Tuesday, August 2, 2016

Tuesday, August 2, Morning Global Market Roundup: Asian Shares Retreat, Australia Central Bank Cuts Rate To All-Time Low

By Lisa Twaronite and Nichola Saminather
August 2, 2016

Asian shares slipped on Tuesday, taking their cues from a modestly lower day on Wall Street, while crude oil prices stabilized after their overnight tumble and the U.S. dollar edged higher.

European markets are set to open flat to slightly lower, with financial spreadbetter CMC Markets expecting Britain's FTSE 100 and France's CAC 40 to open 0.1 percent lower and Germany's DAX to start the day flat.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.4 percent, after the S&P 500 ended Monday 0.1 percent lower, despite hitting an intraday record high.

Australian shares were down 0.6 percent after the Reserve Bank of Australia's policy board decided to cut its benchmark interest rate by 25 basis points to an all-time low of 1.50 percent, as expected.

The Australian dollar fell to as low as $0.75 after the RBA decision, but shrank losses to trade down 0.3 percent at $0.7523.

Trading in Hong Kong was suspended for the day as Typhoon Nida swept through the city, shutting down most of the financial hub.

Japan's Nikkei stock index slipped 1.1 percent.

The Nikkei gained more than 6 percent in July, when monetary and fiscal stimulus hopes propelled it to 1-1/2-month highs.

Prime Minister Shinzo Abe's cabinet is likely to approve a 28 trillion yen ($273 billion) stimulus package on Tuesday, though direct fiscal spending will total only about 7 trillion yen, according to two people briefed on the matter.

"The size and rough contents of the package are already known so I doubt it will move markets. The dollar/yen is likely to fall unless there are clearer signs of a rate hike by the Fed," said Shinichiro Kadota, senior FX and rates strategist at Barclays Securities Japan.

Japanese government bonds skidded in their worst sell-off in more than three years, despite weaker stocks, accelerating a slide begun in the wake of last Friday's Bank of Japan easing steps that disappointed many investors. The benchmark 10-year JGB yield was up 9 basis points at minus 0.050 percent, touching its highest levels since early April.

The dollar reversed early losses and added 0.1 percent to buy 102.45 yen, while the euro was also 0.1 percent higher at $1.1170.

The dollar index, which tracks the U.S. currency against a basket of six major peers, was little changed at 95.693, holding above Friday's 95.384, its lowest since July 5.

The dollar's upside was heavy on dwindling expectations that the U.S. Federal Reserve is gearing up to hike rates this year, which faded further after Monday's weaker-than-expected manufacturing data.

The Institute for Supply Management's (ISM) index of national factory activity dropped to 52.6 in July from 53.2 in June, below market expectations of 53.0.

U.S. crude tumbled below $40 per barrel on Monday for the first time since April, on heightened worries of a supply glut despite peak summer gasoline demand. [O/R] But it edged back up on Tuesday, adding 0.1 percent to $40.11 a barrel, after shedding 3.7 percent on Monday

Brent crude was 0.4 percent higher at $42.30 after closing down 3.2 percent.

Article Link to Reuters:

U.S. Crude Oil Edges Back Over $40, But Oversupply Still Weighs

By Henning Gloystein
August 2, 2016

Oil prices edged up on Tuesday after U.S. crude broke below $40 per barrel the previous session, but traders said fuel markets continued to be dogged by excess production.

U.S. West Texas Intermediate (WTI) crude was at $40.15 a barrel at 0433 GMT (12:33 a.m. ET) , up 9 cents from its last close after dipping below $40 for the first time since April the previous session.

International Brent crude oil futures were trading at $42.34 per barrel, up 20 cents from their last close.

Despite the slightly higher prices on Tuesday, oil market data imply bearish market conditions.

Industry data shows that the global oil rig count for new production edged up in June for the first time this year, rising by two to 1,407, largely thanks to an uptick in U.S. drilling.

Actual production in the United States is also up slightly, according to government data.

Financial oil traders have taken note of the glut, with hedge funds taking on large volumes of bets that would profit from lower prices, known as shorts.

"Speculators increased their shorts by the biggest volume on record... for WTI crude..., dragging the net long position in WTI to its lowest since February," said Matt Smith of U.S.-based ClipperData.

"Another bearish development from the CFTC data has been gasoline positioning. Speculative positions in gasoline have moved to a record net short position as hedge funds bet on an ongoing gasoline supply glut," he added.

Analysts said that high production levels in crude and the refining sector would continue to weigh on markets after contributing to a 20 percent price fall since June.

As a result, refiners will likely reduce orders for new crude feedstocks.

"Weaker crude throughput at refineries will lower crude demand," BMI Research said.

The refinery run cuts are a result of low sector profits. Singapore's overall fuel refinery margins are at $3.53 per barrel, about one-third of their January highs.

In the longer term, however, analysts still think that the market will tighten, bringing supply and demand more in balance.

"The supply and demand balance will be tighter in 2017 and 2018," BMI said, although it added that high production and stock levels would prevent steep price rises.

With oil demand growth still strong despite slowing economic growth, drilling activity for future production also points to a tighter future market as industry data shows that global drilling for new crude remains at levels that have not been seen since the late 1990s.

Article Link to Reuters:

Buffett Rebukes Trump, Questions His Business Skill

By Amanda Becker
August 2, 2016

Billionaire investor Warren Buffett on Monday campaigned alongside U.S. Democratic presidential candidate Hillary Clinton at a rowdy rally in his home state of Nebraska, where he challenged Republican Donald Trump to release his tax returns and questioned Trump's business acumen.

Trump, a New York real estate developer making his first run at public office, has said he cannot release his tax returns, a ritual of U.S. presidential campaigns, until the Internal Revenue Service has completed an audit.

“Now I’ve got news for him," said Buffett, whose Berkshire Hathaway (BRKa.N) conglomerate is based in Omaha. "I'm under audit, too, and I would be delighted to meet him anyplace, anytime, before the election.

“I'll bring my tax return, he can bring his tax return ... and let people ask us questions about the items that are on there,” Buffett added, saying Trump was “afraid” not of the tax-collecting IRS but of voters.

In response, Trump’s spokeswoman Hope Hicks said: “As you know, Mr. Trump is undergoing a routine audit.” She had no immediate comment when asked to respond to Buffett saying that he too was under audit but would release his tax returns.

Trump has asserted his success as a businessman qualifies him to lead the country, but Buffett, who backs Clinton in the Nov. 8 election, said Trump lost money the only time he went to the American people and asked them to invest.

He said it was in 1995 when Trump listed his Trump hotels and casino resorts on the New York Stock Exchange. He said the company lost money every year for the next decade. A monkey would have outperformed Trump's company, Buffett said.

In 1995, "if a monkey had thrown a dart at the stock page, the monkey on average would have made 150 percent," he said.

Buffett spoke for nearly 30 minutes to a raucous capacity crowd of roughly 3,100 people in a suburban Omaha high school with Clinton sitting at his side.

He said Trump's “final straw” was an ABC interview broadcast on Sunday in which he criticized the Muslim parents of a decorated U.S. soldier killed by a bomb in Iraq 12 years ago.

The father Khizr Khan spoke at last week's Democratic National Convention about their son and attacked Trump for proposing a temporary ban on Muslims entering the United States.

Trump said he was “viciously” attacked by Khan, a naturalized U.S. citizen, when the father publicly doubted Trump had read the U.S. Constitution. Khan said that Trump had "sacrificed nothing," prompting Trump in his ABC interview to say, "I think I've made a lot of sacrifices."

Buffett on Monday bluntly contradicted Trump.

“No member of the Buffett family has gone to Iraq or Afghanistan. No member of the Trump family has gone to Iraq or Afghanistan," Buffett said. “We’ve both done extremely well during this period and our families haven’t sacrificed anything.”

In his remarks Buffett announced the launch of a get-out-the vote effort, pledging to take at least 10 people to the polls who would otherwise have difficulty getting there. Buffett said he was backing a website, Drive2Vote, that would coordinate transportation to cast votes and that he had reserved a trolley that seats 32 people for the same purpose.

“I’m going to be on it all day. I’m going to do selfies, whatever it takes,” Buffett said.

Buffett said his goal is to generate the highest voter turnout in the congressional district that includes Omaha of any in the country. Nebraska is one of two U.S. states that award electoral votes in presidential elections by congressional district.

Clinton responded to Buffett's pledge with a promise of her own, if his turnout goal is met.

“Warren and I will dance in the streets of Omaha together! Maybe if we’re really lucky he’ll wear his Elvis costume again!” she said.

Article Link to Reuters:

Australia Cuts Rates To Historic Lows To Head Off Deflation

By Wayne Cole
August 2, 2016

Australia's central bank cut its cash rate a quarter point to an all-time low of 1.5 percent on Tuesday, the second easing this year as it seeks to defend the economy from creeping deflation and restrain a too-strong currency.

