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04/28/2012

For the week 4/23-4/27

[Posted 6:00 AM ET]

Europe, Washington and Wall Street

What an awful week for Europe. Spain and Britain entered recession; the Netherlands, in recession, too, saw its government fall over a debate on the level of austerity the people can take; Romania’s government fell for the second time in two months, Romania being in recession; France’s first-round in its presidential election foretells a Socialist government that doesn’t have a clue (not that the current alternative is any better); Germany’s economy is not looking so rosy after a terrible purchasing managers index number for April (46.3, a 3-year low…the flash PMI for all of the eurozone was a putrid 47.4); and Greece faces an election, May 6, that promises to create utter chaos, particularly when it comes to the terms of its bailouts.

First, Britain is in a double-dip recession after GDP is estimated to have dropped 0.2% in the first quarter after a 0.3% drop in the fourth. While all is not bad in the U.K. and the numbers are deceptive, one fact is clear both here and across the continent…lending to business continues to crater.

In the Netherlands, Prime Minister Mark Rutte was forced to tender his cabinet’s resignation over proposed budget cuts because his right-wing coalition partners refused to support them. Rutte, an ally of Germany on the austerity front, may yet return to government with the special election that will now take place in September. And, to be clear, the Netherlands, while in recession, is not in a deficit crisis like the PIIGS, witness the 10-year bond yield of around 2.40%, last I checked. Nonetheless, the Netherlands becomes a poster-child for the austerity vs. growth debate in the EU. [A budget was eventually passed but Rutte, now caretaker leader, needed the assistance of three weak, far smaller parties to squeak it through.]

The government of German Chancellor Angela Merkel, aside from dealing with an economy that is sputtering largely because its neighbors are dying (it’s pretty hard to buy German goods if you’re dead), with bellwether Siemens, the energy and electronics giant saying new orders fell 13 percent in the first three months of the year, faces key state elections on May 6 and 13.

Greece, with its pending elections, now is staring at an economy that could lose another 5% in GDP this year. Anarchy seems a certainty by July with the looming dysfunctional new government.

French Socialist Francois Hollande, a seeming winner in the May 6 run-off with polls showing him 10 points or more ahead of President Nicolas Sarkozy, is looking to renegotiate the fiscal compact that 24 EU governments agreed to recently, saying on Friday, “it’s not for Germany to decide for the rest of Europe.” While Hollande is trying to reassure some he doesn’t really mean he will demand a new treaty, his calls for the compact to emphasize growth over budget discipline are falling on deaf ears in Germany. No way, say the Germans, will they reopen the treaty as this would kill it, with those already on board then demanding changes of their own.

Meanwhile, Hollande is insisting on confiscatory tax policies when it comes to France’s wealthiest, which is insane. As discussed further below, they’ll just leave…and bye-bye revenue.

While the markets may not show it every day, and as Italian and Spanish bond yields rise on a Tuesday and fall back on Wednesday, Europe is nonetheless in a full-blown crisis all over again.

European Central Bank President Mario Draghi said the eurozone needs to reexamine where it is headed; this after Draghi helped bring the EU together just a few months ago. What? We’re going to reexamine where we’re headed four times a year? You could do that if you were the central bank in the United States, and it’s done, but not when you’re talking 27 separate nations with disparate issues and agendas.

“We need to actively step up our reflections about the longer term vision for Europe as we have done in the past at other defining moments in the history of our union,” he told members of the European Parliament (there’s a bunch of winners). Economic reforms “change profoundly the societies in which we live. This is a source of pain. (But) we must persevere.”

Well, yeah. But you can’t keep having this same debate over and over again. Then again, Merkel is the closest thing Europe has to a leader these days and because she’s German, well, you can see how in places like Greece, and France, that creates problems of an historic nature (see WWII).

Back to Draghi, while on one hand he says political leaders need to take steps to promote long-term growth, such as cutting government operating expenses rather than raising taxes, he then rejected calls for less fiscal rigor. Here he is correct. Countries with a record for deficit spending, he offers, have not seen any benefits; rather their countries have “flatlined.”

“If one thinks you can increase demand by increasing deficits, then how come we don’t have higher demand?” [Jack Ewing / New York Times]

My problem is that Draghi speaks some truths, but he’s also all over the place. He talks about there being more a lack of demand than a lack of credit, but all I see are the banks seizing up on the lending front. 

Here’s a good description of where the eurozone stands today, courtesy of Eurostat. The eurozone’s average budget deficit had been cut from 6.2 percent in 2010 to 4.1 percent in 2011, but total debt levels rose from 85.3 percent of GDP to 87.2 percent by the end of 2011.

Greece’s budget deficit of 9.1 percent marginally beat the EU’s and IMF’s target of 9.3 percent in March, but Greece’s debt to GDP soared to 165 percent, up from 145 percent in 2010.

Jens Weidmann, Bundesbank president, said in a speech in New York that Europe’s leaders must stay the course.

“We can only win back confidence if we bring down excessive deficits and boost competitiveness.”

As I’ve noted many times before, this is my own stance. But it takes leadership. I hold out Britain’s David Cameron as an example. It seemed to me he had the right plan, and he needs to stick to it, but he’s losing control as the backbenchers increasingly question the strategy. He has to be a role model for the continent. The next few months will be telling.

George Soros said the other day that the eurozone crisis is “not over yet, and it is going in the wrong direction.

“The euro is undermining the political cohesion of the European Union, and, if it continues like that, could even destroy the European Union. You can grow out of excessive debt; you cannot shrink out of excessive debt.”

Soros is calling for more pragmatic German policies. Chancellor Merkel admitted that austerity alone would not solve the crisis, but insisted opposition to fiscal discipline was wrong.

“We’re not saying that saving solves all problems,” she said at a conference in Berlin. “(But) you can’t spend more than you take in. You can’t live your whole life this way. Everybody knows this.”

The deposed Dutch Prime Minister Rutte called on politicians to stick to his proposed budget cuts:

“The problems are serious, the economy is stalling, employment is under pressure and government debt is growing faster than the Netherlands can afford. Those are the facts and nobody can run away from them.”

Which brings me to Spain. Treasury Minister Cristobal Montoro told parliament:

“We are in an extremely delicate moment as a country, an extremely fragile moment as a country…This is the most austere budget since democracy, and it is aimed at being the most realistic that Spain needs to overcome this crisis situation.” [Irish Independent]

But when you talk about realism, or lack thereof, how about our new “Idiot of the Year” candidate; Banco Santander CEO Alfredo Saenz, who said, in referring to Spain’s housing crisis of historic proportions, “Mortgages get paid in good times and in bad. Anyone raising this problem as one of the issues for the Spanish financial system is saying something stupid.”   [Bloomberg]

That, my friends, is an idiot.

You see, Mr. Saenz is pointing to government data that says the default ratio in Spain was just 2.6 percent in March, down from 2.7 percent at the end of 2011.

“The data is good so let’s not start debating the quality of the information,” said Saenz. “Mortgage arrears are not a problem and are not going to be a problem.”

But a JPMorgan report, published April 26, said the figures just flat out aren’t real. They can’t be. They drastically understate the issue.

Consider that the delinquency rate in the U.S. is 7.6 percent with unemployment at 8.2 percent. In Ireland, as reported by Bloomberg’s Charles Penty and Esteban Duarte, joblessness is 14.3 percent and the delinquency rate is 9.2 percent.

So this week Spain reported its unemployment rate hit 24.4 percent! [Youth unemployment is in excess of 50 percent.] In other words, these delinquency figures being bandied about can’t possibly be right.

Economists at JPMorgan forecast Spanish unemployment will hit 30 percent. “At a minimum we would expect arrears to increase significantly from the current levels,” said JPM analyst Gareth Davies, co-author of the report, who refused to comment on Saenz’s declarations.

Spain has been living a lie for years now. The central government is mostly transparent, from what we know. But I’ve been telling you for years the problem is in the regions, where corruption was rampant between the developers (none of whom you can find today), the local governments, and the banks. 

Jose Manuel Garcia-Margallo, Spain’s foreign minister, admitted in an interview with state radio that “Spain is undergoing a crisis of enormous proportions.”

Nonetheless, some, such as Economy Minister Luis de Guindos, continue to rule out seeking a bailout, hours before S&P cut the country’s credit rating further.

Oh, and retail sales in Spain were down 3.7 percent in March from a year ago, the 21st month in a row sales have fallen. And according to the Bank of Spain, GDP fell 0.4 percent in the first quarter after dropping 0.3 percent in Q4. [Official numbers come out Monday, supposedly.]

So here’s my bottom line on Europe. The banks are facing a severe capital squeeze, which is squeezing lending at the worst possible time. Governments are seeking the right balance between growth and cutting deficits, but this requires political will and little can be found.

And when governments do decide to come up with needed labor market reforms, as is imperative in Spain and Italy at the moment, implementation will be critical, but there is zero reason to believe such implementation will be forthcoming.   Just look at how fake Prime Minister Mario Monti has been backtracking in Italy on this front.

Oliver Blanchard, the IMF’s chief economist, said about ten days ago, as quoted by the Washington Post’s Robert Samuelson, “For the last six months, the world economy has been on…a roller coaster. One has the feeling that, at any moment, things could well get very bad again.”

No disagreement here.

Washington and Wall Street

And when Spain gets its bailout, and/or when Greeks start rioting worse than ever, with terrorist elements entering the fray this time, the U.S. markets will suffer. So enjoy the firmer footing we’ve been witnessing here while it lasts.

No doubt, corporate earnings have been better than expected, and it helps to have an Apple or an Amazon on our side. It would seem that fears over Europe, while warranted, lowered some company estimates too much. Understand that virtually every multi-national, even in beating expectations, makes note of Europe’s softness. Heck, we’d be at all-time highs if Europe was growing just 1 percent rather than being in a still-largely mild recession.

But this was a week where the Federal Reserve’s Open Market Committee got together and held the line on interest rates again, i.e., at zero, as the Fed talked about there being a potential weather payback going forward, after some of the first quarter’s data could have been inflated due to the fact it was summer in February and March in many parts.

Even still, though, the first estimate on first-quarter GDP came in at a homely 2.2 percent, less than the 2.5 percent consensus forecast, but, more importantly, also less than the 3 percent for Q4. So even though the data for the first three months can be revised two more times, it’s certainly looking like the economy decelerated anew.

Remember, there are good reasons why 2 or 3 percent growth is great for stocks; low growth plus low inflation is almost always a perfect tonic.

But you don’t get a lot of tax revenues out of an economy growing at just 2 percent and unless we start growing more rapidly, the deficit picture will only get uglier and uglier.

Everyone and their mother is now talking about the next deficit-ceiling crisis coming before the election, as much as President Obama wants to push it off (I don’t buy arguments that this would actually be good for the White House…the markets will be tanking and that is never good for the incumbent).

Yes, I still like my deficit-inspired, Europe and program/flash-trading fueled crash for later this year.   We are heading over a cliff, and while many have said this comes in 2013, or at the earliest in the lame-duck session of Congress that follows the election, I just think something triggers it sooner.

I also, despite some talk of an agreement with Iran on its nuclear program, don’t believe for a minute this, or any other hot spot like Pakistan is off the table suddenly.

But one word on housing. I updated my quarterly piece on the topic for my “Wall Street History” link. No one shows the National Association of Realtors data as I do, including them, so if you want, just scroll through the archives for each quarterly update of mine for the full picture.

My bottom line…there was way too much happy talk this week on the housing sector in terms of a rebound. Yes, we have probably bottomed. I said fall of 2008, and then early 2009, that the bottom would actually be hit in April ’09 and then “we’d just sit there.” Well, that call of mine continues to look mighty good.

But as the S&P/Case-Shiller data for February showed this week (remember, these guys use abacuses and thus are behind), the 20-city metropolitan area index showed a decline in median home prices of 3.5 percent over February 2011, and down 0.8 percent month-to-month.

Economist and co-author Robert Shiller said, “I’m more concerned about the downside than most people. I could see it languishing and edging down for years.”

According to Shiller’s own data, and, recall he’s pretty good on this stuff, it took eight years to reach a bottom during the Great Depression and 11 more years to regain the lost ground; with home prices bottoming in 1933 and not returning to pre-crash levels until 1944.

Street Bytes

--It was the best week in six for stocks, with the Dow Jones up 1.5% to 13228, while the S&P 500 added 1.8% and Nasdaq picked up 2.3%.   Fed Chairman Ben Bernanke said at his press conference following the meeting of the FOMC that, “We remain prepared to do more as needed to make sure that this recovery continues and that inflation stays close to target.” Additional bond-buying is still “very much on the table,” he added. Equity traders lapped up the inference further stimulus was on the way.

It also doesn’t hurt that Apple’s influence on the market is huge, especially when the news is good for the company. It accounts for more than 4 percent of the S&P 500 index and is expected to account for about 5.5 percent of its first-quarter profit. Apple is also 18 percent of the Nasdaq 100 index, and nearly 12 percent of the Nasdaq composite. Following its earnings release, Apple staged its best one-day rally, 8.9%, since Nov. 2008.

--U.S. Treasury Yields

6-mo. 0.14% 2-yr. 0.26% 10-yr. 1.93% 30-yr. 3.12%

The Fed lowered its unemployment forecast for 2012 to 7.8 to 8.0 percent for the last three months of the year, from 8.2 to 8.5 percent as it had projected in January, and 7 of 17 Fed officials expect rates below 1 percent by the end of 2014; 10 say 1 percent or higher. 

The Fed also lowered its growth forecast for 2013 slightly to 2.7 to 3.1 percent. Europe remains the wild card.

This coming Friday is the employment report for April and the recent weekly readings on jobless claims, in the 385,000-388,000 range, should not give much comfort we will see a big number, or at least one much above estimates.

--The U.S. Treasury Department said two weeks ago that the Troubled Asset Relief Program (TARP) would turn a profit, but a report to Congress out of the Office of the Special Inspector General for TARP read: “After 3 ½ years, the TARP continues to be an active and significant part of the Government’s response to the financial crisis. It is a widely held misconception that TARP will make a profit. The most recent cost estimate for TARP is a loss of $60 billion. Taxpayers are still owed $118.5 billion.”

Unreal. The administration is feeding us another pack of lies.

You see, it’s all about the smaller banks that were rescued that are still struggling to repay the bailout money.

The report goes on to say that the rescue “is not without profound long-term consequences. A significant legacy of TARP is increased moral hazard and potentially disastrous consequences associated with institutions deemed too big to fail.”

--Trustees for the Medicare and Social Security trust funds said both are on “unsustainable paths” (nothing new here) and will be exhausted by 2024 and 2033, respectively.   Treasury Secretary Timothy Geithner, though, said the 2010 healthcare law would lower costs on Medicare and other administration officials said the same; as in Obamacare will save Medicare $200 billion through 2016. For the other side…

Jennifer Rubin / Washington Post

“Douglas Holtz-Eakin and Michael Ramlet from the American Action Forum provide some useful detail (on Medicare). They write: ‘In 2011, Medicare spent $549.1 billion on medical services for America’s seniors but only collected $260.8 billion in payroll taxes and monthly premiums. Trustees have now issued a funding warning for 7 straight years.’ The bottom line: ‘The cash shortfall is responsible for over one-fourth of the federal debt accumulated since 2001.’….

“Obama’s refusal to lead on entitlement reform is one of Mitt Romney’s better arguments for his presidency. Obama won’t lead; Romney has already set out Medicaid, Medicare and Social Security reform. There is no guarantee that he will have the nerve or skill to push those through, but he’s already done more than Obama has in over three years in the White House.”

Steven Rattner / Financial Times

“As for the Medicare health insurance plan for the elderly, while its outlook didn’t deteriorate last year, it remains in an even more dismal state than Social Security. Over the next 75 years, using realistic assumptions, Medicare costs are projected to increase from less than 4 percent gross domestic product to more than 10 percent of GDP.

