Thinking “Out of the Box”

London

19 January 2018

About twenty years ago, during the last era when US stock markets regularly set records and people were excited about it, the style box ruled the roost. An invention of Morningstar, it divided all equity funds according to two factors: the size of the companies they invested in (small, medium or large) and the style of investing they used to choose between them (value, core or growth). Every fund would fit into one of the nine boxes (small-cap value or large-cap growth, and so on). Fund companies would advertise their place in the style box in all their publicity, and their clients would expect them to stay in their box. “Style discipline” was expected, and “style drift” was always to be avoided.

These days, the style box is less dominant in thinking. There is an awareness that other factors may also be important, along with a fear that the box encouraged rigidity of thinking. Usually, the cliche has it that we should try to think “outside the box”; in the style box world, fund managers tried to stay inside the box. So if small-cap investments had worked out well and were now medium-cap, for example, they would feel the need to sell, even if they expected the stock to keep rising. The box system came to be held as a mechanism for encouraging groupthink and discouraging investor skill. But factors never go out of style.

Bear this in mind as we hear of the latest innovation, the factor box, announced today by MSCI. This takes account of extra layers of complexity, and it also appears to have been drawn up in such a way that it will not encourage blinkered thinking. Here are MSCI’s factors:

Beyond size, growth and value, they also look at momentum, volatility, liquidity, quality and yield. This gives a much more complete picture of the complexity that confronts investors, and includes all the factors that have been agreed by academics to have at least some validity as factors that can lead to long-term outperformance. (There are many hundreds more that have appeared in the literature but do not yet have that level of consent).

This box is more of an analytical tool than its Morningstar predecessor. For any fund or stock, it can show its exposure to each factor. It is perhaps more of a dashboard than a box. Here is MSCI’s illustration:

So the fund in this illustration has made a big bet on small-caps, and has a noticeable bias towards value. They are low-quality stocks with very low momentum – so this looks like almost exactly the kind of fund that it would have been wise to avoid over the last year or so.

This plainly fills a need. Factor investing, as style investing is largely now known, is the flavour of the month, and in the guise of “Smart Beta” is drawing lots of money into exchange-traded funds. In the process, the rigours of quantitative factor-based investing are giving way to the kind of mess that already typifies active investing. Several of the factors, such as quality or growth, lack clear definitions, and all can be measured in different ways. Some standardisation of terms should make it easier to avoid abuse. But the project is very complicated. To quote MSCI:

MSCI FaCS [Factor Classification Standard] is the framework and standard for evaluating, implementing and reporting factor allocations, based on commonly considered “factors” that have historically driven performance. It includes an extensive global equity factor structure – eight factor groups and 16 factors for more than 70,000 global securities. The factor classification can be viewed at the security level for stock selection or aggregate at the fund or portfolio level to analyze and compare factor exposures – historically key drivers of risk and return behavior over time.

This is a big task. To illustrate that further, this is a definition tree produced by SocGen for its own work on factors – there is a lot of leeway and a lot of complexity when drawing lines between the different factors at work in stock performance:

Let us hope that this helps to clarify thought, rather than simplify it and send it down its own tram-rails. It might also make life much harder for successful active managers, many of whom have made their living by exploiting one factor or another without labelling it as such. From now on, it will be easier to mimic successful managers passively, armed with a de-composition of their approach into factors.

Meanwhile, we now have clarity over which styles or factors worked best last year. The winner was growth. Wherever you were in the world, growth stocks crushed the index:

This does not mean that it would be wise to expect growth’s outperformance to continue. Indeed it had already levelled off in the last few months of the year. Growth is a long-used style of investing, but it has never been clear exactly what it is, even among its users. Many think of it as the “opposite of value”. Here is SocGen’s definition:

We define growth as the combination of four underlying factors: Year 1 and Year 2 EPS growth forecasts, and trailing 3-year EPS and Sales growth. Such measures can be problematic though, as historical growth rates are highly mean-reverting, whilst expectations for growth are often optimistic. As such, you often end up overpaying for growth and hence systematically buying growth stocks has historically led to negative excess returns. This is the reason why growth tends to be excluded from most smart beta and equity factor offerings. Whilst this exclusion would have hurt the performance last year, again the long-term evidence makes it hard to justify the existence of a growth premium.

I find this SocGen chart of long-term growth performance very telling:

Growth investing may have done well last year, but over the last quarter-century it has failed miserably even to keep up with the main market indices, barring a brief illusion of great riches at the top of the dot com boom.

Meanwhile, value has had a bad time of it of late. But if the various factors that generally indicate value (such as a low price/earnings or price/book, or a high dividend yield) are analysed separately, different factors of value have performed differently over time – and by far the most successful in the long term has been free cash flow yield:

It is interesting (and a little worrying) that this latest rally has been the first time in a quarter of a century when the market has penalised companies for reliably throwing off a lot of free cash. With the brief exception of the dot com crash (not an encouraging precedent), companies have regularly outperformed if they have a high free cash flow yield.

One last hint on value – it is much easier to find truly cheap stocks that should not be so cheap if you look among smaller companies. In terms of the old Morningstar box, SocGen shows that small-cap value was the way to go:

Persistence

One final point on measuring fund managers: outperformance gets harder from year to year. The latest numbers from S&P Dow Jones’ regular persistence tables, which look at how many funds that do well against the index in one year manage to repeat the feat, suggest that if anything you should take strong recent performance as a reason to avoid a fund. Here is just one example, showing how many US funds managed to stay in the top 25 per cent:

Now try to calculate the chances that you will choose one of the very few funds that beats its index three years in a row. It is no wonder that passive funds are selling so well.

 

 

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Fake News Awards: CNN ‘wins’ taking 4 out of 11 ‘accolades’ announced by Donald Trump


Donald Trump has announced his list of Fake News Award winners

The Highly-Anticipated 2017 Fake News Awards  (Below)

18 January 2018 • 6:42am

Donald Trump gave the broadcaster CNN four of his “fake news” awards on Wednesday as he used the gimmick to escalate his attacks on media.

The US president singled out The New York Times twice while the broadcaster ABC and the magazines Time and Newsweek were each mentioned once.

Claims of “collusion” between the Trump campaign and Russia – a topic which has overshadowed the presidency and is being investigated by a special counsel – was also named.

The so-called “awards” were presented in list form and specified particular stories about his presidency, some of which have previously resulted in apologies.

However the president was mocked online after a link he posted to the list, which was hosted on the Republican Party’s website, failed to load.

A spokesman for the party later said that the surge in traffic had crashed the website, noting it received more hits than ever before.

Details of the awards instead had to be garnered from what appeared to be an archived version of the website before it crashed.

CNN, the broadcaster that Mr Trump has repeatedly clashed with since taking office, was named in four of the 11 awards – more than any other outlet.

One was for when the broadcaster “falsely reported that candidate Donald Trump and his son Donald J. Trump, Jr. had access to hacked documents from WikiLeaks.”

Another was for when it “falsely reported about Anthony Scaramucci’s meeting with a Russian”. Mr Scaramucci was briefly in charge of White House communications.

A third was for when the broadcaster “falsely edited a video to make it appear Mr Trump defiantly overfed fish during a visit with the Japanese prime minister”.

The fourth award was for when CNN “falsely reported that former FBI Director James Comey would dispute President Trump’s claim that he was told he is not under investigation”.

The wording – which included capital letters for the words “falsely” – was constructed by the Republican Party and frames the stories in a negative light.

Reporters for the broadcaster, which has been in an escalating war of words with the president for more than a year, were rejecting his ‘fake news’ criticisms on Wednesday.

Other awards ranged from faulty predictions about the stock market under a Trump presidency to inaccurate reporting, including once instance – from ABC News – that led to a suspension for the reporter involved.

A final award was given to general coverage of the Russian election meddling scandal, which has seen four Trump campaign figures charged with crimes.

That entry read: “And last, but not least: “RUSSIA COLLUSION!” Russian collusion is perhaps the greatest hoax perpetrated on the American people. THERE IS NO COLLUSION!”

There was also a list of 11 “results” from a Trump presidency that the media was urged to cover more, including “historic tax cuts” and victories against the terror group Isil.

Critics have seen the “awards” as another attempt by Mr Trump to undermine the free press and shout down broadcasters and newspapers who have broken revelations about him

However supporters see it as a tongue-in-cheek attempt to call out inaccurate reporting and challenge a media landscape that they believe is tilted against his presidency.

Mr Trump tweeted on Wednesday: “Despite some very corrupt and dishonest media coverage, there are many great reporters I respect and lots of GOOD NEWS for the American people to be proud of!”

A Republican Party spokesman wrote on Twitter: “Tonight, [the Republican Party website] saw more traffic than ever before. Even though the servers were scaled up, the interest was even greater than anticipated. Traffic is off the charts. Come back soon.”

The New York Times, which featured twice in the “fake news awards”, has admitted its “editorial board has been sharply critical of the Trump presidency, on grounds of policy and personal conduct”.

Therefore, “in the spirit of open debate”, it is devoting its editorial page to letters from Trump supporters on Thursday.

Newsweek has defended its reporting after being named in Trump’s “fake news awards”.

According to the GOP website, “Newsweek FALSELY reported that Polish First Lady Agata Kornhauser-Duda did not shake President Trump’s hand.” She did, but only after initially passing him to shake Melania Trump’s hand first.

A piece published by Newsweek on Wednesday said: “Despite the RNC’s [Republican National Committee] claim, a video clearly shows that he was ignored for the initial handshake.”

Mr Trump’s fake news awards are continuing to draw criticism.

However, Republican Governor Mike Huckabee has hit back at Senator Jeff Flake for his attack earlier.

BuzzFeed were an early target of Mr Trump’s fury after publishing details about the Russia dossier compiled by a former British spy. However, they didn’t make the list – much to the chagrin of its editor-in-chief.

The Highly-Anticipated 2017 Fake News Awards

 January 17, 2018

Below are the winners of the 2017 Fake News Awards.

1. The New York Times’ Paul Krugman claimed on the day of President Trump’s historic, landslide victory that the economy would never recover.

2. ABC News’ Brian Ross CHOKES and sends markets in a downward spiral with false report.

3. CNN FALSELY reported that candidate Donald Trump and his son Donald J. Trump, Jr. had access to hacked documents from WikiLeaks.

(via Fox News)
4. TIME FALSELY reported that President Trump removed a bust of Martin Luther King, Jr. from the Oval Office.

5. Washington Post FALSELY reported the President’s massive sold-out rally in Pensacola, Florida was empty. Dishonest reporter showed picture of empty arena HOURS before crowd started pouring in.
6. CNN FALSELY edited a video to make it appear President Trump defiantly overfed fish during a visit with the Japanese prime minister. Japanese prime minister actually led the way with the feeding.


7. CNN FALSELY reported about Anthony Scaramucci’s meeting with a Russian, but retracted it due to a “significant breakdown in process.”

(via washingtonpost.com)
8. Newsweek FALSELY reported that Polish First Lady Agata Kornhauser-Duda did not shake President Trump’s hand.

9. CNN FALSELY reported that former FBI Director James Comey would dispute President Trump’s claim that he was told he is not under investigation.

10. The New York Times FALSELY claimed on the front page that the Trump administration had hidden a climate report.


(via WashingtonPost.com)
11. And last, but not least: “RUSSIA COLLUSION!” Russian collusion is perhaps the greatest hoax perpetrated on the American people. THERE IS NO COLLUSION!

While the media spent 90% of the time focused on negative coverage or fake news, the President has been getting results:

1. The economy has created nearly 2 million jobs and gained over $8 trillion in wealth since the President’s inauguration.

