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11/16/2013

For the week 11/11-11/15

[Posted 12:00 AM ET]

Washington and Wall Street

Before I turn to the issue of the day, ObamaCare, some thoughts on the economy.

President Obama’s nominee to replace Federal Reserve Chairman Ben Bernanke, current vice chair Janet Yellen, appeared before the Senate Banking Committee for her confirmation hearing and did just fine. Yes, she’s a policy “dove” and pledged the Fed would not take its foot off the gas.

“We have made good progress,” she said in her opening statement, “but we have farther to go to regain the ground lost in the crisis and the recession.” Yellen said the unemployment rate at 7.3% “is still too high, reflecting a labor market and economy performing far short of their potential.”

As to the surging stock market, Yellen said, “Stock prices have risen pretty robustly,” but she did not see “stock prices in territory that suggests bubblelike conditions.”

To which Sen. Patrick Toomey (Pa.) asked, “What happens when this morphine drip starts to end?” Toomey, of course, referring to the $85 billion in monthly purchases of Treasury and mortgage-backed securities.

Wall Street interpreted Yellen’s testimony as a clear signal the Fed will not begin tapering when it meets Dec. 17-18. I stick by my pronouncement of last week that the Fed will. 

First off, it’s not Yellen’s meeting, it’s Bernanke’s (his term ends in January), but as I noted last time, assuming the data continues to be solid, including November’s employment report, I just think the Fed can stay true to its mantra of easy money while letting up on the gas just a smidge to keep the markets honest.

The Fed will, however, lower the unemployment rate target for raising the short-term funds rate off zero to 5.5% or 6.0% at the next meeting from the current 6.5% target. No one would say such a dual move, including a small taper, isn’t still pursuing a highly aggressive strategy. Gosh darnit, that’s my stance and I’m stickin’ to it.

I also said, though, that what would change my mind, aside from a putrid November jobs number, is if the budget conferees in Congress fail to come up with a compromise by the Dec. 13 deadline, and this week we learned the news is not good on this front. Democrats want to see more revenue, tax increases, and Republicans keep saying, ‘We already gave that to you last time.’ Heck, as Republican leaders also continuously offer, we don’t have a revenue problem, we have a spending problem.

This week the Treasury Department (still playing catch-up with the statistics after the 16-day shutdown) released the U.S. budget picture for October and while the deficit for the month was $91.6 billion, this compared with a $120 billion shortfall in October 2012 as revenues increased to a record $198.9 billion for the month (vs. $184 billion in Oct. 2012).

Bottom line, it appears we are back to square one, but if I’m the Republican leadership, there are some tax breaks that should be eliminated, for the good of the country, starting with the “carried interest” provision on private equity, real estate and hedge fund profits. Give it to ‘em! [Profits would be taxed at the ordinary income rate of 39.6% instead of the capital gains rate of 20%.] In turn fix some of the sequester issues, particularly on defense. But Republicans don’t want to give in on loophole issues now without broader tax reform that simply isn’t going to be part of this particular deal. Tax-writing committees in both the House and Senate are working on broader reform and in a perfect world this will be addressed in the spring. [The work by Sen. Max Baucus and Cong. Dave Camp.]

But back to Janet Yellen, the equity markets loved her testimony and the party continued, with the Dow Jones and S&P 500 finishing the week at new all-time highs.

As for the upcoming holiday shopping season, which is still kind of important even with the Fed juicing stocks, the picture is a bit uncertain. Macy’s, in handily beating the Street’s projections for its third-quarter earnings and revenues, with overall sales up 3.3% year over year (decent), issued a positive outlook for the next six weeks, but then Wal-Mart and Kohl’s came out with poor forecasts, both guiding lower, while same-store sales figures for the two were down in Q3. Wal-Mart emphasized it was going to be very aggressive this Christmas, which doesn’t bode well for margins (but should be good for consumers).

On to....ObamaCare

Since Barack Obama willingly has his name attached to it, let’s look first at some poll numbers.

A new Quinnipiac survey has Obama’s job approval rating at just 39%, the lowest since taking office. 54% disapprove. [A Pew Research poll has his approval rating at 41%. It was 55% at the end of last year.]

In the Quinnipiac poll, only 44% now find the president honest and trustworthy, down 10 points since October and the first time ever below 50. 52% do not find Obama trustworthy. 

In the Pew survey, only 31% support him on his efforts to improve the economy.

Only 37% approve of his healthcare plan, 59% disapprove.

So early in the week we learned that it is unlikely HealthCare.gov will be working fully by the end of November. And prior to Obama’s apology and “fix” on Thursday, the Washington Post’s Amy Goldstein, Juliet Eilperin and Lena H. Sun had a piece on various issues, including the site’s problems and other challenges.

“Kansas Insurance Commissioner Sandy Praeger said she and her counterparts in other states have offered suggestions to the White House on how best to address the problem of canceled policies. The most obvious solution, she said, would be to allow customers to renew policies early to let them stay in effect until November 2014. But that would come with a trade-off, she said: Those people would not receive federal subsidies for which they might be eligible if they bought a plan on the exchange.

“She said that she and other insurance commissioners are trying to address consumers’ desire to use the federal exchange. ‘Honestly,’ she said, ‘it’s just a big mess right now...I don’t know what to tell people.”

Wednesday afternoon, we finally got some enrollment numbers for the period Oct. 1-Nov. 2. Health and Human Services Department Sec. Kathleen Sebelius reported 106,185 had signed up on exchanges so far, but only 26,794 had done so through HealthCare.gov and joined the exchanges the feds are running in 36 states. The other 79,000 plus came in through the 15 marketplaces run by the other 14 states and the District of Columbia. In an internal memo prior to launch, the administration was looking for 464,000 signing up the first month. The Congressional Budget Office is on record as estimating 7 million Americans will gain private coverage through the federal and state exchanges by spring.

35,364 had actually signed up in California, which is running its own exchange, so more than the 36 states on the federal, but even here this is less than 1% of the 6.6 million in California without health insurance, and one million had already had their plans canceled in the state. [Florida had the most enrollees on the federal exchange, 3,571, while North Dakota had 42, Jackie Robinson’s number!]

All of the above numbers, however, are technically bogus. Why? Because no one has paid their first premiums yet (or very few have). The insurance industry wouldn’t count you until you do.

And not for nothing, but as the Wall Street Journal pointed out, of those signing up on HealthCare.gov, 33% used paper applications, not the website. “Welcome to the 18th century,” opined the Journal.

We also learned this week in congressional testimony that the website can’t handle more than 20-30,000 being on at the same time. 

But if you think we have problems today, imagine what will happen when the employer extension disappears in a year. Employers are already facing pressures to cut costs and coverage.

So President Obama, under immense heat from within his party, strode forth on Thursday and announced an administrative change, allowing insurers to continue offering individual insurance plans for another year even if they don’t comply with ObamaCare’s guidelines for minimum benefits.

“This fix won’t solve every problem for every person, but it’s going to help a lot of people,” Obama said.

As I watched the president, I had but one thought. What a s---storm.

The president went on to apologize.

“I think it’s fair to say that the rollout has been rough so far....

“We fumbled the rollout of this health-care law.” Regarding his repeated promises that people would be able to keep their insurance plans if they liked them, Obama said, “That’s on me... That’s something I deeply regret because it’s scary getting a cancellation notice.”

The president also said, “I was not informed directly that the Web site would not be working the way it was supposed to. I don’t think I’m stupid enough to go around saying, this is like shopping on Amazon or Travelocity, a week before the Web site opens, if I thought that it wasn’t going to work.”

For an hour the president rambled and rambled and rambled...it was pathetic and had Charlie Brown sighing in the back of the room, “Good grief.”

I’ve been writing for a number of weeks now, in expressing my frustration with those seeking to make changes, that it was too late to go back on some of the provisions because the insurance industry not only had been complying with the law in gearing up for October 1, but it had already priced for 2014 based on the new guidelines. Now Obama was asking them to rewrite and restart policies. Total chaos, as if the rollout itself wasn’t bad enough both for policy holders and the uninsured.

Immediately after the president spoke, Washington state became the first to announce it would not allow insurers to extend their policies, the president leaving it up to individual state insurance commissioners. Mike Kreidler, the Washington insurance chief honcho said his state-based exchange was “up and running and successfully enrolling thousands of consumers,” but now he had “serious concerns” about the president’s move and “its potential impact on the overall stability of our health insurance market.”

Then on Friday, the House voted in bipartisan fashion, 261-157, to weaken a core component of ObamaCare and permit the sale of individual health coverage that falls short of requirements in the law. 39 Democrats broke ranks and supported the legislation, which faces an uncertain fate in the Senate, where some Democrats, up for re-election in 2014, could turn against the president, though one, Dem. Sen. Mary Landrieu (La.), favors a different plan than the House effort.

Neither the House bill, or anything Democratic senators or the president has already proposed, really ensures those whose policy has been canceled will be able to keep it.

Opinion....

Editorial / Wall Street Journal

“One of President Obama’s proudest boasts about the Affordable Care Act is that it helps small business. The White House website says the health law ‘makes it easier for businesses to find better coverage options’ and ‘stops insurance companies from taking advantage of you, giving the consumer and business owner more control and making health-care coverage more affordable.’ Small businesses aren’t buying it.

“That’s the finding of a Public Opinion Strategies survey of more than 400 business owners with between 40 and 500 employees conducted in September and October for the U.S. Chamber of Commerce and International Franchise Association. Some 64% of small business franchise owners (such as owners of fast food and retail stores) believe the law will have a ‘negative impact’ on their business, while only 5% expect a ‘positive impact.’ For non-franchise businesses the ratio was 53% negative and 12% positive. Only one in 12 agree with the President that the health-care law will ‘help’ their business.

“Even more problematic is how businesses are already responding to the new law. The White House continues to deny any relationship between hiring and ObamaCare. The poll finds 27% of franchise businesses and 12% of non-franchises have already replaced full-time with part-time employees in anticipation of the law’s employer mandate. ObamaCare defines a full-time employee as someone who works 30 hours or more a week.

“The survey also reveals that the ‘49er’ effect is very real. These are businesses that will cap their full-time payroll workforce at 49 employees to avoid ObamaCare’s insurance mandate for companies with more than 50 full-time equivalent workers. Of firms with between 40 and 70 employees, a little over half say they are likely to ‘make personnel decisions to keep’ their ‘workforce below the threshold of 50 full-time employees and avoid the requirements and penalties associated with the new health care law.’

“More than one in four businesses (28%) say that in 2015, when the employer mandate is scheduled to take full effect, it is ‘likely’ they will drop their insurance coverage and pay the penalty of $2,000 a year per employee. These are the plans employers and employees were promised they would be able to keep.”

John Podhoretz / New York Post

“On Thursday, President Obama conducted the ‘Springtime for Hitler’ of press conferences. He came out at noon and proceeded to blather his way through an hour of self-justifications and evasions and apologies and complaints.

“And as he went on, you could almost see America reacting as the audience in ‘The Producers’ did to the happy-talk number about Adolf romping at his retreat in Berchtesgaden – with gaped-mouth astonishment.

“First, he said he had not been ‘informed directly that the Web site would not be working.’ What on earth does that mean? Was he somehow informed indirectly? In an affronted tone, the president said he wouldn’t have been so stupid as to have promised a great Web site if he’d known it was lousy.

“Which makes you wonder: Did he ask?

“Oh, and how about that now-infamous lie The New York Times hilariously dubbed an ‘incorrect promise’ the other day? Here the president squirmed: ‘With respect to the pledge I made that ‘If you like your plan, you can keep it,’ I think – you know, and I’ve said in interviews – that there is no doubt that the way I put that forward unequivocally ended up not being accurate.’

“So he wouldn’t say he lied, which is understandable....

“But look, he went on to say, this Web-site thing isn’t easy! See, it has programs and things in it. ‘The Web site itself is doing a lot of stuff,’ he explained, because, you know, other Web sites don’t do a lot of stuff. ‘There’s just a – a bunch of pieces to it that made it challenging.’

“Yes, so challenging, they spent 1,100 days and $600 million on it, and it still couldn’t serve more than six people at a time!

“Your average porn star has a Web site more functional than that. She’d have to, you see, because she’s in the private market and is out of business if her site goes down.

“And you know what else is hard? ‘What we’re also discovering,’ said the man who has completely overhauled the insurance industry, ‘is that insurance is complicated to buy.’ That this might have come as a surprise to him is mind-boggling.”

Editorial / New York Post

“Meet the new President Obama.

“Only last month, the president and his fellow Democrats shut down the government rather than agree to a Republican bid to delay ObamaCare. The president characterized the call for delay as ‘threatening to burn the house down.’

“On Thursday, America beheld a new Obama. Now the president himself backs delay, at least in terms of enforcing a requirement that Americans buy policies in compliance with his law. This delay he describes as ‘making the law work better.’

