Sunday, June 11, 2017

How The British Right Went So Very Wrong

By E.J. Dionne Jr. 
The Washington Post
June 12, 2017

Britain’s election was a catastrophe for Conservative Prime Minister Theresa May and a personal vindication for Jeremy Corbyn, the Labour Party’s left-wing leader.

It was also the revenge of the young, whose voices go unheard because their turnout is usually low. Britain’s new generation taught a lesson to their counterparts around the world: Voting confers power.

But the unexpected outcome could produce new forms of conventional wisdom as misleading as the flawed punditry that enticed May to call the election in the first place.

It didn’t need to happen, because May had three years left in her term. Voters clearly resented being called to the polls for opportunistic reasons. May thought that because Corbyn was so unpopular and seemingly out of the mainstream, she could turn a relatively small Conservative Party majority into an overwhelming advantage in Parliament. She also thought she could marshal the nationalism reflected in Britain’s vote to leave the European Union by adding the far-right votes of the UK Independence Party to Conservative totals.

May forgot that 48 percent of British voters rejected Brexit and were still not happy about the outcome. They were looking for ways to strike back, and they did.

She and just about everyone else also underestimated how skilled a campaigner Corbyn would be. For example, Chuka Umunna, one of Corbyn’s critics among moderate Labour parliamentarians, acknowledged that Corbyn ran a “positive and dynamic campaign” that emphasized hope. The Economist, no friend of Corbyn’s, conceded that he “fought a strong campaign against all expectations.” The more sympathetic Observer credited Corbyn with achieving “a sensational result for Labour.”

Lord Stewart Wood, who was a top adviser to former Labour Party leader Ed Miliband, saw Corbyn’s strong showing as the definitive end of “Blairism,” the middle-of-the-road Labour politics associated with former prime minister Tony Blair.

In a telephone interview, Wood noted that Corbyn rode “a tide turning against austerity” after years of Conservative budget cuts. Like Bernie Sanders in 2016, Corbyn had mobilized an energetic grass-roots campaign and sophisticated social media network, Wood said.

And far from working politically in favor of the Conservatives as the traditional party of order, the terrorist attacks before the election hurt May. Corbyn’s criticisms of May’s cutbacks in the police forces, Wood believes, were particularly resonant because they linked the Labour leader’s argument against austerity to the issue of security. He added that many voters he encountered while campaigning door to door were “absolutely furious” over President Trump’s verbal assault on London Mayor Sadiq Khan after the London Bridge attack.

Matt Browne, who was an aide to Blair and is now at the Center for American Progress in Washington, agreed that Corbyn’s showing meant that for the “foreseeable future, centrist progressivism is on hold.” The more moderate left, he told me from London, needed to learn from “what Corbyn accomplished, especially in mobilizing the young.”

But given May’s unpopularity, Browne argued, “this is an election we could have won, and could have won handsomely.” There is some evidence, particularly in anti-Brexit London, that more moderate Labour candidates such as Umunna ran ahead of the national swing.

Thus the twin caveats to sweeping conclusions on the left: Its more moderate wing needs to acknowledge the mobilizing power of a clear and principled egalitarian politics and the increasingly progressive tilt of younger voters. But fans of Corbyn’s approach to politics need to come to terms with the fact that although he outran expectations, he lost the election. Labour still needs a strategy for winning dozens of additional seats.

Britain also defied trends in other Western countries toward the fragmentation of older party systems. This continued on Sunday in France, where President Emmanuel Macron’s year-old party surged past long-established rivals to its left and right in the first round of legislative elections.

In Britain, by contrast, Corbyn boosted the Labour Party vote to 40 percent, 9.5 points higher than it was two years ago. And even though the election was a disaster for May, the Conservative vote rose to 42.4 percent, a 5.5-point increase. It was the highest Labour share since 2001 and the highest Conservative share since 1983. The sharp decline of the Scottish Nationalists — they lost more than a third of their seats — further signaled a return to an earlier political era.

In other words, claims that everything has gone haywire in Western politics since Brexit and Trump’s election are exaggerated, as we are also likely to see in the German election this fall. And backlashes to Trump continue to push electorates in Europe toward the center or left. This certainly played a role in Macron’s victory in France last month and continued to strengthen his middle-of-the road political movement in Sunday’s voting.

