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11/03/2012

For the week 10/29-11/2

[Posted 12:00 AM ET]

Sandy…and then the depression sets in…including the election

The level of devastation is beyond anything I ever thought I’d see. It’s unthinkable.”

--New Jersey Gov. Chris Christie

My state of New Jersey and the surrounding region was as prepared as you can be for a storm that had been telegraphed for about a week. I started stocking up in earnest Thursday, though I didn’t go overboard. Enough to get by for about seven days if I lost power, as was the case last year with Hurricane Irene and the freak Halloween snowstorm (though I was away for part of this one and returned to no power). By Friday, my local supermarket was having major issues with the prime staples like bread and water. People were topping off their gas tanks. I normally do the same but thought I don’t travel anywhere and 3/4s is more than enough. Bring on Hurricane Sandy. We waited with trepidation as the computer models all lined up the same by Saturday.

Only we didn’t know what Tuesday morning’s first light would reveal in full. Unthinkable devastation to the coastline, as it turned out, including not just New Jersey and Long Island, but also New York’s five boroughs and coastal Connecticut.

Inland, where I am, we were slammed with hurricane gusts and in driving around Summit and a neighboring community in the aftermath, I’ve been astounded at the sight of some of the trees that were toppled in the wind, the houses that were crushed, and the destruction wrought, even after last year’s two awful storms.

But my multi-use building, with the Dunkin’ Donuts on the ground floor, did not go dark as it had before (nor did Merck’s huge headquarters across the street) even as the rest of my town and the surrounding area has been without power all week, though it’s slowly coming back on from the utility maps I look at a few times a day, checking for progress. You see, my parents moved in! Nice to have a son nearby with heat and a place to sleep. My brother and his wife are without power in the town of Chatham, next to Summit. Harry is a newspaper editor for a weekly nearby so he’s working away, but my sis-in-law, Cindy, who normally trains it into New York, is scrambling to find power so she can recharge her laptop now and then (including here). Her train line isn’t running yet.

Our gas lines are as long as you’ve seen on television and the networks’ coverage of the usual spots on the Garden State Parkway or New Jersey Turnpike. It really is a mess, for sure.

But it’s nothing like the devastation along the coast. That’s sickening. Aside from a regular family vacation at a house we rented in my youth on Long Beach Island, I haven’t had the biggest connection to the Jersey Shore since I was a kid, though for years a good friend from high school (actually since sixth grade), Tony, has had our poker group to his place in Mantoloking each year. I’ve told you of these trips, including one fairly recently, where we combine a round of golf with plenty of card action for two nights. I won’t tell you the physical condition I’ve been in when I’ve finished those particular “Week in Reviews” at 2:00 or 3:00 a.m. Tony has an absolutely beautiful spot he worked hard for all his life. Right on the beach. The perfect house in a very cool community.

Tony’s place is still standing, last he heard. But two of his neighbors’ homes were washed away. It will be quite a while before Tony is able to check on what is left of his house, or whether the town will ever rebuild. A bridge was washed out, connecting the barrier island to the mainland, and a new channel has been cut.

Thanks to having power, I’ve been glued to the coverage like all of you have from around the country and around the world, for that matter. I greatly appreciate some of the notes I’ve received from readers just checking in.

But I do have some Big Picture thoughts, as we await another northeaster mid-week that could easily undo any progress made on the power and flood recovery front, especially in bringing down the trees now just hanging on.

First, those who say that this tragedy, with 100 or so dead and millions of lives severely disrupted, is somehow stimulative are nuts. At least rationality is entering the discussion by week’s end vs. the happy talk on Tuesday. I used the analogy in one of my new “Nightly Review” videos of a trip I took in 2003 to the scene of a killer tornado in Pierce City, Missouri. Six or seven died there and an historic downtown district was destroyed so I went to spread around some cash (and instead ended up donating towards the purchase of a new fire truck rather than handing it out individually). Sandy wasn’t a tornado that severely devastates a section of a town that in most cases is eventually rebuilt.

Sandy totally destroyed some shore communities for good. They will not be rebuilt, or if they ever are, they will not take their new shape until defenses have long been put in place and the utility companies servicing the area are convinced a new master plan will work. So we’re talking years. As Gov. Christie said, his first step is to meet with the Army Corps of Engineers and see just what defenses are needed and whether some communities should even be located where they once were.

So it’s not about rebuilding everywhere, like it would be here in Summit if a tornado plopped down and took out six or eight blocks of homes. There is no rebuilding for many places.

I also use the analogy of all those boat marinas you’ve seen that have been devastated, and the scores of boats that have been destroyed. Do you really think those boat owners are going to head out to their local dealer in the next few months and buy a new one? Where the heck would you put it?! Do you think the marina owner is going to get his insurance payment (making a big assumption he or she was properly insured in the first place) and just rebuild when his community needs a new master plan and officials may decide the land should be returned to the state it was originally found in?

Think of all the jobs that have been lost servicing these communities that aren’t just coming back. So, no, this is not stimulative in the least, aside from those being paid to remove rubble and trees.

Do you think those living in the flooded parts of Hoboken, N.J., just minutes from Manhattan, are going to simply spray some disinfectant around and just resume their normal lives knowing that the ancient infrastructure of a city once known for having more bars per capita than anywhere in the country (true…been to them all) is literally collapsing underneath their feet and that more big rains, let alone a future storm surge, will bring up tons of raw sewage as was the disgusting case with Sandy?

For those not from the area, yes, this storm was big. The television pictures are not exaggerating the scope in any way. It’s widespread, in a key economic region for our country, and there will be a negative impact.

Of course eventually we all go on. But I do get a kick out of the overused word in all natural disasters, in all parts of the country, “resilience.”

Americans don’t have a monopoly on resilience. Our politicians and network anchors and hack pundits like to use the word, but humans are resilient, not just Americans.

The Bangladeshi facing floods every year…now that’s resilience. The Brits during the Blitz of World War II…that’s resilience. It’s human nature.

But we also have an election on Tuesday in this country, a rather important one, so we’re told. I’m pretty sure I have never used the phrase ‘this is the most important election of our lifetimes,’ as so many say.

I prefer to think we have had such a run of lousy presidents, especially the last two, that they’ve combined to put us so far behind the eight ball that I’m not sure it really matters much. We’re headed to a severe debt crisis, the stock market will crash at a time of its choosing, there will be some unrest in the streets of America that will be a bit unsettling, and then a leader will emerge, finally, and we’ll get back on the right path. 

I hope you agree I haven’t changed my tune this entire election cycle. I am not a fan in the least of either presidential candidate. The only reason why I’m voting for Mitt Romney is I think he has a chance to be a pragmatist, which is the first thing we need, and one who may, fingers crossed, be able to reach across party lines enough to find agreement on entitlement and tax reform…at least get the process started on the kind of path where the financial markets, if not giddy, will take heart that all is not lost and business will feel comfortable investing in their companies again.

This has been a truly pathetic campaign. And everything I’ve written above doesn’t mean a lick if we have a foreign policy crisis that throws all the political melodrama of the past year (or four) out the window.

Foreign policy? Foreign affairs? What is that? I have zero confidence either candidate can handle what may hit us down the road, and it is unfathomable to me the free pass Barack Obama has received on this front. Historians will treat him harshly. What has transpired in Syria, and what follows as the conflict continues to spread, is all on Obama. And if Iran gets the bomb?

So there are tons of concerns, both domestic and foreign, any one of which can sink us. Just how resilient are we? Over the coming year or two, we’re about to find out.

---

Wall Street

If Hurricane Sandy was the “October Surprise” of the presidential campaign, then it was indeed New York’s Katrina moment as well. And for one reason. Just as in Katrina, the television networks were all herded into one area, in this instance Battery Park City, the surge started to come up over the wall by a foot or two, nothing catastrophic, maybe some water in one or two subway stops downtown, I’m thinking, and little did we know the water was pouring in from the East River blocks away from the TV trucks. [Think Katrina and how the network anchors after the storm was winding down were on dry land, saying how N’Orlins had absorbed the blow with few scratches, not knowing the Lower Ninth Ward was being flooded to catastrophic effect even as they spoke.]

And so it was with Sandy that Wall Street took a blow, but the actual New York Stock Exchange stayed dry and the weather disruption was but two days, still the longest such weather-related outage for the exchange since 1888. We survived no trading for two days just fine. There was nothing heroic in moving on in this case. Some of the workers on the exchange and at firms who had no power nearby certainly had god-awful commutes, and will for another week or so in some instances, but if that’s the worst thing that happens to these people in their lives, they should count themselves lucky. 

As for the action once trading resumed, the market went up and down, just like it always does, though before my cynicism gets carried away, some of the economic news was solid, including a better than expected report on manufacturing, the October ISM reading which came in at 51.7, the highest since May, though a Chicago PMI was only 49.9 (50 being the dividing line between growth and contraction). Personal income, up 0.4%, and consumption, up 0.8%, for October was pretty much in line with the latter continuing to show a, err, resilient consumer! Factory and construction orders for September were OK, both positive, while the S&P/Case-Shiller barometer on housing found the 20-city metro price index rose 2% in August over year ago levels. [I lay it all out unlike anyone else in my “Wall Street History” column if you want more data.]

And then on Friday we had the release of the October jobs report and the non-farm payroll rose a respectable 171,000 with upward revisions for August and September. The unemployment rate, though, ticked back up to 7.9% so the Democrats can tout they’ve been creating more jobs because of their policies (cough cough), while Republicans can say, one, that the 7.9% unemployment rate is higher than when Obama took office, and, two, the percentage of those underemployed is still 14.6% (though down a tick from September’s 14.7%).

Meanwhile, earnings continue to roll in and they remain lackluster. I haven’t seen the figures incorporating this week’s releases but thus far, revenues are 1% less than last year’s pace, while earnings are up about 1% over 2011.

But the market did swoon a bit on Friday, with the Dow falling 136 points even on the heels of the better than expected jobs numbers, so what gives? Uncertainty over the election, plus a stronger dollar that then killed commodities were two of the causes. 

Plus we have this fiscal cliff issue hanging over us like the sword of Damocles. And this week the Treasury Department announced that the U.S. will probably hit its $16.4 trillion borrowing limit by year end, just as Congress and the occupant of the White House are addressing the fiscal cliff at the same time. I liked what economist Mark Zandi had to say about this double whammy:

“It adds to the caldron of the dark brew. That makes the disaster more disastrous.”

Yes, Treasury can play games with the debt limit to buy more time, as it did in the summer of 2011, but come hell or high water the debt ceiling issue must be decided no later than February and all the while you are going to have the likes of Moody’s, and probably S&P once again, weighing in on probable ratings downgrades for the United States unless meaningful compromises are reached that begin to address our severe problems. Suffice it to say, markets will be roiled as every rumor of a deal surfaces and is then scotched, until finally our not so merry band of politicos do whatever it is they’ll end up doing.

Editorial / Times of London

“America is set for a real cliffhanger. And not just in the presidential election. Whoever wins next week, America and the rest of the world will face a nerve-racking few weeks as the new administration seeks a way through the deficit deadlock….

“A deal will probably be reached to postpone the measures (ed. big tax increases and spending cuts). But a permanent lifting of the threat will require a bipartisan agreement on a long-term plan for dealing with America’s ballooning deficit. On past experience, the chances of such an agreement do not look good….

“Judd Gregg, the former Republican senator who is one of the leaders of the Fix the Debt campaign (ed. a group of top U.S. chief executives for the most part), was in London last week, warning that without a deal there would soon be another financial crisis when investors decided America could no longer pay its debts without unleashing inflation.

“There are lawmakers in both parties who don’t want a deal and agreement will be impossible without strong leadership from the winner of next week’s election. In terms of presidential leadership, Mr. Romney is untested while Mr. Obama has been tested and found wanting. As America approaches the cliff, the world could be forgiven for feeling just a bit nervous.”

Europe

Eurostat, a collector of data for the 17-nation eurozone, said the unemployment rate for the region hit a new high since they began keeping data in 1995, 11.6%, with France at 10.8%, Ireland 15.1%, Portugal 15.7% and Spain 25.8% (Greece always has a lag in its reporting). Spain’s youth unemployment rate is now 54.2%.

Spain’s retail sales plunged 11% in September over year ago levels, which was the flip side of an increased VAT (value-added tax) that juiced revenues some so Spain’s deficit picture wasn’t quite as bad as the Bank of Spain had thought, minus 0.3% for the third quarter vs. an earlier estimate of minus 0.4%. Nonetheless, Spain remains mired in recession and Prime Minister Mariano Rajoy is insistent he won’t trigger a bailout mechanism until it is in his country’s best interests. This as Catalans prepare to go to the polls on Nov. 25 for parliamentary elections that could lead to a vote on secession from Madrid. [Madrid says this is unconstitutional.]

Germany’s official jobless rate hit 6.9% and there are growing indications the engine of Europe will see a contraction in its economy for the fourth quarter. It doesn’t help that 40% of its exports are to the Euro bloc.

And back to Greece, this was not a good week here. Prime Minister Antonis Samaris desperately wants a two-year extension, to 2016, on the established debt targets that the European Commission, European Central Bank and International Monetary Fund (the troika) have set as a precondition for Greek Bailout II, 130 billion euro on top of the 110 billion from Greek Bailout I.

But not only has the government revised down its forecast for growth in 2013 to minus 4.5%, which would mean a cumulative decline in the Greek economy since 2008 of 22%, it said the total debt to GDP would rise next year to 189% when it’s supposed to be on its way down to 120%.

Plus, the Samaris coalition is fracturing and various austerity measures demanded by the troika are either barely passing parliament or being tabled for now to see if the votes can be rounded up.

Otherwise, Greece will not receive its next tranche of aid, 31 billion euro, and it will run out of money end of November. This whole drama is to reach a conclusion on Nov. 12, when the troika is to decide on whether or not to save Greece. Everyone says it’s a certainty Greece will get the money, but it’s the policies eventually adopted by the government and implementation of same that really matters in this way too long running Greek tragedy.

