Week in Review

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Week in Review

10/29/2011

For the week 10/24-10/28

Europe, Washington and Wall Street

The Devil Is In the Details

It was a week that saw German Chancellor Angela Merkel gaining acceptance in the Bundestag to lever up the European Financial Stability Facility (EFSF), or rescue fund, then all night negotiations on a plan to finally bail out Greece, increase the firepower of the 440bn euro EFSF, and a plan to recapitalize Europe’s banks. It was also a week when, aside from a stupendous global rally in stocks, French President Nicolas Sarkozy admitted the obvious: It was a mistake to admit Greece into the eurozone in the first place back in 2001.

“It was an error because Greece entered with false (economic) figures…it was not ready,” he said. Asked then if he had confidence Greece can emerge from the crisis, Sarkozy opined: “Yes…we have no other choice. We had to face up to all this. If the euro had exploded last night, all of Europe would have exploded. If Greece had defaulted, there would have been a domino effect carrying everyone away…We took important decisions yesterday that avoided catastrophe.”

It turns out that in terms of an outline, virtually everything I have been writing all this year in particular has come to pass; the needed plans to recapitalize the banks, reduce Greece’s debt, and the creation of a firewall around Italy and Spain, at least thus far in theory. 

Improving Europe’s governance, a highly explosive issue still to come in future EU summits, threatens members’ sovereignty. Greece itself is the first victim as a set of advisers from the troika (International Monetary Fund, European Central Bank and European Commission) will be riding herd on Greece to ensure it meets its austerity objectives. The debates regarding other nations, and the ever-increasing power of Germany, promise to be titanic.

On the element of the Greek ‘haircut,’ not only is the reduction in Greece’s debt dependent on current bondholders buying in, but the actual bond-swap has not even begun to be negotiated. Details, details.

Plus, the recapitalization of the banks is not only at an amount far less than most thought was needed, but there are a myriad of issues behind the actual implementation. As I wrote a few weeks ago, the banks are to first look to raise capital internally (like through asset sales), then through private sector investors if the first step isn’t enough, then to their national governments and finally – as a last resort – to the EFSF.

But recall, France, which doesn’t want to lose its AAA-credit rating, is still hoping to eliminate the step where the banks go to their government. It’s unclear just what will happen after this week’s EU actions, though it seems inevitable France will indeed lose the AAA-rating regardless because of perceived future liabilities and that creates a whole new set of issues for the EFSF. Most agree that investors aren’t going to line up to put their money into a French bank, such as BNP Paribas or SocGen, and thus the government will need to bail them out with taxpayers’ money.

Then you have the European Banking Authority saying the banks can’t curtail business lending, but the EBA will ride herd on them to withhold dividends and bonuses to raise capital if the banks can’t raise it per the above. The whole issue of raising capital by June 2012, as mandated, of course means that business lending will be curtailed, so Europe’s small- and medium-sized businesses in particular face even more of a credit squeeze than they are already experiencing today. Yet it’s growth that the eurozone needs more than ever…and fast!

As to ring-fencing Italy and Spain, especially the former, again, the devil is in the details of the EFSF, as European officials hope that China, Japan and others come to the rescue, either through the stability facility or the IMF, which would then save the day. It’s about guarantees of all sorts with no one as yet understanding how they would work.

When it comes to Italy and its $1.9 trillion sovereign debt, ergo, too big to fail, it’s about a totally dysfunctional government that is literally coming to blows in parliament over hiking the retirement age to 67…by 2026! While Spain announced this week that unemployment there is officially at 21.5 percent; this as the nation’s banks keep ratcheting up the estimates for bad loans on the books because of the ongoing crash in the property market.

Oh, and as for the goal of reducing Greece’s debt-to-GDP ratio to 120 percent by 2020? This assumes, among other things, that their economy will be growing by 3 percent annually by 2016, even as the IMF says the country will contract by 5.5 percent this year and 2.5 percent in 2012 due to the crippling austerity measures.

So now it’s on to the G20 Summit in Cannes this coming Nov. 3-4. Further bombast and promises, while behind the scenes there will be more head-scratching as to just how the grandiose objectives are met. At least the latest Euro program not only bought some time, but in the short run the idea of a systemic crisis and a run on a major bank would seem to be off the table. For how long is the big question.

For those who naively think the Euro crisis has now been solved, on Friday, German Chancellor Angela Merkel said “it wouldn’t be over for at least a year.” 

“In typical European fashion, a summit deal which seemed out of reach at midnight last night was triumphantly unveiled at 4 a.m. The deal does not, and was not intended to, have any effect on the core problems facing the eurozone. There is still an urgent need to restore growth to economies which are hamstrung by uncompetitive business sectors, and continuous fiscal tightening. Recession still looms, especially in the southern economies.

“What the deal is intended to provide is adequate medium term financing for sovereigns and banks which have been facing urgent liquidity problems. On that, it is notable that the summit has not really raised any new money, apart from an increase in the private sector’s write-down of Greek debt by some 80 billion euro.

“All of the remaining ‘new’ money, including 106bn euro to recapitalize the banks and over 800bn to be added to the firepower of the EFSF through leverage, has yet to be raised from the private sector, from sovereign lenders outside the eurozone, and conceivably from the ECB.

“There is no guarantee that this can be done. The eventual out-turn of this summit will depend on whether this missing 1,000bn euro can actually be raised.”

“(Europe’s) piecemeal approach is not going to cohere into a real or lasting solution if policy makers continue to ignore the underlying economic anemia that has afflicted the economies of Europe for decades. The patient has risen from his bed and not fallen down. This is one definition of progress.

“Thursday’s deal offers the sort of grab-bag familiar in Brussels. Greece gets another package of bailout loans, totaling 130bn euro in value. Various parts of the EU’s bailout machinery will be tweaked or boosted. But let’s climb across the deal plank by thin plank.

“The biggest accomplishment is the agreement to impose a voluntary 50 percent write-down on private holdings of Greek debt. This is progress for a Continent that dared not to breathe the word haircut only months ago.

“But that’s small consolation now that the European Central Bank, the International Monetary Fund and eurozone governments hold about 40 percent of all Greek debt, a figure that will only grow as privately held bonds mature. As long as these institutions refuse to take haircuts on their own Greek holdings, a private-sector haircut can only go so far toward reducing total debt….

“To prevent the write-down from tanking European banks, the deal provides for a raft of measures for bank recapitalization. One requires eurozone banks to achieve a 9 percent capital ratio for core Tier 1 capital by June 2012….Whether these new capital requirements will do much good remains to be seen. Still fresh in most memories is that Franco-Belgian lender Dexia fully met its own Tier 1 requirements before it went down earlier this month….

