’s proposal marks a victory for internet service providers like AT&T, Comcast and Verizon, handing them power over what content consumers can access.

Companies such as Google (Alphabet) and Facebook urged Pai, a Republican appointed by President Trump, to keep the Obama-era rules barring service providers from blocking, slowing access to or charging more for certain content.

Opponents argue, such as FCC Commissioner Mignon Clyburn, a Democrat, that the vote was “handing the keys to the internet” to a “handful of multibillion-dollar corporations.”

Pai has argued the current rules stifle competition and innovation among service providers.

Consumers won’t see immediate changes, but over time smaller startups worry that the lack of restrictions could drive up costs or lead to their content being blocked.

The Internet service providers have said they wouldn’t block legal content but they may engage in paid prioritization.

--Israeli pharmaceutical giant Teva announced it would lay off 25% of its employees, 14,000 workers worldwide, about 3,400 in Israel, which is a huge deal there, with Prime Minister Benjamin Netanyahu telling the CEO he was worried about the state of the company, while asking him to limit the damage to Israeli workers.

Most of the losses overall, however, will be felt in the U.S., as the world’s biggest seller of generic drugs has been hit hard by declining generic prices in the U.S. and increased competition for its blockbuster multiple-sclerosis drug, while it struggles with a heavy debt load.

--Oracle Corp. forecast current-quarter cloud revenue growth that missed Street expectations and the shares fell about 7% in the aftermarket Thursday (before recovering some today); the company saying it now forecasts growth in the cloud business will grow 21% to 25% in the fiscal third quarter, down from 44% in the preceding one.  [By comparison, Amazon’s cloud sales in the quarter to September rose 42%, while Microsoft’s Azure services surged 90% in the same period.]

Oracle also forecast current-quarter earnings that were below Street forecasts.

Total revenue rose 6% to $9.63 billion, beating expectations, while revenue in the company’s traditional software licensing business, by far still its largest, was up 3%.

--According to an analysis from Moody’s, big tech is projected to boost revenue by 3.5% to 4.5% next year, led by Apple and Microsoft. The two could account for half of all profits from Moody’s basket of 24 tech stocks.

Apple and Microsoft had a combined $74 billion of reported net income for their respective most recent fiscal years.

--On the trade front....from the Associated Press:

“Canada has ditched a plan to buy 18 Super Hornet jet fighters from U.S.-based Boeing Co. and will instead buy 18 used F-18 fighters from Australia.

“Prime Minister Justin Trudeau had previously warned that Canada would stop doing business with Boeing if the company doesn’t drop a trade complaint against Canadian plane maker Bombardier, and the government warned again on Tuesday that Boeing would have little chance of winning a new contract for 88 additional fighter jets under the status quo.”  #TrumpTradePolicy

--Mattel warned of weak holiday sales, even with Barbie at the top of girls’ holiday wish lists.  [Barbie equipped with a smartphone, I assume, so she can message on Facebook.  Actually, Barbie looks like she’s older than 13....I better move on....]

Mattel, in an SEC filing, expects 2017 full-year gross sales to decline by mid-to-high single digits compared with the previous year when they fell 3 percent.

The company is suffering as the industry becomes more fragmented with outfits like Spin Masters, MGA Entertainment and the likes of Moose Toys, plus children are opting for games on their devices like iPads.

--Have we hit bottom in the market for malls?  On Tuesday, the European property company Unibail-Rodamco said it had agreed to acquire the Westfield Corporation for $15.7 billion, giving the former a significant foothold in the United States – with Westfield having such trophy properties as Westfield Century City on the west side of Los Angeles and the shopping center at the World Trade Center in Lower Manhattan.

Earlier, GGP, the rebranded General Growth Properties, turned down a $14.8 billion bid from Brookfield Property Partners for the shares of GGP it didn’t already own.

--Subway has seen its traffic plummet 25% over the past five years with fierce price competition and a slew of scandals, with Subway’s owners promising a cash infusion of $25 million to boost marketing.