But there’s more to the Greece story this week, including the release of the so-called “Lagarde list” of 2,000 Greeks with Swiss bank accounts.

Back in 2010, current IMF managing director Christine Lagarde was French finance minister and as a way of supporting her Greek counterparts, forwarded a disc she had been handed with the names of Greek depositors. She just did it as a favor, but then her counterpart at the time, George Papaconstantinou, did nothing.

So a journalist, Costas Vaxevanis, got hold of the list and published it in a magazine he edits. Needless to say, many of the 2,000 were furious and Vaxevanis was taken to court but acquitted of violating data privacy laws. Now Papaconstantinou, and his successor, face charges of criminal negligence. Also the head of Greece’s Pasok party, Evangelos Venizelos, another former finance minister, faces possible charges for not pursuing the tax cheats as well, which is making a mess of the governing coalition of which Pasok is a member. It all comes to a head with a budget vote on Nov. 11, the day before the troika rules on the aid.

Elena Becatoros / AP…on Greek society in free-fall

“Life in Athens is often punctuated by demonstrations big and small, sometimes on a daily basis. Rows of shuttered shops stand between the restaurants that have managed to stay open. Vigilantes roam inner city neighborhoods, vowing to ‘clean up’ what they claim the demoralized police have failed to do. Right-wing extremists beat migrants, anarchists beat the right-wing thugs and desperate local residents quietly cheer one side or the other as society grows increasingly polarized.

“ ‘Our society is on a razor’s edge,’ Public Order Minister Nikos Dendias said recently, after striking shipyard workers broke into the grounds of the Defense Ministry. ‘If we can’t contain ourselves, if we can’t maintain our social cohesion, if we can’t continue to act within the rules…I fear we will end up being a jungle.’”

Is this the future of America?

Wolfgang Munchau / Financial Times

“The recession in southern Europe, including Greece, will probably continue at least until 2014, at which time debt to GDP ratios are likely to be similar to today’s. If you keep piling austerity program on austerity program for a sufficiently large number of years, then the policy might eventually work. But that’s a politically unrealistic proposition. Portugal, for example, is already cutting subsistence payments for very poor people to meet the agreed deficit targets.

“I believe therefore that crisis resolution still has to happen, but I see no evidence that we are getting there, not even in small steps. I do not expect any change in this situation even after the German elections. Since the crisis is not going to resolve itself, I cannot see any fundamental change in the situation – except that the ECB has removed the risk of accidents in the short term.

“To put it another way: if you are optimistic, then surely you must treat this as a liquidity crisis. And then, surely, you must have believed this six months ago. I think this is wrong, but at least it would be an internally consistent position.

“What I cannot get into my head is why anybody would be optimistic now when they were pessimistic a few months earlier. Could someone explain this to me?”

Street Bytes

--Stocks finished the storm-shortened week mixed, with the Dow Jones losing 14 points to 13093, while the S&P 500 gained 0.2% and Nasdaq lost 0.2% to 2982. It was Nasdaq’s fourth straight weekly decline.

--U.S. Treasury Yields

6-mo. 0.15% 2-yr. 0.28% 10-yr. 1.71% 30-yr. 2.91%

--Asia Beat: China’s purchasing managers’ index for October, 50.2 vs. 49.8 in September and a three-month high is a further sign of bottoming.

Japan’s retail sales for September, up 0.4%, were less than expected as domestic auto sales for the month fell 13.9%. Signs are pointing to contraction in the overall economy as parliament wrangles over a deficit bill, this nation’s own “fiscal cliff” that would involve draconian spending cuts. One of the issues is the opposition is demanding Prime Minister Noda face an election well before the August deadline for holding same.

South Korea had some decent news, the best industrial figure for October in four months, while October exports rose over year ago levels, albeit just 1.2%.

And Singapore’s unemployment rate fell to 1.9%. In our wildest dreams, muse Americans (and Spaniards).

--China’s four largest banks rose 15% in the third quarter. This is good. The better they do, the better we all do, whether you like that fact of life or not.

--One thing concerning China isn’t good. A Financial Times analysis of China’s listed companies reveals that 66% have reported third-quarter results reflecting an increase in accounts receivable (unpaid bills).

--Canada cuts its growth forecast for 2013 to 2% from 2.4%; this on top of an expected 2.1% clip for 2012, citing the same global headwinds everyone else faces, including lower commodity prices as a result of decreasing demand. 

Of course if the global picture stabilizes next year, and China rebounds, Canada’s government will be revising numbers upwards, more so than others (except Australia, which also has a large exposure to commodities…as I begin to ramble…)

--Ireland isn’t totally out of the woods…the nation’s main telecom company, Eircom, is laying off 2,000, or one-in-three workers, as it emerges from bankruptcy. Just five months ago, Eircom insisted the total would only be 1,000.

--Air France-KLM Group announced it was laying off 1,300 from its KLM unit after a previously announced 5,000 cuts at Air France.

--Some of the major retailers reported solid results for October, like Macy’s, up 4.1% on same-store sales (outlets open at least a year). Nordstrom reported sales were up 9.8%, far ahead of analysts’ expectations. But the impact of Sandy had yet to be really felt.

--As the Wall Street Journal noted, many homeowners in the New York/New Jersey region don’t have flood insurance because they live in areas where historically this was never a problem. Such as Moonachie, N.J., inundated by storm surge, with only 21% being properly insured. This compares with, say, 47% in Seaside Heights (or 90% in Ocean City, Md.). Only 1% of New York City residents have flood insurance.

--Auto sales for October were hit by Sandy. Most months the last seven days account for 30% of sales, so you lost three days, Oct. 29-31, in a large segment of the country (1,000 auto dealerships in New York and New Jersey alone). Thus, GM, Chrysler and Ford all ended up selling less than originally expected, with GM’s up 4.7%, Chrysler’s up 10% and Ford’s edging up only 0.3%. Toyota’s, up 16%, also fell short of estimates.

--Ford reported a strong third-quarter net income of $1.6 billion, despite a $470 million pretax loss in Europe (where losses for the year will hit $1.5 billion). Ford also promoted Mark Fields to be chief operating officer, thus making him heir apparent to succeed CEO Alan Mulally, 67, who has said he is staying through 2014.

--Fiat, which controls Chrysler Group, forecast a prolonged downturn in the European market, with CEO Sergio Marchionne saying, “We see continuing weak trading conditions for the remainder of 2012, extending well into 2013 and at least part of 2014.”

Chrysler Group, however, reported a $381 million profit for the quarter.

--Honda Motor’s China car sales plunged 54% in October from a year earlier owing to the territorial dispute between China and Japan. A recovery in sales (and consumer attitudes) will be very slow.

--Toyota’s Scion, Lexus and Toyota brands took the top three spots in Consumer Reports’ annual reliability rankings, while the Toyota Prius C, a subcompact hybrid, got the best overall score. Mazda, Subaru, Honda and Acura also scored well. Ford and Lincoln plunged to the bottom because of problems with the touch screens and “bumpy transmission.” Cadillac (GM) was the top U.S. brand. [Dee-Ann Durbin / AP]

--The Environmental Protection Agency said that Hyundai and Kia have overstated the gas mileage on most of their models from the past three years. Sanctions could be on the way. The EPA said it’s the first case in which erroneous test results were uncovered in a large number of vehicles from the same manufacturer. Only two similar errors have been discovered since 2000, and those involved single models. Executives from both automakers said they would reimburse owners. For example: “The owner of a car in Florida with a one mpg difference who drove 15,000 miles would get a debit card for $88.03 that can be refreshed every year as long as the person owns the car.” [Tom Krisher / AP]

--Sharp, the century-old Japanese consumer electronics company, admits there is a “material doubt” whether or not it can survive as it projects a financial year (March) net loss of $5.6 billion. Sharp blames failed investments in liquid-crystal display manufacturing as prices for flat screen televisions and other household items plunged globally.

[Sony, on the other hand, is sticking with its forecasted projection for a profit this year.]

--Meanwhile, Panasonic posted a loss of nearly $9 billion in the third quarter due to massive restructuring charges and said its annual loss would be close to $10 billion; this after most analysts expected Panasonic to earn a small profit for the quarter, while they had been warned about the big annual loss.

“We apologize for such a big gap in our outlook,” said Hideaki Kawai, managing director at the electronics giant. “The slump in the digital consumer market was dramatic.”

--Dow Chemical quantified its restructuring efforts…3,000 job cuts are forthcoming.

--Interesting piece in the Wall Street Journal that serves as a follow-up to a topic of mine the other week concerning America’s energy independence and how the U.S. could be the global leader by 2014 (over Saudi Arabia)…but…you need a certain price level to make some methods of exploration economic. Such as is now the case in Canada’s oil sands, where the costs of drilling are rising rapidly, including for labor and construction materials. While “the most cost-efficient oil sands producers need U.S. benchmark prices of at least $50 a barrel to justify investment in new projects…for operators who mine bitumen and produce synthetic crude from it, the break-even threshold can exceed $100 a barrel.”

Just keep this in mind next time you hear of oil companies, heaven forbid, making a profit. We want them to! We want them to makes lots and lots of money so they’ll keep drilling. And we want a president who on day one (or two), flies up to Canada and signs a comprehensive energy cooperation agreement with our great friends there, and then on day three (or four) bops down to Mexico and begins negotiations with something similar with our friends there (which would be more complicated).

--Speaking of crude, Exxon Mobil Corp. beat earnings expectations as it reported a profit of $9.57 billion for the quarter, though oil and natural gas production from its wells hit their lowest levels in three years. 

Chevron, in missing on its earnings, also cited lower production.

--UBS, as part of its massive restructuring that is resulting in job cuts of 10,000, said it would be drastically scaling back its investment banking operation and exiting fixed income trading; a boon for JPMorgan Chase, Deutsche Bank and others.

[UBS did a terrible job in notifying some employees they were being laid off.  In London, 100 fixed income traders learned of their dismissal when their entry passes were denied at the turnstile.]

--Apple announced the executive responsible for the Apple Maps disaster was canned, while the head of retail is also leaving (unrelated). The maps guy was responsible for Siri, the voice search assistant, as well. No word on whether she’ll have to find another fake line of work.

[Apple had another poor week on the share price front and is now down 18% from its Sept. 21 intraday high of $705 to Friday’s closing figure of $577.

--Walt Disney Co. is acquiring filmmaker George Lucas’ Lucasfilm Ltd. and its “Star Wars” franchise for $4.05 billion in cash and prizes. Disney said it plans to release at least three more films in the Star Wars saga, with the first in 2015 (Episode 7)

--Carl Icahn has taken a 10% stake in Netflix, saying, “With the smart TV everything will be digitized. Microsoft and Google, they’re going to be represented on the home page of your TV,” thus making it a strong takeover target in Icahn’s mind, specifically by Microsoft.

--Average weekday circulation for 613 U.S. dailies decreased 0.2% for the period ended Sept. 30 from a year earlier, but Sunday circulation for 528 Sunday papers was up 0.6%.

The Wall Street Journal, the country’s largest newspaper by average weekday circulation, saw its numbers rise 9.4% from a year earlier. 

--Shares in Generac Holdings, GNRC, soared 22% in three days. What does it do? It’s a pure play on generators.

--The Legatum Institute’s annual prosperity index (a six-year-old index of wealth and wellbeing in 142 countries based on various categories such as economic strength, education and governance), had the U.S. in 12th. We’re No. 12! We’re No. 12! Topping the rankings are Norway, Denmark and Sweden.

In the sub-indexes, Legatum named Switzerland as having the strongest economy and home to the best system of governance. Denmark was best for entrepreneurship and New Zealand had the best education. Iceland was the safest and Luxembourg the healthiest.

Afghanistan is last in security.

--The major television networks’ ratings are plummeting in the first four weeks of the fall season; CBS down 11%, Fox down 25%, ABC off 8%. Only NBC, which has been bringing up the rear for a decade, saw a 12% gain.

The significance of the declines means the networks will be on the hook for millions in “make goods,” or free commercials.

One factor hurting the networks (aside from four presidential and vice presidential debates) is the emergence of the NFL Network’s Thursday night game of the week.

--The latest James Bond flick, “Skyfall,” which opens in the U.S. on Nov. 9, took in a near record $77.7 million during last weekend’s openings in 25 other countries, particularly in Britain where the gate was second only to Harry Potter.

--Due to tough climate conditions in France and Italy, global wine production will shrink 6% this year to its lowest point since 1975, according to a Paris trade group.

--The French parliament has raised the tax on beer 160 percent which will hike the price of a pint like 20%! Zut alors!

Foreign Affairs

Syria: At least 28 government soldiers were killed in a rebel operation on Thursday and at least a half-dozen were executed, documented in a video posted online, which is yet another instance of the rebels committing a war crime; as well as a further example of the mess you’ll see post-Assad, whenever that is, though our president, recall, said it would be about 15 months ago. I seem to have missed Bashar’s exit. Did you catch it?

120 were killed in fighting across the country on Thursday alone, and, as you saw, it continued unabated through the four-day Eid al-Adha holiday.

It was a week that also saw Qatari Prime Minister Sheikh Hamad, in an interview with Al-Jazeera, take issue with UN-Arab League envoy Lakhdar Brahimi, who is calling the conflict in Syria a “civil war.” Hamad says it’s “not a civil war but a war of extermination against the Syrian people.”

Hamad went on to say the war is being waged “with a license to kill, endorsed firstly by the Syrian government and secondly by the international community.”

Hamad was clearly referencing Russia and China, who have vetoed one UN resolution after another that criticizes and threatens action against the Assad regime. [Daily Star]

Separately, the number of Syrian refugees in neighboring Turkey, Jordan and Lebanon (and to a lesser extent Iraq) is slated to more than double to 700,000 by year’s end, right in time for winter. Many of the border areas are in the mountains. Heck, I’ve seen snow on the mountains in Lebanon in April in my trips there so a further humanitarian disaster looms, but donations for food and housing have been miniscule to date.