2. African Americans and Hispanics are enjoying the lowest unemployment rate in recorded history.

3. The President signed historic tax cuts and relief for hardworking Americans not seen since President Reagan.

4. President Trump’s plan to cut regulations has exceeded “2 out for every 1 in” mandate, issuing 22 deregulatory actions for every one new regulatory action.

5. The President has unleashed an American energy boom by ending Obama-era regulations, approving the Keystone pipeline, auctioning off millions of new acres for energy exploration, and opening up ANWR.

6. ISIS is in retreat, having been crushed in Iraq and Syria.

7. President Trump followed through on his promise to recognize Jerusalem as the capital of the State of Israel and instructed the State Department to begin to relocate the Embassy.

8. With President Trump’s encouragement, more member nations are paying their fair share for the common defense in the NATO alliance.

9. Signed the Veterans Accountability and Whistleblower Protection Act to allow senior officials in the VA to fire failing employees and establishes safeguards to protect whistleblowers.

10. President Trump kept his promise and appointed Associate Justice Neil Gorsuch to the U.S. Supreme Court.

 

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President Trump Physical/Medical Examination at Walter Reed Hospital on January 16, 2018

https://www.whitehouse.gov/wp-content/uploads/2018/01/Summary-of-Physical-Exam-for-President-Trump-12-Jan-2018.pdf?ns_mchannel=email&ns_source=newsdaily_newsletter&ns_campaign=NEWS_NLB_Wk3_Weds_17_Jan&ns_linkname=bbcnews_trumpmedical_newshealth_trumpmedical&ns_fee=0#page=1&zoom=auto,-150,798

https://screenshots.firefox.com/nSZ49Fo72iXDhOc2/www.whitehouse.gov

The Picture of health.

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Fire, fury and the real trouble with Trump

London and Washington

14 January 2018

The discord revealed in Michael Wolff’s exposé is all too plausible. Yet behind it is a story that should worry us much more support of those suffering under the “yolk” of authoritarianism. Cue the inevitable puns about egg on White House faces. Amid a constant stream of Trumpian typos, this ranked among the best.

It captured the indolence of an understaffed presidency that is barely going through the motions. Details are revealing. But you do not need to be a copy-editor to know that Trump cares little about human rights. The error captured the span of Trump’s persona — entertaining and chilling at the same time.

The same applies to Michael Wolff’s controversial book about Trump, Fire and Fury. The furore around it has already ended Trump’s alliance with Steve Bannon, his alt-right alter-ego, who is also Wolff’s biggest source. On Tuesday Bannon quit his job as head of Breitbart News, having lost the confidence of his financial backers. He is surely now regretting having spoken so candidly to the author. Wolff may or may not deserve his reputation as a chancer — a journalist who allegedly disrespects the meaning of “off the record” and embellishes reconstructed scenes. I do not know him personally. But having conducted my own off-the-record conversations with Bannon and others, I find his book to be largely credible.

He paints a White House in which virtually no one has any respect left for the president and where the staff are in “a state of queasy sheepishness, if not constant incredulity”. Both Reince Priebus, Trump’s former White House chief of staff, and Steven Mnuchin, his Treasury secretary, are quoted as calling the president an “idiot”. Gary Cohn, Trump’s chief economic adviser, reportedly describes him as “dumb as shit”. We already knew that Rex Tillerson, the secretary of state, thinks the president is a “f***ing moron”. For good measure, Rupert Murdoch, whose approval Trump craves, apparently called him a “f***ing idiot”. I doubt it needs spelling out but this is not a suitable book for family reading. Meanwhile, Ivanka Trump is “dumb as a brick”, according to Bannon, while Donald Trump Junior is “Fredo” — the low-IQ sibling in the movie The Godfather. But where is Don Corleone? In his bedroom on the phone complaining to his friends, it seems.

Axios, the email-based newsletter, revealed last week that Trump is cutting his office hours ever shorter. He now only emerges for appointments at around 11am — two hours later than when he started the job. He often concludes his lightly scheduled routine before 6pm then retires to the presidential apartment upstairs. There he is surrounded by three giant flatscreen televisions and likes to order a cheeseburger, make “self-pitying calls to friends” and send tweets, says Wolff. John Kelly, the retired general and White House chief of staff, whom Wolff claims can barely conceal his distaste for the president, has professionalised Trump’s Oval Office day. People can no longer wander in and out at will. Trump’s response has been to curtail the hours that Kelly controls.

The journalist Joe Scarborough asked Trump whom he most trusted, according to Wolff: “The answer is me,” said Trump. “ I talk to myself.” For those around him, it is a losing battle. Trump will always win. It is “like trying to figure out what a child wants,” says Katie Walsh, a former White House official who left last year (though she has disputed some of Wolff’s quotes).

Doubtless some of Wolff’s examples are cherry-picked. There must be occasions where Trump uses a grammatically correct sentence, or reads a briefing sheet to the end. There are surely some officials who retain loyalty to their president. But the spirit of Wolff’s narrative rings true amid suspicion over some of the details. In one quoted email purporting to represent the views of Gary Cohn, Trump’s White House is cruelly depicted as “an idiot surrounded by clowns”. The truth is that the Trump administration has no Don Corleone. Yet in spite of lacking a respected authority figure, the show is likely to go on. To work out why, readers should turn to David Frum’s Trumpocracy and How Democracies Die, a slim volume by two Harvard academics, Steven Levitsky and Daniel Ziblatt.

Frum, a former speech writer to George W Bush and one of the most articulate “Never Trumpers”, asks how a man like Trump could have reached high office in the first place. One answer is that Trump does possess real skills. Among these is an almost diabolical knack for divining other people’s resentments — perhaps because he is riddled with so many of his own. Trump often tries out different applause lines at rallies and sticks with the ones that resonate. Such market testing appears to work. He has an ability to identify with people who feel slighted. Wolff describes how on a tour of Atlantic City with foreign investors many years ago, Trump was asked to define “white trash”. He replied: “They’re people just like me, only they’re poor.” Trump converted their frustrations into electoral gold.

Much of their plight is real. Between the late 1990s and 2015, according to Frum, non-college-educated white Americans went from 30 per cent less likely to 30 per cent more likely to die in their fifties than non-college-educated African-Americans. White males account for just under a third of America’s population but over two-thirds of its suicides. Yet white working-class America’s collapsing morale has been downplayed by mainstream society. In the year leading up to Trump’s election victory, the word “transgender” appeared in The New York Times 1,169 times. The word “opioid” appeared just 284 times.

Now picture Trump in his tweet on December 25 2016, standing in front of a Christmas tree with his fist clenched in defiance; “We’ll all be saying Merry Christmas again!” had been the refrain. That image captured the rage against political correctness that fuelled his campaign. It also expressed the mythology. No American was banned from saying “Merry Christmas”. But people started to repeat Trump’s line. They are still doing so. As the writer Dale Beran, quoted by Frum, puts it: “Trump supporters voted for the con-man, the labyrinth with no centre, because the labyrinth with no centre is how they feel.”

Trumpocracy is a far more rewarding book than Fire and Fury. The significance of Trump’s administration goes so much deeper than Wolff’s “idiot and clown” account. Trump’s fate will shape the future of liberal democracy. That is what makes it so alarming. As Frum points out: “Democracy is a work in progress. So is democracy’s undoing.” All it takes is for good men, and women, to do nothing. Just over a third of Republican senators called on Trump to quit the race after the Access Hollywood tapes were released in October 2016. He ignored them. Thirty-two minutes after the “pussy-grabbing” transcript came out, WikiLeaks dumped its largest cache of Hillary Clinton emails to date, including those of John Podesta, her campaign manager. Most of those Republican senators are now firmly behind Trump. Roughly half of the conservative intellectuals who signed the famous “Never Trump” letter published by the National Review during the campaign have now fallen into line behind Trump.

Trump’s inauguration committee raised $107m — twice the previous record — with donations from financiers who had previously shunned Trump. Paul Singer, the “Never Trump” hedge fund billionaire, donated $1m. In the first four months of 2017, the Trump International Hotel in Washington took in $4.1m more in revenues than projected at a time when other hotels’ occupancy rates were flat or declining. Meanwhile, senior Republican figures such as Paul Ryan, the speaker of the House of Representatives, now routinely sing Trump’s praises. The party’s gatekeepers have decided to swallow their doubts. “It is their public actions, despite their private qualms, that sustain Trumpocracy,” writes Frum.

Where does it go from here? The great strength of Levitsky and Ziblatt’s How Democracies Die is that it rejects the exceptionalist account of US democracy. Their lens is comparative. The authors say America is not immune to the trends that have led to democracy’s collapse in other parts of the world. “Even though we know democracies are always fragile, the one in which we live has somehow managed to defy gravity,” they write. “Our constitutional system, while older and more robust than any in history, is vulnerable to the same pathologies that have killed democracy elsewhere.”

Since the turn of this century, according to the Stanford scholar Larry Diamond, no fewer than 25 countries have ceased to be democratic. In almost all cases this happened by stealth within an existing system that retained outwardly democratic trappings. Think of Recep Tayyip Erdogan’s Turkey or Viktor Orban’s Hungary. Gone are the days of military coups. During the cold war, coups d’état accounted for three-quarters of democratic breakdowns. Today they barely feature. “The tragic paradox of the electoral route to authoritarianism is that democracy’s assassins use the very institutions of democracy — gradually, subtly, and even legally — to kill it,” they write.

They set out four tests for whether a democracy is in danger. Trump fulfils them all. The first is when an elected leader rejects the democratic rules of the game. Trump more than meets this test. Campaigning against Hillary Clinton in 2016, he threatened to “lock her up” and said the poll would be “rigged”. Since then he has alleged electoral fraud and repeatedly vowed to use the vast law enforcement powers at his disposal to investigate the defeated Democratic candidate. The second test is whether the leader rejects the legitimacy of his opponents. Ditto. The third is whether he tolerates or encourages violence. During the campaign he encouraged supporters to beat up protesters and even defray their legal costs. Since becoming president, he has goaded law enforcement officers to beat up immigrants and other arrestees. The final one is whether the leader is willing to curtail civil liberties of opponents, including the media. Trump almost daily accuses the media of bias and threatens them with libel action. It took Trump’s lawyers less than 48 hours to issue a “cease and desist” threat to Wolff’s publishers.

As these authors diligently show, and Frum eloquently argues, democracy is based on norms rather than rules. The system is only as good as the people who uphold it. Plenty of Latin American democracies adopted the US constitution almost word for word. It offered them little protection against the depredations of strongmen. According to Wolff, Trump does not even understand the basics of the US Constitution. An aide who was asked to explain it to him stopped after the Fourth Amendment — Trump’s mind had wandered elsewhere. The only people who hold real sway in his White House are his “shamelessly grasping extended family,” says Frum.

That may be true. But American democracy’s ultimate arbiters are those on Capitol Hill, in the federal bureaucracy, in the media and elsewhere who have the power to block or enable him. Whether Trump’s White House heralds a new phase in American politics — or a grotesque aberration — is in the hands of those whose names we may not know. Above all else, the secret sauce of democracy is the integrity of people.

Fire and Fury: Inside the Trump White House, by Michael Wolff, Little, Brown, RRP£20/Henry Holt, RRP$30, 336 pages

Trumpocracy: The Corruption of the American Republic, by David Frum, Harper, RRP£20 (February)/RRP$25.99, 320 pages

How Democracies Die:What History Reveals About Our Future, by Steven Levitsky and Daniel Ziblatt, Viking, RRP£16.99/Crown, RRP$26, 320 pages

 

Robert S. Stewart is preparing a lengthy Op-Ed piece on unfounded criticisms of Trump.

