02/25/2012
For the week 2/20-2/24
[Posted 6:00 AM ET]
Europe, Washington and Wall Street
Greece received its second bailout this week of 130 billion euro or $170 billion. Including the first bailout worth 110 billion euro ($145 billion), the new deal means every Greek man, woman and child will owe the eurozone and the International Monetary Fund about 22,000 euro ($29,000). Greece averted a nightmare, but for how long is still up in the air. Many a headline says Greece bought itself more time, but we could just be talking weeks, not years.
The respective parliaments in the euro-17 have to vote to approve the bailout and on Monday, it is expected Germany’s will weigh in. Chancellor Angela Merkel is receiving a lot of credit for acting like Margaret Thatcher and being the leader to hold the eurozone together, but she is rightfully concerned with public opinion, which is tired of the Greeks and sending money down a rat-hole. Most Germans, for example, don’t want an increase in the firewalls, though that is what is needed to backstop Italy and Spain, even as the rest of the eurozone wants them increased. Merkel herself has two key state elections later in the year as she sets herself up for her re-election fight in 2013.
On the debt-restructuring topic in Greece, private bondholders have accepted a ‘voluntary’ deal with a haircut of 53.5% [70% net present value] in order to pare down $100 billion in debt owed to the creditors, but the actual bond swap doesn’t take place until March 9, so there is always a danger attitudes change in the interim.
An election in Greece is scheduled for April and opinion polls suggest that the two parties in the coalition, which currently dominate parliament, are facing huge losses, while parties on the far left and far right are set to make big gains, they being opposed to the bailout deal. That same month, you have a critical presidential election in France (a run-off in May), and the leader in the polls, a socialist, wants to renegotiate the bailout and other recently agreed to eurozone treaties. [French President Nicolas Sarkozy said if he pulled off the upset, he would put the eurozone’s fiscal accord to a referendum, always dangerous.] So politics will play a huge role in May Day activities, if you catch my drift.
Meanwhile, the IMF said it would decide in the second week of March just how much of the 130 billion euro for the latest Greek bailout it is willing to pony up. It’s indicated it would contribute less than the one-third it provided in previous rescue efforts.
And as for the economic picture across both the European Union and the 17-nation eurozone, the European Commission lowered its forecasts, projecting flat growth for the full 27-nation EU and a contraction in 2012 of 0.3% for the euro-17 after last projecting growth of 0.5%. Greece is slated to decline another 4.3%, its fifth year of recession/depression; Spain is now expected to decline 1% after the EC had predicted a rise in GDP in 2012, so its political leaders are pressing the Commission for a break when it comes to its budget deficit target for this year. How can they lower their deficit to 4.4% from 8% when the economy is contracting, they are arguing?
But bottom line, at least as of today, Greece is set to be able to meet its 14.5 billion euro debt payment on March 20, which was the reason behind the recent rush to get a deal done.
As for the Greek people, they face another round of brutal cuts to wages, jobs, pensions and privileges; plus they lose more of their sovereignty, the real killer to many, as one of the demands of the northern European nations was that there be permanent surveillance in Athens by auditors from the EU, the ECB and the IMF…a total humiliation, even if warranted.
Greece’s finance minister, Evangelos Venizelos, said a “nightmare scenario” had been avoided. “This was a significant development that gives our country a new opportunity, and we need to make the most of this opportunity,” he said as he urged citizens to “put behind us this sense of misery and despair and build a new national social contract.”
But as if all the above isn’t bad enough, a confidential analysis by the IMF, first leaked to the Financial Times, concludes there is no way Greece’s debt will ever reach the 2020 target of 120% of GDP and that it would be more like 160%, so a third bailout would be required at some point of at least another 100 billion euro.
Right now, however, Greece has just days, until Wednesday, to complete to the EU’s satisfaction a checklist of 38 demands; specific changes to the country’s tax, wage and spending policies, which is why I said at the top, the deal really isn’t completed as most have been led to believe.
Editorial / Financial Times
“As Ferrari says to Victor Laszlo in Casablanca, ‘Might as well be frank, Monsieur. It would take a miracle to get you out of Casablanca, and the Germans have outlawed miracles.’ It is the same with Greece. A miracle is required to get Athens to meet the almost impossible targets it has been set by its friends in Brussels and Berlin. The central assumption in the latest bail-out is that the country’s debt ratio will fall to 120% of gross domestic product by 2020 if it implements swinging austerity measures. How likely is it that this miracle will occur?
“The best that can be said about the 130bn euro bailout – and it is not a small thing – is that it adds another layer to the firewall behind which Greece is now quarantined. Other vulnerable eurozone countries may breathe a little easier. In Greece, however, the bailout is likely to do more harm than good.”
Editorial / Wall Street Journal
‘The good news about the latest Greek bailout is that it is much less consequential to Europe or the global economy than the first bailout two years ago. The tragedy is that the cost will be the crushing of the Greek economy and the diminishing of democracy – in its Athens birthplace, no less.
“More than saving Greece, the last two years have been mainly about insulating the rest of Europe from Greece. This Europe has gradually done. Tuesday’s bailout takes another such step by protecting the European Central Bank from taking losses on its Greek bonds, while forcing private bondholders to take losses of as much as 70% in net present value….
“A better outcome would have been a steeper haircut and greater debt reduction, but that would have hurt the European banks that lent so much money to Greece. It also might have made the banks less eager to lend to other European countries….
“Under the burden of debt and austerity policies, the Greek economy won’t recover for years….
“Most striking in this deal is the damage to Greek self-government. The EU’s price for this bailout were assurances from Greece’s two biggest parties – Pasok on the center-left and New Democracy on the center-right – that they maintain current policies after elections this spring. Party leaders swallowed that pill to get the bailout, but Greek voters are understandably dismayed….
“It would have been far better had Europe let Greece default two years ago, reducing its debt to manageable levels and confronting the economic pain of reform earlier. The rest of Europe may congratulate itself this week on one more example of its ‘solidarity.’ But two years later, everything is worse for Greece. This is not the glory that the founders of the euro project imagined.”
Howard Davies / Financial Times
“The first question is – can the Greek government retain control of the streets? So far they have done so, but the mood in Athens and elsewhere is volatile.
“The second is – what kind of government will be elected in April? Wolfgang Schauble, the German finance minister, betrayed his anxiety about the election outcome when he suggested an Italian-style technocratic administration. That was always unlikely, but Mr. Schauble has made it impossible. So next month’s elections will be crucial, and there are signs that the parties that have distanced themselves from the negotiations will do well. But a fragile coalition may not be able to deliver the dramatic spending cuts the deal implies.
“Only the third and final question is economic in nature. Will the Greek economy pull out of its free fall and begin to stabilize this year?...Unless there is a return to growth before too long, the debt mountain will continue to grow more rapidly than the Troika can shovel it away.”
Philip Stephens / Financial Times
“Two things are needed if Greece is to avoid catastrophic economic and social collapse. They apply whether it stays in or leaves the euro. The first is sufficient political resolve within Greece to reform radically the state and economy; the second is a reciprocal willingness among other Europeans to foot a sizable bill for the failures and fraud of past Greek governments….
“Behind the name-calling that marks out Greece’s relationship with its eurozone partners lies a complete breakdown of trust. Many Europeans – and I am not talking only about Germans – do not believe that politicians in Athens will keep their promises; many Greeks think that the draconian austerity demanded as the price of debt relief is calculated to punish rather than rehabilitate. A fair observer would probably say that both sides have a point.”
Wolfgang Munchau / Financial Times
“When Wolfgang Schauble proposed that Greece should postpone its elections as a condition for further help, I knew that the game would soon be up. We are at the point where success is no longer compatible with democracy. The German finance minister wants to prevent a ‘wrong’ democratic choice. Similar to this is the suggestion to let the elections go ahead, but to have a grand coalition irrespective of the outcome. The eurozone wants to impose its choice of government on Greece – the eurozone’s first colony….
“A senior German official has told me that his preference is to force Greece into an immediate default. I can therefore only make sense of Mr. Schauble’s proposal to postpone elections as a targeted provocation intended to illicit an extreme reaction from Athens. If that was the goal, it seems to be working. Karolos Papoulias, the Greek president, fired back at Mr. Schauble’s ‘insults.’ Evangelos Venizelos, finance minister, said certain elements wanted to push Greece out of the eurozone. Conspiracy theories abound. Hardly a day passes by without a cartoon in the Greek press of Angela Merkel and Mr. Schauble in Nazi uniforms. German MPs expressed outrage at the Greek outrage. Bild, the German mass-market daily, is calling for Greece to be ‘kicked out’ of the eurozone. I shudder at the thought of an act of violence committed against Germans in Greece or Greeks in Germany. This is the kind of conflict that could easily escalate….
