Stocks and News
Home | Week in Review Process | Terms of Use | About UsContact Us
   Articles Go Fund Me All-Species List Hot Spots Go Fund Me
Week in Review   |  Bar Chat    |  Hot Spots    |   Dr. Bortrum    |   Wall St. History
Week-in-Review
  Search Our Archives: 
 

 

Week in Review

http://www.gofundme.com/s3h2w8

AddThis Feed Button

   

02/02/2013

For the week 1/28-2/1

[Posted 12:00 AM ET]

Obama’s Failed Foreign Policy

Yes, the Dow Jones Industrial Average and S&P 500 stock indexes hit levels not seen since 2007 this week, and, yes, the news on the economy has been generally good. And, yes, geopolitics is often worrisome but not enough so to impact markets. The Balkan Wars of the 1990s, for example, occurred amidst an historic bull run, especially in Nasdaq.

But as I wrote last week, and have for the better part of two years since the Syrian crisis commenced, the White House ignores developments there, and elsewhere in the region, at its, and our, peril. I am absolutely astounded how this administration gets a free pass on foreign policy, but then the people are tired of war and more concerned about their financial plight.

Nonetheless, last Sunday we had the following.

“Meet the Press”

Moderator David Gregory [addressing panelist Ted Koppel]: “(The Middle East is) a region that’s in ferment, in revolution in certain parts. Where there are a lot of threats facing the United States and it’s not getting a lot of attention thus far from the administration. Certainly from the president’s inaugural address. And there are real fears in the region that Iran, particularly, is going to be on the edge of causing problems for the U.S.”

Ted Koppel: “I think...that we’re entering one of the most dangerous periods this country has ever known. A, it’s not over in Afghanistan. B, to the degree that al-Qaeda has moved over into Pakistan, that’s a country that has over 100 nuclear weapons. Syria, which is an ongoing problem, the suggestion constantly seems to be that we need to come in on the side of the rebels. There are at least 1,000 al-Qaeda members in Syria today fighting on the side of the rebels. If the chemical weapons fall into their hands, big problems.

“You mentioned Iran. Remember now, and it may even have been on this program, I think that Bibi Netanyahu...suggested that come spring, come early summer, if the Iranians still have not pulled back from building a nuclear weapon the Israelis may attack. The Iranians would respond against the United States. And they have the capacity to do it with cyber war.”

Bob Woodward: “I think it’s even bigger and more troubling than that. It isn’t just the Middle East and that region. Look at North Korea announcing that they are going to target the United States. They have nuclear weapons, unlike Iran at this point. You look at what happened in Algeria and Mali. The Egypt problem is not solved. I actually had one of the experts tell me recently that the next book I ought to do is this whole sweep of foreign policy and the working title of the book would be ‘meltdown.’”

Former Republican Sen. Jim DeMint: “I think we see our foreign policy going in a lot of directions. It doesn’t seem to be coherent. It sends signals of weakness. We don’t understand what North Korea really is doing right now. It is not just to provoke us, but it’s a product demonstration for Iran and other countries that want to see if these things work because we know North Korea wants to sell them. So I think there is a perception of American weakness but our problem here is the failure to really understand what is motivating these other countries.”

Later Sunday, on “60 Minutes,” Steve Kroft interviewed Barack Obama and Hillary Clinton.

Kroft: “The biggest criticism of this team in U.S. foreign policy from your political opposition has been what they say is an abdication of the United States on the world stage, sort of a reluctance to become involved in another entanglement, an unwillingness or what seems/appears to be an unwillingness to gauge big issues.  Syria, for example.”

President Obama: ‘Well, Muammar Gaddafi probably does not agree with that assessment, or at least if he was around, he wouldn’t agree with that assessment. Obviously, you know, we helped to put together and lay the groundwork for liberating Libya. You know, when it comes to Egypt, I think, had it not been for the leadership we showed, you might have seen a different outcome there. But also understanding that we do nobody a service when we leap before we look. Where we, you know, take on things without having thought through all the consequences of it. And Syria’s a classic example of where our involvement, we want to make sure that not only does it enhance U.S. security, but also that it is doing right by the people of Syria and neighbors like Israel that are going to be profoundly affected by it. And so it’s true sometimes that we don’t just shoot from the hip.”

Unreal. Earth to President Obama. Libya is a failed state, we lost four Americans there, the terrorists took the weapons from Libya into Mali and Algeria and were it not for the French, al-Qaeda would have overrun the capital of Mali by now and established a safe haven from which to launch attacks against Western interests.

As for Egypt? Syria? Two more failed states. Well over 60,000 dead in the latter. Over 2.7 million displaced and/or refugees...many of which are on the verge of starvation...dealing with disease. Syrians, and many Egyptians, now hate the United States. We lost our ability to influence events in both. Israel is threatened by the two as well, which wasn’t the case two years earlier. The entire region knows it can’t count on the United States of America.

Or as Thane Robinson wrote in a Wall Street Journal op-ed this week:

“The Arab spring has reached its second anniversary, but in the swath of countries upended by continuing populist revolts, it is getting hard to find a safe place to throw a party.”

Not even in Turkey, where a leftist suicide bomber killed a guard at the U.S. Embassy in Ankara on Friday.

Washington and Wall Street

GDP

2009

Q1 -5.3
Q2 -0.3
Q3  1.4
Q4  4.0

2010

Q1  2.3
Q2  2.2
Q3  2.6
Q4  2.4

2011

Q1  0.1
Q2  2.5
Q3  1.3
Q4  4.1

2012

Q1  2.0
Q2  1.3
Q3  3.1
Q4 -0.1

The fourth quarter GDP figure of -0.1% (the first negative quarter since Q2 2009, the end of the recession, as you see above) is deceiving, even for a doom and gloomster like myself. Consumption was up a solid 2.2% for the quarter, business investment up 8.4%, and housing investment up 15.3%. Defense spending, highly volatile, was down 22.2%. Worrisomely, I would note exports fell 5.7%, the first negative number in that category since Q1 2009.

So the better thing to do is to combine Q3 and Q4 and you get an economy growing at 1.5%. 

There were some very solid economic data points this week. December durable goods were up 4.6%, December personal consumption rose 0.2%, the January Chicago PMI came in far better than expected at 55.6 vs. 50.5, the January ISM manufacturing number was also better than forecast, 53.1, Michigan consumer sentiment was up, strong auto sales and December personal income was up a whopping 2.6%.

On this last one, however, it’s important to note that the wealthy in particular pulled income forward at year end in accelerating bonus and dividend payments to beat the anticipated New Year tax hike.

We also had positive data on the housing front as the S&P Case-Shiller property value index for November had a rise of 5.5% over November 2011, the biggest year over year gain since August 2006. Homebuilder DR Horton said orders were up 39% last quarter. Lennar said revenues were up 42%.

And we had a respectable employment report on Friday for the month of January, with the economy creating 157,000 jobs, in line with expectations, but with substantial upward revisions for the prior two months. The unemployment rate, however, ticked up to 7.9%

On the negative front, you had a jobless claims figure, 368,000, that was back to more normal recent levels after two seasonality-impacted weeks in the bullish 330,000 area.

As for the Federal Reserve, its Open Market Committee met this week and as expected kept the funds rate at zero. Of course it has previously announced it will keep rates at zero until the unemployment rate is 6.5%, as long as inflation is in check.

In part the Fed’s statement read:

“Information received since the Federal Open Market Committee met in December suggests that growth in economic activity paused in recent months, in large part because of weather-related disruptions and other transitory factors. Employment has continued to expand at a moderate pace but the unemployment rate remains elevated. Household spending and business fixed investment advanced, and the housing sector has shown further improvement. Inflation has been running somewhat below the Committee’s longer-run objective...Longer-term inflation expectations have remained stable....

“Although strains in global financial markets have eased somewhat, the Committee continues to see downside risks to the economic outlook....

“To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month.”

Editorial / Wall Street Journal

“Meanwhile, and right on cue for Wall Street, the Fed announced Wednesday after its two-day meeting that it will stick with its bond-buying spectacular...The Fed is on pace to expand its balance sheet by another $1 trillion or so through the end of this year – its fifth in a row of near-zero interest rates and some form of ‘quantitative easing.’...

“The Fed has also led a parade of easing around the world, as other central bankers follow to prevent their currencies from rising too much. Even Japan has finally succumbed, raising its inflation target.

“Yet the economic paradox of our time is slow growth and lousy job creation despite these monetary exertions. This continues to be the 2% recovery, the slowest pace in the modern era. The Keynesian explanation is that we’re still recovering from the financial panic, though it’s worth recalling that in January 2010 the Fed predicted that growth in 2012 would be 3.5% to 4.5%, not 2.2%.

“Stanford economist John Taylor offered a different explanation this week, saying on these pages that the Fed’s excessive ease may actually be hampering growth thanks to unintended consequences. These include the misallocation of capital as investors chase yield above all, a subsidy for excessive federal spending by disguising the real cost of repaying debt, and the uncertainty of when the Fed will finally have to stop the party.

“This debate won’t be settled for years, and in any case Mr. Bernanke doesn’t listen to Mr. Taylor or us. By now the world knows he’ll keep doing what he’s been doing until faster growth returns or the markets force him to stop. Risk on, baby.”

Speaking of zero interest rates, I was at my bank this week and a customer next to me was working with a different teller. She spoke in broken English and the teller didn’t understand what her question was. My teller told her associate, “I think she’s asking when the tax forms with the interest for the year go out,” to which a supervisor emerged to say, “If she doesn’t have enough interest she won’t get one.” To which I said, “Yeah, I got nine cents in interest my last statement!”

My teller: “Ha Ha Ha Ha!!!!”
Me: “Ha Ha Ha Ha!!!
The supervisor: “Ha Ha Ha Ha!!!
The other teller: “Ha Ha Ha Ha!!!
The customer: [Nothing. Quizzical look. She’s also probably the millionaire next door for all I know.]

But isn’t it funny getting zero interest?!

No, of course it isn’t. It sucks.

Meanwhile, down in our nation’s capital, the sequester, March 1, is now just four weeks away and about to take center stage after this little break we have had once Republicans acquiesced on the debt-ceiling. Both Republican and Democratic leaders say they don’t see any compromise over replacing or delaying the automatic spending cuts. There is a growing feeling, though, especially among Republicans, that not only would the cuts, $1.2 trillion over 9-10 years improve the government’s books, but they won’t kill the overall economy.

If Congress wants to avoid the cuts, which impact most every program except Medicaid, Medicare and food stamps, they have to find $1.2 trillion in savings elsewhere, so this is where you have the problem.

Democrats continue to insist that any plan to replace the sequester should be a balance of spending cuts and revenue. Republicans say they’ve already done enough on the revenue side; $600 billion in new taxes on the wealthy. House Budget Committee Chairman Paul Ryan is pushing for the sequester and then letting the government stay open come the March 27 deadline on a continuing resolution (CR) to fund the government thru Sept. 30, while spending the spring and summer working on finding common ground for a fiscal 2014 budget.

As for the looming automatic defense cuts, South Carolina Republican Senator Lindsey Graham said: “I think it’s more likely to happen. And I’m ashamed of the Congress, I’m ashamed of the president, and I’m ashamed of being in this body, quite frankly. How do you go to somebody in the military who’s been deployed four or five times...and say, ‘For your good work over the last decade, we’re going to ruin the military; we’re going to make it harder for you to have the equipment you need to fight, and we’re going to reduce benefits to your family?’”

Chief of Staff Gen. Ray Odierno predicted that the Army will “very quickly go to extremely low levels of readiness in the next six months throughout the Army” if Congress doesn’t get the nation’s fiscal house in order and forestall sequestration and the $45 billion in automatic cuts in fiscal 2013 that it will force upon the Defense Department.

Europe

The eurozone remains very much in recession, but the euro currency is hitting levels not seen since November 2011 as the issue of capital flight is off the table, with capital having reversed*, flowing back to the periphery (Spain, Italy, Portugal, Ireland and Greece). Give the European Central Bank (and Angela Merkel) credit for restoring some confidence that the eurozone will hold. Of course a rising euro isn’t good for exports and it is hurting the very same peripheral economies the hardest (with the exception of Ireland which is in better shape and has some unique characteristics).

*ING reports in the first 8 months of 2012, 406 billion euro flowed out, but in the last four months of the year, 93 billion flowed back.

The fact is, again, the eurozone remains in recession!

So why do euro equity markets, for the most part, keep rallying? Because it’s not Armageddon. Yes, an incredibly stupid reason but time to cue Tony Soprano: “Whaddya gonna do?”

I mean those who are bullish on Europe keep talking about how things have stabilized. Well that’s a stretch. Financial contagion may be off the table, for now, but the fundamentals still blow.

Friday, Brussels released manufacturing data for January and the Euro area PMI was 47.9 vs. 46.1 in December, better but still below the 50 line denoting growth and contraction. Germany did rise to 49.8 from 46, but France fell to 42.9. Spain rose from 44.6 to 46.1 and Italy from 46.7 to 47.8, but these are still lousy. [Non-euro U.K. did register a 50.8 for its January PMI.]

As discussed further below, Ford Motor announced its loss in Europe for 2013 will be even more humongous than previously thought. Italy, Spain, Greece and Portugal are still mired in deep recessions and many of the other euro nations are, again, in recessions of their own.

But we keep hearing the worst is over!

Yet there are some other issues...to wit:

Spain: Fourth-quarter GDP fell 0.7%, 1.8% on an annualized basis. December retail sales were down a whopping 10.7% year over year.

And Prime Minister Mariano Rajoy is implicated in a growing scandal over secret cash payments to ruling party politicians, including Rajoy himself. The party denied its leaders received the cash from construction companies, but Spain’s leading daily, El Pais, claims Rajoy has received 25,000 euro a year since 1997. Before this scandal broke, confidence in Spain’s politicians was at an all-time low, with 96% of Spaniards believing their politicians were very corrupt.

Separately, Banco Santander announced it set aside nearly 19 billion euro last year for bad loans and property losses.

In Italy, the 3rd-largest bank, Monte dei Paschi di Siena is involved in a derivatives debacle, requiring a 3.9 billion euro bailout that is impacting the upcoming parliamentary elections because the leading center-left party has close ties to the bank. Wonderful Mario Monti, now caretaker prime minister, doesn’t look so wonderful anymore either.

