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Week in Review

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02/18/2012

For the week 2/13-2/17

[Posted 6:00 AM ET]

Europe, Washington and Wall Street

By Monday night, it is hoped that Greece and the other 16 nations in the euro area, along with the “Troika” of the European Commission, the European Central Bank and the International Monetary Fund will have finally reached agreement on the second Greece bailout package of 130 billion euro ($170 billion), along with a debt-restructuring (bond swap) with Greece’s private investors, as well as the ECB and its holdings of Greek dreck, so that Greece can then make a March 20 debt payment of 14.5 billion euro and move on; all this while slashing spending anew, including another 15,000 job cuts, as well as reductions in the minimum wage and pensions. Whether or not the Greek people will stand still and just take it remains to be seen. Last weekend, protests exploded across Athens with some 50 buildings set on fire.

Nothing is guaranteed, however, and the rhetoric the past few days was as dire as any heard in Europe in decades.

 “The deal will ensure our country’s future inside the euro…A bankruptcy would lead to uncontrollable economic chaos and social explosion,” said Prime Minister Lucas Papademos. He added that a bankruptcy would lead to Greeks losing their savings; the state being unable to pay salaries and pensions; and shortages in import items such as medicines, fuel and machinery. 

“If we do not dare today, we will live a catastrophe.”

“What do you want, a country where food will be handed out with food stamps and where we will have no fuel?” Antonis Samaras, the presumptive winner of this April’s presidential election, asked a dissenting deputy.

Greek Finance Minister Evangelos Venizelos:

“The battle is now.  The war is now. If we falter, nothing will be left standing…The real dilemma is between painful measures and crushingly painful ones.” 

But then Venizelos added:

“We are continually faced with new terms. In the euro area, there are plenty who don’t want us anymore. There are some playing with fire, domestically and abroad. Some are playing with torches and some are playing with matches. But the risk is equally great.”

Greece needs to prove by Monday that they will implement 325 million euro in cuts to meet missed deficit-reduction targets and to clarify how it intends to reduce labor costs by 15%.

What got the ire up of many of the others in the eurozone was when the head of Greece’s second-biggest political party, Samaras, signed a pledge to back the “objectives, targets and key policies” of the austerity program, but then left open “the possibility tomorrow to negotiate and change the policy that is being imposed upon us today,” in his words, an extraordinary meeting of eurozone finance ministers set for Wednesday evening was postponed, as EU leaders saw Samaras’ remarks as a provocation, thus heightening the risk of a disorderly default in March.

The “euro working group” was split on whether Greece could be trusted after failing to meet the targets of the first bailout. Ollie Rehn, the European Commission’s top economist, warned there would be “devastating consequences” if Greece defaulted, and pleaded for approval of the bailout. But hardliners in Germany, Netherlands and Finland, the nations that retain triple-A credit ratings, were losing faith Greece would ever be able to deliver on its promises. While German Chancellor Angela Merkel is adamant Greece not default, her finance minister, Wolfgang Schauble, said on Monday the eurozone was “better prepared than two years ago” to deal with one.

As one headline I saw put it, “Greek EU membership on ‘knife’s edge,’” that being Greek Finance Minister Venizelos’ characterization on Wednesday.

“We have to tell the Greek people the truth…There are several (eurozone countries) who no longer want us.”

But after a three-hour conference call with eurogroup ministers, Jean-Claude Juncker, the chairman, said he was confident Greece’s package would be completed at a Brussels session on Monday and we’ve been progressing towards that finale in the last 48 hours.

Meanwhile…all manner of economic data came out this week and while France and Germany surprised with their performance in the fourth-quarter, the picture was still dire across the eurozone. To wit…

Germany’s Q4 GDP fell 0.2%, the first negative quarter since 2009, but this was a tick better than expected and some believe Germany can avoid recession. Nonetheless, an economy that ended up growing 3% in 2011 is still just projected to grow 0.7% for 2012.

France registered a 0.2% rise in GDP in the fourth over the third quarter, 1.7% better, year-over-year.

The Netherlands is in recession as its GDP fell 0.7% in Q4 after a 0.4% decline in Q3.

Belgium is in recession.

Spain’s Q4 GDP fell 0.3% from Q3 and is expected to decline 1.5%, or worse, in 2012.

Italy is in recession after a 0.7% decline in GDP from Q3, which was down 0.2%.

Portugal’s Q4 GDP plummeted 2.7% from a year earlier, and 5.3% on an annualized basis from Q3 (1.3% for the quarter). Debt to GDP in Portugal is up to 118% when it was supposed to be falling after its bailout, as the economy shrinks far more than expected (and thus revenues decline further). [Spain’s debt level is also rising rapidly.] Portugal’s unemployment rate is 14%, but thus far the people are taking it reasonably well.

As for Greece, its GDP plunged 7% over a year ago in the fourth-quarter, this after a 5% decline in the third. But even though many EU members want to expel Greece, the latest poll shows that 70% of the Greek people want to stay, recognizing the alternative could be worse.

Overall, the European Central Bank lowered its growth forecasts for the eurozone in 2012. Where it had been forecasting growth of 0.8%, it now sees a 0.1% contraction for the year and just a 1.1% gain in 2013. GDP was down 0.3% in the fourth-quarter for the euro-17.

But in non-euro Britain, there was some good news. While unemployment rose to 8.4%, and GDP fell 0.2% in Q4, retail sales rose for a second month in January (unexpectedly so) and the inflation rate fell to 3.6% for the month. It’s looking as if the U.K. can avoid recession, at least that’s the view mid-way through the first quarter.

Opinion…Ambrose Evans-Pritchard / Irish Independent

“Officials from the EU and the IMF made two grave errors when they swooped into Greece in mid-2010 and dictated the now hated ‘Memorandum.’

“The regime of drastic cuts has tipped the economy into a violent downward spiral. They thought that private industry would muddle through as the state went through the austerity mincer. What the EU-IMF ‘Troika’ did not fully understand is how many firms were really part of the state in disguise.

“ ‘The Greek government outsources everything,’ said one official with close knowledge of the events.

“Faced with the guillotine, the state first slashed procurement contracts and then stopped paying its bills altogether. The government is now 7 billion euro in arrears to private companies, including 3 billion in unpaid VAT refunds for exporters. It is why business has borne the brunt of the fiscal squeeze, suffering 450,000 job losses, and why Greece’s unemployment has soared to 21%.

“At the same time the banking system seized up. More than 60 billion euro of deposits were withdrawn. By November, no Greek bank could issue a letter of credit accepted anywhere in the world, with calamitous implications for trade – and for exporters trying to meet Troika demands for export-led recovery. ‘Greece became a leper, and is now stuck in Catch-22,’ said one official.”

Javier Solana, former EU high representative and NATO secretary-general / Moscow Times

“It is now increasingly clear that what started in late 2008 is no ordinary economic slump. Almost four years after the beginning of the crisis, developed economies have not managed a sustainable recovery, and even the better-off countries reveal signs of weakness. Faced with the certainty of a double-dip recession, Europe’s difficulties are daunting.

‘Not only is Europe running the risk of lasting economic damage; high long-term unemployment and popular discontent threaten to weaken permanently the cohesiveness of its social fabric. And politically, there is a real danger that citizens will stop trusting institutions, both national and European, and be tempted by populist appeals, as in the past.

“Europe must avoid this scenario at all costs. Economic growth must be the priority, for only growth will put people back to work and repay Europe’s debts….

“The problem is not debt, but ensuring that it finances productive investment, that it is kept within reasonable limits and that it can be serviced with little difficulty.”

Willem Buiter, chief economist, Citigroup / Financial Times

“The experience with the first Troika program in Greece over the past 18 months has shown that a solution to the challenges Greece faces cannot be imposed from abroad. It would have to be supported by a broad coalition of the willing in Greece, of which there is little evidence. But until such a coalition materializes, Greece will at best live from review to review in the eurozone….

“(Even) with a debt swap, the Greek situation is likely to return to the markets’ attention in a few months at the latest.

“After weeks of improving market sentiment following the European Central Bank’s three-year long-term refinancing operation in December, the unresolved Greek crisis should be a timely reminder for investors that the euro area sovereign debt and banking crisis is far from over. The LTRO [Long Term Refinancing Operation] has merely bought the euro area time to finally get its act together. Fiscal deficits are at best slowly declining; sovereign debt continues to rise in most euro area countries; the EU banking system remains undercapitalized; a euro-wide recapitalization facility for banks is still missing; the ECB is unwilling to put its mouth where its money is and admit that it stands ready, directly and indirectly, to act as lender of last resort to sovereigns as well as banks.

“There is some good news. Plentiful ECB liquidity has pushed back the risk of disorderly default of systemically important euro area banks and, combined with financial repression in euro periphery nations, has eliminated the near-term risk of a disorderly default by a systemically important sovereign. The external damage caused by a Greek euro area exit (or ‘Grexit,’ as we call it) could, given appropriate policy response from the ECB and euro area creditor countries, be limited and need not trigger waves of ‘exit fear contagion’ to other fiscally weak peripheral countries. The second LTRO on February 29 may buy more time but until the fundamental drivers of the euro area sovereign debt and banking crises are addressed, volatility will remain a constant companion and recovery and growth absent friends.”

I will have more on the LTRO next week. In the meantime, we await news out of Brussels and Athens, while observing Spain’s largest union protests, slated for Sunday.

Washington and Wall Street

Most of the economic news on the week was solid, with the figure for January housing starts, 699,000 when 671,000 was expected, as well as renewed home-builder confidence providing some good news on this critical sector. January retail sales were up 0.4%, while the leading economic indicators reading for the month was up a like amount. Jobless claims of 348,000 on the week were another four-year low. Only January industrial production, unchanged, was a disappointment.

One thing is for sure. The mild winter across most of the country has given the economy a huge boost when it comes to construction and auto sales. Of course the issue becomes does this result in slower sales in the spring?

One thing is for sure. Rising gas prices at the pump are not a help and this slow grind up is coming far sooner than the normal advance we see later on. The national average is $3.51 per gallon (which will rise another few cents with the next reading) and is expected to hit $4.00 by June (up to $5.00 in the Chicago area and parts of California). Back in 2008 when gas was at $4.00 before the financial crisis, we didn’t see $3.50 until mid-April. 

$4.00 gasoline will do a number on the economy and if you’ve been playing this terrific rally in equities off the October lows, with the S&P 500 up 24% since 10/9/11, just be aware $4.00 gas is coming; and maybe higher depending on the situation in the Persian Gulf. Stocks are no longer cheap, and as noted below, by now you understand that if you take out Apple’s performance, earnings are just not that great.

Meanwhile, your congressional representatives, increasingly concerned in many cases over whether they’ll get reelected, passed a $150 billion economic package on Friday, extending for the rest of 2012 a payroll tax holiday and unemployment benefits. The vote was 293-132 in the House and 60-36 in the Senate. President Obama thus gets a victory on a portion of his massive jobs package that was presented to Congress last fall.

There are relatively few offsets to the legislation, so that recent hike in the debt ceiling to $16.394 trillion may not last until even October, let alone the original plan of year end to get the issue comfortably past Election Day. Now Treasury Secretary Timothy Geithner is telling Congress that he has a number of measures to buy extra time for it to act to raise it further, a la last year when the ceiling was basically hit in May but Treasury played with the books to prevent a default until August. Isn’t our government wonderful?

As for the release of President Obama’s fiscal 2013 budget (beginning 10/1/12), little of it will be enacted upon, at least between now and November. But what is becoming increasingly apparent is that the lame duck session following Election Day is going to be one of historic proportions as all manner of items are set to expire 12/31, including the Bush tax cuts, and the arguments will be fierce.

Editorial / Wall Street Journal

“With the abracadabra of a tax increase on the wealthy and defense spending cuts that will never materialize, the White House asserts that in President Obama’s second term revenues will soar, outlays will fall, and $1.3 trillion annual deficits will be cut in half like the lady in the box on stage.

“All voters need to do is suspend disbelief for another nine months. And ignore the first four years.

“The real news in Mr. Obama’s budget proposal is the story of those four years, and what a tale they tell.

“Four years of spending of more than 24% of GDP, the four highest years since 1946. In the current fiscal year of 2012, despite talk of austerity, Mr. Obama predicts spending will increase by $193 billion to $3.8 trillion, or 24.3% of GDP.

“Another deficit of $1.327 trillion in 2012, also an increase from 2011, and making four years in a row above $1.29 trillion. The last time that happened? Never.

“Revenues at historic lows because of the mediocre recovery and temporary tax cuts that are deadweight revenue losses because they do so little for economic growth. The White House budget office estimates that for the fourth year in a row revenues won’t reach 16% of GDP. The last time they were below 16% for any year was 1950.

“All of this has added an astonishing $5 trillion in debt in a single Presidential term….

“But, lo, says the White House, all of this will change in 2013 if Mr. Obama is reelected. Next year, revenues will suddenly leap to 17.8% of GDP thanks to tax increases on the wealthy, which we are supposed to believe will have little impact on growth.

“Meanwhile, spending will fall by one percentage point of GDP to 23.3%, thanks to the automatic cuts in last year’s debt-ceiling bill. But more than half of those are scheduled to come out of defense, which even Mr. Obama’s Defense Secretary says are unacceptable. They will be renegotiated next year no matter who wins in November.”

Robert Samuelson / Washington Post

“Obama expects to reduce defense and domestic discretionary spending by an astonishing 43 percent by 2022. It would fall from 8.7 percent of GDP in 2011 to 5 percent in 2022. Everyone understands defense. Domestic discretionary spending includes many of those other governmental activities outside of Social Security, Medicare and Medicaid, the main programs that aid the elderly….