“Still more depressing than these grisly statistics is the utter lack of progress in addressing so obvious and so cataclysmic a problem. Every day that goes by either brings America’s elderly closer to a huge cut in their benefits or threatens every younger generation with an equally huge bill to pay.”

--Mexico’s attorney general will investigate allegations that federal officials received bribes from Wal-Mart in order to speed up permits of new stores in that country.   As first reported by the New York Times in an incredibly detailed piece that may be destined for a Pulitzer, hundreds of suspected illegal payments totaling more than $24 million are alleged to have been made, which would be a major violation of the United States’ Foreign Corrupt Practices Act, which forbids bribing officials to secure business abroad.

But the issue isn’t so much the fine that the U.S. government could levy on Wal-Mart, rather it’s the management changes that could result from the probe as current CEO Mike Duke was reportedly apprised of the Mexico bribes shortly after being named head of Wal-Mart’s international division in 2005, overseeing Mexico operations. Duke took the helm of the company overall in 2009.

The Times reports that Wal-Mart didn’t pass on the allegations at the time to U.S. or Mexican authorities, let alone conduct an internal probe of any substance.

--Moody’s Investors Service said China’s growth will slow to anywhere between 7.5 and 8.5 percent this year, vs. the 8.1 to 8.6 estimate generally out there.   In other words, further ammo for the soft-landing camp. HSBC issued its PMI for April, almost always more conservative than the government figure, and for April it was 49.1, which was an improvement over March’s 48.3. 

But you can’t dismiss comments such as that out of Otis Elevator, which saw new orders from China slide 21 percent in the first quarter as a result of heavy exposure to high-end residential housing markets.

And Caterpillar said it had overestimated Chinese demand on construction equipment, stating its inventories were so high it was exporting machinery to other countries where demand was tight. CAT said demand would decline in China this year, down from a prior forecast of 5-10 percent growth. But, CAT still reported a very solid quarter because China makes up just 3 percent of its overall sales (10 percent of its business in Asia). It would seem, however, that CAT’s expansion plans in China, where it just opened its 16th manufacturing facility with nine more under construction, are rather suspect. [Hal Weitzman / Financial Times]

--So as alluded to above, Apple kicked butt as sales in China more than doubled and represented 26 percent of its $39.2 billion in sales for the first quarter. Apple has yet to ship its new iPad there. Overall, Apple picked up 64 percent of its sales overseas, its highest-ever share for the company.

And for the quarter it sold 35 million iPhones and 11.8 million iPads as net income rose 94 percent to $11.6 billion, or $12.30 a share when the Street was expecting earnings of about $10.00.

--Amazon.com, the world’s largest Internet retailer, slaughtered analysts’ estimates for the first quarter as earnings came in at 28 cents a share vs. expectations of 7 cents, while revenues handily beat as well. Demand for Kindle devices was a big reason for the surge and it remains the best-selling item on Amazon’s website, the company said.

--Chrysler reported earnings of $473 million in the first quarter, topping its entire net income for 2011. Fiat, the Italian automaker that took control of Chrysler out of bankruptcy in 2009, said Chrysler was responsible for all of Fiat’s profits earned worldwide. CEO Sergio Marchionne added, “It is fair to say that Chrysler is firing on all cylinders.”

Chrysler also credited Clint Eastwood’s “Halftime in America” Super Bowl ad as helping create excitement for its brands. Yours truly told you at the time it was indeed a great ad, while some conservatives stupidly tried to turn it into a political football.

--Meanwhile, Ford reported first-quarter profit fell 45 percent, to 35 cents a share compared with 61 cents in the first three months of 2011, as revenue declined to $32.4 billion from $33.1 billion. Ford lost $149 million in Europe as sales there fell 60,000 vehicles to 372,000. Ford’s CFO said, “We had expected the results to be a little bit worse in Europe. We don’t think the environment is going to get a whole lot better for some time.

--Russia reported growth of 4 percent in the first quarter, year on year.

--The new deputy governor of the Central Bank of Ireland, Swedish economist Stefan Gerlach, said it could take decades for the Irish housing market to recover to its 2007 level.

--Facebook reported that net income fell to $205 million in the first quarter from $233 million in Q1 2011, but revenue rose 45 percent to $1.06 billion as the company gears up for its IPO, still slated for May, though some say it could be pushed into June. Facebook reported 901 million monthly active users as of March 31.

--The Senate adopted a plan to deal with the U.S. Postal Service and it doesn’t include eliminating Saturday delivery, restructuring the health insurance program, or downsizing mail-processing facilities. The Senate actually requires Saturday delivery for at least two more years and puts a one-year moratorium on the closing of rural post offices. Instead, it’s all about creative accounting. As the Washington Post reports, the Congressional Budget Office estimates that the bill would increase deficits by more than $6 billion over the next 10 years. I mean USPS management itself had spelled out a five-year plan to cut $20 billion in costs and restore long-term viability, which may yet be the fallback plan because the House effort appears to have stalled.

--The board of Chesapeake Energy is finally phasing out a contentious compensation plan that had chairman and chief executive Aubrey McClendon investing alongside Chesapeake in every well that was drilled, sharing both in profits and expenses. Chesapeake is the nation’s second-largest producer of natural gas, after Exxon-Mobil, but McClendon has been running the operator in an incredibly reckless manner for years. S&P downgraded Chesapeake’s debt further into “junk” territory as it seeks to manage $10.3 billion in debt amidst falling natural gas prices.

--In the S&P/Case-Shiller housing index for February, Atlanta’s market continued to be the worst in the nation over the last one- and two-year periods, with median prices down 17.3 and 21.1 percent, respectively. For the last three years, Las Vegas is still the worst, down 25.8 percent. Washington, D.C., is the best for three years, up 4.6 percent.

Meanwhile, hard-hit Phoenix and Miami have seen their markets stabilize and are up slightly the last 12 months (thru February).

--In the key Southern California home market, the median home price peaked in 2007 at $505,000 and was $280,000 last month.

--The White House is catching a break (as well as consumers) as gasoline-futures have been dropping as more U.S. crude becomes available for refining and North Sea Brent prices decline as a result. A reversal of a pipeline’s flow from Cushing, Okla., to the Gulf Coast has given refiners there greater access to crude that was bottled up in Cushing, which in turn had helped keep Brent prices high.

--Also on the energy front, El Nino, the warming of the Pacific Ocean, may help keep temperatures cool across the U.S. this summer, which would mean less need to run air conditioners. One weather expert told Bloomberg that May will be warmer than normal, but then we’ll see a reversal. June through August 2011 was the second-warmest summer on record in the contiguous U.S. Texas is expected to be much cooler than last year.

--A cow that had died at one of California’s dairy farms was found to have mad cow disease, the first new case of the disease in the U.S. since 2006, though it was quickly deemed to be a highly isolated case, specifically “atypical” in that it didn’t get the disease from eating infected cattle feed. This won’t impact my own beef-eating decisions (though two South Korean chains banned U.S. beef for now), but should I ever get mad cow, or BSE, please shoot me.

--A fourth name associated with Goldman Sachs has emerged in the Galleon Group insider-trading case (think Raj Rajaratnam). The latest fellow, a senior San Francisco investment banker, is suspected of passing on word of pending health-care deals to Galleon. It was former Goldman director Rajat Gupta who was accused of leaking inside information to Rajaratnam.

--Yuck…dried fruit is the latest food scandal in China after an investigation by state television found that some was processed in filthy factories. From Mandy Zuo of the South China Morning Post:

“Preserved peaches were found packed in bags that had been used to hold animal feed, and hawthorn berries were soaked in a pool of water that contained garbage.”

--A friend, Dan V., doing business in Brazil, reported for me that the infrastructure (roads, airport, hotels) were “unimpressive at best” as the country gears up (or not really) to host the 2014 World Cup and 2016 Olympics. The previous week he was in London and said the Olympic Village there looked good, but they were scrambling to finish everything.

--I saw in the Moscow Times there was a weekend oil spill that leaked 2,200 tons of crude across 5 square kilometers of Arctic territory, but “Greenpeace estimates that 5 million tons of oil leak from Russian pipelines and in accidents every year – the equivalent of seven disasters on the scale of BP’s Deepwater Horizon spill in the Gulf of Mexico.”

How many of you knew that? I didn’t, and I thought I knew a lot about Russia’s dreadful environmental record.

But Krispy Kreme is opening up 40 Moscow outlets! 

Foreign Affairs

Syria: Pathetic U.N. special envoy and house-sitter extraordinaire, Kofi Annan, said the level of violence post- the April 12 cease-fire was “unacceptable,” and the Bashar al-Assad regime shuddered. Hours after the U.N. sent a team to Hama, government troops opened fire on those who came out to support the monitors, killing at least 30, while at the same time there is zero evidence Syria has withdrawn heavy weapons from populated areas as required by the April 12 agreement.

French foreign minister Alain Juppe said he was giving the peace plan put forward by Annan until May 5 to show it was working or France would seek a resolution in the U.N. authorizing force.

Fouad Ajami / Wall Street Journal

“The ongoing Kofi Annan diplomacy and United Nations-brokered ‘cease-fire’ are seen for what they are – an alibi for the abdication of Western powers, and a lifeline for the regime….

“In the Syria deliberations, deliverance is always around the corner. American diplomacy is always on the verge of making Russia see its way to the proper path. In these tortured discussions, there is no end to finesse and to the parsing of things….

“In one of its alibis for passivity, the Obama administration falls back on the threat posed by Islamists within the ranks of the opposition. This is but a recycling of the Assad regime’s own assertions that its tyranny is a secular shield for the minorities and a barrier to the rise of the Islamists. Yet the surest way the Islamists and the jihadists can come to greater power in Syria is a drawn-out war that further degrades and radicalizes the country.

“The defining truth of this struggle is the abdication of the Obama administration. For a year now, American officials have skillfully run out the clock. They made much of the authority of the U.N. Security Council when any model U.N. team in any high school would have predicted the vetoes of Russia and China. It was clear that the Obama administration did not want to arm the opposition for fear of ‘escalating’ the conflict….

“In the markets in Dubai, the Assad dictatorship is dumping its gold reserves – at a discount. In the long run, this regime is doomed. But that is hardly consolation to an outgunned rebellion. We shouldn’t be waiting on a Syrian Srebrenica before the regime is pushed into its grave.

“It is a waste of time – and of precious lives – to buy into a wishful diplomacy that maintains that a few hundred U.N. observers will ward off the evils of a merciless sectarian tyranny.”

Benny Avni / New York Post

“Should we carve out safe zones to protect civilians? Nah, it would require boots on the ground (even though these need not be U.S. troops). Establish no-fly zones? Nah, Syrian air defenses are too formidable (although Israel easily disabled them in 2007). Arm the opposition? Sorry, we don’t want to militarize the conflict further.

“By default, we’re stuck with a failing plan that we’ll likely support and finance anyway. Administration foreign-policy hands who might advocate a more muscular approach are no match for Obama’s political advisers, who want no election-year complications….

“ ‘How is it that Assad is still in power?’ Elie Wiesel asked on Monday, as he introduced Obama for a speech at the Holocaust Museum; Obama insisted that Assad would fall – eventually.

“Yet if U.S. leadership remains AWOL, Assad’s likely to survive and kill for some time yet.”

Charles Krauthammer / Washington Post

“Obama has said that we cannot stand idly by. And what has he done? Stand idly by.

“Yes, we’ve imposed economic sanctions. But as with Iran, the economic squeeze has not altered the regime’s behavior. Monday’s announced travel and financial restrictions on those who use social media to track down dissidents is a pinprick.  No Disney World trips for the chiefs of the Iranian and Syrian security agencies. And they might now have to park their money in Dubai instead of New York. That’ll stop ‘em….

“(Obama’s) case for passivity is buttressed by the implication that the only alternative to inaction is military intervention – bombing, boots on the ground.

“But that’s false. It’s not the only alternative. Why aren’t we organizing, training and arming the Syrian rebels in their sanctuaries in Turkey?   Nothing unilateral here. Saudi Arabia is already planning to do so. Turkey has turned decisively against Bashar al-Assad. And the French are pushing for even more direct intervention.

“Instead, Obama insists that we can act only with support of the ‘international community,’ meaning the U.N. Security Council – where Russia and China have a permanent veto. By what logic does the moral legitimacy of U.S. action require the blessing of a thug like Vladimir Putin and the butchers of Tiananmen Square?

“Our slavish, mindless self-subordination to ‘international legitimacy’ does nothing but allow Russia – a pretend post-Soviet superpower – to extend a protective umbrella over whichever murderous client it chooses….

“If Obama wants to stay out of Syria, fine. Make the case that it’s none of our business. That it’s too hard. That we have no security/national interests there.

“In my view, the evidence argues against that, but at least a coherent case for hands-off could be made. That would be an honest, straightforward policy. Instead, the president, basking in the sanctity of the Holocaust Museum, proclaims his solemn allegiance to a doctrine of responsibility – even as he stands by and watches Syria burn.”

Editorial / Washington Post

“(The) Obama administration, like its ‘partners’ on the Security Council, wishes to be seen as doing something to stop the bloodshed in Syria without having to commit resources or exert leadership. Sadly, this is far from the first such failure. In a blog at Foreign Policy’s Web site, Michael Dobbs has been documenting the eerie resemblances between the United Nations’ handling of Syria and its history in Bosnia – where an attempt to stop attacks on civilians by dispatching lightly armed peacekeepers in the 1990s led to the worst massacre in postwar European history.

“As Mr. Dobbs reported, a 1999 report signed by Mr. Annan himself concluded that the Bosnia mission was ‘at best, a half measure’ and a poor substitute for ‘more decisive and forceful action to prevent the unfolding horror.’ Said that Annan report: ‘We tried to keep the peace and apply the rules of peacekeeping when there was no peace to keep.’

“It’s bad enough that the Obama administration refuses to learn the lessons of previous failures. More galling is its claim that it has made the prevention of atrocities a priority – as Mr. Obama did Monday in announcing the creation of an ‘atrocities prevention board.’ ‘We see the Syrian people subjected to unspeakable violence, simply for demanding their universal rights,’ he said. ‘And we have to do everything we can.’

“Is sending unarmed monitors to besieged cities and shrugging when the people they visit are murdered everything the United States can do? Even in an election year, the answer has to be no.”

Iran: A Russian proposal would have Iran ending enhanced enrichment of uranium in exchange for cancellation of new economic sanctions, such as the European Union ban on crude oil that goes into effect July 1. Let’s hope this isn’t the resolution to the next round of talks in Baghdad, May 23.

Nor should we hope a report by the Los Angeles Times’ Paul Richter on Friday, that the Obama administration may be willing to allow Iran to continue enriching uranium up to a concentration of 5% if the Iranian government agreed to unrestricted inspections and strict oversight, is also not where we’re headed. [While I like to wait 24 hours after a report like this, if this last one comes to pass, I’ll go ballistic.]

Israeli Prime Minister Benjamin Netanyahu said earlier in the week that while sanctions are impairing the Iranian economy, “so far they haven’t rolled back the program or even stopped it by one iota. I hope that changes, but so far, I can tell you the centrifuges are spinning. If the sanctions are going to work, they better work soon,” he emphasized.

Israeli Defense Minister Ehud Barak said on Thursday that despite the strongest-ever sanctions against Iran, “the chances that, at this pressure level, Iran will respond to international demands to irreversibly stop its program seem low. I would be happy to be proven wrong….

“Dealing with Iran’s determination to achieve a military nuclear capability is not devoid of complexities, dangers or unpredictable results.”   But dealing with the challenge of a nuclear-armed Iran would be “infinitely more complex, infinitely more dangerous, infinitely expensive in human lives and financial resources.” [Jerusalem Post]

Israel’s military chief, Lt. Gen. Benny Gantz, on the other hand, told the newspaper Haaretz that he did not believe Iran will choose to build a nuclear bomb, a decision that is up to Ayatollah Khamenei. Thus, Gantz doesn’t see the urgency for military action. Gantz said Iran’s leaders are “very rational people” who are still mulling whether to “go the extra mile” and produce nukes.