“That brings us to the summit’s last plank, an agreement to pump up the 440bn European Financial Stability Facility. Details of course will be negotiated later, but the bailout fund is now authorized to act as a bond insurer, guaranteeing first-losses up to an as-yet undecided amount on new issuance of euro-zone sovereign debt.

“The legal basis for this is dubious under the Rome Treaty, which explicitly forbids member states from guaranteeing each others’ debt…

“In short, everyone is bailing out everyone. The larger problem betrayed by yesterday’s agreement is that European leaders continue to act as if they are mainly dealing with a crisis of confidence, which can be restored with evermore far-reaching bailout schemes. Absent from this week’s communiqués are any new ideas for promoting the structural economic reforms – both at the periphery and at the center of the eurozone – that might create real confidence in the eurozone’s long-term economic prospects.”

[On the goal of bringing Greece’s debt-to-GDP ratio down to 120 percent by 2020]

“The European Union has been consistently wrong in its economic forecasts for Greece. They misjudged the impact of austerity on economic growth and public sector deficits. This misjudgment is the reason why the voluntary bank haircut of 21 percent, agreed to in July, has now grown to 50 percent. What happens if the outlook were to deteriorate further? There is no sign yet of a turnaround….

“In the unlikely event that the banks come up with the money, and that Greece manages to hit a 120 percent debt-to-GDP level in 2020, it is far from clear that Greece can return to the capital markets even then….

“On the EFSF, the leaders reached political agreement to leverage it up to about 1,000bn. Herman van Rompuy, the president of the European Council, made a revealing comment following the meeting when he said that banks have been doing this forever. Why should governments not do so as well?

“The reason is simple. Banks can only do this because central banks and governments act as ultimate guarantors of the financial system. There exists an implicit insurance of unlimited liability. In the case of the European Financial Stability Facility the very opposite is the case: there is an explicit insurance of limited liability. Germany wants its exposure capped to a maximum of 210bn. I doubt that global investors will rush into the tranches of the special purpose vehicle through which the eurozone wants to leverage the EFSF. I struggle to see how this structure can lead to a significant and sustained fall in bond spreads.

“Leveraging can work, but only if the eurozone were willing to provide an unlimited backstop.”

“There’s an Orwellian quality to Europe’s latest financial rescue. Words lose their ordinary meaning. Greece, for example, has clearly defaulted, but no one says so. In July, private lenders agreed ‘voluntarily’ to accept an estimated 21 percent reduction in their loans to Greece. Now that’s been pushed to 50 percent, and private lenders’ consent is still described as ‘voluntary.’ Well, it’s about as ‘voluntary as when one hands over one’s wallet in response to the choice of, ‘Your money or your life,’’ notes Douglas Elliott of the Brookings Institution.

“What constitutes a default? Here is Standard & Poor’s definition: ‘We generally define a sovereign default as the failure to meet [the] interest or principal payments … contained in the original terms of the rated obligation.’ Not much doubt there: A 50 percent ‘haircut’ wasn’t part of the original bonds. But for political and legal reasons, it’s inconvenient to declare a default. Instead, the Europeans call the write-down ‘private-sector involvement,’ or PSI. How reassuring.”

[Ed. On Friday, Fitch Ratings issued a statement: “The 50 percent nominal haircut on the proposed bond exchange would be viewed by the agency as a default event under the Distressed Debt Exchange criteria.” The International Swaps and Derivatives Association, whose market decisions are binding, hasn’t ruled on this yet.]

“(The) feel good factor will only last if this is followed quickly by two other important developments.

“First, and most immediate, there is a long list of details that must be specified over the next few weeks to put into practice what was agreed to in Brussels. Many of these are technically very complex. Indeed, implementation may prove as tricky as the original negotiations, if not more so.

“How will the reduction of Greek debt actually be executed? Will the banks that need capital be able to find sufficient private funds to meet the new prudential targets? In the event that they do not, what conditions should be attached to the financing coming from taxpayers? How will the European Financial Stability Facility be levered? How will its funds be allocated among competing claims, including between stabilizing the old stock of debt and providing partial risk insurance for new issuance? And what roles will the European Central Bank and the International Monetary Fund play, as well as other countries?

“Second…Europe desperately needs an effective plan to boost employment and promote inclusive economic growth. Without this, it will be virtually impossible to stabilize the region’s sovereign debt markets, and counter fragilities in its banking system….

“Politicians also need to decide how they will strengthen the institutional underpinnings of the eurozone.”

“You can understand the self-congratulation. In the early hours of October 27th, after marathon talks, the leaders of the eurozone agreed on a ‘comprehensive package’ to dispel the crisis that has been plaguing the eurozone for almost two years. They boosted a fund designed to shore up the eurozone’s troubled sovereign borrowers, drafted a plan to restore Europe’s banks, radically cut Greece’s burden of debt, and set out some ways to put the governance of the euro on a proper footing. After a summer overshadowed by the threat of financial collapse, they had shown the markets who was boss.

“Yet in the light of day, the holes in the rescue plan are plain to see. The scheme is confused and unconvincing. Confused, because its financial engineering is too clever by half and vulnerable to unintended consequences. Unconvincing, because too many details are missing and the scheme at its core is not up to the job of safeguarding the euro.

“This is the eurozone’s third comprehensive package this year. It is unlikely to be its last.”

Washington and Wall Street

Stocks rocketed higher on Thursday thanks to a combination of the seemingly good news out of Europe, coupled with a report showing the U.S. economy grew at a 2.5% rate in the third quarter. This isn’t enough to put a dent in the unemployment rate, but it’s better than the 0.4% and 1.3% rates of the first two quarters this year and puts to bed, at least until next year, talk of a double-dip recession as classically defined. The figures though are pretty much irrelevant unless jobs are being created. It’s going to feel like a recession to many of us.

The reason the economy grew at such a clip, though, was due to increased consumer spending, even as real disposable income declined. So we dipped into our savings some and the savings rate fell. This trend won’t continue, though I’m guessing the Christmas season is a little better than expected. The brakes will come back on early next year, which is about when Europe could once again be a screaming issue, not that it won’t remain on the front page the balance of 2011. Italy, for example, has to roll over $400 billion in debt in 2012.

Just one other item on spending. Friday’s reading of personal income and consumption for September confirmed the GDP report’s findings. Personal income was up 0.1% for the month, while consumption rose 0.6%. Earlier in the week the government did report durable goods (big-ticket items) were up a solid 1.7% in September, ex- the volatile transportation sector.