“Here are the next decade’s projected trends: Spending on Social Security rises 27 percent; for Medicare and Medicaid, the increase is 41 percent. Meanwhile, defense spending falls 23 percent and domestic discretionary spending drops almost 20 percent.

“Social Security, Medicare and Medicaid – boosted by the aging baby boom and high health costs – are relentlessly determining national priorities. Neither Republicans nor Democrats want to discuss this openly. At a press briefing, top administration officials – led by Gene Sperling, head of the National Economic Council, and Jeffrey Zients, acting head of the Office of Management and Budget – barely mentioned these programs. That’s some feat, considering they constitute 44 percent of non-interest spending and are projected to account for 57 percent by 2022.

“The paradox is obvious, if unspoken: An avowedly liberal administration is gutting government because it lacks the political will to confront programs for the elderly….

“The fact that sizable budget deficits remain despite the spending squeeze suggests that large tax increases, going well beyond the ultra-rich, will one day be required.

“Granted, none of the political choices (limits on Social Security and Medicare benefits, deep discretionary spending cuts, much higher taxes or large deficits) is appealing to either party. But instead of a real debate on the size and role of government – which programs are important, which are ineffective, who deserves benefits, what’s a tolerable level of taxation – we are making choices by omission in a way that exempts the elderly.

“All budgetary pressures are being concentrated on (a) the dwindling portion of spending not devoted to the elderly and (b) higher taxes. This is a formula for governmental failure and generational unfairness. It’s a big story. Someone should pay it heed.”

Street Bytes

--Stocks resumed their advance after a one-week respite with the Dow Jones adding 1.2% to 12949, the highest level since May 2008, while the S&P 500 was up 1.4% and Nasdaq gained 1.6%. Nasdaq is already up 13% for the year and sits at levels not seen since December 2000. Should the Greece issue be temporarily resolved come Tuesday morning (the U.S. markets being closed Monday for Presidents Day), we could easily see Dow 13000 and Nasdaq 3000 the same day.

--Again, if you strip out Apple’s earnings from the S&P 500, the fourth-quarter gain in earnings for the index, year-over-year, is just 2.8%, according to UBS.

--U.S. Treasury Yields

6-mo. 0.12% 2-yr. 0.29% 10-yr. 2.00% 30-yr. 3.14%

Treasuries were as close to unchanged on the week as you can get despite the solid economic news, once again tempered by uncertainty over Greece mid-week, while the inflation data offered up no real surprises.

Producer prices in January rose 0.1% and were up 0.4% ex-food and energy. For the past year the PPI is up 4.1%, 3.0% on the core. Consumer prices rose 0.2% on the month, and 0.2% on the core, while the past 12 months the CPI has risen 2.9%, 2.3% ex-food and energy.

--On Thursday, all three major news networks led off their programs with the story of General Motors’ record 2011 profit, $7.59 billion for the year, the best in its history. GM shares rose 6% on the news.

But the European business continues to struggle, losing another $747 million after a loss of $1.95 billion in 2010. Folks in Europe are worried the automaker is preparing another round of cuts there after previously eliminating 8,300 jobs at its Opel division.

The U.S. government still owns 32% of GM’s shares going back to the taxpayer-funded restructuring in 2009. GM is looking to pay profit sharing bonuses of up to $7,000 each for its 47,500 blue-collar workers, while the office folks are being pared back a bit.

[GM had its IPO, post-restructuring, in Nov. 2010, at $33 a share. The current price is $27.30. The government doesn’t make money until the stock hits $53.]

--Shares in Apple hit $500 for the first time on Monday and then traded up to $526, intraday, before backing off and finishing the week at $502. Had Apple been added to the Dow Jones Industrial Average on June 8, 2009, instead of Cisco Systems when it ousted then-struggling GM, after Wednesday’s close, the Dow would be trading at a record 14810 instead of Wednesday’s close of 12781, according to Bespoke Investment Group and Adam Shell of USA TODAY. Back in June ’09, Apple was $143.

But Apple has a major trademark dispute in China as authorities began removing iPads from some stores after a court ruling that Proview Technology owns the right to the product’s name. Proview originally registered the name “iPad” in Taiwan in 2000 and on the mainland in 2001. Apple bought Proview’s iPad trademark for $55,000 in 2009. Proview claims the deal only applies to Taiwan and that it didn’t know that an Apple subsidiary called IP Application Development was connected to Apple.

Proview’s hope has been that Apple would pony up a large sum for the China trademark to help dig Proview out of its debt, said to be about $500 million.

--Thomas Black of Bloomberg reports:

“Global companies from NEC Corp. to PepsiCo Inc. and AstraZeneca Plc are chopping jobs more than three times faster than in 2011 as they brace for recession in Europe and a slowdown in China.

“Announced workforce reductions surged to 94,369 through Feb. 10 from 26,561 a year earlier, according to data compiled by Bloomberg. Employers based in Western Europe accounted for the biggest group of job-cut disclosures, threatening to add to unemployment in the euro area already running at a 13-year high.”

--China instructed its banks to rollover loans to local governments, some $1.7 trillion in debt to provinces and cities – about a quarter of the country’s GDP – with more than half of the loans due in the next three years; an attempt to delay the day of reckoning. Banks have been extending maturities for local governments to avoid a wave of defaults, sources are telling the Financial Times.

No doubt, this is kicking the can down the road, but it is also buying more time for the government to find a more permanent solution. Not dissimilar to some of the aspects of the European debt crisis.

Separately, foreign direct investment here fell for a third consecutive month in January, November’s decline having been the first since 2009. The Commerce Ministry called the outlook in this category “grim.”

Analysts are forecasting that the government will announce at a National Party Congress in March that the GDP target for 2012 will be 7% to 7.5%. While that’s a significant comedown, and worrisome, it also needs to be noted that average disposable income rose 14% in 2011.

--Japan’s economy shrank for the third time in four quarters, with Q4 GDP falling an annualized 2.3%, owing in no small part to the floods in Thailand, as well as a strong yen that hit exports. However, the government remains optimistic on the future, thanks to reconstruction demand in the quake-hit region, for starters.

Separately, core consumer prices fell 0.1% year-over-year in December, the third straight month of decline. Prices haven’t risen at least 1% in Japan since 1997.

--Inflation in India is coming down. Wholesale prices rose 6.5% in January, compared with 7.4% in December, though growth is also slowing.

--The youth unemployment rate in Greece is 48%.

--Median home prices in the key six-county Southern California market fell 3.7% in January to $260,000, only 5.2% above the low hit during the worst of 2009 (April ’09…$247,000). Foreclosure filings were down 23% vs. January 2011, though with the recent bank settlement over foreclosure abuses, more properties will be hitting the market.

Interestingly, only 669 newly built homes sold in the region in January, the lowest since DataQuick started keeping track in 1988, so it seems clear many prospective homebuyers continue to have problems getting financing.

--S&P raised California’s outlook on the state’s ability to repay its debt to “positive” from “stable,” saying “We think the state is poised for credit improvement – and potentially a higher rating.” This is good. Should it come to pass, Democratic Gov. Jerry Brown will deserve a ton of credit. But one problem. California has to keep cutting.

--Robert Zoellick announced he was stepping down as president of the World Bank, where he’s been in charge since 2007. Hillary Clinton and Lawrence Summers have always been mentioned as possible successors, though Clinton has steadfastly denied she’s interested.

Traditionally, the U.S. gets the World Bank head slot while a European gets the IMF’s top job, but now China is angling for at least far more say in the former, which they deserve.

Personally, it looks like a good gig. I’m assuming at Christmas you get beer samplers from every country.

“Mr. Trumbore, the Tiger Beer from Singapore came in.”

“Yes!”

--Speaking of beer, Heineken NV announced it would continue to cut costs as profit slipped for 2011. Volumes were flat in Europe, up 1% in the Americas, up 6.5% in Central & Eastern Europe, and in Africa, the Middle East and Asia Pacific they grew 6.2%.

[The Heineken Brewery tour in Amsterdam is a must see.]

--CBS Corp. reported a 31% increase in fourth-quarter profits, owing to its cable operations, but total revenue declined due to weaker advertising; important because this is 2/3s of its revenue, though you’d expect this to rise come the second half with all the election year advertising coming down the pike.

--Linsanity (the Jeremy Lin phenomenon) has been a godsend to MSG Network with television ratings soaring. Wednesday’s win over the lowly Sacramento Kings drew the best audience yet in the six games Lin has started, prior to Friday night’s contest. Shares of Madison Square Garden Company hit a record high during the week as Lin’s emergence not only is good for ticket prices, merchandise sales and ratings, but it was clearly an impetus behind a late settlement on Friday between MSG and Time Warner Cable to resolve their ongoing dispute, which had resulted in a blackout for fans using the Time Warner Network.

[The Knicks then lost to lowly New Orleans, thus ending Lin’s, and the team’s, winning streak at seven.]

--I mentioned the Tappan Zee Bridge last time and this week New York officials announced they were looking for a $2 billion federal loan to help pay the $6 billion estimated cost to replace the 56-year-old erector set special. The state is convinced it can break ground in August. Seeing actual work on a new bridge will only aid New York Gov. Andrew Cuomo, the Democratic Party’s 2016 nominee for president, as I predicted way back.

[Some are already calculating that the toll on the new bridge could be as high as $30 by 2022, up from the current $5.]

--4,000 passengers were left stranded as Aussie discount air carrier Air Australia filed for bankruptcy. 100,000 tickets have been sold and flyers are unlikely to get refunds. 300 staff are history. The airline was popular for its flights to Phuket and Honolulu and passengers were stranded when the planes were refused fuel.

--A Czech Airlines pilot died during a flight from Warsaw to Prague, but the copilot had no problem guiding the plane to a safe landing.

--United and Continental are merging their computer systems the first week of March, so you may want to do some planning beforehand…just sayin’. These things seldom go smoothly. 

--How many channels on your basic cable system these days? A lot. I got a kick out of a notice I received from Verizon concerning my own service. They are eliminating “Funimation” and “Bridges TV” due to “very low viewership.” I had never heard of these two. They could eliminate another 100+ for all I care.

--As part of Eastman Kodak’s bankruptcy filing, the company will take its name off the Kodak Theatre prior to the Oscar awards show there, Feb. 26, as part of Kodak’s efforts to save money. Kodak had previously agreed to pay $72 million in annual installments over 20 years, according to a court filing, or $3.6 million a year and has $38 million in payments left on the contract. [Crain’s New York Business/Bloomberg]

--Casino revenues in Atlantic City fell 7.2% in January despite the warm weather, this after a surprising increase in December. Only two of 11 casinos showed increases in revenue.

--Speaking of warm weather in January, six degrees above normal in the New York-New Jersey area, you can imagine how local ski areas are taking a pummeling. Crain’s New York Business interviewed ski-related proprietors, such as hotel/motel operators, and most say their weekday business is off about 70%. The flip side, as I noted when I was in balmy Manchester, New Hampshire, is that restaurant business is up.

--Sign of the Apocalypse: Thieves made off with paintings valued at $6.5 million from Greece’s National Gallery, the first such theft in the gallery’s 112 years of operation, but as the Los Angeles Times’ Anthee Carassava points out, there was just one guard on duty that night for the entire gallery…the result of cutbacks, in this case incredibly short-sighted ones.

Art thefts, though, have been increasing across the continent. In Greece, however, as budgets are slashed in its austerity move, “About 1,900 government-paid guards protect more than 15,000 museums, monuments and archaeological sites across the country.”

And so it was that on Thursday, two armed robbers broke into the museum in Ancient Olympia – the birthplace of the Olympics, overpowering the lone guard. The local mayor called the value of the dozens of items stolen “incalculable.” The Culture Minister tendered his resignation.

--Editorial / Washington Post

“In a recent briefing to Congress about worldwide threats, FBI Director Robert S. Mueller III said that the danger of cyberattacks will equal or surpass the danger of terrorism ‘in the foreseeable future.’ What makes that assessment particularly alarming is that the United States may be as unprepared to defend some of its critical computer systems as it was to protect New York and Washington against al-Qaeda before Sept. 11, 2001.

“Though the Pentagon has a cybercommand, it does not cover the domestic civilian economy, including vital infrastructure systems such as the electric power grid, water supplies and the financial system. Many of the computers controlling those utilities lack adequate security measures and could be devastated by viruses launched by hostile states or even hackers. As it is, U.S. companies, from defense contractors such as Lockheed Martin to e-mail carriers such as Google, are under continual assault from China and Russia, which seek to steal industrial or national security secrets and probe for infrastructure weaknesses….

“Cooperation between the government and private companies is also badly needed to ensure protection of power and water plants, banking networks, and other infrastructure essential to modern society.”

At least the Senate is finally working on responsible legislation to ensure better cooperation between the Pentagon, Department of Homeland Security and private companies, but we’ve once again wasted far too much time and implementation should have occurred years ago.

Former National Security official Richard A. Clarke wrote an op-ed for the Wall Street Journal, talking about Arab-Israeli tensions that “have been spilling off the streets and airwaves and onto the region’s fiber optic cables. Citizen hackers on both sides have engaged in tit-for-tat raids on Israeli, Saudi and other regional computer networks. Stock exchanges, airlines, government offices and even hospitals have had their websites defaced or shut down. Credit-card numbers and personal emails have been stolen and posted on the Internet. One Israeli official has labeled the escalating cyber hostility ‘terrorism’ and called for it to be dealt with as such.”

While no one has died, and this is not classic terrorism, Mr. Clarke concludes:

“The recent hacker exchange should…remind us that just as hacking could escalate to the use of conventional force in the Middle East, the reverse is also true. Bombing Iran, for example, could unleash an Iranian government cyber attack. Israelis say they could handle that, despite the recent evidence to the contrary. Unfortunately, much of the critical infrastructure in the U.S. is still not ready for a sophisticated nation-state cyber attack either.”

Foreign Affairs

Iran: President Mahmoud Ahmadinejad appeared at a nuclear facility in Tehran to show off his nation’s new “breakthrough,” fuel plates that few nations have the technology to make. But the backdrop looked like it was from one of those chintzy Matt Helm series films, plus some workers were wearing face masks, others weren’t, so I’m thinking they really have a SARS epidemic, only many of the workers don’t know that. Ahmadinejad also claimed Iran added 3,000 new centrifuges at the Natanz facility, bringing the total there to 9,000, which, if true, would be significant. But U.S. officials were skeptical of both claims.

Iran also expressed renewed willingness to resume talks on its nuclear program, but the West has learned its lesson. This seems highly unlikely. [Then again, I just saw where Sec. of State Clinton said a letter from Iran to the U.S. and its allies was “one we have been waiting for.” Oh brother.]

At the same time, Iran threatened to cut off oil to six European nations ahead of their announced July 1st embargo. [While China is buying less Iranian oil due to a price dispute.]

And Iran attempted to attack Israeli diplomats in New Delhi, Tbilisi, and Bangkok with very limited success, though one Israeli injury was serious. One of the would be terrorists, most likely Hizbullah disciples operating with Iran’s help, blew his leg off with a grenade while being chased by police in Bangkok. Hizbullah was no doubt acting in retaliation for the Feb. 2008 assassination of its key military chief, Imad Moughniyeh.

Lastly, Iran threatened once more to close the Strait of Hormuz and is said to have prepared suicide boats. On this the threat is very real, nor should the West, and Israel, dismiss Hizbullah’s amateur terror attempts. No doubt they have hundreds of more qualified operatives around the world waiting for their orders.

Editorial / Wall Street Journal

“Tehran officially denied involvement (in the attempted terror attacks). But three Iranian nationals are now under arrest in Thailand, another is on the lam, and a fourth is being extradited to Thailand from Malaysia. If these are the marks of a country that is ‘ready to talk’ – as former Obama administration diplomat Dennis Ross argued in a New York Times op-ed this week – we’d be interested to know what Iranian actions would qualify as evidence of belligerence. An attempt to bomb Washington, D.C. ? Oh, wait: They tried that, too.

“The larger story is that Iran is coming close to openly making war on the country it wants to wipe off the map. That’s an escalation from the more veiled (and often more deadly) warfare the Islamic Republic has waged against Israeli and Jewish targets for decades. It’s also an indication that the mullahs, far from seeking to de-escalate tensions with the West, are scrapping for a fight. They might get one.

“It is in nobody’s interest, least of all America’s, to see a regional war erupt in the Middle East. It is even less in America’s interests to back our allies in Jerusalem into a corner where they feel they have no choice other than to fight, as they did in 1967. An Iran that seeks to murder diplomats across the globe is a threat to global security. The U.S. has an even larger interest than Israel in stopping it.”

Israel: For his part, Israeli Prime Minister Benjamin Netanyahu said of the first incidents in Delhi and Tbilisi, “Today we witnessed two attempts of terrorism against innocent civilians. Iran is behind these attacks and it is the largest terror exporter in the world.”

Netanyahu blamed Hizbullah as well.

“Iran is undermining the stability of the world. Nations of the world must…draw a red line against this Iranian aggression. Aggression like this, if it is not stopped, will spread like a storm.”

Barron’s interviewed intelligence consultant George Friedman of Stratfor and I have to take issue with some of Mr. Friedman’s conclusions.

“To Friedman, the likelihood of an imminent Israeli strike on Iran’s nuclear facilities remains low (‘a one-in-four chance,’ he opined). For one thing, to be successful the action would require U.S. assistance. And that aid is unlikely to be forthcoming, especially in an election year.”

The fact that it is an election year makes U.S. assistance more, not less likely. 

Friedman adds, “The task is infinitely more difficult than Israel’s air strikes that destroyed the Iraqi Osirak reactor in 1981 or the Syrian nuclear reactor in 2007…Israel has also lost all elements of surprise by its bellicose broadsides in the Western press. What’s more, if Israel learned anything from its unsuccessful 2006 war against Hizbullah in Lebanon, air-force generals always over-promise what they can deliver on.”

So Friedman is saying it’s too late. Israel will just sit back and let Iran get the bomb, whether it is end of 2012 or 2015. That’s absurd. Or I am totally misreading Netanyahu.

Friedman talks about the aftermath of any attack on Iran. Civilian casualties from Hizbullah and Hamas rocket attacks would be higher than anticipated.

They’ll be high…but not unanticipated.

Friedman says Iran will have success in closing, or dramatically slowing the flow of oil from the Persian Gulf through the Strait. I just don’t see this.

“Friedman believes the hysteria over Iran’s apparent quest to become a nuclear power has clouded rational consideration of more important geopolitical issues. Even if Iran succeeds in building some kind of nuclear arsenal.”

It’s hardly hysteria.

Amir Taheri / The Times of London…on the mindset of Supreme Leader Ayatollah Khamenei:

“(Khamenei’s) analysis is simple: the U.S. is too tired, too divided and too concerned about the global economy to launch a full-scale war against Iran. The perception that Barack Obama is a master of the art of running away reinforces Tehran’s analysis.

“With political moves and economic sanctions manifestly having no effect, the U.S. and its allies are running out of options. Soon they would find themselves with the last of the famous ‘all options on the table’: military action.

“The way Khamenei sees it, such action would be limited to bombing raids on Iran’s most vulnerable nuclear sites, such as the enrichment facility at Natanz. That would be no big deal as Tehran has transferred most of its enrichment activities to a new and air-attack-proof facility in the Fordo mountains. The Americans may also destroy some Islamic Revolutionary Guard bases. However, once all that is done, Khamenei could claim to have fought the ‘Great Satan’ and survived while the U.S. and allies would have nothing more to throw at Iran.

“Comparing himself to the Prophet Muhammad, Khamenei claims that he is about to repeat the great victories of the founder of Islam at Kheybar and Badr. Khamenei’s message is: either surrender or fight. That position is based on the Shia concept of ‘relief after hardship’ under which believers welcome suffering, even martyrdom, in the certainty that their sacrifice leads to comfort or even paradise. Rather than waiting for the worst to happen, the believer should provoke it. In fact, under Shia theology, waiting is worse than death.

“Sanctions are already hurting the people; war, even a limited one, is sure to cause more suffering. However, none of that would alter Khamenei’s behavior. He would compromise only if the survival of his regime is at stake. A limited bombing war would play into his hands. This is why he is trying to trigger it by a series of provocative acts over the nuclear issue and plots to kill Israeli, American and Saudi diplomats in several countries.”

Syria: President Bashar Assad called for a sham referendum on a new constitution for Feb. 26, a document that would allow for multiple parties in the legislature and a maximum two, 7-year terms for the president, but also gives the president sweeping powers to rule by decree and dissolve parliament. Plus, with parliamentary elections slated for 90 days after the constitution is approved, Assad would nonetheless remain in power until his term expires 2014. So he’d let the elections go through and then tell the legislators to go home.

On Feb. 24, Sec. of State Clinton has called for a meeting in Tunisia among the willing to explore ways to help the rebels, but this is now complicated by the United States’ revelation that al-Qaeda in Iraq was involved in the suicide/terror attacks in Damascus and Aleppo; exactly what Assad has claimed. Al-Qaeda leader Ayman al-Zawahiri called on jihadists to join the fight against the Syrian president.

In the meantime, on Thursday the UN General Assembly voted 137-12 to call for an end to the violence in Syria, with Russia and China lining up with the likes of North Korea and Venezuela, as well as Syria itself. Another 17 abstained. The vote was nonbinding but at least a mild morale boost for the opposition.

But just who is the opposition? There is no unified command or leader and al-Qaeda is exploiting the civil war. Lebanon could blow at any minute, dragged into its own civil war by Syria. [Over 6,000 Syrian refugees are already in northern Lebanon.] The Gulf States are aligned against Assad, as well as al-Qaeda. The Iraqis are arming both sides, including allowing Iraqi Shiite militiamen and Iranian fighters through its border with Syria.

[We note the passing of New York Times correspondent Anthony Shadid, who died of an apparent asthma attack while on assignment in Syria. The award-winning Shadid was just 43. I quoted him last week in a bit on Libya.]

Lebanon: Former Prime Minister Saad Hariri, speaking from Paris, called on Hizbullah to begin to surrender its arms to Lebanese authorities and “relieve Lebanon and all Lebanese of the danger of violence, and relieve the state of the danger of collapse. Let Hizbullah and all Lebanese work for the triumph of the state and for Lebanon to remain a pioneer among Arabs in the Arab Spring.”

At the same time, Hariri said:

“Israel is our enemy and a danger to us all which we should all face. Let us all defend our country and win within the confines of the Lebanese state. But when the weapons, under the pretext of fighting Israel, become a weapon to fight each other and eliminate the state, then it only serves Israel and no one but Israel.”

Hariri is recovering in Paris after a skiing accident and promised to return to Lebanon soon.

Libya: The nation is concerned about the pronouncements of one of Muammar Gaddafi’s sons, Saadi, who warned in a television interview from Niger that his family’s supporters were planning attacks on the interim leadership. Niger refuses to extradite Gaddafi back to Libya, let alone other surviving members of the family. Libya itself remains highly unstable with no coherent institutions, including the courts and a police force. Some say it’s even more corrupt than during Gaddafi’s time. Torture, as previously reported, is widespread.

Egypt: President Obama’s new fiscal 2013 budget contains $1.3 billion in military aid for Egypt, along with $250 million for economic assistance, the same level as 2012.

“Our goal is to provide the necessary funds. It’s obviously clear to all of us that we have issues we need to work through, and we’re working very aggressively to do so,” said Deputy Secretary of State Tom Nides. “But this budget reflects our commitment and our desire to fully fund this initiative.”

It goes without saying that Congress will have a voice in any disbursements and right now, Egypt doesn’t deserve a dime.

Likewise with the Palestinians, who stand to receive significant aid as well, though off previous levels, but this depends on the role of Hamas in any new Palestinian government.

Pakistan: Prime Minister Gilani was indicted on Monday for contempt of court, the Supreme Court, in a move that could disqualify him from holding office. If convicted of refusing to re-open a corruption case against President Zardari, Gilani faces six months in prison. 

Afghanistan: In a positive step, at least on paper, Afghan officials are attempting to rid the army of Taliban infiltrators by ordering soldiers with families in Pakistan to either go home or move their relatives to Afghanistan.

But as the Washington Post’s Kevin Sieff reports, “the ultimatum could force painful choices for thousands of Afghan troops, and it is likely to stoke ethnic tensions just as the country’s leadership is seeking a negotiated end to the war. Purging members of the military with family in Pakistan also has the potential to aggravate long-troubled relations between Afghanistan and its eastern neighbor.”

The issue is when the soldiers return home to Pakistan on leave, it is a fact many are then influenced by Pakistani militants to return and kill NATO forces, or launch attacks against government troops under cover of being in the military. At least 58 Western military personnel were killed in 26 attacks by Afghan soldiers or police between May 2007 and May 2011.

Meanwhile, President Hamid Karzai arrived in Pakistan to explore how the Pakistanis can help the peace process between the Karzai government and the Taliban. Heretofore, the Taliban has said they would talk only to the Americans, describing Karzai as a “puppet” leading a “puppet government.”

China: Vice President Xi Jinping, the next president of his country, is nearly finished with his trip to the U.S. as I write. During his visit to Washington, both sides staked out their positions, though without fireworks. Among the issues discussed with President Obama, Vice President Biden and Sec. of State Clinton, Xi said he had a “candid exchange” regarding human rights.

“I stressed that China has made tremendous and well-recognized achievements in the field of human rights over the past 30-plus years, since reform and opening up. Of course, there is always room for improvement when it comes to human rights,” Xi added.

I’ll say. Like why has China been on such a mission lately to arrest dissidents, especially ahead of Xi’s visit? It’s nonsensical.

President Obama said he “welcomed China’s peaceful rise,” but added: “We want to work with China to make sure that everybody is working by the same rules of the road when it comes to the world economic system. That includes ensuring that there is a balanced trading flow not only between the United States and China but around the world.”

Xi signaled he wants to work with the U.S. on foreign policy issues, but he also called on Washington to recognize China’s one-state policy when it comes to Taiwan, as well as Tibet.

“China welcomes the United States playing a constructive role in promoting the peace, stability and prosperity of the Asia-Pacific region. At the same time we hope the U.S. side will truly respect the interests and concerns of countries in the region, including China.”

So did Xi’s visit narrow the “trust gap” between our two nations? Not likely. Xi is, however, limited in what he can do until he formally takes charge end of the year and early 2013, in a staged process. I’m optimistic he is someone the United States can deal with.

Lastly, “Linsanity” creates a problem for Beijing, the New York Knicks Jeremy Lin having a Taiwanese background, as well as being a devout Christian. Chinese Central Television has apparently stopped showing Lin’s games as quickly as it started showing them owing to the presence of Taiwanese flags, though CCT covered Taiwan’s presidential election, where obviously Taiwan flags were everywhere. You can imagine how Lin is being covered on the island. He’s leading every newscast on days the Knicks play.

North Korea: My this place has been quiet following the mourning period after the death of Kim Jong-il and the elevation of his son, “Great Successor,” Kim Jong-un. The transition, we’re to assume, is going smoothly, but Kim has one primary challenge. How to feed his people? Some say the North faces a 700,000-ton grain shortage, which would mean 1/3 of the people starve. Kim needs to be able to deliver the food before he can go forward with his reform plan, whatever that is. But both the U.S. and South Korea aren’t in the food giving mood these days.

Russia: Just two more weeks before the March 4 presidential vote and the question remains, can Putin capture 50% and avoid a run-off? He has zero opposition. Communist Party veteran Gennady Zyuganov will probably finish second but with no more than 10% of the vote, according to the polls. So there’s no question Putin emerges the winner, eventually, it’s just how long does he then remain in office? I’m long on record as saying he’ll be removed. More and more are coming around to my thinking.

It also needs to be said that Putin’s anti-American rhetoric ahead of the election is despicable. But then as one political analyst told the Washington Post the other day, “Putin is choosing worse relations with the West to keep himself in power. Of course it’s a KGB mentality.”

France: President Nicolas Sarkozy formally announced his campaign for reelection, with the first round of voting April 22, and then the top two vote-getters squaring off May 6. March 16 is the deadline for qualifying, which pertains to the likes of National Front candidate Marine Le Pen, who at last word still hadn’t qualified but it’s assumed she eventually will. In the latest Ifop poll, Socialist Francois Hollande has seen his lead dwindle, 30% to Sarkozy’s 25%. Le Pen is third at 17.5% and Centrist Francois Bayrou at 12.5%.

In a rather bizarre situation, German Chancellor Merkel is supporting Sarkozy, as Hollande has said that if he’s elected, he’ll want to renegotiate any EU treaties France is party to, especially as it pertains to the debt crisis. It’s not clear Hollande would even be able to do this.

Sarkozy will campaign on being tough on immigration and welfare. He is not helped by a general mood across Europe that has led to regime change in Spain, the U.K., Ireland, Portugal and Hungary.

Germany: Chancellor Merkel was forced to cancel a visit to Italy on Friday because of a scandal involving President Christian Wulff, a home loan deal that included bullying a paper not to run the story. Wulff, a member of Merkel’s center-right Christian Democrat party, then resigned.

While the president is mostly a figurehead, he is also supposed to be a moral compass for the nation, yet he’d become a laughingstock for the press. The scandal comes at an obviously bad time for Merkel and will hurt her in state elections later this year.

Britain: Prime Minister David Cameron traveled to Edinburgh to try and get the Scots to abandon their idea of independence, but talks went badly. Alex Salmond, Scotland’s First Minister, wants a referendum on independence in 2014. Cameron wants one sooner, gambling it would be defeated.

Venezuela: President Hugo Chavez will have a challenger in the October election, Henrique Capriles, a 39-year-old who handily won a primary last Sunday. 

“This is a country in crisis,” he said. “If there was one message people all across Venezuela gave me, it was they are exhausted by confrontation and division. I’ll be a president for Venezuelans of all colors, not just red ones,” referring to the red shirts worn by Chavez supporters.

Capriles wants to retain Chavez’s social programs, but run a less corrupt government and reduce crime, which has been soaring. [19,400 murders last year compared to 8,000 in 2000.] 

Capriles is looking to model his approach after former Brazilian President Luiz da Silva, who used welfare programs to reduce poverty and increase consumption, which, together with increased education opportunities, raised living standards.

Honduras: The descriptions of the prison fire in Comayagua are beyond horrible. In the world’s deadliest such incident in a century, 358 are confirmed dead, with many bodies found lying on top of each other, burned beyond recognition. Most of the victims had not even been charged with crimes yet.

There were only 12 guards on duty when the fire broke out, with 856 prisoners packed into barracks built to accommodate 400. 

Random Musings

--What an election, eh? According to a CNN/ORC poll, six in ten Republicans continue to wish they had more choices (count me in that group), as the candidates still in it keep swapping places.

So following are some national surveys of Republican voters this past week.

CNN/ORC International

Rick Santorum 34 percent
Mitt Romney 32
Ron Paul 16
Newt Gingrich 15

New York Times/CBS News

Santorum 30
Romney 27
Paul 12
Gingrich 10

Public Policy [week ago]

Santorum 38
Romney 23
Gingrich 17
Paul 13

Pew Research Center

Santorum 30
Romney 28

Gallup

Romney 32
Santorum 30

Romney won the Conservative Political Action Committee straw poll by a 38-31 margin over Santorum (Gingrich 15, Paul 12). In his speech to the group, Romney called himself “severely conservative.” What the heck is that supposed to mean?!    Prepared remarks circulated by his campaign had him saying he was simply “a conservative governor.”

--Romney barely defeated Ron Paul in Maine’s nonbinding caucuses 39-36, with Santorum at 18, though on Friday word came the vote may have been flawed, perhaps “severely” so. Only 6,000 votes were cast, or about 2 percent of registered Republicans, so the state’s elephants were just thrilled by the process…not.

--And, again, as I noted would be the case a few weeks ago, President Obama is now hitting 50% in his approval ratings…but it’s amazing the last four I’ve seen are exactly 50%...including CNN/ORC and New York Times/CBS.

Just as importantly, in the CNN poll, Obama now has a 50% approval rating among independents. The NY Times survey has independents favoring Obama over Romney 49-38. Just a little while ago, it was the reverse. [Overall, Obama defeats Romney 51-46 and both Santorum and Ron Paul 52-45.]

--A Rasmussen survey, released last weekend, had President Obama defeating Santorum by only a 46-42 margin. The same survey had Obama crushing Romney 50-40.

Peggy Noonan / Wall Street Journal

“The Romney campaign is better at dismantling than mantling. They’re better at taking opponents apart than building a compelling candidate of their own. They do not seem capable of deepening his meaning, making his stands and statements more textured and interesting. He comes across like a businessman who studied the data and came up with the formula that will make the deal.

“A particular problem is that he betrays little indignation at any of our problems and their causes. He’s always sunny, pleasant, untouched by anger. This leaves people thinking, ‘Excuse me, but we are in crisis. Financially and culturally we fear our country is going down the drain. This guy doesn’t seem to be feeling it. So why’s he running? Maybe he thinks it’s his personal destiny to be president. But if the animating passion of his candidacy is about him, not us, who needs him?’”

--Fred Barnes / The Weekly Standard

“A week ago, Republican capture of the Senate in the 2012 election was regarded as close to a sure thing. The political direction of the country had shifted in favor of Republicans. Democrats faced the unenviable task of defending 23 seats, Republicans only 10. And 8 of the GOP seats were safely in Republican hands.

“Now Republican prospects are not as rosy. The odds on a Republican Senate are no worse than 50-50, maybe better. But the effort to oust Democrats who currently control the Senate 53-47, looks more difficult than it did.

“What has changed? Most significant may be President Obama’s improved chances of reelection. He has enormous liabilities, but he has managed to alter the political environment enough to make Republicans and the rich a live issue in the campaign. Before, his record in the White House, especially on the economy, was the lone issue.”

So it’s pretty simple. If Obama is reelected, Democrats hold the Senate and your editor moves to Yap.

--One of the key Senate races in the country this fall is in Virginia: Democratic former Gov. Tim Kaine and Republican former Sen. George Allen. As noted by U.S. News Weekly, not only is the race in a dead heat, since last May, 12 different polls have shown the contest to be effectively tied.

--Mike Collins / Baltimore Sun (Star-Ledger)

“Every Republican presidential candidate claims to be the heir to Ronald Reagan’s legacy. For years, Republican partisans have carried Reagan’s memory before them as the ancient Israelites carried the Ark of the Covenant. Just invoking his name proved your ideological purity, and would smite the dreaded RINO – Republican in name only.

“Problem is, those who most fervently claim to adhere to Ronald Reagan’s principles don’t seem to understand Reagan’s greatest principle: decency….

“As a man, Reagan had a sunny optimism and faith in the goodness of his fellow Americans. While his political opponents disagreed with him over policy, he did not consider them his enemies. He viewed them as his fellow citizens, and right or wrong, he valued them. He was a true gentleman.

“If Republicans want to honor his legacy, we should remember the man he really was – not the myth we’ve created to advance our personal interests. If we can emulate the decency, civility, good will and patriotism that was Ronald Reagan – and live the 11th Commandment – we can truly honor him in the second century after his birth and make America the gleaming city on the hill he dreamed of.”

--In a Rasmussen poll, 59% of Catholics disapprove of the president’s job performance after he imposed a new birth control mandate on employers, including Catholic agencies. A CNN/ORC International poll reveals “Half of all Americans say they oppose the Obama administration’s new policy concerning employer-provided health insurance plans and their coverage of contraceptive services for female employees including those at religiously affiliated institutions.”

--PBS is premiering a four-hour “American Experience” documentary on Bill Clinton on Monday and Tuesday, one that chronicles his “unruly libido” as an Irish newspaper put it. Former adviser Dick Morris relates the moment Clinton rang him just before evidence of his affair with Monica Lewinssky was about to be made public.

“Bill said to me: ‘Ever since I got to the White House I have had to shut down my body.”

Clinton then asked Morris to conduct political polls on how he should handle the crisis.

Another adviser speaks of “sparks flying between (Clinton and Lewinsky) from the first moment when they saw each other.”

But otherwise, after reading a poor review in the Washington Post, I’m passing on this one.

--New Jersey Republican Gov. Chris Christie caught heat for his decision to have flags lowered to half-staff on Saturday for Whitney Houston’s funeral, saying he rejects criticism that she “forfeited the good things that she did” because of her struggles with substance abuse.

“What I would say to everybody is there but for the grace of God go I,” he said.

Detractors say that the honor should be reserved for members of the military, for one example, and not to honor a drug addict.

Christie says Houston deserves the honor because of her cultural impact and as “a daughter of New Jersey.”

“I am disturbed by people who believe that because her ultimate demise – and we don’t know what is the cause of her death yet – but because of her history of substance abuse that somehow she’s forfeited the good things that she did in her life. I just reject that on a human level.”

I agree with the governor. He did the same thing last year with the death of Clarence Clemons, Bruce Springsteen’s saxophonist.

Said a Newark resident, Anna Simpson, “She never forgot where she came from. She was real. We would see her and be like, ‘She’s one of ours,’ and she always made us proud, no matter what happened.”

As to the governor’s move, Simpson said, “I don’t agree with a lot of things that he does, but I admire him for that. Whoever don’t agree, they will get over it.”

Personally, I also felt the same way about some of the criticism Clint Eastwood received for his Super Bowl commercial, “Halftime in America.” It was a great spot. If you thought it was blatantly pro-Obama, so what…get over it.

--The incident concerning U.S. Supreme Court Justice Stephen Breyer and his wife where they were robbed by a machete-wielding intruder at their vacation home on the island of Nevis is but another example of how you better have your guard up when you’re traveling in the Caribbean, as I’ve written from time to time. Crime rates on many of the islands have been soaring for years.

[Paid for by BP…and the Gulf Tourism Bureau.]

--Homicides in New York City in 2011 were under 600 for a 10th straight year and some of the credit has to go to the NYPD’s stop-and-frisk policy. Last year, 684,330 people were stopped and questioned, a record number. Of that number, 12% were arrested or received summonses. The remainder, including Mets fans, weren’t charged.

Civil libertarians bitch and moan when they see all these stop-and-frisk figures. Donna Lieberman, executive director of the New York Civil Liberties Union, points to the fact that blacks make up 25% of the city’s population, Hispanics 29% and whites 33%, according to the 2010 census. In 2011, 53% of those stopped were black, 34% Hispanic and 9% were white. 

But an NYPD spokesman maintained the stop numbers “comport by race with victim-crime reports.” In 2011, 66% of violent-crime suspects were black, 34% were Hispanics and 9% white. [Sean Gardiner / Wall Street Journal]

--Finally, Feb. 20 marks the 50th anniversary of John Glenn’s flight on Friendship 7. The 90-year-old Glenn, along with 86-year-old Scott Carpenter, the only other survivor of the original Mercury 7 astronauts, appeared at Cape Canaveral on Friday to begin the celebrations.

As reported by Marcia Dunn of the AP:

“Glenn recalled how he and his fellow Mercury astronauts traveled during their training to Cape Canaveral to watch a missile blast off. It was a night launch, and the rocket blew apart over their heads.

“ ‘That wasn’t a very good confidence-builder for our first trip to the cape,’ Glenn said. Improvements were made, and Glenn said he gained confidence in his Mercury-Atlas rocket, a converted nuclear missile. Otherwise, he said, he would not have climbed aboard.”

By the way, it was Carpenter who called out “Godspeed John Glenn” moments before Glenn’s launch. Carpenter would follow on Aurora 7 on May 24, 1962. Alan Shepard and Gus Grisson preceded the two with suborbital missions in 1961.

This is cool.  Today, Saturday, Glenn and Carpenter are reuniting with more than 100 retirees who worked on Project Mercury. On Monday, Glenn is being feted at Ohio State University, where its school of public affairs bears his name.

A reminder…the other five original Mercury 7 astronauts were Shepard, Grissom, Wally Schirra, Gordon Cooper and Deke Slayton.

We used to dream of big things. We then did them.

Today, the biggest thing we have going is Facebook. 

Lord help us. We’ve become so small. We bitch about the stupidest things, and then don’t take the time to learn about the important issues, relying on just one source, right or left.

Basically, we’re kind of pathetic. Case in point, the presidency. As we celebrate the greatness of Abraham Lincoln and George Washington, look at our recent lineup of presidents…and the lineup of those seeking the office now.

This is the best we can do?
---

Pray for the men and women of our armed forces…and all the fallen.

God bless America.
---

Gold closed at $1723
Oil, $103.57

Returns for the week 2/13-2/17

Dow Jones +1.2% [12949]
S&P 500 +1.4% [1361]
S&P MidCap +2.1%
Russell 2000 +1.9%
Nasdaq +1.6% [2951]

Returns for the period 1/1/12-2/17/12

Dow Jones +6.0%
S&P 500 +8.2%
S&P MidCap +12.0%
Russell 2000 +11.8%
Nasdaq +13.3%

Bulls  54.8
Bears 25.8 [Source: Investors Intelligence]

Have a great week. I appreciate your support.

Brian Trumbore



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Week in Review

02/18/2012

For the week 2/13-2/17

[Posted 6:00 AM ET]

Europe, Washington and Wall Street

By Monday night, it is hoped that Greece and the other 16 nations in the euro area, along with the “Troika” of the European Commission, the European Central Bank and the International Monetary Fund will have finally reached agreement on the second Greece bailout package of 130 billion euro ($170 billion), along with a debt-restructuring (bond swap) with Greece’s private investors, as well as the ECB and its holdings of Greek dreck, so that Greece can then make a March 20 debt payment of 14.5 billion euro and move on; all this while slashing spending anew, including another 15,000 job cuts, as well as reductions in the minimum wage and pensions. Whether or not the Greek people will stand still and just take it remains to be seen. Last weekend, protests exploded across Athens with some 50 buildings set on fire.

Nothing is guaranteed, however, and the rhetoric the past few days was as dire as any heard in Europe in decades.

 “The deal will ensure our country’s future inside the euro…A bankruptcy would lead to uncontrollable economic chaos and social explosion,” said Prime Minister Lucas Papademos. He added that a bankruptcy would lead to Greeks losing their savings; the state being unable to pay salaries and pensions; and shortages in import items such as medicines, fuel and machinery. 

“If we do not dare today, we will live a catastrophe.”

“What do you want, a country where food will be handed out with food stamps and where we will have no fuel?” Antonis Samaras, the presumptive winner of this April’s presidential election, asked a dissenting deputy.

Greek Finance Minister Evangelos Venizelos:

“The battle is now.  The war is now. If we falter, nothing will be left standing…The real dilemma is between painful measures and crushingly painful ones.” 

But then Venizelos added:

“We are continually faced with new terms. In the euro area, there are plenty who don’t want us anymore. There are some playing with fire, domestically and abroad. Some are playing with torches and some are playing with matches. But the risk is equally great.”

Greece needs to prove by Monday that they will implement 325 million euro in cuts to meet missed deficit-reduction targets and to clarify how it intends to reduce labor costs by 15%.

What got the ire up of many of the others in the eurozone was when the head of Greece’s second-biggest political party, Samaras, signed a pledge to back the “objectives, targets and key policies” of the austerity program, but then left open “the possibility tomorrow to negotiate and change the policy that is being imposed upon us today,” in his words, an extraordinary meeting of eurozone finance ministers set for Wednesday evening was postponed, as EU leaders saw Samaras’ remarks as a provocation, thus heightening the risk of a disorderly default in March.

The “euro working group” was split on whether Greece could be trusted after failing to meet the targets of the first bailout. Ollie Rehn, the European Commission’s top economist, warned there would be “devastating consequences” if Greece defaulted, and pleaded for approval of the bailout. But hardliners in Germany, Netherlands and Finland, the nations that retain triple-A credit ratings, were losing faith Greece would ever be able to deliver on its promises. While German Chancellor Angela Merkel is adamant Greece not default, her finance minister, Wolfgang Schauble, said on Monday the eurozone was “better prepared than two years ago” to deal with one.

As one headline I saw put it, “Greek EU membership on ‘knife’s edge,’” that being Greek Finance Minister Venizelos’ characterization on Wednesday.

“We have to tell the Greek people the truth…There are several (eurozone countries) who no longer want us.”

But after a three-hour conference call with eurogroup ministers, Jean-Claude Juncker, the chairman, said he was confident Greece’s package would be completed at a Brussels session on Monday and we’ve been progressing towards that finale in the last 48 hours.

Meanwhile…all manner of economic data came out this week and while France and Germany surprised with their performance in the fourth-quarter, the picture was still dire across the eurozone. To wit…

Germany’s Q4 GDP fell 0.2%, the first negative quarter since 2009, but this was a tick better than expected and some believe Germany can avoid recession. Nonetheless, an economy that ended up growing 3% in 2011 is still just projected to grow 0.7% for 2012.

France registered a 0.2% rise in GDP in the fourth over the third quarter, 1.7% better, year-over-year.

The Netherlands is in recession as its GDP fell 0.7% in Q4 after a 0.4% decline in Q3.

Belgium is in recession.

Spain’s Q4 GDP fell 0.3% from Q3 and is expected to decline 1.5%, or worse, in 2012.

Italy is in recession after a 0.7% decline in GDP from Q3, which was down 0.2%.

Portugal’s Q4 GDP plummeted 2.7% from a year earlier, and 5.3% on an annualized basis from Q3 (1.3% for the quarter). Debt to GDP in Portugal is up to 118% when it was supposed to be falling after its bailout, as the economy shrinks far more than expected (and thus revenues decline further). [Spain’s debt level is also rising rapidly.] Portugal’s unemployment rate is 14%, but thus far the people are taking it reasonably well.

As for Greece, its GDP plunged 7% over a year ago in the fourth-quarter, this after a 5% decline in the third. But even though many EU members want to expel Greece, the latest poll shows that 70% of the Greek people want to stay, recognizing the alternative could be worse.

Overall, the European Central Bank lowered its growth forecasts for the eurozone in 2012. Where it had been forecasting growth of 0.8%, it now sees a 0.1% contraction for the year and just a 1.1% gain in 2013. GDP was down 0.3% in the fourth-quarter for the euro-17.

But in non-euro Britain, there was some good news. While unemployment rose to 8.4%, and GDP fell 0.2% in Q4, retail sales rose for a second month in January (unexpectedly so) and the inflation rate fell to 3.6% for the month. It’s looking as if the U.K. can avoid recession, at least that’s the view mid-way through the first quarter.

Opinion…Ambrose Evans-Pritchard / Irish Independent

“Officials from the EU and the IMF made two grave errors when they swooped into Greece in mid-2010 and dictated the now hated ‘Memorandum.’

“The regime of drastic cuts has tipped the economy into a violent downward spiral. They thought that private industry would muddle through as the state went through the austerity mincer. What the EU-IMF ‘Troika’ did not fully understand is how many firms were really part of the state in disguise.

“ ‘The Greek government outsources everything,’ said one official with close knowledge of the events.

“Faced with the guillotine, the state first slashed procurement contracts and then stopped paying its bills altogether. The government is now 7 billion euro in arrears to private companies, including 3 billion in unpaid VAT refunds for exporters. It is why business has borne the brunt of the fiscal squeeze, suffering 450,000 job losses, and why Greece’s unemployment has soared to 21%.

“At the same time the banking system seized up. More than 60 billion euro of deposits were withdrawn. By November, no Greek bank could issue a letter of credit accepted anywhere in the world, with calamitous implications for trade – and for exporters trying to meet Troika demands for export-led recovery. ‘Greece became a leper, and is now stuck in Catch-22,’ said one official.”

Javier Solana, former EU high representative and NATO secretary-general / Moscow Times

“It is now increasingly clear that what started in late 2008 is no ordinary economic slump. Almost four years after the beginning of the crisis, developed economies have not managed a sustainable recovery, and even the better-off countries reveal signs of weakness. Faced with the certainty of a double-dip recession, Europe’s difficulties are daunting.

‘Not only is Europe running the risk of lasting economic damage; high long-term unemployment and popular discontent threaten to weaken permanently the cohesiveness of its social fabric. And politically, there is a real danger that citizens will stop trusting institutions, both national and European, and be tempted by populist appeals, as in the past.

“Europe must avoid this scenario at all costs. Economic growth must be the priority, for only growth will put people back to work and repay Europe’s debts….

“The problem is not debt, but ensuring that it finances productive investment, that it is kept within reasonable limits and that it can be serviced with little difficulty.”

Willem Buiter, chief economist, Citigroup / Financial Times

“The experience with the first Troika program in Greece over the past 18 months has shown that a solution to the challenges Greece faces cannot be imposed from abroad. It would have to be supported by a broad coalition of the willing in Greece, of which there is little evidence. But until such a coalition materializes, Greece will at best live from review to review in the eurozone….

“(Even) with a debt swap, the Greek situation is likely to return to the markets’ attention in a few months at the latest.

“After weeks of improving market sentiment following the European Central Bank’s three-year long-term refinancing operation in December, the unresolved Greek crisis should be a timely reminder for investors that the euro area sovereign debt and banking crisis is far from over. The LTRO [Long Term Refinancing Operation] has merely bought the euro area time to finally get its act together. Fiscal deficits are at best slowly declining; sovereign debt continues to rise in most euro area countries; the EU banking system remains undercapitalized; a euro-wide recapitalization facility for banks is still missing; the ECB is unwilling to put its mouth where its money is and admit that it stands ready, directly and indirectly, to act as lender of last resort to sovereigns as well as banks.

“There is some good news. Plentiful ECB liquidity has pushed back the risk of disorderly default of systemically important euro area banks and, combined with financial repression in euro periphery nations, has eliminated the near-term risk of a disorderly default by a systemically important sovereign. The external damage caused by a Greek euro area exit (or ‘Grexit,’ as we call it) could, given appropriate policy response from the ECB and euro area creditor countries, be limited and need not trigger waves of ‘exit fear contagion’ to other fiscally weak peripheral countries. The second LTRO on February 29 may buy more time but until the fundamental drivers of the euro area sovereign debt and banking crises are addressed, volatility will remain a constant companion and recovery and growth absent friends.”

I will have more on the LTRO next week. In the meantime, we await news out of Brussels and Athens, while observing Spain’s largest union protests, slated for Sunday.

Washington and Wall Street

Most of the economic news on the week was solid, with the figure for January housing starts, 699,000 when 671,000 was expected, as well as renewed home-builder confidence providing some good news on this critical sector. January retail sales were up 0.4%, while the leading economic indicators reading for the month was up a like amount. Jobless claims of 348,000 on the week were another four-year low. Only January industrial production, unchanged, was a disappointment.

One thing is for sure. The mild winter across most of the country has given the economy a huge boost when it comes to construction and auto sales. Of course the issue becomes does this result in slower sales in the spring?

One thing is for sure. Rising gas prices at the pump are not a help and this slow grind up is coming far sooner than the normal advance we see later on. The national average is $3.51 per gallon (which will rise another few cents with the next reading) and is expected to hit $4.00 by June (up to $5.00 in the Chicago area and parts of California). Back in 2008 when gas was at $4.00 before the financial crisis, we didn’t see $3.50 until mid-April. 

$4.00 gasoline will do a number on the economy and if you’ve been playing this terrific rally in equities off the October lows, with the S&P 500 up 24% since 10/9/11, just be aware $4.00 gas is coming; and maybe higher depending on the situation in the Persian Gulf. Stocks are no longer cheap, and as noted below, by now you understand that if you take out Apple’s performance, earnings are just not that great.

Meanwhile, your congressional representatives, increasingly concerned in many cases over whether they’ll get reelected, passed a $150 billion economic package on Friday, extending for the rest of 2012 a payroll tax holiday and unemployment benefits. The vote was 293-132 in the House and 60-36 in the Senate. President Obama thus gets a victory on a portion of his massive jobs package that was presented to Congress last fall.

There are relatively few offsets to the legislation, so that recent hike in the debt ceiling to $16.394 trillion may not last until even October, let alone the original plan of year end to get the issue comfortably past Election Day. Now Treasury Secretary Timothy Geithner is telling Congress that he has a number of measures to buy extra time for it to act to raise it further, a la last year when the ceiling was basically hit in May but Treasury played with the books to prevent a default until August. Isn’t our government wonderful?

As for the release of President Obama’s fiscal 2013 budget (beginning 10/1/12), little of it will be enacted upon, at least between now and November. But what is becoming increasingly apparent is that the lame duck session following Election Day is going to be one of historic proportions as all manner of items are set to expire 12/31, including the Bush tax cuts, and the arguments will be fierce.

Editorial / Wall Street Journal

“With the abracadabra of a tax increase on the wealthy and defense spending cuts that will never materialize, the White House asserts that in President Obama’s second term revenues will soar, outlays will fall, and $1.3 trillion annual deficits will be cut in half like the lady in the box on stage.

“All voters need to do is suspend disbelief for another nine months. And ignore the first four years.

“The real news in Mr. Obama’s budget proposal is the story of those four years, and what a tale they tell.

“Four years of spending of more than 24% of GDP, the four highest years since 1946. In the current fiscal year of 2012, despite talk of austerity, Mr. Obama predicts spending will increase by $193 billion to $3.8 trillion, or 24.3% of GDP.

“Another deficit of $1.327 trillion in 2012, also an increase from 2011, and making four years in a row above $1.29 trillion. The last time that happened? Never.

“Revenues at historic lows because of the mediocre recovery and temporary tax cuts that are deadweight revenue losses because they do so little for economic growth. The White House budget office estimates that for the fourth year in a row revenues won’t reach 16% of GDP. The last time they were below 16% for any year was 1950.

“All of this has added an astonishing $5 trillion in debt in a single Presidential term….

“But, lo, says the White House, all of this will change in 2013 if Mr. Obama is reelected. Next year, revenues will suddenly leap to 17.8% of GDP thanks to tax increases on the wealthy, which we are supposed to believe will have little impact on growth.

“Meanwhile, spending will fall by one percentage point of GDP to 23.3%, thanks to the automatic cuts in last year’s debt-ceiling bill. But more than half of those are scheduled to come out of defense, which even Mr. Obama’s Defense Secretary says are unacceptable. They will be renegotiated next year no matter who wins in November.”

Robert Samuelson / Washington Post

“Obama expects to reduce defense and domestic discretionary spending by an astonishing 43 percent by 2022. It would fall from 8.7 percent of GDP in 2011 to 5 percent in 2022. Everyone understands defense. Domestic discretionary spending includes many of those other governmental activities outside of Social Security, Medicare and Medicaid, the main programs that aid the elderly….

“Here are the next decade’s projected trends: Spending on Social Security rises 27 percent; for Medicare and Medicaid, the increase is 41 percent. Meanwhile, defense spending falls 23 percent and domestic discretionary spending drops almost 20 percent.

“Social Security, Medicare and Medicaid – boosted by the aging baby boom and high health costs – are relentlessly determining national priorities. Neither Republicans nor Democrats want to discuss this openly. At a press briefing, top administration officials – led by Gene Sperling, head of the National Economic Council, and Jeffrey Zients, acting head of the Office of Management and Budget – barely mentioned these programs. That’s some feat, considering they constitute 44 percent of non-interest spending and are projected to account for 57 percent by 2022.

“The paradox is obvious, if unspoken: An avowedly liberal administration is gutting government because it lacks the political will to confront programs for the elderly….

“The fact that sizable budget deficits remain despite the spending squeeze suggests that large tax increases, going well beyond the ultra-rich, will one day be required.

“Granted, none of the political choices (limits on Social Security and Medicare benefits, deep discretionary spending cuts, much higher taxes or large deficits) is appealing to either party. But instead of a real debate on the size and role of government – which programs are important, which are ineffective, who deserves benefits, what’s a tolerable level of taxation – we are making choices by omission in a way that exempts the elderly.

“All budgetary pressures are being concentrated on (a) the dwindling portion of spending not devoted to the elderly and (b) higher taxes. This is a formula for governmental failure and generational unfairness. It’s a big story. Someone should pay it heed.”

Street Bytes

--Stocks resumed their advance after a one-week respite with the Dow Jones adding 1.2% to 12949, the highest level since May 2008, while the S&P 500 was up 1.4% and Nasdaq gained 1.6%. Nasdaq is already up 13% for the year and sits at levels not seen since December 2000. Should the Greece issue be temporarily resolved come Tuesday morning (the U.S. markets being closed Monday for Presidents Day), we could easily see Dow 13000 and Nasdaq 3000 the same day.

--Again, if you strip out Apple’s earnings from the S&P 500, the fourth-quarter gain in earnings for the index, year-over-year, is just 2.8%, according to UBS.

--U.S. Treasury Yields

6-mo. 0.12% 2-yr. 0.29% 10-yr. 2.00% 30-yr. 3.14%

Treasuries were as close to unchanged on the week as you can get despite the solid economic news, once again tempered by uncertainty over Greece mid-week, while the inflation data offered up no real surprises.

Producer prices in January rose 0.1% and were up 0.4% ex-food and energy. For the past year the PPI is up 4.1%, 3.0% on the core. Consumer prices rose 0.2% on the month, and 0.2% on the core, while the past 12 months the CPI has risen 2.9%, 2.3% ex-food and energy.

--On Thursday, all three major news networks led off their programs with the story of General Motors’ record 2011 profit, $7.59 billion for the year, the best in its history. GM shares rose 6% on the news.

But the European business continues to struggle, losing another $747 million after a loss of $1.95 billion in 2010. Folks in Europe are worried the automaker is preparing another round of cuts there after previously eliminating 8,300 jobs at its Opel division.

The U.S. government still owns 32% of GM’s shares going back to the taxpayer-funded restructuring in 2009. GM is looking to pay profit sharing bonuses of up to $7,000 each for its 47,500 blue-collar workers, while the office folks are being pared back a bit.

[GM had its IPO, post-restructuring, in Nov. 2010, at $33 a share. The current price is $27.30. The government doesn’t make money until the stock hits $53.]

--Shares in Apple hit $500 for the first time on Monday and then traded up to $526, intraday, before backing off and finishing the week at $502. Had Apple been added to the Dow Jones Industrial Average on June 8, 2009, instead of Cisco Systems when it ousted then-struggling GM, after Wednesday’s close, the Dow would be trading at a record 14810 instead of Wednesday’s close of 12781, according to Bespoke Investment Group and Adam Shell of USA TODAY. Back in June ’09, Apple was $143.

But Apple has a major trademark dispute in China as authorities began removing iPads from some stores after a court ruling that Proview Technology owns the right to the product’s name. Proview originally registered the name “iPad” in Taiwan in 2000 and on the mainland in 2001. Apple bought Proview’s iPad trademark for $55,000 in 2009. Proview claims the deal only applies to Taiwan and that it didn’t know that an Apple subsidiary called IP Application Development was connected to Apple.

Proview’s hope has been that Apple would pony up a large sum for the China trademark to help dig Proview out of its debt, said to be about $500 million.

--Thomas Black of Bloomberg reports:

“Global companies from NEC Corp. to PepsiCo Inc. and AstraZeneca Plc are chopping jobs more than three times faster than in 2011 as they brace for recession in Europe and a slowdown in China.

“Announced workforce reductions surged to 94,369 through Feb. 10 from 26,561 a year earlier, according to data compiled by Bloomberg. Employers based in Western Europe accounted for the biggest group of job-cut disclosures, threatening to add to unemployment in the euro area already running at a 13-year high.”

--China instructed its banks to rollover loans to local governments, some $1.7 trillion in debt to provinces and cities – about a quarter of the country’s GDP – with more than half of the loans due in the next three years; an attempt to delay the day of reckoning. Banks have been extending maturities for local governments to avoid a wave of defaults, sources are telling the Financial Times.

No doubt, this is kicking the can down the road, but it is also buying more time for the government to find a more permanent solution. Not dissimilar to some of the aspects of the European debt crisis.

Separately, foreign direct investment here fell for a third consecutive month in January, November’s decline having been the first since 2009. The Commerce Ministry called the outlook in this category “grim.”

Analysts are forecasting that the government will announce at a National Party Congress in March that the GDP target for 2012 will be 7% to 7.5%. While that’s a significant comedown, and worrisome, it also needs to be noted that average disposable income rose 14% in 2011.

--Japan’s economy shrank for the third time in four quarters, with Q4 GDP falling an annualized 2.3%, owing in no small part to the floods in Thailand, as well as a strong yen that hit exports. However, the government remains optimistic on the future, thanks to reconstruction demand in the quake-hit region, for starters.

Separately, core consumer prices fell 0.1% year-over-year in December, the third straight month of decline. Prices haven’t risen at least 1% in Japan since 1997.

--Inflation in India is coming down. Wholesale prices rose 6.5% in January, compared with 7.4% in December, though growth is also slowing.

--The youth unemployment rate in Greece is 48%.

--Median home prices in the key six-county Southern California market fell 3.7% in January to $260,000, only 5.2% above the low hit during the worst of 2009 (April ’09…$247,000). Foreclosure filings were down 23% vs. January 2011, though with the recent bank settlement over foreclosure abuses, more properties will be hitting the market.

Interestingly, only 669 newly built homes sold in the region in January, the lowest since DataQuick started keeping track in 1988, so it seems clear many prospective homebuyers continue to have problems getting financing.

--S&P raised California’s outlook on the state’s ability to repay its debt to “positive” from “stable,” saying “We think the state is poised for credit improvement – and potentially a higher rating.” This is good. Should it come to pass, Democratic Gov. Jerry Brown will deserve a ton of credit. But one problem. California has to keep cutting.

--Robert Zoellick announced he was stepping down as president of the World Bank, where he’s been in charge since 2007. Hillary Clinton and Lawrence Summers have always been mentioned as possible successors, though Clinton has steadfastly denied she’s interested.

Traditionally, the U.S. gets the World Bank head slot while a European gets the IMF’s top job, but now China is angling for at least far more say in the former, which they deserve.

Personally, it looks like a good gig. I’m assuming at Christmas you get beer samplers from every country.

“Mr. Trumbore, the Tiger Beer from Singapore came in.”

“Yes!”

--Speaking of beer, Heineken NV announced it would continue to cut costs as profit slipped for 2011. Volumes were flat in Europe, up 1% in the Americas, up 6.5% in Central & Eastern Europe, and in Africa, the Middle East and Asia Pacific they grew 6.2%.

[The Heineken Brewery tour in Amsterdam is a must see.]

--CBS Corp. reported a 31% increase in fourth-quarter profits, owing to its cable operations, but total revenue declined due to weaker advertising; important because this is 2/3s of its revenue, though you’d expect this to rise come the second half with all the election year advertising coming down the pike.

--Linsanity (the Jeremy Lin phenomenon) has been a godsend to MSG Network with television ratings soaring. Wednesday’s win over the lowly Sacramento Kings drew the best audience yet in the six games Lin has started, prior to Friday night’s contest. Shares of Madison Square Garden Company hit a record high during the week as Lin’s emergence not only is good for ticket prices, merchandise sales and ratings, but it was clearly an impetus behind a late settlement on Friday between MSG and Time Warner Cable to resolve their ongoing dispute, which had resulted in a blackout for fans using the Time Warner Network.

[The Knicks then lost to lowly New Orleans, thus ending Lin’s, and the team’s, winning streak at seven.]

--I mentioned the Tappan Zee Bridge last time and this week New York officials announced they were looking for a $2 billion federal loan to help pay the $6 billion estimated cost to replace the 56-year-old erector set special. The state is convinced it can break ground in August. Seeing actual work on a new bridge will only aid New York Gov. Andrew Cuomo, the Democratic Party’s 2016 nominee for president, as I predicted way back.

[Some are already calculating that the toll on the new bridge could be as high as $30 by 2022, up from the current $5.]

--4,000 passengers were left stranded as Aussie discount air carrier Air Australia filed for bankruptcy. 100,000 tickets have been sold and flyers are unlikely to get refunds. 300 staff are history. The airline was popular for its flights to Phuket and Honolulu and passengers were stranded when the planes were refused fuel.

--A Czech Airlines pilot died during a flight from Warsaw to Prague, but the copilot had no problem guiding the plane to a safe landing.

--United and Continental are merging their computer systems the first week of March, so you may want to do some planning beforehand…just sayin’. These things seldom go smoothly. 

--How many channels on your basic cable system these days? A lot. I got a kick out of a notice I received from Verizon concerning my own service. They are eliminating “Funimation” and “Bridges TV” due to “very low viewership.” I had never heard of these two. They could eliminate another 100+ for all I care.

--As part of Eastman Kodak’s bankruptcy filing, the company will take its name off the Kodak Theatre prior to the Oscar awards show there, Feb. 26, as part of Kodak’s efforts to save money. Kodak had previously agreed to pay $72 million in annual installments over 20 years, according to a court filing, or $3.6 million a year and has $38 million in payments left on the contract. [Crain’s New York Business/Bloomberg]

--Casino revenues in Atlantic City fell 7.2% in January despite the warm weather, this after a surprising increase in December. Only two of 11 casinos showed increases in revenue.

--Speaking of warm weather in January, six degrees above normal in the New York-New Jersey area, you can imagine how local ski areas are taking a pummeling. Crain’s New York Business interviewed ski-related proprietors, such as hotel/motel operators, and most say their weekday business is off about 70%. The flip side, as I noted when I was in balmy Manchester, New Hampshire, is that restaurant business is up.

--Sign of the Apocalypse: Thieves made off with paintings valued at $6.5 million from Greece’s National Gallery, the first such theft in the gallery’s 112 years of operation, but as the Los Angeles Times’ Anthee Carassava points out, there was just one guard on duty that night for the entire gallery…the result of cutbacks, in this case incredibly short-sighted ones.

Art thefts, though, have been increasing across the continent. In Greece, however, as budgets are slashed in its austerity move, “About 1,900 government-paid guards protect more than 15,000 museums, monuments and archaeological sites across the country.”

And so it was that on Thursday, two armed robbers broke into the museum in Ancient Olympia – the birthplace of the Olympics, overpowering the lone guard. The local mayor called the value of the dozens of items stolen “incalculable.” The Culture Minister tendered his resignation.

--Editorial / Washington Post

“In a recent briefing to Congress about worldwide threats, FBI Director Robert S. Mueller III said that the danger of cyberattacks will equal or surpass the danger of terrorism ‘in the foreseeable future.’ What makes that assessment particularly alarming is that the United States may be as unprepared to defend some of its critical computer systems as it was to protect New York and Washington against al-Qaeda before Sept. 11, 2001.

“Though the Pentagon has a cybercommand, it does not cover the domestic civilian economy, including vital infrastructure systems such as the electric power grid, water supplies and the financial system. Many of the computers controlling those utilities lack adequate security measures and could be devastated by viruses launched by hostile states or even hackers. As it is, U.S. companies, from defense contractors such as Lockheed Martin to e-mail carriers such as Google, are under continual assault from China and Russia, which seek to steal industrial or national security secrets and probe for infrastructure weaknesses….

“Cooperation between the government and private companies is also badly needed to ensure protection of power and water plants, banking networks, and other infrastructure essential to modern society.”

At least the Senate is finally working on responsible legislation to ensure better cooperation between the Pentagon, Department of Homeland Security and private companies, but we’ve once again wasted far too much time and implementation should have occurred years ago.

Former National Security official Richard A. Clarke wrote an op-ed for the Wall Street Journal, talking about Arab-Israeli tensions that “have been spilling off the streets and airwaves and onto the region’s fiber optic cables. Citizen hackers on both sides have engaged in tit-for-tat raids on Israeli, Saudi and other regional computer networks. Stock exchanges, airlines, government offices and even hospitals have had their websites defaced or shut down. Credit-card numbers and personal emails have been stolen and posted on the Internet. One Israeli official has labeled the escalating cyber hostility ‘terrorism’ and called for it to be dealt with as such.”

While no one has died, and this is not classic terrorism, Mr. Clarke concludes:

“The recent hacker exchange should…remind us that just as hacking could escalate to the use of conventional force in the Middle East, the reverse is also true. Bombing Iran, for example, could unleash an Iranian government cyber attack. Israelis say they could handle that, despite the recent evidence to the contrary. Unfortunately, much of the critical infrastructure in the U.S. is still not ready for a sophisticated nation-state cyber attack either.”

