Friday, November 18, 2016

Friday, November 18, Morning Global Market Roundup: Rising U.S. Yields Help Dollar To 13-1/2 Year High, Asian Shares Slip

By Hideyuki Sano 
November 18, 2016

Asian share markets weakened on Friday as rising U.S. bond yields carried the dollar to a more than 13-1/2 year high against a basket of major currencies, fueled by expectations that President-elect Donald Trump's policies will lead to higher interest rates.

The post-election shift in expectations has left Asian stocks vulnerable to investors potentially rotating funds out of emerging markets to the United States.

MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.4 percent to hover just above its four-month low touched earlier in the week. It looks set to log its fourth straight week of losses.

The dollar's rise, however, was a boon for Japan's exporter-driven Nikkei average, which rose 1.0 percent to a 10-month high.

On Wall Street, the benchmark S&P 500 index rose 0.5 percent to within a hair's breadth of its record high, as the prospect of higher interest rates boosted bank stocks and consumer discretionary stocks were helped by favorable economic data and earnings.

U.S. consumer prices posted their biggest increase in six months, while housing starts surged to a 9-year high and jobless claims fell to the lowest level since November 1973.

The data supported the market's current theme that U.S. growth and inflation is likely to accelerate even faster if the Trump administration cuts taxes, increases fiscal spending, and becomes more protectionist on trade issues.

"The United States has been leading globalization but now voters said they had enough. They said they want to stop the fall in their wages with fiscal spending and protectionism. This is a very, very big change in trend," said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui Asset Management.

The U.S. elections prompted investors to ditch their once rock-solid conviction that the growth in developed economies will remain tepid because of tough competition from emerging market economies with lower wages.

As investors tried to adjust to the new environment, the 10-year U.S. Treasuries yield rose to 2.338 percent, its highest since January, compared to around 1.86 percent before the U.S. election.

The two-year U.S. Treasuries yield rose to a 10 1/2-month high of 1.071 percent.

Rising yields also reflect market players' reassessment of the Fed's policy path down the road, although Federal Reserve Chair Janet Yellen told the Joint Economic Committee of Congress on Thursday that Trump's election has done nothing to change the Federal Reserve's plans for a rate increase "relatively soon."

Yet market perceptions have clearly changed, with money market futures pricing in about a 90 percent chance of a Fed rate hike in December.

They are also pricing in one or more rate hikes next year, a sea change from before the election when they priced in a less than 50 percent chance of a 2017 rate hike, assuming the dovish Yellen would be extremely cautious in raising rates.

The dollar rose to 110.34 yen, its highest level since early June. The euro slumped to $1.0620, a low last seen almost a year ago.

The dollar's index against a basket of six major currencies rose above its "double top" touched in March and December of 2015. The index now stands at its highest level since April 2003.

"Double top" is a technical analysis term describing a currency (or other liquid asset) rising to a high, falling, and then rising again to the same level. Breaking the double top is often seen as a bullish sign by technical analysts.

A rising dollar is particularly a problem for some emerging economies that could see capital outflows if investors shift more funds to the United States.

The Mexican peso, which has been perceived as the most vulnerable to Trump's policies because of its big exports to the United States, weakened 1 percent after the central bank raised its policy interest rates by 50 basis points to defend the currency, as the market had expected a bigger hike.

Gold slumped to 5 1/2-month low of $1,211.6 per ounce and oil prices, which have been supported by hopes the Organization of the Petroleum Exporting Countries (OPEC) would reach an agreement to cap production at its meeting in Vienna on Nov. 30, were hit by the dollar's strength.

Brent crude futures > fell 1.0 percent in Asia to $46.01 per barrel, down further from Thursday's two-week high of $47.62.

Article Link To Reuters:

Oil Prices Fall As Strong Dollar Wipes Out OPEC Cut Optimism

By Jane Chung 
November 18, 2016

Oil prices fell in early trading on Friday as the strengthening U.S. dollar snuffed out rekindled hopes that OPEC might agree production cuts.

International Brent crude oil futures LCOc1 were trading down 13 cents at $46.36 per barrel at 0445 GMT, from their last close.

U.S. West Texas Intermediate (WTI) crude oil futures CLc1 were trading at $45.19 per barrel, down 23 cents, or 0.51 percent, from their last settlement.

A stronger U.S. dollar makes oil, which is priced in dollars, more expensive to buyers in other currencies.

"Oil traded in a sideways range overnight, as stronger U.S. dollar (overshadowed) optimism from Saudi's Energy Minister over a production cut agreement," said Jeffrey Halley, senior market analyst at OANDA brokerage in Singapore.

"With the dollar reigning supreme, Asia trading of crude should have a slightly heavy tone today as traders lighten up positioning into the weekend," Halley said.

The U.S. dollar index .DXY reached a 13-1/2-year high on comments by U.S. Federal Reserve Chair Janet Yellen as she said the rate increase could happen "relatively soon", indicating higher chances of the rate hike in December.

"Commodities were mixed, with the stronger dollar creating headwinds for the sector. Brent crude oil traded around $46 per barrel as investors saw an increasing chance that OPEC would reach an agreement on production cuts," Australian bank ANZ said in a note.

Saudi Arabian Energy Minister Khalid Al-Falih's optimistic comments on potential OPEC cuts came ahead of a meeting of key oil exporters' officials scheduled to take place between 0530 GMT and 0730 GMT on Friday.

The oil exporters' representatives - from Saudi Arabia, Algeria, Russia, Iran, Kuwait, Libya, Venezuela, Bahrain, the United Arab Emirates, Qatar and Nigeria - are meeting in Qatar's capital Doha to discuss details of a potential deal on output cuts.

"I think (OPEC deal) would have a short-term impact on the market...production cap could induce (oil producers) start producing more in the long term if prices go up," said Ric Spooner, a Sydney-based analyst at CMC Markets.

Although Saudi Arabia is leading to reach a deal on cutting outputs, Venezuela President Nicolas Maduro said the OPEC member would finance $2.2 billion from a Chinese credit line to boost oil joint ventures with China National Petroleum Corp CLc1 by around 277,000 barrels per day.

Iran's increasing output also casts doubt on whether an OPEC deal will be able to clear a persistent global oil glut. Iran overtook Saudi Arabia as India's top oil supplier for the first time in October, shipping data showed.

Article Link To Reuters:

JPMorgan Has Clutch Of CEO Understudies, People Guessing On Winner

By David Henry
November 18, 2016

JPMorgan Chase & Co (JPM.N) is once again facing questions about who will succeed its larger-than-life chief executive after Jamie Dimon was courted by the incoming U.S. president for the role of Treasury secretary.

Dimon, 60, has been running the largest U.S. bank for more than a decade and has faced questions about his longevity in the role before: when potential successors left, when he allowed an embarrassing $6.2 billion derivatives trading loss and, most recently, when he was diagnosed with throat cancer in 2014.

Although associates have said Dimon is not interested in the Treasury job, the recent invitation from a member of President-elect Donald Trump's transition team to apply for the job was a reminder to interested parties, including some investors, that his time at the helm is finite.

"He is not going to be CEO forever," said Walter Todd, chief investment officer at Greenwood Capital Management, which owns JPMorgan shares.

Although a sudden departure would not necessarily lead the investor to sell the stock, it would be "troubling," Todd said. "I would have to gain some comfort with who was taking over that role."

Dimon will not be easy to replace. He has won a higher valuation for JPMorgan stock than rival banks by shepherding it through the financial crisis without any quarterly losses, while earning relatively high returns on equity and explaining the workings of the bank to analysts as though he were a demanding business school professor.

He has been quick to point out that the JPMorgan board has a succession plan in place, whether he departs abruptly due to unforeseen circumstances – known colloquially as a "hit by a truck" scenario – or whether he takes part in a more gradual transition. The board does not publicize those plans. Doing so could prompt executives who are not the favorite to leave.

There are six key members of Dimon's management team who are often mentioned in discussions about succession. They range in age from 46 to 58, with the older executives seen as "hit by a truck" contenders, and younger ones thought to be potential CEOs-in-training.

Each has some qualities Dimon has identified as necessary for the next CEO – like moving through senior roles in different parts of the company, having experience with the investment bank, or having the temperament to be the public face of JPMorgan – but none clearly has them all.

JPMorgan's Got Talent

Gordon Smith, a 58-year-old Briton with computer science training, is chief executive of the consumer bank. He runs nearly half of JPMorgan, including Chase branches, credit cards, mortgages and auto loans.

Dimon hired him from American Express Co (AXP.N) in 2007. Although Smith has many of the skills needed to be CEO, he is close enough to Dimon's age that insiders see him as an unlikely long-term candidate.

Daniel Pinto, 53, who oversees corporate and investment banking, is also on the succession shortlist.

