Monday, September 25, 2017

Monday, September 25, Morning Global Market Roundup: Euro, Kiwi Slip On Political Uncertainties, Asia Shares Fall

By Shinichi Saoshiro
Reuters
September 25, 2017

The euro slipped on Monday after German Chancellor Angela Merkel won a fourth term but faced a fractured parliament as support for the far-right surged, while Asian shares pulled back, weighed by concerns about China’s economy.

The New Zealand dollar also took a hit as the ruling National Party won the largest number votes in a weekend election but failed to secure a ruling majority, with a protracted period of coalition building now a possibility.

Spreadbetters expected European stocks to start slightly lower, forecasting Britain’s FTSE to open down 0.1 percent, Germany’s DAX to open little changed and France’s CAC to start 0.2 percent lower.

The euro slid 0.2 percent to $1.1933, putting more distance between a 2-1/2-year high of $1.2092 reached on Sept. 8, when a European Central Bank policy meeting left currency bulls optimistic the ECB would begin tapering its big stimulus programme.

MSCI’s broadest index of Asia-Pacific shares outside Japan handed back earlier modest gains and was last down 0.6 percent.

Two years after Merkel left German borders open to more than 1 million migrants, the anti-immigration Alternative for Germany (AfD) stunned the establishment by becoming the first far-right party to enter parliament in more than half a century.

Merkel now turns to the task of sounding out new partners to build a coalition government after her current Social Democrat (SPD) coalition partner said it would go into opposition.

“The market reacted by selling the euro on the possibility of Merkel running into difficulties in forging a coalition. The euro, however, was already losing support from the European Central Bank’s monetary policy theme and appeared to be on its way lower,” said Daisuke Karakama, chief market economist at Mizuho Bank in Tokyo.

“The election outcome in Germany showed the country was no longer a special presence in Europe amid growing support for populism and the far right.”

In New Zealand, the kiwi, the world 11th most-traded currency, was down 1 percent at $0.7264 and headed for its biggest intraday percentage loss since May.

It was at a 1-1/2-month high of $0.7435 as recently as Sept. 20, when speculation for a comfortable ruling party win had boosted the currency.

“While there are a few different scenarios and some potentially testy issues to negotiate, ultimately the political landscape appears as though it will remain relatively centralist and we are reasonably agnostic on what it all means,” wrote economists at ANZ.

Chinese stocks remained shaky after falling towards the end of last week following the Federal Reserve’s hawkish policy stance and S&P’s downgrade of China’s sovereign rating.

Hong Kong’s Hang Seng was down 1 percent and Shanghai slipped 0.4 percent after a number of Chinese cities rolled out new measures to cool housing prices.

Investor sentiment was also undermined by concerns that China’s beefed-up environmental protection could reduce demand, and consequently economic growth.

South Korea’s KOSPI shed 0.4 percent while Japan’s Nikkei bucked the trend and rose 0.5 percent thanks to the yen’s weakening against the dollar.

The S&P 500 and Nasdaq closed slightly higher on Friday as worries about the Graham-Cassidy proposal to reform U.S. health insurance eased and investors shrugged off concerns about North Korea.

The pound inched up after sliding on Friday when British Prime Minister Theresa May failed to give any concrete details for how Britain might retain preferential access to Europe’s single market after Brexit.

The currency faced additional pressure on Friday after ratings agency Moody’s downgraded Britain’s credit rating, saying the government’s plans to bring down its heavy debt load had been knocked off course and Brexit would weigh on the economy.

Sterling was up 0.3 percent at $1.3544 after losing 0.6 percent on Friday.

Its peers’ troubles lifted the dollar, with its index against a basket of six major currencies up 0.1 percent at 92.257.

The greenback added 0.2 percent at 112.260 yen , reversing losses suffered on Friday when the exchange of insults between U.S. President Donald Trump and North Korea heated up, sapping broader risk appetite.

Oil prices consolidated after surging on Friday, when OPEC and other oil producers said they were clearing a glut that has weighed on crude prices and may wait until January before deciding whether to extend their output curbs beyond the first quarter of 2018.

Brent crude futures was down 0.1 percent at $56.80 a barrel, not far from a 6-1/2-month high of $56.91 set on Friday.

U.S. crude lost 0.3 percent to $50.52 a barrel.


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Oil Holds Gains As Producers Say Market Rebalancing

By Osamu Tsukimori
Reuters
September 25, 2017

Oil prices came under pressure from a strong dollar, but kept most of their gains from the previous session as major producers meeting in Vienna said the market was well on its way towards rebalancing.

The Organization of the Petroleum Exporting Countries, Russia and several other producers have cut production by about 1.8 million barrels per day since the start of 2017, helping lift oil prices by about 15 percent in the past three months.

Kuwaiti Oil Minister Essam al-Marzouq, who chaired Friday’s meeting of the Joint Ministerial Monitoring Committee, said output curbs were helping cut global crude inventories to their five-year average, OPEC’s stated target.