As for May, she sought to recast British conservatism in a moderately nationalist way. It might be seen as Trump-lite, with more coherence than the American brand. She hoped to hold the metropolitan professionals while expanding her coalition to a restive working class far from the centers of power. It was a bold bet. But it failed.

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Big Tech Stocks Likely To Be Under Pressure Again After Apple Downgraded

-- Mizuho Securities downgraded Apple to neutral from buy on Sunday evening.
-- The five biggest technology stocks including Apple lost nearly $100 billion in market value combined during trading Friday.
-- Nasdaq-100 futures pointed to more tech losses on Monday.

June 12, 2017

After a drop in big technology stocks Friday caused the Nasdaq composite to post its worst week of the year, the shares were likely to come under pressure again on Monday after Apple shares were downgraded.

Mizuho Securities' Abhey Lamba downgraded the iPhone maker to neutral from buy on Sunday, saying the best case scenario is priced into the shares. The analyst echoed a common concern of investors taking profits in big technology stocks last week.

"The stock has meaningfully outperformed on a YTD basis and we believe enthusiasm around the upcoming product cycle is fully captured at current levels, with limited upside to estimates from here on out," wrote Lamba, who cut his 12-month price target to $150, which is about one dollar above where Apple closed Friday.

A Friday selloff pushed the Nasdaq down more than 1.5 percent last week, but the selling was worse among the biggest stocks. Apple, Alphabet, Microsoft, Facebook and Amazon lost nearly $100 billion in market value on Friday on no specific headlines, but rather investors questioning whether valuations for the names were getting ahead of themselves.

Nasdaq-100 futures were lower Sunday evening following the Apple downgrade.

"At 15x and 11x NTM EPS and FCF, the stock is trading near the upper-end of its recent valuation range and we believe it is tough to expect the multiple to expand," wrote Lamba. "With limited upside to EPS or FCF estimates, we think the stock is fully valued."

Apple, Facebook and Amazon are still up more than 27 percent so far in 2017. Alphabet is up 20 percent and Microsoft shares are 11 percent higher for the year. By comparison, the S&P 500 is up more than 7 percent year-to-date.

"Our most bullish case yields earnings of about $11 for FY18, which is only $0.50 above consensus," stated the Mizuho note on Apple.

This is the second week in a row a Wall Street analyst has bailed on Apple on a Sunday evening. Pacific Crest downgraded the stock to start last week to sector weight. There are now six analysts with hold ratings on Apple and 25 who rate it a buy, according to Despite the valuation concerns, zero Wall Street analysts have a sell rating on the shares.

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Comey Could Make Millions Off Of His Memoir

By Mark Moore
The New York Post
June 12, 2017


Fired FBI Director James Comey could get as much as $10 million for his memoir and already has Hollywood movie execs lining up to film the White House blockbuster, according to a report.

“Jim Comey’s story has everything, from White House intrigue to possible corruption and law breaking. His explosive story makes ‘West Wing’ and ‘House of Cards’ on a par with Mister Rogers,” The Daily Mail reported, citing an acquisition editor for a New York publishing house.

“When his proposal hits my desk, I’ve already been authorized to offer $10 million.”

The $10 million payday would put Comey on par with former President Bill Clinton and his wife, Hillary Clinton.

“I know one top drawer producer who’s already talking to stars to cast the Comey role. He has to be tall, good-looking and a Jimmy Stewart-John Wayne-hero type. I was mesmerized when I spent the whole day watching Comey testify,” a movie-TV agent told the website.

Comey testified at a Senate Intelligence Committee hearing last Thursday about Trump asking him to curb and investigation into former national security adviser Michael Flynn.

Trump fired Flynn in February after reports revealed he had met with a Russian ambassador during the campaign and kept those meetings hidden from White House officials.

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A Single-Payer Test Drive

If Democrats are serious, why not try it out in California?

By Review & Outlook
The Wall Street Journal
June 12, 2017

California’s state Senate recently passed a single-payer health-care bill, and we’re warming to the idea as an instructive experiment in progressive government. If Democrats believe the lesson of ObamaCare is that the government should have even more control over health care, then why not show how it would work in the liberal paradise?