Dimon has entrusted Pinto with running the most volatile part of JPMorgan and dealing with the biggest corporate clients. A native of Argentina, Pinto spends much of his time working from JPMorgan's London office.

Doug Petno, who runs commercial banking, is another possible contender. With $212 billion in assets, his segment of the company is bigger than all but a handful of competitors. The 51-year-old came up through the ranks as lender and investment banker to the oil and gas industry.

Mary Erdoes, 49, who runs asset management, is also said to be in the running. Erdoes keeps a relatively low public profile as she travels the world to cater to the richest clients.

Chief Financial Officer Marianne Lake, who is 47, is also floated as a possibility. Lake already has a high profile, because she handles public presentations of the bank's financial results each quarter and has shown she can be as dextrous with numbers as Dimon.

But while Lake is known internally for grasping the details behind summaries she receives from business heads, she has not run any of JPMorgan's units day to day.

Chief Operating Officer Matt Zames is the youngest contender, at 46. In his role, he has the advantage of learning all segments of the bank from the inside out.

Dimon turned to Zames in early 2012 to clean up the portfolio of the bad "London Whale" derivatives trader that was costly not only in dollars but in reputation. Zames came from fixed-income trading, and has worked through financial crises going back to 1998.

'I Don't Want To Retire'

Dimon has said JPMorgan has a "deep bench" of talent, with several people who could take over. But he has been careful not to clearly show favorites.

When all goes right with succession plans, companies tend to announce a few months ahead of time that their leaders will be relinquishing the CEO title to a successor but remain on the board as chairman for a smooth transition. During the interim, other executives in the horse race tend to peel off, letting up-and-comers take over their own roles.

JPMorgan has resolved nearly all of its major legal investigations. Dimon received a clean bill of health after undergoing cancer treatment. And, apparently, he has no plans to join Trump's cabinet. So unless an unexpected event forces his hand, Dimon may not feel compelled to tell investors who is next.

"My retirement date, every time you ask me that, I'm going to say five years," Dimon said in response to a question last year. "I don't want to retire."

Article Link To Reuters:

What Is the Pound Telling Us?

By Jim O'Neill
Project Syndicate
November 18, 2016

I know from my 32 years in finance that the weird world of foreign-exchange markets can sometimes defy comprehension, and that trying to estimate sterling’s baseline, equilibrium value can be an exercise in futility.

Indeed, in the heady hour after the Brexit referendum polls closed on June 23, the British pound initially traded above a rate of £1.5/$1. This exchange rate turned out to reflect the now-ridiculous assumption that the “Remain” side had won. The pound has since declined 20% from that initial peak, and it has declined similarly relative to the euro.

Despite these discrepancies, we do have ways to gauge the pound’s post-Brexit performance reasonably well. For starters, we can compare its value today to its average value during the referendum’s campaign period, from February to June. Viewed from this perspective, the pound has declined by a still significant 13% since voters decided that the United Kingdom should leave the European Union.

Beyond looking at purchasing power parity, we also have models for estimating real-exchange-rate (RER) equilibrium, such as by identifying the exchange rate at which a country can achieve a sustainable current-account balance, or the rate that would allow an economy to reach full employment.

These models include Goldman Sachs’s Dynamic Equilibrium Exchange Rate and the Peterson Institute for International Economics’ Fundamental Equilibrium Exchange Rate. The GSDEER’s current estimated equilibrium rate is £1.44/$1.63, and the FEER’s is £0.88/€0.74, which implies that the pound is now undervalued – by anywhere from 14% to 24% against the dollar, and by as much as 20% against the euro – relative to its notional fair value.

These misalignments could be partly attributable to overvaluation of the other currencies. But let us assume that these estimates are at least roughly accurate, and that the pound is now broadly undervalued relative to the currencies of its major trading partners.

An optimistic interpretation is that, all things being equal, the pound’s decline implies an improved balance-of-payments position in the future, and that the UK economy will undergo a much needed rebalancing. To be sure, economic data released since the referendum suggest bullishness in the manufacturing sector, and the National Institute of Economic and Social Research recently forecast that the UK’s balance of payments could achieve a small surplus by 2019.

Of course, all things are not equal, so another interpretation is that the current equilibrium exchange rates will decline further, reflecting the market’s pessimism about the UK economy’s supply-side outlook and future productivity growth. Much will depend on whether the UK actually does leave the EU, and, if it does, on the government’s post-Brexit trade arrangements and economic policies.

Another, complementary interpretation is that the pound’s weakness, notwithstanding its potential cyclical benefits, reflects a risk premium on the UK, owing to its tricky EU exit path and other policy uncertainties.

We can estimate such risk premia by adjusting the RER equilibrium models to account for “normal” cyclical economic developments. Higher interest rates and low, stable inflation can give a country’s currency an edge over other currencies, so if we factor in the real-interest-rate differential, we can determine a notional price at which a currency should trade. When we do this for the pound against the dollar and the euro, the pound’s notional exchange rate is still substantially weaker than its actual spot rate, which suggests that the market has indeed factored in a considerable risk premium.

These estimates have public-policy implications. For starters, British policymakers should acknowledge that a declining pound is helpful, but not sufficient, for improving the UK’s external position and rebalancing its economy.

Second, the pound’s daily and weekly gyrations reflect a market assumption that a “hard” Brexit – whereby the UK forfeits its EU single-market access in order to restrict immigration – will negatively affect productivity growth. If the market is correct, then the UK’s future growth will depend even more on policymakers’ ability to boost post-Brexit trade. Moreover, policymakers will have to develop a sophisticated immigration strategy to attract high-skill workers, even as they restrict the movement of people overall.

Finally, if there is even a chance that foreign-exchange markets have built in risk premia for the UK (and it appears that there is), policymakers will have to be very careful not to suggest any other changes to the UK’s economic-policy framework. Any new threats to the Bank of England’s independence, in particular, could provoke a reckoning from the market.

Article Link To Project Syndicate:

The Democrats Double Down

The lesson the party is learning from its loss is that it didn’t spend and regulate enough.

By Kimberley A. Strassel 
The Wall Street Journal
November 18, 2016

We teach our children that what matters isn’t how we handle success, but how we handle defeat. Tell that to the collapsing Democratic Party.

Here’s what Democrats know: They got thumped last week. Donald Trump cleaned their clocks, despite his disorganization, controversies and lack of money. Senate Democrats blew at least seven competitive races, and they remain in the minority. House Democrats blew even more, and they remain in the minority. Democratic governors got thumped. Democratic state legislators got thumped. Democratic dog catchers—if there were any on the ballot—got thumped.

What Democrats should realize, because everyone else does, is that voters rejected both their policies (which have undermined middle- and low-income families) and their governance (which has fueled rage at a power-hungry federal government). Hillary Clinton proposed more of the same. Coal workers said no. Blue-collar union workers said no. Suburban moms said no. Small businessmen, drowning under Dodd-Frank and ObamaCare, said no.

Instead Democrats think last week was an accident. Mrs. Clinton tells donors that she only lost because of FBI Director Jim Comey.Barack Obama faults Hillary’s tactics—she didn’t spend enough time in the right states. Michael Dukakis says Democrats only lost because of the Electoral College. Rachel Maddow blames third-party candidates.

All this denial has cleared the field for Massachusetts Sen. Elizabeth Warren, the leading voice now calling on the party to recognize it has erred and needs change. She is telling the masses, however, that Democrats lost because they didn’t go big enough. They didn’t spend enough. Didn’t regulate enough. Didn’t socialize health care enough. Her prescription: Double down.

That is precisely what Democrats are doing. The party is falling in line to install a Minnesota radical, Rep. Keith Ellison,as head of the Democratic National Committee. No one seems concerned that Mr. Ellison is a progressive to make even Mrs. Warren blush, utterly out of tune with the concerns of average Americans.

The party’s only real interest? Mr. Ellison is black and Muslim, which checks the diversity boxes. But might not the party help itself more by electing a Latino leader? Maybe even a Latino woman? This is exactly the approach that Mrs. Clinton pursued by practicing identity politics and catering to specific blocs of voters, while alienating whites and ignoring core issues.

Nancy Pelosi in 2010 oversaw the loss of 63 Democratic House seats, the biggest wipeout in 70 years. After last week, her third failure to retake the House, that net loss figure remains virtually unchanged. Her response was to make another run for House minority leader, though Ohio Rep. Tim Ryan announced Thursday that he will challenge her.

New York’s Sen. Chuck Schumer this week attained his dream of ascending to lead his party in the Senate, and rumors are that he didn’t always agree with the obstructionist tactics of his predecessor Harry Reid. So he has already reached out to Mr. Trump. Sen. Schumer has an interest in doing so, if only to try to save the skins of the 10 Democrats up for re-election in 2018 who hail from states that Mr. Trump won—among them, Indiana, West Virginia, Montana and North Dakota.