“The reason the current system is breaking down is the loss of mutual trust. It narrows the political options of crisis resolution. Mistrust is the reason why the Greek rescue package has been delayed until the latest possible moment, and why the latest proposals contain so many poison pills: implementation deadlines, the escrow account, and a permanent representation of creditors and the International Monetary Fund. Soon there will be yet more austerity. At some point, somebody will snap.
“The German strategy seems to be to make life so unbearable that the Greeks themselves will want to leave the eurozone. Ms. Merkel certainly does not want to be caught with a smoking gun in her hand. It is a strategy of assisted suicide, and one that is extremely dangerous and irresponsible.”
Finally, on Feb. 29, the European Central Bank will launch phase two of its long-term refinancing operation, LTRO, that is to have the impact of the 2008 TARP bailout; a mechanism that staves off disaster among the banks. Phase I, last Dec. 8, by most accounts has been a huge success. We were on the verge, as I was writing at the time, of a systemic failure in the European banking system and there was no telling where it would go once the first bank run commenced and panic set in.
Instead, the ECB lent out 489 billion euro ($640 billion) to 523 banks, a far larger sum than anticipated. The money was lent at 1% for three years and there was no stigma attached. The banks are expected to take anywhere from 400 billion to 680 billion euro in round two. If it’s the larger sum, that means the collective borrowings under the LTRO would surpass the amount lent out during TARP.
But here’s the thing. There is zero evidence whatsoever the European banks are taking the funds and then lending them out to business and consumers. Instead they are either refinancing their own debt, using the proceeds to buy sovereign bonds yielding far more than the 1% they borrowed at, or sticking it back in the ECB’s overnight lending facility until they need it. Goldman Sachs did a survey of investors and only 4% said they thought the proceeds would be used to increase lending to customers, compared with 56% who thought it would be used to refinance maturing debt and 26% who said it would be invested in sovereign bonds.
Well it’s not all bad to invest in sovereign bonds. That no doubt has helped reduce the yields on Italian paper, for example. And that’s a good thing.
But, again, this eventual 1.2 trillion euro or so isn’t going to the consumer or corporations, at the very time Europe needs growth. Yes, Spain and Italy, in particular, need to be able to refinance their humongous debt loads at reasonable rates to avoid requiring bailouts of their own, that’s one piece of the puzzle, but the other side of the equation is crying out for help, too.
At the same time, think about how the LTRO funds are designed to encourage the banks to buy the sovereign debt that the central bank can’t. As Andrew Stuttaford wrote in the Feb. 13 issue of The Weekly Standard:
“Pause for a moment…to think through this money-laundering. Banks that have been weakened by their exposure to dodgy European sovereign debt were being encouraged to use loans (secured by similar debt, and worse) from an already highly leveraged central bank (underwritten by increasingly restive taxpayers) that was itself heavily exposed to identical crumbling borrowers, to buy even more of the same poison. Ponzi himself would have blanched. Nicolas Sarkozy, however, thought it was a great idea. ‘Each state,’ he said, ‘can turn to its banks’ to buy its bonds. Because thanks to the LTRO, the banks ‘will have liquidity at their disposal.’….
“The fundamental flaw of the euro was, and is, that this one-size currency does not fit all. All the liquidity in the world will not change that. Europe’s monetary union was assembled on the basis of political fiat rather than economic reality, and the economics and politics have both turned sour. And not just sour: They have combined into a murderous cocktail. Understandably enough, the looted taxpayers of the north want to see budgetary discipline imposed on the dysfunctional south….But too much austerity too soon is draining the ability of the PIIGS to generate the growth that is the only way out of their burning sty. More dangerously still, it is reaching the limits of the politically possible. Shuttered businesses, soaring unemployment, and the prospect of years of stagnation to come are not the stuff of social stability. If insults like the recent draft German proposals that would have ground into dust the last shards of Greece’s economic sovereignty (and much of what remains of its self-respect) are then added to the mix, an explosion is unlikely to be far behind.”
I’ve been saying the explosion is as likely in Eastern Europe as it is in the southern tier.
Washington
When it comes to the topic of oil, one of the true know-nothings on the planet is Fox News’ Bill O’Reilly. Every time the price at the pump rises, he totally gets the fundamentals wrong. The other night he was insisting that the reason why gas is headed to a nationwide average of $4.00 a gallon is because Big Oil is selling its surplus overseas, to China and India, and not keeping it here. Good lord. For starters, half of all U.S. gasoline is refined from overseas oil and that price has generally been $15 to $20 a barrel more than what I quote at the end of this column each week, which is West Texas Intermediate, out of a key storage hub in Cushing, Oklahoma. The price for West Texas ended the week shy of $110. But Brent Crude from overseas closed at $125!
There is one reason, and one reason only, why the oil price has spiked as it has the past few weeks, and thus the price of gasoline. Iran. There are other tangential reasons, such as a low refinery operating rate in America, and to a lesser extent talk of a stronger economic picture worldwide, which is frankly just talk. I mean there were those this week who said the Greek bailout agreement was cause for optimism with regards to European growth and thus higher energy demand. If that was the case, then why did the European Commission lower its growth outlook? I also get a kick out of those who actually touted rising consumer and business confidence in Germany, or here in the U.S. Puhleeze…oil doesn’t trade on that, at least not more than $0.50 or so a barrel.
I mean Bloomberg had a story on Thursday that started out thusly:
“Oil rose to the highest level in more than nine months as jobless claims held at a four-year low in the U.S. and German business confidence surpassed forecasts, signs fuel consumption may improve.” Nothing on Iran until about the fifteenth paragraph, and then only in passing.
It’s Iran and, yes, speculators. What’s clear is that until there is a resolution of the Iranian nuclear crisis, one way or another, President Obama has a real problem on his hands if he wants to hang out at the White House for another four years beyond next January.
I also got a kick out of those, like CNBC’s Jim Cramer, who said something is different this time. We don’t seem too upset about rising oil prices as some restaurant chains aren’t getting hit like they normally do when oil is spiking.
It’s the weather. Geezuz. In case you haven’t noticed, we’ve had no winter! When the roads are icy and the windchill is zero, you aren’t as likely to go out to dinner as when it’s 50 and you just got off the golf course. And, yes, the overall economy has shown some improvement.
But if we get to $4.00 and stay there ($5.00 in some areas), it will have an impact and gives the Republican presidential candidate a terrific talking point this fall, assuming they don’t blow it, the surviving candidates being a most dysfunctional lot. In all honesty, the price of gas is all I hear people talking about in my neck of the woods. [Currently about $3.70 at the three stations I use.]
I discuss Iran in depth down below (as I have for the 13 years of this column…I think I’ve covered it all about sixteen times over by now, and to digress, if we had talked to Rafsanjani like I suggested years ago we wouldn’t be in this mess today). For now just know that on Friday afternoon, the International Atomic Energy Agency said Iran is making significant advancements in its enrichment of uranium.
As for tapping the Strategic Petroleum Reserve as a way of lowering prices, that would be the stupidest move, at least today. We are lucky past leaders had the foresight to build it out, but it is to be used for national emergencies, and we don’t have one, yet. If Iran successfully closed the Strait of Hormuz for a decent length of time, then it’s a different story, but for now the oil is flowing and the SPR should be left untouched.
Meanwhile, President Obama, beginning to feel the heat on the topic, seeing as how the price at the gas pump when he took office was 50% lower than today, says he’s not to blame. Energy production is up in this country, but as the Wall Street Journal correctly editorializes:
“The reality is that most of the increase in U.S. oil and gas production has come despite the Obama administration. It is flowing from the shale boom, which is the result of private technological advances and investment. Mr. Obama has seen the energy sun rise and is crowing like a rooster that he made it happen.
“Mr. Obama (Thursday) also repeated his proposal that now is the time to raise taxes on oil and gas companies, as if doing so will make them more likely to drill. He must not believe the economic truism that when you tax something you get less of it, including fewer of the new jobs they’ve created.
“We’d almost feel sorry for Mr. Obama’s gas-price predicament if it weren’t a case of rough justice. The President has deliberately sought to raise the price of energy throughout the economy via his cap-and-trade agenda. He is now getting his wish, albeit a little too overtly for political comfort. Mr. Obama has also spent three years blaming George W. Bush for every economic ill. If Mr. Obama now feels frustrated by economic events beyond his control, perhaps he should call Mr. Bush for consolation.”
President Obama was in the news over his new corporate tax plan as well this week, as alluded to in the Journal editorial, whereby he would lower the corporate rate from 35% to 28% (lower for manufacturers) while closing loopholes. But while I would love to see a lower corporate rate, and the elimination of every single freakin’ loophole around, as would most corporations themselves, truth be told, Obama’s picking and choosing who would benefit and who would suffer (i.e., the oil and gas industry regarding the latter), is once again falling into the trap of picking the outcome in his “Winning the Future” dogma. You’d think he would have learned otherwise with Solyndra.