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How China is locking up critical resources in the US’s own backyard

January 14 2018

Congo state miner ‘strongly opposed’ to Lundin’s sale of stake in Tenke Fungurume

Aerial view of the processing plant at the Tenke Fungurume mine. Top publicly-held copper producer Freeport-McMoRan Copper & Gold announced the sale of its largest African copper mine to China Molybdenum for up to $2.65 billion. (Image: Screenshot from Freeport-McMoRan Copper & Gold’s video.)

As a general rule, the most successful man in life is the man who has the best information

In the 1800’s the United States under President James Monroe invoked the Monroe Doctrine, which stated that any effort by European nations to control any independent state in North or South America would be viewed as “an unfriendly disposition towards the United States.”

The intent of the Monroe Doctrine was to free the newly independent colonies of Latin America from mostly Spain and Portugal, so that the States could exert its influence undisturbed.

“The Monroe Doctrine, first articulated in 1823 as a means of blocking external interference in the Western Hemisphere, was the central pillar of US policy toward Latin America until Barack Obama’s secretary of State, John Kerry, told a roomful of Latin American diplomats in 2013 that “the era of the Monroe Doctrine is over.” The statement was part of an effort to rehabilitate the US image in a region long accustomed to seeing the United States as seeking to control it through persuasion when possible, and force when necessary.

In a policy paper published last December, Craig Deare, a dean at the US National Defense University and now Mr. Trump’s top Latin America advisor on the National Security Council staff, denounced Kerry’s statement “as a clear invitation to those extra-regional actors looking for opportunities to increase their influence. He specifically mentioned China.” Is Trump resurrecting the Monroe Doctrine? Max Paul Friedman

The point of mentioning the Monroe Doctrine is to illustrate just how far the United States has moved away from it. Now, the real influencer in Latin America is China, evidenced by the billions worth of investment either through the purchase of mining and energy company stakes, or outright mine acquisitions.

The reason, of course, is to feed China’s insatiable appetite for commodities. As an example, the Chinese are both the largest producers and consumers of aluminum and iron ore, with iron ore imports exceeding the 100-million-tonne threshold for the first time in September 2017.

The enormous political, economic and cultural shift in China, from a developing agrarian society to a modern, urban one, has led to some remarkable developments, all of which are good for commodities.

China’s New Silk Road is a $900 billion initiative meant to open channels between China and its neighbors, mostly through infrastructure investments. China, long ago put a lock on much of Africa’s vast resources.

http://www.mining.com/wp-content/uploads/2018/01/Untitled1.png

Last April President Xi Jinping announced a grand scheme to transform a backwater called Xiongan, south of Beijing, into a city triple the size of New York. Consulting firm Wood Mackenzie estimates that building the city will call for around 20 million tonnes of steel, 400,000 tonnes of aluminum, and 250,000 tonnes of copper during the first 10 years of construction.

The Made in China 2025 initiative, which aims to make China’s copper industry more efficient, is expected to grow Chinese copper demand by an additional 232,000 tonnes by 2025. This isn’t counting the need for more copper for railways, electric vehicles, car motors and power transformers.

While iron ore and copper have been the hot targets of overseas acquisitions by Chinese firms as they seek to feed an economy that up until 2015 was growing at double digits, the Chinese have also gone after gold, nickel, tin and coking coal. More recently the most desired metals are those that feed into a tectonic global shift from fossil fuels to the electrification of vehicles. This has meant a hunt for lithium, cobalt, graphite, copper and rare earths – metals that are used in electric vehicles, of which China has become the world leader.

The most interesting part of this trend is not that China is acquiring mines and mining company stakes abroad – that has been going on for at least a decade – but that the overt attempts to lock up the world’s mining and energy resources, some of which are critical to the fu ture world economy, are happening under the nose of the United States in Latin America, in countries previously subject to the Monroe Doctrine and in one case, right in their own front yard.

Rare earth robbery

In 2016 Molycorp’s Mountain Pass Mine in California was shut down because it couldn’t compete with the low rare earth oxide prices coming out of China – which has cornered the market in REOs with about 95% of the world’s production. The timing was bad because Molycorp had just invested $1.25 billion to expand the light rare earths facility. It was forced into bankruptcy, until last summer when an investor group with ties to the Chinese government bought the mine for $20.5 million, beating out American bidders including ERP Strategic Minerals.

While this purchase likely flew under many radars (rare earths haven’t been in vogue among investors for years), it should be greeted with considerable alarm. The Coalition for a Prosperous America is calling on the US government to block the sale on national security and economic grounds. Why? Because rare earths are critical to US military technology, and Mountain Pass was the only rare earths mine in the country. Electric systems in manned and unmanned aircraft, atomic batteries that power guided missiles, and lightweight materials used to make jet engines and rocket noses, all rely on REEs. Without a domestic supply, the Americans must rely on Chinese sources of rare earths to build “made in America” military and space equipment.

Mission critical for “the big four”

Rare earths aren’t the only minerals that the United States is woefully dependent on foreign mines. While the US has consistently maintained that a strong domestic metals industry is an essential contributor to the nation’s economic and security interests, the fact remains that since the 1990s the US has lost control of several critical mined commodities. Written about in a previous Ahead of the Herd post, chromium, cobalt, manganese and platinum group metals represent the metallurgical Achilles’ heel of the United States because of their widespread role and vulnerability to supply disruptions. Six of the world’s top 10 cobalt mines are in the DRC, hardly a stable jurisdiction for mining, where resource nationalism – the tendency of governments to grab control of their own natural resources – is a continuous threat.

Manganese is another striking example. Most of the world’s manganese comes from South Africa, Gabon and China. There are no producing manganese mines in North America. Aside from iron ore, manganese is the most essential mineral in the production of steel. If manganese imports were suddenly stopped, there would be no US steel industry – making this one of the most critical, and vulnerable, supply chains for the nation. The States gets most of its electrolytic manganese from China. EM is used as an aluminum and copper alloy, but its most important application is in lithium-ion-manganese batteries. If the US can’t access competitively priced and reliable supplies of EM, a host of high-tech new applications will be lost to foreign competitors.

While much of the rest of the world is scrambling to tie up control of strategic minerals, America has deliberately hamstrung itself. After World War II the US set up the National Defense Stockpile to acquire and store strategic minerals for national defense purposes, but in 1992, the bulk of these stored commodities were sold off. In 1985 the secretary of the US Army testified before Congress that America was more than 50 percent dependent on foreign sources for 23 of 40 critical materials essential to US security.

Trump gets it

In December Donald Trump issued a directive that aims to identify new domestic sources of strategic metals. The thrust of the directive is to reduce US dependence of foreign supplies of these materials. “The United States must not remain reliant on foreign competitors like Russia and China for the critical minerals needed to keep our economy and our country safe,” Reuters quoted President Trump saying.

While this is certainly a step in the right direction, the United States appears to be doing little to gain access, through acquisitions, joint ventures or off-take agreements, to the materials of the future that are essential in the making of smart phones, computers, military equipment and renewable energy technologies.

The Chinese, on the other hand, are way ahead in foreign mine acquisitions and off-takes. So far ahead that it is unlikely that the United States will ever be able to catch up, and break free of their current state of critical metal dependence. Below are just a few examples.

Argentine gold tie-up

Last summer Shandong Gold partnered with Barrick, the world’s biggest gold producer, to purchase a 50% stake in the Veladero gold mine on the Chile-Argentina border. The $960 million deal included Shandong, China’s top gold miner, studying the possibility of building the massive Pascua Lama gold deposit Barrick has been trying to develop on the same border. The Chinese firm could also work with Barrick to explore other mines in the El Indio gold belt of Chile.

Brazil’s vulnerability is China’s gain

Brazil, one of the best mining jurisdictions with a wealth of minerals including iron ore, gold, copper, manganese and bauxite, should be tightening control of its mineral riches as it struggles through a major recession fueled by a corruption scandal. Instead the country has opened its doors to foreign investment: namely, Chinese.

According to Dealogic Chinese M&A of Brazilian companies totalled $10.8 billion in 2017 and $11.9 billion in 2016. Chinese banks and investment groups have committed $15 billion of a $20-billion China-Brazil Fund, a Beijing-managed fund to finance infrastructure projects that was launched in 2016. The fund is to speed resource development, including rail projects. There’s also the $10 billion “dollars for oil” loan between China Development Bank and Petrobas, the Brazilian state oil company. In return for paying off Petrobas’ debts, China gets oil supply commitments for Chinese buyers.

Next door in Venezuela, despite the basketcase of an economy run under President Nicolas Maduro, China is also investing heavily, hoping to cash in on the country’s natural resources that were plundered by the late dictator Hugo Chavez. In July the government signed agreements totaling just over $1 billion to expand mining in the country gripped by low oil prices and hyperinflation. Venezuelan state-owned CARBOZULIA will partner with Chinese state mining giant Yuankuang Group, as well as a Colombian engineering firm, to renovate mining and port infrastructure in Zulia state to the tune of $400 million. A second $180 million deal has the Venezuelan government working with Yuankuang and China CAMC to jumpstart nickel mining. In a third agreement, Defense Ministry-owned CAMIMPEG signed a $580 million deal backed by joint Chinese and Venezuelan investment to provide services in the areas of mining and gas production, reports Venezuelanalysis.com.

The great lithium grab

Speculation of a lithium shortage, led by Tesla which is helping to drive demand for EVs, almost tripled the price of lithium carbonate to over $20,000 a ton in 10 months. The burgeoning energy storage market for intermittent wind and solar power is also poised to become a major demand driver for lithium.

It is no surprise then that China, where the market for EVs is booming, wants to lock up lithium supply contracts before the price shoots up any further, and to meet the government’s ambitious plans to expand EV production.

Last July, among the bidders interested in Potash Corp’s 32% position in Chilean major lithium producer SQM, was Chinese private equity firm GSR Capital. A few months later Sinochem, China’s state chemical firm, joined the race for the $4-billion stake. In August GSR bought Nissan’s electric vehicle battery business and last fall Chinese carmaker Great Wall Motor signed an agreement with Pilbara Minerals, the Australian lithium miner, to secure supplies for the next five years, the Financial Times reported.

China Molybdenum bought the Tenke copper and cobalt mine in the Democratic Republic of Congo last year for $2.65 billion in an effort to secure a supply of cobalt for EV batteries. In November Chinese battery maker Contemporary Amperex Technology Co Ltd (CATL) said it is “looking into upstream investments in raw materials, mostly cobalt” to ensure stable supply as demand for electric vehicles (EVs) soars, according to Reuters.

The Chinese are also investing in early-stage lithium plays. In December Bacanora Minerals, which has a lithium project in Mexico, announced that NextView Capital, a Chinese institutional fund manager, has acquired a 19.89% equity interest, in exchange for a lithium battery offtake agreement.

While most North American EV enthusiasts are focused on Tesla and its Nevada gigafactory, experts see the real growth happening in China. According to a report by Bloomberg Intelligence, Chinese gigafactories will pump out 120 gigawatt hours annually worth of electric batteries by 2021, compared to Tesla’s 35.

That’s enough to supply batteries for around 1.5 million Tesla Model S vehicles or 13.7 million Toyota Prius Plug-in Hybrids per year according to Bloomberg New Energy Finance.

Warming up to South American copper

Electric vehicles use a lot of copper, and China hasn’t been shy about orchestrating a major increase in copper imports to meet the expected demand. Geologist and newsletter writer Dave Forest noticed that Chinese imports of copper concentrate from both world-leading copper nation Chile and less prolific red metal producer Peru, have both increased in the past couple of years.

He notes that together, Chile and Peru accounted for 55% of China’s total copper concentrate imports of 17.05 million tonnes in 2016. The next-biggest supplier, Mongolia, only shipped 1.50 million tonnes.