“Insurance execs say it’s late in the game to be changing the rules. So whether the president’s ‘fix’ is even possible is an open question. And if it is possible and Americans take advantage of it, the result will be greater fiscal stress on ObamaCare exchanges – which are counting on the infusion of cash from younger and healthier Americans to finance the more expansive coverage required by ObamaCare.

“Still, it’s a neat political trick if it allows Obama to pass the buck by blaming mean old insurance companies when Americans lose plans they are happy with.”

Ruth Marcus / Washington Post

“The promise and the apology are the bookends of effective politics. President Obama has, tragically and perhaps irreparably, flubbed both.

“Overpromising is every politicians’ temptation, every journalist’s gotcha, every political opponent’s handy club. A chicken in every pot. Read my lips. On the campaign trail, nuance is an unwelcome intruder....

“Likewise, all political promise-breaking is not equally devastating. Cynical voters assume, even accept, a certain level of calculated, built-in betrayal....

“The promise you can’t break without suffering significant political damage is one that is central to your platform and within your capacity to deliver.

“Such as, ‘If you like your insurance plan, you will keep it.’ This repeated promise was foolhardy on its face. You can’t renovate the kitchen without suffering some disruption. Same for health care....

“Which brings us to the art of the political apology. As with the spousal apology, the longer you wait, the worse it is. Obama’s first fault was in chiding people for misunderstanding him: ‘What we said was you could keep it if it hasn’t changed since the law was passed.’

“His second misstep was resorting to the politician’s favorite dodge: the non-apology apology, conditional and passive. I’m sorry if anyone was offended. Mistakes were made. ‘I am sorry that they, you know, are finding themselves in this situation based on assurances they got from me,’ Obama told NBC’s Chuck Todd. What does that even mean?

“Third, Obama’s actual apology was for the wrong thing. ‘Obviously, we didn’t do a good enough job in terms of how we crafted the law,’ he told Todd. ‘That’s something that I regret.’

“But the problem wasn’t the crafting...it was the misleading selling and botched implementation.

“We put a grandfather clause into the law, but it was insufficient,’ Obama said Thursday. ‘My working assumption was that...the universe of folks who potentially would not find a better deal in the marketplaces, the grandfather clause would work sufficiently for them. And it didn’t.’

“And that working assumption was based on...? Obviously not the administration’s own estimates that two-thirds or more of people in the individual marketplace would not be grandfathered in.

“Belatedly, with congressional Republicans pouncing and Democrats threatening to bolt, Obama on Thursday proffered a supposed...fix....

“Listening to the president Thursday was painful. He acknowledged the need ‘to win back some credibility.’ He ‘fumbled the rollout’ of health care. He is ‘letting...down’ congressional Democrats who took the risk of supporting ObamaCare. Although he’s sometimes been ‘slapped around a little bit unjustly,’ the president said, ‘This one’s deserved, all right? It’s on us.’

“Can he recover? I’m sorry to say: I’m not at all confident.”

Finally, President Obama said on Thursday, “There will be ups and downs over the course of my presidency.” I don’t want to be too snarky. Discuss amongst yourselves.

Europe and China

The flash estimate on GDP for the eurozone in the third quarter was not good, up just 0.1% over the second quarter. This compares to a 0.3% increase in Q2 for the euro folk. European Central Bank President Mario Draghi (and yours truly) have been warning the recovery in euroland is highly fragile and the figures are bearing this out.

Germany’s GDP rose just 0.3% in Q3 (1.3% on an annualized basis) vs. 0.7% in Q2.

In France, GDP fell 0.1%, or minus 0.6% annualized, after a 0.5% rebound in the second so highly distressing for the French.

Italy saw its ninth consecutive quarter of contraction, down 0.1%.

One other eurozone economic tidbit. September industrial production in the eurozone declined 0.5% over August and is up only 1.1% year over year. [Germany, thru September, is up 1.3% in this category for the 12 months, France down 0.2%.]

Regarding France, the Organization for Economic Cooperation and Development, the club of rich countries, warned the French are falling further behind the rest of Europe in reforming its economy and it needs to take more steps to restore competitiveness.

The Paris-based group’s secretary-general, Angel Gurria, wrote in a preface: “The efforts under way [by the government] should be written into a strategy of more comprehensive and coherent, fundamental reforms to increase productivity and restore the competitiveness of the French productive fabric.” [Financial Times]

Not surprisingly, France’s high tax burden was singled out, as well as high minimum labor costs (80% above the OECD average).   I have more on France below.

On the topic of Germany, it was two weeks ago that the United States criticized the country for its large trade surplus, saying it was causing problems for the rest of the eurozone, as in not encouraging more domestic demand that could sop up products from the likes of Greece and Spain. This week the European Commission echoed the same sentiments.

EU Economics Commissioner Olli Rehn wrote: “If Germany can take steps to lift domestic demand and investment, while France embraces reforms to its labor market, business environment and pension system to support competitiveness, they will together do a great service to the entire eurozone – providing stronger growth, creating more jobs and reducing social tensions.”

At least in the U.K., the unemployment rate dropped to 7.6% in the third quarter, vs. the eurozone’s 12.2% September rate, though the Bank of England said it will not raise short-term interest rates until the jobless rate hits 7.0%.

The BoE also said that while the economy is “a long way” from normality, it was raising the GDP outlook to 1.6% for all of 2013, and to 2.8% for 2014, which would be terrific. October retail sales in Britain, however, declined 0.7% over September (but up 1.8% year over year).

Ireland said it is going to make a clean break from its three-year 85 billion euro bailout program, without a safety net. Ireland is due to leave the EU-IMF bailout on December 15.

Prime Minister (Taoiseach) Enda Kenny told the Irish parliament:

“We will exit the bailout in a strong position. The government has been preparing for a return to normal market trading.

“We will set out a path to a brighter economic future for our people, a path from mass unemployment to full employment, from involuntary emigration to the return of thousands of people who have to leave for other countries to find work.

“Today is just the latest step in that ongoing journey, a significant step indeed but also just another step towards our ultimate job getting Ireland working again.” [BBC News]

Now it’s up to the market, and bond investors will demand continued austerity as Ireland still has a humongous debt load. This is going to be interesting to watch. 

The Greek government reiterated it will not yield to pressures for more austerity.

Finance Minister Yannis Stournaras said, “No austerity measures are needed. They are dangerous” at this stage.

But Eurogroup president Jeroen Dijsselbloem said Greece must continue to meet key commitments in order to unlock the next loan installment of $1.3 billion.

Greece’s lenders, the “troika,” estimate Greece still faces a 2 billion euro shortfall in achieving its mandated targets in 2014.

Finally, there was some good news on the trade front. The European Union and the United States resumed negotiations on a free-trade agreement following the U.S. government shutdown and outrage over American spying after the Edward Snowden disclosures.

China

Before I get to the Communist Party Central Committee’s four-day plenum, some economic news.

Industrial production in October was up 10.3%...good...while retail sales rose 13.3% year over year, also solid.

The consumer price index rose 3.2% in October after a 3.1% rise in September, with the government’s target at 3.5%. But food prices were up 6.5%, not good.

Producer prices fell 1.5%, the 20th straight month of declining factory-gate prices, also not good.

But October passenger vehicle sales were up 24% last month, the best performance since January; though the more cars on the road, the more pollution.

As for the “third plenum,” which was attended by 204 full members of the CPCC (as well as alternates) at first there were thought to be few real changes in policy and direction with a bland initial communique talking of two powerful organs...one to spearhead reforms and the other to coordinate national security strategy.

Regarding the latter the communique read: “A national security committee will be established to perfect the national security system and national security strategy and safeguard national security.”

Chinese officials have actually sought information from U.S. officials on the structure of our National Security Council, though in the case of the new Chinese version, it will focus on both foreign and domestic strategy.

Beijing is definitely moving to a more aggressive foreign policy, especially in dealing with territorial disputes with maritime neighbors such as Japan and the Philippines.

Internally, it’s about ethnic unrest in Tibet and Xinjiang, both considered the main security threats, the issue of cybersecurity, as well as public discord on social issues such as economic inequality.

Until now, China lacked a powerful agency to coordinate strategy across the intelligence, military, foreign policy and police apparatuses. 

In the United States, the president is chairman of the National Security Council, with regular attendees including the vice president, the secretaries of state, defense and treasury, the director of national intelligence, and the chairman of the Joint Chiefs of Staff.

Clearly, President Xi Jinping will head up China’s new security council, which increases his already firm grasp on power.

For dissidents, however, the new setup is already being compared to the Soviet Union’s KGB.

“All security committees of communist regimes have a bad reputation,” said activist Hu Jia. “It is another step taken by the party to consolidate its power.” [South China Morning Post]

On the issue of the economy and reform, while the initial communique was lacking in details: “The core issue is to straighten out the relationship between government and the market, allowing the market to play a decisive role in allocating resources and improving the government’s role,” some details emerged on Friday and the changes appear to be substantial, some say the biggest expansion of economic freedoms since at least the 1990s.

The one-child policy would be changed to the extent that families in which at least one parent was an only child would be allowed to have a second child themselves. Previously, both parents had to be an only child to qualify for this exemption. This is still absurd, but it’s a start. China faces huge demographic challenges and should have squelched the one-child policy long ago, even though the government credits it for lifting hundreds of millions out of poverty. [At the same time, with the Chinese preference for boys, we don’t want to know how many female fetuses were aborted, or how many cases of infanticide of baby girls by parents there have been.]

In other developments, China will open its energy conservation and environmental protection industries to foreign and private investment. Premier LI Keqiang, who is in charge of the economy, recognizes, for example, that the shale gas revolution in the United States has presented a threat to Chinese manufacturers because average U.S. energy prices are now far cheaper than in China.

Other reforms would encourage private investment in other state businesses and give farmers increased rights in collective assets, including the establishment of a rural property market.

Also, parts of the labor camp system would be abolished.

Much more upon closer reading next time.

But one negative on a broader issue. There is no doubt, as Cisco Systems announced down below, that fallout from the NSA / Edward Snowden debacle has hurt U.S. high-tech business in China. It also only makes sense that a Cisco is hurt when the U.S. concludes Chinese competitors such as Huawwei and ZTE Corp. pose a security risk to the U.S. Why would China then wish to do a lot of business with Cisco, while the likes of IBM and Microsoft have also reported declining sales in China.

Finally, a bit on Japan. Third quarter GDP rose 1.9% on an annualized basis, down from the 3.8% pace of the second quarter. Key export data is due next week for October that is expected to be strong and show that the dip in Q3 activity was but a blip as the nation begins to gear up for April’s sales tax increase.

Street Bytes

--The Dow Jones and S&P rose a sixth straight week, with the Dow closing at a record high of 15961, up 1.3%, while the S&P added 1.6% to a record 1798. Nasdaq broke a two-week losing streak to finish at 3985.

So...Monday could be a special day, with the Dow closing above 16000, the S&P at 1800, and Nasdaq crossing 4000 for the first time since 2000.

Helping matters on Friday were large investments in two Dow components; Warren Buffett buying a chunk of Exxon Mobil and investors John Paulson and George Soros buying into FedEx.

--Fidelity Investments said the average balance of 401(k) accounts it administers was $84,300 at the end of September, up 11% from a year earlier to a record high.

For pre-retirees age 55 or older who have been active in their plan for at least 10 years, the average balance was $269,500, the company said. 

--U.S. Treasury Yields

6-mo. 0.09% 2-yr. 0.29% 10-yr. 2.70% 30-yr. 3.79%

For all the talk how dovish Janet Yellen was, it’s not as if yields plunged anew. The 10-year fell just five basis points.

--It’s official. For the first time in nearly two decades last month, the United States produced more crude oil than it imported. Production exceeded net imports for the first time since February 1995, though as noted in a piece by Wendy Koch of USA TODAY, “the nation still imports 35% of the petroleum it uses.”

I get a kick out of the Obama administration taking credit for all the success in energy land, though I did support the move to nearly double fuel-efficiency standards...and have since day one of this column, actually.

But the White House can hardly take credit on the production side. As the American Petroleum Institute said in a statement, “Domestic oil and natural gas production is only on the rise thanks to development on state and private lands. In areas controlled by the federal government, production has actually fallen on President Obama’s watch.”

As Wendy Koch reports: “The non-partisan Congressional Research Service reported in March that on federal lands, oil production fell 6% and natural gas production fell 21% from the beginning of 2009 to the end of 2012.”

--Related to the above, gasoline prices may have hit the lows for 2013, with prices typically bottoming in December. The Energy Information Administration expects 2014 gas prices to average $3.39 a gallon, vs. $3.50 this year and $3.63 in 2012. [The average pump price is currently $3.20.]

--From an extensive investigation by the AP’s Dina Cappiello and Matt Apuzzo:

“The hills of southern Iowa bear the scars of America’s push for green energy: The brown gashes where rain has washed away the soil. The polluted streams that dump fertilizer into the water supply.

“Even the cemetery that disappeared like an apparition into a cornfield.