On the earnings front, while over 70% of those reporting are beating expectations, this is a vastly overrated barometer these days with companies doing their best to tamp down expectations in order to more often than not pleasantly surprise, the better for one’s share price.

More important is the guidance and the accompanying statements on the outlook for business and on this, the last two weeks have shown a Corporate America that is decidedly mixed when looking at the next 6-12 months, as in many, such as Cummins Engine and 3M remain exceedingly cautious on the global picture, while others such as Caterpillar are optimistic.

As for the bipartisan ‘supercommittee’ that is supposed to come up with something heroic, like budget savings of $3 trillion that could begin to put a real dent in the federal deficit, as well as restore a huge amount of confidence to the business community, rather than the minimum $1.2 trillion they are charged with finding by Nov. 23, you can basically forget about our elected officials playing profiles in courage. It’s the same game-playing; Democrats don’t want to do anything significant with entitlements, and Republicans refuse to discuss revenue increases from personal or corporate taxes.

Lastly, a bit on China, which played no small part in the week’s equity rally. HSBC’s flash report on the manufacturing sector, the PMI, rose to 51.1 in October from September’s final reading of 49.9, 50.0 being the dividing line between contraction and expansion. With this one figure talk of a “hard landing” fell by the wayside. I have been steadfast in saying China would see a soft landing, but it’s a little too soon to declare victory on this one. If China’s GDP were to stay above 8.5% or so the next few quarters, though, it would be a huge boost to global confidence. It was also helpful this week to have Premier Wen Jiabao strongly hint that the government’s tightening policy is over and that it may be ready to relax credit controls to ensure employment growth. [I’m also going to learn a lot about the country’s economy with the coming earnings release of my large holding in Fujian province, sometime in the next two weeks.]

Street Bytes

--The Dow Jones rose a 5th straight week in advancing 3.6% to 12231, the first close above 12000 in three months. The S&P 500 rose a 4th straight, up 3.8%, while Nasdaq added an equal amount. All major indexes, except the Russell 2000, are now up for the year. For the month, the S&P is up 14% and the Dow 12%. For the S&P it would be its best single month since 1974.  Unbelievable.

--U.S. Treasury Yields

6-mo. 0.06% 2-yr. 0.29% 10-yr. 2.32% 30-yr. 3.38%

Yields continue to inch up on the longer end of the curve as money flows from Treasuries into stocks.

--Hong Kong’s market had its best week in 2 ½ years, up 15.2%, while China’s Shanghai Composite gained 6.7%.

--In housing, sales of new homes climbed at an annual pace of 313,000 in September as inventory fell to 6.2 months, the lowest level in almost a year and a half, so this is mildly encouraging, though the pace of construction remains at putrid levels.

Pending home sales unexpectedly fell in September, 4.6 percent, the biggest decline since April, which isn’t helpful.

Separately, the S&P/Case-Shiller index showed home prices in 20 major metropolitan areas were flat in August vs. July, but down about 4% from year ago levels. Year-over-year results in 16 of 20 cities were better, however, than they had been in recent months.

--Don’t tell Occupy Wall Street (OWS) protesters the following:

“Sales of homes commanding prices of $5 million and up continued to drive activity in the Hamptons, New York City’s popular summer destination, in the third quarter of this year…

“During the quarter, there were 30 sales of homes fitting that bill, almost triple the number racked up in the same quarter of 2010.” [Amanda Fung / Crain’s New York Business]

--Here’s another one OWS (London version) won’t like, from Brian Groom of the Financial Times:

“FTSE 100 directors saw their total earnings rise by 49 percent in the past financial year….

“The increase will fuel controversy over executive pay as Vince Cable, business secretary, consults on proposals to clamp down on the ‘escalation’ of awards, including putting employees on remuneration committees and making shareholder votes binding.”

Bonuses this year in the City of London, however, are set to fall 38 percent to a level just over a third of the peak seen in 2007-08, which makes the increases for those at the top all the more egregious.

--Jesse Eisinger summed up the popular feeling perfectly in a piece for the New York Times.

“(Last week) the SEC announced that it had agreed to a measly $285 million settlement with Citigroup over the bank having misled its own customers in selling an investment it created out of mortgage securities as the housing market was beginning its collapse.

“In addition, the SEC accused one person – a low-level banker. Hooray, we finally got the guy who caused the financial crisis! The Occupy Wall Street protesters can now go home.

“After years of lengthy investigations into collateralized debt obligations, the mortgage securities at the heart of the financial crisis, the SEC has brought civil actions against only two small-time bankers. But compared with the Justice Department, the SEC is the second coming of Eliot Ness. No major investment banker has been brought up on criminal charges stemming from the financial crisis.”

I wrote the other week that this is what OWS should be focusing on as well, the whole CDO game and how they were sold, and dumped, on investors. It was out and out fraud, regardless of the legal mumbo jumbo inserted into prospectuses and the like.

But as Eisinger points out, regulators are intimidated by the prospect of going up against high-powered Street execs. The SEC’s chairwoman, Mary L. Schapiro, “while deserving credit for pushing investigations of structured investments, is sending the signal that she does not want to lose. Her agency is meekly willing to get token settlements when the situation calls for Old Testament justice….

“This seems to be our fate: our bankers took reckless risks, but our regulators take none.”

--Meanwhile, in a different sphere of Wall Street, former Goldman Sachs director, Rajat Gupta, was arrested on federal charges of insider trading as part of the Raj Rajaratnam case, though the charges are based on evidence uncovered by the FBI more so than evidence provided by Rajaratnam, who refused to inform on Gupta or wear a wire to record him for the FBI. 

--Shares in Amazon plunged after the online retailer missed badly on third quarter earnings (despite a 44 percent rise in sales) and forecast a possible earnings loss in the fourth quarter as it spends heavily on the Kindle Fire tablet, a rival to Apple’s iPad.

Here’s the thing, though, as I’ve noted over the years. I could never touch the stock because of its valuation, today with a P/E still over 95 (after recovering much of the loss later in the week). Of course the shares just continue hitting one new high after another. I’m just not that kind of investor.

--ExxonMobil reported a 41 percent rise in earnings to $10.3 billion, in line with expectations, but actual oil production was down 4 percent. The high price of crude was the difference vs. year ago performance.

--Ford Motor Co. earned $1.65 billion, compared to $1.69 billion in the year-earlier third quarter as margins slipped due to losses on commodity bets.

