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12/01/2012

For the week 11/26-11/30

[Posted 11:30 PM ET, Friday]

The Middle East

I stated in my “Nightly Review” video for Nov. 29 that Thursday will go down as one of the key dates in the decade, even if we don’t know it yet. The wave of car-bombings in Iraq continued, bringing the two-day death toll to over 80…just a reminder to those who thought al-Qaeda in Iraq was a spent force. The situation in Syria worsened to the point where the main airport was shut down due to fierce fighting nearby and the internet and phone service across the nation turned off, thus sowing terror of a different kind. The constituent assembly in Egypt rushed through a new constitution. And the UN General Assembly voted to upgrade the status of the Palestinians from that of a non-member observer “entity” to a non-member observer “state,” the same status granted the Vatican, only last I saw the Vatican wasn’t firing rockets at its neighbor. These last two items, occurring within hours of each other, may have titanic consequences.

The UN General Assembly, against the wishes of Israel and the United States, voted 138 to nine with 41 abstentions following a speech by Palestinian President Mahmoud Abbas in which he called on the UN to issue the Palestinians their “birth certificate” as a nation. 

[The nine ‘no’ votes were U.S., Israel, Canada, Czech Republic, Palau, Panama, Nauru, Micronesia and Marshall Islands.]

Abbas cited Israel’s “institutionalized colonial occupation” of Palestinian land and said the Palestinian people had been subjected to an “unprecedented intensification of military assaults” and “ethnic cleansing” in the last few months.

“The moment has arrived for the world to say clearly, enough of aggression, occupation and settlements.”

Israeli Prime Minister Benjamin Netanyahu labeled Abbas’ remarks “hostile and poisonous.”

Speaking before the vote, Netanyahu said, “The only way to achieve peace is through agreements that are reached by the parties directly…and not through UN resolutions that completely ignore Israel’s vital security and national interests.”

Netanyahu added: “And because this resolution is so one-sided, it doesn’t advance peace, it pushes it backwards.”

Ron Prosor, Israeli ambassador to the UN, said: “It will make a negotiated settlement less likely as Palestinians continue to harden their positions…it will raise expectations that cannot be met. There is only one route to Palestinian statehood – direct negotiation. There are no short cuts, no quick fixes, no instant solutions.”

Prosur added: “No decision by the UN can break the 4000-year-old bond between the people of Israel and the land of Israel.”

U.S. ambassador to the UN, Susan Rice, said the “unfortunate and counterproductive” resolution “placed further obstacles on the path to peace….

“Today’s grand pronouncement will soon fade and the Palestinian people will get up tomorrow and find that little in their lives has changed….This resolution does not establish that Palestine is a state.”

The chief concern of both the U.S. and Israel, though, is President Abbas may now feel pressure from the more radical Palestinian elements to have Palestine join the International Criminal Court and other treaty bodies.

Ahead of the vote, a bipartisan group of senators warned the Palestinians that millions in U.S. financial aid was at risk if they use their upgraded status against Israel.

“The biggest fear I have is that if the Palestinians achieve this status it won’t be very long before the Palestinians use the United Nations as a club against Israel,” said Lindsey Graham (R-S.C.)

At the same time, following the vote, Secretary of State Hillary Clinton said: “We have been clear that only through direct negotiations between the parties can the Palestinians and Israelis achieve the peace they both deserve: two states for two people with a sovereign, viable, independent Palestine living side by side in peace and security with a Jewish and democratic Israel.”

Editorial / New York Post

“Let’s be clear.

“One can always hope for the eventual emergence of a Palestinian state dedicated to a peaceful coexistence with Israel.

“But that will never happen while Palestinians and their murderous enablers in Iran and in the Islamist movements worldwide surrender their fantasies of extinguishing the Jewish state.

“Don’t hold your breath.

:”Indeed, yesterday’s UN vote only made that less likely. Because what Turtle Bay did, coming hard on the heels of a round of Hamas-inspired violence in Gaza, was to reward the concept of statehood-by-terror; it sent a stark message that peace and negotiation are for suckers; that violence, terror and bullying will win the day.

“How ironic. And sad.

“True, it is Palestinian Authority President Mahmoud Abbas who has pushed the bid for unilateral UN recognition. In recent years, Abbas’ faction – based in the West Bank – has been somewhat less radical and violent. And it’s nominally distinct from the more openly terroristic Hamas in Gaza.

“But making distinctions of any sort between Palestinian factions is a mug’s game – to say nothing of making actual policy decisions based on such differences.

“The Palestinians have to sort out their own rivalries – which will be a long and bloody process – before they are fit negotiating partners for anyone.

“For the UN, none of that matters. Fact is it long ago lost its way – along with its credibility, its legitimacy and its honor.

“Yesterday’s vote only reinforced that.”

On Friday, Israel authorized the construction of 3,000 more housing units in occupied East Jerusalem and the West Bank, as well as speeding up the processing of 1,000 planning permissions; two items Israel had been holding off on as a carrot to Abbas if he didn’t proceed with the UN move. The Palestinian Authority had long said it would not return to talks without a freeze in settlement building. Israel has said it will negotiate but only with no preconditions.

Back to square one…which is nowhere.

In Egypt, the Islamist-led constituent assembly, operating without 15-20 of its 100 members (liberals, minorities, Christians) who boycotted the event, chose to rush through a new constitution in an attempt to pre-empt a move by the supreme judiciary that could dissolve the panel. With President Morsi approving the constitution, it must now be put to a nationwide referendum in December.

The assembly took 16 hours to vote on 234 articles and a member of the Muslim Brotherhood said, “This constitution represents the diversity of the Egyptian people. All Egyptians, male and female, will find themselves in this constitution.”

But in rushing it through, all the assembly did was tinker with the existing document rather than offer real reforms and, of course, now you have Islamists calling the shots and interpreting the language as they see fit.

Reform leader and Nobel Peace laureate Mohamed ElBaradei said: “I am saddened to see this come out while Egypt is so divided.” ElBaradei, though, didn’t think the document would last long. “It…will go into the garbage bin of history.”

Human Rights Watch criticized the hurried manner in which the assembly pushed the draft through, saying it was hardly the way to guarantee fundamental rights or the rule of law.

An article specifically establishing women’s equality, for example, was dropped because of a dispute over its language.

The new constitution maintains the old language that the “principles of Islamic law” will be the rule of the land, but there was an addition that could be interpreted to give Islamists a tool for stricter enforcement of rulings of Sharia than was the case before.

The new draft also includes bans on “insulting or defaming all prophets and messengers” or even “insulting humans” – rather broad language that could be used to crack down on various segments, I think you’d agree.

As for the Egyptian military, it remains insulated from parliamentary oversight.

Bret Stephens / Wall Street Journal

“It may take some time for the West fully to appreciate the ugliness of Egypt’s new regime. For now, it is enough to appreciate its potency and intelligence. Mr. Obama was right to praise Mr. Morsi’s ‘engineer’s precision.’ He would be a fool to imagine that such precision can be divorced from an ideology for which Mr. Morsi once went to prison, and which now rests in his hands to impose.”

Regarding Syria, I can’t help but note the following passage from a New York Times piece by David E. Sanger and Eric Schmitt.

“In the case of Syria, a far more complex conflict than Libya’s, some (U.S.) officials continue to worry that the risks of intervention – both in American lives and in setting off a broader conflict, potentially involving Turkey – are too great to justify action. Others argue that more aggressive steps are justified in Syria by the loss in life there, the risks that its chemical weapons could get loose, and the opportunity to deal a blow to Iran’s only ally in the region. The debate now coursing through the White House, the Pentagon, the State Department and the C.I.A. resembles a similar one among America’s main allies.

“ ‘Look, let’s be frank, what we’ve done over the last 18 months [Ed. 20] hasn’t been enough,’ Britain’s prime minister, David Cameron, said after visiting a Syrian refugee camp in Jordan. ‘The slaughter continues, the bloodshed is appalling, the bad effects it’s having on the region, the radicalization, but also the humanitarian crisis that is engulfing Syria. So let’s work together on really pushing what more we can do.’ Mr. Cameron has discussed those options directly with Mr. Obama, White House officials say.”

What upsets me about the above two paragraphs, as I expressed in one of my “Nightly Review” videos this week, is that this discussion is absurd. IT’S TOO FREAKIN’ LATE!!!

Some of us were arguing 18 months ago that we needed to take action. I was calling for a move to establish safe zones for refugees, working with our ally, Turkey, who was crying for our help.

Instead, what have you seen? A refugee crisis of humongous proportions that is getting worse by the day, threatening to destabilize governments such as Lebanon and Jordan, and a very pissed off one-time friend, Turkish President Erdogan, who feels slighted and ignored and is now lashing out anew against Israel while he fights for influence in the region with Egyptian President Morsi.

But most importantly, the inaction on the part of the United States unleashed the whirlwind and terrorists have been flooding into Syria. This week I thought one of the most telling incidents was a twin suicide car bombing in a suburb of Damascus that killed at least 34 civilians. There were no Syrian troops that could have been construed as a target. Just a classic al-Qaeda-type attack. Kill as many people as possible.

This isn’t the original opposition rebels of the first days of the Arab Spring, or the Syrian conflict. It has metastasized into Terror Central. The one thing the Assad regime is correct on, as it stated the other day, is it’s fighting al-Qaeda as much as the rebels.

And now, as the rebels get hold of shoulder-fired missiles, which did indeed take down a Syrian fighter jet and helicopter this week, guess who else no doubt is grabbing hold of them? It seems to me it’s just a matter of weeks before a commercial airliner in the region is targeted.

But back to the Sanger/Schmitt piece, the naivety of some when it comes to Syria is astounding.

It’s over. It doesn’t matter if Assad is taken out tomorrow…it’s over. The United States has lost any chance it had to influence the government (or five of ‘em across the country) that follows. And look at the over 750,000 refugees that have fled to the likes of Turkey, Jordan, Lebanon and Iraq. Do you think they are waving American flags?

The one thing the UN does well is supply emergency aid and the UN has been screaming for help and none is forthcoming, despite what the White House and our State Department say. There are no safe havens. There is no secure way to get aid to the 2.5 million inside Syria who need help with winter bearing down on them.

It’s a tragedy of immense proportions. No one cares how this will change the region, forever.

It didn’t have to be this way. The United States and President Obama blew it. What follows is on him…and eventually all of us in one form or another.

Condoleezza Rice / Washington Post

“The civil war in Syria may well be the last act in the story of the disintegration of the Middle East as we know it. The opportunity to hold the region together and to rebuild it on a firmer foundation of tolerance, freedom and, eventually, democratic stability is slipping from our grasp….

“The conflict in Syria is pushing Iraq and others to the breaking point. At the same time, U.S. disengagement has tempted Iraqi politicians to move toward sectarian allies for survival. If Prime Minister Nouri al-Maliki cannot count on the Americans, he will take no risks with Tehran.

“The great mistake of the past year has been to define the conflict with Bashar al-Assad’s regime as a humanitarian one. The regime in Damascus has been brutal, and many innocent people have been slaughtered. But this was no replay of Libya. Much more is at stake.

“As Syria crumbles, Sunnis, Shiites and Kurds are being drawn into a regional web of sectarian allegiances. Karl Marx once called on workers of the world to unite across national boundaries. He told them that they had more in common with each other than with the ruling classes that oppressed them in the name of nationalism….

“Today’s Karl Marx is Iran. It envisions the spread of its influence among Shiites, uniting them under the theocratic flag of Tehran – destroying the integrity of Bahrain, Saudi Arabia, Iraq and Lebanon. Iran uses terrorist groups, Hizbullah and the Shiite militias in Iraq to do its bidding. Syria is the linchpin, the bridge into the Arab Middle East. Tehran no longer hides the fact that its security forces are working in Syria to prop up Assad….

“In response, Saudi Arabia, Qatar and other neighboring powers arm and support Sunni factions. The Turks are being drawn into the conflict, desperately fearful that the Kurds will break away in Syria and push their brethren in Turkey to do the same….Ankara’s cries to NATO for help last month should have gotten our attention….

“Certainly there are risks. After more than a year of brutal conflict, the most extreme elements of the opposition – including al-Qaeda – have been empowered. Civil wars tend to strengthen the worst forces. The overthrow of Assad could indeed bring these dangerous groups to power.

“But the breakdown of the Middle East state system is a graver risk. Iran will win, our allies will lose, and for decades the region’s misery and violence will make today’s chaos look tame.

“War is not receding in the Middle East. It is building to a crescendo. Our elections are over. Now, America must act.”

Again, it’s too late, Condi.

Washington

Before we get to the fiscal cliff, the Organization for Economic Cooperation and Development slashed its forecast for growth in 34 of the wealthiest economies for 2013 to just 1.4% from a May forecast of 2.2%. The OECD now expects the eurozone economy to contract for a second successive year and is warning that the currency bloc “could be in danger” if there is a lack of sufficient progress by the region’s policy makers. Growth in the United States is forecast at 2% while Japan’s is expected to expand by 0.8%. Greece is projected to be the worst performer among the membership, with the OECD expecting its economy to shrink by 4.5%. The Spanish, Italian, Slovenian and Portuguese economies are also predicted to contract over the course of 2013.

So with this crummy background, and with the world needing a strong U.S. economy (and respectable growth in China) to have a shot at keeping the rest of the globe’s head above water, we have this fiscal cliff debate.

President Obama, as described below, is hardly in a compromise mode, refusing to yield on any item of his original plan that begins by calling for taxing the rich, while refusing to put forward any kind of remotely sincere effort to tackle entitlements.

In yet another campaign-style appearance in Pennsylvania on Friday, which is really sickening when you get right down to it…get in a freakin’ room with the opposition and deal!...the president said:

“In Washington, nothing’s easy so there’s going to be some prolonged negotiations. Where the clock is really ticking, right now, is on middle-class taxes.”

Around the same time, Friday afternoon, House Speaker John Boehner said negotiations are at a “stalemate” because the administration hasn’t made a serious proposal. “Let’s not kid ourselves. Right now, we’re almost nowhere.” 

Earlier, Majority Leader Harry Reid said: “Democrats are on the same page. The president has made his proposal; we need a proposal from them.”

Erskine Bowles of Simpson-Bowles fame said he is discouraged by the slow pace of the negotiations and the distance between the sides on both taxes and spending.

“I think the probability is we’re going over the cliff. I’m hopeful but, boy, I wouldn’t put me down as optimistic.”

Thursday, Boehner said there has been “no substantive progress between the White House and the House the last two weeks.” Democrats “have yet to get serious about spending cuts.”

But Boehner, in talking of a down payment on deficit reduction through revenue increases and spending cuts, followed by broader entitlement and tax reform next year, for the first time conceded the maximum we can hope for by yearend is a stop-gap, bridge deal to avoid the fiscal cliff and sequestration, and then a broader agreement next year.