The local dollar AUD=D4 did initially retreat on the Reserve Bank of Australia's (RBA) widely expected move. But it quickly rebounded as investors anticipated easings by other central banks, underlining the challenge of keeping the currency down in a world where negative rates are now commonplace.

"The Reserve Bank is clearly on a mission to avoid the near zero inflation rates that many similar countries have," said Shane Oliver, chief economist at AMP Capital Investors.

"With the inflation numbers so low and the risk that if they didn't cut that the Aussie dollar would have been 76-77 (U.S. cents) by now, they felt they probably had to act."

The Aussie was last at $0.7528 AUD=D4, having been as low as $0.7486 at one stage. That resilience is a major reason the market is already pricing in the possibility of a further rate cut to 1.25 percent.

Interbank futures imply a 68 percent probability of a further easing by December <0>. Likewise, yields on three-year government debt AU3YT=RR dropped to 1.39 percent, making it cheaper than borrowing overnight.

RBA Governor Glenn Stevens, who retires next month after a decade at the helm of the central bank, was characteristically tight-lipped on the outlook for policy.

"The Board judged that prospects for sustainable growth in the economy, with inflation returning to target over time, would be improved by easing monetary policy at this meeting," said Stevens, while noting that inflation would likely be low for an extended period.

Data out last week showed consumer price inflation slowed to 17-year lows in the June quarter while underlying inflation hit an all-time trough of 1.5 percent.

That was well short of the RBA's long-term target band of 2 to 3 percent, suggesting the economy needed to grow faster if disinflation was not to become the new norm.

Less Risk From Housing

Neighboring New Zealand is already stuck in that trap, with inflation at just 0.4 percent and its central bank under intense pressure to cut rates at a policy meeting next week.

Japan, long locked into deflation, added to its stimulus campaign last week and analysts fully expect the Bank of England to resume easing on Thursday.

A hike from the Federal Reserve would help by lifting the U.S. dollar, but officials there seem in no hurry to act.

There have been concerns that ever lower rates would merely fuel a borrowing binge in the housing market, a real risk given Australian households are among the most indebted in the world.

Commonwealth Bank was quick to trim its variable mortgage rate to 5.22 percent, though a raft of special offers mean it is fairly easy to pay less than 5 percent.

Yet cheap borrowing costs have also driven a boom in home building, which looks to be taking some of the steam out of house prices.

Figures from property consultant CoreLogic out this week showed annual growth in home prices for Australia's capital cities slowed to 6.1 percent July, down from 8.3 percent in June and a long way from last year's peak above 11 percent.

The RBA's Stevens himself noted that a large supply of apartments would come on stream over the next couple of years, and lending for property investment had slowed.

"All this suggests that the likelihood of lower interest rates exacerbating risks in the housing market has diminished," said Stevens in his post meeting statement.

Article Link to Reuters:

Why Is America So Bad At The Olympics?

America’s Olympic performance is slipping. Hamstrung by the traditional collegiate sports system, it is failing to keep up with the latest scientific advances.

By Nico Hines
The Daily Beast
August 2, 2016

CHELTENHAM, England — The U.S. Olympic Team has been left behind.

At London 2012, the U.S. could be found languishing in 48th place if you adjusted the medal table to account for country size.

For almost a century after the birth of the modern Olympics in 1896, the U.S. was in the top 20 for medals per capita—but since Seoul 1988, Team USA has been on a sharp slide.

Hundreds of factors shape today’s global sporting map but one crucial trend, welcomed by many of America’s most successful competitors, is the honing of sports science programs.

The U.S. was a sports science trailblazer in the late ‘70s and ‘80s, but understanding its importance is no longer enough to stay ahead of the game.

The globalization of sports science has begun to level the playing field.

The latest battles between national teams are dominated not just by scientific advances, but the ability to develop comprehensive development systems to apply them. Young people with natural potential to win Olympic medals must be identified early and have all the wisdom of sports science—from nutrition to medicine, psychology and training—funneled directly into their development.

To American ears, this might sound sinister—the kind of thing the Russians and Chinese are good at. But the fact is, Britain, Canada and Australia are now in the vanguard.

“I think where Britain leads the way along with others like the Australian Institute of Sport is that the funding allows full-time dedicated sports scientists to work with the sports,” says Greg Whyte, a double Olympian and former Director of Research for the British Olympic Association.

In Britain, the major Olympic sports are now centrally funded so they can employ full-time scientists, sports medics, physiotherapists and soft tissue specialists who are on call seven days a week drawing up and then implementing rigorous programs that will allow a small group of chosen athletes to reach their physical peak in the coming weeks.

“There has been virtually no technological advance since the last Olympics,” Whyte told The Daily Beast during this summer’s Cheltenham Science Festival in England. “What we are starting to understand much better is the individual approach of working with athletes, in other words, our coaching science. The relationship between coaching and science is coming closer together. We are not necessarily advancing knowledge, what we are doing is advancing practice.”

In the U.S. sporting world, there is no equivalent federal funding for the Olympic sports. In most cases there are hardly even any central organizers.

Wade Gilbert, a sports science consultant for the U.S. Olympic Committee and editor of the International Sport Coaching Journal, said there was a lack of alignment and planning in U.S. sports compared to some of the world’s most advanced systems.

“The U.S. is unique from a sports perspective; we have no minister of sport or federal ministry. Even the Olympic association really has no control over any of this process—they’re there to support but they can’t really mandate anything,” he told The Daily Beast.

“It’s not a mystery, most of the high-level research in athletics is coming out of Canada, Australia and England, and that’s because those countries have federal oversight of sport, federal ministries of sport.”

It’s the collegiate sports programs that dominate the coaching of many of America’s rising Olympic stars. In a way that is unparalleled in other countries, American colleges have taken a stranglehold on youth sports.

Television money pouring into college football and basketball in the late 1960s and ‘70s transformed college sports programs into multi-million dollar behemoths.

Ronald Gallimore, a professor emeritus at the University of California, Los Angeles, has witnessed that transformation at first hand. As part of his groundbreaking investigations into coaching, he wrote a book on UCLA basketball coach John Wooden, one of the most celebrated icons of college sport. (In 2009 Sporting News named Wooden the greatest coach in American sporting history knocking Vince Lombardi of the Green Bay Packers down into second place.)

Men like Wooden became household names and helped to convince the American public that college sports programs were global bastions of athletic excellence.

The likes of Carl Lewis, Mark Spitz, Cam Newton, Michael Jordan and Wooden’s own Kareem Abdul-Jabbar certainly flourished in the NCAA system, and college sports teams become symbols of pride for entire cities or even states.

“Everybody in Tennessee, for example, roots for the University of Tennessee. On football Saturday the state shuts down and everyone watches the game—including the legislators,” said Gallimore.

“The alumnae love their teams to be successful and they are the ones donating to the university. At the state universities the legislature votes on the money that supports the university and many of those legislators are graduates of the university.”

There is no doubt that the crucible of collegiate competition has forged some of the world’s greatest athletes and many colleges have modern facilities that are the envy of similar institutions around the world.

That doesn’t mean they can compete on an equal footing with the well-funded national programs in other countries, however. Some countries have nationwide systems to identify talent earlier and are able to tailor personal development plans that are more concerned with maximizing long-term potential than ensuring the student’s school or college beats its deadly division rival in an end of season match-up.

Could college sports ever be replaced by such a science and performance-led system in the U.S.?

“No, no, I don’t see that happening here,” said Gallimore. And nor does he think it would be worthwhile. “When you consider the opportunities of the current system there are thousands of opportunities. Even if you’re not an Olympic hopeful we’ve got so many chances to be on a team and win in your division or championship.”

There is no time for such romantic notions at the English Institute for Sport in Manchester, where they have helped to mastermind a plan that has shot Great Britain up the Olympic medal table in recent years. In 2012, Team GB finished third in the gold medal count. If you exclude very small countries (populations under 20 million), the per capita table had Australia in first place and Great Britain second. The U.S. is just below Kenya in 11th.

The English Institute for Sport concentrates on training and assisting the coaches who work with small cohorts of rising stars who have been identified from all corners of the country.

The director of science and technical development told The Daily Beast that they focused on preparing athletes for “what it actually takes to win instead of just building an engine.”

Speaking at the Cheltenham Science Festival, Dr. Steve Ingham said he traveled to observe training programs all over the world.

“I’ve had the chance to go round many of the institutes—I’ve seen the talent out in China, for example, but in many instances they’re not optimizing it. The talent comes in at a young age but they are given quite generic programs with no individualization or monitoring and in some cases they just don’t improve as much as they could. I have seen it in canoeing, rowing, cycling programs,” he said.

“I visited a rowing program which had a 40 percent back-injury rate, so they’re not addressing the big problem areas. In the British system, modern day strength conditioning is preserving our athletes’ ability to train on a day-to-day basis but also preserving their career and longevity.”

“If countries like China with big populations—and therefore a greater talent pool—begin to apply science to preparation and performance in the same way we have in Britain we will struggle to compete as we have done.”