Two large Peruvian copper mines are owned by Chinese companies. Chinese state-run Chinalco owns the Toromocho copper mine, while the La Bambas mine is a joint venture between operator MMG (62.5%), a subsidiary of Guoxin International Investment Co. Ltd (22.5%) and CITIC Metal Co. Ltd (15.0%). The Chinese-backed Mirador mine in Ecuador is slated to open in 2018.

Most of the metal produced under these off-take agreements will NEVER come to the market anyplace other then in China. Those metals that do can have their China to U.S. supply shut down any time the Chinese want.

Rise of the petro-yuan

There is one more important development set to increase China’s global commodities dominance, and that is the recent announcement that China is shaking up the oil futures market. Because most commodities are traded in USD, the greenback has a huge advantage over other currencies.

China has long wanted to reduce the dominance of the USD in commodities markets, and its strategy is to launch a crude oil futures contract priced in yuan and convertible into gold. Crude oil futures, either Brent or WTI, are currently priced in USD.

The yuan-denominated oil futures will allow exporters like Russia and Iran to avoid US economic sanctions and circumvent the US dollar. Zerohedge quotes Adam Levinson, CEO at Graticule Management Asia, warning Washington that besides allowing Chinese companies to hedge oil prices, the futures contract will also increase the use of the yuan, “and thus the acceleration of de-dollarization and the rise of the petro-yuan. “I don’t think there’s any doubt we’re going to see use of the renminbi in reserves go up substantially,” says Levinson.

Conclusion

It’s hard to escape the conclusion that China, both through its enormous purchasing power, and its financial muscle that allows it to make substantial investments in mining and energy resources overseas, is assuming a position of world dominance in the commodities markets. Credit must be given to Chinese leadership for forward-thinking in developing its EV industry and for making strategic acquisitions of commodities like copper, manganese, vanadium, lithium and other battery metals that will provide a steady feedstock for the new electrified economy. But scorn must also be heaped on the United States and other countries that have failed to prepare. In the US, public infrastructure is crumbling, the automobile is still king in most states, few cities have decent transit, and many still consider global warming to be a hoax. The situation isn’t much better in Canada.

North American politicians really need to get with the program; to invest in and facilitate the mining of critical metals in North America; to scour the globe for mines that can provide the feedstock for the industries of the future, and invest in them; and to block the sale of strategic mineral assets like Mountain Pass to foreign buyers. If none of this is done, we are quickly heading into a two-tier world of haves and have-nots. Where the haves are countries like China that seized the opportunity to acquire the world’s finite resources while they were still available, and the have-nots are forced to cow to the victors who will control and set the prices of the spoils.

China’s global resource grab, and the ramifications for the rest of the world, are on my radar screen.

Are they on yours?

If not, maybe they should.

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Stumbling from New World Order to No World Order

Monday, January 8, 2018    
 

 A Review of Anatomy of Failure by Harlan K. Ullman (Naval Institute Press, 242 pages)

By Stanley A. Weiss

LONDON-It was a hell of a place for a kid just out of the Naval Academy to find himself: the mouth of the Cua Viet River near the De-Militarized Zone separating North and South Vietnam, commanding a Swift boat in a land most Americans barely knew.

 

He and his Swift boat crew, going by the call sign “Red Baron” and sporting red ball caps, patrolled the waters, inserted commandos into the jungle in the dead of night, and blasted cover fire for U.S. marines fighting off the Viet Cong. He would command over 150 missions.

 

Vietnam in 1966 was where that Swift boat skipper, Harlan Ullman, got his first lessons in war – and why the United States fails at the ones it starts. That’s Ullman’s argument in his latest book, Anatomy of Failure, a systematic and damning look at the mistakes of judgment and knowledge U.S. presidents from John F. Kennedy through Barack Obama made, entangling the United States in poorly conceived military conflicts. Ullman brings his decades of experience since Vietnam – from commanding a destroyer in the Persian Gulf to advising the Pentagon on naval strategy – to bear as he delves deep into our long history of military failure.

 

The key problem Ullman diagnoses is poor presidential judgment and a lack of critical knowledge. John F. Kennedy’s inability to challenge the judgment of more experienced advisors led to the Bay of Pigs – and his pursuit of an arms buildup to fill a non-existent “missile gap” with the Soviet Union created strategic insecurity in Moscow, leading directly to the Cuban Missile Crisis. Lyndon Johnson subscribed to the catchy but flawed “domino theory” and failed to understand the history, regional politics, and the reality of the situation on the ground in Vietnam. Ronald Reagan pressed for an unaffordable and unsustainable 600-ship navy that didn’t meet our strategic needs – while initiating ill-advised military interventions in Lebanon and Grenada and allowing the Iran-Contra scandal to happen on his watch. Through each presidency leading up to the Obama administration, Ullman convincingly traces our military blunders back to failures of presidential leadership.

 

Though Ullman spares no one from criticism, he does hold two U.S. presidents in high regard: Richard Nixon and George Herbert Walker Bush. Why? Nixon was experienced, qualified, and had learned from defeat. Ullman praises Nixon’s use of the Sino-Soviet split to open up triangular diplomacy with both, yielding the beginning of a new relationship with China and two arms control agreements with the Soviets. These improved ties also helped isolate North Vietnam and end the Vietnam War. Bush was similarly experienced and effectively handled the “big crises” of the post-Cold War “New World Order” – though Ullman laments the Bush administration didn’t have the capacity to give the right attention to other festering crises like Yugoslavia, which soon plunged into a bloody civil war. Bush’s leadership in the Gulf War helped to “restore fully the credibility and prowess of American forces.”

 

These two, though, are the exceptions to the rule. Most U.S. presidents don’t understand the reasons — many self-evident given the right information and judgment – why we’ve lost every recent war we’ve started.

 

What can change the course of U.S. leadership after such an abysmal track record? Ullman – who also holds a Ph.D. from The Fletcher School of Diplomacy at Tufts University and is the principal author of the doctrine of “shock and awe,” which he coined in 1996 after a stint at the National Defense University of the United States – recommends what he calls a “brains-based approach to sound strategic thinking.” What does that mean?  Three things. First, “complete knowledge and full understanding” of every part of the situation. Second, a “mindset that is based on the realities of the situation.” Third, “a focus on affecting, influencing, and controlling the wills and perceptions of real and potential enemies.”

 

Ullman, who now serves as a Senior Advisor at the Atlantic Council and chairman of the high-level consultancy the Killowen Group, as well as a member of the advisory boards to the Supreme Allied Commander Europe and Business Executives for National Security in Washington, ends his analysis with Obama, but he makes clear he doesn’t have high hopes for President Donald Trump – whom he rightly labels “the least prepared, least experienced, least ready person to enter the Oval Office in the modern age.” What’s more, he argues that the Trump presidency is taking place as the world has transitioned from New World Order – when the United States was the dominant superpower in the aftermath of the Cold War – to what Ullman calls “No World Order.”

 

Whether you agree or disagree with Ullman, Anatomy of Failure is a must-read for anyone concerned about the future of U.S. leadership. Ullman’s thoughtful and intelligent analyses will help readers understand all of the factors that go into the success or failure of war, and provoke important questions about our strategic role and the judgment of our top leaders in a rapidly changing global order. Ullman ties all of this together with riveting stories – whether from his time in Vietnam or his talks about strategy with some of the most important military and political leaders of our time.

 

One story in particular stood out to me.

 

Around midnight on August 10-11, 1966, Ullman’s Swift Boat was on patrol near the unit’s base when two U.S. Air Force B-57 bombers fired at a vessel in the river. The vessel was the U.S. Coast Guard cutter Point Welcome – but the bombers had mistaken it for a North Vietnamese boat. Ullman’s Swift Boat quickly closed in and picked up survivors from the water.

 

Years later, Ullman found himself recounting the incident for journalist Tim Page. “Page remained stunned for a moment,” Ullman writes, “recovering slightly, he looked at me and asked, with emotion, ‘did your crew wear red ball caps?’

 

It turned out Page had been on the Point Welcome – and Ullman’s Swift boat crew had saved his life. After an accident caused by bad judgment, Ullman’s good judgment and leadership saved lives.

 

That’s the sort of leadership we should demand from U.S. presidents, whose decisions can save or destroy many more lives every day than a single Swift boat skipper.

 

For now, it falls to President Trump, who was carried into office by a different group of people in red caps.  Trump is rumored not to read at all. Here’s hoping that a book-on-tape version of Anatomy of Failure finds its way into the Oval Office – and swiftly.

 

Stanley A. Weiss is a business leader and founder of Business Executives for National Security. His memoir, “Being Dead is Bad for Business,” is available online and a collection of his selected writings, titled “Where Have You Gone, Harry Truman?” was just published by Disruption Books, available here.

Response from Robert S. Stewart

Once again, you pluck from the cinders of history, morsels of wisdom that every sitting President needs before he enters his official office. I have written for decades in the NYT and other piths of journalism, that one of the downfalls of Americana is that you elect leaders with no competence in their former careers, no experience or background in what work they will undertake for the next four years.

They arrive in the Oval Office salted and pickled in the pursuit of power, high ego and global status but little else. Witness, a trooping of State Governors who normally look after prisons, property taxes, crumbling highways and marching bands at local high schools ending up running the White House.

There are three layers of official public administration in America: Federal, State and Municipal Governments. Each to his own. It is not about hoping from one ship to another up the ladder of political success until you find yourself surrounded by Ambassadors from Tanzania, Tajikistan or Turkmenistan. If you come from Topeka, it must be dizzying to sort out the forks from the knives at state dinners. But if you grow up in any of those three circles, you become wiser by the day, the decade and finally in high office, you actually know what you are doing before you start the job.

Electing State Governors as Presidents is akin to hiring corner greengrocers as Secretaries of State. One may have enlightening conversations with cabbies from Mogadishu or Moscow, but it isn’t the same as speaking Amharic (Coptic Christian) or Aramaic (ancient Judea). There is a difference. The reason, as you rightly point out, that Nixon and GHW Bush were good at their jobs, is that they spent their former careers learning how to do it with great skill.

Working their way up the ladder of Washington transforms the country bumpkin from Arkansas into the global statesman with skills that don’t have to be learned on the job. After four or eight years in the Oval Office, the least one should be doing is finally understanding Foreign Defence Policy, Foreign Affairs or Financial Management. Those are the three major F’s of Policy management within the Beltway. Horses for Courses as the British say. One only wins a horserace if you have been around the track a few times and know how to get to the winning post.

State Governors have a long list of responsibilities which include education, healthcare, state highways, prisons, etc. If one spends decades learning those skills, by the time one is elected a State Governor, there is little learning on the job. When the foot hits the peddle in various state houses in Montgomery, Tallahassee, Juneau or Des Moines, a level of competence in dealing with State matters is meant to kick into immediate action.

So too at the Municipal level. Being the Mayors of San Francisco, Boise, Des Moines or Springfield is one matter. Running Foggy Bottom, The Pentagon or the Treasury are totally different worlds. Electing someone who ran a peanut farm and worked out of Atlanta, or someone who was born in Hope and ran the secretaries around the office in Little Rock, are hardly issues that confront the nuclear button, controlling the egregious behaviour of bankers on Wall Street, or appointing statesmen to run interference in Belgrade, Moscow, London or Ottawa. Again, horses for courses. Social workers from Hawaii or Chicago, editing the Harvard Law Review, are not deep thinkers in the matters of outer space and crypto counter-intelligence networks.

While some Presidents have greater understanding of the shoes they are filling in The White House, let us not forget that many come with empty briefcases and spend the next four-eight years simply learning on-the-job. Hopefully, some let highly-skilled underlings advise them who call the shots rather than blindly walking into long-term defence commitments they wish they hadn’t taken overseas.