The issue is the image of the product, and the erosion of traffic after public-relations nightmares such as a suit claiming the company’s foot-long sandwiches were only 11 inches (a case recently dismissed by a judge), the revelation Subway’s bread contained a chemical that’s used to make yoga mats, and the whole Jared deal (the pitchman now serving 15 years in prison on child-porn charges). And there was the Canadian TV network story that Subway’s chicken was mostly soy filler, for which Subway was forced to sue the station.

--From the Wall Street Journal:

“Behind bitcoin’s stunning rise lies a new force in global financial markets: millions of individual Asian investors.

“Despite the attention focused on the launch of bitcoin futures in the U.S. last weekend, the center of gravity for trading the virtual currency, measured by volumes, has been in the East – starting in China, before shifting earlier this year to Japan and recently to South Korea as the latest hot spot.”

Regulators clamped down inside China, which had represented the bulk of trading, but by end of November, Japan, South Korea and Vietnam accounted for nearly 80% of bitcoin trading activity globally, according to research firm CryptoCompare.

But the Journal piece doesn’t mention what I first wrote of months ago...that some bitcoin exchanges in Asia, such as in Hong Kong, are run by top organized crime bosses.  I told you of the guy who had left prison after a lengthy sentence and immediately went into the bitcoin business.  It’s stories like this that leave me shaking my head on the whole topic. As traders say, “Yours.”

The first week of futures trading, though, went reasonably well, I guess.  Talk died down a bit.

--I’m officially tired of all the folks being outed for sexual harassment, including the likes of Dustin Hoffman and Mario Batali....Tavis Smiley of PBS.

--This story made every paper in America it seems. The Chronicle of Higher Education released its annual survey of presidents’ compensation from private colleges and universities, looking at tax forms from 2015, the latest available year, filed by 500 private colleges across the nation with the largest endowments, and the highest-paid private college president was....

Nathan Hatch at Wake Forest ($4 million). Go Deacs!  [This included a hefty bonus for sticking around ten years, so otherwise $1 million.]

The average compensation for the 500 was $570,000, including salary, bonuses and benefits.

Foreign Affairs

Syria: Russian President Putin on Monday ordered “a significant part” of Moscow’s military contingent to start pulling out of Syria, declaring their work largely done.

Putin made the announcement during a surprise visit to the Russian Hmeymim air base in Syria, where he met President Assad and addressed Russian forces.

Kremlin spokesman Dmitry Peskov said: “Thanks to the fact that the operation to save Syria and the liberation of Syrian land from terrorists have been completed, there is no longer a need for broad-scale combat strength.”

But Russia, as I long wrote of, said it will keep its naval base at the port of Tartous, as well as the Hmeymim air base, both capable of carrying out strikes against insurgents if required after a partial military pull-out, the Kremlin said.

The announcement of supposed Russian success is designed to give Putin a boost for his re-election.

The official death toll for Russian forces killed in Syria is 38, according to Reuters, though there were more deaths, unannounced as yet, borne by private military contractors working with the military.

A few days after Putin’s announcement of a withdrawal of forces, the U.S. said it has not observed any meaningful one.

Anshel Pfeffer / Haaretz...perfect analysis....

“Twenty-seven months since the Russian deployment to Syria began, no one has any illusions that, as far as the Kremlin is concerned, this has been a resounding success.  There were expectations that this foreign intervention in a Mideast war would end in tears, as so many previous ones had. But not this time.

“Questions were raised over whether Russia’s military – still undergoing a transition from its old and unwieldy Soviet Red Army version – could carry out a prolonged and long-range deployment of this scale.  But despite a few mishaps, which included the smoke-shrouded arrival of the ineffective aircraft carrier Admiral Kuznetsov last year, the modernized Russian army pulled it off.

“Of course, this was nothing like the interventions of the United States and its allies in recent years.  Putin’s aims were not to bring democracy and freedom to Syria.  On the contrary, he set out to keep a blood-soaked dictator in place, and did so by indiscriminately bombing civilian targets that were held by rebel forces.

“Putin plays by Moscow rules, and by those rules this has indeed been a resounding success.  He has kept an ally in place, cemented a strategic regional alliance that includes Iran, ensured Russia has long-term rights for air and sea bases in the Mediterranean and established himself as the only world leader with real influence in the region.