The legislation guarantees free government-run health care for California’s 39 million residents—no co-pays, deductibles or insurance premiums—as well as virtually unlimited benefits. Patients could see any specialist without a referral and receive any treatment that their provider says is medically appropriate. Democrats seem to believe this will have no effect on the incentive to use health care.

A University of Massachusetts Amherst study commissioned by the California Nurses Association—which favors government-run health care—claims that single-payer would reduce health-care spending by $37.5 billion a year. This miracle would be achieved largely by slashing administrative costs as well as provider and drug reimbursement rates. According to the study, letting people get treated whenever and wherever they want would save money. We don’t think Jonathan Gruber did this study, but he could have.

The study also asserts that California could reallocate $225 billion a year in Medicaid, Medicare and ObamaCare spending for single-payer assuming a federal waiver. Thus the legislature would only have to come up with $107 billion.

The Senate didn’t pass the bill with a funding mechanism, leaving that to the Assembly. The Senate appropriations committee contemplated a 15% payroll tax, but the nurses’ study suggests instead a 2.3-percentage point increase in the state sales tax (to 9.55%, not including local add-ons) and a 2.3% business gross receipts tax on revenue exceeding $2 million. The latter would be baked into the cost of everything from a taco to a Tesla. The lesson here would be to show middle-class taxpayers that there aren’t enough rich people even in Silicon Valley or Hollywood to pay for this.

Governor Jerry Brown has hinted that he might not sign such a bill, even rolling out the Latin phrase “ignotum per ignotius” to describe it. “In other words,” he said, “you take a problem and say, ‘I’m going to solve it by something that’s even a bigger problem,’ which makes no sense.” But if Mr. Brown believes this, maybe he should sign it and force progressives to live with the consequences before they foist another health-care experiment on the entire country.

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Uber Board To Discuss CEO Absence, Policy Changes

By Joseph Menn and Heather Somerville
June 12, 2017

Uber Technologies Inc's [UBER.UL] board will discuss Chief Executive Travis Kalanick temporarily stepping away from the embattled ride-hailing firm and consider sweeping changes to the company's management practices at a meeting on Sunday, according to a person familiar with the situation.

The person briefed on the matter said the board will discuss Kalanick taking time off from the company. The discussion involved the possibility that Kalanick might return in a role with less authority, this person said, either in a position other than CEO or as CEO with narrower responsibilities and subject to stronger oversight.

The source said it is not clear that the board will make any decision to change Kalanick’s role. The board is expected to adopt a number of internal policy and management changes recommended by outside attorneys hired to investigate sexual harassment and the firm's broader culture. The outside lawyers made no recommendation about Kalanick.

An Uber spokesman had no comment. Kalanick did not immediately respond to requests for comment late on Saturday.

The meeting, which Uber has not publicized, could be a pivotal moment for the world's most valuable venture-backed private company, which has upended the tightly regulated taxi industry in many countries but has run into legal trouble with a rough-and-tumble approach to local regulations and the way it handles employees and drivers.

At the Sunday meeting, according to two people familiar with the matter, the seven voting members of Uber's board, including Kalanick, are expected to vote on recommendations made by the law firm of former U.S. Attorney General Eric Holder, which conducted a review of the company's policies and culture.

The review was launched in February after former Uber engineer Susan Fowler published a blog post detailing what she described as sexual harassment and the lack of a suitable response by senior managers. Fowler now works for digital payments company Stripe.

Uber's board will likely tell employees and the public of its decisions by Tuesday, one of the sources said.

Kalanick has developed a reputation as an abrasive leader, and his approach has rubbed off on his company. The 40-year-old executive was captured on video in February berating an Uber driver.

"I must fundamentally change as a leader and grow up," Kalanick said in a statement following the video's release.

Uber board member Arianna Huffington said in March that Kalanick needed to change his leadership style from that of a "scrappy entrepreneur" to be more like a "leader of a major global company." The board has been looking for a chief operating officer to help Kalanick run the company since March.