But this assumes that Mr. Schumer will be running the show. The party’s two super-senators, Ms. Warren and Bernie Sanders, have other ideas. Both intend to rally the furies of the progressive movement to oppose any Republican reform. Even Mr. Schumer’s polite outreach to Mr. Trump provoked a progressive meltdown, with screams that Senate Democrats are already “selling out.” This might be why Mr. Schumer, in penance, threw his support behind Mr. Ellison to lead the party.

A few lone dissenters are shouting in the gale. Boyd Brown, a Democratic National Committee member from South Carolina (and therefore a dying breed), told Politico this week: “When you have Nancy Pelosi, Hillary Clinton, Chuck Schumer making the sale for you, that dog don’t hunt. It’s time to reshuffle the deck and get some younger folks in there with some more diverse backgrounds.” Mr. Boyd is likely to be ignored, and for reasons that go beyond his folksy reference to hunting dogs.

That’s because Democrats right now look a lot like the House Republicans of the early 2000s, who became ever more desperate to hold on to power in the face of scandal, laziness and a loss of principle. As more voters abandoned them, the GOP became ever more interested in culturally catering to a shrinking circle of supporters, in particular the religious right. Remember the explosion over Terri Schiavo? That was the GOP version of executive orders on transgender bathrooms.

Republicans had the benefit of a broad grass-roots movement in the Tea Party that soon after defined the terms of the party’s re-election: If it wanted power again, it would have to embrace a reform agenda for a center-right country. It would have to give up earmarks and self-dealing, focus on fixing taxes, entitlements, health care. The GOP took back the House in 2010.

In Mrs. Clinton’s defeat, progressives see their chance to finally run the Democratic Party. And they may run it—in the minority—for a very long time.

Article Link To The Wall Street Journal:

Liberals Who Claim History’s On Their Side Got A Cold Wake-Up Call

By Rich Lowry
The New York Post
November 18, 2016

President Obama won’t explicitly say Donald Trump is on the wrong side of history, but surely it’s what he believes.

The president basically thinks anyone who gets in his way is transgressing the larger forces of history with a capital H. During the 2008 campaign, he declared Sen. John McCain “on the wrong side of history right now” (the “right now” was a generous touch — allowing for the possibility McCain might get right with History at some future, undetermined date).

Obama has returned to this phrase and argument obsessively throughout his time in office. It is deeply embedded in his, and the larger progressive, mind — and indirectly contributed to the left’s catastrophic defeat on Nov. 8.

The notion that History takes sides ultimately traces back to the philosopher G.W.F. Hegel and borrows heavily from the (genuine and very hard-won) moral capital of the abolitionists and the civil-rights movement.

Obama is given to quoting Martin Luther King for the proposition that the arc of the moral universe bends toward justice. Whoever is deemed to be on “the wrong side of history” by progressives is always loosely associated with the opprobrium directed toward the Southern Fire-Eaters and the defenders of Jim Crow.

This means the left wields History as a weapon and makes it an occasion for constant self-congratulation. But there’s a downside.

For the left, History isn’t a vast, unpredictable, untameable force, but just like someone who might be standing in line next to you at Whole Foods. History is a board member of Planned Parenthood. It reads The Huffington Post and Vox, and follows Lena Dunham on Twitter.

It really cares whether transgender people are allowed to use the appropriate bathroom. History was probably hanging out at the Javits Center on election night and collapsed into a puddle of tears right around the time Wisconsin was called.

The political dangers of this point of view should be obvious:

It assumes that certain classes of people are retrograde. Why would Democrats bother to try to appeal to working-class white voters if they’re stamped with the disapproval of History?

According to Politico’s reporting, when poor Bill Clinton piped up at strategy sessions and wondered why Hillary’s campaign wasn’t trying to appeal to these voters, he was treated as an embarrassing relic, out of touch with the inexorable tide of the future.

It becomes a warrant for all manner of overreach. History evidently favored trying to get nuns to sign up for contraceptives they didn’t want — and morally opposed — and forcing small businesses to bake cakes for gay weddings. There was really no amount of coercion on behalf of social liberalism History wouldn’t heartily embrace.

And, if History is thought to have an ascendant electoral coalition (and a hell of a data operation), it creates an unjustified sense of electoral inevitably. This is what the theorists of the “emerging Democratic majority,” and most of the pundits on the left, bought into.

Sean Trende of RealClearPolitics has long been a scourge of this thesis, rightly pointing out the allegedly unstoppable coalition was vulnerable to relatively small changes in voting behavior and turnout, and of course larger events.

All that said, the evidence was pretty good for the proposition that welfare-state programs, once ensconced, could never be reversed and therefore must enjoy the approval of History. This assumption pervaded the ObamaCare debate. Upon passage of his health-care law, Obama said, “Tonight, we answered the call of history.”

Harry Reid lambasted Republicans for not “joining us on the right side of history” and compared them to — of course — defenders of slavery.

In retrospect, History might not have been so enamored of sprawling laws based on poorly thought-through economic premises, and might have looked more kindly on other, less disruptive means of getting more people insured. Regardless, when Republicans pass a repeal bill in one form or another early next year, it will constitute their most significant rollback of the welfare state ever.

Another progressive assumption is that the nation-state is bound inevitably to decline in importance, as supranational institutions like the European Union grow in power and cross-border migrations increase. In a trip to Germany in April, Obama deemed Angela Merkel’s policy of welcoming a massive wave of migrants as “on the right side of history.”

Never mind that its recklessness has caused a political backlash in Europe that’s still brewing. Obama believed the same of his own latitudinarian views on immigration, apparently never imagining how many people might consider it progress to tighten our borders rather than render them more porous.

Now, a president who so confidently associated himself and his cause with the tide of the future has presided over a political wipeout that’ll send much of his legacy into the dustbin. If nothing else, History has a keen sense of humor.

Article Link To To The New York Post:

Noonan: What To Tell Your Children About Trump

We are the world’s oldest democracy, we are good people, and we’ve been through shocks before.

By Peggy Noonan
The Wall Street Journal
November 18, 2016

Eight points and two anecdotes as we continue to digest this astounding election.

You don’t know a tree is hollow until you push hard against it and it falls. The establishments of both parties did not know, a year ago, that they were hollow trees. They thought themselves strong because they always had been, and people think what has been true will continue. Then suddenly the tree is pushed and falls. To me that is the symbol, the image of 2016: the hollowed trees and how easily they fell.

Election night 2016 was not like 1980. That year produced an outcome fully within the political norms: a former two-term governor won the presidency. This year’s outcome went beyond all previous norms. Twenty-sixteen was like nothing in our lifetimes. In the future people will say, “Where were you that election night?” the way they do for other epochal moments.

Much of the mainstream, legacy media continues its self-disgrace. Having failed to kill Donald Trump’s candidacy they will now aim at his transition. Soon they will try to kill his presidency. Any journalists who are judicious toward Trump, who treat him fairly or even as a human being, are now accused of “normalizing” him. This is a manipulation: It is a way of warning your colleagues to approach the president-elect with the proper hostility or be scorned. None of this will do our country any good.

The left is in enraged mourning. A better way forward would be: reflect, absorb, gather your strength as the opposition, constructively oppose. Lose the hissing rancor. Use that energy to rebuild your party.

Right now 60 million people are very happy, and hopeful. They haven’t taken to the streets in elation, so we can’t see them. They haven’t broken car windows in their joy. Respect their happiness.

This is my fear: The question we ask after every national election is, “Can we come together?” The question this year is more, “Do we even want to come together?” Have the two nations within our nation reached a point of permanent estrangement? If the cultural left eases up and the economic right loosens up, maybe things can be soothed.

I think many people intuitively sense this: The Trump era either really will work or really won’t. It’s going to be something good or a disaster, but it won’t be a middling thing.

This big, burly country can take it either way. The proper attitude now? Give him a chance, watch close, wish well. Cheer what’s sound, criticize what isn’t.

And this: trust America.

Five days after the election I met an Ethiopian immigrant on a street in Washington. We got to talking. He spoke of how bad it was in his old country, all the killing. He’d been here 15 years. “I love America,” he said. “It gave everything to me.” But he was deeply concerned by the election. He has two sons, 8 and 6. The younger got up Wednesday morning, saw the TV and burst into tears. Trump won! The boy calls Trump “the mouth man.” How could a bully be president? “He wept,” said the Ethiopian. “How do I explain it to him?”

I thought. Finally I said, “Tell him to trust America.” Tell him that we are the world’s oldest democracy, that we are a good people, that we’ve been through shocks and surprises, and that we have checks and balances. “If it turns out good,” I said, “we’ll be happy. If it turns out really bad, America has a way of making your stay in the White House not too long. But tell him to trust America as you did, and it gave you everything.”

He said he’d tell his son that. We warmly shook hands.

