NYT : Why the Trump Impeachment Inquiry Is the Only Option

Why the Trump Impeachment Inquiry Is the Only Option
THE PEACEFUL TRANSFER of presidential power through free and fair elections is the crowning glory of American democracy. It concretizes the people’s will, conferring legitimacy, assuring stability. President Trump may have finished second in the popular vote, but he is the legitimate president. In the normal course of events, his mismanagement of the nation’s affairs would be left for the electorate to repudiate, through support of a challenger in a primary race or, failing that, in the general election.
But the course of events is not normal. Mr. Trump campaigned as an iconoclast, but it became clear early in his administration that his disruptiveness was aimed less at bringing fresh thinking to bear on stale policymaking than at assaulting the vital institutions of governance themselves. He has attacked the legitimacy of law enforcement, of intelligence agencies, of Congress and of the courts — of anyone he judges to threaten him politically.
For nearly three years, public-spirited people have debated whether each instance of executive overreach by Mr. Trump and his lieutenants went far enough to require the traumatic recourse of an impeachment inquiry. They have wondered at what point the checks and balances of American governance might have to be restored by means of the most radical check of all.
That point has now been reached.
THE AMERICAN PEOPLE HAVE LEARNED over the past week that Mr. Trump, during a July phone call, pressed the president of Ukraine, Volodymyr Zelensky, to investigate Joe Biden, one of his leading political rivals, according to a written summary of the conversation released by the White House. What’s more, Mr. Trump offered the assistance of the Justice Department in that investigation. These facts are not in dispute, which is why some of the president’s die-hard defenders are trying to dismiss the conversation as an inconsequential instance of the president’s bad judgment.
But it was so much more dangerous than that. A president’s use of his power for his own political gain, at the expense of the public interest, is the quintessence of an impeachable offense. It was, in fact, one of the examples the Constitution’s framers deployed to explain what would constitute “high crimes and misdemeanors,” the standard for impeachment.
Have other presidents conducted foreign policy with re-election in mind? Of course. But there is no known precedent for a president pressuring a foreign nation to tear down a political rival. (As a candidate in 1968, Richard M. Nixon tried to sabotage peace talks to end the Vietnam War, but the details didn’t become public knowledge until decades later.)
Have other presidents conducted foreign policy with re-election in mind? Of course. But there is no known precedent for a president pressuring a foreign nation to tear down a political rival.
Mr. Trump appears to have applied more than just verbal pressure. Just days before the call with President Zelensky, Mr. Trump froze nearly $400 million in military aid to Ukraine, aid that Congress had judged to be in America’s national security interest. He released those funds weeks later, and only under intense bipartisan pressure from Congress. Even the president’s reliable ally Mitch McConnell, the Senate majority leader, has said he did not receive an explanation for why Mr. Trump chose to withhold those funds.
The president has insisted that he raised the matter with Mr. Zelensky because Mr. Biden, as vice president, had engaged in criminal conduct. Mr. Biden has denied that; Mr. Trump has provided no evidence; and previous investigations have found no evidence of wrongdoing. But consider the hypothetical that Mr. Trump was correct about Mr. Biden. Would that legitimize the president’s behavior? No. If the president had evidence, his White House counsel should have shared it with the Department of Justice and let the F.B.I. do its job, in coordination with Ukrainian counterparts.
White House aides appear to have recognized that Mr. Trump egregiously overstepped, and to have tried to cover up his actions. According to the complaint filed in August by a whistle-blower in the intelligence community and released publicly on Thursday morning, there was a discussion among “White House lawyers about how to treat the call because of the likelihood, in the officials’ retelling, that they had witnessed the president abuse his office for personal gain.” At the direction of White House lawyers, the whistle-blower says, these officials “intervened to ‘lock down’ all records of the phone call, especially the word-for-word transcript that was produced.” And “this was ‘not the first time’” White House officials had done this, according to the complaint.
Some of Mr. Trump’s defenders assert that no criminal statute prevents a president from soliciting foreign interference in American elections. But the law is clear that impeachment does not require a crime. In fact, the absence of a criminal statute to restrain this sort of abuse of authority only reinforces the need for Congress to act in accordance with the aims of the framers of the Constitution. As Alexander Hamilton wrote in Federalist No. 65, impeachment was provided as a response not just to crimes but to acts that were an “abuse or violation of some public trust.” During this administration, Americans have discovered to their sorrow the degree to which past presidents were constrained not by specific laws but only by tradition, character and an understanding of the framers’ intent. Mr. Trump has proved immune to such considerations.
OF COURSE, THE PRESIDENT has committed previous offenses that many critics argued justified an impeachment inquiry months if not years ago. During the 2016 campaign, he appears to have violated federal election law by directing his personal lawyer Michael Cohen to pay $280,000 in hush money to two women who say they had sex with Mr. Trump. Mr. Cohen testified that Mr. Trump continued to reimburse him for making those payments into 2017, after Mr. Trump became president.
In office, he has also repeatedly sought to obstruct federal investigations. And his companies – which he has refused to divest or place in a blind trust – actively solicit business from foreign governments and leaders. Those governments have spent vast sums at Trump properties, enriching the president in possible violation of the emoluments clause of the Constitution, which prohibits foreign gifts.