In Greece, public transport workers walked off the job in a 24-hour strike; doctor’s struck, leaving hospitals functioning with emergency staff; and dock workers began a 48-hour strike that left the islands without ferry service for two days. Most public sector workers saw their incomes cut 25% the start of the year as part of the government’s austerity program.

And in Germany, while the unemployment rate dropped to 6.8%, matching a two-decade low, the German economy has stagnated. German retail sales fell 4.7% in December from a year ago, the worst performance since March 2009.

Editorial / The Economist

“The biggest reason for caution, though, lies in the gap between financial-market optimism and economic reality. That gap is widest in Europe. The single currency may not be about to fracture, but its economies are still in deep trouble: the IMF expects the eurozone economy to shrink 0.2% this year. [Ed. the ECB has it contracting 0.3%.] Those on the periphery are stuck in recessions. Even those in the core are looking weaker. With more fiscal austerity ahead and credit tight, it is hard to see how Europe returns to growth.

“The reforms needed to make the euro work are far from complete. America looks set to administer itself another dose of short-term austerity without addressing its long-term fiscal problems. Japan’s economy needs deep changes. The latest bout of optimism in the markets is welcome, but governments should not let it infect them with a dangerous complacency.”

Lastly, a note on Asia. China’s manufacturing PMI for January came in at 50.4 vs. 50.6 in December, a slight disappointment and surprising given HSBC’s own final figure for the month, 52.3, up from December’s 51.5. China’s official number is said to be more a barometer of state-owned companies, while HSBC’s is a proxy for the private sector. 

New home prices in China rose 1 percent in January from December, the biggest gain in two years. Optimism returned because the government didn’t impose any new measures to curb the property market last month. For three years, Beijing has raised down-payment and mortgage requirements in an effort to curb the property bubble.

Bottom line, China’s recovery remains in place but is far from robust.

Street Bytes

--Stocks registered their fifth consecutive weekly advance for 2013, with the Dow Jones, on the heels of Friday’s 149-point advance, finishing up 0.8% to 14009, or 156 points from an all-time high. The S&P 500 added 0.7% to 1513, or just 53 points from making a high of its own. Nasdaq was up 0.9% to 3179.

For January, the Dow was up 5.8%, the S&P up 5.1% and Nasdaq up 4.0%. This is the 12th time the S&P has started the year up 5% and in the previous 11, the average finished in positive territory for the year. In 10 of the 11 up at least 16%.

--U.S. Treasury Yields

6-mo. 0.11% 2-yr. 0.26% 10-yr. 2.01% 30-yr. 3.22%

I’m not going to start barking about interest rates until the 10-year gets to 2.25%.

--The U.S. Drought Monitor concludes the drought west of the Mississippi River continues, with climatologist Mark Svoboda of the center saying “The drought is firmly entrenched as we roll toward February.”

The western Plains and eastern Rockies are seeing the worst. Accuweather meteorologist Paul Pastelok says, “In the heart of the drought, it doesn’t look good right now.”

East of the Mississippi, at least, the situation is improving.

--Swedish appliance giant Electrolux AB said the market in Europe is likely to get worse before it gets better, though demand in North America continues to increase.

--Dow Chemical CEO Andrew Liveris said the second half of 2012 “saw significant deterioration in the markets we serve, particularly in China,” yet the company sees a better environment there in 2013. Nonetheless, Liveris said the chemical giant had taken “aggressive action to mitigate the effects of a slow-to-no-growth global environment.”

--Caterpillar predicted continued global economic weakness in the first half of 2013, but a better tone in the second half of the year. The machinery maker generates two-thirds of its revenue outside of North America as it lowered its revenue forecast for 2013, “(reflecting) the level of uncertainty we see in the world today.”

Per a previous announcement, CAT also took a charge of $580 million in the fourth quarter after being burned with a Chinese acquisition and alleged accounting misconduct at the operation, ERA Mining Machinery.

--Ford shares fell on the rising costs of fixing its European exposure. Losses on the continent for 2013 are now estimated at $2 billion. Not too long ago, Ford said they would be $1 billion. Then it raised that to $1.5 billion.

Profits for the fourth quarter exceeded expectations as revenue in North America rose 13%, but it’s the Euro situation that caught investors’ attention.

--Chrysler’s net income soared to $1.67 billion in 2012, up from $183 million earned in 2011. Revenue in the fourth quarter was up 13% from a year earlier.

Chrysler has little exposure to Europe, but parent Fiat reported that without Chrysler, it would have lost $1.4 billion last year. Fiat currently owns 58.5% of Chrysler.

--Toyota reclaimed the No. 1 slot in global auto sales, selling a record 9.75 million vehicles around the world in 2012 as the Japanese car industry rebounded far more strongly than expected after 2011’s earthquake and tsunami (as well as flooding in key supplier Thailand that year). General Motors is No. 2, having sold 9.29 million, while Volkswagen was third at 9.1 million.

Nissan and Honda also had record years at 4.9M and 3.8M vehicles, respectively.

--For the month of January, U.S. car and light-truck sales rose 14% over a year earlier, with Toyota’s up 27%, Ford’s up 22%, GM’s and Chrysler’s up 16%, Honda’s up 13%, VW’s up 7% and Nissan and Hyundai’s up 2% apiece. A terrific start to the year.

--Despite problems surrounding the 787 Dreamliner, Boeing said it was business as usual, even as it seems clear a solution to the electrical problems on the plane is weeks away. Boeing continues to produce 787s, but has halted deliveries. CEO Jim McNerney said on an earnings call, “I’m confident we’ll identify the root cause.” The company did revise its revenue forecast down for this year due to the fewer deliveries.

The company reported fourth-quarter profit of $978 million, down from $1.39 billion a year earlier, while revenue increased 14%. Revenue from its all-important defense unit fell 1.5%.

Back to the Dreamliner, Japan’s All Nippon Airways revealed it had repeatedly replaced the batteries even before overheating problems surfaced, so the National Transportation Safety Board said they asked Boeing to provide a full operating history of lithium-ion batteries used. The 787 is the first airliner to make wide use of them.

--Facebook posted a 40% fourth-quarter increase in revenue to $1.59 billion, with overall ad revenue rising 41% to $1.33 billion from a year ago as mobile ads made up 23% of the total. In the prior quarter, Mobile was 14% of total advertising revenue so as CEO Mark Zuckerberg said on Wednesday, “Today there is no argument Facebook is a mobile company.”

Facebook also said that as of late December, 680 million users were actively accessing the social app on smartphones every month, up 57% from a year earlier.

But earnings and revenue figures, while exceeding expectations, didn’t beat the most optimistic of estimates so the share price fell by week’s end.

--Yahoo! Inc. reported fourth-quarter profit and revenue that beat expectations, with revenue, ex- that passed on to partner sites, up 4 percent. CEO Marissa Mayer recorded the first annual sales increase in four years in 2012, but forecasts for this quarter and full year were below expectations.

--California’s real estate market continues to rebound strongly. The number of homes that sold for at least $1 million reached a five-year high in 2012, up 27% from 2011, according to DataQuick.

--The U.S. Department of Justice filed a lawsuit blocking Anheuser-Bush InBev’s $20 billion acquisition of Grupo Modelo, the Mexican brewer, arguing the merger could raise prices in deterring competition.

Bill Baer, assistant attorney-general in charge of the antitrust division, said, “If ABI fully owned and controlled Modelo, ABI would be able to increase beer prices to American consumers. This lawsuit seeks to prevent ABI from eliminating Modelo as an important competitive force in the beer industry.”

The thing is, a combination of AB Inbev and Modelo would control about 46 percent of the $80 billion beer market.

AB Inbev said it would “vigorously contest” the lawsuit.

--According to research firm IDC, Samsung doubled its share of the tablet PC market in the fourth quarter, taking its market share to 15.1%. Apple saw its share slide to 43.6% from 51.7%, despite also seeing a jump in sales.

Global shipments of tablet PCs surged 75% in the final quarter of 2012 to a record 52.5 million units. IDC added that reaction to Microsoft’s Surface tablets was “muted at best,” with nearly 900,000 sold in the final three months of the year.

--Research in Motion renamed itself BlackBerry and, in a do-or-die moment for the company, unveiled the new BlackBerry 10 which will be available in the U.S. in March, but next week in Canada.

--Amazon reported revenues grew by 22%, but were short of expectations, as were earnings, though the profit margin was up and so the shares rallied anew. CEO and founder Jeff Bezos said ebooks were boosting its profitability as he suggested that consumers’ adoption of them was accelerating.

“After five years, ebooks is a multibillion dollar category for us and growing fast – up approximately 70 percent last year. In contrast, our physical book sales experienced the lowest December growth rate [in 17 years], up just 5 percent.”

As for Amazon’s valuation and the share price, I gave up years ago trying to rationalize it.

--According to TransUnion LLC, 33% of all subprime student loans were 90 days or more past due in March 2012, up from 24% in 2007. Overall, in the five years through last March, the portion of all student loans that were 90 days or more delinquent rose to 11.4% from 8.8%.

--Time Inc., home to titles such as Time, People and Sports Illustrated, said it would slash 500 jobs, or 6 percent of its global workforce. Digital revenue is growing rapidly, but it’s not enough to offset the erosion of print advertising. According to the Publishers Information Bureau, advertising pages fell 8.2% in 2012, and 39% since 2006.

--Controversial CEO Aubrey McClendon of Chesapeake Energy Corp. is leaving the company he built into the nation’s second-largest natural-gas producer, citing “philosophical differences’ with the board. The board in turn grew tired of his risk-taking and epic spending ways through acquisition that left the company vulnerable to lower nat gas prices.

McClendon’s own finances were under intense scrutiny the last few years as various loans were revealed to help him cover losses. Actually, the company’s books are a total mess but McClendon will nonetheless leave with parting gifts of $50 million, on top of the $75 million he paid himself in 2008. Among his various outside ventures, he owns a 19% stake in the Oklahoma City Thunder.

--European supermarket giant Tesco dealt the Irish food industry a big blow when it dropped an Irish supplier of beef over the horsemeat scandal. It turns out the original supplier was in Poland, but then passed through to Irish and U.K. processors.

The meat Tesco sold that was tainted did not come from a list of approved suppliers, the chain revealed.

“Nor was the meat from the U.K. or Ireland, despite our instruction that only beef from the U.K. and Ireland should be used in our frozen beefburgers.

“Consequently we have decided not to take products from that supplier in future. We took that decision with regret but the breach of trust is simply too great.”

--Princeton University is hiking tuition 3.9% this fall to over $40,000 for the first time in school history. Coupled with $13,080 for a room and a full meal plan, the cost will be $53,250. But the trustees announced they were increasing financial aid by 4.6%. Sixty percent of Princeton undergraduates receive it. Princeton has a $17 billion endowment, one of the largest in the country. 

By the way, here in New Jersey, Stevens Institute of Technology in Hoboken and Drew University in Madison have tuition of $43,196 and $42,620, respectively. [Kelly Heyboer / Star-Ledger]

--Here’s a fun story, from the Irish Independent:

“A valuable hoard of gold coins dating back almost 400 years has been discovered in the foundations of a Tipperary pub, writes Bernie Commins.

“Although the value of the treasure trove, comprising 81 coins dating from the 1630s to the early 1700s, has not yet been assessed, it was last night described by the National Museum as ‘significant.’...

“There are 35 Charles II coins, 25 James II coins, 19 William III and two William III and Mary III coins.

“The coins were discovered by construction workers at Cooney’s pub on Main Street, Carrick-on-Suir.

“South Tipperary County Museum curator Marie McMahon said the artifacts were stacked in tube-shaped bundles.”

In case you’re thinking, gee, why did the construction workers give them up? That’s the law in Ireland. All artifacts belong to the State and must be reported.

--Shares in Jos. A. Bank Clothiers Inc. plunged about 20% as the maker of men’s apparel said annual profit will fall 20% amid lost sales from unseasonably warm weather and U.S. political uncertainty.

This of course is laughable. Clearly, it was all about the Jets’ dismal football season. Everyone knows that.

Or perhaps it’s because of the “Buy 1 get 3 Free” sale that the company is running again this weekend. Like buy one suit, get three of comparable value free. 

Foreign Affairs

Syria: It is still unclear exactly what happened on Wednesday. There were two reports. One that Israel struck a convoy transporting anti-aircraft missiles to Hizbullah in Lebanon. Another, from Syrian state TV, that a military research facility near Damascus was hit. Syria, Russia, Iran and Hizbullah condemned the attack, the one on the research facility as Syria’s military denied a convoy was hit. Hizbullah’s statement of support for the Assad regime didn’t mention a convoy.

Iran’s deputy foreign minister hinted at retaliation, saying Israel should not rely on its Iron Dome missile shield.

Russia said, “If this information (of an attack) is confirmed, we have a case of unprovoked attacks on targets in the territory of a sovereign state, which grossly violates the U.N. Charter and is unacceptable.

As for the research center, there are conflicting reports whether it is involved in developing chemical and biological weapons. And then an Iraqi newspaper quoted a Western diplomatic source as saying the alleged Israeli attack caused heavy casualties among special Iranian Guards stationed at the facility. This particular source says the talk of an attack on a convoy was meant to divert attention from the attack on the center, which according to this story actually occurred two days before it was reported. [Jerusalem Post]   Confused?

And on Thursday, a Saudi-based paper reported the Syrian regime has already transferred nonconventional weapons to Hizbullah, beginning in early 2012, including 2 tons of mustard gas as well as long-range missiles.

Many of these stories are later proved to be total garbage (see history of the lead-up to the war in Iraq), but if just one is true, it’s obviously a potential game-changer.

Separately, there was a particularly horrific discovery in Aleppo this week...up to 100 bodies, hands bound, executed; seemingly the victims of Assad’s henchmen.

U.N.-Arab League mediator Lakhdar Brahimi, the man with the most thankless job in the world these days, told the U.N. Security Council Tuesday night that Syria is “breaking up before everyone’s eyes,” describing “unprecedented levels of horror.” But the Security Council remains deadlocked on action, namely because of Russia and China. Russia continues to insist that Assad’s departure not be a precondition for peace negotiations.