This isn’t the first story of frightened children I’ve heard since the election. It’s the third. When I told it to a friend, also foreign-born, and so America-loving that he chokes up when he quotes past presidents, he told me that his 5-year-old woke up after the election and sobbed at the news.

Trump supporters feel that the left did this, demonizing Mr. Trump and making him monstrous. There’s some truth in that. But even truer is that Mr. Trump himself scared the children of America for a solid year with his loud ways and rough manner—“the mouth man.”

What a great thing it would be if Donald Trump would take a day off from the presidential transition, go to a series of schools, bring the press, and speak to children, telling them that he has nothing in his heart but the desire to do good and help people. “I have children and even grandchildren,” he might say. “I love them. I will do my best, and I love you.”

Mr. Trump’s people seem to me right now proud, exhausted and painfully aware that they emerged victorious despite the daily pummeling from the establishment and elite media. No one gave them a break.

And they’re right. It was that way.

But it’s not sissy-ish to respect peoples’ anxieties. It doesn’t legitimize your foes’ criticisms to show sensitivity. All presidents since Washington, “the father of our country,” have been seen as a national father figure. It grates on conservatives to think like that. It grates on me. But that’s inevitable for kids who see the president on TV all the time in an un-parented country.

They need to see a little gentleness and good intent. Their parents would appreciate it. And it’s needed before the inauguration. Impressions will have hardened by then.

I end with a related personal note. I never interviewed Donald Trump throughout this year’s campaign. From the beginning he reminded me of men I grew up with, Trumps with no money—loud, unsmooth, rough opinions. Where you came from and who you were surrounded by has a bearing on your loyalties and can bend your thinking. I judged that I’d see Mr. Trump most clearly from a middle distance. So I didn’t go, talk, interview. Six weeks ago I called a Trump staffer I’d interviewed to check a quote. She returned my call from Trump Force One. We spoke, and then suddenly the phone seemed to drop and I heard, “Who’s that?” Then I heard, “Peggy, this is Donald.”

I won’t quote exactly what was said. No one put it off the record, but it felt off the record, and some of the conversation was personal. But I can describe it. He was dignified, hilarious and modest. He told me that I’d sometimes been unfair to him, sometimes mean, sometimes really, really mean, but that when I was he usually deserved it, always appreciated it, and keep it up. He spoke of other things; he characterized for me my career.

I’d heard of his charm offensive, but I’d be lying if I didn’t say how charming, funny and frank he was—and, as I say, how modest. How actually humble.

It moved me. And it hurt to a degree a few weeks later when I wrote in this space that “Sane Donald Trump” would win in a landslide but that the one we had long seen, the crazed, shallow one, wouldn’t, and didn’t deserve to.

Is it possible there are deeper reserves of humility, modesty and good intent lurking around in there than we know? And maybe a toolbox, too, that can screw those things together and produce something good?

Where there’s life, there’s hope. He’s lively. Let’s hope.

But whatever happens, trust America. She has a way of weathering through.

Article Link To The Wall Street Journal:

Don't Build Trump's Wall. Amend the Constitution.

By James Gibney
The Bloomberg View
November 18, 2016

I support expanding legal immigration. I believe in welcoming refugees. I think deporting 11 million illegal immigrants is cruel and impractical, some form of amnesty is inevitable and wise, and Donald Trump’s wall on the border with Mexico would be a $25 billion boondoggle.

I also believe that the U.S. needs to pass a constitutional amendment making it impossible for anyone living in the country illegally after that point to acquire legal permanent residency or citizenship, including for their children born here.

As part of a package of comprehensive immigration reforms, such an amendment could both curb illegal immigration and help heal one of the biggest partisan rifts facing the country. It would remove a huge incentive for illegal immigration. It would reinforce the importance of citizenship, bolster public support for legal immigration, and honor the 4.5 million would-be immigrants waiting patiently for their green cards. And it would affirm that we are a nation of laws, not loopholes -- surely one reason many immigrants are attracted to the U.S. in the first place.

Opponents will ask if this is necessary, arguing that the problem is fixing itself: The U.S. illegal immigrant population peaked in 2007. But how glad should we be that it has “stabilized” at 11 million? That’s basically unchanged since 2009, and still about three times its level in 1990. Annual apprehensions at the southern border are below their pre-recession levels, but the Border Patrol still intercepted 408,000 people in the 12 months ending in September. And despite much better enforcement, these apprehensions likely represent only about half of all those who cross the border illegally.

Moreover, as crises around the world have metastasized, and migrant smuggling has become a sophisticated global enterprise, the range of nationalities illegally crossing the border has expanded. With no end in sight to strife, conflict, poverty, and repression in Afghanistan, Syria, Libya, Central America, China, India, Pakistan, and swathes of sub-Saharan Africa, you can expect that trend to continue, and new pipelines for illegal migration into the U.S. to emerge. Let's also not forget that up to 40 percent of the illegal population in the U.S. are visa over-stayers, not border-jumpers -- so building a bigger wall is an imperfect solution.

Unless you have a heart of stone and $300 billion to pay for deportations of Biblical dimensions, the only just and rational solution to the existing illegal population is some form of amnesty. But here’s the problem: Without a change in laws and enforcement, one amnesty just creates a need for another. In 1986, when President Ronald Reagan signed a bill on immigration reform, he enabled nearly 3 million illegal immigrants to legalize their status. Here we are 30 years (and several other smaller amnesties) later and the illegal population is many times that.

There are many reasons for the post-1986 surge in illegal immigration, from lax border enforcement to unclear rules and weak penalties for hiring illegal workers. But regardless of which explanation you favor, another amnesty, however necessary, would encourage the belief among those seeking to enter the U.S. illegally that, eventually, they'll acquire legal status for themselves and their families.

Here's where a constitutional amendment comes in: By enshrining the principle that those who enter the U.S. illegally (or are here because they've overstayed their visas) can never attain legal status, it eliminates the prospect of future deliverance. If you're living here illegally, you're doomed to life in the margins and shadows.

Such an amendment would fall most heavily on those who couldn't qualify for any form of legal entry into the U.S. -- generally those of lower skill levels. That's not a bad thing. As Harvard University economist George Borjas has argued, low-skilled immigration, especially the illegal variety, hurts the fortunes of U.S. natives on the lowest rungs of the socioeconomic ladder, "redistributes wealth from those who compete with immigrants to those who use immigrants," and imposes a net fiscal cost on the native population in terms of government assistance.

Of course, such an amendment by itself wouldn't end illegal immigration. For many illegal workers, jobs that enable them to send money home to their families are worth the risk. And there's no question that such an amendment would lead to cruel separations, injustices, and bitter twists of fate.

But such an amendment might also deter vulnerable people from putting themselves in harm's way, like the countless Central Americans killed, robbed or injured on their journey north after hearing (often from migrant smugglers) that planned changes in immigration law might mean they'd be able to reunite legally with family members already in the U.S. It would also provide meaningful proof to Americans disturbed or disadvantaged by illegal immigration that their concerns are being taken seriously.

Such an amendment could be linked to passage of comprehensive reforms that include a path to legal residency and, eventually, citizenship for those illegal immigrants who have no criminal record. There's no getting around the need for some kind of amnesty. At the same time, if that isn't accompanied by measures to keep future border-jumpers from legalizing their status, the U.S. will be stuck in a Santayana loop, condemned to repeat a cycle that further corrodes the public’s faith in their country's ability to protect its borders.

Linking the two measures would also increase the odds of passage for both. Republicans would find backing an amnesty easier if they could argue convincingly that it won't happen again, and that the fight against illegal immigration has been strengthened. Democrats might sign onto an amendment blocking future legal status because few want to be on record supporting illegal immigration -- and because an amnesty will likely swell the ranks of their voters. To sweeten the pot further, and reward those who have actually abided by the law, any such bargain should also clear up the huge backlog of folks waiting to get their green cards.

Constitutional amendments rarely come easy. But given the stakes involved for both sides, this one is worth pursuing -- and after the political earthquake we’ve just witnessed, who’s to say it couldn’t happen?

Article Link To The Bloomberg View:

The Democrats Must Learn From The GOP And Rebuild

By Eugene Robinson
The Washington Post
November 18, 2016

The Republican Party is fractured by ideological divisions, led by an inexperienced and unpredictable president-elect, and quite possibly headed for a fratricidal civil war. The Democratic Party should be so lucky.

There is much unpleasant reality for Democrats to deal with right now, starting with this: The GOP controls virtually everything. The two-party system is, at best, one and a half.

Republicans won the presidency. They retained control of both houses of Congress. Soon, when Donald Trump appoints a replacement for the late Justice Antonin Scalia, they will re-establish a conservative majority on the Supreme Court. As far as the federal government is concerned, that's the whole trifecta.

But there's much more: After making significant gains last week, Republicans control both legislative chambers in 32 states -- and hold the governorships in 33. Some of the nation's most diverse and populous states, including Texas and Florida, are living under one-party Republican rule.