The report was prepared by Holder and partner Tammy Albarrán at Covington & Burling, which did not respond to requests for comment. It comes shortly after another law firm, Perkins Coie, submitted a separate report on sexual harassment and other employee concerns at the company.

On Tuesday, Uber responded to that report's findings by saying it had fired 20 employees for a variety of reasons, and was increasing training and adopting new policies. Uber said that report considered 215 cases encompassing sexual harassment, discrimination, unprofessional behavior, bullying and other employee complaints.

Recommendations For Tighter Controls

San Francisco-based Uber is valued at nearly $70 billion but has yet to turn a profit.

Some of the recommendations in Holder's firm's report would force greater controls on spending, human resources and other areas where executives led by Kalanick have had a surprising amount of autonomy for a company with more than 12,000 employees, one person familiar with the matter said. Uber's more than 1.5 million drivers worldwide are classified as independent contractors rather than employees.

Kalanick, along with two close allies, has voting control of the company.

The board's discussions come at a moment when Kalanick is facing a personal trauma: his mother died last month in a boating accident, in which his father was also badly injured.

Employees and former employees interviewed by Holder's team complained about sexual and racial bias, bullying and retaliation, according to people familiar with their accounts.

They said that Kalanick and his lieutenants had favorites who played by different rules than other employees, and that even those favorites were nervous that they could fall from grace, which they sometimes did. Uber declined comment on that characterization.

One of the issues that came to Holder’s team's attention, according to two people familiar with the matter, was the company’s handling of a crisis in India after one of its drivers was arrested for raping a customer.

Though the man was convicted in 2015, Kalanick and other executives became convinced that the crime was a set up by a local competitor, former employees said. Eric Alexander, the head of Asian business, shared medical records internally that he argued showed that the woman had been assaulted but not raped, people who spoke to him said. Alexander was fired this week; he did not return messages seeking comment. Uber confirmed Alexander had left the company but declined to discuss the matter further.

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Trump Is Not Destiny. Here’s What Is.

By Robert J. Samuelson 
The Washington Post
June 12, 2017

It’s time to take a brief break from President Trump. Whatever you think of him, there’s no denying that he dominates the news cycle. We seem to assume that the nation’s future depends on Trump’s fate, for better or worse. The reality is otherwise: The nation’s future also hangs on larger economic and social trends that no president can shape.

A new report from the congressional Joint Economic Committee (JEC) reminds us of this. The report examines the nation’s “social capital.” Now, social capital is an obscure academic term that, essentially, signifies the ability of people to work and play together — to cooperate and connect with others. The stronger a society’s social capital, the less isolated and powerless people feel. The news here is cautionary; our social capital is depleting.

The JEC study assessed social capital in four realms — family life, the workplace, religion and community — and found it weakening in all four. Here’s a brief summary of the report’s conclusions, which are based on scholarly studies and public opinion surveys.

●Family life: Marriages are down; out-of-wedlock births are up. In 2015, nearly a third of all children (31 percent) were being raised by single parents or no parent at all, up from 15 percent in 1970. Over the same period, births to single mothers jumped from 11 percent of all births to 40 percent. Marriage rates plunged. In 1970, there were 76.5 marriages for every 1,000 unmarried women over 15; by 2015, the rate was 32 per thousand.

●Work: The main trend was the gradual entrance of millions of women into the job market. In 2015, 74 percent of prime-working-age women (25 to 54) were in the labor force, up from 35 percent in 1948. However, there were social costs. There was more “reliance on markets for child care,” and “community-based” volunteer work suffered. Meanwhile, increasing numbers of men with lower levels of education dropped out of the labor force.

●Religion: Fewer Americans feel loyal to organized religion. In the early 1970s, about seven in 10 adults were members of a church or synagogue, and slightly more than half attended services at least once a month. Now, only slightly more than half (55 percent) belong to churches and synagogues, and monthly attendance has dropped to about 40 percent.

●Community: There’s been a broad erosion of public trust. In Gallup polls, only 36 percent have “a great deal” or “quite a lot” of confidence in the Supreme Court, but that rating is higher than for schools (30 percent), banks (27 percent), newspapers (20 percent), big business (18 percent) and Congress (6 percent). In addition, the share of the voting-age population that actually registered fell from 72 percent in 1972 to 65 percent in 2012.