China runs a regional training, system which means each area competes against each other, with the best qualifying for the Olympics, but with little central oversight.

“The U.S. is dominated by the collegiate system which, is similar in a way to the Chinese scenario, where they select the best in Olympic year and they’re the ones that go to the games. In Britain, we are committed to developing our talent throughout their careers, nurturing them to perform at the Games,” Ingham told The Daily Beast. “The U.S. Olympic Committee has some good systems in place but it is tiny compared to their collegiate and professional sport system that hoovers [vacuums] up a ton of talent.”

Team GB’s medal haul in London was its best ever, but Ingham and his team wasted no time congratulating themselves, they are determined not to follow Australia’s drop-off in performance in the years after their home Games in Sydney in 2000.

“We’ve got a workforce of 300 people and it was counter-intuitive to say to them after a hugely successful home games in London, ‘We are going to change.’ Some said, ‘Why? It was brilliant!’ But we said we are going to change it because we have got to set the bar higher for the next Games in Rio.”

U.S. coaching expert Gilbert knows Team USA has little chance of emulating that kind of nationwide thinking and scientific planning. The current collegiate sporting development system is too deeply entrenched, socially and financially, and anyway, most Americans think they are doing well enough so there’s no impetus to tear up the system and start again.

“We’re around 50th in per capita but the attitude is ‘We’re first or second in overall medals—we’re still winning so who cares, right?’” he said.

If China, Russia and countries like South Korea and Japan start following Britain and Australia’s lead, U.S. sports fans are going to be worrying pretty soon.

Article Link To The Daily Beast:

Is Erdogan Really Stronger After Failed Coup?

Contrary to the prevailing view that President Recep Tayyip Erdogan has emerged stronger from the failed coup attempt, a seasoned eye can discern signs that Turkey’s strongman feels less powerful.

August 2, 2016

The prevailing view among punditry and the media, both Turkish and international, is that President Recep Tayyip Erdogan has emerged much stronger from the July 15 coup attempt and is now empowered to steer the country as he likes.

This assumption, however, is less than convincing for those who have closely watched Erdogan’s character, relationship with power and general political style during his 14 years in power. Erdogan’s statements and political behavior since the thwarted coup suggest quite the contrary — that he feels less powerful. The declaration of emergency rule and the draconian purge of the Gulen community — the decision-making and operational center of the putsch — may be projecting power, but that is an illusion.

In fact, Erdogan is readjusting his political behavior in a way that suggests he feels less powerful. The first signs to that effect came not immediately after the coup was suppressed on July 16, but several days later. Judging by the changes in his political attitude, he seems to have recognized a new reality sometime between July 19 and 20 — probably after an assessment of external rather than domestic implications — and decided to step back accordingly.

After the failed coup, Erdogan’s first address to his supporters was on the night of July 18 outside his posh house in Istanbul, perched on the hills of the Bosporus’ Asian shore. In that speech, he seemed confident he was now more powerful, very much in the style of “what doesn’t kill me makes me stronger.” This was evidenced by the fact that only three days after the coup bid he declared he would proceed with a project that did require him to be more powerful than ever. It was none but the project to erase Gezi Park at Taksim Square and replace it with a replica of former Ottoman barracks — the very spark of the 2013 Gezi Park resistance — which he had grudgingly shelved but had since become obsessed with.

The project will go ahead “whether they like it or not,” he told the crowd, and went on to give “other good news” — a plan to erect also a mosque on Taksim Square. It was the typical Erdogan who had lost nothing from his overbearing style even after weathering a mortal threat. It was the same Erdogan, who, in 2013, had closed Taksim Square to the opposition, including on May Day, stoking popular resentment that eventually boiled over in the Gezi revolt.

But in a couple of days Erdogan’s rhetoric and behavior in domestic politics began to noticeably change. The domineering Erdogan full of hubris was gone, replaced with one who clearly sought cooperation and support from the opposition. The first sign came July 20 as the main opposition Republican People’s Party (CHP) got permission to organize a "democracy rally" at Taksim Square. Opening the square to the opposition after a three-year ban was Erdogan’s first step of domestic moderation, which was followed by other decisions.

The same day he signaled he had shelved, at least for now, his plan for an executive presidency regime, which lies at the core of Turkey’s deepening polarization and the apprehension the opposition and civic society feel vis-a-vis him. “We will remain inside the democratic parliamentary system, we will never step back from it,” he told Al Jazeera.

On July 24, Taksim Square witnessed one of its biggest rallies in recent times as tens of thousands from almost all oppositional quarters joined the CHP-organized event.

On July 25, Erdogan invited CHP leader Kemal Kilicdaroglu and the chairman of the Nationalist Action Party (MHP), Devlet Bahceli, to his palace to listen to their views on the coup attempt and its aftermath. He snubbed the Kurdish Peoples’ Democratic Party (HDP), but Prime Minister Binali Yildirim said later in the day the HDP was welcome to come on board in a joint parliamentary effort, agreed to with the CHP and the MHP, for several constitutional amendments.

On July 27, Erdogan moved to crown his efforts at “coup peace” with the opposition, withdrawing all libel cases against Kilicdaroglu and Bahceli. Soon he went even further, dropping all lawsuits against hundreds of people accused of “insulting” him.

Finally, the Justice and Development Party (AKP) hung a giant portrait of Mustafa Kemal Ataturk on the facade of its headquarters in Ankara, which left many stunned, given the Turkish Islamists’ aversion for the man who abolished the caliphate and founded modern Turkey as a secular republic. Only a few months ago, AKP heavyweights were calling for removing the tenet of secularism from the constitution.

So, what is behind Erdogan’s sudden peace-making drive? Understanding his motives is crucial for correct reading of developments in Turkey in the wake of the failed coup. Over the past 14 years, Erdogan has steadily opted for polarization as a means to consolidate power, so why does he need “national unity” now? Is this meant as a form of societal and political deterrence against a possible second putsch? This possibility, however, is gone with the massive purges in the military and other security branches of the state. Hence, his motives must be rooted abroad rather than at home.

To start with, let’s see how the world reacted to the coup attempt. Generally speaking, the United States and Europe saw it as a move directed primarily at Erdogan. Both the scope and tone of their reactions was just the minimum of what diplomatic etiquette requires. The Western media focused less on the putsch itself and more on Erdogan’s crackdown on the putschists, using a highly apprehensive language in reporting the measures. The solidarity expressed by the Arab and Muslim world also fell short of the vibrant, impassionate support that Erdogan must have expected.

But not only that. Starting on July 16, Erdogan and his aides were all eyes and ears for signals from the United States, the world’s only power at which Erdogan would flinch, barring perhaps Russia since the plane crisis last year. And what Erdogan saw across the Atlantic must have been very alarming. Whether his July 19 phone call with President Barack Obama bore on his anxiety is unknown, but Ankara clearly perceived a threat from the United States. Its bluntest expression came in a headline in the staunchly pro-government Yeni Safak, which trumpeted, "The United States tried to kill Erdogan!"

Justice Minister Bekir Bozdag would later say he was sure “Obama knows the coup was the work of Fethullah Gulen as much as he knows his own name,” but a perception of threat was discernible in these remarks as well. Gulen has been in self-exile in Pennsylvania since 1999, and his extradition is a demand Ankara raised immediately after the botched coup.

In sum, Erdogan embarked on peace-making at home upon concluding he was facing a threat from outside. For him, the failed coup is no longer a domestic but an international issue. It has opened his eyes to how isolated he has become internationally, as evidenced in a sentence he uttered July 23: “If I had died [in the coup], our Western friends were ready to jump for joy.”

Having pinned the United States at the origin of the threat, Erdogan quickly realized he cannot face the challenge with the AKP and his supporters alone, and moved fast to reposition himself in line with this sudden loss of power. The cooperation ground he seeks with the opposition by engaging it along the narrative of “defending democracy against coups” is in fact an effort to stand against that external threat. His trip to Russia for talks with President Vladimir Putin, scheduled for Aug. 9, is a product of the same effort.

Yet one should have no illusions that the failed coup has changed Erdogan in a positive way. He is merely in a forced retreat, with a view of compensating for it later. To speak of any new hope for Turkish democracy is still premature.

Article Link to Al-Monitor:

Can China Really Ignore International Law?

History shows that small countries can get the upper hand in the end.

By Richard Javad Heydarian
The National Interest
August 2, 2016

In a recent essay, eminent political scientist Graham Allison downplays international criticism of China’s blatant rejection of an unfavorable legal verdict at The Hague. By pointing out the unlawful behavior of status quo powers, his article gives the misleading impression that China’s noncompliance to the international court’s decision is essentially normal.

“[N]one of the five permanent members of the UN Security Council have ever accepted any international court’s ruling when (in their view) it infringed their sovereignty or national security interests,” Allison argues. “Thus, when China rejects the Court’s decision in this case, it will be doing just what the other great powers have repeatedly done for decades.”