But last week I talked of how the lame duck session of Congress following next November’s election is going to be historic, and one helluva fight, and I thought Lori Montgomery of the Washington Post summed it up better than I did. To wit:
“On Dec. 31, the George W. Bush-era tax cuts are scheduled to expire, raising rates on investment income, estates and gifts, and earnings at all levels. Overnight, the marriage penalty for joint filers will spring back to life, the value of the child credit will drop from $1,000 to $500, and the rate everyone pays on the first $8,700 of wages will jump from 10 percent to 15 percent.
“The Social Security payroll tax will pop back up to 6.2 percent from 4.2 percent under the deal approved Friday (Feb. 17) by Congress. And new Medicare taxes enacted as part of President Obama’s health-care initiative will for the first time strike high-income households.
“The potential shock to the nation’s pocketbook is so enormous, congressional aides have dubbed it ‘Taxmageddon.’ Some economists say it could push the fragile U.S. economy back into recession, particularly if automatic cuts to federal agencies, also set for January, are permitted to take effect….
“(Both) sides are bracing for another epic showdown in the weeks after the November election, as Democrats prepare to use Taxmageddon to break the partisan impasse over taxes that has blocked action on an array of issues, from modernizing the nation’s infrastructure to taming the national debt.”
Some say it will be a time to put divisiveness behind them, referring to our fearless elected officials, with such a hard deadline ahead of them. You’ll also either have a president who is crowing and putting on his ghetto voice with the southern twang, or he’ll be fuming.
One thing he should do in the interim, however, is sit down with Republicans on a corporate tax overhaul. Each side has an incentive to act in the best interests of the country, while still protecting their flank for November.
Street Bytes
--Stocks edged up this week, with the Dow Jones adding 0.3% to 12982, crossing 13000 a few times before backing off, while the S&P 500 also added 0.3% to close at 1365, its highest mark since June 2008. Nasdaq added 0.4% to finish at 2963. Target was among the retailers reporting solid earnings vs. expectations, but for the most part the group’s profits were less than comparable periods a year earlier. Wal-Mart, for example, continues to suffer as its fourth-quarter earnings and sales were short of Street projections. Higher gas prices don’t help in its target market. Home Depot, though, not only handily beat expectations, it raised guidance.
--U.S. Treasury Yields
6-mo. 0.13% 2-yr. 0.30% 10-yr. 1.98% 30-yr. 3.10%
No earth-shattering news in bond land. Treasuries once again finished basically unchanged.
--China’s Premier Wen Jiabao is slated to target cutting pollution, while also addressing income inequality, at the upcoming National People’s Congress, where it is expected he’ll set a government growth target of 7.0%-7.5% for 2012. A preliminary purchasing managers’ index by HSBC has the PMI at 49.7 for Feb, with new export orders at just 47.4, further evidence of a significant slowdown. Home prices in January fell or were unchanged in all 70 metropolitan areas that are tracked, though the government will not waiver on its controls for the sector and efforts to bring prices down.
There was one positive; the leading economic indicators for January, issued by the Conference Board, actually rose 1.6%. Plus China’s central bank issued a report that concluded the country must open its capital markets to the rest of the world, giving foreigners far more access to Chinese stocks and bonds, a positive step that will nonetheless take time.
--Britain recorded its biggest budget surplus in four years in January. In the first ten months of the fiscal year, the deficit narrowed to 93.5 billion pounds from 109.1 billion a year earlier. Government revenue increased 4.7% and spending grew 1.6%. This is pretty good.
--London home prices continued to buck the trend, rising to another record level in February. The average asking price is now $710,300, or up 4.3% in January over a year ago.
--A leading think tank in Ireland is forecasting growth in the economy of 0.9% for 2012, on top of estimated growth of a like amount in 2011. But this ‘think tank,’ ESRI, had forecast 2011 growth of 2.2% initially, which begs the question, why is it a “leading think tank” as described by the Wall Street Journal. What were they thinking?
[Separately, President Obama’s corporate tax plan could hurt business in Ireland in particular because he seeks a minimum tax on profits made by U.S. firms overseas and Ireland’s legal loopholes would be at risk, thus making it less attractive for U.S. companies to operate there.]
--Tourism in Ireland rose from 6 million in 2010 to 6.5 million in 2011, but trips to the Emerald Isle declined 3% in the fourth quarter over the same period in 2010. Hmmm. Might have to get a pint of Guinness and ponder this for 20 minutes.
--Thailand’s economy shrank 9% in the fourth quarter over the same period a year earlier owing to the worst flooding on record that severely disrupted manufacturing. The government expects the economy to expand 5.5%-6.5% this year, owing in no small part to flood-prevention infrastructure projects.
--It is estimated that Indians have deposited $500 billion illegally in overseas tax havens, “which has led to a critical loss of revenue for the fast-developing country.” [TIME]
--Editorial / New York Post:
“In a pre-nomination interview in 2008, now-Energy Secretary Steven Chu told the Wall Street Journal, ‘Somehow we have to figure out how to boost the price of gasoline to the levels in Europe.’
“Mission accomplished?”
--The U.S. Department of Agriculture confirmed an earlier report that it projects farmers will plant 2.3% more corn this year, hopefully easing price pressures on both food and fuel (think ethanol).
On the soybean front, China, the world’s biggest consumer, signed agreements in Iowa and California to purchase 13.4 million tons of the oilseed by Aug. 31, 2013, as part of Vice President Xi’s recent trip to both states. China’s corn imports are also expected to surge sevenfold by 2015-2016, another boon to U.S. farmers, as domestic production in China can’t keep up with rising demand. So this, ironically, may negate any potential price benefits from increased planting here.
--From a piece in the High Plains Journal, a farm publication I subscribe to, we learn that “Agriculture is responsible for one out of every 12 jobs in our country. Each additional billion dollars of agricultural exports generates 8,400 more jobs for us.” [Adrian Polansky, USDA Farm Service Agency]
A big concern, however, is that there has been a 20% decrease in the number of farmers under the age of 25. The average age of a farmer overall is 57.
--In an ugly case, Steve Wynn, CEO of Wynn Resorts, along with the board, removed long-time business partner Kazuo Okada from both Wynn Resorts and Wynn Macau amid allegations Okada made illegal payments to regulators, a super no-no in the casino biz which can impact one’s license. A suit filed by Wynn Resorts alleges Okada made at least $110,000 in unauthorized payments to gaming officials in the Philippines. Last weekend, the Wynn board moved to buy out Okada’s 20% stake in Wynn Resorts for $1.9 billion – a 30% discount to its market value. Okada is trying to block the move.
--The battle between Apple and Proview Technology moved to Shanghai, with Chinese tech firm Proview arguing Apple infringed on its trademark on the mainland. Previous court rulings in favor of Proview covered specific retailers in smaller cities, so a Shanghai order would eat into one of Apple’s biggest markets. Apple’s lawyer argued, “Proview has no product, no markets, no customers and no suppliers. It has nothing.” Apple sold 1.3 million iPads in China in the third quarter. A ruling is expected soon.
--Meanwhile, leading Apple contract manufacturer, Taiwan’s Foxconn Technology Group, said it was hiking wages by up to 25% in its second major salary hike in less than two years as Foxconn comes under further scrutiny for work conditions at its massive plants in China. Workers there currently earn between $285-$400 per month.
--Back in 2005, hedge fund operator Eddie Lampert took control of Sears by merging it with Kmart. It’s been a disaster ever since and on Thursday, Sears disclosed it lost more than $3 billion ($2.4 billion in the fourth quarter), with sales continuing to slide.
But Sears shares soared 34% over three days (beginning Wednesday) as Lampert took pains to assure analysts that he was not taking the company into bankruptcy and that suppliers had no reason to worry as the company has ample liquidity. In turn, Sears will sell down its vast real estate holdings, spinning off 1,200 smaller stores in a rights offering that’s expected to raise $500 million, while 11 department stores will be sold to a mall developer for $270 million.
The thing is, you’re still left with drab Sears and many now believe the shares, after this week’s rally, are incredibly overvalued.
--Procter & Gamble Inc. said it planned to eliminate 5,700 positions over the next 1 ½ years, or about 10% of the company’s non-manufacturing workforce
--The U.S. Postal Service is pushing ahead with plans to close 260 mail processing centers around the nation as part of a billion-dollar-cost-cutting effort that will slow first-class delivery. The consolidations are expected to result in a loss of 35,000 jobs.
--Johnson & Johnson CEO William Weldon announced he is stepping down in April after a slew of product missteps, recalls and court settlements over improper marketing practices tarnished its once pristine image, though Weldon is remaining as chairman. Alex Gorsky, who has overseen J&J’s medical device business, takes over.
--According to the Radio Advertising Bureau, ad spending was up 1% in 2011, the first increase after three down years. Campaign spending will help in a big way later in the year. As I’ve said before, having some experience in radio and online advertising related to StocksandNews, radio is superior. Online advertising blows, plus its ripe with fraud.