U.S. Defense Secretary Leon Panetta said, “Are they trying to develop a nuclear weapon? No. But they are trying to develop a nuclear capability, and that is what concerns us.”

Reuel Marc Gerecht writes in The Weekly Standard:

“Round two (of the talks) could be a success, and lead to a round three, if Khamenei agreed to do five things: (1) Stop all uranium enrichment to 20 percent purity, which is near bomb-grade; (2) ship abroad the entire stockpile of 20 percent enriched uranium; (3) close the Fordow enrichment facility, which is buried under a mountain near the clerical city of Qom; (4) allow inspectors from the International Atomic Energy Agency immediate and unfettered access to any suspected nuclear site: and (5) permit the IAEA to install devices on centrifuges for monitoring uranium-enrichment levels. Khamenei is, to say the least, unlikely to agree to this.”

Other Iran-related tidbits:

The Oil Ministry admitted it was the victim of a large-scale cyberattack that shut the ministry down, though not the flow of oil; a virus similar in power to Stuxnet, it seems.

The Iranian government said it had reverse-engineered an American spy drone it captured last year. I hardly believe this one.

Die Welt, a German newspaper, ran a poll and 48% of Germans see Iran as the main threat to world peace.

A poll sponsored by the Jerusalem Post found that 24% believe the Obama administration is more pro-Israel, 24% said more pro-Palestinian, 36% said neutral and 16% did not express an opinion.

Israel: Prime Minister Netanyahu on Egypt’s Sinai Peninsula:

“The Sinai is turning into a kind of Wild West which…terror groups from Hamas, Islamic Jihad and al Qaeda, with the aid of Iran, are using to smuggle arms, to bring in arms, to mount attacks against Israel,” he told Israel Radio.

“We are acting against this reality and we are in…continuous discussions with the Egyptian government, which is also troubled by this.”

Israeli Foreign Minister Avigdor Lieberman said the situation in Egypt was more worrying than what was happening in Iran, calling for a significant boost in troop strength along the southern borders.

Egypt’s interim military ruler, Field Marshal Tantawi, countered, “We will break the legs of anyone trying to attack us or who come near the borders.” [Reuters]

Egypt: Regarding the upcoming presidential election, the Wall Street Journal’s Matt Bradley reports that support for the Islamist parties is suddenly waning. I’m not so sure, and it’s not as if the main alternative to an Islamist candidate, Amr Moussa, the former secretary-general of the Arab League, is the answer because, recall, he is a hardliner against Israel.

Yemen: The Obama administration has given the green light to the CIA and U.S. military for an increased drone campaign against al Qaeda, which has been building a base in the southern part of the country ever since the turmoil over the central government erupted. The new government is mostly supportive of the U.S., but also argues the drone attacks are used by al Qaeda as a recruiting tool.

North Korea: Most experts seem to agree Pyongyang could conduct its third nuclear weapons test within a week or so (the other tests having been conducted in 2006 and 2009). China’s vice foreign minister warned, “China will oppose anything which might jeopardize peace and stability on the Korean Peninsula and in Northeast Asia, as this would damage China’s national security interests and the interests of the relevant parties as well.”

But then the vice foreign minister said, “We believe that no party should take any action that might escalate tensions,” a none too subtle hint Beijing expects the U.S. and South Korea to butt out as well. [South China Morning Post]

So while the United States was generally pleased China issued the statement, it being North Korea’s only ally, the fact is China always says one thing and does another when it comes to its neighbor.

This week was one in which the North Korean government interrupted television programming to issue a ‘special report’ wherein it went after South Korea, threatening to “reduce all the rat-like groups and the bases for provocations to ashes in three or four minutes, (or) in much shorter time, by unprecedented peculiar means and methods of our own style.”

Well that would be a bit unsettling if you were in the middle of watching a Yankees-Red Sox game.

South Korea reacted angrily: “We urge North Korea to immediately stop this practice. We express deep concern that the North’s threats and accusations have worsened inter-Korean ties and heightened tensions.”

Seoul also recently announced it has deployed a home-grown, long-range cruise missile that can hit key facilities in the North. North Korea is said to have deployed 600 Scud missiles and 200 Rodong missiles near the DMZ.

Meanwhile, the other day when North Korea held its military parade, it showed missiles being ferried on vehicles that bore a striking resemblance to a 16-wheel transporter erector launcher manufactured by Hubei Sanjiang Space Wanshan Special Vehicle Co., a subsidiary of the China Aerospace Science and Industry Corp., according to military experts. White House officials say, however, they do not believe the suspected sale to North Korea was sanctioned by the Beijing government.

Why not? So what if China signed on to United Nations resolutions imposing an arms embargo on the North.

As for the missiles on said launchers, analysts now say a study of the photos reveals they were fakes. 

China: As the scandal involving Bo Xilai, former Chongqing party boss and politburo member, and his wife, Gu, suspected of murder in the death of a British businessman, exploded further with the revelation that Bo was tapping the phone lines of President Hu Jintao, some say Premier Wen Jiabao’s reform efforts will gain steam, even as he prepares to step down this fall. One Chinese Communist Party member told the Financial Times:

“The fundamental problem is that there are no real rules in this country. The party makes the laws but then says it and its members are not subject to them. This is unsustainable.”

Corruption makes the world go ‘round, but nowhere as much as it does in China.

Meanwhile, Gu Kailal confessed to police that she was in the room when Neil Heywood was poisoned, according to an account given to American diplomats. Heywood was evidently held down in a hotel room in Chongqing and forced to drink cyanide. He first spat it out and they had to give him more. [Irish Independent]

As to the phone tapping, surveillance is rampant these days in China and the politicos don’t know who to trust anymore.

And now we have the case of blind legal activist Chen Guangcheng, who fled house arrest in his rural Chinese village and is said to be under the protection of U.S. officials. I don’t have enough details as yet but high-level talks between the countries concerning his fate are now underway, just as Secretary of State Hillary Clinton and other top officials are due in China this week for the latest round of the Strategic and Economic Dialogue. Talk about a huge issue for the Obama administration. This comes just as the White House is seeking China’s cooperation on a slew of hot spots, including North Korea, Iran and Syria.

Pakistan: The Supreme Court convicted Prime Minister Gilani on contempt for failing to revive a long-standing corruption investigation against President Zardari, though it opted not to sentence Gilani to a maximum six months in prison as allowed. However, he could yet be forced to step down, as opposition leaders now demand. As of this writing, Gilani will defend his right to stay in office, so say his people.   The high court itself could come back and disqualify the prime minister.

Separately, talks between the United States and Pakistan over the November American airstrikes that killed 24 Pakistani soldiers on the Afghan border ended in failure on Friday. Pakistan demands a full apology. The U.S. was prepared to bite the bullet and issue one but then came the April 15 attacks on Kabul and other Afghan cities directed by the Haqqani network, which has its main base in Pakistan. So for now, Pakistan won’t reopen NATO supply routes into Afghanistan that have been closed since the November incident. The Americans, in turn, are withholding at least $1.2 billion in military aid.

Meanwhile, Pakistan successfully tested an upgraded ballistic missile capable of carrying a nuclear warhead, days after India conducted its own long-range test.

So we have the Agni-V (India’s latest) vs. the Shaheen-1A (Pakistan’s). India’s missile has a far longer range, but it’s intended to scare China, while Pakistan’s test was designed to intimidate India.

Afghanistan: The United States committed to defend Afghanistan militarily for 10 years after most foreign forces leave in 2014, though Afghanistan will be able to approve any American military operations after 2014 and the agreement bars the U.S. from using its soil to attack Pakistan, or any neighboring country where the Evil Doers have their bases. So I’m not so sure this agreement is worth a damn, but we’ll cross that bridge when we get to it. Issues such as funding, by the way, were left out for now, as well as the critical issue of permanent bases for the Americans.

Meanwhile, while the details are to be worked out shortly, it would be nice if President Obama would address the American people at some point on the topic.

Kosovo: Tensions surrounding neighbor Serbia’s parliamentary elections on May 6 have forced NATO to strengthen the mission in Kosovo by about 700 troops amid signs violence could flare up anew between ethnic Albanians and majority Serbs in northern Kosovo.

Russia: Prime Minister Vladimir Putin and President Dmitry Medvedev virtually completed their job swap when Putin announced he would hand over control of his United Russia party to Medvedev when both trade positions on May 7. But Putin also has his All-Russia People’s Front, which he set up a year ago, while United Russia’s influence has been waning, though it retains a parliamentary majority. So it’s like, ‘Here, Dmitry, you take it!’

Ukraine: Jailed former prime minister Yulia Tymoshenko declared a hunger strike on Tuesday after claiming she was assaulted by prison guards. In a statement, Tymoshenko said the guards “came to my bed, threw a sheet over me and started dragging me off the bed” when she refused to leave her cell for a medical checkup.

So that was Tuesday. Curiously, on Friday, a series of four bomb blasts went off in the eastern Ukrainian city of Dnipropetrovsk, injuring 27. Ukraine hosts the European soccer championships in June. But some say the “terror attack” was instigated by the government to deflect attention away from the Tymoshenko case.

And finally…

France: The first round of voting went pretty much as the final polls said it would, with Socialist Francois Hollande gaining 28.5% to President Nicolas Sarkozy’s 27%. The surprise was that National Front (FN by the French initials) candidate Marine Le Pen captured 18% in finishing third; a higher percentage for FN than her father, Jean-Marie, picked up in 2002 when he gained the run-off, only to get slaughtered by Jacques Chirac.

Sarkozy now desperately needs every one of Marine’s supporters if he is to have a chance in the run-off against Hollande, who will pick up the bulk of the supporters of the far-left’s Jean-Luc Melenchon (11%) and centrist Francois Bayrou (8%).

But there is zero sign that more than about 50% of the FN vote will go to Sarkozy, with many choosing just to abstain from the ballot out of their disgust for the guy, even if he has adopted many of the FN’s political platforms, particularly in terms of an anti-immigration stance. [Le Pen is also virulently anti-euro, not exactly where Sarkozy is.]

It was one year ago, May Day, that I witnessed Marine (and her father) in Paris for the National Front’s traditional speech, but this May Day, Tuesday, Le Pen has said she will tell her supporters how to vote, or not.

There are many in Europe, like Chancellor Merkel, who are most concerned about the far-right’s vote in France. I have expressed similar concerns over the years myself, concerning Europe overall, going back to Jorg Haider and his Freedom Party in Austria that picked up so much of the vote in 2000 (27%), he became a coalition partner in the government.

But I was early. I always said that Europe’s far-right would rise in force (but not majority status, mind you) when the economy tanked and of course that day is now. Whether the FN’s rise sets the stage for the rest of the continent, though, is highly debatable.

It would be disingenuous of me at the same time not to say I had done my homework on Le Pen before my trip, but it was pure luck I got to see her. Upon seizing the opportunity to witness history, however, I was indeed taken with Marine’s charisma. She’s only 43, and could be a player in France for decades to come…a legitimate player…a 20-percenter, and maybe then some.

Le Pen said on Sunday evening following the vote, “We have exploded the monopoly of the two parties. Whatever might happen in the 15 days to come, the battle for France is only beginning. Nothing will ever be the same again…The people of France have invited themselves to the table of the elite.”

The political junkie in me would love to be in Paris this Tuesday. I also hope security is much tighter than it was last year.

Meanwhile, wealthy French are preparing to leave in droves, fleeing for better tax situations in Belgium, Britain, and Switzerland, where individual rates may not be much better than France’s (under Hollande), but the treatment of capital gains and estates would be.

One thing is for sure; neither Hollande nor Sarkozy has addressed France’s real economic problems.

Bret Stephens / Wall Street Journal

“No candidate in the contest has suggested the country ought to attract foreign investment or nurture its native entrepreneurs. No candidate seems to think a tax cut – whether on consumers, producers or wage-earners – might be a good idea. Is France capable of nurturing a Steve Jobs or a Mark Zuckerberg? The idea seems to have crossed none of the candidates’ minds….

“Yet Americans should also take note that we aren’t so different from France, either: in our debt-to-GDP ratio, our employment rate, our credit rating. Above all, both in France and in America there’s a belief that, as exceptional nations, we are impervious to the forces that make other nations fall. It’s the conceit that, sooner or later, brings every great nation crashing to earth. “

Random Musings

--Mitt Romney swept five states on Tuesday – Connecticut, Rhode Island, Delaware, Pennsylvania and New York – and Newt Gingrich dropped out (or will, officially, on Tuesday, in case anyone gives a hoot).

Editorial / Wall Street Journal

“(Mitt Romney) is now closer to realizing the ambition he has so long pursued: He has an even-money chance to become America’s 45th president. He’s more likely to fulfill that ambition if he overcomes his cautious nature and runs a campaign that is equal to America’s current political moment….

“The temptation will be to assume the public has decided to fire the incumbent and so run a campaign to become the safe alternative. Take no policy risk, stress Mr. Romney’s biography, his attractive family and the seven habits of highly effective businessmen, and then hammer away on the economy.

“It’s possible, if job creation sputters again or Europe goes into bond-market arrest, that this kind of campaign will be enough to win. It’s also possible – more likely in our view – that this will play into Mr. Obama’s strengths of personal likability and Oval Office experience, especially if the economy keeps chugging on its current slow-growth path. Mr. Romney will have to make a case not merely against Mr. Obama’s failings but also for why he has the better plan to restore prosperity….

“(Mr. Obama’s) diversionary re-election strategy will be a combination of class warfare, more government subsidies (free student loans!), and personal attacks on Mr. Romney for being wealthy. Mr. Romney will need allies who can rebut these attacks….

“One of Mr. Romney’s trickiest challenges will be how to handle Mr. Obama’s, err, veracity. More than any President we’ve seen, this incumbent is willing to say things that aren’t in the area code of the truth. Thus he gives himself credit for the natural gas drilling boom, the deficits are still Mr. Bush’s fault, Mr. Obama has never raised taxes, and ‘green jobs’ in his dream economy are blooming by the millions.

“Mr. Romney can’t let the President get away with this, or Mr. Obama will conjure a vision of unreality that enough voters might believe….(Romney) needs his version of Reagan’s ‘there he goes again.’”

---

Following is some commentary on issues that point to the decline in America that I have mentioned before, whether it’s the fact some of our military leaders flat out suck, or the total lack of character exhibited by many of our neighbors, as best exploited by social media these days. 

I’ve had it. I’ve also noted from time to time, as much as some don’t want to hear it, that America is overrated…deeply so, these days.

I’m also sick of some of the apologists, especially when it comes to the military. I’ll put my own support for the institution up against anyone’s. But if the military doesn’t get a handle on the bad behavior we have been witnessing (which didn’t seem to occur when the likes of Colin Powell and Norman Schwarzkopf were leading the way, to cite some modern examples), then there is going to be a deep backlash, which I would say is already simmering beneath the surface.

Read the below editorial on hazing, for example. And, more broadly, look at the scandals in the Secret Service, the General Services Administration, the John Edwards trial where it is still incredible how close we came to electing one of the primo dirtballs of our time (and how dangerous that would have been).

On a lesser extent, look at “Death Race 2012.” This was a case that has recently surfaced here in New Jersey where some of our state troopers escorted dozens of high-performance autos, such as Lamborghinis and Porsches, at speeds in excess of 100 mph on three of our major highways down to Atlantic City! Incredibly dangerous. State troopers in front and back., lights flashing. What the hell are some people thinking these days?! [Governor Christie’s initial response also sucked in this matter. Something like, ‘People do stupid things. We’ll investigate and move on.’ No, Governor. Throw your substantial weight around, get in the troopers’ faces and say enough is enough!]

And so….

Andrew J. Bacevich / Washington Post

“For too long now, command accountability for our troops’ misconduct in wartime has been more theoretical than real. The latest scandal to erupt in Afghanistan – photographs of American soldiers amusing themselves with dismembered Taliban corpses – suggests that it’s past time to confront this problem.