In the case of Reagan, he was smart enough to bring seasoned professional economists from Wall Street, global corporate CEO’s from San Francisco or men with military war muscle and a chest full of medals into his inner circle. George Shultz, Cap Weinberger, and dozens of other CEO’s and VP’s from Bechtel have held Cabinet positions with every Republican President since Herbert Hoover. They served in the Marine Corps or US Navy. Who designed and oversaw construction of the Hoover Dam, the Tennessee Valley Authority and numerous nuclear power reactors creating millions of megawatts of low cost clean energy for America?

It was a company with knowledge in dam building and green energy capable of handling mega billion dollar contracts built on-time and on-budget. They went on to build 25 renewable power plants around North America and the wider world. Would you hire an engineer who knew only how to fix a swimming pool to build colossal dams in Northern Manitoba, Ontario and Quebec to feed the giant cities ringing Canada’s frontier from Denver, to Minneapolis to Chicago, to Boston and finally New York? Not likely.

So why do the political parties in the US pick State Governors, peanut farmers, haberdashers or property merchants to run Washington, arguably the most powerful government force in the world?

To get elected, the back-room boys of the existing political parties have their front men smile in front of the cameras and give prepared speeches in order to win elections. Jacques Lowe, a young man from Hitler’s Germany who escaped to the streets of the Bronx in 1939 with his family, bought a box camera at Woolworths and snapped photos of pretty women coming out of fancy hotels in upper Manhattan.

Jackie Kennedy was one of them. He put Jackie on the cover of Vanity Fair. That propelled her husband, the young Senator from Massachusetts into a race for the White House. Lowe ended up in the little corridor outside the Oval office snapping photos of visiting Heads-of-State and many pretty girls going into same office via the back door through Jacque’s cubby hole.

The stories that man could tell would make the cover of Vanity Fair blush today. But it helps to explain why someone from Boston was ill-suited to resolve the Bay of Pigs crisis, a war of words and potential nukes that should never have been. Khrushchev was ten times more skilled at ruling the world’s biggest country, albeit a much poorer one, but none-the-less dangerous to America’s interests. He was someone who could garner attention by banging his shoe on his desk at the UN better than a US President around whom he ran embarrassing rings-of-fire.

Kennedy’s Camelot, came a lot, but his prime attention span was not focussed on things that matter, only what goes boom in the night. Ditto, the dildo from Arkansas. Power corrupts one’s ego. Absolute power corrupts the ego absolutely. One died for it. The other withers away in partial disgrace.

George W. Bush worked in his Daddy’s office towards the end of a four year Presidency sadly curtailed which should have gone on for second term. GHWB was one of only two Presidents who was highly skilled in running the Washington circuit since the 1970’s. It lasted only one term. He had been the son of a Senator, Ambassador to China and the UN, head of the CIA, Vice President for eight years and knew better than his Boss (Ronald Reagan) how to run a White House. Nixon lasted little more although he too was one of the most skilled citizens to run his country, learning at the hip of Dwight D. Eisenhower for many years. Making use of the existing Canadian Embassy in Beijing, Nixon swiftly stitched agreements swapped maotai with Mao Zedong that opened the door to understanding the rising tide of China.

When his son Dubya took over eight years later, he was hunting for revenge with Sadaam Hussein as his father had left the barn door open in Kuwait letting the man from Baghdad to retreat without consequences. The Emir of Kuwait had invited GHW back to Kuwait City which he helped to liberate in the first Kuwait War. As the private jet lent by Bechtel carrying the ex-President was landing at Kuwait airport, a surface-to-air-missile fired from a Iraqi warrior on the ground narrowly missed the jet and it’s occupant’s tailfeathers. Bush the Younger, vowed to get even one day. So started three more wars with Iraq in 2001 which brought one act of terror after another back onto the shores of America.

Texas Governors (with their shotguns on racks in the back windows of their trucks) shoot first and ask questions later. That may work in Waco, but on the world stage, it sets into motion actions that can have dire, long-term consequences. Many wars and eight years later, Dubya backed off the world stage in disgrace having led America through many unwanted encounters with strangers in the night.

He did, however, contribute heavily to finding anti-retroviral cures for the pandemic HIV/AIDS and for this he ought to be given a Nobel Prize in Medicine. Every other President around the word ignored it at the time as forty million people began to drop like flies around the world. No one warned them that multiple partnered, unprotected sex had its consequences.

Other US Presidents continue to milk the funds from the American taxpayer to grow their net worth, but it was Bush the Younger who took advice from his Peace Crops-serving daughter in Rwanda that this scourge was real and needed to be beaten head-on. The President’s Emergency Fund Fighting AIDS did the trick. PEPFAR will go down as his greatest contribution as President. Healthcare was something he understood as a long-serving State Governor with experience in infectious diseases.

It is often said that America starts most of the wars we know today, while Canadians sop up the blood and run around ending them. The UN Blue Helmets were started by the Under-Secretary General and co-founder of the UN, former Canadian Foreign and Prime Minister Lester B. Pearson. From Vietnam in the 1970’s to the Golan Heights of Syria today, Canadian soldiers, air force squadrons and naval vessels have provided the means to bring about an “honourable end” (?) to many wars. In the Vietnam War (Canada led the International Control Commission and International Commission for Control and Supervision 1970-1975) which put Kissinger’s Paris Peace Accords into practise and so ended the decades of hostility.

Putting Presidents into the White House who are skilled in Public Administration, operations of the three principal policies guiding the Washington Establishment, are key to running The New World Order, or at least, a world with some peace, stability and order. The Canadian Constitution is different from America’s. While American’s pursue “Life, Liberty and the Pursuit of Happiness” , Canadians follow “Peace, Order and Good Governance.”

Prime Minister Margaret Thatcher once lectured me on her role as British Prime Minister. I was having lunch in the Member’s Restaurant of the Parliament at Westminster when she brushed by my table while I lunched with the MP for my riding from West Sussex, The Hon. Tony Abbott. I was introduced to The Right Honourable Lady and asked her immediately why she had just declared war on a Banana Republic over a tiny island with sheep pastures in the South Atlantic called the Falklands.

I suggested that it was a bold gesture equivalent to Reagan invading Granada to free some students found guilty of a binging party while on study vacations in the tropical Caribbean. Surely, calling up the British Fleet to set sail for Los Malvinas over a territorial dispute was not necessary. Jaw-jaw might suffice over War-War. She declared in her haughty, frosty, and somewhat elegant manner that: “No Prime Minister in England is ever remembered beyond a few years in office if he/she hasn’t started and won a war somewhere on the planet”. With that, she marched off to a Press conference to explain her actions.

Young women who grow up over a Chemist shop are not the most qualified to run military operations which cost the British taxpayer dearly, with heavy losses in naval hardware, aircraft and loss of feigned leadership in a world that had forgotten the Falklands existed. Puffing up a PM’s ego or image is not statecraft. Pride took precedence over practicality in the modern world. The sheep received more protection that most of the citizens of Central London who never noticed what they were missing. Everyone sang “Rule Britannia” even if a little out of key. Cap Weinberger picked up a peerage for offering US satellite reconnaissance photos of the positions of Argentine warships, ex-British naval vessels that were soon sunk.

Property merchants from the Big Apple may need to listen to the wiser souls who have had decades of experience in running interference with foreign dictators. Stanley Weiss is one of our prized guardians of security with history in his hip pocket. He remembers the Second World War as a uniformed American soldier ready to fight on the front lines and under-aged at that. He can see far beyond the headline grabbing antics of the latter-day Presidents.  Electing Presidents with a long curriculum vitae in foreign diplomacy, defence strategy and financial management is what is needed to run the New World Order. Bravo to Daddy Weissbucks who is wise beyond his bucks.

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Big mining’s surge in value shames tech giants

Vancouver 3rd January 2017

Big cap diversified miners are riding a wave of optimism as global growth prospects – especially in manufacturing – continues to strengthen.  Global economic activity as measured by the JP Morgan global manufacturing and services index showed output rising at the fastest pace since March 2015.

CHART: Big mining's surge in value one for the ages

The manufacturing index has now signalled expansion for a record 82 months in a row and the investment bank believes “forward looking indicators such as new orders and backlogs of work also point to the current solid upturn being extended into the start of 2018. Growth in the goods sector appears to be especially strong.”

BHP is worth an eye-popping $75 billion more than two years ago despite spinning off non-core assets into South32, itself a top 20 mining company

Copper, a barometer of economic activity thanks to its widespread use in transportation, construction, manufacturing and power infrastructure, exchanged hands for $3.23 a pound or $7,120 a tonne on Friday, bringing the bellwether metal rally from multi-year lows at the start of 2016 to 66%.

The rally for zinc has been even more spectacular with the metal, mainly used to galvanize steel, setting a fresh decade high on Friday of $3,354 a tonne. Zinc has more than doubled in value after a prolonged slump that ended around the same time copper hit bottom two years ago.

The iron ore price which has been defying expectations of a downturn gained again on Friday with benchmark Northern China import prices jumping to the highest since September to $77.10 a tonne, up 34% in fewer than three months. The steelmaking raw material bottomed at $37 in November 2015.

Premium export coking coal was at $261.70 a tonne, levels last seen in April last year when Cyclone Debbie halted Australian exports.  Coal used in steelmaking bottomed just over two years ago at $73. Perhaps the most surprising recovery is in thermal coal which was back in triple digits on Friday with Newcastle futures trading at $104 a tonne – two years ago coal for power generation was in the low $40s.

Obituaries were being written for Anglo American two years ago before the 100-year old firm went on radical restructuring drive – since then the world’s fourth largest diversified miner has surged 477%

The bullishness is even more evident in share prices of sector heavyweights with investors piling into stocks that were decimated at the bottom of the cycle.
CHART: Big mining's surge in value one for the ages
Shares in world number one miner BHP (NYSE:BHP) has more than doubled the past two years and the company is now worth $121 billion in New York. The Anglo-Australian giant is worth an eye-popping $75 billion more than two years ago, despite spinning off non-core assets into South32, itself a top 20 mining company, along the way.

Vale (NYSE:VALE), the world’s top iron ore and nickel producer, is up fourfold since the bottom of the cycle at the beginning of 2016. Russia’s top mining company Norilsk Nickel (MCX: GMKN) is the underperformer among the top tier, but the company which has benefitted from a record high palladium price still added two-thirds in value since the cycle turned.

The world’s second largest miner based on revenue Rio Tinto (NYSE:RIO) has doubled. The Melbourne-HQed company is the world’s number two iron ore producer and number seven copper producer.

Obituaries were being written for Anglo American (LON:AAL) two years ago before the 100-year old company went on radical restructuring drive. Since then the world’s fourth largest diversified miner has surged 477% in value approaching a $30 billion market cap.

Top listed copper producer Freeport-McMoRan (NYSE:FCX) which regularly features among the NYSE’s most actively traded stocks has added more than 7% just this week and is up 40% over the past month. The Phoenix-based company is in the midst of arduous talks with the Indonesian government about the future of its iconic Grasberg mine and since giving up its oil and gas assets Freeport has become one of the best ways to play copper.

Glencore (LON:GLEN) is the world’s third most valuable mining company with a market cap of $76 billion thanks to a 355% gain over two years. Number three in copper, number one in cobalt – the best performing metal over the past year – and a major producer and top trader of coal, the Swiss giant made the most of the upturn despite having no exposure to iron ore.

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Departure gates of hell: Which are the world’s worst airports?