Ford suffered in another area this week. Consumer Reports came out with its latest reliability ratings and Ford is 20th out of the 28 brands. Ford was 10th last year. The Focus and Fiesta compact cars had below-average reliability ratings, as did the new Explorer SUV. In June, Ford had fallen from fifth to 23rd place in J.D. Power and Associates’ annual quality study.

[Scion, a Toyota division, received the best ratings in Consumer Reports, followed by Toyota’s Lexus division, Acura, Mazda and Honda. Honda had been first last year.]

--The average minimum wage in most of China rose 21.7% in September vs. year ago levels. Rising costs threaten China’s edge as one of the world’s cheapest manufacturing centers.

--Dr. W. reported in again from Vietnam, where he is training physicians.

“The average income in Vietnam is now about $1200 per year. The average experienced physician employed by the government makes $200-$250 per month (they can make more if they have a private clinic on the side). The ones I spoke to don’t have private clinics and referred to these state salaries as ‘poverty wages’ in Vietnam. Nurses make $70-$150 per month, teachers make about $100 per month. The average rent for a small apartment in the big cities is about $250 per month and $500 per month for a ‘decent’ apartment. Inflation is running about 20 percent. Many of the decently employed, decently educated state workers are getting upset and angry about their inability to earn enough to keep pace with inflation and status. They all participate in leverage to try and get ahead. The temptation for leverage, corruption and theft has to be huge when you see examples of outrageously disproportionate wealth all around you in this very secular society. The price of property and the price to develop property here is just mind-boggling.

“On the other hand, the people could not be nicer and the country is very safe to travel in.”

Earlier, Dr. W. told me of playing an exclusive Greg Norman golf course where his foursome was the only one on it; a resort with condos going for $585,000, none having been sold. Yup, a rather severe bubble.

--As a piece in Bloomberg pointed out, Eastern Europe is set to suffer the most from the continent’s credit crunch as the Western lenders who bankrolled the former’s boom before the 2008 swoon pull back anew.

--The U.S. Agriculture Department expects retail food prices to increase 3.5% to 4.5% this year, after climbing just 0.8% in 2010, the slowest rate since 1962.

--Hewlett-Packard decided to retain its personal computer unit, a flip-flop in strategy as new CEO Meg Whitman said the company was “stronger” with it.

--IBM named Virginia Rometty, 54, to succeed Sam Palmisano as CEO at the start of next year, the first female to lead the company in its 100-year history. She is currently head of sales, marketing and strategy and has been at Big Blue 30 years.

--Novartis, the Swiss drug giant, announced it was cutting 2,000 jobs, mostly in Switzerland and the U.S.

--Whirlpool is eliminating 5,000 positions as it reduces capacity and lowered earnings targets in a big way owing to reduced consumer spending around the world.

--The SEC is investigating whether Avon Products violated “Regulation FD,” a rule governing “selective disclosure” of company information. The company’s shares fell 18 percent on the news and are down 35 percent over the past year, thus shining the spotlight on highly-overrated CEO Andrea Jung; she of the massive pay packages and continually sliding share price.

--California Gov. Jerry Brown proposed raising the retirement age for state workers in a sweeping package of changes that also bans “pension spiking” and “double dipping.” Brown is looking to cut the state’s pension costs “in half.” The increase in the retirement age for full benefits would rise from 55 to 67. The changes obviously face stiff opposition in the state legislature but good luck to the governor.

--Former New Jersey senator, governor, and Goldman Sachs CEO, Jon Corzine, is now running futures broker MF Global Holdings Ltd., and this week he drew down its revolving credit lines of some $1.3 billion in an attempt to stave off bankruptcy as Corzine seeks a buyer, while Moody’s and Fitch downgraded MF’s debt to junk. MF reported a loss of $186 million in the third quarter – its largest ever.

The problem for the brokerage is that Corzine made a decision about a year ago to invest heavily in sovereign debt, to the tune of $6.3 billion in the paper of Italy, Spain, Belgium Portugal and Ireland.

--Shares in Netflix continued to crater. After hitting a July high of $304, the stock plummeted to $77 on Tuesday (before closing at $84 on Friday), an absolutely stunning fall as the company reported a shareholder exodus and rising costs. It was back in July that CEO Reed Hastings announced plans for a 60 percent price hike, sparking a customer backlash (800,000 leaving since June, far worse than anticipated). Then he split the company into two divisions, further angering folks. Despite the mistakes, with Hastings saying it would be “accurate” to say that “we shot ourselves in the foot with the abruptness” of the price increase, the company will not reverse itself on this front.

--In a rare display of bipartisanship, 84 senators voted to discontinue certain farm subsidies for people making more than $1 million in adjusted gross income. The current limit is $1.2 million, so the actual impact is minimal, but it is very symbolic of a change in attitudes.

--One of my favorite topics, mislabeled fish, is in the headlines again as Consumer Reports revealed that “22 percent of the seafood it tested at supermarkets, restaurants, fish markets, gourmet stores and big-box stores in three states was either mislabeled, incompletely labeled or misidentified by store or restaurant employees.” [Bruce Horovitz / USA TODAY]

The investigation was in New Jersey, New York and Connecticut. Among the findings, “Not one of the 10 lemon soles tested was lemon sole….And of 22 red snapper samples, not one was definitively red snapper.”

--No problem mislabeling the McRib, McDonald’s elusive sandwich that is now back on the menu at all U.S. locations through Nov. 14, as opposed to being offered in only select ones. The company declines to give specific sales figures but if you miss out this time and still want a McRib, it’s sold year round in Germany, so hop a flight there!

Foreign Affairs

Libya: The ruling National Transitional Council vowed to prosecute the killers of Muammar Gaddafi, citing “some violations” in the handling of prisoners as well amid an international outcry over torture claims. Gaddafi, a son, and a close aide were buried on Tuesday at an undisclosed location in the desert.

The big immediate issue for the NTC is to attempt to disarm the militias, over 25 of them. Arms must be consolidated under one national security force, or, for starters, foreign companies will not return unless they can ensure the safety of their workers. But there is too much ‘score-settling’ to take place, witness the torture claims on all sides. Human Rights Watch reported that 53 Gaddafi loyalist troops were massacred in the center of Sirte, the final Gaddafi stronghold.

As for NATO, the NTC wanted it to stay through yearend but NATO’s mission is officially over as of Monday.