But an impeachment inquiry was not necessary to deal previously with those transgressions, because the system was working: The courts were dealing with some charges, and the special counsel overseeing the Russia investigation, Robert Mueller, with others. Trump lieutenants were going to prison for their crimes, and despite various efforts by the administration to suppress the truth, an aggressive press ensured the American people learned enough about the dark dealings of Mr. Trump and his associates to inform their decisions in the next presidential election.
White House aides appear to have recognized that Mr. Trump egregiously overstepped, and to have tried to cover up his actions.
This board has made clear its own view of Mr. Trump’s unfitness for his office. We have opposed Mr. Trump not only because of his personal transgressions, divisiveness and dishonesty, but also because of the substance of many of his policies — on the environment, immigration, taxes, trade and other matters. But provided Mr. Trump was acting within the law, he had the absolute right to pursue his chosen course and be judged upon it by the electorate, one way or another, in 2020.
The disclosures about the president’s pressure on Ukraine have changed that picture. They have revealed Mr. Trump to be working to subvert the 2020 election, undermining the proper electoral check on presidential misbehavior. The Constitution provides only one fail-safe in such a situation, and that’s why the House was right this week to announce a formal impeachment inquiry, under the purview of the Judiciary Committee.
After all, Americans have seen this playbook before. During the 2016 campaign, Mr. Trump called on Russia to find emails he hoped would embarrass Hillary Clinton: “Russia, if you're listening, I hope you're able to find the 30,000 emails that are missing,” he bellowed then at a campaign news conference in Florida. Mr. Mueller subsequently showed that Russian agents tried to hack into Mrs. Clinton’s personal servers that same day. He eventually secured the indictment of 12 Russian agents in a hacking scheme, and more than a dozen more Russians in a disinformation campaign. They were trying to divide Americans and help Mr. Trump win.
NOW, AS PRESIDENT, Mr. Trump evidently feels free to demand such interference directly. In fact, Mr. Trump spoke to the Ukrainian president the day after Mr. Mueller had testified to Congress about the magnitude of Russian interference, its continuing menace and Mr. Trump’s efforts to obstruct the investigation. That Mr. Trump was not dissuaded by the response to Mr. Mueller’s findings from seeking political aid from another foreign source suggests he has learned nothing except that he is free to try anything — that a president may use the office as he chooses to promote his re-election.
We don't have to guess at what he believes. In July, he said it out loud, telling a group of teenagers and young adults that under Article II of the Constitution, "I have the right to do whatever I want as president."
During an impeachment inquiry, the Judiciary Committee has enhanced power to obtain documents from the executive branch and to compel the testimony of the president’s aides. The theory is that the House is dealing with a matter both momentous and urgent, and that in doing so it must operate more like a federal court than an oversight body. That may help Congress overcome Mr. Trump’s past refusals to let it perform its oversight function. “We’re fighting all the subpoenas,” Mr. Trump said in April.
Among the Democrats, some voices are already clamoring for the House to rush to judgment, and perhaps even to narrow its focus to the Ukraine incident. Those would be mistakes. The House now has a duty not to use an impeachment inquiry to seek political advantage but to protect the integrity of the next election by using its powers to conduct a methodical and fair investigation of impeachable behavior.
That Mr. Trump was not dissuaded by the response to Mr. Mueller’s findings from seeking political aid from another foreign source suggests he has learned nothing.
The Judiciary Committee can, and should, seek to require the appearance of presidential aides who have previously claimed immunity from testimony, like Don McGahn, the former White House counsel. It can, and should, seek to compel the disclosure of documents the White House has claimed to be shielded by executive privilege or grand jury protections.
Yet much of Mr. Trump’s behavior should remain outside the scope of the inquiry. The founders intended impeachment as a remedy for committing treason, bribery or high crimes and misdemeanors. While the exact meaning of the last phrase ultimately rests on the judgment of the House, lawmakers would be wise to construe it narrowly, as concerning the same type of conduct as treason and bribery: placing private above public interest.
That is the difference between the justified effort to remove President Nixon from office, for misconduct that amounted to an assault on the integrity of the political system and the rights of private citizens, and the unjustified and unpopular impeachment of President Bill Clinton, for lying under oath about an affair. This is not the moment to seek to investigate Mr. Trump for tax fraud, unless it is tied to impeachable conduct.
IT IS QUITE POSSIBLE, though by no means assured, that an impeachment inquiry will produce political benefits for Mr. Trump. He and many of his supporters draw energy and a sense of purpose from conflict. They relish defining themselves in opposition to enemies real and imagined. Further, weary of bickering in Washington and anxious about paying for health care or housing or schooling or wars without end, many Americans may choose to tune out.
The imperative of constitutional accountability outweighs such fears. Mr. Trump is testing the norms and limits of the American system of government. He has left Congress no other recourse than considering impeachment to prevent future presidents from emulating and even expanding upon his piratical application of executive power.
Just three times before in American history have presidents been subject to impeachment inquiries. The first time, in 1868, when Andrew Johnson was prosecuted by Congress for defying an act meant to limit his constitutional powers, this board deplored Mr. Johnson’s behavior but opposed impeachment, arguing that the matter should be left to the voters. (Mr. Johnson’s position, that it was within his power to fire the secretary of war despite a law intended to constrain him, was ultimately affirmed by the Supreme Court.)