4th January 2018

An informal survey of the most horrible places to be lost in transit

LIKE expensive watches that never break, the world’s best airports can be boring. You land, breeze through passport control and check into a hotel within minutes. The experience is pleasant, but not memorable. The worst airports have more character. To adapt Tolstoy, lovely airports are all alike, but every wretched airport is wretched in its own way.

Consider Juba. The airport in South Sudan’s capital is a sweltering tent next to a festering puddle. Planes are often late, so passengers must sweat for hours. The departure lounge has no toilets, no food and no queuing system. Lucky is the traveller who finds a chair that is only half-broken. Since dirty water and tropical diseases are common, so are upset stomachs. Tough luck. Travellers should have thought twice before eating salad.

Security is haphazard. Big important people’s flunkies carry their bags, which are ostentatiously passed round, not through, the scanner. Since the machine seldom works, little people are in effect upgraded to big important status by not having their bags scanned for guns and explosives, either.

South Sudan is at war, so many UN planes take off from Juba carrying aid workers and emergency supplies. Aggressive officials in sunglasses take pleasure in obstructing them. When your correspondent was booked on a UN flight, he was assured by the government that his papers were in order. Yet at the airport he was told to get a fourth permit, as well as the three pricey ones he had already obtained. This required a trip across town and a tedious haggle. Predictably, he missed his plane.

Juba has three terminals, but only one is in use. After South Sudan became independent in 2011, the government planned to build an airy structure of glass, steel and concrete. Work started in 2012, but stopped when the bills were not paid. In 2016 the government decided to build a more modest terminal. But it, too, stands half-completed and empty, next to the tented camp that people actually have to use. Travellers are advised to bring a good, long book.

All are bored:

Working out which is the world’s worst airport is not easy. The best rough-and-ready attempt is the Guide to Sleeping in Airports, a website that publishes an annual survey based on voluntary submissions from irate travellers. It ranks airports by qualities such as discomfort, poor service, bad food, cumbersome immigration procedures and how hard it is to grab forty winks while waiting for a connection.

Overall, Juba was rated worst in 2017. Since photographing any airport in South Sudan will get you arrested, the description of its “horrific smells and filth” is accompanied by an artist’s impression which makes the departure lounge look far nicer than it is.

The ranking is inevitably skewed by sampling bias. It misses truly awful places that hardly anyone visits, and over-emphasises less egregious ones that handle more people. Juba won its “worst in the world” ranking not only on demerit but also because so many foreign charity workers pass through and complain about it. Jeddah, in Saudi Arabia, comes second not because it is really the second-worst in the world but because it is swamped with haj pilgrims every year and cannot cope.

Because gripes spring from disappointment, expectations matter. Travellers in the rougher parts of the world applaud wildly when a plane lands without crashing; more pampered types are enraged if the Wi-Fi is slow. It was the mismatch between expectation and reality that doubtless propelled three Greek hubs (Crete, Santorini and Rhodes) into the Sleeping in Airports worst ten. Hordes of northern Europeans flew to Greece for a cheap holiday in 2017, where they encountered strikes, delays and other indignities to which they were unaccustomed. Many reached for their smartphones and complained.

To illuminate some of the gaps in existing rankings of bad airports, The Economist conducted an unscientific, anecdotal poll of its globe-trotting correspondents. It attracted more, and more passionate, responses than nearly any other internal survey we have done. Here are some of our reflections from the departure gates of hell.

Several airports in war zones are worse than Juba. Our Africa editor cites Bangui, in the Central African Republic: “The fence around it has been stolen, so when big jets come in to land the pilots keep their hands on the throttle so they can pull up if they see people trying to run across the runway (which lies between a refugee camp and the city, and so has lots of crossing traffic). On the plus side it has sandbagged bunkers on its roof and was designated the final fallback position by French forces during the civil war, so if you are in it you are about as safe as you can be.”

Although each awful airport is unique, four themes recur: danger, bullying by officials, theft and delay. Sometimes, all these reinforce each other. For example, it takes ages to get through Lubumbashi airport (in the Democratic Republic of Congo) because truculent security officials slow things down in the hope that passengers will give them “un cadeau” to hurry up. If you hand over $1, they let you board without your bags getting checked at all. Such transactions are often referred to as “bribes”, but are really a form of extortion with menaces. They make air travel in places like Congo slower, riskier, costlier and much more unpleasant.

Air travellers make tempting targets for thieves. They are rich enough to afford an air ticket, which in many places makes them rich indeed. They carry luggage, some of it valuable. They are often far from home and unfamiliar with local rules. Finally, airports are full of choke points through which travellers must pass if they are to board their planes, creating opportunities for crooked officials to fleece them.

The ones in Manila are especially creative. Some have been known to plant bullets in luggage so they can “find” them and demand bribes not to have the owners arrested. This scam is known in Tagalog as “laglag bala” (“drop bullet”).

In Johannesburg the pilfering is covert but rampant. Our correspondent grumbles: “Despite packing absolutely nothing of value in my checked bags they are regularly rifled through and were twice slashed open (they weren’t even locked). Once I found someone else’s sunglasses case in my bag; mislaid, perhaps, by luggage handlers in a looting frenzy.”

Some travellers are harassed by officials who seem to fear that, if they do not look busy, they will be replaced by machines, as many have been at modern airports. The magnificently uniformed functionary in Delhi who demands to see your papers—despite having just watched another functionary inspect them—falls into this category. Other officials harass travellers for the sheer fun of wielding power. Our former Cairo bureau chief writes, of Saudi immigration procedures: “The queues are subtly divided by nationality and caste. If you happen to be a Baloch labourer, your lot is to sit on the floor for hours, getting barked at and swatted by swagger-stick-wielding Saudi policemen. Anyone who falls asleep risks a thrashing.”

Rules change at borders, and some airport officials enforce them mindlessly. One correspondent recalls that in Santiago, Chile: “I once got detained for two hours for failing to declare an unopened, sealed bag of almonds. I then had to write a declaration expressing my contrition for bringing the nuts. When I failed to do so without cracking up I was threatened with arrest. The lady next to me was being interrogated for smuggling in a lone banana.”

The worst airports reflect the vices of the governments that regulate them. Pyongyang has a totalitarian vibe. A correspondent writes: “The plane played rousing music when we flew over the border into North Korea, and we were handed copies of the national newspaper and asked not to fold it, since it had a photo of Kim Jong Il on the front page.” The only consolation is that the airport has a chocolate-fondue fountain.

Venezuela’s half-Marxist, half-gangster, wholly incompetent government, which has prompted much of the middle class to emigrate, does not make the journey easy or pleasant. Our Bello columnist grumbles of Caracas: “Your hand baggage will be searched in detail twice (by the National Guard, who are drug smugglers who claim to be fighting drugs).” Our organised-crime correspondent also has miserable memories: “The departures board showed our flight as delayed up to the moment when it showed it as closed. I waited endless hours for the next flight in a fast-food restaurant, the only place with seats, and watched a mange-ridden dog licking out the polystyrene containers strewn on the floor.”

Poor countries have an excuse for poor airports. Rich countries do not, which is perhaps why travellers are particularly irked to find grottiness in, say, Brussels, the heart of the European Union and a noted centre of gastronomy. Our Charlemagne columnist writes of Charleroi, its second airport: “It is grim, grimy and cramped, and has atrocious food. The planes leave and land at ungodly hours. And the only real way into town is a coach that runs every 30 minutes and is frequently overbooked: more than once I’ve queued in the rain only to see it drive off as I reach the front.” Many correspondents moaned about Berlin, where a new, unfinished terminal is six years late. Another European airport that elicits howls is Luton, which claims, fancifully, to be close to London. An intern writes: “Going on holiday and returning to Luton is like having a wonderful dream and waking up to find yourself in a puddle under a railway bridge.”

Airports all around the world have to cope with growing crowds. The number of passengers has roughly doubled since 2005, to an estimated 4bn in 2017. Some have done so brilliantly, harnessing technology and smart design to usher more people swiftly through. Singapore, Seoul and Munich score highly on this measure.

American airports, by and large, do not. This is not simply because security has grown tighter since 2001—that is true everywhere. It is because security and immigration screening are far more hasslesome than they need to be. Border officials are rude, and there are too few of them. Surveys suggest that every year millions of tourists shun the world’s greatest country because getting in is so horrible. A “trusted traveller” programme speeds things up a bit, but only for a handful of passengers.

Idiotic bureaucracy abounds. Travellers from Europe to Latin America who change planes in the United States must pass through immigration control, thus running the risk of missing their connection. What is the point of asking people who do not wish to enter the United States why they wish to enter the United States? Transit passengers in Singapore or Nairobi do not have their time wasted like this.

Our overall judgment (readers are invited to visit our travel blog, Gulliver, to dispute it) is that, adjusted for national income per head, several busy American airports would be contenders for worst in the world. Washington Dulles has the worst-designed ground transport: travellers must enter and leave a mobile pod by the same door, so everyone crowds round in the hope of getting off first, thus blocking it. JFK is the main gateway to the world’s capital of consumerism, yet scarcely any retail therapy is available to treat travellers’ boredom. But Miami is surely worst of all. The queues at passport control take nearly as long to navigate as Leif Erikson took to cross the Atlantic in a longboat.

Air rage: Are America’s airports the worst in the world?

Luton Airport in Britain may be awful but it is not as bad as many across the Atlantic Ocean

SOME airports are known for being the antithesis of elegance. The reputation of Luton Airport in Britain was famously trashed by a television advert for Campari, a posh drink, in the 1980s. In the clip, a well-dressed man offered a drink of the stuff to a fashion model on holiday and asked, “Were you truly wafted here from paradise?” She replied in her full cockney accent, “Nah, Lu’on Airport!” Its reputation as a place to fly from has never quite recovered since. In August it was named Britain’s worst airport by Which?, a consumer group.

But at least Luton’s terminals are modern and safe—and that cannot be said of others around the world. In this week’s print issue, Gulliver’s colleagues from around the globe have reviewed some of the world’s worst airports. These range from departure lounges with no toilets in South Sudan to aeroplanes having near misses with people crossing a runway in the Central African Republic. But the harshest criticism is reserved for America, a country in the rich world that should know how to run its airports better:

[In America] Idiotic bureaucracy abounds. Travellers from Europe to Latin America who change planes in the United States must pass through immigration control, thus running the risk of missing their connection. What is the point of asking people who do not wish to enter the United States why they wish to enter the United States? Transit passengers in Singapore or Nairobi do not have their time wasted like this.

Our overall judgment…is that, adjusted for national income per head, several busy American airports would be contenders for worst in the world.

Gulliver can certainly sympathise with that choice. After flying out of London Heathrow’s shiny terminals—which look more like swish shopping malls than places you can take a flight from—the experience of arrival at many airports in America feels like a landing in the developing world.

But do you agree with our judgement on America’s dire airports? Please do share your anecdotes of terrible terminals or awful airstrips below. The best will be collated and published on Gulliver later in the year.

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Michael Wolff book: inside the Trump White House with Bannon, Kushner, Conway and Melania

A new, more reasonable Donald Trump presidency might just be on the way

4 January 2018

The first year of Donald Trump’s presidency has yielded more leaks and horror stories than we get from most presidents over a lifetime. His habit of employing people who loathe and brief against each other has meant a non-stop supply of scandal, which, oddly, suits him.

He believes his political power lies in dominating the national conversation and, if that means being denounced, so be it. Given everything we heard before he assumed office, let alone in the past year, it’s hard to think of any scandal – bar impeachment – that could change the direction of his presidency.