London Brent crude for November delivery was down 4 cents at $56.82 a barrel, near the highest since March. U.S. crude for November delivery was down 10 cents at $50.56, but not far off recent four-month highs.

The dollar index was up 0.1 percent against a basket of currencies. The euro slipped after Germany’s election showed surging support for a far-right party that left Chancellor Angela Merkel scrambling to form a governing coalition. [USD/]

Russia’s energy minister said no decision on extending output curbs beyond the end of March was expected before January, although other ministers suggested such a decision could be taken before the end of this year.

The UAE’s energy minister said on Monday its compliance to supply cuts was 100 percent, while Libya’s production stands around 900,000 bpd, down from about 1 million bpd in recent months, a Libyan source said. Elsewhere, Nigeria is pumping below its agreed output cap, its oil minister said.

“Oil is relatively underpriced compared with other markets, but any steep rise would be offset by rising shale oil production,” said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting in Tokyo.

Production curbs have faced rising U.S. shale oil output. U.S. energy firms cut the number of oil rigs operating for a third week as a 14-month drilling recovery stalled.

Markets were also eyeing developments in North Korea. U.S. Treasury Secretary Steve Mnuchin on Sunday said President Donald Trump wants to avoid nuclear war with North Korea and “will do everything we can” to avoid conflict.

The WTI crude front month discount to the same month of Brent futures hit $6.28, the widest since August 2015, as U.S. crude was pressured by hurricane damage to U.S. refineries.


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U.S. To Partially Unveil Key NAFTA Proposal, Talks Seen Dragging

By Lesley Wroughton and David Ljunggren
Reuters
September 25, 2017

U.S. trade negotiators will only partially unveil new text on modifying a key chapter on investment under NAFTA, two well-placed sources said on Sunday, underlying the cautious pace of talks that are supposed to wrap up by the end of the year.

The sources, with knowledge of the effort to modernize the trilateral North American Free Trade Agreement (NAFTA), said the proposal on investment would not elaborate on possible changes being weighed by Washington under Chapter 11 of NAFTA.

U.S. officials, speaking on condition of anonymity, said the administration was still consulting with stakeholders, including business, on the issue.

Trade experts say the sluggish tempo of the talks mean it is doubtful whether Canada, Mexico and the United States -- meeting in Ottawa for the third of seven planned rounds -- can come to a deal by the end of December.

Chief Canadian negotiator Steve Verheul said he did not expect the U.S. side to present detailed proposals in Ottawa on major issues such as dispute settlement, the dairy sector and tougher rules for North American content on autos.

“We’re making good solid progress ... but the end game is always the hardest part and impossible to predict,” he told reporters toward the end of the day.

U.S. President Donald Trump, who frequently describes the 1994 treaty as a disaster, is threatening to walk away unless major changes are made.

Verheul told reporters the talks were constructive, although they had occasionally “become a little more heated”. He said had seen no sign so far that the U.S. delegation might be preparing to leave the talks.

NAFTA underpins more than $1 trillion in trade between the three countries a year, accounting for 39 percent of Canada’s GDP and 40 percent of Mexico‘s, but just 5 percent in the case of the United States, the world’s largest economy.

NAFTA’s Chapter 11 allows an investor from a member country to sue a member government on the basis that it was not treated fairly.

While corporations want the administration to keep Chapter 11 -- the investor state dispute settlement -- in NAFTA, some U.S. lawmakers argue that it infringes on sovereignty by allowing foreign investors to sue the U.S. government over laws that are valid.

Canada is proposing a similar arrangement to the one it has in its free trade deal with the European Union, a senior Canadian source said. Canada and the EU have agreed to set up a permanent investment court to settle disputes.

U.S. Trade Representative Robert Lighthizer told a U.S. Senate committee he was “troubled” by Chapter 11 but pushed back at suggestions that it should be abolished.

The sources said that when the U.S. team unveiled its proposal later in the round, it would focus on eliminating barriers to investment in all sectors in the NAFTA countries, but not weigh into possible changes to Chapter 11.

The three member nations want to seal a deal before Mexico’s presidential election campaign kicks into high gear early next year.

Canadian officials said on Sunday there had been advances in less heated subjects such as the environment and small and medium-size enterprises.


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Why The GOP’s Tax Plan Could Leave High-Wage Earners With Little To Gain

Republican proposal to create a new special rate for business income potentially puts high-income wage earners at a disadvantage.


By Richard Rubin and Laura Saunders
The Wall Street Journal
September 25, 2017

Today, a business owner making $500,000 gets taxed much like a corporate executive with a $500,000 salary. How they make their income doesn’t matter much.

That could change dramatically under Republican plans aimed at driving down tax rates on business income, leaving high-income wage earners with much less to gain from a tax overhaul.