“Putin did all this despite Russia’s faltering economy, hit by plunging oil prices and Western sanctions over Ukraine, and despite the threat of Islamist terror attacks on Russian soil in retaliation.  He did it because he identified a historic opportunity during the presidency of Barack Obama, with the United States in retreat from the region, to assert Russian power instead. Obama opened the door for Russia, and President Donald Trump is now keeping it wide open.

“It is important to keep Putin’s achievement in focus. He hasn’t rebuilt Syria and has no intention of doing so.  Unlike the United States, which poured hundreds of billions of dollars in civilian aid into Iraq and Afghanistan, Putin’s approach is a much more instrumental one. To the victor go the spoils, and he certainly has no intention of picking up any tabs.

“Syria will remain a ruined nation for decades to come, over half of its population uprooted and a quarter living outside the country as refugees.  Putin never intended to save Syria, just the mass murderer who is still its president.  For other countries in the region, including Israel, this means that for the time being at least, they have to deal with Putin regarding any postwar arrangements.”

And Iran is staying.  As Mr. Pfeffer adds in this regard, “Russia, for the time being at least, is happy for Iran’s proxies, Hizbullah and other Shia militias, to provide the ‘boots on the ground’ to continue pacifying the country, parts of which are still under rebel control.”

Putin also seems to be willing to listen to Israel’s concerns over Iran’s entrenchment in Syria, though Vlad hasn’t put any real pressure on Iran as yet. The Golan Heights is the ultimate test case.

Meanwhile, the negotiator for the Bashar al-Assad government in UN-sponsored peace talks accused Western countries and Saudi Arabia of sabotage and blackmail at the end of a round of discussions in Geneva on Thursday, adding Damascus did not want to see the political process fail.  “Nobody can exert pressure on us,” Bashar al-Ja’afari said. Needless to say, talks are going nowhere.

UN Special Envoy for Syria Staffan de Mistura urged Russia to convince the Syrian government of the need to clinch a peace deal to end the nearly seven-year-old war, saying failure to do so would lead to the “fragmentation of Syria.”  De Mistura said “there has to be a new constitution and new elections, through the United Nations.”

Israel: The leaders of 57 Muslim nations have called on the world to recognize East Jerusalem as ‘the occupied capital of a Palestinian state.’

Saudi Foreign Minister Adel al-Jubeir, a former ambassador to the United States, said the U.S. administration is serious about getting a peace deal between Israelis and Palestinians, but the plan is still being put together.

President Trump’s decision to recognize Jerusalem as Israel’s capital and eventually move the U.S. Embassy there has angered Palestinians, who question America’s role as an ‘honest broker.’ The Palestinians want the eastern part of the city as a capital of a future independent state of their own.

The Trump administration argues that any credible peace plan would put the Israeli capital in Jerusalem, and that moving past the question can unblock a peace process frozen since 2014. The White House insists Trump’s decision does not affect Jerusalem’s borders or future status which can still be decided in talks.

The U.S. is looking to release a peace plan early next year with Jubeir emphasizing that Riyadh continues to support a two-state solution.

But Jubeir denied the Sunni Muslim kingdom had any relations with Israel despite sharing Israel’s concern about the regional influence of Shiite Iran. [Reuters]

Meanwhile, on Wednesday the Palestinians said they would reject efforts by the U.S. to act as a peacemaker.

“The United States has chosen to lose its qualifications as a mediator... We will no longer accept that it has a role in the political process,” Palestinian Authority President Mahmoud Abbas.

Vice President Pence, depending on the fate of the tax bill in Washington, is due in the region at some point next week.  Abbas has said he would not meet with him.

Christian leaders in the Middle East, such as the head of Egypt’s Coptic Church, which is the largest Christian community in the Arab world, also announced he would be boycotting Pence.

Israeli Prime Minister Benjamin Netanyahu urged Palestinians “to recognize reality and to work for peace, not for radicalization, and to recognize another fact about Jerusalem: Not only is it Israel’s capital, but we also maintain freedom of religion in Jerusalem for all faiths and we are the ones who keep this promise in the Middle East like none others do, and they often fail disgracefully.”