WSJ : Before 737 MAX, Boeing’s Flight-Control System Included Key Safeguards

Before 737 MAX, Boeing’s Flight-Control System Included Key Safeguards
Earlier military version of MCAS had features to prevent misfires implicated in two 737 MAX crashes

Boeing Co. BA -1.04% engineers working on a flight-control system for the 737 MAX omitted key safeguards that had been included in an earlier version of the same system used on a military tanker jet, people familiar with the matter said.

Accident investigators have implicated the system, known as MCAS, in two deadly crashes of the jetliner that killed a total of 346 people.

The engineers who created MCAS more than a decade ago for the military refueling plane designed the system to rely on inputs from multiple sensors and with limited power to move the tanker’s nose—which one person familiar with the design described as deliberate checks against the system acting erroneously or causing a pilot to lose control.

“It was a choice,” this person said. “You don’t want the solution to be worse than the initial problem.”

The MAX’s version of MCAS, however, relied on input from just one of the plane’s two sensors that measure the angle of the plane’s nose. The system also proved tougher for pilots to override. Investigators have implicated the system in the fatal nosedives of Indonesia’s Lion Air jet in October 2018 and of an Ethiopian Airlines MAX in March. Indonesia is expected to fault that MCAS design, in addition to U.S. oversight lapses and pilot missteps, in their final report on the first crash, The Wall Street Journal has reported.

Now, Boeing’s expected fix for the 737 MAX will make its MCAS more like the one used in the tanker, according to people familiar with the matter.

Details of the system’s history and engineers’ desire to build in safeguards on the tanker version of MCAS haven’t been previously reported. The existence of a version of MCAS on the tanker was earlier reported by Air Force magazine.

MCAS stands for the Maneuvering Characteristics Augmentation System. A Boeing spokesman declined to explain why the systems differ on two airplanes, but said, “The systems are not directly comparable.” The contrast in design highlights how different teams of Boeing engineers wound up including protections on one airplane but not on a later model of another aircraft.

Boeing has said the MAX, with its revised MCAS, will be among the safest airplanes ever to fly.

After the MAX operated by Indonesia’s Lion Air crashed, Air Force officials said they were concerned their tanker, known as the KC-46A Pegasus, shared the same problems. An Air Force spokeswoman said senior officials met with their Boeing counterparts to confirm the tanker’s MCAS complied with military requirements for designs that prevent a single faulty sensor from causing a system to fail.

Boeing developed the MCAS for the military tanker around the early 2000s, another person familiar with the project said. The tanker was a military derivative of Boeing’s wide-body 767 commercial jet and included pods on its wings used for air-to-air refueling of fighters and other war planes. Those wing pods added lift and caused the tanker’s nose to pitch up in some flight conditions, risking the plane’s ability to meet Federal Aviation Administration safety requirements, people familiar with the matter said. So engineers devised MCAS software, which automatically pushes down the tanker’s nose if necessary, to comply with FAA standards, these people said.

In a key difference from the subsequent version of the system used on the MAX, the system on the tanker moves the plane’s horizontal stabilizer—the control surface perpendicular to the airplane’s tail—once per activation and not repeatedly, the person familiar with the tanker project said.

The tanker engineers also gave the system only limited power to nudge the plane’s nose down to ensure that pilots would be able to recover if it accidentally pushed the plane into a dive, said the person familiar with the tanker’s MCAS design. That meant MCAS had little authority over the stabilizer, which made it much easier for pilots to counteract.

Boeing began developing the MAX in 2011 amid competition with rival Airbus SE, which had been enticing airline customers with its new single-aisle passenger jet.

The MAX’s new fuel-efficient engines were larger and placed farther forward on the wing than on previous 737 models. That caused the plane’s nose to pitch up in certain extreme flight conditions, endangering the plane’s ability to win FAA certification, people familiar with the matter said. The large engines on the MAX essentially had the same effect on the plane’s aerodynamics that the refueling pods had on the military plane.

Engineers who had worked on the tanker suggested MCAS as a possible solution for the MAX engineers, people familiar with the matter said.

Boeing said it isn’t aware of any consideration to rely on both sensors that measure the angle of the plane’s nose when its engineers designed MCAS for the 737 MAX. A single “angle of attack” sensor was deemed sufficient, and Boeing has said it complied with safety and regulatory requirements. Other systems on earlier 737s relied on single sensors, former Boeing engineers and others familiar with the designs have said.

Boeing instead relied primarily on pilots as the backstop should that plane’s MCAS misfire. MAX engineers determined pilots would quickly identify an MCAS misfire as an emergency known as a “runaway stabilizer,” then counteract the system with a longstanding cockpit procedure.

The more advanced flight-control computer systems on the tanker also made it easier for MCAS to compare data from multiple sensors, the person familiar with the tanker project said. “The underlying architecture was there to take advantage of,” this person said.

Aside from sensors, the tanker MCAS has another key safeguard. Pilots of the tanker can override MCAS by simply pulling back on controls, according to a senior Air Force official and others familiar with the matter.

“We have better sensor data,” Will Roper, an assistant Air Force secretary who is the branch’s procurement chief, said. “But most importantly, when the pilot grabs the stick, the pilot is completely in control.”

On the MAX, MCAS’s design required it to remain active even if pilots pulled back on the controls, making it more complicated to stop the system from forcefully and repeatedly pushing down the nose.