“On the question of accountability, the military’s ethic is clear: With authority comes responsibility. More specifically, commanders bear responsibility for everything that happens within their jurisdiction. This decree supposedly applies to high-ranking generals as much as lowly lieutenants.

“Once upon a time, the standard for implementing this code was straightforward: Win, and you gain fame and fortune; fail to win, and you’re toast. As commander in chief during the Civil War, Abraham Lincoln enforced this standard ruthlessly. As a result, Ulysses S. Grant and William T. Sherman achieved a measure of immortality. Meanwhile, Irvin McDowell, George McClellan, John Pope, Ambrose Burnside, Joseph Hooker and George Meade, among a host of other mediocrities, found themselves unemployed or consigned to lesser positions.

“In the post-9/11 era, President George W. Bush abandoned this standard. In 2003, Gen. Tommy Franks presided over a campaign in Iraq that dispersed a pathetic local army even as Franks neglected to consider what might ensue. The answer was not long in coming: chaos and a far uglier and more costly conflict than Americans had bargained for.

“Historians will probably place Franks in the company of Burnside and Hooker rather than Grant and Sherman. Yet, for whatever reason, Bush glossed over his field commander’s shortcomings, ordained him a great leader [Ed. as did butt-boy Sean Hannity] and awarded him the Medal of Freedom. Franks had neither won nor lost his war; he had merely mismanaged it and then moved on, washing his hands of the mess. Here was a troubling precedent.

“War induces barbarism, and the Iraq war proved no exception. Soon enough, egregious transgressions by U.S. troops surfaced. Abu Ghraib provides one especially notorious example; the massacre at Haditha another. But there were others, now mostly forgotten, at least by Americans – among them the Iraq insurgency’s equivalent of the Boston Massacre. In Fallujah on April 28, 2003, with Franks still in command, U.S. troops opened fire on Iraqi demonstrators, killing more than a dozen and wounding several dozen more.

“The Pentagon declared each of these an aberration. In each instance, extensive investigation singled out a handful of minions for punishment. In each, senior commanders escaped unscathed. (Abu Ghraib is the partial exception that proves the rule: In the scandal’s aftermath, a female Army Reserve brigadier general – not quite a member of the club – lost her star, a fate thus far shared with no male counterpart and no regular officer.)…

“The best way to stanch (the) outpouring of embarrassing news from Afghanistan is to bring our soldiers home, an option that many Americans find increasingly attractive. In the interim, however, we should reassert a standard of command responsibility that Lincoln would have understood. Yes, when soldiers behave badly, the harsh hand of discipline should fall on individual perpetrators. Yet soldier misconduct expresses professional malpractice at all levels. This epidemic will subside only once we recognize that….

“(No) leader is irreplaceable – sometimes nothing beats replacing a few near the top to focus the attention of the rest. For an American military well into a second exhausting decade of continuous war, this is one of those times.”

Editorial / Army Times

“Hazing has been around since the first person short-sheeted his roommate’s bunk.

“But what starts as a seemingly harmless prank too often gets out of hand and people are publicly humiliated, hurt and sometimes die.

“The Army has had several recent cases that show how out of control hazing can become.

“Eight soldiers have been accused of bullying Pvt. Danny Chen, a Chinese-American who fatally shot himself, allegedly after suffering racial taunts and physical abuse from soldiers in his company.

“A battery commander, first sergeant, platoon sergeant and squad leader were found responsible for hazing Army Spc. Brushaun Anderson, who killed himself in Iraq in 2010, according to Stars and Stripes.

“Three noncommissioned officers and a specialist in the 1st Squadron 9th Cavalry Regiment’s ‘Crazy’ Troop have been court-martialed for a raunchy sexual assault – in effect, a rape – that they considered a rite of initiation.

“In a hearing on hazing in the ranks, Army Chief of Staff Gen. Ray Odierno told lawmakers that it had gotten out of control and that it owed to ‘a leadership failure.’

“Odierno is spot on. Hazing will only continue if it is tolerated by Army leadership.

“Because even seemingly harmless hazing has, on occasion, turned to abuse, soldiers – from the top down – need to understand that hazing is never OK. Period. That has to be part of every soldier’s training, and that training needs to make clear it is every soldier’s duty to report hazing up their chain of command.

“Some soldiers may believe that hazing belongs as part of Army culture and tradition. Nothing could be further from the truth.”

Daniel Henninger / Wall Street Journal

“The reign of indiscretion has been a long time coming. Some say it arrived in the late 1960s or early ‘70s, when constraints on behavior eased. But the new age’s booster rocket, the thing that finally killed discretion, was social media….

“Going further than one should is one thing, but why the compulsion always to record it in a media format that can be distributed to the whole world? Such is the allure and power of indiscretion….

“A big part of the Greatest Generation’s mystique was its instinct to self-protect. On balance, they were discreet. Countless intelligence veterans of World War II and the Cold War, for example, have gone to their graves without a public peep about their successes. But when the current generation takes down Osama bin Laden, it releases a photograph of itself in the Situation Room and provides operational details of the Navy Seals’ attack plan to the media the next day. That was indiscreet.

“The mortgage-securities bubble was fraught with systemic misfeasance. At its core, though, a liar loan was an act of indiscretion, on both sides of the deal. ‘Honey, do you really think we should be taking out a loan this big?’ ‘Why not ?!?!’ Yeah, said lenders from Countrywide and mortgage packagers from Citibank, why not?....

“The straightforward truth is that much unusual behavior can be tolerated and absorbed by a free society if discretion is putting speed bumps in the path of excess. It beats hitting the wall.”

Victor Davis Hanson / New York Post…on the perception that America is in “inevitable decline.”

“The manifest symptoms of decline – frustration with the Mideast, military retrenchment, exorbitant energy costs and financial insolvency – are choices we make but need not make in the future.

“If our students are burdened with oppressive loans, why do so many university rec centers look like spas? Student cellphones and cars are indistinguishable from those of the faculty.

“The underclass suffers more from obesity than malnutrition; our national epidemic is not unaffordable protein but rather a surfeit of even cheaper sweets….

“Children don’t suffer from lack of Internet access, but from wasting hours on video games and less-than-instructional Web sites….

“The problem isn’t that government workers are underpaid but that so many seem to think mind readers, clowns and prostitutes come with the job….

“Over the last half-century, bizarre new words entered the American vocabulary – triple-dipping, Botox, liposuction, jet set, cost-of-living adjustment – that don’t reflect a deprived citizenry. In 1980, a knee or hip replacement was experimental surgery for the 1 percent; now it’s a Medicare entitlement….

“As America re-examines its military, entitlements, energy sources and popular culture, it will learn that our ‘decline’ isn’t due to material shortages but rather arises from moral confusion over how to master the vast riches we’ve created. If decline is fighting just two wars at a time rather than three, just budgeting what we did in 2008, tapping a bit more oil offshore or having our colleges offer more grammar courses and fewer rock-climbing walls, then by all means bring it on.”

Peggy Noonan / Wall Street Journal

“People in politics talk about the right track/wrong track numbers as an indicator of public mood. This week Gallup had a poll showing only 24% of Americans feel we’re on the right track as a nation. That’s a historic low. Political professionals tend, understandably, to think it’s all about the economy – unemployment, foreclosures, we’re going in the wrong direction. I’ve long thought that public dissatisfaction is about more than the economy, that it’s also about our culture, or rather the flat, brute, highly sexualized thing we call our culture.

“Now I’d go a step beyond that. I think more and more people are worried about the American character – who we are and what kind of adults we are raising.

“Every story that has broken through the past few weeks has been about who we are as a people. And they are all disturbing.

“A tourist is beaten in Baltimore. Young people surround him and laugh. He’s pummeled, stripped and robbed. No one helps. They’re too busy taping it on their smartphones. That’s how we heard their laughter. The video is on YouTube along with the latest McDonald’s beat-down and the latest store surveillance tapes of flash mobs. Groups of teenagers swarm into stores, rob everything they can, and run out. The phenomenon is on the rise across the country. Police now have a nickname for it: ‘flash robs.’

“That’s just the young, you say. Juvenile delinquency is as old as history.

“Let’s turn to adults.

“Also starring on YouTube this week was the sobbing woman. She’s the poor traveler who began to cry great heaving sobs when a Transportation Security Administration agent at the Madison, Wis., airport either patted her down or felt her up, depending on your viewpoint and experience. Jim Hoft of TheGatewayPundit.com recorded it, and like all the rest of the videos it hurts to watch. When the TSA agent – an adult, a middle aged woman – was done, she just walked away, leaving the passenger alone and uncomforted, like a tourist in Baltimore.

“There is the General Services Administration scandal. An agency devoted to efficiency is outed as an agency of mindless bread-and-circuses indulgence….

“(The GSA’s) leaders didn’t even pretend to have a sense of mission and responsibility.   They reminded me of the story a year ago of the dizzy captain of a U.S. Navy ship who made off-color videos and played them for his crew. He wasn’t interested in the burdens of leadership – the need to be the adult, the uncool one, the one who maintains standards. No one at GSA seemed interested in playing the part of the grown-up, either….

“There’s the Secret Service scandal….

“What’s terrible about this story is that for anyone who’s ever seen the Secret Service up close it’s impossible to believe. The Secret Service are the best of the best. That has been their reputation because that has been their reality. They have always been tough, disciplined and mature. They are men, and they have the most extraordinary job: take the bullet.

“Remember when Reagan was shot? That was Secret Service agent Tim McCarthy who stood there like a stone wall, and took one right in the gut. Jerry Parr pushed Reagan into the car, and Mr. Parr was one steely-eyed agent. Reagan coughed up a little blood, and Mr. Parr immediately saw its color was a little too dark. He barked the order to change direction and get to the hospital, not the White House, and saved Reagan’s life. From Robert Caro’s ‘Passage of Power,’ on Secret Service agent Rufus Youngblood, Nov. 22, 1963: ‘there was a sharp, cracking sound,’ and Youngblood, ‘whirling in his seat,’ grabbed Vice President Lyndon Johnson and threw him to the floor of the car, ‘shielding his body with his own.’

“In any presidential party, the Secret Service guys are the ones who are mature, who you can count on, who’ll keep their heads. They have judgment, they’re by the book unless they have to rewrite it on a second’s notice. And they wore suits, like adults.

“This week I saw a picture of agents in Colombia. They were in T-shirts, wrinkled khakis and sneakers. They looked like a bunch of mooks, like slobs, like children with muscles.

“Special thanks to the person who invented casual Friday. Now it’s casual everyday in America. But when you lower standards people don’t decide to give you more, they give you less….

“The leveling or deterioration of public behavior has got to be worrying people who have enough years on them to judge with some perspective.

“Something seems to be going terribly wrong.

“Maybe we have to stop and think about this.”

---

--The Supreme Court held oral arguments on a provision of Arizona’s tough immigration law that some say points to a partial victory for the state. In a recent Quinnipiac poll, 62% of respondents said the Supreme Court should uphold the Arizona law, while 27% wanted it struck down. 45% of Latino respondents wanted the court to uphold it as well, while 43% hoped it would be overturned. [Michael McGough / Los Angeles Times] 

Separately, a study by the nonpartisan Pew Hispanic Center says that between 2005 and 2010, 1.4 million Mexicans migrated north of the border, and 1.4 million returned to Mexico. Smaller families in Mexico and issues with the U.S. economy are the chief causes of the net zero number.

--Hey kids…looking for a good trade? How about learning to become a nuclear weapons technician?

From Kate Brannen of Defense News:

“In about five years, every scientist with experience designing and testing nuclear weapons will have retired from the U.S. government.”

There are no more than 15 scientists left who were responsible for the design of a warhead that’s in the existing stockpile, according to the undersecretary for nuclear security.

Of course if you aren’t designing or testing new weapons, as some in Congress say we must do to keep our edge, you don’t have a need for the scientists, right?

But how do we know that with natural degradation our nukes would still work?

--According to the trade publication Talkers, Rush Limbaugh, despite his “slut” controversy, remains No. 1, followed by Sean Hannity, Michael Savage, Ed Schultz and Laura Ingraham.

--According to an annual survey issued by the Institute for Economics & Peace, the “most peaceful” state in the nation is Maine, while Louisiana placed last for the 11th year in a row, when looking at five criteria…number of homicides per 100,000 people; number of violent crimes; incarceration rate; number of police employees; and availability of small arms. [Vermont, New Hampshire, Minnesota and Utah round out the top five; Arizona, Florida, Nevada and Tennessee occupy Nos. 46-49.]

--More bad behavior. Jesse Washington / AP:

“It had all the makings of a feel-good hockey moment – except the guy who scored the goal was black.

“Soon after Joel Ward eliminated the defending Stanley Cup champion Boston Bruins on Wednesday with a Game 7 overtime goal for the Washington Capitals, Twitter erupted in a shower of n-words and other racial insults.

“ ‘Go play basketball, hockey is a white sport,’ ‘4th line black trash’ and ‘white power’ were some of the nicer phrases tweeted by angry Boston fans. One said that the fact that a black player scored ‘makes this loss hurt a lot more.’”

Thankfully, the Bruins issued a statement.

“These classless, ignorant views are in no way a reflection of anyone associated with the Bruins organization.”

Nice job, tweeters, and all those out in social media land who hide anonymously.    

--Former Liberian President Charles Taylor became the first head of state since World War II to be convicted of war crimes.   Taylor, the warlord-turned-president, was responsible for more than 50,000 deaths for arming Sierra Leone rebels in exchange for “blood diamonds” mined and then smuggled across the border. The rebels were known for savage mutilations, such as hacking off hands or arms above the elbow. At least Taylor’s conviction sends a signal to the likes of Bashar Assad.   

--What was Vogue thinking last year when it profiled Asma al-Assad, Bashar’s wife and first lady?! Joan Juliet Buck began her profile, “The 35-year-old first lady’s central mission is to change the mindset of six million Syrians under 18, encourage them to engage in what she calls ‘active citizenship.’”

Oh brother. It was the March 2011 issue and hit the stands just as Bashar was launching his crackdown. Vogue titled the profile “A Rose in the Desert.”

The article has been scrubbed from the magazine’s site. Poof!

--Finally, last Saturday I drove from Johnson City, Tenn. to Asheville, N.C. and stopped at the North Carolina Welcome Center across the border, a beautiful spot as these things go. Some centers/rest stops have plaques on local history and I hope you take a minute to actually read them. Pennsylvania’s turnpike has some good ones, for example.

So I read this plaque on Liston B. Ramsey, 1919-2001. Ramsey served 19 terms in the North Carolina House of Representatives, including four terms as speaker (1981-89). 

A Madison County, N.C. Mountain Man
Who knew that poor is a matter of spirit,
Not just lack of wealth

That love of home is a matter of family and community,
Not just place

That leadership is a matter of service and commitment,
Not just influence

I can just imagine what Mr. Ramsey would say today about much of what I have above; the bad behavior, the lack of ethics, and failure to understand the true meaning of service and commitment.                                         

---

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

God bless America.
---

Gold closed at $1664
Oil, $104.93

Returns for the week 4/23-4/27

Dow Jones +1.5% [13228]
S&P 500 +1.8% [1403]
S&P MidCap +2.4%
Russell 2000 +2.7%
Nasdaq +2.3% [3069]

Returns for the period 1/1/12-4/27/12

Dow Jones +8.3%
S&P 500 +11.6%
S&P MidCap +13.7%
Russell 2000 +11.4%
Nasdaq +17.8%

Bulls 41.9
Bears 
23.7 [Investors Intelligence]

Have a great week. I appreciate your support.

Don’t forget to get your official StocksandNews.com iPad app. Recommended by 6 out of 49 doctors in a recent survey.

Next week’s column may be a few hours late. I’m out of pocket on Friday and, as it’s also a key market day, come Saturday morning I may need some time to catch up before posting.

