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06/08/2013

For the week 6/3-6/7

[Posted 12:00 AM ET]

Washington and Wall Street

While Washington was focused on new controversies, which I address below, Wall Street spent another volatile week trying to figure out when the Federal Reserve will begin pulling away the punch bowl and just how fast bond yields could rise, seeing as how a 50 basis point (0.50%) move in May caused more than a bit of indigestion in the fixed income and currency markets. What if we saw a 100 bp move in 30-45 days? From existing levels, that could mean a crash, or at least a crashette (15-20% in a month as opposed to 3 or 4 days...Tokyo’s Nikkei, I’d argue, is in crashette mode currently).

So the equity markets were bouncing up and down, waiting for Friday’s jobs report. A May reading on manufacturing, the ISM, came in at 49.0, down from 50.7 in April, the first decline since November and the lowest since June 2009. This contrasted sharply with the prior week’s Chicago PMI, over 58. Both construction spending (+0.4%) and factory orders (+1.0%) for April were below expectations, while the May reading on the service sector was 53.7, in line.

The Federal Reserve released its beige book on regional economic activity on Wednesday and it spoke of “modest to moderate” growth in 11 of 12 districts.

“Hiring increased at a measured pace in several districts, with some contacts noting difficulty finding qualified workers...

“Most districts noted slight to moderate gains in consumer spending and a moderate increase in vehicle sales.”

Manufacturing increased across most regions as residential construction “was a boon” to suppliers.

The New York region reported “steady business activity” in manufacturing, and Boston firms said they’re “reasonably optimistic about the outlook.”

But that “modest” word had some talking slowdown, or perhaps more 2% growth in the second half and not the hoped for 2.5% to 3.0% pace. 2% would mean earnings estimates for the second half might be a bit frothy.

The respected quarterly Anderson Forecast from UCLA’s economists said “Jobs are growing, but not rapidly enough to create good jobs for all.” Edward Leamer, director of the forecast, wrote, “It’s not a recovery. It’s not even normal growth. It’s bad.”

That has long-term implications in the face of technological advancements that continue to displace workers, Leamer said. And the country’s education system isn’t developing the workforce of the future.

“Regrettably we reward teachers if their students can regurgitate the information on standardized tests,” Leamer wrote. Future workers will need creative and analytical thinking skills. [Ricardo Lopez / Los Angeles Times]

Well that’s depressing, as was a less than impressive jobs report from the ADP folks midweek, 135,000 in May, which further led to the concern that Friday’s nonfarm payrolls number would disappoint, less than the 160,000 figure that was the general consensus.

But then the Labor Department’s jobs data was released at 8:30 a.m. and it was 175,000, with a downward revision of 12,000 for both March and April, though the unemployment rate ticked up to 7.6% because more people were out looking.

So at least for one day this was what the doctor ordered. Had the number been, say, 250,000, there would have been all manner of folks jumping out windows over fears the Fed would pull back. Had it been 100,000, there would be talk of an economy moving in reverse (which I’m guessing would have trumped the Fed not needing to taper).

Plus it wasn’t bad for the monetary stimulus addicts that the unemployment rate ticked up. The Dow Jones rose 207 points on the news.

But regarding housing, a pillar of the recovery, Barron’s Gene Epstein had some of the following:

“This recovery has been so stuffed with government steroids, you wonder if it could make it on its own if these drugs were withdrawn. Ask the average person what share of new home mortgages are guaranteed by government, and he or she is unlikely to estimate anywhere near 91.6%. But that is the actual figure as of the first quarter, based on data from Inside Mortgage Finance.

“The insurers and guarantors include the Federal Housing Administration, the Veterans Administration, and the government-sponsored enterprises Fannie Mae and Freddie Mac, among the major entities.

“And where the FHA and VA are concerned, the down payments required are minuscule by conventional standards, ranging from 0% to 5%. According to a recent FHA report, the average down payment required on its insured mortgages in the first quarter has been a little over 4%. The VA’s rather chilling statistical category called No Down Payment indicates that close to 90% of its home loans normally enjoy this status.

“Recent data are not available for the share of all mortgages insured by the FHA and VA. But we do know they accounted for a hefty 46.4% of all mortgages in 2011, way up from an average of about 10% from 2004 to 2007, just before the Great Recession.”

Yikes. And consider this, as reported by Nick Timiraos of the Wall Street Journal:

“The Federal Housing Administration’s projected losses over 30 years could reach as high as $115 billion under a previously undisclosed ‘stress test’ conducted last year to determine how the agency would fare under an extremely severe economic scenario, according to documents reviewed by a congressional committee.

“The forecast was significantly worse than the most severe estimate included in the government mortgage-insurance agency’s independent actuarial review released last November.”

Congressman Darrell Issa (R-Calif.), who chairs the House Oversight and Government Reform Committee, wondered why the agency hadn’t disclosed the figure before.

Finally, you’ve undoubtedly noticed there has been little talk from Washington of a grand bargain, a deficit deal.

Sen. Bob Corker (R-Tenn.) said in an interview with the Wall Street Journal, “The intensity that has been there is not present today. I sense it in Congress and around the country – almost a fiscal fatigue that has set in.”

Rep. Chris Van Hollen (D-Md.), the top Democrat on the House Budget Committee, said, “The best opportunity is between now and October, and “even the chance of that is diminishing as the days go by.”

Congress still needs to produce a budget for next fiscal year, beginning October 1st, as well as a measure on raising the government’s debt ceiling this fall.

It’s just that there will be no entitlement reform and no true tax reform (not President Obama’s idea of it). Nothing on the corporate tax reform front either, as the United States continues to have among the highest corporate rates in the world.

So another stopgap spending bill to keep government running seems a certainty.

Yes, the deficits are shrinking, but they will soar anew in a few years, led as much by rising net interest expense as entitlements. 

As for the latest scandals, while they aren’t market movers, they create distractions Washington doesn’t need. And these two particular ones directly impact the atmospherics behind the Obama-Xi summit in a most unwelcome way.

All hell broke loose on Thursday with the disclosure in Britain’s Guardian newspaper that the National Security Agency is currently collecting the telephone records of millions of U.S. customers of Verizon under a top secret court order, granted by the secret Foreign Intelligence Surveillance Court on April 25 and good until July 19. The order requires Verizon, on an “ongoing, daily basis,” to give the NSA information on all telephone calls in its systems, both within the U.S. and between the U.S. and other countries. One must assume it’s more than Verizon.

This potentially represents the broadest surveillance order known to have been issued.

And then the Washington Post and The Guardian reported the existence of another program used by the NSA and FBI that scours the nation’s main Internet companies, including Microsoft, Yahoo, Google, Facebook, AOL, Skype, YouTube and Apple, extracting audio, video, photographs, emails, documents and connection logs to help analysts track a person’s movements and contacts. The program is called PRISM and it’s not clear whether it is used to target known suspects or just broadly collect data.

Director of National Intelligence James R. Clapper said late Thursday, that the “information collected under (PRISM) is among the most important and valuable foreign intelligence information we collect, and is used to protect our nation from a wide variety of threats. The unauthorized disclosure of information about this important and entirely legal program is reprehensible and risks important protections for the security of Americans.”

A spokesman for Apple, Steve Dowling, said, “We have never heard of PRISM.”

All of the service providers said they do not provide the government with direct access to their servers, systems, or network and only provide information after legally receiving a binding order or subpoena to do so.

Sen. Ron Wyden, D-Ore., said of the phone-records collecting: “When law-abiding Americans make phone calls, who they call, when they call and where they call is private information. As a result of the discussion that came to light today, now we’re going to have a real debate.”

Elizabeth Goitean, co-director of the Liberty and National Security Program at the Brennan Center for Justice, said: “This is a truly stunning revelation. This suggests that the government has been compiling a comprehensive record of Americans’ associations and possibly even their whereabouts.”

Sen. Mark Udall, D-Colo., said it was the type of surveillance that “I have long said would shock the public if they knew about it.”

Wyden released a video of himself pressing James Clapper on the matter during a Senate hearing in March.

“Does the NSA collect any type of data at all on millions or hundreds of millions of Americans?” Wyden asked.

“No, sir,” Clapper answered.

“It does not?” Wyden pressed.

Clapper then goes, “Not wittingly. There are cases where they could, inadvertently perhaps, collect – but not wittingly.”

But Senate Intelligence Committee Chairwoman Dianne Feinstein, D-Calif., said the order was a three-month renewal of an ongoing practice that is supervised by federal judges who balance efforts to protect the country from terror attacks against privacy concerns. The surveillance powers are part of the post-9/11 Patriot Act (section 215), which was renewed in 2006 and again in 2011.

House Intelligence Committee Chairman Mike Rogers (R-Mich.) said the NSA program helped thwart a “significant case” of terrorism in the United States “within the last few years....We know that. It’s important.”

Senate Democratic leader Harry Reid (Nev.) said: “Everyone should just calm down and understand that this isn’t anything that’s brand new. This is a program that’s been in effect for seven years, as I recall. It’s a program that has worked to prevent not all terrorism but certainly the vast, vast majority. Now is the program perfect? Of course not.”

Sen. Saxby Chambliss (R-Ga.), the top Republican on the Intelligence Committee, said, “This is nothing particularly new....Every member of the United States Senate has been advised of this.”

Sen. Lindsey Graham (R-S.C.): “I’m a Verizon customer. I don’t mind Verizon turning over records to the government if the government’s going to try to match up a known terrorist’s phone with somebody in the United States. I’m glad the activity is going on, but it is limited to tracking people who are suspected to be terrorists and who they may be talking to.”

House Speaker John Boehner called on Obama to explain why the program is necessary.

Rep. Jim Sensenbrenner, R-Wis., who sponsored the Patriot Act, said he was “extremely troubled by the FBI’s interpretation of this legislation.”

Editorial / New York Times

“Within hours of the disclosure that federal authorities routinely collect data on phone calls Americans make, regardless of whether they have any bearing on a counterterrorism investigation, the Obama administration issued the same platitude it has offered every time President Obama has been caught overreaching in the use of his powers: Terrorists are a real menace and you should just trust us to deal with them because we have internal mechanisms (that we are not going to tell you about) to make sure we do not violate your rights.

“Those reassurances have never been persuasive – whether on secret warrants to scoop up a news agency’s phone records or secret orders to kill an American suspected of terrorism – especially coming from a president who once promised transparency and accountability.

“The administration has now lost all credibility on this issue. Mr. Obama is proving the truism that the executive branch will use any power it is given and very likely abuse it. That is one reason we have long argued that the Patriot Act, enacted in the heat of fear after the Sept. 11, 2001, attacks by members of Congress who mostly had not even read it, was reckless in its assignment of unnecessary and overbroad surveillance powers....

“Essentially, the administration is saying that without any individual suspicion of wrongdoing, the government is allowed to know whom Americans are calling every time they make a phone call, for how long they talk and from where. This sort of tracking can reveal a lot of personal and intimate information about an individual. To casually permit this surveillance – with the American public having no idea that the executive branch is now exercising this power – fundamentally shifts power between the individual and the state, and it repudiates constitutional principles governing search, seizure and privacy.

“The defense of this practice offered by Senator Dianne Feinstein of California, who as chairwoman of the Senate Intelligence Committee is supposed to be preventing this sort of overreaching, was absurd. She said on Thursday that the authorities need this information in case someone might become a terrorist in the future. Senator Saxby Chambliss of Georgia, the vice chairman of the committee, said the surveillance has ‘proved meritorious, because we have gathered significant information on bad guys and only on bad guys over the years.’

“But what assurance do we have of that, especially since Ms. Feinstein went on to say that she actually did not know how the data being collected was used?”

Editorial / Wall Street Journal

“The critics...say the NSA program is a violation of privacy, or illegal, or unconstitutional, or all of the above. But nobody’s civil liberties are violated by tech companies or banks that constantly run the same kinds of data analysis. We bow to no one in our desire to limit government power, but data-mining is less intrusive on individuals than routine airport security. The data sweep is worth it if it prevents terror attacks that would lead politicians to endorse far greater harm to civil liberties....

“The real danger from this leak is the potential political overreaction. The NSA is collecting less information than appears on a monthly phone bill (no names), but Americans would worry less about the government spying on them if, for example, the Justice Department wasn’t secretly spying on the Associated Press and Fox News. Or if the IRS wasn’t targeting White House critics. Or if the Administration in general showed a higher regard for the law when it conflicts with its policy preferences....

“Amid many real abuses of power, the political temptation will be to tie data-mining into a narrative about a government out of control. Such opportunism can only weaken our counterterror defenses and endanger the country.”

On Friday, President Obama defended the phone and Internet surveillance programs, saying they are closely overseen by Congress and the courts.

“Nobody is listening to your phone calls,” said Obama.

For selfish reasons, I’m not concerned about the phone issue (I last used my cellphone in 2012). I am very concerned over the Internet surveillance program and would never believe anything our government says in this regard, from the president on down.

Europe

An important EU summit is coming up on June 27 and the focus will be on a true banking union, which should have been in place by now but won’t be, if ever, until 2015 at this point, plus you have the September elections in Germany that take precedence. Chancellor Merkel can’t agree to anything in Brussels that could hurt her at the polls in Hamburg and Munich.

So for now we’re left with a spat between the IMF and EC, see below, and European Central Bank President Mario Draghi saying, in holding the line on interest rates at the ECB’s monthly meeting, that “The economic situation in the euro area remains challenging but there are a few signs of a possible stabilization, and our baseline scenario continues to be one of a very gradual recovery starting in the latter part of this year.”

Par-tay!!!

Call me underwhelmed. Germany, the supposed growth engine, saw its Bundesbank reduce GDP estimates to just 0.3% in 2013, and 1.5% in 2014. The Bundesbank also suggested that the worst could be over for the eurozone, saying that in the euro area “the economy appears to be bottoming out.”

“Nevertheless, the Bundesbank sees continuing structural problems as standing in the way of a rapid improvement,” it added. “This is likely to place a major strain on the German economy.”

Eurozone manufacturing, as measured by the PMI, came in at 48.3 in May, up from April’s 46.7, the highest in 15 months, but still below the 50 dividing line between growth and contraction, a line it has been below for 22 consecutive months. Oh well, at least it’s not worsening.

Germany’s May PMI was 49.4 vs. 48.1 in April; Spain’s 48.1, best in 24 months; Greece 45.3, a 23-month high; Italy up to 47.3; France 46.4, a 13-month high.

The eurozone’s service sector in May came in at 47.2, up from 47.0 in April. Retail sales fell 0.5% in April over March.

New car sales in Germany were down 9.9% in May, with BMW’s sales sliding 11%. 

But at least there was some solid news in the U.K. The service sector reading for May was 54.9, up from 52.9 in April and the best in 14 months. Retail sales here also rose 1.8% in May from a year earlier in stores open at least a year.

So British Prime Minister David Cameron has something to crow about.

Eurobits

--Latvia is set to become the 18th member of the eurozone in the beginning of 2014. It had undergone one of Europe’s most severe austerity programs after the 2008-09 financial crisis, which knocked a fifth off its GDP, and received a 7.5 billion euro bailout in 2008, but it has now repaid the loans.

--Finland’s economy fell 0.1% in the first quarter, sending it into recession after a 0.7% decline in the fourth.

--The IMF and European Commission battled each other over the issue of Greece and its bailouts. The IMF confessed on Wednesday to “notable failures,” as part of an “ex-post evaluation” on its involvement in the first Greek bailout in 2010, recognizing that it badly underestimated the damage its austerity policies would inflict on the Greek economy.

“Market confidence was not restored, the banking system lost 30% of its deposits, and the economy encountered a much deeper than expected recession with exceptionally high unemployment,” the 50-page report said.