Since days after a second 737 MAX crashed in Ethiopia in March, that aircraft has been grounded world-wide. The flight ban has thrown a wrench into airline finances and planning, and disrupted customers’ travel plans.

The new MCAS for the 737 MAX is expected to rely on two sensors to verify data. It will fire once, not repeatedly, each time it activates. And pilots will be able to override the system by pulling back on the controls.

Bus. Of Fash. : The Great Makeup Crash of 2019

The Great Makeup Crash of 2019
Many of the largest cosmetics brands are seeing US sales drop as new rivals enter the market even as consumers spend less on makeup.

NEW YORK, United States — Beauty brands are good at generating hype. Nars just celebrated its 25th anniversary with a splashy release of 75 new lipsticks; Anastasia Beverly Hills’ new 50-shade foundation launch was unavoidable on social media and Urban Decay’s highly anticipated Game of Thrones collection sold out of its first run in hours.
But the beauty industry has a dirty little secret: all of these brands are struggling. According to NPD, the L’Oréal owned Urban Decay’s sales dropped by 19 percent in the first half of 2019 compared with a year earlier. Anastasia’s sales decreased by 24 percent and Nars’ saw a seven percent dip. In fact, 18 of the 20 largest prestige makeup brands in the US saw sales fall in the first six months of 2019. Overall sales for the sector fell four percent.
The decline is hitting both stodgy department store brands and newer labels that point to millions of devoted social media followers and support from mega-influencers. Stila was down 27 percent; Hourglass was down 15 percent; CoverFX was down 31 percent; Lorac was down 48 percent; Tarte was down 11 percent; It Cosmetics was down 12 percent and Laura Mercier was down by four percent. The only two brands in the top 20 to skirt the cosmetics slump were Benefit Cosmetics and Charlotte Tilbury.
Beauty brands and retailers are struggling to adjust to the new reality. L’Oréal Chief Executive Jean-Paul Agon said in July the US makeup market contributed to the conglomerate’s disappointing second-quarter sales. Ulta Beauty’s stock plunged by 30 percent last month after the company warned its sales growth would slow after five years of rapid expansion. LVMH does not release sales for Sephora, but Chief Financial Officer Jean-Jacques Guiony in July flagged a “difficult environment” for makeup in the US.
In a conference call with analysts last month, Ulta Chief Executive Mary Dillon blamed brands’ focus on “newness and innovation” rather than training customers to adopt “new rituals” that drive repeat sales. Examples from the last decade include contouring and brow styling, which turned brands like Anastasia Beverly Hills into big sellers.
Makeup may also be falling victim to broader changes in consumers’ shopping habits. People with jam-packed schedules have less time to browse makeup aisles, said Wendy Liebmann, chief executive of WSL Retail Strategy. A recent survey by the consulting firm found 26 percent of women spend less time shopping for beauty products than they used to, compared to 18 percent who are spending more time.

The big brands realised they pay so much money to these influencers and at lunch they’ll promote us and at dinner, they’ll promote Marc Jacobs Beauty.
“Big macro trends like time, pressure and stress are impacting the way people are willing to spend time in a category we once thought everyone used to immerse themselves in. It’s becoming more rote,” Liebmann said, pointing out that Millennials in particular, and mostly those with families, are spending less time shopping for cosmetics than the total population.
Plus, many women are wearing less makeup, even as influencers tout ever-more elaborate looks on Instagram and YouTube.
“The full coverage and the crazy eye look — that’s all over social media,” said Sarah Jindal, a senior global beauty analyst at Mintel. “But day-to-day, walking down the street, how many people do you see that actually look like that, that are wearing that full face of makeup, full-coverage foundation and lashes? Nobody. Nobody is actually doing that in real life.”
Instead, consumers are spending more on skincare, she said. Many women are gravitating toward lighter textures, swapping out their foundation for tinted moisturisers, and heading to the dermatologist or spa for lasers or peels.
And when consumers do want makeup, they can increasingly find what they need at lower price points. Ingredients and technologies initially developed by high-end brands are now seen in products found at the local drugstore or supermarket. There’s often little difference between items costing $5 or $50, and a growing number of shoppers are aware of that fact, Jindal said.
“Stuff starts at the top and it eventually makes its way down,” she said. “Maybelline’s killing it with their eyebrow products. [Consumers are saying,] ‘I don’t need Anastasia [Beverly Hills] necessarily, I can go to the drugstore and buy it.’”
Prestige brands can’t count on Instagram to drive sales, either. Many used influencer campaigns and advertising to amass millions of followers, who would then run out to Sephora or Ulta to buy the newest products. But it’s become harder to stand out now that nearly all major brands have huge followings, said David Silverman, senior director, corporates at Fitch Ratings.
“One could argue that the first-mover advantage led to its own tutorial on how second and third movers could copy the process,” Silverman said.