Can’t disagree with this.

As for the post-U.S. announcement violence that was forecast, little has unfolded, especially when considering the region, but terrorist groups now feel unleashed...again....such as the Salafis in Gaza that Hamas is trying to control.

But you still have rhetoric from the likes of Turkish President Erdogan, who on Monday said the U.S. has become a “partner in bloodshed” with their decision to recognize Jerusalem. He said he believes the Organization of Islamic Cooperation meeting would be a turning point.  Erdogan also called Israeli forces “terrorists,” while accusing Israel of having no values other than “occupation and plunder.”

Netanyahu responded: “Mr. Erdogan has attacked Israel.  I’m not used to receiving lectures about morality from a leader who bombs Kurdish villages in his native Turkey.”

Iraq: Prime Minister Haider al-Abadi announced that the war on Islamic State was over, telling a conference in Baghdad that Iraqi troops were now in complete control of the Iraqi-Syrian border.

It’s a proud moment for Abadi, but it doesn’t mean the battle against the group’s ideology or its ability to stage an insurgency or massive terror attack is finished, whether here, Syria or around the world.

Iran: On Thursday, the U.S. publicly displayed for the first time evidence of what it says represents Iran’s growing military influence in the Middle East.

The evidence, some of which was wreckage that had been reassembled, was presented by Nikki Haley, the U.S. ambassador to the UN, who said the debris pointed to Iran’s threat to the region.

Iran’s mission to the UN, in a Twitter post responding to Haley, said the evidence unveiled by the U.S. was fabricated and denounced her accusations as “irresponsible, provocative and destructive.”

Among the items Haley displayed was a purported missile fired by Iranian-backed Houthi rebels in Yemen at an airport in Saudi Arabia last month.

North Korea: President Trump and Secretary of State Rex Tillerson are once again at odds. Tillerson said on Tuesday that the United States was ready to open talks with Pyongyang “without precondition.”

Hours later the White House distanced itself, with press secretary Sarah Sanders saying President Trump’s position on North Korea had not changed – meaning talks were pointless if Kim Jong-un continued to threaten his neighbors.

“North Korea is acting in an unsafe way not only toward Japan, China, and South Korea, but the entire world,” Sanders said.  “North Korea’s actions are not good for anyone and certainly not good for North Korea.”

But then today, addressing a meeting of the UN Security Council, Sec. Tillerson backtracked, urging North Korea to carry out a “sustained cessation” of weapons testing to allow the two countries to hold talks.

“North Korea must earn its way back to the table. The pressure campaign must and will continue until denuclearization is achieved.”

Tillerson didn’t specify how long the lull should last.

For his part, Kim promised to develop more nuclear weapons while he personally decorated scientists and officials who contributed to the development of Pyongyang’s most advanced intercontinental ballistic missile, according to state media.

Meanwhile, South Korean President Moon Jae-in arrived in Beijing with 200 business people amid a thaw in frosty relations with its major trading partner, and then Moon and President Xi agreed to “normalize” relations on multiple fronts to free up trade and tourism. Chinese tourism to South Korea, for example, had plunged 70 percent this year.

Beijing had banned travel agencies selling group tours in retaliation for South Korea installing the U.S. anti-missile system, THAAD, to protect it from North Korea; China claiming THAAD can be used to spy deep into Chinese territory.  Giant South Korean retailer Lotte was forced to close stores after failing “fire safety” inspections at the time.

But Friday, China’s Premier Li Keqiang, standing alongside Moon, said “We should say, springtime is expected.  We also all want China and South Korea relations to move forward in a stable and healthy manner.”

Separately, the Washington Post’s Joby Warrick reported that North Korea is bent on acquiring machinery for a biological weapons program – including factories to produce deadly microbes and labs that specialize in genetic modification.

Pyongyang has sent scientists abroad to earn advanced degrees in microbiology, and is offering to sell biotechnology services to developing nations, U.S. and Asian intelligence officials told Warrick. But there is no hard evidence the North has ordered the production of any weapons as yet.