Democrats should reject the urge to take comfort in favorable demographic trends. It is true that within a generation, minorities will be in the majority -- and that minorities tend to vote for Democrats. But what would the country be like after 20 or 30 years of near-total Republican control? I'm sure most progressives would join me in not wanting to run that dangerous experiment.

Did Democrats lose the White House because their presidential candidate had baggage and was not perfect in every way? Come on, the Republicans nominated Trump, for heaven's sake, a man who bragged about grabbing women by the genitals. I don't have nearly enough space to list all the ways in which he disqualified himself. Yet he won.

The Republican Party is so splintered -- the establishment, the tea party wing, the fiscal tightwads, the defense hawks, the social conservatives, the libertarians and now the Trumpistas -- that sometimes I think of it as Afghanistan: with each faction having its own warlords and grievances and goals. Many of the demands they make upon Trump, House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell will be uncompromisingly extreme and mutually exclusive. There will be blood (metaphorically, of course).

Yet if Democrats expect to sit back and watch the GOP self-destruct, I fear they will be disappointed. Consider this fact: The Republican Party not only survived the Trump candidacy, but prospered. Why would the same not be true of a Trump presidency?

One of the biggest lessons I draw from the election is that the GOP basically came together behind its candidate. Despite all the Never Trump noise, most prominent Republican officials eventually fell in line. Some voiced strong reservations but said they would vote for him anyway, which amounted to an endorsement. Others, such as the Bush family, declined to publicly proclaim their opposition in a way that perhaps might have made a difference. Maybe they thought he was bound to lose anyway; if so, they miscalculated.

Another lesson, perhaps the most important one, is that the Democratic Party cannot hope to succeed by relying solely on its ability to win the popular vote in presidential elections.

Democrats have won the popular vote in 1992, 1996, 2000, 2008, 2012 and now 2016. That's six out of the last seven presidential contests. Yet the Republican Party is running the country, or at least most of it.

The Democratic Party cannot just wait for the next Barack Obama to come along. The president is a unique political talent of the kind that appears only once in a great while, when the stars magically align. Instead, Democrats need to do what Republicans did, which is to build from the ground up and start winning state and local elections.

A Democratic rebound has to begin with the basics: Getting people who agree with you to vote. Less than 60 percent of those eligible to cast ballots in last week's election bothered to do so. Conservatives who say this is "a center-right nation" may be right in terms of who votes, but they're wrong in terms of who could vote. Polls show that the country favors Democratic over Republican positions on most issues.

The Democratic Party should put its energy and money into connecting with potential voters at the grass-roots level. Trump made a bunch of pie-in-the-sky promises he can never keep. Democrats need a hopeful but realistic message recognizing that while most big cities prosper in today's globalized economy, much of the rest of the country suffers.

Democrats will win when theirs is the "big tent" party. Right now, though, the GOP circus is in town.

Article Link To The Washington Post:

Contenders For Key Jobs In Trump Administration

By Ginger Gibson and Richard Cowan
November 18, 2016

New names for possible appointees to U.S. President-elect Donald Trump's Cabinet have emerged, including 2012 presidential candidate Mitt Romney as secretary of state, as he works to fill administration positions ahead of his inauguration on Jan. 20.

A senior Trump official said the job of national security adviser has been offered to retired Lieutenant General Michael Flynn.

Trump announced on Sunday he would hire Republican National Committee Chairman Reince Priebus as White House chief of staff and named Stephen Bannon, former head of the conservative website Breitbart News, as his chief strategist and senior counselor.

Below are people mentioned as contenders for senior roles.

Treasury Secretary

* Steven Mnuchin, former Goldman Sachs Group Inc executive and Trump's campaign finance chairman

* Jeb Hensarling, U.S. representative from Texas and chairman of the House Financial Services Committee

* Jamie Dimon, JPMorgan Chase & Co chief executive officer

* Tom Barrack, founder and chairman of Colony Capital Inc

Secretary Of State

* Mitt Romney, 2012 presidential nominee and former Massachusetts governor

* Rudy Giuliani, former mayor of New York City

* Nikki Haley, governor of South Carolina

* Jeff Sessions, U.S. senator from Alabama and early Trump supporter, member of the Senate Armed Services Committee

* John Bolton, former U.S. ambassador to the United Nations under President George W. Bush

* Bob Corker, U.S. senator from Tennessee and chairman of the Senate Foreign Relations Committee

* Zalmay Khalilzad, former U.S. ambassador to Iraq

Defense Secretary 

* Jeff Sessions, U.S. senator from Alabama and early Trump supporter, member of the Senate Armed Services Committee

* Tom Cotton, U.S. senator from Arkansas

* Jon Kyl, former U.S. senator from Arizona

* Duncan Hunter, U.S. representative from California and early Trump supporter, member of the House Armed Services Committee

* Jim Talent, former U.S. senator from Missouri who was on the Senate Armed Services Committee

* Kelly Ayotte, outgoing U.S. senator from New Hampshire and member of the Senate Armed Services Committee

Attorney General

* Rudy Giuliani, former mayor of New York City

* Ted Cruz, U.S. senator from Texas

* Jeff Sessions, senior member of the Senate Judiciary Committee who takes a hard line on immigration

* Kris Kobach, Kansas secretary of state, architect of anti-immigration efforts who says he is advising Trump on immigration issues

* Pam Bondi, Florida attorney general

* Trey Gowdy, U.S. representative from South Carolina who headed the House committee that investigated the 2012 attacks on the U.S. mission in Benghazi, Libya

* Henry McMaster, lieutenant governor of South Carolina

Health And Human Services Secretary 

* Tom Price, U.S. representative from Georgia who is an orthopedic surgeon

* Rick Scott, Florida governor

* Rich Bagger, former pharmaceutical executive and former top aide to New Jersey Governor Chris Christie

* Bobby Jindal, former Louisiana governor

Homeland Security Secretary 

* Michael McCaul, U.S. representative from Texas and chairman of the House Homeland Security Committee

* David Clarke, Milwaukee county sheriff and vocal Trump supporter

* Joe Arpaio, outgoing Maricopa County, Arizona, sheriff who campaigned for Trump

EPA Administrator 

* Jeff Holmstead, energy lawyer, former EPA official during George W. Bush administration

* Mike Catanzaro, energy lobbyist, former EPA official during George W. Bush administration

* Robert Grady, venture capitalist, partner in private equity firm Gryphon Investors

* Leslie Rutledge, Arkansas attorney general

* Carol Comer, commissioner of the Indiana Department of Environmental Management

Energy Secretary

* Harold Hamm, Oklahoma oil and gas mogul, chief executive of Continental Resources Inc

* Kevin Cramer, U.S. Representative from North Dakota

* Robert Grady, venture capitalist, partner in private equity firm Gryphon Investors

* Larry Nichols, co-founder of Devon Energy Corp

* James Connaughton, chief executive of Nautilus Data Technologies and a former environmental adviser to President George W. Bush

Interior Secretary 

* Sarah Palin, former Alaska governor, 2008 Republican vice presidential nominee

* Jan Brewer, former Arizona governor

* Forrest Lucas, founder of oil products company Lucas Oil

* Harold Hamm, Oklahoma oil and gas mogul, chief executive of Continental Resources Inc

* Robert Grady, venture capitalist, partner in private equity firm Gryphon Investors

Commerce Secretary 

* Wilbur Ross, billionaire investor, chairman of Invesco Ltd subsidiary WL Ross & Co

* Linda McMahon, former World Wrestling Entertainment executive and two-time Senate candidate

Director Of National Intelligence

* Ronald Burgess, retired lieutenant general and former Defense Intelligence Agency chief

* Robert Cardillo, director of the National Geospatial-Intelligence Agency

* Pete Hoekstra, former U.S. representative from Michigan

CIA Director 

* Pete Hoekstra, former U.S. representative from Michigan

National Security Adviser 

* Michael Flynn, retired lieutenant general and former director of the Defense Intelligence Agency, was offered the job, according to a senior Trump official.

United Nations Ambassador

* Kelly Ayotte, outgoing U.S. senator from New Hampshire and member of the Senate Armed Services Committee

* Richard Grenell, former spokesman for the United States at the United Nations

* Peter King, U.S. representative from New York

U.S. Trade Representative

* Dan DiMicco, former chief executive of steel producer Nucor Corp

Supreme Court Vacancy

The Trump transition team confirmed he would choose from the list of 21 names he drew up during his campaign, including U.S. Senator Mike Lee of Utah, and William Pryor, a federal judge with the 11th U.S. Circuit Court of Appeals.

Labor Secretary

* Victoria Lipnic, U.S. Equal Employment Opportunity Commission commissioner and former Labor Department official during the George W. Bush administration.

* Andrew Puzder, CEO of CKE Restaurants.