And while I was never under the illusion there would be a grand bargain by yearend, market participants need to be prepared for the potential for a crash because there is no way…no way…the two sides come up with a creditable short-term deal in December with firm benchmarks and target dates for broader reform, both in taxes and entitlements, in the first half of next year. The financial markets will see right through it (after an initial burst of euphoria, of that I’m also sure).

Read the following and prepare to be depressed.

Former Congressmen Chris Cox and Bill Archer / Wall Street Journal

“A decade and a half ago, both of us served on President Clinton’s Bipartisan Commission on Entitlement and Tax Reform, the forerunner to President Obama’s recent National Commission on Fiscal Responsibility and Reform. In 1994 we predicted that, unless something was done to control runaway entitlement spending, Medicare and Social Security would eventually go bankrupt or confront severe benefit cuts.

“Eighteen years later, nothing has been done. Why? The usual reason is that entitlement reform is the third rail of American politics. That explanation presupposes voter demand for entitlements at any cost, even if it means bankrupting the nation.

“A better explanation is that the full extent of the problem has remained hidden from policy makers and the public because of less than transparent government financial statements. How else could responsible officials claim that Medicare and Social Security have the resources they need to fulfill their commitments for years to come?

“As Washington wrestles with the (fiscal cliff and 2013 budget), the far greater fiscal challenge of the U.S. government’s unfunded pension and health-care liabilities remains offstage. The truly important figures would appear on the federal balance sheet – if the government prepared an accurate one.

“But it hasn’t….

“As a result, fiscal policy discussions generally focus on current-year budget deficits, the accumulated national debt, and the relationships between these two items and gross domestic product. We most often hear about the alarming $15.96 trillion national debt [Ed. now $16.3 T] (more than 100% of GDP), and the 2012 budget deficit of $1.1 trillion (6.97% of GDP). As dangerous as those numbers are, they do not begin to tell the story of the federal government’s true liabilities.

“The actual liabilities of the federal government – including Social Security, Medicare, and federal employees’ future retirement benefits – already exceed $86.8 trillion, or 550% of GDP. For the year ending Dec. 31, 2011, the annual accrued expense of Medicare and Social Security was $7 trillion. Nothing like that figure is used in calculating the deficit. In reality, the reported budget deficit is less than one-fifth of the more accurate figure.

“Why haven’t Americans heard about the titanic $86.8 trillion liability from these programs? One reason: The actual figures do not appear in black and white on any balance sheet. But it is possible to discover them. Included in the annual Medicare Trustees’ report are separate actuarial estimates of the unfunded liability for Medicare Part A (the hospital portion), Part B (medical insurance) and Part D (prescription drug coverage).

“As of the most recent Trustees’ report in April, the net present value of the unfunded liability of Medicare was $42.8 trillion. The comparable balance sheet liability for Social Security is $20.5 trillion.

“Were American policy makers to have the benefit of transparent financial statements prepared the way public companies must report their pension liabilities, they would see clearly the magnitude of the future borrowing that these liabilities imply. Borrowing on this scale could eclipse the capacity of global capital markets – and bankrupt not only the programs themselves but the entire federal government.”

It gets worse…but I’ll leave part II for next time.

Editorial / Wall Street Journal

“(The) President is insisting on about $1 trillion in new tax revenues immediately by raising tax rates, plus another $60 billion in net new revenue as part of tax reform next year. He also wants $150 billion in new public works ‘stimulus’ spending, $50 billion of it next year, and another extension in unemployment benefits (one year cost: $30 billion).

“In return, Mr. Obama will only promise some $400 billion in entitlement savings next year, details to come later. Keep in mind this negotiation is supposed to reduce the deficit. We’re told (Treasury Secretary Timothy Geithner, serving as Obama’s emissary on Capitol Hill), demanded a permanent increase in the debt limit, meaning that no future action would be required to raise it again….As one senior Republican told us, ‘This was almost insulting.’”

Editorial / Washington Post

“(Democrats) insist that Social Security, Medicare, Medicaid and education – pretty much everything except the Pentagon – are untouchable. Senate Majority Whip Richard J. Durbin (Ill.), who had been one of the more reasonable Democratic leaders, said Tuesday that, while he favors reform of entitlement programs, it shouldn’t be part of the negotiations on the fiscal cliff. The Post’s Greg Sargent reported that union leaders and other liberals came away from a White House meeting encouraged that administration officials agree entitlements shouldn’t be part of the negotiations.

“ ‘They expect taxes to go up on the wealthy and to protect Medicare and Medicaid benefits,’ one attendee said. ‘They feel confident that they don’t have to compromise.’

“Don’t have to compromise?

“Elections do have consequences, and Mr. Obama ran on a clear platform of increasing taxes on the wealthy. But he was clear on something else, too: Deficit reduction must be ‘balanced,’ including spending cuts as well as tax increases. Since 60 percent of the federal budget goes to entitlement programs such as Medicare, Medicaid and Social Security, there’s no way to achieve balance without slowing the rate of increase of those programs….

“Mr. Obama has understood this since at least 2009, when he told The Post’s editorial board that he would tackle entitlement reform.

“ ‘What we have done is kicked this can down the road. We are now at the end of the road and are not in a position to kick it any further,’ he said then. ‘We have to signal seriousness in this by making sure some of the hard decisions are made under my watch, not someone else’s.’

“Four years later, has the moment arrived? Since his reelection, Mr. Obama has fueled a campaign-style effort to pressure Republicans to give ground on taxes. That’s fine, but it won’t be enough. At some point, he has to prepare the American people – and his own supporters most of all – for the ‘hard decisions’ required to put the country on a sound financial footing. That means spending cuts, it means entitlement reform, it means compromise, it means a balanced solution that will please neither House Speaker John A. Boehner nor Senate Majority Leader Harry Reid. Only one person is in a position to make it happen.”

Europe

Eurozone finance ministers and the IMF finally agreed to unblock 44 billion euro in loans from Greek Bailout II, giving the Greeks 34.4 billion sometime around Dec. 13, and another 9.3 billion in installments early next year as long as Greece is complying with various benchmarks.

The aim is to reduce Greek debt to 124% by 2020 (thought the number is really 126%) and in essence cuts Greek debt by 40 billion. Current loans to Greece had their maturities extended 15 years and interest was deferred for 10 years. What’s not to love, if you’re a Greek!

European Central Bank chief Mario Draghi said the moves would “strengthen confidence in Europe and Greece.” The deal also allows for bank support and the Greek government can pay wages and pensions in December.

But the IMF isn’t releasing their share of the aid until further details are ironed out and IMF Managing Director Christine Lagarde wants Greece’s debt reduced to 110% by 2022, which would force governments to provide more aid and/or debt relief in the future.

The thing is, it’s all bogus, as has been just about every “solution” over the past 2 ½ years with the euro debt crisis. Eurozone governments almost certainly will have to accept losses as part of a debt buyback which is key to the program and at some point the people in the donor countries will have had enough, as expressed through their political representatives.

It all begins to come to a head in just the next few days. One explanation, as reported by BBC News:

“On Wednesday, the Greek government announced that it would seek to carry out a buyback next week.

“How much of its debts Greece actually manages to cancel depends entirely on the price it can buy the debts back at.

“For example, Greece’s existing 10-year bond is currently traded in financial markets at a price of 35% of the amount owed. If Greece could buy the bond at this price, it would be able to cancel the other 65% of the money it owed under the bond.

“If however Greece is forced to pay a much higher price for its debts, then the amount it could cancel would be commensurately lower.

“In that case, the IMF may deem the government incapable of reducing its debts to a sustainable level, and therefore refuse to endorse the deal it reached with eurozone lenders, unless some other way could be found of reducing the Greek government’s debt burden.”

Obviously more next time on this topic as well.

But the real bottom line is that for this plan to work, Greece needs growth and you saw above how the OECD, for one, is forecasting further contraction in 2013 of 4.5%.  The current economic projections for the rescue package are way too rosy. Greece will be unable to pay its debt and capital write-offs are coming.

You also have a situation where the opposition in Greece is once again gaining strength in the polls, with left-wing, anti-austerity Syriza beating the ruling conservatives in the latest survey by 4 points. And the debt agreement hardly helps the average Greek, at least in the short term as it contains more austerity.

In Spain, they held the election in Catalonia last Sunday and the ruling center-right, secessionist CiU party of provincial president Artur Mas suffered a big defeat as its share of the 135-seat parliament went from 62 to 50, though other parties backing secession gained so the pro-independence movement has 87 of the 135. Only one problem. None of the other three parties with an independence agenda have anything other than that in common with the CiU and coalition talks failed the day after.

So people voted for independence but there is not likely to be a referendum on same for some time, a referendum that Madrid feels is illegal anyway.

And Catalonia still has a huge debt to deal with, up to 48 billion euro, it’s shut out of the capital markets, it’s had to get a bailout of 5 billion euro this year already from the central government, and so the irony of it all is that Catalonia wants its independence, but it’s dependent on Madrid.

Spain, overall, did receive approval from the European Commission on a bank recapitalization program of 40 billion euro, but everyone and their mother knows this is not nearly enough.

One of the institutions being bailed out, again, is Bankia, which immediately announced it would lay off 6,000 employees and shut 39% of its branches; hardly the kind of measure that helps the unemployment rate there. Those banks being recapitalized are no longer going to be able to lend to property developers.

No doubt, Spain will need a government bailout next year. Book it. But it was kind of funny how on Friday, the eurozone’s bailout fund, the European Stability Mechanism (ESM), had its triple-A rating cut by Moody’s.

Street Bytes

--Stocks rallied for a second consecutive week, though the Dow Jones gain was just 16 points or 0.1% to 13025. The S&P 500 added 0.5% and Nasdaq rose 1.5% to 3010. Nasdaq’s gain for the year is back to 15.5%. Action was dominated by talk on the fiscal cliff and will undoubtedly continue to be so.

--U.S. Treasury Yields

6-mo. 0.13% 2-yr. 0.25% 10-yr. 1.61% 30-yr. 2.81%

The Journal ran a story confirming the Federal Reserve was going to continue buying Treasuries to keep yields low, not that this is any great surprise. The Fed’s Open Market Committee next meets Dec. 11 and 12. I can’t wait. I love receiving no interest on my accounts.

--In economic news, third quarter GDP was revised up to 2.7% from the initial flash estimate of 2.0%, though this was as expected and some of the components are squishy. All believe Q4 GDP will do well to hit 2.0% and will be more in the 1.7% range.

Durable goods orders for October were better than expected, up 1.7% on non-defense, non-aircraft; the best performance since May. But the October figures on personal income, unchanged, and personal consumption, down 0.2%, were worse than expected and influenced by Hurricane Sandy at month’s end.

--On the housing front, new-home sales for October were disappointing, far less than expected, but the S&P/Case-Shiller home data for September was solid, with the 20-city index up 3% over September 2011 and 3.6% for the third quarter.

--Among the items up for debate in fiscal cliff discussions is the mortgage-interest deduction, which costs the government about $100 billion a year. Most would agree something has to be done, such as perhaps eliminating it on second homes, but as economist Mark Zandi told the Washington Post, “It’s a very visceral thing for people. People account for it when they think about how much house they could afford to buy. You take that away, and house prices are going to weaken. They are going to decline.”

If it’s phased in over a period of years, though, I’m guessing the impact is minimal. Face facts; it’s part of the solution in longer-term tax reform.

--Many of the nation’s top retailers reported disappointing November same-store sales, even though they talked of a solid Thanksgiving. Kohl’s, Macy’s, Target, Tiffany’s…all were hit by either a “Sandy” effect or generally punk economic conditions. In the case of Tiffany’s, which cut its full-year earnings estimate, it continued to cite global economic weakness, with same-store sales in the Americas flat and Asia-Pacific registering a 3% decline. 

--I always get a kick out of the breathless talk during Black Friday and Cyber Monday. The initial reports are never to be believed and it’s a long holiday shopping season, anyway. I would tend to agree with the original National Retail Federation’s estimate that holiday sales overall will rise 4.1% this year. The wealthy will do their fair share; the not so wealthy will spend no more than last year.

But regarding Cyber Monday, one IBM report said sales rose 30% over a year ago, but then said the average order was down 6.6%. Then ComScore said sales rose 17%, to $1.47 billion, which was less than their original estimate of up 20%. That sounds more like it.

--China’s government reported this morning (Sat.) that the purchasing managers index for November came in at 50.6 after the 50.2 reading for October, a hopeful sign.

--India’s economy slowed further in the third quarter, just 5.3% year on year. Manufacturing grew only 0.8% year on year. Yikes. This is India. Not Europe. The growth came from finance and business services, 9.4%, while construction rose 6.7%.

--Brazil’s economy grew just 0.6% in the third quarter vs. the previous quarter, half the rate expected. Businesses cut their investment by a further 2%, which offset a big round of stimulus spending unleashed by the government. 

Growth for 2012 now looks likely to come in around 1%, vs. 2.7% last year and 7.5% in 2010.

--Retail sales in Japan fell in October by the most in 11 months, 1.2%, worse than expected, but the Japanese stock market has been surging on hopes the opposition wins the Dec. 16 flash election. Opposition leader Shinzo Abe has called for unlimited monetary easing and public spending to create inflation. Abe’s Liberal Democratic Party is way ahead in the polls (though in this fractured country with a myriad of parties, 23% is a landslide). So on Friday, Prime Minister Noda announced a second round of stimulus in little more than a month in an attempt to appear relevant.

Consumer prices in Japan for October were unchanged, speaking of inflation, while the jobless rate stayed at 4.2%.

There was a bright spot in the data at week’s end as well; industrial production for October rose 1.8% from the previous month owing to production of parts for devices such as Apple’s iPhone.

But add it all up and Japan is still expected to fall back into recession when fourth quarter data is tallied.

--Speaking of iPhones, Apple’s latest finally gained approval in China and should make its debut there in December.

--I loved this one: “Anglo Irish Bank is taking legal action against its former auditor Ernst & Young for failing to spot the lender’s massive exposure to the Irish property bubble.” [BBC News]

Isn’t that what company management is for?

--Canada’s third quarter GDP slowed to a 0.6% annualized pace with falling business investment and declining exports. Like virtually everywhere else, it’s about slowing Chinese growth and a recession in Europe.

--The Philippine economy unexpectedly grew 7.1% in the third quarter vs. a year ago when a figure more like 5.5% was forecasted. This is good! As a Hong-Kong based economist with HSBC told Bloomberg:

“The Philippines is going to rock. The central bank and the government have made timely policy adjustments that are boosting trend growth. With momentum so strong, we think BSP (Bangko Sentral ng Pilipinas) will hold rates and mark the end of the easing cycle.”

Exports here rose 22.8% in September from a year earlier, which also signaled a recovery in the U.S. and China.

--I’m ignoring the very complex case of hedge fund titan Paul Singer and his Elliott Management vs. Argentina because a court ruling ordering Argentina to put $1.3 billion in escrow to pay Elliott and other bondholders who refused to participate in two previous debt restructurings is seemingly being negotiated between the parties. Previously, Argentina President Cristina Kirchner said her country wouldn’t pay out “one dollar” to holdouts from a 2002 default when 92% of Argentina’s bondholders chose to accept 35 cents on the dollar, while Singer and others refused to participate.