Iran: Ayatollah Ali Khamenei put his foot down and told President Ahmadinejad and those in opposition to him, like the Larijani brothers, to cut the crap and stop bickering in public; Khamenei specifically saying this was providing ammunition to “foreign media and enemies,” as reported by Thomas Erdbrink of the New York Times.

Ahmadinejad can’t run for a third term in next June’s presidential election

Ralph Peters / New York Post…on President Obama’s policy the last four years here:

“We’ve spent four years talking. Tehran’s spent four years pursuing nuclear weapons. When brave Iranians challenged their oppressors in the street, begging for ‘hope and change,’ our president cowered in silence, protecting his cherished ‘strategy’ of negotiations with a regime that kills Americans and wants all Israelis dead. The ayatollahs’ thugs crushed the uprising.

“Predictably, negotiations failed. Now we’re told that sanctions are the answer. But there’s zero chance that Iran’s leaders will abandon their nuke program. If they did, their domestic authority would collapse. (I believe that this administration has privately accepted that Iran will get nukes.)”

Israel: Did Israel hit a Sudanese weapons manufacturing site the other week? Yes. Some say the strike was designed as much to send a message to Iran as it was to take out a plant supplying weapons to Hamas in Gaza. The site was also supposedly controlled by Iran and on Monday, two Iranian warships docked in Sudan.

And Israel is ready to act should Hizbullah attempt to move Syria’s chemical weapons into Lebanon, as well as ballistic missiles. Defense Minister Ehud Barak also warned in London this week that Israel may have to strike Iran in the spring, but would hold off until then because it appears Iran used a third of its medium-enriched uranium for civilian purposes, thus delaying its military nuclear program. Barak told The Daily Telegraph that without this delay, Israel would have had to strike before the U.S. presidential election. The minister talked of reaching “the moment of truth” – the decision on whether or not to launch an attack – in eight to ten months.

Libya: I mentioned on one of my Nightly Review videos this week that the White House was successfully running out the clock (before Tuesday’s vote) in the Benghazi matter and now with Sandy so front and center, attacks on the administration’s handling of the tragedy just won’t receive the air time they otherwise might have this final weekend.

Plus there are reports that CIA security officers responded within 25 minutes to a call for help, seemingly refuting a Fox News report asserting that CIA managers ordered them not to go.

A senior intelligence official said in a statement: “At every level in the chain of command, from the senior officers in Libya to the most senior officials in Washington, everyone was fully engaged in trying to provide whatever help they could. There were no orders to anybody to stand down in providing support.”

Fox asserted its sources said the CIA did order security officers to “stand down” and there was a lengthy delay before officers ignored orders and went to help. Among those in the rescue effort was Tyrone Woods, who later died in the attacks.

The CIA has remained silent until now because they didn’t want to reveal the extent of their presence in Benghazi.

Iraq: According to a report by the U.S. special inspector general for reconstruction in Iraq, the nation has endured “a troubled year evidenced by increasing official corruption, resurgent violence” and apprehension about the war in Syria since the last U.S. troops departed. [Tony Capaccio / Bloomberg]

854 Iraqi civilians were killed in the third quarter, more than 1,600 wounded in attacks, with September’s casualty figure of 1,048 being the highest in two years.

China: So, are you all set for the Communist Party Congress beginning on Nov. 8? I was hoping ESPN or someone would televise it, not that we don’t already know what the result will be, as opposed to a certain election being held in our country two days earlier where the outcome is in much doubt.

Xi Jinping will succeed Hu Jintao as party chief and president in this once-a-decade leadership change, while Li Keqiang will replace Wen Jiabao as prime minister.

The most immediate issue is will Xi take the right steps to get the economy humming again. Secondarily, how will Xi handle the dispute with Japan in the East China Sea? He has to appease the nationalists, and a military leadership as hawkish as any in recent memory. Major General Luo Yuan said this week that the islands in dispute should be turned into a bombing range, which would mean ripping up peace treaties going back to World War II.

Remember, the 2.3 million-member People’s Liberation Army is kind of like the “house army” for the Communist Party as an AP story I read put it. [I’d mention the reporter’s name but didn’t see it…sorry…I just like this term that I hadn’t seen before.]

No general is challenging authority, but I’ve read numerous hardline pieces over the past year in particular, the tone of which bears watching. Certainly it’s in keeping with the growing potency of China’s hardware.

Lastly, the Xi-Li duo also has to tackle the issue of an increasingly restive work force and citizenry. Regarding the latter, crowds opposed to the expansion of a petrochemical plant in eastern China won out after days of protests in Zhejiang province; a major win for a rising environmental movement.

As for the New York Times story that blistered Premier Wen’s family members for accumulating some $2.7 billion in wealth, the Wen family threatened legal action, which in and of itself was rare; families normally staying silent in such cases.

Russia: All kinds of rumors concerning President Vladimir Putin and his health. At first, Putin’s aides said he hadn’t been seen in public because he didn’t want his motorcade to disrupt traffic when he ventured to the Kremlin, but now a spokesman is admitting that he had a lingering “sports injury” that everyone speculates was a result of his venture into an ultra-light aircraft to fly with Siberian cranes. He was seen walking with a limp a day or two after. Reuters has reported he needs back surgery.

Said Kremlin spokesman Dmitry Peskov: “He was suffering from some muscle pain then. Actually, we have never tried to conceal it because any athlete has lots of injuries, which, however, do not mean any restrictions of his activities.”

What of his mistresses? Or was that a low blow?

Meanwhile, billionaire Mikhail Prokhorov announced he was quitting business to enter politics, forming a new party, Civic Platform, that will be a third power competing both with the Kremlin and the opposition. I wish Prokhorov the best but needless to say he has his work cut out for him. In March’s presidential election, he finished third as an independent with 8%, falling to Putin’s 64% and Communist leader Zyuganov’s 17%.

So I’ve long predicted Putin would be gone by yearend. Of course that doesn’t look real good today. Then again, is Putin having back surgery?

Ukraine: In the parliamentary elections last Sunday, President Viktor Yanukovich’s Party of Regions finished first with 32%, while jailed former prime minister, Yulia Tymoshenko, was second with 24% for her Fatherland party. The Communist Party had 14% and the new party of heavyweight champion Vitali Klitschko, Udar, came in at 13%. [The vote is a highly complicated two-step process, though, and final results are days off.]

But the ultranationalist (read Fascist) Freedom party garnered 9% when pre-election polls had it at 1%...not good. Tymoshenko and Klitschko want to align themselves with the West. Yanukovich, while he speaks of himself as independent (an immensely corrupt one), is certainly in the Kremlin camp.

International observers, of which there were some 3,500, said that while the vote itself seemed relatively free of fraud, it was hardly a free election as Yanukovich’s party dominated the airwaves and restricted access to those in opposition; what the regional security body OSCE called “the abuse of power and the excessive role of money.” The OSCE went so far as to say the election “reversed democracy.” And at week’s end, Canadian monitors announced there was indeed manipulation of ballots taking place. It also seems the Communists don’t want to be in Yanukovich’s coalition, as they have in the past.

Myanmar: At least 60 have been killed in ethnic violence between Buddhists and Muslims. Thousands of homes have been burned.

Random Musings

--Various final polls:

Washington Post / ABC News…49-48 Obama, nationally; 49-48 Obama in 8 “tossup” states

New York Times / CBS News: 48-47 Obama, nationally…women: 52-44 Obama…men: 51-44 Romney

Pew Research Center: 47-47, nationally

CNN/ORC…50-49 Romney in Florida

NBC News / Wall Street Journal…49-46 Obama in Wisconsin; 49-47 Obama in New Hampshire; 50-44 Obama in Iowa

Fox News: Romney 46-44 in Virginia (51-47 Obama, Washington Post/ABC)

Ohio Newspaper Assiociation: 49-49 in Ohio

Minneapolis Star-Tribune: 47-44 Obama (Obama was up 8 in Sept.)

The Des Moines Register endorsed Mitt Romney for president last Sunday; the first time they endorsed a Republican presidential candidate since Richard Nixon in 1972. I got a particular kick out of this because a few days before, Bill O’Reilly was harrumphing in classic O’Reilly fashion, “Well we all know the Des Moines Register will endorse Obama.” Sorry, Bill.

The Register correctly said of Romney that he should focus on building consensus instead of “wasting time on issues that animate many in his party.”

--As I told you awhile back, the election results are going to be delayed due to Ohio and the “nightmare scenario” with the ‘provisional’ ballots. You’ll hear enough about this over the next few days so I won’t repeat the details. The point is, if by 10:00 p.m. ET on Tuesday the networks are telling you this is going down to the wire, get some sleep. Go to bed. Because that means Ohio will end up deciding things and we might not know their official tally under around Nov. 17. I remember in 2000 I didn’t stay up for that fiasco. We’ll survive regardless. But not the kids.

--Various opinions on the election….all sides:

Michael Goodwin / New York Post

“Each time I mention that I voted for Barack Obama in 2008, I get a blast from some who didn’t. ‘How could you be so dumb?’ is a typical response to my confession.

“It is certainly a confession – of error. Obama fooled me once, but not twice. I’m voting for Mitt Romney.

“To understand why I’m switching, it helps to understand why I backed Obama four years ago. I am a Democrat, but vote as an independent. I see people, not parties, so Obama’s label played no role.

“My choice involved a simple calculation. Would John McCain or Obama be more likely to forge a consensus on big issues? America was dangerously polarized, and unable to act in ways that even 60 percent of the public could support. History shows that paralysis leads to disaster….

“When the financial crisis hit, McCain stumbled. He wanted to postpone a debate and rushed back to Washington – but had nothing to say or do. Obama kept silent and followed the lead of congressional Democrats. While not exactly great statesmanship, he at least looked steady.

“McCain, a genuine American hero, often revealed his maverick streak, his choice of Sarah Palin being Exhibit A. Despite doubts about her readiness, I found myself defending her against the vicious attacks from the left, especially by women.

“McCain was my real problem…

“Obama’s soaring rhetoric enticed me at first, and I agreed that a restoration of the Clinton presidency would be a bad idea….

“Where he totally fooled me was his claim to be a pragmatist, not an ideologue. He spoke of uniting the country and I believed he was capable and sincere. That he won 70 million votes and more than two-thirds of the Electoral College spoke to his appeal.

“He failed as president because he is incompetent, dishonest and not interested in the actual work of governing. His statist policies helped consign millions of Americans to a lower standard of living and his odious class warfare further divided the nation. He had no intention of uniting the country – it was his Big Lie.

“I don’t hate him. But I sure as hell don’t trust him.”

Editorial / New York Times

“The economy is slowly recovering from the 2008 meltdown, and the country could suffer another recession if the wrong policies take hold. The United States is embroiled in unstable regions that could easily explode into full-blown disaster. An ideological assault from the right has started to undermine the vital health reform law passed in 2010. Those forces are eroding women’s access to health care, and their right to control their lives. Nearly 50 years after passage of the Civil Rights Act, all Americans’ rights are cheapened by the right wing’s determination to deny marriage benefits to a selected group of us. Astonishingly, even the very right to vote is being challenged.

“That is the context for the Nov. 6 election, and as stark as it is, the choice is just as clear.

“President Obama has shown a firm commitment to using government to help foster growth. He has formed sensible budget policies that are not dedicated to protecting the powerful, and has worked to save the social safety net to protect the powerless. Mr. Obama has impressive achievements despite the implacable wall of refusal erected by Congressional Republicans so intent on stopping him that they risked pushing the nation into depression, held its credit rating hostage, and hobbled economic recovery.

“Mitt Romney, the former governor of Massachusetts, has gotten this far with a guile that allows him to say whatever he thinks an audience wants to hear. But he has tied himself to the ultraconservative forces that control the Republican Party and embraced their policies, including reckless budget cuts and 30-year-old, discredited trickle-down ideas. Voters may still be confused about Mr. Romney’s true identity, but they know the Republican Party, and a Romney administration would reflect its agenda. Mr. Romney’s choice of Representative Paul Ryan as his running mate says volumes about that.

“We have criticized individual policy choices that Mr. Obama has made over the last four years, and have been impatient with his unwillingness to throw himself into the political fight. But he has shaken off the hesitancy that cost him the first debate, and he approaches the election clearly ready for the partisan battles that would follow his victory.”

--New York City Mayor Michael Bloomberg endorsed Barack Obama, writing in Bloomberg View that Hurricane Sandy “brought the stakes of Tuesday’s presidential election into sharp relief.” Bloomberg added:

“Our climate is changing. And while the increase in extreme weather we have experienced in New York City and around the world may or may not be the result of it, the risk that it might be – given this week’s devastation – should compel all elected leaders to take immediate action….

“We need leadership from the White House – and over the past four years, President Barack Obama has taken major steps to reduce our carbon consumption, including setting higher fuel-efficiency standards for cars and trucks.”

Edward Luce / Financial Times

“This weekend the Obama campaign added an exclamation mark to its slogan, which is now ‘Forward!’ It is probably too late to come up with anything more persuasive. ‘I guess it’s better than backward,’ said Bruce Springsteen after the president asked him to write a song around the theme. ‘It is not much to go on.’

“Mr. Obama was never going to rediscover the once-in-a-generation alchemy of 2008. Then he was young, black, exciting and not from Washington. He offered a demoralized America the chance to show the world it could renew itself. Whether or not he squeaks through next week, his most resonant change is that it is now normal to have a black president in the White House. It remains an extraordinary feat. But it has already happened.

“As the incumbent, Mr. Obama could hardly have campaigned again on a theme of change (except when talking about wresting control of Capitol Hill from the Republicans). Nor, given the continued weakness of the recovery, could he imitate Ronald Reagan’s ‘Morning in America.’ All he could do was promise voters the economy would mend and convince them it would not under Mitt Romney. The rest is mood music.