--The U.S. and Mexico reached a significant agreement that would allow oil and gas drilling on more than 1.5 million acres in the Gulf of Mexico, resolving a decade-long dispute.
--For 2011, the Transportation Department says U.S. airlines set a record for fewest mishandled or lost bags since the agency began keeping track in 1988. Also, fewer passengers were bumped than ever before.
--Americans are holding onto their cars for a record average of six years vs. the old pattern of flipping every three or four. Improving quality is definitely among the factors pushing the trend.
--Warren Buffett has famously called for the nation’s wealthiest to pay more taxes, to which New Jersey Republican Gov. Chris Christie replied this week that Buffett should “just write a check and shut up.”
In an interview with CNN’s Piers Morgan, Christie said, “I’m tired of hearing about it. If he wants to give the government more money, he’s got the ability to write a check. Go ahead and write it.”
Later, in a town-hall meeting, Christie said, Democrats “want you to be angry because your neighbor makes more than you do. That’s not the New Jersey I know, and it’s not the America that I know.”
Related to the preceding, an AP-GfK survey found that 65% of the people favor Obama’s plan to require people making $1 million or more pay taxes equal to at least 30% of their income. Just 26% opposed Obama’s idea. 2/3s of independents support the idea.
[An AP-GfK poll found that 72% of Americans support raising taxes on people with incomes over $1 million a year.]
But, by a 56-31 margin, more embraced cuts in government services than higher taxes as the best medicine for the budget, according to the same survey.
Left unsaid is that if Americans were told their benefits were being cut, we’d go, “Whoa…now just wait a second, pardner!”
--Goldline International Inc., one of the nation’s largest gold retailers, agreed to refund as much as $4.5 million to former customers over “unfair sales practices,” including the accusation the company was running a “bait and switch” operation. Goldline hadn’t been disclosing markups on telephone calls with customers.
--San Miguel is in talks to buy 49% of Philippine Airlines Inc. San Miguel is also the Philippines’ biggest beer maker, so this would give stewardesses an easier job.
“Do you have Coors Light?” “No, just San Miguel.” “Do you have Miller Lite?” “No!!!! Just San Miguel!!! Didn’t you hear me?!!!” [Stewardesses aren’t real patient these days.]
--The Fuller Brush Co. filed for Chapter 11. About 37 years ago I sold Fuller Brush one summer. I think I was the worst salesman in the history of the company. A few years later, I then sold books for the Southwestern Book Co., going door-to-door in Oklahoma and Kansas. I was the worst salesman in the history of that company, too, and almost starved to death. But then I later became national sales manager of a leading mutual fund shop and the company survived. Go figure.
--While Jeremy Lin finally came down to earth against the Miami Heat on Thursday, going just 1-for-11 from the field with 8 turnovers, unless this becomes a new pattern, sales of Lin merchandise should continue to soar. As of Feb. 16, Modell’s sporting goods had sold 50,000 units of Lin paraphernalia and had 168,000 on order. “It’s like Christmas in February,” said Mitchell Modell, CEO of the 150-store chain.
Linsanity has also been a godsend to bars in the New York area, with fans flocking to watch each Knicks game. I myself haven’t missed any of the last 9, after not watching a full contest in about a year. MSG Network’s television ratings have been the highest for the regular-season since the 1988-89 season.
--Norwegian artist Edvard Munch did four versions of his best-known image, “The Scream,” and one is going on auction May 2 at Sotheby’s with an expected sale price of around $80 million. This is the only one of the four versions left in private hands. It has been in the Olsen family of Norway for 70 years and proceeds will be used to build a new museum and art center on the family farm. Two other versions were stolen in 1994 and 2004, but later recovered.
--Australian miner Rio Tinto said it has found a 12.76-carat pink diamond, the largest such find ever in the country. It’s worth somewhere in the millions and evidently will be sold later this year after being shown around the world, including in New York and Hong Kong. More than 90% of the pink diamonds in the world come from Rio’s Argyle mine in Western Australia’s East Kimberly region. [Just added this factoid for my Aussie readers.]
And for the record, in 2010, a rare 24.78-carat “fancy intense pink” diamond sold for a record-breaking $46 million, the highest price ever paid for a jewel.
Foreign Affairs
Iran: There is no doubt that sanctions have been effective in applying increasing pressure on the Iranian economy, and on this the Obama administration, Congress (especially) and Western Europe are to be commended. I agree with commentator Michael Gerson who writes on Friday in the Washington Post:
“Sanctions have not caused Iran to back down, but the approach is not yet exhausted. It is worth another twist of the tourniquet to reduce significant exceptions and exemptions.”
And that’s the thing. The White House has a June deadline for compliance with U.S. sanctions in terms of Iran’s customers and oil, but the United States can’t wait forever, nor can Israel, and it was highly disturbing that Secretary of State Clinton said a letter Iran sent to the P5+1 – the five permanent members of the UN Security Council, Britain, France, U.S., Russia and China, plus Germany – was what she had been looking for as Iran expressed that it wants talks on the nuclear issue.
But this letter becomes an issue the same week the International Atomic Energy Agency’s inspectors were blocked by Iran’s leadership on their second visit from seeing the military site at Parchin, as well as interviewing selected key scientists, plus there are reports of expanded nuclear activity at the Fordow underground site; while Iran announced new military exercises, suspended oil sales to Britain and France (admittedly negligible…last year France bought only 3% of its oil from Iran and the UK imported even less), and reiterated threats to close the Strait, as well as saying Iran itself could launch a preemptive strike.
As noted above, the IAEA then issued a revised report on Iran’s activities, while earlier, both the U.S. and Britain urged Israel not to attack.
U.S. Chairman of the Joint Chiefs of Staff, Gen. Martin Dempsey, told CNN that while Israel has the ability to strike Iran, it would delay them “probably for a couple of years. But some of the targets are probably beyond their reach.” Dempsey expressed concern an Israeli attack would spark reprisals against U.S. targets in the Gulf or Afghanistan. “That’s the question with which we all wrestle. And the reason that we think that it’s not prudent at this point to decide to attack Iran.” Dempsey also described Iran as a “rational actor.”
British Foreign Minister William Hague said: “I don’t think a wise thing at this moment is for Israel to launch a military attack on Iran. I think Israel like everyone else in the world should be giving a real chance to the approach we have adopted on very serious economic sanctions and economic pressure and the readiness to negotiate with Iran.”
I find it highly distressing that top Obama administration and defense officials continue to voice their opinions on this topic in public rather than privately. At the same time, Israeli officials should keep their mouths shut as well.
The preferred type of dialogue was actually exhibited by Dan Shapiro, U.S. Ambassador to Israel, on Thursday in Jerusalem.
“It is clear that Iran is under significant economic strain…(but the sanctions have) not yet achieved the goal, which is to get that nuclear program stopped…For both us and for Israel this is the preferred strategy, to achieve that all-important objective.
“It’s also true, as the president has said…we are coordinating with our Israeli partners…that other options, all other options, are on the table to achieve that goal…[and] the necessary planning has been done to ensure that those options are actually available if at any time they become necessary,” he stated.
There. That’s more like it. A balanced statement that keeps Iran guessing.
Editorial / Wall Street Journal
“In a single sound bite, General Dempsey managed to tell the Iranians they can breathe easier because Israel’s main ally is opposed to an attack on Iran, such attack isn’t likely to work in any case, and the U.S. fears Iran’s retaliation. It’s as if General Dempsey wanted to ratify Iran’s rhetoric that the regime is a fearsome global military threat.
“If the U.S. really wanted its diplomacy to work in lieu of force, it would say and do whatever it can to increase Iran’s fear of an attack….America’s top military officer in particular should say that if Iran escalates in response to an Israeli attack, the U.S. would have no choice but to intervene on behalf of its ally….
“The general is not a free-lancer, so his message was almost certainly guided by the White House. His remarks only make strategic sense if President Obama’s real priority is to contain Israel first – especially before the November election….
“Like most of Mr. Obama’s Iran policy, General Dempsey’s comments will have the effect of making war more likely, not less. They will increase Israel’s anxiety about U.S. support, especially if Mr. Obama is re-elected and he has a freer political hand. This may drive Israel’s leadership to strike sooner. Weakness invites war, and General Dempsey has helped the administration send a message of weakness to Israel and Iran.”
Ray Takeyh / Washington Post
“From Tehran’s perspective, protracted diplomacy has the advantage of potentially dividing the international community, shielding Iran’s facilities from military retribution and easing economic sanctions. Iran may have to be patient in its quest to get the bomb; it may have to offer confidence-building measures and placate its allies in Beijing and Moscow. Any concessions it makes will probably be reversible and symbolic so as not to derail the overall trajectory of the nuclear program.
“Can Tehran be pressed into conceding to a viable arms-control treaty? On the surface, it is hard to see how Iran’s leaders could easily reconsider their national interest. The international community is confronting an Islamic republic in which moderate voices have been excised from power.