Republicans, eager to drive down business tax rates in a bid to boost economic growth, want roughly similar tax rates for corporations and for so-called pass-through firms that report business income on the individual tax returns of their owners.

For them, lowering the 35% corporate tax rate requires also lowering the 39.6% top rate for pass-through business income, even though creating a new special rate for that business income leaves a potentially large gap with the top rate for high-income wage earners.

The exact contours of the GOP tax agenda aren’t set. Top lawmakers and administration officials say they will release another blueprint in the coming days.



The 2016 House GOP blueprint called for a 20% corporate tax rate, a 25% tax rate on pass-throughs and a 33% top individual rate. In April the White House proposed a 35% top rate for individuals. President Donald Trump has said he might not cut taxes for the wealthiest Americans, and recently Republicans have talked a lot less about the importance of reducing the 39.6% top tax rate on ordinary income. In the end that rate might not come down much and some deductions could go away.

With GOP senators agreeing to, at most, $1.5 trillion in tax cuts over the next decade, there is a limited amount to go around. Republicans are focused on cutting business taxes and offering a larger standard deduction for middle-income households.

The emerging Republican plan would “open a gulf between wages and pass-through business income that has never existed before, putting the high-wage earners at a disadvantage,” said Andy Mattson, a certified public accountant with Moss Adams in Campbell, Calif.

Keeping the top tax rate on wages near 39.6% would be a way for Mr. Trump to defend his argument that he isn’t prioritizing tax cuts for the rich, even if other pieces of the tax plan favor wealthy business owners, investors or heirs of large estates.

Under current law, pass-through businesses include partnerships, limited liability companies and S corporations. The income they earn doesn’t face the corporate income tax and then a potential second tax layer on capital gains or dividends; instead, it passes through to owners’ tax returns and is taxed at their individual rates.

Such firms reported more than 40% of net business income in 2014, according to the congressional Joint Committee on Taxation.

They include global law and accounting firms, real-estate investors, hedge funds, doctors’ offices and manufacturers. About 60% of pass-through income goes to households making over $500,000, according to the Tax Policy Center.

In the past, Republicans have seized on the importance of pass-through income to argue against raising the top rate on individuals. They warned tax increases would punish successful small businesses, although many aren’t small. By splitting wage and business taxation, the approach under consideration could undercut future arguments against raising the top rate.



Lowering the corporate rate to improve U.S. investment incentives is a core driver of the planned tax overhaul. Other large industrialized countries have lowered their rates. The gap between the U.S. and others affects business investment decisions and encourages tax avoidance, experts say.

Politically, it is nearly impossible to cut corporate rates without cutting the rate on pass-through income. Pass-throughs, prominent in every congressional district, form an essential part of the Republican coalition.

“The pass-through community demands something in the process of the corporate rate going down,” said Douglas Holtz-Eakin, president of the center-right American Action Forum.

“There is a difference between high-wage income or some other [business] income,” said Sen. Mike Crapo (R., Idaho). “It doesn’t have to all be treated identically.”

The challenge for policy makers will be separating wage income from business income for high earners. The proposed lower pass-through rate wouldn’t help the large share of business owners who don’t generate significant high income, because their top rates are below the 25% proposed rate in the House plan. The biggest winners are high earners who can classify their earnings as business income.

“The real fight here is going to be over what income qualifies for the rate reduction and what income doesn’t,” said Warren Payne, a former House GOP aide who wrote a policy paper for the Bipartisan Policy Center on pass-through taxation.

For more than a year, Republicans have been floating alternatives for defining the line between wage and business income. They haven’t settled on anything. One option would assume that 70% of pass-through income is taxable at the wage rate and 30% at the lower business rate.

Alternatively, Treasury Secretary Steven Mnuchin said certain service providers wouldn’t get the lower rate. He named accountants specifically, but others could include doctors, lawyers, consultants and architects.

“You have to have dollar bills that are labeled wage income and business income and they don’t come that way,” Mr. Holtz-Eakin said.

Creating a special, much lower pass-through rate only for business income will lead to big changes in tax planning, said Lily Batchelder, a law professor at New York University who was an Obama administration tax aide.

Already, some pass-through owners engage in techniques to avoid or minimize a 3.8% payroll tax; a bigger tax-rate gap would encourage more avoidance.

“Everyone whose income is high enough to benefit and who can afford excellent tax advice will figure out how to get the lower rate,” she said.


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Internet Giants, Once Above The Fray, On The Defensive In Washington

By Dustin Volz
Reuters
September 25, 2017

Internet giants, including Alphabet’s Google (GOOGL.O) and Facebook (FB.O), are moving to compromise on several major policy issues as they adjust to an abrupt shift in the political winds in Washington.

Just last week, the U.S. Senate took a big step toward advancing legislation that would partially strip away the internet industry’s bedrock legal protection, a 1996 law that shields companies from liability for the activities of their users.