--A French appeals court cleared Continental Airlines of criminal blame for the July 2000 crash of a Concorde jet shortly after takeoff from Charles de Gaulle airport, killing all 109 people on board and four hotel workers. In 2010, a French court decided that the crash had been caused by a titanium strip that had fallen from a Continental airliner. Continental was convicted of involuntary manslaughter and fined, while a Continental mechanic was given a 15-month suspended prison sentence. Thursday’s ruling overturned all of this, including the fine. Continental had long argued the Concorde caught fire before it hit the strip.

--But also in France this week, the minister for industrial recovery, Arnaud Montebourg had heads shaking when he said steel giant ArcelorMittal is no longer welcome in his country after Mittal announced a plan in October to close two furnaces at its steel plant in Florange, which Montebourg says breaks a promise made by chief executive Lakshmi Mittal during Mittal Steel’s 2006 takeover of Arcelor.

Florange is a traditional steel town in northeastern France and Mittal gave Saturday as the deadline for finding a buyer. Mittal refuses to sell the full operation, which employs 20,000 workers.

So what surprised folks is Montebourg saying he would seize the entire plant and nationalize it.

But late Friday we learned from French Prime Minister Ayrault that the government will not nationalize the plant after receiving assurances from ArcelorMittal that it would invest in the complex and not cut jobs.

--Home prices in Ireland fell in October after three months of increases. The year on year fall is now 8.1% and the value of the average property is half of what it was during the peak in 2007. Prices in Dublin are off 56% from the peak; outside the capital, they are 47% lower.

--Want an example of the Irish real estate market? The Burlington Hotel, one of Dublin’s largest, was sold to Blackstone for 67 million euro, or just one-fifth of the price paid five years ago. It’s the biggest hotel sale since the economy collapsed.

--From Nick Webb of the Irish Independent:

“Michael Hasenstab, the star trader at 700 billion (euro) fund manager Franklin Templeton, which now owns 10 percent of Ireland’s debt, may make a profit of as much as 4.75 billion on his staggering gamble on Irish bonds.

“In a ballsy move backed up with hard cash, Hasenstab has taken an extraordinary contrarian bet against the market by backing Ireland.

“It is a daring 8.1 billion that is looking so lucrative it could make an extra chapter in the Michael Lewis best-seller ‘The Big Short,’ where traders made billions betting against sub-prime mortgages at the start of the financial crisis. Hasenstab’s 8.1 billion investment on Irish bonds is the biggest private punt on this country’s future….

“Writing to Franklin Templeton clients, Hasenstab notes: ‘I believe the Irish model could be an ideal prescription for problems in the other parts of Europe.

“ ‘What has been happening in Ireland is positive. The country, despite facing great adversity, continues to make progress on fiscal reform and is increasingly getting recognition as a model for other countries.

“ ‘It can be summarized as a pro-growth and pro-austerity package, where growth is facilitated through structural reforms and competitiveness and austerity is facilitated through fiscal responsibility, which Ireland has put forth and executed well.”

This is exactly the approach I thought British Prime Minister David Cameron was taking when he announced his nation’s first austerity programs, which I figured would prove to be the model for Europe. Certainly, the U.K. is holding up far better than most, though I thought improvement would come sooner.

--New Jersey Gov. Chris Christie estimated his state’s storm damage from Hurricane Sandy at $29.4 billion, plus he submitted a further request for federal aid in the amount of $7.4 billion to reduce damage from future hurricanes and floods. For his part, New York Gov. Andrew Cuomo estimated the cost to be $42 billion, with $19 billion in the city alone. Cuomo argued the devastation statewide was worse than what Katrina did to Louisiana (save for the human toll…1,866 vs. more than 100), because of New York’s density. Far more people were impacted, with repairs to the subways and commuter rail lines expected to cost $5 billion.

Figures released by Cuomo’s office showed 305,000 homes were damaged or destroyed by Sandy, compared with 214,700 for Katrina in Louisiana. But the number of businesses hit in New York was 265,000 vs. nearly 19,000 in Louisiana.

Cuomo, though, like with Christie’s $7.4 billion, called for $9.1 billion in “prevention and mitigation” measures as part of the $42 billion request.

Editorial / New York Post

“New York pols are launching a major blitz for some $33 billion in federal aid – but a related plea, for $9 billion, could put their entire ask at some risk.

“Let’s hope they know what they’re doing.

“On Monday, Gov. Cuomo cited a need for $32.8 billion for ‘recovery’ efforts – to restore the state to where it was, pre-Sandy.

“But Cuomo wants another $9.1 billion for ‘prevention/mitigation’ measures – ‘to make sure this doesn’t happen again or lessen the impact if it does,’ he says.

“Those funds would go for ‘flood protection’ for subways, sewer-treatment plants, key roads, the World Trade Center site and other areas – and also for back-up generator upgrades for hospitals and such.

“There’s obvious logic in taking preventive steps to save lives and lower recovery costs when future storms strike….

“But Cuomo & Co. sure are taking a big risk.

“Because the idea of using federal dollars for essentially local capital needs puts the entire endeavor in a whole new ballpark.

“Does anyone seriously think, after all, that DC aid won’t come with strings? Federal cash means federal rules. And oversight.

“More important, New York will have to make a case that it’s special. It will have to convince the nation that it deserves extra protection before other storm-exposed areas – from Maine’s northern-most shores to Texas’ Gulf coast.

“And it’s not like DC lawmakers are known for their intense love of funding New York (Remember the endless fights over federal anti-terror cash?)….

“Meantime, fiscal-cliff talks are under way in Washington, and Congress is looking to trim costs – not add new ones.”

Let the fun begin.

--Just a few examples of the extensive damage Sandy caused to the local economy. 400 workers at Ellis and Liberty Islands have been laid off because both parks won’t be re-opened until April. The concession and ferry operators probably won’t survive the shutdown. About 700,000 people visit Liberty Island between November and March and around 500,000 go to Ellis Island.

And then there’s the Hoboken PATH station, a critical commuting hub into Manhattan that sustained $300 million in damages. Monday will mark five weeks since it was closed down by 12-feet of water in some spots. There is still no timetable whatsoever for when it’s going to reopen. Some workers, on very limited budgets, are now paying over $30 more a week for their commutes because they are forced to take the more expensive ferry.  

Separately, Federal Reserve Bank of New York President William Dudley called Sandy’s damage extensive and longer-lasting than initially anticipated, though…

“Putting all the factors together, at present I expect that economic activity in our region was adversely affected in October and November but will show a noticeable rebound starting in December.”

--The airline industry in the U.S. lost up to $500 million in revenue because of Sandy. At the peak, Monday, Oct. 29, about 9% of global airline capacity was grounded, according to the International Air Transport Association.

--Edward Luce of the Financial Times opined the other day on America’s infrastructure, best exposed by Sandy.

“There are three reasons to worry. First, there is remarkably little public outrage over the dilapidation in the power grid, public roads, domestic airports and waterways….It is hard to fly domestically in the U.S. and not at regular intervals face heavy delays, cancellations or being bumped off your flight. It is also hard not to miss the impressively stoical reaction of most passengers.

“A big chunk of America’s domestic flying woes could be solved by building NextGen, which would switch the U.S. from its Second World War radar network to a satellite-based flight-tracking system….But Congress has little stomach for the bill, which would come to at least $25 billion.

“Second, most Americans are unaware of how far behind the rest of the world their country has fallen. [Ed. you wouldn’t know unless you traveled, frankly. I’m thinking of using up some frequent flyer miles next year to fly to Hong Kong just to hang out at the airport there for a week, like I’ve done before. Great spot. Seriously.] According to the World Economic Forum’s competitiveness report, U.S. infrastructure ranks below 20th in most of the nine categories, and below 30 for quality of air transport and electricity supply. The U.S. gave birth to the internet – the kind of decentralized network that the U.S. power grid desperately needs. Yet according to the OECD club of mostly rich nations, average U.S. internet speeds are barely a 10th of those in countries such as South Korea and Germany. In an age where the global IT superhighway is no longer a slogan, this is no joke. The budding U.S. entrepreneur can survive gridlocked traffic. But a slow internet can be crippling.

“Third, it may be asking too much of Washington in its present state of polarization to give the green light to an ambitious infrastructure plan. According to the American Society of Civil Engineers, the U.S. needs to spend $2.2 trillion in the next decade simply to maintain the existing quality of infrastructure. Under the current budget, Washington will spend less than half that amount.”

--Mary Shapiro, chair of the Securities and Exchange Commission, is stepping down, to be replaced by Elisse Walter, one of the SEC’s five commissioners, though her term expires next year. Shapiro was worthless.

--Morgan Stanley strategist Adam Parker has been the most negative on the Street this year, with a yearend forecast of 1250 on the S&P 500, building his case on the deteriorating earnings picture for U.S. corporations. For next year, though, he sees a December 2013 figure of 1434, or essentially unchanged from today, noting “the acuteness” of issues such as the U.S. deficit and debt levels, the Euro crisis and slowing emerging markets growth. I’ll set my own target end of December but, like Parker, I missed it this year. Suffice it to say, however, I admire Parker for being a realist.

--SAC Capital faces civil fraud charges in the largest insider trading case in U.S. history as the feds tighten the noose around founder Steven Cohen. SAC was informed last week by the SEC that it was planning on bringing the charges – what is known as a Wells Notice. Cohen spoke with investors on a conference call and assured them he has been acting appropriately, even as the case of Mathew Martoma, a former SAC portfolio manager, proceeds. The government says SAC avoided losses of $194 million and made a profit of $83 million betting against the share prices of pharmaceutical companies Wyeth and Elan ahead of negative test results. Since 2009, three former SAC employees have pleaded guilty to insider trading while working at SAC.

--Shares in Yum! Brands Inc., owner of Taco Bell and KFC fast-food chains, tumbled 10% on Friday after the company said same-store sales in China will decline 4% in the fourth quarter compared with a gain of 21% a year earlier. China accounted for 44% of Yum’s revenues in 2011. Earlier in November, McDonald’s said same-store sales fell in China in October.

Yum plans on opening 700 outlets in China next year, which is down from 800 in 2012.

I still just want a KFC in my neighborhood and will remain grumpy until I get one.

--The other day I was checking out laptops at my Staples store and the only ones on display had Windows 8 rather than the Windows 7 I’m looking for. Now I know I can get one with Windows 7, but I could not have been more turned off by the Windows 8 interface, which in reading a piece from Australia the other day described said interface as “a monster that terrorizes poor office workers and strangles their productivity.”

No wonder early sales of Windows 8, it would seem, suck; certainly versus expectations. In fact a report by NPD Group said sales of Microsoft-powered personal computers in the four weeks since Windows 8 was released fell 21%. The Sydney Morning Herald’s Asher Moses summed up my feelings and apparently those of countless others.

“While the ‘live tile’ interface of Windows has been a solid innovation for mobile devices, making it the default starting-screen for desktop and laptop users has been confusing for those who liked their old icons, windows and start menu just the way they were.”

Correctomundo! I hate change.

*Speaking of change…I was surprised by a slew of e-mails this week asking for me to adapt new apps for Android systems, seeing as how I have the StocksandNews iPad app.

The iPad app was a natural for me to explore, though I made a stupid mistake in keeping the “free” window open far too long. 

So I’ve heard you in the case of mobile/Android…it’s a matter of funding. Maybe first half of next year.

And while I’m on the issue of change…I continue to look at my video launch as only being in the test phase. It’s been just five weeks, after all…19 videos. I have not publicized it in any way because it’s not exactly where I envision it being yet, so I’ll let the masses know maybe in January or February.

I’m also going to take a few days off here and there, but come January, I’m glued to the chair for the first four months of 2013. I wouldn’t want to do press releases and such and then have someone look for a fresh video and it not be there because I’ve taken the day off. [Regardless, it’s only going to be Monday thru Thursday for the foreseeable future.]

--Former NBC Universal CEO Jeff Zucker has signed on as the new boss at CNN’s global news operations.

--Hollywood had its best five-day Thanksgiving holiday stretch ever, $290 million owing to the “Twilight Saga” finale, “Skyfall” and “Lincoln.” So movie sales are slated to exceed $11 billion for the first time, exceeding 2009’s record $10.6 billion. As of last Sunday, Skyfall’s global revenues were already $790 million.

Foreign Affairs (cont’d)

Syria: One other item…the Los Angeles Times had a piece on the destruction here since the uprising began in March 2011. An estimated 3.5 million homes, schools, mosques, churches and hospitals have been damaged or destroyed. More than half a million are a complete loss.

Afghanistan: Once again, as was the case in Iraq, the United States is beginning to negotiate a status of forces agreement with Afghanistan to establish a force level for after the combat mission formally concludes at the end of 2014. The thinking is 10,000 or so troops will stay to continue to train Afghan troops and go after terrorists.

But, as was the case in Iraq, President Karzai has to agree to any lasting presence and he is demanding that American forces come under the jurisdiction of Afghan courts; which was a deal breaker in Iraq and consequently we have no residual force there (and this week was another example of how unstable Iraq remains because of this).

China: Philippine Foreign Secretary Albert del Rosario told the South China Morning Post that he was told by China it intends to keep ships permanently stationed at the disputed Scarborough Shoal in the South China Sea, with del Rosario describing Beijing’s moves as “dictatorial” and warning its new leadership might struggle to ignore demands from the public for more assertiveness. [The long-held opinion of your editor.]

“He said he feared a permanent presence would make it ‘impossible’ to return to earlier diplomatic efforts to prevent the dispute harming broader Sino-Philippine ties….

“ ‘The longer the ships remain, the more impossible the situation becomes.’” [SCMP]

Yup, it’s a lock the South China/East China Seas will be on my radar for 2013.

North Korea: The International Atomic Energy Agency said on Thursday that North Korea had pressed ahead in its pursuit of two “deeply troubling” nuclear projects.

“The D.P.R.K. has continued construction of the light-water reactor and largely completed work on the exterior of the main buildings.” [This could be tapped to generate plutonium for its nuclear weapons.]

And Director General Yukiya Amano said the “configuration and operational status” of a separate uranium facility at Yongbyon “cannot be established,” despite continued monitoring of the site from space. Some suspect the reactor is a cover to justify the stockpiling of refined uranium.

Meanwhile, the United States is readying its defense systems to potentially counter an anticipated North Korean ballistic missile launch in mid-December. Pyongyang last attempted to test a long-range missile seven months ago, though this was unsuccessful.

Russia: President Vladimir Putin is hitting the road again next week, traveling to Turkey, after being house bound since Oct. 5. Clearly there was something wrong with his health, probably a back injury and/or surgery.

Whatever it was, Putin canceled his annual TV call-in show until summer, get this, “citing climatic conditions,” as the Moscow Times reported. The annual presidential State of the Nation Address is also overdue.