Editorial / Washington Post

“It might seem as though the horrors of Syria, where more than 60,000 people have died violently in the last 22 months, could not grow worse. Yet steadily, week by week, they do. One measure is the refugee flows: In the past month more than 30,000 people have fled to neighboring Jordan alone, threatening to overwhelm an already unstable monarchy...A group of U.S. senators who recently visited a camp heard horrific stories of the ongoing crimes by the regime of Bashar al-Assad, as well as bitter complaints that Western countries – in particular, the United States – are doing little or nothing to help....

“In speaking about Syria in recent days, Mr. Kerry and President Obama described not a strategy for stopping a bloodbath that threatens vital U.S. interests but rather a series of excuses for inaction. In an interview with the New Republic published over the weekend, Mr. Obama wondered how to ‘weigh’ the thousands dying in Syria against the thousands being killed in the Congo, as if all wars are of equal importance to the United States or the inability to solve every problem means America should not help even where it can.

“Not for the first time, Mr. Obama also asked whether U.S. intervention could ‘trigger even worse violence or the use of chemical weapons.’ The president asked the same question a year ago, and the answer is now known: In the absence of U.S. action, the violence grew far worse and the Assad regime moved dangerously close to using chemical arms.

“The United States could do much to shape the course of events in Syria without using American troops. It could begin providing aid directly to Syrian refugee organizations and civilian councils inside the country, as France has done for months. It could provide arms to moderate rebel factions, so that they can compete with the jihadists and so that they will look to the United States when the war is over. Continued passivity will ensure that the crisis in Syria continues to worsen – along with the consequences for the United States.”

Editorial / Wall Street Journal...re Obama’s comparing Congo to Syria...

“Unlike in the Congo, the U.S. has vital national interests in the Syrian war. One interest is to inflict a strategic blow to Iran by deposing its principal Arab client. Another is to cut Iran’s military-supply link to Hizbullah, a terrorist group that has killed hundreds of Americans. A third is to prevent Syria’s unrest from spilling into its neighbors. A fourth is to avoid the outbreak of a wider regional war. A fifth is to make sure that the U.S. might have some leverage and standing with a post-Assad government in Syria.

“A sixth is to prevent further thousands from being killed. Oh, sorry, that’s an issue less of American interests than of our values, which aren’t in vogue these days.

“The fruit of two years of U.S. inaction in Syria is that the very nightmare scenarios the Administration fretted about are closer to occurring. The U.S. doesn’t have to put boots on Syrian ground to help bring the Assad regime to an end, such as by imposing a no-fly-zone over Aleppo and the rest of western Syria. A similar no-fly-zone over Libya in 2011 helped spell Moammar Gaddafi’s demise.

“In his inaugural, Mr. Obama declared that the era of endless war is over. If he really believes that, the result will be more war.”

Israel: Prime Minister Benjamin Netanyahu told a congressional delegation that the policy choices for dealing with Syria “are between bad, bad and worse.” U.S. Ambassador Dan Shapiro said, “Either the regime will use chemical weapons against the Syrian people, or will transfer the chemical weapons to Hizbullah or other extreme organizations.”

Iran: Tehran is poised for a major technological update of its uranium enrichment program, allowing it to vastly increase production of the material that can be used for both reactor fuel and nuclear warheads.

Diplomats told the Associated Press that Iran recently told the International Atomic Energy Agency that it wants to install thousands of new centrifuges at its main enriching site at Natanz. The machines are estimated to be able to enrich up to five times faster than the present, decades-old equipment.

Uranium is only being enriched to 4 percent at Natanz, but a separate facility at Fordow, the underground one that wasn’t discovered until 2009, is producing material enriched to 20 percent, which can be turned into weapons-grade material (90 percent) much more quickly.

Natanz, though, could be used to raise the percentage to 20 for its uranium as well.

Separately, industry sources say Iran’s oil exports rose to 1.4 million barrels per day in December. Before Western sanctions, Iran was exporting about 2.2 million bpd. But demand from China remains robust, about 600,000 bpd in December, while India is importing 275,000 bpd from Iran. Washington has been loath to try to rein in the Chinese as the White House concludes it would be too damaging to bilateral relations.

Lebanon: Four Lebanese army soldiers were killed in a gun battle with rebels in the Bekaa Valley on Friday as the military was trying to root out a leader of an anti-Assad Islamist group that uses the Lebanese side of the border to hide out from the Syrians.

Egypt: Abdel-Fattah el-Sissi, Egypt’s defense minister and army chief, said in an address to the military academy:

“The continuation of the conflict between the different political forces and their differences over how the country should be run could lead to the collapse of the state and threaten future generations.”

After a week of deadly protests, with a toll around 60, most of which were in Port Said, President Mohammed Morsi is clearly out of his league. He also sees no need for concessions in downplaying the significance of the violence.

“What is happening now in Egypt is natural in nations experiencing a shift to democracy,” he told reporters in Berlin, where he made a quick trip. Morsi sees no need to form a unity government, because a new government will be formed after parliamentary elections this spring.

Earlier, Morsi invoked emergency powers amidst the rioting, saying on television:

“Those who try to scare citizens, use weapons, block roads, throw rocks at the innocent, those who attempt to jeopardize the safety and security of this nation, we must deal with them with all force and firmness.”

The issue in Port Said was the sentencing of 21 soccer fans to death for their role in a riot last year that killed rival fans.

On Friday, protesters firebombed the presidential palace in Cairo.

Mali: French forces entered the last major town in the north. The Islamists melted away. Kidal does present issues with two competing clans claiming control as well. But no French casualties since the first day. 

French President Francois Hollande said, “We are winning this battle....Now the Africans can take over.”

Mali does remain highly dangerous. The other day, four Malian soldiers were killed when their vehicle hit a mine, but France will be turning over the cities they and their Malian colleagues have retaken to the African army forces, as the French move to the back, where, indeed, they would remain targets for terrorists.

But what a success the mission has been to date. And in several polls of French adults, 2/3s of respondents said they backed the government’s decision to send troops to the West African country. Hollande has seen his popularity rise to 44% from 40%, the first uptick since he was elected in May.

But of course should there be casualties, or the mission drag on far longer than the government is hinting, attitudes will change. You also have the issue of retaliation against the French and their homeland.

Additionally, I have to note the action of French Interior Minister Manuel Valls, who said this week Paris was set to deport a string of radical religious imams as part of a fight against “global jihadism.”

“Several radical foreign preachers will be expelled in the coming days....

“I don’t confuse this radical Islam with the Islam of France but there is a religious environment, there are Salafist groupings, who are involved in a political process, whose aim is to monopolize cultural associations, the schooling system.

“We will expel all these imams, all these foreign preachers who denigrate women, who hold views that run counter to our values and who say there is a need to combat France.

“We have to be extremely firm and that I will be.”

Vive le France.

North Korea: The nation was placed under martial law by Kim Jong-un, who told his front-line troops to “be ready for a war,” according to South Korean media.

Kim held an emergency meeting of his top defense and security officials last weekend, with a nuclear test being imminent. North Korean state media has also reported that Kim ordered his officials to take “effective, high-profile state measures.”

As the New York Times reports, however, the American intelligence community is hoping the North conducts a test because it would provide insights into how much progress the North has made toward a weapon that could threaten the U.S. or its allies.

Of course Iran is also anxious to gauge Pyongyang’s progress, as much to see what the rest of the world does in response.

[Meanwhile, South Korea successfully launched a satellite into orbit from its own soil for the first time. Two prior attempts had failed, and two others were aborted, so this is a big milestone.]

China: Editorial / Washington Post

“Given President Obama’s preoccupation with ending what he calls ‘a decade of war,’ it’s hard to believe that the United States could be dragged into a military conflict in the western Pacific over a group of tiny, uninhabited islands claimed by both Japan and China. Probably, it won’t be. Yet thanks to a disturbing confluence of events in those countries and Mr. Obama’s own commitments, the chance that it will happen is rising....

“China’s state-controlled media have been whipping up something like war fever, with one paper declaring that a military fight is ‘more likely’ and the country ‘needs to prepare for the worst.’ Disturbingly, this provocative and dangerous campaign has been overseen by the new Communist leadership under Xi Jinping, which has ample motive to divert attention from domestic problems.

“The political climate in Tokyo, too, gives cause for concern. The new prime minister, Shinzo Abe, is a nationalist who has packed his cabinet with politicians who share his aims of boosting Japanese defense spending and standing up to China. Japan has refused negotiations over the islands, declaring that there is nothing to discuss....

“Secretary of State Hillary Rodham Clinton has also reiterated a position the administration first adopted two years ago: A security treaty binding the United States to defend Japan against attack applies to the islets. That public stance may have been intended to deter China from provoking a crisis, but it also magnifies the stakes for Washington. Should China attempt to seize control of the territory, Mr. Obama could have to choose between backing Japan in a military confrontation and a climb-down that would undermine the ‘pivot to Asia’ he has placed at the center of his foreign policy.”

This week China said its navy was proceeding with a deep-water training exercise, away from the disputed islands but then the vessels did enter what Japan sees as its territorial waters in heading farther out. A Chinese foreign ministry spokesman today said China-Japan relations are at a “critical phase.”

Germany: Chancellor Angela Merkel has a personal approval rating of 65% but her party, the Christian Democrats, has been polling far less in state elections, like the recent one in Lower Saxony where the CDs received just 36%.

So Merkel needs a coalition partner and that has been the pro-business Free Democratic Party. But the FDP has seen their numbers plunge from 15% since the last general election in 2009 to about 2% today. You need 5% to gain seats in parliament.

That 2%, though, was before allegations against the FDP leader, 67-year-old Rainer Bruderle, came out.

In a first-person account in mass-circulation Stern magazine, 29-year-old German journalist Laura Himmelreich says Bruderle made lewd comments to her. Such as when Bruderle was at a bar, chatting with reporters, when he looked at Himmelreich and remarked, ‘You could fill out a dirndl.’

If you don’t know what a dirndl is, think St. Pauli Girl.

Anyway, Merkel will have to look to the Social Democrats for a grand coalition, but their leader, Peer Steinbruck, is a jerk himself, suggesting last month that Merkel was popular because she gets ‘a women’s bonus’ from female voters.

Mexico: A powerful explosion rocked an auxiliary building next to the headquarters of state-owned oil giant Pemex, killing at least 32 people, with more than 100 injured and many trapped inside. Early reports say it was a gas boiler explosion. The iconic 54-story office tower suffered damage to the lower floors but it appears the bulk of the casualties were in this three-story building that is attached to it.

Venezuela:

Vice President Nicolas Maduro read an 11-page letter bearing the signature of President Hugo Chavez at a regional meeting this week, in another attempt to show the country Chavez is still in charge, let alone alive.

But Chavez hasn’t been seen in public and his voice not heard in Venezuela since he was hospitalized in Cuba Dec. 11.

Random Musings

--Paul Richter / Los Angeles Times...on Hillary Clinton and her legacy at the State Dept.

“She devoted long hours to signature issues, including empowerment of women and girls, gay rights, Third World development, health and Internet freedoms. Clinton lent her support to a wide range of new projects and organizations, and she appointed new officials in the State Department to shepherd them. Some of these may eventually have huge effects, but many are at an early stage.

“At the same time, the most important and toughest foreign policy issues of the day – Iran, North Korea, Afghanistan-Pakistan, the Arab-Israeli standoff – weren’t resolved during the four years. Some grew more intractable. Though none of that may be Clinton’s fault, the lack of diplomatic breakthroughs on her watch limits her legacy.

“ ‘She’s coming away with a stellar reputation that seems to have put her almost above criticism,’ said Aaron David Miller, a longtime U.S. peace negotiator who is a vice president at the Woodrow Wilson International Center for Scholars. ‘But you can’t say that she’s really led on any of the big issues for this administration or made a major mark on high strategy.’”

--Editorial / Washington Post

“In 2012, Republicans ran against the massive cuts to defense that might occur in early 2013 under the congressionally mandated budget sequester. At an Oct. 23 presidential debate, President Obama responded that his opponent, Mitt Romney, was blowing the risk out of proportion: The cuts, he said, ‘will not happen.’

“Well, those cuts are now scheduled to take effect on March 1 – and, by the look of things, they will. The GOP has changed its tune; the Republican majority in the House seems content to let them happen. Meanwhile, Mr. Obama, whose defense secretary has warned in the direst terms against imposing the cuts – hardly mentions the subject.

“How did we get here?

“The authors of sequestration, which was supposed to scare Congress into agreement on an alternative, did not anticipate the GOP’s postelection maneuvering. The party is abandoning its unpopular threat to block a debt-ceiling increase – and using the threat of the sequester instead. The goal, apparently, is still more spending cuts without any tax increases, a deal Mr. Obama properly refuses and which is less sensible for the country than is a combination of entitlement cuts and higher revenue through closing tax loopholes, which Mr. Obama might accept....

“The Pentagon was already planning to trim a manageable $450 billion from its spending plans over the next decade. If sequestration happens, and continues over a decade, that figure would more than double. As a result, the United States could have to terminate major weapons programs and would be left with the smallest ground force since prior to Pearl Harbor, according to estimates by Defense Secretary Leon Panetta.

“The sequester would force the Pentagon to reduce its planned spending by 16.3 percent between now and Sept. 30, and to do so in an undifferentiated, across-the-board manner. The resulting furloughs, training reductions and procurement hassles would sow disorder and diminish readiness...

“Given the uncertain global security environment, we are more skeptical than others of the need to downsize defense. But even those who disagree should recognize that sequestration is not the way to go about it. It’s become a cliché of sorts to predict that partisan gridlock will undermine national security. If sequestration goes forward unchanged, that prediction will come true.”

--Regarding Chuck Hagel, Obama’s nominee for secretary of defense, and his Senate hearing yesterday, wow, not a real impressive performance, was it? I’m on record as liking the guy, but...well...here’s the New York Post’s John Podhoretz:

“ ‘I’ve said many, many things over many, many years,’ said Chuck Hagel...He was trying, for the umpteenth time during his testimony, to explain away another of the many, many impolitic statements that have come to light over the past couple of months.

“Well, as a result of this confirmation hearing – the most disastrous of its kind since another veteran senator, John Tower, blew himself up in his pursuit of the same post back in 1989 – Hagel has probably lost many, many votes to confirm him as secretary of defense.

“Though he was being asked about things he had said over the course of the past 15 years, it was what Hagel said yesterday – and how he said what he said – that had his defenders reeling in shock and even his critics aghast at how poorly he handled himself.