Then again, the work is no doubt taking place in civilian factories that produce agricultural and pharmaceutical products, so unless you had a defector or informant, you’ll never know.

Lastly, the PyeongChang Winter Olympics are fast approaching and North Korea has been relatively quiet on the missile testing front since September, as pointed out by the Wall Street Journal’s Gerald Seib, vs. the first eight months of the year.

Up thru August, Pyongyang conducted 23 nuclear or missile tests for the year, but it has staged only three such tests since September, including the impressive one on Nov. 28.

But now we have the Olympics in February, followed by the Paralympic Winter Games in March.

“South Korea clearly wants the Olympics to go smoothly, so it is unlikely to sanction any joint pre-emptive military actions with the U.S. until after the Games are finished,” Seib writes.

“It’s harder to determine how North Korea will behave during the Olympics.  A clear signal will come when Pyongyang reveals whether two North Korean athletes who have qualified are allowed to travel to South Korea to take part.”

China: Related to the above topic of trade, the Beijing mouthpiece, Global Times, editorialized that claims of Chinese infiltration in Australia had spread to New Zealand and Germany like an “infectious disease.

The paper warned: “The esteem with which Chinese regard certain Western countries will be downsized, as it becomes necessary for Beijing to retaliate. China needs to figure out tactics that can silently make Western institutions and individuals truly feel the pain.”

Australia is under fire from a comment made by Prime Minister Malcolm Turnbull that China was infiltrating not just the government, but business.  With China’s threat of retaliation, Aussie cattle ranchers, commodities firms and others are shuddering.

Josh Roggin / Washington Post

“Washington is waking up to the huge scope and scale of Chinese Communist Party influence operations inside the United States, which permeate American institutions of all kinds. China’s overriding goal is, at the least, to defend its authoritarian system from attack and at most to export it to the world at America’s expense.

“The foreign influence campaign is part and parcel of China’s larger campaign for global power, which includes military expansion, foreign direct investment, resource hoarding, and influencing international rules and norms. But this part of China’s game plan is the most opaque and least understood. Beijing’s strategy is first to cut off critical discussion of China’s government, then to co-opt American influencers in order to promote China’s narrative.

“Countries such as Australia, New Zealand and even Canada have been rocked by recent revelations of Chinese-sponsored efforts to corrupt their politicians, universities, think tanks and businesses.  U.S. political and thought leaders are just beginning to understand the problem and come together to devise responses....

“All countries seek influence abroad, pursue soft power and spread propaganda. But the Chinese combination of technology, coercion, pressure, exclusion and economic incentives is beyond anything this country has faced before. The sooner the United States acknowledges that reality, the better chance we have of responding.”

Separately, China is planning to build refugee camps on its border with North Korea in what is being seen as an indication that Beijing is preparing for a conflict, as first reported by the Financial Times, which reviewed a document from the Chinese internet that has since been deleted.

Russia: What a whirlwind week for Vladimir Putin. After going to Syria on Monday, the same day he stopped in Turkey and Egypt.

In Cairo, Putin and Abdel Fattah el-Sissi reached a deal on a nuclear power plant at a cost of $21 billion, as the two nations enter a new era of close ties, reminiscent of the previous Soviet sphere of influence during the Cold War.

Farid Farid / Sydney Morning Herald

“As Yemen’s civil war worsens and Saudi Arabia assumes a more dominant regional role, American allies such as Egypt and Israel, as well as foes including Iran, are turning to Russia as a more reliable partner to push their diplomatic and foreign agendas.

“The military pomp and parade on display for Putin in Cairo on his flash visit on Monday was a graphic indicator of how both autocratic leaders are attracted to exuding political might rather than necessarily acknowledging the terminal economic calamities gripping their countries....

“Although Arab regimes still rely heavily on U.S. security patronage, the Russia appeal lies in Moscow’s willingness to aggressively put its hands up as an international power that is concerned about regime stability and unencumbered by lip service to human rights.

“ ‘The message Russia is sending to other Arab countries by supporting [Syrian President Bashar] Assad is that if you are facing domestic trouble we are going to stick by our allies,’ Karim Bitar, a Middle East expert at the Paris-based Institute for Strategic International Relations told Fairfax Media.