Allison also fell short of mentioning some key facts as far as great powers’ compliance with international arbitration is concerned. For instance, it was not the Permanent Court of Arbitration (PCA) that decided on the Philippines’ complaint against China, but an Arbitral Tribunal constituted under Article 287, Annex VII of the United Nations Convention on the Law of the Sea (UNCLOS). The PCA only serves as a registry.

Such seemingly minute legal facts inform the nature and implications of the Philippines’ landmark lawfare against China. Crucially, Allison didn’t mention that there have been encouraging instances whereby major powers rejected arbitration, and subsequently an unfavorable verdict, but still ended up complying with it anyway. After all, even for great powers, which aspire to leadership and seek respect and predictability in the international system, ignoring international arbitration carries immense costs.

More Than Meets the Eye

In an authoritative article for The European Journal of International Law, legal scholar Aloysius P. Llamzon (2008) shows that “through complex mechanisms of authority signal and the political inertia induced by [international court] decisions, almost all of the [International Court of Justice] decisions have achieved substantial, albeit imperfect, compliance.”

Keep in mind: the International Court of Justice (ICJ) oversees extremely delicate, if not seemingly intractable, cases such as territorial sovereignty. Take for example, the 1986 Nicaragua vs. the United States case filed before the International Court of Justice. At first, America took a hardline position, arrogantly refusing to participate in the arbitration proceedings at all. Similar to China, it also dismissed the unfavorable verdict. Nicaragua, however, relentlessly stepped up international pressure on America by rallying developing world support behind it. The U.S. refused to pay $370.2 million in damages, but after years of successful Nicaragua-led diplomatic pressure, Washington ended up compensating its Latin American neighbor by offering an even larger development aid package during the Victoria Chamorro administration.

True, the United States continues to alienate allies and undermine its moral authority by failing to ratify UNCLOS. And it is high time for belligerent elements within the U.S. Senate to change course. But the U.S. government, as a signatory, has actually complied with the relevant provisions of UNCLOS as a matter of customary international law.

This was more than evident when Washington allowed Chinese warships to pass through America’s two-hundred-nautical-mile Exclusive Economic Zone (EEZ) in the Pacific, while magnanimously respecting Chinese warships’ right to innocent passage within America’s territorial sea in theshores of Alaska.

In contrast, China, which has ratified UNCLOS, has consistently refused to reciprocate America’s operational observance of prevailing international law, placing restrictions on the movement of foreign military assets well beyond its territorial sea and contiguous zone. Chinese harassment of America’s lawful reconnaissance missions and warships operating in international waters has increased over the years.

China has also rattled most of its neighbors by claiming “historic rights” over adjacent waters such as the South China Sea. In fact, as the Hague verdict makes clear, China has violated the rights of countries such as the Philippines to exploit natural resources within their EEZ. Its massive reclamation activities, almost two dozen times more than that of all other claimant countries combined, has also caused severe ecological damage, the tribunal at The Hague ruled.

Light at the End of the Tunnel

One factor that explains broad compliance with international arbitration, even among great powers, is the concern over reputational cost and long-term consequences of ignoring international law, which is crucial to securing a rule-based global order. This may explain why even an increasingly aggressive Russia, which recently occupied Crimea and has adopted a belligerent position in its “near abroad,” also eventually complied, albeit informally, with the verdict of an arbitration proceeding, which it rejected from the onset.

In the “Arctic Sunrise” case, the Kingdom of Netherlands successfully filed a case at the International Tribunal on the Law of the Sea (ITLOS), complaining that Russia unlawfully placed environmental activists aboard a Greenpeace vessel under detention. Eventually, the Russian legislature approved the release of the crew and the vessel, despite Moscow’s official rejection of the verdict. In short, there was informal compliance.

In South Asia, regional powerhouse India also initially adopted an uncompromising position vis-à-vis its maritime borders with Bangladesh, which took the case to international court despite New Delhi’s opposition. The Permanent Court of Arbitration (PCA) favored Bangladesh in its final award at the Bay of Bengal, and India complied. The key to ensuring compliance is concerted international pressure, especially when one speaks of a hubristic status quo power (America during Cold War) or assertive revisionist power (China).

This is precisely why it is paramount for China’s neighbors, including Japan, South Korea, India, Australia and the Association of Southeast Asian Nations (ASEAN) to consistently push for compliance and encourage China to align its claims with prevailing international law, not obscurely concocted doctrines purportedly based on “historic rights,” lousy cartography and pre-modern historiography.

Based on the Hague verdict, concerned naval powers, through Freedom of Navigation Operations can utilize the arbitration verdict to challenge China’s baseless sovereignty claims in the Spratlys over low-tide-elevations, which were artificially transformed into islands. If China continues to refuse compliance, the Philippines (and other claimant states) can ask the International Seabed Authority, constituted under the UNCLOS, to revoke China’s license to extract seabed resources in international waters.

Since the Hague verdict clearly states that there are no overlapping EEZs between China and the Philippines, Manila also has the option of filing additional legal complaints if Chinese energy companies unilaterally drill within its EEZ. Not to mention, Vietnam, Malaysia, Japan and Indonesia can also file similar compulsory arbitration cases against China. In short, there will be huge costs if China doesn’t recalibrate its maritime posturing.

So far, it seems that China has successfully tamed its smaller and divided neighbors in Southeast Asia, including the Philippines, but major Asia-Pacific powers such as Japan, South Korea, Australia, India and America have been more forthcoming in their call for compliance with international law and legally binding court verdicts. As the supposed anchor of the Asia-Pacific order, the United States shouldn’t only ratify the UNCLOS, to gain moral ascendancy, but also lead a coalition of law-abiding countries to ensure China operates within the boundaries of prevailing international law. No less than the future of the Asian and the broader global liberal order are at stake.

Article Link to The National Interest:

These Telltale Market Indicators Suggest Stock Prices Are Topping

Tug-of-war between bulls and bears is entering a danger zone

August 2, 2016

Market indicators last week suggested the U.S. stock market was stalling and topping out, and that process is continuing, but at a slow-as-molasses pace.

Last week, it seemed the market was going to the moon. The S&P 500 SPX, -0.13% reached all-time highs, bulls were giddy, and most short-sellers had disappeared. We also have an accommodative Fed that won’t raise interest rates anytime soon, no matter how much they promise. What could possibly go wrong?

Plenty. Let’s take a look at the most recent indicators for clues:

Technical Indicators:

S&P 500 is above its moving averages = Bullish

MACD (S&P 500) is above zero line = Bullish

S&P 500 Support: 2,150 (Above support = Bullish)

Sentiment Indicators:

II survey (July 26): 53.9% Bulls; 21.6% Bears = Bearish

AAII survey (July 27): 31.3% Bulls; 28.4% Bears = Neutral

VIX @ 12.44 = Bearish

RSI (S&P 500) @ 62.74 = Overbought

The sentiment indicators are flashing warning signs. In particular, the Investors Intelligence (II) reading is so bullish that a pullback or correction appears imminent. At over 50% bullish, it’s time to sell (do the opposite of consensus). If the II gets as high as 60% bullish, it’s a screaming sell. Historically, this survey works remarkably well at extremes, which is where we are at now.

Another red flag is the CBOE Volatility Index VIX, +4.80% which has been at ridiculously low levels (at or near 12) for months. A VIX at these historic lows tells us that volatility has been crushed, but that cannot continue indefinitely. In fact, the longer volatility remains this low, the stronger the reaction will be in the future.

On the technical side, the S&P 500 is above its 50-day, 100-day, and 200-day moving averages, which is bullish. The MACD (19,39,9) is above its zero line and slightly above its 9-day signal line. That’s bullish although watch the signal line for an early warning sell signal. Wise traders do not fight the market trend but wait and watch. Although we’re in a tug of war now, one side will eventually be victorious.

Another important clue was that after the S&P made its all-time high of 2,175, it retreated once again. Technicians pointed out correctly that it made those all-time highs on low-volume, which is suspicious. A healthy market will make new highs on strong volume, not on smoke and mirrors generated by computer algos.

Trading Strategies

If the sentiment readings are correct and the market sinks in the near future, prepare to buy on the dip. Before the November election and beyond, any pullback or correction will be met with intervention by the central banks. Therefore, unless there is a rip-your-face-off Black Swan event, buying on the dip is the strategy of choice after a major pullback. In addition, because the trend is still up, wise traders do not short the market in this low-volatile, low-volume environment.

Conversely, it is too dangerous to follow the crowd into buying at all-time highs. It’s been reported that retail investors are withdrawing money out of managed mutual funds and pouring into index funds. This is another clue that we’re near a top. When the herd thinks they are smarter than the pros, it’s a warning sign.

It’s not easy to pay close attention to the market when it’s moving so slowly, but this is the time to be observant. Most investors will be caught off guard when volatility returns with a vengeance. That day is coming, but few will be ready. We appear to be at a pivot point, but it could be a while before the real fireworks start.