Syria: Friday was one of the worst days of the uprising as troops killed at least 40 civilians and the Arab League sent an “urgent message” to the Assad regime, calling on it to stop the violence against innocents. Troops were also seen planting mines along a border with Lebanon on Thursday in a bid to stem weapons smuggling to the budding Syrian opposition militia. 

The Arab American Institute, which carries out periodic polling in the Middle East, has President Bashar Assad with approval ratings near zero in some Arab countries. As recently as 2008, Assad polled as one of the most respected leaders in the region. 1% (you’re reading that right) in Lebanon said Assad can still govern Syria, though 39% said Hizbullah was playing a positive role there, and, lest Washington feel smug, 0% of Lebanese felt the U.S. had a positive influence on Syria.

Lastly, the U.S. withdrew its ambassador, Robert Ford, because of credible threats to his safety that the White House explicitly blamed the Syrian regime for, while Amnesty International reports that patients in at least four state hospitals are being tortured in an attempt to suppress dissent.

Iran: Russia warned the U.N. on Tuesday against an imminent report by the International Atomic Energy Agency that is expected to heighten tension between Iran and the rest of the world, Russia claiming that the report will strain efforts to start serious negotiations. The IAEA is expected to spell out why it believes Iran is intent on building the bomb, unless the IAEA backs off due to pressure from both Russia and China.

Separately, there were further signs of tension between supporters of President Mahoud Ahmadinejad and Supreme Leader Ayatollah Khamenei. The hardline clerics want to sweep parliamentary elections slated for next March, which can then be used as a platform for the presidential vote in 2013

Saudi Arabia: King Abdullah appointed Interior Minister Prince Nayef as his new heir following the death of Crown Prince Sultan, who had been next in line. Nayef is also the Deputy Prime Minister and is a known conservative and authoritarian. But then there is the growing tension between Saudi Arabia and Iran.

“Never mind trade with China, or even the crisis in the eurozone; these may come to be seen as foreign policy luxuries compared with the threat of a stand-off between Saudi Arabia and Iran. It is shaping up to be the most difficult international problem confronting Britain and the U.S. – and could be the first crisis facing President Obama or his successor after next year’s presidential election….

“(Nayef’s) reputation and past instincts do not make him seem the best candidate for handling Saudi Arabia’s simmering social problems in the heat of the Arab Spring. The population has more than tripled over the past 34 years; even the oil wealth has failed to maintain standards of living for all. Despite King Abdullah’s efforts, the economy has only just begun to diversify from oil and gas. Nor has a work culture developed; many jobs are done by temporary foreign workers.

“Unemployment is at 11 percent, but is much higher for young men, and the kingdom has begun to pay benefits for the first time – an explicit use of oil wealth to buy peace. The women’s movement is increasingly vocal and will not be satisfied by the recently granted right to vote in near-meaningless provincial elections.

“Most of all, the Shia minority, largely based in the oil-rich Eastern Province, has watched with rage the Saudi-backed suppression of the uprising by Bahrain’s largely Shia population.”

Meanwhile, the Saudis are watching the standoff between Iran and the U.S. et al regarding Iran’s nuclear program. The Saudis have made it clear that if Iran gets the bomb, they want one too. The kingdom would easily get it from Pakistan, which the Saudis have bankrolled.

“The Arab Spring has injected hope and a sense of change across countries whose governments have been frozen for generations.  But the shadow over it has been the outlook for Saudi Arabia, given its record of always responding very little, very late to pressure for change.

“Perhaps, through repression, the Royal Family can continue to hold off such forces for years. But the clash with Iran is a new reason for thinking that stability may not last.”

Israel: Palestinian officials denied that President Mahmoud Abbas is resigning. Abbas hinted during the week at the possible dissolution of the Palestinian Authority, telling an Egyptian TV station that the PA “was not an authority and many people and institutions ask me about the futility of maintaining it.”

On the Gilad Schalit issue, Hizbullah leader Sheikh Nasrallah praised Hamas’ decision to hold the Israeli soldier alive and well in Gaza for so long, this as Israel completed another prisoner release, this time with Egypt. Ilan Grapel, an American law student from Queens who holds dual Israeli citizenship, was arrested in Egypt in June and charged with spying for Israel. He was exchanged for 25 Egyptians held in Israeli prisons, none of whom is deemed a security threat, unlike many of the Hamas prisoners who were released in exchange for Schalit.

Commenting on the lopsided Israeli-Hamas deal, Defense Minister Ehud Barak said Israel would “do what we have to do” to ensure that it does not release such a large amount of prisoners in future kidnapping instances, adding, Hamas will understand the change.

Barak said that a “life-loving country cannot continue” to release over 1,000 prisoners for a soldier. “This slippery slope has to stop. A change is needed.” 

But Barak denied Israel was weakened by the Schalit exchange. “It strengthened solidarity. We lived up to an unwritten code on protecting soldiers who went out on missions and find themselves kidnapped. We have a supreme obligation to them.”

On the settlement front, Vice Premier Ya’alon, referring to a report that Prime Minister Netanyahu was willing to freeze all construction on government land in West Bank settlements if Mahmoud Abbas resumed direct negotiations, said, “The demand for territory without Jews anywhere else would be called ethnic cleansing. We cannot accept a demand for ethnic cleansing in the land of Israel.” 

In Lebanon, 11 Israeli warplanes violated Lebanese airspace in a period of two days, as reported by the National News Agency. I don’t care what the Israelis say, this violates U.N. resolutions.

Iraq: In the first significant attack since President Obama declared the full withdrawal of U.S. forces at the end of the year, at least 18 were killed in a Shiite neighborhood in Baghdad, Thursday, as a result of a twin bombing, the second timed for when rescue workers arrived on the scene.

Afghanistan: One day President Hamid Karzai said that if in the unlikely event the United States found itself in a war with Pakistan, Afghanistan would side with the latter. “Afghanistan is your brother.” Two days later, Karzai backed off, saying he was misinterpreted.

Tunisia: The Islamist Ennahda (Renaissance) party won an estimated 43 percent of the vote in the first free election of the Arab Spring. Everyone says they are moderates, but while they will need coalition partners to rule, the real test will be in the writing of the country’s new constitution within a year. For now we’ll just sit back and observe.

Thailand: The worst flooding in 50 years is a true national calamity, with the impact on all facets of the economy, from agriculture to manufacturing to tourism, being severe. Food and fresh water shortages are growing rapidly worse. Anyone with the ability to do so is leaving Bangkok. Supply chains for some of the world’s biggest corporations, like Toyota, have been crippled. Why, in the aftermath, would you invest in new plants here? New Prime Minister Yingluck Shinawatra is doing a terrible job and one would think another coup is in the cards, though it wasn’t her fault the country’s haphazard over-development helped lead to the destruction of natural outlets for the flood water.

China: The government in Zhejiang province downplayed a series of riots in the town of Zhili as more than 1,000 migrant workers attacked cars and buildings. The area is the site for 5,000 baby clothing factories and the workers were protesting a new tax on sewing machines, with a prominent factory owner then refusing to pay it, while gathering supporters to confront the tax collector. The government then rescinded the tax.

Videos of the rioting were displayed on Sina Weibo, China’s equivalent to Twitter, the use of such social networking coming under government attack this week as a big crackdown on the networks looms. How the people handle this is going to be a critical issue over the next 6 to 12 months. Sina Weibo is used by 400 million Chinese posting opinions and sharing information. Heretofore the government pretty much looked the other way. No longer. Beijing is now seeking to ensure “orderly dissemination of information.” In response, Sina has hired 1,000 staff to monitor the flow of messages through its servers.

North Korea: Defense Secretary Leon Panetta, in a visit to Japan and South Korea, called North Korea “reckless and provocative,” while also criticizing China for its secret military buildup. Panetta emphasized that Pyongyang is developing nuclear and ballistic missiles that pose a threat to the entire region, harsh language compared to recent White House statements.

The U.S. wrapped up talks with North Korea on the issue of resuming long-stalled talks on their nuclear program, but there were no breakthroughs.

The main immediate concern is that Kim Jong Il’s ongoing process of transferring leadership to his youngest son could lead to new aggressive acts and the U.S. and South Korea made it clear this week that any such moves would be met with serious force.

As for China, Panetta said it is “rapidly modernizing its military, but with a troubling lack of transparency, coupled with increasingly assertive activity in the East and South China Seas.”

Argentina: President Cristina Kirchner won a second term in office by the widest vote margin in Argentine history and now Britain, for one, is waiting to see what she will do in her campaign to win back the Falklands. Relations between the two countries are at a new low over British oil exploration in the area. It was last June that Kirchner accused Prime Minister David Cameron of “arrogance” and “stupidity” for vowing the islands would remain British forever.

Britain: Meanwhile, Cameron faced major troubles back home. During last weekend’s EU summit, French President Sarkozy accused Britain of “interfering” with a currency it never wanted. “You have lost a good opportunity to shut up. We are sick of you criticizing us and telling us what to do.” Cameron had said that changing the treaty, as some want to do, “can only happen if it is agreed to by all the 27 member states. Any change is an opportunity for Britain to advance our national interest.”

But Germany wants to discuss treaty changes in December and Cameron says now is not the right time to start clawing back powers from Brussels as he previously promised his own Tory faithful. So the party is in internal revolt over whether Britain should even be part of the European Union.

Meanwhile, as the Financial Times reported, while the Tories debate whether to leave the EU, the Scottish National party is advancing Scotland’s departure from Britain. The SNP leader, Alex Salmond, “has the confidence and guile to change the political weather.” What was once just talk could turn into reality over the coming decade or so.

Italy: The London Times reports that Prime Minister Silvio Berlusconi paid millions of euros to women even before his split from his wife in 2009, like almost $4 million worth; $300,000 of which went to ex-Miss Lithuania Rasa Kulyte from Berlusconi’s private bank account.

Random Musings

--Thomas Friedman / New York Times…on Barack Obama’s foreign policy.

“(While) Obama has been deft at implementing Bush’s antiterrorism policy, he has been less successful with his own foreign policy. His Arab-Israeli diplomacy has been a mess. His hopes of engaging Iran foundered on the rocks of, well, Iran. He’s made little effort to pull together a multilateral coalition to buttress the Arab Awakening, in places like Egypt, to handle the post-revolution challenges. His ill-considered decision to double down on Afghanistan could prove fatal. He is in a war of words with Pakistan. His global climate policy is an invisible embarrassment. And the coolly calculating Chinese and Russians, while occasionally throwing him a bone, pursue their interests with scant regard to Obama’s preferences.”

--In a New York Times/CBS News poll, 89 percent of Americans say they distrust government to do the right thing, but 74 percent say the country is on the wrong track and 84 percent disapprove of Congress. President Obama’s approval rating is 46 percent.

Among Republican primary voters in the above survey, it’s Herman Cain with 25 percent, Mitt Romney 21 percent, New Gingrich 10 percent, Ron Paul 8 percent, and Rick Perry a pathetic 6 percent. Regarding the Texas governor, he is going to skip some of the upcoming debates after his poor early performances. How he thinks this will help him I’ll never know.

--Income inequality continues to rise as an issue. Nearly 9 in 10 Democrats, 2/3s of independents and just over 1/3 of all Republicans say that the distribution of wealth in the country should be more equitable, even as a majority of Republicans said they think it is fair, according to the New York Times/CBS poll.

It’s largely about the nonpartisan Congressional Budget Office study that revealed the top 1% of households saw their after-tax incomes grow by 275% from 1979 to 2007, or more than quadruple the growth of the rest of the top 20% of the population during that period.

“Meanwhile, income for the 60% of households that make up the middle of the income scale increased by slightly less than 40%, the study found. The poor – the 20% of the population with the lowest incomes – saw just an 18% increase.” [Jim Puzzanghea / Los Angeles Times]

--Nevada backed off and will now hold its caucuses on Feb. 4 after pressure from New Hampshire and the Republican National Committee.

So, assuming New Hampshire goes for Jan. 10, as expected,  it’s…

Iowa: Jan 3
New Hampshire: Jan. 10
South Carolina: Jan. 21
Florida: Jan. 31
Nevada: Feb. 4

So what did your editor immediately do upon hearing the Nevada news? I booked a flight to Manchester, N.H., first week in January, that’s what I did. And seeing as how a simple Radisson in downtown Manchester was suddenly displaying a $400 rate when it would normally be about $100, I scooped up a decent alternative right at the airport for far cheaper. Anyway, I’ll be on the ground, hitting a few of those last frantic speeches, with the goal of catching Romney and Cain at a minimum. It was in 2004 that I saw John Edwards and John Kerry in New Hampshire, plus two or three others, including Joe Lieberman, and it’s a lot of fun, as long as the weather cooperates. [Richard L., send me a note if you’re still in the area.] 

“Stop proposing nonsense tax plans that won’t work. Stop making ridiculous attention-getting ads that might be minimally acceptable if you were running for county supervisor in Oklahoma. Stop saying you’re going to build a U.S.-Mexico border fence you know perfectly well you’re not going to build.

“Give the GOP electorate and the American people some credit. This country is in terrible shape.   They know it. You know it. They want solutions. You’re providing comedy.

“This is a serious time. It requires serious leaders. Where’s the gravity?

“The reason that many on the Right have spent the year hunting somewhere, anywhere, for better candidates to challenge President Obama is becoming ever more plain with each passing day.

“Herman Cain now leads in at least one major poll. He released his first TV commercial on Monday. In it, his campaign manager talks about how different the campaign is, then lights up a cigarette and exhales the smoke in a curlicue. Next comes a shot of Cain smiling devilishly.

“It’s impossible not to like Cain. But this ad is a humiliating embarrassment. This is his moment, and rather than rising to it, he’s behaving as though even he can’t imagine he’ll one day sit in the Oval Office. He discards positions when they are inconvenient, and speaks dismissively of the notion that a presidential candidate ought to know something about foreign policy.

“These are not the actions of a serious man. Good October poll data or not, if he doesn’t take himself seriously, few will once voting commences.”

And Podhoretz goes on to talk about Rick Perry and his flat tax proposal that isn’t really flat because you can pick and choose.

“So there will be two parallel tax systems. But this doesn’t simplify matters at all, since there are already two parallel tax systems (one is called the Alternative Minimum Tax). …

“Perry’s refusal to pick and choose with his non-flat, optional ‘flat tax’ constitutes an act of egregious cynicism. He wants the credit for proposing something bold while denying that any such boldness will have palpable consequences as well as benefits.

“Yet a truly flat tax will necessarily raise taxes on middle-income earners and lower them on those making more money. Rather than acknowledge this and do the hard work of explaining why and how a flat tax will work to create the economic growth that will get us out of this morass, Perry simply wishes the hard work away.”

--This is really too much…the fact the Occupy Wall Street crowd in Manhattan is sitting on over $500,000 in cash from donors. Members of the “finance committee” are like Al Pacino in “Scarface.” [“The biggest problem I have is what to do with all the…”]  So OWS has endless meetings to decide how to distribute it.

But then you have the dirtballs in London who have been occupying an area outside St. Paul’s Cathedral, a major tourist destination. City officials allowed the group to close the cathedral down for a week, a longer period than during the Blitz, for crying out loud, as reported by the London Times’ Fay Schlesinger. Even when it reopens this weekend, the upper parts will be closed because London’s Fire Brigade would be blocked from using ladder trucks. If I was a tourist there today, I’d be going ballistic. Plus, the Times of London has taken infrared camera shots to prove that most of the protesters don’t sleep in their tents at night, they just go home! Like try 9 out of ten! Sweep ‘em into the Thames.

By the way, I seem to be in a minority over my opinion towards the Occupy Wall Street group. 43% of those surveyed for a CBS/New York Times poll agree with OWS’s goals, while 27% said they disagree. Aside from a communist/class warfare agenda, however, what are the group’s goals, pray tell?

Here’s one issue I’ll grant OWS, however, the cost of college. New figures show that average in-state tuition and fees at four-year public colleges rose an additional $631 this fall, or 8.3 percent, compared with a year ago. Including room and board, the average price for a state school is now more than $17,000 a year, though many families pay far less because of a large increase in federal grants and tax credits. 

Nonetheless, President Obama unveiled a plan to deal with the student loan issue and give 1.6 million some relief on their payments. The plan isn’t new; it’s just accelerating a program already passed by Congress that reduces the maximum required payment on student loans from 15 percent of discretionary income annually to 10 percent. Like the White House’s plans on the housing front, the impact will be minimal and is hardly about job creation.

But the president also said something incredibly stupid in his speech addressing student loans at a school in Denver, that being graduates will have more money to spend on things “like buying homes.”

What bank these days is going to give a mortgage to a person with a large student loan balance? Maybe they did in the bubble days, but not now. The College Board reports, after all, that roughly 56 percent of 2009-2010 bachelor’s degree recipients at public four-years graduated with debt, averaging about $22,000. Total student loans outstanding are slated to exceed $1 trillion this year, which in future years could be a significant drag on economic growth. And, no, President Obama, a slight reduction in the amount owed will not lead to a surge in home-buying.

I knew the student loan issue was going to be a White House topic this week and thus held off last time on a comment by Rich Lowry in an op-ed for the New York Post from Oct. 14, as it would be more appropriate today.

“College students and recent graduates are overrepresented (on the “We Are the 99 Percent” Web page). Their complaint comes down to too much debt, and too few job opportunities to get out from under it. There’s the guy with the master’s from Harvard who owes $60,000 and lives off temp jobs. There’s the woman who is paying her $50,000 in debt and the $20,000 in debt for her 22-year-old daughter. There’s the graduate with a master’s from ‘a major U.S. university’ who is unemployed and $92,000 in hock. And on and on.

“The representatives of these debt-burdened grads shouldn’t be at Zucotti Park, but at the American Association of University Professors or some other arm of the academic complex that gouges students. College tuition has been increasing at a rapid clip. Does anyone believe that higher ed is getting constantly better? It’s an inflationary spiral, partly driven by a federal student-loan program that feeds the maw of the beast regardless of quality of outcomes.

“Another running theme is the high cost of health care and the lack of insurance. One man writes of his job ‘that pays 15 percent less than it did five years ago’ even as ‘health insurance costs are up over 175 percent.’….

“The puerile ideology of Occupy Wall Street is irrelevant to all of this. Goldman Sachs could be dissolved tomorrow and the wealth of the 1 percent confiscated, and it wouldn’t make college or health care cheaper, or create one new job. If the ‘revolution’ yearned for by the protesters is insipid, there’s no doubt that the moment calls for bold economic reforms and a rethinking of health care and higher education.

“President Obama’s misbegotten contribution is a health-care law that won’t control costs and will insure more people only while making the current system more unsustainable.

“Republicans often don’t even bother to try to connect their program to the troubles of workers down the income scale. The leading establishment Republican presidential candidate, Mitt Romney, wants to cut their capital-gains taxes. The leading Tea Party presidential candidate, Herman Cain, wants to raise their taxes. 

“If nothing else, ‘We are the 99 Percent’ is a reminder that the suffering is real.”

--Shootings are way up in New York City thanks to Occupy Wall Street. How is that, you may ask? Because “When OWS marches, as many as 3,000 cops a day could be called on to keep the peace. That’s about 10 percent of the total force.