“Hagel said many, many things yesterday – incoherent things, confused things, wrong things, untrue things, and things that seemed to contradict other things he had said previously. Some were about Israel, some about Iran, some about American policy....

“ ‘There are a lot of things I don’t know about,’ Hagel said, when it came to America’s defenses. ‘If confirmed, I intend to know a lot more than I do.’

“But why should he bother? After all, he said in perhaps the most head-shaking comment of the day, ‘It doesn’t matter what I think.’

“Sen. Kelly Ayotte (R-NH) begged to differ: ‘It matters what you think,’ she found herself saying in response.

“Or maybe this was the most head-shaking comment: Defense secretary is ‘not a policymaking position,’ and because he has to work in consultation with others and in service to the president, he won’t be ‘running anything.’

“After yesterday, maybe he won’t. Because maybe, after this horror show, the Senate will decide it just can’t countenance confirming Chuck Hagel. That would be a shocker, but no less shocking than his performance.”

Hagel will still get confirmed.

--Michael Gerson / Washington Post...on the immigration topic

“President Obama has grown testy about reporters who have a ‘default position’ that policy debates have two sides. ‘On almost every issue,’ he recently told the New Republic, ‘it’s, ‘Well, Democrats and Republicans can’t agree’ – as opposed to looking at why is it that they can’t agree. Who exactly is preventing us from agreeing?’

“His insight is undeniable. If Republicans didn’t have all those pesky convictions and objections, agreement in Washington would come as surely as a river flows to the sea. This is the best description yet of Obama’s second-term governing vision: the invincible assumption of his own rightness. To him, objectivity requires the recognition that reality has only one side, which the president fully occupies....

“On immigration reform, the divisions have not yet similarly hardened. In fact, the prospects are surprisingly good. Democrats are beholden to Latino voters; Republicans are justifiably terrified by an electoral future without them. Leaders of both parties seem to recognize that our immigration system is inhumane and economically counterproductive. A bipartisan group of eight senators has set out principles of reform, including improved border security, an orderly system for guest workers and a rigorous path to citizenship for 11 million undocumented immigrants already in the country. Republican senators and staffers express the rarest of opinions in Washington: trust for a leader of the other party. They generally believe that Sen. Chuck Schumer (D-N.Y.), chairman of the immigration subcommittee, wants a bipartisan solution.

“Behind this fragile consensus is a remarkable, year-long effort by Sen. Marco Rubio (R-Fla.) to move the GOP beyond its suicidal embrace of immigrant self-deportation. Rubio has been willing to risk his tea party credibility in making the conservative case for reform....

“But now enters President Obama. If he chooses – if he prefers a wedge issue to a legislative accomplishment – he could easily polarize this most polarizing of issues. It wouldn’t take much to undermine Rubio and spook the House Republican caucus. Obama could push for quick green cards for undocumented workers, leapfrogging them over people currently in the legalization line. He could, under pressure from labor unions, limit the scope of guest-worker programs. He could downplay border security and employer verification – which many Republicans regard as the only guarantees that current problems won’t be repeated 20 years down the road....

“If Obama pushes a fast pass to legalization above other reform priorities, he could fracture Rubio’s nascent coalition.

“Which may be the point. So far, White House contact with Rubio and his staff has been minimal and perfunctory. Why elevate a possible Republican presidential candidate, with a powerful immigrant story, who can explain his views on Univision without a translator? Wouldn’t it be easier for Obama, once again, to push past the red lines of his opponents and then declare their opposition to be evidence of irrationality?

“It would, unless the president actually wants an immigration deal, which would require him to do something he finds difficult: recognize that an argument can have another side.”

Eight senators – four Republicans, four Democrats – came up with a plan to address the failings of the immigration system in one comprehensive measure and to offer a “tough, fair and practical road map” that would eventually lead to a chance at citizenship for nearly all of the immigrants here illegally.

“ ‘We on the Democratic side have said that we are flexible and we want to get a bill,’ Mr. Schumer told reporters in New York on Sunday. ‘But there’s a bottom line, and that’s a path to citizenship for the 11 or so million people who qualify. We’ve made great, great progress with our Republican colleagues.’”

Julia Preston / New York Times

“Under the senators’ plan, most illegal immigrants would be able to apply to become permanent residents – a crucial first step toward citizenship – but only after certain border enforcement measures had been accomplished.

“Among the plan’s new proposals is the creation of a commission of governors, law enforcement officials and community leaders from border states that would assess when border security measures had been completed. A proposal would also require that an exit system be in place for tracking departures of foreigners who entered the country through airports or seaports, before any illegal immigrants could start on a path to citizenship.”

But the latest, Friday, from the Washington Post’s Peter Wallsten and Rosalind S. Helderman:

“Rising tensions over whether to give illegal immigrants a chance to pursue full citizenship could ruin what President Obama and congressional leaders agree is a pivotal moment in resolving long-simmering problems in the country’s immigration system.

“Immigrant advocates and their Democratic allies insist that now, at long last, is their time. After various failed proposals over the past decade, they finally feel they have the leverage to accept nothing less than a path to full citizenship for the millions of people living illegally in the country.

“But although Republican leaders are newly interested in a compromise on immigration, many in the party say that allowing undocumented immigrants to live here legally is enough and that a push for citizenship would face fierce, and possibly insurmountable, opposition from conservatives....

“On the right, some conservatives have begun heaping criticism on one of their own rising stars, Sen. Marco Rubio...On the left, some liberals are privately grousing that Democratic senators working with Rubio are giving too much ground....

“The Senate group, which includes Rubio and top members of both parties, would require that the U.S.-Mexico border be found secure and that other strict enforcement measures be enacted before those here illegally could become citizens. Many on the left say the path needs to be more straightforward, while many on the right see even the compromise idea as a non-starter, deeming it too lenient.”

This incredibly complex issue is going to take months, it would seem, before legislation is finally crafted and presented to both chambers....if at all. It’s up to President Obama. If he wants to torpedo it so Republicans continue to lose the Hispanic vote, he can. For my part, I’ll have little on the topic going forward until it’s actually decision time.

But one last word for now...New Jersey Democratic Senator Bob Menendez is one of the bipartisan group of eight working on immigration. He is also the new chair of the Senate Foreign Relations Committee.

This week, however, he has been forced to deny allegations that he consorted with prostitutes during trips to the Dominican Republic with a longtime friend and campaign donor, Dr. Salomon Melgen, a well-known South Florida ophthalmologist.

FBI agents raided Melgen’s office on Tuesday, the doctor being a target in an investigation of healthcare fraud. 

Menendez, in a statement, described Melgen as a “friend and political supporter...for many years,” admitting he had traveled on Melgen’s plane on three occasions, “all of which have been paid for and reported appropriately.”

Well not really. Maybe eventually paid for, but definitely not reported appropriately, it would seem. 

Editorial / New York Post

“As officials sort out the charges and denials, it’s illuminating to look back at how Menendez responded in October, after U.S. Secret Service officers doing advance work for a presidential visit to Colombia were caught bringing prostitutes to their rooms.

“ ‘If the facts are true, they should all be fired,’ he said back then, though under Colombian law it’s not illegal to hire hookers.

“ ‘The reality is that the Secret Service...represent[s] the United States of America.’

“He got that right. We don’t know yet whether Menendez is guilty. But if, in his words, ‘the facts turn out to be true,’ surely the Menendez standard ought to be applied to Bob Menendez, too.”

--Iowa five-term Democratic Sen. Tom Harkin said he will not seek reelection in 2014, making him the third senator up for reelection this cycle to announce his retirement; Sens. John D. Rockefeller IV (D-W.Va.) and Saxby Chambliss (R-Ga.) being the others.

Reminder, Democrats, with a current 55-seat majority, will be defending 20 of the 34 seats up for grabs and Harkin’s now looks to be one of the most competitive.

Harkin, 73, said the recent death of his friend, Sen. Daniel Inouye of Hawaii was a factor.

“It begins to bring home that life is fleeting. I’ve had the privilege of 40 years in the House and Senate...but it’s somebody else’s turn.”

--President Obama’s favorable rating soared to 60% in a new Washington Post-ABC News poll, the highest since his first year in office. Independents see him favorably by a 60-36 margin, compared with 51-45 a year ago. Independent voters backed Mitt Romney by a 6-point margin in November.

But 80% of Republicans have an unfavorable view of Obama. It was 78% last January.

--George Will / Washington Post...on New Jersey Gov. Chris Christie

“His budget for 2013 calls for spending less than did the state’s 2008 budget. He has vetoed a tax on millionaires three times. He has scrapped, exuberantly, with public employee unions. In the aftermath of Superstorm Sandy, 41,000 families are still homeless. Nevertheless, 61 percent of his constituents think the state is on the right track, more than twice the 27 percent who thought so when he entered office three years ago. His 74 percent job approval rating includes 56 percent among Democrats and 78 percent among independents. This in a state where only 29 percent view the Republican Party favorably. And New Jersey is one of just three states (with New York and Maryland) in which Barack Obama improved upon his 2008 margin of victory (18 points, up from 16).

“When the House of Representatives pondered longer than he thought proper in considering the bill for aiding Sandy’s victims, Christie placed, in less than an hour, four unanswered late-evening calls to Speaker John Boehner, calls that were, Christie says mildly, ‘increasingly agitated.’ At last, Christie did his best imitation of Mount Vesuvius, denouncing Boehner by name. The approval-disapproval numbers for his eruption were 79-15, including 70-22 among Republicans. People may not like government, but they enjoy one operatic governor....

“He is potentially the un-Romney of Republican presidential politics, the candidate who connects viscerally, sometimes perhaps too much so, with voters....

“He calls the GOP’s decision, made in the run-up to 2012, to lengthen the nominating process ‘the stupidest thing the Republican Party ever did.’ When the process is too protracted, ‘You wind up with a good candidate who’s damaged.’...

“By 2015, the Republican nominating electorate will have forgotten Christie’s effusive praise of Obama’s post-Sandy solicitousness toward New Jersey. And Christie will be the rambunctious fellow who before Sandy described Obama as ‘a man walking around in a dark room looking for the light switch of leadership.’ Remember the name of Mickey Spillane’s famous protagonist: Mike Hammer.”

--New York Democratic Gov. Andrew Cuomo’s approval rating went from a stratospheric 74% on Dec. 12 to 59% this week in the wake of his sweeping new gun law.

--The New York Times said on Thursday that Chinese hackers had “persistently” attacked its computers over the past four months in retaliation for a story on Premier Wen Jiabao, but the hackers weren’t able to access the sensitive material related to the report. In a statement the Times said:

“Security experts hired by The Times to detect and block the computer attacks gathered digital evidence that Chinese hackers, using methods that some consultants have associated with the Chinese military in the past, breached The Times’ network.”

Jill Abramson, the paper’s executive editor, said, “Computer security experts found no evidence that sensitive emails or files from the reporting of our articles about the Wen family were accessed, downloaded or copied.”

The Wall Street Journal also reported similar Chinese hack attacks on their operations.

--Finally, we note the passing of the great former New York City mayor, Ed Koch, 88. I love what NBC reporter Gabe Pressman, himself 88, said of Koch today. “He defeated ‘defeatism.’...He was a psychotherapist, treating the whole city.”

New York truly was the pits before Koch took over on Jan. 1, 1978, for his first of three terms. Greg David of Crain’s New York Business had a good summary.

“The history books tell how the city had barely escaped bankruptcy in the fiscal crisis, but that is only part of the story.

“A seven-year-long economic collapse had finally reached its bottom, but not before eliminating 620,000 jobs. By comparison, New York lost 135,000 jobs in the Great Recession.

“People were fleeing, too. The Census two years later would find the population had declined by 800,000. Half of New Yorkers told a New York Times poll they wanted to be living somewhere else in five years.

“But Ed Koch changed everything, unexpectedly, maybe because he was such a controversial and divisive mayor.

“He was a conventional New York liberal, representing Greenwich Village in the City Council and then the East Side in Congress. He worked on Jewish immigration issues, better aid for pregnant women, housing and transportation.

“When he won election in 1977, he asked himself how he could revive New York. His conclusion was that he could only do so if the economy prospered, and he could do that only if it – and the businesses that made the economy go – received his intense attention.

“This was a decisive break because mayors before Mr. Koch, stretching all the way back to the revered Fiorello La Guardia, had either not understood the economy or saw it as a resource to be taxed and used to right social wrongs.

“In his typical hyperbole, he explained this to a newspaper reporter looking back on the fiscal crisis. ‘Past administrations did not talk about jobs and profits,’ he said, ‘but how to get New York City to be the No. 1 welfare city in America. The whole business of our city is how do you get people to stay here, how do you get people to come here and how do you get business to thrive.’

“Joyce Purnick, who covered both John Lindsay and Mr. Koch for The New York Times, agrees. ‘Koch did not apologize for being pro-development,’ she said. ‘Koch never got enough credit for turning around the city’s attitude toward business. This was a major shift that we now take for granted.’”

Personally, I received my first job working in Manhattan in 1980 and then my first opportunity on Wall Street in ‘82. That year, the city reached a milestone, as reported by Greg David.  “The number of people working in finance surpassed those with factory jobs for the first time.”

By the time Koch’s 12-year run was over, the city had added 400,000 more jobs than when he took office, even though another 275,000 manufacturing jobs had disappeared.

Ed Koch was truly an original. The perfect mayor for Gotham. A leader who came along when the city most needed him. He grabbed the opportunity, ran with it, and New Yorkers will be forever grateful. Many New Jerseyans, too.

---

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

God bless America.
---

Gold closed at $1670
Oil, $97.77

Returns for the week 1/28-2/1

Dow Jones +0.8% [14009]
S&P 500 +0.7% [1513]
S&P MidCap +0.4%
Russell 2000 +0.7%
Nasdaq +0.9% [3179]

Returns for the period 1/1/13-2/1/13

Dow Jones +6.9%
S&P 500 +6.1%
S&P MidCap +7.9%
Russell 2000 +7.3%
Nasdaq +5.3%

Bulls 54.3
Bears 22.3 [Source: Investors Intelligence...very much in danger zone]

Nightly Review video schedule...Mon. thru Thurs., posted by 5:30 PM ET.