At the same time, Democratic senators are writing legislation that would create new disclosure rules for online political ads after Facebook this month revealed that suspected Russian trolls purchased more than $100,000 worth of divisive ads on its platform during the 2016 election cycle. The U.S. Federal Election Commission is considering bringing in Facebook and other tech firms for a public hearing.

Unlike in Europe, where they have faced a bevy of new rules and billion-dollar fines, internet giants have avoided virtually all types of government regulation in the United States, even as their market power continues to grow. Amazon (AMZN.O), for example, controls more than a third of U.S. online commerce, while Google and Facebook combined account for more than sixty percent of the U.S. digital ad market.

Internet firms have from their inception urged U.S. politicians in both parties to treat their industry as a nascent sector in need of unique protections. These firms enjoyed an especially close relationship with the Democratic administration of former President Barack Obama, which saw several officials go to work for Google upon leaving the White House.

But some Democrats, still bitter over Russia’s alleged meddling in the 2016 election, are now expressing alarm at the industry’s power. Virginia Senator Mark Warner, the vice chairman of the Senate Intelligence Committee, this month compared political ads on social media to the “wild, wild West” and is working on legislation to require more disclosure.

On the Republican side, President Donald Trump has been hostile to the tech industry in many of his public remarks. Google and Facebook have been repeatedly attacked from the right for alleged liberal bias and a globalist outlook.

Now, the Internet firms are backpedaling from earlier positions as they seek to avoid regulation, according to congressional aides, industry lobbyists and company sources.

“Tech is no longer the golden goose,” said one technology industry source, who spoke on condition of anonymity. “Maybe it’s a good thing we start behaving like a rational part of the economy.”

Silicon Valley lobbyists and congressional aides in both parties were quick to temper talk of a sweeping regulatory crackdown, in part because the government agencies that could move against the industry, notably the Federal Trade Commission, remain severely understaffed.

But the shift in tone is palpable.

On Thursday, Facebook Chief Executive Mark Zuckerberg said the company, for the first time, would make it possible for anyone to see details about political ads that run on Facebook, which, unlike television ads, do not fall under U.S. law requiring disclosure of who pays for them. Requiring such transparency is one of the key provisions of the proposed legislation on online political ads.

The company also said it would turn over to congressional investigators political ads that it says were likely purchased by Russian entities during and after the 2016 U.S. presidential election.

The moves marked an about-face for Zuckerberg, who after the November election said it was a “crazy idea” to think that activity on Facebook swayed the vote.

Facebook has also shifted its stance on proposed changes to the liability protections for internet companies, formally known as Section 230 of the 1996 Communications Decency Act. The legislation, which is aimed at stopping online sex trafficking, has been fiercely opposed by companies that see it as a threat to openness and innovation on the internet.

But after an emotional hearing last week featuring testimony from the mother of a murdered sex-trafficking victim - which followed two big tech companies, Oracle (ORCL.N) and Hewlett Packard Enterprise (HPE.N), breaking ranks with industry peers on the issue - Facebook and Google have opened the door to negotiation on the bill, according to congressional aides and industry sources.

In a statement, Erin Egan, Facebook’s vice president of U.S. policy, said the company believed a legislative solution was possible to “address this terrible problem while ensuring that the internet remains open and free and that responsible companies can continue to work to stop sex trafficking before it happens.”

The tech industry in recent years has neutralized other ideas percolating in the halls of Congress that it perceived as threatening, including calls to weaken encryption and demands that social media companies report “terrorist” activity to the government.

But the effort to amend Section 230 is seen as different. The fast progress of legislation, introduced in August, has alarmed lobbyists and company representatives who initially predicted it would not go far in an otherwise gridlocked Congress.

The bill comes after years of law enforcement lobbying for a crackdown on the online classified site backpage.com, which is used for sex advertising. The measure would make it easier for states and sex trafficking victims to sue social media networks, advertisers and others who fail to keep exploitative material off their platforms.

Republican Senator Rob Portman of Ohio, the lead architect of the Section 230 legislation, said in an interview with Reuters that he was confident his measure would become law this congressional term, with or without Silicon Valley’s cooperation.

The bill has attracted bipartisan support from nearly a third of the Senate; a companion measure has similar backing in the House of Representatives. Portman said he had met with Trump’s daughter and advisor, Ivanka Trump, who expressed strong support.

“Frankly, I am disappointed (that) more in the technology industry are not joining us on this effort,” Portman said. “It is in their interest to be supportive of a solution on this problem.”


Article Link To Reuters:

In Echoes Of Financial Crisis, Warning Signs On The Global Economy

Mervyn King, the former governor of the Bank of England, says total debt is troublesome.


By Mervyn King
The Wall Street Journal
September 25, 2017

A decade ago, the global financial crisis was under way. A year later, the banking system of the industrialized world was on the verge of collapse. Before those events, I told a gathering of business leaders in London, “Excessive leverage is the common theme of many financial crises of the past. Are we really so much cleverer than the financiers of the past?”