Article Link To Reuters:

Japan's Abe Says After Meeting With Trump, He Is Confident Of Building Trust

By Steve Holland and Kiyoshi Takenaka
November 18, 2016

Japanese Prime Minister Shinzo Abe met with Donald Trump on Thursday seeking clarity on campaign statements by the president-elect that rattled the Tokyo government, later telling reporters he was confident Trump was a "trustworthy leader."

After the hastily arranged 90-minute meeting at Trump Tower in Manhattan, Abe told reporters: "The talks made me feel sure that we can build a relationship of trust." But he would not disclose specifics of the conversation because the talks were unofficial.

The conversation came as Japan's leadership was nervous about the future strength of an alliance that is core to Tokyo's diplomacy and security.

Abe and other Asian leaders were alarmed at Trump's pledge during his campaign to make allies pay more for help from U.S. forces, his suggestion that Japan should acquire its own nuclear weapons and his staunch opposition to the Trans-Pacific Partnership trade deal.

The Republican president-elect will succeed Democratic President Barack Obama on Jan. 20.

Describing his conversation as "candid" and held in a "warm atmosphere," Abe said: "Alliances cannot function without trust. I am now confident that President-elect Trump is a trustworthy leader."

He said he had agreed to meet again with Trump "at a convenient time to cover a wider area in greater depth." It was not clear if such a meeting would occur before Trump's inauguration.

Trump official Kellyanne Conway said earlier on Thursday in an interview with CBS that "any deeper conversations about policy and the relationship between Japan and the United States will have to wait until after the inauguration."

Trump officials did not immediately comment following the meeting with Abe.

Abe is a veteran lawmaker who worked closely with Obama on the 12-nation TPP trade pact, which was part of Obama's push to counter the rising strength of China and was a pillar of Abe's economic reforms.

Abe and Trump gave each other golfing gear as gifts during their meeting, according to a Japanese government statement.

Photographs taken inside the ornate meeting room at Trump Tower showed Abe and an interpreter along with Trump, his daughter Ivanka, her husband and Trump adviser Jared Kushner, and Retired Lieutenant General Michael Flynn.

Filling Administration Posts

A senior Trump official said on Thursday that Trump had offered Flynn the national security adviser position.

While it was not clear whether Flynn had accepted the job, a person familiar with the offer told Reuters: "When the president-(elect) of the United States asks you to serve, there is only one answer."

As the incoming Trump administration prepares to take office on Jan. 20, a Pentagon spokesman said he expected the Defense Department would conduct its first military briefing for Trump transition officials on Friday.

Other Obama administration agencies, including the Justice Department, were taking similar steps.

A brash outsider who has never held public office, Trump has been consumed since winning last week's election with working out who will occupy senior positions in his administration.

Democrats in Congress kept up their criticism of Trump's controversial selection of right-wing firebrand Stephen Bannon as senior counselor.

A spokesman for House of Representatives Democratic leader Nancy Pelosi said that during a meeting with Vice President-elect Mike Pence, she urged that the appointment be reconsidered.

Trump has been holed up in Trump Tower meeting with people who could fill senior roles on his governing team.

On Saturday, he plans to meet with Mitt Romney, the Republican nominee in the 2012 presidential election, and may discuss bringing him on as secretary of state, a source familiar with the meeting said. The source had earlier said the meeting would take place on Sunday.

It would be an extraordinary turn of events, given that Romney called Trump a "fraud" and urged Republicans to vote for anyone but the real estate magnate while the party was picking its presidential nominee.

Trump mocked Romney on the campaign trail, saying he "choked like a dog" during his unsuccessful 2012 run against President Barack Obama.

Trump's 1980's View Of Japan?

Japanese Finance Minister Taro Aso told reporters on Friday in Tokyo that it was beneficial for Abe to meet Trump before he becomes president, given the importance of Japan-U.S. relations.

Abe adviser Katsuyuki Kawai told Reuters he had spoken to several Trump advisers and lawmakers since arriving in Washington on Monday and had been told: "We don’t have to take each word that Mr. Trump said publicly literally."

Abe has boosted Japan's overall defense spending since taking office in 2012, while stretching the limits of its pacifist postwar constitution to allow the military to take a bigger global role. Defense spending still stands at just over 1 percent of GDP compared with more than 3 percent in the United States.

The United States is projected to spend $5.745 billion for U.S. forces in Japan in the current 2017 fiscal year. According to Japan’s Defense Ministry, Tokyo’s expenses related to U.S. troops stationed in Japan totaled about 720 billion yen ($6.6 billion) in the year that ended in March.

Some of Trump's campaign rhetoric suggested an image of Japan forged in the 1980s, when Tokyo was seen by many in the United States as a threat to jobs and a free-rider on defense.

The Trump adviser who spoke earlier in the week stressed a more positive view.

"Frankly, the prime minister has been more assertive and forthright in trying to make those changes to Japan’s global posture," he said.

Abe was expected to see Obama at a summit in Peru on the weekend. Hours before Abe and Trump met, Obama's secretary of state, John Kerry, and Japanese Foreign Minister Fumio Kishida met in Lima to discuss the Paris climate accord - a deal Trump has pledged to exit.

Some diplomats say that until Trump makes key appointments, it will be hard to assess his policies on security issues ranging from overseas deployments of U.S. troops, China's maritime assertiveness and the North Korean nuclear threat.

Article Link To Reuters:

With Trump Win, China Looks To Seize Asia Free Trade Leadership

By Michael Martina
November 18, 2016

China will position itself as free trade's new champion at an Asia-Pacific summit this weekend, with the Communist government seeking to project economic leadership as a U.S.-led Pacific Rim trade pact languishes under President-elect Donald Trump.

Beijing aims to capitalize on the Trump-induced coma of the Trans-Pacific Partnership (TPP), with President Xi Jinping selling alternate visions for regional trade at the Asia-Pacific Economic Cooperation (APEC) meeting this weekend in Peru.

"If the U.S. gives up its leadership here, of course China will take the role," said Tu Xinquan, a trade expert at Beijing's University of International Business and Economics, who has advised China's government on trade issues.

On the campaign trail, Trump labeled the TPP, championed by President Barack Obama, a "disaster". Obama last week abandoned efforts to win congressional approval for the TPP before Trump takes office, saying its fate was up to the President-elect and Republican lawmakers.

The China-backed Regional Comprehensive Economic Partnership (RCEP), a rival pact that excludes the United States, has become the front-runner for new free trade deals in the region.

The RCEP and the TPP -- which excludes China -- were viewed as parallel, if competing pathways, to an eventual broader Asia-Pacific free trade zone. But when Beijing hosted the APEC meeting in 2014 and pushed the Free Trade Area of the Asia-Pacific (FTAAP) as a framework for liberalizing Pacific Rim trade, the United States saw it as a distraction from TPP.

Now, the RCEP is likely the main avenue to a future FTAAP, giving China, as the largest economy among the deal's 16 countries, a driving role in the future of Asia-Pacific trade.

Obama had argued that the TPP would allow the United States and not China to write the rules of trade for the region.

'Geopolitical Realities'

China's efforts to push trade pacts coincide with other soft power initiatives aimed at cementing the country's economic influence, such as Xi's global One Belt, One Road infrastructure plan and the Beijing-led Asian Infrastructure Investment Bank.

Claire Reade, senior counsel at U.S. law firm Arnold & Porter and a former Assistant U.S. Trade Representative for China Affairs, said China would seek to contrast its commitment to the region with U.S. inconstancy.

"The geopolitical realities and China's economic diplomacy make it seem unlikely the smaller countries in the region would spurn China's leadership," she said.

In a sign of frustration with the United States among some TPP members, Peru's president has said that Pacific-rim countries can forge a new trade deal to replace TPP that includes China and Russia but not the United States.

This week, Peru's trade minister said it was engaging China on ways to get involved with RCEP negotiations. If Lima joined the talks, which is unlikely until existing members come to terms, it would be the only participant from the Americas and could encourage other TPP signatories in Latin America to follow suit.

Other TPP members, including staunch U.S. ally Australia, have said they will pursue other free trade options in Asia.

Malaysia has said it would shift its focus from TPP to RCEP, and Vietnam, which is also party to both deals, will shelve its ratification of TPP due to political changes in Washington.

More Off-Shoring

Trade experts say that in addition to dealing a blow to U.S. influence, TPP's failure could mean U.S. goods lose out on lower tariffs and market access to RCEP countries, including Japan, China and India. Proposed dates for an agreement have come and gone, but an RCEP deal could be reached as soon as next year.

Deborah Elms, who runs the Singapore-based Asian Trade Centre consultancy and advises governments, said the lack of U.S. involvement in future trade deals could spur more off-shoring by U.S. companies.

"If you want to take advantage of RCEP, you need to be in Asia to service Asian markets. That means you need to be physically present with at least some part of your operation," Elms said.