Stuff starts at the top and it eventually makes its way down.
The founder of one prestige makeup brand who declined to be named, said there are simply too many brands competing for the same customers. The “hundreds” of new entrants that have emerged in the past several years — many of these influencer and celebrity lines — are generating customer fatigue. Consumers are growing more sceptical of influencers, and celebrities can no longer count on fans for unwavering support of their products. Jaclyn Hill’s anticipated lipstick launch was met with negative feedback from followers who received damaged product. The onslaught of vocal, unhappy customers eventually lead the influencer to post a makeup-free, 14-minute long YouTube explanation, followed by a six-week hiatus from vlogging. This week, online viewers expressed concern when Millie Bobbie Brown wore perfectly intact eye makeup throughout a tutorial that was supposed to show her nighttime skincare routine.
“Everybody started paying attention to makeup … Every consumer started buying more [and] you start buying and having so much makeup that you have supply for a lifetime,” the founder said. “The big brands realised they pay so much money to these influencers and at lunch they’ll promote us and at dinner, they’ll promote Marc Jacobs Beauty.”

Bus of Fas. : The New Ways Retailers Are Watching You Shop

Retailers are using sophisticated surveillance technology to monitor shopping behaviour. |

WSJ : Why Precious Metals Have Become More Appealing

Why Precious Metals Have Become More Appealing
Low yields give safety-seeking investors an attractive alternative to bonds

Unlike stocks and bonds, precious metals don’t give investors any income simply for holding them. So why are they the market’s best performers in the third quarter?

The reason: In a world of falling—or outright negative—yields, nervous investors seeking havens are less likely to miss out on returns from bonds if they put money into gold or silver. That eliminates the major trade-off that typically confronts those interested in owning gold: It offers no yield at all.

That declining opportunity cost is why trillions of dollars of negative-yielding debt around the world and sharp declines in Treasury yields in the U.S. have sparked a rally in precious metals. The price of silver has soared 15% so far in the third quarter, while platinum has rallied 11%. Gold is up 6.3% with one trading day remaining in the quarter and is now up 17% for the year, headed toward its biggest annual gain since 2010.

The sudden allure of precious metals highlights the turbulence of this year’s third quarter, in which stocks, bonds and other assets have swung wildly as investors weigh the latest developments in the U.S.-China trade war. Stocks have recovered from a turbulent August to creep back toward records in September, while bond yields, which move inversely to prices, have stabilized after approaching record lows earlier in the month.

The surge in metals prices has spilled over to exchange-traded funds that track the sector such as the SPDR Gold Trust and iShares Silver Trust and lifted shares of producers, many of which have logged double-digit percentage gains for the quarter. The VanEck Vectors Gold Miners ETF has advanced 7.4% for the quarter to bring its advance for the past year to 50%, while Barrick Gold Corp. has logged a 12% quarterly gain and First Majestic Silver Corp. has rallied 23%.

ETFs and shares of producers are the main ways many investors can gain exposure to the sector, since they are less complex than trading commodity futures.

They have become even more popular as investors have piled into bonds to protect against a much weaker economic environment and a drop in stocks. Bond yields fall as prices rise.

Although the surge in bonds and precious metals has paused in September as recession fears waned and stocks stabilized, some analysts expect further gains ahead as the trade war rages on.

“There’s potentially a little more fuel to the upside if we do get a sudden, dramatic escalation in the trade war,” said Tai Wong, head of base and precious metals derivatives trading at Bank of Montreal .

Front-month gold futures finished Friday at $1,499.10 a troy ounce, 3.3% below their six-year high from early September. Silver is at $17.552, also below its recent multiyear peak, while platinum trades at $931.

The gains have come as manufacturing data around the globe signal a sharp slowdown in factory activity. Organizations such as the International Monetary Fund and the Organization for Economic Cooperation and Development recently cut their projections for global growth in 2019.

Many analysts expect moves in the bond market to continue dictating momentum in precious metals. Some expect steady buying around coming trade talks and are skeptical the recent recovery in bond yields and risky assets will last.

“It’s still a very recent shift in sentiment,” said Anwiti Bahuguna, senior portfolio manager and head of multiasset strategy at Columbia Threadneedle Investments, which has maintained its investments in gold recently. “It’s promising, so we’re watching it, but there is no reason to take off hedges at this point.”

At the same time, some analysts are hopeful that steady U.S. consumer spending and a U.S.-China cease-fire on tariffs will power stocks to new records, threatening the metals rally. Lower interest rates around the world also could spur a pickup in economic activity, potentially limiting further gains in haven metals.

Another reason some analysts think the rally could stall is that the dollar has remained steady as growth in the U.S. has outpaced the rest of the world. A stronger dollar can hurt commodities denominated in the U.S. currency by making them more expensive for overseas buyers.

But for now, some investors are maintaining their bets on gold and silver as geopolitical uncertainty lingers.

“We’re big fans of both as havens and more of a fan of silver than gold” because of its many industrial applications, said Ed Cofrancesco, president and CEO of International Assets Advisory.

WSJ : Fewer Stocks Are Participating in the Market’s Rally

Fewer Stocks Are Participating in the Market’s Rally
The number of stocks hitting fresh 52-week highs has fallen since June

U.S. stocks are hovering near record levels but many are struggling to break out of a narrow trading range to hit new highs. One reason: Fewer individual stocks are contributing to the rally.

The number of stocks hitting 52-week highs has fallen since June—when the S&P 500 kicked off its last successful run at a record. Last week, 106 firms in the index set new 52-week highs, down from 293 in mid-June, according to FactSet.

The lack of breadth in the stock market is concerning to some analysts who note the S&P 500 has broken out to fresh highs three times since early 2018, but each rally was short-lived. That marks a divergence from 2013 and 2017 when stocks notched a series of new highs in the wake of strong bouts of volatility.