Well, we weren’t. Excessive leverage once again proved to be the weak point of our financial system. And wisdom does not seem to be on an upward trend.

A decade on, one might expect that leverage would have been significantly reduced. And in the majority of large banks, that is indeed true.

But the opposite is the case for much of the rest of our economy. Indeed, total debt relative to gross domestic product is higher now than it was immediately before the crisis.

At the end of 2016, according to figures produced by the Bank for International Settlements, household and corporate debt in the world economy, as a share of GDP, amounted to 138%, compared with 115% at the end of 2007. For advanced economies, that ratio averaged 195% last year, compared with 183% at the end of 2007. And, with only a few exceptions, in most countries public debt rose significantly over the same period.

So, indebtedness in the world is higher today than it was at the start of the financial crisis.

Does this mean that we face another financial crisis, this time located not in the banking system but in the wider economy? After a lost decade with slow growth well below long-run potential, there are now signs that the world economy is picking up. Businesses and households are ready to return to steady, sustained growth. And central banks are anxious to raise interest rates to more-normal levels, both to rebalance economies and to create room to cope with unexpected downturns in the future.

But after 10 years of relative stagnation, we could be in for a bumpy decade ahead, because of the only immutable law of economics—double-entry bookkeeping. If asset values fall, then so too must total liabilities.

For companies and banks, their assets are the future stream of earnings discounted back to the present, while their liabilities are the amounts owed to creditors (often short-term debts fixed in money terms) and the residual value of equity.

So, as interest rates rise, the discount rate will increase and asset prices will fall relative to incomes. A squeeze on the value of total liabilities falls initially on the value of their equity, making it more difficult to borrow. But it also increases the likelihood that some companies and banks will default on their debts. We could see a sequence of defaults in different sectors of the economy and in different countries.

Up until now, extraordinarily low interest rates mean that many borrowers have been able to continue to service their debt when in fact there is little prospect that the full value of the loan will be repaid. When the Bank of England conducted its first stress test of the U.K. banking system in 2013, we found that expected losses on loans were much higher than stated provisions.



Unsustainably low interest rates over a long period have led to a significant imbalance in economies around the world. Whether excess capacity in the export sectors of Germany and China, or excess investment in residential and commercial property in the U.S. and U.K., much misplaced investment remains to be written off.

Rising interest rates will reveal the true state of balance sheets that has been concealed by accounting rules that allow loans to be valued at their full value, provided those loans are currently being serviced. We shall see the force of what economist Joseph Schumpeter described as “creative destruction,” an inevitable part of economic growth in a prosperous capitalist economy. That force is now needed to correct the misplaced pattern of investments induced by faulty market signals such as inappropriate exchange rates and excessively low interest rates.

As we have seen many times over the past century—from the financial crisis at the outbreak of the First World War to the events of 2007-08—markets sometimes wake up to the true position at the last moment, and then seemingly small events can trigger a sharp change in sentiment and asset values. A few unconnected defaults could lead to a reappraisal of the effective leverage of the financial system. Although banks are better capitalized than a decade ago, they are still vulnerable to runs.

And foreign banks are still heavily reliant on short-term dollar funding. That will lead to increasing pressure on the Federal Reserve to enter into swap agreements. Understandably, the Federal Reserve is reluctant to make open-ended and indefinite commitments of that kind. So, governments will need to think carefully about the regulation of short-term liabilities of their banks denominated in U.S. dollars.

We cannot know whether the process of writing down debt will, as we emerge from the excesses of the financial crisis, undermine the normal forces generating economic growth. And there will be plenty of investment opportunities for those able to spot the companies and sectors in which expansion will occur, and plenty of pitfalls for the unwary who think we are merely recovering from an unusually long but traditional business-cycle downturn. Over the next decade, our economic journey will take us along an interesting and bumpy road.


Article Link To The WSJ:

Walt Disney Threatens To Pull ESPN, ABC From Optimum

By Jarrett Renshaw
Reuters
September 25, 2017

Walt Disney Co (DIS.N) has threatened to pull its programming from the fourth largest U.S. cable distributor, Altice USA, if the two parties cannot reach a deal before the end of the month, the cable company said on Sunday.

New York-based Altice (ATUS.N), which is owned by a European conglomerate and is better known as Optimum, said Disney had asked it for “hundreds of millions of dollars” in new fees to be able to continue carrying ESPN and ABC, even as ratings suffer.

The two parties have been working on a new contract to replace the one that expires at the end of the month, and Walt Disney has warned customers that its channels will go dark on Oct. 1 if a new deal is not worked out, according to media reports.

“We are always working hard to negotiate carriage agreements that reflect the best interest of all our customers. We want to carry ESPN and its sister networks, including ABC and Disney, at a reasonable rate and have already offered an increase in retransmission fees and sports programming costs,” Altice said in a statement emailed to Reuters on Sunday.