“Yet he could hardly have made a more uninspiring job of it. Perhaps the most startling revelation of the past nine weeks is that Mr. Obama is no longer a very good campaigner. Since governing is nowadays a permanent campaign, this does not bode well for how he would fare in a second term. Indeed, the soporific way in which he has engaged the electorate gives reasons to worry a second term would not be much different from the past two years.”

Charles Krauthammer / Washington Post

“Government grows in size and power as the individual shrinks into dependency. Until the tipping point where dependency becomes the new norm – as it is in Europe, where even minor retrenchment of the entitlement state has led to despair and, for the more energetic, rioting.

“An Obama second term means that the movement toward European-style social democracy continues, in part by legislation, in part by executive decree. The American experiment – the more individualistic, energetic, innovative, risk-taking model of democratic governance – continues to recede, yielding to the supervised life of the entitlement state.

“If Obama loses, however, his presidency becomes a historical parenthesis, a passing interlude of overreaching hyper-liberalism, rejected by a center-right country that is 80 percent non-liberal.

“Should they summon the skill and dexterity, Mitt Romney and Paul Ryan could guide the country to the restoration of a more austere and modest government with more restrained entitlements and a more equitable and efficient tax code. Those achievements alone would mark a new trajectory – a return to what Reagan started three decades ago.

“Every four years we are told that the coming election is the most important of one’s life. This time it might actually be true. At stake is the relation between citizen and state, the very nature of the American social contract.”

Peggy Noonan / Wall Street Journal

“Look at where he started, placing his hand on the Bible Abe Lincoln was sworn in on in 1861. It was Jan. 20, 2009. The new president was 47 and in the kind of position politicians can only dream of – a historic figure walking in, the first African-American president, broadly backed by the American people. He won by 9.5 million votes. Two days after his inauguration, Gallup had him at 68% approval, only 12% disapproval. He had a Democratic Senate, and for a time a cloture-proof 60 members. He had a Democratic House (256-178) with a colorful, energetic speaker. The mainstream media were excited about him, supportive of him.

“His political foes were demoralized, their party fractured.

“He faced big problems – an economic crash, two wars – but those crises gave him broad latitude. All of his stars were perfectly aligned. He could do anything.

“And then it all changed. At a certain point he lost the room.

“Books will be written about what happened, but early on the president made two terrible legislative decisions. The stimulus bill was a political disaster, and it wasn’t the cost, it was the content. We were in crisis, losing jobs. People would have accepted high spending if it looked promising. But the stimulus was the same old same old, pure pork aimed at reliable constituencies. It would course through the economy with little effect. And it would not receive a single Republican vote in the House (three in the Senate) which was bad for Washington, bad for our politics.   It was a catastrophic victory. It did say there was a new boss in town. But it also said the new boss was out of his league.

“Then health care, a mistake beginning to end. The president’s 14-month-long preoccupation with ObamaCare signaled that he did not share the urgency of people’s most immediate concerns – jobs, the economy, all the coming fiscal cliffs. The famous 2,000-page bill added to their misery by adding to their fear….

“You have to build the kind of trust it takes to do something so all-encompassing.

“And so began the resistance, the Tea Party movement and the town-hall protests, full of alarmed independents and older Democrats. Both revived Republicans and, temporarily at least, reunited conservatives.

“Why did the president make such mistakes? Why did he make decisions that seemed so unknowing, and not only in retrospect?

“Because he had so much confidence, he thought whatever he did would work. He thought he had ‘a gift,’ as he is said to have told Senate Majority Leader Harry Reid. He thought he had a special ability to sway the American people, or so he suggested to House Speaker John Boehner and Majority Leader Eric Cantor.

“But whenever he went over the heads of the media and Congress and went to the people, in prime-time addresses, it didn’t really work. He did not have a magical ability to sway. And – oddly – he didn’t seem to notice.

“It is one thing to think you’re LeBron. It’s another thing to keep missing the basket and losing games and still think you’re LeBron.

“And that really was the problem: He had the confidence without the full capability. And he gathered around him friends and associates who adored him, who were themselves talented but maybe not quite big enough for the game they were in. They understood the Democratic Party, its facts and assumptions. But they weren’t America-sized. They didn’t get the country so well….

“He doesn’t do chastened. He didn’t do what Bill Clinton learned to do, after he took a drubbing in 1994: change course and prosper.

“Mr. Obama may yet emerge victorious. There are, obviously, many factors in every race. Maybe, as one for instance, the seriousness of the storm has sharpened people’s anxieties – there are no local crises anymore, a local disaster is a national disaster – so that anxiety will leave some people leaning toward the status quo, toward the known.

“Or maybe, conversely, they’ll think he failed to slow the oceans’ rise.

“We’ll know soon.

“Whatever happens, Mr. Obama will not own the room again as once he did. If he wins, we will see a different presidency – even more stasis, and political struggle – but not a different president.”

David Brooks / New York Times

“Let’s try to imagine what the world would look like if President Obama is re-elected.

“Washington over the next four years would probably look much as it has over the last two: Obama running the White House, Republicans controlling the House and Democrats managing the Senate. We’d have had a long slog of an election before a change-hungry electorate, and we’d end up with pretty much the same cast of characters as before….

“Now let’s try to imagine the world if Mitt Romney were to win. Republicans would begin with the premise that the status quo is unsustainable. The mounting debt is ruinous. The byzantine tax and regulatory regimes are stifling innovation and growth.

“Republicans would like to take the reform agenda that Republican governors have pursued in places like Indiana and take it to the national level: structural entitlement reform; fundamental tax reform. These reforms wouldn’t make government unrecognizable (we’d probably end up spending 21 percent of GDP in Washington instead of about 24 percent), but they do represent a substantial shift to the right….

“The bottom line is this: If Obama wins, we’ll probably get small-bore stasis; if Romney wins, we’re more likely to get bipartisan reform. Romney is more of a flexible flip-flopper than Obama. He has more influence over the most intransigent element in the Washington equation, House Republicans.  He’s more likely to get big stuff done.”

--George Will / Washington Post

“Energetic in body but indolent in mind, Barack Obama in his frenetic campaigning for a second term is promising to replicate his first term, although simply apologizing would be appropriate. His long campaign’s bilious tone – scurrilities about Mitt Romney as a monster of, at best, callous indifference; adolescent japes about ‘Romnesia’ – is discordant coming from someone who has favorably compared his achievements to those of ‘any president’ since Lincoln, with the ‘possible’ exceptions of Lincoln, LBJ and FDR. Obama’s oceanic self-esteem – no deficit there – may explain why he seems to smolder with resentment that he must actually ask for a second term.”

--Re Hurricane Sandy…Republican Haley Barbour (former Mississippi governor) / Washington Post

“Having worked as governor with administrations of both parties on several natural disasters, including Hurricane Katrina, I am surprised – to the point of disbelief – at the reactions from both right and left that New Jersey Gov. Chris Christie (R) has said favorable things about the Obama administration’s efforts in these early days after Hurricane Sandy.

“At the same time, I find it interesting that many in the media act as though it is of great political import that Christie praises Obama for trying to help – when the same media organizations challenged and criticized me for not attacking the Bush administration in the early days after Katrina.

“Christie is no doubt operating under the same thinking I learned from my old high school football coach: Praise in public; criticize in private. I knew that it would be unwise to nitpick the people with whom my state would be partnered for years, especially when those people did more right than wrong.

“Because of the damage wrought by Sandy, New Jersey and the federal government will work together for years in the sheltering, cleanup, recovery and rebuilding efforts. Really, their working relationship has barely begun….

“Republicans worried that Christie saying anything favorable about Obama is politically disloyal need to remember that a governor’s first responsibility is to his or her state and its people. Those in the media looking to determine political winners and losers in this situation should stop. We Republicans ought to be proud of public officials who, like Christie, are faithful to the job they’re elected to do.”

Same topic…Editorial / New York Post

“America this week got an up-close look at a very rare bird indeed: a politician who wears his heart on his sleeve while giving not a tinker’s damn about what people think about it.

“Not since Rudy Giuliani inspired America in the aftermath of 9/11 has an elected leader stepped up to the plate like New Jersey Gov. Chris Christie did this week.

“It’s not just that he was anywhere and everywhere even before the monster storm struck, warning people in flood-prone areas to evacuate.

“Since the storm, he’s been up and down the Garden State, surveying the devastation, talking to as many stricken residents as possible and overseeing rescue efforts.

“Gone has been the brashness, the swagger, the in-your-face style. Instead, we’ve seen a starkly emotional governor, whose expressions of loss are deeply personal.

“A lifelong New Jerseyan who loves his state….

“(As) the governor noted: ‘I have a job to do. I’ve got 2.4 million people out of power. I’ve got devastation on the shore. I’ve got floods in the northern part of my state.’

“Christie this week proved that he’s much more than just Jersey attitude. He’s got the let’s-get-it-done leadership to back it up.

“And that’s what people saw.”

--New Jersey has a senate race between incumbent Democrat Robert Menendez and Republican challenger Joe Kyrillos with Menendez (who I am not a fan of) slated to romp.

Well, too bad the state is occupied with Sandy because a sex scandal just broke wherein two women from the Dominican Republic allege Menendez paid them for sex. Challenger Kyrillos wants Menendez to release his travel records. Too late…and not exactly a priority for us voters now.

--I didn’t have a chance to write of this last time…an article in the November issue of The Atlantic by Thomas E. Ricks, the former Washington Post war reporter now with the Center for a New American Security who has written a book titled “The Generals.” 

Ricks did some great, balanced reporting from Iraq and Afghanistan and writes of the incompetence of some of our military leaders. I often cited Ricks in the past as part of my railing over America’s military leadership. Men like Generals Tommy Franks and Ricardo Sanchez. An example:

“Most generals get the opportunity to lose, at worst, one war. Franks, who from mid-2000 to mid-2003 oversaw the U.S. Central Command, the headquarters for operations in the Middle East, bungled two. Warning signs began flashing in late 2001, with his tepid effort to capture Osama bin Laden in Tora Bora, on the Afghanistan-Pakistan border, about 90 miles southeast of the Afghan capital, Kabul. Coming just three months after the stunning attacks of 9/11, the Tora Bora fight provided the best early chance for American forces to kill or capture the al-Qaeda leader. Yet Franks seemed inattentive, almost as if the battle were someone else’s problem. The Centcom commander did not see bin Laden’s capture as crucial to his campaign, or as a goal for which he should risk casualties and a messy fight. He was content to provide air power, which dropped 700,000 pounds of bombs in the area of Tora Bora over a few days in December 2001.

“The CIA officer in charge at Tora Bora was certain he had bin Laden cornered, though his team remained outnumbered on the ground. He repeatedly requested a battalion of Army rangers to help press the attack and seal the escape routes into Pakistan. But Franks declined the requests, citing several reasons, among them his desire not to inject more troops, the time it would take to send them, and his sense that the intelligence on bin Laden’s location was less reliable than the CIA believed. The best evidence indicates that bin Laden walked south into Pakistan in mid-December 2001, perhaps wounded in the shoulder.”

[More next week]

--Boy, I’m really enforcing my ‘wait 24 hours’ rule on the late decision not to hold the New York City Marathon. I was very disturbed by some of the comments, mostly on the side of those who wanted it called off, including the whiners being kicked out of hotel rooms because some runner flew in from overseas and had a reservation… which is like a contract, a-h---…..oops, back to my 24-hour rule.

I’ll say this much for now. My concern was the issue of security and taking 1,000 to 2,000 policemen off other work. Mayor Bloomberg’s statement in canceling was perfect. He just should have done this by noon on Wednesday when enough was known about the extent of the damage to Gotham. This could not have been handled more poorly.

This is also a complicated issue. Those shooting from the hip don’t see that and don’t understand the long-term ramifications for New York.

--The New York Road Runners, by the way, had pledged $1 million to storm relief. By contrast, the New York Yankees have pledged $500,000…last I saw.

--I netted a $1 on my Powerball tickets this week (started playing this irregularly after that mammoth $300 million pot a few months ago). Dollar Tree here we come! I’m thinking the beef stew from somewhere in South America. 

--Hey, I just saw that 500 million gallons of raw sewage a day is flowing into Newark Bay after their wastewater treatment plant was disabled in the storm.

I wouldn’t go crabbing in these waters, kids, in case you were thinking of doing that this weekend.

--America is becoming a tinker-toy nation…An example…No. 987… “Experts have grown increasingly alarmed in the past two years because the existing polar satellites are nearing or beyond their life expectancies, and the launch of the next replacement, known as JPSS-1, has slipped to 2017, probably too late to avoid a gap of at least a year.” [New York Times]

That’s a year or two without being able to accurately predict storm tracks. We’re No. 12! We’re No. 12!

---

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

God bless America.
---

Gold closed at $1677…lowest since 8/24
Oil, $84.80…lowest since 7/6

Returns for the week 10/29-11/2

Dow Jones -0.1% [13093]
S&P 500 +0.2% [1414]
S&P MidCap +1.3%
Russell 2000 +0.1%
Nasdaq -0.2% [2982]

Returns for the period 1/1/12-11/2/12

Dow Jones +7.2%
S&P 500 +12.4%
S&P MidCap +12.4%
Russell 2000 +9.9%
Nasdaq +14.5%

Bulls 41.5
Bears 27.7 [Source: Investors Intelligence…yes, both unchanged on the week]

*Don’t forget the StocksandNews iPad app as the perfect stocking stuffer as we roll into the holiday shopping season.

**And don’t forget to catch one of my Nightly Review videos. Actually, while I’m not really promoting this yet, what the heck, set it up in front of your baby and they’ll get the head start on life that could be a difference maker. Or they might have a crying jag.