Dr. Bortrum posted a new column....he worked for 17 years on lithium batteries and comments on Boeing’s recent issues.

Have a great week. I appreciate your support.

Brian Trumbore



AddThis Feed Button

-02/02/2013-      
Web Epoch NJ Web Design  |  (c) Copyright 2016 StocksandNews.com, LLC.

Week in Review

02/02/2013

For the week 1/28-2/1

[Posted 12:00 AM ET]

Obama’s Failed Foreign Policy

Yes, the Dow Jones Industrial Average and S&P 500 stock indexes hit levels not seen since 2007 this week, and, yes, the news on the economy has been generally good. And, yes, geopolitics is often worrisome but not enough so to impact markets. The Balkan Wars of the 1990s, for example, occurred amidst an historic bull run, especially in Nasdaq.

But as I wrote last week, and have for the better part of two years since the Syrian crisis commenced, the White House ignores developments there, and elsewhere in the region, at its, and our, peril. I am absolutely astounded how this administration gets a free pass on foreign policy, but then the people are tired of war and more concerned about their financial plight.

Nonetheless, last Sunday we had the following.

“Meet the Press”

Moderator David Gregory [addressing panelist Ted Koppel]: “(The Middle East is) a region that’s in ferment, in revolution in certain parts. Where there are a lot of threats facing the United States and it’s not getting a lot of attention thus far from the administration. Certainly from the president’s inaugural address. And there are real fears in the region that Iran, particularly, is going to be on the edge of causing problems for the U.S.”

Ted Koppel: “I think...that we’re entering one of the most dangerous periods this country has ever known. A, it’s not over in Afghanistan. B, to the degree that al-Qaeda has moved over into Pakistan, that’s a country that has over 100 nuclear weapons. Syria, which is an ongoing problem, the suggestion constantly seems to be that we need to come in on the side of the rebels. There are at least 1,000 al-Qaeda members in Syria today fighting on the side of the rebels. If the chemical weapons fall into their hands, big problems.

“You mentioned Iran. Remember now, and it may even have been on this program, I think that Bibi Netanyahu...suggested that come spring, come early summer, if the Iranians still have not pulled back from building a nuclear weapon the Israelis may attack. The Iranians would respond against the United States. And they have the capacity to do it with cyber war.”

Bob Woodward: “I think it’s even bigger and more troubling than that. It isn’t just the Middle East and that region. Look at North Korea announcing that they are going to target the United States. They have nuclear weapons, unlike Iran at this point. You look at what happened in Algeria and Mali. The Egypt problem is not solved. I actually had one of the experts tell me recently that the next book I ought to do is this whole sweep of foreign policy and the working title of the book would be ‘meltdown.’”

Former Republican Sen. Jim DeMint: “I think we see our foreign policy going in a lot of directions. It doesn’t seem to be coherent. It sends signals of weakness. We don’t understand what North Korea really is doing right now. It is not just to provoke us, but it’s a product demonstration for Iran and other countries that want to see if these things work because we know North Korea wants to sell them. So I think there is a perception of American weakness but our problem here is the failure to really understand what is motivating these other countries.”

Later Sunday, on “60 Minutes,” Steve Kroft interviewed Barack Obama and Hillary Clinton.

Kroft: “The biggest criticism of this team in U.S. foreign policy from your political opposition has been what they say is an abdication of the United States on the world stage, sort of a reluctance to become involved in another entanglement, an unwillingness or what seems/appears to be an unwillingness to gauge big issues.  Syria, for example.”

President Obama: ‘Well, Muammar Gaddafi probably does not agree with that assessment, or at least if he was around, he wouldn’t agree with that assessment. Obviously, you know, we helped to put together and lay the groundwork for liberating Libya. You know, when it comes to Egypt, I think, had it not been for the leadership we showed, you might have seen a different outcome there. But also understanding that we do nobody a service when we leap before we look. Where we, you know, take on things without having thought through all the consequences of it. And Syria’s a classic example of where our involvement, we want to make sure that not only does it enhance U.S. security, but also that it is doing right by the people of Syria and neighbors like Israel that are going to be profoundly affected by it. And so it’s true sometimes that we don’t just shoot from the hip.”

Unreal. Earth to President Obama. Libya is a failed state, we lost four Americans there, the terrorists took the weapons from Libya into Mali and Algeria and were it not for the French, al-Qaeda would have overrun the capital of Mali by now and established a safe haven from which to launch attacks against Western interests.

As for Egypt? Syria? Two more failed states. Well over 60,000 dead in the latter. Over 2.7 million displaced and/or refugees...many of which are on the verge of starvation...dealing with disease. Syrians, and many Egyptians, now hate the United States. We lost our ability to influence events in both. Israel is threatened by the two as well, which wasn’t the case two years earlier. The entire region knows it can’t count on the United States of America.

Or as Thane Robinson wrote in a Wall Street Journal op-ed this week:

“The Arab spring has reached its second anniversary, but in the swath of countries upended by continuing populist revolts, it is getting hard to find a safe place to throw a party.”

Not even in Turkey, where a leftist suicide bomber killed a guard at the U.S. Embassy in Ankara on Friday.

Washington and Wall Street

GDP

2009

Q1 -5.3
Q2 -0.3
Q3  1.4
Q4  4.0

2010

Q1  2.3
Q2  2.2
Q3  2.6
Q4  2.4

2011

Q1  0.1
Q2  2.5
Q3  1.3
Q4  4.1

2012

Q1  2.0
Q2  1.3
Q3  3.1
Q4 -0.1

The fourth quarter GDP figure of -0.1% (the first negative quarter since Q2 2009, the end of the recession, as you see above) is deceiving, even for a doom and gloomster like myself. Consumption was up a solid 2.2% for the quarter, business investment up 8.4%, and housing investment up 15.3%. Defense spending, highly volatile, was down 22.2%. Worrisomely, I would note exports fell 5.7%, the first negative number in that category since Q1 2009.

So the better thing to do is to combine Q3 and Q4 and you get an economy growing at 1.5%. 

There were some very solid economic data points this week. December durable goods were up 4.6%, December personal consumption rose 0.2%, the January Chicago PMI came in far better than expected at 55.6 vs. 50.5, the January ISM manufacturing number was also better than forecast, 53.1, Michigan consumer sentiment was up, strong auto sales and December personal income was up a whopping 2.6%.

On this last one, however, it’s important to note that the wealthy in particular pulled income forward at year end in accelerating bonus and dividend payments to beat the anticipated New Year tax hike.

We also had positive data on the housing front as the S&P Case-Shiller property value index for November had a rise of 5.5% over November 2011, the biggest year over year gain since August 2006. Homebuilder DR Horton said orders were up 39% last quarter. Lennar said revenues were up 42%.

And we had a respectable employment report on Friday for the month of January, with the economy creating 157,000 jobs, in line with expectations, but with substantial upward revisions for the prior two months. The unemployment rate, however, ticked up to 7.9%

On the negative front, you had a jobless claims figure, 368,000, that was back to more normal recent levels after two seasonality-impacted weeks in the bullish 330,000 area.

As for the Federal Reserve, its Open Market Committee met this week and as expected kept the funds rate at zero. Of course it has previously announced it will keep rates at zero until the unemployment rate is 6.5%, as long as inflation is in check.

In part the Fed’s statement read:

“Information received since the Federal Open Market Committee met in December suggests that growth in economic activity paused in recent months, in large part because of weather-related disruptions and other transitory factors. Employment has continued to expand at a moderate pace but the unemployment rate remains elevated. Household spending and business fixed investment advanced, and the housing sector has shown further improvement. Inflation has been running somewhat below the Committee’s longer-run objective...Longer-term inflation expectations have remained stable....

“Although strains in global financial markets have eased somewhat, the Committee continues to see downside risks to the economic outlook....

“To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month.”

Editorial / Wall Street Journal

“Meanwhile, and right on cue for Wall Street, the Fed announced Wednesday after its two-day meeting that it will stick with its bond-buying spectacular...The Fed is on pace to expand its balance sheet by another $1 trillion or so through the end of this year – its fifth in a row of near-zero interest rates and some form of ‘quantitative easing.’...

“The Fed has also led a parade of easing around the world, as other central bankers follow to prevent their currencies from rising too much. Even Japan has finally succumbed, raising its inflation target.

“Yet the economic paradox of our time is slow growth and lousy job creation despite these monetary exertions. This continues to be the 2% recovery, the slowest pace in the modern era. The Keynesian explanation is that we’re still recovering from the financial panic, though it’s worth recalling that in January 2010 the Fed predicted that growth in 2012 would be 3.5% to 4.5%, not 2.2%.

“Stanford economist John Taylor offered a different explanation this week, saying on these pages that the Fed’s excessive ease may actually be hampering growth thanks to unintended consequences. These include the misallocation of capital as investors chase yield above all, a subsidy for excessive federal spending by disguising the real cost of repaying debt, and the uncertainty of when the Fed will finally have to stop the party.

“This debate won’t be settled for years, and in any case Mr. Bernanke doesn’t listen to Mr. Taylor or us. By now the world knows he’ll keep doing what he’s been doing until faster growth returns or the markets force him to stop. Risk on, baby.”

Speaking of zero interest rates, I was at my bank this week and a customer next to me was working with a different teller. She spoke in broken English and the teller didn’t understand what her question was. My teller told her associate, “I think she’s asking when the tax forms with the interest for the year go out,” to which a supervisor emerged to say, “If she doesn’t have enough interest she won’t get one.” To which I said, “Yeah, I got nine cents in interest my last statement!”

My teller: “Ha Ha Ha Ha!!!!”
Me: “Ha Ha Ha Ha!!!
The supervisor: “Ha Ha Ha Ha!!!
The other teller: “Ha Ha Ha Ha!!!
The customer: [Nothing. Quizzical look. She’s also probably the millionaire next door for all I know.]

But isn’t it funny getting zero interest?!

No, of course it isn’t. It sucks.

Meanwhile, down in our nation’s capital, the sequester, March 1, is now just four weeks away and about to take center stage after this little break we have had once Republicans acquiesced on the debt-ceiling. Both Republican and Democratic leaders say they don’t see any compromise over replacing or delaying the automatic spending cuts. There is a growing feeling, though, especially among Republicans, that not only would the cuts, $1.2 trillion over 9-10 years improve the government’s books, but they won’t kill the overall economy.

If Congress wants to avoid the cuts, which impact most every program except Medicaid, Medicare and food stamps, they have to find $1.2 trillion in savings elsewhere, so this is where you have the problem.

Democrats continue to insist that any plan to replace the sequester should be a balance of spending cuts and revenue. Republicans say they’ve already done enough on the revenue side; $600 billion in new taxes on the wealthy. House Budget Committee Chairman Paul Ryan is pushing for the sequester and then letting the government stay open come the March 27 deadline on a continuing resolution (CR) to fund the government thru Sept. 30, while spending the spring and summer working on finding common ground for a fiscal 2014 budget.

As for the looming automatic defense cuts, South Carolina Republican Senator Lindsey Graham said: “I think it’s more likely to happen. And I’m ashamed of the Congress, I’m ashamed of the president, and I’m ashamed of being in this body, quite frankly. How do you go to somebody in the military who’s been deployed four or five times...and say, ‘For your good work over the last decade, we’re going to ruin the military; we’re going to make it harder for you to have the equipment you need to fight, and we’re going to reduce benefits to your family?’”

Chief of Staff Gen. Ray Odierno predicted that the Army will “very quickly go to extremely low levels of readiness in the next six months throughout the Army” if Congress doesn’t get the nation’s fiscal house in order and forestall sequestration and the $45 billion in automatic cuts in fiscal 2013 that it will force upon the Defense Department.

Europe

The eurozone remains very much in recession, but the euro currency is hitting levels not seen since November 2011 as the issue of capital flight is off the table, with capital having reversed*, flowing back to the periphery (Spain, Italy, Portugal, Ireland and Greece). Give the European Central Bank (and Angela Merkel) credit for restoring some confidence that the eurozone will hold. Of course a rising euro isn’t good for exports and it is hurting the very same peripheral economies the hardest (with the exception of Ireland which is in better shape and has some unique characteristics).

*ING reports in the first 8 months of 2012, 406 billion euro flowed out, but in the last four months of the year, 93 billion flowed back.

The fact is, again, the eurozone remains in recession!

So why do euro equity markets, for the most part, keep rallying? Because it’s not Armageddon. Yes, an incredibly stupid reason but time to cue Tony Soprano: “Whaddya gonna do?”

I mean those who are bullish on Europe keep talking about how things have stabilized. Well that’s a stretch. Financial contagion may be off the table, for now, but the fundamentals still blow.

Friday, Brussels released manufacturing data for January and the Euro area PMI was 47.9 vs. 46.1 in December, better but still below the 50 line denoting growth and contraction. Germany did rise to 49.8 from 46, but France fell to 42.9. Spain rose from 44.6 to 46.1 and Italy from 46.7 to 47.8, but these are still lousy. [Non-euro U.K. did register a 50.8 for its January PMI.]

As discussed further below, Ford Motor announced its loss in Europe for 2013 will be even more humongous than previously thought. Italy, Spain, Greece and Portugal are still mired in deep recessions and many of the other euro nations are, again, in recessions of their own.

But we keep hearing the worst is over!

Yet there are some other issues...to wit:

Spain: Fourth-quarter GDP fell 0.7%, 1.8% on an annualized basis. December retail sales were down a whopping 10.7% year over year.

And Prime Minister Mariano Rajoy is implicated in a growing scandal over secret cash payments to ruling party politicians, including Rajoy himself. The party denied its leaders received the cash from construction companies, but Spain’s leading daily, El Pais, claims Rajoy has received 25,000 euro a year since 1997. Before this scandal broke, confidence in Spain’s politicians was at an all-time low, with 96% of Spaniards believing their politicians were very corrupt.

Separately, Banco Santander announced it set aside nearly 19 billion euro last year for bad loans and property losses.

In Italy, the 3rd-largest bank, Monte dei Paschi di Siena is involved in a derivatives debacle, requiring a 3.9 billion euro bailout that is impacting the upcoming parliamentary elections because the leading center-left party has close ties to the bank. Wonderful Mario Monti, now caretaker prime minister, doesn’t look so wonderful anymore either.