With the market at all-time highs, with overbought conditions and high sentiment, caution is advised. It’s been a long time since we’ve experienced a correction, or even a 30-point pullback on the S&P 500. The odds are good that one is coming.

Keep An Open Mind

That said, it’s important to keep an open mind. The mistake I’ve made in the past is “thinking” the market can’t go any higher. Of course it can. Another mistake I’ve made is underestimating the power of the Fed to move the markets with hints, meetings, speeches, and liquidity. It has been a losing strategy to fight the Fed, although that could change. Until then, when there is a pullback, follow the Fed and buy on the dip (but be careful as that strategy won’t last forever.)

This tired, old market is languishing at its all-time highs. Although the uptrend is intact, the market appears to be stalling out at these overbought levels. If the market can smash through resistance and make all-time highs on strong volume, that would be bullish. Unfortunately, it has been unable to do that.

The S&P 500 has traded between 2,150 and 2,175 for the past 11 trading days. This tight trading range usually ends in a breakout or breakdown. Based on indicators and clues, the odds are good that the S&P 500 breaks below 2,150 in the near future.

Bottom line: Stay cautiously neutral until the market makes its next move.

Article Link to MarketWatch:

World’s Most Valuable Companies Now Include Amazon And Facebook

By James Covert
The New York Post
August 2, 2016

Move over, Warren Buffett and Big Oil — the tech brats have arrived.

Amazon and Facebook surged past ExxonMobil and Buffett’s Berkshire Hathaway on Monday to become the fourth and fifth most valuable companies on Earth.

The stock moves left ExxonMobil at No. 6 and investing conglomerate Berkshire at No. 7.

As such, for the first time, the world’s five most valuable companies, based on market capitalization, are now in the tech niche, signaling the rise of a new generation of tycoon — like Google’s Larry Page, Facebook’s Mark Zuckerberg and Amazon’s Jeff Bezos.

Apple shares added 1.8 percent on Monday, to close at $106.05. It now has a market cap of $571.4 billion, making it the world’s biggest company.

Google’s parent, Alphabet, wasn’t far behind, gaining $4.09 to close at $772.88, putting it at No. 2 with a market cap of $549.5 billion.

Microsoft, whose stock lately has surged on the strength of a turnaround effort by Chief Executive Satya Nadella, is at No. 3 at $440.9 billion.

Meanwhile, Amazon’s hard-charging founder Bezos in recent days has seen his net worth climb past that of Buffett for the second time in recent weeks — making him the world’s No. 3 wealthiest person.

On Monday, Bezos’ wealth hit an all-time high as Amazon’s shares did the same, boosted by unexpectedly strong second-quarter results.

The Seattle-based tech tycoon — who lately has been spending millions of his personal fortune on a rocket-fueled space race against billionaire Elon Musk — is now worth $67 billion.

Microsoft co-founder Bill Gates is still No. 1 at $88 billion.

By comparison, Warren Buffett is worth $64.7 billion, according to Bloomberg. Berkshire’s market cap is $355 billion.

On Monday, Berkshire got edged out of fifth place by Facebook, which rose 0.3 percent, to $356.9 billion.

In a tight race, ExxonMobil was between Facebook and Berkshire on Monday with a market cap of $356 billion.

Trump Is Killing Himself With Self-Inflicted Wounds

By Rich Lowry
The New York Post
August 2, 2016

Donald Trump got sound advice the other day. At a rally at Davenport, Iowa, he told the crowd that a prominent supporter had called and urged him not to sweat all the attacks at the Democratic National Convention.

“Don’t hit down,” the supporter urged, according to Trump. “You have one person to beat. It’s Hillary Rodham Clinton.”

By Trump’s account, he conceded the good sense of this, although he noted how he always prefers hitting back — “it makes me feel good.”

If so, he must have enjoyed his weekend. He spent it attacking not just Khizr Khan, the Muslim father of a soldier killed in Iraq who spoke at the DNC, but his wife.

In other words, roughly 48 hours after publicly sharing the advice he had gotten not to punch down, Trump delivered a flurry of downward blows the likes of which we haven’t seen from a presidential candidate in memory.

The old political and media rule is unassailable. When you are the bigger, more famous figure, you only draw more attention to a less-prominent critic by engaging.

If people hadn’t heard, or heard about, Khan’s short speech against Trump at the DNC before, they probably have now.

In its unadorned righteous indignation, the Khan DNC speech was a stinging rebuke of Trump — Khan suggested the Republican candidate hasn’t read the Constitution, nor ever sacrificed anything for the country — and the mogul duly acted stung.

His first swipe was at Khan’s wife Ghazala, for standing silently at her husband’s side during the speech (perhaps, Trump implied, she was forbidden from speaking as a woman?).

In subsequently trying to tamp down the controversy, Trump stoked it further by saying Khizr Khan had “no right” to criticize him as he had and complaining about his viciousness.

The Trump response predictably fueled an all-out media blitz by the Khans. It validated one of the main lines of criticism of him at the DNC — that he is so thin-skinned that he can’t be entrusted with the awesome powers of the presidency.

And his religiously fraught slap at Khan’s wife and his rhetorical manhandling of a family who had sacrificed so much for the country reinforced the sense that he refuses to honor basic political norms.

It’s not that grief validates a particular point of view, or someone who has suffered a terrible loss should be above criticism. But the grieving mother or father deserves an extra measure of respect. This isn’t just Politics 101, but Decency 101.

President George W. Bush was gentle with Cindy Sheehan, the Gold Star mother who became a fierce critic of the Iraq War. Asked on “Fox News Sunday” about two parents of State Department employees killed in the Benghazi attack who have criticized her — including Patricia Smith at the Republican National Convention — Hillary Clinton said first, “my heart goes out to both of them,” and then countered their criticisms without making it personal.

This isn’t hard. Trump may figure he needn’t bother because he has weathered so many other controversies that appalled critics on the left and the right.

But the playing field is different when he is potentially three months away from being elected president of the United States, as opposed to a Republican primary contender among many others.

It’s one thing to beat Ted Cruz and his family about the head and shoulders — he’s just another a pol — but something else entirely to do it to the parents of an exemplary young man who sacrificed his life protecting others in Iraq.

Trump believes, from his decades in the public eye in the media capital of the world, that it always pays to be on the attack. This isn’t true anymore.

The question no longer is whether he can garner headlines, but whether he can demonstrate his suitability to becoming commander-in-chief. The only one he’s hurt by his assault on the Khans is himself.

Article Link to The New York Post:

Brexit In The Hands Of The Unbelievers

Britain’s civil servants never wanted to leave the EU. Now it’s up to them to make it happen.

Politico EU
August 2, 2016 

When voters in the United Kingdom chose to leave the European Union, Britain’s civil servants reacted with shock and disbelief. This was no surprise. After all, as highly educated, affluent technocrats, they pretty much check off every stereotype of a Remain supporter.

Reality is slowly setting in. As ministers head off on their summer holidays, staff in Whitehall are starting to accept that the next portion of their careers will be dominated by the implementation of a decision with which they thoroughly disagreed.

Being professionals, the question is not whether they will do it, but whether they can.Even as they knuckle down, a large question mark looms over whether a government machine shorn of so much of its former capability — and with a patchy record on major projects — will be able to cope with such significant strain.

So far, the focus has been on trade, a field in which Britain has perhaps two dozen trained negotiators, lined up against the 600 acting on behalf of the EU. Using this vestigial capacity to negotiate the myriad of trade deals that may be required will be like “trying to bail an Olympic swimming pool with a thimble,” according to one former trade adviser.

"The salary of any civil servant earning more than the prime minister must be publicly disclosed. Senior trade negotiators in Brussels already earn well above that amount."

Hundreds of trade negotiators are already being recruited, alongside experts from the private sector. New Zealand has offered to loan and train staff, and there are suggestions that Australia and Canada might offer similar assistance. But it will still be difficult to find enough qualified experts, given the number of simultaneous deals that could be required. “This is complicated, incredibly technical work,” said one insider. “It isn’t like finding 300 tax collectors, it’s like finding 300 nuclear physicists.”

The draft of the trade agreement between Canada and the EU, for example, is 1,600 pages of impossibly dense technical verbiage, including obscure clauses relating to reindeer husbandry and the Saskatchewan Liquor and Gaming Authority.

One obvious place to look for experts is Brussels, in the form of Britons currently working for the EU. But luring them back to the U.K. will be tricky.

As part of an effort to cap Whitehall pay, the salary of any civil servant earning more than the prime minister must be publicly disclosed. Senior trade negotiators in Brussels already earn well above that amount — with far less scrutiny, accountability and pressure than they would face on Team Brexit. Even if their career prospects in Brussels have dimmed, how many can be lured back to fight for a cause they personally despise?

* * *

In the short term at least, there is also the problem of internal politics: the rupture caused by the creation of two new departments, for Brexit and for international trade, will inevitably result in Whitehall infighting.