Brian Trumbore
 
 



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Week in Review

11/03/2012

For the week 10/29-11/2

[Posted 12:00 AM ET]

Sandy…and then the depression sets in…including the election

The level of devastation is beyond anything I ever thought I’d see. It’s unthinkable.”

--New Jersey Gov. Chris Christie

My state of New Jersey and the surrounding region was as prepared as you can be for a storm that had been telegraphed for about a week. I started stocking up in earnest Thursday, though I didn’t go overboard. Enough to get by for about seven days if I lost power, as was the case last year with Hurricane Irene and the freak Halloween snowstorm (though I was away for part of this one and returned to no power). By Friday, my local supermarket was having major issues with the prime staples like bread and water. People were topping off their gas tanks. I normally do the same but thought I don’t travel anywhere and 3/4s is more than enough. Bring on Hurricane Sandy. We waited with trepidation as the computer models all lined up the same by Saturday.

Only we didn’t know what Tuesday morning’s first light would reveal in full. Unthinkable devastation to the coastline, as it turned out, including not just New Jersey and Long Island, but also New York’s five boroughs and coastal Connecticut.

Inland, where I am, we were slammed with hurricane gusts and in driving around Summit and a neighboring community in the aftermath, I’ve been astounded at the sight of some of the trees that were toppled in the wind, the houses that were crushed, and the destruction wrought, even after last year’s two awful storms.

But my multi-use building, with the Dunkin’ Donuts on the ground floor, did not go dark as it had before (nor did Merck’s huge headquarters across the street) even as the rest of my town and the surrounding area has been without power all week, though it’s slowly coming back on from the utility maps I look at a few times a day, checking for progress. You see, my parents moved in! Nice to have a son nearby with heat and a place to sleep. My brother and his wife are without power in the town of Chatham, next to Summit. Harry is a newspaper editor for a weekly nearby so he’s working away, but my sis-in-law, Cindy, who normally trains it into New York, is scrambling to find power so she can recharge her laptop now and then (including here). Her train line isn’t running yet.

Our gas lines are as long as you’ve seen on television and the networks’ coverage of the usual spots on the Garden State Parkway or New Jersey Turnpike. It really is a mess, for sure.

But it’s nothing like the devastation along the coast. That’s sickening. Aside from a regular family vacation at a house we rented in my youth on Long Beach Island, I haven’t had the biggest connection to the Jersey Shore since I was a kid, though for years a good friend from high school (actually since sixth grade), Tony, has had our poker group to his place in Mantoloking each year. I’ve told you of these trips, including one fairly recently, where we combine a round of golf with plenty of card action for two nights. I won’t tell you the physical condition I’ve been in when I’ve finished those particular “Week in Reviews” at 2:00 or 3:00 a.m. Tony has an absolutely beautiful spot he worked hard for all his life. Right on the beach. The perfect house in a very cool community.

Tony’s place is still standing, last he heard. But two of his neighbors’ homes were washed away. It will be quite a while before Tony is able to check on what is left of his house, or whether the town will ever rebuild. A bridge was washed out, connecting the barrier island to the mainland, and a new channel has been cut.

Thanks to having power, I’ve been glued to the coverage like all of you have from around the country and around the world, for that matter. I greatly appreciate some of the notes I’ve received from readers just checking in.

But I do have some Big Picture thoughts, as we await another northeaster mid-week that could easily undo any progress made on the power and flood recovery front, especially in bringing down the trees now just hanging on.

First, those who say that this tragedy, with 100 or so dead and millions of lives severely disrupted, is somehow stimulative are nuts. At least rationality is entering the discussion by week’s end vs. the happy talk on Tuesday. I used the analogy in one of my new “Nightly Review” videos of a trip I took in 2003 to the scene of a killer tornado in Pierce City, Missouri. Six or seven died there and an historic downtown district was destroyed so I went to spread around some cash (and instead ended up donating towards the purchase of a new fire truck rather than handing it out individually). Sandy wasn’t a tornado that severely devastates a section of a town that in most cases is eventually rebuilt.

Sandy totally destroyed some shore communities for good. They will not be rebuilt, or if they ever are, they will not take their new shape until defenses have long been put in place and the utility companies servicing the area are convinced a new master plan will work. So we’re talking years. As Gov. Christie said, his first step is to meet with the Army Corps of Engineers and see just what defenses are needed and whether some communities should even be located where they once were.

So it’s not about rebuilding everywhere, like it would be here in Summit if a tornado plopped down and took out six or eight blocks of homes. There is no rebuilding for many places.

I also use the analogy of all those boat marinas you’ve seen that have been devastated, and the scores of boats that have been destroyed. Do you really think those boat owners are going to head out to their local dealer in the next few months and buy a new one? Where the heck would you put it?! Do you think the marina owner is going to get his insurance payment (making a big assumption he or she was properly insured in the first place) and just rebuild when his community needs a new master plan and officials may decide the land should be returned to the state it was originally found in?

Think of all the jobs that have been lost servicing these communities that aren’t just coming back. So, no, this is not stimulative in the least, aside from those being paid to remove rubble and trees.

Do you think those living in the flooded parts of Hoboken, N.J., just minutes from Manhattan, are going to simply spray some disinfectant around and just resume their normal lives knowing that the ancient infrastructure of a city once known for having more bars per capita than anywhere in the country (true…been to them all) is literally collapsing underneath their feet and that more big rains, let alone a future storm surge, will bring up tons of raw sewage as was the disgusting case with Sandy?

For those not from the area, yes, this storm was big. The television pictures are not exaggerating the scope in any way. It’s widespread, in a key economic region for our country, and there will be a negative impact.

Of course eventually we all go on. But I do get a kick out of the overused word in all natural disasters, in all parts of the country, “resilience.”

Americans don’t have a monopoly on resilience. Our politicians and network anchors and hack pundits like to use the word, but humans are resilient, not just Americans.

The Bangladeshi facing floods every year…now that’s resilience. The Brits during the Blitz of World War II…that’s resilience. It’s human nature.

But we also have an election on Tuesday in this country, a rather important one, so we’re told. I’m pretty sure I have never used the phrase ‘this is the most important election of our lifetimes,’ as so many say.

I prefer to think we have had such a run of lousy presidents, especially the last two, that they’ve combined to put us so far behind the eight ball that I’m not sure it really matters much. We’re headed to a severe debt crisis, the stock market will crash at a time of its choosing, there will be some unrest in the streets of America that will be a bit unsettling, and then a leader will emerge, finally, and we’ll get back on the right path. 

I hope you agree I haven’t changed my tune this entire election cycle. I am not a fan in the least of either presidential candidate. The only reason why I’m voting for Mitt Romney is I think he has a chance to be a pragmatist, which is the first thing we need, and one who may, fingers crossed, be able to reach across party lines enough to find agreement on entitlement and tax reform…at least get the process started on the kind of path where the financial markets, if not giddy, will take heart that all is not lost and business will feel comfortable investing in their companies again.

This has been a truly pathetic campaign. And everything I’ve written above doesn’t mean a lick if we have a foreign policy crisis that throws all the political melodrama of the past year (or four) out the window.

Foreign policy? Foreign affairs? What is that? I have zero confidence either candidate can handle what may hit us down the road, and it is unfathomable to me the free pass Barack Obama has received on this front. Historians will treat him harshly. What has transpired in Syria, and what follows as the conflict continues to spread, is all on Obama. And if Iran gets the bomb?

So there are tons of concerns, both domestic and foreign, any one of which can sink us. Just how resilient are we? Over the coming year or two, we’re about to find out.

---

Wall Street

If Hurricane Sandy was the “October Surprise” of the presidential campaign, then it was indeed New York’s Katrina moment as well. And for one reason. Just as in Katrina, the television networks were all herded into one area, in this instance Battery Park City, the surge started to come up over the wall by a foot or two, nothing catastrophic, maybe some water in one or two subway stops downtown, I’m thinking, and little did we know the water was pouring in from the East River blocks away from the TV trucks. [Think Katrina and how the network anchors after the storm was winding down were on dry land, saying how N’Orlins had absorbed the blow with few scratches, not knowing the Lower Ninth Ward was being flooded to catastrophic effect even as they spoke.]

And so it was with Sandy that Wall Street took a blow, but the actual New York Stock Exchange stayed dry and the weather disruption was but two days, still the longest such weather-related outage for the exchange since 1888. We survived no trading for two days just fine. There was nothing heroic in moving on in this case. Some of the workers on the exchange and at firms who had no power nearby certainly had god-awful commutes, and will for another week or so in some instances, but if that’s the worst thing that happens to these people in their lives, they should count themselves lucky. 

As for the action once trading resumed, the market went up and down, just like it always does, though before my cynicism gets carried away, some of the economic news was solid, including a better than expected report on manufacturing, the October ISM reading which came in at 51.7, the highest since May, though a Chicago PMI was only 49.9 (50 being the dividing line between growth and contraction). Personal income, up 0.4%, and consumption, up 0.8%, for October was pretty much in line with the latter continuing to show a, err, resilient consumer! Factory and construction orders for September were OK, both positive, while the S&P/Case-Shiller barometer on housing found the 20-city metro price index rose 2% in August over year ago levels. [I lay it all out unlike anyone else in my “Wall Street History” column if you want more data.]

And then on Friday we had the release of the October jobs report and the non-farm payroll rose a respectable 171,000 with upward revisions for August and September. The unemployment rate, though, ticked back up to 7.9% so the Democrats can tout they’ve been creating more jobs because of their policies (cough cough), while Republicans can say, one, that the 7.9% unemployment rate is higher than when Obama took office, and, two, the percentage of those underemployed is still 14.6% (though down a tick from September’s 14.7%).

Meanwhile, earnings continue to roll in and they remain lackluster. I haven’t seen the figures incorporating this week’s releases but thus far, revenues are 1% less than last year’s pace, while earnings are up about 1% over 2011.

But the market did swoon a bit on Friday, with the Dow falling 136 points even on the heels of the better than expected jobs numbers, so what gives? Uncertainty over the election, plus a stronger dollar that then killed commodities were two of the causes. 

Plus we have this fiscal cliff issue hanging over us like the sword of Damocles. And this week the Treasury Department announced that the U.S. will probably hit its $16.4 trillion borrowing limit by year end, just as Congress and the occupant of the White House are addressing the fiscal cliff at the same time. I liked what economist Mark Zandi had to say about this double whammy:

“It adds to the caldron of the dark brew. That makes the disaster more disastrous.”

Yes, Treasury can play games with the debt limit to buy more time, as it did in the summer of 2011, but come hell or high water the debt ceiling issue must be decided no later than February and all the while you are going to have the likes of Moody’s, and probably S&P once again, weighing in on probable ratings downgrades for the United States unless meaningful compromises are reached that begin to address our severe problems. Suffice it to say, markets will be roiled as every rumor of a deal surfaces and is then scotched, until finally our not so merry band of politicos do whatever it is they’ll end up doing.

Editorial / Times of London

“America is set for a real cliffhanger. And not just in the presidential election. Whoever wins next week, America and the rest of the world will face a nerve-racking few weeks as the new administration seeks a way through the deficit deadlock….

“A deal will probably be reached to postpone the measures (ed. big tax increases and spending cuts). But a permanent lifting of the threat will require a bipartisan agreement on a long-term plan for dealing with America’s ballooning deficit. On past experience, the chances of such an agreement do not look good….

“Judd Gregg, the former Republican senator who is one of the leaders of the Fix the Debt campaign (ed. a group of top U.S. chief executives for the most part), was in London last week, warning that without a deal there would soon be another financial crisis when investors decided America could no longer pay its debts without unleashing inflation.

“There are lawmakers in both parties who don’t want a deal and agreement will be impossible without strong leadership from the winner of next week’s election. In terms of presidential leadership, Mr. Romney is untested while Mr. Obama has been tested and found wanting. As America approaches the cliff, the world could be forgiven for feeling just a bit nervous.”

Europe

Eurostat, a collector of data for the 17-nation eurozone, said the unemployment rate for the region hit a new high since they began keeping data in 1995, 11.6%, with France at 10.8%, Ireland 15.1%, Portugal 15.7% and Spain 25.8% (Greece always has a lag in its reporting). Spain’s youth unemployment rate is now 54.2%.

Spain’s retail sales plunged 11% in September over year ago levels, which was the flip side of an increased VAT (value-added tax) that juiced revenues some so Spain’s deficit picture wasn’t quite as bad as the Bank of Spain had thought, minus 0.3% for the third quarter vs. an earlier estimate of minus 0.4%. Nonetheless, Spain remains mired in recession and Prime Minister Mariano Rajoy is insistent he won’t trigger a bailout mechanism until it is in his country’s best interests. This as Catalans prepare to go to the polls on Nov. 25 for parliamentary elections that could lead to a vote on secession from Madrid. [Madrid says this is unconstitutional.]

Germany’s official jobless rate hit 6.9% and there are growing indications the engine of Europe will see a contraction in its economy for the fourth quarter. It doesn’t help that 40% of its exports are to the Euro bloc.

And back to Greece, this was not a good week here. Prime Minister Antonis Samaris desperately wants a two-year extension, to 2016, on the established debt targets that the European Commission, European Central Bank and International Monetary Fund (the troika) have set as a precondition for Greek Bailout II, 130 billion euro on top of the 110 billion from Greek Bailout I.

But not only has the government revised down its forecast for growth in 2013 to minus 4.5%, which would mean a cumulative decline in the Greek economy since 2008 of 22%, it said the total debt to GDP would rise next year to 189% when it’s supposed to be on its way down to 120%.

Plus, the Samaris coalition is fracturing and various austerity measures demanded by the troika are either barely passing parliament or being tabled for now to see if the votes can be rounded up.

Otherwise, Greece will not receive its next tranche of aid, 31 billion euro, and it will run out of money end of November. This whole drama is to reach a conclusion on Nov. 12, when the troika is to decide on whether or not to save Greece. Everyone says it’s a certainty Greece will get the money, but it’s the policies eventually adopted by the government and implementation of same that really matters in this way too long running Greek tragedy.