“It wasn’t supposed to be this way.

“With the Iowa political caucuses on the horizon in 2007, presidential candidate Barack Obama made homegrown corn a centerpiece of his plan to slow global warming. And when President George W. Bush signed a law that year requiring oil companies to add billions of gallons of ethanol to their gasoline each year, Bush predicted it would make the country ‘stronger, cleaner and more secure.’

“But the ethanol era has proven far more damaging to the environment than politicians promised and much worse than the government admits today.

“As farmers rushed to find new places to plant corn, they wiped out millions of acres of conservation land, destroyed habitat and polluted water supplies, an Associated Press investigation found.”

The AP adds, “In the first year after the ethanol mandate, more than 2 million acres disappeared.

“Since Obama took office, 5 million more acres have vanished.”

--Last week I noted that the long-range growth forecast from Russia’s Economy Ministry was for just 2.5% annual growth to 2030. This week it was announced the economy grew at the same 1.2% annualized rate in the third quarter as in the second. Growth averaged 7% during Putin’s first two terms as president in 2000-2008.

--Cisco Systems’ earnings report could not have been worse. Yes, the networking giant beat on the bottom line, but revenues failed to meet expectations and then the company guided drastically lower for the current quarter, saying revenues would be down at least 10%, owing mainly to weak emerging markets. CEO John Chambers spoke of an “inconsistent” economic environment.

Six months ago, emerging market sales were up 13% year on year. Now they are 12% lower. Sales in China dropped 18% in the quarter vs. a year ago, with CFO Frank Calderone pointing to the NSA and Edward Snowden debacle.

Shares in Cisco fell 11% the day after its earnings release.

--The merger of American Airlines and US Airways became a virtual certainty after the two reached a settlement with the Justice Department. So they will now compete with United Airlines and Delta for supremacy in the international skies, while Southwest Airlines remains a domestic giant.

Technically, there is still a step or two before the deal is official, but it essentially is. The two will have to sell 104 takeoff and landing slots at Reagan National Airport in Washington, and some slots at LaGuardia in New York to lower-cost carriers. And there were a few other givebacks at other airports around the country.

--The International Assn. of Machinists and Aerospace Workers voted down a tentative labor agreement with Boeing Co. that would have kept work on the 777X jetliner in the Seattle area, so now Boeing is looking elsewhere, specifically potential sites in Huntsville, Ala., Charleston, S.C., and Long Beach, Calif., all of which are licking their chops. 

Understand the 777 is one of Boeing’s best-selling models and the loss to the Seattle area would be huge. Up to 20,000 jobs could be affected, both directly and indirectly. Boeing played hardball with the union and the machinists fought back, not wanting to accept Boeing’s insistence on give backs, but now the entire Puget Sound community suffers.

--Lockheed Martin is planning to cut 4,000 jobs, or more than 3% of its worldwide workforce, and close four U.S. locations. Lockheed is simply a victim of reduced defense spending.

--Heinz is closing three plants in North America and laying off 1,350. The company will be shifting to other locations in the U.S. and Canada and adding 450 jobs at these facilities, all part of an efficiency drive. Recall, Heinz was taken private earlier this year by Berkshire Hathaway and 3G Capital.

--Amazon.com announced a new partnership with the U.S. Postal Service to deliver online orders on Sunday for the first time, a potential shot in the arm for the USPS. Amazon is launching the service in Los Angeles and New York and will expand from there in 2014.

The company has been investing $billions in new warehouses around the country to be able to deliver products more quickly. Adding Sunday delivery should only help sales.

As for the postal service, overall it will deliver 12% more packages this year than last year, some 420 million. Details on the economics for the USPS were not disclosed. [Separately, the Postal Service announced its loss for the fiscal year had been pared to $5 billion.]

--In an interview with the New York Times, Attorney General Eric Holder said of the ongoing investigation into possible currency manipulation among traders at banks like Barclays, the Royal Bank of Scotland and Citigroup, “The manipulation we’ve seen so far may just be the tip of the iceberg. We’ve recognized that this is potentially an extremely consequential investigation."

Evidently, the cooperation of at least one trader has been secured. Holder also emphasized the investigation is “truly global.”

--Moody’s cut the credit ratings of Morgan Stanley, Goldman Sachs and JPMorgan Chase, as Moody’s decided the federal government is not as likely to bail out the big financial institutions should there be another crisis. S&P made a similar move last June. The lower credit ratings could raise the cost of capital a bit.

However, in the case of Morgan Stanley, according to the Financial Times, “it might have to post an additional $3 billion in collateral to derivatives counterparties if it was downgraded to Baa2 by Moody’s” (which it was) but also BBB by S&P and it retains a higher rating with the latter, thus far.

--On Friday, JPMorgan agreed to pay $4.5 billion to institutional investors including BlackRock and Goldman Sachs Asset Management to settle claims it mis-sold mortgage securities. This is separate, however, from the still to be finalized settlement with the Feds that is expected to be in the neighborhood of $13 billion.

--Southern California home prices, measured by the median in the six-county region, were flat for the fourth consecutive month in October...$383,750, which is 21.8% higher than last year, according to research firm DataQuick, but unchanged from June.

--Starbucks is going to have to pay $2.8 billion in damages and costs to Kraft Foods in a case going back to 1998, when Kraft began selling bags of Starbucks branded coffee under a deal that was to run until 2014.

But Starbucks broke off the contract in 2010, saying Kraft broke the terms of the deal.

Kraft said, “Cheez-o!” and challenged the move.

Kraft was spun off by Mondelez International last year and under an agreement between the two, Mondelez gets the cash.

For its part, Starbucks isn’t happy.

--McDonald’s executives conceded they introduced too many new products this year and customer service has suffered as a result. One executive told investors, “We need to be smarter about how we roll new products out.”

--A Wall Street Journal study found that from 2010 through 2012, “freshman enrollment at more than a quarter of U.S. private four-year schools declined 10% or more.”

Many see it as the start of a big shakeout.

Jonathan Henry, vice president for enrollment at Husson University in Bangor, Maine, whose 2013 first-year enrollment was 17% lower than in 2009, said, “I think it’s fair to say 30% of these private schools won’t exist in a decade.”

At Mitchell College in New London, Conn., 2012 freshman enrollment was down a third from 2010.

But the schools have been forced to be creative and at Spring Hill College in Mobile, Ala., an offer of a $1,000 scholarship for taking a campus tour was a hit, with the 2013 class size rebounding with the help of 315 tour scholarships.

--Snapchat, the latest messaging service, recently turned down a $3 billion offer from Facebook, it was learned this week, but has supposedly already received higher offers.

Snapchat specializes in mobile messages or photos that disappear after a few seconds. The service hasn’t generated any revenue. 23-year-old co-founder and CEO Evan Spiegel should take the money and run.

--Nov. 11 has become the world’s largest online shopping event, specifically in China, where on Monday, “Singles’ Day,” China’s biggest online shopping company, Alibaba, processed more than $5.75 billion in orders, a record for a single day anywhere in the world. [2 ½ times what the U.S. does on Cyber Monday.]

--The World Gold Council announced global demand fell to a four-year low in the third quarter as the price has fallen nearly 40% from its 2011 high.

--Irish marketing and travel business Loyaltybuild suffered a major hack attack in mid-October and at first the company said there had been no attempts to obtain cash even though hundreds of thousands of credit card holders had their accounts accessed.

But now two Irish backs have confirmed thousands have fallen victim to fraudulent transactions on their cards.

--Hedge fund king David Tepper of Appaloosa Management is giving another $67 million to his B-school alma mater, Carnegie Mellon, bringing his total beneficence to $125 million in the last decade. Tepper went to Pitt for his undergraduate degree.

--Irishman Francis Bacon, who died in 1992, was a painter whose work “Three Studies of Lucian Freud,” ye olde triptych (don’t get to use that word much), became the most expensive work of art at auction when Christie’s sold it for $142.4 million in New York on Tuesday. Buyer and seller chose to be anonymous. [The prior record was $119.9 million paid for Edvard Munch’s “The Scream” last year.]

Jeff Koons, who is still alive and hails from York, Pa., sold his sculpture “Balloon Dog” for $58.4 million the same evening, a record for a living artist. As Tony Soprano would have said, “Whaddya gonna do?”

--Sign of the Apocalypse (if you don’t think the above is):

“Insurer State Farm began asking drivers in 2009 whether they went online while driving. The percentage of drivers who said they do so has nearly doubled, from 13% in 2009 to 24% this year. Among drivers ages 18-29, that number rose from 29% to 49%.” 35% of all drivers admit to texting while driving. [Larry Copeland / USA TODAY]

Foreign Affairs

Iran: About 12 hours after I posted my last review, talks broke down in Geneva between the P5+1 and Tehran after it appeared an interim agreement was close. Recriminations then began to fly, with Secretary of State John Kerry saying Iran had backed out when everyone and their mother knows it was the French who scuttled it, France wanting to tighten restrictions on the heavy-water reactor project at Arak that provides Iran with a plutonium route to a nuclear weapon.

But Kerry said, “The P5+1 was unified on Saturday, the French signed off on it, we signed off on it...Iran couldn’t take it.”

Kerry also blamed Israeli Prime Minister Benjamin Netanyahu for being premature in labeling the prospective short-term confidence building agreement a “bad deal.”

French Foreign Minister Laurent Fabius admitted the sides were “not far from agreement.” But he added, “This stock(pile) (of uranium) at 20% must be dismantled and come back to 5%,” as well as the suspension of construction at Arak.

Israel has said all along that all enrichment activity must cease before there is the consideration of lessening the U.N. sanctions on Iran.

Iranian President Rohani, addressing his parliament, said uranium enrichment is a “red line” that cannot be crossed.

“Nuclear rights in the international framework, including uranium enrichment, on its soil,” are not negotiable. [AP]

Separately, the International Atomic Energy Agency reached an agreement with the Iranians, a “roadmap for cooperation,” with six specific issues being addressed over the next three months, all pertaining to access to both nuclear sites and documents that the IAEA has been seeking for years; another instance of supposed confidence building. The IAEA / Tehran agreement was seen as an important parallel track to the P5+1.

Iran would grant the IAEA “managed access” to the plant near Arak, among other items, but, no access to the disputed military base at Parchin that I have been writing about for years at this point.

When all was said and done after last weekend, the parties took to the airwaves, and in the case of Iran, Twitter, to state their case even as talks are to resume in Geneva on Nov. 20.

Middle East allies of the U.S., and bitter foes of Iran, such as Saudi Arabia and the UAE, are furious at the deal that was almost signed were it not for the French, complaining at least behind closed doors that they haven’t been consulted enough by the U.S. There are simply growing feelings the U.S. can’t be trusted. They, like the Israelis, don’t want Iran to be able to enrich any uranium.

On Wednesday, Sec. of State Kerry met in closed door session with leading senators in an attempt to stop the move for further sanctions on Iran before negotiations have a chance to play out. But as the top Republican on the Senate Foreign Relations Committee, Sen. Bob Corker (Tenn.), said after, “It was a very unsatisfying briefing.” Democrat Robert Menendez (N.J.), chairman of the foreign relations committee, still wants new sanctions.

Kerry said, “If all of a sudden sanctions were to be increased, there are members of that coalition who have put it in place who would think that we are dealing in bad faith, and they would bolt. And then the sanctions would fall apart.”

Prime Minister Netanyahu is slated to meet with French President Hollande in Jerusalem on Sunday.

It was also revealed at week’s end that the IAEA believes Iran has virtually halted its rapid expansion of its uranium-enrichment capacity since President Rohani became president, which the White House and the West can use to their advantage in beating back opponents of a deal. The IAEA, which does have inspectors on the ground, (even if they don’t have access everywhere they want), also said in its eagerly awaited quarterly report that Iran has “more or less frozen” construction at the controversial Arak reactor.

The IAEA added that the amount of material Iran has enriched to 20% at 250 kg was still below the amount needed for a bomb if processed to 90%.

And the IAEA said Iran had installed only four more first-generation centrifuges at its Natanz plant since August, making a total of 15,240. In the previous three-month period, May-August, it added 1,800. [Jerusalem Post]

Finally, back to the French, they have been deeply disappointed with Washington, going back to the Obama administration’s hesitation in supporting France’s move in Mali, let alone the near-disaster over Syria when French fighter jets were within hours of bombing Syria to punish its use of chemical arms – only to be told by President Obama to stand down.

A senior French official told Reuters, “Our American partners used to lecture us 15 years ago. Now, when it comes to the Middle East they are filled with uncertainty and doubt. That uncertainty gives us a card to influence our policy.”

Of course France also has myriad domestic problems to deal with, including the previously noted sick economy, and currying favor with the likes of the Saudis and UAE is smart on the commercial front. Nothing wrong with picking up some arms deals to juice the French economy. Just in the last few months France has won major contracts from both the Saudis and the United Arab Emirates.

Some opinion....