The broad stock-market index is within 2.1% of July 26’s record—it has rallied 18% this year to 2961.79 but is up just 1.6% from a year ago following last fall’s brutal selloff.

“Investors are concerned that this is another breakout that won’t last,” said Frank Cappelleri, executive director at brokerage Instinet. “Violent back-and-forth stock moves shake investor confidence, which causes doubt for the next breakout to work.”

After growing fears of a potential U.S. recession rocked financial markets in August, the S&P 500 has done an about-face in September, rising 1.2%. The latest leg up coincides with the biggest rotation out of high-momentum stocks and into value shares since the financial crisis.

Investors have been selling higher growth technology companies including the popular FAANG stocks— Facebook Inc., Amazon.com Inc., Apple Inc., Netflix Inc. and Google parent Alphabet Inc. —that have propelled the decadelong bull market.

They are opting instead for beaten-down value stocks, often defined as companies whose shares trade at a low multiple of their book value, or net worth. That includes energy and financial stocks that have underperformed the broader market in recent years.

“With fewer stocks hitting new highs, the question is: Has the market been using bond-proxy sectors as leadership stocks, or is the low interest rate environment keeping other sectors like financials back that have a bigger punch?” Mr. Cappelleri said.

Some analysts and investors said the recent rotation out of momentum shares is a sign that major averages are vulnerable to a pullback. Technology giant Microsoft Corp. , network-equipment maker Cisco Systems Inc. and software company Oracle Corp. were among companies hitting fresh records earlier this year but are now struggling to reclaim their highs. Those stocks have lost 2.6%, 14% and 7.5%, respectively, since the S&P 500 peaked in July.

Meanwhile, safety stocks in sectors including consumer staples, utilities and real estate have led this month’s rally. Retail titan Walmart Inc., consumer-goods giant Procter & Gamble Co. , utility holding company American Electric Power Co. and cellular-tower firm American Tower Co. each hit new highs in September. All four stocks climbed at least 4.8% since late July.

The latest rally has been largely driven by easing monetary policy from the Federal Reserve and signs of a firming U.S. housing market. But those factors haven’t dispelled worries about the U.S.-China trade spat and a slowdown in corporate earnings that threaten to upend the bull market.

The S&P 500 has struggled to stay above 3000, a key resistance level. Investors will be awaiting the outcome of the next round of trade negotiations in October and monitoring third-quarter earnings reports—which are expected to show another quarter of lower profits—in the coming weeks. Analysts will also be watching Friday’s labor-market data for further indications on the health of the economy after Fed officials earlier this month were split over the outlook for further interest-rate reductions.

“The stock market has grown dependent on low interest rates, but rates that continue to decline suggest that the global economy and perhaps the U.S. economy is losing some traction,” said Bruce Bittles, chief investment strategist at Robert W. Baird & Co. “With the Fed and other central banks running out of bullets, it’s less support for the market and that could be another headwind for stocks to overcome.”

Data has remained decidedly mixed. Recent housing figures have pointed to a firming U.S. economy, while consumer spending has remained robust. At the same time, manufacturing activity has eased, hiring slowed in August and consumer confidence slid this month.

Still, some analysts and investors remain optimistic on the latest run for stocks and argue a long period of sideways trading often presages a sharp move higher.

“Historically, markets that have gone nowhere like the S&P 500 has the last 18 months have typically resolved with a big upside move,” said Thomas Lee, managing partner and head of research at Fundstrat Global Advisors.

Technical indicators have turned bullish after flashing red this summer. About 68% of the companies in the S&P 500 are now trading above their 50-day moving averages, up from less than 25% when the broad index came under pressure in early August.

Indicators tied to the U.S. economy have also rebounded. The gap between short- and long-term Treasury yields, known as the yield curve, has stabilized after inverting this summer, easing concerns about the direction of the economy.

Some investors point to signs of improving market breadth as an encouraging sign. The NYSE advance-decline line, a popular indicator that tracks the number of stocks rising minus the number falling each day, hit a fresh high Sept. 23, according to Dow Jones Market Data.

“If it’s really a strong market and we see broad participation across both value and growth stocks, then that’s what’s going to push major averages to new highs,” said Nick Giacoumakis, president and founder at New England Investment & Retirement Group Inc. “But it’s going to be harder to sustain when it’s led by more defensive plays.”

WSJ : Embarrassing Leaks Led to Clampdown on Trump’s Phone Records

Embarrassing Leaks Led to Clampdown on Trump’s Phone Records
After blowup over calls with Mexican, Australian leaders, officials moved toward greater secrecy, now an issue in impeachment inquiry

WASHINGTON—The White House moved to clamp down on access to records of presidential phone calls after problematic leaks of sensitive discussions early in the Trump administration, according to people with knowledge of the actions, culminating in the use of a secret national security server which is now central to the impeachment probe.

Back-to-back leaks of controversial remarks by President Trump during calls with leaders of Mexico and Australia resulted from an unusually loose record-distribution policy in the first days of the Trump White House, one of these people said, leading to the secret server’s eventual use for records of calls involving leaders of Saudi Arabia, Russia and Ukraine.

White House officials also moved to significantly limit the number of individuals who could listen in on many of his calls, or who could access the records after those calls were concluded, the people said.