“However, it may still be possible to disarm Iran without using force. The key figure remains (Supreme Leader Ayatollah) Khamenei, who maintains the authority and stature to impose a decision on his reluctant disciples. A coercive strategy that exploits not just Khamenei’s economic distress but his political vulnerabilities may cause him to reach beyond his narrow circle, broaden his coalition and inject a measure of pragmatism into his state’s deliberations. As with most ideologies, Iran’s supreme leader worries more about political dissent than economic privation. Such a strategy requires not additional sanctions but considerable imagination.”
Michael Gerson / Washington Post
“The president probably recognizes that the containment of an Iran with nuclear weapons is not a serious option, because advocates for this approach are confused about the meaning of containment. Obama could make clear that an Iranian nuclear attack on America would result in the death of every Iranian citizen. The promise of lopsided assured destruction would deter a direct attack on the American homeland. But it would not contain Iran. Behind a uranium shield, the Iranian regime would increase its support for terrorism and destabilize its neighbors, who would find a nuclear deterrent of their own highly desirable. And how would promises of future containment be minimally credible? If Western nations did nothing before Iran had nuclear weapons, why would they become more determined after Iran possesses them? Permitting a nuclear Iran would mean that everyone, including America and Israel, was bluffing – except Iran.
“Obama can’t do nothing. But it is not advisable or practical to launch a multi-week conventional air and naval campaign. So the national security adviser, the defense secretary and intelligence officials need to provide their boss something better than this dismal, binary choice….
“A limited strike, it is true, would only buy time. The message, however, would be clear enough: If you keep at it, we’ll do it again. In the meantime, an oppressive and increasingly desperate regime may lose its grip on power….
“Obama wants to be known for winding down long wars. But he has shown no hesitance when it comes to shorter, Israel-style operations. He is a special ops hawk, a drone militarist.
“Iran should take this fact seriously as it calculates its next move.”
Israeli Prime Minister Netanyahu is meeting with President Obama on March 5. As the Washington Post’s Jennifer Rubin notes:
“(Netanyahu) will probably take the time to remind Obama that the president has staked his own credibility and that of the United States on preventing Iran from acquiring nuclear weapons. The only way to ensure that that pledge is fulfilled, and for the United States to remain relevant in the region, is to make clear that the United States is prepared – with the cooperation of states in the Mideast (surely the Saudis must be as nervous as Netanyahu about Obama’s fecklessness) – to take military action if needed to thwart Iran’s nuclear ambitions.”
Israeli Foreign Minister Avigdor Lieberman rebuffed both Washington and Moscow, the latter’s Deputy Foreign Minister Gennyadi Gatilov having expressed an Israeli strike “would be a catastrophe not only for the region but for the whole system of international relations.”
“The security of the citizens of Israel, the future of the state of Israel, this is the responsibility of the Israeli government,” Lieberman said. “We will make the best decision for the Israeli interest.”
Last fall I said President Obama would strike Iran in the spring. If Israel goes first, we will be there with them. I am not changing that stance. Those saying the president is just hoping to hold off until after the election simply don’t get it. If Iran were to test a nuclear weapon in, say, September, Obama goes down in flames at the polls. He cannot risk that. Acting preemptively, even if it just sets back Iran’s program a few years, gives him time to deal with the blowback.
As for Israel, I also continue to maintain that anyone thinking Benjamin Netanyahu will let Iran continue with their nuclear program just doesn’t understand the man. He is the last Israeli that would let Iran get the bomb under his watch.
Of course all the preceding is moot should Iran make a stupid mistake first, like a suicide mission on one of the U.S. naval vessels in the Gulf. As noted last week, maybe this is what Ayatollah Khamenei wants, thinking any conflict would be limited while he rallies his people and lets his proxies battle it out with Israel.
More next time as we continue to game it out, including my take on Saturday’s New York Times story on how U.S. intelligence agencies don’t think Iran is working on a warhead; as if the CIA has any clue.
Syria: The situation here deteriorated further as the international community, led by the Red Cross, in actuality, sought a ceasefire in Homs where President Bashar Assad continued to butcher the people there, including two Western journalists this week. The Red Cross is seeking a two-hour daily truce for the delivery of emergency medical and food supplies, this as Sec. of State Hillary Clinton said Thursday that Syrian opposition forces will become “increasingly capable” of carrying out offensive operations.
“They will, from somewhere, somehow, find the means to defend themselves, as well as begin offensive measures,” but she didn’t endorse arming the opposition.
I admit arming the rebels is troublesome because we don’t have a handle on who the leaders of the Syrian opposition are. Oh, we know who some of the spokesmen are, many of whom have been in exile for years, not just the past 11 months, but they don’t get along with each other, plus you have the al-Qaeda element.
But humanitarian assistance is one of America’s hallmarks and we must do everything we can to aid the Red Cross, for crying out loud!
Meanwhile, the United Nations named former UN secretary general Kofi Annan as joint special envoy for the UN and the Arab League. Mr. Annan is hardly an imposing figure. I’ve noted in the past he’d make for a good neighbor, like take in your mail and water the flowers when you’re away. As leader of the UN, though, he was an utter disaster. Ask the residents of Rwanda, when he was responsible for the UN Peacekeeping Force there in 1994.
Philip Collins / London Times
“There is a lot that is species-shaming but not much that is surprising about the actions of President Assad’s thugs. Bizarre as it now seems, Assad was greeted in the summer of 2000 as a herald of reform in what was called, with optimism that is now gruesome, the Damascus Spring. In the autumn of 2001, he clamped the intellectuals in jail and, ever since, his regime has practiced the full arbitrary panoply of detention, torture and citizens who vanish off the face of the Earth.
“And yet, in Syria today the case for standing by and doing nothing is very close to being persuasive. The Syrian Army is eight times larger than the Libyan Army. A weak, split opposition controls no territory. There is no obvious dissident body to inherit power. Even if the end were imminent. Assad might well be prepared, like Samson, to bring the temple down with him. The Russians and the Chinese will not grant a UN mandate for action and there is a risk, in any case, of a full-scale war in which Russia and Iran would stand with Syria and Hizbullah against the West in a horrible rerun of the power blocks of the Great War.
“Intervention, in other words, will mean chaos. But there is chaos already. We have to trade these risks against the following certainty. Six thousand are dead and the upshot of standing by is the gang rape of a young boy. The upshot of inaction is murder. The rhetorical naivety in this appeal is deliberate. When you see children slaughtered by state-backed monsters, there is nothing wrong with being reduced to cliché. This cannot be allowed to happen. Not in my name. Something must be done.
“The revulsion is too profound to be written off as adolescent or unrealistic. For those of us who are not religious, the suffering of other human beings is the deepest mark of common human heritage. So it is important to add weight to our moral impulse rather than to dismiss it as naïve and foolish. Where does revulsion meet practical reality? That is the central question….
“The practical arguments against military intervention in Syria are overwhelming. But there is a lot that can be done short of marching in. The success of our intervention in Libya and the absence of intervention in Syria is redeeming the argument that was lost in Iraq.
“The lesson is simple. If you take on a fascist you get chaos. If you don’t take on a fascist you get chaos. It’s the nature of the beast and sometimes we forget that it’s the fascist that’s the beast, not us. We’re better than that and in our actions we will show it.”
Senator John McCain:
“To somehow sit by and watch this massacre continue without exploring and employing every option that we possibly can to stop it is a betrayal of everything the United States stands for and believes in.”
Michael Young / Daily Star (Beirut)
“The administration of President Barack Obama has often been ridiculed for what is described as ‘leading from behind.’ More often than not this has been an excuse for not leading at all, and nowhere has American vacillation been more on display than in Syria….
“Washington has been all over the place. In an interview with France 24 just over a week ago, the U.S. ambassador to Syria, Robert Ford, said that the Obama administration was looking for a ‘peaceful political solution’ in Syria. ‘Even the Syrian people do not want a military solution to this crisis,’ he said, before adding: ‘We believe [President] Assad should step down, but at the end of the day the Syrian people will make the decision, not the U.S.’
“A few days later, Victoria Nuland, the State Department spokeswoman, sounded less affirmative. While also defending a political solution, she observed, ‘If we can’t get Assad to yield to the pressure that we are all bringing to bear, we may have to consider additional measures.’ To many people this suggested that the U.S. might possibly endorse arming Syria’s opposition if that became necessary. Evidently, the Obama administration – amid the carnage in Homs and elsewhere in Syria – feared that it would fall behind the policy curve.
“There are no easy answers in Syria but Washington’s trouble is that it has no strategy for the country. This is proving very damaging indeed, given that the Russians and Iranians do have one, and it can be summarized quite simply: Actively support the repression by the Syrian army and security services, bringing the opposition, or a portion of the opposition, to the negotiating table. Introduce reforms, albeit cosmetic reforms, to return the political initiative to Assad. Integrate willing opposition figures into a national unity government, thereby neutralizing the discontent on the ground. And give the regime the latitude to govern again, in order to snuff out pockets of dissent.