Philip Stephens / Financial Times

“The who-said-what game about last weekend’s talks in Geneva has become a distraction. The six-power negotiations with Tehran to curb Iran’s nuclear program may yet succeed or fail. But wrangling between the U.S. and France on the terms of an acceptable deal should not allow the trees to obscure the forest. The organizing facts shaping the negotiations have not changed.

“The first of these is that Tehran’s acquisition of a bomb would be more than dangerous for the Middle East and for wider international security. It would most likely set off a nuclear arms race that would see Saudi Arabia, Turkey and Egypt signing up to the nuclear club. The nuclear non-proliferation treaty would be shattered. A future regional conflict could draw Israel into launching a pre-emptive nuclear strike. This is not a region obviously susceptible to cold war disciplines of deterrence.

“The second ineluctable reality is that Iran has mastered the nuclear cycle. How far it is from building a bomb remains a subject of debate. Different intelligence agencies give different answers. These depend in part on what the spooks actually know and in part on what their political masters want others to hear. The progress on an Iranian warhead program is one of the known unknowns that have often wreaked havoc in this part of the world....

“The third fact – and this one is hard for many to swallow – is that neither a negotiated settlement nor the air strikes long favored by Benjamin Netanyahu can offer the rest of the world a watertight insurance policy.

“It should be possible to construct a deal that acts as a plausible restraint...but no amount of restrictions or intrusive monitoring can offer a certain guarantee against Tehran’s future intentions....

“If there is an agreement when talks resume later this month, it will not satisfy hardliners on either side. The challenges to Mr. Obama from those in Washington who think the U.S. should be ready to start another Middle East war will be mirrored by opposition from the more reactionary elements in Tehran to any concessions to the ‘Great Satan.’ Sad to say, Mr. Obama does not have a great record in winning arguments in Congress, while no one really knows the limits of Ayatollah Khamenei’s negotiating flexibility.”

Editorial / London Times

“Iran’s record of duplicity is a huge obstacle to building trust. Since the regime accelerated its nuclear program in the late 1990s, it has been caught again and again in the act of building illicit facilities. Its uranium enrichment facility at Natanz and heavy water plant at Arak were acknowledged by the regime only when they could no longer be denied. These and other facilities are unnecessary for a civil nuclear program. They make complete sense, however, if Iran is holding out the option of a military one.

“Negotiations with Iran should have the aim of stopping a military capability. If Tehran acquires nuclear weapons, or even the credible threat of developing them, there is no security structure in the Middle East that can deter them. NATO countered the Soviet nuclear threat in the Cold War by formal treaty obligations and extensive U.S. military deployments. An Iranian Bomb will destabilize the Middle East and be a threat to the security of Israel. Pressure has brought Tehran to the negotiating table. This is no time to relax it.”

Bret Stephens / Wall Street Journal

“(The French are now) at the head of a de facto Axis of Reality, the other prominent members of which are Saudi Arabia and Israel. In this Axis, strategy is not a game of World of Warcraft conducted via avatars in a virtual reality. ‘We are not blind, and I don’t think we’re stupid,’ a defensive John Kerry said over the weekend on ‘Meet the Press,’ sounding uncomfortably like Otto West (Kevin Kline) from ‘A Fish Called Wanda.’ When you’ve reached the ‘don’t call me stupid’ stage of diplomacy, it means the rest of the world has your number.

“Now the question is whether the French were staking out a position at Geneva or simply demanding to be heard. If it’s the latter, the episode will be forgotten and Jerusalem and Riyadh will have to reach their own conclusions about how to operate in a post-American Middle East. If it’s the former, Paris has a chance to fulfill two cherished roles at once: as the de facto shaper of European policy on the global stage, and as an obstacle to Washington’s presumptions to speak for the West.”

Lastly, Reuters did an extensive investigation of the holdings of the Iranian leadership, specifically an outfit called “Setad Ejraiye Farmane Hazrate Emam” – Headquarters for Executing the Order of the Imam. Shortly before his death in 1989, Ayatollah Khomeini signed an edict spawning a new entity, Setad, to manage and sell properties abandoned in the 1979 Islamic Revolution.

Today, Ayatollah Khamenei is in charge of Setad which, as Reuters has found, “has morphed into a business juggernaut that now holds stakes in nearly every sector of Iranian industry, including finance, oil, telecommunications, the production of birth-control pills and even ostrich farming.”

Reuters estimates Setad’s total worth at $95 billion, and while Reuters found no evidence Khamenei is tapping Setad himself, he is empowered because he can dole out resources of the organization as he sees fit, as in to buy, and retain, support for 24 years.

Syria: It would appear the Syrian Army has been on a roll in recent weeks. On Wednesday it captured a contested suburb of Damascus and it has taken four other opposition strongholds south of the capital, according to state media and the Daily Star. The military has also secured most of the area around Aleppo International Airport and could reopen the facility, which has been closed due to fighting for nearly a year.

If peace talks are ever held and Assad is part of them, he’d certainly be dealing from more of a position of strength. Rebel infighting hasn’t helped their cause either.

Hizbullah leader Sayyed Hassan Nasrallah said his militia will continue to fight alongside President Assad’s forces as long as necessary.

After initially saying it would not help in the dismantling of Syria’s chemical weapons stockpile, Norway announced it would send troops and ships to assist in moving the arsenal. The munitions are expected to be destroyed outside of its borders but one prospective candidate for the job, Albania, has seen large protests against such a move and on Friday said it would not participate. A big blow.

And in an example of how difficult it is to differentiate between moderate rebel forces and the Islamists, fighters linked with al-Qaeda begged for forgiveness after cutting off the head of one of their allies by mistake. In a video posted to YouTube, fighters affiliated with the Islamic State of Iraq and Syria (ISIS) were pictured holding up the head of a bearded man before a crowd in Aleppo, claiming he was an Iraqi fighting for Assad.

But others recognized the head and it turns out he was a Sunni Islamist rebel whose group fights alongside the ISIS. [London Times]

Michael Young / Daily Star

“You can sympathize with Syrians looking longingly at the extended coverage in Western media of the humanitarian catastrophe in the Philippines caused by Typhoon Haiyan. When it comes to Syria, no such concern is evident. There is an assumption that saving the Syrian people from their regime only means reinforcing Al-Qaeda....

“Credit Assad with reading quite well the Western mindset. He pushed the Al-Qaeda button from the outbreak of the revolt against his rule, and very soon Western publics believed that Assad was a brave secularist resisting a return to the dark ages. That this was the same man who headed the most sectarian of regimes, whose army and intelligence services performed with such unspeakable sectarian barbarity that they provoked a sectarian response from their victims, was lost on most people in the West. 

“Assad understood that one front in his war had to be fought over Western public opinion. This would determine the reaction of the U.S. and European governments, whose armies could destroy his. He repressed the early peaceful protests in blood, producing a military response from the opposition. Once the uprising became militarized, Assad grasped, it would quickly become more radicalized. This would do two things: it would confirm his claim that his regime was fighting armed Islamists; and it would spread panic among his Alawite brethren and other minorities, guaranteeing their continued solidarity with the regime.

“Not surprisingly, on the ground the regime has also given a wide berth to the most extreme jihadist groups, letting them gain ground and sowing dissension among rebels. Western publics, little concerned by the details and utterly credulous when it comes to the media’s jihadist focus, has swallowed the Assad version hook, line and sinker....

“Young Americans and Europeans are brought up on the memory of the Holocaust, particularly the complicity of many societies in Europe with the slaughter of Jews during World War II. One theme that keeps coming back is how blameworthy were those who preferred to look the other way on the crimes that were being perpetuated.

“Even if the Syrian situation is different, there has been an underlying self-centeredness in Western societies to avoid facing the humanitarian outrage in Syria, and this has led to a hardness when considering the situation... Al-Qaeda or no Al-Qaeda, suffering is suffering. To justify one’s lack of concern on the grounds that one fears the jihadists is no more than a convenient means to assuage an uneasy conscience.

“Who would be surprised if one day this attitude in the West pushes embittered young Syrians to strike back through violence. That’s not to say that they would be justified, but one can anticipate their anger. When Western societies portray themselves as paragons of virtue, against reality, they engage in the highest form of hypocrisy.”

Lastly, the New York-based Committee to Protect Journalists said this week that at least 30 journalists are being held in Syria and another 52 have been killed since the start of the civil war in early 2011. Paris-based Reporters Without Borders puts the number at 60 “news providers” currently being detained and more than 110 killed. [By comparison, 150 journalists were killed in Iraq between 2003 and the departure of U.S. troops in 2011.]

Israel: Under intense pressure from Washington and the European Union, Prime Minister Benjamin Netanyahu backed off plans to construct more than 20,000 homes in the West Bank. Netanyahu said the plans would create unnecessary friction, while the Palestinians had said they would appeal to the UN, warning the settlement construction would derail peace talks.

Of course this is just more of the same. And wouldn’t you know, hours later, after telling his Housing Ministry to “reconsider,” Netanyahu announced building in settlements would continue, but had to be done wisely.

Netanyahu’s point was that he didn’t want to waste political capital on the issue today when Israel is trying to gain support for its position on Iran.

Egypt: Ousted President Mohammed Morsi accused the military, specifically Defense Minister Gen. Sissi, that deposed him of treason in a message Morsi sent out from prison as he tries to rally his supporters. But after a severe crackdown on the Muslim Brotherhood, protests are few and far between and the military regime lifted the 3-month-old state of emergency and curfew.

On a different issue, as a consequence of the Obama administration’s totally incoherent policy towards Egypt, Cairo gave diplomats from Russia the red carpet treatment this week as there is a growing chance the Egyptians may sign a major arms deal with Moscow. Russian-Egyptian relations haven’t been good in decades, but while Egypt still needs the U.S. and its aid (some of which is currently suspended), Russia’s moves in the region bear watching.

Libya: Two years after the overthrow of Muammar Gaddafi, Libya still has no constitution and divisions between secular and Islamist forces have paralyzed the country. On Friday, Tripoli saw its worst violence in years as at least 31 were killed and 235 injured in clashes between militiamen and protesters demanding one particular militia leave.

Militias have carved out sections of the capital city and what passes for the official army is powerless to dislodge them.

Afghanistan: Various experts are warning of an Iraq-style chaos when U.S. combat forces pull out of Afghanistan. Retired Army Gen. John Keane said, “Only if the security situation is stable and the Taliban know they cannot win [in Afghanistan] can there ever be a realistic hope for a political settlement.” [Army Times]

There is still a chance the U.S. and its allies could leave as many as 20,000 troops in Afghanistan assuming an agreement is reached with Kabul that is contingent on legal immunity for U.S. troops.

Separately, it’s pathetic that many Afghan interpreters who worked alongside U.S. troops are being denied U.S. visas because the State Department “says there is no serious threat against their lives.” [Kevin Sieff / Washington Post]

Many of the interpreters live in Taliban havens and retribution seems a certainty when they know the interpreter worked with the Americans.

The Post spoke to one, Mohammad, who said he received a form letter saying he had failed to establish there was a “serious threat” against his life.

U.S. military officers have been supporting many of those seeking visas, but the State Department review board is the stumbling block.

Some 1,648 interpreters have received the Special Immigrant Visas, or SIVs, out of 8,750 allocated by Congress.

Another interpreter told the Post, “What’s a serious ongoing threat for them? Do they need someone to bring in my decapitated head?”

China: Supporters of disgraced senior politician Bo Xilai, who was recently jailed for corruption, have formed the Zhi Xian Party, “the constitution is the supreme authority” party. Bo was named “chairman for life.” The move is legal, but no word as yet what the Communist Party’s response will be.

Russia: Opposition leader Alexei Navalny’s assets were to be seized in connection to the theft and money laundering charges against him. Alexei and his brother, Oleg, are to have their assets frozen in an outrageous act of intimidation. I thought President Vladimir Putin, who had to approve of the Basmanny District court move, would wait until the end of the Sochi Winter Olympics before making such a move.

Meanwhile, 28 Greenpeace activists and two journalists were moved from the northern city of Murmansk to pre-trial detention centers in St. Petersburg following a reduction of the charges against them.

Activists were being confined for 23 hours a day in ice-cold cells, Murmansk being above the Arctic Circle.

The 30 were arrested after protesting at an oil platform owned by Gazprom. While the charges may have been reduced, they still face up to seven years in prison. Even Sir Paul McCartney is pleading for their release.

On a totally separate topic, as reported by the New York Times, a dancer from Texas who became the first American to join the Bolshoi Ballet has quit after alleging she was denied certain opportunities to perform unless she paid a bribe of $10,000. The Bolshoi has been battered by one scandal after another. The dancer, Joy Womack, said she was heartbroken to be leaving. She moved to Moscow at the age of 15, on her own, to attend the Bolshoi school and then graduated to the big time.