In Greece, public transport workers walked off the job in a 24-hour strike; doctor’s struck, leaving hospitals functioning with emergency staff; and dock workers began a 48-hour strike that left the islands without ferry service for two days. Most public sector workers saw their incomes cut 25% the start of the year as part of the government’s austerity program.

And in Germany, while the unemployment rate dropped to 6.8%, matching a two-decade low, the German economy has stagnated. German retail sales fell 4.7% in December from a year ago, the worst performance since March 2009.

Editorial / The Economist

“The biggest reason for caution, though, lies in the gap between financial-market optimism and economic reality. That gap is widest in Europe. The single currency may not be about to fracture, but its economies are still in deep trouble: the IMF expects the eurozone economy to shrink 0.2% this year. [Ed. the ECB has it contracting 0.3%.] Those on the periphery are stuck in recessions. Even those in the core are looking weaker. With more fiscal austerity ahead and credit tight, it is hard to see how Europe returns to growth.

“The reforms needed to make the euro work are far from complete. America looks set to administer itself another dose of short-term austerity without addressing its long-term fiscal problems. Japan’s economy needs deep changes. The latest bout of optimism in the markets is welcome, but governments should not let it infect them with a dangerous complacency.”

Lastly, a note on Asia. China’s manufacturing PMI for January came in at 50.4 vs. 50.6 in December, a slight disappointment and surprising given HSBC’s own final figure for the month, 52.3, up from December’s 51.5. China’s official number is said to be more a barometer of state-owned companies, while HSBC’s is a proxy for the private sector. 

New home prices in China rose 1 percent in January from December, the biggest gain in two years. Optimism returned because the government didn’t impose any new measures to curb the property market last month. For three years, Beijing has raised down-payment and mortgage requirements in an effort to curb the property bubble.

Bottom line, China’s recovery remains in place but is far from robust.

Street Bytes

--Stocks registered their fifth consecutive weekly advance for 2013, with the Dow Jones, on the heels of Friday’s 149-point advance, finishing up 0.8% to 14009, or 156 points from an all-time high. The S&P 500 added 0.7% to 1513, or just 53 points from making a high of its own. Nasdaq was up 0.9% to 3179.

For January, the Dow was up 5.8%, the S&P up 5.1% and Nasdaq up 4.0%. This is the 12th time the S&P has started the year up 5% and in the previous 11, the average finished in positive territory for the year. In 10 of the 11 up at least 16%.

--U.S. Treasury Yields

6-mo. 0.11% 2-yr. 0.26% 10-yr. 2.01% 30-yr. 3.22%

I’m not going to start barking about interest rates until the 10-year gets to 2.25%.

--The U.S. Drought Monitor concludes the drought west of the Mississippi River continues, with climatologist Mark Svoboda of the center saying “The drought is firmly entrenched as we roll toward February.”

The western Plains and eastern Rockies are seeing the worst. Accuweather meteorologist Paul Pastelok says, “In the heart of the drought, it doesn’t look good right now.”

East of the Mississippi, at least, the situation is improving.

--Swedish appliance giant Electrolux AB said the market in Europe is likely to get worse before it gets better, though demand in North America continues to increase.

--Dow Chemical CEO Andrew Liveris said the second half of 2012 “saw significant deterioration in the markets we serve, particularly in China,” yet the company sees a better environment there in 2013. Nonetheless, Liveris said the chemical giant had taken “aggressive action to mitigate the effects of a slow-to-no-growth global environment.”

--Caterpillar predicted continued global economic weakness in the first half of 2013, but a better tone in the second half of the year. The machinery maker generates two-thirds of its revenue outside of North America as it lowered its revenue forecast for 2013, “(reflecting) the level of uncertainty we see in the world today.”

Per a previous announcement, CAT also took a charge of $580 million in the fourth quarter after being burned with a Chinese acquisition and alleged accounting misconduct at the operation, ERA Mining Machinery.

--Ford shares fell on the rising costs of fixing its European exposure. Losses on the continent for 2013 are now estimated at $2 billion. Not too long ago, Ford said they would be $1 billion. Then it raised that to $1.5 billion.

Profits for the fourth quarter exceeded expectations as revenue in North America rose 13%, but it’s the Euro situation that caught investors’ attention.

--Chrysler’s net income soared to $1.67 billion in 2012, up from $183 million earned in 2011. Revenue in the fourth quarter was up 13% from a year earlier.

Chrysler has little exposure to Europe, but parent Fiat reported that without Chrysler, it would have lost $1.4 billion last year. Fiat currently owns 58.5% of Chrysler.

--Toyota reclaimed the No. 1 slot in global auto sales, selling a record 9.75 million vehicles around the world in 2012 as the Japanese car industry rebounded far more strongly than expected after 2011’s earthquake and tsunami (as well as flooding in key supplier Thailand that year). General Motors is No. 2, having sold 9.29 million, while Volkswagen was third at 9.1 million.

Nissan and Honda also had record years at 4.9M and 3.8M vehicles, respectively.

--For the month of January, U.S. car and light-truck sales rose 14% over a year earlier, with Toyota’s up 27%, Ford’s up 22%, GM’s and Chrysler’s up 16%, Honda’s up 13%, VW’s up 7% and Nissan and Hyundai’s up 2% apiece. A terrific start to the year.

--Despite problems surrounding the 787 Dreamliner, Boeing said it was business as usual, even as it seems clear a solution to the electrical problems on the plane is weeks away. Boeing continues to produce 787s, but has halted deliveries. CEO Jim McNerney said on an earnings call, “I’m confident we’ll identify the root cause.” The company did revise its revenue forecast down for this year due to the fewer deliveries.

The company reported fourth-quarter profit of $978 million, down from $1.39 billion a year earlier, while revenue increased 14%. Revenue from its all-important defense unit fell 1.5%.

Back to the Dreamliner, Japan’s All Nippon Airways revealed it had repeatedly replaced the batteries even before overheating problems surfaced, so the National Transportation Safety Board said they asked Boeing to provide a full operating history of lithium-ion batteries used. The 787 is the first airliner to make wide use of them.

--Facebook posted a 40% fourth-quarter increase in revenue to $1.59 billion, with overall ad revenue rising 41% to $1.33 billion from a year ago as mobile ads made up 23% of the total. In the prior quarter, Mobile was 14% of total advertising revenue so as CEO Mark Zuckerberg said on Wednesday, “Today there is no argument Facebook is a mobile company.”

Facebook also said that as of late December, 680 million users were actively accessing the social app on smartphones every month, up 57% from a year earlier.

But earnings and revenue figures, while exceeding expectations, didn’t beat the most optimistic of estimates so the share price fell by week’s end.

--Yahoo! Inc. reported fourth-quarter profit and revenue that beat expectations, with revenue, ex- that passed on to partner sites, up 4 percent. CEO Marissa Mayer recorded the first annual sales increase in four years in 2012, but forecasts for this quarter and full year were below expectations.

--California’s real estate market continues to rebound strongly. The number of homes that sold for at least $1 million reached a five-year high in 2012, up 27% from 2011, according to DataQuick.

--The U.S. Department of Justice filed a lawsuit blocking Anheuser-Bush InBev’s $20 billion acquisition of Grupo Modelo, the Mexican brewer, arguing the merger could raise prices in deterring competition.

Bill Baer, assistant attorney-general in charge of the antitrust division, said, “If ABI fully owned and controlled Modelo, ABI would be able to increase beer prices to American consumers. This lawsuit seeks to prevent ABI from eliminating Modelo as an important competitive force in the beer industry.”

The thing is, a combination of AB Inbev and Modelo would control about 46 percent of the $80 billion beer market.

AB Inbev said it would “vigorously contest” the lawsuit.

--According to research firm IDC, Samsung doubled its share of the tablet PC market in the fourth quarter, taking its market share to 15.1%. Apple saw its share slide to 43.6% from 51.7%, despite also seeing a jump in sales.

Global shipments of tablet PCs surged 75% in the final quarter of 2012 to a record 52.5 million units. IDC added that reaction to Microsoft’s Surface tablets was “muted at best,” with nearly 900,000 sold in the final three months of the year.

--Research in Motion renamed itself BlackBerry and, in a do-or-die moment for the company, unveiled the new BlackBerry 10 which will be available in the U.S. in March, but next week in Canada.

--Amazon reported revenues grew by 22%, but were short of expectations, as were earnings, though the profit margin was up and so the shares rallied anew. CEO and founder Jeff Bezos said ebooks were boosting its profitability as he suggested that consumers’ adoption of them was accelerating.

“After five years, ebooks is a multibillion dollar category for us and growing fast – up approximately 70 percent last year. In contrast, our physical book sales experienced the lowest December growth rate [in 17 years], up just 5 percent.”

As for Amazon’s valuation and the share price, I gave up years ago trying to rationalize it.

--According to TransUnion LLC, 33% of all subprime student loans were 90 days or more past due in March 2012, up from 24% in 2007. Overall, in the five years through last March, the portion of all student loans that were 90 days or more delinquent rose to 11.4% from 8.8%.

--Time Inc., home to titles such as Time, People and Sports Illustrated, said it would slash 500 jobs, or 6 percent of its global workforce. Digital revenue is growing rapidly, but it’s not enough to offset the erosion of print advertising. According to the Publishers Information Bureau, advertising pages fell 8.2% in 2012, and 39% since 2006.

--Controversial CEO Aubrey McClendon of Chesapeake Energy Corp. is leaving the company he built into the nation’s second-largest natural-gas producer, citing “philosophical differences’ with the board. The board in turn grew tired of his risk-taking and epic spending ways through acquisition that left the company vulnerable to lower nat gas prices.

McClendon’s own finances were under intense scrutiny the last few years as various loans were revealed to help him cover losses. Actually, the company’s books are a total mess but McClendon will nonetheless leave with parting gifts of $50 million, on top of the $75 million he paid himself in 2008. Among his various outside ventures, he owns a 19% stake in the Oklahoma City Thunder.

--European supermarket giant Tesco dealt the Irish food industry a big blow when it dropped an Irish supplier of beef over the horsemeat scandal. It turns out the original supplier was in Poland, but then passed through to Irish and U.K. processors.

The meat Tesco sold that was tainted did not come from a list of approved suppliers, the chain revealed.

“Nor was the meat from the U.K. or Ireland, despite our instruction that only beef from the U.K. and Ireland should be used in our frozen beefburgers.

“Consequently we have decided not to take products from that supplier in future. We took that decision with regret but the breach of trust is simply too great.”

--Princeton University is hiking tuition 3.9% this fall to over $40,000 for the first time in school history. Coupled with $13,080 for a room and a full meal plan, the cost will be $53,250. But the trustees announced they were increasing financial aid by 4.6%. Sixty percent of Princeton undergraduates receive it. Princeton has a $17 billion endowment, one of the largest in the country. 

By the way, here in New Jersey, Stevens Institute of Technology in Hoboken and Drew University in Madison have tuition of $43,196 and $42,620, respectively. [Kelly Heyboer / Star-Ledger]

--Here’s a fun story, from the Irish Independent:

“A valuable hoard of gold coins dating back almost 400 years has been discovered in the foundations of a Tipperary pub, writes Bernie Commins.

“Although the value of the treasure trove, comprising 81 coins dating from the 1630s to the early 1700s, has not yet been assessed, it was last night described by the National Museum as ‘significant.’...

“There are 35 Charles II coins, 25 James II coins, 19 William III and two William III and Mary III coins.

“The coins were discovered by construction workers at Cooney’s pub on Main Street, Carrick-on-Suir.

“South Tipperary County Museum curator Marie McMahon said the artifacts were stacked in tube-shaped bundles.”

In case you’re thinking, gee, why did the construction workers give them up? That’s the law in Ireland. All artifacts belong to the State and must be reported.

--Shares in Jos. A. Bank Clothiers Inc. plunged about 20% as the maker of men’s apparel said annual profit will fall 20% amid lost sales from unseasonably warm weather and U.S. political uncertainty.

This of course is laughable. Clearly, it was all about the Jets’ dismal football season. Everyone knows that.

Or perhaps it’s because of the “Buy 1 get 3 Free” sale that the company is running again this weekend. Like buy one suit, get three of comparable value free. 

Foreign Affairs

Syria: It is still unclear exactly what happened on Wednesday. There were two reports. One that Israel struck a convoy transporting anti-aircraft missiles to Hizbullah in Lebanon. Another, from Syrian state TV, that a military research facility near Damascus was hit. Syria, Russia, Iran and Hizbullah condemned the attack, the one on the research facility as Syria’s military denied a convoy was hit. Hizbullah’s statement of support for the Assad regime didn’t mention a convoy.

Iran’s deputy foreign minister hinted at retaliation, saying Israel should not rely on its Iron Dome missile shield.

Russia said, “If this information (of an attack) is confirmed, we have a case of unprovoked attacks on targets in the territory of a sovereign state, which grossly violates the U.N. Charter and is unacceptable.

As for the research center, there are conflicting reports whether it is involved in developing chemical and biological weapons. And then an Iraqi newspaper quoted a Western diplomatic source as saying the alleged Israeli attack caused heavy casualties among special Iranian Guards stationed at the facility. This particular source says the talk of an attack on a convoy was meant to divert attention from the attack on the center, which according to this story actually occurred two days before it was reported. [Jerusalem Post]   Confused?

And on Thursday, a Saudi-based paper reported the Syrian regime has already transferred nonconventional weapons to Hizbullah, beginning in early 2012, including 2 tons of mustard gas as well as long-range missiles.

Many of these stories are later proved to be total garbage (see history of the lead-up to the war in Iraq), but if just one is true, it’s obviously a potential game-changer.

Separately, there was a particularly horrific discovery in Aleppo this week...up to 100 bodies, hands bound, executed; seemingly the victims of Assad’s henchmen.

U.N.-Arab League mediator Lakhdar Brahimi, the man with the most thankless job in the world these days, told the U.N. Security Council Tuesday night that Syria is “breaking up before everyone’s eyes,” describing “unprecedented levels of horror.” But the Security Council remains deadlocked on action, namely because of Russia and China. Russia continues to insist that Assad’s departure not be a precondition for peace negotiations.

Editorial / Washington Post

“It might seem as though the horrors of Syria, where more than 60,000 people have died violently in the last 22 months, could not grow worse. Yet steadily, week by week, they do. One measure is the refugee flows: In the past month more than 30,000 people have fled to neighboring Jordan alone, threatening to overwhelm an already unstable monarchy...A group of U.S. senators who recently visited a camp heard horrific stories of the ongoing crimes by the regime of Bashar al-Assad, as well as bitter complaints that Western countries – in particular, the United States – are doing little or nothing to help....