Both the Mexico and Australia calls early in 2017 were damaging for the new president. He warned Mexico’s then-President Enrique Peña Nieto that he might send U.S. troops to take on the “tough hombres” driving the Mexican drug trade. In his call to Australia’s then-Prime Minister Malcolm Turnbull, Mr. Trump lashed out at a “stupid,” “disgusting” and “horrible” Obama-era refugee deal with Australia under which the U.S. agreed to take up to 1,250 refugees housed in detention camps on the Pacific island nations of Nauru and Papua New Guinea.

Around the same time, it was revealed that in his first call as president with Russian President Vladimir Putin, Mr. Trump denounced the New START treaty that caps U.S. and Russian deployment of nuclear warheads as a bad deal for the U.S., according to a report by Reuters.

Then, in May 2017, a day after firing James Comey as Federal Bureau of Investigation director, Mr. Trump met in the White House Oval Office with Russian officials including Foreign Minister Sergei Lavrov and then-Ambassador to the U.S. Sergey Kislyak, and shared then-classified details of U.S. efforts to counter the Islamic State extremist group, U.S. officials said at the time. Those disclosures led to further restrictions, according to the people with knowledge of the actions.

The disclosure this week of a complaint by an unidentified whistleblower revealed concern among White House officials over alleged attempts by the administration to “lock down” access to internal information, including the president’s July 2019 discussion with Ukrainian President Volodymyr Zelensky.

That call has prompted allegations from lawmakers that Mr. Trump improperly asked Mr. Zelensky to investigate political rival Joe Biden, and that officials at the time hid records of it by using the national security computer server instead of systems where such records normally are maintained. An impeachment inquiry announced Tuesday by House Speaker Nancy Pelosi is likely to delve into both issues.

The White House said Friday that the record of the Trump-Zelensky call was added to the highly secure server at the direction of National Security Council lawyers. Mr. Trump has denounced the impeachment inquiry as a “witch hunt.”

According to the whistleblower’s complaint, White House officials were “directed” to remove the electronic records from the computer system where such documents are normally stored “for coordination, finalization and distribution to Cabinet-level officials.”

The complaint added that the record of the president’s phone call with Ukraine was “loaded into a separate electronic system that is otherwise used to store and handle classified information of an especially sensitive nature.”

In some cases, including the president’s calls with Saudi Arabia’s crown prince, restrictions were agreed upon in advance, and the number of officials allowed to listen in on the call was greatly limited, one of the people with knowledge of the situation said.

Presidents generally make phone calls on one of several secure phone lines, including those in the White House Situation Room, the Oval Office or the presidential limousine. A number of national security officials, including NSC and Situation Room staffers, traditionally listen in to the calls.

The standard practice under former President Obama was to distribute records strictly to the relevant offices, according to people who served in the White House under both presidents.

But in the first few months of the Trump White House, the National Security Council, which had been in disarray during national security adviser Michael Flynn’s three weeks of service, utilized far more broad distribution lists, according to former White House officials.

The subsequent disclosures of details of Mr. Trump’s conversations with foreign leaders fueled conspiracy theories among some within the administration that “deep state” actors were involved in an effort to derail the Trump presidency.

Following the Mexico and Australia leaks, the National Security Council “severely cut back” on broad dissemination of records, instead sending them only to those who were directly involved in the issues discussed in the call, according to the people knowledgeable of the situation.

Mr. Flynn was asked to resign in mid-February 2017 for failing to disclose the true nature of his meetings with Russian officials to the president and Vice President Mike Pence. He didn’t immediately respond to a request for comment.

When H.R. McMaster took over as Mr. Trump’s second national security adviser, those distribution lists grew smaller, officials said, although certain individuals, on a need-to-know basis, still could access records from the NSC traditional computer portal, which handled everything except CIA operational information, one official explained.

It couldn’t immediately be determined whether the records of Mr. Trump’s conversations with Mexico’s president were stored in the highly secure computer system, but access to its content was virtually blocked, the officials said.

Two ranking officials who served in the Obama administration said transcripts then were limited to only the top people on the national security team and officials overseeing policy areas that came up during a phone call. The officials said they weren’t aware of an instance in which a record was put into a stand-alone computer system, such as the secure system used by the Trump White House. “That is for the highest secret assets,” said Rahm Emanuel, Mr. Obama’s former chief of staff. “I’d be shocked.”

Asked Friday about the publication of the record of the conversation between Mr. Trump and Mr. Zelensky, Mr. Lavrov said that those who pushed for it were undermining the confidentiality crucial for diplomacy.

“Diplomatic matters suppose a certain degree of diplomatic confidentiality,” he said following a United Nations speech.

Beyond the existence of official records from the president’s official calls, many senior officials have expressed concern over phone calls the president has had with foreign leaders on his cellphone.

Early in his presidency, the president handed his cellphone number out to several world leaders, including the heads of Mexico, Canada and France, and urged them to call him directly, an unusual invitation that breaks with diplomatic protocol and raised concerns about the security and secrecy of his communications, according to people with direct knowledge.

Even if the president conducted business on his government-issued cellphone, the calls are vulnerable to eavesdropping, particularly from foreign governments, officials said.

One former senior administration official said the president’s advisers tried the best they could to manage the president’s discussions with world leaders, “but once he’s up in the residence, we never know who he’s speaking to.”