The majority of Altice’s customers live in New Jersey, New York, Connecticut and parts of Pennsylvania.

The company has said it had an obligation to warn customers about the loss of programming and disagreed with Altice’s characterization of the fee increase, according to media reports.

“Our contract with Altice is due to expire soon, so we have a responsibility to make our viewers aware of the potential loss of our programming,” a Disney spokeswoman said in a statement. “We remain fully committed to reaching a deal and are hopeful we can do so.”

Disputes between cable companies and media groups over the cost of carrying channels are common, but the dispute marks the first time a cable company has pushed back at increased fees for ESPN, the most popular sports network.

The typical customer pays $160 or more each month for service to Altice, she said.

Altice charges its customers $34, which is more than 15 times the amount Disney is seeking for the market’s most watched station, WABC, she added.

Altice said the request for “exorbitant fee increases” came even as viewership had been declining and that Disney now wanted to force customers who do not receive ESPN to pay for it anyway.

High fees are to blame for rising cable bills, Altice said, adding that ESPN was already the most expensive basic cable channel in history.

ESPN carries live sports, such as “Monday Night Football,” and is believed to be less exposed to the cord-cutting culture that has left cable providers losing customers.


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Trump’s Strange, Sports Radio-Style Weekend

The president enters the fray over protests in the NFL—and takes on the NBA champion Golden State Warriors as well.


By Jason Gay
The Wall Street Journal
September 25, 2017

Believe me, my friends, I wanted to “stick to sports” this weekend.

After the prior week of ESPN madness, I was eager to get back to the goofy. You know: My usual, meaningless sports insanity, with a couple of spelling errors and grammatical mistakes sprinkled in for fun.

Maybe, for a column, I’d take my kids to the annual meatball-eating contest at the Feast of San Gennaro in Little Italy. Meatball eating is basically a sport, and Tony Danza was set to host. Maybe I’d write about the men’s road cycling world championships in Norway, which the remarkable Slovak Peter Sagan won for the third year in a row. You know how I love me some bike racing and Peter Sagan. I could write about that stuff until your eyes fall out.

But then, on Friday night, the president of the United States drove a monster truck onto the sports world’s front lawn, and blasted the horn until he woke up the entire neighborhood.

In a loud, impossible-to-miss speech, Donald Trump assailed NFL players who have been protesting during the national anthem, referring to a player who does so as a disrespectful “son-of-a-bitch” and goading team owners to fire anyone who took a knee. He also lamented what he sees as football’s over-penalizing of aggressive hits—an odd choice at a moment where there is widening scientific concern about the long-term impact of head injuries.

“They’re ruining the game!” Trump said. “They want to hit.”

He didn’t stop with Alabama. By now, you know that the president spent the weekend on his Magic Twitter Machine taking on not only the NFL, but the NBA. He revoked a White House invitation to the Golden State Warriors to celebrate their basketball title, an apparent reaction to star Steph Curry’s lack of interest in going. He again urged NFL owners to fire protesting players. He further mocked the league for allegedly declining ratings and attendance, and urged fans to boycott if the protests continued.

The president basically took American professional sports in 2017 and set its pants on fire. And it wasn’t long before Trump was getting blowback from athletes, coaches, owners, and leagues for being unnecessarily divisive. His remarks were condemned not just by his usual detractors, but also by people who voted for him, campaigned for him, and contributed to him. Even New England Patriots owner and loyal Trump friend Bob Kraft said he was “deeply disappointed” by Trump’s NFL commentary. Fox’s Terry Bradshaw offered this exquisite Terry Bradshaw-ism: “I think our president should concentrate on serious issues like North Korea.”

The protests, meanwhile, only widened—on Sunday, more NFL players took a knee than ever before. The Pittsburgh Steelers—hardly a bunch of rosé-sipping coastal media elites—passed on the “Star-Spangled Banner” entirely, choosing to stay in the locker room. So did both sides of the Tennessee Titans-Seattle Seahawks game. The Warriors acknowledged the White House disinvite. Then the 2017 championship-winning University of North Carolina men’s basketball team announced that they, too, would not be going to the White House.

So, you can see, it’s been going really well.

No matter what side you fall on, I think we can all agree that “Stick to Sports” is officially dead as a reasonable expectation in the American sports landscape in 2017. I’ve always thought “Stick to Sports” was a ridiculous ask—politics have forever been entangled in sports. It’s really an absurd ask now, as the nation’s highest elected official has decided to turn athletes and athlete activism—and let’s be specific here, this is activism by athletes who are largely African-American—into his latest rhetorical target. A president who shortly after taking office tweeted that “Peaceful protests are a hallmark of our democracy. Even if I don’t always agree, I recognize the rights of people to express their views” has decided these particular protests (which have been tolerated by their employers) have gone too far, and is using the power of his office to put pressure on everyone involved, including fans.