“In speaking about Syria in recent days, Mr. Kerry and President Obama described not a strategy for stopping a bloodbath that threatens vital U.S. interests but rather a series of excuses for inaction. In an interview with the New Republic published over the weekend, Mr. Obama wondered how to ‘weigh’ the thousands dying in Syria against the thousands being killed in the Congo, as if all wars are of equal importance to the United States or the inability to solve every problem means America should not help even where it can.

“Not for the first time, Mr. Obama also asked whether U.S. intervention could ‘trigger even worse violence or the use of chemical weapons.’ The president asked the same question a year ago, and the answer is now known: In the absence of U.S. action, the violence grew far worse and the Assad regime moved dangerously close to using chemical arms.

“The United States could do much to shape the course of events in Syria without using American troops. It could begin providing aid directly to Syrian refugee organizations and civilian councils inside the country, as France has done for months. It could provide arms to moderate rebel factions, so that they can compete with the jihadists and so that they will look to the United States when the war is over. Continued passivity will ensure that the crisis in Syria continues to worsen – along with the consequences for the United States.”

Editorial / Wall Street Journal...re Obama’s comparing Congo to Syria...

“Unlike in the Congo, the U.S. has vital national interests in the Syrian war. One interest is to inflict a strategic blow to Iran by deposing its principal Arab client. Another is to cut Iran’s military-supply link to Hizbullah, a terrorist group that has killed hundreds of Americans. A third is to prevent Syria’s unrest from spilling into its neighbors. A fourth is to avoid the outbreak of a wider regional war. A fifth is to make sure that the U.S. might have some leverage and standing with a post-Assad government in Syria.

“A sixth is to prevent further thousands from being killed. Oh, sorry, that’s an issue less of American interests than of our values, which aren’t in vogue these days.

“The fruit of two years of U.S. inaction in Syria is that the very nightmare scenarios the Administration fretted about are closer to occurring. The U.S. doesn’t have to put boots on Syrian ground to help bring the Assad regime to an end, such as by imposing a no-fly-zone over Aleppo and the rest of western Syria. A similar no-fly-zone over Libya in 2011 helped spell Moammar Gaddafi’s demise.

“In his inaugural, Mr. Obama declared that the era of endless war is over. If he really believes that, the result will be more war.”

Israel: Prime Minister Benjamin Netanyahu told a congressional delegation that the policy choices for dealing with Syria “are between bad, bad and worse.” U.S. Ambassador Dan Shapiro said, “Either the regime will use chemical weapons against the Syrian people, or will transfer the chemical weapons to Hizbullah or other extreme organizations.”

Iran: Tehran is poised for a major technological update of its uranium enrichment program, allowing it to vastly increase production of the material that can be used for both reactor fuel and nuclear warheads.

Diplomats told the Associated Press that Iran recently told the International Atomic Energy Agency that it wants to install thousands of new centrifuges at its main enriching site at Natanz. The machines are estimated to be able to enrich up to five times faster than the present, decades-old equipment.

Uranium is only being enriched to 4 percent at Natanz, but a separate facility at Fordow, the underground one that wasn’t discovered until 2009, is producing material enriched to 20 percent, which can be turned into weapons-grade material (90 percent) much more quickly.

Natanz, though, could be used to raise the percentage to 20 for its uranium as well.

Separately, industry sources say Iran’s oil exports rose to 1.4 million barrels per day in December. Before Western sanctions, Iran was exporting about 2.2 million bpd. But demand from China remains robust, about 600,000 bpd in December, while India is importing 275,000 bpd from Iran. Washington has been loath to try to rein in the Chinese as the White House concludes it would be too damaging to bilateral relations.

Lebanon: Four Lebanese army soldiers were killed in a gun battle with rebels in the Bekaa Valley on Friday as the military was trying to root out a leader of an anti-Assad Islamist group that uses the Lebanese side of the border to hide out from the Syrians.

Egypt: Abdel-Fattah el-Sissi, Egypt’s defense minister and army chief, said in an address to the military academy:

“The continuation of the conflict between the different political forces and their differences over how the country should be run could lead to the collapse of the state and threaten future generations.”

After a week of deadly protests, with a toll around 60, most of which were in Port Said, President Mohammed Morsi is clearly out of his league. He also sees no need for concessions in downplaying the significance of the violence.

“What is happening now in Egypt is natural in nations experiencing a shift to democracy,” he told reporters in Berlin, where he made a quick trip. Morsi sees no need to form a unity government, because a new government will be formed after parliamentary elections this spring.

Earlier, Morsi invoked emergency powers amidst the rioting, saying on television:

“Those who try to scare citizens, use weapons, block roads, throw rocks at the innocent, those who attempt to jeopardize the safety and security of this nation, we must deal with them with all force and firmness.”

The issue in Port Said was the sentencing of 21 soccer fans to death for their role in a riot last year that killed rival fans.

On Friday, protesters firebombed the presidential palace in Cairo.

Mali: French forces entered the last major town in the north. The Islamists melted away. Kidal does present issues with two competing clans claiming control as well. But no French casualties since the first day. 

French President Francois Hollande said, “We are winning this battle....Now the Africans can take over.”

Mali does remain highly dangerous. The other day, four Malian soldiers were killed when their vehicle hit a mine, but France will be turning over the cities they and their Malian colleagues have retaken to the African army forces, as the French move to the back, where, indeed, they would remain targets for terrorists.

But what a success the mission has been to date. And in several polls of French adults, 2/3s of respondents said they backed the government’s decision to send troops to the West African country. Hollande has seen his popularity rise to 44% from 40%, the first uptick since he was elected in May.

But of course should there be casualties, or the mission drag on far longer than the government is hinting, attitudes will change. You also have the issue of retaliation against the French and their homeland.

Additionally, I have to note the action of French Interior Minister Manuel Valls, who said this week Paris was set to deport a string of radical religious imams as part of a fight against “global jihadism.”

“Several radical foreign preachers will be expelled in the coming days....

“I don’t confuse this radical Islam with the Islam of France but there is a religious environment, there are Salafist groupings, who are involved in a political process, whose aim is to monopolize cultural associations, the schooling system.

“We will expel all these imams, all these foreign preachers who denigrate women, who hold views that run counter to our values and who say there is a need to combat France.

“We have to be extremely firm and that I will be.”

Vive le France.

North Korea: The nation was placed under martial law by Kim Jong-un, who told his front-line troops to “be ready for a war,” according to South Korean media.

Kim held an emergency meeting of his top defense and security officials last weekend, with a nuclear test being imminent. North Korean state media has also reported that Kim ordered his officials to take “effective, high-profile state measures.”

As the New York Times reports, however, the American intelligence community is hoping the North conducts a test because it would provide insights into how much progress the North has made toward a weapon that could threaten the U.S. or its allies.

Of course Iran is also anxious to gauge Pyongyang’s progress, as much to see what the rest of the world does in response.

[Meanwhile, South Korea successfully launched a satellite into orbit from its own soil for the first time. Two prior attempts had failed, and two others were aborted, so this is a big milestone.]

China: Editorial / Washington Post

“Given President Obama’s preoccupation with ending what he calls ‘a decade of war,’ it’s hard to believe that the United States could be dragged into a military conflict in the western Pacific over a group of tiny, uninhabited islands claimed by both Japan and China. Probably, it won’t be. Yet thanks to a disturbing confluence of events in those countries and Mr. Obama’s own commitments, the chance that it will happen is rising....

“China’s state-controlled media have been whipping up something like war fever, with one paper declaring that a military fight is ‘more likely’ and the country ‘needs to prepare for the worst.’ Disturbingly, this provocative and dangerous campaign has been overseen by the new Communist leadership under Xi Jinping, which has ample motive to divert attention from domestic problems.

“The political climate in Tokyo, too, gives cause for concern. The new prime minister, Shinzo Abe, is a nationalist who has packed his cabinet with politicians who share his aims of boosting Japanese defense spending and standing up to China. Japan has refused negotiations over the islands, declaring that there is nothing to discuss....

“Secretary of State Hillary Rodham Clinton has also reiterated a position the administration first adopted two years ago: A security treaty binding the United States to defend Japan against attack applies to the islets. That public stance may have been intended to deter China from provoking a crisis, but it also magnifies the stakes for Washington. Should China attempt to seize control of the territory, Mr. Obama could have to choose between backing Japan in a military confrontation and a climb-down that would undermine the ‘pivot to Asia’ he has placed at the center of his foreign policy.”

This week China said its navy was proceeding with a deep-water training exercise, away from the disputed islands but then the vessels did enter what Japan sees as its territorial waters in heading farther out. A Chinese foreign ministry spokesman today said China-Japan relations are at a “critical phase.”

Germany: Chancellor Angela Merkel has a personal approval rating of 65% but her party, the Christian Democrats, has been polling far less in state elections, like the recent one in Lower Saxony where the CDs received just 36%.

So Merkel needs a coalition partner and that has been the pro-business Free Democratic Party. But the FDP has seen their numbers plunge from 15% since the last general election in 2009 to about 2% today. You need 5% to gain seats in parliament.

That 2%, though, was before allegations against the FDP leader, 67-year-old Rainer Bruderle, came out.

In a first-person account in mass-circulation Stern magazine, 29-year-old German journalist Laura Himmelreich says Bruderle made lewd comments to her. Such as when Bruderle was at a bar, chatting with reporters, when he looked at Himmelreich and remarked, ‘You could fill out a dirndl.’

If you don’t know what a dirndl is, think St. Pauli Girl.

Anyway, Merkel will have to look to the Social Democrats for a grand coalition, but their leader, Peer Steinbruck, is a jerk himself, suggesting last month that Merkel was popular because she gets ‘a women’s bonus’ from female voters.

Mexico: A powerful explosion rocked an auxiliary building next to the headquarters of state-owned oil giant Pemex, killing at least 32 people, with more than 100 injured and many trapped inside. Early reports say it was a gas boiler explosion. The iconic 54-story office tower suffered damage to the lower floors but it appears the bulk of the casualties were in this three-story building that is attached to it.

Venezuela:

Vice President Nicolas Maduro read an 11-page letter bearing the signature of President Hugo Chavez at a regional meeting this week, in another attempt to show the country Chavez is still in charge, let alone alive.

But Chavez hasn’t been seen in public and his voice not heard in Venezuela since he was hospitalized in Cuba Dec. 11.

Random Musings

--Paul Richter / Los Angeles Times...on Hillary Clinton and her legacy at the State Dept.

“She devoted long hours to signature issues, including empowerment of women and girls, gay rights, Third World development, health and Internet freedoms. Clinton lent her support to a wide range of new projects and organizations, and she appointed new officials in the State Department to shepherd them. Some of these may eventually have huge effects, but many are at an early stage.

“At the same time, the most important and toughest foreign policy issues of the day – Iran, North Korea, Afghanistan-Pakistan, the Arab-Israeli standoff – weren’t resolved during the four years. Some grew more intractable. Though none of that may be Clinton’s fault, the lack of diplomatic breakthroughs on her watch limits her legacy.

“ ‘She’s coming away with a stellar reputation that seems to have put her almost above criticism,’ said Aaron David Miller, a longtime U.S. peace negotiator who is a vice president at the Woodrow Wilson International Center for Scholars. ‘But you can’t say that she’s really led on any of the big issues for this administration or made a major mark on high strategy.’”

--Editorial / Washington Post

“In 2012, Republicans ran against the massive cuts to defense that might occur in early 2013 under the congressionally mandated budget sequester. At an Oct. 23 presidential debate, President Obama responded that his opponent, Mitt Romney, was blowing the risk out of proportion: The cuts, he said, ‘will not happen.’

“Well, those cuts are now scheduled to take effect on March 1 – and, by the look of things, they will. The GOP has changed its tune; the Republican majority in the House seems content to let them happen. Meanwhile, Mr. Obama, whose defense secretary has warned in the direst terms against imposing the cuts – hardly mentions the subject.

“How did we get here?

“The authors of sequestration, which was supposed to scare Congress into agreement on an alternative, did not anticipate the GOP’s postelection maneuvering. The party is abandoning its unpopular threat to block a debt-ceiling increase – and using the threat of the sequester instead. The goal, apparently, is still more spending cuts without any tax increases, a deal Mr. Obama properly refuses and which is less sensible for the country than is a combination of entitlement cuts and higher revenue through closing tax loopholes, which Mr. Obama might accept....

“The Pentagon was already planning to trim a manageable $450 billion from its spending plans over the next decade. If sequestration happens, and continues over a decade, that figure would more than double. As a result, the United States could have to terminate major weapons programs and would be left with the smallest ground force since prior to Pearl Harbor, according to estimates by Defense Secretary Leon Panetta.

“The sequester would force the Pentagon to reduce its planned spending by 16.3 percent between now and Sept. 30, and to do so in an undifferentiated, across-the-board manner. The resulting furloughs, training reductions and procurement hassles would sow disorder and diminish readiness...

“Given the uncertain global security environment, we are more skeptical than others of the need to downsize defense. But even those who disagree should recognize that sequestration is not the way to go about it. It’s become a cliché of sorts to predict that partisan gridlock will undermine national security. If sequestration goes forward unchanged, that prediction will come true.”

--Regarding Chuck Hagel, Obama’s nominee for secretary of defense, and his Senate hearing yesterday, wow, not a real impressive performance, was it? I’m on record as liking the guy, but...well...here’s the New York Post’s John Podhoretz:

“ ‘I’ve said many, many things over many, many years,’ said Chuck Hagel...He was trying, for the umpteenth time during his testimony, to explain away another of the many, many impolitic statements that have come to light over the past couple of months.

“Well, as a result of this confirmation hearing – the most disastrous of its kind since another veteran senator, John Tower, blew himself up in his pursuit of the same post back in 1989 – Hagel has probably lost many, many votes to confirm him as secretary of defense.

“Though he was being asked about things he had said over the course of the past 15 years, it was what Hagel said yesterday – and how he said what he said – that had his defenders reeling in shock and even his critics aghast at how poorly he handled himself.