France: To say President Francois Hollande is reeling would be an understatement. S&P cut his country’s credit rating, there have been increasingly violent street protests over taxation, the debt continues to rise, the economy has stalled out, and there is nothing on the horizon that would make one optimistic about the future.

Hollande also faces an open revolt in his own Socialist party. Some are even talking of a snap parliamentary election.

Socialist party members want Hollande to replace Prime Minister Jean-Marc Ayrault with someone like hard-line Interior Minister Manuel Valls, who is the most popular figure in the nation these days.

But Hollande apparently wants to wait to make a move on prime minister until after next spring’s European elections, but the Socialists could go down in flames at the hands of Marine Le Pen’s far-right National Front.

The National Front is now the country’s most popular party in the latest polls. Le Pen said in an interview with Bloomberg that “We will be in power in the next 10 years. Votes now flow from the left to the Front as much as they flow from the right to the Front. A year after rejecting Nicolas Sarkozy, the French are asking, ‘what’s the difference.’”

The latest poll on the European elections in May show the Front’s candidates gaining 24%, Sarkozy’s Union for Popular Movement 22%, and 19% for the Socialists.

As noted before, the right wing’s influence is spreading well beyond France and Le Pen is trying to forge alliances with like-minded parties in Austria, the Netherlands, Britain and Finland, among others.

Germany: One major concern following the Edward Snowden revelations of U.S. spying on Germany, including tapping into Chancellor Angela Merkel’s cellphone, is that Germany would retaliate by turning the World Wide Web into the “Internetz,” an entirely German internet. Deutsche Telekom, which controls most of the nation’s cable infrastructure, is working on such a project, which would keep Germans’ emails and surfing habits away from the prying eyes of the NSA.

But this would lead to the Balkanization of the internet, according to many. Others say such a structure isn’t the least bit practicable and is more about public relations.

On the stolen art issue in Germany, under international pressure, particularly from the U.S., the German government announced it would release a list of 590 works it believes may have been looted by the Nazis. A total of 1,400 works were discovered in a Munich apartment, the collection of a former Nazi art dealer. The U.S. says release a full catalogue.

Philippines: If the situation wasn’t so serious, it would have been comical when the Chinese government announced it would give $100,000 in emergency aid to the Philippines. Even the Beijing-based government mouthpiece Global Times said this was a mistake.

“If China gives meager aid to the Philippines this time, our own losses may well outweigh the losses inflicted upon them by insufficient aid,” the paper editorialized.

Days later the government announced it was kicking in another $1.5 million.

As for conditions on the ground, a week after Typhoon Haiyan hit, you’ve all seen the depressing news reports. Your heart aches for these people. The government has projects budgeted for, such as for flood control and earthquake monitoring, but little has been completed. And then when a Haiyan strikes, there are zero disaster management plans.

Venezuela: Daka is an electronics chain store that is the equivalent of Best Buy in Venezuela and last weekend the government ordered a military “occupation” of the company’s stores as President Nicolas Maduro continued his crackdown on an “economic war” he claims is being waged against his country by the likes of Washington. The government forced the chain to charge customers “fair” prices and thousands swooped into the stores looking for bargains.

Maduro took to state television proclaiming, “Leave nothing on the shelves, nothing in the warehouses... Let nothing remain in stock!”

Some store managers were arrested.

Canada: The saga of Toronto Mayor Rob Ford continues, even after he admitted to smoking crack cocaine and buying illegal drugs. The vast majority of the City Council wants him to step down, but as I noted the other day, there is currently no legal way to remove him. So on Friday, the Council began to strip Ford of his powers, one vote at a time.

Random Musings

--Fouad Ajami / Wall Street Journal

“If Barack Obama seems like a man alone, with nervous Democrats up for re-election next year running for cover, and away from him, this was the world he made. No advisers of stature can question his policies; the price of access in the Obama court is quiescence before the leader’s will. The imperial presidency is in full bloom.

“There are no stars in the Obama cabinet today, men and women of independent stature and outlook. It was after a walk on the White House grounds with his chief of staff, Denis McDonough, that Mr. Obama called off the attacks on the Syrian regime that he had threatened. If he had taken that walk with Henry Kissinger or George Shultz, one of those skilled statesmen might have explained to him the consequences of so abject a retreat. But Mr. Obama needs no sage advice, he rules through political handlers.

“Valerie Jarrett, the president’s most trusted, probably most powerful, aide, once said in admiration that Mr. Obama has been bored his whole life. The implication was that he is above things, a man alone, and anointed. Perhaps this moment – a presidency coming apart, the incompetent social engineering of an entire health-care system – will now claim Mr. Obama’s attention.” [Ajami wrote this prior to Thursday.]

--Michael Goodwin / New York Post

“When I first saw the headline saying Bill Clinton was advising President Obama to ‘honor his commitment,’ I had to laugh. The idea of Monica Lewinsky’s boyfriend as moral referee always cracks me up.

“Then I got to wondering. Which commitment was Clinton talking about?

“Is it the one Obama made to the Israeli people, that he had their backs and would never let Iran get a nuclear weapon? Or was it his promise to enforce a ‘red line’ in Syria?

“Or maybe it was Obama’s promise to ‘never rest’ until we caught the terrorists who killed our ambassador and three other Americans in Libya?

“Or was Clinton talking about the many times the president said he would ‘never rest’ until every American who wanted a job had one?

“Or maybe he was talking about the pledge to change the tone in Washington? Or to go through the budget ‘line by line’ and cross out the waste driving up the deficit?

“You get the picture – any of those whoppers would qualify. But, of course, Clinton was talking about the broken promise of the moment, the one where Obama vowed that ‘if you like your health insurance, you can keep it.’

“It ranks as one of the biggest presidential lies of modern times, all the more so because Obama repeated it 30 times. The fallout of millions being forced from their policies, an experience exacerbated by the hapless Web site, has created a crisis of confidence so vast, it threatens to swallow the second term....

“(Clinton) knows the Big Lie is shredding Obama’s ace in the hole – his personal credibility.”

--Joe Scarborough / TIME

“Yes, the fervor of Tea Party activists in 2009 fueled the rise of candidates who rocked the Washington establishment and led the GOP to its greatest legislative victories in half a century. It also led to the elevation of extreme candidates who cost Republicans control of the U.S. Senate and damaged the party’s brand nationwide.

“To win again – to make America great and growing again – requires a return to the spirit and substance of Eisenhower and Reagan. We Republicans will not win national elections if we do not broaden our appeal in the way these giants did. Nor will we govern well if we refuse to make principled compromises when necessary, the kinds of compromises that led Ike and Reagan to historical greatness.”

--The Economist...on New York City Mayor-elect Bill de Blasio, who promises he will be the mayor for “the 99%,” proclaiming New York is a tale of two cities.

“(De Blasio) vowed to tax the rich to pay for universal pre-school. This is a worthy project, but New York’s public school system is not obviously short of cash – spending per pupil is nearly $20,000, far more than some private schools spend.

“And New York’s tax base is precarious. The top 1% of earners (about 35,000 people) pay 43% of the city’s income taxes. Including federal and state taxes, they already face a top marginal rate of 55% or so. Bumping that up by half a percentage point (he would raise the top city rate from 3.9% to 4.4%) may not, in itself, cause them to flee to Florida.    But Mr. de Blasio’s rhetoric makes many nervous, and his lack of executive experience makes some wonder if he will be competent.”

Meanwhile, in an interview with Playboy, NYPD Commissioner Ray Kelly accused the mayor-elect and his fellow Democratic mayoral hopefuls of pandering for votes this fall by attacking the NYPD’s stop-and-frisk tactic. [A New York Daily News front page story on Friday concerning the interview was very deceptive and won’t be repeated here.]

--Tom Kean was the very popular two-term Republican governor of New Jersey from 1982 to 1990. His son, Tom Jr., is the state Senate Minority Leader. He’s also my state representative.

But despite Chris Christie’s romp in the gubernatorial election, Republicans failed to pick up a single seat in the Senate in an effort led by Kean Jr. The Democrats retain a 24-16 majority.

Christie has never been a fan of Kean Jr. and sought to have him replaced with a key ally in the Legislature, state Sen. Kevin O’Toole. But Republican senators bucked Christie, and Kean retained his leadership position 10-6.

I admit to not following state politics much at all (at the legislature level), but I was struck how Christie did not reach out to Gov. Kean beforehand to say he was moving against his son. Very bad form. It’s also well-known Christie gets along with Senate President Stephen Sweeney, the lead Democrat in the state, who in turn hates (not too strong a word) Kean Jr.

Christie’s relationship with Gov. Kean isn’t irreparably harmed. But in doing Sweeney’s bidding, it’s something that perhaps comes back to haunt Christie in an early 2016 primary battle. “You’re hardly loyal to your party, Governor,” Sen. Cruz, Paul or Rubio will say at a debate in Iowa. “I’m out to get things done for my state, Senator. And I was trying to build the Republican brand at the same time. I beat my opponent by over 20 points, yet we didn’t pick up one Republican senate seat. I thought a change needed to be made.”

They say Christie is a brilliant political strategist and is thinking 3 or 4 steps ahead of the rest of us. I’m just trying to think maybe two steps ahead.

I also greatly admire the Kean family.

--Polls on 2016 will be all over the board the next two years, for starters, but interesting for the archives. An NBC News poll has Hillary Clinton beating Gov. Christie in a hypothetical matchup 44-34. Exit poll surveys from Nov. 5 had it 48-44 and 49-43, Clinton.

--Oh yeah, it’s early, but talk of Elizabeth Warren challenging Hillary Clinton for the Democratic nomination is interesting. As Chris Cillizza wrote in the Washington Post:

“Clinton represents the head of the Democratic party. But Warren is its heart....

“Embracing Warren as the next ‘one’ is, in part, a way of getting over Obama; she provides an optimistic distraction from the fact that under our current president, too little has changed, for reasons having to do both with the limitations of the political system and the limitations of the man. She makes people forget that estimations of him were too overheated, trust in his powers too fervid.”

Warren has already signed a letter supporting Clinton for president, but no one would hold that against her.

--I read a few articles on the new health guidelines for using statins and frankly found it all rather confusing. So I agree with Dr. Steven E. Nissen, cardiologist at the Cleveland Clinic, who was not a member of the committee coming up with the guidelines, that he thought it would take years for doctors to change their practices.

It does seem, to this layman, however, that blood pressure level is more important in the new calculations doctors will be looking at for prescribing the right level of statins.

--Nick Squires / Irish Independent

“In one of his strongest homilies since he was elected in March, the Pontiff (Pope Francis) said Christians who led ‘a double life’ by giving money to the church while stealing from the state were sinners who deserved to be punished.

“Quoting from the Gospel of St. Luke in the New Testament, he said: ‘Jesus says it would be better for him if a millstone were put around his neck and he be thrown into the sea.’

“While he did not allude directly to corruption within the Roman Catholic Church, his remarks yesterday came just days after a scandal erupted inside an ancient religious order linked to the Vatican, and as he forged ahead with a determined effort to root out cronyism within the Holy See and financial irregularities in the scandal-tainted Vatican bank.

“The Pope described people engaged in corruption as ‘whitewashed tombs,’ explaining that ‘they appear beautiful from the outside, but inside they are full of dead bones and putrefaction.’ A life based on corruption was ‘varnished putrefaction,’ he said.”

The prior week, Pope Francis blasted those who grew wealthy from graft and then showered their children with lavish gifts. “Those who take kickbacks have lost their dignity and give their children dirty bread.”

--U.S. officials destroyed more than 6 tons of confiscated ivory tusks, carvings and jewelry and urged others to follow suit to fight the $10 billion global trade that results in the slaughter of 20-30,000 elephants a year (32,000 last year).

This week, the U.S. State Department offered a $1 million reward for information leading to the dismantling of a Laos-based criminal syndicate that poaches elephants for ivory. 

--Robert Lee Hotz of the Wall Street Journal had a piece on sunspot activity, as in “Scientists say that solar activity is stranger than in a century or more, with the sun producing barely half the number of sunspots as expected and its magnetic poles oddly out of sync.”

Andres Munoz-Jaramillo of the Harvard-Smithsonian Center for Astrophysics, notes, “There is no scientist alive who has seen a solar cycle as weak as this one.”

And the sun “also is undergoing one of its oddest magnetic reversals on record,” writes Mr. Hotz.

“Scientists said they are puzzled, but not concerned.”

Hey, screw the ObamaCare issue. I take no comfort from the statement scientists are not concerned. They clearly have no clue what is going on.

So I’m thinking one day next spring, some of us will be looking out the window thinking, ‘Gee, I thought the sun was supposed to rise ten minutes ago....uh oh....’

--Last Sunday morning there was an event providing a glimmer of hope for Planet Earth. They ran the Beirut Marathon and more than 36,000 representing 104 countries participated. The first Beirut Marathon was run in 2003 with just 6,000 runners. Apparently the race is very well organized...in a country that otherwise is totally dysfunctional.

--With Veterans Day this past Monday, we note that of the 16.1 million World War II vets, fewer than 1.7 million are still alive and they are dying at a rate of more than 600 a day. Bill Sternberg, deputy editorial page editor of USA TODAY, noted, on Sept. 22, Lawrence Aaron Sternberg, his father, was one of them. Mr. Sternberg landed on Omaha Beach a few days after D-Day and was at the Battle of the Bulge.

“We watched Jeopardy together for the last time in the hospital on a Friday evening. The Final Jeopardy category that day was ‘French Geography.’ The answer had to do with the eight countries that border modern-day France, but all I could think of was how different the geography would be if not for the veterans who saved the world from fascism.

“Dad lived another two days after that Final Jeopardy. Losing him was painful. But I’m sure if you had told him when he landed in France in 1944 that he’d get out of the war alive, have another 69 good years and six really bad weeks at the end, he’d have taken that deal in a New York minute.”

--Daniel Henninger / Wall Street Journal

“The White House recently whispered out the back door that President Obama would not appear in Pennsylvania next Tuesday at the ceremonies for the 150th anniversary of Abraham Lincoln’s Gettysburg Address. The political betting had been that this was a big-speech venue whose glow Mr. Obama would not want to miss. The higher-road expectation was that this particular Civil War anniversary required the presence of this particular American president. It’s not happening. The administration’s official attendee will be Secretary of the Interior Sally Jewell.

“The White House offered no explanation beyond Jay Carney’s bloodless reply to a reporter: ‘I think Americans will take the appropriate time to consider the speech that was delivered there. I would simply say that I have no updates on the president’s schedule.’

“What was he supposed to say? Once the president – or whoever – decided he wouldn’t attend, no possible explanation was going to suffice for the Gettysburg no-show....

“(Maybe) it’s just as well we won’t hear Mr. Obama’s thoughts on the Gettysburg Address. Those words were about a renewal of the nation’s unity, and five years into the Obama presidency, the United States is about as politically divided as it can get. The division is so intense that Americans paint their political beliefs in one of two colors: blue or red.

“That this division exists in 2013, 150 years after Lincoln wrote those words, is ironic, to say the least.”

---

Pray for the men and women of our armed forces...and all the fallen, including the four victims of the tragic accident at Camp Pendleton.

God bless America.
---

Gold closed at $1287
Oil, $93.84

Returns for the week 11/11-11/15

Dow Jones +1.3% [15961]
S&P 500 +1.6% [1798]
S&P MidCap +2.0%
Russell 2000 +1.5%
Nasdaq +1.7% [3985]

Returns for the period 1/1/13-11/15/13

Dow Jones +21.8%
S&P 500 +26.1%
S&P MidCap +28.5%
Russell 2000 +31.4%
Nasdaq +32.0%

Bulls 52.6
Bears 15.5 [Source: Investors Intelligence]

Have a great week. I appreciate your support.

I am committed to Twitter, finally... @stocksandnews

Brian Trumbore

 



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Week in Review

11/16/2013

For the week 11/11-11/15

[Posted 12:00 AM ET]

Washington and Wall Street

Before I turn to the issue of the day, ObamaCare, some thoughts on the economy.

President Obama’s nominee to replace Federal Reserve Chairman Ben Bernanke, current vice chair Janet Yellen, appeared before the Senate Banking Committee for her confirmation hearing and did just fine. Yes, she’s a policy “dove” and pledged the Fed would not take its foot off the gas.

“We have made good progress,” she said in her opening statement, “but we have farther to go to regain the ground lost in the crisis and the recession.” Yellen said the unemployment rate at 7.3% “is still too high, reflecting a labor market and economy performing far short of their potential.”

As to the surging stock market, Yellen said, “Stock prices have risen pretty robustly,” but she did not see “stock prices in territory that suggests bubblelike conditions.”

To which Sen. Patrick Toomey (Pa.) asked, “What happens when this morphine drip starts to end?” Toomey, of course, referring to the $85 billion in monthly purchases of Treasury and mortgage-backed securities.

Wall Street interpreted Yellen’s testimony as a clear signal the Fed will not begin tapering when it meets Dec. 17-18. I stick by my pronouncement of last week that the Fed will. 

First off, it’s not Yellen’s meeting, it’s Bernanke’s (his term ends in January), but as I noted last time, assuming the data continues to be solid, including November’s employment report, I just think the Fed can stay true to its mantra of easy money while letting up on the gas just a smidge to keep the markets honest.

The Fed will, however, lower the unemployment rate target for raising the short-term funds rate off zero to 5.5% or 6.0% at the next meeting from the current 6.5% target. No one would say such a dual move, including a small taper, isn’t still pursuing a highly aggressive strategy. Gosh darnit, that’s my stance and I’m stickin’ to it.

I also said, though, that what would change my mind, aside from a putrid November jobs number, is if the budget conferees in Congress fail to come up with a compromise by the Dec. 13 deadline, and this week we learned the news is not good on this front. Democrats want to see more revenue, tax increases, and Republicans keep saying, ‘We already gave that to you last time.’ Heck, as Republican leaders also continuously offer, we don’t have a revenue problem, we have a spending problem.

This week the Treasury Department (still playing catch-up with the statistics after the 16-day shutdown) released the U.S. budget picture for October and while the deficit for the month was $91.6 billion, this compared with a $120 billion shortfall in October 2012 as revenues increased to a record $198.9 billion for the month (vs. $184 billion in Oct. 2012).

Bottom line, it appears we are back to square one, but if I’m the Republican leadership, there are some tax breaks that should be eliminated, for the good of the country, starting with the “carried interest” provision on private equity, real estate and hedge fund profits. Give it to ‘em! [Profits would be taxed at the ordinary income rate of 39.6% instead of the capital gains rate of 20%.] In turn fix some of the sequester issues, particularly on defense. But Republicans don’t want to give in on loophole issues now without broader tax reform that simply isn’t going to be part of this particular deal. Tax-writing committees in both the House and Senate are working on broader reform and in a perfect world this will be addressed in the spring. [The work by Sen. Max Baucus and Cong. Dave Camp.]

But back to Janet Yellen, the equity markets loved her testimony and the party continued, with the Dow Jones and S&P 500 finishing the week at new all-time highs.

As for the upcoming holiday shopping season, which is still kind of important even with the Fed juicing stocks, the picture is a bit uncertain. Macy’s, in handily beating the Street’s projections for its third-quarter earnings and revenues, with overall sales up 3.3% year over year (decent), issued a positive outlook for the next six weeks, but then Wal-Mart and Kohl’s came out with poor forecasts, both guiding lower, while same-store sales figures for the two were down in Q3. Wal-Mart emphasized it was going to be very aggressive this Christmas, which doesn’t bode well for margins (but should be good for consumers).

On to....ObamaCare

Since Barack Obama willingly has his name attached to it, let’s look first at some poll numbers.

A new Quinnipiac survey has Obama’s job approval rating at just 39%, the lowest since taking office. 54% disapprove. [A Pew Research poll has his approval rating at 41%. It was 55% at the end of last year.]

In the Quinnipiac poll, only 44% now find the president honest and trustworthy, down 10 points since October and the first time ever below 50. 52% do not find Obama trustworthy. 

In the Pew survey, only 31% support him on his efforts to improve the economy.

Only 37% approve of his healthcare plan, 59% disapprove.

So early in the week we learned that it is unlikely HealthCare.gov will be working fully by the end of November. And prior to Obama’s apology and “fix” on Thursday, the Washington Post’s Amy Goldstein, Juliet Eilperin and Lena H. Sun had a piece on various issues, including the site’s problems and other challenges.

“Kansas Insurance Commissioner Sandy Praeger said she and her counterparts in other states have offered suggestions to the White House on how best to address the problem of canceled policies. The most obvious solution, she said, would be to allow customers to renew policies early to let them stay in effect until November 2014. But that would come with a trade-off, she said: Those people would not receive federal subsidies for which they might be eligible if they bought a plan on the exchange.

“She said that she and other insurance commissioners are trying to address consumers’ desire to use the federal exchange. ‘Honestly,’ she said, ‘it’s just a big mess right now...I don’t know what to tell people.”

Wednesday afternoon, we finally got some enrollment numbers for the period Oct. 1-Nov. 2. Health and Human Services Department Sec. Kathleen Sebelius reported 106,185 had signed up on exchanges so far, but only 26,794 had done so through HealthCare.gov and joined the exchanges the feds are running in 36 states. The other 79,000 plus came in through the 15 marketplaces run by the other 14 states and the District of Columbia. In an internal memo prior to launch, the administration was looking for 464,000 signing up the first month. The Congressional Budget Office is on record as estimating 7 million Americans will gain private coverage through the federal and state exchanges by spring.

35,364 had actually signed up in California, which is running its own exchange, so more than the 36 states on the federal, but even here this is less than 1% of the 6.6 million in California without health insurance, and one million had already had their plans canceled in the state. [Florida had the most enrollees on the federal exchange, 3,571, while North Dakota had 42, Jackie Robinson’s number!]

All of the above numbers, however, are technically bogus. Why? Because no one has paid their first premiums yet (or very few have). The insurance industry wouldn’t count you until you do.

And not for nothing, but as the Wall Street Journal pointed out, of those signing up on HealthCare.gov, 33% used paper applications, not the website. “Welcome to the 18th century,” opined the Journal.

We also learned this week in congressional testimony that the website can’t handle more than 20-30,000 being on at the same time. 

But if you think we have problems today, imagine what will happen when the employer extension disappears in a year. Employers are already facing pressures to cut costs and coverage.

So President Obama, under immense heat from within his party, strode forth on Thursday and announced an administrative change, allowing insurers to continue offering individual insurance plans for another year even if they don’t comply with ObamaCare’s guidelines for minimum benefits.

“This fix won’t solve every problem for every person, but it’s going to help a lot of people,” Obama said.

As I watched the president, I had but one thought. What a s---storm.

The president went on to apologize.

“I think it’s fair to say that the rollout has been rough so far....

“We fumbled the rollout of this health-care law.” Regarding his repeated promises that people would be able to keep their insurance plans if they liked them, Obama said, “That’s on me... That’s something I deeply regret because it’s scary getting a cancellation notice.”

The president also said, “I was not informed directly that the Web site would not be working the way it was supposed to. I don’t think I’m stupid enough to go around saying, this is like shopping on Amazon or Travelocity, a week before the Web site opens, if I thought that it wasn’t going to work.”

For an hour the president rambled and rambled and rambled...it was pathetic and had Charlie Brown sighing in the back of the room, “Good grief.”

I’ve been writing for a number of weeks now, in expressing my frustration with those seeking to make changes, that it was too late to go back on some of the provisions because the insurance industry not only had been complying with the law in gearing up for October 1, but it had already priced for 2014 based on the new guidelines. Now Obama was asking them to rewrite and restart policies. Total chaos, as if the rollout itself wasn’t bad enough both for policy holders and the uninsured.

Immediately after the president spoke, Washington state became the first to announce it would not allow insurers to extend their policies, the president leaving it up to individual state insurance commissioners. Mike Kreidler, the Washington insurance chief honcho said his state-based exchange was “up and running and successfully enrolling thousands of consumers,” but now he had “serious concerns” about the president’s move and “its potential impact on the overall stability of our health insurance market.”

Then on Friday, the House voted in bipartisan fashion, 261-157, to weaken a core component of ObamaCare and permit the sale of individual health coverage that falls short of requirements in the law. 39 Democrats broke ranks and supported the legislation, which faces an uncertain fate in the Senate, where some Democrats, up for re-election in 2014, could turn against the president, though one, Dem. Sen. Mary Landrieu (La.), favors a different plan than the House effort.

Neither the House bill, or anything Democratic senators or the president has already proposed, really ensures those whose policy has been canceled will be able to keep it.

Opinion....

Editorial / Wall Street Journal

“One of President Obama’s proudest boasts about the Affordable Care Act is that it helps small business. The White House website says the health law ‘makes it easier for businesses to find better coverage options’ and ‘stops insurance companies from taking advantage of you, giving the consumer and business owner more control and making health-care coverage more affordable.’ Small businesses aren’t buying it.

“That’s the finding of a Public Opinion Strategies survey of more than 400 business owners with between 40 and 500 employees conducted in September and October for the U.S. Chamber of Commerce and International Franchise Association. Some 64% of small business franchise owners (such as owners of fast food and retail stores) believe the law will have a ‘negative impact’ on their business, while only 5% expect a ‘positive impact.’ For non-franchise businesses the ratio was 53% negative and 12% positive. Only one in 12 agree with the President that the health-care law will ‘help’ their business.

“Even more problematic is how businesses are already responding to the new law. The White House continues to deny any relationship between hiring and ObamaCare. The poll finds 27% of franchise businesses and 12% of non-franchises have already replaced full-time with part-time employees in anticipation of the law’s employer mandate. ObamaCare defines a full-time employee as someone who works 30 hours or more a week.

“The survey also reveals that the ‘49er’ effect is very real. These are businesses that will cap their full-time payroll workforce at 49 employees to avoid ObamaCare’s insurance mandate for companies with more than 50 full-time equivalent workers. Of firms with between 40 and 70 employees, a little over half say they are likely to ‘make personnel decisions to keep’ their ‘workforce below the threshold of 50 full-time employees and avoid the requirements and penalties associated with the new health care law.’

“More than one in four businesses (28%) say that in 2015, when the employer mandate is scheduled to take full effect, it is ‘likely’ they will drop their insurance coverage and pay the penalty of $2,000 a year per employee. These are the plans employers and employees were promised they would be able to keep.”

John Podhoretz / New York Post

“On Thursday, President Obama conducted the ‘Springtime for Hitler’ of press conferences. He came out at noon and proceeded to blather his way through an hour of self-justifications and evasions and apologies and complaints.

“And as he went on, you could almost see America reacting as the audience in ‘The Producers’ did to the happy-talk number about Adolf romping at his retreat in Berchtesgaden – with gaped-mouth astonishment.

“First, he said he had not been ‘informed directly that the Web site would not be working.’ What on earth does that mean? Was he somehow informed indirectly? In an affronted tone, the president said he wouldn’t have been so stupid as to have promised a great Web site if he’d known it was lousy.

“Which makes you wonder: Did he ask?

“Oh, and how about that now-infamous lie The New York Times hilariously dubbed an ‘incorrect promise’ the other day? Here the president squirmed: ‘With respect to the pledge I made that ‘If you like your plan, you can keep it,’ I think – you know, and I’ve said in interviews – that there is no doubt that the way I put that forward unequivocally ended up not being accurate.’

“So he wouldn’t say he lied, which is understandable....

“But look, he went on to say, this Web-site thing isn’t easy! See, it has programs and things in it. ‘The Web site itself is doing a lot of stuff,’ he explained, because, you know, other Web sites don’t do a lot of stuff. ‘There’s just a – a bunch of pieces to it that made it challenging.’

“Yes, so challenging, they spent 1,100 days and $600 million on it, and it still couldn’t serve more than six people at a time!

“Your average porn star has a Web site more functional than that. She’d have to, you see, because she’s in the private market and is out of business if her site goes down.

“And you know what else is hard? ‘What we’re also discovering,’ said the man who has completely overhauled the insurance industry, ‘is that insurance is complicated to buy.’ That this might have come as a surprise to him is mind-boggling.”

Editorial / New York Post

“Meet the new President Obama.

“Only last month, the president and his fellow Democrats shut down the government rather than agree to a Republican bid to delay ObamaCare. The president characterized the call for delay as ‘threatening to burn the house down.’

“On Thursday, America beheld a new Obama. Now the president himself backs delay, at least in terms of enforcing a requirement that Americans buy policies in compliance with his law. This delay he describes as ‘making the law work better.’

“Insurance execs say it’s late in the game to be changing the rules. So whether the president’s ‘fix’ is even possible is an open question. And if it is possible and Americans take advantage of it, the result will be greater fiscal stress on ObamaCare exchanges – which are counting on the infusion of cash from younger and healthier Americans to finance the more expansive coverage required by ObamaCare.

“Still, it’s a neat political trick if it allows Obama to pass the buck by blaming mean old insurance companies when Americans lose plans they are happy with.”

Ruth Marcus / Washington Post

“The promise and the apology are the bookends of effective politics. President Obama has, tragically and perhaps irreparably, flubbed both.

“Overpromising is every politicians’ temptation, every journalist’s gotcha, every political opponent’s handy club. A chicken in every pot. Read my lips. On the campaign trail, nuance is an unwelcome intruder....

“Likewise, all political promise-breaking is not equally devastating. Cynical voters assume, even accept, a certain level of calculated, built-in betrayal....

“The promise you can’t break without suffering significant political damage is one that is central to your platform and within your capacity to deliver.

“Such as, ‘If you like your insurance plan, you will keep it.’ This repeated promise was foolhardy on its face. You can’t renovate the kitchen without suffering some disruption. Same for health care....

“Which brings us to the art of the political apology. As with the spousal apology, the longer you wait, the worse it is. Obama’s first fault was in chiding people for misunderstanding him: ‘What we said was you could keep it if it hasn’t changed since the law was passed.’

“His second misstep was resorting to the politician’s favorite dodge: the non-apology apology, conditional and passive. I’m sorry if anyone was offended. Mistakes were made. ‘I am sorry that they, you know, are finding themselves in this situation based on assurances they got from me,’ Obama told NBC’s Chuck Todd. What does that even mean?

“Third, Obama’s actual apology was for the wrong thing. ‘Obviously, we didn’t do a good enough job in terms of how we crafted the law,’ he told Todd. ‘That’s something that I regret.’

“But the problem wasn’t the crafting...it was the misleading selling and botched implementation.

“We put a grandfather clause into the law, but it was insufficient,’ Obama said Thursday. ‘My working assumption was that...the universe of folks who potentially would not find a better deal in the marketplaces, the grandfather clause would work sufficiently for them. And it didn’t.’

“And that working assumption was based on...? Obviously not the administration’s own estimates that two-thirds or more of people in the individual marketplace would not be grandfathered in.

“Belatedly, with congressional Republicans pouncing and Democrats threatening to bolt, Obama on Thursday proffered a supposed...fix....

“Listening to the president Thursday was painful. He acknowledged the need ‘to win back some credibility.’ He ‘fumbled the rollout’ of health care. He is ‘letting...down’ congressional Democrats who took the risk of supporting ObamaCare. Although he’s sometimes been ‘slapped around a little bit unjustly,’ the president said, ‘This one’s deserved, all right? It’s on us.’

“Can he recover? I’m sorry to say: I’m not at all confident.”

Finally, President Obama said on Thursday, “There will be ups and downs over the course of my presidency.” I don’t want to be too snarky. Discuss amongst yourselves.

Europe and China

The flash estimate on GDP for the eurozone in the third quarter was not good, up just 0.1% over the second quarter. This compares to a 0.3% increase in Q2 for the euro folk. European Central Bank President Mario Draghi (and yours truly) have been warning the recovery in euroland is highly fragile and the figures are bearing this out.

Germany’s GDP rose just 0.3% in Q3 (1.3% on an annualized basis) vs. 0.7% in Q2.

In France, GDP fell 0.1%, or minus 0.6% annualized, after a 0.5% rebound in the second so highly distressing for the French.

Italy saw its ninth consecutive quarter of contraction, down 0.1%.

One other eurozone economic tidbit. September industrial production in the eurozone declined 0.5% over August and is up only 1.1% year over year. [Germany, thru September, is up 1.3% in this category for the 12 months, France down 0.2%.]

Regarding France, the Organization for Economic Cooperation and Development, the club of rich countries, warned the French are falling further behind the rest of Europe in reforming its economy and it needs to take more steps to restore competitiveness.

The Paris-based group’s secretary-general, Angel Gurria, wrote in a preface: “The efforts under way [by the government] should be written into a strategy of more comprehensive and coherent, fundamental reforms to increase productivity and restore the competitiveness of the French productive fabric.” [Financial Times]

Not surprisingly, France’s high tax burden was singled out, as well as high minimum labor costs (80% above the OECD average).   I have more on France below.

On the topic of Germany, it was two weeks ago that the United States criticized the country for its large trade surplus, saying it was causing problems for the rest of the eurozone, as in not encouraging more domestic demand that could sop up products from the likes of Greece and Spain. This week the European Commission echoed the same sentiments.

EU Economics Commissioner Olli Rehn wrote: “If Germany can take steps to lift domestic demand and investment, while France embraces reforms to its labor market, business environment and pension system to support competitiveness, they will together do a great service to the entire eurozone – providing stronger growth, creating more jobs and reducing social tensions.”

At least in the U.K., the unemployment rate dropped to 7.6% in the third quarter, vs. the eurozone’s 12.2% September rate, though the Bank of England said it will not raise short-term interest rates until the jobless rate hits 7.0%.

The BoE also said that while the economy is “a long way” from normality, it was raising the GDP outlook to 1.6% for all of 2013, and to 2.8% for 2014, which would be terrific. October retail sales in Britain, however, declined 0.7% over September (but up 1.8% year over year).

Ireland said it is going to make a clean break from its three-year 85 billion euro bailout program, without a safety net. Ireland is due to leave the EU-IMF bailout on December 15.

Prime Minister (Taoiseach) Enda Kenny told the Irish parliament:

“We will exit the bailout in a strong position. The government has been preparing for a return to normal market trading.

“We will set out a path to a brighter economic future for our people, a path from mass unemployment to full employment, from involuntary emigration to the return of thousands of people who have to leave for other countries to find work.

“Today is just the latest step in that ongoing journey, a significant step indeed but also just another step towards our ultimate job getting Ireland working again.” [BBC News]

Now it’s up to the market, and bond investors will demand continued austerity as Ireland still has a humongous debt load. This is going to be interesting to watch. 

The Greek government reiterated it will not yield to pressures for more austerity.

Finance Minister Yannis Stournaras said, “No austerity measures are needed. They are dangerous” at this stage.

But Eurogroup president Jeroen Dijsselbloem said Greece must continue to meet key commitments in order to unlock the next loan installment of $1.3 billion.

Greece’s lenders, the “troika,” estimate Greece still faces a 2 billion euro shortfall in achieving its mandated targets in 2014.

Finally, there was some good news on the trade front. The European Union and the United States resumed negotiations on a free-trade agreement following the U.S. government shutdown and outrage over American spying after the Edward Snowden disclosures.

China

Before I get to the Communist Party Central Committee’s four-day plenum, some economic news.

Industrial production in October was up 10.3%...good...while retail sales rose 13.3% year over year, also solid.

The consumer price index rose 3.2% in October after a 3.1% rise in September, with the government’s target at 3.5%. But food prices were up 6.5%, not good.

Producer prices fell 1.5%, the 20th straight month of declining factory-gate prices, also not good.

But October passenger vehicle sales were up 24% last month, the best performance since January; though the more cars on the road, the more pollution.

As for the “third plenum,” which was attended by 204 full members of the CPCC (as well as alternates) at first there were thought to be few real changes in policy and direction with a bland initial communique talking of two powerful organs...one to spearhead reforms and the other to coordinate national security strategy.

Regarding the latter the communique read: “A national security committee will be established to perfect the national security system and national security strategy and safeguard national security.”

Chinese officials have actually sought information from U.S. officials on the structure of our National Security Council, though in the case of the new Chinese version, it will focus on both foreign and domestic strategy.

Beijing is definitely moving to a more aggressive foreign policy, especially in dealing with territorial disputes with maritime neighbors such as Japan and the Philippines.

Internally, it’s about ethnic unrest in Tibet and Xinjiang, both considered the main security threats, the issue of cybersecurity, as well as public discord on social issues such as economic inequality.

Until now, China lacked a powerful agency to coordinate strategy across the intelligence, military, foreign policy and police apparatuses. 

In the United States, the president is chairman of the National Security Council, with regular attendees including the vice president, the secretaries of state, defense and treasury, the director of national intelligence, and the chairman of the Joint Chiefs of Staff.

Clearly, President Xi Jinping will head up China’s new security council, which increases his already firm grasp on power.

For dissidents, however, the new setup is already being compared to the Soviet Union’s KGB.

“All security committees of communist regimes have a bad reputation,” said activist Hu Jia. “It is another step taken by the party to consolidate its power.” [South China Morning Post]

On the issue of the economy and reform, while the initial communique was lacking in details: “The core issue is to straighten out the relationship between government and the market, allowing the market to play a decisive role in allocating resources and improving the government’s role,” some details emerged on Friday and the changes appear to be substantial, some say the biggest expansion of economic freedoms since at least the 1990s.

The one-child policy would be changed to the extent that families in which at least one parent was an only child would be allowed to have a second child themselves. Previously, both parents had to be an only child to qualify for this exemption. This is still absurd, but it’s a start. China faces huge demographic challenges and should have squelched the one-child policy long ago, even though the government credits it for lifting hundreds of millions out of poverty. [At the same time, with the Chinese preference for boys, we don’t want to know how many female fetuses were aborted, or how many cases of infanticide of baby girls by parents there have been.]

In other developments, China will open its energy conservation and environmental protection industries to foreign and private investment. Premier LI Keqiang, who is in charge of the economy, recognizes, for example, that the shale gas revolution in the United States has presented a threat to Chinese manufacturers because average U.S. energy prices are now far cheaper than in China.

Other reforms would encourage private investment in other state businesses and give farmers increased rights in collective assets, including the establishment of a rural property market.

Also, parts of the labor camp system would be abolished.

Much more upon closer reading next time.