Hey, still four weeks for me to be proven right on one of my predictions for 2012…that Putin wouldn’t last the year, typed the editor with a mischievous grin on his face.

Hungary: Yes, perhaps I’ve written too much on the ‘rise’ of the far-right across Europe than was merited, but in Hungary, the far-right Jobbik party is the third-largest in parliament and this week, Jobbik’s leader Marton Gyongyosi said the government should draw up a list of Jews living in Hungary who pose a “national security threat” to the country.

Gyongyosi said this in parliament on Monday, addressing the 8-day war between Israel and Hamas. “I think such a conflict makes it timely to tally up people of Jewish ancestry who live here, especially in the Hungarian Parliament and the Hungarian government, who, indeed, pose a national security risk to Hungary.”

Oh brother. Mr. Gyongyosi has the brain of a toad.

The Hungarian government denounced his statements, but took no action.

Gyongyosi later said on the party website: “I apologize to my Jewish compatriots for my declarations that could be misunderstood.”

Mexico: As reported by the Washington Post’s William Booth: “Mexico’s attorney general has compiled a list showing that more than 25,000 adults and children have gone missing in Mexico in the past six years, according to unpublished government documents….

“Families have been left wondering whether their loved ones are alive or among the more than 100,000 victims of homicides recorded during the presidency of Felipe Calderon, who leaves office Saturday.”

The names often have “chilling details” next to them. Such as…

“His wife went to buy medicine and disappeared.”

“The son was addicted to drugs.”

“Her daughter was forced into a car.”

“The father was arrested by men wearing uniforms and never seen again.”

Random Musings

--Mary Kate Cary / U.S. News Weekly

“Here’s CNN’s Wolf Blitzer asking House Republican Whip Kevin McCarthy why he won’t agree to raising taxes on those making over $250,000 a year: ‘Those families and those small businesses did quite well during the years of the Clinton administration when the rate was 39.6. Why not go back to that?’ What Blitzer failed to mention was that when President Clinton’s top tax rate was 39 percent, government spending was only 18.2 percent of GDP. (Under President George W. Bush spending rose to 20.8 percent; now, under President Obama, spending stands at 24.3 percent of our economy.) Liberals want to return to 1990s tax rates but not 1990s spending levels. Clinton-era tax rates with Obama-era spending won’t bring us back to a balanced budget. Republicans should answer liberals longing for a return to Clinton’s tax policies with a challenge to meet his spending caps as well. Even Clinton might actually agree with conservatives on that.”

--The lunch President Obama had with Mitt Romney was stupid, but as Peggy Noonan wrote in the Wall Street Journal, “brilliant” on the part of Obama. “It makes Obama look big, gracious. It implies the weakened, battered former GOP nominee is the leader of the Republican Party – and if the other party has to have a leader, the weakened, battered one is the one you want.

“Mr. Romney is not the leader of the party; he left no footprints in the sand….

“To the extent the GOP has an elected face, it is that of Speaker John Boehner. And he is precisely the man with whom Mr. Obama should be having friendly lunches….

“At a news conference Thursday, Mr. Boehner looked frustrated. In fact, he looked exactly the way he looked at the end of the debt ceiling crisis in the summer of 2011 – like someone who wanted a deal, was willing to gamble to get it, and failed….

“The election is over, a new era begins – and it looks just like the old one. A crisis is declared. Confusion, frustration, and a more embittered process follow. This is…the Obama Way. Nothing has changed, even after a yearlong campaign that must, at times, have looked to him like a near-death experience. He still doesn’t want to forestall jittery, gloom-laden headlines and make an early deal with the other guy. He wants to beat the other guy.

“You watch and wonder: Why does it always have to be cliffs with this president? Why is it always a high-stakes battle? Why doesn’t he shrewdly re-enact Ronald Reagan, meeting, arguing and negotiating in good faith with Speaker Tip O’Neill, who respected very little of what the president stood for and yet, at the end of the day and with the country in mind, could shake hands and get it done? Why is there never a sense with Mr. Obama that he understands the other guys’ real position?....

“In an interview last year, shortly after the debt ceiling debate, Mr. Boehner spoke of how much he’d wanted a deal. He wanted entitlement reforms, cuts in spending, was happy to increase revenues through tax reform. He thought our fiscal realities the great issue of his speakership, said he meant it when he told staffers if it resulted in the end of his speakership then so be it. He’d have walked out of Congress knowing ‘I did the right thing.’

“That’s who Obama should be negotiating with – in good faith, and with his eye not on ideology but on the country.

“Instead, it’s going to be a long four weeks. Scratch that, it’s going to be a long four years.”

--Susan Rice went to mend fences with Republican senators, including her chief detractors John McCain, Lindsey Graham and Kelly Ayotte, and instead the three left a meeting with Rice angrier than ever about her defiance of her behavior in those first days after the killing of four Americans in Benghazi on September 11.

Sen. Lindsey Graham (S.C.) said, “Bottom line, I’m more disturbed now than I was before.” Ayotte (N.H.) said her meeting with Rice left her “more troubled, not less.” McCain (Ariz.) was “significantly troubled.”

Should President Obama proceed to nominate Rice to succeed Hillary Clinton as Secretary of State, the confirmation hearing now seems destined to be explosive.

I’ve followed Susan Rice’s career. I’ve written of her incompetence. Take her down.

Stephen F. Hayes / The Weekly Standard

“At his first press conference after being elected to a second term, President Barack Obama did everything he could to avoid directly answering the difficult questions on the growing scandal about his administration’s handling of the terrorist attacks in Benghazi. But in so doing, the president inadvertently told us quite a bit. 

“At one point he said, ‘And we’re after an election now. I think it is important for us to find out exactly what happened in Benghazi, and I’m happy to cooperate in any ways that Congress wants.’ It was, of course, just as important to find out what happened in Benghazi before the election, but we should be grateful to the president for giving us this inadvertent glimpse into the role politics played in his thinking about Benghazi before he was reelected.

“The president, perhaps realizing he had made a revealing slip of the tongue, went on to insist that he’d been providing information all along. But in response to a question about criticism of U.S. ambassador to the United Nations Susan Rice from Senators John McCain and Lindsey Graham, the president slipped again. ‘For them to go after the U.N. ambassador, who had nothing to do with Benghazi, and was simply making a presentation based on intelligence that she had received, and to besmirch her reputation, is outrageous.’

“If Susan Rice ‘had nothing to do with Benghazi,’ why then was she sent out to represent the administration in multiple television interviews five days after the attacks?”

Anne Bayefsky and Michael B. Mukasey / Wall Street Journal

“According to Mr. Obama (and to her), (Rice) simply repeated talking points provided by an amorphous and anonymous ‘intelligence community.’

“But Ms. Rice did know at least a couple of things. She knew that she had nothing to do with Benghazi. She knew that after the attack the president insisted that U.S. leaders not ‘shoot first and aim later’ but rather ‘make sure that the statements that you make are backed up by the facts.’ She knew that the video story line was questionable, as Sen. Dianne Feinstein (chairman of the Senate Select Committee on Intelligence) and administration officials had already suggested that the attack was al-Qaeda-related. And she knew that the president had a political interest in asserting that al-Qaeda wasn’t successfully attacking senior American officials but was instead ‘on the run,’ as he maintained on the campaign trail….

“With respect to the ghastly scenario in Syria, Ms. Rice’s efforts in the Security Council have been stunningly meager. The Russians (with whom America supposedly ‘reset’ its relationship) and the Chinese have her thoroughly stymied.

“Other examples, of both her inexcusable absences from the U.N. and her inconsequential presence, could be adduced. And though the president, not the U.N. ambassador, makes foreign policy, one is entitled to ask how a Secretary Rice would view the acts and omissions of Ambassador Rice.”

Maureen Dowd / New York Times

“(Republican) Senator Susan Collins of Maine, the soft-spoken ranking member on the homeland security committee, hasn’t been part of this shrill debate. Though they had met only once or twice, Collins agreed to introduce Rice to the Foreign Relations Committee in 2009 when Rice was nominated as the U.S. ambassador to the U.N. Rice’s grandparents immigrated from Jamaica to Portland, Maine.

“ ‘I don’t bear any animus to her at all,’ the senator said. ‘In fact, to the contrary.’

“But she said she is ‘troubled’ by Rice’s role. ‘If I wanted to be secretary of state,’ Collins observed, ‘I would not go on television and perform what was essentially a political role.’

“Collins drew up a list of questions to ask Rice at their one-on-one hour long meeting slated for Wednesday. She wants Rice to explain how she could promote a story ‘with such certitude’ about a spontaneous demonstration over the anti-Muslim video that was so at odds with the classified information to which the ambassador had access. (It was also at odds with common sense, given that there were Al Qaeda sympathizers among the rebel army members that overthrew Muammar Gaddafi with help from the U.S. – an intervention advocated by Rice – and Islamic extremist training camps in the Benghazi area.)

“The F.B.I. interviewed survivors of the attack in Germany and, according to some senators, had done most of the interviews of those on site by Sept. 15, the day before Rice went on TV, and established that there was no protest. Collins wants to learn if the F.B.I. had failed to communicate that, or if they had communicated it and Rice went ahead anyway?

“When Rice heard the president of the Libyan National Congress tell Bob Schieffer on ‘Face the Nation,’ right before her appearance, that 50 people had been arrested who were either foreign or affiliated with or sympathized with Al Qaeda, why did she push back with the video story? ‘Why wouldn’t she think what the Libyan president said mattered?’ Collins wondered.

“Why did Rice say on ABC News’ ‘This Week,’ that ‘two of the four Americans who were killed were there providing security’? Rice was referring to the two ex-Navy SEAL team members who were C.I.A. security officers working on a base about a mile away. ‘They weren’t there to protect Ambassador Stevens,’ Collins said. ‘That wasn’t their job.’

“Rice also said that ‘we had a substantial security presence with our personnel’ – which was clearly not the case. Collins wants to know Rice’s basis for saying on ABC that the attacks were ‘a direct result of a heinous and offensive video.’ And why did she say ‘a small number of people’ came to the consulate to protest, when that phrase is not in her talking points? Collins is curious why Rice is not angrier, if, as she insists, she was repeating what she was told. ‘I’d be furious at the White House and F.B.I. and intelligence community for destroying my credibility,’ the senator said.”

After her meeting, Collins, like the other Republican senators, said she was “troubled” and still has “many questions.”

Look, when you have Maureen Dowd clearly in the anti-Rice camp, need you say anything more?

--New Jersey Republican Gov. Chris Christie announced he is running for reelection and the early polls are astounding as he continues to reap the benefits of his early leadership during the Hurricane Sandy crisis. Christie leads presumptive Democratic nominee, Newark Mayor Cory Booker, 53% to 35% according to Quinnipiac University Polling Institute. Just last month it was only 46-42 Christie. [A Rutgers-Eagleton survey has Christie ahead of Booker 53-34, so early on there is consistency in the numbers.]

--According to a study in the journal Science, the polar ice sheets are melting at an accelerating rate, contributing to an almost half-inch rise in global sea levels since 1992, or about 20% of the total rise in that period. One reason is Northern Hemisphere ocean temps are warmer, plus air temperatures are much warmer than the past. 

However, Professor Andrew Shepherd of the University of Leeds, lead author of the study, said, “The signals suggest there is no immediate threat” from rising sea levels, “But we can at least warn people that there are instabilities that need to be investigated.”

This wasn’t exactly the way the story was presented on NBC News the other night (the lead, as a matter of fact, which was absurd). Totally one-sided.

That said, you’ve long known my opinion on climate change. The debate should have been relabeled one over “global pollution.” You throw a lot of garbage in the air (and in the waters), of course it’s not good. There isn’t a soul on the planet who can defend this. 

And remember…who was the first great environmental president? Richard Nixon.

--According to a Pew Research Center study, the U.S. birth rate plunged last year to a record low, with the decline highest among foreign-born women, 14% between 2007 and 2010.  The overall birth rate is at its lowest since 1920, just half the peak set in 1957. Immigrant women were hit hard by the recession, thus the decline, which has long-term implications for the U.S. economy, for starters.

--Motivational speaker Zig Ziglar died. He was 86. Back in 1978, the summer between my sophomore and junior years at Wake Forest, I sold books door-to-door for the Southwestern Book Co. and heard Ziglar speak as part of our training. I then ended up being the worst salesman in the history of the company who stuck it out a full summer, but I still admire the work of Mr. Ziglar and others like him, including Dale Carnegie. The more modern day versions, such as Tony Robbins, not so much, especially after some of the stories I’ve heard from those attending his sessions.

--Marvin Miller, the Major League Players Association union chief from 1966-82, died. He was 95. Miller ushered in the era of free agency and was the most transformative figure in his sport the last 40+ years.

Consider that in 1966, the minimum salary was $6,000 in baseball. [40% earned below $12,000.] Today, the minimum is $480,000, with an average salary of $3 million.

Baseball revenues have soared from $50 million in 1967 to $7.5 billion today, and Marvin Miller deserves a ton of credit for this. He should also be in the Hall of Fame.

--Sign of the Apocalypse: Only 29% of high school students in New York City public schools are prepared to handle college-level school work. [Not that everyone should be going to college in the first place, mind you.]

--SpaceX founder Elon Musk estimates a ticket to Mars might cost $500,000, once SpaceX designs what he calls a “rapid and reusable” rocket that can land vertically. “That is the pivotal step to achieving a colony on Mars.”

Ooh ooh! Send me! [Mused the editor who’s increasingly tired of this planet. Of course it doesn’t help when you are a Mets, Jets and Wake Forest Demon Deacons’ fan.]

--Finally, no doubt, New York City Police Officer Larry DePrimo is the hero of the week for stopping to help a homeless man with no shoes on his feet on a frigid night. DePrimo went into a shoe store, bought the man some boots, and the whole episode was captured by an Arizona tourist in a photo that whipped around the world.

Editorial / New York Post

“New York cops get bashed every day – so this is an image of the force that is rarely seen, a side its critics would have you believe doesn’t exist.

“But the NYPD is not just a wall of blue.

“It’s a collection of 35,000 men and women like Larry DePrimo, who spend their days and nights working to protect and serve the city – and who, in quiet moments like this, give a great deal of comfort, too.

“New York’s lucky to have the NYPD. 

“Just as the NYPD is blessed to have DePrimo.”

Amen.
---

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

God bless America.
---

Gold closed at $1716
Oil, $88.90

Returns for the week 11/26-11/30

Dow Jones +0.1% [13025]
S&P 500 +0.5% [1416]
S&P MidCap +1.0%
Russell 2000 +1.8%
Nasdaq +1.5% [3010]

Returns for the period 1/1/12-11/30/12

Dow Jones +6.6%
S&P 500 +12.6%
S&P MidCap +13.8%
Russell 2000 +10.9%
Nasdaq +15.5%

Bulls 39.3
Bears 27.7 [Source: Investors Intelligence]

Have a great week. I appreciate your support.