“Hagel said many, many things yesterday – incoherent things, confused things, wrong things, untrue things, and things that seemed to contradict other things he had said previously. Some were about Israel, some about Iran, some about American policy....

“ ‘There are a lot of things I don’t know about,’ Hagel said, when it came to America’s defenses. ‘If confirmed, I intend to know a lot more than I do.’

“But why should he bother? After all, he said in perhaps the most head-shaking comment of the day, ‘It doesn’t matter what I think.’

“Sen. Kelly Ayotte (R-NH) begged to differ: ‘It matters what you think,’ she found herself saying in response.

“Or maybe this was the most head-shaking comment: Defense secretary is ‘not a policymaking position,’ and because he has to work in consultation with others and in service to the president, he won’t be ‘running anything.’

“After yesterday, maybe he won’t. Because maybe, after this horror show, the Senate will decide it just can’t countenance confirming Chuck Hagel. That would be a shocker, but no less shocking than his performance.”

Hagel will still get confirmed.

--Michael Gerson / Washington Post...on the immigration topic

“President Obama has grown testy about reporters who have a ‘default position’ that policy debates have two sides. ‘On almost every issue,’ he recently told the New Republic, ‘it’s, ‘Well, Democrats and Republicans can’t agree’ – as opposed to looking at why is it that they can’t agree. Who exactly is preventing us from agreeing?’

“His insight is undeniable. If Republicans didn’t have all those pesky convictions and objections, agreement in Washington would come as surely as a river flows to the sea. This is the best description yet of Obama’s second-term governing vision: the invincible assumption of his own rightness. To him, objectivity requires the recognition that reality has only one side, which the president fully occupies....

“On immigration reform, the divisions have not yet similarly hardened. In fact, the prospects are surprisingly good. Democrats are beholden to Latino voters; Republicans are justifiably terrified by an electoral future without them. Leaders of both parties seem to recognize that our immigration system is inhumane and economically counterproductive. A bipartisan group of eight senators has set out principles of reform, including improved border security, an orderly system for guest workers and a rigorous path to citizenship for 11 million undocumented immigrants already in the country. Republican senators and staffers express the rarest of opinions in Washington: trust for a leader of the other party. They generally believe that Sen. Chuck Schumer (D-N.Y.), chairman of the immigration subcommittee, wants a bipartisan solution.

“Behind this fragile consensus is a remarkable, year-long effort by Sen. Marco Rubio (R-Fla.) to move the GOP beyond its suicidal embrace of immigrant self-deportation. Rubio has been willing to risk his tea party credibility in making the conservative case for reform....

“But now enters President Obama. If he chooses – if he prefers a wedge issue to a legislative accomplishment – he could easily polarize this most polarizing of issues. It wouldn’t take much to undermine Rubio and spook the House Republican caucus. Obama could push for quick green cards for undocumented workers, leapfrogging them over people currently in the legalization line. He could, under pressure from labor unions, limit the scope of guest-worker programs. He could downplay border security and employer verification – which many Republicans regard as the only guarantees that current problems won’t be repeated 20 years down the road....

“If Obama pushes a fast pass to legalization above other reform priorities, he could fracture Rubio’s nascent coalition.

“Which may be the point. So far, White House contact with Rubio and his staff has been minimal and perfunctory. Why elevate a possible Republican presidential candidate, with a powerful immigrant story, who can explain his views on Univision without a translator? Wouldn’t it be easier for Obama, once again, to push past the red lines of his opponents and then declare their opposition to be evidence of irrationality?

“It would, unless the president actually wants an immigration deal, which would require him to do something he finds difficult: recognize that an argument can have another side.”

Eight senators – four Republicans, four Democrats – came up with a plan to address the failings of the immigration system in one comprehensive measure and to offer a “tough, fair and practical road map” that would eventually lead to a chance at citizenship for nearly all of the immigrants here illegally.

“ ‘We on the Democratic side have said that we are flexible and we want to get a bill,’ Mr. Schumer told reporters in New York on Sunday. ‘But there’s a bottom line, and that’s a path to citizenship for the 11 or so million people who qualify. We’ve made great, great progress with our Republican colleagues.’”

Julia Preston / New York Times

“Under the senators’ plan, most illegal immigrants would be able to apply to become permanent residents – a crucial first step toward citizenship – but only after certain border enforcement measures had been accomplished.

“Among the plan’s new proposals is the creation of a commission of governors, law enforcement officials and community leaders from border states that would assess when border security measures had been completed. A proposal would also require that an exit system be in place for tracking departures of foreigners who entered the country through airports or seaports, before any illegal immigrants could start on a path to citizenship.”

But the latest, Friday, from the Washington Post’s Peter Wallsten and Rosalind S. Helderman:

“Rising tensions over whether to give illegal immigrants a chance to pursue full citizenship could ruin what President Obama and congressional leaders agree is a pivotal moment in resolving long-simmering problems in the country’s immigration system.

“Immigrant advocates and their Democratic allies insist that now, at long last, is their time. After various failed proposals over the past decade, they finally feel they have the leverage to accept nothing less than a path to full citizenship for the millions of people living illegally in the country.

“But although Republican leaders are newly interested in a compromise on immigration, many in the party say that allowing undocumented immigrants to live here legally is enough and that a push for citizenship would face fierce, and possibly insurmountable, opposition from conservatives....

“On the right, some conservatives have begun heaping criticism on one of their own rising stars, Sen. Marco Rubio...On the left, some liberals are privately grousing that Democratic senators working with Rubio are giving too much ground....

“The Senate group, which includes Rubio and top members of both parties, would require that the U.S.-Mexico border be found secure and that other strict enforcement measures be enacted before those here illegally could become citizens. Many on the left say the path needs to be more straightforward, while many on the right see even the compromise idea as a non-starter, deeming it too lenient.”

This incredibly complex issue is going to take months, it would seem, before legislation is finally crafted and presented to both chambers....if at all. It’s up to President Obama. If he wants to torpedo it so Republicans continue to lose the Hispanic vote, he can. For my part, I’ll have little on the topic going forward until it’s actually decision time.

But one last word for now...New Jersey Democratic Senator Bob Menendez is one of the bipartisan group of eight working on immigration. He is also the new chair of the Senate Foreign Relations Committee.

This week, however, he has been forced to deny allegations that he consorted with prostitutes during trips to the Dominican Republic with a longtime friend and campaign donor, Dr. Salomon Melgen, a well-known South Florida ophthalmologist.

FBI agents raided Melgen’s office on Tuesday, the doctor being a target in an investigation of healthcare fraud. 

Menendez, in a statement, described Melgen as a “friend and political supporter...for many years,” admitting he had traveled on Melgen’s plane on three occasions, “all of which have been paid for and reported appropriately.”

Well not really. Maybe eventually paid for, but definitely not reported appropriately, it would seem. 

Editorial / New York Post

“As officials sort out the charges and denials, it’s illuminating to look back at how Menendez responded in October, after U.S. Secret Service officers doing advance work for a presidential visit to Colombia were caught bringing prostitutes to their rooms.

“ ‘If the facts are true, they should all be fired,’ he said back then, though under Colombian law it’s not illegal to hire hookers.

“ ‘The reality is that the Secret Service...represent[s] the United States of America.’

“He got that right. We don’t know yet whether Menendez is guilty. But if, in his words, ‘the facts turn out to be true,’ surely the Menendez standard ought to be applied to Bob Menendez, too.”

--Iowa five-term Democratic Sen. Tom Harkin said he will not seek reelection in 2014, making him the third senator up for reelection this cycle to announce his retirement; Sens. John D. Rockefeller IV (D-W.Va.) and Saxby Chambliss (R-Ga.) being the others.

Reminder, Democrats, with a current 55-seat majority, will be defending 20 of the 34 seats up for grabs and Harkin’s now looks to be one of the most competitive.

Harkin, 73, said the recent death of his friend, Sen. Daniel Inouye of Hawaii was a factor.

“It begins to bring home that life is fleeting. I’ve had the privilege of 40 years in the House and Senate...but it’s somebody else’s turn.”

--President Obama’s favorable rating soared to 60% in a new Washington Post-ABC News poll, the highest since his first year in office. Independents see him favorably by a 60-36 margin, compared with 51-45 a year ago. Independent voters backed Mitt Romney by a 6-point margin in November.

But 80% of Republicans have an unfavorable view of Obama. It was 78% last January.

--George Will / Washington Post...on New Jersey Gov. Chris Christie

“His budget for 2013 calls for spending less than did the state’s 2008 budget. He has vetoed a tax on millionaires three times. He has scrapped, exuberantly, with public employee unions. In the aftermath of Superstorm Sandy, 41,000 families are still homeless. Nevertheless, 61 percent of his constituents think the state is on the right track, more than twice the 27 percent who thought so when he entered office three years ago. His 74 percent job approval rating includes 56 percent among Democrats and 78 percent among independents. This in a state where only 29 percent view the Republican Party favorably. And New Jersey is one of just three states (with New York and Maryland) in which Barack Obama improved upon his 2008 margin of victory (18 points, up from 16).

“When the House of Representatives pondered longer than he thought proper in considering the bill for aiding Sandy’s victims, Christie placed, in less than an hour, four unanswered late-evening calls to Speaker John Boehner, calls that were, Christie says mildly, ‘increasingly agitated.’ At last, Christie did his best imitation of Mount Vesuvius, denouncing Boehner by name. The approval-disapproval numbers for his eruption were 79-15, including 70-22 among Republicans. People may not like government, but they enjoy one operatic governor....

“He is potentially the un-Romney of Republican presidential politics, the candidate who connects viscerally, sometimes perhaps too much so, with voters....

“He calls the GOP’s decision, made in the run-up to 2012, to lengthen the nominating process ‘the stupidest thing the Republican Party ever did.’ When the process is too protracted, ‘You wind up with a good candidate who’s damaged.’...

“By 2015, the Republican nominating electorate will have forgotten Christie’s effusive praise of Obama’s post-Sandy solicitousness toward New Jersey. And Christie will be the rambunctious fellow who before Sandy described Obama as ‘a man walking around in a dark room looking for the light switch of leadership.’ Remember the name of Mickey Spillane’s famous protagonist: Mike Hammer.”

--New York Democratic Gov. Andrew Cuomo’s approval rating went from a stratospheric 74% on Dec. 12 to 59% this week in the wake of his sweeping new gun law.

--The New York Times said on Thursday that Chinese hackers had “persistently” attacked its computers over the past four months in retaliation for a story on Premier Wen Jiabao, but the hackers weren’t able to access the sensitive material related to the report. In a statement the Times said:

“Security experts hired by The Times to detect and block the computer attacks gathered digital evidence that Chinese hackers, using methods that some consultants have associated with the Chinese military in the past, breached The Times’ network.”

Jill Abramson, the paper’s executive editor, said, “Computer security experts found no evidence that sensitive emails or files from the reporting of our articles about the Wen family were accessed, downloaded or copied.”

The Wall Street Journal also reported similar Chinese hack attacks on their operations.

--Finally, we note the passing of the great former New York City mayor, Ed Koch, 88. I love what NBC reporter Gabe Pressman, himself 88, said of Koch today. “He defeated ‘defeatism.’...He was a psychotherapist, treating the whole city.”

New York truly was the pits before Koch took over on Jan. 1, 1978, for his first of three terms. Greg David of Crain’s New York Business had a good summary.

“The history books tell how the city had barely escaped bankruptcy in the fiscal crisis, but that is only part of the story.

“A seven-year-long economic collapse had finally reached its bottom, but not before eliminating 620,000 jobs. By comparison, New York lost 135,000 jobs in the Great Recession.

“People were fleeing, too. The Census two years later would find the population had declined by 800,000. Half of New Yorkers told a New York Times poll they wanted to be living somewhere else in five years.

“But Ed Koch changed everything, unexpectedly, maybe because he was such a controversial and divisive mayor.

“He was a conventional New York liberal, representing Greenwich Village in the City Council and then the East Side in Congress. He worked on Jewish immigration issues, better aid for pregnant women, housing and transportation.

“When he won election in 1977, he asked himself how he could revive New York. His conclusion was that he could only do so if the economy prospered, and he could do that only if it – and the businesses that made the economy go – received his intense attention.

“This was a decisive break because mayors before Mr. Koch, stretching all the way back to the revered Fiorello La Guardia, had either not understood the economy or saw it as a resource to be taxed and used to right social wrongs.

“In his typical hyperbole, he explained this to a newspaper reporter looking back on the fiscal crisis. ‘Past administrations did not talk about jobs and profits,’ he said, ‘but how to get New York City to be the No. 1 welfare city in America. The whole business of our city is how do you get people to stay here, how do you get people to come here and how do you get business to thrive.’

“Joyce Purnick, who covered both John Lindsay and Mr. Koch for The New York Times, agrees. ‘Koch did not apologize for being pro-development,’ she said. ‘Koch never got enough credit for turning around the city’s attitude toward business. This was a major shift that we now take for granted.’”

Personally, I received my first job working in Manhattan in 1980 and then my first opportunity on Wall Street in ‘82. That year, the city reached a milestone, as reported by Greg David.  “The number of people working in finance surpassed those with factory jobs for the first time.”

By the time Koch’s 12-year run was over, the city had added 400,000 more jobs than when he took office, even though another 275,000 manufacturing jobs had disappeared.

Ed Koch was truly an original. The perfect mayor for Gotham. A leader who came along when the city most needed him. He grabbed the opportunity, ran with it, and New Yorkers will be forever grateful. Many New Jerseyans, too.

---

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

God bless America.
---

Gold closed at $1670
Oil, $97.77

Returns for the week 1/28-2/1

Dow Jones +0.8% [14009]
S&P 500 +0.7% [1513]
S&P MidCap +0.4%
Russell 2000 +0.7%
Nasdaq +0.9% [3179]

Returns for the period 1/1/13-2/1/13

Dow Jones +6.9%
S&P 500 +6.1%
S&P MidCap +7.9%
Russell 2000 +7.3%
Nasdaq +5.3%

Bulls 54.3
Bears 22.3 [Source: Investors Intelligence...very much in danger zone]

Nightly Review video schedule...Mon. thru Thurs., posted by 5:30 PM ET.

Dr. Bortrum posted a new column....he worked for 17 years on lithium batteries and comments on Boeing’s recent issues.

Have a great week. I appreciate your support.

Brian Trumbore