“ ‘We are not like the U.S., we are not going to sell you weapons and then abandon you when you face problems.’

“ ‘So when Sissi flirts with Russia he’s just sending a signal to the U.S. that we might explore alternatives.’”

On a totally different topic, in his annual yearend press conference, Putin asserted that the key whistleblower who uncovered Russia’s state-sponsored doping scheme is working for U.S. intelligence agencies.

“What drugs do they give him (Rodchenkov) to make him say what he says?  It’s a joke.”

Putin also said he would run for a new term for president as an independent candidate while hoping for support from more than one party.  Putin told the press that the opposition lacked a strong candidate to challenge him because his opponents had very little to offer the nation.

Saudi Arabia: After a 35-year ban on cinemas, the kingdom announced movies could once again be shown, another reform from Crown Prince Mohammed bin Salman, MBS. The minister of culture said, “Opening cinemas will act as a catalyst for economic growth and diversification.”

No word from conservative clerics who have long supported the ban (and were the cause of it).

Personally, I’d recommend “Ben-Hur,” “Lawrence of Arabia,” “Animal House,” “Airplane,” and the “Lord of the Rings” trilogy. 

Venezuela: “A-hole of the Year” contender, Venezuelan President Nicolas Maduro, said the country’s main opposition parties are banned from taking part in next year’s presidential election.

The three most prominent parties boycotted last weekend’s mayoral elections, saying the electoral system is rigged.  So Maduro said they couldn’t take part in the national vote.

Random Musings

--Presidential tracking polls....

Gallup:  35% approve of Trump’s job performance, 60% disapprove
Rasmussen: 40% approve, 57% disapprove

Quinnipiac: 37% approve, 57% disapprove
Monmouth: 32% approve, 56% disapprove

In the Monmouth survey, only 24% of women approve of Trump’s performance, 68% disapprove (this had been 36/55 in Sept.), while among men, 40% approve, 44% disapprove (44/42 in September).

--As for the polling before the Doug Jones-Roy Moore vote, the Washington Post showed Jones ahead by 3 points, a CBS News/YouGov survey showed Moore up by 6, and a Fox News poll had Jones up 10 points.

--House Speaker Paul Ryan is rumored to be mulling retirement after the 2018 elections, as first reported by Politico.  “Ryan has made it known to some of his closest confidants that this will be his final term as speaker,” the report stated. “In recent interviews with three dozen people who know the speaker...not a single person believed Ryan will stay in Congress past 2018.”

Asked by a reporter earlier on Thursday if he was quitting, Ryan responded: “I’m not, no.”

Of course he is leaving. Wouldn’t you? Why deal with this s---show.

Of course Speaker Ryan will one day run for president.  He’d also be a helluva secretary of state (under anyone but Trump).

--Minnesota Gov. Mark Dayton (D) named Lt. Gov. Tina Smith (D) to fill Sen. Al Franken’s soon-to-be-vacated seat.

Smith said she intends to run in November 2018 to complete the remaining two years of Franken’s term.

I still haven’t seen a formal date for Franken’s departure, as the least funny so-called comedian bids us adieu.

It has been reported that Minnesota Rep. Keith Ellison won’t run for the Senate in 2018, has had been rumored.

Minnesota’s other Democratic senator, Amy Klobuchar, is also up for reelection in November. Ergo, Republicans feel like they have a shot at picking one off.

--From an interview by Jason Willick of the Wall Street Journal of Arkansas Republican Sen. Tom Cotton, Cotton addressing a U.S. foreign policy that he feels has been adrift for a quarter-century:

“The coalitions of the Cold War rapidly began to break down as soon as the Soviet Union dissolved,” Cotton said.  That first became clear during the debate over the Balkan wars of the Clinton years. “You had some Cold War hawks that were all of a sudden sounding like doves,” referring to conservatives who’d been staunchly anti-Soviet but were wary of U.S. involvement in what was then Yugoslavia.  “You had Cold War doves” – including the liberal humanitarians of the Clinton administration – “that were beginning to sound like Teddy Roosevelt, ready to charge up the hill.  That pattern consistently repeated itself” in subsequent years.