Jill Rutter, program director at the Institute for Government, says the think tank cautioned against carving out completely new ministries. “If you’re really a department, you have to do lots of things that distract from your core business, like setting up your own finance system, HR system, producing an annual report, defining terms and conditions for employees. If it’s not going to last for that long, it’s potentially quite a big distraction.”

To be fair, the Brexit department appears not to have had many problems recruiting top-flight staff: In particular, its new head, Oliver Robbins, is regarded as one of Whitehall’s rising stars.

But at a lower level, many within the Foreign Office unit that deals with the technicalities of EU membership — the European Union Division Internal — are alarmed at the thought of being hived off to the new body. These are generally staff from domestic departments who have been brought over to the Foreign Office because of their in-depth policy expertise — but then often move on to pursue a diplomatic career elsewhere within the Foreign Office. That door has been shut in their face.

And it’s not only the Brexit department that will feel the demands of EU renegotiation. At a speech to the Institute for Government, Amyas Morse, head of the National Audit Office, warned that the civil service is already “over-committed” and would have to abandon projects that were not “mission-critical.”

“You’re already running two programs,” said one Whitehall insider. “There’s the ‘business as usual’ program and the ‘change’ program contained in the Tory manifesto. Now, on top of that, you’ve got the biggest, most seismic change program in peacetime history. How are you going to do a seven-day NHS, 3 million apprenticeships, pensions reform, youth and childcare and prison reform, rolling out academies, cutting the deficit and Brexit, all at the same time?”

And that’s without taking into account any additional priorities set out by Theresa May and her new team of ministers.

Bob Kerslake, the former joint head of the Civil Service, already claimed that to cope with the added work, the government will need to halt planned Whitehall job cuts: Manpower has shrunk by a fifth since 2010, to the lowest levels since World War II.

* * *

At the moment, however, the cuts are set to continue: The business department, for example, is supposed to lose up to 40 percent of its headcount by 2020. “I think that’s pie in the sky, given the amount of stuff that’s got to go on,” said one civil servant. “That Steve Hilton [Cameron’s former strategy director] idea of being able to fit the whole government in Somerset House — to me, that’s dead in the water.”

For Rutter of the Institute for Government, it is a question of working out how to prioritize resources. “Some departments will be very unaffected by Brexit,” she said. “But some will be profoundly affected. At my old department, Defra [which covers the environment and the countryside], all its policy agenda is affected. For example, it currently does very little legislation of its own — it’s all about bringing through EU directives.”

Agriculture is a good example of one of the likely consequences of Brexit: more British bureaucracy. In the popular imagination, the money Britain sends to the European Union — the mythical £350 million a week — is simply a sunk cost, used to pay for jacuzzis in Brussels and Strasbourg or hand-outs to avant-garde theater troupes in Riga and Nicosia. In fact, much of it comes back to Britain, in the form of grants for the regions and in particular for the agricultural system.

More pertinently, some of the spending that remains in the EU is used for shared services. In the same way that councils might outsource a particular specialized function to save money, or pool services to get the benefits of scale, Britain signed up to all manner of pan-European agencies: the European Medicines Agency, the Unified Patent Court, and several dozen more.

Yes, some of these overlap with existing British institutions. But others do not. In each case, there will be the question of whether Britain should remain part of the existing system, or set up its own, more expensive alternative — which means swelling the size of the state.

“Down the line, we may well need to start setting up big new administrative systems,” said Rutter. “For example, for registering migrants or bringing in checks at the border. What you really need to do — and what the Brexit department will be doing — is working out where the pressure will fall, and what your options are for dealing with that.”

"The more Britain strikes out into the unknown, the greater the pressures on government."

Much of what happens will, inevitably, depend on the kind deal the U.K. negotiates with the EU.

A post-Brexit relationship could end up sticking closely to the status quo, simply due to bureaucratic inertia. “Under the maximal form of withdrawal, civil servants would painstakingly have to copy, or scrap, 12,295 EU regulations,” the Economist recently pointed out. “They have already started to map out every British law that derives from the EU.” All other things being equal, they will surely keep as much of that corpus as they can.

The closer the Brexit deal is to existing arrangements (in particular, over membership in the single market), the less dislocation there will be for civil servants, and for Whitehall as a whole; it’s easier to copy and paste an existing law than write a new one from scratch. The more Britain strikes out into the unknown, the greater the pressures on government — and the need for more manpower — will become.

Many of those who campaigned for Brexit did so in the hope for precisely such a leap into the unknown. In some cases, they wanted to sacrifice membership in the free market in exchange for limiting free movement. In others, they wanted to restore parliamentary sovereignty and sweep away intrusive European regulation. Indeed, these people tend to be most skeptical of government’s ability to deliver, and the keenest to see it cut down to size.

Even as Brexit voters rejoice at being liberated from the bureaucrats of Brussels, they may find that power has simply been handed to the bureaucrats of Britain.

Article Link to Politico EU:

WSJ: How I Was Wrong About ObamaCare

The law’s drafters wanted consolidation: 112 hospital mergers last year. But smaller practices have improved care better.

By Bob Kocher
The Wall Street Journal
August 2, 2016

I was wrong. Wrong about an important part of ObamaCare.

When I joined the Obama White House to advise the president on health-care policy as the only physician on the National Economic Council, I was deeply committed to developing the best health-care reform we could to expand coverage, improve quality and bring down costs. We worked for months to pass this landmark legislation, and I still count celebrating the passage of the Affordable Care Act with the president one balmy spring night in 2010 as one of my greatest Washington memories.

What I got wrong about ObamaCare was how the change in the delivery of health care would, and should, happen. I believed then that the consolidation of doctors into larger physician groups was inevitable and desirable under the ACA. I joined my White House health-care colleagues— Ezekiel Emanuel and Nancy-Ann DeParle—in writing a medical journal article arguing that “these reforms will unleash forces that favor integration across the continuum of care.” We added that “only hospitals or health plans can afford to make the necessary investments” needed to provide the care we will need in a post-ACA world.

Well, the consolidation we predicted has happened: Last year saw 112 hospital mergers (up 18% from 2014). Now I think we were wrong to favor it.

I still believe that organizing medicine into networks that can share information, coordinate care for patients and manage risk is critical for delivering higher-quality care, generating cost savings and improving the experience for patients. What I know now, though, is that having every provider in health care “owned” by a single organization is more likely to be a barrier to better care.

Over the past five years, published research, some of it well summarized on a Harvard Medical School site, has indicated thatsavings and quality improvement are generated much more often by independent primary-care doctors than by large hospital-centric health systems.

Look at accountable-care organizations (ACOs), in which doctors and health-care providers come together to provide complete care for an individual and are compensated for keeping them healthy and generating savings. Based upon the latest data the Centers for Medicare and Medicaid Services has released,from 2014, independent physician-led ACOs, like the Rio Grande ACO on the Texas border, are outperforming ACOs from many of the most famous health systems. Johns Hopkins Hospital in Baltimore has been ranked as one of the top three health systems in the nation, but its ACO failed to achieve shared savings in 2014.

Small, independent practices know their patients better than any large health system ever can. They are going up against the incumbent and thus are driven to innovate. These small businesses can learn faster without holding weeks of committee discussions and without permission from finance, legal and IT departments to make a change.

More often than not, one of the most important changes these practices make is embracing technology. The ability to store, analyze and make sense of data has now become so easy and inexpensive that all physicians can use “big data.”

In my White House days, we believed it would take three to five years for physicians to use electronic health records effectively. We were wrong about that too. At every opportunity, organized medicine has asked to delay and lower thresholds for tracking and reporting basic quality measures; yet they have no reason to delay.

In the ACOs run by Aledade, which advises small medical practices (I sit on its board), we have found that independent primary-care doctors are able to change their care models in weeks and rapidly learn how to use data to drive savings and quality. For small practices, it does not take years to root out waste, rewire referrals to providers who charge less but deliver more, and redesign schedules so patients can see their doctors more often to avert emergency-room visits and readmissions.

Recognizing the strength in the small practices, the federal government needs to write rules that make it easier for them to thrive under ObamaCare and don’t tip the scales toward consolidation. That means introducing payment models that limit losses for small providers to the Medicare dollars they receive rather than total spending, and which rely on multiyear benchmarks instead of single-year swings. It also means comparing small practices to other small ones—instead of to large health systems with large balance sheets—when determining if a practice deserves bonus payments for savings.

Large health systems deliver “personalized” care in the same way that GM can sell you a car with the desired options. Yet personal relationships of the kind often found in smaller practices are the key to the practice of medicine. They are the relationships that doctors want to forge with patients, and vice versa. It may sound old-fashioned, but what I have learned is that we do not need to sacrifice this unique feature of our health-care system as we move forward in adapting new value-based payment models and improving the health of patients.

Article Link to The Wall Street Journal:

Hillary Clinton's "Public Service" And Donald Trump's "Sacrifice" Are Empty Words

America’s choice is between two supremely selfish candidates.