Brian Trumbore



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-04/28/2012-      
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Week in Review

04/28/2012

For the week 4/23-4/27

[Posted 6:00 AM ET]

Europe, Washington and Wall Street

What an awful week for Europe. Spain and Britain entered recession; the Netherlands, in recession, too, saw its government fall over a debate on the level of austerity the people can take; Romania’s government fell for the second time in two months, Romania being in recession; France’s first-round in its presidential election foretells a Socialist government that doesn’t have a clue (not that the current alternative is any better); Germany’s economy is not looking so rosy after a terrible purchasing managers index number for April (46.3, a 3-year low…the flash PMI for all of the eurozone was a putrid 47.4); and Greece faces an election, May 6, that promises to create utter chaos, particularly when it comes to the terms of its bailouts.

First, Britain is in a double-dip recession after GDP is estimated to have dropped 0.2% in the first quarter after a 0.3% drop in the fourth. While all is not bad in the U.K. and the numbers are deceptive, one fact is clear both here and across the continent…lending to business continues to crater.

In the Netherlands, Prime Minister Mark Rutte was forced to tender his cabinet’s resignation over proposed budget cuts because his right-wing coalition partners refused to support them. Rutte, an ally of Germany on the austerity front, may yet return to government with the special election that will now take place in September. And, to be clear, the Netherlands, while in recession, is not in a deficit crisis like the PIIGS, witness the 10-year bond yield of around 2.40%, last I checked. Nonetheless, the Netherlands becomes a poster-child for the austerity vs. growth debate in the EU. [A budget was eventually passed but Rutte, now caretaker leader, needed the assistance of three weak, far smaller parties to squeak it through.]

The government of German Chancellor Angela Merkel, aside from dealing with an economy that is sputtering largely because its neighbors are dying (it’s pretty hard to buy German goods if you’re dead), with bellwether Siemens, the energy and electronics giant saying new orders fell 13 percent in the first three months of the year, faces key state elections on May 6 and 13.

Greece, with its pending elections, now is staring at an economy that could lose another 5% in GDP this year. Anarchy seems a certainty by July with the looming dysfunctional new government.

French Socialist Francois Hollande, a seeming winner in the May 6 run-off with polls showing him 10 points or more ahead of President Nicolas Sarkozy, is looking to renegotiate the fiscal compact that 24 EU governments agreed to recently, saying on Friday, “it’s not for Germany to decide for the rest of Europe.” While Hollande is trying to reassure some he doesn’t really mean he will demand a new treaty, his calls for the compact to emphasize growth over budget discipline are falling on deaf ears in Germany. No way, say the Germans, will they reopen the treaty as this would kill it, with those already on board then demanding changes of their own.

Meanwhile, Hollande is insisting on confiscatory tax policies when it comes to France’s wealthiest, which is insane. As discussed further below, they’ll just leave…and bye-bye revenue.

While the markets may not show it every day, and as Italian and Spanish bond yields rise on a Tuesday and fall back on Wednesday, Europe is nonetheless in a full-blown crisis all over again.

European Central Bank President Mario Draghi said the eurozone needs to reexamine where it is headed; this after Draghi helped bring the EU together just a few months ago. What? We’re going to reexamine where we’re headed four times a year? You could do that if you were the central bank in the United States, and it’s done, but not when you’re talking 27 separate nations with disparate issues and agendas.

“We need to actively step up our reflections about the longer term vision for Europe as we have done in the past at other defining moments in the history of our union,” he told members of the European Parliament (there’s a bunch of winners). Economic reforms “change profoundly the societies in which we live. This is a source of pain. (But) we must persevere.”

Well, yeah. But you can’t keep having this same debate over and over again. Then again, Merkel is the closest thing Europe has to a leader these days and because she’s German, well, you can see how in places like Greece, and France, that creates problems of an historic nature (see WWII).

Back to Draghi, while on one hand he says political leaders need to take steps to promote long-term growth, such as cutting government operating expenses rather than raising taxes, he then rejected calls for less fiscal rigor. Here he is correct. Countries with a record for deficit spending, he offers, have not seen any benefits; rather their countries have “flatlined.”

“If one thinks you can increase demand by increasing deficits, then how come we don’t have higher demand?” [Jack Ewing / New York Times]

My problem is that Draghi speaks some truths, but he’s also all over the place. He talks about there being more a lack of demand than a lack of credit, but all I see are the banks seizing up on the lending front. 

Here’s a good description of where the eurozone stands today, courtesy of Eurostat. The eurozone’s average budget deficit had been cut from 6.2 percent in 2010 to 4.1 percent in 2011, but total debt levels rose from 85.3 percent of GDP to 87.2 percent by the end of 2011.

Greece’s budget deficit of 9.1 percent marginally beat the EU’s and IMF’s target of 9.3 percent in March, but Greece’s debt to GDP soared to 165 percent, up from 145 percent in 2010.

Jens Weidmann, Bundesbank president, said in a speech in New York that Europe’s leaders must stay the course.

“We can only win back confidence if we bring down excessive deficits and boost competitiveness.”

As I’ve noted many times before, this is my own stance. But it takes leadership. I hold out Britain’s David Cameron as an example. It seemed to me he had the right plan, and he needs to stick to it, but he’s losing control as the backbenchers increasingly question the strategy. He has to be a role model for the continent. The next few months will be telling.

George Soros said the other day that the eurozone crisis is “not over yet, and it is going in the wrong direction.

“The euro is undermining the political cohesion of the European Union, and, if it continues like that, could even destroy the European Union. You can grow out of excessive debt; you cannot shrink out of excessive debt.”

Soros is calling for more pragmatic German policies. Chancellor Merkel admitted that austerity alone would not solve the crisis, but insisted opposition to fiscal discipline was wrong.

“We’re not saying that saving solves all problems,” she said at a conference in Berlin. “(But) you can’t spend more than you take in. You can’t live your whole life this way. Everybody knows this.”

The deposed Dutch Prime Minister Rutte called on politicians to stick to his proposed budget cuts:

“The problems are serious, the economy is stalling, employment is under pressure and government debt is growing faster than the Netherlands can afford. Those are the facts and nobody can run away from them.”

Which brings me to Spain. Treasury Minister Cristobal Montoro told parliament:

“We are in an extremely delicate moment as a country, an extremely fragile moment as a country…This is the most austere budget since democracy, and it is aimed at being the most realistic that Spain needs to overcome this crisis situation.” [Irish Independent]

But when you talk about realism, or lack thereof, how about our new “Idiot of the Year” candidate; Banco Santander CEO Alfredo Saenz, who said, in referring to Spain’s housing crisis of historic proportions, “Mortgages get paid in good times and in bad. Anyone raising this problem as one of the issues for the Spanish financial system is saying something stupid.”   [Bloomberg]

That, my friends, is an idiot.

You see, Mr. Saenz is pointing to government data that says the default ratio in Spain was just 2.6 percent in March, down from 2.7 percent at the end of 2011.

“The data is good so let’s not start debating the quality of the information,” said Saenz. “Mortgage arrears are not a problem and are not going to be a problem.”

But a JPMorgan report, published April 26, said the figures just flat out aren’t real. They can’t be. They drastically understate the issue.

Consider that the delinquency rate in the U.S. is 7.6 percent with unemployment at 8.2 percent. In Ireland, as reported by Bloomberg’s Charles Penty and Esteban Duarte, joblessness is 14.3 percent and the delinquency rate is 9.2 percent.

So this week Spain reported its unemployment rate hit 24.4 percent! [Youth unemployment is in excess of 50 percent.] In other words, these delinquency figures being bandied about can’t possibly be right.

Economists at JPMorgan forecast Spanish unemployment will hit 30 percent. “At a minimum we would expect arrears to increase significantly from the current levels,” said JPM analyst Gareth Davies, co-author of the report, who refused to comment on Saenz’s declarations.

Spain has been living a lie for years now. The central government is mostly transparent, from what we know. But I’ve been telling you for years the problem is in the regions, where corruption was rampant between the developers (none of whom you can find today), the local governments, and the banks. 

Jose Manuel Garcia-Margallo, Spain’s foreign minister, admitted in an interview with state radio that “Spain is undergoing a crisis of enormous proportions.”

Nonetheless, some, such as Economy Minister Luis de Guindos, continue to rule out seeking a bailout, hours before S&P cut the country’s credit rating further.

Oh, and retail sales in Spain were down 3.7 percent in March from a year ago, the 21st month in a row sales have fallen. And according to the Bank of Spain, GDP fell 0.4 percent in the first quarter after dropping 0.3 percent in Q4. [Official numbers come out Monday, supposedly.]

So here’s my bottom line on Europe. The banks are facing a severe capital squeeze, which is squeezing lending at the worst possible time. Governments are seeking the right balance between growth and cutting deficits, but this requires political will and little can be found.

And when governments do decide to come up with needed labor market reforms, as is imperative in Spain and Italy at the moment, implementation will be critical, but there is zero reason to believe such implementation will be forthcoming.   Just look at how fake Prime Minister Mario Monti has been backtracking in Italy on this front.

Oliver Blanchard, the IMF’s chief economist, said about ten days ago, as quoted by the Washington Post’s Robert Samuelson, “For the last six months, the world economy has been on…a roller coaster. One has the feeling that, at any moment, things could well get very bad again.”

No disagreement here.

Washington and Wall Street

And when Spain gets its bailout, and/or when Greeks start rioting worse than ever, with terrorist elements entering the fray this time, the U.S. markets will suffer. So enjoy the firmer footing we’ve been witnessing here while it lasts.

No doubt, corporate earnings have been better than expected, and it helps to have an Apple or an Amazon on our side. It would seem that fears over Europe, while warranted, lowered some company estimates too much. Understand that virtually every multi-national, even in beating expectations, makes note of Europe’s softness. Heck, we’d be at all-time highs if Europe was growing just 1 percent rather than being in a still-largely mild recession.

But this was a week where the Federal Reserve’s Open Market Committee got together and held the line on interest rates again, i.e., at zero, as the Fed talked about there being a potential weather payback going forward, after some of the first quarter’s data could have been inflated due to the fact it was summer in February and March in many parts.

Even still, though, the first estimate on first-quarter GDP came in at a homely 2.2 percent, less than the 2.5 percent consensus forecast, but, more importantly, also less than the 3 percent for Q4. So even though the data for the first three months can be revised two more times, it’s certainly looking like the economy decelerated anew.

Remember, there are good reasons why 2 or 3 percent growth is great for stocks; low growth plus low inflation is almost always a perfect tonic.

But you don’t get a lot of tax revenues out of an economy growing at just 2 percent and unless we start growing more rapidly, the deficit picture will only get uglier and uglier.

Everyone and their mother is now talking about the next deficit-ceiling crisis coming before the election, as much as President Obama wants to push it off (I don’t buy arguments that this would actually be good for the White House…the markets will be tanking and that is never good for the incumbent).

Yes, I still like my deficit-inspired, Europe and program/flash-trading fueled crash for later this year.   We are heading over a cliff, and while many have said this comes in 2013, or at the earliest in the lame-duck session of Congress that follows the election, I just think something triggers it sooner.

I also, despite some talk of an agreement with Iran on its nuclear program, don’t believe for a minute this, or any other hot spot like Pakistan is off the table suddenly.

But one word on housing. I updated my quarterly piece on the topic for my “Wall Street History” link. No one shows the National Association of Realtors data as I do, including them, so if you want, just scroll through the archives for each quarterly update of mine for the full picture.

My bottom line…there was way too much happy talk this week on the housing sector in terms of a rebound. Yes, we have probably bottomed. I said fall of 2008, and then early 2009, that the bottom would actually be hit in April ’09 and then “we’d just sit there.” Well, that call of mine continues to look mighty good.

But as the S&P/Case-Shiller data for February showed this week (remember, these guys use abacuses and thus are behind), the 20-city metropolitan area index showed a decline in median home prices of 3.5 percent over February 2011, and down 0.8 percent month-to-month.

Economist and co-author Robert Shiller said, “I’m more concerned about the downside than most people. I could see it languishing and edging down for years.”

According to Shiller’s own data, and, recall he’s pretty good on this stuff, it took eight years to reach a bottom during the Great Depression and 11 more years to regain the lost ground; with home prices bottoming in 1933 and not returning to pre-crash levels until 1944.

Street Bytes

--It was the best week in six for stocks, with the Dow Jones up 1.5% to 13228, while the S&P 500 added 1.8% and Nasdaq picked up 2.3%.   Fed Chairman Ben Bernanke said at his press conference following the meeting of the FOMC that, “We remain prepared to do more as needed to make sure that this recovery continues and that inflation stays close to target.” Additional bond-buying is still “very much on the table,” he added. Equity traders lapped up the inference further stimulus was on the way.

It also doesn’t hurt that Apple’s influence on the market is huge, especially when the news is good for the company. It accounts for more than 4 percent of the S&P 500 index and is expected to account for about 5.5 percent of its first-quarter profit. Apple is also 18 percent of the Nasdaq 100 index, and nearly 12 percent of the Nasdaq composite. Following its earnings release, Apple staged its best one-day rally, 8.9%, since Nov. 2008.

--U.S. Treasury Yields

6-mo. 0.14% 2-yr. 0.26% 10-yr. 1.93% 30-yr. 3.12%

The Fed lowered its unemployment forecast for 2012 to 7.8 to 8.0 percent for the last three months of the year, from 8.2 to 8.5 percent as it had projected in January, and 7 of 17 Fed officials expect rates below 1 percent by the end of 2014; 10 say 1 percent or higher. 

The Fed also lowered its growth forecast for 2013 slightly to 2.7 to 3.1 percent. Europe remains the wild card.

This coming Friday is the employment report for April and the recent weekly readings on jobless claims, in the 385,000-388,000 range, should not give much comfort we will see a big number, or at least one much above estimates.

--The U.S. Treasury Department said two weeks ago that the Troubled Asset Relief Program (TARP) would turn a profit, but a report to Congress out of the Office of the Special Inspector General for TARP read: “After 3 ½ years, the TARP continues to be an active and significant part of the Government’s response to the financial crisis. It is a widely held misconception that TARP will make a profit. The most recent cost estimate for TARP is a loss of $60 billion. Taxpayers are still owed $118.5 billion.”

Unreal. The administration is feeding us another pack of lies.

You see, it’s all about the smaller banks that were rescued that are still struggling to repay the bailout money.

The report goes on to say that the rescue “is not without profound long-term consequences. A significant legacy of TARP is increased moral hazard and potentially disastrous consequences associated with institutions deemed too big to fail.”

--Trustees for the Medicare and Social Security trust funds said both are on “unsustainable paths” (nothing new here) and will be exhausted by 2024 and 2033, respectively.   Treasury Secretary Timothy Geithner, though, said the 2010 healthcare law would lower costs on Medicare and other administration officials said the same; as in Obamacare will save Medicare $200 billion through 2016. For the other side…

Jennifer Rubin / Washington Post

“Douglas Holtz-Eakin and Michael Ramlet from the American Action Forum provide some useful detail (on Medicare). They write: ‘In 2011, Medicare spent $549.1 billion on medical services for America’s seniors but only collected $260.8 billion in payroll taxes and monthly premiums. Trustees have now issued a funding warning for 7 straight years.’ The bottom line: ‘The cash shortfall is responsible for over one-fourth of the federal debt accumulated since 2001.’….

“Obama’s refusal to lead on entitlement reform is one of Mitt Romney’s better arguments for his presidency. Obama won’t lead; Romney has already set out Medicaid, Medicare and Social Security reform. There is no guarantee that he will have the nerve or skill to push those through, but he’s already done more than Obama has in over three years in the White House.”

Steven Rattner / Financial Times

“As for the Medicare health insurance plan for the elderly, while its outlook didn’t deteriorate last year, it remains in an even more dismal state than Social Security. Over the next 75 years, using realistic assumptions, Medicare costs are projected to increase from less than 4 percent gross domestic product to more than 10 percent of GDP.