As for Cotton’s current view, and America’s many challenges – from Iran to North Korea, China to Russia, Syria to Ukraine – he is squarely on Team Roosevelt.  “There is always a military option. That is the case everywhere in the world.”

But today there is the lack of a clear organizing principle for how and when to use that power, which is knocking our global strategy off kilter.

Cotton will certainly be running for president in 2024, if not sooner.  [Or a Ryan-Cotton ticket would be unbeatable.]

--Trump tweet: “Another false story, this time in the Failing @nytimes, that I watch 4-8 hours of television a day – Wrong! Also, I seldom, if ever, watch CNN or MSNBC, both of which I consider Fake News. I never watch Don Lemon, who I once called the ‘dumbest man on television!’ Bad reporting.”

He’s of course lying.  It’s at least 8 hours.

By the way, I watch about 14 hours of television a day!!!  [Had to get my own exclamation points in.]

As for the story Trump drinks 12 Diet Cokes a day, can’t say I’ve ever had one in my life.  Really.  As for the number of Coors Lights I’ve consumed....that’s classified.

Actually, the Times piece on Trump had this nugget: “Before taking office, Mr. Trump told top aides to think of each presidential day as an episode in a television show in which he vanquishes rivals.”

If true, that’s kind of a loaded statement. As Chris Cillizza of the Washington Post observed:

“The secret strategy is that there is no secret strategy. Trump acts and reacts. He says stuff. He parries and jabs. He tries to win the minute-by-minute news cycle with little concern about any sort of long-range plan. That’s it.”

--Skiing superstar Lindsey Vonn said she was stunned by the responses she received since commenting last week that if she were to win a gold medal in the PyeongChang Olympics she would not visit President Trump’s White House.

In an Instagram post, Vonn wrote that the reaction “opened my eyes” to divisions in the country and said “it is hurtful to read comments where people are hoping I break my neck or that God is punishing me for being ‘anti-Trump.’”

“I am proud to be an American, and I want our country to continue to be a symbol of hope, compassion, inclusion and world unity.  My travels around the world have recently made clear that this is no longer how people view the United States.  You cannot pick up a newspaper or turn on the TV in Europe without noticing how people are questioning our direction.  It seems to me that we must lead with understanding and strive for unity in our relationships throughout the world....

“All of this is much bigger than skiing and the Olympics.  I am going to take the next two months to focus on what I can do and right now that is competing for my country.  In doing that, I will be hoping that we Americans can still be that ‘shining city on a hill.’”

Go Lindsey!  Ms. Vonn is my early pick for American Female Athlete of the Century, though U.S. phenom Mikaela Shiffrin will give her a run for the money and the coveted award from StocksandNews.   [Oops, gotta throw Serena Williams in there too.]

Vonn is once again suffering from injury issues but she has won 77 World Cup races and Ingemar Stenmark’s record of 86 is within reach should she decide to continue beyond PyeongChang.

--Back to Omarosa, according to reporter April Ryan, “Gen. Kelly kicked her out with high drama with the Minister offering vulgarities and curse words as she was escorted out of the building and off campus.”

During the altercation, Omarosa told Kelly that she had brought the black vote to Trump, Ryan said, but he snapped: “No, that is not the case!”

Omarosa then tried to walk over to Trump’s office – but was stopped by Secret Service agents who physically removed her from the premises, Ryan said.

No one ever understood what exactly it was that Omarosa did. She just wandered around looking for photo ops, including bringing her wedding party over to the White House, without permission.

---

Gold $1258
Oil $57.36

Returns for the week 12/11-12/15

Dow Jones  +1.3%  [24651]
S&P 500  +0.9%  [2675]
S&P MidCap  -0.2%
Russell 2000  +0.6%
Nasdaq  +1.4%  [6936]

Returns for the period 1/1/17-12/15/17

Dow Jones  +24.7%
S&P 500  +19.5%
S&P MidCap  +13.6%
Russell 2000  +12.8%
Nasdaq  +28.9%

Bulls 61.9
Bears 15.2 [Source: Investors Intelligence]

Have a great week.

Brian Trumbore