 

Extracts from Fire and Fury, a new book about Trump’s West Wing, provide a scathing portrait of chaos and feuding by Michael Wolff

Tony Bliar tried to broker MIddle East Deals with the Trump Presidency on a fraudulant

January 4 2018

Donald Trump and Melania, dismayed by his win, have separate bedroomsDonald Trump and Melania, dismayed by his win, have separate bedrooms

On the afternoon of November 8, 2016, Kellyanne Conway settled into her glass office at Trump Tower. Right up until the last weeks of the race, the campaign headquarters had remained a listless place. All that seemed to distinguish it from a corporate back office were a few posters with right-wing slogans.

Conway, the campaign’s manager, was in a remarkably buoyant mood, considering she was about to experience a resounding defeat. Donald Trump would lose the election — of this she was sure. She had spent a good part of the day calling friends and allies in the political world and blaming Reince Priebus, the chairman of the Republican National Committee. Now she briefed some of the television producers and anchors whom she had been carefully courting since joining the Trump campaign — and with whom she had been actively interviewing in the last few weeks, hoping to land a permanent on-air job after the election.

Even though the numbers in a few key states had appeared to be changing to Trump’s advantage, neither Conway nor Trump himself nor his son-in-law, Jared Kushner — the effective head of the campaign — wavered in their certainty: their unexpected adventure would soon be over. Not only would Trump not be president, almost everyone in the campaign agreed, he should probably not be. Conveniently, the former conviction meant nobody had to deal with the latter issue.

As the campaign came to an end, Trump himself was sanguine. His ultimate goal, after all, had never been to win. “I can be the most famous man in the world,” he had told his aide Sam Nunberg at the outset of the race. His longtime friend Roger Ailes, the former head of Fox News, liked to say that if you want a career in television, first run for president. Now Trump, encouraged by Ailes, was floating rumours about a Trump network. It was a great future. He would come out of this campaign, Trump assured Ailes, with a far more powerful brand and untold opportunities.

“This is bigger than I ever dreamt of,” he told Ailes a week before the election. “I don’t think about losing, because it isn’t losing. We’ve totally won.”

From the start, the leitmotif for Trump about his own campaign was how crappy it was, and how everybody involved in it was a loser. In August, when he was trailing Hillary Clinton by more than 12 points, he couldn’t conjure even a far-fetched scenario for achieving an electoral victory. He was baffled when the right-wing billionaire Robert Mercer, a Ted Cruz backer whom Trump barely knew, offered Trump’s campaign an infusion of $5 million. Trump didn’t turn down the help — he just expressed vast incomprehension about why anyone would want to do that. “This thing,” he told Mercer, “is so f***ed up.”

Steve Bannon, who became chief executive of Trump’s team in mid-August [2016], called it “the broke-dick campaign”. Almost immediately, he saw that it was hampered by an even deeper structural flaw: the candidate who billed himself as a billionaire — ten times over — refused to invest his own money in it. Bannon told Kushner that, after the first debate in September, they would need another $50 million to cover them until election day.

“No way we’ll get $50 million unless we can guarantee him victory,” a clear-eyed Kushner said.

“Twenty-five million?” prodded Bannon.

“If we can say victory is more than likely.”

In the end, the best Trump would do is to loan the campaign $10 million, provided he got it back as soon as they could raise other money.

Not only did Trump disregard the potential conflicts of his own business deals and property holdings, he audaciously refused to release his tax returns. Why should he? Once he lost, Trump would be both insanely famous and a martyr to Crooked Hillary. His daughter, Ivanka, and son-in-law, Jared, would be international celebrities. Steve Bannon would become the de facto head of the Tea Party movement. Kellyanne Conway would be a cable-news star. Melania Trump, who had been assured by her husband that he wouldn’t become president, could return to inconspicuously lunching. Losing would work out for everybody. Losing was winning.

“Melania was in tears on election night — and not of joy”
“Melania was in tears on election night — and not of joy”
Carlo Allegri/Reuters

Shortly after 8pm on election night, when the unexpected trend — Trump might actually win — seemed confirmed, Donald Trump Jr told a friend that his father, or DJT, as he calls him, looked as if he had seen a ghost. Melania was in tears — and not of joy. There was, in the space of little more than an hour, in Steve Bannon’s not unamused observation, a befuddled Trump morphing into a disbelieving Trump and then into a horrified Trump. But still to come was the final transformation: suddenly, Donald Trump became a man who believed that he deserved to be, and was wholly capable of being, the president of the United States.

THE INAUGURATION
Few people who knew Trump had illusions about him. That was his appeal: he was what he was. Twinkle in his eye, larceny in his soul. Everybody in his rich-guy social circle knew about his wide-ranging ignorance. Early in the campaign, Sam Nunberg, a campaign official, was sent to explain the constitution to the candidate. “I got as far as the Fourth Amendment,” Nunberg recalled, “before his finger is pulling down on his lip and his eyes are rolling back in his head.”

Trump did not enjoy his own inauguration. He was angry that A-level stars had snubbed the event, disgruntled with the accommodations at Blair House — the president’s guest house — and visibly fighting with his wife, who seemed on the verge of tears. He wore what some around him had taken to calling his golf face: angry and pissed off, shoulders hunched, arms swinging, brow furled, lips pursed.

BANNON THE AUTEUR
Meanwhile, Steve Bannon, in the role he had conceived for himself, the auteur of the Trump presidency, charged forward. The real enemy, he said, was China. China was the first front in a new Cold War.

Steve Bannon was eventually sacked
Steve Bannon was eventually sacked
JONATHAN BACHMAN/REUTERS

“China’s everything. Nothing else matters. We don’t get China right, we don’t get anything right. This whole thing is very simple. China is where Nazi Germany was in 1929 to 1930. The Chinese, like the Germans, are the most rational people in the world, until they’re not. And they’re gonna flip like Germany in the Thirties. You’re going to have a hypernationalist state, and once that happens you can’t put the genie back in the bottle.”

Those who had worked on the campaign noticed the sudden change. Within the first week in office, Bannon seemed to have put away the camaraderie of Trump Tower and become far more remote, if not unreachable. “What’s up with Steve?” Kushner began to ask. “I don’t understand. We were so close.” Now that Trump had been elected, Bannon was already focused on his next goal: capturing the soul of the Trump White House.

This was the message whose urgency Bannon had been trying to impress on an often distracted Trump, who was already trying to limit his hours in the office and keep to his normal golf habits. Bannon’s strategic view of government was shock and awe. In his head, he carried a set of decisive actions that would not just mark the new administration’s opening days but make it clear that nothing ever again would be the same. He had quietly assembled a list of more than 200 executive orders to issue in the first 100 days. The very first EO, in his view, had to be a crackdown on immigration. After all, it was one of Trump’s core campaign promises. Plus, Bannon knew, it was an issue that made liberals batshit mad.

Bannon could push through his agenda for a simple reason: because nobody in the administration really had a job. Priebus, as chief of staff, had to organise meetings, hire staff, and oversee the individual offices in the executive-branch departments. But Bannon, Kushner and Ivanka Trump had no specific responsibilities — they did what they wanted. And for Bannon, the will to get big things done was how big things got done. “Chaos was Steve’s strategy,” one insider said.

JARVANKA

Jared Kushner and Ivanka, who wants to be the first female president
Jared Kushner and Ivanka, who wants to be the first female president
DIMITRIOS KAMBOURIS/GETTY IMAGES

The First Children couple were having to navigate Trump’s volatile nature just like everyone else in the White House. And they were willing to do it for the same reason as everyone else — in the hope that Trump’s unexpected victory would catapult them into a heretofore unimagined big time. Balancing risk against reward, both Jared and Ivanka decided to accept roles in the West Wing over the advice of almost everyone they knew.

It was a joint decision by the couple, and, in some sense, a joint job. Between themselves, the two had made an earnest deal: if sometime in the future the opportunity arose, she’d be the one to run for president. The first woman president, Ivanka entertained, would not be Hillary Clinton; it would be Ivanka Trump. Bannon, who had coined the term “Jarvanka” that was now in ever greater use in the White House, was horrified when the couple’s deal was reported to him. “They didn’t say that?” he said. “Stop. Oh, come on. They didn’t actually say that? Please don’t tell me that. Oh my God.”

The truth was, Ivanka and Jared were as much the chief of staff as Priebus or Bannon, all of them reporting directly to the president. The couple had opted for formal jobs in the West Wing, in part because they knew that influencing Trump required you to be all-in. From phone call to phone call — and his day, beyond organised meetings, was almost entirely phone calls — you could lose him. He could not really converse, not in the sense of sharing information, or of a balanced back-and-forth conversation. He neither particularly listened to what was said to him nor particularly considered what he said in response. He demanded you pay him attention, then decided you were weak for grovelling. In a sense, he was like an instinctive, pampered and hugely successful actor. Everybody was either a lackey who did his bidding or a high-ranking film functionary trying to coax out his performance — without making him angry or petulant.

Ivanka maintained a relationship with her father that was in no way conventional. She was a helper not just in his business dealings but in his marital realignments. If it wasn’t pure opportunism, it was certainly transactional. For Ivanka, it was all business — building the Trump brand, the presidential campaign, and now the White House. She treated her father with a degree of detachment, even irony, going so far as to make fun of his comb-over to others. She often described the mechanics behind it to friends: an absolutely clean pate — a contained island after scalp-reduction surgery — surrounded by a furry circle of hair around the sides and front, from which all ends are drawn up to meet in the centre and then swept back and secured by a stiffening spray. The colour, she would point out to comical effect, was from a product called Just for Men — the longer it was left on, the darker it got. Impatience resulted in Trump’s orange-blond hair colour.

Nothing contributed to the chaos and dysfunction of the White House as much as Trump’s own behaviour. The big deal of being president was just not apparent to him. Most victorious candidates, arriving in the White House from ordinary political life, could not help but be reminded of their transformed circumstances by their sudden elevation to a mansion with palace-like servants and security, a plane at constant readiness and downstairs a retinue of courtiers and advisers. But this wasn’t that different from Trump’s former life in Trump Tower, which was actually more commodious and to his taste than the White House.

Trump, in fact, found the White House to be vexing and even a little scary. He retreated to his own bedroom — the first time since the Kennedy White House that a presidential couple had maintained separate rooms. In the first days he ordered two television screens in addition to the one already there, and a lock on the door, precipitating a brief standoff with the secret service, who insisted they have access to the room. He reprimanded the housekeeping staff for picking up his shirt from the floor: “If my shirt is on the floor, it’s because I want it on the floor.” Then he imposed a set of new rules: nobody touch anything, especially not his toothbrush. (He had a longtime fear of being poisoned, one reason why he liked to eat at McDonald’s — nobody knew he was coming and the food was safely premade.) Also, he would let housekeeping know when he wanted his sheets done, and he would strip his own bed.

If he was not having his 6.30 dinner with Steve Bannon, then, more to his liking, he was in bed by that time with a cheeseburger, watching his three screens and making phone calls — the phone was his true contact point with the world — to a small group of friends, who charted his rising and falling levels of agitation through the evening and then compared notes with one another.

DAILY WAR OF THREE ADVISERS
Priebus and Bannon and Kushner were all fighting to be the power behind the Trump throne. And in these crosshairs was Katie Walsh, the deputy chief of staff. It became clear to her that “the three gentlemen running things”, as she came to characterise them, had each found his own way to appeal to the president. Bannon offered a rousing f***-you show of force; Priebus offered flattery from the congressional leadership; Kushner offered the approval of blue-chip businessmen. Each appeal was exactly what Trump wanted from the presidency, and he didn’t understand why he couldn’t have them all. He wanted to break things, he wanted Congress to give him bills to sign and he wanted the love and respect of New York machers and socialites.