Governments in the region should take advantage of RCEP momentum, she said.

"I would be trumpeting loudly from the rooftops ... Put your whole global operations here to take advantage of the place that is still open for business."

The role-reversal on free trade zones and other uncertainties stemming from Trump's election bolsters China's image, Douglas Paal, vice president for studies at the Carnegie Endowment for International Peace, said at a forum in Beijing on Wednesday.

"Withdrawing from trade agreements, talking about shaking up alliances, talking about pulling out of the climate change agreement, talking about pulling out of Iran – all of these make China look like the responsible stakeholder," Paal said.

Article Link To Reuters:

Globalization’s Last Gasp

By Barry Eichengreen
Project Syndicate
November 18, 2016

Does Donald Trump’s election as United States president mean that globalization is dead, or are reports of the process’ demise greatly exaggerated? If globalization is only partly incapacitated, not terminally ill, should we worry? How much will slower trade growth, now in the offing, matter for the global economy?

World trade growth would be slowing down, even without Trump in office. Its growth was already flat in the first quarter of 2016, and it fell by nearly 1% in the second quarter. This continues a prior trend: since 2010, global trade has grown at an annual rate of barely 2%. Together with the fact that worldwide production of goods and services has been rising by more than 3%, this means that the trade-to-GDP ratio has been falling, in contrast to its steady upward march in earlier years.

This disturbing trajectory, argue the mavens of globalization, reflects the resurgent protectionism manifest in popular opposition to the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP), and now in Trump’s electoral victory. It means that the benefits of openness and specialization are being squandered.

Causality in economics may be elusive, but in this case it is clear. So far, slower trade growth has been the result of slower GDP growth, not the other way around.

This is particularly evident in the case of investment spending, which has fallen sharply since the global financial crisis. Investment spending is trade-intensive, because countries rely disproportionately on a relatively small handful of producers, like Germany, for technologically sophisticated capital goods.

In addition, slower trade growth reflects China’s economic deceleration. Until 2011 China was growing at double-digit rates, and Chinese exports and imports were growing even faster. China’s growth has now slowed by a third, leading to slower growth of Chinese trade.

China’s growth miracle, benefiting a fifth of the earth’s population, is the most important economic event of the last quarter-century. But it can happen only once. And now that the phase of catch-up growth is over for China, this engine of global trade will slow.

The other engine of world trade has been global supply chains. Trade in parts and components has benefited from falling transport costs, reflecting containerization and related advances in logistics. But efficiency in shipping is unlikely to continue to improve faster than efficiency in the production of what is being shipped. Already, motor-vehicle manufacturers ship an automotive transmission back and forth across the US-Mexican border several times in the course of production. At some point, unpacking that production process still further will reach the point of diminishing returns.

So should we worry that trade is growing more slowly? Yes, but only in the sense that a doctor worries when a patient runs a fever. Fever is rarely life-threatening; rather, it is a symptom of an underlying condition. In this case, the condition is slow economic growth, also known as secular stagnation, caused by depressed investment, which in turn reflects financial problems and policy uncertainty.

This, then, is the underlying condition. Trade agreements like the TPP and TTIP address it only obliquely. Increased spending on infrastructure by governments, to boost investment and growth directly, is more to the point. But whether the Trump administration and the new US Congress can design and implement a program of productive infrastructure spending remains to be seen.

More generally, a political consensus is needed on growth-promoting policies, so that investment is not held hostage to political infighting. Whether this will be possible under Trump’s administration is another open question.

The story for cross-border flows of financial capital is even more dramatic. Gross capital flows – the sum of inflows and outflows – are not just growing more slowly; they are down significantly in absolute terms from 2009 levels.

But dramatic is not the same as alarming. In fact, it is mainly cross-border bank lending and borrowing that have fallen. Foreign direct investment – financial flows to build foreign factories and acquire foreign companies – remains at pre-crisis levels. So do cross-border borrowing and lending through stock and bond markets.

This difference reflects regulation. Having concluded, rightly, that cross-border bank lending is especially risky, regulators clamped down on banks’ international operations. In response, many banks curtailed their cross-border business. But, rather than alarming anyone, this should be seen as reassuring, because the riskiest forms of international finance have been curtailed without disrupting more stable and productive forms of foreign investment.

We now face the prospect of the US government revoking the Dodd-Frank Act and rolling back the financial reforms of recent years. Less stringent financial regulation may make for the recovery of international capital flows. But we should be careful what we wish for.

Article Link To Project Syndicate:

Ford Tells Trump No Lincoln SUV Production Going To Mexico

By David Shepardson
November 18, 2016

U.S. President-elect Donald Trump said on Thursday Ford Motor Co Executive Chairman Bill Ford Jr told him the automaker would not move production at a Kentucky plant to Mexico.

"I worked hard with Bill Ford to keep the Lincoln plant in Kentucky. I owed it to the great State of Kentucky for their confidence in me!" Trump posted on Twitter. "He will be keeping the Lincoln plant in Kentucky - no Mexico."

Ford has repeatedly said it has no plans to close any U.S. plants and likely could not do so under the terms of the current United Auto Workers contract that expires in 2019.

Ford spokeswoman Christin Baker said late on Thursday the automaker "confirmed with the President-elect that our small Lincoln utility vehicle made at the Louisville Assembly plant will stay in Kentucky."

"We are encouraged that President-elect Trump and the new Congress will pursue policies that will improve U.S. competitiveness and make it possible to keep production of this vehicle here in the United States," she added, in a statement.

The U.S. No. 2 automaker is planning to move some small-car production south of the border.

The company builds the Ford Escape and Lincoln MKC SUV at its Louisville assembly plant in Kentucky, where it employs about 4,700 people. It also has a separate truck plant in Louisville, where it builds pickups and larger SUVs.

Ford has endured scathing criticism from Trump over its Mexican investments for nearly 18 months.

The Republican candidate repeatedly said during his long presidential campaign that if elected he would not allow Ford to open a new plant in Mexico and would slap hefty tariffs on any Ford vehicles made in Mexico.

Ford said in April 2015 it planned to invest $2.5 billion to build two new plants in Mexico, adding 3,800 jobs in all. Earlier this year, Ford said it will invest a further $1.6 billion in Mexico for small-car production to start in 2018.

In September, Ford confirmed that all of the company's small-car production will leave U.S. plants and head to lower-cost Mexico by 2019, but no plants would be closed as a result.

Ford has repeatedly said no U.S. jobs will be lost because of the move - and it will produce two new vehicles at a Detroit area plant that built the small cars.

In October, Bill Ford said he had met with Trump to talk about his extensive attacks on the automaker's investments in Mexico.

Ford said Trump's criticism was "infuriating" and "frustrating" because of the company's extensive investments and employment in the United States.

Article Link To Reuters:

Salesforce's Revenue Forecast Beats Estimates, Shares Rise

By Narottam Medhora and Stephen Nellis 
November 18, 2016 Inc on Thursday forecast current-quarter revenue above analysts' estimates as it closed deals for its cloud-based sales and marketing software with a number of major customers, sending its shares 5 percent higher in extended trade.

The San Francisco-based company has consistently reported double-digit growth in recent quarters as companies shift to cheaper and easier cloud-based products, but it is facing growing competition from Oracle Corp and Microsoft Corp.

"Our checks indicate that Salesforce still has a number of very good secular growth drivers, including selling some of their newer cloud offerings and upselling activity into large customers is robust," said Wedbush Securities analyst Steve Koenig.

The results marked a sharp reversal from the previous quarter, when a lighter-than-expected revenue forecast prompted concerns about slowing growth. But this quarter the company closed large deals with customers including Citigroup Inc and Inc to help it get back on track.

Deferred revenue, a key metric for subscription-based software businesses, rose 23 percent to $3.50 billion in the third quarter. Analysts on average had expected deferred revenue of $3.42 billion, according to research firm FactSet StreetAccount.

"We expect to deliver our first $10 billion-year during our fiscal year 2018," Chief Executive Officer Marc Benioff said in a statement.

Salesforce stock rose 4.8 percent in extended trade to $78.74.

Benioff is looking to broaden the company's cloud offerings through new features, especially focusing on artificial intelligence.

The company, which launched its artificial intelligence platform Einstein in October, has made a number of acquisitions to build up its machine learning and big data analysis capabilities.

Benioff, who has grown increasingly active in politics and civic affairs in San Francisco, is also eager to make Salesforce a more prominent brand in the minds of consumer.

The company considered buying Twitter Inc earlier this year, but abandoned the pursuit last month amid investor concerns over the strategic merits and valuation of the deal.

Salesforce also lost out to Microsoft in a bid to buy LinkedIn Corp.

The competition between Microsoft and Salesforce is now intensifying on several fronts, with Microsoft's Dynamics product taking business from Salesforce among mid-sized customers. Microsoft also this summer launched a direct competitor to Salesforce's AppExchange for business software.