At the start of his presidency, Mr. Trump’s freewheeling conversations with world leaders prompted consternation among the president’s senior aides, who took steps to keep him from making inappropriate comments or divulging sensitive information.

On more than one occasion, John Kelly, the White House’s then-chief of staff, who was often in the room during calls with world leaders, briefly muted the line so he could caution Mr. Trump against continuing to talk about sensitive subjects, according to a person with knowledge of the matter. The small group of advisers in the room for the calls would also often pass the president notes offering guidance, the person said.

FT : Trump administration considers ban on Chinese listings in US

Trump administration considers ban on Chinese listings in US
Measure is one option as advisers debate expanding trade war into capital markets

The White House is weighing a plan to stop Chinese companies listing on US exchanges in a move that would take its trade war with China to Wall Street.

President Donald Trump’s advisers are exploring steps to limit financial investments between the US and China, according to people briefed on the plans. Other options include curbing the ability of US government pension funds to buy Chinese equities.

Beijing is preparing to mark the 70th anniversary of the founding of the People’s Republic of China with a national celebration next week and is due to have new trade talks with the US in October.

A widening of the US-China economic conflict into the arena of capital markets has long been pushed by hawks in Washington, particularly Marco Rubio, the Republican senator from Florida, and like-minded officials within the administration. But it has been resisted by other Trump advisers who fear that it could deal a fresh blow to markets and undermine investor confidence.

Over a day after news of the discussions were first reported by Bloomberg, Treasury spokeswoman Monica Crowley released a statement saying: “The administration is not contemplating blocking Chinese companies from listing shares on US stock exchanges at this time.”

The idea prompted a pointed response from one of the largest US stock markets, Nasdaq, which said in a statement: “One critical quality of our capital markets is that we provide non-discriminatory and fair access to all eligible companies. The statutory obligation of all US equity exchanges to do so creates a vibrant market that provides diverse investment opportunities for US investors.”

The US equity benchmark, the S&P 500, turned negative after the news broke, ending Friday down 0.5 per cent. There was also a sharp fall in the shares of New York-listed Chinese companies and a weakening of the renminbi.

Ecommerce giant Alibaba’s shares were down 5 per cent, search engine Baidu dropped almost 4 per cent and the depository receipts of online retailer JD.com were down 6 per cent, respectively.

As of February this year, 156 Chinese companies with a total market capitalisation of $1.2tn were listed on the biggest US stock exchanges, according to the US-China Economic and Security Review Commission, with at least 11 of them being state-owned.

China’s renminbi, traded in offshore foreign exchange markets outside the mainland, weakened by as much as 0.4 per cent, a sizeable move for the currency, but tempered that decline to be 0.2 per cent softer at 7.14 per US dollar.

After a flurry of tariff escalations rattled markets in August, US and Chinese officials have been exploring ways to reduce tensions ahead of next month’s new round of talks.

FT : Car industry to get £1bn boost as electric drive shifts gear

Car industry to get £1bn boost as electric drive shifts gear
Leadsom seeks to burnish Tories’ green credentials before party conference

Business secretary Andrea Leadsom has announced plans to invest “up to £1bn” in the car industry, to accelerate the shift towards electric vehicles and reduce carbon emissions, but warned the sector will have to change after Brexit.

The move comes as climate change moves up the political agenda, with the Conservatives keen to burnish their green credentials ahead of the party’s conference this weekend. 

The £1bn pot of funding for the car industry has not yet been allocated to specific projects, but officials said it will be used to support research and development, as well as “major investments in the manufacturing of batteries, electric motors, drives, power electronics and hydrogen fuel cells”. 

Mrs Leadsom admitted the car industry would have to “adjust” its “just in time” business model after Brexit, reducing its reliance on the fast flow of components from mainland Europe through Dover. 

“The just in time supply networks are vital to the current operation of the automotive sector,” she told the Financial Times. “Over a period of time, with a free trade deal [with the EU], it is perfectly possible for companies to adjust the way they do things.”

She said this would “by no means just involve onshoring” some production. “One of the interesting observations in preparing for Brexit is the incredible reliance on the short straits,” she said, referring to the Dover-Calais route.

“The UK has many ports, we’re an island nation. It would be possible to establish very good just in time supply chains capability at other ports and using technology.” 

The car industry is unlikely to respond enthusiastically to the idea that future trade friction at Dover might be overcome by using longer sea crossings to avoid customs bottlenecks.

The sector is grappling with falling sales in the UK this year, and some overseas carmakers with factories in Britain have announced plans to close factories or scale back production.

Ministers have been facing mounting questions about whether they are doing enough to secure the industry’s future, particularly as it transitions from petrol and diesel cars to electric vehicles.

While some overseas carmakers have invested in UK battery development, others have tended to focus technology closer to their headquarters. For example, Germany’s BMW is importing batteries for the electric Mini that will be assembled at its Oxford factory.

Meanwhile, the government announced that updated building regulations would mean that new homes should cut their carbon emissions by 78 per cent from 2025.

It also outlined plans for a new Great Northumberland forest, where up to 1m trees will be planted by 2024.

In June, Britain became the first leading economy to set a net zero carbon emissions target for 2050.

Labour used its annual conference this week to commit to net zero by 2030.

The government’s latest announcement comes just days after the UN climate summit, at which teenage activist Greta Thunberg berated world leaders for their failure to combat global warming.