“The scheme is unlikely to work, but at least it is straightforward. Moscow and Tehran have dispatched military and intelligence units to Syria to impose their will. There are reports that the U.S. has also sent people into Syria to organize the Syrian opposition, but apparently in numbers so infinitesimal as to be virtually useless….
“A Syrian civil war is a fearful prospect, but American indecision is not going to prevent one from taking place. If Washington and the Europeans dither, the Gulf states won’t, and weapons will enter Syria anyway, as they already are. Better for the Obama administration to devise a political approach that embraces, while also controlling, a military dimension that would push Assad to reconsider his options….
“Washington needs to get a grip. Its policy toward Syria has been strangely disconnected from its other regional priority, namely containing Iran. It took many months for the administration to acknowledge the Syrian crisis as a major issue. By insisting, on the record and off, that there is nothing they can do in Syria, American officials have effectively ensured that they will do nothing. Their performance has been craven and one-dimensional – in a word, pathetic.”
Lastly, journalist Marie Colvin, who was killed in Homs this week, worked for the Sunday Times of London. An editorial in that paper concluded:
“Mr. Assad has begun something that he cannot finish, started a war that he will not win. Marie Colvin gave her life to bear witness to his cruelty and barbarism. It is up to those she left behind to bring an end to it.”
Afghanistan: Violence exploded across the country as a result of an incredibly stupid act, the burning of Korans by U.S. soldiers. I’m sorry. You know my support for our military, but you also know of my disdain for some in the higher command and it is the responsibility of our generals, and the immediate levels below them, to ensure that our men and women are sensitive to the issues where they serve.
Editorial / London Times
“In a calm and tolerant country, where the pervasive national debate is mature, worldly and peaceable in tone, the inadvertent burning of a holy book could be expected to cause only minor offense, quickly forgotten.
“Afghanistan is not such a country. Yesterday, a crowd of thousands gathered outside Bagram airbase, after scores of Korans were burnt inside. This, reportedly, was the routine disposal of the former possessions of detainees held at the base, and no offense was intended. One must ask, nonetheless, how ignorant, naïve and stupid were those responsible, who had not considered that offense might be caused. This is a fight both predictable and not worth having.
“In April of last year, ten people were killed in protests unleashed by the decision of Terry Jones, an imbecilic pastor, to burn a Koran in Florida. He, at least, knew what he was doing. The West’s war in Afghanistan has never been a war on Islam. Rather, it was a war against a network that preached a perversion of that faith and used it to inspire murder and mayhem in the free world.
“Fundamentalist Islam is a grim pursuit, antithetical to basic liberty, but the Taliban became the West’s enemy only because they were al-Qaeda’s friends. On human rights, in particular, the rights of women, some clash of values was inevitable and indeed morally desirable. The burning of the Koran is a pointless provocation, creating friction and outrage for no reason at all.
“ISAF and NATO forces have been in that country for ten years and by now ought to know a little about it. Yes, Afghans should be able to better control themselves. But what manner of fools failed to anticipate that they might not?”
Two U.S. soldiers were killed in rioting on Thursday, while further protests around the country claimed another seven lives, as of Friday. [I see there has been further bloodshed as I go to post on Saturday.] The top U.S. commander in Afghanistan, Gen. John Allen, traveled to the base where an Afghan soldier opened fire on U.S. troops, leading to the two deaths.
Allen told the troops: “There will be moments like this when you’re searching for the meaning of this loss. There will be moments like this when your emotions are governed by anger and a desire to strike back. Now is not the time for revenge. Now is not the time for vengeance. Now is the time to look deep inside your souls, remember your mission, remember your discipline, remember who you are.”
Iraq: It had been relatively quiet for a few weeks but then on Thursday there was a wave of attacks across Baghdad that killed 55 and wounded more than 200. The attacks unfolded over a 2 ½ hour period, to heighten the sheer terror of it all. Last Sunday, a suicide car bomber took out 20 police recruits in Baghdad.
North/South Korea: The United States and North Korea held their first formal talks since last year, even as South Korea began live-fire military drills near its disputed border with the North. Pyongyang threatened retaliation but none was forthcoming. On the negotiation front, Washington is trying to steer the new regime of Kim Jong Un, or whoever is in charge, back to the negotiating table, but there were no breakthroughs. As noted before, all the North wants now is food aid. Like 300,000 tons of the stuff. The Obama administration is prepared to provide it if North Korea will suspend its uranium enrichment program. But of course any deal on this front must include UN monitors to verify any freeze.
China: Vice President Xi received favorable reviews back home for his trip to the United States, especially among ordinary people, as reported by the Washington Post’s Keith B. Richburg from Beijing. Xi “struck a chord by using the simple everyday language of most Chinese and sprinkling his speeches with common cultural references, including a line from a pop song and an advertising jingle….It’s not an image Chinese are used to after the decade-long presidency of the stiff and formal-looking Hu Jintao, who often comes across in photos as a typical Communist Party bureaucrat. And many here noticed the difference.”
Russia: You know who’s a real pain in the butt these days, even more so than before? Vladimir Putin. With no real opposition, it now looks like he’ll gain the 50% necessary to avoid a run-off in the March 4 presidential vote as the latest poll from the reputable Levada Center has him suddenly at 66% of decided voters, compared with 15% for Communist Party leader Gennady Zyuganov. [New Jersey Nets owner Mikhail Prokhorov, the billionaire, is only polling at 6%.]
This week, in final campaign appearances, Putin vowed that if he’s re-elected to the office he once held for 8 years, he would pursue the largest arms buildup the country has experienced since the end of the Cold War, some $772 billion, including the acquisition of 400 shiny new ICBMs and eight strategic ballistic missile submarines, which is highly worrisome, seeing as the Russkies have an abysmal safety record when it comes to their nuclear subs. By the way, you know that one that had a fire recently? The Russians first denied there were nukes on board. Now the story is there were.
Putin explained why the big build-up is necessary.
“We are forced to take decisive steps to bolster our national aerospace defense system to counter the U.S. and NATO efforts in the deployment of missile defense. One cannot be ‘too patriotic’ about this issue,” Putin wrote in an article. “Russia’s military response to the global U.S. missile shield…will be effective and asymmetrical, a match for U.S. missile defense policy.” [Christian Science Monitor]
Putin also said at a Thursday campaign rally:
“We ask everyone not to look abroad, not to run to the other side and not to deceive your motherland, but to join us.”
Then he warned the West: “We won’t allow anyone to meddle in our affairs or impose their will upon us, because we have a will of our own.”
Geezuz, Vlad. Just shut up.
Separately, we note that Latvian voters resoundingly rejected a proposal to give official status to Russian, the mother tongue of their former Soviet occupiers. The thing is, Russian is the first language of about a third of the country’s 2.1 million people. But ethnic Latvians saw the referendum as a brazen attempt to infringe on their sovereignty, which was restored two decades ago following the collapse of the Soviet Union. Ethnic Russians say they have faced 20 years of discrimination. The schism between the two will only widen now.
France: President Nicolas Sarkozy has narrowed Socialist Party candidate Francois Hollande’s lead to just one or two points…27% for Sarko, 28/29% for Hollande…though voters still have Hollande then prevailing in a run-off, 56-44. National Front candidate Marine Le Pen remains in third at 17%. However, Ms. Le Pen faces a big challenge in just getting on the ballot as she is falling short thus far and has until March 16 to meet the requirement of submitting 500 signatures of supporters among mayors and other local officials, with the signatures to be made public. And therein lies the sticking point.
For his part, Sarkozy is projecting himself as a man of the people, going back to the formula that first made him successful. “When you love France, you tell the truth to the French,” he told a crowd of 10,000 in Marseilles. Wife Carla Bruni is being featured prominently in the campaign and I’ve seen tons of photos where she is careful to be seen giving him an adoring eye, or laying her head on his shoulder.
Actually, I don’t dislike Sarko. I just wanted Le Pen to be in the thick of things to make it all more interesting and I really did believe she would upset the president and gain the run-off against Hollande, whereupon she’d get her clock cleaned.
But what is amazing about French politics is just how close the voters were to electing Dominique Strauss-Kahn, the presumptive Socialist standard-bearer before he was charged with rape in New York while leading the International Monetary Fund. This week he was held by police for questioning in a prostitution ring before being released. According to police, Strauss-Kahn had some connection to sex parties at luxury hotels in the city of Lille. Messing around with prostitutes is legal in France, but supplying them to others isn’t. He could be called back for further questioning in March.