For the current quarter, Salesforce said it expected revenue of $2.27 billion to $2.28 billion, above analysts' average estimate of $2.24 billion.

Excluding items, the company earned 24 cents per share in the third quarter on a non-GAAP basis, beating the average analyst estimate of 21 cents, according to Thomson Reuters I/B/E/S.

Revenue rose 25.3 percent to $2.14 billion. Analysts had expected revenue of $2.12 billion.

However, on traditional GAAP measures of earnings, the company's net loss widened to $37.3 million, or 5 cents per share, in the three months ended Oct. 31 from $25.2 million, or 4 cents per share, a year earlier.

Up to Thursday's close, Salesforce's shares had fallen 4.1 percent this year, underperforming the 7 percent gain in the broader S&P 500 index.

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Why Trump Voters Should Love The TPP

By Mihir Sharma
The Bloomberg View
November 18, 2016

When he travels to Peru this weekend for an Asia-Pacific summit, U.S. President Barack Obama will have to admit that the Trans-Pacific Partnership, his signature trade pact, is very likely dead. President-elect Donald Trump swept to victory in part by railing against such massive trade deals. Today, few in Washington would dare to challenge the view that globalization has benefited cheaper foreign workers at the expense of hard-working Americans.

But Washington’s politicians, Donald Trump -- and, yes, his voters -- are mistaken about the TPP. Perhaps they haven’t noticed that poorer countries such as India fear the TPP as much as anyone in the U.S -- because such deals are designed primarily to benefit Americans, at least in the near term.

I don't mean to suggest that free trade has been bad for workers in India, China and other developing nations: It hasn't. Trade has lifted millions out of poverty across the world. When some on the American left bemoan the effect of trade on the working class, they are being as nativist as Trump. Their moral calculus consistently ignores the obvious benefits of trade for workers in poorer countries, and thus barely deserves to be called progressive.

But, even by those standards, they are mistaken about the TPP, which is a different kind of deal altogether. Nations can address the rules governing the global trade in goods in one of three ways. They can raise protectionist barriers to shut down trade -- a dead end that would further impoverish their most vulnerable citizens. The poorest 10 percent of Americans, for example, gain 62 percent of their purchasing power from trade.

Or they could do the opposite, lowering tariff barriers to keep goods flowing. Such initiatives have mostly run their course, however, given that tariffs in most countries are already the lowest they’ve ever been. In the U.S, tariff revenues are not even 2 percent of the total dollar value of imports.

Or they could focus on harmonizing regulations across borders in order to smooth out competition and make trade more "fair," at least as activists in the West have defined it. And this is precisely what the TPP does. For the first time, strict labor and environmental rules matching Western standards are being imposed in principle on all signatories, no matter how poor. A failure to enforce “acceptable” labor standards, for example, “cannot be excused on the grounds of resource allocation.”

Countries like Vietnam have committed to allowing effective trade unionism for the first time -- a commitment that has been made enforceable. And reforms in a range of other “behind the border” regulations have been addressed, including opening up government procurement to competition and ending the unfair advantages given to the public sector. The West has been trying to get trade rules to recognize these issues for years and developing counties have refused -- until the TPP. That’s why the deal is a game-changer for global trade, and why it worries developing-country governments so much.

Even countries like India, which isn't one of the 12 TPP members, know that if the deal goes into effect, they'll face pressure to carry out similar reforms if they ever want to join the pact. And once major countries sign up to a deal incorporating such standards, they have an incentive to introduce similar rules into other negotiations, such as those dealing with the Asia-based Regional Comprehensive Economic Partnership, or RCEP. Indeed, before Trump's victory, India’s trade negotiators had worried that had already begun to happen.

All of this is precisely what many trade skeptics in the U.S. claimed was needed in order to provide American workers with a more level playing field. But in the long run, workers from other nations will benefit too, as TPP's conditions force fairly dramatic changes in member countries. Vietnam will have to open up its cosseted state sector to competition, while Japan will have to do the same with its agricultural sector. Naturally, the adjustment could be painful, and these countries will have to work harder to compensate losers than the U.S. has. But workers and entrepreneurs will gain access to new protections and markets, increasing efficiency and creating new job opportunities.

The larger geo-strategic imperatives for the TPP haven’t changed, either. The deal was always meant as a concrete demonstration that the U.S. intended to remain a leader in the Asia-Pacific. China is embedded in the economies of the region; this would ensure that Asian nations continued to have an alternative. As Obama has repeatedly said, if the U.S. doesn’t set these rules for future trade, China will -- and that won’t help American (or Indian) workers at all.

Yes, the TPP isn’t perfect, but it is a major step forward for international trade -- and for workers everywhere. Trump, while campaigning, didn’t deny the need for trade altogether; he promised “smart” trade deals. It’s up to pro-trade Republicans in Congress, and America's trade partners, to explain to the president-elect why the TPP is, indeed, smart.

Article Link To The Bloomberg View:

Yellen Says Fed Could Raise Interest Rates 'Relatively Soon'

By Howard Schneider and Jason Lange 
November 18, 2016

The election of Donald Trump as U.S. president has done nothing to change the Federal Reserve's plans for a rate increase "relatively soon," Fed Chair Janet Yellen said on Thursday in Congressional testimony that included a pledge to serve out her term.

Yellen said the U.S. central bank would change its outlook as necessary as the new administration rolls out plans for perhaps hundreds of billions of dollars in tax cuts and additional government spending. She also suggested the new government keep in mind that the United States is near full employment and inflation may be rising.

"Markets are anticipating ... a fiscal package that involves a net expansionary stance of policy and that in a context of an economy that is operating reasonably close to maximum employment with inflation heading back to 2 percent," Yellen said, suggesting new programs focus on "policies that would improve ... long run growth and productivity."

There had been some uncertainty about how Yellen would interact with a new president who at turns during the campaign spoke favorably of the Fed's low rate policies, and yet also accused the Fed of acting politically to help Democratic nominee Hillary Clinton.

Trump, during his election campaign, had also said he would replace Yellen when her term expires. Asked directly by a member of the Joint Economic Committee on Thursday, Yellen said she planned to serve out her term as chair, which ends in 2018.

While the election has not affected matters yet, they may find themselves at odds if Trump, for example, pursues a roll-back of financial regulations.

On that topic, Yellen cautioned against any effort to "turn back the clock" on the Dodd-Frank financial regulations approved following the 2007 to 2009 financial crisis because that could make a repeat more likely.

For the time being, Yellen said, incoming economic data justified a rate hike "relatively soon" and, absent any dramatic changes, a gradual pace of hikes after that.

So far she said there was little risk the Fed had fallen behind the curve and would lose control of inflation.

"The evidence we have seen since we met in November is consistent with our expectation of strengthening growth and improving labor markets and inflation moving up," Yellen said. "The risk of falling behind the curve in the near future appears limited."

However the chair also acknowledged the uncertainty that may lie ahead as President-elect Trump rolls out his program.

"When there is greater clarity about the economic policies that might be put into effect the (Federal Open Market Committee) will have to factor those assessments of their impact on employment and inflation and perhaps adjust our outlook," Yellen said.

U.S. Treasury yields rose on Thursday after data suggested the U.S. labor market is tightening and inflation is beginning to gain traction, which prompted investors to sell government debt.

"Yellen is saying it's full steam ahead for a Fed hike in December," said Luke Bartholomew, fixed income investment manager at Aberdeen Asset Management. "The big question is what happens after that. Trump's election has given investors plenty of reason to question the lower for longer mantra."

The U.S. dollar rose to a 13-1/2-year high against a basket of currencies on Thursday as the bond market resumed its sell-off.

Central Bank Independence Produces Better Outcomes

Yellen also repeated the consensus among central bankers that remaining clear of politics was central to their job, a message the Fed has repeated to Congressional Republicans who have argued for closer oversight of monetary policy.

"There is clear evidence of better outcomes in countries where central banks can take the long view," Yellen said. "Sometimes central banks need to do things that are not immediately popular for the health of the economy."

The Fed may face pressure, given Republican control of the White House and both chambers of Congress, to hew to a more mathematical formula for setting rates, something central bankers in general argue should not fully displace their judgment.

Yellen spoke on a day when economic data showed continuing economic momentum, with consumer prices posting their largest gain in six months, new home construction soaring and new claims for unemployment benefits near 43-year lows.

The data underscored Yellen's generally upbeat assessment of where the country stands. There remains "room to run" in the U.S. recovery, Yellen said, and rate increases can likely proceed on a gradual basis. But she noted that wages were rising, growth had accelerated over the second half of the year, and the world economy was on a firmer footing than it had been in recent months when uncertainty about China and Europe had caused the Fed to postpone its rate increase plans.

"U.S. economic growth appears to have picked up," Yellen said.

Article Link To Reuters: