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For the week 3/26-3/30
Europe, Washington and Wall Street
So last week I wrote that the euro debt crisis would reemerge in “4 to 8 weeks,” adding “what is most apparent is that Spain is about to become the next crisis. Maybe not tomorrow. Maybe not April 5. But it’s coming.”
Actually, we learned this week it could indeed be around April 5, maybe April 3 when the Spanish parliament debates a new austerity program put forward by the government that is designed to slash the budget deficit from 8.5% of GDP to a mandated 5.3% by yearend, with government spending reduced a whopping 16.9%, corporate taxes raised, and public sector pay frozen. But with 23% unemployment, the plan hardly does anything immediate on the growth front. Contained in the budget proposal are sweeping labor reforms that will make it easier to hire, and fire, which didn’t go down well with the unions so there were massive protests across the nation on Thursday that not only shut down much of the country (Iberia canceled 65% of its flights, for example), but also turned a bit ugly, Spain normally not known for violent protests. Prime Minister Rajoy has been in office just three months but it must seem like an eternity and it only gets tougher from here.
So the euro-17 needs a bigger firewall and we’ve only been talking about this for two years now. On Friday, eurozone finance ministers raised the firewall to not only deal with Greece, Ireland and Portugal, the three already receiving bailouts, but also to keep speculators from going after Italy and Spain.
So the bailout funding has been increased to 700 billion euro, 500 from the European Stability Mechanism (ESM) and 200 billion as a temporary fund, such funds currently reserved for Greece, Ireland and Portugal, which will come out of the ESM but at the same time the ESM will have a full 500 billion capacity.
In addition, ministers allowed the 240 billion euro in unused funds in the current European Financial Stability Facility (EFSF), which was part of the original 440 billion pool. The 240 can be used until the ESM is up and running, with ESM not fully capitalized until early 2014.
So you’ll hear talk of a nearly one trillion euro pool to provide for bailouts and beat back speculators but it really isn’t that size. Just more of the same Ponzi scheme if you ask me, plus I’m guessing in a few months we’ll be talking about just how the ESM is actually being funded, as in some nations will begin to renege on their commitments.
“Contagion may…reemerge at very short notice, as demonstrated only a few days ago, and re-launch the potentially perverse triangle between sovereign, bank funding risk and growth,” as reported by the Financial Times.
And just remember, the financing needs of Italy and Spain alone are about 1.2 trillion euro over the next two years.
Meanwhile, Italian Prime Minister Mario Monti, the toast of Europe these days, still has a huge issue on his hands; getting the Italian parliament to approve the kinds of sweeping labor laws that Spain’s Rajoy is attempting to get through; replacing the old with the young to gain increased productivity.
And elsewhere in the EU, Germany reported a second straight monthly decline in retail sales for February.
Motorists in the U.K. are in panic buying mode as a strike by fuel tank drivers looms in about a week.
Ireland set the date for a referendum on the recently signed European fiscal compact for May 31. If Irish voters turn it down, all hell breaks loose.
And all hell might break loose when Greece holds new elections, sometime in the next 4-5 weeks, with half the electorate apparently prepared to vote for radical parties, leaving whoever wins struggling to find viable coalition partners.
Lastly, I’ve written gobs about the European Central Bank’s two long-term refinancing operations, LTROs, that provided 1 trillion euro in cheap three-year loans to the financial system. More and more are calling it a Ponzi scheme, finally, and should rates rise, as they’ve done in Spain in particular the past two weeks, a very dangerous one. “Weak banks are buying weak sovereigns,” as some have put it. It’s that simple. It’s bound to fail unless…all together, boys and girls…Europe grows!!!!
The economic data on the week was mixed, at least vs. expectations. The final figure on fourth-quarter GDP was unchanged at 3.0%, which is certainly not the figure we’ll see reported for Q1, with consensus being around 2.0%. February durable goods orders came in up 2.2%, less than expected, while personal income for the month grew only 0.2%, on the light side and equal to January’s weak rise, but consumer spending for February rose 0.8%, so, we were dipping into savings again as the savings rate dropped to 3.7% of after-tax income, the lowest level since Aug. 2009.
On the housing front, the S&P/Case-Shiller data for January showed prices declined 3.8% from year ago levels and are now down 34.4% from the 2006 peak as prices dropped in 16 of 19 major metropolitan areas (Miami, Phoenix and Washington, D.C., bucking the trend…Atlanta, Chicago and Las Vegas among those hitting their lowest levels since 2000). Yes, we’re bottoming, it’s just when is the true recovery in prices? Not any time soon…at least nothing that is sustainable.
Federal Reserve Chairman Ben Bernanke, addressing the issue of unemployment, told an audience of economists:
“(Further) improvements in the unemployment rate will probably require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies.”
Translation: We went from 9.1% to 8.3% over six months. Don’t expect a similar rate of decline anytime soon.
But stocks rallied on Bernanke’s not so rosy forecast because the chairman also seemed to make clear the Fed is determined to provide further liquidity if necessary to help improve the labor picture, which the stock market likes and the quarter finished on a high note, making it the best first three months for equities since 1998, at least in terms of the S&P 500, up 12%. The Dow Jones advanced 8% and Nasdaq had its best first quarter since 1991, up 19%.
On the energy front, the average price at the pump hit $3.91, according to the EIA (check out my “Wall Street History” link for a look at past prices), as the United States, the U.K., France and Japan explored the idea of releasing a large amount of supply onto the market, which helped curb oil prices a little this week. Of course Presidents Obama and Sarkozy are also up for reelection; not that this would have anything to do with their decision to make such a move. According to a Reuters/Ipsos poll, 2/3s of Americans disapprove of the way Obama is handling high gasoline prices, including a majority of Democratic voters, which could spell trouble.
But to beat a dead horse, oil prices are not coming down in any substantial way with Iran still hanging over the world, and according to the International Energy Agency, $100+ oil ($125 on Brent) could tip the world back into recession if it continues. European households, for example, are spending 11% of their income on all things energy-related vs. a normal 6% to 7%. That makes a heckuva difference for an already recessionary environment across the pond.
As for the refinery issue, just remember when you hear of problems and can’t quite understand why, East Coast refineries are largely getting supplies from overseas, or Brent crude, the $125 variety, whereas Texas refineries are supplied for the most part from Cushing, Oklahoma, and the cheaper West Texas Intermediate that I’ve quoted forever down below. So it’s the East Coast ones that are getting killed on their margins with declining U.S. demand.
On the ObamaCare front, after an historic six hours of oral arguments, many believe it will once again come down to Justice Anthony Kennedy as the swing vote, though I’m betting Chief Justice John Roberts could surprise going the other way.
As to what happens to the rest of the Affordable Care Act if the individual mandate is struck down, or “severability,” there seems to be a consensus the whole law would be taken out, seeing as the mandate is “the very heart of this act,” as attorney Paul Clement argued for the 26 states challenging the ACA.
Justice Antonin Scalia argued that severing the mandate from the rest of the law “would require the Justices to comb through ObamaCare’s 2,700 pages and pick out the parts that are connected to the mandate and those that aren’t – essentially asking them to play omniscient time travelers, if not legislators. Striking it down altogether would paradoxically be a gift of judicial modesty by avoiding the legal invention of a new law. A clean slate gives Congress the most options.” [Wall Street Journal]
So now we sit and wait. Actually, as Robert Barnes writes in the Washington Post, the Justices probably met on Friday morning to cast their votes, only they and their clerks are sworn to secrecy. The rest of us won’t know until late June, if precedent is followed. And boy will that be fun.
Finally, three months into 2012 and my predictions are all shot to hell.
Or are they? I wrote on 12/31/11, “I see the three major U.S. stock indices falling 10%, and it is going to be one wild year…Stocks could be up big like 15% to 20%, and then crash.” Seeing as how history has shown after a strong first quarter like we’ve just had, stocks invariably finish up for the year, this already looks like a big miss.
But three months ago, I pointed out a comment of mine from 3/5/11 that when it came to our deficits, “We will meet our Waterloo at some point in 2012.” I still believe that; that it won’t be 2013 as everyone else says it will. Last year, I said of 2012 that we would witness “a 30% decline in a short period of time that will be fueled by our Greece- or Italian-like moment….something will trigger a severe change in sentiment, which in turn may finally force our policymakers to act. No, the president won’t be able to just employ a four corners stall game until November. The markets won’t let him.” [WIR 12/31/11]
In my predictions for 2012, I spelled out how “Obama can lose the election on (the single issue of Iran), if, say, after Labor Day, Iran were to explode even a crude nuclear device.” Which led me to believe Obama would act no later than May. Of course I’ve talked about this every week going back to last fall. We’ll see.
I still believe Pakistan will witness a coup in 2012; Russia may yet see waves of terrorism; Putin will not last the year; Europe will be convulsed in riots over austerity programs; and there will be problems with the Summer Olympics.
I wrote on 12/31/11 that with regards to North Korea and new leader Kim Jong Un, “I’m holding off. No one knows, or can really hazard a guess.”
I also said that in 2012 “the eurozone crisis will continue unabated.”
One thing I’m likely to get very wrong was I really thought Marine Le Pen in France would upset Nicolas Sarkozy and gain the run-off in April’s election. That will not be the case.
So it’s already been a fascinating first three months, but you ain’t seen nothin’ yet.
--The Dow Jones snapped back after its worst week of the year, finishing up 1% to 13212, while the S&P and Nasdaq each added 0.8%.
There was a feeding frenzy for the IPO of Annie’s organic food company, rising 89% in its first day. Then Millennial Media (mobile ad-aps) more than doubled on Thursday, jumping to $27.90 its first day of trading vs. the $13 it was priced at.
Meanwhile, Facebook appears to be targeting May for its IPO, with the company’s valuation now pegged at $102 billion.
--U.S. Treasury Yields
6-mo. 0.13% 2-yr. 0.33% 10-yr. 2.21% 30-yr. 3.35%
While the Fed is projecting an unemployment rate of 7.4% to 8.1% for Q4 2013, research from the Federal Reserve Bank of New York forecast the jobless rate could drop to as low as 6% by the first half of 2013. Holy Toledo! Were this to occur, the nation would form one giant conga line and sing “Happy Days Are Again!” Peace and brotherhood would be in the air. We’d slow down at pedestrian crossings and stop texting while driving….OK, I’m getting a little carried away.
--Small businesses, those with fewer than 500 employees, account for about 65% of jobs created in the past 20 years, according to the Business Roundtable.
--There were further signs of a significant slowdown in China as industrial company profits for Jan. and Feb. declined at the fastest pace since 2009. All eyes are on next week’s slew of economic data, while I’ll be focused on the release of Macau’s gaming numbers for another signal as to the pace of the slowdown.
--Retail sales in Japan rose at a significant 3.5% rate in February vs. a year earlier, but industrial production was down 1.2% for the month.
--Canada hiked the eligibility age for its Old Age Security (OAS) benefits from 65 to 67, starting in 2023, as part of the government’s new budget that includes cuts in defense, health care and agriculture. Plus the minting of pennies has been stopped, though they can still be used in purchases.
Canadian Finance Minister Jim Flaherty said of the OAS change:
“Canadians are living longer and healthier. Canada has changed. Old Age Security must change with it.”
[A U.K. study out this week said that of the 826,000 births in that country expected in 2012, one in three will reach age 100.]
--An independent investigation into working practices at Chinese plants making Apple iPhones and iPads found “significant issues.” But this is way overblown.
The U.S. Fair Labor Association (FLA) was hired by Apple itself to investigate working conditions at Foxconn after reports of long hours (horror!!!) and poor safety (eh).
Apple said it “fully accepted” the report’s recommendations. “We share the FLA’s goal of improving lives and raising the bar to manufacturing companies everywhere,” it said in a statement.
Apple CEO Tim Cook visited Foxconn facilities this week and met with Chinese government leaders.
Now I understand that there have been a number of suicides at Foxconn facilities, and wages need to rise so that some aren’t working so hard just to keep up, but as one who has taken one week off in 13 years of writing this column, you get no sympathy from me on work hours.
China’s legal limit on hours is said to be 49 per week. That’s nothing, though Foxconn said it would comply with the FLA’s standards by July 2013. From the looks of the hippie/60s throwback leader of the FLA, I’m guessing he works 30 hours a week.
FLA President Auret van Heerden said, “The eyes of the world are on (Apple) and there’s just no way they can’t deliver. It’s a real showstopper.”
--In 2007, the Russian government’s budget balanced at less than $30 a barrel of crude whereas predictions for 2012 put the measurement above $115. [Moscow Times] I’d say that’s a growing dependency on high oil prices, wouldn’t you?
--As the Washington Post editorialized, Hong Kong’s new chief executive, Leung Chun-ying, “was muscled through by pressure from Beijing despite his unpopularity with the local business elite. As for the general population, an online poll in which 220,000 people took part recorded 54% for none of the candidates, followed by 17% for Mr. Leung.”
Leung is allegedly a secret member of the Chinese Communist Party and has favored repression by force in the past, charges he denies.
So Hong Kong still has free speech and assembly, but not free elections.
--Britain’s energy policy “is in tatters,” as the London Times put it, after two German energy giants, E.ON and RWE, scrapped plans to build up to six new nuclear reactors in Britain, citing funding constraints and the decision to phase out nuclear power in Germany following the Fukushima disaster. So only the French seem willing to build new reactors in the U.K., but the plan on the part of EDF Energy and Areva has been delayed by two years.
The utilities are dying. One government official said, “We need more power generation, and we need it from a range of sources including nuclear. Without enough reliable and affordable power to underpin our economy, businesses will find it harder to deliver growth. This decision is disappointing, and the Government needs a far better energy strategy to ensure the lights stay on and the factories keep running.”
--Inventories of natural gas are at record highs in the U.S., owing to the mild winter and new production techniques, so the price fell this week to another decade low, closing at $2.12 a million BTUs. The outlook is for even lower prices as we enter the injection season, April through October.
Eventually, however, the cycle will reverse as more and more production is shut off due to the same low prices and should we return to normal weather next winter, this will be a terrific investment. [Which means you start nibbling around June, I’m guessing.]
--The USDA reported that America’s farmers will plant 95.9 million acres of corn this spring, the most since 1937 and above expectations. Worldwide demand is soaring and the U.S. is the leading exporter of the crop. But, with more corn being planted, plantings of soybeans are expected to fall 1%, while the cotton crop could come in 11% below 2011.
--As a Bloomberg story pointed out, the “Arab Spring” has not done wonders for the Tunisian and Egyptian economies, both of which shrank in 2011. For Tunisia, it was the first decline since 1986, and for Egypt its first contraction in “decades.”
--Home prices in Ireland fell another 2.2% in February, according to the official statistics office in Dublin, bringing the total decline from the peak to 50%, though as I’ve written recently, some say it’s closer to 70% in many parts of the country. Apartment prices in Dublin have fallen 23% in just the past year (57% from their peak). Economist Alan McQuaid sees another 10% decline in 2012, nationwide.
--BlackBerry maker Research In Motion Ltd. continued to plummet into the depths of Commodore Computerdom as it announced an overhauling of its executive suite while exploring strategic options, including a sale. RIM shares have lost about 75% of their value in the past year as companies move away from BlackBerrys at lightspeed in favor of Apple’s iPhone and other competitors. Revenue for the quarter ending March 3 dropped by 25% from year ago levels and the company said it was writing off $267 million worth of unsold BlackBerry 7 models, its newest device. Yikes.
[RIM did still sell 11.1 million BlackBerrys for the quarter, but this was 21% fewer than the previous one.]
--Regarding the issue of some employers requiring job applicants to hand over confidential passwords to Facebook and other social networking sites, I’d tell the interviewer to “Blank off” and then post the specifics.
Of course I’d only do that if I had $1 million in cash lying in the bank.
But this is a no-brainer, as it’s being explored by Democratic Senators Schumer (N.Y.) and Blumenthal (Conn.). No way should employers be able to ask for that.
--Speaking of lots of cash, I’m one of the countless millions who has never played the lottery but broke down this week for Mega Millions. Yup, plopped down $10.
I also got a kick out of the stories of long lines because I had none where I purchased mine. [Pssst….Summit residents…for future reference the liquor store across from Marco Polo.]
--MF Global assistant treasurer Edith O’Brien pleaded the fifth amendment, refusing to give evidence to a congressional committee looking into the collapse of MF, the eighth largest bankruptcy in U.S. history with $1 billion of client funds still missing. O’Brien is believed to have knowledge of the critical final days and a crucial transfer of MF Global funds that may, or may not have, involved client money.
And in another classic case of “wait 24 hours,” there have been conflicting reports as to just what former CEO Jon Corzine knew and what he actually approved in terms of the transfer of $200 million to meet an overdraft in a JPMorgan Chase account, though the edge appears to go to him at this point.
--BATS Global Markets Inc.’s directors removed Joe Ratterman as chairman, though supported him as CEO after the collapse of the exchange operator’s IPO.
BATS, by the way, cited a “software bug” / server issue for creating the chaos that prevented its stock from opening, as well as causing a momentary halt in Apple trading, as exchanges group servers for different securities, normally alphabetically, and, presto! Apple is one of the first in order.
--Best Buy, the nation’s largest specialty electronics retailer, announced it would close 50 of its big-box stores, cut 400 corporate jobs and trim $800 million in costs.
But, the company, with 1,400 locations, also plans to open 100 smaller and more profitable Best Buy Mobile stores. “More doors…less square footage,” is the new mantra. Makes sense. Earnings for the period ending March 3 exceeded Street expectations handily, though revenues fell short.
--According to the Financial Times, investment banking fees from mergers and acquisitions, equity and debt capital markets were down 24%, year-on-year, in the first quarter.
--Former Goldman Sachs banker Greg Smith, who resigned via the New York Times op-ed for which he is receiving his 15 minutes of fame, is said to be close to receiving $1 million for his memoir on life inside Goldman. I will not buy this one.
--In a study by Kantar Media, auto ad spending totaled $13.9 billion in 2011, accounting for 20% to 25% of total ad revenue for cable systems and local TV stations. As reported by Crain’s New York Business, “Combined with the summer Olympics and the November elections, higher auto sales could lead to a record upfront advertising market in May, and a strong market for spot advertising in the second half of the year,” according to Moody’s in a separate report, where Moody’s forecasts a 9.3% increase in auto sales this year over last.
CBS Corp. is poised to benefit as it receives 63% of its revenue from advertising.
--An investor group led by NBA Hall of Famer Magic Johnson acquired the Los Angeles Dodgers for $2 billion, a record for a professional sports franchise. According to a media analyst, the value of the New York Yankees is now $2.85 billion. It’s all about television rights. People love to watch sports.
Former owner Frank McCourt could make as much as $1 billion, which is outrageous seeing as he looted the coffers and ran the franchise into the ground. Only in America. [Or Russia, actually…China…]
--JetBlue pilot Clayton Osbon faces a lengthy prison sentence for his meltdown on Flight 191 that could have resulted in catastrophe for the 135 passengers and crew on board had the co-pilot not heroically acted in the fashion he did, along with passengers and flight attendants.
--Atlantic City is counting on a new $2.4 billion resort, Revel, to kickstart the casino industry there. The place is getting excellent initial reviews. It’s the 12th casino in A.C. and first to open since Borgata in 2003.
--Still no word on my China holding as it put in for a two-week extension on reporting earnings (which is legal) due to its large acquisition last November of a feedstock company and the first extensive official valuation of same. I have no problem with this, but now I won’t know what the results are until April 13, or thereabouts. The company already announced its conference call would be April 17, which is a good sign.
Iran: A date has been set for talks between Iran and the P5+1 – U.S., Russia, China, France, Britain and Germany – April 14 in Istanbul. The last time these parties met was in January 2011, and it didn’t go well, obviously. For its part, Israel has made it clear that Iran cannot be allowed to continue to enrich uranium while the talks are ongoing. Prime Minister Netanyahu warned awhile back that the world cannot fall into the trap of allowing the Iranians to buy time through negotiations.
Netanyahu has said the three goals of the talks should be: “Iran must stop all uranium enrichment, remove from the country all uranium already enriched beyond 3.5 percent and close down its underground nuclear facility at Qom.” [Jerusalem Post]
Thus far, no other country in the P5+1 has signed off on these objectives. But on Friday, President Obama applied fresh sanctions on Iranian oil, formalizing those originally set to go into place by July 1.
Last week I cited the thoughts of The Atlantic’s Jeffrey Goldberg, who has had extensive discussions with Israeli officials. Following are some of his further comments, part II, as put forward in a Bloomberg op-ed.
“I disagree with (Defense Secretary Leon) Panetta’s view that an Israeli attack could come by June, but I do think that, if current conditions prevail, there is a very good chance Israel will strike by the end of the year….
“The Israelis don’t see Obama as an adversary. Especially after the air-clearing meeting between Obama and Netanyahu this month at the White House, the Israeli leadership is fairly confident Obama will side with them if they launch an attack, and they are also fairly confident the president is serious when he suggests that the U.S. might one day use force to stop Iran.
“But that’s almost beside the point. From the perspective of the two men who matter most in the Israeli decision-making process – Netanyahu and Defense Minister Ehud Barak – American promises are somewhat immaterial. Because it is imprinted on the Israeli DNA that Jews, post-Holocaust, shouldn’t rely on the kindness of non-Jews to bail them out of trouble. In other words, no matter how strong Obama’s rhetoric, Israel’s leaders will not subcontract out their defense to the U.S. or any other party….
“U.S. officials are confident they could destroy Iran’s nuclear facilities in 2013 or 2014 if they needed to. The Israelis seem to believe that, because of their more modest offensive capabilities, they either strike in 2012 or don’t strike at all.
“In fact, I’ve concluded that there are only two reasons Israel’s leaders haven’t struck already.
“First, they believe that there is still some time before Iran enters the ‘zone of immunity,’ in which its nuclear sites are so hardened or spread so widely that a strike would be ineffective. And second, because Iran has not yet approached the zone of immunity, Israeli leaders believe they can still pay heed to Obama’s request to hold off…
“When Israeli leaders conclude that Iran has reached the threshold of the zone of immunity, there’s a strong likelihood they will act.”
*There’s also a rumor that Israel purchased an airbase in Azerbaijan to facilitate a strike on Iran.
On a different topic concerning Israel, jailed Palestinian leader Marwan Barghouti has called for a new wave of civil resistance, Barghouti being a revered Fatah leader.
“The launch of large-scale popular resistance at this stage serves the cause of our people. Stop marketing the illusion that there is a possibility of ending the occupation and achieving a state through negotiations after this vision has failed miserably,” he said in a statement then read to a crowd of supporters in Ramallah.
This is not good…the timing couldn’t be worse. Barghouti also called for the stoppage of all cooperation, such as on security and the economy, between Israel and the Palestinians.
There is the theory that Barghouti remains in Israeli custody because Palestinian President Mahmoud Abbas wants him there, afraid if Barghouti were released, he and his younger generation would topple the Abbas generation, who largely emigrated from Tunisia following the signing of the Oslo Accords in 1993.
Syria: What a joke. House-sitter Kofi Annan’s peace plan, that is, which President Bashar al-Assad signed off on and then immediately ignored. One incredibly worrisome sign is there is evidence of intense clashes on the Lebanese border and conflicting reports on whether or not Syrian forces, pursuing rebels, crossed into the country. One thing is for sure; Syrian mortar shells have landed in Lebanon. Clashes throughout Syria are just as intense as ever.
Annan’s peace plan, by the way, which was signed off on by the five permanent members of the Security Council (see P5 above), calls for a UN-monitored ceasefire, the pull-out of troops from cities, freedom of assembly, and a political dialogue between the regime and the opposition.
Meanwhile, Turkey has significant issues with its border with Syria. Well over 30,000 refugees have crossed into the country and the government said it can handle 100,000, but much more than that begins to create major problems. Turkey wants support from the Security Council for a buffer zone, but it seems Russia and China would object. Turkey also engages in substantial trade with Russia and Iran, Syria’s two patrons, and Turkey relies on Russian energy, so it’s sensitive all around.
“There was something nauseating in Russian President Dmitri Medvedev’s recent comments that the plan currently being peddled by Kofi Anna…represents the last best chance to avert a Syrian civil war.
“Medvedev knows that Russia has been greatly responsible for escalating the violence in Syria, sending weapons and advisers to help President Bashar Assad repress his own people. Diplomatically, however, the Russians are paying no price. In fact, they’re making headway.
“The outgoing Russian president isn’t alone. Annan’s six-point plan has been picked up by the international community as the way to resolve the Syrian crisis. That the plan is awash with ambiguity, so that each government can interpret it advantageously, has been its strongest point. However, imprecise plans are usually easier to market than to execute. Annan’s scheme is no different….
“The most contentious aspect of the plan is that Assad stays in place. It’s remarkable that some Western observers regard the Annan project as a mechanism for ousting the Syrian president. On this page, for instance, David Ignatius [Ed. Washington Post, syndicated in the Daily Star] writes that it ‘could open the way toward a ‘soft landing’ in Syria that would remove Assad without shattering the stability of the country.’ And yet Annan’s plan is but a modestly reinforced version of an Arab League plan from last November – one also accepted by Damascus – that hardly weakened Syria’s president.
“We should have no allusions. Russia and China consider the Annan plan a formula for saving Bashar Assad, not getting rid of him. The most ridiculous claim in the past two weeks is that Moscow and Beijing have softened on Syria, and proved this by moving closer to the Americans and the Europeans in the Security Council, where they signed on to a presidential statement backing Annan’s mission.
“The truth is that it’s the Obama administration and its European partners that have adopted the Russian and Chinese perspective. When President Barack Obama says that Assad will fall, that’s empty oratory destined to keep Syria at arm’s length during an election year, and avoid accusations that the U.S. president is soft on mass murder. But Obama’s focus is elsewhere. He prefers to subcontract Syria to regional states, even to the feckless Russians, so that he can pursue America’s strategic reorientation away from the Middle East.”
Afghanistan: In a New York Times/CBS News poll, 69% of Americans believe the U.S. should no longer be in Afghanistan. Just four months ago, the figure was 53%. 68% thought the fighting was going “somewhat badly “ or “very badly,” compared with 43% who had those impressions in November.
As Michael O’Hanlon of the Brookings Institution told the Times:
“I honestly believe if more people understood that there is a strategy and intended sequence of events with an end in sight, they would be tolerant. The overall image of this war is of U.S. troops mired in quicksand and getting blown up and arbitrarily waiting until 2014 to come home. Of course you’d be against it.”
Ergo, nice leadership on the part of President Obama in explaining the situation.
But O’Hanlon should have mentioned that Americans may not believe we’re getting blown up, but more likely we’ve seen too many stories of being turned on by the very Afghans we’re training, or by Taliban infiltrators. Another American was killed this week in such a fashion, two Brits, bringing the number of NATO troops killed by Afghan soldiers and policemen to 16 this year; 16 out of 84 foreign troops killed in the first quarter.
Pakistan: Senior U.S. military commanders met with their Pakistani counterparts in an attempt to get the latter to reopen supply lines NATO uses for its troops in Afghanistan, the routes being closed since the accidental attack by U.S. helicopters that killed 24 Pakistani soldiers back in November. While relations are said to have improved slightly since last year’s uproar, the supply lines remain shut down as Pakistan also wants a halt to drone attacks inside its borders.
Separately, Osama bin Laden’s widow, it has been revealed, says Osama fathered four children while moving from hideout to hideout in Pakistan, but CNN security expert Peter Bergen, one of the better ones, is convinced senior Pakistani leadership did not know of bin Laden’s locations.
Egypt: I was wrong…it seems the Egyptian presidential election will indeed be held this spring, specifically May 23-24. But wouldn’t you know the Muslim Brotherhood, which had said it would not field a candidate, is now intending to do so.
Recall, the problem with an early election is that the Brotherhood is the only party with an infrastructure, while the new, reformist parties, are struggling to create theirs, so the earlier the election is held, the greater advantage for the Brotherhood.
The Brotherhood claims it changed its mind because there weren’t any qualified candidates who have announced. They also say minority rights will be safeguarded.
But in the immediate term, you have the fight over the new constitution, which is being written by a panel of 100 members; 50 of which are lawmakers, the other 50 being prominent Egyptian figures. The Brotherhood gets 25 of the 50 seats allotted to parliament, with the ultraconservative Salafists receiving 11, or just 14 seats for those who may be deemed moderate.
A member of parliament told the Los Angeles Times’ Jeffrey Fleishman that when it comes to the military, “The decisive battle…will be over the constitution. The army will insist on keeping some privileges…including keeping their budget secret and [attempting to] form a national security council of army officers to have the final say on political and military affairs.”
Separately, the Brotherhood is actively overhauling its relations with Palestinian factions Hamas and Fatah, trying to get the two to compromise, especially Hamas, which some in the Obama administration may see as a good sign, the Brotherhood encouraging moderation among the Palestinians. But a key Brotherhood policymaker, Gehad al-Haddad, indicated that as Egypt is a “new state,” Israel would be “held to the letter” of a peace agreement signed in 1979.
“All clauses in the agreement have been violated by Israel,” al-Haddad said. “This could entail a review of the accords. What is going on in Gaza is a human rights abuse not seen since the Holocaust in Europe.”
Libya: At least 50 have been killed in tribal clashes in the southern part of the country, while another official was kidnapped in the north.
North Korea: Japan’s defense minister said an order to shoot down North Korea’s rocket if it threatens Japanese territory has been issued as satellite images show preparation for a mid-April launch is underway. [South Korea basically said the same.] Japan does not expect it to travel over its territory, however, because the U.S. is saying it’s headed to Australia.
President Obama warned a rocket launch “would constitute a direct violation” of North Korea’s commitments and “seriously undermine the prospects of future negotiations.” The program to send food assistance to the North has been put on hold.
Earlier, at an international nuclear security summit, President Obama said China must do more to rein in Pyongyang as opposed to past efforts to “paper over” North Korea’s repeated belligerence and defiance.
For its part, North Korea said, “The DPRK (Democratic People’s Republic of Korea) will never give up the launch of a satellite for peaceful purposes.”
Back to Australia’s sudden interest, Peter Hartcher / Sydney Morning Herald:
“There are two reasons why (the missile test) is troubling. The purpose of the test is explained by an eminent physicist, one whom the North Koreans in 2010 trusted enough to actually invite into their nuclear facilities, Siegfried Hecker, former director of the U.S. Los Alamos nuclear laboratory.
“Hecker said that while North Korea possesses enough material for six to eight nuclear warheads, it’s frustrated by its inability actually to deliver a warhead to a target: ‘They have the bomb but not much of a delivery system. That’s why these tests are so important.’
“Second, North Korea’s earlier tests have aimed east, over Japan. This one is aiming south, for the first time. If it proceeds, it will show it is unconcerned by the prospect of angering a whole new region….
“North Korea’s intent to improve its intercontinental missile capability, combined with its nuclear capability and history of descriptive and aggressive conduct, moved the Foreign Affairs Minister, Bob Carr, to tell the Herald: ‘The North Korean nuclear and long-range missile plans represent a real and credible threat to the security of the region and to Australia.’”
So you might wonder, why would North Korea ever think of targeting Australia? Because Australia is an ally of the U.S. and Japan, that’s why. As one expert, Alan Dupont, told Peter Hartcher, North Korea can send a message without actually attacking the U.S. or Japan, “perhaps demonstrate that they could strike a U.S. territory – say Guam or Hawaii.”
China: The whereabouts of Bo Xilai, one-time party chief and rising political star in Chongqing, are still not known following his removal. Authorities in Beijing were concerned Bo wanted to go back to the days of the Cultural Revolution, he espousing Maoist virtues and songs from time to time.
But with the absence of facts, rumors have been flying fast and furious, including talk of a coup. So it’s time for leadership to address the Bo case or risk continuing to sap the people’s trust. After all, as of today he is still a member of the Politburo and had been in line for a spot on the nine-member Standing Committee that actually runs China.
Russia: “On all these issues, but particularly missile defense, this can be solved, but it’s important for him [Vladimir Putin] to give me space…This is my last election. After my election, I have more flexibility.”
“You don’t often hear an American president secretly (he thinks) assuring foreign leaders that concessions are coming their way, but they must wait because he’s seeking reelection and he dares not tell his own people.
“Not at all, spun a White House aide in major gaffe-control mode. The president was merely explaining that arms control is too complicated to be dealt with in a year in which both Russia and the United States hold presidential elections.
“Rubbish. First of all, to speak of Russian elections in the same breath as ours is a travesty. Theirs was a rigged, predetermined farce. Putin ruled before. Putin rules after.
“Obama spoke of the difficulties of the Russian presidential ‘transition.’ What transition? It’s a joke. It had no effect on Putin’s ability to negotiate anything.
“As for the U.S. election, the problem is not that the issue is too complicated but that if people knew Obama’s intentions of flexibly caving on missile defense, they might think twice about giving him a second term….
“Can you imagine the kind of pressure a reelected Obama will put on Israel, the kind of anxiety he will induce from Georgia to the Pacific Gulf, the nervousness among our most loyal East European friends who, having been left out on a limb by Obama once before, are now wondering what new flexibility Obama will show Putin – the man who famously proclaimed that the ‘greatest geopolitical catastrophe’ of the 20th century was Russia’s loss of its Soviet empire?
“They don’t know. We don’t know. We didn’t even know this was coming – until the mike was left open. Only Putin was to know. ‘I will transmit this information to Vladimir,’ Medvedev assured Obama.
“Added Medvedev: ‘I stand with you.’ A nice endorsement from Putin’s puppet, enough to chill friends and allies, democrats and dissidents, all over the world.”
It’s yet another plot line straight out of “24,” I’d add.
“(The message), the important one, concerns us, here in America. It is that the American people can’t be trusted if the president is honest with them about what he proposes. More bluntly, that the American people are not trusted by their own president. Otherwise the president would tell us the truth about his intentions. And here he is, admitting his distrust of his own people to a leader of a nasty foreign government that seeks to thwart our purposes in the Middle East and elsewhere. President Obama is in cahoots with the Russian regime against America’s very body politic.
“Mr. Obama’s revealing comment, and the question of missile defense, and the question of Mr. Obama’s bizarre desire for coziness with Vladimir Putin, is a matter about which our European allies have great concerns.”
Understand that prior to open mike night, Medvedev reiterated his objections to NATO’s missile defense plan, demanding written proof that Russia isn’t the ultimate target.
Putin is sworn in May 7 and is traveling to the U.S. 11 days later to attend an economic summit at Camp David.
France: President Nicolas Sarkozy announced 19 Islamists were arrested and weapons seized in a series of raids in Toulouse and other cities on Friday; Toulouse being the home of gunman Mohamed Merah, who killed seven people in three separate attacks before being killed himself in a shoot-out March 22. There is no supposed link between Merah and the suspects just arrested.
None of the arrests were in Nantes, home to a Salafist group, “Knights of Pride,” to which Merah was linked. Scary stuff, the Salafists being Sons of Satan. [Actually, even Satan is scared of them.]
[Merah’s brother, incidentally, who was taken into custody along with his girlfriend for questioning, reportedly told police: “I am very proud of my brother,” though he denies knowing anything of Mohamed’s intentions.]
Sarkozy, in the midst of the presidential campaign which sees the first round of voting in three weeks, April 22, did not get a significant boost in the polls over the tracking down and killing of Merah, though 75% of the French people approved of his handling of the crisis.
Nonetheless, the latest survey, CSA, has Sarko in the lead over his main challenger, Socialist Francois Hollande, 30-26, with far-right Marine Le Pen at 15, and centrist Bayrou and leftist Melenchon at 12.5% apiece. Melenchon is eating into Hollande’s base, while Sarko is taking away from Le Pen. The same CSA survey then has Hollande winning the run-off, 53-47, with other polls having it 54-46.
Voters are still fixated on the economy and the unemployment rate, 9.8%, as Sarko works the national security angle.
Sarko also gave an interview on French television last Sunday night where he praised the German economic model profusely, mentioning Germany 15 times; an interesting dynamic as German Chancellor Merkel has agreed to make some joint appearances with him.
One last item. If you think the language used in U.S. presidential campaigns is harsh, Sarkozy was quoted as calling Hollande “nul” (or “useless”) in a Le Monde magazine profile.
Cuba: Pope Benedict XVI demanded more freedom for the Cuban people and Catholic Church on the island on his visit here this week. In his homily during Mass in Havana, celebrated before hundreds of thousands, Benedict didn’t hold back, saying people find freedom when they seek the truth that Christianity offers, adding, “On the other hand there are those who wrongly interpret this search for the truth, leading them to irrationality and fanaticism; they close themselves up in ‘their truth’ and try to impose it on others.” Benedict urged the Cuban government to let the church more freely preach its message.
“I have also prayed to the Virgin for the needs of those who suffer, of those who are deprived of freedom, those who are separated from their loved ones or who are undergoing times of difficulty.”
Earlier, on his flight from Rome to Mexico, where his trip started, Benedict said: “Today it is evident that Marxist ideology, in the way it was conceived, no longer corresponds to reality. In this way, we can no longer respond and build a society. New models must be found with patience and in a constructive way.”
In Mexico, Benedict proclaimed, “It is the responsibility of the church to educate consciences, to teach moral responsibility and to unmask the evil, to unmask this idolatry of money that enslaves man, to unmask the false promises, the lies, the fraud that is behind drugs.”
--Rick Santorum won the Louisiana primary last Saturday with 49% of the vote to Mitt Romney’s 26.7%. So the delegate count is:
New Gingrich 135
Next up, April 3…primaries in D.C., Maryland, Texas and Wisconsin.
--Newt Gingrich is scaling back his campaign, in case anyone cares, as he runs out of money. For $50 you can have your picture taken with Humpty Dumpty.
In a CNN/ORC International survey six out of ten Republicans say Gingrich should drop out, while 61% say Ron Paul should do the same.
The same CNN/ORC poll has 36% of Republicans supporting Romney and 26% Santorum. [Paul 17%, Gingrich 15%.]
In head-to-head matchups, Obama beats Romney 54-43 (up from 51-46 in February) and Santorum 55-42.
--If the race gets to California, June 5, a USC/Los Angeles Times poll has Romney with a 42-23 advantage over Santorum.
--In a Washington Post/ABC News survey, 50% of all adults and 52% of registered voters express unfavorable opinions of Mitt Romney. 53% of Americans hold favorable views of the president vs. just 34% for Romney.
Independents are evenly divided on the president – 50% favorable, 46% unfavorable. But with Romney, only 35% view him favorably, 52% unfavorably.
[In the above CNN/ORC poll, 57% view Obama favorably as a person, 42% unfavorably; while Romney’s favorable is at 37%, unfavorable 43%. Interestingly, the same percentage of independents view Romney favorably in the CNN poll as the Washington Post survey, 35%.]
--Also in the CNN/ORC survey, 56% of Americans continue to blame former President George W. Bush and the Republicans for the country’s economic woes, with only 29% blaming Obama and the Democrats. Not good for the pachyderms.
And this is important. Last October, 64% of Republicans told CNN/ORC pollsters that they were extremely or very enthusiastic about voting in the 2012 elections. That figure is now 52% (was 51% in February). Only 43% of Democrats were enthused last October and now that is up to 46%.
--According to a pair of surveys by Quinnipiac University, in two key swing states, Florida and Ohio, Senate Democrats have big leads. In Florida, Senator Bill Nelson leads U.S. Rep. Connie Mack 44-36, after being tied in January, while in Ohio, Senator Sherrod Brown leads GOP challenger Josh Mandel 46-36. Republicans have been targeting both in an attempt to overcome the Dems’ 53-47 majority in the Senate.
--Wisconsin Republican Congressman Paul Ryan’s proposed budget plan passed the House 228-191, so this is the blueprint Republicans will be defending come November; one that tackles entitlement spending head on.
“It’s true that Mr. Ryan’s budget has no chance in the Senate, but then nothing does. Democrats under Harry Reid haven’t passed any budget in 1,065 days, and the Majority Leader has already said he plans to do nothing again this year…
“(Which) means that Mr. Ryan’s budget is the only serious governing document in town. Democrats will spend the next six months attacking it while they go another year without a budget of their own. Amazingly, Mr. Obama calls the Republicans the ‘do nothing’ party.”
--New York City Mayor Michael Bloomberg / Wall Street Journal
“If the federal government passed a real deficit-reduction plan, business leaders would respond as they did in the 1990s, when President Clinton and Congress adopted a long-term deficit-reduction plan that gave businesses more certainty about the market. A serious deficit-reduction plan that both increases revenues and reduces expenditures would be the most effective economic stimulus plan Washington could adopt.
“As the two parties sketch out their general-election campaign platforms, both should commit to a reasonable and responsible goal – closing the deficit in 10 years. Even given Washington’s current dysfunction, this can be achieved through a simple two-step process: The president can declare that he will allow the Bush tax cuts to expire for all income levels, and Congress can take an up-or-down vote on the Simpson-Bowles deficit-reduction plan, as a bipartisan group of House centrists will propose this week. That plan calls for $4 trillion in savings by capping discretionary spending, slowing the growth of entitlement costs including Social Security, and raising revenue through tax reform.
“I believe there is enough support in both parties and both houses to pass Simpson-Bowles. And the American people deserve to know, before the November election, where their representatives – and the candidates for president – stand on it.
“The era of something for nothing must end if we are to get our country back on track. The nominee who is more willing to tell that truth to the American people will win the election.”
--In the latest Gallup Poll, Mississippi is the most religious state, with 59% describing themselves as “very religious,” followed by 57% in Utah and 56% in Alabama. On the other end, only 23% of the residents in Vermont and New Hampshire say they are “very religious,” followed by Maine (25%) and Massachusetts (28%). Others… California (35%); New York (32%); Texas (47%); Florida (39%).
--From Defense News we learn the Pentagon wants a new super duper icebreaker, which Senators Lieberman (I-Conn.) and Cantwell (D-Wash.), along with Alaska’s senators, say is a national security need. [I agree, once I saw what we currently have in this regard.] But guess how much it costs? Try $1 billion! Goodness gracious.
“U.S. Ambassador Michael McFaul wowed guests with his polka steps at a country western bash at his sumptuous residence on Tuesday night that featured a yodeler flown in from McFaul’s native Montana.”
The article doesn’t answer my question. Did McFaul actually spend U.S. tax dollars bringing a freakin’ yodeler from Montana to entertain a bunch of Russkies?
The article does state the yodeler (who it turns out does the Yahoo! ‘yelp’) and his band appeared elsewhere in Russia, but, boy, I want to know the answer.
--Princeton University announced it accepted 7.9% of students applying for the freshman class, a record low, as reported by Bloomberg. The rate was based on an applicant pool of 26,664. If you are one of the 7.9%, you have until May 1 to let them know. So make sure you place lots of post-its all over the place as reminders.
Did I ever tell you of how when I graduated from Wake Forest, a few weeks later I went to American University for an interview for a graduate poli-sci program and the fellow just laughed when he looked at my grades? I then went to an Irish pub in D.C. and had quite a good time.
--So the big story in these parts this week concerned the New York Jets’ acquisition of quarterback Tim Tebow from Denver. It makes zero sense from a football standpoint, the Jets having just committed to incumbent Mark Sanchez for two years (the guaranteed portion, $20 million, of a contract extension).
But…I know my brother and I are already warming up to the idea of Tebow taking over for the insecure Sanchez, one pretty boy steamrolling another, and as for Tebow’s strong Christian beliefs, New York Cardinal Timothy Dolan said of his arrival to the area:
“I’m kinda happy about (it). He’s a class act. I’ve followed him with great interest, and I highly respect him for his unabashedly Christian values. And I’ve never found it put-offish or arrogant. It’s just very gentle and sincere.”
My sentiments exactly. His coming out press conference on Monday was masterful, and having watched the entire thing, I have no problem admitting I almost shed a tear the one time Tebow was asked to talk about his faith and his foundation.
We keep waiting for someone like him to fall, because it always seems to happen. I instead pray that Tim Tebow stays just as he is. Welcome to New York, kid!
--When I went to post last time, the Trayvon Martin story had been in the national news about 72 hours but I invoked my “24-hour” rule in waiting further before commenting, which once again proved the right thing to do as all manner of folks made total jackasses of themselves.
But even after another week, one where new video has emerged, details on the backgrounds of both Trayvon and shooter George Zimmerman, and various eyewitnesses, I still really don’t want to comment. It’s not the kind of thing I normally write about, anyway.
When the heck will we learn?! Just last week I told you how the initial reports out of Toulouse, France spoke of a Neo-Nazi as being the killer of the Jewish schoolchildren; I brought up the first hours after Oklahoma City; the Duke lacrosse case; the Olympic bombing…all instances where the initial reactions and deductions were very wrong.
You have tabloid shows like “Extra” on Thursday blaring, “Hollywood rallying around Trayvon”…”A nation outraged.”
Oprah said: “33 days later there hasn’t been an arrest …Justice needs to be served.”
You have idiot NBA stars doing spots wearing hoodies to show their support, when anyone watching the local news and videos of crimes, like assaults on old ladies in apartment vestibules in New York, knows that 90% of the assailants are wearing them! [Geraldo is right, Fox viewers.]
You have the usual race baiters, Jesse and Al, doing their thing when they are the very “leaders” who have every right to lead peaceful protests but not the right to incite riots, which Sanford was on the verge of those first days.
They say it’s not fair to talk about Trayvon’s background because it has nothing to do with the fact he was shot and killed, ‘innocently walking’ through the gated community.
But two things: As an AP story from last night pointed out, “Old photos may be deceptive in Fla. shooting case.” Trayvon is depicted as a little angel. We’ve since learned the kid was far from that.
George Zimmerman, we’ve learned, has a checkered past as well.
People are tweeting all kinds of garbage, endangering innocent lives. When caught, the reaction, like those of Roseanne Barr and Spike Lee, is “Oh, sorry…I didn’t mean that, leave them alone.”
No, these days it’s far too much for people to expect “wait 24 hours” as a rule. Mercifully, this is the last time I’m likely to comment on this one.
--The New York Post had a story breaking down the country of birth of taxi drivers in the Big Apple.
Pakistan, 14%; Bangladesh, 14%; India, 10%; Haiti, 10%, United States, 9%.
--From Juliet Eilperin and Brian Vastag / Washington Post
“On Wednesday, the United Nations Intergovernmental Panel on Climate Change released a 594-page study suggesting that when it comes to weather observations since 1950, there has been a ‘change in some extremes,’ which stem in part from global warming.
“The report – from 220 authors in 62 countries – makes distinctions among weather phenomena. It shows there is ‘limited to medium evidence’ that climate change has contributed to changes in flooding, for example, and there is ‘low confidence’ that long-term hurricane trends over the past 40 years have been driven by the world’s growing carbon output.
“But the IPCC team projects that there is a 90 to 100 percent probability that sea-level rise ‘will contribute to upward trends in extreme coastal high-water levels in the future.’….
“Whether particular extreme weather events can be blamed on human-caused global warming is the wrong question to ask, since there is no method available to make such a connection, said Dim Coumou, a climate scientist at the Potsdam Institute for Climate Impact Research in Germany.
“Instead, a new analysis from Coumou and a colleague, published in the journal Nature Climate Change, examines patterns of extreme weather since 2000 and asks whether the likelihood of these events was heightened by human-driven climate change.
“The answer is ‘yes’ for extreme heat waves and unusual downpours, Coumou and his colleagues found. ‘The evidence is solid,’ he said: Human-emitted greenhouse gases trap heat in the atmosphere; warmer air, in turn, soaks up more moisture.”
Look, I know many of you disagree with such findings, but you’d have to be an idiot not to think there are more extremes these days, especially when it comes to downpours.
Which is why the whole freakin’ argument, I’ve said for over ten years now, needs to be relabeled “global pollution.”
By the way, as the Post reported, “Across the United States this year so far, warm weather records have outnumbered cold records by a factor of 12.”
Of course the weather in the U.S. the past six months has not been about global pollution, but rather something far more simple…the jetstream! We already have Mother Nature, but I suggest we add another, George Jetstream, to the lexicon. At least I will here.
[I also just read parts of Britain are in their worst droughts since 1921.]
--I saw this in a London Times piece on James Cameron’s descent to the bottom of the Earth’s deepest abyss, the Mariana Trench in the Pacific.
“There’s only 2% of the ocean that’s at this depth,” Cameron told the paper, “but that’s a big chunk of our planet we know nothing about…This is the beginning of opening up this new frontier.”
But did you know that at this depth, 7 miles down, conditions are so formidable that “outside of a protective vehicle, the human body would dissolve because of the pressure”?
--Finally, a report in the journal Astronomy & Astrophysics is as cool as it gets, short of the actual thing. An international team of astronomers headed up by Dr. Xavier Bonfils of Grenoble University in France has concluded that there are “billions” of potentially habitable planets in the Milky Way galaxy. That’s us, sports fans! Forget last week’s story on Mercury, this is a billion times bigger. Upstairs, Carl Sagan is smiling.
Gold closed at $1670
Returns for the week 3/26-3/30
Dow Jones +1.0% 
S&P 500 +0.8% 
S&P MidCap +0.3%
Russell 2000 +0.0%
Nasdaq +0.8% 
Returns for the period 1/1/12-3/30/12
Dow Jones +8.1%
S&P 500 +12.0%
S&P MidCap +13.1%
Russell 2000 +12.1%
Bears 22.6 [Source: Investors Intelligence]
Have a great week. I appreciate your support.