The president has plenty of supporters on this issue. I don’t dispute that for a second. This is a jet fuel topic for him and anyone who wants a quick burst of attention. Long before Donald Trump repurposed the presidency into a morning sports radio talk show, there were a great many Americans who did not agree with the athlete protests, which began last season with former San Francisco 49ers quarterback Colin Kaepernick taking a knee during the anthem to protest issues affecting the African-American community, including what he viewed as unequal treatment by law enforcement. This rancor predates Trump’s victory, and I am certain that there are plenty of people who think the president is right on, and I have the hate mail to prove it. (I read all my hate mail out loud to my cat, using a cat voice.)

But a protest isn’t a popularity contest. Trump, a creature of television, is habitually obsessed with ratings, and seems to equate success or failure with Nielsen points and how many people can be stuffed into a stadium. There’s a case to be made that Trump’s railing about NFL ratings and attendance declines—“WAY DOWN” he wrote in all-caps—is factually wrong (ratings are down only mildly, for a variety of factors, and attendance last year was the NFL’s highest in a decade, and 2017 is tracking to match it thus far), but that whole discussion is irrelevant, anyway.

A protest, by definition, is always going to challenge the status quo. It is designed to cause agitation and discomfort, and maybe even cost protesters their jobs, and, in extreme cases, their lives. It isn’t the People’s Choice Awards. “This ain’t never been popular,” the author Ta-Nehisi Coates tweeted about protests over the weekend, citing, among other unpopular-in-their-time American protests, the Alabama bus boycotts, the March on Washington, and Muhammad Ali’s refusal to enlist during Vietnam.

This is hard, painful stuff. And that’s the other thing: We can either sit here on the surface of this topic and bicker glibly on social media, or we can drill deeper into what it’s really about. To make this about Trump actually does a disservice to the protesters, because these protests are not a referendum on Trump. They’re not about the flag, or the anthem, either. This has always been a protest intended to provoke a much broader and harder-to-have conversation about racial and other mistreatment in this country, and what all of us can do to get better. That’s a conversation that a number of high-profile athletes in this country want to have—and, because of the elevated place we give in this country to athletes, and all the patriotism we’ve wrapped around our sporting events, they now have a platform and our attention.

It’s also a conversation that a president of the United States can have a constructive role in, but after this weekend, I’m not sure he’s eager. “Son of a bitch”? What is going on?

This is exactly where we are now. Today, I would have loved to have given you a play-by-play of the meatball-eating contest, or the bike race, or even a Jets game. (They won!) Politics are exhausting, especially now, and I’d have loved to have to steered clear of them and stuck to sports.

But politics have barged down the door. And they look like they’re going to stay for a very long while.


Article Link To The WSJ:

The Politicization Of Everything

Everybody loses in the Trump-NFL brawl over the national anthem.


By The Editorial Board
The Wall Street Journal
September 25, 2017

Healthy democracies have ample room for politics but leave a larger space for civil society and culture that unites more than divides. With the politicization of the National Football League and the national anthem, the Divided States of America are exhibiting a very unhealthy level of polarization and mistrust.

The progressive forces of identity politics started this poisoning of America’s favorite spectator sport last year by making a hero of Colin Kaepernick for refusing to stand for “The Star-Spangled Banner” before games. They raised the stakes this year by turning him into a progressive martyr because no team had picked him up to play quarterback after he opted out of his contract with the San Francisco 49ers.

The NFL is a meritocracy, and maybe coaches and general managers thought he wasn’t good enough for the divisions he might cause in a locker room or among fans. But the left said it was all about race and class.

All of this is cultural catnip for Donald Trump, who pounced on Friday night at a rally and on the weekend on Twitter with his familiar combination of gut political instinct, rhetorical excess, and ignorance. “Wouldn’t you love to see one of these NFL owners, when somebody disrespects our flag, to say, ‘Get that son of a bitch off the field right now, out, he’s fired. He’s fired,’” Mr. Trump said Friday.

No doubt most Americans agree with Mr. Trump that they don’t want their flag disrespected, especially by millionaire athletes. But Mr. Trump never stops at reasonable, and so he called for kneeling players to be fired or suspended, and if the league didn’t comply for fans to “boycott” the NFL.

He also plunged into the debate over head injuries without a speck of knowledge about the latest brain science, claiming that the NFL was “ruining the game” by trying to stop dangerous physical hits. This is the kind of rant you’d hear in a lousy sports bar.

Mr. Trump has managed to unite the players and owners against him, though several owners supported him for President and donated to his inaugural. The owners were almost obliged to defend their sport, even if their complaints that Mr. Trump was “divisive” ignored the divisive acts by Mr. Kaepernick and his media allies that injected politics into football in the first place.