Foreign Affairs

Iran: President Mahmoud Ahmadinejad appeared at a nuclear facility in Tehran to show off his nation’s new “breakthrough,” fuel plates that few nations have the technology to make. But the backdrop looked like it was from one of those chintzy Matt Helm series films, plus some workers were wearing face masks, others weren’t, so I’m thinking they really have a SARS epidemic, only many of the workers don’t know that. Ahmadinejad also claimed Iran added 3,000 new centrifuges at the Natanz facility, bringing the total there to 9,000, which, if true, would be significant. But U.S. officials were skeptical of both claims.

Iran also expressed renewed willingness to resume talks on its nuclear program, but the West has learned its lesson. This seems highly unlikely. [Then again, I just saw where Sec. of State Clinton said a letter from Iran to the U.S. and its allies was “one we have been waiting for.” Oh brother.]

At the same time, Iran threatened to cut off oil to six European nations ahead of their announced July 1st embargo. [While China is buying less Iranian oil due to a price dispute.]

And Iran attempted to attack Israeli diplomats in New Delhi, Tbilisi, and Bangkok with very limited success, though one Israeli injury was serious. One of the would be terrorists, most likely Hizbullah disciples operating with Iran’s help, blew his leg off with a grenade while being chased by police in Bangkok. Hizbullah was no doubt acting in retaliation for the Feb. 2008 assassination of its key military chief, Imad Moughniyeh.

Lastly, Iran threatened once more to close the Strait of Hormuz and is said to have prepared suicide boats. On this the threat is very real, nor should the West, and Israel, dismiss Hizbullah’s amateur terror attempts. No doubt they have hundreds of more qualified operatives around the world waiting for their orders.

Editorial / Wall Street Journal

“Tehran officially denied involvement (in the attempted terror attacks). But three Iranian nationals are now under arrest in Thailand, another is on the lam, and a fourth is being extradited to Thailand from Malaysia. If these are the marks of a country that is ‘ready to talk’ – as former Obama administration diplomat Dennis Ross argued in a New York Times op-ed this week – we’d be interested to know what Iranian actions would qualify as evidence of belligerence. An attempt to bomb Washington, D.C. ? Oh, wait: They tried that, too.

“The larger story is that Iran is coming close to openly making war on the country it wants to wipe off the map. That’s an escalation from the more veiled (and often more deadly) warfare the Islamic Republic has waged against Israeli and Jewish targets for decades. It’s also an indication that the mullahs, far from seeking to de-escalate tensions with the West, are scrapping for a fight. They might get one.

“It is in nobody’s interest, least of all America’s, to see a regional war erupt in the Middle East. It is even less in America’s interests to back our allies in Jerusalem into a corner where they feel they have no choice other than to fight, as they did in 1967. An Iran that seeks to murder diplomats across the globe is a threat to global security. The U.S. has an even larger interest than Israel in stopping it.”

Israel: For his part, Israeli Prime Minister Benjamin Netanyahu said of the first incidents in Delhi and Tbilisi, “Today we witnessed two attempts of terrorism against innocent civilians. Iran is behind these attacks and it is the largest terror exporter in the world.”

Netanyahu blamed Hizbullah as well.

“Iran is undermining the stability of the world. Nations of the world must…draw a red line against this Iranian aggression. Aggression like this, if it is not stopped, will spread like a storm.”

Barron’s interviewed intelligence consultant George Friedman of Stratfor and I have to take issue with some of Mr. Friedman’s conclusions.

“To Friedman, the likelihood of an imminent Israeli strike on Iran’s nuclear facilities remains low (‘a one-in-four chance,’ he opined). For one thing, to be successful the action would require U.S. assistance. And that aid is unlikely to be forthcoming, especially in an election year.”

The fact that it is an election year makes U.S. assistance more, not less likely. 

Friedman adds, “The task is infinitely more difficult than Israel’s air strikes that destroyed the Iraqi Osirak reactor in 1981 or the Syrian nuclear reactor in 2007…Israel has also lost all elements of surprise by its bellicose broadsides in the Western press. What’s more, if Israel learned anything from its unsuccessful 2006 war against Hizbullah in Lebanon, air-force generals always over-promise what they can deliver on.”

So Friedman is saying it’s too late. Israel will just sit back and let Iran get the bomb, whether it is end of 2012 or 2015. That’s absurd. Or I am totally misreading Netanyahu.

Friedman talks about the aftermath of any attack on Iran. Civilian casualties from Hizbullah and Hamas rocket attacks would be higher than anticipated.

They’ll be high…but not unanticipated.

Friedman says Iran will have success in closing, or dramatically slowing the flow of oil from the Persian Gulf through the Strait. I just don’t see this.

“Friedman believes the hysteria over Iran’s apparent quest to become a nuclear power has clouded rational consideration of more important geopolitical issues. Even if Iran succeeds in building some kind of nuclear arsenal.”

It’s hardly hysteria.

Amir Taheri / The Times of London…on the mindset of Supreme Leader Ayatollah Khamenei:

“(Khamenei’s) analysis is simple: the U.S. is too tired, too divided and too concerned about the global economy to launch a full-scale war against Iran. The perception that Barack Obama is a master of the art of running away reinforces Tehran’s analysis.

“With political moves and economic sanctions manifestly having no effect, the U.S. and its allies are running out of options. Soon they would find themselves with the last of the famous ‘all options on the table’: military action.

“The way Khamenei sees it, such action would be limited to bombing raids on Iran’s most vulnerable nuclear sites, such as the enrichment facility at Natanz. That would be no big deal as Tehran has transferred most of its enrichment activities to a new and air-attack-proof facility in the Fordo mountains. The Americans may also destroy some Islamic Revolutionary Guard bases. However, once all that is done, Khamenei could claim to have fought the ‘Great Satan’ and survived while the U.S. and allies would have nothing more to throw at Iran.

“Comparing himself to the Prophet Muhammad, Khamenei claims that he is about to repeat the great victories of the founder of Islam at Kheybar and Badr. Khamenei’s message is: either surrender or fight. That position is based on the Shia concept of ‘relief after hardship’ under which believers welcome suffering, even martyrdom, in the certainty that their sacrifice leads to comfort or even paradise. Rather than waiting for the worst to happen, the believer should provoke it. In fact, under Shia theology, waiting is worse than death.

“Sanctions are already hurting the people; war, even a limited one, is sure to cause more suffering. However, none of that would alter Khamenei’s behavior. He would compromise only if the survival of his regime is at stake. A limited bombing war would play into his hands. This is why he is trying to trigger it by a series of provocative acts over the nuclear issue and plots to kill Israeli, American and Saudi diplomats in several countries.”

Syria: President Bashar Assad called for a sham referendum on a new constitution for Feb. 26, a document that would allow for multiple parties in the legislature and a maximum two, 7-year terms for the president, but also gives the president sweeping powers to rule by decree and dissolve parliament. Plus, with parliamentary elections slated for 90 days after the constitution is approved, Assad would nonetheless remain in power until his term expires 2014. So he’d let the elections go through and then tell the legislators to go home.

On Feb. 24, Sec. of State Clinton has called for a meeting in Tunisia among the willing to explore ways to help the rebels, but this is now complicated by the United States’ revelation that al-Qaeda in Iraq was involved in the suicide/terror attacks in Damascus and Aleppo; exactly what Assad has claimed. Al-Qaeda leader Ayman al-Zawahiri called on jihadists to join the fight against the Syrian president.

In the meantime, on Thursday the UN General Assembly voted 137-12 to call for an end to the violence in Syria, with Russia and China lining up with the likes of North Korea and Venezuela, as well as Syria itself. Another 17 abstained. The vote was nonbinding but at least a mild morale boost for the opposition.

But just who is the opposition? There is no unified command or leader and al-Qaeda is exploiting the civil war. Lebanon could blow at any minute, dragged into its own civil war by Syria. [Over 6,000 Syrian refugees are already in northern Lebanon.] The Gulf States are aligned against Assad, as well as al-Qaeda. The Iraqis are arming both sides, including allowing Iraqi Shiite militiamen and Iranian fighters through its border with Syria.

[We note the passing of New York Times correspondent Anthony Shadid, who died of an apparent asthma attack while on assignment in Syria. The award-winning Shadid was just 43. I quoted him last week in a bit on Libya.]

Lebanon: Former Prime Minister Saad Hariri, speaking from Paris, called on Hizbullah to begin to surrender its arms to Lebanese authorities and “relieve Lebanon and all Lebanese of the danger of violence, and relieve the state of the danger of collapse. Let Hizbullah and all Lebanese work for the triumph of the state and for Lebanon to remain a pioneer among Arabs in the Arab Spring.”

At the same time, Hariri said:

“Israel is our enemy and a danger to us all which we should all face. Let us all defend our country and win within the confines of the Lebanese state. But when the weapons, under the pretext of fighting Israel, become a weapon to fight each other and eliminate the state, then it only serves Israel and no one but Israel.”

Hariri is recovering in Paris after a skiing accident and promised to return to Lebanon soon.

Libya: The nation is concerned about the pronouncements of one of Muammar Gaddafi’s sons, Saadi, who warned in a television interview from Niger that his family’s supporters were planning attacks on the interim leadership. Niger refuses to extradite Gaddafi back to Libya, let alone other surviving members of the family. Libya itself remains highly unstable with no coherent institutions, including the courts and a police force. Some say it’s even more corrupt than during Gaddafi’s time. Torture, as previously reported, is widespread.

Egypt: President Obama’s new fiscal 2013 budget contains $1.3 billion in military aid for Egypt, along with $250 million for economic assistance, the same level as 2012.

“Our goal is to provide the necessary funds. It’s obviously clear to all of us that we have issues we need to work through, and we’re working very aggressively to do so,” said Deputy Secretary of State Tom Nides. “But this budget reflects our commitment and our desire to fully fund this initiative.”

It goes without saying that Congress will have a voice in any disbursements and right now, Egypt doesn’t deserve a dime.

Likewise with the Palestinians, who stand to receive significant aid as well, though off previous levels, but this depends on the role of Hamas in any new Palestinian government.

Pakistan: Prime Minister Gilani was indicted on Monday for contempt of court, the Supreme Court, in a move that could disqualify him from holding office. If convicted of refusing to re-open a corruption case against President Zardari, Gilani faces six months in prison. 

Afghanistan: In a positive step, at least on paper, Afghan officials are attempting to rid the army of Taliban infiltrators by ordering soldiers with families in Pakistan to either go home or move their relatives to Afghanistan.

But as the Washington Post’s Kevin Sieff reports, “the ultimatum could force painful choices for thousands of Afghan troops, and it is likely to stoke ethnic tensions just as the country’s leadership is seeking a negotiated end to the war. Purging members of the military with family in Pakistan also has the potential to aggravate long-troubled relations between Afghanistan and its eastern neighbor.”

The issue is when the soldiers return home to Pakistan on leave, it is a fact many are then influenced by Pakistani militants to return and kill NATO forces, or launch attacks against government troops under cover of being in the military. At least 58 Western military personnel were killed in 26 attacks by Afghan soldiers or police between May 2007 and May 2011.

Meanwhile, President Hamid Karzai arrived in Pakistan to explore how the Pakistanis can help the peace process between the Karzai government and the Taliban. Heretofore, the Taliban has said they would talk only to the Americans, describing Karzai as a “puppet” leading a “puppet government.”

China: Vice President Xi Jinping, the next president of his country, is nearly finished with his trip to the U.S. as I write. During his visit to Washington, both sides staked out their positions, though without fireworks. Among the issues discussed with President Obama, Vice President Biden and Sec. of State Clinton, Xi said he had a “candid exchange” regarding human rights.

“I stressed that China has made tremendous and well-recognized achievements in the field of human rights over the past 30-plus years, since reform and opening up. Of course, there is always room for improvement when it comes to human rights,” Xi added.

I’ll say. Like why has China been on such a mission lately to arrest dissidents, especially ahead of Xi’s visit? It’s nonsensical.

President Obama said he “welcomed China’s peaceful rise,” but added: “We want to work with China to make sure that everybody is working by the same rules of the road when it comes to the world economic system. That includes ensuring that there is a balanced trading flow not only between the United States and China but around the world.”

Xi signaled he wants to work with the U.S. on foreign policy issues, but he also called on Washington to recognize China’s one-state policy when it comes to Taiwan, as well as Tibet.

“China welcomes the United States playing a constructive role in promoting the peace, stability and prosperity of the Asia-Pacific region. At the same time we hope the U.S. side will truly respect the interests and concerns of countries in the region, including China.”

So did Xi’s visit narrow the “trust gap” between our two nations? Not likely. Xi is, however, limited in what he can do until he formally takes charge end of the year and early 2013, in a staged process. I’m optimistic he is someone the United States can deal with.

Lastly, “Linsanity” creates a problem for Beijing, the New York Knicks Jeremy Lin having a Taiwanese background, as well as being a devout Christian. Chinese Central Television has apparently stopped showing Lin’s games as quickly as it started showing them owing to the presence of Taiwanese flags, though CCT covered Taiwan’s presidential election, where obviously Taiwan flags were everywhere. You can imagine how Lin is being covered on the island. He’s leading every newscast on days the Knicks play.

North Korea: My this place has been quiet following the mourning period after the death of Kim Jong-il and the elevation of his son, “Great Successor,” Kim Jong-un. The transition, we’re to assume, is going smoothly, but Kim has one primary challenge. How to feed his people? Some say the North faces a 700,000-ton grain shortage, which would mean 1/3 of the people starve. Kim needs to be able to deliver the food before he can go forward with his reform plan, whatever that is. But both the U.S. and South Korea aren’t in the food giving mood these days.

Russia: Just two more weeks before the March 4 presidential vote and the question remains, can Putin capture 50% and avoid a run-off? He has zero opposition. Communist Party veteran Gennady Zyuganov will probably finish second but with no more than 10% of the vote, according to the polls. So there’s no question Putin emerges the winner, eventually, it’s just how long does he then remain in office? I’m long on record as saying he’ll be removed. More and more are coming around to my thinking.

It also needs to be said that Putin’s anti-American rhetoric ahead of the election is despicable. But then as one political analyst told the Washington Post the other day, “Putin is choosing worse relations with the West to keep himself in power. Of course it’s a KGB mentality.”

France: President Nicolas Sarkozy formally announced his campaign for reelection, with the first round of voting April 22, and then the top two vote-getters squaring off May 6. March 16 is the deadline for qualifying, which pertains to the likes of National Front candidate Marine Le Pen, who at last word still hadn’t qualified but it’s assumed she eventually will. In the latest Ifop poll, Socialist Francois Hollande has seen his lead dwindle, 30% to Sarkozy’s 25%. Le Pen is third at 17.5% and Centrist Francois Bayrou at 12.5%.

In a rather bizarre situation, German Chancellor Merkel is supporting Sarkozy, as Hollande has said that if he’s elected, he’ll want to renegotiate any EU treaties France is party to, especially as it pertains to the debt crisis. It’s not clear Hollande would even be able to do this.

Sarkozy will campaign on being tough on immigration and welfare. He is not helped by a general mood across Europe that has led to regime change in Spain, the U.K., Ireland, Portugal and Hungary.

Germany: Chancellor Merkel was forced to cancel a visit to Italy on Friday because of a scandal involving President Christian Wulff, a home loan deal that included bullying a paper not to run the story. Wulff, a member of Merkel’s center-right Christian Democrat party, then resigned.

While the president is mostly a figurehead, he is also supposed to be a moral compass for the nation, yet he’d become a laughingstock for the press. The scandal comes at an obviously bad time for Merkel and will hurt her in state elections later this year.

Britain: Prime Minister David Cameron traveled to Edinburgh to try and get the Scots to abandon their idea of independence, but talks went badly. Alex Salmond, Scotland’s First Minister, wants a referendum on independence in 2014. Cameron wants one sooner, gambling it would be defeated.

Venezuela: President Hugo Chavez will have a challenger in the October election, Henrique Capriles, a 39-year-old who handily won a primary last Sunday. 

“This is a country in crisis,” he said. “If there was one message people all across Venezuela gave me, it was they are exhausted by confrontation and division. I’ll be a president for Venezuelans of all colors, not just red ones,” referring to the red shirts worn by Chavez supporters.

Capriles wants to retain Chavez’s social programs, but run a less corrupt government and reduce crime, which has been soaring. [19,400 murders last year compared to 8,000 in 2000.] 

Capriles is looking to model his approach after former Brazilian President Luiz da Silva, who used welfare programs to reduce poverty and increase consumption, which, together with increased education opportunities, raised living standards.

Honduras: The descriptions of the prison fire in Comayagua are beyond horrible. In the world’s deadliest such incident in a century, 358 are confirmed dead, with many bodies found lying on top of each other, burned beyond recognition. Most of the victims had not even been charged with crimes yet.

There were only 12 guards on duty when the fire broke out, with 856 prisoners packed into barracks built to accommodate 400. 

Random Musings

--What an election, eh? According to a CNN/ORC poll, six in ten Republicans continue to wish they had more choices (count me in that group), as the candidates still in it keep swapping places.

So following are some national surveys of Republican voters this past week.

CNN/ORC International

Rick Santorum 34 percent
Mitt Romney 32
Ron Paul 16
Newt Gingrich 15

New York Times/CBS News

Santorum 30
Romney 27
Paul 12
Gingrich 10

Public Policy [week ago]

Santorum 38
Romney 23
Gingrich 17
Paul 13

Pew Research Center

Santorum 30
Romney 28

Gallup

Romney 32
Santorum 30

Romney won the Conservative Political Action Committee straw poll by a 38-31 margin over Santorum (Gingrich 15, Paul 12). In his speech to the group, Romney called himself “severely conservative.” What the heck is that supposed to mean?!    Prepared remarks circulated by his campaign had him saying he was simply “a conservative governor.”

--Romney barely defeated Ron Paul in Maine’s nonbinding caucuses 39-36, with Santorum at 18, though on Friday word came the vote may have been flawed, perhaps “severely” so. Only 6,000 votes were cast, or about 2 percent of registered Republicans, so the state’s elephants were just thrilled by the process…not.

--And, again, as I noted would be the case a few weeks ago, President Obama is now hitting 50% in his approval ratings…but it’s amazing the last four I’ve seen are exactly 50%...including CNN/ORC and New York Times/CBS.

Just as importantly, in the CNN poll, Obama now has a 50% approval rating among independents. The NY Times survey has independents favoring Obama over Romney 49-38. Just a little while ago, it was the reverse. [Overall, Obama defeats Romney 51-46 and both Santorum and Ron Paul 52-45.]

--A Rasmussen survey, released last weekend, had President Obama defeating Santorum by only a 46-42 margin. The same survey had Obama crushing Romney 50-40.

Peggy Noonan / Wall Street Journal

“The Romney campaign is better at dismantling than mantling. They’re better at taking opponents apart than building a compelling candidate of their own. They do not seem capable of deepening his meaning, making his stands and statements more textured and interesting. He comes across like a businessman who studied the data and came up with the formula that will make the deal.

“A particular problem is that he betrays little indignation at any of our problems and their causes. He’s always sunny, pleasant, untouched by anger. This leaves people thinking, ‘Excuse me, but we are in crisis. Financially and culturally we fear our country is going down the drain. This guy doesn’t seem to be feeling it. So why’s he running? Maybe he thinks it’s his personal destiny to be president. But if the animating passion of his candidacy is about him, not us, who needs him?’”

--Fred Barnes / The Weekly Standard

“A week ago, Republican capture of the Senate in the 2012 election was regarded as close to a sure thing. The political direction of the country had shifted in favor of Republicans. Democrats faced the unenviable task of defending 23 seats, Republicans only 10. And 8 of the GOP seats were safely in Republican hands.

“Now Republican prospects are not as rosy. The odds on a Republican Senate are no worse than 50-50, maybe better. But the effort to oust Democrats who currently control the Senate 53-47, looks more difficult than it did.

“What has changed? Most significant may be President Obama’s improved chances of reelection. He has enormous liabilities, but he has managed to alter the political environment enough to make Republicans and the rich a live issue in the campaign. Before, his record in the White House, especially on the economy, was the lone issue.”

So it’s pretty simple. If Obama is reelected, Democrats hold the Senate and your editor moves to Yap.

--One of the key Senate races in the country this fall is in Virginia: Democratic former Gov. Tim Kaine and Republican former Sen. George Allen. As noted by U.S. News Weekly, not only is the race in a dead heat, since last May, 12 different polls have shown the contest to be effectively tied.

--Mike Collins / Baltimore Sun (Star-Ledger)

“Every Republican presidential candidate claims to be the heir to Ronald Reagan’s legacy. For years, Republican partisans have carried Reagan’s memory before them as the ancient Israelites carried the Ark of the Covenant. Just invoking his name proved your ideological purity, and would smite the dreaded RINO – Republican in name only.

“Problem is, those who most fervently claim to adhere to Ronald Reagan’s principles don’t seem to understand Reagan’s greatest principle: decency….

“As a man, Reagan had a sunny optimism and faith in the goodness of his fellow Americans. While his political opponents disagreed with him over policy, he did not consider them his enemies. He viewed them as his fellow citizens, and right or wrong, he valued them. He was a true gentleman.

“If Republicans want to honor his legacy, we should remember the man he really was – not the myth we’ve created to advance our personal interests. If we can emulate the decency, civility, good will and patriotism that was Ronald Reagan – and live the 11th Commandment – we can truly honor him in the second century after his birth and make America the gleaming city on the hill he dreamed of.”

--In a Rasmussen poll, 59% of Catholics disapprove of the president’s job performance after he imposed a new birth control mandate on employers, including Catholic agencies. A CNN/ORC International poll reveals “Half of all Americans say they oppose the Obama administration’s new policy concerning employer-provided health insurance plans and their coverage of contraceptive services for female employees including those at religiously affiliated institutions.”

--PBS is premiering a four-hour “American Experience” documentary on Bill Clinton on Monday and Tuesday, one that chronicles his “unruly libido” as an Irish newspaper put it. Former adviser Dick Morris relates the moment Clinton rang him just before evidence of his affair with Monica Lewinssky was about to be made public.

“Bill said to me: ‘Ever since I got to the White House I have had to shut down my body.”

Clinton then asked Morris to conduct political polls on how he should handle the crisis.

Another adviser speaks of “sparks flying between (Clinton and Lewinsky) from the first moment when they saw each other.”

But otherwise, after reading a poor review in the Washington Post, I’m passing on this one.

--New Jersey Republican Gov. Chris Christie caught heat for his decision to have flags lowered to half-staff on Saturday for Whitney Houston’s funeral, saying he rejects criticism that she “forfeited the good things that she did” because of her struggles with substance abuse.

“What I would say to everybody is there but for the grace of God go I,” he said.

Detractors say that the honor should be reserved for members of the military, for one example, and not to honor a drug addict.

Christie says Houston deserves the honor because of her cultural impact and as “a daughter of New Jersey.”

“I am disturbed by people who believe that because her ultimate demise – and we don’t know what is the cause of her death yet – but because of her history of substance abuse that somehow she’s forfeited the good things that she did in her life. I just reject that on a human level.”

I agree with the governor. He did the same thing last year with the death of Clarence Clemons, Bruce Springsteen’s saxophonist.

Said a Newark resident, Anna Simpson, “She never forgot where she came from. She was real. We would see her and be like, ‘She’s one of ours,’ and she always made us proud, no matter what happened.”

As to the governor’s move, Simpson said, “I don’t agree with a lot of things that he does, but I admire him for that. Whoever don’t agree, they will get over it.”

Personally, I also felt the same way about some of the criticism Clint Eastwood received for his Super Bowl commercial, “Halftime in America.” It was a great spot. If you thought it was blatantly pro-Obama, so what…get over it.

--The incident concerning U.S. Supreme Court Justice Stephen Breyer and his wife where they were robbed by a machete-wielding intruder at their vacation home on the island of Nevis is but another example of how you better have your guard up when you’re traveling in the Caribbean, as I’ve written from time to time. Crime rates on many of the islands have been soaring for years.

[Paid for by BP…and the Gulf Tourism Bureau.]

--Homicides in New York City in 2011 were under 600 for a 10th straight year and some of the credit has to go to the NYPD’s stop-and-frisk policy. Last year, 684,330 people were stopped and questioned, a record number. Of that number, 12% were arrested or received summonses. The remainder, including Mets fans, weren’t charged.

Civil libertarians bitch and moan when they see all these stop-and-frisk figures. Donna Lieberman, executive director of the New York Civil Liberties Union, points to the fact that blacks make up 25% of the city’s population, Hispanics 29% and whites 33%, according to the 2010 census. In 2011, 53% of those stopped were black, 34% Hispanic and 9% were white. 

But an NYPD spokesman maintained the stop numbers “comport by race with victim-crime reports.” In 2011, 66% of violent-crime suspects were black, 34% were Hispanics and 9% white. [Sean Gardiner / Wall Street Journal]

--Finally, Feb. 20 marks the 50th anniversary of John Glenn’s flight on Friendship 7. The 90-year-old Glenn, along with 86-year-old Scott Carpenter, the only other survivor of the original Mercury 7 astronauts, appeared at Cape Canaveral on Friday to begin the celebrations.

As reported by Marcia Dunn of the AP:

“Glenn recalled how he and his fellow Mercury astronauts traveled during their training to Cape Canaveral to watch a missile blast off. It was a night launch, and the rocket blew apart over their heads.

“ ‘That wasn’t a very good confidence-builder for our first trip to the cape,’ Glenn said. Improvements were made, and Glenn said he gained confidence in his Mercury-Atlas rocket, a converted nuclear missile. Otherwise, he said, he would not have climbed aboard.”

By the way, it was Carpenter who called out “Godspeed John Glenn” moments before Glenn’s launch. Carpenter would follow on Aurora 7 on May 24, 1962. Alan Shepard and Gus Grisson preceded the two with suborbital missions in 1961.

This is cool.  Today, Saturday, Glenn and Carpenter are reuniting with more than 100 retirees who worked on Project Mercury. On Monday, Glenn is being feted at Ohio State University, where its school of public affairs bears his name.

A reminder…the other five original Mercury 7 astronauts were Shepard, Grissom, Wally Schirra, Gordon Cooper and Deke Slayton.

We used to dream of big things. We then did them.

Today, the biggest thing we have going is Facebook. 

Lord help us. We’ve become so small. We bitch about the stupidest things, and then don’t take the time to learn about the important issues, relying on just one source, right or left.

Basically, we’re kind of pathetic. Case in point, the presidency. As we celebrate the greatness of Abraham Lincoln and George Washington, look at our recent lineup of presidents…and the lineup of those seeking the office now.

This is the best we can do?
---

Pray for the men and women of our armed forces…and all the fallen.

God bless America.
---

Gold closed at $1723
Oil, $103.57

Returns for the week 2/13-2/17

Dow Jones +1.2% [12949]
S&P 500 +1.4% [1361]
S&P MidCap +2.1%
Russell 2000 +1.9%
Nasdaq +1.6% [2951]

Returns for the period 1/1/12-2/17/12

Dow Jones +6.0%
S&P 500 +8.2%
S&P MidCap +12.0%
Russell 2000 +11.8%
Nasdaq +13.3%

Bulls  54.8
Bears 25.8 [Source: Investors Intelligence]

Have a great week. I appreciate your support.

Brian Trumbore