“Still more depressing than these grisly statistics is the utter lack of progress in addressing so obvious and so cataclysmic a problem. Every day that goes by either brings America’s elderly closer to a huge cut in their benefits or threatens every younger generation with an equally huge bill to pay.”

--Mexico’s attorney general will investigate allegations that federal officials received bribes from Wal-Mart in order to speed up permits of new stores in that country.   As first reported by the New York Times in an incredibly detailed piece that may be destined for a Pulitzer, hundreds of suspected illegal payments totaling more than $24 million are alleged to have been made, which would be a major violation of the United States’ Foreign Corrupt Practices Act, which forbids bribing officials to secure business abroad.

But the issue isn’t so much the fine that the U.S. government could levy on Wal-Mart, rather it’s the management changes that could result from the probe as current CEO Mike Duke was reportedly apprised of the Mexico bribes shortly after being named head of Wal-Mart’s international division in 2005, overseeing Mexico operations. Duke took the helm of the company overall in 2009.

The Times reports that Wal-Mart didn’t pass on the allegations at the time to U.S. or Mexican authorities, let alone conduct an internal probe of any substance.

--Moody’s Investors Service said China’s growth will slow to anywhere between 7.5 and 8.5 percent this year, vs. the 8.1 to 8.6 estimate generally out there.   In other words, further ammo for the soft-landing camp. HSBC issued its PMI for April, almost always more conservative than the government figure, and for April it was 49.1, which was an improvement over March’s 48.3. 

But you can’t dismiss comments such as that out of Otis Elevator, which saw new orders from China slide 21 percent in the first quarter as a result of heavy exposure to high-end residential housing markets.

And Caterpillar said it had overestimated Chinese demand on construction equipment, stating its inventories were so high it was exporting machinery to other countries where demand was tight. CAT said demand would decline in China this year, down from a prior forecast of 5-10 percent growth. But, CAT still reported a very solid quarter because China makes up just 3 percent of its overall sales (10 percent of its business in Asia). It would seem, however, that CAT’s expansion plans in China, where it just opened its 16th manufacturing facility with nine more under construction, are rather suspect. [Hal Weitzman / Financial Times]

--So as alluded to above, Apple kicked butt as sales in China more than doubled and represented 26 percent of its $39.2 billion in sales for the first quarter. Apple has yet to ship its new iPad there. Overall, Apple picked up 64 percent of its sales overseas, its highest-ever share for the company.

And for the quarter it sold 35 million iPhones and 11.8 million iPads as net income rose 94 percent to $11.6 billion, or $12.30 a share when the Street was expecting earnings of about $10.00.

--Amazon.com, the world’s largest Internet retailer, slaughtered analysts’ estimates for the first quarter as earnings came in at 28 cents a share vs. expectations of 7 cents, while revenues handily beat as well. Demand for Kindle devices was a big reason for the surge and it remains the best-selling item on Amazon’s website, the company said.

--Chrysler reported earnings of $473 million in the first quarter, topping its entire net income for 2011. Fiat, the Italian automaker that took control of Chrysler out of bankruptcy in 2009, said Chrysler was responsible for all of Fiat’s profits earned worldwide. CEO Sergio Marchionne added, “It is fair to say that Chrysler is firing on all cylinders.”

Chrysler also credited Clint Eastwood’s “Halftime in America” Super Bowl ad as helping create excitement for its brands. Yours truly told you at the time it was indeed a great ad, while some conservatives stupidly tried to turn it into a political football.

--Meanwhile, Ford reported first-quarter profit fell 45 percent, to 35 cents a share compared with 61 cents in the first three months of 2011, as revenue declined to $32.4 billion from $33.1 billion. Ford lost $149 million in Europe as sales there fell 60,000 vehicles to 372,000. Ford’s CFO said, “We had expected the results to be a little bit worse in Europe. We don’t think the environment is going to get a whole lot better for some time.

--Russia reported growth of 4 percent in the first quarter, year on year.

--The new deputy governor of the Central Bank of Ireland, Swedish economist Stefan Gerlach, said it could take decades for the Irish housing market to recover to its 2007 level.

--Facebook reported that net income fell to $205 million in the first quarter from $233 million in Q1 2011, but revenue rose 45 percent to $1.06 billion as the company gears up for its IPO, still slated for May, though some say it could be pushed into June. Facebook reported 901 million monthly active users as of March 31.

--The Senate adopted a plan to deal with the U.S. Postal Service and it doesn’t include eliminating Saturday delivery, restructuring the health insurance program, or downsizing mail-processing facilities. The Senate actually requires Saturday delivery for at least two more years and puts a one-year moratorium on the closing of rural post offices. Instead, it’s all about creative accounting. As the Washington Post reports, the Congressional Budget Office estimates that the bill would increase deficits by more than $6 billion over the next 10 years. I mean USPS management itself had spelled out a five-year plan to cut $20 billion in costs and restore long-term viability, which may yet be the fallback plan because the House effort appears to have stalled.

--The board of Chesapeake Energy is finally phasing out a contentious compensation plan that had chairman and chief executive Aubrey McClendon investing alongside Chesapeake in every well that was drilled, sharing both in profits and expenses. Chesapeake is the nation’s second-largest producer of natural gas, after Exxon-Mobil, but McClendon has been running the operator in an incredibly reckless manner for years. S&P downgraded Chesapeake’s debt further into “junk” territory as it seeks to manage $10.3 billion in debt amidst falling natural gas prices.

--In the S&P/Case-Shiller housing index for February, Atlanta’s market continued to be the worst in the nation over the last one- and two-year periods, with median prices down 17.3 and 21.1 percent, respectively. For the last three years, Las Vegas is still the worst, down 25.8 percent. Washington, D.C., is the best for three years, up 4.6 percent.

Meanwhile, hard-hit Phoenix and Miami have seen their markets stabilize and are up slightly the last 12 months (thru February).

--In the key Southern California home market, the median home price peaked in 2007 at $505,000 and was $280,000 last month.

--The White House is catching a break (as well as consumers) as gasoline-futures have been dropping as more U.S. crude becomes available for refining and North Sea Brent prices decline as a result. A reversal of a pipeline’s flow from Cushing, Okla., to the Gulf Coast has given refiners there greater access to crude that was bottled up in Cushing, which in turn had helped keep Brent prices high.

--Also on the energy front, El Nino, the warming of the Pacific Ocean, may help keep temperatures cool across the U.S. this summer, which would mean less need to run air conditioners. One weather expert told Bloomberg that May will be warmer than normal, but then we’ll see a reversal. June through August 2011 was the second-warmest summer on record in the contiguous U.S. Texas is expected to be much cooler than last year.

--A cow that had died at one of California’s dairy farms was found to have mad cow disease, the first new case of the disease in the U.S. since 2006, though it was quickly deemed to be a highly isolated case, specifically “atypical” in that it didn’t get the disease from eating infected cattle feed. This won’t impact my own beef-eating decisions (though two South Korean chains banned U.S. beef for now), but should I ever get mad cow, or BSE, please shoot me.

--A fourth name associated with Goldman Sachs has emerged in the Galleon Group insider-trading case (think Raj Rajaratnam). The latest fellow, a senior San Francisco investment banker, is suspected of passing on word of pending health-care deals to Galleon. It was former Goldman director Rajat Gupta who was accused of leaking inside information to Rajaratnam.

--Yuck…dried fruit is the latest food scandal in China after an investigation by state television found that some was processed in filthy factories. From Mandy Zuo of the South China Morning Post:

“Preserved peaches were found packed in bags that had been used to hold animal feed, and hawthorn berries were soaked in a pool of water that contained garbage.”

--A friend, Dan V., doing business in Brazil, reported for me that the infrastructure (roads, airport, hotels) were “unimpressive at best” as the country gears up (or not really) to host the 2014 World Cup and 2016 Olympics. The previous week he was in London and said the Olympic Village there looked good, but they were scrambling to finish everything.

--I saw in the Moscow Times there was a weekend oil spill that leaked 2,200 tons of crude across 5 square kilometers of Arctic territory, but “Greenpeace estimates that 5 million tons of oil leak from Russian pipelines and in accidents every year – the equivalent of seven disasters on the scale of BP’s Deepwater Horizon spill in the Gulf of Mexico.”

How many of you knew that? I didn’t, and I thought I knew a lot about Russia’s dreadful environmental record.

But Krispy Kreme is opening up 40 Moscow outlets! 

Foreign Affairs

Syria: Pathetic U.N. special envoy and house-sitter extraordinaire, Kofi Annan, said the level of violence post- the April 12 cease-fire was “unacceptable,” and the Bashar al-Assad regime shuddered. Hours after the U.N. sent a team to Hama, government troops opened fire on those who came out to support the monitors, killing at least 30, while at the same time there is zero evidence Syria has withdrawn heavy weapons from populated areas as required by the April 12 agreement.

French foreign minister Alain Juppe said he was giving the peace plan put forward by Annan until May 5 to show it was working or France would seek a resolution in the U.N. authorizing force.

Fouad Ajami / Wall Street Journal

“The ongoing Kofi Annan diplomacy and United Nations-brokered ‘cease-fire’ are seen for what they are – an alibi for the abdication of Western powers, and a lifeline for the regime….

“In the Syria deliberations, deliverance is always around the corner. American diplomacy is always on the verge of making Russia see its way to the proper path. In these tortured discussions, there is no end to finesse and to the parsing of things….

“In one of its alibis for passivity, the Obama administration falls back on the threat posed by Islamists within the ranks of the opposition. This is but a recycling of the Assad regime’s own assertions that its tyranny is a secular shield for the minorities and a barrier to the rise of the Islamists. Yet the surest way the Islamists and the jihadists can come to greater power in Syria is a drawn-out war that further degrades and radicalizes the country.

“The defining truth of this struggle is the abdication of the Obama administration. For a year now, American officials have skillfully run out the clock. They made much of the authority of the U.N. Security Council when any model U.N. team in any high school would have predicted the vetoes of Russia and China. It was clear that the Obama administration did not want to arm the opposition for fear of ‘escalating’ the conflict….

“In the markets in Dubai, the Assad dictatorship is dumping its gold reserves – at a discount. In the long run, this regime is doomed. But that is hardly consolation to an outgunned rebellion. We shouldn’t be waiting on a Syrian Srebrenica before the regime is pushed into its grave.

“It is a waste of time – and of precious lives – to buy into a wishful diplomacy that maintains that a few hundred U.N. observers will ward off the evils of a merciless sectarian tyranny.”

Benny Avni / New York Post

“Should we carve out safe zones to protect civilians? Nah, it would require boots on the ground (even though these need not be U.S. troops). Establish no-fly zones? Nah, Syrian air defenses are too formidable (although Israel easily disabled them in 2007). Arm the opposition? Sorry, we don’t want to militarize the conflict further.

“By default, we’re stuck with a failing plan that we’ll likely support and finance anyway. Administration foreign-policy hands who might advocate a more muscular approach are no match for Obama’s political advisers, who want no election-year complications….

“ ‘How is it that Assad is still in power?’ Elie Wiesel asked on Monday, as he introduced Obama for a speech at the Holocaust Museum; Obama insisted that Assad would fall – eventually.

“Yet if U.S. leadership remains AWOL, Assad’s likely to survive and kill for some time yet.”

Charles Krauthammer / Washington Post

“Obama has said that we cannot stand idly by. And what has he done? Stand idly by.

“Yes, we’ve imposed economic sanctions. But as with Iran, the economic squeeze has not altered the regime’s behavior. Monday’s announced travel and financial restrictions on those who use social media to track down dissidents is a pinprick.  No Disney World trips for the chiefs of the Iranian and Syrian security agencies. And they might now have to park their money in Dubai instead of New York. That’ll stop ‘em….

“(Obama’s) case for passivity is buttressed by the implication that the only alternative to inaction is military intervention – bombing, boots on the ground.

“But that’s false. It’s not the only alternative. Why aren’t we organizing, training and arming the Syrian rebels in their sanctuaries in Turkey?   Nothing unilateral here. Saudi Arabia is already planning to do so. Turkey has turned decisively against Bashar al-Assad. And the French are pushing for even more direct intervention.

“Instead, Obama insists that we can act only with support of the ‘international community,’ meaning the U.N. Security Council – where Russia and China have a permanent veto. By what logic does the moral legitimacy of U.S. action require the blessing of a thug like Vladimir Putin and the butchers of Tiananmen Square?

“Our slavish, mindless self-subordination to ‘international legitimacy’ does nothing but allow Russia – a pretend post-Soviet superpower – to extend a protective umbrella over whichever murderous client it chooses….

“If Obama wants to stay out of Syria, fine. Make the case that it’s none of our business. That it’s too hard. That we have no security/national interests there.

“In my view, the evidence argues against that, but at least a coherent case for hands-off could be made. That would be an honest, straightforward policy. Instead, the president, basking in the sanctity of the Holocaust Museum, proclaims his solemn allegiance to a doctrine of responsibility – even as he stands by and watches Syria burn.”

Editorial / Washington Post

“(The) Obama administration, like its ‘partners’ on the Security Council, wishes to be seen as doing something to stop the bloodshed in Syria without having to commit resources or exert leadership. Sadly, this is far from the first such failure. In a blog at Foreign Policy’s Web site, Michael Dobbs has been documenting the eerie resemblances between the United Nations’ handling of Syria and its history in Bosnia – where an attempt to stop attacks on civilians by dispatching lightly armed peacekeepers in the 1990s led to the worst massacre in postwar European history.

“As Mr. Dobbs reported, a 1999 report signed by Mr. Annan himself concluded that the Bosnia mission was ‘at best, a half measure’ and a poor substitute for ‘more decisive and forceful action to prevent the unfolding horror.’ Said that Annan report: ‘We tried to keep the peace and apply the rules of peacekeeping when there was no peace to keep.’

“It’s bad enough that the Obama administration refuses to learn the lessons of previous failures. More galling is its claim that it has made the prevention of atrocities a priority – as Mr. Obama did Monday in announcing the creation of an ‘atrocities prevention board.’ ‘We see the Syrian people subjected to unspeakable violence, simply for demanding their universal rights,’ he said. ‘And we have to do everything we can.’

“Is sending unarmed monitors to besieged cities and shrugging when the people they visit are murdered everything the United States can do? Even in an election year, the answer has to be no.”

Iran: A Russian proposal would have Iran ending enhanced enrichment of uranium in exchange for cancellation of new economic sanctions, such as the European Union ban on crude oil that goes into effect July 1. Let’s hope this isn’t the resolution to the next round of talks in Baghdad, May 23.

Nor should we hope a report by the Los Angeles Times’ Paul Richter on Friday, that the Obama administration may be willing to allow Iran to continue enriching uranium up to a concentration of 5% if the Iranian government agreed to unrestricted inspections and strict oversight, is also not where we’re headed. [While I like to wait 24 hours after a report like this, if this last one comes to pass, I’ll go ballistic.]

Israeli Prime Minister Benjamin Netanyahu said earlier in the week that while sanctions are impairing the Iranian economy, “so far they haven’t rolled back the program or even stopped it by one iota. I hope that changes, but so far, I can tell you the centrifuges are spinning. If the sanctions are going to work, they better work soon,” he emphasized.

Israeli Defense Minister Ehud Barak said on Thursday that despite the strongest-ever sanctions against Iran, “the chances that, at this pressure level, Iran will respond to international demands to irreversibly stop its program seem low. I would be happy to be proven wrong….

“Dealing with Iran’s determination to achieve a military nuclear capability is not devoid of complexities, dangers or unpredictable results.”   But dealing with the challenge of a nuclear-armed Iran would be “infinitely more complex, infinitely more dangerous, infinitely expensive in human lives and financial resources.” [Jerusalem Post]

Israel’s military chief, Lt. Gen. Benny Gantz, on the other hand, told the newspaper Haaretz that he did not believe Iran will choose to build a nuclear bomb, a decision that is up to Ayatollah Khamenei. Thus, Gantz doesn’t see the urgency for military action. Gantz said Iran’s leaders are “very rational people” who are still mulling whether to “go the extra mile” and produce nukes.

U.S. Defense Secretary Leon Panetta said, “Are they trying to develop a nuclear weapon? No. But they are trying to develop a nuclear capability, and that is what concerns us.”

Reuel Marc Gerecht writes in The Weekly Standard:

“Round two (of the talks) could be a success, and lead to a round three, if Khamenei agreed to do five things: (1) Stop all uranium enrichment to 20 percent purity, which is near bomb-grade; (2) ship abroad the entire stockpile of 20 percent enriched uranium; (3) close the Fordow enrichment facility, which is buried under a mountain near the clerical city of Qom; (4) allow inspectors from the International Atomic Energy Agency immediate and unfettered access to any suspected nuclear site: and (5) permit the IAEA to install devices on centrifuges for monitoring uranium-enrichment levels. Khamenei is, to say the least, unlikely to agree to this.”

Other Iran-related tidbits:

The Oil Ministry admitted it was the victim of a large-scale cyberattack that shut the ministry down, though not the flow of oil; a virus similar in power to Stuxnet, it seems.

The Iranian government said it had reverse-engineered an American spy drone it captured last year. I hardly believe this one.

Die Welt, a German newspaper, ran a poll and 48% of Germans see Iran as the main threat to world peace.

A poll sponsored by the Jerusalem Post found that 24% believe the Obama administration is more pro-Israel, 24% said more pro-Palestinian, 36% said neutral and 16% did not express an opinion.

Israel: Prime Minister Netanyahu on Egypt’s Sinai Peninsula:

“The Sinai is turning into a kind of Wild West which…terror groups from Hamas, Islamic Jihad and al Qaeda, with the aid of Iran, are using to smuggle arms, to bring in arms, to mount attacks against Israel,” he told Israel Radio.

“We are acting against this reality and we are in…continuous discussions with the Egyptian government, which is also troubled by this.”

Israeli Foreign Minister Avigdor Lieberman said the situation in Egypt was more worrying than what was happening in Iran, calling for a significant boost in troop strength along the southern borders.

Egypt’s interim military ruler, Field Marshal Tantawi, countered, “We will break the legs of anyone trying to attack us or who come near the borders.” [Reuters]

Egypt: Regarding the upcoming presidential election, the Wall Street Journal’s Matt Bradley reports that support for the Islamist parties is suddenly waning. I’m not so sure, and it’s not as if the main alternative to an Islamist candidate, Amr Moussa, the former secretary-general of the Arab League, is the answer because, recall, he is a hardliner against Israel.

Yemen: The Obama administration has given the green light to the CIA and U.S. military for an increased drone campaign against al Qaeda, which has been building a base in the southern part of the country ever since the turmoil over the central government erupted. The new government is mostly supportive of the U.S., but also argues the drone attacks are used by al Qaeda as a recruiting tool.

North Korea: Most experts seem to agree Pyongyang could conduct its third nuclear weapons test within a week or so (the other tests having been conducted in 2006 and 2009). China’s vice foreign minister warned, “China will oppose anything which might jeopardize peace and stability on the Korean Peninsula and in Northeast Asia, as this would damage China’s national security interests and the interests of the relevant parties as well.”

But then the vice foreign minister said, “We believe that no party should take any action that might escalate tensions,” a none too subtle hint Beijing expects the U.S. and South Korea to butt out as well. [South China Morning Post]

So while the United States was generally pleased China issued the statement, it being North Korea’s only ally, the fact is China always says one thing and does another when it comes to its neighbor.

This week was one in which the North Korean government interrupted television programming to issue a ‘special report’ wherein it went after South Korea, threatening to “reduce all the rat-like groups and the bases for provocations to ashes in three or four minutes, (or) in much shorter time, by unprecedented peculiar means and methods of our own style.”

Well that would be a bit unsettling if you were in the middle of watching a Yankees-Red Sox game.

South Korea reacted angrily: “We urge North Korea to immediately stop this practice. We express deep concern that the North’s threats and accusations have worsened inter-Korean ties and heightened tensions.”

Seoul also recently announced it has deployed a home-grown, long-range cruise missile that can hit key facilities in the North. North Korea is said to have deployed 600 Scud missiles and 200 Rodong missiles near the DMZ.

Meanwhile, the other day when North Korea held its military parade, it showed missiles being ferried on vehicles that bore a striking resemblance to a 16-wheel transporter erector launcher manufactured by Hubei Sanjiang Space Wanshan Special Vehicle Co., a subsidiary of the China Aerospace Science and Industry Corp., according to military experts. White House officials say, however, they do not believe the suspected sale to North Korea was sanctioned by the Beijing government.

Why not? So what if China signed on to United Nations resolutions imposing an arms embargo on the North.

As for the missiles on said launchers, analysts now say a study of the photos reveals they were fakes. 

China: As the scandal involving Bo Xilai, former Chongqing party boss and politburo member, and his wife, Gu, suspected of murder in the death of a British businessman, exploded further with the revelation that Bo was tapping the phone lines of President Hu Jintao, some say Premier Wen Jiabao’s reform efforts will gain steam, even as he prepares to step down this fall. One Chinese Communist Party member told the Financial Times:

“The fundamental problem is that there are no real rules in this country. The party makes the laws but then says it and its members are not subject to them. This is unsustainable.”

Corruption makes the world go ‘round, but nowhere as much as it does in China.

Meanwhile, Gu Kailal confessed to police that she was in the room when Neil Heywood was poisoned, according to an account given to American diplomats. Heywood was evidently held down in a hotel room in Chongqing and forced to drink cyanide. He first spat it out and they had to give him more. [Irish Independent]

As to the phone tapping, surveillance is rampant these days in China and the politicos don’t know who to trust anymore.

And now we have the case of blind legal activist Chen Guangcheng, who fled house arrest in his rural Chinese village and is said to be under the protection of U.S. officials. I don’t have enough details as yet but high-level talks between the countries concerning his fate are now underway, just as Secretary of State Hillary Clinton and other top officials are due in China this week for the latest round of the Strategic and Economic Dialogue. Talk about a huge issue for the Obama administration. This comes just as the White House is seeking China’s cooperation on a slew of hot spots, including North Korea, Iran and Syria.

Pakistan: The Supreme Court convicted Prime Minister Gilani on contempt for failing to revive a long-standing corruption investigation against President Zardari, though it opted not to sentence Gilani to a maximum six months in prison as allowed. However, he could yet be forced to step down, as opposition leaders now demand. As of this writing, Gilani will defend his right to stay in office, so say his people.   The high court itself could come back and disqualify the prime minister.

Separately, talks between the United States and Pakistan over the November American airstrikes that killed 24 Pakistani soldiers on the Afghan border ended in failure on Friday. Pakistan demands a full apology. The U.S. was prepared to bite the bullet and issue one but then came the April 15 attacks on Kabul and other Afghan cities directed by the Haqqani network, which has its main base in Pakistan. So for now, Pakistan won’t reopen NATO supply routes into Afghanistan that have been closed since the November incident. The Americans, in turn, are withholding at least $1.2 billion in military aid.

Meanwhile, Pakistan successfully tested an upgraded ballistic missile capable of carrying a nuclear warhead, days after India conducted its own long-range test.

So we have the Agni-V (India’s latest) vs. the Shaheen-1A (Pakistan’s). India’s missile has a far longer range, but it’s intended to scare China, while Pakistan’s test was designed to intimidate India.

Afghanistan: The United States committed to defend Afghanistan militarily for 10 years after most foreign forces leave in 2014, though Afghanistan will be able to approve any American military operations after 2014 and the agreement bars the U.S. from using its soil to attack Pakistan, or any neighboring country where the Evil Doers have their bases. So I’m not so sure this agreement is worth a damn, but we’ll cross that bridge when we get to it. Issues such as funding, by the way, were left out for now, as well as the critical issue of permanent bases for the Americans.

Meanwhile, while the details are to be worked out shortly, it would be nice if President Obama would address the American people at some point on the topic.

Kosovo: Tensions surrounding neighbor Serbia’s parliamentary elections on May 6 have forced NATO to strengthen the mission in Kosovo by about 700 troops amid signs violence could flare up anew between ethnic Albanians and majority Serbs in northern Kosovo.

Russia: Prime Minister Vladimir Putin and President Dmitry Medvedev virtually completed their job swap when Putin announced he would hand over control of his United Russia party to Medvedev when both trade positions on May 7. But Putin also has his All-Russia People’s Front, which he set up a year ago, while United Russia’s influence has been waning, though it retains a parliamentary majority. So it’s like, ‘Here, Dmitry, you take it!’

Ukraine: Jailed former prime minister Yulia Tymoshenko declared a hunger strike on Tuesday after claiming she was assaulted by prison guards. In a statement, Tymoshenko said the guards “came to my bed, threw a sheet over me and started dragging me off the bed” when she refused to leave her cell for a medical checkup.

So that was Tuesday. Curiously, on Friday, a series of four bomb blasts went off in the eastern Ukrainian city of Dnipropetrovsk, injuring 27. Ukraine hosts the European soccer championships in June. But some say the “terror attack” was instigated by the government to deflect attention away from the Tymoshenko case.

And finally…

France: The first round of voting went pretty much as the final polls said it would, with Socialist Francois Hollande gaining 28.5% to President Nicolas Sarkozy’s 27%. The surprise was that National Front (FN by the French initials) candidate Marine Le Pen captured 18% in finishing third; a higher percentage for FN than her father, Jean-Marie, picked up in 2002 when he gained the run-off, only to get slaughtered by Jacques Chirac.

Sarkozy now desperately needs every one of Marine’s supporters if he is to have a chance in the run-off against Hollande, who will pick up the bulk of the supporters of the far-left’s Jean-Luc Melenchon (11%) and centrist Francois Bayrou (8%).

But there is zero sign that more than about 50% of the FN vote will go to Sarkozy, with many choosing just to abstain from the ballot out of their disgust for the guy, even if he has adopted many of the FN’s political platforms, particularly in terms of an anti-immigration stance. [Le Pen is also virulently anti-euro, not exactly where Sarkozy is.]

It was one year ago, May Day, that I witnessed Marine (and her father) in Paris for the National Front’s traditional speech, but this May Day, Tuesday, Le Pen has said she will tell her supporters how to vote, or not.

There are many in Europe, like Chancellor Merkel, who are most concerned about the far-right’s vote in France. I have expressed similar concerns over the years myself, concerning Europe overall, going back to Jorg Haider and his Freedom Party in Austria that picked up so much of the vote in 2000 (27%), he became a coalition partner in the government.

But I was early. I always said that Europe’s far-right would rise in force (but not majority status, mind you) when the economy tanked and of course that day is now. Whether the FN’s rise sets the stage for the rest of the continent, though, is highly debatable.

It would be disingenuous of me at the same time not to say I had done my homework on Le Pen before my trip, but it was pure luck I got to see her. Upon seizing the opportunity to witness history, however, I was indeed taken with Marine’s charisma. She’s only 43, and could be a player in France for decades to come…a legitimate player…a 20-percenter, and maybe then some.

Le Pen said on Sunday evening following the vote, “We have exploded the monopoly of the two parties. Whatever might happen in the 15 days to come, the battle for France is only beginning. Nothing will ever be the same again…The people of France have invited themselves to the table of the elite.”

The political junkie in me would love to be in Paris this Tuesday. I also hope security is much tighter than it was last year.

Meanwhile, wealthy French are preparing to leave in droves, fleeing for better tax situations in Belgium, Britain, and Switzerland, where individual rates may not be much better than France’s (under Hollande), but the treatment of capital gains and estates would be.

One thing is for sure; neither Hollande nor Sarkozy has addressed France’s real economic problems.

Bret Stephens / Wall Street Journal

“No candidate in the contest has suggested the country ought to attract foreign investment or nurture its native entrepreneurs. No candidate seems to think a tax cut – whether on consumers, producers or wage-earners – might be a good idea. Is France capable of nurturing a Steve Jobs or a Mark Zuckerberg? The idea seems to have crossed none of the candidates’ minds….

“Yet Americans should also take note that we aren’t so different from France, either: in our debt-to-GDP ratio, our employment rate, our credit rating. Above all, both in France and in America there’s a belief that, as exceptional nations, we are impervious to the forces that make other nations fall. It’s the conceit that, sooner or later, brings every great nation crashing to earth. “

Random Musings

--Mitt Romney swept five states on Tuesday – Connecticut, Rhode Island, Delaware, Pennsylvania and New York – and Newt Gingrich dropped out (or will, officially, on Tuesday, in case anyone gives a hoot).

Editorial / Wall Street Journal

“(Mitt Romney) is now closer to realizing the ambition he has so long pursued: He has an even-money chance to become America’s 45th president. He’s more likely to fulfill that ambition if he overcomes his cautious nature and runs a campaign that is equal to America’s current political moment….

“The temptation will be to assume the public has decided to fire the incumbent and so run a campaign to become the safe alternative. Take no policy risk, stress Mr. Romney’s biography, his attractive family and the seven habits of highly effective businessmen, and then hammer away on the economy.

“It’s possible, if job creation sputters again or Europe goes into bond-market arrest, that this kind of campaign will be enough to win. It’s also possible – more likely in our view – that this will play into Mr. Obama’s strengths of personal likability and Oval Office experience, especially if the economy keeps chugging on its current slow-growth path. Mr. Romney will have to make a case not merely against Mr. Obama’s failings but also for why he has the better plan to restore prosperity….

“(Mr. Obama’s) diversionary re-election strategy will be a combination of class warfare, more government subsidies (free student loans!), and personal attacks on Mr. Romney for being wealthy. Mr. Romney will need allies who can rebut these attacks….

“One of Mr. Romney’s trickiest challenges will be how to handle Mr. Obama’s, err, veracity. More than any President we’ve seen, this incumbent is willing to say things that aren’t in the area code of the truth. Thus he gives himself credit for the natural gas drilling boom, the deficits are still Mr. Bush’s fault, Mr. Obama has never raised taxes, and ‘green jobs’ in his dream economy are blooming by the millions.

“Mr. Romney can’t let the President get away with this, or Mr. Obama will conjure a vision of unreality that enough voters might believe….(Romney) needs his version of Reagan’s ‘there he goes again.’”

---

Following is some commentary on issues that point to the decline in America that I have mentioned before, whether it’s the fact some of our military leaders flat out suck, or the total lack of character exhibited by many of our neighbors, as best exploited by social media these days. 

I’ve had it. I’ve also noted from time to time, as much as some don’t want to hear it, that America is overrated…deeply so, these days.

I’m also sick of some of the apologists, especially when it comes to the military. I’ll put my own support for the institution up against anyone’s. But if the military doesn’t get a handle on the bad behavior we have been witnessing (which didn’t seem to occur when the likes of Colin Powell and Norman Schwarzkopf were leading the way, to cite some modern examples), then there is going to be a deep backlash, which I would say is already simmering beneath the surface.

Read the below editorial on hazing, for example. And, more broadly, look at the scandals in the Secret Service, the General Services Administration, the John Edwards trial where it is still incredible how close we came to electing one of the primo dirtballs of our time (and how dangerous that would have been).

On a lesser extent, look at “Death Race 2012.” This was a case that has recently surfaced here in New Jersey where some of our state troopers escorted dozens of high-performance autos, such as Lamborghinis and Porsches, at speeds in excess of 100 mph on three of our major highways down to Atlantic City! Incredibly dangerous. State troopers in front and back., lights flashing. What the hell are some people thinking these days?! [Governor Christie’s initial response also sucked in this matter. Something like, ‘People do stupid things. We’ll investigate and move on.’ No, Governor. Throw your substantial weight around, get in the troopers’ faces and say enough is enough!]

And so….

Andrew J. Bacevich / Washington Post

“For too long now, command accountability for our troops’ misconduct in wartime has been more theoretical than real. The latest scandal to erupt in Afghanistan – photographs of American soldiers amusing themselves with dismembered Taliban corpses – suggests that it’s past time to confront this problem.