Americans don’t begrudge athletes their free-speech rights—see the popularity of Charles Barkley —but disrespecting the national anthem puts partisanship above a symbol of nationhood that thousands have died for. Players who chose to kneel shouldn’t be surprised that fans around the country booed them on Sunday. This is the patriotic sentiment that they are helping Mr. Trump exploit for what he no doubt thinks is his own political advantage.

American democracy was healthier when politics at the ballpark was limited to fans booing politicians who threw out the first ball—almost as a bipartisan obligation. This showed a healthy skepticism toward the political class. But now the players want to be politicians and use their fame to lecture other Americans, the parsons of the press corps want to make them moral spokesmen, and the President wants to run against the players.

The losers are the millions of Americans who would rather cheer for their teams on Sunday as a respite from work and the other divisions of American life.


Article Link To The WSJ:

Driverless Cars May Be Appealing. But They Could Be Used Against Us.

By Robert J. Samuelson
The Washington Post
September 25, 2017

Driverless vehicles may not be all they’re cracked up to be. Indeed, they may be harmful to our collective security and well-being.

Unless you’ve been vacationing on Saturn, you know that driverless vehicles are the next Big Thing. Almost every major car company (General Motors, Ford, Toyota, Mercedes) has a program, often in cooperation with tech firms. A few of those, Google being a prominent example, have their own prototypes. In a recent study, Navigant Research — a consulting firm — counted 18 projects.

To be sure, the appeal of driverless cars is powerful. In 2015, 35,092 people died in road accidents nationwide, says the Transportation Department. It attributed more than 90 percent of the crashes “to human choice or error.” If these people had been riding in driverless cars, many of these accidents would not have occurred, the argument goes. The hazards of drinking, texting, speeding and other driving dangers would have been sharply reduced.

The broadest case for driverless vehicles is that they would allow us to recapture the many hours we spend sitting in traffic, fuming and wasting time. Instead, we’d program our vehicle with the destination. It would drive while we snoozed, streamed TV shows and movies, attended to work, read a book, or gazed at the scenery. Billions of hours would be recovered.

There are some obvious obstacles to this seductive future. Under favorable circumstances, it would take years to materialize. There are roughly 250 million cars and other light-duty vehicles (pickups, SUVs) on the road. In a good year, the industry sells 17 million vehicles. Even if, beginning in 2018, all these were driverless, it would be 15 years before today’s fleet was replaced.

And these assumptions are, of course, unrealistic. “Some people actually like driving,” says economist Benjamin Leard of the think tank Resources for the Future. Most won’t be customers for driverless vehicles. Neither will many Americans who don’t trust the reliability of self-driving vehicles. That’s about 60 percent of the public, reports an opinion survey conducted by Michael Sivak and Brandon Schoettle of Sustainable Worldwide Transportation, a research group at the University of Michigan.

Still other potential customers may be deterred by the high costs of all the needed sensors, cameras, computer chips and software. With present technology, this could add $10,000 to the cost of new vehicles, although that is expected to decline with time, says Leard.

Even those who expect to benefit from driverless vehicles may be disappointed, notes Sivak. True, typical drivers spend an hour a day on the road, which seems an ample period for other uses. But there’s a catch. “The fact [is] that current trips in light-duty vehicles average only about 19 minutes — a rather short duration for sustained productive activity or invigorating sleep,” he says.

So the benefits of driverless vehicles may be modest, at least at the start, while the costs could be considerable. A clear danger would be digital hacking. In a recent special section on cybersecurity, a writer for the Wall Street Journal put it this way:

“As vehicles fill up with more digital controls and internet-connected devices, they’re becoming more vulnerable to cybercriminals, who can hack into those systems just like they can attack computers. Almost any digitally connected device in a car could become an entry point to the vehicle’s central communications network, opening a door for hackers to potentially take control by, for instance, disabling the engine or brakes.”


The Wall Street Journal story focuses exclusively on cybercrime — for example, locking a car remotely and refusing to open it until a ransom is paid. If millions of vehicles were shut down simultaneously, the ransom paid by car companies could be staggering.

But the real threat is not ordinary crime. It’s cyberwarfare, attacks by terrorist groups or hostile nations intent on sowing panic and social disorder. Imagine the chaos if some adversary immobilized 10 percent of the light-vehicle fleet, leaving about 25 million cars and trucks sprawled randomly along roads from Maine to California.

Do our enemies have this capacity, or could they develop it? We don’t know. What we do know is that we have consistently underestimated the dangers posed by the misuse of cybertechnologies — the latest examples being Russian interference with the 2016 election and the massive hack at the credit bureau Equifax.

There is a disturbing relationship here: The more we depend on digital technology for everyday business and pleasure, the more we become vulnerable to potentially catastrophic disruptions. Cars and trucks are but the latest examples.

Driverless technologies are not to be coddled or promoted. Their development should be slow and sober. If the evidence warrants, their development should be stopped altogether. We are weaponizing our cars and trucks for use against us. It’s madness.



Article Link To The Washington Post: