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03/03/2012

For the week 2/27-3/2

[Posted 6:00 AM ET]

Europe, Washington and Wall Street

For once it was a quiet week across euro land as all but two of the European Union’s 27 members (Britain and Czech Republic being the exceptions) signed the new “fiscal compact” that aims to prevent the euro-17 nations from running up huge debts again. German Chancellor Angela Merkel called it a “great leap,” or at least a first step towards stability, with even Merkel’s parliament also passing the new rescue package for Greece by a whopping margin; this as the Greek parliament approved another mammoth series of budget measures, including deep cuts to healthcare and pensions, or else they wouldn’t receive their 130 billion euro for the second bailout of their depressed nation.

President of the European Council, Herman Van Rompuy, said: “This stronger self-constraint by each and every one of you as regards debts and deficits is important in itself. It helps prevent a repetition of the sovereign debt crisis. It will thus also reinforce trust among member states, which is politically important as well.

“The restoration of confidence in the future of the eurozone will lead to economic growth and jobs.”

Aaarghhh!!! Viva L’Europe!!!

So they all toasted each other, formed a mosh pit or somethin’, and then Spain and the Netherlands asked to take the floor.

“Ah, gentlemen? You know our deficit targets? We’re going to miss them again…by like a lot.”

And then someone reminded the group that their own statistics bureau had just released the unemployment rate for the euro-17, 10.7%, with Italy at an all-time high of 9.2%, Greece at 19.9%, and Spain up to an unfathomable 23.3% (over 50% for those under age 25).

And then someone else reminded them that growth is still awful hard to come by, as in the group is in all probability experiencing another down quarter to open 2012, but then some of the ministers reminded the party-poopers that this was a time for celebration and to shut up.

Oh, there are still quite a few issues to be addressed, and there are some pressing timetables, like the private-sector debt restructuring for Greece’s bond holders needs to be wrapped up next week; plus the firewalls need to be increased, ostensibly to backstop Italy and Spain, though this discussion has been put off until end of the month as Chancellor Merkel continues to take heat from within about increasing the funding, specifically the European Stability Mechanism, or ESM.

And eurozone members are delaying payment on half of Greece’s bailout until they receive further proof that Greece can implement its spending cuts, let alone complete the just mentioned bond swap. But generally everyone is happy with what the Greeks have done, this as the Greek people are reduced to eating dirt.

The fiscal compact now needs to be approved by individual parliaments, though only 12 ratifications are needed to implement it, so it’s still not clear just what French presidential candidate Francois Hollande can do if he wins; Hollande saying he’ll want to renegotiate the treaty.

Ditto, Ireland, whose government said it will be necessary to hold a referendum on the compact by June. Normally this would be dicey for the whole union, but with only 12 needed for ratification, the only people hurt by a no vote in Ireland (and it will undoubtedly be close) are the Irish, who then wouldn’t receive any further bailout funds of their own.

But all the above aside, unelected Italian Prime Minister Mario Monti said the worst is over for the euro region, as long as there is an increased firewall, he quickly added, because “size matters” in order to combat any further contagion.

Contagion was far from the minds of Italian and Spanish bond holders this week. Back in December, the yield on Italy’s 10-year paper was over 7.25%. For Spain, 6.67%.

Remember how everyone was talking about the 7% level being unsustainable? Well by the close on Friday, the yields on the 10-year for both Italy and Spain were around 4.90%, highly sustainable, and their respective 2-year yields were about 2%, despite their ongoing debt and lack of growth issues.

How can this be?

Why it’s all about, to a great extent, the latest LTRO, longer-term refinancing operation by the European Central Bank. Round 2 had 800 banks lapping up 489 billion euro of 1%, 3-year loans on top of December’s 523 banks borrowing 530 billion euro in Round 1.

So you borrow at 1% and if you’re a Spanish or Italian bank you kind of feel obligated to help your countrymen out and you then turn around and buy some of your own country’s paper yielding over 5%, until Friday. Or you buy up some presumably safer 2-year scrip for over 2% and still pocket a nice spread.

Such a deal! Or what’s better known these days as the “Sarkozy trade,” since this is what French President Nicolas Sarkozy recommended all the banks do when LTRO was first introduced last year. Spain’s banks, for example, increased their holdings of sovereign debt by 29% between December and January.

So the banks have borrowed over 1 trillion euro and aside from buying sovereign debt, where is the rest going? Well, it seems that the banks have 700 billion euro of their own debt maturing this year, and seeing as the banks don’t lend to each other anymore because there is zero trust between ‘em, a lot of the LTRO funds are just going to refinance bank debt and probably just sit back in the ECB until it’s necessary to use it.

OK, so you have some going to buy sovereign debt, whose quality is still highly iffy, and then a large portion of the loans are being used to refinance existing bank debt. What else?

Well, the ECB has asked all the banks to boost their capital, some in a big way, so you have some of the loan money being used for this purpose.

But, hey, Mr. Editor…weren’t these funds supposed to be used to boost the economy as well? Like wasn’t this money supposed to go to consumers and business?

Sure…but it isn’t. And that’s why you still have no growth, Charlie Brown. I mean it’s not as if the ECB can force these guys to lend the funds out.

So what you have instead are a bunch of zombie banks. They just tinker with their balance sheets. They aren’t really banks in the traditional sense. According to the European Central Bank itself, loans to businesses increased a mere 0.7% in January from a year earlier despite Round 1 of the LTRO.

Plus, you have this issue of collateral. You see, the ECB was rightly concerned with systemic risk and bank runs last December so they flooded the institutions with fresh euro bills to ensure that Monique and Jean-Claude didn’t suddenly feel compelled to pull all their money out and stick it under the mattress.

But this meant the ECB, especially with Round 2 of the LTRO, had to lessen the collateral requirements. In fact our microphone (we only have one) was there to record a typical conversation at the ECB window this week.

ECB: Next…
Bank No. 422: I’d like one billion euro please.
ECB: What kind of collateral do you have?
Bank No. 422: Four pigs and six sheep.
ECB: Hmmm…let me see the pigs…they look pretty plump. Do you have one more?
Bank No. 422: Wilbur…come over here…Here, how ‘bout him?
ECB: Done…here’s your billion. Buy some sovereign debt, OK?
Bank No. 422: Will do…Gee, thanks, ECB. You guys aren’t as bad as the press makes you out to be.
ECB: We’re here to flood the system…just doing our job…Next!

John Plender / Financial Times

“Mario Draghi, president of the European Central Bank, is quite a phenomenon. His longer-term refinancing operation to provide cheap funding to the banks has put an end to fears of a Lehman-style collapse while simultaneously transforming market perceptions of sovereign risk in southern Europe. More than that: as we learned this week, Italian and Spanish banks have substantially increased their holdings of domestic government debt, so it is not just a matter of sentiment. Serious purchasing power has been unleashed. In effect, the ECB is underpinning the eurozone sovereign bond markets by proxy. It is acting, albeit indirectly, as a lender of last resort to governments, notwithstanding German reservations….

“But…its ultimate success depends on the value of the acquired asset holding up. And this is where the difficulties set in.

“The ECB has addressed the eurozone’s liquidity problem, but cannot remove the solvency issue, even if the decline in yields has provided modest relief. To be solvent and reduce debt, southern Europe needs growth….

“Companies, like banks, have been hoarding cash….

“Meantime, the policy initiatives to enhance the supply side of the southern European economy, such as labor market reforms and deepening of the single market, will take years to raise growth rates. In the interim, all we have is German insistence on fiscal austerity at a time of deficient demand. The recently agreed fiscal compact admittedly reduces the moral hazard implicit in Mr. Draghi’s three-year liquidity injection, but it also means that debt levels will remain stubbornly high.

“This suggests that market perceptions on solvency in southern Europe could yet swing back to a more pessimistic view. They may focus on the fact that, unlike the Federal Reserve and the Bank of England, the ECB has loaded sovereign risk onto the balance sheets of undercapitalized private banks instead of taking it onto its own balance sheet. The economist Charles Wyplosz argues that this is tantamount to the ECB taking a trillion euro bet.”

No doubt, we’ve bought some time, but as Plender concludes, perceptions can “swing back with a vengeance. If eurozone governments fail to come up with a better strategy for growth and firewalls, that may not be as remote a possibility as it now appears.”

Washington and Wall Street

The economy’s performance in the fourth quarter was revised upward to 3.0% from 2.8%; still not great for a recovery, but actually perfect for equities if you kept that pace up…not too cold, not too hot. But from the looks of some of the recent data, I’d be surprised if we registered a ‘3-handle’ in the first quarter, even though the figures for auto and chain store sales in the month of February were solid, as spelled out further below.

I just see a poor durable goods number for January, down 4.0%, and a poor reading for the ISM index on manufacturing for February, just 52.4 when 54.5 was forecast. [Chicago’s Purchasing Managers Index for the month, on the other hand, was an excellent 64.0]

It’s just that the January numbers on personal income, up 0.3%, and consumption, up 0.2%, were both also less than expected and at some point you’ve got to believe the still rising price of gasoline will take a toll, though maybe that doesn’t work into the calculations in a significant way until the second quarter.

Nonetheless, the price of gas at the pump rose to $3.72 for a national average (and up further by the time many of you read this), up 13 cents on the week and 26 cents in California to an average there of $4.29. The record national average is $4.11.

On Thursday, the price of West Texas Intermediate, what I quote each week below, hit $110 per barrel on rumors of a pipeline explosion in Saudi Arabia, though this was denied by the Saudis, who said it was only a fire and nothing that was impacting refining operations. But the area in question is in a restive part of the kingdom with zero press coverage so who knows. What we do know is that curiously the report emanated out of Iran.

Markets were roiled a bit on Wednesday amid testimony by Federal Reserve Chairman Ben Bernanke who, while his economic forecast was pessimistic, gave no hint of further Fed stimulus, so gold, for one, took a header, down $100 at one point.

Bernanke said that while the drop in the unemployment rate had been “somewhat more rapid than might have been expected,” given that the economy wasn’t moving that fast, “The fundamentals that support spending continue to be weak: real household income and wealth were flat in 2011, and access to credit remained restricted for many potential borrowers. The job market remains far from normal.”

Bernanke then talked about the dangers of long-term unemployment. “People who are out of work for six months or more will be starting to lose skills. They will be losing attachment to the labor force. They won’t know what’s happening in their field or their industry. And that’s really one reason for urgency to try to get jobs created and try and bring the economy back to a more normal labor market.”

On the housing front, the news is still lousy. The S&P/Case-Shiller data for December (recall there is a lag with this barometer) showed home prices fell 4% for the month vs. December 2010 in the 20-city major metro index, down 1.1% from November, with 18 of the 20 reporting declines. For 2011, the average home price fell 12.8% in Atlanta and another 8.8% in Las Vegas, as homes in the foreclosure process continue to keep prices low.

Robert Reich had a depressing look at the impact of the housing bubble, “the biggest continuing problem for most Americans,” in an op-ed for the Financial Times.

“Houses are the major assets of the middle class. Most Americans are therefore far poorer than they were six years ago. Almost one out of three homeowners with a mortgage is now ‘underwater,’ owing more to the banks than their homes are worth on the market.

“Optimists point to declining home inventories in relation to sales, but they are looking at an illusion. Those supposed inventories do not include about 5m housing units with delinquent mortgages or those in foreclosure, which will soon be added to the pile. Nor do they include approximately 3m housing units that stand vacant – foreclosed upon but not yet listed for sale, or vacant homes that owners have pulled off the market because they can’t get a decent price for them.

“We are witnessing a fundamental change in the consciousness of Americans about their homes. Starting at the end of the Second World War, houses were seen as safe investments because home values rose continuously….(Baby Boomers then) took out the largest mortgages they could afford, and watched their nest eggs grow into ostrich eggs. Homes morphed into ATMs, as Americans used them as collateral for additional loans. Most assumed their homes would become their retirement savings. When the time came, they would trade them in for a smaller unit and live off the capital gains.

“The plunge in home values has changed all this. Young couples are no longer buying homes; they are renting because they are not confident they can get, or hold, jobs that will reliably allow them to pay a mortgage. Middle-aged couples are underwater or unable to sell their homes at prices that allow them to recover their initial investments. They cannot relocate to find employment. They cannot retire….

“(The) negative wealth effect of home values, combined with declining wages, makes it highly unlikely the U.S. will enjoy a robust recovery any time soon.”

Street Bytes

--Stocks finished mixed with the Dow Jones off a fraction, 5 points, to 12977, while the S&P 500 rose 0.3% and Nasdaq gained 0.4%. The Dow Jones hit the 13000 level but couldn’t hold it for a second week, while Nasdaq briefly hit 3000. Nonetheless, in the case of the Dow and S&P 500, they remain at levels not seen since spring 2008, while Nasdaq was last at its level in 2000.

Shares in Apple rose to another all-time high, closing the week at $545, for a market cap of $508 billion, rarefied air in the investment world. Microsoft was briefly worth $500 billion at the end of 1999 and early 2000, while Cisco Systems, Intel and General Electric all peaked at just above $500 billion in early 2000. Since then they’ve all have fallen mightily.

Apple is to unveil the iPad 3 this coming week.

--U.S. Treasury Yields

6-mo. 0.11% 2-yr. 0.27% 10-yr. 1.97% 30-yr. 3.10%

China reduced its holdings of U.S. government debt last year for the first time since the Treasury Department began keeping track of the data in 2001. China now holds $1.15 trillion in Treasuries as of Dec. 31, down from $1.16 trillion at the end of 2010. Treasury revised some data and now shows China’s holdings peaked in July at $1.3149 trillion.

[Japan is still America’s second-largest lender, with $1.06 trillion of Treasuries. The U.S. Federal Reserve remains the top holder with $1.66 trillion on its balance sheet.]

--China’s February PMI came in at 51.0, thus lending credence to the soft-landing camp, of which I’ve been a nervous member.

--The Shanghai Composite Index closed the week at its highest level since mid-November. It’s also on a seven-week winning streak, the longest since July 2009 as investors believe the government will announce some pro-growth measures at the National People’s Congress.

--In my key barometer for the health of China’s economy and the growing middle class, casino revenues in Macau rose 22.3% year over year in February. Here’s the trend.

Feb. 2012…22.3 percent
Jan. 2012…34.8
Dec. 2011…25.0
Nov. 2011…32.9
Oct. 2011…42.3
Sept. 2011…38.8

The outlook is generally for 15% to 20% growth throughout 2012.

--China is looking to put a brake on highway spending amid concerns over high debt levels resulting from earlier projects, according to the top economist in the country for such matters, as told to government mouthpiece, Global Times.

“The major concern is huge debts accumulated from highway projects. Road construction funds account for the majority of local government loans from banks, posing great financial risks to banks,” said Guo Wenlong.

I didn’t realize the risks are greater with the highway projects than with high-speed rail. In many places the toll revenue doesn’t meet interest on loans.

--Back to gambling, revenues in the U.S. are showing small signs of life, up 2.3% in the first 11 months of 2011, according to the American Gaming Association, though many of the biggest operators, such as Caesars Entertainment, are saddled with humongous debt loads. After posting my column last week, I headed to Prior Lake, Minn., and the Mystic Lake Casino Hotel, an Indian operation. I was startled how big it was and business was brisk. It also seems the ‘tribal’ leaders refuse to talk to the press, or the surrounding community, probably because they don’t want anyone knowing how rich they are.

--February proved to be a strong month for U.S. auto sales, the best Feb. since 2008, as automakers sold cars at an annualized sales pace of 15.1 million. Fuel-efficient vehicle sales benefited in particular with rising gas prices. Honda, for example, sold 42% more Civics than a year earlier. Toyota Prius sales rose 52% to more than 20,000.

Overall, Chrysler’s U.S. sales rose 40.4% vs. the same month a year ago; Ford’s increased 14%; General Motors’ edged up just 1%, but this was coming off an incentive-laden Feb. 2011; Toyota was up 12.4%; Honda up 12.3%; Nissan 15% and Hyundai 17%.

[General Motors announced on Friday it was halting production of the battery-powered Chevy Volt for five weeks due to poor sales.]

--Among the chain store retailers reporting strong February sales were Saks, up 6.6% year over year; Macy’s, up 4.6%; Target 7%; and Nordstrom’s 10%. Only Kohl’s were weak, down 0.8%.

--From January 2011 to January 2012, the unemployment rate for the euro-17 has risen from 10.0% to 10.7%, while the rate in the U.S. has declined from 9.1% to 8.3%.

--India’s economy slowed in the fourth quarter with GDP growth down to 6.1%. February’s PMI, however, was a still solid 56.6 vs. January’s 57.1.

--Russian foreign direct investment soared to $18.4 billion last year, up 33% over 2010. Putin can legitimately point to a stronger economy as his countrymen go to the polls on Sunday.

--Canada’s fourth-quarter GDP came in at 1.8% on an annualized basis, following a revised 4.2% gain for the third-quarter.

--TransCanada announced that despite the Keystone XL oil pipeline being put on hold for the segment crossing the U.S-Canada border, it would build the segment from Oklahoma to the Gulf of Mexico, which does not require presidential approval.

Editorial / Washington Post

“The White House embraced the announcement, and deservedly so. The Oklahoma-to-Texas segment will accomplish one of the primary goals of the Keystone XL project: alleviating an inefficient glut of crude in the central United States. Constructing it will help untangle the politics, too: Opposition to the full pipeline should moderate as the first stage creates construction jobs.”

--Late Friday came word that BP had reached a settlement with lawyers representing tens of thousands of victims of the 2010 Gulf of Mexico spill. I’ll have more on this next time, though the figure being bandied about is $7.8 billion. The victims’ attorneys get $7.7 billion…the victims themselves, $100 million.

--This is depressing. According to an analysis from a research firm in Washington, D.C., Wider Opportunities for Women, as reported by Walter Hamilton of the Los Angeles Times, “Of the nearly 20 million older Americans who live alone or with a spouse, about 47% can’t afford everyday necessities such as proper nutrition and medical care.” [Another 20 million seniors live with family members or in group settings such as nursing homes. They aren’t included in the study.]

--A Dallas-area doctor, Jacques Roy, was accused of bilking Medicare of $350 million over a five-year period in the largest Medicare fraud scheme by dollar value ever linked to a single physician. Roy and six other alleged accomplices were charged with conspiracy to bill the government for unnecessary services or those never provided.

I’ve said this before and I can’t help but repeat it. White-collar crime on such a massive scale should result in the death penalty. As it is, if convicted on all nine counts of health-care fraud, the 54-year-old faces a maximum sentence of 100 years in prison. The threat of a death sentence would stop this stuff cold.

--AT&T is ending unlimited data plans and will slow download speeds for those exceeding the limits on their 3G and 4G smartphones. The company says it will send a text message when your usage nears the cap in a billing cycle. Once the billing cycle ends, your speeds go back to normal for the next one.

--In yet another huge black eye for both the cruise industry and Costa Cruises (parent of the doomed Costa Concordia and a subsidiary of Miami-based Carnival Corp.), the Costa Allegra limped into port in the Seychelles after a fire disabled it. It took two days to tow it. 1,000 passengers and crew were impacted. With no electricity and no air conditioning for three nights, the passengers were crowded on decks in baking temperatures.   You can imagine the living hell it was, with no bathrooms working, for one thing.

--The Costa Concordia and other vessels in the Costa Cruises fleet “were hotbeds of sexual harassment, drinking and drug abuse, former crew members have claimed,” as reported by Nick Squires of the Sydney Morning Herald. One woman told Italian prosecutors that Captain Francesco Schettino, the Costa Concordia’s commander, “used women as goods to be exchanged.”

--Stephen Schwarzman took home $213.5 million in pay and dividends in 2011, the Blackstone CEO topping the list of publicly traded private equity companies. Of the total, $4.6 million was so-called “carried interest,” which is usually taxed as a capital gain; the loophole for which President Obama proposes to eliminate, which would mean it’s then taxed at ordinary income rates. I totally agree with this.

As for Mrs. Schwarzman, she is very proud of her husband and is busy shopping. “My Stephen is doing such a good job!” she tells anyone who will listen.

--Cash bonuses on Wall Street fell 14% last year, according to an estimate by New York State, as the shift to “deferrals” as a larger element of pay continues. Some investment bankers, however, saw bigger cuts, with Morgan Stanley, as previously reported, limiting cash payouts to $125,000.

According to New York State’s comptroller, Thomas DiNapoli, the securities industry gained back 9,600 of the 28,000 jobs lost during the financial crisis, but then in the second quarter of 2011 began shedding positions again. Between April and December, 4.300 jobs were lost. That trend should only continue throughout 2012, I strongly suspect. Of course the declining cash bonuses are killing New York State’s and Gotham’s coffers.

--In his presentation for investor day, JPMorgan Chase CEO Jamie Dimon lashed out at criticism of high pay for bankers, as well as Warren Buffett. But then Dimon stupidly said that the compensation-to-revenue ratio at newspapers was higher than that of JPMorgan’s investment bank, adding, “Worse than that, you don’t make any money,” he told the reporters in the room. “We pay 35%, and we make money.”

As the “Heard on the Street” column of the Journal observed, “Of course, newspapers didn’t rely on taxpayers of all income brackets for billions of dollars in bailout funds.”

--Speaking of Buffett, he said he was “dead wrong” on housing in his annual shareholder letter, but is now very bullish on the sector. Frankly, I’ve grown weary of the guy. 

--Aaron Elstein / Crain’s New York Business, on JPMorgan Chase’s retail clientele, “nearly half of its customers” being unprofitable.

“Here’s the math, as given in (an investor presentation). 69% of Chase’s customers have less than $100,000 in their accounts. Of those clients, 70% are unprofitable….Now, 70% of 69 equals 48. That suggests Chase is losing money on just about half of its retail customers, which came as quite a surprise to the investment pros assembled at the bank’s Park Avenue headquarters for the presentation.”

Yet Chase is plowing ahead with plans to add another 900 branches in the years to come.

--IBM fired more than 1,000 workers in North America this week, mostly in the U.S.

--General Electric’s global work force expanded last year by 4.9% to 301,000. Employment peaked in 2007 at 327,000, with 155,000 being in the U.S. at the time. As of December 2011, the figure here was 131,000.

--James Murdoch quit News International, a result of the News of the World phone-hacking scandal that forced that publication to close last July.

--McDonald’s is looking to ramp up in China. So far it has lagged Yum Brands Inc. in opening outlets on the mainland, as Yum has about 4,500 restaurants under brands including KFC and Pizza Hut, while McDonald’s owns more than 1,400, with a goal of opening 225-250 there this year.

--Federal investigators are looking into scores of wire transfers in the final days of MF Global, including a possible movement of $325 million in suspected customer funds, as reported by the New York Times. Investigators have also reviewed another $220 million transfer on Oct. 31, the day the firm filed for bankruptcy. Former CEO Jon Corzine remains untouched…at least thus far.

--Michael Jordan is selling his Highland Park, Illinois home for $29 million. He built it between 1993 and 1995, and it features at least 15 baths, which would have come in handy on the Costa Allegra, not to conflate the two.

--I’m going to miss Continental Airlines, which had its last flight Friday night with the changeover to United now being complete. I started flying Continental heavily in the late 1980s when it was the pits. Half my flights seemed to have mechanical problems.

But then Gordon Bethune took over and righted the airline. I miss Gordon! 

--I saw a piece in Investment News concerning former NBA star David Robinson, who now has a private-equity firm, Admiral Capital Group. Thus far, Admiral is focusing on real estate, buying five office buildings and hotels in California, Nevada and Texas.

Years ago I wrote in this space, seriously, that I’d vote for David Robinson for president. I hadn’t thought of him in a while until seeing this article, though. Now, more than ever, I wish he’d give politics a go. The Naval Academy graduate is superior to anyone in either party today.

--Ever wonder how much a dancer makes? You know, a regular dancer, like you see on the Oscars or on Broadway…not an adult dancer, cough cough. According to a study released in New York City, the average professional dancer earns only $28,000, which is basically living in poverty in these parts. So parents…encourage your kids to pursue an engineering degree instead.

--Finally, last week I mentioned the Kimberley, a region in Western Australia, where a pink diamond was found. So I’m reading a travel section piece in the Los Angeles Times by Amanda Jones and I see this, Ms. Jones having just written of how friendly the people are there:

“Of course, the Kimberley also has man-eating saltwater crocodiles and an unsettlingly large number of the Earth’s most poisonous snakes, spiders and jellyfish.”

I wouldn’t be able to sleep there, knowing this. I think I’ll just stay home the rest of this year.

The Los Angeles Times, by the way, is joining a growing number of newspapers worldwide in charging readers, as of March 5. You wouldn’t believe how much I’m now spending on subscriptions from around the world to bring you the best each week.

So don’t forget I have an iPad app, which I’m now charging for…assuming my Web people set it up right, yours truly not having an iPad himself yet.

Foreign Affairs

Iran: Iranians went to the polls on Friday to vote between bad and worse; the latter representing the parliamentary slate favored by Supreme Leader Ayatollah Khamenei and the former the candidates of President Mahmoud Ahmadinejad. 3,400 were on the ballots for 290 seats in the Majlis, though at least another 1,000 were barred from running by the Guardian Council, which is comprised of the Sons of Satan (Rick Santorum knows their names). Of course the election is a joke, what with the two main opposition candidates, Mir Hossein Mousavi and Mehdi Karrubi, being under house arrest for more than a year.

When it comes to the Iranian nuclear crisis, though, it’s all about the visit on Monday between President Obama and Israeli Prime Minister Benjamin Netanyahu at the White House, along with parsing the words each are making in speeches at the pro-Israel lobby, American Israeli Public Affairs Committee, or AIPAC, over the coming days. Israeli leaders want President Obama to lay all his cards on the table…all the “options.” Israel is frustrated that it doesn’t know what the White House considers to be the real “red lines”. Joint Chiefs of Staff Chairman Gen. Martin Dempsey earlier called Iran a “rational actor,” which many can’t fathom. And U.S. intelligence agencies are once again saying that Iran has not decided to take the next step and build a nuclear bomb; rather it is content to continue to enrich uranium to 20 percent (below weapons grade) while preserving its own options.

But late in the week, General Norton Schwartz, the U.S. Air Force Chief of Staff, told reporters that plans had been drawn up outlining how Washington could join a potential Israeli air offensive should Israel pursue that path. “What we can do, you wouldn’t want to be in the area,” Schwartz said of the options. Supposedly they include going after the Revolutionary Guard and its al-Quds force, along with installations of the Ministry of Intelligence and Security. Schwartz also said the latest version of America’s bunker-busting bombs was “operational.” This is significant; this being the weapon of choice against the likes of the Fordow nuclear processing plant built into a mountain outside the holy city of Qom. U.S. military planners, according to the Washington Post’s Joby Warrick, are increasingly confident they can severely disrupt Fordow. I believe we overstate the ability of Iran to construct an impregnable facility.

And then late Friday, in an interview with The Atlantic’s Jeffrey Goldberg, President Obama tested out his talking points.

“I think that the Israeli government recognizes that, as president of the United States, I don’t bluff. I also don’t, as a matter of sound policy, go around advertising exactly what our intentions are. But I think both the Iranian and the Israeli governments recognize that when the United States says it is unacceptable for Iran to have a nuclear weapons, we mean what we say.”

Obama reiterated to Goldberg that “all options are on the table,” and that the final option is the “military component.” Obama then noted that sanctions organized by his administration had put Iran in a “world of hurt” that might force Iran to rethink its efforts to pursue a nuclear weapon.

“Without in any way being under an illusion about Iranian intentions, without in any way being naïve about the nature of that regime, they are self-interested,” Obama said. “It is possible for them to make a strategic calculation that, at minimum, pushes much further to the right whatever potential breakout capacity they may have, and that may turn out to be the best decision for Israel’s security.”

This is clearly much of what Netanyahu wants to hear from the president directly, even as Obama is strongly encouraging Israel to still hold off at the same time, and we’ll see if the Israeli prime minister can pressure Obama into making a further public declaration that America is prepared to support an Israeli strike. The two are not currently slated to hold a joint news conference following their meeting but both sides are to issue statements. Republican Senator John McCain, who met with Netanyahu in Israel last week, said he had never seen an Israeli leader “that unhappy.” “He was angry,” McCain said. “And, frankly, I’ve never seen U.S.-Israel relations at this point.”  

In Israel itself, in a recent survey, 19% of Israelis support an attack against Iran without the backing of the United States, while 42% support a strike only if there is U.S. support. 32% oppose an attack regardless of the level of assistance from Washington.

Syria: In a major shift in policy, Russian Prime Minister, soon to be president again, Vladimir Putin said that Russia had no special relationship with Syrian President Bashar Assad and that it was up to Syrians to decide who should run the country. Putin said, “We need to make sure they stop killing each other.” Putin told the Times of London that he had been appalled by the brutal killing of Muammar Gaddafi and the atrocities committed in Libya. Putin called for an immediate ceasefire and negotiations between the parties.

Heretofore, both Russia and China, as two permanent members of the United Nations Security Council, had supported Syria, but on Thursday, both countries voted in favor of a statement deploring the decision by the Syrian government not to admit Baroness Amos, the UN’s human rights chief.

The White House said Thursday the situation in Homs was “horrific.” Assistant Secretary of State Jeffrey Feltman added: “It’s important that the tipping point for the regime be reached quickly, because the longer the regime assaults the Syrian people, the greater the chances of all-out war in a failed state.”

The UN has raised its estimated death toll to 7,500, though it would seem it’s now far higher as Homs is “cleaned” (sic) within hours, according to one report. There is no telephone or internet service. Communication is impossible, yet tens of thousands of civilians remain, trapped. 13 were killed in a botched attempt to smuggle out four reporters (at least three of whom later escaped), while the bodies of the two journalists killed on Feb. 22 were finally taken to Damascus, at last word.  Sec. of State Hillary Clinton called for a coup, while Qatar and Saudi Arabia want the rebels armed; the Saudis wanting to see the majority Sunnis in charge in Syria.

Meanwhile, the United States is very concerned over the fate of Syria’s chemical weapons stockpiles and has warned neighboring states to be on the lookout for the spread of them. Sound familiar? We have the same issue with Libya and hundreds of missing shoulder-fired missiles.

In the case of Syria, the concern is more than warranted. For starters, Syria is not a signatory to the Chemical Weapons Convention, so the international community lacks comprehensive knowledge of how much they have and where it is stored. There are also legitimate concerns Bashar Assad will use the weapons on his own people to save his skin.

Lastly, I just have to note for the record that Syria did hold its sham referendum on a new constitution; one that would enable Assad to stay in power until 2028…his current term ends in 2014 and the new constitution allows for two, 7-year terms, so he’d run under the rules of the new document.

Egypt: A court adjourned a trial of 16 Americans and 27 others from non-governmental organizations and then two of the NGOs paid $4 million in bail on Thursday to fly out 11 employees, including six Americans (the others already being out of the country), capping weeks of diplomatic wrangling. The United States had threatened to end $1.5 billion in annual aid, most of which went to the Egyptian military, unless the case was resolved, but what resulted was “a growing backlash against the perceived American interference in the Egyptian justice system,” as reported by the New York Times’ David D. Kirkpatrick and Steven Lee Myers, who added, “No Egyptian official stepped forward to accept responsibility for releasing the Americans. Instead, judges and prosecutors distanced themselves from the decision and traded accusations of political capitulation and conflict of interest.”

So you can see how difficult it is going to be to maintain any semblance of influence in Egypt. Saturday is supposed to be the day a 100-member panel is selected to draft a new constitution, and the ruling military council reiterated it wants to hold a presidential election by June (the electoral commission said the process will actually begin in May…with a run-off June 16-17). I remain highly skeptical this timetable will be met. First, for example, the new constitution must be approved.

Ironically, the very Muslim Brotherhood the United States fears played a positive role in getting the Americans released; the Brotherhood now the leading bloc in the new parliament. But don’t read too much into this.

Afghanistan: Two more American soldiers were killed when an Afghan civilian opened fire after seizing a weapon from a guard tower at a joint NATO-Afghan base in the southern part of the country. That makes six American service members killed by Afghans as a result of the violence that followed the accidental burning of Korans by American forces, two officers being shot in the back of the head right after I had posted last week’s column. [12 of the 60 U.S.-led coalition soldiers who have died thus far this year have been killed by their Afghan comrades.]

So with so much mistrust after ten years, is there any cause for optimism whatsoever? No.

You know what’s never brought up in this whole debate? It goes back to the last Afghan presidential election. We’re dealing with a corrupt, and treacherous, ruler in Hamid Karzai who shouldn’t be president in the first place. It should have been Abdullah Abdullah, who won the vote, until it was stolen from him.

The problem now is that as the United States draws down its forces, American troops will be increasingly relying on Afghans to offer perimeter security, such as at combat posts and along key roads. That’s a formula for further Taliban infiltration. We want to leave an Afghan army and police force capable of defending the country, but in reality, NATO and the Afghans don’t totally control a single province today. When you hear otherwise, it’s a bunch of lies.

I do have a “Hot Spots” post on the topic that offers a somewhat different opinion. Check it out.

[And an old story has reemerged in a potentially big way. This week, as part of a long-running massive lawsuit against the Saudi government and its supposed complicity in 9/11, as filed by victims’ families, former Senator Bob Graham details his suspicions in an affidavit; Graham having headed up the Senate Intelligence Committee at the time. Former Sen. Bob Kerrey, who served on the 9/11 Commission, also will be saying more on the topic, it seems.]

Russia: Sunday is election day and marks the return of Vladimir Putin to the presidency. He is expected to gain the 50% necessary to avoid a run-off, though should he fall short it only delays the inevitable. Putin could rule until 2024, if he lasts for two, six-year terms, but while the opposition wasn’t able to coalesce this time around a viable candidate who could challenge Putin, opposition is nonetheless growing.

Speaking to campaign workers this week, Putin said, “We have reason to believe that our opponents are preparing…to use some kind of mechanisms that would confirm that the elections were falsified. They will stuff [ballot boxes] themselves and manipulate [the vote],” he said. “Then they will present [the evidence]. We already see this – we already know this.” [Moscow Times]

Hilarious. 

And then there was the revelation this week that an assassination plot against Putin had been foiled, with the arrest of two men by Russian and Ukrainian special forces in Odessa, we were told. They were dispatched to kill Putin by Chechen rebel Doku Umarov, the leader of the separatist movement.

How conveeenient, many of us thought; the plot being disclosed days before the election. What I found interesting is that the ‘terrorists’ supposedly planted explosives on one of Moscow’s major thoroughfares often used by Putin’s entourage to take him from his home to his office. I know the road. I just have a hard time believing they could plant explosives on it without being discovered.

Masha Lipman / Washington Post

“The main idea of Putin’s campaign is that there is no alternative to his leadership and that, without him at the top, Russia will fall apart. While his own campaign rhetoric may be a bit more subtle, his loyalists commonly treat their anti-Putin compatriots as enemies and traitors inspired or, worse, paid by evil, alien forces out to destroy Russia.

“Such aggressive rhetoric, exploitation of xenophobic fears, and the blatant abuse of government authority and resources are not new: They have been part and parcel of the Putin regime. This behavior has antagonized the new class of urban professionals and has eventually led them to protest Putin’s rule. Since the government shows no interest in changing its practices, the rift between government and Russia’s modernized constituencies is becoming irreparable. Putin will win Sunday’s presidential election, but this growing alienation will steadily erode his power.”

Personally, I still don’t believe he lasts the year, but not because of Chechen terrorists.

North Korea: The United States and North Korea reached an agreement on Pyongyang’s nuclear weapons program whereby the North would voluntarily cease all atomic device detonations, long-range missile tests and enrichment of uranium in return for over 240,000 metric tons of food aid. The deal would also allow the International Atomic Energy Agency to place its inspectors back into the Yongbyon nuclear complex to monitor compliance, though it is not known just how many plants North Korea has. The deal is supposed to have mechanisms in place to ensure the food doesn’t go solely to the military and the elite. It’s to be divvied up 20,000 tons each month.

There are no plans to restart six-party talks, however, which were last held in December 2008, about five months before the North detonated its second nuclear test device, and many, to say the least, are highly skeptical given Pyongyang’s abysmal track record of honoring past agreements. Both the Clinton and George W. Bush administrations were bamboozled by Kim Jong Il.

But now we have 28-year-old (?) Kim Jong Un on the throne and who knows who is really pulling the strings. What we do know is the kid and his handlers are operating from the same playbook used by his father.

I do agree with the Obama administration, though, that it’s worth learning more about the new regime. Give it two or three months to see how it goes. It’s not like we were gaining anything the way things stood before the latest probable sham agreement.

For its part, Seoul was highly skeptical, while the Chinese Foreign Ministry welcomed the hoped for breakthrough. Said a South Korean foreign policy expert, Andrei Lankov, “We are facing an endless soap opera. What does it mean? Pretty much nothing: the North Koreans will offer some symbolic concession to squeeze some aid and will behave themselves for a while.” [South China Morning Post]

Yemen: This hellhole has a new president, Abd-Rabbu Mansour Hadi, who won a rigged, single candidate election, backed by Gulf neighbors and the West, to replace Ali Saleh, who had ruled Yemen for 33 years. Hadi is to oversee a two-year transition to parliamentary rule with a new constitution. His election was greeted by a car bomb in the southern part of the country that killed 21.

France: National Front candidate Marine Le Pen is still trying to qualify for the April presidential election and if she does, some continue to maintain (such as moi) that she can cause more than a bit of mischief; Le Pen playing well among working-class voters. Sarkozy had a bad week on the campaign trail and Hollande’s lead over the president is back to 3.5 percent.

Britain: The leader of Britain’s largest labor union is threatening mass civil disobedience timed for the London Olympics. Unite’s Len McCluskey said: “The attacks that are being launched on public sector workers at the moment are so deep and ideological that the idea the world should arrive in London and have these wonderful Olympic Games as though everything is nice and rosy in the garden is unthinkable….The unions, and the general community, have got every right to be out protesting.” [BBC News]

Opposition Labour leader Ed Milliband, though, wrote: “Any threat to the Olympics is totally unacceptable and wrong. This is a celebration for the whole country and must not be disrupted.”

Hear Hear! God Save the Queen!

Germany: Chancellor Angela Merkel, facing re-election next year, has seen her approval rating rise to a three-year high, 64%. If President George W. Bush were still around, he’d say “Good girl” and give Merkel a back rub.

Actually, the Chancellor deserves credit for the coolness in which she handled the dumping of four beers on her. That counts for something in my book, as much as I mourned the loss of those premium pilsners.

Australia: Prime Minister Julia Gillard fended off a leadership challenge from rival and former foreign minister (and prime minister), Kevin Rudd; Gillard prevailing 71 to 31. She then consolidated her power and reshuffled her cabinet.

But Gillard remains deeply unpopular across the country, with her latest approval rating at a putrid 26%.

Colombia: The rebel group, FARC, said it was abandoning its practice of kidnapping civilians for ransom, which could signal the group’s willingness to enter into final peace negotiations. A sustained 10-year offensive by the Colombian military has cut FARC in half, though the group still holds at least 100 civilians hostage. FARC said it would release 10 members of the armed forces it was treating as “prisoners of war.”

Venezuela: There are reports President Hugo Chavez has less than one year to live. According to leaked e-mails, Russian doctors treating him in Cuba say he’s a miserable patient, for one, suspending treatment whenever he had to make public appearances. The Russians also feel like they are trying to clean up mistakes the Cuban team made. Chavez had more surgery this week, which we are told went well.

Mexico: From Rong-Gong Lin II of the Los Angeles Times:

“Twenty-two guests on the Carnival Splendor cruise ship out of Long Beach were robbed at gunpoint in Mexico last week as they traveled by bus from a nature hike in the jungle to the Mexican port city of Puerto Vallarta….

“Hooded gunmen intercepted the tourists’ bus…The gunmen took cameras, money, watches and other valuables before fleeing into the countryside….

“ ‘Carnival sincerely apologizes to its guests for this very unfortunate and disturbing event.’”

[Isn’t Carnival great? Can there be another company on the planet on a worse roll?]

And that’s your Mexico tourism update. Easier to go to your local Mexican food joint and drink some Dos Equis, if you ask me.

Random Musings

--Mitt Romney defeated Rick Santorum in Michigan, 41-38 percent, and in Arizona, 47-27.

Now it’s on to Super Tuesday, March 6, with primaries or caucuses in Alaska, Georgia, Idaho, Massachusetts, North Dakota, Ohio, Oklahoma, Tennessee, Vermont, Virginia, and Wyoming.

Ohio is the big one between Romney and Santorum, while Newt Gingrich, by his own admission, is finished if he doesn’t win his home state of Georgia. The last poll in Ohio before the Michigan and Arizona results had Santorum up 37-26 over Romney, but that undoubtedly has narrowed. For example a Gallup national tracking poll of registered Republicans as of Thursday had Romney ahead of Santorum, 35-24, while a week earlier Santorum was ahead of Romney, 34-27.

Meanwhile, Barack Obama is leading both Romney and Santorum in a national Politico/George Washington University Battleground Poll released Feb. 27, 53-43 and 53-42, respectively.

But according to Gallup, Obama trails Romney in Ohio, 50-46, and narrowly edges Santorum, 49-48.

[Ohio is one of the 12 battleground states for November…the others being Colorado, Iowa, Florida, Michigan, Nevada, New Hampshire, New Mexico, North Carolina, Pennsylvania, Virginia and Wisconsin.]

--Michael Gerson / Washington Post

“Romney’s wealth is not ill-gotten. His problem is political. He talks about money as though engaged in a discussion with his stockbroker. So $374,000 from paid speeches is ‘not very much.’ He is ‘not concerned about the very poor,’ on the assumption that the safety net is enough for them. His wife ‘drives a couple of Cadillacs.’ While not a racing enthusiast himself, Romney has ‘some great friends that are NASCAR team owners.’

“A single gaffe is a political flesh wound. A series of gaffes that confirm a damaging stereotype is potentially fatal.

“These blunders not only reinforce a traditional Republican weakness, they threaten to diminish a large Republican advantage – Barack Obama’s dramatic disconnect with blue-collar whites. The candidate who talked of small-town Americans as clinging ‘to guns or religion’ lost white working-class voters by 18 points in 2008. In 2010, congressional Democrats lost the same group by 30 points. A similarly dismal performance by Obama in 2012 would open vast blue portions of the electoral map to Republican raids.

“Romney may be the only candidate capable of herding working-class voters back toward the president….

“Voters need to know that Romney has at least witnessed the struggles he has not shared. When another wealthy politician, Robert F. Kennedy, toured Appalachia a week before his presidential announcement, Americans understood that he had met people and seen things that don’t leave a man unchanged. Romney must give some evidence – visiting, say, a low-income health clinic or a gang-occupied school – that his hand has touched, that his retina has registered, the hurt and hardship of another America.

“ ‘For the fortunate among us,’ RFK said, ‘there is the temptation to follow the easy and familiar paths of personal ambition and financial success so grandly spread before those who enjoy the privilege of education. But that is not the road history has marked out for us…The future does not belong to those who are content with today, apathetic toward common problems and their fellow man alike…Rather it will belong to those who can blend vision, reason and courage in a personal commitment to the ideals and great enterprises of American society.’

“If Romney can demonstrate this commitment – personally and authentically – he may yet become president of the United States.”

--Maureen Dowd / New York Times

“It’s finally sinking in.

“Republicans are getting queasy at the gruesome sight of their party eating itself alive, savaging the brand in ways that will long resonate.

“ ‘Republicans being against sex is not good,’ the G.O.P. strategist Alex Castellanos told me mournfully. ‘Sex is popular.’

“He said his party is ‘coming to grips with a weaker field than we’d all want’ and going through the five stages of grief. ‘We’re at No. 4,’ he said. (Depression.) ‘We’ve still got one to go.’ (Acceptance.)

“The contenders in the Hester Prynne primaries are tripping over one another trying to be the most radical, unreasonable and insane candidate they can be. They pounce on any traces of sanity in the other candidates – be it humanity toward women, compassion toward immigrants or the willingness to make the rich pay a nickel more in taxes – and try to destroy them with it….

“How can the warm, nurturing Catholic Church of my youth now be represented in the public arena by uncharitable nasties like Gingrich and Rick Santorum?

“ ‘It makes the party look like it isn’t a modern party,’ Rudy Giuliani told CNN’s Erin Burnett, fretting about the candidates’ Cotton Mather attitude about women and gays. ‘It doesn’t understand the modern world that we live in.’

“After a speech in Dallas on Thursday, Jeb Bush also recoiled: ‘I used to be a conservative, and I watch these debates and I’m wondering. I don’t think I’ve changed, but it’s a little troubling sometimes when people are appealing to people’s fears and emotion rather than trying to get them to look over the horizon for a broader perspective.’….

“Republicans have a growing panic at the thought of going down the drain with a loser, missing their chance at capturing the Senate and giving back all those House seats won in 2010. More and more, they openly yearn for a fresh candidate, including Jeb Bush, who does, after all, have experience at shoplifting presidential victories at the last minute….

“Romney’s Richie Rich slips underscore what Ed Rollins, a Republican strategist, told the Ripon Forum: ‘If we are only the party of Wall Street and country clubbers, we will quickly become irrelevant.’

“Santorum, whose name aptly comes from the same Latin root as sanctimonious, went on Glenn Beck’s Web-based show with his family and offered this lunacy: ‘I understand why Barack Obama wants to send every kid to college,’ because colleges are ‘indoctrination mills’ that ‘harm’ the country. He evidently wants home university schooling, which will cut down on keggers.”

--Kathleen Parker / Washington Post

“Let me be blunt: If Republicans nominate Rick Santorum to run for president, they will lose….

“It gives me no pleasure to rap Santorum, a man I know and respect even if I disagree with him on some issues. Not that he minds. He’s a scrapper who loves a fight – and he forgives. Bottom line: Santorum is a good man. He’s just a good man in the wrong century.

“This doesn’t necessarily mean he’s wrong about everything, but he’s so far out of step with the majority of Americans that he can’t hope to win the votes of moderates and independents so crucial to victory in November. The Republican Party’s insistence on conservative purity, meanwhile, will result in the cold comfort of defeat with honor and, in the longer term, potential extinction.

“Increasingly, the party is growing grayer and whiter. Nine out of 10 Republicans are non-Hispanic white, and more than half are highly religious, according to Gallup. This isn’t news, but when this demographic is suddenly associated with renewed debate about whether women should have access to contraception – never mind abortion – suddenly they begin to look like the Republican Brotherhood….

“The math is clear: Sixty-seven percent of women are either Democrats (41 percent) or independents (26 percent); more women than men vote; 55 percent of women ages 18-22 voted in the 2008 presidential election….

“Republicans may sleep better if they nominate The Most Conservative Person In The World, but they won’t be seeing the executive branch anytime soon.”

--John Podhoretz / New York Post…following the Michigan primary.

“Santorum slaughtered Romney among those Michigan voters who said they wanted a ‘true conservative,’ by a margin of 57-17. But those voters made up only 12 percent of the electorate.

“Most of the commentary you read and hear about the GOP – especially from the Right itself – would lead you to think those highly ideological voters constitute a near-majority. The truth is more complicated.

“Most Republican voters are out-and-out conservatives (indeed, 42 percent of all Americans describe themselves as conservative) – but they’re not necessarily tribal conservatives who are searching for someone ideologically pure to follow. Romney was more than conservative enough, it would appear, for a near-majority of Republicans in Michigan and Arizona.

“That said, Romney did worse than he should, and that happened not because Santorum is such a contender, but because Romney keeps shooting himself in the foot he has put in his own mouth….

“After his stunning victory in Florida, he said he ‘didn’t care about the poor.’ After his commanding victory in last week’s debate, he spoke about his wife’s ‘couple of Cadillacs’ and his friends ‘who own NASCAR teams.’…

“If he keeps getting in his own way, he will get to Tampa unnecessarily and pointlessly wounded. But if Romney can break the pattern, he will cruise to the nomination holding a hand far stronger than overconfident chortling Democrats – and the president himself – realize.”

--The Wall Street Journal’s Daniel Henninger has written some outstanding columns lately on the mythology being spun by President Obama as he rewrites reality in describing today’s economy.

“The economic and social world Barack Obama inhabits, and has always inhabited, is totally static. Your lot in life – income, status, mobility – is largely set, with little prospect of escaping upward.

“He spoke in (last week’s) UAW speech of ‘sons and daughters’ aspiring to assembly-line jobs held by their grandparents. Even they don’t believe life is that static. He promises to solve their economic problems by expropriating money from the wealthy. Boeing will be forced to make planes in Washington State – forever. Naturally this president’s biggest believers live in Hollywood.

“Most Americans are not so credulous. But unless the GOP candidates start spending more time dismantling Obama’s mythical America instead of each other, this grim fairy tale could win.”

--Hopes for Republicans winning the Senate were dealt a big blow when Maine Republican Sen. Olympia Snowe, a true moderate, opted not to run for re-election, citing the chamber’s growing ‘polarization.’ Snowe joins other Senate centrists in announcing her retirement, including Ben Nelson (D., Neb.), Joseph Lieberman (I., Conn.) and Jim Webb (D., Va.).

In the case of Nelson’s seat, former Democratic Sen. Bob Kerrey reversed an earlier pledge not to run and said he would now go for his old seat, thus ticking off party stalwarts in Nebraska but giving that state’s Democrats a better shot at retaining the seat by most accounts. Republicans need to pick up four to recapture the Senate.

Sen. Snowe wrote an op-ed in the Washington Post explaining her decision:

“Simply put, the Senate is not living up to what the Founding Fathers envisioned.

“During the Federal Convention of 1787, James Madison wrote in his Notes of Debates that ‘the use of the Senate is to consist in its proceedings with more coolness, with more system, and with more wisdom, than the popular branch.’ Indeed, the Founding Fathers intended the Senate to serve as an institutional check that ensures all voices are heard and considered, because while our constitutional democracy is premised on majority rule, it is also grounded in a commitment to minority rights.

“Yet more than 200 years later, the greatest deliberative body in human history is not living up to its billing. The Senate of today routinely jettisons regular order, as evidenced by the body’s failure to pass a budget for more than 1,000 days; serially legislates by political brinkmanship, as demonstrated by the debt-ceiling debacle of August that should have been addressed the previous January; and habitually eschews full debate and an open amendment process in favor of competing, up-or-down, take-it-or-leave-it proposals….

“In a politically diverse nation, only by finding (common ground) can we achieve results for the common good. That is not happening today and, frankly, I do not see it happening in the near future.”

--Meanwhile, as reported by the Washington Post, “In the months to come, political strategists expect to see the first family used as a political asset.” As noted by The Weekly Standard, the Post then goes on to quote Democratic pollster Celinda Lake: ‘The value of the family is enormous. The more you know this family and the more you think of Barack Obama in these terms, the harder it is to vilify him.”

To which The Weekly Standard’s ‘Scrapbook’ responds: Oh, really?

“You see, what surprises The Scrapbook is not the apparent fact that the Obamas are a nice, close-knit family, or that Malia, 13, and 10-year-old Sasha are appealing young girls. What surprises The Scrapbook is that, up until the re-election campaign of Barack Obama, news organizations such as the Washington Post have been exceedingly protective of Democratic presidential families, especially children, and highly critical of any comment made about, any attention whatsoever paid to, presidential offspring.

“Unless, of course, the children were the presidential offspring of Republican presidents.”

--We note the passing of conservative activist Andrew Breitbart at the age of 43. 

--From Army Times: “The top U.S. and NATO commander in Afghanistan has ordered coalition troops to complete training no later than March 3 in the proper handling of religious materials.”

So commands Marine Corps Gen. John Allen. The Korans that were burned that caused the uproar and led to the deaths of six American soldiers were removed from a library at the Parwan Detention Facility, adjoining Bagram, because they contained extremist messages or inscriptions. It’s just pathetic that ten years into the war, our soldiers still need to be trained on how Korans are to be handled.

--“Seventeen commissioned and noncommissioned officers in a single company in Kosovo have been suspended amid an Army investigation into allegations they employed harsh training tactics to initiate junior soldiers, the commander of U.S. Army Europe said.”

“ ‘It was all about not respecting soldiers, using the wrong kinds of training methods, frat house kinds of jackassery, and just poor leadership,’ Lt. Gen. Mark Hertling said in an interview with Army Times on Feb. 24.”

The allegations surfaced after a private in the company lodged a formal complaint in early February. Hertling said it would be a mistake to characterize the private as weak for his response to the abusive tactics.

“For a young private to stand up like that, it’s courageous,” Hertling said. “For this new guy to say what you guys are doing is wrong, courageous is an understatement. It took a great deal of courage by this young guy.”

Military hazing has led to suicides. I bring it up because it’s the kind of crap you read about when it comes to the Russian military. It’s not supposed to happen in the U.S. armed forces.

I’ve been railing about the generals for years now. It seems I’ve been right to do so, on a number of different levels. The buck stops with them.

And I haven’t even brought up the ongoing investigation of Dover Air Force Base, where we learned on Tuesday that partial remains of some victims of 9/11, from the Pentagon and Shanksville, ended up in landfills. Previously, officials at Dover acknowledged that some portions of remains of fallen soldiers from Iraq and Afghanistan had been incinerated and sent to a landfill. [The military now disposes of cremated remains at sea.]

Air Force Secretary Michael Donley told a news conference on Tuesday he was not aware that some remains of 9/11 victims had been taken to the landfill, saying: “This is new information to me.”

It’s sickening. We must do better!

--Police in Latin America and Europe arrested 25 suspected members of the Anonymous hacking group, according to Interpol. Drop ‘em from a helicopter into shark-infested waters.

--Feb. 21-28, 1972…President Nixon went to China.

--Uh oh… “An asteroid with a one in 625 chance of striking Earth in 30 years’ time has been identified by NASA.

“The 460 foot ball of rock named 2011 AG5 is potentially on course to hit this planet on February 5, 2040.

“The United Nations Action Team on near-Earth objects has begun discussions about how to divert the asteroid, amid fears that the likelihood of a collision could increase over the next few years….

“According to sky scans carried out by NASA, there around 19,000 ‘mid-sized’ asteroids of between 330 and 3,300 feet wide within 120 million miles of Earth. All have the potential to destroy an area the size of a city were they to strike.

“The Aphophis asteroid, which is the size of two and a half football pitches, is on course to pass close to the Earth in 2036, coming within 18,300 miles of this planet. Scientists expect that it will be visible from most of Europe, Africa and Asia.” [Rosa Prince / Irish Independent]

I don’t plan on being around for AG5, though Aphophis could be an issue for yours truly, but you younger folk might want to think about putting in for sick days now, just to get ahead of the crowd.

--And the New York Daily News had a story on research published in the journal Space Weather that “finds the sun could unleash another big solar flare (like 1859), much larger than the ones in January that set off impressive aurora borealis displays and caused some airlines to divert flights near the North Pole to avoid disturbances to their planes’ equipment.”

1859 was the year of the so-called Carrington Event, which “was epic – it was the largest on record – and damaged the telecommunications infrastructure of its day, setting telegraph stations ablaze and damaging their communication networks. But it was the show in the sky that proved unforgettable.

“The New York Times descried the skies in Manhattan in breathtaking terms.

“ ‘On Sunday night the heavens were arrayed in a drapery more gorgeous than they have been for years…Such was the aurora, as thousands witnessed it from housetops and from pavements. Many imagined they heard rushing sounds as if Aeolus [a mythological Greek god] had let loose winds.”

Meanwhile, a Carrington Event today would do a number on us; transportation, communication, banking, water supply.

Then again, a bunch of computer hackers can do the same thing.

---

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

Our thoughts and prayers are with those devastated by this week’s tornadoes, as well as the community of Chardon, Ohio.

God bless America.

---

Gold closed at $1709
Oil, $106.70

Returns for the week 2/27-3/2

Dow Jones -0.04% [12977]
S&P 500 +0.3% [1369]
S&P MidCap -0.8%
Russell 2000 -3.0%
Nasdaq +0.4% [2976]

Returns for the period 1/1/12-3/2/12

Dow Jones +6.2%
S&P 500 +8.9%
S&P MidCap +11.1%
Russell 2000 +8.3%
Nasdaq +14.2%

Bulls 51.1
Bears 25.5 [Source: Investors Intelligence]

Dr. Bortrum posted a new column, as he nears the end of his Bell Labs days. I’m sure many of you saw last week’s Sunday Times piece on Bortrum’s old haunt.

Have a great week.   I appreciate your support.
 
Brian Trumbore



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Week in Review

03/03/2012

For the week 2/27-3/2

[Posted 6:00 AM ET]

Europe, Washington and Wall Street

For once it was a quiet week across euro land as all but two of the European Union’s 27 members (Britain and Czech Republic being the exceptions) signed the new “fiscal compact” that aims to prevent the euro-17 nations from running up huge debts again. German Chancellor Angela Merkel called it a “great leap,” or at least a first step towards stability, with even Merkel’s parliament also passing the new rescue package for Greece by a whopping margin; this as the Greek parliament approved another mammoth series of budget measures, including deep cuts to healthcare and pensions, or else they wouldn’t receive their 130 billion euro for the second bailout of their depressed nation.

President of the European Council, Herman Van Rompuy, said: “This stronger self-constraint by each and every one of you as regards debts and deficits is important in itself. It helps prevent a repetition of the sovereign debt crisis. It will thus also reinforce trust among member states, which is politically important as well.

“The restoration of confidence in the future of the eurozone will lead to economic growth and jobs.”

Aaarghhh!!! Viva L’Europe!!!

So they all toasted each other, formed a mosh pit or somethin’, and then Spain and the Netherlands asked to take the floor.

“Ah, gentlemen? You know our deficit targets? We’re going to miss them again…by like a lot.”

And then someone reminded the group that their own statistics bureau had just released the unemployment rate for the euro-17, 10.7%, with Italy at an all-time high of 9.2%, Greece at 19.9%, and Spain up to an unfathomable 23.3% (over 50% for those under age 25).

And then someone else reminded them that growth is still awful hard to come by, as in the group is in all probability experiencing another down quarter to open 2012, but then some of the ministers reminded the party-poopers that this was a time for celebration and to shut up.

Oh, there are still quite a few issues to be addressed, and there are some pressing timetables, like the private-sector debt restructuring for Greece’s bond holders needs to be wrapped up next week; plus the firewalls need to be increased, ostensibly to backstop Italy and Spain, though this discussion has been put off until end of the month as Chancellor Merkel continues to take heat from within about increasing the funding, specifically the European Stability Mechanism, or ESM.

And eurozone members are delaying payment on half of Greece’s bailout until they receive further proof that Greece can implement its spending cuts, let alone complete the just mentioned bond swap. But generally everyone is happy with what the Greeks have done, this as the Greek people are reduced to eating dirt.

The fiscal compact now needs to be approved by individual parliaments, though only 12 ratifications are needed to implement it, so it’s still not clear just what French presidential candidate Francois Hollande can do if he wins; Hollande saying he’ll want to renegotiate the treaty.

Ditto, Ireland, whose government said it will be necessary to hold a referendum on the compact by June. Normally this would be dicey for the whole union, but with only 12 needed for ratification, the only people hurt by a no vote in Ireland (and it will undoubtedly be close) are the Irish, who then wouldn’t receive any further bailout funds of their own.

But all the above aside, unelected Italian Prime Minister Mario Monti said the worst is over for the euro region, as long as there is an increased firewall, he quickly added, because “size matters” in order to combat any further contagion.

Contagion was far from the minds of Italian and Spanish bond holders this week. Back in December, the yield on Italy’s 10-year paper was over 7.25%. For Spain, 6.67%.

Remember how everyone was talking about the 7% level being unsustainable? Well by the close on Friday, the yields on the 10-year for both Italy and Spain were around 4.90%, highly sustainable, and their respective 2-year yields were about 2%, despite their ongoing debt and lack of growth issues.

How can this be?

Why it’s all about, to a great extent, the latest LTRO, longer-term refinancing operation by the European Central Bank. Round 2 had 800 banks lapping up 489 billion euro of 1%, 3-year loans on top of December’s 523 banks borrowing 530 billion euro in Round 1.

So you borrow at 1% and if you’re a Spanish or Italian bank you kind of feel obligated to help your countrymen out and you then turn around and buy some of your own country’s paper yielding over 5%, until Friday. Or you buy up some presumably safer 2-year scrip for over 2% and still pocket a nice spread.

Such a deal! Or what’s better known these days as the “Sarkozy trade,” since this is what French President Nicolas Sarkozy recommended all the banks do when LTRO was first introduced last year. Spain’s banks, for example, increased their holdings of sovereign debt by 29% between December and January.

So the banks have borrowed over 1 trillion euro and aside from buying sovereign debt, where is the rest going? Well, it seems that the banks have 700 billion euro of their own debt maturing this year, and seeing as the banks don’t lend to each other anymore because there is zero trust between ‘em, a lot of the LTRO funds are just going to refinance bank debt and probably just sit back in the ECB until it’s necessary to use it.

OK, so you have some going to buy sovereign debt, whose quality is still highly iffy, and then a large portion of the loans are being used to refinance existing bank debt. What else?

Well, the ECB has asked all the banks to boost their capital, some in a big way, so you have some of the loan money being used for this purpose.

But, hey, Mr. Editor…weren’t these funds supposed to be used to boost the economy as well? Like wasn’t this money supposed to go to consumers and business?

Sure…but it isn’t. And that’s why you still have no growth, Charlie Brown. I mean it’s not as if the ECB can force these guys to lend the funds out.

So what you have instead are a bunch of zombie banks. They just tinker with their balance sheets. They aren’t really banks in the traditional sense. According to the European Central Bank itself, loans to businesses increased a mere 0.7% in January from a year earlier despite Round 1 of the LTRO.

Plus, you have this issue of collateral. You see, the ECB was rightly concerned with systemic risk and bank runs last December so they flooded the institutions with fresh euro bills to ensure that Monique and Jean-Claude didn’t suddenly feel compelled to pull all their money out and stick it under the mattress.

But this meant the ECB, especially with Round 2 of the LTRO, had to lessen the collateral requirements. In fact our microphone (we only have one) was there to record a typical conversation at the ECB window this week.

ECB: Next…
Bank No. 422: I’d like one billion euro please.
ECB: What kind of collateral do you have?
Bank No. 422: Four pigs and six sheep.
ECB: Hmmm…let me see the pigs…they look pretty plump. Do you have one more?
Bank No. 422: Wilbur…come over here…Here, how ‘bout him?
ECB: Done…here’s your billion. Buy some sovereign debt, OK?
Bank No. 422: Will do…Gee, thanks, ECB. You guys aren’t as bad as the press makes you out to be.
ECB: We’re here to flood the system…just doing our job…Next!

John Plender / Financial Times

“Mario Draghi, president of the European Central Bank, is quite a phenomenon. His longer-term refinancing operation to provide cheap funding to the banks has put an end to fears of a Lehman-style collapse while simultaneously transforming market perceptions of sovereign risk in southern Europe. More than that: as we learned this week, Italian and Spanish banks have substantially increased their holdings of domestic government debt, so it is not just a matter of sentiment. Serious purchasing power has been unleashed. In effect, the ECB is underpinning the eurozone sovereign bond markets by proxy. It is acting, albeit indirectly, as a lender of last resort to governments, notwithstanding German reservations….

“But…its ultimate success depends on the value of the acquired asset holding up. And this is where the difficulties set in.

“The ECB has addressed the eurozone’s liquidity problem, but cannot remove the solvency issue, even if the decline in yields has provided modest relief. To be solvent and reduce debt, southern Europe needs growth….

“Companies, like banks, have been hoarding cash….

“Meantime, the policy initiatives to enhance the supply side of the southern European economy, such as labor market reforms and deepening of the single market, will take years to raise growth rates. In the interim, all we have is German insistence on fiscal austerity at a time of deficient demand. The recently agreed fiscal compact admittedly reduces the moral hazard implicit in Mr. Draghi’s three-year liquidity injection, but it also means that debt levels will remain stubbornly high.

“This suggests that market perceptions on solvency in southern Europe could yet swing back to a more pessimistic view. They may focus on the fact that, unlike the Federal Reserve and the Bank of England, the ECB has loaded sovereign risk onto the balance sheets of undercapitalized private banks instead of taking it onto its own balance sheet. The economist Charles Wyplosz argues that this is tantamount to the ECB taking a trillion euro bet.”

No doubt, we’ve bought some time, but as Plender concludes, perceptions can “swing back with a vengeance. If eurozone governments fail to come up with a better strategy for growth and firewalls, that may not be as remote a possibility as it now appears.”

Washington and Wall Street

The economy’s performance in the fourth quarter was revised upward to 3.0% from 2.8%; still not great for a recovery, but actually perfect for equities if you kept that pace up…not too cold, not too hot. But from the looks of some of the recent data, I’d be surprised if we registered a ‘3-handle’ in the first quarter, even though the figures for auto and chain store sales in the month of February were solid, as spelled out further below.

I just see a poor durable goods number for January, down 4.0%, and a poor reading for the ISM index on manufacturing for February, just 52.4 when 54.5 was forecast. [Chicago’s Purchasing Managers Index for the month, on the other hand, was an excellent 64.0]

It’s just that the January numbers on personal income, up 0.3%, and consumption, up 0.2%, were both also less than expected and at some point you’ve got to believe the still rising price of gasoline will take a toll, though maybe that doesn’t work into the calculations in a significant way until the second quarter.

Nonetheless, the price of gas at the pump rose to $3.72 for a national average (and up further by the time many of you read this), up 13 cents on the week and 26 cents in California to an average there of $4.29. The record national average is $4.11.

On Thursday, the price of West Texas Intermediate, what I quote each week below, hit $110 per barrel on rumors of a pipeline explosion in Saudi Arabia, though this was denied by the Saudis, who said it was only a fire and nothing that was impacting refining operations. But the area in question is in a restive part of the kingdom with zero press coverage so who knows. What we do know is that curiously the report emanated out of Iran.

Markets were roiled a bit on Wednesday amid testimony by Federal Reserve Chairman Ben Bernanke who, while his economic forecast was pessimistic, gave no hint of further Fed stimulus, so gold, for one, took a header, down $100 at one point.

Bernanke said that while the drop in the unemployment rate had been “somewhat more rapid than might have been expected,” given that the economy wasn’t moving that fast, “The fundamentals that support spending continue to be weak: real household income and wealth were flat in 2011, and access to credit remained restricted for many potential borrowers. The job market remains far from normal.”

Bernanke then talked about the dangers of long-term unemployment. “People who are out of work for six months or more will be starting to lose skills. They will be losing attachment to the labor force. They won’t know what’s happening in their field or their industry. And that’s really one reason for urgency to try to get jobs created and try and bring the economy back to a more normal labor market.”

On the housing front, the news is still lousy. The S&P/Case-Shiller data for December (recall there is a lag with this barometer) showed home prices fell 4% for the month vs. December 2010 in the 20-city major metro index, down 1.1% from November, with 18 of the 20 reporting declines. For 2011, the average home price fell 12.8% in Atlanta and another 8.8% in Las Vegas, as homes in the foreclosure process continue to keep prices low.

Robert Reich had a depressing look at the impact of the housing bubble, “the biggest continuing problem for most Americans,” in an op-ed for the Financial Times.

“Houses are the major assets of the middle class. Most Americans are therefore far poorer than they were six years ago. Almost one out of three homeowners with a mortgage is now ‘underwater,’ owing more to the banks than their homes are worth on the market.

“Optimists point to declining home inventories in relation to sales, but they are looking at an illusion. Those supposed inventories do not include about 5m housing units with delinquent mortgages or those in foreclosure, which will soon be added to the pile. Nor do they include approximately 3m housing units that stand vacant – foreclosed upon but not yet listed for sale, or vacant homes that owners have pulled off the market because they can’t get a decent price for them.

“We are witnessing a fundamental change in the consciousness of Americans about their homes. Starting at the end of the Second World War, houses were seen as safe investments because home values rose continuously….(Baby Boomers then) took out the largest mortgages they could afford, and watched their nest eggs grow into ostrich eggs. Homes morphed into ATMs, as Americans used them as collateral for additional loans. Most assumed their homes would become their retirement savings. When the time came, they would trade them in for a smaller unit and live off the capital gains.

“The plunge in home values has changed all this. Young couples are no longer buying homes; they are renting because they are not confident they can get, or hold, jobs that will reliably allow them to pay a mortgage. Middle-aged couples are underwater or unable to sell their homes at prices that allow them to recover their initial investments. They cannot relocate to find employment. They cannot retire….

“(The) negative wealth effect of home values, combined with declining wages, makes it highly unlikely the U.S. will enjoy a robust recovery any time soon.”

Street Bytes

--Stocks finished mixed with the Dow Jones off a fraction, 5 points, to 12977, while the S&P 500 rose 0.3% and Nasdaq gained 0.4%. The Dow Jones hit the 13000 level but couldn’t hold it for a second week, while Nasdaq briefly hit 3000. Nonetheless, in the case of the Dow and S&P 500, they remain at levels not seen since spring 2008, while Nasdaq was last at its level in 2000.

Shares in Apple rose to another all-time high, closing the week at $545, for a market cap of $508 billion, rarefied air in the investment world. Microsoft was briefly worth $500 billion at the end of 1999 and early 2000, while Cisco Systems, Intel and General Electric all peaked at just above $500 billion in early 2000. Since then they’ve all have fallen mightily.

Apple is to unveil the iPad 3 this coming week.

--U.S. Treasury Yields

6-mo. 0.11% 2-yr. 0.27% 10-yr. 1.97% 30-yr. 3.10%

China reduced its holdings of U.S. government debt last year for the first time since the Treasury Department began keeping track of the data in 2001. China now holds $1.15 trillion in Treasuries as of Dec. 31, down from $1.16 trillion at the end of 2010. Treasury revised some data and now shows China’s holdings peaked in July at $1.3149 trillion.

[Japan is still America’s second-largest lender, with $1.06 trillion of Treasuries. The U.S. Federal Reserve remains the top holder with $1.66 trillion on its balance sheet.]

--China’s February PMI came in at 51.0, thus lending credence to the soft-landing camp, of which I’ve been a nervous member.

--The Shanghai Composite Index closed the week at its highest level since mid-November. It’s also on a seven-week winning streak, the longest since July 2009 as investors believe the government will announce some pro-growth measures at the National People’s Congress.

--In my key barometer for the health of China’s economy and the growing middle class, casino revenues in Macau rose 22.3% year over year in February. Here’s the trend.

Feb. 2012…22.3 percent
Jan. 2012…34.8
Dec. 2011…25.0
Nov. 2011…32.9
Oct. 2011…42.3
Sept. 2011…38.8

The outlook is generally for 15% to 20% growth throughout 2012.

--China is looking to put a brake on highway spending amid concerns over high debt levels resulting from earlier projects, according to the top economist in the country for such matters, as told to government mouthpiece, Global Times.

“The major concern is huge debts accumulated from highway projects. Road construction funds account for the majority of local government loans from banks, posing great financial risks to banks,” said Guo Wenlong.

I didn’t realize the risks are greater with the highway projects than with high-speed rail. In many places the toll revenue doesn’t meet interest on loans.

--Back to gambling, revenues in the U.S. are showing small signs of life, up 2.3% in the first 11 months of 2011, according to the American Gaming Association, though many of the biggest operators, such as Caesars Entertainment, are saddled with humongous debt loads. After posting my column last week, I headed to Prior Lake, Minn., and the Mystic Lake Casino Hotel, an Indian operation. I was startled how big it was and business was brisk. It also seems the ‘tribal’ leaders refuse to talk to the press, or the surrounding community, probably because they don’t want anyone knowing how rich they are.

--February proved to be a strong month for U.S. auto sales, the best Feb. since 2008, as automakers sold cars at an annualized sales pace of 15.1 million. Fuel-efficient vehicle sales benefited in particular with rising gas prices. Honda, for example, sold 42% more Civics than a year earlier. Toyota Prius sales rose 52% to more than 20,000.

Overall, Chrysler’s U.S. sales rose 40.4% vs. the same month a year ago; Ford’s increased 14%; General Motors’ edged up just 1%, but this was coming off an incentive-laden Feb. 2011; Toyota was up 12.4%; Honda up 12.3%; Nissan 15% and Hyundai 17%.

[General Motors announced on Friday it was halting production of the battery-powered Chevy Volt for five weeks due to poor sales.]

--Among the chain store retailers reporting strong February sales were Saks, up 6.6% year over year; Macy’s, up 4.6%; Target 7%; and Nordstrom’s 10%. Only Kohl’s were weak, down 0.8%.

--From January 2011 to January 2012, the unemployment rate for the euro-17 has risen from 10.0% to 10.7%, while the rate in the U.S. has declined from 9.1% to 8.3%.

--India’s economy slowed in the fourth quarter with GDP growth down to 6.1%. February’s PMI, however, was a still solid 56.6 vs. January’s 57.1.

--Russian foreign direct investment soared to $18.4 billion last year, up 33% over 2010. Putin can legitimately point to a stronger economy as his countrymen go to the polls on Sunday.

--Canada’s fourth-quarter GDP came in at 1.8% on an annualized basis, following a revised 4.2% gain for the third-quarter.

--TransCanada announced that despite the Keystone XL oil pipeline being put on hold for the segment crossing the U.S-Canada border, it would build the segment from Oklahoma to the Gulf of Mexico, which does not require presidential approval.

Editorial / Washington Post

“The White House embraced the announcement, and deservedly so. The Oklahoma-to-Texas segment will accomplish one of the primary goals of the Keystone XL project: alleviating an inefficient glut of crude in the central United States. Constructing it will help untangle the politics, too: Opposition to the full pipeline should moderate as the first stage creates construction jobs.”

--Late Friday came word that BP had reached a settlement with lawyers representing tens of thousands of victims of the 2010 Gulf of Mexico spill. I’ll have more on this next time, though the figure being bandied about is $7.8 billion. The victims’ attorneys get $7.7 billion…the victims themselves, $100 million.

--This is depressing. According to an analysis from a research firm in Washington, D.C., Wider Opportunities for Women, as reported by Walter Hamilton of the Los Angeles Times, “Of the nearly 20 million older Americans who live alone or with a spouse, about 47% can’t afford everyday necessities such as proper nutrition and medical care.” [Another 20 million seniors live with family members or in group settings such as nursing homes. They aren’t included in the study.]

--A Dallas-area doctor, Jacques Roy, was accused of bilking Medicare of $350 million over a five-year period in the largest Medicare fraud scheme by dollar value ever linked to a single physician. Roy and six other alleged accomplices were charged with conspiracy to bill the government for unnecessary services or those never provided.

I’ve said this before and I can’t help but repeat it. White-collar crime on such a massive scale should result in the death penalty. As it is, if convicted on all nine counts of health-care fraud, the 54-year-old faces a maximum sentence of 100 years in prison. The threat of a death sentence would stop this stuff cold.

--AT&T is ending unlimited data plans and will slow download speeds for those exceeding the limits on their 3G and 4G smartphones. The company says it will send a text message when your usage nears the cap in a billing cycle. Once the billing cycle ends, your speeds go back to normal for the next one.

--In yet another huge black eye for both the cruise industry and Costa Cruises (parent of the doomed Costa Concordia and a subsidiary of Miami-based Carnival Corp.), the Costa Allegra limped into port in the Seychelles after a fire disabled it. It took two days to tow it. 1,000 passengers and crew were impacted. With no electricity and no air conditioning for three nights, the passengers were crowded on decks in baking temperatures.   You can imagine the living hell it was, with no bathrooms working, for one thing.

--The Costa Concordia and other vessels in the Costa Cruises fleet “were hotbeds of sexual harassment, drinking and drug abuse, former crew members have claimed,” as reported by Nick Squires of the Sydney Morning Herald. One woman told Italian prosecutors that Captain Francesco Schettino, the Costa Concordia’s commander, “used women as goods to be exchanged.”

--Stephen Schwarzman took home $213.5 million in pay and dividends in 2011, the Blackstone CEO topping the list of publicly traded private equity companies. Of the total, $4.6 million was so-called “carried interest,” which is usually taxed as a capital gain; the loophole for which President Obama proposes to eliminate, which would mean it’s then taxed at ordinary income rates. I totally agree with this.

As for Mrs. Schwarzman, she is very proud of her husband and is busy shopping. “My Stephen is doing such a good job!” she tells anyone who will listen.

--Cash bonuses on Wall Street fell 14% last year, according to an estimate by New York State, as the shift to “deferrals” as a larger element of pay continues. Some investment bankers, however, saw bigger cuts, with Morgan Stanley, as previously reported, limiting cash payouts to $125,000.

According to New York State’s comptroller, Thomas DiNapoli, the securities industry gained back 9,600 of the 28,000 jobs lost during the financial crisis, but then in the second quarter of 2011 began shedding positions again. Between April and December, 4.300 jobs were lost. That trend should only continue throughout 2012, I strongly suspect. Of course the declining cash bonuses are killing New York State’s and Gotham’s coffers.

--In his presentation for investor day, JPMorgan Chase CEO Jamie Dimon lashed out at criticism of high pay for bankers, as well as Warren Buffett. But then Dimon stupidly said that the compensation-to-revenue ratio at newspapers was higher than that of JPMorgan’s investment bank, adding, “Worse than that, you don’t make any money,” he told the reporters in the room. “We pay 35%, and we make money.”

As the “Heard on the Street” column of the Journal observed, “Of course, newspapers didn’t rely on taxpayers of all income brackets for billions of dollars in bailout funds.”

--Speaking of Buffett, he said he was “dead wrong” on housing in his annual shareholder letter, but is now very bullish on the sector. Frankly, I’ve grown weary of the guy. 

--Aaron Elstein / Crain’s New York Business, on JPMorgan Chase’s retail clientele, “nearly half of its customers” being unprofitable.

“Here’s the math, as given in (an investor presentation). 69% of Chase’s customers have less than $100,000 in their accounts. Of those clients, 70% are unprofitable….Now, 70% of 69 equals 48. That suggests Chase is losing money on just about half of its retail customers, which came as quite a surprise to the investment pros assembled at the bank’s Park Avenue headquarters for the presentation.”

Yet Chase is plowing ahead with plans to add another 900 branches in the years to come.

--IBM fired more than 1,000 workers in North America this week, mostly in the U.S.

--General Electric’s global work force expanded last year by 4.9% to 301,000. Employment peaked in 2007 at 327,000, with 155,000 being in the U.S. at the time. As of December 2011, the figure here was 131,000.

--James Murdoch quit News International, a result of the News of the World phone-hacking scandal that forced that publication to close last July.

--McDonald’s is looking to ramp up in China. So far it has lagged Yum Brands Inc. in opening outlets on the mainland, as Yum has about 4,500 restaurants under brands including KFC and Pizza Hut, while McDonald’s owns more than 1,400, with a goal of opening 225-250 there this year.

--Federal investigators are looking into scores of wire transfers in the final days of MF Global, including a possible movement of $325 million in suspected customer funds, as reported by the New York Times. Investigators have also reviewed another $220 million transfer on Oct. 31, the day the firm filed for bankruptcy. Former CEO Jon Corzine remains untouched…at least thus far.

--Michael Jordan is selling his Highland Park, Illinois home for $29 million. He built it between 1993 and 1995, and it features at least 15 baths, which would have come in handy on the Costa Allegra, not to conflate the two.

--I’m going to miss Continental Airlines, which had its last flight Friday night with the changeover to United now being complete. I started flying Continental heavily in the late 1980s when it was the pits. Half my flights seemed to have mechanical problems.

But then Gordon Bethune took over and righted the airline. I miss Gordon! 

--I saw a piece in Investment News concerning former NBA star David Robinson, who now has a private-equity firm, Admiral Capital Group. Thus far, Admiral is focusing on real estate, buying five office buildings and hotels in California, Nevada and Texas.

Years ago I wrote in this space, seriously, that I’d vote for David Robinson for president. I hadn’t thought of him in a while until seeing this article, though. Now, more than ever, I wish he’d give politics a go. The Naval Academy graduate is superior to anyone in either party today.

--Ever wonder how much a dancer makes? You know, a regular dancer, like you see on the Oscars or on Broadway…not an adult dancer, cough cough. According to a study released in New York City, the average professional dancer earns only $28,000, which is basically living in poverty in these parts. So parents…encourage your kids to pursue an engineering degree instead.

--Finally, last week I mentioned the Kimberley, a region in Western Australia, where a pink diamond was found. So I’m reading a travel section piece in the Los Angeles Times by Amanda Jones and I see this, Ms. Jones having just written of how friendly the people are there:

“Of course, the Kimberley also has man-eating saltwater crocodiles and an unsettlingly large number of the Earth’s most poisonous snakes, spiders and jellyfish.”

I wouldn’t be able to sleep there, knowing this. I think I’ll just stay home the rest of this year.

The Los Angeles Times, by the way, is joining a growing number of newspapers worldwide in charging readers, as of March 5. You wouldn’t believe how much I’m now spending on subscriptions from around the world to bring you the best each week.

So don’t forget I have an iPad app, which I’m now charging for…assuming my Web people set it up right, yours truly not having an iPad himself yet.

Foreign Affairs

Iran: Iranians went to the polls on Friday to vote between bad and worse; the latter representing the parliamentary slate favored by Supreme Leader Ayatollah Khamenei and the former the candidates of President Mahmoud Ahmadinejad. 3,400 were on the ballots for 290 seats in the Majlis, though at least another 1,000 were barred from running by the Guardian Council, which is comprised of the Sons of Satan (Rick Santorum knows their names). Of course the election is a joke, what with the two main opposition candidates, Mir Hossein Mousavi and Mehdi Karrubi, being under house arrest for more than a year.

When it comes to the Iranian nuclear crisis, though, it’s all about the visit on Monday between President Obama and Israeli Prime Minister Benjamin Netanyahu at the White House, along with parsing the words each are making in speeches at the pro-Israel lobby, American Israeli Public Affairs Committee, or AIPAC, over the coming days. Israeli leaders want President Obama to lay all his cards on the table…all the “options.” Israel is frustrated that it doesn’t know what the White House considers to be the real “red lines”. Joint Chiefs of Staff Chairman Gen. Martin Dempsey earlier called Iran a “rational actor,” which many can’t fathom. And U.S. intelligence agencies are once again saying that Iran has not decided to take the next step and build a nuclear bomb; rather it is content to continue to enrich uranium to 20 percent (below weapons grade) while preserving its own options.

But late in the week, General Norton Schwartz, the U.S. Air Force Chief of Staff, told reporters that plans had been drawn up outlining how Washington could join a potential Israeli air offensive should Israel pursue that path. “What we can do, you wouldn’t want to be in the area,” Schwartz said of the options. Supposedly they include going after the Revolutionary Guard and its al-Quds force, along with installations of the Ministry of Intelligence and Security. Schwartz also said the latest version of America’s bunker-busting bombs was “operational.” This is significant; this being the weapon of choice against the likes of the Fordow nuclear processing plant built into a mountain outside the holy city of Qom. U.S. military planners, according to the Washington Post’s Joby Warrick, are increasingly confident they can severely disrupt Fordow. I believe we overstate the ability of Iran to construct an impregnable facility.

And then late Friday, in an interview with The Atlantic’s Jeffrey Goldberg, President Obama tested out his talking points.

“I think that the Israeli government recognizes that, as president of the United States, I don’t bluff. I also don’t, as a matter of sound policy, go around advertising exactly what our intentions are. But I think both the Iranian and the Israeli governments recognize that when the United States says it is unacceptable for Iran to have a nuclear weapons, we mean what we say.”

Obama reiterated to Goldberg that “all options are on the table,” and that the final option is the “military component.” Obama then noted that sanctions organized by his administration had put Iran in a “world of hurt” that might force Iran to rethink its efforts to pursue a nuclear weapon.

“Without in any way being under an illusion about Iranian intentions, without in any way being naïve about the nature of that regime, they are self-interested,” Obama said. “It is possible for them to make a strategic calculation that, at minimum, pushes much further to the right whatever potential breakout capacity they may have, and that may turn out to be the best decision for Israel’s security.”

This is clearly much of what Netanyahu wants to hear from the president directly, even as Obama is strongly encouraging Israel to still hold off at the same time, and we’ll see if the Israeli prime minister can pressure Obama into making a further public declaration that America is prepared to support an Israeli strike. The two are not currently slated to hold a joint news conference following their meeting but both sides are to issue statements. Republican Senator John McCain, who met with Netanyahu in Israel last week, said he had never seen an Israeli leader “that unhappy.” “He was angry,” McCain said. “And, frankly, I’ve never seen U.S.-Israel relations at this point.”  

In Israel itself, in a recent survey, 19% of Israelis support an attack against Iran without the backing of the United States, while 42% support a strike only if there is U.S. support. 32% oppose an attack regardless of the level of assistance from Washington.

Syria: In a major shift in policy, Russian Prime Minister, soon to be president again, Vladimir Putin said that Russia had no special relationship with Syrian President Bashar Assad and that it was up to Syrians to decide who should run the country. Putin said, “We need to make sure they stop killing each other.” Putin told the Times of London that he had been appalled by the brutal killing of Muammar Gaddafi and the atrocities committed in Libya. Putin called for an immediate ceasefire and negotiations between the parties.

Heretofore, both Russia and China, as two permanent members of the United Nations Security Council, had supported Syria, but on Thursday, both countries voted in favor of a statement deploring the decision by the Syrian government not to admit Baroness Amos, the UN’s human rights chief.

The White House said Thursday the situation in Homs was “horrific.” Assistant Secretary of State Jeffrey Feltman added: “It’s important that the tipping point for the regime be reached quickly, because the longer the regime assaults the Syrian people, the greater the chances of all-out war in a failed state.”

The UN has raised its estimated death toll to 7,500, though it would seem it’s now far higher as Homs is “cleaned” (sic) within hours, according to one report. There is no telephone or internet service. Communication is impossible, yet tens of thousands of civilians remain, trapped. 13 were killed in a botched attempt to smuggle out four reporters (at least three of whom later escaped), while the bodies of the two journalists killed on Feb. 22 were finally taken to Damascus, at last word.  Sec. of State Hillary Clinton called for a coup, while Qatar and Saudi Arabia want the rebels armed; the Saudis wanting to see the majority Sunnis in charge in Syria.

Meanwhile, the United States is very concerned over the fate of Syria’s chemical weapons stockpiles and has warned neighboring states to be on the lookout for the spread of them. Sound familiar? We have the same issue with Libya and hundreds of missing shoulder-fired missiles.

In the case of Syria, the concern is more than warranted. For starters, Syria is not a signatory to the Chemical Weapons Convention, so the international community lacks comprehensive knowledge of how much they have and where it is stored. There are also legitimate concerns Bashar Assad will use the weapons on his own people to save his skin.

Lastly, I just have to note for the record that Syria did hold its sham referendum on a new constitution; one that would enable Assad to stay in power until 2028…his current term ends in 2014 and the new constitution allows for two, 7-year terms, so he’d run under the rules of the new document.

Egypt: A court adjourned a trial of 16 Americans and 27 others from non-governmental organizations and then two of the NGOs paid $4 million in bail on Thursday to fly out 11 employees, including six Americans (the others already being out of the country), capping weeks of diplomatic wrangling. The United States had threatened to end $1.5 billion in annual aid, most of which went to the Egyptian military, unless the case was resolved, but what resulted was “a growing backlash against the perceived American interference in the Egyptian justice system,” as reported by the New York Times’ David D. Kirkpatrick and Steven Lee Myers, who added, “No Egyptian official stepped forward to accept responsibility for releasing the Americans. Instead, judges and prosecutors distanced themselves from the decision and traded accusations of political capitulation and conflict of interest.”

So you can see how difficult it is going to be to maintain any semblance of influence in Egypt. Saturday is supposed to be the day a 100-member panel is selected to draft a new constitution, and the ruling military council reiterated it wants to hold a presidential election by June (the electoral commission said the process will actually begin in May…with a run-off June 16-17). I remain highly skeptical this timetable will be met. First, for example, the new constitution must be approved.

Ironically, the very Muslim Brotherhood the United States fears played a positive role in getting the Americans released; the Brotherhood now the leading bloc in the new parliament. But don’t read too much into this.

Afghanistan: Two more American soldiers were killed when an Afghan civilian opened fire after seizing a weapon from a guard tower at a joint NATO-Afghan base in the southern part of the country. That makes six American service members killed by Afghans as a result of the violence that followed the accidental burning of Korans by American forces, two officers being shot in the back of the head right after I had posted last week’s column. [12 of the 60 U.S.-led coalition soldiers who have died thus far this year have been killed by their Afghan comrades.]

So with so much mistrust after ten years, is there any cause for optimism whatsoever? No.

You know what’s never brought up in this whole debate? It goes back to the last Afghan presidential election. We’re dealing with a corrupt, and treacherous, ruler in Hamid Karzai who shouldn’t be president in the first place. It should have been Abdullah Abdullah, who won the vote, until it was stolen from him.

The problem now is that as the United States draws down its forces, American troops will be increasingly relying on Afghans to offer perimeter security, such as at combat posts and along key roads. That’s a formula for further Taliban infiltration. We want to leave an Afghan army and police force capable of defending the country, but in reality, NATO and the Afghans don’t totally control a single province today. When you hear otherwise, it’s a bunch of lies.

I do have a “Hot Spots” post on the topic that offers a somewhat different opinion. Check it out.

[And an old story has reemerged in a potentially big way. This week, as part of a long-running massive lawsuit against the Saudi government and its supposed complicity in 9/11, as filed by victims’ families, former Senator Bob Graham details his suspicions in an affidavit; Graham having headed up the Senate Intelligence Committee at the time. Former Sen. Bob Kerrey, who served on the 9/11 Commission, also will be saying more on the topic, it seems.]

Russia: Sunday is election day and marks the return of Vladimir Putin to the presidency. He is expected to gain the 50% necessary to avoid a run-off, though should he fall short it only delays the inevitable. Putin could rule until 2024, if he lasts for two, six-year terms, but while the opposition wasn’t able to coalesce this time around a viable candidate who could challenge Putin, opposition is nonetheless growing.

Speaking to campaign workers this week, Putin said, “We have reason to believe that our opponents are preparing…to use some kind of mechanisms that would confirm that the elections were falsified. They will stuff [ballot boxes] themselves and manipulate [the vote],” he said. “Then they will present [the evidence]. We already see this – we already know this.” [Moscow Times]

Hilarious. 

And then there was the revelation this week that an assassination plot against Putin had been foiled, with the arrest of two men by Russian and Ukrainian special forces in Odessa, we were told. They were dispatched to kill Putin by Chechen rebel Doku Umarov, the leader of the separatist movement.

How conveeenient, many of us thought; the plot being disclosed days before the election. What I found interesting is that the ‘terrorists’ supposedly planted explosives on one of Moscow’s major thoroughfares often used by Putin’s entourage to take him from his home to his office. I know the road. I just have a hard time believing they could plant explosives on it without being discovered.

Masha Lipman / Washington Post

“The main idea of Putin’s campaign is that there is no alternative to his leadership and that, without him at the top, Russia will fall apart. While his own campaign rhetoric may be a bit more subtle, his loyalists commonly treat their anti-Putin compatriots as enemies and traitors inspired or, worse, paid by evil, alien forces out to destroy Russia.

“Such aggressive rhetoric, exploitation of xenophobic fears, and the blatant abuse of government authority and resources are not new: They have been part and parcel of the Putin regime. This behavior has antagonized the new class of urban professionals and has eventually led them to protest Putin’s rule. Since the government shows no interest in changing its practices, the rift between government and Russia’s modernized constituencies is becoming irreparable. Putin will win Sunday’s presidential election, but this growing alienation will steadily erode his power.”

Personally, I still don’t believe he lasts the year, but not because of Chechen terrorists.

North Korea: The United States and North Korea reached an agreement on Pyongyang’s nuclear weapons program whereby the North would voluntarily cease all atomic device detonations, long-range missile tests and enrichment of uranium in return for over 240,000 metric tons of food aid. The deal would also allow the International Atomic Energy Agency to place its inspectors back into the Yongbyon nuclear complex to monitor compliance, though it is not known just how many plants North Korea has. The deal is supposed to have mechanisms in place to ensure the food doesn’t go solely to the military and the elite. It’s to be divvied up 20,000 tons each month.

There are no plans to restart six-party talks, however, which were last held in December 2008, about five months before the North detonated its second nuclear test device, and many, to say the least, are highly skeptical given Pyongyang’s abysmal track record of honoring past agreements. Both the Clinton and George W. Bush administrations were bamboozled by Kim Jong Il.

But now we have 28-year-old (?) Kim Jong Un on the throne and who knows who is really pulling the strings. What we do know is the kid and his handlers are operating from the same playbook used by his father.

I do agree with the Obama administration, though, that it’s worth learning more about the new regime. Give it two or three months to see how it goes. It’s not like we were gaining anything the way things stood before the latest probable sham agreement.

For its part, Seoul was highly skeptical, while the Chinese Foreign Ministry welcomed the hoped for breakthrough. Said a South Korean foreign policy expert, Andrei Lankov, “We are facing an endless soap opera. What does it mean? Pretty much nothing: the North Koreans will offer some symbolic concession to squeeze some aid and will behave themselves for a while.” [South China Morning Post]

Yemen: This hellhole has a new president, Abd-Rabbu Mansour Hadi, who won a rigged, single candidate election, backed by Gulf neighbors and the West, to replace Ali Saleh, who had ruled Yemen for 33 years. Hadi is to oversee a two-year transition to parliamentary rule with a new constitution. His election was greeted by a car bomb in the southern part of the country that killed 21.

France: National Front candidate Marine Le Pen is still trying to qualify for the April presidential election and if she does, some continue to maintain (such as moi) that she can cause more than a bit of mischief; Le Pen playing well among working-class voters. Sarkozy had a bad week on the campaign trail and Hollande’s lead over the president is back to 3.5 percent.

Britain: The leader of Britain’s largest labor union is threatening mass civil disobedience timed for the London Olympics. Unite’s Len McCluskey said: “The attacks that are being launched on public sector workers at the moment are so deep and ideological that the idea the world should arrive in London and have these wonderful Olympic Games as though everything is nice and rosy in the garden is unthinkable….The unions, and the general community, have got every right to be out protesting.” [BBC News]

Opposition Labour leader Ed Milliband, though, wrote: “Any threat to the Olympics is totally unacceptable and wrong. This is a celebration for the whole country and must not be disrupted.”

Hear Hear! God Save the Queen!

Germany: Chancellor Angela Merkel, facing re-election next year, has seen her approval rating rise to a three-year high, 64%. If President George W. Bush were still around, he’d say “Good girl” and give Merkel a back rub.

Actually, the Chancellor deserves credit for the coolness in which she handled the dumping of four beers on her. That counts for something in my book, as much as I mourned the loss of those premium pilsners.

Australia: Prime Minister Julia Gillard fended off a leadership challenge from rival and former foreign minister (and prime minister), Kevin Rudd; Gillard prevailing 71 to 31. She then consolidated her power and reshuffled her cabinet.

But Gillard remains deeply unpopular across the country, with her latest approval rating at a putrid 26%.

Colombia: The rebel group, FARC, said it was abandoning its practice of kidnapping civilians for ransom, which could signal the group’s willingness to enter into final peace negotiations. A sustained 10-year offensive by the Colombian military has cut FARC in half, though the group still holds at least 100 civilians hostage. FARC said it would release 10 members of the armed forces it was treating as “prisoners of war.”

Venezuela: There are reports President Hugo Chavez has less than one year to live. According to leaked e-mails, Russian doctors treating him in Cuba say he’s a miserable patient, for one, suspending treatment whenever he had to make public appearances. The Russians also feel like they are trying to clean up mistakes the Cuban team made. Chavez had more surgery this week, which we are told went well.

Mexico: From Rong-Gong Lin II of the Los Angeles Times:

“Twenty-two guests on the Carnival Splendor cruise ship out of Long Beach were robbed at gunpoint in Mexico last week as they traveled by bus from a nature hike in the jungle to the Mexican port city of Puerto Vallarta….

“Hooded gunmen intercepted the tourists’ bus…The gunmen took cameras, money, watches and other valuables before fleeing into the countryside….

“ ‘Carnival sincerely apologizes to its guests for this very unfortunate and disturbing event.’”

[Isn’t Carnival great? Can there be another company on the planet on a worse roll?]

And that’s your Mexico tourism update. Easier to go to your local Mexican food joint and drink some Dos Equis, if you ask me.

Random Musings

--Mitt Romney defeated Rick Santorum in Michigan, 41-38 percent, and in Arizona, 47-27.

Now it’s on to Super Tuesday, March 6, with primaries or caucuses in Alaska, Georgia, Idaho, Massachusetts, North Dakota, Ohio, Oklahoma, Tennessee, Vermont, Virginia, and Wyoming.

Ohio is the big one between Romney and Santorum, while Newt Gingrich, by his own admission, is finished if he doesn’t win his home state of Georgia. The last poll in Ohio before the Michigan and Arizona results had Santorum up 37-26 over Romney, but that undoubtedly has narrowed. For example a Gallup national tracking poll of registered Republicans as of Thursday had Romney ahead of Santorum, 35-24, while a week earlier Santorum was ahead of Romney, 34-27.

Meanwhile, Barack Obama is leading both Romney and Santorum in a national Politico/George Washington University Battleground Poll released Feb. 27, 53-43 and 53-42, respectively.

But according to Gallup, Obama trails Romney in Ohio, 50-46, and narrowly edges Santorum, 49-48.

[Ohio is one of the 12 battleground states for November…the others being Colorado, Iowa, Florida, Michigan, Nevada, New Hampshire, New Mexico, North Carolina, Pennsylvania, Virginia and Wisconsin.]

--Michael Gerson / Washington Post

“Romney’s wealth is not ill-gotten. His problem is political. He talks about money as though engaged in a discussion with his stockbroker. So $374,000 from paid speeches is ‘not very much.’ He is ‘not concerned about the very poor,’ on the assumption that the safety net is enough for them. His wife ‘drives a couple of Cadillacs.’ While not a racing enthusiast himself, Romney has ‘some great friends that are NASCAR team owners.’

“A single gaffe is a political flesh wound. A series of gaffes that confirm a damaging stereotype is potentially fatal.

“These blunders not only reinforce a traditional Republican weakness, they threaten to diminish a large Republican advantage – Barack Obama’s dramatic disconnect with blue-collar whites. The candidate who talked of small-town Americans as clinging ‘to guns or religion’ lost white working-class voters by 18 points in 2008. In 2010, congressional Democrats lost the same group by 30 points. A similarly dismal performance by Obama in 2012 would open vast blue portions of the electoral map to Republican raids.

“Romney may be the only candidate capable of herding working-class voters back toward the president….

“Voters need to know that Romney has at least witnessed the struggles he has not shared. When another wealthy politician, Robert F. Kennedy, toured Appalachia a week before his presidential announcement, Americans understood that he had met people and seen things that don’t leave a man unchanged. Romney must give some evidence – visiting, say, a low-income health clinic or a gang-occupied school – that his hand has touched, that his retina has registered, the hurt and hardship of another America.

“ ‘For the fortunate among us,’ RFK said, ‘there is the temptation to follow the easy and familiar paths of personal ambition and financial success so grandly spread before those who enjoy the privilege of education. But that is not the road history has marked out for us…The future does not belong to those who are content with today, apathetic toward common problems and their fellow man alike…Rather it will belong to those who can blend vision, reason and courage in a personal commitment to the ideals and great enterprises of American society.’

“If Romney can demonstrate this commitment – personally and authentically – he may yet become president of the United States.”

--Maureen Dowd / New York Times

“It’s finally sinking in.

“Republicans are getting queasy at the gruesome sight of their party eating itself alive, savaging the brand in ways that will long resonate.

“ ‘Republicans being against sex is not good,’ the G.O.P. strategist Alex Castellanos told me mournfully. ‘Sex is popular.’

“He said his party is ‘coming to grips with a weaker field than we’d all want’ and going through the five stages of grief. ‘We’re at No. 4,’ he said. (Depression.) ‘We’ve still got one to go.’ (Acceptance.)

“The contenders in the Hester Prynne primaries are tripping over one another trying to be the most radical, unreasonable and insane candidate they can be. They pounce on any traces of sanity in the other candidates – be it humanity toward women, compassion toward immigrants or the willingness to make the rich pay a nickel more in taxes – and try to destroy them with it….

“How can the warm, nurturing Catholic Church of my youth now be represented in the public arena by uncharitable nasties like Gingrich and Rick Santorum?

“ ‘It makes the party look like it isn’t a modern party,’ Rudy Giuliani told CNN’s Erin Burnett, fretting about the candidates’ Cotton Mather attitude about women and gays. ‘It doesn’t understand the modern world that we live in.’

“After a speech in Dallas on Thursday, Jeb Bush also recoiled: ‘I used to be a conservative, and I watch these debates and I’m wondering. I don’t think I’ve changed, but it’s a little troubling sometimes when people are appealing to people’s fears and emotion rather than trying to get them to look over the horizon for a broader perspective.’….

“Republicans have a growing panic at the thought of going down the drain with a loser, missing their chance at capturing the Senate and giving back all those House seats won in 2010. More and more, they openly yearn for a fresh candidate, including Jeb Bush, who does, after all, have experience at shoplifting presidential victories at the last minute….

“Romney’s Richie Rich slips underscore what Ed Rollins, a Republican strategist, told the Ripon Forum: ‘If we are only the party of Wall Street and country clubbers, we will quickly become irrelevant.’

“Santorum, whose name aptly comes from the same Latin root as sanctimonious, went on Glenn Beck’s Web-based show with his family and offered this lunacy: ‘I understand why Barack Obama wants to send every kid to college,’ because colleges are ‘indoctrination mills’ that ‘harm’ the country. He evidently wants home university schooling, which will cut down on keggers.”

--Kathleen Parker / Washington Post

“Let me be blunt: If Republicans nominate Rick Santorum to run for president, they will lose….

“It gives me no pleasure to rap Santorum, a man I know and respect even if I disagree with him on some issues. Not that he minds. He’s a scrapper who loves a fight – and he forgives. Bottom line: Santorum is a good man. He’s just a good man in the wrong century.

“This doesn’t necessarily mean he’s wrong about everything, but he’s so far out of step with the majority of Americans that he can’t hope to win the votes of moderates and independents so crucial to victory in November. The Republican Party’s insistence on conservative purity, meanwhile, will result in the cold comfort of defeat with honor and, in the longer term, potential extinction.

“Increasingly, the party is growing grayer and whiter. Nine out of 10 Republicans are non-Hispanic white, and more than half are highly religious, according to Gallup. This isn’t news, but when this demographic is suddenly associated with renewed debate about whether women should have access to contraception – never mind abortion – suddenly they begin to look like the Republican Brotherhood….

“The math is clear: Sixty-seven percent of women are either Democrats (41 percent) or independents (26 percent); more women than men vote; 55 percent of women ages 18-22 voted in the 2008 presidential election….

“Republicans may sleep better if they nominate The Most Conservative Person In The World, but they won’t be seeing the executive branch anytime soon.”

--John Podhoretz / New York Post…following the Michigan primary.

“Santorum slaughtered Romney among those Michigan voters who said they wanted a ‘true conservative,’ by a margin of 57-17. But those voters made up only 12 percent of the electorate.

“Most of the commentary you read and hear about the GOP – especially from the Right itself – would lead you to think those highly ideological voters constitute a near-majority. The truth is more complicated.

“Most Republican voters are out-and-out conservatives (indeed, 42 percent of all Americans describe themselves as conservative) – but they’re not necessarily tribal conservatives who are searching for someone ideologically pure to follow. Romney was more than conservative enough, it would appear, for a near-majority of Republicans in Michigan and Arizona.

“That said, Romney did worse than he should, and that happened not because Santorum is such a contender, but because Romney keeps shooting himself in the foot he has put in his own mouth….

“After his stunning victory in Florida, he said he ‘didn’t care about the poor.’ After his commanding victory in last week’s debate, he spoke about his wife’s ‘couple of Cadillacs’ and his friends ‘who own NASCAR teams.’…

“If he keeps getting in his own way, he will get to Tampa unnecessarily and pointlessly wounded. But if Romney can break the pattern, he will cruise to the nomination holding a hand far stronger than overconfident chortling Democrats – and the president himself – realize.”

--The Wall Street Journal’s Daniel Henninger has written some outstanding columns lately on the mythology being spun by President Obama as he rewrites reality in describing today’s economy.

“The economic and social world Barack Obama inhabits, and has always inhabited, is totally static. Your lot in life – income, status, mobility – is largely set, with little prospect of escaping upward.

“He spoke in (last week’s) UAW speech of ‘sons and daughters’ aspiring to assembly-line jobs held by their grandparents. Even they don’t believe life is that static. He promises to solve their economic problems by expropriating money from the wealthy. Boeing will be forced to make planes in Washington State – forever. Naturally this president’s biggest believers live in Hollywood.

“Most Americans are not so credulous. But unless the GOP candidates start spending more time dismantling Obama’s mythical America instead of each other, this grim fairy tale could win.”

--Hopes for Republicans winning the Senate were dealt a big blow when Maine Republican Sen. Olympia Snowe, a true moderate, opted not to run for re-election, citing the chamber’s growing ‘polarization.’ Snowe joins other Senate centrists in announcing her retirement, including Ben Nelson (D., Neb.), Joseph Lieberman (I., Conn.) and Jim Webb (D., Va.).

In the case of Nelson’s seat, former Democratic Sen. Bob Kerrey reversed an earlier pledge not to run and said he would now go for his old seat, thus ticking off party stalwarts in Nebraska but giving that state’s Democrats a better shot at retaining the seat by most accounts. Republicans need to pick up four to recapture the Senate.

Sen. Snowe wrote an op-ed in the Washington Post explaining her decision:

“Simply put, the Senate is not living up to what the Founding Fathers envisioned.

“During the Federal Convention of 1787, James Madison wrote in his Notes of Debates that ‘the use of the Senate is to consist in its proceedings with more coolness, with more system, and with more wisdom, than the popular branch.’ Indeed, the Founding Fathers intended the Senate to serve as an institutional check that ensures all voices are heard and considered, because while our constitutional democracy is premised on majority rule, it is also grounded in a commitment to minority rights.

“Yet more than 200 years later, the greatest deliberative body in human history is not living up to its billing. The Senate of today routinely jettisons regular order, as evidenced by the body’s failure to pass a budget for more than 1,000 days; serially legislates by political brinkmanship, as demonstrated by the debt-ceiling debacle of August that should have been addressed the previous January; and habitually eschews full debate and an open amendment process in favor of competing, up-or-down, take-it-or-leave-it proposals….

“In a politically diverse nation, only by finding (common ground) can we achieve results for the common good. That is not happening today and, frankly, I do not see it happening in the near future.”

--Meanwhile, as reported by the Washington Post, “In the months to come, political strategists expect to see the first family used as a political asset.” As noted by The Weekly Standard, the Post then goes on to quote Democratic pollster Celinda Lake: ‘The value of the family is enormous. The more you know this family and the more you think of Barack Obama in these terms, the harder it is to vilify him.”

To which The Weekly Standard’s ‘Scrapbook’ responds: Oh, really?

“You see, what surprises The Scrapbook is not the apparent fact that the Obamas are a nice, close-knit family, or that Malia, 13, and 10-year-old Sasha are appealing young girls. What surprises The Scrapbook is that, up until the re-election campaign of Barack Obama, news organizations such as the Washington Post have been exceedingly protective of Democratic presidential families, especially children, and highly critical of any comment made about, any attention whatsoever paid to, presidential offspring.

“Unless, of course, the children were the presidential offspring of Republican presidents.”

--We note the passing of conservative activist Andrew Breitbart at the age of 43. 

--From Army Times: “The top U.S. and NATO commander in Afghanistan has ordered coalition troops to complete training no later than March 3 in the proper handling of religious materials.”

So commands Marine Corps Gen. John Allen. The Korans that were burned that caused the uproar and led to the deaths of six American soldiers were removed from a library at the Parwan Detention Facility, adjoining Bagram, because they contained extremist messages or inscriptions. It’s just pathetic that ten years into the war, our soldiers still need to be trained on how Korans are to be handled.

--“Seventeen commissioned and noncommissioned officers in a single company in Kosovo have been suspended amid an Army investigation into allegations they employed harsh training tactics to initiate junior soldiers, the commander of U.S. Army Europe said.”

“ ‘It was all about not respecting soldiers, using the wrong kinds of training methods, frat house kinds of jackassery, and just poor leadership,’ Lt. Gen. Mark Hertling said in an interview with Army Times on Feb. 24.”

The allegations surfaced after a private in the company lodged a formal complaint in early February. Hertling said it would be a mistake to characterize the private as weak for his response to the abusive tactics.

“For a young private to stand up like that, it’s courageous,” Hertling said. “For this new guy to say what you guys are doing is wrong, courageous is an understatement. It took a great deal of courage by this young guy.”

Military hazing has led to suicides. I bring it up because it’s the kind of crap you read about when it comes to the Russian military. It’s not supposed to happen in the U.S. armed forces.

I’ve been railing about the generals for years now. It seems I’ve been right to do so, on a number of different levels. The buck stops with them.

And I haven’t even brought up the ongoing investigation of Dover Air Force Base, where we learned on Tuesday that partial remains of some victims of 9/11, from the Pentagon and Shanksville, ended up in landfills. Previously, officials at Dover acknowledged that some portions of remains of fallen soldiers from Iraq and Afghanistan had been incinerated and sent to a landfill. [The military now disposes of cremated remains at sea.]

Air Force Secretary Michael Donley told a news conference on Tuesday he was not aware that some remains of 9/11 victims had been taken to the landfill, saying: “This is new information to me.”

It’s sickening. We must do better!

--Police in Latin America and Europe arrested 25 suspected members of the Anonymous hacking group, according to Interpol. Drop ‘em from a helicopter into shark-infested waters.

--Feb. 21-28, 1972…President Nixon went to China.

--Uh oh… “An asteroid with a one in 625 chance of striking Earth in 30 years’ time has been identified by NASA.

“The 460 foot ball of rock named 2011 AG5 is potentially on course to hit this planet on February 5, 2040.

“The United Nations Action Team on near-Earth objects has begun discussions about how to divert the asteroid, amid fears that the likelihood of a collision could increase over the next few years….

“According to sky scans carried out by NASA, there around 19,000 ‘mid-sized’ asteroids of between 330 and 3,300 feet wide within 120 million miles of Earth. All have the potential to destroy an area the size of a city were they to strike.

“The Aphophis asteroid, which is the size of two and a half football pitches, is on course to pass close to the Earth in 2036, coming within 18,300 miles of this planet. Scientists expect that it will be visible from most of Europe, Africa and Asia.” [Rosa Prince / Irish Independent]

I don’t plan on being around for AG5, though Aphophis could be an issue for yours truly, but you younger folk might want to think about putting in for sick days now, just to get ahead of the crowd.

--And the New York Daily News had a story on research published in the journal Space Weather that “finds the sun could unleash another big solar flare (like 1859), much larger than the ones in January that set off impressive aurora borealis displays and caused some airlines to divert flights near the North Pole to avoid disturbances to their planes’ equipment.”

1859 was the year of the so-called Carrington Event, which “was epic – it was the largest on record – and damaged the telecommunications infrastructure of its day, setting telegraph stations ablaze and damaging their communication networks. But it was the show in the sky that proved unforgettable.

“The New York Times descried the skies in Manhattan in breathtaking terms.

“ ‘On Sunday night the heavens were arrayed in a drapery more gorgeous than they have been for years…Such was the aurora, as thousands witnessed it from housetops and from pavements. Many imagined they heard rushing sounds as if Aeolus [a mythological Greek god] had let loose winds.”

Meanwhile, a Carrington Event today would do a number on us; transportation, communication, banking, water supply.

Then again, a bunch of computer hackers can do the same thing.

---

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

Our thoughts and prayers are with those devastated by this week’s tornadoes, as well as the community of Chardon, Ohio.

God bless America.

---

Gold closed at $1709
Oil, $106.70

Returns for the week 2/27-3/2

Dow Jones -0.04% [12977]
S&P 500 +0.3% [1369]
S&P MidCap -0.8%
Russell 2000 -3.0%
Nasdaq +0.4% [2976]

Returns for the period 1/1/12-3/2/12

Dow Jones +6.2%
S&P 500 +8.9%
S&P MidCap +11.1%
Russell 2000 +8.3%
Nasdaq +14.2%

Bulls 51.1
Bears 25.5 [Source: Investors Intelligence]

Dr. Bortrum posted a new column, as he nears the end of his Bell Labs days. I’m sure many of you saw last week’s Sunday Times piece on Bortrum’s old haunt.

Have a great week.   I appreciate your support.
 
Brian Trumbore