Australia: Big story here. On Monday, Australia’s ruling party is holding a Labor leadership vote on Monday with former prime minister, and just resigned foreign minister, Kevin Rudd, going up against current Prime Minister Julia Gillard. Rudd resigned under pressure from “faceless men” and senior ministers in the party, as he put it, saying he could only serve if he had the confidence of the prime minister. Gillard is confident she will win and remain in office until the next election, 2013.
It was Gillard and her supporters who ousted Rudd in a coup in 2010. I can’t say I follow Aussie politics as closely as, say, Russia, but Rudd always struck me as being superior to Gillard. Both, however, have a solid record of achievement. I mean for crying out loud, Australia is far from a basket case, which is what makes the political drama all the more interesting.
Venezuela: President Hugo Chavez shook up the country again in announcing he needed further cancer surgery after doctors discovered a lesion during medical tests in Cuba. Last year he had two operations to remove a cancerous tumor from his pelvis. The lesion is in the same area. Chavez told the nation in a television address it was a small lesion that hadn’t metastasized.
So will Chavez even be in any shape to sustain a high-energy campaign for re-election, the vote taking place in October? You also have to wonder just how loyal those around him will be if they sense he could be defeated due to his medical condition. Do they oust him and put up another candidate to save their jobs? There’s only one problem with that scenario. Chavez controls everything. Those behind him are hardly well known among the people.
Argentina: The nation is in mourning over a horrible commuter train crash that killed 49. The conductor appeared to be struggling with the brakes when the train, loaded with 1,200 passengers, slammed into a metal barrier as it hurtled uncontrollably until it met the end of the line. You can imagine the scene as the victims, packed into the first two cars to get ahead of the rush-hour crowds on arrival, were squeezed into each other. 461 were hospitalized. The conductor/motorman, survived the crash. The train had just left the shop a day before and was said to be in good order.
Mexico: Just another week in this killing field. 44 died in a prison riot that it turns out was cover for a massive jailbreak by members of the deadly gang, the Zetas. 30 Zetas henchmen escaped from the maximum-security prison during the fighting. Prison guards were clearly complicit, for starters. All of those killed were from the Zetas’ rival, the Gulf cartel. The two are at war for control of part of the drug trade and other criminal enterprises.
And in the city of Monterrey, which you’ll recall up until about a year ago was a relatively peaceful, thriving industrial city where Major League Baseball used to hold an annual game, five taxi-drivers were gunned down with assault rifles as they waited for passengers in the mid-morning. It turns out the Zetas and Gulf cartels are battling over Monterrey.
India: Talk about a disgrace, a safety panel in India said 15,000 people die annually while crossing railroad tracks; around 6,000 on Mumbai’s crowded railroad alone. A government report concluded: “No civilized society can accept such massacre on their railway system.” The country badly needs overpasses, for starters.
Random Musings
[The following surveys were conducted prior to Wednesday’s Republican presidential debate. Arizona and Michigan are next up, Feb. 28.]
--NBC News/Marist poll, Michigan
Mitt Romney 37 percent
Rick Santorum 35
Ron Paul 13
Newt Gingrich 8
Detroit News poll, Michigan
Romney 34
Santorum 30
Gingrich 12
Paul 9
Mitchell Research for Michigan Information & Research Service
Santorum 34
Romney 25
NBC News/Marist poll, Arizona
Romney 43
Santorum 27
Gingrich 16
Paul 11
CNN/Time/ORC poll, Arizona
Romney 36
Santorum 32
Gingrich 18
Paul 6
USA TODAY/Gallup Poll, nationwide
Santorum 36
Romney 26
Gingrich 13
Paul 11
--A Quinnipiac University poll shows Mitt Romney’s unfavorability rating among registered voters nationwide has risen to 43% from 31% in November. A total of 35% had a favorable view of Romney. Santorum was at 34% favorable, 31% unfavorable.
--In 2006, Rick Santorum lost a senate re-election bid by 18 points in Pennsylvania. But a new poll from Franklin and Marshall College shows he is leading Mitt Romney by a 45-16 margin in the state. However, President Obama holds an 8-point lead over both GOP candidates here.
--A Public Policy Polling survey in Arizona now has President Obama tied with Romney at 47%, while leading Santorum 47-46. Back in November, Obama trailed badly in the state.
--From an AP-GfK national poll, President Obama defeats Mitt Romney by 8 points, Rick Santorum by 9, and Newt Gingrich and Ron Paul by 10. Republicans favored Santorum over Romney, 33-32. Gingrich and Paul had 15 percent each.
--According to a USA TODAY/Gallup Poll, Americans are increasingly upbeat about the economy. By 3-1, they say it’s expanding. Six in 10 predict it will be growing a year from now.
But this hasn’t meant much, yet, for President Obama. His favorable rating is 50%. The thing is, the Gallup poll also reveals 51% says Obama is too liberal, and Americans are inclined to say they disagree with him on the issues that matter most to them.
As for the GOP: “The two leading presidential candidates (Romney and Santorum), have favorable ratings significantly lower than any nominee in the past five elections at this point in the election year. Most Republican voters say they wish someone else was seeking the nomination….
“The GOP does have an edge on enthusiasm. In the poll, 53% of Republican voters say they’re more enthusiastic than usual about voting, compared with 45% of Democrats.”
Yeah, but that 53% needs to be far greater, as it was about a year ago
--Jennifer Rubin / Washington Post
“The last four Republican presidential candidates in the last debate before the Michigan, Arizona and Super Tuesday contests went at it in Mesa, Arizona. It was, to be blunt, a wipeout. Mitt Romney brought the heat and the oppo research and flattened Rick Santorum, getting the former Pennsylvania senator hot and defensive. It was also a good night for Newt Gingrich, who returned to his professorial role. And Ron Paul, for once, was a model of common sense, at least when it came to the federal government and contraception.”
--John Podhoretz / New York Post
“Last night, in the 20th GOP debate, national front-runner Rick Santorum spoke these potentially prophetic words: ‘Everything’s not going to be fine.’ He was trying to explain why he’s been speaking so sourly about the condition of American society, but that sentence may prove to be his epitaph following a truly disastrous debate performance.
“Sometimes, politics is hand-to-hand combat, as when Santorum and Mitt Romney scuffled a few times, with Romney mostly getting the better of the exchanges. And sometimes, as Santorum said in defending his unpopular votes in his 12 years as a senator, ‘Politics is a team sport and you have to take one for the team.’
“But sometimes, politics is like golf, with every candidate playing parallel to every other – in which case, the most formidable foe each faces is the one inside his own head. That’s especially true of someone like Santorum, who took the lead unexpectedly a few weeks ago. He had to keep his wits about him last night. If he’d stayed steady, calm and unruffled, he might’ve run away with it.
“Santorum didn’t. He overthought. He overcorrected. He overdid. He spent so much time explaining the process by which he voted for this, or why he’d originally done that, and the difficulty in his position that led to do the other, that he never made a positive case for himself.”
--George Will / Washington Post…on Rick Santorum’s opening “multiple fronts in the culture wars.”
“In 1965, Daniel Patrick Moynihan, then in President Lyndon Johnson’s administration, published his report on the black family’s ‘crisis,’ which was that 24 percent of black children were then born to unmarried women. Today, 73 percent are. Forty-one percent of all children are now born to unmarried women.
“Moynihan, a social scientist in politics, proposed various family policies but also noted this: When the medieval invention of distilling was combined with Britain’s 18th-century surplus of grain, the result was cheap gin – and appalling pockets of social regression. The most effective response to which was not this or that government policy, it was John Wesley – Methodism. Which brings us back to Santorum.
“He is an engagingly happy warrior, except when he is not. Then he is an angry prophet of a dystopian future in which, he has warned, people will be ‘holed up in their homes afraid to go outside at night.’ He has the right forebodings but might have the wrong profession. Presidential candidates do not thrive as apostles of social regeneration; they are expected to be as sunny as Ronald Reagan was as he assured voters that they were as virtuous as their government was tedious.
“Today’s Republican contest has become a binary choice between two similarly miscast candidates. Mitt Romney cannot convince voters that he understands the difference between business and politics, between being a CEO and the president. To bring economic rationality to an underperforming economic entity requires understanding a market segment. To bring confidence to a discouraged nation requires celebrating its history and sketching an inspiring destiny this history has presaged.
“Romney is right about the futility of many current policies, but being offended by irrationality is insufficient. Santorum is right to be alarmed by many cultural trends but implies that religion must be the nexus between politics and cultural reform. Romney is not attracting people who want rationality leavened by romance. Santorum is repelling people who want politics unmediated by theology.
“Neither Romney nor Santorum looks like a formidable candidate for November.”
Couldn’t agree more.
--Michael Gerson / Washington Post
“Both Santorum and Romney have also stumped across Michigan criticizing the auto bailout, which Romney describes as ‘crony capitalism on a grand scale.’ This at a time when General Motors has announced the largest profits in its history.