Brian Trumbore



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Week in Review

12/01/2012

For the week 11/26-11/30

[Posted 11:30 PM ET, Friday]

The Middle East

I stated in my “Nightly Review” video for Nov. 29 that Thursday will go down as one of the key dates in the decade, even if we don’t know it yet. The wave of car-bombings in Iraq continued, bringing the two-day death toll to over 80…just a reminder to those who thought al-Qaeda in Iraq was a spent force. The situation in Syria worsened to the point where the main airport was shut down due to fierce fighting nearby and the internet and phone service across the nation turned off, thus sowing terror of a different kind. The constituent assembly in Egypt rushed through a new constitution. And the UN General Assembly voted to upgrade the status of the Palestinians from that of a non-member observer “entity” to a non-member observer “state,” the same status granted the Vatican, only last I saw the Vatican wasn’t firing rockets at its neighbor. These last two items, occurring within hours of each other, may have titanic consequences.

The UN General Assembly, against the wishes of Israel and the United States, voted 138 to nine with 41 abstentions following a speech by Palestinian President Mahmoud Abbas in which he called on the UN to issue the Palestinians their “birth certificate” as a nation. 

[The nine ‘no’ votes were U.S., Israel, Canada, Czech Republic, Palau, Panama, Nauru, Micronesia and Marshall Islands.]

Abbas cited Israel’s “institutionalized colonial occupation” of Palestinian land and said the Palestinian people had been subjected to an “unprecedented intensification of military assaults” and “ethnic cleansing” in the last few months.

“The moment has arrived for the world to say clearly, enough of aggression, occupation and settlements.”

Israeli Prime Minister Benjamin Netanyahu labeled Abbas’ remarks “hostile and poisonous.”

Speaking before the vote, Netanyahu said, “The only way to achieve peace is through agreements that are reached by the parties directly…and not through UN resolutions that completely ignore Israel’s vital security and national interests.”

Netanyahu added: “And because this resolution is so one-sided, it doesn’t advance peace, it pushes it backwards.”

Ron Prosor, Israeli ambassador to the UN, said: “It will make a negotiated settlement less likely as Palestinians continue to harden their positions…it will raise expectations that cannot be met. There is only one route to Palestinian statehood – direct negotiation. There are no short cuts, no quick fixes, no instant solutions.”

Prosur added: “No decision by the UN can break the 4000-year-old bond between the people of Israel and the land of Israel.”

U.S. ambassador to the UN, Susan Rice, said the “unfortunate and counterproductive” resolution “placed further obstacles on the path to peace….

“Today’s grand pronouncement will soon fade and the Palestinian people will get up tomorrow and find that little in their lives has changed….This resolution does not establish that Palestine is a state.”

The chief concern of both the U.S. and Israel, though, is President Abbas may now feel pressure from the more radical Palestinian elements to have Palestine join the International Criminal Court and other treaty bodies.

Ahead of the vote, a bipartisan group of senators warned the Palestinians that millions in U.S. financial aid was at risk if they use their upgraded status against Israel.

“The biggest fear I have is that if the Palestinians achieve this status it won’t be very long before the Palestinians use the United Nations as a club against Israel,” said Lindsey Graham (R-S.C.)

At the same time, following the vote, Secretary of State Hillary Clinton said: “We have been clear that only through direct negotiations between the parties can the Palestinians and Israelis achieve the peace they both deserve: two states for two people with a sovereign, viable, independent Palestine living side by side in peace and security with a Jewish and democratic Israel.”

Editorial / New York Post

“Let’s be clear.

“One can always hope for the eventual emergence of a Palestinian state dedicated to a peaceful coexistence with Israel.

“But that will never happen while Palestinians and their murderous enablers in Iran and in the Islamist movements worldwide surrender their fantasies of extinguishing the Jewish state.

“Don’t hold your breath.

:”Indeed, yesterday’s UN vote only made that less likely. Because what Turtle Bay did, coming hard on the heels of a round of Hamas-inspired violence in Gaza, was to reward the concept of statehood-by-terror; it sent a stark message that peace and negotiation are for suckers; that violence, terror and bullying will win the day.

“How ironic. And sad.

“True, it is Palestinian Authority President Mahmoud Abbas who has pushed the bid for unilateral UN recognition. In recent years, Abbas’ faction – based in the West Bank – has been somewhat less radical and violent. And it’s nominally distinct from the more openly terroristic Hamas in Gaza.

“But making distinctions of any sort between Palestinian factions is a mug’s game – to say nothing of making actual policy decisions based on such differences.

“The Palestinians have to sort out their own rivalries – which will be a long and bloody process – before they are fit negotiating partners for anyone.

“For the UN, none of that matters. Fact is it long ago lost its way – along with its credibility, its legitimacy and its honor.

“Yesterday’s vote only reinforced that.”

On Friday, Israel authorized the construction of 3,000 more housing units in occupied East Jerusalem and the West Bank, as well as speeding up the processing of 1,000 planning permissions; two items Israel had been holding off on as a carrot to Abbas if he didn’t proceed with the UN move. The Palestinian Authority had long said it would not return to talks without a freeze in settlement building. Israel has said it will negotiate but only with no preconditions.

Back to square one…which is nowhere.

In Egypt, the Islamist-led constituent assembly, operating without 15-20 of its 100 members (liberals, minorities, Christians) who boycotted the event, chose to rush through a new constitution in an attempt to pre-empt a move by the supreme judiciary that could dissolve the panel. With President Morsi approving the constitution, it must now be put to a nationwide referendum in December.

The assembly took 16 hours to vote on 234 articles and a member of the Muslim Brotherhood said, “This constitution represents the diversity of the Egyptian people. All Egyptians, male and female, will find themselves in this constitution.”

But in rushing it through, all the assembly did was tinker with the existing document rather than offer real reforms and, of course, now you have Islamists calling the shots and interpreting the language as they see fit.

Reform leader and Nobel Peace laureate Mohamed ElBaradei said: “I am saddened to see this come out while Egypt is so divided.” ElBaradei, though, didn’t think the document would last long. “It…will go into the garbage bin of history.”

Human Rights Watch criticized the hurried manner in which the assembly pushed the draft through, saying it was hardly the way to guarantee fundamental rights or the rule of law.

An article specifically establishing women’s equality, for example, was dropped because of a dispute over its language.

The new constitution maintains the old language that the “principles of Islamic law” will be the rule of the land, but there was an addition that could be interpreted to give Islamists a tool for stricter enforcement of rulings of Sharia than was the case before.

The new draft also includes bans on “insulting or defaming all prophets and messengers” or even “insulting humans” – rather broad language that could be used to crack down on various segments, I think you’d agree.

As for the Egyptian military, it remains insulated from parliamentary oversight.

Bret Stephens / Wall Street Journal

“It may take some time for the West fully to appreciate the ugliness of Egypt’s new regime. For now, it is enough to appreciate its potency and intelligence. Mr. Obama was right to praise Mr. Morsi’s ‘engineer’s precision.’ He would be a fool to imagine that such precision can be divorced from an ideology for which Mr. Morsi once went to prison, and which now rests in his hands to impose.”

Regarding Syria, I can’t help but note the following passage from a New York Times piece by David E. Sanger and Eric Schmitt.

“In the case of Syria, a far more complex conflict than Libya’s, some (U.S.) officials continue to worry that the risks of intervention – both in American lives and in setting off a broader conflict, potentially involving Turkey – are too great to justify action. Others argue that more aggressive steps are justified in Syria by the loss in life there, the risks that its chemical weapons could get loose, and the opportunity to deal a blow to Iran’s only ally in the region. The debate now coursing through the White House, the Pentagon, the State Department and the C.I.A. resembles a similar one among America’s main allies.

“ ‘Look, let’s be frank, what we’ve done over the last 18 months [Ed. 20] hasn’t been enough,’ Britain’s prime minister, David Cameron, said after visiting a Syrian refugee camp in Jordan. ‘The slaughter continues, the bloodshed is appalling, the bad effects it’s having on the region, the radicalization, but also the humanitarian crisis that is engulfing Syria. So let’s work together on really pushing what more we can do.’ Mr. Cameron has discussed those options directly with Mr. Obama, White House officials say.”

What upsets me about the above two paragraphs, as I expressed in one of my “Nightly Review” videos this week, is that this discussion is absurd. IT’S TOO FREAKIN’ LATE!!!

Some of us were arguing 18 months ago that we needed to take action. I was calling for a move to establish safe zones for refugees, working with our ally, Turkey, who was crying for our help.

Instead, what have you seen? A refugee crisis of humongous proportions that is getting worse by the day, threatening to destabilize governments such as Lebanon and Jordan, and a very pissed off one-time friend, Turkish President Erdogan, who feels slighted and ignored and is now lashing out anew against Israel while he fights for influence in the region with Egyptian President Morsi.

But most importantly, the inaction on the part of the United States unleashed the whirlwind and terrorists have been flooding into Syria. This week I thought one of the most telling incidents was a twin suicide car bombing in a suburb of Damascus that killed at least 34 civilians. There were no Syrian troops that could have been construed as a target. Just a classic al-Qaeda-type attack. Kill as many people as possible.

This isn’t the original opposition rebels of the first days of the Arab Spring, or the Syrian conflict. It has metastasized into Terror Central. The one thing the Assad regime is correct on, as it stated the other day, is it’s fighting al-Qaeda as much as the rebels.

And now, as the rebels get hold of shoulder-fired missiles, which did indeed take down a Syrian fighter jet and helicopter this week, guess who else no doubt is grabbing hold of them? It seems to me it’s just a matter of weeks before a commercial airliner in the region is targeted.

But back to the Sanger/Schmitt piece, the naivety of some when it comes to Syria is astounding.

It’s over. It doesn’t matter if Assad is taken out tomorrow…it’s over. The United States has lost any chance it had to influence the government (or five of ‘em across the country) that follows. And look at the over 750,000 refugees that have fled to the likes of Turkey, Jordan, Lebanon and Iraq. Do you think they are waving American flags?

The one thing the UN does well is supply emergency aid and the UN has been screaming for help and none is forthcoming, despite what the White House and our State Department say. There are no safe havens. There is no secure way to get aid to the 2.5 million inside Syria who need help with winter bearing down on them.

It’s a tragedy of immense proportions. No one cares how this will change the region, forever.

It didn’t have to be this way. The United States and President Obama blew it. What follows is on him…and eventually all of us in one form or another.

Condoleezza Rice / Washington Post

“The civil war in Syria may well be the last act in the story of the disintegration of the Middle East as we know it. The opportunity to hold the region together and to rebuild it on a firmer foundation of tolerance, freedom and, eventually, democratic stability is slipping from our grasp….

“The conflict in Syria is pushing Iraq and others to the breaking point. At the same time, U.S. disengagement has tempted Iraqi politicians to move toward sectarian allies for survival. If Prime Minister Nouri al-Maliki cannot count on the Americans, he will take no risks with Tehran.

“The great mistake of the past year has been to define the conflict with Bashar al-Assad’s regime as a humanitarian one. The regime in Damascus has been brutal, and many innocent people have been slaughtered. But this was no replay of Libya. Much more is at stake.

“As Syria crumbles, Sunnis, Shiites and Kurds are being drawn into a regional web of sectarian allegiances. Karl Marx once called on workers of the world to unite across national boundaries. He told them that they had more in common with each other than with the ruling classes that oppressed them in the name of nationalism….

“Today’s Karl Marx is Iran. It envisions the spread of its influence among Shiites, uniting them under the theocratic flag of Tehran – destroying the integrity of Bahrain, Saudi Arabia, Iraq and Lebanon. Iran uses terrorist groups, Hizbullah and the Shiite militias in Iraq to do its bidding. Syria is the linchpin, the bridge into the Arab Middle East. Tehran no longer hides the fact that its security forces are working in Syria to prop up Assad….

“In response, Saudi Arabia, Qatar and other neighboring powers arm and support Sunni factions. The Turks are being drawn into the conflict, desperately fearful that the Kurds will break away in Syria and push their brethren in Turkey to do the same….Ankara’s cries to NATO for help last month should have gotten our attention….

“Certainly there are risks. After more than a year of brutal conflict, the most extreme elements of the opposition – including al-Qaeda – have been empowered. Civil wars tend to strengthen the worst forces. The overthrow of Assad could indeed bring these dangerous groups to power.

“But the breakdown of the Middle East state system is a graver risk. Iran will win, our allies will lose, and for decades the region’s misery and violence will make today’s chaos look tame.

“War is not receding in the Middle East. It is building to a crescendo. Our elections are over. Now, America must act.”

Again, it’s too late, Condi.

Washington

Before we get to the fiscal cliff, the Organization for Economic Cooperation and Development slashed its forecast for growth in 34 of the wealthiest economies for 2013 to just 1.4% from a May forecast of 2.2%. The OECD now expects the eurozone economy to contract for a second successive year and is warning that the currency bloc “could be in danger” if there is a lack of sufficient progress by the region’s policy makers. Growth in the United States is forecast at 2% while Japan’s is expected to expand by 0.8%. Greece is projected to be the worst performer among the membership, with the OECD expecting its economy to shrink by 4.5%. The Spanish, Italian, Slovenian and Portuguese economies are also predicted to contract over the course of 2013.

So with this crummy background, and with the world needing a strong U.S. economy (and respectable growth in China) to have a shot at keeping the rest of the globe’s head above water, we have this fiscal cliff debate.

President Obama, as described below, is hardly in a compromise mode, refusing to yield on any item of his original plan that begins by calling for taxing the rich, while refusing to put forward any kind of remotely sincere effort to tackle entitlements.

In yet another campaign-style appearance in Pennsylvania on Friday, which is really sickening when you get right down to it…get in a freakin’ room with the opposition and deal!...the president said:

“In Washington, nothing’s easy so there’s going to be some prolonged negotiations. Where the clock is really ticking, right now, is on middle-class taxes.”

Around the same time, Friday afternoon, House Speaker John Boehner said negotiations are at a “stalemate” because the administration hasn’t made a serious proposal. “Let’s not kid ourselves. Right now, we’re almost nowhere.” 

Earlier, Majority Leader Harry Reid said: “Democrats are on the same page. The president has made his proposal; we need a proposal from them.”

Erskine Bowles of Simpson-Bowles fame said he is discouraged by the slow pace of the negotiations and the distance between the sides on both taxes and spending.

“I think the probability is we’re going over the cliff. I’m hopeful but, boy, I wouldn’t put me down as optimistic.”

Thursday, Boehner said there has been “no substantive progress between the White House and the House the last two weeks.” Democrats “have yet to get serious about spending cuts.”

But Boehner, in talking of a down payment on deficit reduction through revenue increases and spending cuts, followed by broader entitlement and tax reform next year, for the first time conceded the maximum we can hope for by yearend is a stop-gap, bridge deal to avoid the fiscal cliff and sequestration, and then a broader agreement next year.

And while I was never under the illusion there would be a grand bargain by yearend, market participants need to be prepared for the potential for a crash because there is no way…no way…the two sides come up with a creditable short-term deal in December with firm benchmarks and target dates for broader reform, both in taxes and entitlements, in the first half of next year. The financial markets will see right through it (after an initial burst of euphoria, of that I’m also sure).

Read the following and prepare to be depressed.

Former Congressmen Chris Cox and Bill Archer / Wall Street Journal

“A decade and a half ago, both of us served on President Clinton’s Bipartisan Commission on Entitlement and Tax Reform, the forerunner to President Obama’s recent National Commission on Fiscal Responsibility and Reform. In 1994 we predicted that, unless something was done to control runaway entitlement spending, Medicare and Social Security would eventually go bankrupt or confront severe benefit cuts.

“Eighteen years later, nothing has been done. Why? The usual reason is that entitlement reform is the third rail of American politics. That explanation presupposes voter demand for entitlements at any cost, even if it means bankrupting the nation.

“A better explanation is that the full extent of the problem has remained hidden from policy makers and the public because of less than transparent government financial statements. How else could responsible officials claim that Medicare and Social Security have the resources they need to fulfill their commitments for years to come?

“As Washington wrestles with the (fiscal cliff and 2013 budget), the far greater fiscal challenge of the U.S. government’s unfunded pension and health-care liabilities remains offstage. The truly important figures would appear on the federal balance sheet – if the government prepared an accurate one.

“But it hasn’t….

“As a result, fiscal policy discussions generally focus on current-year budget deficits, the accumulated national debt, and the relationships between these two items and gross domestic product. We most often hear about the alarming $15.96 trillion national debt [Ed. now $16.3 T] (more than 100% of GDP), and the 2012 budget deficit of $1.1 trillion (6.97% of GDP). As dangerous as those numbers are, they do not begin to tell the story of the federal government’s true liabilities.

“The actual liabilities of the federal government – including Social Security, Medicare, and federal employees’ future retirement benefits – already exceed $86.8 trillion, or 550% of GDP. For the year ending Dec. 31, 2011, the annual accrued expense of Medicare and Social Security was $7 trillion. Nothing like that figure is used in calculating the deficit. In reality, the reported budget deficit is less than one-fifth of the more accurate figure.

“Why haven’t Americans heard about the titanic $86.8 trillion liability from these programs? One reason: The actual figures do not appear in black and white on any balance sheet. But it is possible to discover them. Included in the annual Medicare Trustees’ report are separate actuarial estimates of the unfunded liability for Medicare Part A (the hospital portion), Part B (medical insurance) and Part D (prescription drug coverage).

“As of the most recent Trustees’ report in April, the net present value of the unfunded liability of Medicare was $42.8 trillion. The comparable balance sheet liability for Social Security is $20.5 trillion.

“Were American policy makers to have the benefit of transparent financial statements prepared the way public companies must report their pension liabilities, they would see clearly the magnitude of the future borrowing that these liabilities imply. Borrowing on this scale could eclipse the capacity of global capital markets – and bankrupt not only the programs themselves but the entire federal government.”

It gets worse…but I’ll leave part II for next time.

Editorial / Wall Street Journal

“(The) President is insisting on about $1 trillion in new tax revenues immediately by raising tax rates, plus another $60 billion in net new revenue as part of tax reform next year. He also wants $150 billion in new public works ‘stimulus’ spending, $50 billion of it next year, and another extension in unemployment benefits (one year cost: $30 billion).

“In return, Mr. Obama will only promise some $400 billion in entitlement savings next year, details to come later. Keep in mind this negotiation is supposed to reduce the deficit. We’re told (Treasury Secretary Timothy Geithner, serving as Obama’s emissary on Capitol Hill), demanded a permanent increase in the debt limit, meaning that no future action would be required to raise it again….As one senior Republican told us, ‘This was almost insulting.’”

Editorial / Washington Post

“(Democrats) insist that Social Security, Medicare, Medicaid and education – pretty much everything except the Pentagon – are untouchable. Senate Majority Whip Richard J. Durbin (Ill.), who had been one of the more reasonable Democratic leaders, said Tuesday that, while he favors reform of entitlement programs, it shouldn’t be part of the negotiations on the fiscal cliff. The Post’s Greg Sargent reported that union leaders and other liberals came away from a White House meeting encouraged that administration officials agree entitlements shouldn’t be part of the negotiations.

“ ‘They expect taxes to go up on the wealthy and to protect Medicare and Medicaid benefits,’ one attendee said. ‘They feel confident that they don’t have to compromise.’

“Don’t have to compromise?

“Elections do have consequences, and Mr. Obama ran on a clear platform of increasing taxes on the wealthy. But he was clear on something else, too: Deficit reduction must be ‘balanced,’ including spending cuts as well as tax increases. Since 60 percent of the federal budget goes to entitlement programs such as Medicare, Medicaid and Social Security, there’s no way to achieve balance without slowing the rate of increase of those programs….

“Mr. Obama has understood this since at least 2009, when he told The Post’s editorial board that he would tackle entitlement reform.

“ ‘What we have done is kicked this can down the road. We are now at the end of the road and are not in a position to kick it any further,’ he said then. ‘We have to signal seriousness in this by making sure some of the hard decisions are made under my watch, not someone else’s.’

“Four years later, has the moment arrived? Since his reelection, Mr. Obama has fueled a campaign-style effort to pressure Republicans to give ground on taxes. That’s fine, but it won’t be enough. At some point, he has to prepare the American people – and his own supporters most of all – for the ‘hard decisions’ required to put the country on a sound financial footing. That means spending cuts, it means entitlement reform, it means compromise, it means a balanced solution that will please neither House Speaker John A. Boehner nor Senate Majority Leader Harry Reid. Only one person is in a position to make it happen.”

Europe

Eurozone finance ministers and the IMF finally agreed to unblock 44 billion euro in loans from Greek Bailout II, giving the Greeks 34.4 billion sometime around Dec. 13, and another 9.3 billion in installments early next year as long as Greece is complying with various benchmarks.

The aim is to reduce Greek debt to 124% by 2020 (thought the number is really 126%) and in essence cuts Greek debt by 40 billion. Current loans to Greece had their maturities extended 15 years and interest was deferred for 10 years. What’s not to love, if you’re a Greek!

European Central Bank chief Mario Draghi said the moves would “strengthen confidence in Europe and Greece.” The deal also allows for bank support and the Greek government can pay wages and pensions in December.

But the IMF isn’t releasing their share of the aid until further details are ironed out and IMF Managing Director Christine Lagarde wants Greece’s debt reduced to 110% by 2022, which would force governments to provide more aid and/or debt relief in the future.

The thing is, it’s all bogus, as has been just about every “solution” over the past 2 ½ years with the euro debt crisis. Eurozone governments almost certainly will have to accept losses as part of a debt buyback which is key to the program and at some point the people in the donor countries will have had enough, as expressed through their political representatives.

It all begins to come to a head in just the next few days. One explanation, as reported by BBC News:

“On Wednesday, the Greek government announced that it would seek to carry out a buyback next week.

“How much of its debts Greece actually manages to cancel depends entirely on the price it can buy the debts back at.

“For example, Greece’s existing 10-year bond is currently traded in financial markets at a price of 35% of the amount owed. If Greece could buy the bond at this price, it would be able to cancel the other 65% of the money it owed under the bond.

“If however Greece is forced to pay a much higher price for its debts, then the amount it could cancel would be commensurately lower.

“In that case, the IMF may deem the government incapable of reducing its debts to a sustainable level, and therefore refuse to endorse the deal it reached with eurozone lenders, unless some other way could be found of reducing the Greek government’s debt burden.”

Obviously more next time on this topic as well.

But the real bottom line is that for this plan to work, Greece needs growth and you saw above how the OECD, for one, is forecasting further contraction in 2013 of 4.5%.  The current economic projections for the rescue package are way too rosy. Greece will be unable to pay its debt and capital write-offs are coming.

You also have a situation where the opposition in Greece is once again gaining strength in the polls, with left-wing, anti-austerity Syriza beating the ruling conservatives in the latest survey by 4 points. And the debt agreement hardly helps the average Greek, at least in the short term as it contains more austerity.

In Spain, they held the election in Catalonia last Sunday and the ruling center-right, secessionist CiU party of provincial president Artur Mas suffered a big defeat as its share of the 135-seat parliament went from 62 to 50, though other parties backing secession gained so the pro-independence movement has 87 of the 135. Only one problem. None of the other three parties with an independence agenda have anything other than that in common with the CiU and coalition talks failed the day after.

So people voted for independence but there is not likely to be a referendum on same for some time, a referendum that Madrid feels is illegal anyway.

And Catalonia still has a huge debt to deal with, up to 48 billion euro, it’s shut out of the capital markets, it’s had to get a bailout of 5 billion euro this year already from the central government, and so the irony of it all is that Catalonia wants its independence, but it’s dependent on Madrid.

Spain, overall, did receive approval from the European Commission on a bank recapitalization program of 40 billion euro, but everyone and their mother knows this is not nearly enough.

One of the institutions being bailed out, again, is Bankia, which immediately announced it would lay off 6,000 employees and shut 39% of its branches; hardly the kind of measure that helps the unemployment rate there. Those banks being recapitalized are no longer going to be able to lend to property developers.

No doubt, Spain will need a government bailout next year. Book it. But it was kind of funny how on Friday, the eurozone’s bailout fund, the European Stability Mechanism (ESM), had its triple-A rating cut by Moody’s.

Street Bytes

--Stocks rallied for a second consecutive week, though the Dow Jones gain was just 16 points or 0.1% to 13025. The S&P 500 added 0.5% and Nasdaq rose 1.5% to 3010. Nasdaq’s gain for the year is back to 15.5%. Action was dominated by talk on the fiscal cliff and will undoubtedly continue to be so.

--U.S. Treasury Yields

6-mo. 0.13% 2-yr. 0.25% 10-yr. 1.61% 30-yr. 2.81%

The Journal ran a story confirming the Federal Reserve was going to continue buying Treasuries to keep yields low, not that this is any great surprise. The Fed’s Open Market Committee next meets Dec. 11 and 12. I can’t wait. I love receiving no interest on my accounts.

--In economic news, third quarter GDP was revised up to 2.7% from the initial flash estimate of 2.0%, though this was as expected and some of the components are squishy. All believe Q4 GDP will do well to hit 2.0% and will be more in the 1.7% range.

Durable goods orders for October were better than expected, up 1.7% on non-defense, non-aircraft; the best performance since May. But the October figures on personal income, unchanged, and personal consumption, down 0.2%, were worse than expected and influenced by Hurricane Sandy at month’s end.

--On the housing front, new-home sales for October were disappointing, far less than expected, but the S&P/Case-Shiller home data for September was solid, with the 20-city index up 3% over September 2011 and 3.6% for the third quarter.

--Among the items up for debate in fiscal cliff discussions is the mortgage-interest deduction, which costs the government about $100 billion a year. Most would agree something has to be done, such as perhaps eliminating it on second homes, but as economist Mark Zandi told the Washington Post, “It’s a very visceral thing for people. People account for it when they think about how much house they could afford to buy. You take that away, and house prices are going to weaken. They are going to decline.”

If it’s phased in over a period of years, though, I’m guessing the impact is minimal. Face facts; it’s part of the solution in longer-term tax reform.

--Many of the nation’s top retailers reported disappointing November same-store sales, even though they talked of a solid Thanksgiving. Kohl’s, Macy’s, Target, Tiffany’s…all were hit by either a “Sandy” effect or generally punk economic conditions. In the case of Tiffany’s, which cut its full-year earnings estimate, it continued to cite global economic weakness, with same-store sales in the Americas flat and Asia-Pacific registering a 3% decline. 

--I always get a kick out of the breathless talk during Black Friday and Cyber Monday. The initial reports are never to be believed and it’s a long holiday shopping season, anyway. I would tend to agree with the original National Retail Federation’s estimate that holiday sales overall will rise 4.1% this year. The wealthy will do their fair share; the not so wealthy will spend no more than last year.

But regarding Cyber Monday, one IBM report said sales rose 30% over a year ago, but then said the average order was down 6.6%. Then ComScore said sales rose 17%, to $1.47 billion, which was less than their original estimate of up 20%. That sounds more like it.

--China’s government reported this morning (Sat.) that the purchasing managers index for November came in at 50.6 after the 50.2 reading for October, a hopeful sign.

--India’s economy slowed further in the third quarter, just 5.3% year on year. Manufacturing grew only 0.8% year on year. Yikes. This is India. Not Europe. The growth came from finance and business services, 9.4%, while construction rose 6.7%.

--Brazil’s economy grew just 0.6% in the third quarter vs. the previous quarter, half the rate expected. Businesses cut their investment by a further 2%, which offset a big round of stimulus spending unleashed by the government. 

Growth for 2012 now looks likely to come in around 1%, vs. 2.7% last year and 7.5% in 2010.

--Retail sales in Japan fell in October by the most in 11 months, 1.2%, worse than expected, but the Japanese stock market has been surging on hopes the opposition wins the Dec. 16 flash election. Opposition leader Shinzo Abe has called for unlimited monetary easing and public spending to create inflation. Abe’s Liberal Democratic Party is way ahead in the polls (though in this fractured country with a myriad of parties, 23% is a landslide). So on Friday, Prime Minister Noda announced a second round of stimulus in little more than a month in an attempt to appear relevant.

Consumer prices in Japan for October were unchanged, speaking of inflation, while the jobless rate stayed at 4.2%.

There was a bright spot in the data at week’s end as well; industrial production for October rose 1.8% from the previous month owing to production of parts for devices such as Apple’s iPhone.

But add it all up and Japan is still expected to fall back into recession when fourth quarter data is tallied.

--Speaking of iPhones, Apple’s latest finally gained approval in China and should make its debut there in December.

--I loved this one: “Anglo Irish Bank is taking legal action against its former auditor Ernst & Young for failing to spot the lender’s massive exposure to the Irish property bubble.” [BBC News]

Isn’t that what company management is for?

--Canada’s third quarter GDP slowed to a 0.6% annualized pace with falling business investment and declining exports. Like virtually everywhere else, it’s about slowing Chinese growth and a recession in Europe.

--The Philippine economy unexpectedly grew 7.1% in the third quarter vs. a year ago when a figure more like 5.5% was forecasted. This is good! As a Hong-Kong based economist with HSBC told Bloomberg:

“The Philippines is going to rock. The central bank and the government have made timely policy adjustments that are boosting trend growth. With momentum so strong, we think BSP (Bangko Sentral ng Pilipinas) will hold rates and mark the end of the easing cycle.”

Exports here rose 22.8% in September from a year earlier, which also signaled a recovery in the U.S. and China.

--I’m ignoring the very complex case of hedge fund titan Paul Singer and his Elliott Management vs. Argentina because a court ruling ordering Argentina to put $1.3 billion in escrow to pay Elliott and other bondholders who refused to participate in two previous debt restructurings is seemingly being negotiated between the parties. Previously, Argentina President Cristina Kirchner said her country wouldn’t pay out “one dollar” to holdouts from a 2002 default when 92% of Argentina’s bondholders chose to accept 35 cents on the dollar, while Singer and others refused to participate.

--A French appeals court cleared Continental Airlines of criminal blame for the July 2000 crash of a Concorde jet shortly after takeoff from Charles de Gaulle airport, killing all 109 people on board and four hotel workers. In 2010, a French court decided that the crash had been caused by a titanium strip that had fallen from a Continental airliner. Continental was convicted of involuntary manslaughter and fined, while a Continental mechanic was given a 15-month suspended prison sentence. Thursday’s ruling overturned all of this, including the fine. Continental had long argued the Concorde caught fire before it hit the strip.

--But also in France this week, the minister for industrial recovery, Arnaud Montebourg had heads shaking when he said steel giant ArcelorMittal is no longer welcome in his country after Mittal announced a plan in October to close two furnaces at its steel plant in Florange, which Montebourg says breaks a promise made by chief executive Lakshmi Mittal during Mittal Steel’s 2006 takeover of Arcelor.

Florange is a traditional steel town in northeastern France and Mittal gave Saturday as the deadline for finding a buyer. Mittal refuses to sell the full operation, which employs 20,000 workers.

So what surprised folks is Montebourg saying he would seize the entire plant and nationalize it.

But late Friday we learned from French Prime Minister Ayrault that the government will not nationalize the plant after receiving assurances from ArcelorMittal that it would invest in the complex and not cut jobs.

--Home prices in Ireland fell in October after three months of increases. The year on year fall is now 8.1% and the value of the average property is half of what it was during the peak in 2007. Prices in Dublin are off 56% from the peak; outside the capital, they are 47% lower.

--Want an example of the Irish real estate market? The Burlington Hotel, one of Dublin’s largest, was sold to Blackstone for 67 million euro, or just one-fifth of the price paid five years ago. It’s the biggest hotel sale since the economy collapsed.

--From Nick Webb of the Irish Independent:

“Michael Hasenstab, the star trader at 700 billion (euro) fund manager Franklin Templeton, which now owns 10 percent of Ireland’s debt, may make a profit of as much as 4.75 billion on his staggering gamble on Irish bonds.

“In a ballsy move backed up with hard cash, Hasenstab has taken an extraordinary contrarian bet against the market by backing Ireland.

“It is a daring 8.1 billion that is looking so lucrative it could make an extra chapter in the Michael Lewis best-seller ‘The Big Short,’ where traders made billions betting against sub-prime mortgages at the start of the financial crisis. Hasenstab’s 8.1 billion investment on Irish bonds is the biggest private punt on this country’s future….

“Writing to Franklin Templeton clients, Hasenstab notes: ‘I believe the Irish model could be an ideal prescription for problems in the other parts of Europe.

“ ‘What has been happening in Ireland is positive. The country, despite facing great adversity, continues to make progress on fiscal reform and is increasingly getting recognition as a model for other countries.

“ ‘It can be summarized as a pro-growth and pro-austerity package, where growth is facilitated through structural reforms and competitiveness and austerity is facilitated through fiscal responsibility, which Ireland has put forth and executed well.”

This is exactly the approach I thought British Prime Minister David Cameron was taking when he announced his nation’s first austerity programs, which I figured would prove to be the model for Europe. Certainly, the U.K. is holding up far better than most, though I thought improvement would come sooner.

--New Jersey Gov. Chris Christie estimated his state’s storm damage from Hurricane Sandy at $29.4 billion, plus he submitted a further request for federal aid in the amount of $7.4 billion to reduce damage from future hurricanes and floods. For his part, New York Gov. Andrew Cuomo estimated the cost to be $42 billion, with $19 billion in the city alone. Cuomo argued the devastation statewide was worse than what Katrina did to Louisiana (save for the human toll…1,866 vs. more than 100), because of New York’s density. Far more people were impacted, with repairs to the subways and commuter rail lines expected to cost $5 billion.

Figures released by Cuomo’s office showed 305,000 homes were damaged or destroyed by Sandy, compared with 214,700 for Katrina in Louisiana. But the number of businesses hit in New York was 265,000 vs. nearly 19,000 in Louisiana.

Cuomo, though, like with Christie’s $7.4 billion, called for $9.1 billion in “prevention and mitigation” measures as part of the $42 billion request.

Editorial / New York Post

“New York pols are launching a major blitz for some $33 billion in federal aid – but a related plea, for $9 billion, could put their entire ask at some risk.

“Let’s hope they know what they’re doing.

“On Monday, Gov. Cuomo cited a need for $32.8 billion for ‘recovery’ efforts – to restore the state to where it was, pre-Sandy.

“But Cuomo wants another $9.1 billion for ‘prevention/mitigation’ measures – ‘to make sure this doesn’t happen again or lessen the impact if it does,’ he says.

“Those funds would go for ‘flood protection’ for subways, sewer-treatment plants, key roads, the World Trade Center site and other areas – and also for back-up generator upgrades for hospitals and such.

“There’s obvious logic in taking preventive steps to save lives and lower recovery costs when future storms strike….

“But Cuomo & Co. sure are taking a big risk.

“Because the idea of using federal dollars for essentially local capital needs puts the entire endeavor in a whole new ballpark.

“Does anyone seriously think, after all, that DC aid won’t come with strings? Federal cash means federal rules. And oversight.

“More important, New York will have to make a case that it’s special. It will have to convince the nation that it deserves extra protection before other storm-exposed areas – from Maine’s northern-most shores to Texas’ Gulf coast.

“And it’s not like DC lawmakers are known for their intense love of funding New York (Remember the endless fights over federal anti-terror cash?)….

“Meantime, fiscal-cliff talks are under way in Washington, and Congress is looking to trim costs – not add new ones.”

Let the fun begin.

--Just a few examples of the extensive damage Sandy caused to the local economy. 400 workers at Ellis and Liberty Islands have been laid off because both parks won’t be re-opened until April. The concession and ferry operators probably won’t survive the shutdown. About 700,000 people visit Liberty Island between November and March and around 500,000 go to Ellis Island.

And then there’s the Hoboken PATH station, a critical commuting hub into Manhattan that sustained $300 million in damages. Monday will mark five weeks since it was closed down by 12-feet of water in some spots. There is still no timetable whatsoever for when it’s going to reopen. Some workers, on very limited budgets, are now paying over $30 more a week for their commutes because they are forced to take the more expensive ferry.  

Separately, Federal Reserve Bank of New York President William Dudley called Sandy’s damage extensive and longer-lasting than initially anticipated, though…

“Putting all the factors together, at present I expect that economic activity in our region was adversely affected in October and November but will show a noticeable rebound starting in December.”

--The airline industry in the U.S. lost up to $500 million in revenue because of Sandy. At the peak, Monday, Oct. 29, about 9% of global airline capacity was grounded, according to the International Air Transport Association.

--Edward Luce of the Financial Times opined the other day on America’s infrastructure, best exposed by Sandy.

“There are three reasons to worry. First, there is remarkably little public outrage over the dilapidation in the power grid, public roads, domestic airports and waterways….It is hard to fly domestically in the U.S. and not at regular intervals face heavy delays, cancellations or being bumped off your flight. It is also hard not to miss the impressively stoical reaction of most passengers.

“A big chunk of America’s domestic flying woes could be solved by building NextGen, which would switch the U.S. from its Second World War radar network to a satellite-based flight-tracking system….But Congress has little stomach for the bill, which would come to at least $25 billion.

“Second, most Americans are unaware of how far behind the rest of the world their country has fallen. [Ed. you wouldn’t know unless you traveled, frankly. I’m thinking of using up some frequent flyer miles next year to fly to Hong Kong just to hang out at the airport there for a week, like I’ve done before. Great spot. Seriously.] According to the World Economic Forum’s competitiveness report, U.S. infrastructure ranks below 20th in most of the nine categories, and below 30 for quality of air transport and electricity supply. The U.S. gave birth to the internet – the kind of decentralized network that the U.S. power grid desperately needs. Yet according to the OECD club of mostly rich nations, average U.S. internet speeds are barely a 10th of those in countries such as South Korea and Germany. In an age where the global IT superhighway is no longer a slogan, this is no joke. The budding U.S. entrepreneur can survive gridlocked traffic. But a slow internet can be crippling.

“Third, it may be asking too much of Washington in its present state of polarization to give the green light to an ambitious infrastructure plan. According to the American Society of Civil Engineers, the U.S. needs to spend $2.2 trillion in the next decade simply to maintain the existing quality of infrastructure. Under the current budget, Washington will spend less than half that amount.”

--Mary Shapiro, chair of the Securities and Exchange Commission, is stepping down, to be replaced by Elisse Walter, one of the SEC’s five commissioners, though her term expires next year. Shapiro was worthless.

--Morgan Stanley strategist Adam Parker has been the most negative on the Street this year, with a yearend forecast of 1250 on the S&P 500, building his case on the deteriorating earnings picture for U.S. corporations. For next year, though, he sees a December 2013 figure of 1434, or essentially unchanged from today, noting “the acuteness” of issues such as the U.S. deficit and debt levels, the Euro crisis and slowing emerging markets growth. I’ll set my own target end of December but, like Parker, I missed it this year. Suffice it to say, however, I admire Parker for being a realist.

--SAC Capital faces civil fraud charges in the largest insider trading case in U.S. history as the feds tighten the noose around founder Steven Cohen. SAC was informed last week by the SEC that it was planning on bringing the charges – what is known as a Wells Notice. Cohen spoke with investors on a conference call and assured them he has been acting appropriately, even as the case of Mathew Martoma, a former SAC portfolio manager, proceeds. The government says SAC avoided losses of $194 million and made a profit of $83 million betting against the share prices of pharmaceutical companies Wyeth and Elan ahead of negative test results. Since 2009, three former SAC employees have pleaded guilty to insider trading while working at SAC.

--Shares in Yum! Brands Inc., owner of Taco Bell and KFC fast-food chains, tumbled 10% on Friday after the company said same-store sales in China will decline 4% in the fourth quarter compared with a gain of 21% a year earlier. China accounted for 44% of Yum’s revenues in 2011. Earlier in November, McDonald’s said same-store sales fell in China in October.

Yum plans on opening 700 outlets in China next year, which is down from 800 in 2012.

I still just want a KFC in my neighborhood and will remain grumpy until I get one.

--The other day I was checking out laptops at my Staples store and the only ones on display had Windows 8 rather than the Windows 7 I’m looking for. Now I know I can get one with Windows 7, but I could not have been more turned off by the Windows 8 interface, which in reading a piece from Australia the other day described said interface as “a monster that terrorizes poor office workers and strangles their productivity.”

No wonder early sales of Windows 8, it would seem, suck; certainly versus expectations. In fact a report by NPD Group said sales of Microsoft-powered personal computers in the four weeks since Windows 8 was released fell 21%. The Sydney Morning Herald’s Asher Moses summed up my feelings and apparently those of countless others.

“While the ‘live tile’ interface of Windows has been a solid innovation for mobile devices, making it the default starting-screen for desktop and laptop users has been confusing for those who liked their old icons, windows and start menu just the way they were.”

Correctomundo! I hate change.

*Speaking of change…I was surprised by a slew of e-mails this week asking for me to adapt new apps for Android systems, seeing as how I have the StocksandNews iPad app.

The iPad app was a natural for me to explore, though I made a stupid mistake in keeping the “free” window open far too long. 

So I’ve heard you in the case of mobile/Android…it’s a matter of funding. Maybe first half of next year.

And while I’m on the issue of change…I continue to look at my video launch as only being in the test phase. It’s been just five weeks, after all…19 videos. I have not publicized it in any way because it’s not exactly where I envision it being yet, so I’ll let the masses know maybe in January or February.

I’m also going to take a few days off here and there, but come January, I’m glued to the chair for the first four months of 2013. I wouldn’t want to do press releases and such and then have someone look for a fresh video and it not be there because I’ve taken the day off. [Regardless, it’s only going to be Monday thru Thursday for the foreseeable future.]

--Former NBC Universal CEO Jeff Zucker has signed on as the new boss at CNN’s global news operations.

--Hollywood had its best five-day Thanksgiving holiday stretch ever, $290 million owing to the “Twilight Saga” finale, “Skyfall” and “Lincoln.” So movie sales are slated to exceed $11 billion for the first time, exceeding 2009’s record $10.6 billion. As of last Sunday, Skyfall’s global revenues were already $790 million.

Foreign Affairs (cont’d)

Syria: One other item…the Los Angeles Times had a piece on the destruction here since the uprising began in March 2011. An estimated 3.5 million homes, schools, mosques, churches and hospitals have been damaged or destroyed. More than half a million are a complete loss.

Afghanistan: Once again, as was the case in Iraq, the United States is beginning to negotiate a status of forces agreement with Afghanistan to establish a force level for after the combat mission formally concludes at the end of 2014. The thinking is 10,000 or so troops will stay to continue to train Afghan troops and go after terrorists.

But, as was the case in Iraq, President Karzai has to agree to any lasting presence and he is demanding that American forces come under the jurisdiction of Afghan courts; which was a deal breaker in Iraq and consequently we have no residual force there (and this week was another example of how unstable Iraq remains because of this).

China: Philippine Foreign Secretary Albert del Rosario told the South China Morning Post that he was told by China it intends to keep ships permanently stationed at the disputed Scarborough Shoal in the South China Sea, with del Rosario describing Beijing’s moves as “dictatorial” and warning its new leadership might struggle to ignore demands from the public for more assertiveness. [The long-held opinion of your editor.]

“He said he feared a permanent presence would make it ‘impossible’ to return to earlier diplomatic efforts to prevent the dispute harming broader Sino-Philippine ties….

“ ‘The longer the ships remain, the more impossible the situation becomes.’” [SCMP]

Yup, it’s a lock the South China/East China Seas will be on my radar for 2013.

North Korea: The International Atomic Energy Agency said on Thursday that North Korea had pressed ahead in its pursuit of two “deeply troubling” nuclear projects.

“The D.P.R.K. has continued construction of the light-water reactor and largely completed work on the exterior of the main buildings.” [This could be tapped to generate plutonium for its nuclear weapons.]

And Director General Yukiya Amano said the “configuration and operational status” of a separate uranium facility at Yongbyon “cannot be established,” despite continued monitoring of the site from space. Some suspect the reactor is a cover to justify the stockpiling of refined uranium.

Meanwhile, the United States is readying its defense systems to potentially counter an anticipated North Korean ballistic missile launch in mid-December. Pyongyang last attempted to test a long-range missile seven months ago, though this was unsuccessful.

Russia: President Vladimir Putin is hitting the road again next week, traveling to Turkey, after being house bound since Oct. 5. Clearly there was something wrong with his health, probably a back injury and/or surgery.

Whatever it was, Putin canceled his annual TV call-in show until summer, get this, “citing climatic conditions,” as the Moscow Times reported. The annual presidential State of the Nation Address is also overdue.

Hey, still four weeks for me to be proven right on one of my predictions for 2012…that Putin wouldn’t last the year, typed the editor with a mischievous grin on his face.

Hungary: Yes, perhaps I’ve written too much on the ‘rise’ of the far-right across Europe than was merited, but in Hungary, the far-right Jobbik party is the third-largest in parliament and this week, Jobbik’s leader Marton Gyongyosi said the government should draw up a list of Jews living in Hungary who pose a “national security threat” to the country.

Gyongyosi said this in parliament on Monday, addressing the 8-day war between Israel and Hamas. “I think such a conflict makes it timely to tally up people of Jewish ancestry who live here, especially in the Hungarian Parliament and the Hungarian government, who, indeed, pose a national security risk to Hungary.”

Oh brother. Mr. Gyongyosi has the brain of a toad.

The Hungarian government denounced his statements, but took no action.

Gyongyosi later said on the party website: “I apologize to my Jewish compatriots for my declarations that could be misunderstood.”

Mexico: As reported by the Washington Post’s William Booth: “Mexico’s attorney general has compiled a list showing that more than 25,000 adults and children have gone missing in Mexico in the past six years, according to unpublished government documents….

“Families have been left wondering whether their loved ones are alive or among the more than 100,000 victims of homicides recorded during the presidency of Felipe Calderon, who leaves office Saturday.”

The names often have “chilling details” next to them. Such as…

“His wife went to buy medicine and disappeared.”

“The son was addicted to drugs.”

“Her daughter was forced into a car.”

“The father was arrested by men wearing uniforms and never seen again.”

Random Musings

--Mary Kate Cary / U.S. News Weekly

“Here’s CNN’s Wolf Blitzer asking House Republican Whip Kevin McCarthy why he won’t agree to raising taxes on those making over $250,000 a year: ‘Those families and those small businesses did quite well during the years of the Clinton administration when the rate was 39.6. Why not go back to that?’ What Blitzer failed to mention was that when President Clinton’s top tax rate was 39 percent, government spending was only 18.2 percent of GDP. (Under President George W. Bush spending rose to 20.8 percent; now, under President Obama, spending stands at 24.3 percent of our economy.) Liberals want to return to 1990s tax rates but not 1990s spending levels. Clinton-era tax rates with Obama-era spending won’t bring us back to a balanced budget. Republicans should answer liberals longing for a return to Clinton’s tax policies with a challenge to meet his spending caps as well. Even Clinton might actually agree with conservatives on that.”

--The lunch President Obama had with Mitt Romney was stupid, but as Peggy Noonan wrote in the Wall Street Journal, “brilliant” on the part of Obama. “It makes Obama look big, gracious. It implies the weakened, battered former GOP nominee is the leader of the Republican Party – and if the other party has to have a leader, the weakened, battered one is the one you want.

“Mr. Romney is not the leader of the party; he left no footprints in the sand….

“To the extent the GOP has an elected face, it is that of Speaker John Boehner. And he is precisely the man with whom Mr. Obama should be having friendly lunches….

“At a news conference Thursday, Mr. Boehner looked frustrated. In fact, he looked exactly the way he looked at the end of the debt ceiling crisis in the summer of 2011 – like someone who wanted a deal, was willing to gamble to get it, and failed….

“The election is over, a new era begins – and it looks just like the old one. A crisis is declared. Confusion, frustration, and a more embittered process follow. This is…the Obama Way. Nothing has changed, even after a yearlong campaign that must, at times, have looked to him like a near-death experience. He still doesn’t want to forestall jittery, gloom-laden headlines and make an early deal with the other guy. He wants to beat the other guy.

“You watch and wonder: Why does it always have to be cliffs with this president? Why is it always a high-stakes battle? Why doesn’t he shrewdly re-enact Ronald Reagan, meeting, arguing and negotiating in good faith with Speaker Tip O’Neill, who respected very little of what the president stood for and yet, at the end of the day and with the country in mind, could shake hands and get it done? Why is there never a sense with Mr. Obama that he understands the other guys’ real position?....

“In an interview last year, shortly after the debt ceiling debate, Mr. Boehner spoke of how much he’d wanted a deal. He wanted entitlement reforms, cuts in spending, was happy to increase revenues through tax reform. He thought our fiscal realities the great issue of his speakership, said he meant it when he told staffers if it resulted in the end of his speakership then so be it. He’d have walked out of Congress knowing ‘I did the right thing.’

“That’s who Obama should be negotiating with – in good faith, and with his eye not on ideology but on the country.

“Instead, it’s going to be a long four weeks. Scratch that, it’s going to be a long four years.”

--Susan Rice went to mend fences with Republican senators, including her chief detractors John McCain, Lindsey Graham and Kelly Ayotte, and instead the three left a meeting with Rice angrier than ever about her defiance of her behavior in those first days after the killing of four Americans in Benghazi on September 11.

Sen. Lindsey Graham (S.C.) said, “Bottom line, I’m more disturbed now than I was before.” Ayotte (N.H.) said her meeting with Rice left her “more troubled, not less.” McCain (Ariz.) was “significantly troubled.”

Should President Obama proceed to nominate Rice to succeed Hillary Clinton as Secretary of State, the confirmation hearing now seems destined to be explosive.

I’ve followed Susan Rice’s career. I’ve written of her incompetence. Take her down.

Stephen F. Hayes / The Weekly Standard

“At his first press conference after being elected to a second term, President Barack Obama did everything he could to avoid directly answering the difficult questions on the growing scandal about his administration’s handling of the terrorist attacks in Benghazi. But in so doing, the president inadvertently told us quite a bit. 

“At one point he said, ‘And we’re after an election now. I think it is important for us to find out exactly what happened in Benghazi, and I’m happy to cooperate in any ways that Congress wants.’ It was, of course, just as important to find out what happened in Benghazi before the election, but we should be grateful to the president for giving us this inadvertent glimpse into the role politics played in his thinking about Benghazi before he was reelected.

“The president, perhaps realizing he had made a revealing slip of the tongue, went on to insist that he’d been providing information all along. But in response to a question about criticism of U.S. ambassador to the United Nations Susan Rice from Senators John McCain and Lindsey Graham, the president slipped again. ‘For them to go after the U.N. ambassador, who had nothing to do with Benghazi, and was simply making a presentation based on intelligence that she had received, and to besmirch her reputation, is outrageous.’

“If Susan Rice ‘had nothing to do with Benghazi,’ why then was she sent out to represent the administration in multiple television interviews five days after the attacks?”

Anne Bayefsky and Michael B. Mukasey / Wall Street Journal

“According to Mr. Obama (and to her), (Rice) simply repeated talking points provided by an amorphous and anonymous ‘intelligence community.’

“But Ms. Rice did know at least a couple of things. She knew that she had nothing to do with Benghazi. She knew that after the attack the president insisted that U.S. leaders not ‘shoot first and aim later’ but rather ‘make sure that the statements that you make are backed up by the facts.’ She knew that the video story line was questionable, as Sen. Dianne Feinstein (chairman of the Senate Select Committee on Intelligence) and administration officials had already suggested that the attack was al-Qaeda-related. And she knew that the president had a political interest in asserting that al-Qaeda wasn’t successfully attacking senior American officials but was instead ‘on the run,’ as he maintained on the campaign trail….

“With respect to the ghastly scenario in Syria, Ms. Rice’s efforts in the Security Council have been stunningly meager. The Russians (with whom America supposedly ‘reset’ its relationship) and the Chinese have her thoroughly stymied.

“Other examples, of both her inexcusable absences from the U.N. and her inconsequential presence, could be adduced. And though the president, not the U.N. ambassador, makes foreign policy, one is entitled to ask how a Secretary Rice would view the acts and omissions of Ambassador Rice.”

Maureen Dowd / New York Times

“(Republican) Senator Susan Collins of Maine, the soft-spoken ranking member on the homeland security committee, hasn’t been part of this shrill debate. Though they had met only once or twice, Collins agreed to introduce Rice to the Foreign Relations Committee in 2009 when Rice was nominated as the U.S. ambassador to the U.N. Rice’s grandparents immigrated from Jamaica to Portland, Maine.

“ ‘I don’t bear any animus to her at all,’ the senator said. ‘In fact, to the contrary.’

“But she said she is ‘troubled’ by Rice’s role. ‘If I wanted to be secretary of state,’ Collins observed, ‘I would not go on television and perform what was essentially a political role.’

“Collins drew up a list of questions to ask Rice at their one-on-one hour long meeting slated for Wednesday. She wants Rice to explain how she could promote a story ‘with such certitude’ about a spontaneous demonstration over the anti-Muslim video that was so at odds with the classified information to which the ambassador had access. (It was also at odds with common sense, given that there were Al Qaeda sympathizers among the rebel army members that overthrew Muammar Gaddafi with help from the U.S. – an intervention advocated by Rice – and Islamic extremist training camps in the Benghazi area.)

“The F.B.I. interviewed survivors of the attack in Germany and, according to some senators, had done most of the interviews of those on site by Sept. 15, the day before Rice went on TV, and established that there was no protest. Collins wants to learn if the F.B.I. had failed to communicate that, or if they had communicated it and Rice went ahead anyway?

“When Rice heard the president of the Libyan National Congress tell Bob Schieffer on ‘Face the Nation,’ right before her appearance, that 50 people had been arrested who were either foreign or affiliated with or sympathized with Al Qaeda, why did she push back with the video story? ‘Why wouldn’t she think what the Libyan president said mattered?’ Collins wondered.

“Why did Rice say on ABC News’ ‘This Week,’ that ‘two of the four Americans who were killed were there providing security’? Rice was referring to the two ex-Navy SEAL team members who were C.I.A. security officers working on a base about a mile away. ‘They weren’t there to protect Ambassador Stevens,’ Collins said. ‘That wasn’t their job.’

“Rice also said that ‘we had a substantial security presence with our personnel’ – which was clearly not the case. Collins wants to know Rice’s basis for saying on ABC that the attacks were ‘a direct result of a heinous and offensive video.’ And why did she say ‘a small number of people’ came to the consulate to protest, when that phrase is not in her talking points? Collins is curious why Rice is not angrier, if, as she insists, she was repeating what she was told. ‘I’d be furious at the White House and F.B.I. and intelligence community for destroying my credibility,’ the senator said.”

After her meeting, Collins, like the other Republican senators, said she was “troubled” and still has “many questions.”

Look, when you have Maureen Dowd clearly in the anti-Rice camp, need you say anything more?

--New Jersey Republican Gov. Chris Christie announced he is running for reelection and the early polls are astounding as he continues to reap the benefits of his early leadership during the Hurricane Sandy crisis. Christie leads presumptive Democratic nominee, Newark Mayor Cory Booker, 53% to 35% according to Quinnipiac University Polling Institute. Just last month it was only 46-42 Christie. [A Rutgers-Eagleton survey has Christie ahead of Booker 53-34, so early on there is consistency in the numbers.]

--According to a study in the journal Science, the polar ice sheets are melting at an accelerating rate, contributing to an almost half-inch rise in global sea levels since 1992, or about 20% of the total rise in that period. One reason is Northern Hemisphere ocean temps are warmer, plus air temperatures are much warmer than the past. 

However, Professor Andrew Shepherd of the University of Leeds, lead author of the study, said, “The signals suggest there is no immediate threat” from rising sea levels, “But we can at least warn people that there are instabilities that need to be investigated.”

This wasn’t exactly the way the story was presented on NBC News the other night (the lead, as a matter of fact, which was absurd). Totally one-sided.

That said, you’ve long known my opinion on climate change. The debate should have been relabeled one over “global pollution.” You throw a lot of garbage in the air (and in the waters), of course it’s not good. There isn’t a soul on the planet who can defend this. 

And remember…who was the first great environmental president? Richard Nixon.

--According to a Pew Research Center study, the U.S. birth rate plunged last year to a record low, with the decline highest among foreign-born women, 14% between 2007 and 2010.  The overall birth rate is at its lowest since 1920, just half the peak set in 1957. Immigrant women were hit hard by the recession, thus the decline, which has long-term implications for the U.S. economy, for starters.

--Motivational speaker Zig Ziglar died. He was 86. Back in 1978, the summer between my sophomore and junior years at Wake Forest, I sold books door-to-door for the Southwestern Book Co. and heard Ziglar speak as part of our training. I then ended up being the worst salesman in the history of the company who stuck it out a full summer, but I still admire the work of Mr. Ziglar and others like him, including Dale Carnegie. The more modern day versions, such as Tony Robbins, not so much, especially after some of the stories I’ve heard from those attending his sessions.

--Marvin Miller, the Major League Players Association union chief from 1966-82, died. He was 95. Miller ushered in the era of free agency and was the most transformative figure in his sport the last 40+ years.

Consider that in 1966, the minimum salary was $6,000 in baseball. [40% earned below $12,000.] Today, the minimum is $480,000, with an average salary of $3 million.

Baseball revenues have soared from $50 million in 1967 to $7.5 billion today, and Marvin Miller deserves a ton of credit for this. He should also be in the Hall of Fame.

--Sign of the Apocalypse: Only 29% of high school students in New York City public schools are prepared to handle college-level school work. [Not that everyone should be going to college in the first place, mind you.]

--SpaceX founder Elon Musk estimates a ticket to Mars might cost $500,000, once SpaceX designs what he calls a “rapid and reusable” rocket that can land vertically. “That is the pivotal step to achieving a colony on Mars.”

Ooh ooh! Send me! [Mused the editor who’s increasingly tired of this planet. Of course it doesn’t help when you are a Mets, Jets and Wake Forest Demon Deacons’ fan.]

--Finally, no doubt, New York City Police Officer Larry DePrimo is the hero of the week for stopping to help a homeless man with no shoes on his feet on a frigid night. DePrimo went into a shoe store, bought the man some boots, and the whole episode was captured by an Arizona tourist in a photo that whipped around the world.

Editorial / New York Post

“New York cops get bashed every day – so this is an image of the force that is rarely seen, a side its critics would have you believe doesn’t exist.

“But the NYPD is not just a wall of blue.

“It’s a collection of 35,000 men and women like Larry DePrimo, who spend their days and nights working to protect and serve the city – and who, in quiet moments like this, give a great deal of comfort, too.

“New York’s lucky to have the NYPD. 

“Just as the NYPD is blessed to have DePrimo.”

Amen.
---

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

God bless America.
---

Gold closed at $1716
Oil, $88.90

Returns for the week 11/26-11/30

Dow Jones +0.1% [13025]
S&P 500 +0.5% [1416]
S&P MidCap +1.0%
Russell 2000 +1.8%
Nasdaq +1.5% [3010]

Returns for the period 1/1/12-11/30/12

Dow Jones +6.6%
S&P 500 +12.6%
S&P MidCap +13.8%
Russell 2000 +10.9%
Nasdaq +15.5%

Bulls 39.3
Bears 27.7 [Source: Investors Intelligence]

Have a great week. I appreciate your support.

Brian Trumbore