“On the question of accountability, the military’s ethic is clear: With authority comes responsibility. More specifically, commanders bear responsibility for everything that happens within their jurisdiction. This decree supposedly applies to high-ranking generals as much as lowly lieutenants.

“Once upon a time, the standard for implementing this code was straightforward: Win, and you gain fame and fortune; fail to win, and you’re toast. As commander in chief during the Civil War, Abraham Lincoln enforced this standard ruthlessly. As a result, Ulysses S. Grant and William T. Sherman achieved a measure of immortality. Meanwhile, Irvin McDowell, George McClellan, John Pope, Ambrose Burnside, Joseph Hooker and George Meade, among a host of other mediocrities, found themselves unemployed or consigned to lesser positions.

“In the post-9/11 era, President George W. Bush abandoned this standard. In 2003, Gen. Tommy Franks presided over a campaign in Iraq that dispersed a pathetic local army even as Franks neglected to consider what might ensue. The answer was not long in coming: chaos and a far uglier and more costly conflict than Americans had bargained for.

“Historians will probably place Franks in the company of Burnside and Hooker rather than Grant and Sherman. Yet, for whatever reason, Bush glossed over his field commander’s shortcomings, ordained him a great leader [Ed. as did butt-boy Sean Hannity] and awarded him the Medal of Freedom. Franks had neither won nor lost his war; he had merely mismanaged it and then moved on, washing his hands of the mess. Here was a troubling precedent.

“War induces barbarism, and the Iraq war proved no exception. Soon enough, egregious transgressions by U.S. troops surfaced. Abu Ghraib provides one especially notorious example; the massacre at Haditha another. But there were others, now mostly forgotten, at least by Americans – among them the Iraq insurgency’s equivalent of the Boston Massacre. In Fallujah on April 28, 2003, with Franks still in command, U.S. troops opened fire on Iraqi demonstrators, killing more than a dozen and wounding several dozen more.

“The Pentagon declared each of these an aberration. In each instance, extensive investigation singled out a handful of minions for punishment. In each, senior commanders escaped unscathed. (Abu Ghraib is the partial exception that proves the rule: In the scandal’s aftermath, a female Army Reserve brigadier general – not quite a member of the club – lost her star, a fate thus far shared with no male counterpart and no regular officer.)…

“The best way to stanch (the) outpouring of embarrassing news from Afghanistan is to bring our soldiers home, an option that many Americans find increasingly attractive. In the interim, however, we should reassert a standard of command responsibility that Lincoln would have understood. Yes, when soldiers behave badly, the harsh hand of discipline should fall on individual perpetrators. Yet soldier misconduct expresses professional malpractice at all levels. This epidemic will subside only once we recognize that….

“(No) leader is irreplaceable – sometimes nothing beats replacing a few near the top to focus the attention of the rest. For an American military well into a second exhausting decade of continuous war, this is one of those times.”

Editorial / Army Times

“Hazing has been around since the first person short-sheeted his roommate’s bunk.

“But what starts as a seemingly harmless prank too often gets out of hand and people are publicly humiliated, hurt and sometimes die.

“The Army has had several recent cases that show how out of control hazing can become.

“Eight soldiers have been accused of bullying Pvt. Danny Chen, a Chinese-American who fatally shot himself, allegedly after suffering racial taunts and physical abuse from soldiers in his company.

“A battery commander, first sergeant, platoon sergeant and squad leader were found responsible for hazing Army Spc. Brushaun Anderson, who killed himself in Iraq in 2010, according to Stars and Stripes.

“Three noncommissioned officers and a specialist in the 1st Squadron 9th Cavalry Regiment’s ‘Crazy’ Troop have been court-martialed for a raunchy sexual assault – in effect, a rape – that they considered a rite of initiation.

“In a hearing on hazing in the ranks, Army Chief of Staff Gen. Ray Odierno told lawmakers that it had gotten out of control and that it owed to ‘a leadership failure.’

“Odierno is spot on. Hazing will only continue if it is tolerated by Army leadership.

“Because even seemingly harmless hazing has, on occasion, turned to abuse, soldiers – from the top down – need to understand that hazing is never OK. Period. That has to be part of every soldier’s training, and that training needs to make clear it is every soldier’s duty to report hazing up their chain of command.

“Some soldiers may believe that hazing belongs as part of Army culture and tradition. Nothing could be further from the truth.”

Daniel Henninger / Wall Street Journal

“The reign of indiscretion has been a long time coming. Some say it arrived in the late 1960s or early ‘70s, when constraints on behavior eased. But the new age’s booster rocket, the thing that finally killed discretion, was social media….

“Going further than one should is one thing, but why the compulsion always to record it in a media format that can be distributed to the whole world? Such is the allure and power of indiscretion….

“A big part of the Greatest Generation’s mystique was its instinct to self-protect. On balance, they were discreet. Countless intelligence veterans of World War II and the Cold War, for example, have gone to their graves without a public peep about their successes. But when the current generation takes down Osama bin Laden, it releases a photograph of itself in the Situation Room and provides operational details of the Navy Seals’ attack plan to the media the next day. That was indiscreet.

“The mortgage-securities bubble was fraught with systemic misfeasance. At its core, though, a liar loan was an act of indiscretion, on both sides of the deal. ‘Honey, do you really think we should be taking out a loan this big?’ ‘Why not ?!?!’ Yeah, said lenders from Countrywide and mortgage packagers from Citibank, why not?....

“The straightforward truth is that much unusual behavior can be tolerated and absorbed by a free society if discretion is putting speed bumps in the path of excess. It beats hitting the wall.”

Victor Davis Hanson / New York Post…on the perception that America is in “inevitable decline.”

“The manifest symptoms of decline – frustration with the Mideast, military retrenchment, exorbitant energy costs and financial insolvency – are choices we make but need not make in the future.

“If our students are burdened with oppressive loans, why do so many university rec centers look like spas? Student cellphones and cars are indistinguishable from those of the faculty.

“The underclass suffers more from obesity than malnutrition; our national epidemic is not unaffordable protein but rather a surfeit of even cheaper sweets….

“Children don’t suffer from lack of Internet access, but from wasting hours on video games and less-than-instructional Web sites….

“The problem isn’t that government workers are underpaid but that so many seem to think mind readers, clowns and prostitutes come with the job….

“Over the last half-century, bizarre new words entered the American vocabulary – triple-dipping, Botox, liposuction, jet set, cost-of-living adjustment – that don’t reflect a deprived citizenry. In 1980, a knee or hip replacement was experimental surgery for the 1 percent; now it’s a Medicare entitlement….

“As America re-examines its military, entitlements, energy sources and popular culture, it will learn that our ‘decline’ isn’t due to material shortages but rather arises from moral confusion over how to master the vast riches we’ve created. If decline is fighting just two wars at a time rather than three, just budgeting what we did in 2008, tapping a bit more oil offshore or having our colleges offer more grammar courses and fewer rock-climbing walls, then by all means bring it on.”

Peggy Noonan / Wall Street Journal

“People in politics talk about the right track/wrong track numbers as an indicator of public mood. This week Gallup had a poll showing only 24% of Americans feel we’re on the right track as a nation. That’s a historic low. Political professionals tend, understandably, to think it’s all about the economy – unemployment, foreclosures, we’re going in the wrong direction. I’ve long thought that public dissatisfaction is about more than the economy, that it’s also about our culture, or rather the flat, brute, highly sexualized thing we call our culture.

“Now I’d go a step beyond that. I think more and more people are worried about the American character – who we are and what kind of adults we are raising.

“Every story that has broken through the past few weeks has been about who we are as a people. And they are all disturbing.

“A tourist is beaten in Baltimore. Young people surround him and laugh. He’s pummeled, stripped and robbed. No one helps. They’re too busy taping it on their smartphones. That’s how we heard their laughter. The video is on YouTube along with the latest McDonald’s beat-down and the latest store surveillance tapes of flash mobs. Groups of teenagers swarm into stores, rob everything they can, and run out. The phenomenon is on the rise across the country. Police now have a nickname for it: ‘flash robs.’

“That’s just the young, you say. Juvenile delinquency is as old as history.

“Let’s turn to adults.

“Also starring on YouTube this week was the sobbing woman. She’s the poor traveler who began to cry great heaving sobs when a Transportation Security Administration agent at the Madison, Wis., airport either patted her down or felt her up, depending on your viewpoint and experience. Jim Hoft of TheGatewayPundit.com recorded it, and like all the rest of the videos it hurts to watch. When the TSA agent – an adult, a middle aged woman – was done, she just walked away, leaving the passenger alone and uncomforted, like a tourist in Baltimore.

“There is the General Services Administration scandal. An agency devoted to efficiency is outed as an agency of mindless bread-and-circuses indulgence….

“(The GSA’s) leaders didn’t even pretend to have a sense of mission and responsibility.   They reminded me of the story a year ago of the dizzy captain of a U.S. Navy ship who made off-color videos and played them for his crew. He wasn’t interested in the burdens of leadership – the need to be the adult, the uncool one, the one who maintains standards. No one at GSA seemed interested in playing the part of the grown-up, either….

“There’s the Secret Service scandal….

“What’s terrible about this story is that for anyone who’s ever seen the Secret Service up close it’s impossible to believe. The Secret Service are the best of the best. That has been their reputation because that has been their reality. They have always been tough, disciplined and mature. They are men, and they have the most extraordinary job: take the bullet.

“Remember when Reagan was shot? That was Secret Service agent Tim McCarthy who stood there like a stone wall, and took one right in the gut. Jerry Parr pushed Reagan into the car, and Mr. Parr was one steely-eyed agent. Reagan coughed up a little blood, and Mr. Parr immediately saw its color was a little too dark. He barked the order to change direction and get to the hospital, not the White House, and saved Reagan’s life. From Robert Caro’s ‘Passage of Power,’ on Secret Service agent Rufus Youngblood, Nov. 22, 1963: ‘there was a sharp, cracking sound,’ and Youngblood, ‘whirling in his seat,’ grabbed Vice President Lyndon Johnson and threw him to the floor of the car, ‘shielding his body with his own.’

“In any presidential party, the Secret Service guys are the ones who are mature, who you can count on, who’ll keep their heads. They have judgment, they’re by the book unless they have to rewrite it on a second’s notice. And they wore suits, like adults.

“This week I saw a picture of agents in Colombia. They were in T-shirts, wrinkled khakis and sneakers. They looked like a bunch of mooks, like slobs, like children with muscles.

“Special thanks to the person who invented casual Friday. Now it’s casual everyday in America. But when you lower standards people don’t decide to give you more, they give you less….

“The leveling or deterioration of public behavior has got to be worrying people who have enough years on them to judge with some perspective.

“Something seems to be going terribly wrong.

“Maybe we have to stop and think about this.”

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--The Supreme Court held oral arguments on a provision of Arizona’s tough immigration law that some say points to a partial victory for the state. In a recent Quinnipiac poll, 62% of respondents said the Supreme Court should uphold the Arizona law, while 27% wanted it struck down. 45% of Latino respondents wanted the court to uphold it as well, while 43% hoped it would be overturned. [Michael McGough / Los Angeles Times] 

Separately, a study by the nonpartisan Pew Hispanic Center says that between 2005 and 2010, 1.4 million Mexicans migrated north of the border, and 1.4 million returned to Mexico. Smaller families in Mexico and issues with the U.S. economy are the chief causes of the net zero number.

--Hey kids…looking for a good trade? How about learning to become a nuclear weapons technician?

From Kate Brannen of Defense News:

“In about five years, every scientist with experience designing and testing nuclear weapons will have retired from the U.S. government.”

There are no more than 15 scientists left who were responsible for the design of a warhead that’s in the existing stockpile, according to the undersecretary for nuclear security.

Of course if you aren’t designing or testing new weapons, as some in Congress say we must do to keep our edge, you don’t have a need for the scientists, right?

But how do we know that with natural degradation our nukes would still work?

--According to the trade publication Talkers, Rush Limbaugh, despite his “slut” controversy, remains No. 1, followed by Sean Hannity, Michael Savage, Ed Schultz and Laura Ingraham.

--According to an annual survey issued by the Institute for Economics & Peace, the “most peaceful” state in the nation is Maine, while Louisiana placed last for the 11th year in a row, when looking at five criteria…number of homicides per 100,000 people; number of violent crimes; incarceration rate; number of police employees; and availability of small arms. [Vermont, New Hampshire, Minnesota and Utah round out the top five; Arizona, Florida, Nevada and Tennessee occupy Nos. 46-49.]

--More bad behavior. Jesse Washington / AP:

“It had all the makings of a feel-good hockey moment – except the guy who scored the goal was black.

“Soon after Joel Ward eliminated the defending Stanley Cup champion Boston Bruins on Wednesday with a Game 7 overtime goal for the Washington Capitals, Twitter erupted in a shower of n-words and other racial insults.

“ ‘Go play basketball, hockey is a white sport,’ ‘4th line black trash’ and ‘white power’ were some of the nicer phrases tweeted by angry Boston fans. One said that the fact that a black player scored ‘makes this loss hurt a lot more.’”

Thankfully, the Bruins issued a statement.

“These classless, ignorant views are in no way a reflection of anyone associated with the Bruins organization.”

Nice job, tweeters, and all those out in social media land who hide anonymously.    

--Former Liberian President Charles Taylor became the first head of state since World War II to be convicted of war crimes.   Taylor, the warlord-turned-president, was responsible for more than 50,000 deaths for arming Sierra Leone rebels in exchange for “blood diamonds” mined and then smuggled across the border. The rebels were known for savage mutilations, such as hacking off hands or arms above the elbow. At least Taylor’s conviction sends a signal to the likes of Bashar Assad.   

--What was Vogue thinking last year when it profiled Asma al-Assad, Bashar’s wife and first lady?! Joan Juliet Buck began her profile, “The 35-year-old first lady’s central mission is to change the mindset of six million Syrians under 18, encourage them to engage in what she calls ‘active citizenship.’”

Oh brother. It was the March 2011 issue and hit the stands just as Bashar was launching his crackdown. Vogue titled the profile “A Rose in the Desert.”

The article has been scrubbed from the magazine’s site. Poof!

--Finally, last Saturday I drove from Johnson City, Tenn. to Asheville, N.C. and stopped at the North Carolina Welcome Center across the border, a beautiful spot as these things go. Some centers/rest stops have plaques on local history and I hope you take a minute to actually read them. Pennsylvania’s turnpike has some good ones, for example.

So I read this plaque on Liston B. Ramsey, 1919-2001. Ramsey served 19 terms in the North Carolina House of Representatives, including four terms as speaker (1981-89). 

A Madison County, N.C. Mountain Man
Who knew that poor is a matter of spirit,
Not just lack of wealth

That love of home is a matter of family and community,
Not just place

That leadership is a matter of service and commitment,
Not just influence

I can just imagine what Mr. Ramsey would say today about much of what I have above; the bad behavior, the lack of ethics, and failure to understand the true meaning of service and commitment.                                         

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

God bless America.
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Gold closed at $1664
Oil, $104.93

Returns for the week 4/23-4/27

Dow Jones +1.5% [13228]
S&P 500 +1.8% [1403]
S&P MidCap +2.4%
Russell 2000 +2.7%
Nasdaq +2.3% [3069]

Returns for the period 1/1/12-4/27/12

Dow Jones +8.3%
S&P 500 +11.6%
S&P MidCap +13.7%
Russell 2000 +11.4%
Nasdaq +17.8%

Bulls 41.9
Bears 
23.7 [Investors Intelligence]

Have a great week. I appreciate your support.

Don’t forget to get your official StocksandNews.com iPad app. Recommended by 6 out of 49 doctors in a recent survey.

Next week’s column may be a few hours late. I’m out of pocket on Friday and, as it’s also a key market day, come Saturday morning I may need some time to catch up before posting.

Brian Trumbore