By David French 
The National Review
August 2, 2016

Last week, Gold Star father Khizr Khan made headlines when he ripped Donald Trump’s proposed Muslim ban, declaring at the crescendo of his speech at the Democratic National Convention that Trump had “sacrificed nothing and no one.” It was an undeniably powerful moment — made only more powerful by Trump’s personal counterattack against Khan and his wife, Ghazala. The Khans’ son, U.S. Army Captain Humayun Khan, was killed in action in Iraq in 2004. At the same time, however, calling out Trump’s lack of sacrifice was an odd choice — especially when Hillary Clinton is his opponent. After all, what has Hillary ever sacrificed?

On Saturday, I made that point on Twitter, and the backlash was immediate: Hillary gave up high-paying jobs to work in Arkansas and teach law school; she has a lifetime of “public service.” How dare I compare Trump’s private-sector greed with Hillary’s public-sector “sacrifice.”

Let’s be clear. Hillary Clinton hasn’t sacrificed — she’s lived the progressive dream. And she’s certainly not a “public servant” — she’s a cynical, grasping, and ambitious politician. Her accomplishments are meager, and her one guiding star is her own self-advancement.

First, let’s dispense with the notion that there is anything at all sacrificial about her career. Walk into any elite law school and lay out her career path — work for fashionable left-wing causes, teach law school, make partner in a state’s premiere law firm, move into the White House, and then run for a gift-wrapped Senate seat — and you’ll watch students knife one another in the back for the opportunity to have half her chances. Every one of her jobs has been “cool.” Each of her jobs helped build her résumé. Not one of her jobs involved any serious sacrifice for her country.

Most progressive students don’t want to start or end their careers in big corporate law firms. Indeed, they often choose that life only because they feel boxed-in by student loans and try to escape the big firm the instant they’re financially able. It’s not a “sacrifice” to choose to escape the 70-hour work weeks. It’s not a “sacrifice” to avoid endless hours of thankless document review and mindless discovery. It’s a dream.

Second, it’s simply false that activists, politicians, or bureaucrats are — by definition — “public servants.” Instead, they’re often wannabe rulers, seeking their own good at the expense of the public. Activists and politicians have pulled off a neat trick. Unlike other professionals, they’ve figured out a way to cast their naked ambition as selfless and righteous. If public office is such a sacrifice, why do senators and representatives hold on to their offices with a vise grip? Many of them love the perks. Most of them love the power. Some of them love the public.

So, please, spare me the rhetoric that any given politician is a public servant. Hillary Clinton has mainly been a destructive force in American life. Her zealous defense of abortion-on-demand has helped maintain a culture of death that has cost millions of young lives. Her foreign-policy missteps have helped turn Libya into an ISIS playground and assisted in squandering American victories in Iraq and Afghanistan. Her Russian “reset” merely lulled Americans into believing the Russian bear was benign. Her unrelenting personal corruption has helped degrade American politics. She serves mainly herself.

It is a fact of our modern elite that true sacrifice or service is the exception rather than the rule. The number of veterans in Congress keeps declining, and it’s even rare to see veterans run for president — only two of the 17 Republican candidates, Rick Perry and Lindsey Graham, were veterans. Military service is hardly the only sacrifice that can teach a person the humility and self-awareness necessary to become a true public servant, but look at the résumés of our non-veteran “elite” and you see depressing, dreary sameness. They catapult from one elite posting to another, and there is always a disturbing symmetry between the “public interest” and their own advancement.

But don’t tell that to Hillary’s hagiographers. A nation founded by great men — and that has spawned many great presidents — still yearns to look up to its leaders. And so we commence the selling of a president. A real-estate developer develops his own strongman cult, and a glorified political wife tries to transform herself into a heroic trailblazer. But in the end we’re left with nothing but grasping cynicism and petty personal corruption. Neither candidate sacrifices for this nation. Instead, they sacrifice our nation on the altar of their own ambition. In calling out Trump’s lack of sacrifice, Khizr Khan condemns his own candidate.

Article Link to The National Review:

The Ukrainian State Treaty: An Offer Putin Can’t Refuse

Why a 1955 neutrality agreement might be the perfect model for a strategic and successful deal for Moscow, Washington, and Kiev.

Foreign Policy
August 2, 2016

In late June, Russia’s Defense Minister Sergei Shoigu surprised Western observers when he announced the removal of 50 top naval officers, including both the commander of the Baltic Fleet and his chief of staff, for “dereliction of duty” and “distortion of the real state of things.” Alexey Arbatov, a member of the research council of the Russian Ministry of Foreign Affairs, responded to the news with a cautionary note for Russian President Vladimir Putin: “NATO deploys a battalion, we respond by deploying an army. If we want to make Sweden and Finland join NATO, there is no better way to do it.”

In considering what Putin’s true and ultimate goals really are — and whether this culling of senior officers is an indication that he’s changed his tune about confronting the United States and its NATO allies or his domineering plans for Ukraine — the real question for Washington is this: Do these changes provide an opening for a new, more mutually beneficial relationship with Moscow?

While on the one hand, it would be a mistake for Washington and its NATO allies to assume that Putin has abandoned his long-term goal of dominating Russia’s “near abroad,” particularly the Baltic littoral and Ukraine — he’s already paid a high price at home and abroad to prevent Ukraine from slipping any further into NATO’s orbit. But it would also be wrong to conclude that Putin’s recent personnel changes in the Baltic military command structure are not meant to scale back the escalating tensions in the Baltic region. These very tensions have inspired an unprecedented level of military cooperation among Swedes, Finns, Germans, Poles, Lithuanians, Latvians, and Estonians, not to mention the United States.

Moreover, Russia’s deteriorating economy, its costly defense buildup, and unrelenting war with Turkic Islamists in the Northern Caucasus may now incline Moscow toward a strategic accommodation with the West. If so, Ukraine may be a good place to begin.

In contrast to Estonia, Latvia, and Lithuania, Ukraine is not a NATO member; it’s currently a political no-man’s land wedged uncomfortably between NATO and Russia. Putin justifies his actions in Crimea and Eastern Ukraine by insisting that, “if we do nothing, then at some point, guided by the same principles, NATO will drag Ukraine in.” Putin’s statement makes clear that Russia does not want to lose control of the southeastern half of the oil-rich Donbass along with access to the Caspian Sea and Moscow’s ally, Iran. More important, many of Putin’s comments at news conferences and in public speeches equate NATO’s threat with NATO expansion, implying that he may be receptive to a guarantee from the United States (and NATO’s 28 member states), that the West will not insist on incorporating 35-40 million incurably anti-Russian Ukrainians into NATO.

In considering strategic solutions that would satisfy Western, Ukrainian, and Russian strategic interests, and guarantee both Ukrainian independence and Russian national NATO security interests, few examples of successful agreements on territorial and political governance come to mind. Yet one stands out: the Austrian State Treaty.

Signed in 1955, the Austrian State Treaty was designed to reestablish Austria as a separate, independent state. To attain this goal, representatives of the governments of the Soviet Union, United Kingdom, United States, and France agreed that in exchange for the restoration of Austrian national sovereignty and political independence, the Austrian Republic would declare its total and unconditional neutrality. (Additional provisions in the treaty prohibited unification with Germany or the restoration of the Habsburg monarchy ensuring both Austria’s sovereignty and democratic future.) Specific language safeguarding minority rights for Austria’s Croatian and Slovenian citizens was also included. Though Austria’s neutrality was not explicitly promised in the text of the treaty, the Austrian government agreed to declare neutrality in October 1955 after all four Allied countries withdrew their troops from Austrian territory, which had been partitioned into occupation zones since the end of World War II. Austria’s parliament enacted neutrality, as well as a ban on all foreign military bases, on Oct. 26, 1955.

Austria’s model of neutrality restored Austrian independence and provided the Soviets and the western Allies with security arrangements that both sides considered to be essential. The Soviets incorporated its conquered territories into the Warsaw Pact alliance while the West German state became part of NATO. War was avoided and today, the Warsaw Pact’s former members are in the European Union and Austria has 18 representatives in the European Parliament. Under the circumstances it seems reasonable to ask whether a similar, contemporary “Ukrainian State Treaty” modeled on the Austrian precedent could perform a similar service for Europe.

Ukrainian neutrality would certainly provide Putin with the conditions he insists Russia actually wants — a permanent barrier to NATO’s eastward advancement. A Ukrainian state treaty that includes provisions banning all foreign bases and all foreign forces on Ukrainian territory should allay Moscow’s fear that Ukraine could become a platform for the projection of Western military power into Eastern Europe. New territorial arrangements that allow Ukraine to shed territory it no longer controls — territory populated with ethnic Russians — in return for Moscow’s commitment to end hostilities and recognize the inviolability of Ukraine’s borders would allow Ukraine to focus its efforts on building a free and prosperous society. A free, independent Ukraine at peace with Russia would likely attract massive investment from the West.