“You can’t prove a counterfactual, so Santorum and Romney can claim that GM and Chrysler would have been even more successful without public loans, emerging from Chapter 11 leaner, meaner and better able to survive. But this requires an intentional, determined amnesia.
“In 2008, GM and Chrysler were not prepared for a Chapter 11 filing. President George W. Bush’s economic advisers studied the firms’ numbers and determined they might be forced to liquidate without a loan. So Bush provided a three-month bridge loan, allowing the automakers time to restructure before entering bankruptcy and giving Obama some time to make his own policy choices. There are valid questions about the way Obama and Steve Rattner structured their auto bailout. But GM and Chrysler did eventually enter a managed bankruptcy, which was the endgame that Romney himself recommended.
“Specific bailout policies can be disputed, but one fact cannot: No president – Republican or Democrat – would have allowed the economic collapse of the upper Midwest in the midst of a national economic panic. A conservatism that prefers ideology to reality is not particularly conservative.”
For the record, I supported the auto bailout for the exact reason Mr. Gerson gives.
Gerson continues:
“Republicans have a (simple) task. They need to offer a credible economic alternative, while pointing out that Obama has missed his own objectives on reducing unemployment and the federal debt by a mile. Obama – having pledged to cut the deficit in half during his term – has produced four massively unbalanced budgets that put the United States on the road to Athens. He has done little or nothing – this is the craven part – about the unsustainable growth of entitlement spending, which threatens the security of the elderly and the future stability of the economy.
“But as long as Republicans are focused elsewhere, they are providing Obama with his own private bailout.”
--Santorum made news last weekend in saying of President Obama that he was peddling a “phony theology” and policies not rooted in the Bible, while also touting home-schooling, which he has done with his seven children. Less than 3% of American parents home-school their kids.
They say home-schooled kids probably eat a more balanced meal at lunch.
--A new Washington Post/ABC News poll shows that Republican women have a 57% favorable view of Rick Santorum, up 13 points since January. 61% of Republican women view Romney favorably, though he has higher negatives than Santorum – 28% to 18%.
--According to a USA TODAY/Gallup Poll, by 66%-29%, Republicans and Republican-leaning independents surveyed say it would be better if one of the four candidates now running managed to secure enough delegates to clinch the nomination.
But I want a brokered convention! whined your editor. It would be a helluva lot more fun than many of us are having now.
--In a Suffolk University/WHDH-Boston poll, Republican Sen. Scott Brown leads his Democratic challenger, Elizabeth Warren, by a 49-40 margin in a key race this fall. Among independents, 60% support Brown while only 28% supported Warren.
--A study of 2,600 patients by researchers at Memorial Sloan-Kettering Cancer Center, New York, found that undergoing a colonoscopy where polyps were removed resulted in a 53% reduction in risk of death from colon cancer. You don’t need more powerful evidence than this that once you hit 50, get it done.
[Previous research showed the removal of polyps prevented cancer, not necessarily death.]
--The Supreme Court heard arguments on Wednesday on whether lying about something like the Congressional Medal of Honor is a criminal offense as part of the Stolen Valor Act of 2005, which targets individuals who “falsely represents himself or herself, verbally or in writing, to have been awarded any decoration or medal authorized by Congress for the Armed Forces of the United States.”
So the Court will be ruling on the act of lying. A decision is expected this summer. It should make for fascinating reading.
--Sign of the Apocalypse…from Newsweek:
“When Paul McCartney took the stage at the 2012 Grammy Awards, Twitter exploded not with praise but confusion. ‘Who is Paul McCartney?’ became a trending topic on the micro-blogging site, with users making all sorts of ill-informed observations about the former Beatle, such as ‘who is he, he hella old too’ and ‘He’s not very popular over here, I think.’”
--Sign of the Apocalypse, part deux:
Steve Schmidt was a key adviser to Sen. John McCain during the 2008 presidential race and Mr. Schmidt, as part of the upcoming HBO “docudrama” about the ’08 campaign, related a story in an interview with producers that McCain’s running mate, Sarah Palin, believed the Queen, not the prime minister, was responsible for the decision to keep British forces in Iraq.
It seems during a coaching session with Schmidt, he asked her what she would do if Britain began to waver in its commitment to the Iraq war.
As reported by Raf Sanchez of London’s Telegraph, “In one of the many rambling responses that eroded her credibility, Mrs. Palin reportedly replied she would ‘continue to have an open dialogue’ with the Queen. A horrified Mr. Schmidt informed her the prime minister, then Gordon Brown, would be responsible for the decision. She also mistakenly believed Saddam Hussein ordered the September 11 attacks.”
Time to complete my move to Yap.
--Chelsea Clinton apparently is going to be re-signed by NBC, despite the fact her reporting, err, you know, kind of, err….
--Editorial / New York Post…on the 50th anniversary of John Glenn becoming the first American to orbit the Earth.
“Today, the U.S. space program is arguably at its nadir. The final space shuttle mission concluded last summer and, with it, America’s leadership in space exploration.
“President Obama says he wants to land astronauts on an asteroid sometime after 2025, with a manned orbit of Mars a decade later – but with nowhere near the clear vision and commitment Kennedy articulated.
“And trillions in red ink place major constraints on such aspirations.
“However, a core lesson of John Glenn’s historic flight remains: A will to stand as the world’s preeminent and influential power is inextricably linked to the nation’s exploratory spirit.
“Fifty years later, does America still have ‘the right stuff’?”
Nope. At least not with the current sorry bunch of leaders.
--But let’s end on a positive note, shall we? George Will commented on Jean Edward Smith’s biography “Eisenhower in War and Peace” from his perch at the Washington Post. As I’ve said on more than one occasion, I’m a big fan of Ike, whose standing among the presidents continues to improve with each passing year it seems. Will calls Eisenhower “the most underrated president.”
A memorial to Eisenhower is being planned on four acres across Independence Avenue from the National Mall and Will takes issue with The Post’s cultural critic, Philip Kennicott, who praises the Frank Gehry design because it acknowledges that “few great men are absolutely great, without flaws and failings.” To which Will says, “Good grief. If Ike, with all his defects, was not great, cancel the memorial.”
So Will focuses on “Smith’s superb biography of one of three Americans (with Washington and Grant) who were world figures before becoming president. Eisenhower entered the White House having dealt with such demanding military men as John Pershing, Douglas MacArthur and George Marshall, then FDR, Churchill, Stalin…de Gaulle and others in the excruciatingly complex task of conducting coalition warfare with the largest multinational force ever assembled.
“Intellectuals and journalists, who are often the last to learn things, regarded Eisenhower as amiable and mediocre. He was neither. He was cold (see Smith on Eisenhower’s dismissal of his wartime companion Kay Summersby). He was steely (a three-to-four-pack-a-day smoker, he quit when ‘I simply gave myself an order’). He was brutal (he used financial pressure to bring Britain to heel during the 1956 Suez crisis). He was subtle (he assisted de Gaulle’s seizure of power in France in 1944 contrary to FDR’s fervent wishes). He was audacious (he evaded Churchill by dealing directly with Stalin).
“After Eisenhower quickly liquidated a stalemated war in Korea, no American died in combat during his presidency. Twice, concerning the French besieged at Dien Bien Phu in Vietnam and during the Formosa Strait crisis, he resisted – a president with less military confidence might not have – his most senior advisers advocating the use of nuclear weapons.”
There was also no stronger president on the issue of race. Ike finally integrated the army (“two-thirds of Army units were still segregated five years after President Truman’s integration order”), plus he sent the 101st Airborne to integrate Little Rock’s Central High School. As George Will added, “In 1942, when Australia desperately sought U.S. troops but said a law prohibited blacks from entering the country, Gen. Eisenhower said, ‘All right. No troops.’ Australia quickly saw the light.”
Smith writes: “[Eisenhower] was buried in a government-issue, eighty-dollar pine coffin, wearing his famous Ike jacket with no medals or decorations other than his insignia of rank.”
We salute Dwight D. Eisenhower. One of the Greatest this nation has ever produced.
---
Pray for the men and women of our armed forces…and all the fallen.
We note the deaths of four special ops airmen in Djibouti, and seven marines in a training exercise here in the States.
God bless America.
---
Gold closed at $1776…highest since November
Oil, $109.77…highest since April
Returns for the week 2/20-2/24
Dow Jones +0.3% [12982]
S&P 500 +0.3% [1365]
S&P MidCap +0.1%
Russell 2000 -0.2%
Nasdaq +0.4% [2963]
Returns for the period 1/1/12-2/24/12
Dow Jones +6.3%
S&P 500 +8.6%
S&P MidCap +12.1%
Russell 2000 +11.6%
Nasdaq +13.8%
Bulls 51.1…big drop over last week
Bears 26.6 [Source: Investors Intelligence]
Have a great week. I appreciate your support.
Off to Prior Lake, Minn., to see country act Montgomery Gentry. On the off chance one of you is there for Sunday’s show, drop me a line.
Brian Trumbore