“ ‘The city is going crazy with demonstrations and protests, and I’m lucky if I can get four cars out there,’ said Deputy Inspector Ted Bernstein, commander of the 13th precinct in Chelsea.” [Brad Hamilton / New York Post]

“Clinton and Bush won’t apologize and atone (for their failure to tackle entitlements). They won’t play truth squad. But the fact that my fantasy seems so outlandish offers a sobering commentary on our politics.

“There’s no culture of moral accountability. There’s no sense that political leaders, retired from office seeking, should come clean with the public. The essential nature of the country’s budget problem – the dominance of spending on retirement benefits and uncontrolled health costs – was no secret to either Clinton or Bush. It would be healthy for the country if they confessed that their dodging of unpopular choices helped create today’s mess.

“Their silence contributes to continued public confusion and political stalemate. Polls consistently show that Americans want budget deficits closed but dislike the policies that would close them: higher taxes on much of the public; cuts in retirement benefits; reductions in other government programs. On both left and right, myths persist of painless solutions: ‘eliminating waste’ or ‘taxing millionaires.’

“It’s true, as Democrats charge, that Republican rigidity on taxes obstructs agreement. But that’s not the only obstacle. Democrats’ intransigent defense of Social Security and Medicare reflects the programs’ utility as a partisan vote-getter. Republicans ‘have launched an all-out war on Medicare and Social Security’ says a new fundraising mailer from House Minority Leader Nancy Pelosi. Why sacrifice this pitch even if it’s untrue?

“Congress’ ‘supercommittee’ – charged with reducing budget deficits – is reportedly floundering. Small wonder. Our political system prefers rhetorical fairy tales to unpleasant budget realities.”

--So last week I mentioned that about the only two politicians I want to listen to these days are Republican Congressman Paul Ryan and Senator Tom Coburn, who speak the truth about the problems facing our nation. In her Wall Street Journal op-ed this weekend, Peggy Noonan writes the following:

“People are increasingly fearing the divisions within, even the potential coming apart of, our country. Rich/poor, black/white, young/old, red/blue: The things that divide us are not new, yet there’s a sense now that the glue that held us together for more than two centuries has thinned and cracked with age. That it was allowed to thin and crack, that the modern era wore it out.

“What was the glue? A love of country based on a shared knowledge of how and why it began; a broad feeling among our citizens that there was something providential in our beginnings; a gratitude that left us with a sense that we should comport ourselves in a way unlike the other nations of the world, that more was expected of us, and not unjustly – ‘To whom much is given much is expected’; a general understanding that we were something new in history, a nation founded on ideals and aspirations – liberty, equality – and not mere grunting tribal wants….

“Where is the president in all this? He doesn’t seem to be as worried about his country’s continuance as his own. He’s out campaigning and talking of our problems, but he seems oddly oblivious to or detached from America’s deeper fears. And so he feels free to exploit divisions. It’s all the rich versus the rest, and there are a lot more of the latter….

“Which gets us to Rep. Paul Ryan. Mr. Ryan receives much praise, but I don’t think his role in the current moment has been fully recognized. He is doing something unique in national politics. He thinks. He studies. He reads. Then he comes forward to speak, calmly and at some length, about what he believes to be true. He defines a problem and offers solutions, often providing the intellectual and philosophical rationale behind them. Conservatives naturally like him – they agree with him – but liberals and journalists inclined to disagree with him take him seriously and treat him with respect….

“The president, (Ryan said in a highly publicized speech at the Heritage Foundation), has made a shift in his appeal to the electorate. ‘Instead of appealing to the hope and optimism that were hallmarks of his first campaign, he has launched his second campaign by preying on the emotions of fear, envy and resentment.’”

--In a study reported in The Lancet, a daily dose of aspirin should be given to people at high risk of colon cancer. Newcastle University Prof. Sir John Burn, who led the study, said the evidence “seems overwhelmingly strong.”

--I loved George Will’s piece on noise in airports, like the recorded voice that says: “The moving sidewalk is coming to an end. Please look down.”

Will: “Well, yes. Pretty much everything does come to an end, doesn’t it?...Passing through a U.S. airport is an immersion in a merciless river of words. They are intended to be helpful, but clearly they flow from an assumption that increasingly animates our government in its transactions with us. The assumption is that we are all infants or imbeciles in need of constant, kindly supervision and nudging, lest we allow ourselves to be flung off a moving walkway and over the edge of the world….

“At Kansas City’s airport, a recurring announcement tells travelers: ‘Designated smoking areas are located outside, away from doors.’ That means the designated smoking areas are pretty much the entire Midwest and everything contiguous to it – all of Creation that is ‘away from’ this airport’s doors….

“The drizzle of superfluous words continues on the plane, beginning with ‘this is a no-smoking flight’ – please tell us something we don’t already know: Smoking on planes has been banned for more than a decade – and ending with the admonition that deplaning passengers should ‘make sure you have all your belongings.’ Shoes? Check.  Trousers?   Check….

“More and more public spaces are like airports, places where we are assaulted by instructions, advice, warnings and unwanted information. Almost none of this noise is necessary for people mature enough to be allowed to walk around the block, let alone fly around the country. This is the way the world will end, not with a bang but with an environmental blitzkrieg of blather.”

--Further evidence that as a species we can really suck. Headline from the Star-Ledger (New Jersey) this week.

“Linden man dies after being hit by driver on cell phone.”

The poor fellow was in a crosswalk, which is how I’ve always felt I’ll go one day.

--What a heartbreaking loss for the Texas Rangers and their fans. But congratulations to St. Louis for a spectacular run going back to August. Baseball fans around the country will be talking about Game 6 all winter at their favorite watering holes, just replaying those last incredible innings.

--The United Nations’ population division projects the world will reach 7 billion on October 31…Only about 3.4 billion of us deserve to be here. Happy Halloween!

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

Gold closed at $1744…up $100 on the week
Oil, $93.57…highest close since 7/29

Returns for the week 10/24-10/28

Dow Jones +3.6% [12231]
S&P 500 +3.8% [1285]
S&P MidCap +5.7%
Russell 2000 +6.8%
Nasdaq +3.8%

Returns for the period 1/1/11-10/28/11

Dow Jones +5.6%
S&P 500 +2.2%
S&P MidCap +0.4%
Russell 2000 -2.9%
Nasdaq +3.2%

Bulls 40.0
Bears 37.9 [Source: Chartcraft / Investors Intelligence]

Have a great week. I’m off to Charleston, S.C., weather permitting, for five days of great food, drink and some American history. Ted and Kelly, I’ll have a cold one at the Noisy Oyster for you.

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