“Public debt remained too high and eventually had to be restructured, with collateral damage for bank balance sheets that were also weakened by the recession.”

In its evaluation of the initial Greek bailout, the IMF acknowledged that it repeatedly overestimated the prospects of the Greek economy.

And it conceded it bent its own rules, or “lowered the bar,” to make Greece’s ballooning debt appear sustainable.

The IMF’s share of the second Greek bailout in 2011 was substantially lower than the first, which was part of a move to distance itself from the European Commission and ECB.

Another accusation leveled against the EC was that it was unsuccessful at enforcing fiscal discipline and had no crisis-management experience.

So Olli Rehn, the EC’s economic chief who has been responsible for Brussels’ management of Greece’s two bailouts, lashed out at the IMF’s criticism of the rescue, accusing the fund, and managing director Christine Lagarde, of revisionist history.

“I don’t think it’s fair and just for the IMF to wash its hands and throw the dirty water on the Europeans,” said Rehn on Friday.

The IMF argued in its report that a restructuring of Greek debt should have occurred in early 2011 and not February 2012.

Rehn said, “I do not recall Dominique Strauss-Kahn (Lagarde’s predecessor at the IMF) calling for an early restructuring of Greek debt, but I do remember Christine Lagarde opposing it.”

China and Japan

In less than three weeks, the Tokyo Nikkei index had five days of 3%+ declines and the index is now 20% off its recent peak, a crashette by any measure; certainly more than your garden variety correction. Prime Minister Shinzo Abe laid out his full growth strategy to reboot the economy and beat deflation, but there are serious doubts he can pull it off, especially if the global economy doesn’t grow enough to benefit Japan’s big exporters.

There was an interesting bit in a story by the New York Times’ Hiroko Tabuchi.

“A 2010 study by the economists Kyoji Fukao and Hyeog Ug Kwon showed that Japanese companies set up after 1996 added the most jobs in the period to 2010, creating 1.2 million, compared with a net loss of 3.1 million jobs over the same period at all companies founded before 1996. Foreign companies added more than 150,000 net jobs to Japan, highlighting what is seen as the need for Japan to open up to more foreign direct investment, whose inflows came to less than 4% of economic output in 2001, compared to a fifth of the American economy and half of Britain’s.

“That, economists say, would bring real change to a country famous for its world-class exporters like Toyota and Canon but also chock-full of laggards that are sheltered by regulations and kept alive by subsidies, sucking the lifeblood out of the Japanese economy. For Japan to make the productivity gains it needs to grow, economists say, these domestic companies must be opened up to more competition from both inside Japan and overseas.”

But labor market changes are missing from Prime Minister Abe’s policy plans, as were vital details.

Meanwhile, in China, HSBC’s PMI on manufacturing in May was just 49.2, down from April’s 50.4, and the lowest since October. The government’s official PMI was 50.8, up from 50.6. President Xi Jinping, speaking from Latin America, said the fundamentals are “sound” and growth is on a “more stable footing.”

The government’s reading on the service sector was 54.3 for May, down from April’s 54.5 and the lowest since September.

China’s service sector has inched up to 45% of the economy, which compares to about 90% in the U.S.

As to the summit between Presidents Obama and Xi, it is interesting that in light of all the cybersecurity and eavesdropping concerns, Xi and his entourage opted to stay at a nearby Hyatt rather than the Annenberg estate in Rancho Mirage, simply because they were concerned with eavesdropping. That was before this week’s revelations.

Understand, President Xi is going to be in power the next decade and he is also in charge of the military. Analysts in Beijing say Xi’s two main goals at the summit are to nurture trust while projecting self-confidence. There should be no doubt who is in charge. If the two strike up a friendship, good.

Regardless of how you feel about President Obama and his domestic policies, and regardless of whether you believe he is already a lame duck, his remaining 3 ½ years in office could easily be dominated by foreign policy, and on virtually every major issue, whether it is North Korea or Iran’s nuclear programs, Syria’s war, relations with Japan and South Korea, territorial disputes in the South and East China seas, Africa, you name it, it would certainly be better for all of us if Presidents Obama and Xi can talk to each other, with a common respect, to keep hot spots from boiling over.

On the cybersecurity front, China needs to understand that there is a difference between snooping and hacking, government to government, and the stealing of intellectual property.

The head of the U.S. Cyber Command and director of the National Security Agency, General Keith Alexander, has said cyberattacks have resulted in the “greatest transfer of wealth in history.”

For its part, the Chinese will press the Americans on their use of cyberweapons: while there is no evidence they have been used against Chinese targets, the sophisticated cyberattacks on Iran’s nuclear program by the U.S. and Israel are often cited by the Chinese news media and military journals as evidence that Washington, too, uses cyberspace for strategic advantage.

As an aside, I dream that Obama would confront Xi on issues such as overfishing and poaching, examples of China’s wanton disregard for the earth’s natural resources and a way Xi could show some common decency by, for instance, enforcing a global ban on the ivory trade.

But I’m not in the least bit optimistic about anything these days when it comes to the U.S.-China relationship.

Editorial / Washington Post

“The United States hopes China will help influence North Korea and Iran to stem or reverse their pursuit of nuclear weapons. It wants Beijing to stop bullying its neighbors in the South China Sea. More broadly, Mr. Obama should make the case to Mr. Xi that his best interest lies in steps toward liberalizing China’s political system – starting with an end to the persecution of human rights activists.

“Economic espionage in cyberspace is a pressing issue where progress might be possible. To say that China has carried out a massive stealing campaign is not hyperbole, Chinese denials notwithstanding. The intrusions have been increasingly well documented. The United States also carries out cyberspying against China, and a nascent, offensive U.S. cyberwarfare capability is growing. But U.S. intelligence agencies do not steal technology or proprietary information for the private sector.

“China probably can’t turn off the economic espionage like a switch....Both will remain wary military competitors, on the ground and in cyberspace.

“But Mr. Xi could agree to a sustained and deeper engagement on the topic....A useful long-range goal for these talks would be an agreement on norms and standards of behavior....

“If China fails to evolve toward more responsible behavior both abroad and at home, a backlash that is already forming in the United States and among its neighbors will swell. A fundamental change at the top is needed, and Mr. Obama should urge Mr. Xi to provide it.”

But another story is the absence of Michelle Obama, while Xi’s charismatic wife is in attendance.

Michelle’s excuse is this is her daughter’s last week in school. That’s a bunch of B.S. It ends up being a snub of the worst kind.

Just as her husband plays the American people like chumps and couldn’t care less about you and me, which drives me up the wall when I see his likeability poll #s still above 50%, now Michelle is taking on the same persona in a critical moment for U.S.-China relations.

Max Fisher / Washington Post

“This might seem, from the U.S. perspective, pretty banal: Of course she wouldn’t want to serve as a set-piece at some humdrum summit meetings. But from the Chinese perspective, it’s an unexpected snub, an affirmation of deeply held suspicions that Washington does not respect China and, perhaps most importantly, a relatively minor but unnecessary setback to the much-needed trust-building session before it’s even begun.

“The two things to understand here are that (1) Michelle Obama is a big star in China; her presence at the summit was eagerly anticipated in the Chinese media and would have been a nice win for Xi; (2) China still views itself as vulnerable and weak compared to the United States, which informs both its respect for the United States and its deep-seated insecurity about how China is viewed in Washington. Those two factors help explain why China-watchers say that the first lady’s absence could offend both Xi and the many Chinese citizens watching the summit, which is after all the exact opposite of what the White House wants to accomplish.”

A Chinese political scientist named Zhang Ming told the Independent, “First lady diplomacy is also very important and the U.S. side has failed to cooperate. ...According to normal diplomatic etiquette this is very strange. It shouldn’t be like this.” He added that her absence would “not go down very well” in Beijing.

Max Fisher:

“This week’s summit is partly about building personal trust between the two leaders, but it’s also about enshrining the importance of the U.S.-China relationship. China wants to be taken seriously, and the United States wants China to take itself seriously. The fact that China’s first lady will fly across the Pacific but America’s couldn’t bother to travel within her own country will not on its own overturn the U.S.-China relationship, of course. But it does undercut the summit’s implicit diplomatic goals in a minor but pretty direct way.”

Street Bytes

--Owing to Friday’s 207-point rally, stocks broke their two-week slide to finish up, with the Dow Jones gaining 0.9% to 15248, while the S&P 500 added 0.8% and Nasdaq 0.4%.

At the lows on Thursday, the S&P was down 5.3% from the intraday high of 1687 set on May 22. [The closing high is 1669 set May 21.]

--U.S. Treasury Yields

6-mo. 0.07% 2-yr. 0.30% 10-yr. 2.17% 30-yr. 3.33%

The 10-year traded below 2.00%, before rebounding back on Friday following the jobs report and the rush back into equities.

--Investors have pulled a record amount out of U.S. junk bond funds in the past week, this from what had been one of the hottest areas of the fixed income market in the past year. How much? $4.63 billion in outflows for the week ending on Wednesday, according to Lipper. Meanwhile, the average yield on ‘junk’ has surged from its historic low of 4.95% on May 9, to 6.16% on Wednesday, according to a Barclays index.

Higher-quality bond funds lost an average 1.8% in May, the worst performance since the depths of the financial crisis in October 2008, also according to Lipper.

--One of Britain’s biggest hedge funds, the Man Group’s AHL Diversified flagship fund, suffered losses of 6.1% in the past week owing to the bond market collapse of the past few weeks.   AHL is a “black box” fund, run by computer algorithms, which proved not to be that smart.

--And I just saw a piece for the weekend edition of the Financial Times talking of investors pulling a record $12.53 billion out of global bond funds in the past week, according to EPFR Global, a research firm. 2/3s of the total outflows came from U.S. funds.

--Auto sales rose 8.2% in the U.S. for the month of May over year ago levels. GM’s rose 3.1%, Ford’s 14.1%, Chrysler’s 11%, Toyota’s 2.5%, Honda’s 4.5%, Nissan’s 24.7% (its best May ever in the U.S.), while Subaru reported a 34.2% gain, its best month ever here.

Tesla sold 1,425 vehicles last month and has sold 7,506 so far this year, according to Autodata Corp.

The annualized sales pace in the U.S. is 15.3 million vehicles. In 2012, auto sales rose 13% to 14.5 million.

--Chrysler is refusing a request by the U.S. government to recall 2.7 million Jeeps dating back to 1993-2004, and 2002-2007, depending on the model.

The National Highway Traffic Safety Administration (NHTSA) says the Grand Cherokee and Liberty models in question are at risk of fuel tank fires if they are hit from behind. Chrysler said “it does not intend to recall the vehicles.”

The NHTSA can order a recall, but would need a court order to carry it out. Refusals on the part of automakers are rare.

--Australia’s first-quarter GDP rose 0.6% over the fourth quarter, 2.5% on an annualized basis, which was a little bit less than expected.

--According to the UCLA Anderson forecast noted above, California’s unemployment rate will drop to 8.8% by the end of this year and to 7.7% by the end of 2014. Maybe even 6.8% by the end of 2015. As former California Governor Ronald Reagan would have said...not bad, not bad at all.

--Watch out this fall...a sleeper economic issue. Health officials in Saudi Arabia are battling to halt the spread of a deadly Sars-like virus before millions of pilgrims arrive for the haj.

The coronavirus, which has baffled experts, has caused 30 deaths from 53 confirmed cases worldwide, but 24 out of 39 infections in Saudi Arabia.

The Kingdom has been criticized for its lack of cooperation with the World Health Organization, which has stated the disease poses “a threat to the entire world.”

The haj takes place in October, so picture up to four million Muslims converging on Mecca and Medina, and then flying back to all corners of the world. Those already infected in Britain, France and Germany thus far had recently returned from the Middle East or been in contact with someone who had.

--Samsung shares fell 6% on concerns the company’s new Galaxy S4 phone may not be selling as strongly as expected.

--Personally, I would consider the BlackBerry Q10 because of its physical keyboard, the Canadian company rolling out the smartphone in the U.S. this week. I’m guessing BlackBerry does very well with this.

--Meanwhile, Apple lost a ruling by the International Trade Commission, which says Apple infringed a Samsung patent, which could mean some older models of the iPad and iPhone are banned from sale in the U.S. The patent relates to 3G wireless technology. Apple said it plans to appeal.

Samsung said in a statement: “We believe the ITC’s final determination has confirmed Apple’s history of free-riding on Samsung’s technological innovations.”

For its part, Apple is seeking to limit the growth of Google’s Android system, used by the likes of Samsung and HTC.

--The European Union proposed tariffs on Chinese solar panels, so China launched a trade investigation into European wine exports in retaliation. The EU did offer an olive branch, a temporary lowering of tariffs on Chinese panels while the two sides negotiate a solution to this  long-running trade issue.

China’s limiting wine exports from the EU would be a big blow, as China is the fastest growing wine market in the world, and already the fifth-largest globally.

--China’s imports of grains, used mostly for fattening herds, are expected to double by 2022, according to the Food and Agriculture Organization and the OECD. Imports of soybeans will grow 40%, while meat imports are set to soar – beef doubling. The report said: “The challenge is clear: feeding China in the context of its rapid economic growth and limited resource constraints is a daunting task.”

So expect more deals like the Shuanghui of China acquisition of Smithfield Foods, while the likes of ADM are busy acquiring grain traders overseas, such as in Australia, in targeting the China market.

--Germany completed its first census in nearly a quarter of a century and distressingly found 1.5 million fewer inhabitants than previously assumed (80.2 million rather than 81.7 million).   The government has been worried about the nation’s rapidly dwindling population and then this figure hits. How future generations will repay German debts (like on entitlements), let alone liabilities and guarantees meant to contain the eurozone debt crisis, is a huge issue.

--Household wealth in the U.S. jumped to a record in the first quarter, exceeding its pre-recession peak for the first time owing to rising stock prices and the recovering housing market.

Household net worth is $2.29 trillion above its pre-recession peak of $68.1 trillion reached in the third quarter of 2007. It was at $67.2 trillion in the last three months of 2012.

--According to a congressional report, Wal-Mart’s wages are so low they force many of its employees onto the public doles.

As reported by Alejandro Lazo of the Los Angeles Times:

“The report analyzes data from Wisconsin’s Medicaid program, estimating that a single 300-person Wal-Mart Supercenter in that state likely costs taxpayers at least $904,542 per year and could cost up to $1,744,590 per year, or roughly $5,815 per employee.”

--Two Fridays ago, former telecom analyst Jack Grubman of Goldman Sachs returned to CNBC for the first time since 2002, having been barred from the securities industry in 2003. He is now an industry consultant and is gaining renewed attention.

But in reading Crain’s New York Business, I saw that back in Grubman’s heyday, 2000, the percentage of stocks rated “sell” was 2%, according to the Wall Street Journal. Today, according to Thomson Reuters, the percentage of stocks rated “sell” is 3%.

Yup, little has changed, as Grubman himself said.

--Zynga, maker of “Farmville” and other stuff I don’t play, is cutting 520 jobs, on top of an earlier cut of 300. I’m just astounded the company had 500 to start with.

--U.S. government lawyers say the late Apple founder Steve Jobs was the “ringleader” in an e-books price-fixing conspiracy.

Apple claims it did nothing wrong but earlier, five publishers also charged in the case settled before the trial at a Manhattan federal court and now they are set to testify against Apple.

The government charges Jobs and Apple laid out the conspiracy in 2010 as they prepared to introduce the iPad. Apple’s effort was a response to Amazon’s cost-cutting that hurt sales through brick-and-mortar stores.

--Years ago I flew coach on Austrian Airlines and was bowled over by the delicious Wiener schnitzel and spaetzle meal I was served. Then it was free. Now such a dish would cost $19.60, according to a Bloomberg story on Europe’s full-service carriers dishing up gourmet menus while looking for increased revenue.

“So-called ancillary sales ranging from food to overhead-bin space have jumped more than tenfold to $36 billion since 2007, amounting to 5% of the total $680 billion earned by airlines last year,” according to the International Air Transport Association.

Air France is now serving duck confit with mushrooms and sautéed potatoes for about $23. I’m drooling...

--According to the Los Angeles Times’ Hugo Martin:

“Saudi prince Fahd al-Saud, who booked whole sections of the park for himself and 60 friends over three days, spent roughly $19.5 million to ‘celebrate his degree’ at Disneyland Paris.”

Disneyland Paris needed this shot in the arm, seeing as how attendance grew by less than 2% last year compared with 2011.

“By comparison, the world’s top 25 theme parks enjoyed an average 5.2% increase in attendance in 2012.”

--Tourism in Hawaii is set to post a record in 2013 for both visitors and tourism spending, seeing as it is already about 6% ahead of 2012’s record pace. I just hope those heading over for a first time realize the beach at Waikiki is extremely narrow and don’t walk on the sidewalk in your bare feet because it can be kind of nasty.

On the other hand, allow more time than you would first think for Pearl Harbor and take in the submarine wall of honor. You can easily spend 90 minutes on that alone, reading all the accounts.

--The New York Hilton Midtown, the largest in the city with nearly 2,000 rooms, is eliminating room service, opting instead to open a grab-and-go restaurant this summer called Herb n’ Kitchen, a cafeteria-style eatery that will offer breakfast, lunch and dinner. Good idea. Yes, it means you have to get a little more dressed up to go downstairs and get your meal, but if it’s open 24 hours, great. And no waiting an hour for your meal during crush times.

--A Texas woman sued Continental Airlines for $170,550, saying that on a flight from Madrid to Newark, N.J., with Houston the ultimate destination, a flight attendant placed a hot cop of coffee on the seat-back tray in front of her when the passenger in the seat in front reclined, sending the coffee spilling onto her lap. Lourdes Cervantes said she suffered second-degree burns on the inner thighs, resulting in permanent scarring and disfiguration.

Which reminds me of a time when I was a waiter at my very first wedding reception at the Grand Summit Hotel, was literally pouring a cup from my first pot of coffee but didn’t know it had been filled to the brim, and, whoooosh! It went streaming onto the legs of a female guest.

Uh oh....this could be bad, I mused. Alas, for some reason the woman didn’t sue me, or the hotel, and my boss liked me so I was spared the guillotine. Never found out if the woman’s skin grafts took.

And now you know...the rest of the story...

Foreign Affairs

Syria: This week Secretary of Defense John Kerry said of the war in Syria and rapidly failing attempts to put together peace talks amid victories on the battlefield for the Assad regime:

“This is a very difficult process, which we come to late. We are trying to prevent the sectarian violence from dragging Syria down into a complete and total implosion where it has broken up into enclaves, and the institutions of the state have been destroyed, with God knows how many additional refugees and how many innocent people killed.”

I love how Kerry is Master of the Obvious. Too bad he and his president didn’t see the light two years ago. Back then, Obama declared, “The time has come for President Assad to step aside.” A year later, he warned that moving or preparing chemical weapons would be a “red line” that would change his thinking about military engagement.

Instead, nothing. And this was indeed an awful week for the U.S. and its allies, and a big one for Assad, Russia and Iran, as Syrian government troops, aided in a big way by Hizbullah, retook the strategic town of Qusair near the Lebanese border.

The Syrian and Hizbullah forces reduced the town to rubble as the rebels fled, leaving hundreds and hundreds (1,200 according to the Syrian Observatory for Human Rights) of injured civilians without medical care while the government, as of this writing, has refused to allow the Red Cross in.

The rebels were totally outgunned and their pleas to the West for arms are being ignored. Only Qatar and Saudi Arabia have stepped up. Now Hizbullah is on the move to Aleppo in an attempt to help the regime retake that city.

Meanwhile, al-Qaeda leader Ayman al-Zawahri urged Syrians to unite to bring down Assad and thwart what he said were U.S. plans to set up a client state in Syria to safeguard Israel’s security. Hardly, Ayman.

Charles Krauthammer / Washington Post

“For the rebels, (Qusair is) a devastating loss of territory, morale and their supply corridor to Lebanon. No one knows if this reversal of fortune will be the last, but everyone knows that Assad now has the upper hand.

“What altered the tide of battle was brazen outside intervention. A hardened, well-trained, well-armed Hizbullah force – from the terrorist Shiite group that dominates Lebanon and answers to Iran – crossed into Syria and drove the rebels out of Qusair, which Syrian artillery has left a smoking ruin.

“This is a huge victory not just for Tehran but also for Moscow, which sustains Assad in power and prizes its warm-water port at Tartus, Russia’s only military base outside of the former Soviet Union. Vladimir Putin has stationed a dozen or more Russian warships offshore, further protecting his strategic outpost and his Syrian client.

“The losers? NATO-member Turkey, the major supporter of the rebels; Jordan, America’s closest Arab ally, now drowning in half a million Syrian refugees; and America’s Gulf allies, principal weapons suppliers to the rebels.

“And the United States, whose bystander president, having declared that Assad must go, that he has lost all legitimacy and that his fall is just a matter of time, is looking not just feckless but clueless.

“President Obama doesn’t want U.S. boots on the ground. Fine. No one does. But between nothing and invasion lie many intermediate measures: arming the rebels, helping Turkey maintain a safe zone in northern Syria, grounding Assad’s murderous air force by attacking airfields – all the way up to enforcing a no-fly zone by destroying the regime’s air-defense system.

‘Obama could have chosen any rung on the ladder. He chose none....

“Obama imagines that if America is completely hands-off, a civil war like Syria’s will carry on as is, self-contained. He simply does not understand that if America withdraws from the scene, it creates a vacuum that invites hostile outside intervention. A superpower’s role in a regional conflict is deterrence.”

As for the fate of the talks that were scheduled for June in Geneva, with some now saying July, it is possible they will never come about.

Russia has ruled out any preconditions for talks, while Assad has refused to step down as part of any transition plan.

The rebels can’t agree on who would represent them, let alone they said they wouldn’t show if a representative of Assad’s regime was in attendance.

The West, concerned about weapons ending up in the hands of hostile extremist groups, has only promised nonlethal aid to the opposition.

Historian and opposition adviser, Amr al-Azm, told the Daily Star:

“The West talked the talk but didn’t back it up, whereas the regime talked the talk and delivered, with Hizbullah and the Iranians.

“In early 2013, the expectation was that the U.S. administration was only able to bring the regime to the negotiating table through military degradation of Assad’s forces and support for the opposition forces that would allow them to take and hold areas that were of vital strategic interest to the regime.

“The opposition would then have something the regime actually wants and would be willing to sit and negotiate over.” Instead, he said, the U.S. and its allies promises of military aid amounted to mere “saber rattling.”

“They [the West] managed to push the Iranians and the regime to thinking they were serious, making them confident enough to take more assertive action... The regime will happily go to the table now, but in no mood to negotiate. They will be in a mood to impose their demands.

“The U.S. administration’s singular lack of assertive leadership has not only undermined the opposition and very much contributed to the state of affairs we find ourselves in now, but consistently undermined any chance of getting rid of the regime or replacing it with something else,” he said.

In the meantime, the war is increasingly moving into Lebanon. At least 12 Syrian rebels were killed in east Lebanon in an ambush by Hizbullah, with the rebels, post-Qusair, saying they would take the battle to Lebanon. Israel’s air force has been flying over the Hizbullah stronghold of Baalbek, as well as other parts of the Bekaa Valley and Beirut itself. Rockets are falling all the time on Lebanon, launched from Syria.

Separately, Austria, whose troops comprise 380 of the 1,000-strong U.N. Disengagement Observer Force (UNDOF) in the Golan Heights, said it is pulling them out because of battles between Syrian troops and rebels there, a big blow to a mission that has kept the Israeli-Syrian war front quiet for 40 years.

Friday, the U.N. launched its largest appeal in history, seeking $5 billion for humanitarian aid to Syria. The U.N. now estimates 10 million Syrians – half the population – will need help by the end of the year.

As many as four million children are in urgent need. The number of refugees, now 1.5 million, is expected to leap to 3.5 million by year end.

How the heck is Jordan to survive? We already know Lebanon is a seething cauldron.

This is so sad, and was all so preventable.

Turkey: After a week of growing protests across the country, Prime Minister Recep Tayyip Erdogan acknowledged that some Turks have been involved in the protests out of environmental concerns, but insisted that terrorist groups are involved in the unrest.

It all started with peaceful protests at a place I am most familiar with, Taksim Square in Istanbul. The protesters wanted Erdogan to squelch plans for a new shopping mall at the square, one of the few large open spaces in this sprawling megalopolis. But then the demonstrations spiraled into an outpouring of rage directed at Erdogan, who in ten years of rule has increasingly taken on the look of an autocrat. The police launched a brutal crackdown, with hundreds injured, and the protests spread to Ankara and elsewhere.

Kemal Ataturk, the secular founder of modern-day Turkey, must be squirming in his impressive tomb in Ankara.

During the week, Erdogan was traveling through North Africa and only apologized for some of the violence of the police crackdown, but not the excessive use of tear gas. He also indicated the government would go through with the redevelopment plans in central Istanbul, insisting it would beautify the city.

One thing to watch here are the dynamics between Erdogan and President Abdullah Gul, the latter largely a figurehead.

Erdogan’s term as prime minister expires next year and he wants to run for president, possibly  against Gul should he choose to run again, but only after installing a system that would give the head of state increased powers. The two used to be close allies but no longer. Gul has been praising the protesters for the most part.

As for the reaction in Turkey’s financial market, stocks fell 10% the day after the protests turned violent.

Editorial / Wall Street Journal

“Once pragmatic and careful, Mr. Erdogan has lately tried to accumulate power with stunning arrogance. He wants to rewrite the constitution to create a stronger presidency and then take the job. If successful, he would – like his friend Vladimir Putin in Russia – position himself to lead Turkey for another 10 years. In his re-election campaign two years ago, he signaled his intentions with the slogan ‘Goal 2023.’...

“His response is typically tin-eared and dangerously confrontational. The clash in Turkey isn’t about Islam but democracy. The protesters tend to be young, urban, well-educated and secular, yet no political party or figure is leading them. After a decade, many Turks are growing tired of Mr. Erdogan and frustrated by the lack of a competitive opposition....

“Mr. Erdogan’s mistake, a familiar one among strong rulers, is to assume that he is personally indispensable to Turkey’s continued progress. He’d be wiser to conclude from the protests that the Turkish middle class wants a democracy of checks and balances, not the rule of one man.”

Iran: The presidential election is next Friday, June 14, but there is little buzz surrounding the eight hand-picked candidates. One 37-year-old housewife told the Financial Times, “I do not know anyone who is going to vote.”

Saeed Jalili will win. He is a staunch conservative who has championed “resistance” against the West. He does not favor women in the workplace. This guy is evil. 

Reformists are trying to rally around one of the two (of the eight) who are viewed as most moderate, and Jalili was ganged up on by the other seven candidates in Friday’s debate, but it won’t work.

Instead, some may be yearning for the ‘good old days of Ahmadinejad.’ The Supreme Leader and his loyal clerics are strengthening their authoritarian powers.

As Amir Taheri writes in the New York Post:

“(Jalili claims) there was ‘no reason why the Islamic Republic should not lead the world’s Muslims in seeking global power.’

“Yet the Islam of which Jalili talks is a special brand. Labeled ‘pure Mohammadan Islam,’ it is based on Shiism plus the teachings of the late Ayatollah Khomeini and ‘Supreme Guide’ Khamenei.

“ ‘We are in a position to challenge global powers,’ Jalili said (in his first major speech as presidential candidate). ‘And if anyone says that we are after creating a great empire, we have no problem with that.’

“His analysis is based on the belief that the United States is in ‘historic retreat’ and that other Western democracies lack the will to defy Tehran. Iran’s alliance with Russia will help neutralize the United Nations and prevent it from taking action against Iranian ambitions....

“Jalili and his group could best be described as ‘the North Koreans of Islam.’ Their aim is to build a wall around Iran while waging low-intensity terrorist war against real or imagined foes abroad. The result could be greater misery for the Iranian people.

“However, Iranians could still fight back to prevent Khamenei from imposing his protégé. 

“A discredited electoral process shouldn’t be allowed to produce a suicidal administration that could make even Ahmadinejad look sane.”

Iraq: The United Nations says 1,045 civilians and security personnel were killed in May, surpassing the 712 figure for April, the deadliest month since June 2008. More than half of those killed were in the capital district of Baghdad. Staggering. There is so little press, mainly because there are no actual press there anymore, it seems. Certainly not from the networks.

500 in Baghdad in one month!!! And it is only going to get worse as Syria increasingly bleeds over.

Afghanistan: The Georgian contingent in Helmand Province is the largest non-NATO member of the International Security Assistance Force and it has not been a good stretch for them. On Thursday, a suicide truck bomb killed seven Georgian soldiers at a remote base, but failed to get inside the outer perimeter. Earlier, on May 13, a second truck bomb killed three Georgians. The Taliban has claimed responsibility for the attacks. The Georgians now have three bases in one of the most dangerous areas of Helmand. 30 Georgians have been killed in the war.

Separately, Italy and Germany committed to join the United States in helping to train Afghan troops after combat operations cease at the end of next year.

North/South Korea: The two agreed on Thursday to hold their first talks since 2008, raising hopes of a thaw in relations after the North’s provocations.

Pyongyang proposes the two discuss reopening the Kaesong joint industrial complex, which the North stupidly closed in April, and resuming cross-border tours, also suspended since 2008.

China: This week’s fire at a Chinese poultry slaughterhouse killed at least 120 people, with the government now going ‘dark’ on revealing the fate of the missing, best I can determine.

The building included locked doors and a lack of fire escapes and you can imagine the rising anger among the population. Apparently, local fire safety officials had just inspected the place three days before. Said one local, “They knew what was wrong....but have done nothing for so long.”

On Friday, 47 died in a commuter bus fire in Fujian province. 34 were injured. So 80+ on the bus.

Russia: President Putin and his wife, Lyudmila, appeared on Russian national television Thursday night to announce that they are getting a “civilized divorce,” just before their 30th wedding anniversary. It was the first time they had been seen together in public for more than a year and brings to an end years of speculation and rumors. It now seems pretty obvious Putin’s affair with former Olympic champion gymnast, Alina Kabaeva, was one of the reasons for the split. She is supposedly the mother of at least one child by him, maybe two, even as he denied the liaison.

Mrs. Putin said, “We will forever remain very close people. I’m grateful to Vladimir Vladimirovich that he supports me.”

And oh how Lyudmila knows he can cut her off at the knees if she says any more than that.

On perhaps a more serious issue, Moscow police rounded up 300 people at a Muslim prayer room in the city on Friday after Putin ordered a crackdown on radical Islamists ahead of next year’s Winter Olympics in Sochi. Smart move, Vlad the Great. [Pssst...since I thought he would have been taken out by now, time to suck up to Vlad, know what I’m sayin’?]

Putin told a meeting of security officers: “We must fight back hard against extremists who, under the banners of radicalism, nationalism and separatism, are trying to split our society.”

Venezuela: The government is so dysfunctional these days, parts of the country are forced to ration food and smartcards are being issued that will allow only a limited purchase of staples such as rice, flour, cooking oil, sugar and powdered milk. President Nicolas Maduro will be removed shortly...just an educated guess. I mean for crying out loud, the Roman Catholic Church said it will have to restrict Mass because of a lack of Communion wine and flour for Eucharist wafers. And toilet paper is still hard to come by in some spots.

Random Musings

--Of 10 American institutions listed in the latest Wall Street Journal/NBC News poll, released Wednesday, only the military and the auto industry received confidence marks of over 25%. 67% said they have “a great deal” or “quite a bit” of confidence in the military, but this figure is down from 76% the last time the question was asked in May 2012. And it’s an 18-point drop in confidence since January 2002, months after 9/11.

The auto industry is the second-most trusted, with 29% saying they have “a great deal” or “quite a bit” of confidence in it. In January 2009, the same figure was 13% after the industry petitioned the federal government for a massive bailout.

Social networking websites garner only a 13% confidence rating. The financial industry fell a point to 11%.

Federal government rose to 17%. The IRS came in at 10%. [It wasn’t included last year.]

--Acting IRS Commissioner Danny Werfel acknowledged to Congress on Monday that American taxpayers no longer trust the institution, declaring he was “committed to restoring that trust.” [cough cough] Werfel promised the transparency that has been lacking.

“We must have the trust of the American taxpayer. Unfortunately, that trust has been broken. The agency stands ready to confront the problems that occurred, hold accountable those who acted inappropriately, be open about what happened, and permanently fix these problems so that such missteps do not occur again. It has to start with a recognition that a trust has been violated.”

Meanwhile, we have learned via a new inspector general’s report that the IRS spent $50 million to hold at least 220 conferences for employees between 2010 and 2012, including $4 million for an August 2010 gathering in Anaheim, Calif., for which the agency did not negotiate lower room rates, even though that is standard government practice.

“Instead, some of the 2,600 attendees received benefits, including baseball tickets and stays in presidential suites that normally cost $1,500 to $3,500 per night. In addition, 15 outside speakers were paid a total of $135,000 in fees, with one paid $17,000 to talk about ‘leadership through art,’ the committee said.” [Stephen Ohlemacher / AP]

--According to Edward Klein’s book, “The Amateur: Barack Obama in the White House,” as Klein himself wrote in the New York Post last weekend:

“President Obama made a secret deal to support Hillary Clinton when she runs for president in 2016, campaign sources say, payback for the support her husband gave him in 2012.

“Bill Clinton’s animosity toward Obama is legendary. A year before the last election, he was urging Hillary to challenge the sitting president for the nomination – a move she rejected.

“According to two people who attended that meeting in Chappaqua, Bill Clinton then went on a rant against Obama.

“ ‘I’ve heard more from Bush, asking for my advice, than I’ve heard from Obama,’ my sources quoted Clinton as saying. ‘I have no relationship with the president – none whatsoever. Obama doesn’t know how to be president. He doesn’t know how the world works. He’s incompetent. He’s an amateur!’

“For his part, Obama wasn’t interested in Bill Clinton upstaging him during the presidential campaign. He resisted giving him any role at the convention.

“But as last summer wore on, and Democrat enthusiasm waned, chief political strategist David Axelrod convinced the president that he needed Bill Clinton’s mojo.

“A deal was struck: Clinton would give the key nominating speech at the convention, and a full-throated endorsement of Obama. In exchange, Obama would endorse Hillary Clinton as his successor.”

Bill Clinton upheld his end of the bargain, giving a terrific speech with surprising enthusiasm. But more people talked of Clinton’s speech after than Obama’s. So Obama began to have second thoughts.

“He would prefer to stay neutral in the next election, as is traditional of outgoing presidents.

“Bill Clinton went ballistic and threatened retaliation. Obama backed down. He called his favorite journalist, Steve Kroft of ’60 Minutes,’ and offered an unprecedented ‘farewell interview’ with departing Secretary of State Hillary Clinton.

“The result was a slobbering televised love-in – and an embarrassment to all concerned.”

And as Edward Klein concludes, Barack Obama, in the eyes of many, has been such a disappointment that “will Clinton even still want his endorsement?”

--Pete Du Pont / Wall Street Journal

“It’s too early to tell if May will be remembered as marking the beginning of a failed second term for President Obama, but it is clear the atmosphere in Washington has changed. We don’t yet know the full impact of new revelations about last September’s attack in Benghazi, the political abuse of the Internal Revenue Service, and the Justice Department’s secret surveillance of journalists, but we do know there are questions in Congress and among a suddenly energetic Washington press corps, questions likely to affect the president’s agenda and legacy.

“If the scandals do cause long-term damage, it will be because they point to failings of this president and his administration. The Benghazi tragedy shows the naivete of thinking that our nation would be loved and the world safer simply because of the power of Mr. Obama’s personality. The IRS abuses and Justice’s snooping on the press, reminiscent of the worst of President Nixon, highlight for all the danger of larger government involvement in our lives....

“Will all this lead to impeachment, as some have speculated recently? Probably not, and certainly not now. But not being guilty of an impeachable offense is a low hurdle for a president focused on his legacy. For a man who came to office with the goal of expanding the role of government to better our lives, it would be quite a comedown to leave office with the main accomplishment of increasing the nation’s distrust of government.”

--In the above noted Wall Street Journal / NBC News survey, President Obama received a 48% approval rating, matching his marks from April. But only 28% of independents approve of the job he is doing, a steep slide from January’s 41% approval rating among this group.

For example, in January, 45% of independents gave Obama high marks for being “honest and straightforward.” Today, that number is 27%.

In a Bloomberg National Poll, Obama’s job approval declined from 55% to 49% since Bloomberg’s last survey in February.

47% of Americans say they don’t believe Obama when he says he didn’t know the IRS was giving extra scrutiny to the applications of small government groups seeking tax-exempt status. Only 40% say he is being truthful. [53% of independents say he isn’t telling the truth, 34% believe him.]

And in the Bloomberg survey, 53% still have a favorable impression of the president, continuing the trend since day one of his presidency. His favorability rating has always been a significant percentage higher than his actual approval rating. 

--Editorial / Wall Street Journal

“President Obama reshuffled his national security team Wednesday, and it’s a sign of the times that the reaction was mostly yawns. His choices for national security adviser and ambassador to the U.N. are loyalists who share Mr. Obama’s view that the U.S. is no longer the world’s ‘indispensable nation’ (as Bill Clinton’s Secretary of State Madeleine Albright once put it).

“Some Republicans are squawking that Mr. Obama named U.N. Ambassador Susan Rice to the NSC post despite her post-Benghazi follies. But the position is the most personal in foreign policy and requires no Senate confirmation. Her false Benghazi spin cost her a promotion to Secretary of State, and Mr. Obama is now making amends by handing her the top White House security post.

“She replaces Tom Donilon, a Hillary Clinton loyalist who served with discretion even if he leaves with the world a more dangerous place. Mr. Donilon helped to fulfill Mr. Obama’s desire to steer the U.S. out of old, and away from new, foreign entanglements. But the world’s troubles will not steer clear of us, so Ms. Rice will spend much of her time dodging the gathering storms. This includes trying to prevent Syria’s civil war from becoming a Russian-Iran strategic victory or a regional Shiite-Sunni war.

“To replace Ms. Rice at the U.N., Mr. Obama chose Samantha Power, who was also present at his creation in the Senate and has worked at the White House. Ms. Power and Ms. Rice joined Mrs. Clinton in urging Mr. Obama to intervene in Libya, but otherwise Ms. Power shares Mr. Obama’s desire for a diminished U.S. role in the world.”

Ralph Peters / New York Post

“There are three big losers from President Obama’s cynical appointment of Susan Rice as his new national security adviser: Secretary of State John Kerry, Congress and the American people.

“As for the nomination of left-wing activist Samantha Power to replace Rice as U.N. ambassador, the losers are our foreign policy, our allies and the lefties bellowing for the closure of Gitmo....

“These personnel choices are brilliant hardball politics – but, once again, the Obama White House has elevated politics above serious strategy....

“Pity poor John Kerry...He really, really wanted to be a noteworthy secretary of state. Already held at arms-length, now he’ll be relegated to visiting countries that never make the headlines and handing out retirement awards (plus working on the Middle East ‘peace process,’ the ultimate diplomatic booby prize).

“Rice has the weakest credentials of any national security adviser in the history of the office, but she has the president’s ear as his old pal. And she’ll work in the White House: Proximity to POTUS is trumps in D.C. Kerry’s desk in Foggy Bottom might as well be a hundred miles from the Oval Office.

“However incompetent, Rice may become the most influential national security adviser since Henry Kissinger eclipsed the entire State Department. Which means that Obama’s foreign policy, already disastrous, is now going to get worse.

“As for the earnest Ms. Power, she has zero qualifications to serve as our U.N. ambassador. She’s a left-wing militant who has yet to show the least interest in defending America, rather than merely using our might as her tool. Her cause is human rights abroad, and that’s her only cause. And while respect for human rights should be a major factor in our foreign policy, it can’t be the only factor....

“On a purely practical level, Power is a terrible choice to be our U.N. rep. It’s a job for a veteran, polished ambassador who understands the arcane ways of diplomacy and the U.N.’s exasperating rules and procedures – which the Russian and Chinese ambassadors employed to humiliate Rice. It’s not a job for a zealot on a hobby horse.

“Obama knows that, of course. But the Power nomination’s a win for him, even if she’s not confirmed. He just covered his left flank on the cheap. It’s not about Power, just about power.”

--Florida Republican Sen. Marco Rubio sought support from House conservatives on his far-ranging immigration legislation, but many of the lawmakers were unimpressed and it will be interesting to see if Rubio backs off on his efforts in light of his probable run for the presidency in 2016. Many of the Republican congressmen said things like, ‘I cannot vote for a bill that gives amnesty to illegal aliens here in this country.’

Rubio knows he needs stronger border security provisions in his bill in order to pass the House, and he’s said it lacks the 60 votes needed to pass the Senate without improvements.

Such talk has confused immigration advocates, who question his commitment to the cause.

“It’s very simple,” Rubio now says. “If people want immigration reform, we’re going to have to improve the border security elements of the bill and we’re going to have to make people confident that what we’re doing is enough. And that’s what I’m going to focus on.” [Erica Werner / AP]

--Over the years I was less than complimentary when it came to Democratic Sen. Frank Lautenberg of New Jersey, who passed away on Monday at the age of 89. He had been largely incapacitated the past year and it took him awhile to see the light. Only in April did he announce he wouldn’t seek a new term in 2014 when he would have been 91.

Immediately all eyes turned to Republican Gov. Chris Christie. With the term not set to expire until January 2015, I thought (preferred) that the governor select Tom Kean Sr., former member of Congress and beloved governor, to fill out the term. Other Republicans said to be in the mix included state Sens. Thomas Kean Jr. and Joe Kyrillos, Lt. Gov. Kim Guadagno and Assemblyman Jon Bramnick.

But rather than opt to fill the term and wait until Nov. 2014 and the normal election cycle, or rather than hold a special election this coming November, Christie opted to go for an August primary and a special election on Oct. 16, three weeks before the November vote where he will be on the ballot for governor, running against Democratic state Sen. Barbara Buono, whom Christie leads by 30 percentage in most polls. I’ve been saying how Christie needs 60%, in this Democratic state, to send a huge statement when it comes to his national ambitions.

So now it is going to cost the state an estimated $25 million, and has voters and politicos from both sides ticked off. I am.

I do understand the politics of it, however. Christie just doesn’t want to be on the ballot at the same time as Newark Mayor Cory Booker, the Democrat now expected to win the rushed primary. Booker’s presence in November would have driven more Democrats to the polls and impacted Christie’s victory margin.

If Christie had picked a Kyrillos or Kean Jr., and let them stay in office until November 2014, that would let them build their own reputations and legislative record. [Democrats would have contested such a move in the courts.] But this is why I thought Kean Sr. would have been a solid choice because Christie wouldn’t have been playing politics, while still letting Republicans pick a long-term candidate to battle Booker in 2014.

“The right thing is to let the people decide,” said Christie.

Well, that certainly is disingenuous, and this coming from our straight-talkin’, straight-shooter. We have a ways to go, and I keep saying Christie likes to think 3 or 4 steps ahead of the rest of us, but my gut reaction is this backfires and he doesn’t get the 60% that would enhance his national stature among the Republican rank and file.

Meanwhile, Christie selected state Attorney General Jeff Chiesa to fill the Senate seat until the October vote.

Lastly, a Wall Street Journal / NBC poll found that more than 43% of Democrats surveyed said they had positive impressions of Christie, compared with 41% of independents and 40% of Republicans. 

By comparison, Hillary Clinton enjoyed positive ratings among 83% of Democrats, but only 15% of Republicans.

In a Bloomberg National Poll, Clinton’s favorability dropped from 70% in December to 58%, owing to criticism over her handling of Benghazi. 22% view her unfavorably.

In the same survey, Christie was viewed favorably by 50% of Americans and unfavorably by 16%.

--A government prosecutor told a court martial at Fort Meade, Maryland, that Bradley Manning “systematically harvested” massive amounts of secret data from hundreds of volumes of classified information, putting the lives of soldiers at risk and helping America’s enemies, as reported by the Wall Street Journal.

Manning has already pleaded guilty to less charges that could amount to 20 years in prison, but he faces more serious charges that could tack on another 154 years.

Manning was in regular contact with Julian Assange of WikiLeaks. I’ve said my piece on Assange. I also believe Manning deserves the death penalty.

--Prosecutors Friday recommended four years in prison for former Rep. Jesse Jackson Jr., following his guilty plea this year on criminal charges related to a scheme to spend $750,000 in campaign funds on personal items. It was suggested his wife receive 18 months. Both will be sentenced July 3.

--A Johns Hopkins University study of more than 6,000 people finds that only 2% of those studied, or 129, satisfied all four healthy lifestyle criteria; someone who has never smoked, eats a Mediterranean diet and keeps a normal weight and who exercises regularly. If you do, chances of death from all causes is reduced by 80% over eight years. An author of the study, Dr. Roger Blumenthal, said, “Of all the lifestyle factors, we found that smoking avoidance played the largest role in reducing the risk of coronary heart disease and mortality. In fact, smokers who adopted two or more of the healthy behaviors still had lower survival rates after 7.6 years than did nonsmokers who were sedentary and obese.”

--For the archives, the deadly tornado that struck near Oklahoma City on May 31 was not only the area’s second EF5 twister in less than two weeks, but a record-breaking 2.6 miles wide at one point. It was determined it packed winds of up to 295 mph when it hit El Reno. 18 people died in the storm, including three storm chasers, and its subsequent flooding. The EF5 that struck Moore on May 20 killed 24. Moore had an EF5 in 1999 that still holds the record for strongest winds ever measured on earth: 302 mph.

--Some cities in the path of the raging Danube River this week saw it reach heights not seen in over 500 years. And I just read that Hungary, including Budapest, is now looking at the worst flooding ever from the Danube, possibly on Monday. Just as tourist season is getting underway.

--According to Al Cambronne, who authored a book “Deerland,” “Each of America’s 30 million deer eats about 3,000 pounds of vegetation per year.” When it comes to America’s farmers, the damage to crops is conservatively estimated at $2 billion per year.
---

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

God bless America.

---

Gold closed at $1383
Oil, $96.03

Returns for the week 6/3-6/7

Dow Jones +0.9% [15248]
S&P 500 +0.8% [1643]
S&P MidCap -0.3%
Russell 2000 +0.3%
Nasdaq +0.4% [3469]

Returns for the period 1/1/13-6/7/13

Dow Jones +16.4%
S&P 500 +15.2%
S&P MidCap +15.8%
Russell 2000 +16.3%
Nasdaq +14.9%

Bulls 45.8
Bears 20.8 [Source: Investors Intelligence...big drop in bulls...]

Nightly Review video schedule...Monday, Wednesday and Thursday this week, posted around 5:30 PM ET.

Have a great week. I appreciate your support.

Brian Trumbore



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Week in Review

06/08/2013

For the week 6/3-6/7

[Posted 12:00 AM ET]

Washington and Wall Street

While Washington was focused on new controversies, which I address below, Wall Street spent another volatile week trying to figure out when the Federal Reserve will begin pulling away the punch bowl and just how fast bond yields could rise, seeing as how a 50 basis point (0.50%) move in May caused more than a bit of indigestion in the fixed income and currency markets. What if we saw a 100 bp move in 30-45 days? From existing levels, that could mean a crash, or at least a crashette (15-20% in a month as opposed to 3 or 4 days...Tokyo’s Nikkei, I’d argue, is in crashette mode currently).

So the equity markets were bouncing up and down, waiting for Friday’s jobs report. A May reading on manufacturing, the ISM, came in at 49.0, down from 50.7 in April, the first decline since November and the lowest since June 2009. This contrasted sharply with the prior week’s Chicago PMI, over 58. Both construction spending (+0.4%) and factory orders (+1.0%) for April were below expectations, while the May reading on the service sector was 53.7, in line.

The Federal Reserve released its beige book on regional economic activity on Wednesday and it spoke of “modest to moderate” growth in 11 of 12 districts.

“Hiring increased at a measured pace in several districts, with some contacts noting difficulty finding qualified workers...

“Most districts noted slight to moderate gains in consumer spending and a moderate increase in vehicle sales.”

Manufacturing increased across most regions as residential construction “was a boon” to suppliers.

The New York region reported “steady business activity” in manufacturing, and Boston firms said they’re “reasonably optimistic about the outlook.”

But that “modest” word had some talking slowdown, or perhaps more 2% growth in the second half and not the hoped for 2.5% to 3.0% pace. 2% would mean earnings estimates for the second half might be a bit frothy.

The respected quarterly Anderson Forecast from UCLA’s economists said “Jobs are growing, but not rapidly enough to create good jobs for all.” Edward Leamer, director of the forecast, wrote, “It’s not a recovery. It’s not even normal growth. It’s bad.”

That has long-term implications in the face of technological advancements that continue to displace workers, Leamer said. And the country’s education system isn’t developing the workforce of the future.

“Regrettably we reward teachers if their students can regurgitate the information on standardized tests,” Leamer wrote. Future workers will need creative and analytical thinking skills. [Ricardo Lopez / Los Angeles Times]

Well that’s depressing, as was a less than impressive jobs report from the ADP folks midweek, 135,000 in May, which further led to the concern that Friday’s nonfarm payrolls number would disappoint, less than the 160,000 figure that was the general consensus.

But then the Labor Department’s jobs data was released at 8:30 a.m. and it was 175,000, with a downward revision of 12,000 for both March and April, though the unemployment rate ticked up to 7.6% because more people were out looking.

So at least for one day this was what the doctor ordered. Had the number been, say, 250,000, there would have been all manner of folks jumping out windows over fears the Fed would pull back. Had it been 100,000, there would be talk of an economy moving in reverse (which I’m guessing would have trumped the Fed not needing to taper).

Plus it wasn’t bad for the monetary stimulus addicts that the unemployment rate ticked up. The Dow Jones rose 207 points on the news.

But regarding housing, a pillar of the recovery, Barron’s Gene Epstein had some of the following:

“This recovery has been so stuffed with government steroids, you wonder if it could make it on its own if these drugs were withdrawn. Ask the average person what share of new home mortgages are guaranteed by government, and he or she is unlikely to estimate anywhere near 91.6%. But that is the actual figure as of the first quarter, based on data from Inside Mortgage Finance.

“The insurers and guarantors include the Federal Housing Administration, the Veterans Administration, and the government-sponsored enterprises Fannie Mae and Freddie Mac, among the major entities.

“And where the FHA and VA are concerned, the down payments required are minuscule by conventional standards, ranging from 0% to 5%. According to a recent FHA report, the average down payment required on its insured mortgages in the first quarter has been a little over 4%. The VA’s rather chilling statistical category called No Down Payment indicates that close to 90% of its home loans normally enjoy this status.

“Recent data are not available for the share of all mortgages insured by the FHA and VA. But we do know they accounted for a hefty 46.4% of all mortgages in 2011, way up from an average of about 10% from 2004 to 2007, just before the Great Recession.”

Yikes. And consider this, as reported by Nick Timiraos of the Wall Street Journal:

“The Federal Housing Administration’s projected losses over 30 years could reach as high as $115 billion under a previously undisclosed ‘stress test’ conducted last year to determine how the agency would fare under an extremely severe economic scenario, according to documents reviewed by a congressional committee.

“The forecast was significantly worse than the most severe estimate included in the government mortgage-insurance agency’s independent actuarial review released last November.”

Congressman Darrell Issa (R-Calif.), who chairs the House Oversight and Government Reform Committee, wondered why the agency hadn’t disclosed the figure before.

Finally, you’ve undoubtedly noticed there has been little talk from Washington of a grand bargain, a deficit deal.

Sen. Bob Corker (R-Tenn.) said in an interview with the Wall Street Journal, “The intensity that has been there is not present today. I sense it in Congress and around the country – almost a fiscal fatigue that has set in.”

Rep. Chris Van Hollen (D-Md.), the top Democrat on the House Budget Committee, said, “The best opportunity is between now and October, and “even the chance of that is diminishing as the days go by.”

Congress still needs to produce a budget for next fiscal year, beginning October 1st, as well as a measure on raising the government’s debt ceiling this fall.

It’s just that there will be no entitlement reform and no true tax reform (not President Obama’s idea of it). Nothing on the corporate tax reform front either, as the United States continues to have among the highest corporate rates in the world.

So another stopgap spending bill to keep government running seems a certainty.

Yes, the deficits are shrinking, but they will soar anew in a few years, led as much by rising net interest expense as entitlements. 

As for the latest scandals, while they aren’t market movers, they create distractions Washington doesn’t need. And these two particular ones directly impact the atmospherics behind the Obama-Xi summit in a most unwelcome way.

All hell broke loose on Thursday with the disclosure in Britain’s Guardian newspaper that the National Security Agency is currently collecting the telephone records of millions of U.S. customers of Verizon under a top secret court order, granted by the secret Foreign Intelligence Surveillance Court on April 25 and good until July 19. The order requires Verizon, on an “ongoing, daily basis,” to give the NSA information on all telephone calls in its systems, both within the U.S. and between the U.S. and other countries. One must assume it’s more than Verizon.

This potentially represents the broadest surveillance order known to have been issued.

And then the Washington Post and The Guardian reported the existence of another program used by the NSA and FBI that scours the nation’s main Internet companies, including Microsoft, Yahoo, Google, Facebook, AOL, Skype, YouTube and Apple, extracting audio, video, photographs, emails, documents and connection logs to help analysts track a person’s movements and contacts. The program is called PRISM and it’s not clear whether it is used to target known suspects or just broadly collect data.

Director of National Intelligence James R. Clapper said late Thursday, that the “information collected under (PRISM) is among the most important and valuable foreign intelligence information we collect, and is used to protect our nation from a wide variety of threats. The unauthorized disclosure of information about this important and entirely legal program is reprehensible and risks important protections for the security of Americans.”

A spokesman for Apple, Steve Dowling, said, “We have never heard of PRISM.”

All of the service providers said they do not provide the government with direct access to their servers, systems, or network and only provide information after legally receiving a binding order or subpoena to do so.

Sen. Ron Wyden, D-Ore., said of the phone-records collecting: “When law-abiding Americans make phone calls, who they call, when they call and where they call is private information. As a result of the discussion that came to light today, now we’re going to have a real debate.”

Elizabeth Goitean, co-director of the Liberty and National Security Program at the Brennan Center for Justice, said: “This is a truly stunning revelation. This suggests that the government has been compiling a comprehensive record of Americans’ associations and possibly even their whereabouts.”

Sen. Mark Udall, D-Colo., said it was the type of surveillance that “I have long said would shock the public if they knew about it.”

Wyden released a video of himself pressing James Clapper on the matter during a Senate hearing in March.

“Does the NSA collect any type of data at all on millions or hundreds of millions of Americans?” Wyden asked.

“No, sir,” Clapper answered.

“It does not?” Wyden pressed.

Clapper then goes, “Not wittingly. There are cases where they could, inadvertently perhaps, collect – but not wittingly.”

But Senate Intelligence Committee Chairwoman Dianne Feinstein, D-Calif., said the order was a three-month renewal of an ongoing practice that is supervised by federal judges who balance efforts to protect the country from terror attacks against privacy concerns. The surveillance powers are part of the post-9/11 Patriot Act (section 215), which was renewed in 2006 and again in 2011.

House Intelligence Committee Chairman Mike Rogers (R-Mich.) said the NSA program helped thwart a “significant case” of terrorism in the United States “within the last few years....We know that. It’s important.”

Senate Democratic leader Harry Reid (Nev.) said: “Everyone should just calm down and understand that this isn’t anything that’s brand new. This is a program that’s been in effect for seven years, as I recall. It’s a program that has worked to prevent not all terrorism but certainly the vast, vast majority. Now is the program perfect? Of course not.”

Sen. Saxby Chambliss (R-Ga.), the top Republican on the Intelligence Committee, said, “This is nothing particularly new....Every member of the United States Senate has been advised of this.”

Sen. Lindsey Graham (R-S.C.): “I’m a Verizon customer. I don’t mind Verizon turning over records to the government if the government’s going to try to match up a known terrorist’s phone with somebody in the United States. I’m glad the activity is going on, but it is limited to tracking people who are suspected to be terrorists and who they may be talking to.”

House Speaker John Boehner called on Obama to explain why the program is necessary.

Rep. Jim Sensenbrenner, R-Wis., who sponsored the Patriot Act, said he was “extremely troubled by the FBI’s interpretation of this legislation.”

Editorial / New York Times

“Within hours of the disclosure that federal authorities routinely collect data on phone calls Americans make, regardless of whether they have any bearing on a counterterrorism investigation, the Obama administration issued the same platitude it has offered every time President Obama has been caught overreaching in the use of his powers: Terrorists are a real menace and you should just trust us to deal with them because we have internal mechanisms (that we are not going to tell you about) to make sure we do not violate your rights.

“Those reassurances have never been persuasive – whether on secret warrants to scoop up a news agency’s phone records or secret orders to kill an American suspected of terrorism – especially coming from a president who once promised transparency and accountability.

“The administration has now lost all credibility on this issue. Mr. Obama is proving the truism that the executive branch will use any power it is given and very likely abuse it. That is one reason we have long argued that the Patriot Act, enacted in the heat of fear after the Sept. 11, 2001, attacks by members of Congress who mostly had not even read it, was reckless in its assignment of unnecessary and overbroad surveillance powers....

“Essentially, the administration is saying that without any individual suspicion of wrongdoing, the government is allowed to know whom Americans are calling every time they make a phone call, for how long they talk and from where. This sort of tracking can reveal a lot of personal and intimate information about an individual. To casually permit this surveillance – with the American public having no idea that the executive branch is now exercising this power – fundamentally shifts power between the individual and the state, and it repudiates constitutional principles governing search, seizure and privacy.

“The defense of this practice offered by Senator Dianne Feinstein of California, who as chairwoman of the Senate Intelligence Committee is supposed to be preventing this sort of overreaching, was absurd. She said on Thursday that the authorities need this information in case someone might become a terrorist in the future. Senator Saxby Chambliss of Georgia, the vice chairman of the committee, said the surveillance has ‘proved meritorious, because we have gathered significant information on bad guys and only on bad guys over the years.’

“But what assurance do we have of that, especially since Ms. Feinstein went on to say that she actually did not know how the data being collected was used?”

Editorial / Wall Street Journal

“The critics...say the NSA program is a violation of privacy, or illegal, or unconstitutional, or all of the above. But nobody’s civil liberties are violated by tech companies or banks that constantly run the same kinds of data analysis. We bow to no one in our desire to limit government power, but data-mining is less intrusive on individuals than routine airport security. The data sweep is worth it if it prevents terror attacks that would lead politicians to endorse far greater harm to civil liberties....

“The real danger from this leak is the potential political overreaction. The NSA is collecting less information than appears on a monthly phone bill (no names), but Americans would worry less about the government spying on them if, for example, the Justice Department wasn’t secretly spying on the Associated Press and Fox News. Or if the IRS wasn’t targeting White House critics. Or if the Administration in general showed a higher regard for the law when it conflicts with its policy preferences....

“Amid many real abuses of power, the political temptation will be to tie data-mining into a narrative about a government out of control. Such opportunism can only weaken our counterterror defenses and endanger the country.”

On Friday, President Obama defended the phone and Internet surveillance programs, saying they are closely overseen by Congress and the courts.

“Nobody is listening to your phone calls,” said Obama.

For selfish reasons, I’m not concerned about the phone issue (I last used my cellphone in 2012). I am very concerned over the Internet surveillance program and would never believe anything our government says in this regard, from the president on down.

Europe

An important EU summit is coming up on June 27 and the focus will be on a true banking union, which should have been in place by now but won’t be, if ever, until 2015 at this point, plus you have the September elections in Germany that take precedence. Chancellor Merkel can’t agree to anything in Brussels that could hurt her at the polls in Hamburg and Munich.

So for now we’re left with a spat between the IMF and EC, see below, and European Central Bank President Mario Draghi saying, in holding the line on interest rates at the ECB’s monthly meeting, that “The economic situation in the euro area remains challenging but there are a few signs of a possible stabilization, and our baseline scenario continues to be one of a very gradual recovery starting in the latter part of this year.”

Par-tay!!!

Call me underwhelmed. Germany, the supposed growth engine, saw its Bundesbank reduce GDP estimates to just 0.3% in 2013, and 1.5% in 2014. The Bundesbank also suggested that the worst could be over for the eurozone, saying that in the euro area “the economy appears to be bottoming out.”

“Nevertheless, the Bundesbank sees continuing structural problems as standing in the way of a rapid improvement,” it added. “This is likely to place a major strain on the German economy.”

Eurozone manufacturing, as measured by the PMI, came in at 48.3 in May, up from April’s 46.7, the highest in 15 months, but still below the 50 dividing line between growth and contraction, a line it has been below for 22 consecutive months. Oh well, at least it’s not worsening.

Germany’s May PMI was 49.4 vs. 48.1 in April; Spain’s 48.1, best in 24 months; Greece 45.3, a 23-month high; Italy up to 47.3; France 46.4, a 13-month high.

The eurozone’s service sector in May came in at 47.2, up from 47.0 in April. Retail sales fell 0.5% in April over March.

New car sales in Germany were down 9.9% in May, with BMW’s sales sliding 11%. 

But at least there was some solid news in the U.K. The service sector reading for May was 54.9, up from 52.9 in April and the best in 14 months. Retail sales here also rose 1.8% in May from a year earlier in stores open at least a year.

So British Prime Minister David Cameron has something to crow about.

Eurobits

--Latvia is set to become the 18th member of the eurozone in the beginning of 2014. It had undergone one of Europe’s most severe austerity programs after the 2008-09 financial crisis, which knocked a fifth off its GDP, and received a 7.5 billion euro bailout in 2008, but it has now repaid the loans.

--Finland’s economy fell 0.1% in the first quarter, sending it into recession after a 0.7% decline in the fourth.

--The IMF and European Commission battled each other over the issue of Greece and its bailouts. The IMF confessed on Wednesday to “notable failures,” as part of an “ex-post evaluation” on its involvement in the first Greek bailout in 2010, recognizing that it badly underestimated the damage its austerity policies would inflict on the Greek economy.

“Market confidence was not restored, the banking system lost 30% of its deposits, and the economy encountered a much deeper than expected recession with exceptionally high unemployment,” the 50-page report said.

“Public debt remained too high and eventually had to be restructured, with collateral damage for bank balance sheets that were also weakened by the recession.”

In its evaluation of the initial Greek bailout, the IMF acknowledged that it repeatedly overestimated the prospects of the Greek economy.

And it conceded it bent its own rules, or “lowered the bar,” to make Greece’s ballooning debt appear sustainable.

The IMF’s share of the second Greek bailout in 2011 was substantially lower than the first, which was part of a move to distance itself from the European Commission and ECB.

Another accusation leveled against the EC was that it was unsuccessful at enforcing fiscal discipline and had no crisis-management experience.

So Olli Rehn, the EC’s economic chief who has been responsible for Brussels’ management of Greece’s two bailouts, lashed out at the IMF’s criticism of the rescue, accusing the fund, and managing director Christine Lagarde, of revisionist history.

“I don’t think it’s fair and just for the IMF to wash its hands and throw the dirty water on the Europeans,” said Rehn on Friday.

The IMF argued in its report that a restructuring of Greek debt should have occurred in early 2011 and not February 2012.

Rehn said, “I do not recall Dominique Strauss-Kahn (Lagarde’s predecessor at the IMF) calling for an early restructuring of Greek debt, but I do remember Christine Lagarde opposing it.”

China and Japan

In less than three weeks, the Tokyo Nikkei index had five days of 3%+ declines and the index is now 20% off its recent peak, a crashette by any measure; certainly more than your garden variety correction. Prime Minister Shinzo Abe laid out his full growth strategy to reboot the economy and beat deflation, but there are serious doubts he can pull it off, especially if the global economy doesn’t grow enough to benefit Japan’s big exporters.

There was an interesting bit in a story by the New York Times’ Hiroko Tabuchi.

“A 2010 study by the economists Kyoji Fukao and Hyeog Ug Kwon showed that Japanese companies set up after 1996 added the most jobs in the period to 2010, creating 1.2 million, compared with a net loss of 3.1 million jobs over the same period at all companies founded before 1996. Foreign companies added more than 150,000 net jobs to Japan, highlighting what is seen as the need for Japan to open up to more foreign direct investment, whose inflows came to less than 4% of economic output in 2001, compared to a fifth of the American economy and half of Britain’s.

“That, economists say, would bring real change to a country famous for its world-class exporters like Toyota and Canon but also chock-full of laggards that are sheltered by regulations and kept alive by subsidies, sucking the lifeblood out of the Japanese economy. For Japan to make the productivity gains it needs to grow, economists say, these domestic companies must be opened up to more competition from both inside Japan and overseas.”

But labor market changes are missing from Prime Minister Abe’s policy plans, as were vital details.

Meanwhile, in China, HSBC’s PMI on manufacturing in May was just 49.2, down from April’s 50.4, and the lowest since October. The government’s official PMI was 50.8, up from 50.6. President Xi Jinping, speaking from Latin America, said the fundamentals are “sound” and growth is on a “more stable footing.”

The government’s reading on the service sector was 54.3 for May, down from April’s 54.5 and the lowest since September.

China’s service sector has inched up to 45% of the economy, which compares to about 90% in the U.S.

As to the summit between Presidents Obama and Xi, it is interesting that in light of all the cybersecurity and eavesdropping concerns, Xi and his entourage opted to stay at a nearby Hyatt rather than the Annenberg estate in Rancho Mirage, simply because they were concerned with eavesdropping. That was before this week’s revelations.

Understand, President Xi is going to be in power the next decade and he is also in charge of the military. Analysts in Beijing say Xi’s two main goals at the summit are to nurture trust while projecting self-confidence. There should be no doubt who is in charge. If the two strike up a friendship, good.

Regardless of how you feel about President Obama and his domestic policies, and regardless of whether you believe he is already a lame duck, his remaining 3 ½ years in office could easily be dominated by foreign policy, and on virtually every major issue, whether it is North Korea or Iran’s nuclear programs, Syria’s war, relations with Japan and South Korea, territorial disputes in the South and East China seas, Africa, you name it, it would certainly be better for all of us if Presidents Obama and Xi can talk to each other, with a common respect, to keep hot spots from boiling over.

On the cybersecurity front, China needs to understand that there is a difference between snooping and hacking, government to government, and the stealing of intellectual property.

The head of the U.S. Cyber Command and director of the National Security Agency, General Keith Alexander, has said cyberattacks have resulted in the “greatest transfer of wealth in history.”

For its part, the Chinese will press the Americans on their use of cyberweapons: while there is no evidence they have been used against Chinese targets, the sophisticated cyberattacks on Iran’s nuclear program by the U.S. and Israel are often cited by the Chinese news media and military journals as evidence that Washington, too, uses cyberspace for strategic advantage.

As an aside, I dream that Obama would confront Xi on issues such as overfishing and poaching, examples of China’s wanton disregard for the earth’s natural resources and a way Xi could show some common decency by, for instance, enforcing a global ban on the ivory trade.

But I’m not in the least bit optimistic about anything these days when it comes to the U.S.-China relationship.

Editorial / Washington Post

“The United States hopes China will help influence North Korea and Iran to stem or reverse their pursuit of nuclear weapons. It wants Beijing to stop bullying its neighbors in the South China Sea. More broadly, Mr. Obama should make the case to Mr. Xi that his best interest lies in steps toward liberalizing China’s political system – starting with an end to the persecution of human rights activists.

“Economic espionage in cyberspace is a pressing issue where progress might be possible. To say that China has carried out a massive stealing campaign is not hyperbole, Chinese denials notwithstanding. The intrusions have been increasingly well documented. The United States also carries out cyberspying against China, and a nascent, offensive U.S. cyberwarfare capability is growing. But U.S. intelligence agencies do not steal technology or proprietary information for the private sector.

“China probably can’t turn off the economic espionage like a switch....Both will remain wary military competitors, on the ground and in cyberspace.

“But Mr. Xi could agree to a sustained and deeper engagement on the topic....A useful long-range goal for these talks would be an agreement on norms and standards of behavior....

“If China fails to evolve toward more responsible behavior both abroad and at home, a backlash that is already forming in the United States and among its neighbors will swell. A fundamental change at the top is needed, and Mr. Obama should urge Mr. Xi to provide it.”

But another story is the absence of Michelle Obama, while Xi’s charismatic wife is in attendance.

Michelle’s excuse is this is her daughter’s last week in school. That’s a bunch of B.S. It ends up being a snub of the worst kind.

Just as her husband plays the American people like chumps and couldn’t care less about you and me, which drives me up the wall when I see his likeability poll #s still above 50%, now Michelle is taking on the same persona in a critical moment for U.S.-China relations.

Max Fisher / Washington Post

“This might seem, from the U.S. perspective, pretty banal: Of course she wouldn’t want to serve as a set-piece at some humdrum summit meetings. But from the Chinese perspective, it’s an unexpected snub, an affirmation of deeply held suspicions that Washington does not respect China and, perhaps most importantly, a relatively minor but unnecessary setback to the much-needed trust-building session before it’s even begun.

“The two things to understand here are that (1) Michelle Obama is a big star in China; her presence at the summit was eagerly anticipated in the Chinese media and would have been a nice win for Xi; (2) China still views itself as vulnerable and weak compared to the United States, which informs both its respect for the United States and its deep-seated insecurity about how China is viewed in Washington. Those two factors help explain why China-watchers say that the first lady’s absence could offend both Xi and the many Chinese citizens watching the summit, which is after all the exact opposite of what the White House wants to accomplish.”

A Chinese political scientist named Zhang Ming told the Independent, “First lady diplomacy is also very important and the U.S. side has failed to cooperate. ...According to normal diplomatic etiquette this is very strange. It shouldn’t be like this.” He added that her absence would “not go down very well” in Beijing.

Max Fisher:

“This week’s summit is partly about building personal trust between the two leaders, but it’s also about enshrining the importance of the U.S.-China relationship. China wants to be taken seriously, and the United States wants China to take itself seriously. The fact that China’s first lady will fly across the Pacific but America’s couldn’t bother to travel within her own country will not on its own overturn the U.S.-China relationship, of course. But it does undercut the summit’s implicit diplomatic goals in a minor but pretty direct way.”

Street Bytes

--Owing to Friday’s 207-point rally, stocks broke their two-week slide to finish up, with the Dow Jones gaining 0.9% to 15248, while the S&P 500 added 0.8% and Nasdaq 0.4%.

At the lows on Thursday, the S&P was down 5.3% from the intraday high of 1687 set on May 22. [The closing high is 1669 set May 21.]

--U.S. Treasury Yields

6-mo. 0.07% 2-yr. 0.30% 10-yr. 2.17% 30-yr. 3.33%

The 10-year traded below 2.00%, before rebounding back on Friday following the jobs report and the rush back into equities.

--Investors have pulled a record amount out of U.S. junk bond funds in the past week, this from what had been one of the hottest areas of the fixed income market in the past year. How much? $4.63 billion in outflows for the week ending on Wednesday, according to Lipper. Meanwhile, the average yield on ‘junk’ has surged from its historic low of 4.95% on May 9, to 6.16% on Wednesday, according to a Barclays index.

Higher-quality bond funds lost an average 1.8% in May, the worst performance since the depths of the financial crisis in October 2008, also according to Lipper.

--One of Britain’s biggest hedge funds, the Man Group’s AHL Diversified flagship fund, suffered losses of 6.1% in the past week owing to the bond market collapse of the past few weeks.   AHL is a “black box” fund, run by computer algorithms, which proved not to be that smart.

--And I just saw a piece for the weekend edition of the Financial Times talking of investors pulling a record $12.53 billion out of global bond funds in the past week, according to EPFR Global, a research firm. 2/3s of the total outflows came from U.S. funds.

--Auto sales rose 8.2% in the U.S. for the month of May over year ago levels. GM’s rose 3.1%, Ford’s 14.1%, Chrysler’s 11%, Toyota’s 2.5%, Honda’s 4.5%, Nissan’s 24.7% (its best May ever in the U.S.), while Subaru reported a 34.2% gain, its best month ever here.

Tesla sold 1,425 vehicles last month and has sold 7,506 so far this year, according to Autodata Corp.

The annualized sales pace in the U.S. is 15.3 million vehicles. In 2012, auto sales rose 13% to 14.5 million.

--Chrysler is refusing a request by the U.S. government to recall 2.7 million Jeeps dating back to 1993-2004, and 2002-2007, depending on the model.

The National Highway Traffic Safety Administration (NHTSA) says the Grand Cherokee and Liberty models in question are at risk of fuel tank fires if they are hit from behind. Chrysler said “it does not intend to recall the vehicles.”

The NHTSA can order a recall, but would need a court order to carry it out. Refusals on the part of automakers are rare.

--Australia’s first-quarter GDP rose 0.6% over the fourth quarter, 2.5% on an annualized basis, which was a little bit less than expected.

--According to the UCLA Anderson forecast noted above, California’s unemployment rate will drop to 8.8% by the end of this year and to 7.7% by the end of 2014. Maybe even 6.8% by the end of 2015. As former California Governor Ronald Reagan would have said...not bad, not bad at all.

--Watch out this fall...a sleeper economic issue. Health officials in Saudi Arabia are battling to halt the spread of a deadly Sars-like virus before millions of pilgrims arrive for the haj.

The coronavirus, which has baffled experts, has caused 30 deaths from 53 confirmed cases worldwide, but 24 out of 39 infections in Saudi Arabia.

The Kingdom has been criticized for its lack of cooperation with the World Health Organization, which has stated the disease poses “a threat to the entire world.”

The haj takes place in October, so picture up to four million Muslims converging on Mecca and Medina, and then flying back to all corners of the world. Those already infected in Britain, France and Germany thus far had recently returned from the Middle East or been in contact with someone who had.

--Samsung shares fell 6% on concerns the company’s new Galaxy S4 phone may not be selling as strongly as expected.

--Personally, I would consider the BlackBerry Q10 because of its physical keyboard, the Canadian company rolling out the smartphone in the U.S. this week. I’m guessing BlackBerry does very well with this.

--Meanwhile, Apple lost a ruling by the International Trade Commission, which says Apple infringed a Samsung patent, which could mean some older models of the iPad and iPhone are banned from sale in the U.S. The patent relates to 3G wireless technology. Apple said it plans to appeal.

Samsung said in a statement: “We believe the ITC’s final determination has confirmed Apple’s history of free-riding on Samsung’s technological innovations.”

For its part, Apple is seeking to limit the growth of Google’s Android system, used by the likes of Samsung and HTC.

--The European Union proposed tariffs on Chinese solar panels, so China launched a trade investigation into European wine exports in retaliation. The EU did offer an olive branch, a temporary lowering of tariffs on Chinese panels while the two sides negotiate a solution to this  long-running trade issue.

China’s limiting wine exports from the EU would be a big blow, as China is the fastest growing wine market in the world, and already the fifth-largest globally.

--China’s imports of grains, used mostly for fattening herds, are expected to double by 2022, according to the Food and Agriculture Organization and the OECD. Imports of soybeans will grow 40%, while meat imports are set to soar – beef doubling. The report said: “The challenge is clear: feeding China in the context of its rapid economic growth and limited resource constraints is a daunting task.”

So expect more deals like the Shuanghui of China acquisition of Smithfield Foods, while the likes of ADM are busy acquiring grain traders overseas, such as in Australia, in targeting the China market.

--Germany completed its first census in nearly a quarter of a century and distressingly found 1.5 million fewer inhabitants than previously assumed (80.2 million rather than 81.7 million).   The government has been worried about the nation’s rapidly dwindling population and then this figure hits. How future generations will repay German debts (like on entitlements), let alone liabilities and guarantees meant to contain the eurozone debt crisis, is a huge issue.

--Household wealth in the U.S. jumped to a record in the first quarter, exceeding its pre-recession peak for the first time owing to rising stock prices and the recovering housing market.

Household net worth is $2.29 trillion above its pre-recession peak of $68.1 trillion reached in the third quarter of 2007. It was at $67.2 trillion in the last three months of 2012.

--According to a congressional report, Wal-Mart’s wages are so low they force many of its employees onto the public doles.

As reported by Alejandro Lazo of the Los Angeles Times:

“The report analyzes data from Wisconsin’s Medicaid program, estimating that a single 300-person Wal-Mart Supercenter in that state likely costs taxpayers at least $904,542 per year and could cost up to $1,744,590 per year, or roughly $5,815 per employee.”

--Two Fridays ago, former telecom analyst Jack Grubman of Goldman Sachs returned to CNBC for the first time since 2002, having been barred from the securities industry in 2003. He is now an industry consultant and is gaining renewed attention.

But in reading Crain’s New York Business, I saw that back in Grubman’s heyday, 2000, the percentage of stocks rated “sell” was 2%, according to the Wall Street Journal. Today, according to Thomson Reuters, the percentage of stocks rated “sell” is 3%.

Yup, little has changed, as Grubman himself said.

--Zynga, maker of “Farmville” and other stuff I don’t play, is cutting 520 jobs, on top of an earlier cut of 300. I’m just astounded the company had 500 to start with.

--U.S. government lawyers say the late Apple founder Steve Jobs was the “ringleader” in an e-books price-fixing conspiracy.

Apple claims it did nothing wrong but earlier, five publishers also charged in the case settled before the trial at a Manhattan federal court and now they are set to testify against Apple.

The government charges Jobs and Apple laid out the conspiracy in 2010 as they prepared to introduce the iPad. Apple’s effort was a response to Amazon’s cost-cutting that hurt sales through brick-and-mortar stores.

--Years ago I flew coach on Austrian Airlines and was bowled over by the delicious Wiener schnitzel and spaetzle meal I was served. Then it was free. Now such a dish would cost $19.60, according to a Bloomberg story on Europe’s full-service carriers dishing up gourmet menus while looking for increased revenue.

“So-called ancillary sales ranging from food to overhead-bin space have jumped more than tenfold to $36 billion since 2007, amounting to 5% of the total $680 billion earned by airlines last year,” according to the International Air Transport Association.

Air France is now serving duck confit with mushrooms and sautéed potatoes for about $23. I’m drooling...

--According to the Los Angeles Times’ Hugo Martin:

“Saudi prince Fahd al-Saud, who booked whole sections of the park for himself and 60 friends over three days, spent roughly $19.5 million to ‘celebrate his degree’ at Disneyland Paris.”

Disneyland Paris needed this shot in the arm, seeing as how attendance grew by less than 2% last year compared with 2011.

“By comparison, the world’s top 25 theme parks enjoyed an average 5.2% increase in attendance in 2012.”

--Tourism in Hawaii is set to post a record in 2013 for both visitors and tourism spending, seeing as it is already about 6% ahead of 2012’s record pace. I just hope those heading over for a first time realize the beach at Waikiki is extremely narrow and don’t walk on the sidewalk in your bare feet because it can be kind of nasty.

On the other hand, allow more time than you would first think for Pearl Harbor and take in the submarine wall of honor. You can easily spend 90 minutes on that alone, reading all the accounts.

--The New York Hilton Midtown, the largest in the city with nearly 2,000 rooms, is eliminating room service, opting instead to open a grab-and-go restaurant this summer called Herb n’ Kitchen, a cafeteria-style eatery that will offer breakfast, lunch and dinner. Good idea. Yes, it means you have to get a little more dressed up to go downstairs and get your meal, but if it’s open 24 hours, great. And no waiting an hour for your meal during crush times.

--A Texas woman sued Continental Airlines for $170,550, saying that on a flight from Madrid to Newark, N.J., with Houston the ultimate destination, a flight attendant placed a hot cop of coffee on the seat-back tray in front of her when the passenger in the seat in front reclined, sending the coffee spilling onto her lap. Lourdes Cervantes said she suffered second-degree burns on the inner thighs, resulting in permanent scarring and disfiguration.

Which reminds me of a time when I was a waiter at my very first wedding reception at the Grand Summit Hotel, was literally pouring a cup from my first pot of coffee but didn’t know it had been filled to the brim, and, whoooosh! It went streaming onto the legs of a female guest.

Uh oh....this could be bad, I mused. Alas, for some reason the woman didn’t sue me, or the hotel, and my boss liked me so I was spared the guillotine. Never found out if the woman’s skin grafts took.

And now you know...the rest of the story...

Foreign Affairs

Syria: This week Secretary of Defense John Kerry said of the war in Syria and rapidly failing attempts to put together peace talks amid victories on the battlefield for the Assad regime:

“This is a very difficult process, which we come to late. We are trying to prevent the sectarian violence from dragging Syria down into a complete and total implosion where it has broken up into enclaves, and the institutions of the state have been destroyed, with God knows how many additional refugees and how many innocent people killed.”

I love how Kerry is Master of the Obvious. Too bad he and his president didn’t see the light two years ago. Back then, Obama declared, “The time has come for President Assad to step aside.” A year later, he warned that moving or preparing chemical weapons would be a “red line” that would change his thinking about military engagement.

Instead, nothing. And this was indeed an awful week for the U.S. and its allies, and a big one for Assad, Russia and Iran, as Syrian government troops, aided in a big way by Hizbullah, retook the strategic town of Qusair near the Lebanese border.

The Syrian and Hizbullah forces reduced the town to rubble as the rebels fled, leaving hundreds and hundreds (1,200 according to the Syrian Observatory for Human Rights) of injured civilians without medical care while the government, as of this writing, has refused to allow the Red Cross in.

The rebels were totally outgunned and their pleas to the West for arms are being ignored. Only Qatar and Saudi Arabia have stepped up. Now Hizbullah is on the move to Aleppo in an attempt to help the regime retake that city.

Meanwhile, al-Qaeda leader Ayman al-Zawahri urged Syrians to unite to bring down Assad and thwart what he said were U.S. plans to set up a client state in Syria to safeguard Israel’s security. Hardly, Ayman.

Charles Krauthammer / Washington Post

“For the rebels, (Qusair is) a devastating loss of territory, morale and their supply corridor to Lebanon. No one knows if this reversal of fortune will be the last, but everyone knows that Assad now has the upper hand.

“What altered the tide of battle was brazen outside intervention. A hardened, well-trained, well-armed Hizbullah force – from the terrorist Shiite group that dominates Lebanon and answers to Iran – crossed into Syria and drove the rebels out of Qusair, which Syrian artillery has left a smoking ruin.

“This is a huge victory not just for Tehran but also for Moscow, which sustains Assad in power and prizes its warm-water port at Tartus, Russia’s only military base outside of the former Soviet Union. Vladimir Putin has stationed a dozen or more Russian warships offshore, further protecting his strategic outpost and his Syrian client.

“The losers? NATO-member Turkey, the major supporter of the rebels; Jordan, America’s closest Arab ally, now drowning in half a million Syrian refugees; and America’s Gulf allies, principal weapons suppliers to the rebels.

“And the United States, whose bystander president, having declared that Assad must go, that he has lost all legitimacy and that his fall is just a matter of time, is looking not just feckless but clueless.

“President Obama doesn’t want U.S. boots on the ground. Fine. No one does. But between nothing and invasion lie many intermediate measures: arming the rebels, helping Turkey maintain a safe zone in northern Syria, grounding Assad’s murderous air force by attacking airfields – all the way up to enforcing a no-fly zone by destroying the regime’s air-defense system.

‘Obama could have chosen any rung on the ladder. He chose none....

“Obama imagines that if America is completely hands-off, a civil war like Syria’s will carry on as is, self-contained. He simply does not understand that if America withdraws from the scene, it creates a vacuum that invites hostile outside intervention. A superpower’s role in a regional conflict is deterrence.”

As for the fate of the talks that were scheduled for June in Geneva, with some now saying July, it is possible they will never come about.

Russia has ruled out any preconditions for talks, while Assad has refused to step down as part of any transition plan.

The rebels can’t agree on who would represent them, let alone they said they wouldn’t show if a representative of Assad’s regime was in attendance.

The West, concerned about weapons ending up in the hands of hostile extremist groups, has only promised nonlethal aid to the opposition.

Historian and opposition adviser, Amr al-Azm, told the Daily Star:

“The West talked the talk but didn’t back it up, whereas the regime talked the talk and delivered, with Hizbullah and the Iranians.

“In early 2013, the expectation was that the U.S. administration was only able to bring the regime to the negotiating table through military degradation of Assad’s forces and support for the opposition forces that would allow them to take and hold areas that were of vital strategic interest to the regime.

“The opposition would then have something the regime actually wants and would be willing to sit and negotiate over.” Instead, he said, the U.S. and its allies promises of military aid amounted to mere “saber rattling.”

“They [the West] managed to push the Iranians and the regime to thinking they were serious, making them confident enough to take more assertive action... The regime will happily go to the table now, but in no mood to negotiate. They will be in a mood to impose their demands.

“The U.S. administration’s singular lack of assertive leadership has not only undermined the opposition and very much contributed to the state of affairs we find ourselves in now, but consistently undermined any chance of getting rid of the regime or replacing it with something else,” he said.

In the meantime, the war is increasingly moving into Lebanon. At least 12 Syrian rebels were killed in east Lebanon in an ambush by Hizbullah, with the rebels, post-Qusair, saying they would take the battle to Lebanon. Israel’s air force has been flying over the Hizbullah stronghold of Baalbek, as well as other parts of the Bekaa Valley and Beirut itself. Rockets are falling all the time on Lebanon, launched from Syria.

Separately, Austria, whose troops comprise 380 of the 1,000-strong U.N. Disengagement Observer Force (UNDOF) in the Golan Heights, said it is pulling them out because of battles between Syrian troops and rebels there, a big blow to a mission that has kept the Israeli-Syrian war front quiet for 40 years.

Friday, the U.N. launched its largest appeal in history, seeking $5 billion for humanitarian aid to Syria. The U.N. now estimates 10 million Syrians – half the population – will need help by the end of the year.

As many as four million children are in urgent need. The number of refugees, now 1.5 million, is expected to leap to 3.5 million by year end.

How the heck is Jordan to survive? We already know Lebanon is a seething cauldron.

This is so sad, and was all so preventable.

Turkey: After a week of growing protests across the country, Prime Minister Recep Tayyip Erdogan acknowledged that some Turks have been involved in the protests out of environmental concerns, but insisted that terrorist groups are involved in the unrest.

It all started with peaceful protests at a place I am most familiar with, Taksim Square in Istanbul. The protesters wanted Erdogan to squelch plans for a new shopping mall at the square, one of the few large open spaces in this sprawling megalopolis. But then the demonstrations spiraled into an outpouring of rage directed at Erdogan, who in ten years of rule has increasingly taken on the look of an autocrat. The police launched a brutal crackdown, with hundreds injured, and the protests spread to Ankara and elsewhere.

Kemal Ataturk, the secular founder of modern-day Turkey, must be squirming in his impressive tomb in Ankara.

During the week, Erdogan was traveling through North Africa and only apologized for some of the violence of the police crackdown, but not the excessive use of tear gas. He also indicated the government would go through with the redevelopment plans in central Istanbul, insisting it would beautify the city.

One thing to watch here are the dynamics between Erdogan and President Abdullah Gul, the latter largely a figurehead.

Erdogan’s term as prime minister expires next year and he wants to run for president, possibly  against Gul should he choose to run again, but only after installing a system that would give the head of state increased powers. The two used to be close allies but no longer. Gul has been praising the protesters for the most part.

As for the reaction in Turkey’s financial market, stocks fell 10% the day after the protests turned violent.

Editorial / Wall Street Journal

“Once pragmatic and careful, Mr. Erdogan has lately tried to accumulate power with stunning arrogance. He wants to rewrite the constitution to create a stronger presidency and then take the job. If successful, he would – like his friend Vladimir Putin in Russia – position himself to lead Turkey for another 10 years. In his re-election campaign two years ago, he signaled his intentions with the slogan ‘Goal 2023.’...

“His response is typically tin-eared and dangerously confrontational. The clash in Turkey isn’t about Islam but democracy. The protesters tend to be young, urban, well-educated and secular, yet no political party or figure is leading them. After a decade, many Turks are growing tired of Mr. Erdogan and frustrated by the lack of a competitive opposition....

“Mr. Erdogan’s mistake, a familiar one among strong rulers, is to assume that he is personally indispensable to Turkey’s continued progress. He’d be wiser to conclude from the protests that the Turkish middle class wants a democracy of checks and balances, not the rule of one man.”

Iran: The presidential election is next Friday, June 14, but there is little buzz surrounding the eight hand-picked candidates. One 37-year-old housewife told the Financial Times, “I do not know anyone who is going to vote.”

Saeed Jalili will win. He is a staunch conservative who has championed “resistance” against the West. He does not favor women in the workplace. This guy is evil. 

Reformists are trying to rally around one of the two (of the eight) who are viewed as most moderate, and Jalili was ganged up on by the other seven candidates in Friday’s debate, but it won’t work.

Instead, some may be yearning for the ‘good old days of Ahmadinejad.’ The Supreme Leader and his loyal clerics are strengthening their authoritarian powers.

As Amir Taheri writes in the New York Post:

“(Jalili claims) there was ‘no reason why the Islamic Republic should not lead the world’s Muslims in seeking global power.’

“Yet the Islam of which Jalili talks is a special brand. Labeled ‘pure Mohammadan Islam,’ it is based on Shiism plus the teachings of the late Ayatollah Khomeini and ‘Supreme Guide’ Khamenei.

“ ‘We are in a position to challenge global powers,’ Jalili said (in his first major speech as presidential candidate). ‘And if anyone says that we are after creating a great empire, we have no problem with that.’

“His analysis is based on the belief that the United States is in ‘historic retreat’ and that other Western democracies lack the will to defy Tehran. Iran’s alliance with Russia will help neutralize the United Nations and prevent it from taking action against Iranian ambitions....

“Jalili and his group could best be described as ‘the North Koreans of Islam.’ Their aim is to build a wall around Iran while waging low-intensity terrorist war against real or imagined foes abroad. The result could be greater misery for the Iranian people.

“However, Iranians could still fight back to prevent Khamenei from imposing his protégé. 

“A discredited electoral process shouldn’t be allowed to produce a suicidal administration that could make even Ahmadinejad look sane.”

Iraq: The United Nations says 1,045 civilians and security personnel were killed in May, surpassing the 712 figure for April, the deadliest month since June 2008. More than half of those killed were in the capital district of Baghdad. Staggering. There is so little press, mainly because there are no actual press there anymore, it seems. Certainly not from the networks.

500 in Baghdad in one month!!! And it is only going to get worse as Syria increasingly bleeds over.

Afghanistan: The Georgian contingent in Helmand Province is the largest non-NATO member of the International Security Assistance Force and it has not been a good stretch for them. On Thursday, a suicide truck bomb killed seven Georgian soldiers at a remote base, but failed to get inside the outer perimeter. Earlier, on May 13, a second truck bomb killed three Georgians. The Taliban has claimed responsibility for the attacks. The Georgians now have three bases in one of the most dangerous areas of Helmand. 30 Georgians have been killed in the war.

Separately, Italy and Germany committed to join the United States in helping to train Afghan troops after combat operations cease at the end of next year.

North/South Korea: The two agreed on Thursday to hold their first talks since 2008, raising hopes of a thaw in relations after the North’s provocations.

Pyongyang proposes the two discuss reopening the Kaesong joint industrial complex, which the North stupidly closed in April, and resuming cross-border tours, also suspended since 2008.

China: This week’s fire at a Chinese poultry slaughterhouse killed at least 120 people, with the government now going ‘dark’ on revealing the fate of the missing, best I can determine.

The building included locked doors and a lack of fire escapes and you can imagine the rising anger among the population. Apparently, local fire safety officials had just inspected the place three days before. Said one local, “They knew what was wrong....but have done nothing for so long.”

On Friday, 47 died in a commuter bus fire in Fujian province. 34 were injured. So 80+ on the bus.

Russia: President Putin and his wife, Lyudmila, appeared on Russian national television Thursday night to announce that they are getting a “civilized divorce,” just before their 30th wedding anniversary. It was the first time they had been seen together in public for more than a year and brings to an end years of speculation and rumors. It now seems pretty obvious Putin’s affair with former Olympic champion gymnast, Alina Kabaeva, was one of the reasons for the split. She is supposedly the mother of at least one child by him, maybe two, even as he denied the liaison.

Mrs. Putin said, “We will forever remain very close people. I’m grateful to Vladimir Vladimirovich that he supports me.”

And oh how Lyudmila knows he can cut her off at the knees if she says any more than that.

On perhaps a more serious issue, Moscow police rounded up 300 people at a Muslim prayer room in the city on Friday after Putin ordered a crackdown on radical Islamists ahead of next year’s Winter Olympics in Sochi. Smart move, Vlad the Great. [Pssst...since I thought he would have been taken out by now, time to suck up to Vlad, know what I’m sayin’?]

Putin told a meeting of security officers: “We must fight back hard against extremists who, under the banners of radicalism, nationalism and separatism, are trying to split our society.”

Venezuela: The government is so dysfunctional these days, parts of the country are forced to ration food and smartcards are being issued that will allow only a limited purchase of staples such as rice, flour, cooking oil, sugar and powdered milk. President Nicolas Maduro will be removed shortly...just an educated guess. I mean for crying out loud, the Roman Catholic Church said it will have to restrict Mass because of a lack of Communion wine and flour for Eucharist wafers. And toilet paper is still hard to come by in some spots.

Random Musings

--Of 10 American institutions listed in the latest Wall Street Journal/NBC News poll, released Wednesday, only the military and the auto industry received confidence marks of over 25%. 67% said they have “a great deal” or “quite a bit” of confidence in the military, but this figure is down from 76% the last time the question was asked in May 2012. And it’s an 18-point drop in confidence since January 2002, months after 9/11.

The auto industry is the second-most trusted, with 29% saying they have “a great deal” or “quite a bit” of confidence in it. In January 2009, the same figure was 13% after the industry petitioned the federal government for a massive bailout.

Social networking websites garner only a 13% confidence rating. The financial industry fell a point to 11%.

Federal government rose to 17%. The IRS came in at 10%. [It wasn’t included last year.]

--Acting IRS Commissioner Danny Werfel acknowledged to Congress on Monday that American taxpayers no longer trust the institution, declaring he was “committed to restoring that trust.” [cough cough] Werfel promised the transparency that has been lacking.

“We must have the trust of the American taxpayer. Unfortunately, that trust has been broken. The agency stands ready to confront the problems that occurred, hold accountable those who acted inappropriately, be open about what happened, and permanently fix these problems so that such missteps do not occur again. It has to start with a recognition that a trust has been violated.”

Meanwhile, we have learned via a new inspector general’s report that the IRS spent $50 million to hold at least 220 conferences for employees between 2010 and 2012, including $4 million for an August 2010 gathering in Anaheim, Calif., for which the agency did not negotiate lower room rates, even though that is standard government practice.

“Instead, some of the 2,600 attendees received benefits, including baseball tickets and stays in presidential suites that normally cost $1,500 to $3,500 per night. In addition, 15 outside speakers were paid a total of $135,000 in fees, with one paid $17,000 to talk about ‘leadership through art,’ the committee said.” [Stephen Ohlemacher / AP]

--According to Edward Klein’s book, “The Amateur: Barack Obama in the White House,” as Klein himself wrote in the New York Post last weekend:

“President Obama made a secret deal to support Hillary Clinton when she runs for president in 2016, campaign sources say, payback for the support her husband gave him in 2012.

“Bill Clinton’s animosity toward Obama is legendary. A year before the last election, he was urging Hillary to challenge the sitting president for the nomination – a move she rejected.

“According to two people who attended that meeting in Chappaqua, Bill Clinton then went on a rant against Obama.

“ ‘I’ve heard more from Bush, asking for my advice, than I’ve heard from Obama,’ my sources quoted Clinton as saying. ‘I have no relationship with the president – none whatsoever. Obama doesn’t know how to be president. He doesn’t know how the world works. He’s incompetent. He’s an amateur!’

“For his part, Obama wasn’t interested in Bill Clinton upstaging him during the presidential campaign. He resisted giving him any role at the convention.

“But as last summer wore on, and Democrat enthusiasm waned, chief political strategist David Axelrod convinced the president that he needed Bill Clinton’s mojo.

“A deal was struck: Clinton would give the key nominating speech at the convention, and a full-throated endorsement of Obama. In exchange, Obama would endorse Hillary Clinton as his successor.”

Bill Clinton upheld his end of the bargain, giving a terrific speech with surprising enthusiasm. But more people talked of Clinton’s speech after than Obama’s. So Obama began to have second thoughts.

“He would prefer to stay neutral in the next election, as is traditional of outgoing presidents.

“Bill Clinton went ballistic and threatened retaliation. Obama backed down. He called his favorite journalist, Steve Kroft of ’60 Minutes,’ and offered an unprecedented ‘farewell interview’ with departing Secretary of State Hillary Clinton.

“The result was a slobbering televised love-in – and an embarrassment to all concerned.”

And as Edward Klein concludes, Barack Obama, in the eyes of many, has been such a disappointment that “will Clinton even still want his endorsement?”

--Pete Du Pont / Wall Street Journal

“It’s too early to tell if May will be remembered as marking the beginning of a failed second term for President Obama, but it is clear the atmosphere in Washington has changed. We don’t yet know the full impact of new revelations about last September’s attack in Benghazi, the political abuse of the Internal Revenue Service, and the Justice Department’s secret surveillance of journalists, but we do know there are questions in Congress and among a suddenly energetic Washington press corps, questions likely to affect the president’s agenda and legacy.

“If the scandals do cause long-term damage, it will be because they point to failings of this president and his administration. The Benghazi tragedy shows the naivete of thinking that our nation would be loved and the world safer simply because of the power of Mr. Obama’s personality. The IRS abuses and Justice’s snooping on the press, reminiscent of the worst of President Nixon, highlight for all the danger of larger government involvement in our lives....

“Will all this lead to impeachment, as some have speculated recently? Probably not, and certainly not now. But not being guilty of an impeachable offense is a low hurdle for a president focused on his legacy. For a man who came to office with the goal of expanding the role of government to better our lives, it would be quite a comedown to leave office with the main accomplishment of increasing the nation’s distrust of government.”

--In the above noted Wall Street Journal / NBC News survey, President Obama received a 48% approval rating, matching his marks from April. But only 28% of independents approve of the job he is doing, a steep slide from January’s 41% approval rating among this group.

For example, in January, 45% of independents gave Obama high marks for being “honest and straightforward.” Today, that number is 27%.

In a Bloomberg National Poll, Obama’s job approval declined from 55% to 49% since Bloomberg’s last survey in February.

47% of Americans say they don’t believe Obama when he says he didn’t know the IRS was giving extra scrutiny to the applications of small government groups seeking tax-exempt status. Only 40% say he is being truthful. [53% of independents say he isn’t telling the truth, 34% believe him.]

And in the Bloomberg survey, 53% still have a favorable impression of the president, continuing the trend since day one of his presidency. His favorability rating has always been a significant percentage higher than his actual approval rating. 

--Editorial / Wall Street Journal

“President Obama reshuffled his national security team Wednesday, and it’s a sign of the times that the reaction was mostly yawns. His choices for national security adviser and ambassador to the U.N. are loyalists who share Mr. Obama’s view that the U.S. is no longer the world’s ‘indispensable nation’ (as Bill Clinton’s Secretary of State Madeleine Albright once put it).

“Some Republicans are squawking that Mr. Obama named U.N. Ambassador Susan Rice to the NSC post despite her post-Benghazi follies. But the position is the most personal in foreign policy and requires no Senate confirmation. Her false Benghazi spin cost her a promotion to Secretary of State, and Mr. Obama is now making amends by handing her the top White House security post.

“She replaces Tom Donilon, a Hillary Clinton loyalist who served with discretion even if he leaves with the world a more dangerous place. Mr. Donilon helped to fulfill Mr. Obama’s desire to steer the U.S. out of old, and away from new, foreign entanglements. But the world’s troubles will not steer clear of us, so Ms. Rice will spend much of her time dodging the gathering storms. This includes trying to prevent Syria’s civil war from becoming a Russian-Iran strategic victory or a regional Shiite-Sunni war.

“To replace Ms. Rice at the U.N., Mr. Obama chose Samantha Power, who was also present at his creation in the Senate and has worked at the White House. Ms. Power and Ms. Rice joined Mrs. Clinton in urging Mr. Obama to intervene in Libya, but otherwise Ms. Power shares Mr. Obama’s desire for a diminished U.S. role in the world.”

Ralph Peters / New York Post

“There are three big losers from President Obama’s cynical appointment of Susan Rice as his new national security adviser: Secretary of State John Kerry, Congress and the American people.

“As for the nomination of left-wing activist Samantha Power to replace Rice as U.N. ambassador, the losers are our foreign policy, our allies and the lefties bellowing for the closure of Gitmo....

“These personnel choices are brilliant hardball politics – but, once again, the Obama White House has elevated politics above serious strategy....

“Pity poor John Kerry...He really, really wanted to be a noteworthy secretary of state. Already held at arms-length, now he’ll be relegated to visiting countries that never make the headlines and handing out retirement awards (plus working on the Middle East ‘peace process,’ the ultimate diplomatic booby prize).

“Rice has the weakest credentials of any national security adviser in the history of the office, but she has the president’s ear as his old pal. And she’ll work in the White House: Proximity to POTUS is trumps in D.C. Kerry’s desk in Foggy Bottom might as well be a hundred miles from the Oval Office.

“However incompetent, Rice may become the most influential national security adviser since Henry Kissinger eclipsed the entire State Department. Which means that Obama’s foreign policy, already disastrous, is now going to get worse.

“As for the earnest Ms. Power, she has zero qualifications to serve as our U.N. ambassador. She’s a left-wing militant who has yet to show the least interest in defending America, rather than merely using our might as her tool. Her cause is human rights abroad, and that’s her only cause. And while respect for human rights should be a major factor in our foreign policy, it can’t be the only factor....

“On a purely practical level, Power is a terrible choice to be our U.N. rep. It’s a job for a veteran, polished ambassador who understands the arcane ways of diplomacy and the U.N.’s exasperating rules and procedures – which the Russian and Chinese ambassadors employed to humiliate Rice. It’s not a job for a zealot on a hobby horse.

“Obama knows that, of course. But the Power nomination’s a win for him, even if she’s not confirmed. He just covered his left flank on the cheap. It’s not about Power, just about power.”

--Florida Republican Sen. Marco Rubio sought support from House conservatives on his far-ranging immigration legislation, but many of the lawmakers were unimpressed and it will be interesting to see if Rubio backs off on his efforts in light of his probable run for the presidency in 2016. Many of the Republican congressmen said things like, ‘I cannot vote for a bill that gives amnesty to illegal aliens here in this country.’

Rubio knows he needs stronger border security provisions in his bill in order to pass the House, and he’s said it lacks the 60 votes needed to pass the Senate without improvements.

Such talk has confused immigration advocates, who question his commitment to the cause.

“It’s very simple,” Rubio now says. “If people want immigration reform, we’re going to have to improve the border security elements of the bill and we’re going to have to make people confident that what we’re doing is enough. And that’s what I’m going to focus on.” [Erica Werner / AP]

--Over the years I was less than complimentary when it came to Democratic Sen. Frank Lautenberg of New Jersey, who passed away on Monday at the age of 89. He had been largely incapacitated the past year and it took him awhile to see the light. Only in April did he announce he wouldn’t seek a new term in 2014 when he would have been 91.

Immediately all eyes turned to Republican Gov. Chris Christie. With the term not set to expire until January 2015, I thought (preferred) that the governor select Tom Kean Sr., former member of Congress and beloved governor, to fill out the term. Other Republicans said to be in the mix included state Sens. Thomas Kean Jr. and Joe Kyrillos, Lt. Gov. Kim Guadagno and Assemblyman Jon Bramnick.

But rather than opt to fill the term and wait until Nov. 2014 and the normal election cycle, or rather than hold a special election this coming November, Christie opted to go for an August primary and a special election on Oct. 16, three weeks before the November vote where he will be on the ballot for governor, running against Democratic state Sen. Barbara Buono, whom Christie leads by 30 percentage in most polls. I’ve been saying how Christie needs 60%, in this Democratic state, to send a huge statement when it comes to his national ambitions.

So now it is going to cost the state an estimated $25 million, and has voters and politicos from both sides ticked off. I am.

I do understand the politics of it, however. Christie just doesn’t want to be on the ballot at the same time as Newark Mayor Cory Booker, the Democrat now expected to win the rushed primary. Booker’s presence in November would have driven more Democrats to the polls and impacted Christie’s victory margin.

If Christie had picked a Kyrillos or Kean Jr., and let them stay in office until November 2014, that would let them build their own reputations and legislative record. [Democrats would have contested such a move in the courts.] But this is why I thought Kean Sr. would have been a solid choice because Christie wouldn’t have been playing politics, while still letting Republicans pick a long-term candidate to battle Booker in 2014.

“The right thing is to let the people decide,” said Christie.

Well, that certainly is disingenuous, and this coming from our straight-talkin’, straight-shooter. We have a ways to go, and I keep saying Christie likes to think 3 or 4 steps ahead of the rest of us, but my gut reaction is this backfires and he doesn’t get the 60% that would enhance his national stature among the Republican rank and file.

Meanwhile, Christie selected state Attorney General Jeff Chiesa to fill the Senate seat until the October vote.

Lastly, a Wall Street Journal / NBC poll found that more than 43% of Democrats surveyed said they had positive impressions of Christie, compared with 41% of independents and 40% of Republicans. 

By comparison, Hillary Clinton enjoyed positive ratings among 83% of Democrats, but only 15% of Republicans.

In a Bloomberg National Poll, Clinton’s favorability dropped from 70% in December to 58%, owing to criticism over her handling of Benghazi. 22% view her unfavorably.

In the same survey, Christie was viewed favorably by 50% of Americans and unfavorably by 16%.

--A government prosecutor told a court martial at Fort Meade, Maryland, that Bradley Manning “systematically harvested” massive amounts of secret data from hundreds of volumes of classified information, putting the lives of soldiers at risk and helping America’s enemies, as reported by the Wall Street Journal.

Manning has already pleaded guilty to less charges that could amount to 20 years in prison, but he faces more serious charges that could tack on another 154 years.

Manning was in regular contact with Julian Assange of WikiLeaks. I’ve said my piece on Assange. I also believe Manning deserves the death penalty.

--Prosecutors Friday recommended four years in prison for former Rep. Jesse Jackson Jr., following his guilty plea this year on criminal charges related to a scheme to spend $750,000 in campaign funds on personal items. It was suggested his wife receive 18 months. Both will be sentenced July 3.

--A Johns Hopkins University study of more than 6,000 people finds that only 2% of those studied, or 129, satisfied all four healthy lifestyle criteria; someone who has never smoked, eats a Mediterranean diet and keeps a normal weight and who exercises regularly. If you do, chances of death from all causes is reduced by 80% over eight years. An author of the study, Dr. Roger Blumenthal, said, “Of all the lifestyle factors, we found that smoking avoidance played the largest role in reducing the risk of coronary heart disease and mortality. In fact, smokers who adopted two or more of the healthy behaviors still had lower survival rates after 7.6 years than did nonsmokers who were sedentary and obese.”

--For the archives, the deadly tornado that struck near Oklahoma City on May 31 was not only the area’s second EF5 twister in less than two weeks, but a record-breaking 2.6 miles wide at one point. It was determined it packed winds of up to 295 mph when it hit El Reno. 18 people died in the storm, including three storm chasers, and its subsequent flooding. The EF5 that struck Moore on May 20 killed 24. Moore had an EF5 in 1999 that still holds the record for strongest winds ever measured on earth: 302 mph.

--Some cities in the path of the raging Danube River this week saw it reach heights not seen in over 500 years. And I just read that Hungary, including Budapest, is now looking at the worst flooding ever from the Danube, possibly on Monday. Just as tourist season is getting underway.

--According to Al Cambronne, who authored a book “Deerland,” “Each of America’s 30 million deer eats about 3,000 pounds of vegetation per year.” When it comes to America’s farmers, the damage to crops is conservatively estimated at $2 billion per year.
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Pray for the men and women of our armed forces...and all the fallen.

God bless America.

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Gold closed at $1383
Oil, $96.03

Returns for the week 6/3-6/7

Dow Jones +0.9% [15248]
S&P 500 +0.8% [1643]
S&P MidCap -0.3%
Russell 2000 +0.3%
Nasdaq +0.4% [3469]

Returns for the period 1/1/13-6/7/13

Dow Jones +16.4%
S&P 500 +15.2%
S&P MidCap +15.8%
Russell 2000 +16.3%
Nasdaq +14.9%

Bulls 45.8
Bears 20.8 [Source: Investors Intelligence...big drop in bulls...]

Nightly Review video schedule...Monday, Wednesday and Thursday this week, posted around 5:30 PM ET.

Have a great week. I appreciate your support.

Brian Trumbore