As soon as the campaign team had stepped into the White House, Walsh saw, it had gone from managing Trump to the expectation of being managed by him. Yet the president, while proposing the most radical departure from governing and policy norms in several generations, had few specific ideas about how to turn his themes and vitriol into policy. He didn’t read. He didn’t really even skim.

And if Bannon, Priebus, and Kushner were now fighting a daily war with one another, it was exacerbated by the running disinformation campaign about them that was being prosecuted by the president himself.

When he got on the phone after dinner, he’d speculate on the flaws and weaknesses of each member of his staff. Bannon was disloyal (not to mention he always looks like shit). Priebus was weak (not to mention he was short — a midget). Kushner was a suck-up. Sean Spicer was stupid (and looks terrible too). Conway was a crybaby. Jared and Ivanka should never have come to Washington.

Tony Blair ‘warned Trump’ that UK may have spied on him

President Trump’s White House is portrayed as being dogged by inexperience and feuding among senior staff
President Trump’s White House is portrayed as being dogged by inexperience and feuding among senior staffCHIP SOMODEVILLA/GETTY IMAGES
Tony Blair warned Donald Trump’s aides that British intelligence may have spied on them during the election, according to an explosive new book.

The former prime minister met Jared Kushner, son-in-law to Donald Trump and a senior aide, at the White House last February.

Tony Blair is said to have been angling to become a Middle East adviser
Tony Blair is said to have been angling to become a Middle East adviserStefan Rousseau/PA

According to the author Michael Wolff, Mr Blair shared a “juicy rumour” during their meeting — “that the British had had the Trump campaign staff under surveillance, monitoring its telephone calls and other communications and possibly even Trump himself”.

The claim is made in Fire and Fury: Inside the Trump White House, which draws on 200 interviews with Mr Trump’s circle and the president himself.

Mr Blair is said to have been angling for a role as an adviser to Mr Trump on the Middle East. A month after his tip-off, Britain’s relationship with the United States nosedived when Sean Spicer, then the White House press secretary, claimed that GCHQ, the British signals intelligence agency, had spied on Trump Tower during the election. GCHQ denied the claims as “utterly ridiculous”.

Last night a spokeswoman for the former prime minister responded: “It is all a complete and total fabrication,” adding that Mr Blair had made no pitch to be the president’s Middle East envoy.

The account provides a scathing portrait of Mr Trump and a West Wing hit by inexperience and feuding among its senior staff. It claims that:

● Mr Trump promised his wife, Melania, that he would not win the presidency. The future first lady wept when she realised that he had won.

● Ivanka Trump, his daughter who is married to Mr Kushner, wants to be the first female president.

● Steve Bannon, Mr Trump’s former chief political strategist, said that a meeting between three top Trump campaign officials and a lawyer linked to the Kremlin amounted to “treason”. Mr Trump said last night that Mr Bannon had “lost his mind”.

The book claims that Mr Trump started election day in a buoyant mood. He expected to lose but believed that his campaign had boosted his personal brand and would prove lucrative. Mr Bannon allegedly later recounted how Mr Trump’s demeanour transformed as the votes came in: “A befuddled Trump morphing into a disbelieving Trump and then into a horrified Trump.” When he realised that he was on course to become president, Mr Trump “looked as if he had seen a ghost”, according to his eldest son, Donald Jr.

On inauguration day Mr Trump was “visibly fighting” with his wife. He is said to have found the White House an intimidating home. He and Melania have separate bedrooms, the first residents to sleep apart since the Kennedys. Mr Trump asked for two more TVs to be installed in his bedroom, bringing the total to three. He demanded a lock on the door, resulting in a stand-off with his secret service, who insisted on having access to his room.

He was said to have banned domestic staff from touching his belongings, especially his toothbrush, partly because of a fear he could be poisoned. This phobia apparently helps to explain his taste for fast food, which is “safely pre-made” by a McDonald’s cook who has no idea who will eat it. Mr Trump told his housekeepers when he wanted his sheets changed, and would strip his own bed. Ivanka Trump is said to treat her father with “a degree of detachment”, mocking his hairstyle to friends. The colour, she would point out, was from a product called Just for Men — the longer it was left on, the darker it got. Impatience resulted in Mr Trump’s orange-blond hair.

A spokeswoman for Mrs Trump described the book as “bargain fiction”. Stephanie Grisham added: “Mrs Trump supported her husband’s decision to run for president. She was confident he would win and very happy when he did.”

Exclusive extract: Blair ‘came knocking with juicy rumour’
One of Jared Kushner’s many new patrons was Tony Blair, the former prime minister, whom Kushner had got to know when, on the banks of the River Jordan in 2010, they attended the baptism of Grace and Chloe Murdoch, the young daughters of Rupert Murdoch and his then wife, Wendi.

Jared and his wife, Ivanka, had also lived in the Trump building on Park Avenue where the Murdochs lived (for the Murdochs it was a rental apartment while their grand triplex on Fifth Avenue was renovated, but the renovation had lasted four years), and Ivanka Trump had become one of Wendi Murdoch’s closest friends.

“Blair . . . was particularly intent on helping to shepherd some of Jared Kushner’s Middle East initiatives”
“Blair . . . was particularly intent on helping to shepherd some of Jared Kushner’s Middle East initiatives”Evan Vucci/AP

Once in the White House, the president’s daughter and son-in-law became the target of a renewed and eager cultivation. Blair, now with philanthropic, private diplomatic and varied business interests in the Middle East, was particularly intent on helping to shepherd some of Jared’s Middle East initiatives.

In February Blair visited Kushner in the White House. On this trip the now freelance diplomat, perhaps seeking to prove his usefulness to this new White House, mentioned a juicy rumour: the possibility that the British had had the Trump campaign staff under surveillance, monitoring its telephone calls and other communications and possibly even Trump himself.

This was, as Kushner might understand, the Sabbath goy theory of intelligence. On the Sabbath, observant Jews could not turn on the lights, nor ask someone else to turn on the lights. But if they expressed the view that it would be much easier to see with light, and if a non-Jew then happened to turn them on, that would be fine. So although the Obama administration would not have asked the British to spy on the Trump campaign, the Brits would have been led to understand how helpful it might be if they did.

It was unclear whether the information was rumour, informed conjecture, speculation or solid stuff. But, as it festered in the president’s mind, Kushner and Steve Bannon went out to CIA headquarters in Langley to meet Mike Pompeo and his deputy director, Gina Haspel, to check it out. A few days later, the CIA opaquely reported back that the information was not correct; it was a “miscommunication”.

Jared Kushner and Ivanka Trump vied for influence but knew the president “was often most influenced by the last person he spoke to”
Jared Kushner and Ivanka Trump vied for influence but knew the president “was often most influenced by the last person he spoke to”Carlos Barria/Reuters

By October Steve Bannon, the White House chief strategist, was telling people that he thought there was a 33.3 per cent chance that the Mueller investigation [into Russian collusion] would lead to the impeachment of the president, a 33.3 per cent chance that Trump would resign, perhaps in the wake of a threat by the cabinet to act on the 25th Amendment [by which the cabinet can remove the president in the event of his incapacitation], and a 33.3 per cent chance that he would limp to the end of his term. In any event, there would certainly not be a second term, or even an attempt at one.

“He’s not going to make it,” said Bannon at the Breitbart Embassy [his news site’s office].…

© Michael Wolff 2018 Extracted from Fire and Fury: Inside the Trump White House, to be published by Little, Brown on January 9 at £20

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The new world disorder and the fracturing of the west

London – 3rd January 2017

The geopolitical situation remains tense, although the world economy is improving.

The path to a more unified Europe in 2018. We have reached the end of an economic period, that of western-led globalisation, and a geopolitical one — the post-cold war “unipolar moment”. This is what I argued almost exactly a year ago.

The question was whether the world would experience an unravelling of the US-created, post-second world war liberal order into deglobalisation and conflict, or a resurgence of co-operation. A year into the presidency of Donald Trump, we should return to this point.

In brief, unravelling is even more likely. Experience has underlined the special character of Mr Trump’s presidency. On a daily basis, he violates the behaviour and attitudes the world expects of a US president. But the exploitation of office for personal gain, indifference to truth and assault on institutions of a law-governed republic are all as one should have expected.

A liberal democracy only survives if the participants recognise the legitimacy of other participants. A leader who calls upon his officials to prosecute erstwhile opponents is a would-be dictator, not a democrat. Character is one thing; actions quite another. So far, Mr Trump has governed mainly as a traditional Republican “pluto-populist”, delivering policies to the plutocracy and rhetoric to his angered base.

Yet his characteristics are still to be seen, in his consistently mercenary attitude to US alliances and narrowly mercantilist views of trade. The Trump presidency has weakened the cause of liberal democracy (democracy that rests on a neutral rule of law). In former communist countries of eastern Europe, the style of plebiscitary dictatorship (euphemistically called “illiberal democracy”) characteristic of Vladimir Putin’s Russia seduces admirers and encourages imitators.

Tayyip Recep Erdogan’s narrow victory in the referendum on presidential power moved Turkey further in this direction.

Yet the UK’s 2016 Brexit referendum has not, so far, attracted imitators inside the EU.

In France, Emmanuel Macron stemmed the populist and xenophobic tide. But the German elections have weakened the country’s ability to respond to Mr Macron, while the forthcoming Italian elections might prove disruptive not just for Italy, but for the whole of the eurozone.

Arguably, the most important of all the political developments of 2017 was in China. Here Xi Jinping has apparently established supremacy over the Communist party and reinforced the supremacy of party over state, and state over the Chinese people. Of the world’s strongmen, he has emerged the strongest — the leader of a rising superpower.

In 2017, then, autocracy was on the rise. The “democratic recession” continues. What, meanwhile, has happened to global co-operation? Here, too, we saw significant developments. One was the decision of Mr Trump to pull out of the Trans-Pacific Partnership, in which US allies, notably Japan, had invested so much, and to renegotiate the North American Free Trade Agreement.

Another was the administration’s decision to pull out of the Paris climate agreement. In the opposite direction was the rhetorical attempt of Mr Xi to pick up the mantle of globalisation.

On balance, the forces against co-operation made progress last year, as did those against democracy. That is not surprising when the world’s leading country has a president who sees conflict as the norm. These developments have to be set against longer-term trends. Most important, the position of today’s high-income countries, though still enormously powerful, is in relative decline.

China’s military spending is rising sharply, relative to that of the US, even though it remains at just 2 per cent of gross domestic product. The share of high-income countries in world output has fallen by about 20 percentage points since the beginning of the century, at market prices, and their share in world merchandise trade has fallen by 17 percentage points (see charts). Here are a few implications.

 

First, these political developments have fractured the west as an ideologically coherent entity. Close co-operation among the high-income countries was largely a creation of US will and power. The centre of that power currently repudiates the values and perception of interests that underpinned this idea. That changes just about everything.

Second, modern western ideals of democracy and liberal global markets have lost prestige and appeal, not just in emerging and developing countries, but in the high-income nations themselves. While no alternative economic system has yet won the day, the appeal of xenophobic populists and authoritarians (often the same) has risen.

Third, managing the world economy, the global commons (notably climate) and security issues, demands co-operation between high-income and emerging countries, above all China. The old days of domination by the leading high-income countries are over. Securing co-operation among such diverse countries is extremely hard.

Finally, there is a real risk of conflict between the US and China, as Harvard’s Graham Allison argues in his book, Destined for War. Optimists will argue (rightly) that economic interdependence and nuclear weapons make war insane. Pessimists will respond that humanity has a huge capacity for blundering into disaster.

Maybe the generals who surround Mr Trump will fail to keep him under control. Maybe they will even promote a ruinous war over North Korea. If 2017 underlined the geopolitical stresses, it also saw a healthy global economic upswing. How do these things relate? That will be my topic next week.

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