But there’s more to the Greece story this week, including the release of the so-called “Lagarde list” of 2,000 Greeks with Swiss bank accounts.

Back in 2010, current IMF managing director Christine Lagarde was French finance minister and as a way of supporting her Greek counterparts, forwarded a disc she had been handed with the names of Greek depositors. She just did it as a favor, but then her counterpart at the time, George Papaconstantinou, did nothing.

So a journalist, Costas Vaxevanis, got hold of the list and published it in a magazine he edits. Needless to say, many of the 2,000 were furious and Vaxevanis was taken to court but acquitted of violating data privacy laws. Now Papaconstantinou, and his successor, face charges of criminal negligence. Also the head of Greece’s Pasok party, Evangelos Venizelos, another former finance minister, faces possible charges for not pursuing the tax cheats as well, which is making a mess of the governing coalition of which Pasok is a member. It all comes to a head with a budget vote on Nov. 11, the day before the troika rules on the aid.

Elena Becatoros / AP…on Greek society in free-fall

“Life in Athens is often punctuated by demonstrations big and small, sometimes on a daily basis. Rows of shuttered shops stand between the restaurants that have managed to stay open. Vigilantes roam inner city neighborhoods, vowing to ‘clean up’ what they claim the demoralized police have failed to do. Right-wing extremists beat migrants, anarchists beat the right-wing thugs and desperate local residents quietly cheer one side or the other as society grows increasingly polarized.

“ ‘Our society is on a razor’s edge,’ Public Order Minister Nikos Dendias said recently, after striking shipyard workers broke into the grounds of the Defense Ministry. ‘If we can’t contain ourselves, if we can’t maintain our social cohesion, if we can’t continue to act within the rules…I fear we will end up being a jungle.’”

Is this the future of America?

Wolfgang Munchau / Financial Times

“The recession in southern Europe, including Greece, will probably continue at least until 2014, at which time debt to GDP ratios are likely to be similar to today’s. If you keep piling austerity program on austerity program for a sufficiently large number of years, then the policy might eventually work. But that’s a politically unrealistic proposition. Portugal, for example, is already cutting subsistence payments for very poor people to meet the agreed deficit targets.

“I believe therefore that crisis resolution still has to happen, but I see no evidence that we are getting there, not even in small steps. I do not expect any change in this situation even after the German elections. Since the crisis is not going to resolve itself, I cannot see any fundamental change in the situation – except that the ECB has removed the risk of accidents in the short term.

“To put it another way: if you are optimistic, then surely you must treat this as a liquidity crisis. And then, surely, you must have believed this six months ago. I think this is wrong, but at least it would be an internally consistent position.

“What I cannot get into my head is why anybody would be optimistic now when they were pessimistic a few months earlier. Could someone explain this to me?”

Street Bytes

--Stocks finished the storm-shortened week mixed, with the Dow Jones losing 14 points to 13093, while the S&P 500 gained 0.2% and Nasdaq lost 0.2% to 2982. It was Nasdaq’s fourth straight weekly decline.

--U.S. Treasury Yields

6-mo. 0.15% 2-yr. 0.28% 10-yr. 1.71% 30-yr. 2.91%

--Asia Beat: China’s purchasing managers’ index for October, 50.2 vs. 49.8 in September and a three-month high is a further sign of bottoming.

Japan’s retail sales for September, up 0.4%, were less than expected as domestic auto sales for the month fell 13.9%. Signs are pointing to contraction in the overall economy as parliament wrangles over a deficit bill, this nation’s own “fiscal cliff” that would involve draconian spending cuts. One of the issues is the opposition is demanding Prime Minister Noda face an election well before the August deadline for holding same.

South Korea had some decent news, the best industrial figure for October in four months, while October exports rose over year ago levels, albeit just 1.2%.

And Singapore’s unemployment rate fell to 1.9%. In our wildest dreams, muse Americans (and Spaniards).

--China’s four largest banks rose 15% in the third quarter. This is good. The better they do, the better we all do, whether you like that fact of life or not.

--One thing concerning China isn’t good. A Financial Times analysis of China’s listed companies reveals that 66% have reported third-quarter results reflecting an increase in accounts receivable (unpaid bills).

--Canada cuts its growth forecast for 2013 to 2% from 2.4%; this on top of an expected 2.1% clip for 2012, citing the same global headwinds everyone else faces, including lower commodity prices as a result of decreasing demand. 

Of course if the global picture stabilizes next year, and China rebounds, Canada’s government will be revising numbers upwards, more so than others (except Australia, which also has a large exposure to commodities…as I begin to ramble…)

--Ireland isn’t totally out of the woods…the nation’s main telecom company, Eircom, is laying off 2,000, or one-in-three workers, as it emerges from bankruptcy. Just five months ago, Eircom insisted the total would only be 1,000.

--Air France-KLM Group announced it was laying off 1,300 from its KLM unit after a previously announced 5,000 cuts at Air France.

--Some of the major retailers reported solid results for October, like Macy’s, up 4.1% on same-store sales (outlets open at least a year). Nordstrom reported sales were up 9.8%, far ahead of analysts’ expectations. But the impact of Sandy had yet to be really felt.

--As the Wall Street Journal noted, many homeowners in the New York/New Jersey region don’t have flood insurance because they live in areas where historically this was never a problem. Such as Moonachie, N.J., inundated by storm surge, with only 21% being properly insured. This compares with, say, 47% in Seaside Heights (or 90% in Ocean City, Md.). Only 1% of New York City residents have flood insurance.

--Auto sales for October were hit by Sandy. Most months the last seven days account for 30% of sales, so you lost three days, Oct. 29-31, in a large segment of the country (1,000 auto dealerships in New York and New Jersey alone). Thus, GM, Chrysler and Ford all ended up selling less than originally expected, with GM’s up 4.7%, Chrysler’s up 10% and Ford’s edging up only 0.3%. Toyota’s, up 16%, also fell short of estimates.

--Ford reported a strong third-quarter net income of $1.6 billion, despite a $470 million pretax loss in Europe (where losses for the year will hit $1.5 billion). Ford also promoted Mark Fields to be chief operating officer, thus making him heir apparent to succeed CEO Alan Mulally, 67, who has said he is staying through 2014.

--Fiat, which controls Chrysler Group, forecast a prolonged downturn in the European market, with CEO Sergio Marchionne saying, “We see continuing weak trading conditions for the remainder of 2012, extending well into 2013 and at least part of 2014.”

Chrysler Group, however, reported a $381 million profit for the quarter.

--Honda Motor’s China car sales plunged 54% in October from a year earlier owing to the territorial dispute between China and Japan. A recovery in sales (and consumer attitudes) will be very slow.

--Toyota’s Scion, Lexus and Toyota brands took the top three spots in Consumer Reports’ annual reliability rankings, while the Toyota Prius C, a subcompact hybrid, got the best overall score. Mazda, Subaru, Honda and Acura also scored well. Ford and Lincoln plunged to the bottom because of problems with the touch screens and “bumpy transmission.” Cadillac (GM) was the top U.S. brand. [Dee-Ann Durbin / AP]

--The Environmental Protection Agency said that Hyundai and Kia have overstated the gas mileage on most of their models from the past three years. Sanctions could be on the way. The EPA said it’s the first case in which erroneous test results were uncovered in a large number of vehicles from the same manufacturer. Only two similar errors have been discovered since 2000, and those involved single models. Executives from both automakers said they would reimburse owners. For example: “The owner of a car in Florida with a one mpg difference who drove 15,000 miles would get a debit card for $88.03 that can be refreshed every year as long as the person owns the car.” [Tom Krisher / AP]

--Sharp, the century-old Japanese consumer electronics company, admits there is a “material doubt” whether or not it can survive as it projects a financial year (March) net loss of $5.6 billion. Sharp blames failed investments in liquid-crystal display manufacturing as prices for flat screen televisions and other household items plunged globally.

[Sony, on the other hand, is sticking with its forecasted projection for a profit this year.]

--Meanwhile, Panasonic posted a loss of nearly $9 billion in the third quarter due to massive restructuring charges and said its annual loss would be close to $10 billion; this after most analysts expected Panasonic to earn a small profit for the quarter, while they had been warned about the big annual loss.

“We apologize for such a big gap in our outlook,” said Hideaki Kawai, managing director at the electronics giant. “The slump in the digital consumer market was dramatic.”

--Dow Chemical quantified its restructuring efforts…3,000 job cuts are forthcoming.

--Interesting piece in the Wall Street Journal that serves as a follow-up to a topic of mine the other week concerning America’s energy independence and how the U.S. could be the global leader by 2014 (over Saudi Arabia)…but…you need a certain price level to make some methods of exploration economic. Such as is now the case in Canada’s oil sands, where the costs of drilling are rising rapidly, including for labor and construction materials. While “the most cost-efficient oil sands producers need U.S. benchmark prices of at least $50 a barrel to justify investment in new projects…for operators who mine bitumen and produce synthetic crude from it, the break-even threshold can exceed $100 a barrel.”

Just keep this in mind next time you hear of oil companies, heaven forbid, making a profit. We want them to! We want them to makes lots and lots of money so they’ll keep drilling. And we want a president who on day one (or two), flies up to Canada and signs a comprehensive energy cooperation agreement with our great friends there, and then on day three (or four) bops down to Mexico and begins negotiations with something similar with our friends there (which would be more complicated).

--Speaking of crude, Exxon Mobil Corp. beat earnings expectations as it reported a profit of $9.57 billion for the quarter, though oil and natural gas production from its wells hit their lowest levels in three years. 

Chevron, in missing on its earnings, also cited lower production.

--UBS, as part of its massive restructuring that is resulting in job cuts of 10,000, said it would be drastically scaling back its investment banking operation and exiting fixed income trading; a boon for JPMorgan Chase, Deutsche Bank and others.

[UBS did a terrible job in notifying some employees they were being laid off.  In London, 100 fixed income traders learned of their dismissal when their entry passes were denied at the turnstile.]

--Apple announced the executive responsible for the Apple Maps disaster was canned, while the head of retail is also leaving (unrelated). The maps guy was responsible for Siri, the voice search assistant, as well. No word on whether she’ll have to find another fake line of work.

[Apple had another poor week on the share price front and is now down 18% from its Sept. 21 intraday high of $705 to Friday’s closing figure of $577.

--Walt Disney Co. is acquiring filmmaker George Lucas’ Lucasfilm Ltd. and its “Star Wars” franchise for $4.05 billion in cash and prizes. Disney said it plans to release at least three more films in the Star Wars saga, with the first in 2015 (Episode 7)

--Carl Icahn has taken a 10% stake in Netflix, saying, “With the smart TV everything will be digitized. Microsoft and Google, they’re going to be represented on the home page of your TV,” thus making it a strong takeover target in Icahn’s mind, specifically by Microsoft.

--Average weekday circulation for 613 U.S. dailies decreased 0.2% for the period ended Sept. 30 from a year earlier, but Sunday circulation for 528 Sunday papers was up 0.6%.

The Wall Street Journal, the country’s largest newspaper by average weekday circulation, saw its numbers rise 9.4% from a year earlier. 

--Shares in Generac Holdings, GNRC, soared 22% in three days. What does it do? It’s a pure play on generators.

--The Legatum Institute’s annual prosperity index (a six-year-old index of wealth and wellbeing in 142 countries based on various categories such as economic strength, education and governance), had the U.S. in 12th. We’re No. 12! We’re No. 12! Topping the rankings are Norway, Denmark and Sweden.

In the sub-indexes, Legatum named Switzerland as having the strongest economy and home to the best system of governance. Denmark was best for entrepreneurship and New Zealand had the best education. Iceland was the safest and Luxembourg the healthiest.

Afghanistan is last in security.

--The major television networks’ ratings are plummeting in the first four weeks of the fall season; CBS down 11%, Fox down 25%, ABC off 8%. Only NBC, which has been bringing up the rear for a decade, saw a 12% gain.

The significance of the declines means the networks will be on the hook for millions in “make goods,” or free commercials.

One factor hurting the networks (aside from four presidential and vice presidential debates) is the emergence of the NFL Network’s Thursday night game of the week.

--The latest James Bond flick, “Skyfall,” which opens in the U.S. on Nov. 9, took in a near record $77.7 million during last weekend’s openings in 25 other countries, particularly in Britain where the gate was second only to Harry Potter.

--Due to tough climate conditions in France and Italy, global wine production will shrink 6% this year to its lowest point since 1975, according to a Paris trade group.

--The French parliament has raised the tax on beer 160 percent which will hike the price of a pint like 20%! Zut alors!

Foreign Affairs

Syria: At least 28 government soldiers were killed in a rebel operation on Thursday and at least a half-dozen were executed, documented in a video posted online, which is yet another instance of the rebels committing a war crime; as well as a further example of the mess you’ll see post-Assad, whenever that is, though our president, recall, said it would be about 15 months ago. I seem to have missed Bashar’s exit. Did you catch it?

120 were killed in fighting across the country on Thursday alone, and, as you saw, it continued unabated through the four-day Eid al-Adha holiday.

It was a week that also saw Qatari Prime Minister Sheikh Hamad, in an interview with Al-Jazeera, take issue with UN-Arab League envoy Lakhdar Brahimi, who is calling the conflict in Syria a “civil war.” Hamad says it’s “not a civil war but a war of extermination against the Syrian people.”

Hamad went on to say the war is being waged “with a license to kill, endorsed firstly by the Syrian government and secondly by the international community.”

Hamad was clearly referencing Russia and China, who have vetoed one UN resolution after another that criticizes and threatens action against the Assad regime. [Daily Star]

Separately, the number of Syrian refugees in neighboring Turkey, Jordan and Lebanon (and to a lesser extent Iraq) is slated to more than double to 700,000 by year’s end, right in time for winter. Many of the border areas are in the mountains. Heck, I’ve seen snow on the mountains in Lebanon in April in my trips there so a further humanitarian disaster looms, but donations for food and housing have been miniscule to date.

Iran: Ayatollah Ali Khamenei put his foot down and told President Ahmadinejad and those in opposition to him, like the Larijani brothers, to cut the crap and stop bickering in public; Khamenei specifically saying this was providing ammunition to “foreign media and enemies,” as reported by Thomas Erdbrink of the New York Times.

Ahmadinejad can’t run for a third term in next June’s presidential election

Ralph Peters / New York Post…on President Obama’s policy the last four years here:

“We’ve spent four years talking. Tehran’s spent four years pursuing nuclear weapons. When brave Iranians challenged their oppressors in the street, begging for ‘hope and change,’ our president cowered in silence, protecting his cherished ‘strategy’ of negotiations with a regime that kills Americans and wants all Israelis dead. The ayatollahs’ thugs crushed the uprising.

“Predictably, negotiations failed. Now we’re told that sanctions are the answer. But there’s zero chance that Iran’s leaders will abandon their nuke program. If they did, their domestic authority would collapse. (I believe that this administration has privately accepted that Iran will get nukes.)”

Israel: Did Israel hit a Sudanese weapons manufacturing site the other week? Yes. Some say the strike was designed as much to send a message to Iran as it was to take out a plant supplying weapons to Hamas in Gaza. The site was also supposedly controlled by Iran and on Monday, two Iranian warships docked in Sudan.

And Israel is ready to act should Hizbullah attempt to move Syria’s chemical weapons into Lebanon, as well as ballistic missiles. Defense Minister Ehud Barak also warned in London this week that Israel may have to strike Iran in the spring, but would hold off until then because it appears Iran used a third of its medium-enriched uranium for civilian purposes, thus delaying its military nuclear program. Barak told The Daily Telegraph that without this delay, Israel would have had to strike before the U.S. presidential election. The minister talked of reaching “the moment of truth” – the decision on whether or not to launch an attack – in eight to ten months.

Libya: I mentioned on one of my Nightly Review videos this week that the White House was successfully running out the clock (before Tuesday’s vote) in the Benghazi matter and now with Sandy so front and center, attacks on the administration’s handling of the tragedy just won’t receive the air time they otherwise might have this final weekend.

Plus there are reports that CIA security officers responded within 25 minutes to a call for help, seemingly refuting a Fox News report asserting that CIA managers ordered them not to go.

A senior intelligence official said in a statement: “At every level in the chain of command, from the senior officers in Libya to the most senior officials in Washington, everyone was fully engaged in trying to provide whatever help they could. There were no orders to anybody to stand down in providing support.”

Fox asserted its sources said the CIA did order security officers to “stand down” and there was a lengthy delay before officers ignored orders and went to help. Among those in the rescue effort was Tyrone Woods, who later died in the attacks.

The CIA has remained silent until now because they didn’t want to reveal the extent of their presence in Benghazi.

Iraq: According to a report by the U.S. special inspector general for reconstruction in Iraq, the nation has endured “a troubled year evidenced by increasing official corruption, resurgent violence” and apprehension about the war in Syria since the last U.S. troops departed. [Tony Capaccio / Bloomberg]

854 Iraqi civilians were killed in the third quarter, more than 1,600 wounded in attacks, with September’s casualty figure of 1,048 being the highest in two years.

China: So, are you all set for the Communist Party Congress beginning on Nov. 8? I was hoping ESPN or someone would televise it, not that we don’t already know what the result will be, as opposed to a certain election being held in our country two days earlier where the outcome is in much doubt.

Xi Jinping will succeed Hu Jintao as party chief and president in this once-a-decade leadership change, while Li Keqiang will replace Wen Jiabao as prime minister.

The most immediate issue is will Xi take the right steps to get the economy humming again. Secondarily, how will Xi handle the dispute with Japan in the East China Sea? He has to appease the nationalists, and a military leadership as hawkish as any in recent memory. Major General Luo Yuan said this week that the islands in dispute should be turned into a bombing range, which would mean ripping up peace treaties going back to World War II.

Remember, the 2.3 million-member People’s Liberation Army is kind of like the “house army” for the Communist Party as an AP story I read put it. [I’d mention the reporter’s name but didn’t see it…sorry…I just like this term that I hadn’t seen before.]

No general is challenging authority, but I’ve read numerous hardline pieces over the past year in particular, the tone of which bears watching. Certainly it’s in keeping with the growing potency of China’s hardware.

Lastly, the Xi-Li duo also has to tackle the issue of an increasingly restive work force and citizenry. Regarding the latter, crowds opposed to the expansion of a petrochemical plant in eastern China won out after days of protests in Zhejiang province; a major win for a rising environmental movement.

As for the New York Times story that blistered Premier Wen’s family members for accumulating some $2.7 billion in wealth, the Wen family threatened legal action, which in and of itself was rare; families normally staying silent in such cases.

Russia: All kinds of rumors concerning President Vladimir Putin and his health. At first, Putin’s aides said he hadn’t been seen in public because he didn’t want his motorcade to disrupt traffic when he ventured to the Kremlin, but now a spokesman is admitting that he had a lingering “sports injury” that everyone speculates was a result of his venture into an ultra-light aircraft to fly with Siberian cranes. He was seen walking with a limp a day or two after. Reuters has reported he needs back surgery.

Said Kremlin spokesman Dmitry Peskov: “He was suffering from some muscle pain then. Actually, we have never tried to conceal it because any athlete has lots of injuries, which, however, do not mean any restrictions of his activities.”

What of his mistresses? Or was that a low blow?

Meanwhile, billionaire Mikhail Prokhorov announced he was quitting business to enter politics, forming a new party, Civic Platform, that will be a third power competing both with the Kremlin and the opposition. I wish Prokhorov the best but needless to say he has his work cut out for him. In March’s presidential election, he finished third as an independent with 8%, falling to Putin’s 64% and Communist leader Zyuganov’s 17%.

So I’ve long predicted Putin would be gone by yearend. Of course that doesn’t look real good today. Then again, is Putin having back surgery?

Ukraine: In the parliamentary elections last Sunday, President Viktor Yanukovich’s Party of Regions finished first with 32%, while jailed former prime minister, Yulia Tymoshenko, was second with 24% for her Fatherland party. The Communist Party had 14% and the new party of heavyweight champion Vitali Klitschko, Udar, came in at 13%. [The vote is a highly complicated two-step process, though, and final results are days off.]

But the ultranationalist (read Fascist) Freedom party garnered 9% when pre-election polls had it at 1%...not good. Tymoshenko and Klitschko want to align themselves with the West. Yanukovich, while he speaks of himself as independent (an immensely corrupt one), is certainly in the Kremlin camp.

International observers, of which there were some 3,500, said that while the vote itself seemed relatively free of fraud, it was hardly a free election as Yanukovich’s party dominated the airwaves and restricted access to those in opposition; what the regional security body OSCE called “the abuse of power and the excessive role of money.” The OSCE went so far as to say the election “reversed democracy.” And at week’s end, Canadian monitors announced there was indeed manipulation of ballots taking place. It also seems the Communists don’t want to be in Yanukovich’s coalition, as they have in the past.

Myanmar: At least 60 have been killed in ethnic violence between Buddhists and Muslims. Thousands of homes have been burned.

Random Musings

--Various final polls:

Washington Post / ABC News…49-48 Obama, nationally; 49-48 Obama in 8 “tossup” states

New York Times / CBS News: 48-47 Obama, nationally…women: 52-44 Obama…men: 51-44 Romney

Pew Research Center: 47-47, nationally

CNN/ORC…50-49 Romney in Florida

NBC News / Wall Street Journal…49-46 Obama in Wisconsin; 49-47 Obama in New Hampshire; 50-44 Obama in Iowa

Fox News: Romney 46-44 in Virginia (51-47 Obama, Washington Post/ABC)

Ohio Newspaper Assiociation: 49-49 in Ohio

Minneapolis Star-Tribune: 47-44 Obama (Obama was up 8 in Sept.)

The Des Moines Register endorsed Mitt Romney for president last Sunday; the first time they endorsed a Republican presidential candidate since Richard Nixon in 1972. I got a particular kick out of this because a few days before, Bill O’Reilly was harrumphing in classic O’Reilly fashion, “Well we all know the Des Moines Register will endorse Obama.” Sorry, Bill.

The Register correctly said of Romney that he should focus on building consensus instead of “wasting time on issues that animate many in his party.”

--As I told you awhile back, the election results are going to be delayed due to Ohio and the “nightmare scenario” with the ‘provisional’ ballots. You’ll hear enough about this over the next few days so I won’t repeat the details. The point is, if by 10:00 p.m. ET on Tuesday the networks are telling you this is going down to the wire, get some sleep. Go to bed. Because that means Ohio will end up deciding things and we might not know their official tally under around Nov. 17. I remember in 2000 I didn’t stay up for that fiasco. We’ll survive regardless. But not the kids.

--Various opinions on the election….all sides:

Michael Goodwin / New York Post

“Each time I mention that I voted for Barack Obama in 2008, I get a blast from some who didn’t. ‘How could you be so dumb?’ is a typical response to my confession.

“It is certainly a confession – of error. Obama fooled me once, but not twice. I’m voting for Mitt Romney.

“To understand why I’m switching, it helps to understand why I backed Obama four years ago. I am a Democrat, but vote as an independent. I see people, not parties, so Obama’s label played no role.

“My choice involved a simple calculation. Would John McCain or Obama be more likely to forge a consensus on big issues? America was dangerously polarized, and unable to act in ways that even 60 percent of the public could support. History shows that paralysis leads to disaster….

“When the financial crisis hit, McCain stumbled. He wanted to postpone a debate and rushed back to Washington – but had nothing to say or do. Obama kept silent and followed the lead of congressional Democrats. While not exactly great statesmanship, he at least looked steady.

“McCain, a genuine American hero, often revealed his maverick streak, his choice of Sarah Palin being Exhibit A. Despite doubts about her readiness, I found myself defending her against the vicious attacks from the left, especially by women.

“McCain was my real problem…

“Obama’s soaring rhetoric enticed me at first, and I agreed that a restoration of the Clinton presidency would be a bad idea….

“Where he totally fooled me was his claim to be a pragmatist, not an ideologue. He spoke of uniting the country and I believed he was capable and sincere. That he won 70 million votes and more than two-thirds of the Electoral College spoke to his appeal.

“He failed as president because he is incompetent, dishonest and not interested in the actual work of governing. His statist policies helped consign millions of Americans to a lower standard of living and his odious class warfare further divided the nation. He had no intention of uniting the country – it was his Big Lie.

“I don’t hate him. But I sure as hell don’t trust him.”

Editorial / New York Times

“The economy is slowly recovering from the 2008 meltdown, and the country could suffer another recession if the wrong policies take hold. The United States is embroiled in unstable regions that could easily explode into full-blown disaster. An ideological assault from the right has started to undermine the vital health reform law passed in 2010. Those forces are eroding women’s access to health care, and their right to control their lives. Nearly 50 years after passage of the Civil Rights Act, all Americans’ rights are cheapened by the right wing’s determination to deny marriage benefits to a selected group of us. Astonishingly, even the very right to vote is being challenged.

“That is the context for the Nov. 6 election, and as stark as it is, the choice is just as clear.

“President Obama has shown a firm commitment to using government to help foster growth. He has formed sensible budget policies that are not dedicated to protecting the powerful, and has worked to save the social safety net to protect the powerless. Mr. Obama has impressive achievements despite the implacable wall of refusal erected by Congressional Republicans so intent on stopping him that they risked pushing the nation into depression, held its credit rating hostage, and hobbled economic recovery.

“Mitt Romney, the former governor of Massachusetts, has gotten this far with a guile that allows him to say whatever he thinks an audience wants to hear. But he has tied himself to the ultraconservative forces that control the Republican Party and embraced their policies, including reckless budget cuts and 30-year-old, discredited trickle-down ideas. Voters may still be confused about Mr. Romney’s true identity, but they know the Republican Party, and a Romney administration would reflect its agenda. Mr. Romney’s choice of Representative Paul Ryan as his running mate says volumes about that.

“We have criticized individual policy choices that Mr. Obama has made over the last four years, and have been impatient with his unwillingness to throw himself into the political fight. But he has shaken off the hesitancy that cost him the first debate, and he approaches the election clearly ready for the partisan battles that would follow his victory.”

--New York City Mayor Michael Bloomberg endorsed Barack Obama, writing in Bloomberg View that Hurricane Sandy “brought the stakes of Tuesday’s presidential election into sharp relief.” Bloomberg added:

“Our climate is changing. And while the increase in extreme weather we have experienced in New York City and around the world may or may not be the result of it, the risk that it might be – given this week’s devastation – should compel all elected leaders to take immediate action….

“We need leadership from the White House – and over the past four years, President Barack Obama has taken major steps to reduce our carbon consumption, including setting higher fuel-efficiency standards for cars and trucks.”

Edward Luce / Financial Times

“This weekend the Obama campaign added an exclamation mark to its slogan, which is now ‘Forward!’ It is probably too late to come up with anything more persuasive. ‘I guess it’s better than backward,’ said Bruce Springsteen after the president asked him to write a song around the theme. ‘It is not much to go on.’

“Mr. Obama was never going to rediscover the once-in-a-generation alchemy of 2008. Then he was young, black, exciting and not from Washington. He offered a demoralized America the chance to show the world it could renew itself. Whether or not he squeaks through next week, his most resonant change is that it is now normal to have a black president in the White House. It remains an extraordinary feat. But it has already happened.