For its part, Moscow would have to agree to demilitarize its border with Ukraine and promise not to interfere with the conduct of Ukraine’s internal affairs. Moscow would also have to commit itself to the regulated, but free and uninterrupted movement of commerce and people across the Russo-Ukrainian Border. Russians or Ukrainians who opt to move to new locations as a result of the territorial arrangements could be assisted and compensated by the parties to the agreement. Specific language guaranteeing minority rights to Ukraine’s native Russians and to its many other minorities could be modeled on the language in the Austrian State Treaty.

Once a Ukrainian state treaty is signed and hostilities are ended, the West’s economic sanctions could be lifted. Moreover, Moscow could withdraw its forces from its western borders and concentrate instead on defeating Islamist terrorism inside and along Russia’s periphery. The treaty would also enable Moscow to influence the deteriorating situation around Christian Armenia and keep pressure on Islamist Turkey.

Strategically, it’s an offer Putin might well accept. Putin gets to keep what he already controls and neutralizes an alleged threat to Russia. He can present the outcome as a “win” for Russia. For the West, a Ukrainian state treaty provides a more profound strategic bargain; it creates the foundation for enduring regional stability when viewed in the context of Moscow’s current minimal requirements— that Ukraine pass a constitutional amendment on the special status of the Russian-controlled territory, an amnesty of the crimes of Russia’s armed proxies, and a special law on elections in that territory.

These points notwithstanding, if Moscow rejects Washington’s and NATO’s willingness to forgo the notion that “all nations have the right to freely associate with EU or NATO” in favor of Austrian-style neutrality for Ukraine, then, Moscow is effectively demonstrating its malevolent intentions towards Ukraine, Moldova and, for that matter, toward any state along Russia’s borders that seeks to maintain its political independence. Perhaps even more important, Moscow’s rejection of Ukrainian neutrality would constitute a severe slap-in-the-face for the German left as well as NATO’s southern European allies. These actors insist that Washington, not Moscow, is the source of trouble in Kiev and that Moscow’s interests are being treated unfairly.

Kiev’s reaction is more difficult to gauge. No doubt some Ukrainians will regard the treaty proposal as a concession to Moscow that puts Ukrainian independence at risk. Unfortunately, there is no certainty that NATO’s leaders will be any more willing to risk a direct military confrontation with Russia in the future than they are today. In fact, the opposite may well be the case.

There is, of course, no certainty that a future president can stand up to the forces of Washington’s neo-Wilsonian internationalists who want the United States and its allies to press for Ukrainian membership in NATO. These liberal internationalists will dismiss the “Austrian” alternative to eventual Ukrainian membership in NATO as a de facto acceptance of “spheres of influence,” a concept that Moscow and Beijing advocate.

Timing may turn out to be right for an accommodation between disputing parties — in this case, Moscow, Washington, NATO, and Kiev — that avoids war and allows life to go on. However, unless the next president is willing to explore the possibility, the West will not know just what Putin is prepared to accept — at least not until Russian ground forces move west across the Dnieper River.

Article Link to Foreign Policy:

Donald Trump Tries to Move Past Flare-Up With Khizr Khan, Ghazala Khan

Campaign rally tries to change the subject, but Republicans and veterans groups condemn the comments

By Beth Reinhard, Janet Hook, and Reid J. Epstein
The Wall Street Journal
August 2, 2016

COLUMBUS, Ohio—At his first campaign rally since a public spat erupted with the parents of a Muslim U.S. Army captain killed in Iraq, Republican presidential nominee Donald Trump sought to change the subject to economic issues and concerns he has about the course of the general election.

At his rally here, Mr. Trump didn’t mention the parents of Capt. Humayun Khan, whose speech last week at the Democratic convention touched off his campaign’s latest controversy. Instead, Mr. Trump said he was “afraid the election is going to be rigged,” echoing complaints he made during the Republican primaries despite his series of victories.

Meanwhile, many fellow Republicans didn’t have the luxury of avoiding Mr. Trump’s comments, which provoked a strong negative reaction among veterans groups that are typically aligned with the GOP. The responses showed the awkward position some Republicans are in as they try to condemn Mr. Trump’s remarks while not renouncing his candidacy.

GOP Sen. John McCain of Arizona, a former prisoner of war and the party’s 2008 nominee, said Monday that he “cannot emphasize enough how deeply I disagree with Mr. Trump’s statement” disparaging Mr. and Mrs. Khan’s convention address.

“I hope Americans understand that the remarks do not represent the views of our Republican Party, its officers, or candidates,” he added.

Republican National Committee chairman Reince Priebus on CNN said, “I believe that these Gold Star families are off limits,” but he dodged a question of whether Mr. Trump should apologize. Gold Star families are those who have had a loved one killed in combat while serving in the U.S. Armed Forces, like the Khans.

Meanwhile, Mr. Trump’s remarks left unfazed his core supporters. “He speaks his mind at a time when political correctness is ruining this country,” said 62-year-old Becky Engel, who runs a wellness company and attended Monday’s Trump rally. “I like that he’s a straight shooter.”

The controversy came as the latest polls showed Democrat Hillary Clinton climbing back into the lead over the Republican. A CNN poll released Monday found Mrs. Clinton gaining 7 percentage points from before the Democratic convention, giving her a 52%-to-43% lead, while a CBS News poll out Monday showed Mrs. Clinton with a lead of 46% to 39%, compared with a tie of 42% to 42% before her convention.

The clash began after Khizr Khan, the father of Capt. Khan, chided Mr. Trump last Thursday for wanting to temporarily ban Muslims like his son, who died saving his troops from a suicide bomber, from entering the U.S.

“If it was up to Donald Trump, he never would have even been in America,” Mr. Khan said at the Philadelphia convention. “You have sacrificed nothing, and no one,” he added in a rebuke of the New York businessman’s lack of military service.

Mr. Trump said Mr. Kahn “viciously attacked” him, and theorized that their faith explained why his wife, Ghazala, standing beside him on stage, “had nothing to say.”

That led to a Washington Post opinion piece written by Mrs. Khan explaining that it was her grief, not her Muslim faith, that prompted her to refrain from making convention remarks.

To Trump’s critics, his sniping with the Khans encompasses what they see as his most glaring shortcomings: a short fuse and tendency to attack. To his fans here in central Ohio, the exchange reveals the qualities they cherish most about Mr. Trump.

“I would rather have someone who is aggressive and doesn’t just sit back and let people walk all over him,” said 67-year-old retiree Mary Funkhauser. “Trump not wanting Muslims to come into the country has nothing to do with [Mr. Khan’s son] who died, he’s just trying to protect the country.”

In an interview, Mr. Khan described himself as an independent voter who would be happy to speak in front of Republican groups. He hasn’t made political donations to federal candidates from either party, according to records at the Center for Responsive Politics.

On Monday, Mr. Khan, in an MSNBC interview, called Mr. Trump a “snake-oil salesman” and said he found Mr. Trump’s attack beyond the limits of decency.

Mr. Trump’s confrontational approach to the Khans is reinforcing the tensions with the political establishment in Ohio, a key presidential battleground state.

Ohio Gov. John Kasich, a former rival who hasn’t endorsed him, was one of the first elected officials to rebuke Mr. Trump. Ohio Sen. Rob Portman, who has endorsed Mr. Trump amid a tough re-election campaign, said Monday that he didn’t agree with Mr. Trump’s remarks.

“Captain Khan was an American hero who gave his life for his country,” said Portman campaign spokesman Michawn Rich. “As he has said previously many times, Rob does not agree with the idea of banning people from entering the country based on their religion.”

The harshest criticism came from Mr. McCain, who said, “While our party has bestowed upon him the nomination, it is not accompanied by unfettered license to defame those who are the best among us.”

Mr. McCain is facing a Republican primary opponent who Monday claimed the senator’s attack on Mr. Trump showed he is in league with the Democrats.

Of the 22 Republican senators facing election this November, only one, Ron Johnson of Wisconsin, would consent to an interview about Mr. Trump’s comments about the Khan family. He said they weren’t helping his re-election effort or Mr. Trump’s campaign.

“Campaigns need to be disciplined,” Mr. Johnson said. “Anything that distracts us from core issues…is not helpful to his campaign or to our campaign.”

Veterans of Foreign Wars, one of the largest advocacy groups in the U.S., whose convention gave Mr. Trump a rousing welcome last week, issued a statement denouncing his treatment of the Khans.

“Election year or not, the VFW will not tolerate anyone berating a Gold Star family member for exercising his or her right of speech or expression,” said Brian Duffy, national commander-in-chief of the VFW. “There are certain sacrosanct subjects that no amount of wordsmithing can repair once crossed.”

Among Mr. Trump’s defenders Monday was Rep. Lou Barletta, a Pennsylvania Republican who introduced Mr. Trump at a rally last week in Scranton. Mr. Barletta on Monday said attention to the Khan family is “a media question” that most voters don’t care about.

Article Link to The Wall Street Journal:

Donald Trump Tries to Move Past Flare-Up With Khizr Khan, Ghazala Khan