The institutions that provide social stability and personal contentment seem to be in retreat. The fact that one-third of children are raised by single parents cannot be good. Neither is the loss of confidence in major institutions. As private institutions weaken, pressure mounts on government to fill the void, but the effect is to place more demands of government than it can meet, contributing to its unpopularity.

Remember, however, that some of these changes have also created huge benefits. Women’s entrance into the paid labor force has both raised household incomes and provided satisfying careers for millions. We must also guard against exaggerating adverse effects. The JEC study reports that parents still spend the same amount of time with their children as before, despite the pressures of balancing work and family. Similarly, some types of volunteering have increased since the 1970s.

Perhaps slightly faster economic growth and higher wages would alleviate some social and economic tensions. But economic growth is not a panacea for all of our problems and worries. Indeed, paradoxically, greater wealth and affluence are the causes of some of our discontents, as the JEC report acknowledges.

“The increases in dual-income and single-parent families reflect the rising affluence of our nation, not growing hardship,” it says. “Technological innovation reduced the amount of time it took to maintain homes. . . . Even the growth in single parenthood reflects rising affluence. More women are able to support children on their own . . . due to their increased earnings. So too, the public safety net for single parents, while by no means allowing a lavish existence, is sufficiently generous to facilitate single parenthood.”

To some extent, the future of the United States depends on Trump. But it depends even more on how these social and economic trends evolve — how we cope with them and whether we become a more cohesive society or a more contentious one. Trump is not destiny. For better or worse, we are.

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Global Economy Week Ahead: U.S. CPI And Retail Sales; Fed And BOE Meetings

The central banks of Japan and Switzerland also meet this week, while industrial production data is due from China.

By WSJ Staff
The Wall Street Journal
June 12, 2017

Wednesday will be busy in the U.S., with data on consumer prices and retail sales due, followed later in the day by a Federal Reserve monetary-policy decision. The Bank of England also meets to set policy this week, just days after the U.K. election caused new political turmoil.

Economists surveyed by The Wall Street Journal expect U.S. retail sales increased 0.1% in May from the prior month. The April report from the U.S. Commerce Department showed a 0.4% gain in consumer spending despite weak earnings at large brick-and-mortar retailers, as households boosted their spending in other areas.

The U.S. Labor Department’s consumer-price index rose a seasonally adjusted 0.2% in April from the prior month, but the annual increase slowed for the second straight month, to 2.2%. The lower trajectory for inflation has raised concerns for the Fed as it weighs further interest-rate increases this year. Economists surveyed by WSJ forecast CPI was unchanged in May from the prior month.

May industrial production figures from China (release time is Tuesday evening in the U.S.) are forecast to show growth of 6.4% year on year. This compares with April’s 6.5% expansion, which would signal that the world’s second-largest economy is slowly losing steam. Still, economists expect fixed-asset investment, a gauge of construction activity that will be released at the same time, to show a rise of 9% on year for the January-May period—compared with an 8.9% annual increase over the first four months of the year.

Economists almost unanimously expect the Fed’s interest-rate-setting committee to announce an increase in short-term interest rates, but they are split over when it will raise rates after that. Fed officials must weigh mixed economic signals, such as a strengthening labor market coupled with softening inflation. The central bank will release updated economic projections, and Fed Chairwoman Janet Yellen will speak at a press conference following the meeting. The communications will be watched for any details on the Fed’s planned timing for shrinking its $4.5 trillion holdings of bonds and other assets.

The Bank of England could be more inclined to maintain its loose monetary policy for now following Thursday’s surprising U.K. election results, in which Conservatives came up short of a majority in Parliament, creating political uncertainty and complicating Brexit talks.

The Swiss National Bank is expected to keep its deposit rate unchanged at minus 0.75% while reiterating its longstanding view that the Swiss franc is “significantly overvalued.” The franc’s value is key to Switzerland’s export-dependent economy, and the SNB has struggled for years to keep it from strengthening too much.

A number of other central banks will set monetary policy this week, including Turkey’s (Thursday), Russia’s (Friday) and Japan’s (Friday local time).

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