“As the incumbent, Mr. Obama could hardly have campaigned again on a theme of change (except when talking about wresting control of Capitol Hill from the Republicans). Nor, given the continued weakness of the recovery, could he imitate Ronald Reagan’s ‘Morning in America.’ All he could do was promise voters the economy would mend and convince them it would not under Mitt Romney. The rest is mood music.

“Yet he could hardly have made a more uninspiring job of it. Perhaps the most startling revelation of the past nine weeks is that Mr. Obama is no longer a very good campaigner. Since governing is nowadays a permanent campaign, this does not bode well for how he would fare in a second term. Indeed, the soporific way in which he has engaged the electorate gives reasons to worry a second term would not be much different from the past two years.”

Charles Krauthammer / Washington Post

“Government grows in size and power as the individual shrinks into dependency. Until the tipping point where dependency becomes the new norm – as it is in Europe, where even minor retrenchment of the entitlement state has led to despair and, for the more energetic, rioting.

“An Obama second term means that the movement toward European-style social democracy continues, in part by legislation, in part by executive decree. The American experiment – the more individualistic, energetic, innovative, risk-taking model of democratic governance – continues to recede, yielding to the supervised life of the entitlement state.

“If Obama loses, however, his presidency becomes a historical parenthesis, a passing interlude of overreaching hyper-liberalism, rejected by a center-right country that is 80 percent non-liberal.

“Should they summon the skill and dexterity, Mitt Romney and Paul Ryan could guide the country to the restoration of a more austere and modest government with more restrained entitlements and a more equitable and efficient tax code. Those achievements alone would mark a new trajectory – a return to what Reagan started three decades ago.

“Every four years we are told that the coming election is the most important of one’s life. This time it might actually be true. At stake is the relation between citizen and state, the very nature of the American social contract.”

Peggy Noonan / Wall Street Journal

“Look at where he started, placing his hand on the Bible Abe Lincoln was sworn in on in 1861. It was Jan. 20, 2009. The new president was 47 and in the kind of position politicians can only dream of – a historic figure walking in, the first African-American president, broadly backed by the American people. He won by 9.5 million votes. Two days after his inauguration, Gallup had him at 68% approval, only 12% disapproval. He had a Democratic Senate, and for a time a cloture-proof 60 members. He had a Democratic House (256-178) with a colorful, energetic speaker. The mainstream media were excited about him, supportive of him.

“His political foes were demoralized, their party fractured.

“He faced big problems – an economic crash, two wars – but those crises gave him broad latitude. All of his stars were perfectly aligned. He could do anything.

“And then it all changed. At a certain point he lost the room.

“Books will be written about what happened, but early on the president made two terrible legislative decisions. The stimulus bill was a political disaster, and it wasn’t the cost, it was the content. We were in crisis, losing jobs. People would have accepted high spending if it looked promising. But the stimulus was the same old same old, pure pork aimed at reliable constituencies. It would course through the economy with little effect. And it would not receive a single Republican vote in the House (three in the Senate) which was bad for Washington, bad for our politics.   It was a catastrophic victory. It did say there was a new boss in town. But it also said the new boss was out of his league.

“Then health care, a mistake beginning to end. The president’s 14-month-long preoccupation with ObamaCare signaled that he did not share the urgency of people’s most immediate concerns – jobs, the economy, all the coming fiscal cliffs. The famous 2,000-page bill added to their misery by adding to their fear….

“You have to build the kind of trust it takes to do something so all-encompassing.

“And so began the resistance, the Tea Party movement and the town-hall protests, full of alarmed independents and older Democrats. Both revived Republicans and, temporarily at least, reunited conservatives.

“Why did the president make such mistakes? Why did he make decisions that seemed so unknowing, and not only in retrospect?

“Because he had so much confidence, he thought whatever he did would work. He thought he had ‘a gift,’ as he is said to have told Senate Majority Leader Harry Reid. He thought he had a special ability to sway the American people, or so he suggested to House Speaker John Boehner and Majority Leader Eric Cantor.

“But whenever he went over the heads of the media and Congress and went to the people, in prime-time addresses, it didn’t really work. He did not have a magical ability to sway. And – oddly – he didn’t seem to notice.

“It is one thing to think you’re LeBron. It’s another thing to keep missing the basket and losing games and still think you’re LeBron.

“And that really was the problem: He had the confidence without the full capability. And he gathered around him friends and associates who adored him, who were themselves talented but maybe not quite big enough for the game they were in. They understood the Democratic Party, its facts and assumptions. But they weren’t America-sized. They didn’t get the country so well….

“He doesn’t do chastened. He didn’t do what Bill Clinton learned to do, after he took a drubbing in 1994: change course and prosper.

“Mr. Obama may yet emerge victorious. There are, obviously, many factors in every race. Maybe, as one for instance, the seriousness of the storm has sharpened people’s anxieties – there are no local crises anymore, a local disaster is a national disaster – so that anxiety will leave some people leaning toward the status quo, toward the known.

“Or maybe, conversely, they’ll think he failed to slow the oceans’ rise.

“We’ll know soon.

“Whatever happens, Mr. Obama will not own the room again as once he did. If he wins, we will see a different presidency – even more stasis, and political struggle – but not a different president.”

David Brooks / New York Times

“Let’s try to imagine what the world would look like if President Obama is re-elected.

“Washington over the next four years would probably look much as it has over the last two: Obama running the White House, Republicans controlling the House and Democrats managing the Senate. We’d have had a long slog of an election before a change-hungry electorate, and we’d end up with pretty much the same cast of characters as before….

“Now let’s try to imagine the world if Mitt Romney were to win. Republicans would begin with the premise that the status quo is unsustainable. The mounting debt is ruinous. The byzantine tax and regulatory regimes are stifling innovation and growth.

“Republicans would like to take the reform agenda that Republican governors have pursued in places like Indiana and take it to the national level: structural entitlement reform; fundamental tax reform. These reforms wouldn’t make government unrecognizable (we’d probably end up spending 21 percent of GDP in Washington instead of about 24 percent), but they do represent a substantial shift to the right….

“The bottom line is this: If Obama wins, we’ll probably get small-bore stasis; if Romney wins, we’re more likely to get bipartisan reform. Romney is more of a flexible flip-flopper than Obama. He has more influence over the most intransigent element in the Washington equation, House Republicans.  He’s more likely to get big stuff done.”

--George Will / Washington Post

“Energetic in body but indolent in mind, Barack Obama in his frenetic campaigning for a second term is promising to replicate his first term, although simply apologizing would be appropriate. His long campaign’s bilious tone – scurrilities about Mitt Romney as a monster of, at best, callous indifference; adolescent japes about ‘Romnesia’ – is discordant coming from someone who has favorably compared his achievements to those of ‘any president’ since Lincoln, with the ‘possible’ exceptions of Lincoln, LBJ and FDR. Obama’s oceanic self-esteem – no deficit there – may explain why he seems to smolder with resentment that he must actually ask for a second term.”

--Re Hurricane Sandy…Republican Haley Barbour (former Mississippi governor) / Washington Post

“Having worked as governor with administrations of both parties on several natural disasters, including Hurricane Katrina, I am surprised – to the point of disbelief – at the reactions from both right and left that New Jersey Gov. Chris Christie (R) has said favorable things about the Obama administration’s efforts in these early days after Hurricane Sandy.

“At the same time, I find it interesting that many in the media act as though it is of great political import that Christie praises Obama for trying to help – when the same media organizations challenged and criticized me for not attacking the Bush administration in the early days after Katrina.

“Christie is no doubt operating under the same thinking I learned from my old high school football coach: Praise in public; criticize in private. I knew that it would be unwise to nitpick the people with whom my state would be partnered for years, especially when those people did more right than wrong.

“Because of the damage wrought by Sandy, New Jersey and the federal government will work together for years in the sheltering, cleanup, recovery and rebuilding efforts. Really, their working relationship has barely begun….

“Republicans worried that Christie saying anything favorable about Obama is politically disloyal need to remember that a governor’s first responsibility is to his or her state and its people. Those in the media looking to determine political winners and losers in this situation should stop. We Republicans ought to be proud of public officials who, like Christie, are faithful to the job they’re elected to do.”

Same topic…Editorial / New York Post

“America this week got an up-close look at a very rare bird indeed: a politician who wears his heart on his sleeve while giving not a tinker’s damn about what people think about it.

“Not since Rudy Giuliani inspired America in the aftermath of 9/11 has an elected leader stepped up to the plate like New Jersey Gov. Chris Christie did this week.

“It’s not just that he was anywhere and everywhere even before the monster storm struck, warning people in flood-prone areas to evacuate.

“Since the storm, he’s been up and down the Garden State, surveying the devastation, talking to as many stricken residents as possible and overseeing rescue efforts.

“Gone has been the brashness, the swagger, the in-your-face style. Instead, we’ve seen a starkly emotional governor, whose expressions of loss are deeply personal.

“A lifelong New Jerseyan who loves his state….

“(As) the governor noted: ‘I have a job to do. I’ve got 2.4 million people out of power. I’ve got devastation on the shore. I’ve got floods in the northern part of my state.’

“Christie this week proved that he’s much more than just Jersey attitude. He’s got the let’s-get-it-done leadership to back it up.

“And that’s what people saw.”

--New Jersey has a senate race between incumbent Democrat Robert Menendez and Republican challenger Joe Kyrillos with Menendez (who I am not a fan of) slated to romp.

Well, too bad the state is occupied with Sandy because a sex scandal just broke wherein two women from the Dominican Republic allege Menendez paid them for sex. Challenger Kyrillos wants Menendez to release his travel records. Too late…and not exactly a priority for us voters now.

--I didn’t have a chance to write of this last time…an article in the November issue of The Atlantic by Thomas E. Ricks, the former Washington Post war reporter now with the Center for a New American Security who has written a book titled “The Generals.” 

Ricks did some great, balanced reporting from Iraq and Afghanistan and writes of the incompetence of some of our military leaders. I often cited Ricks in the past as part of my railing over America’s military leadership. Men like Generals Tommy Franks and Ricardo Sanchez. An example:

“Most generals get the opportunity to lose, at worst, one war. Franks, who from mid-2000 to mid-2003 oversaw the U.S. Central Command, the headquarters for operations in the Middle East, bungled two. Warning signs began flashing in late 2001, with his tepid effort to capture Osama bin Laden in Tora Bora, on the Afghanistan-Pakistan border, about 90 miles southeast of the Afghan capital, Kabul. Coming just three months after the stunning attacks of 9/11, the Tora Bora fight provided the best early chance for American forces to kill or capture the al-Qaeda leader. Yet Franks seemed inattentive, almost as if the battle were someone else’s problem. The Centcom commander did not see bin Laden’s capture as crucial to his campaign, or as a goal for which he should risk casualties and a messy fight. He was content to provide air power, which dropped 700,000 pounds of bombs in the area of Tora Bora over a few days in December 2001.

“The CIA officer in charge at Tora Bora was certain he had bin Laden cornered, though his team remained outnumbered on the ground. He repeatedly requested a battalion of Army rangers to help press the attack and seal the escape routes into Pakistan. But Franks declined the requests, citing several reasons, among them his desire not to inject more troops, the time it would take to send them, and his sense that the intelligence on bin Laden’s location was less reliable than the CIA believed. The best evidence indicates that bin Laden walked south into Pakistan in mid-December 2001, perhaps wounded in the shoulder.”

[More next week]

--Boy, I’m really enforcing my ‘wait 24 hours’ rule on the late decision not to hold the New York City Marathon. I was very disturbed by some of the comments, mostly on the side of those who wanted it called off, including the whiners being kicked out of hotel rooms because some runner flew in from overseas and had a reservation… which is like a contract, a-h---…..oops, back to my 24-hour rule.

I’ll say this much for now. My concern was the issue of security and taking 1,000 to 2,000 policemen off other work. Mayor Bloomberg’s statement in canceling was perfect. He just should have done this by noon on Wednesday when enough was known about the extent of the damage to Gotham. This could not have been handled more poorly.

This is also a complicated issue. Those shooting from the hip don’t see that and don’t understand the long-term ramifications for New York.

--The New York Road Runners, by the way, had pledged $1 million to storm relief. By contrast, the New York Yankees have pledged $500,000…last I saw.

--I netted a $1 on my Powerball tickets this week (started playing this irregularly after that mammoth $300 million pot a few months ago). Dollar Tree here we come! I’m thinking the beef stew from somewhere in South America. 

--Hey, I just saw that 500 million gallons of raw sewage a day is flowing into Newark Bay after their wastewater treatment plant was disabled in the storm.

I wouldn’t go crabbing in these waters, kids, in case you were thinking of doing that this weekend.

--America is becoming a tinker-toy nation…An example…No. 987… “Experts have grown increasingly alarmed in the past two years because the existing polar satellites are nearing or beyond their life expectancies, and the launch of the next replacement, known as JPSS-1, has slipped to 2017, probably too late to avoid a gap of at least a year.” [New York Times]

That’s a year or two without being able to accurately predict storm tracks. We’re No. 12! We’re No. 12!

---

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

God bless America.
---

Gold closed at $1677…lowest since 8/24
Oil, $84.80…lowest since 7/6

Returns for the week 10/29-11/2

Dow Jones -0.1% [13093]
S&P 500 +0.2% [1414]
S&P MidCap +1.3%
Russell 2000 +0.1%
Nasdaq -0.2% [2982]

Returns for the period 1/1/12-11/2/12

Dow Jones +7.2%
S&P 500 +12.4%
S&P MidCap +12.4%
Russell 2000 +9.9%
Nasdaq +14.5%

Bulls 41.5
Bears 27.7 [Source: Investors Intelligence…yes, both unchanged on the week]

*Don’t forget the StocksandNews iPad app as the perfect stocking stuffer as we roll into the holiday shopping season.

**And don’t forget to catch one of my Nightly Review videos. Actually, while I’m not really promoting this yet, what the heck, set it up in front of your baby and they’ll get the head start on life that could be a difference maker. Or they might have a crying jag.

Brian Trumbore