But one negative on a broader issue. There is no doubt, as Cisco Systems announced down below, that fallout from the NSA / Edward Snowden debacle has hurt U.S. high-tech business in China. It also only makes sense that a Cisco is hurt when the U.S. concludes Chinese competitors such as Huawwei and ZTE Corp. pose a security risk to the U.S. Why would China then wish to do a lot of business with Cisco, while the likes of IBM and Microsoft have also reported declining sales in China.

Finally, a bit on Japan. Third quarter GDP rose 1.9% on an annualized basis, down from the 3.8% pace of the second quarter. Key export data is due next week for October that is expected to be strong and show that the dip in Q3 activity was but a blip as the nation begins to gear up for April’s sales tax increase.

Street Bytes

--The Dow Jones and S&P rose a sixth straight week, with the Dow closing at a record high of 15961, up 1.3%, while the S&P added 1.6% to a record 1798. Nasdaq broke a two-week losing streak to finish at 3985.

So...Monday could be a special day, with the Dow closing above 16000, the S&P at 1800, and Nasdaq crossing 4000 for the first time since 2000.

Helping matters on Friday were large investments in two Dow components; Warren Buffett buying a chunk of Exxon Mobil and investors John Paulson and George Soros buying into FedEx.

--Fidelity Investments said the average balance of 401(k) accounts it administers was $84,300 at the end of September, up 11% from a year earlier to a record high.

For pre-retirees age 55 or older who have been active in their plan for at least 10 years, the average balance was $269,500, the company said. 

--U.S. Treasury Yields

6-mo. 0.09% 2-yr. 0.29% 10-yr. 2.70% 30-yr. 3.79%

For all the talk how dovish Janet Yellen was, it’s not as if yields plunged anew. The 10-year fell just five basis points.

--It’s official. For the first time in nearly two decades last month, the United States produced more crude oil than it imported. Production exceeded net imports for the first time since February 1995, though as noted in a piece by Wendy Koch of USA TODAY, “the nation still imports 35% of the petroleum it uses.”

I get a kick out of the Obama administration taking credit for all the success in energy land, though I did support the move to nearly double fuel-efficiency standards...and have since day one of this column, actually.

But the White House can hardly take credit on the production side. As the American Petroleum Institute said in a statement, “Domestic oil and natural gas production is only on the rise thanks to development on state and private lands. In areas controlled by the federal government, production has actually fallen on President Obama’s watch.”

As Wendy Koch reports: “The non-partisan Congressional Research Service reported in March that on federal lands, oil production fell 6% and natural gas production fell 21% from the beginning of 2009 to the end of 2012.”

--Related to the above, gasoline prices may have hit the lows for 2013, with prices typically bottoming in December. The Energy Information Administration expects 2014 gas prices to average $3.39 a gallon, vs. $3.50 this year and $3.63 in 2012. [The average pump price is currently $3.20.]

--From an extensive investigation by the AP’s Dina Cappiello and Matt Apuzzo:

“The hills of southern Iowa bear the scars of America’s push for green energy: The brown gashes where rain has washed away the soil. The polluted streams that dump fertilizer into the water supply.

“Even the cemetery that disappeared like an apparition into a cornfield.

“It wasn’t supposed to be this way.

“With the Iowa political caucuses on the horizon in 2007, presidential candidate Barack Obama made homegrown corn a centerpiece of his plan to slow global warming. And when President George W. Bush signed a law that year requiring oil companies to add billions of gallons of ethanol to their gasoline each year, Bush predicted it would make the country ‘stronger, cleaner and more secure.’

“But the ethanol era has proven far more damaging to the environment than politicians promised and much worse than the government admits today.

“As farmers rushed to find new places to plant corn, they wiped out millions of acres of conservation land, destroyed habitat and polluted water supplies, an Associated Press investigation found.”

The AP adds, “In the first year after the ethanol mandate, more than 2 million acres disappeared.

“Since Obama took office, 5 million more acres have vanished.”

--Last week I noted that the long-range growth forecast from Russia’s Economy Ministry was for just 2.5% annual growth to 2030. This week it was announced the economy grew at the same 1.2% annualized rate in the third quarter as in the second. Growth averaged 7% during Putin’s first two terms as president in 2000-2008.

--Cisco Systems’ earnings report could not have been worse. Yes, the networking giant beat on the bottom line, but revenues failed to meet expectations and then the company guided drastically lower for the current quarter, saying revenues would be down at least 10%, owing mainly to weak emerging markets. CEO John Chambers spoke of an “inconsistent” economic environment.

Six months ago, emerging market sales were up 13% year on year. Now they are 12% lower. Sales in China dropped 18% in the quarter vs. a year ago, with CFO Frank Calderone pointing to the NSA and Edward Snowden debacle.

Shares in Cisco fell 11% the day after its earnings release.

--The merger of American Airlines and US Airways became a virtual certainty after the two reached a settlement with the Justice Department. So they will now compete with United Airlines and Delta for supremacy in the international skies, while Southwest Airlines remains a domestic giant.

Technically, there is still a step or two before the deal is official, but it essentially is. The two will have to sell 104 takeoff and landing slots at Reagan National Airport in Washington, and some slots at LaGuardia in New York to lower-cost carriers. And there were a few other givebacks at other airports around the country.

--The International Assn. of Machinists and Aerospace Workers voted down a tentative labor agreement with Boeing Co. that would have kept work on the 777X jetliner in the Seattle area, so now Boeing is looking elsewhere, specifically potential sites in Huntsville, Ala., Charleston, S.C., and Long Beach, Calif., all of which are licking their chops. 

Understand the 777 is one of Boeing’s best-selling models and the loss to the Seattle area would be huge. Up to 20,000 jobs could be affected, both directly and indirectly. Boeing played hardball with the union and the machinists fought back, not wanting to accept Boeing’s insistence on give backs, but now the entire Puget Sound community suffers.

--Lockheed Martin is planning to cut 4,000 jobs, or more than 3% of its worldwide workforce, and close four U.S. locations. Lockheed is simply a victim of reduced defense spending.

--Heinz is closing three plants in North America and laying off 1,350. The company will be shifting to other locations in the U.S. and Canada and adding 450 jobs at these facilities, all part of an efficiency drive. Recall, Heinz was taken private earlier this year by Berkshire Hathaway and 3G Capital.

--Amazon.com announced a new partnership with the U.S. Postal Service to deliver online orders on Sunday for the first time, a potential shot in the arm for the USPS. Amazon is launching the service in Los Angeles and New York and will expand from there in 2014.

The company has been investing $billions in new warehouses around the country to be able to deliver products more quickly. Adding Sunday delivery should only help sales.

As for the postal service, overall it will deliver 12% more packages this year than last year, some 420 million. Details on the economics for the USPS were not disclosed. [Separately, the Postal Service announced its loss for the fiscal year had been pared to $5 billion.]

--In an interview with the New York Times, Attorney General Eric Holder said of the ongoing investigation into possible currency manipulation among traders at banks like Barclays, the Royal Bank of Scotland and Citigroup, “The manipulation we’ve seen so far may just be the tip of the iceberg. We’ve recognized that this is potentially an extremely consequential investigation."

Evidently, the cooperation of at least one trader has been secured. Holder also emphasized the investigation is “truly global.”

--Moody’s cut the credit ratings of Morgan Stanley, Goldman Sachs and JPMorgan Chase, as Moody’s decided the federal government is not as likely to bail out the big financial institutions should there be another crisis. S&P made a similar move last June. The lower credit ratings could raise the cost of capital a bit.

However, in the case of Morgan Stanley, according to the Financial Times, “it might have to post an additional $3 billion in collateral to derivatives counterparties if it was downgraded to Baa2 by Moody’s” (which it was) but also BBB by S&P and it retains a higher rating with the latter, thus far.

--On Friday, JPMorgan agreed to pay $4.5 billion to institutional investors including BlackRock and Goldman Sachs Asset Management to settle claims it mis-sold mortgage securities. This is separate, however, from the still to be finalized settlement with the Feds that is expected to be in the neighborhood of $13 billion.

--Southern California home prices, measured by the median in the six-county region, were flat for the fourth consecutive month in October...$383,750, which is 21.8% higher than last year, according to research firm DataQuick, but unchanged from June.

--Starbucks is going to have to pay $2.8 billion in damages and costs to Kraft Foods in a case going back to 1998, when Kraft began selling bags of Starbucks branded coffee under a deal that was to run until 2014.

But Starbucks broke off the contract in 2010, saying Kraft broke the terms of the deal.

Kraft said, “Cheez-o!” and challenged the move.

Kraft was spun off by Mondelez International last year and under an agreement between the two, Mondelez gets the cash.

For its part, Starbucks isn’t happy.

--McDonald’s executives conceded they introduced too many new products this year and customer service has suffered as a result. One executive told investors, “We need to be smarter about how we roll new products out.”

--A Wall Street Journal study found that from 2010 through 2012, “freshman enrollment at more than a quarter of U.S. private four-year schools declined 10% or more.”

Many see it as the start of a big shakeout.

Jonathan Henry, vice president for enrollment at Husson University in Bangor, Maine, whose 2013 first-year enrollment was 17% lower than in 2009, said, “I think it’s fair to say 30% of these private schools won’t exist in a decade.”

At Mitchell College in New London, Conn., 2012 freshman enrollment was down a third from 2010.

But the schools have been forced to be creative and at Spring Hill College in Mobile, Ala., an offer of a $1,000 scholarship for taking a campus tour was a hit, with the 2013 class size rebounding with the help of 315 tour scholarships.

--Snapchat, the latest messaging service, recently turned down a $3 billion offer from Facebook, it was learned this week, but has supposedly already received higher offers.

Snapchat specializes in mobile messages or photos that disappear after a few seconds. The service hasn’t generated any revenue. 23-year-old co-founder and CEO Evan Spiegel should take the money and run.

--Nov. 11 has become the world’s largest online shopping event, specifically in China, where on Monday, “Singles’ Day,” China’s biggest online shopping company, Alibaba, processed more than $5.75 billion in orders, a record for a single day anywhere in the world. [2 ½ times what the U.S. does on Cyber Monday.]

--The World Gold Council announced global demand fell to a four-year low in the third quarter as the price has fallen nearly 40% from its 2011 high.

--Irish marketing and travel business Loyaltybuild suffered a major hack attack in mid-October and at first the company said there had been no attempts to obtain cash even though hundreds of thousands of credit card holders had their accounts accessed.

But now two Irish backs have confirmed thousands have fallen victim to fraudulent transactions on their cards.

--Hedge fund king David Tepper of Appaloosa Management is giving another $67 million to his B-school alma mater, Carnegie Mellon, bringing his total beneficence to $125 million in the last decade. Tepper went to Pitt for his undergraduate degree.

--Irishman Francis Bacon, who died in 1992, was a painter whose work “Three Studies of Lucian Freud,” ye olde triptych (don’t get to use that word much), became the most expensive work of art at auction when Christie’s sold it for $142.4 million in New York on Tuesday. Buyer and seller chose to be anonymous. [The prior record was $119.9 million paid for Edvard Munch’s “The Scream” last year.]

Jeff Koons, who is still alive and hails from York, Pa., sold his sculpture “Balloon Dog” for $58.4 million the same evening, a record for a living artist. As Tony Soprano would have said, “Whaddya gonna do?”

--Sign of the Apocalypse (if you don’t think the above is):

“Insurer State Farm began asking drivers in 2009 whether they went online while driving. The percentage of drivers who said they do so has nearly doubled, from 13% in 2009 to 24% this year. Among drivers ages 18-29, that number rose from 29% to 49%.” 35% of all drivers admit to texting while driving. [Larry Copeland / USA TODAY]

Foreign Affairs

Iran: About 12 hours after I posted my last review, talks broke down in Geneva between the P5+1 and Tehran after it appeared an interim agreement was close. Recriminations then began to fly, with Secretary of State John Kerry saying Iran had backed out when everyone and their mother knows it was the French who scuttled it, France wanting to tighten restrictions on the heavy-water reactor project at Arak that provides Iran with a plutonium route to a nuclear weapon.

But Kerry said, “The P5+1 was unified on Saturday, the French signed off on it, we signed off on it...Iran couldn’t take it.”

Kerry also blamed Israeli Prime Minister Benjamin Netanyahu for being premature in labeling the prospective short-term confidence building agreement a “bad deal.”

French Foreign Minister Laurent Fabius admitted the sides were “not far from agreement.” But he added, “This stock(pile) (of uranium) at 20% must be dismantled and come back to 5%,” as well as the suspension of construction at Arak.

Israel has said all along that all enrichment activity must cease before there is the consideration of lessening the U.N. sanctions on Iran.

Iranian President Rohani, addressing his parliament, said uranium enrichment is a “red line” that cannot be crossed.

“Nuclear rights in the international framework, including uranium enrichment, on its soil,” are not negotiable. [AP]

Separately, the International Atomic Energy Agency reached an agreement with the Iranians, a “roadmap for cooperation,” with six specific issues being addressed over the next three months, all pertaining to access to both nuclear sites and documents that the IAEA has been seeking for years; another instance of supposed confidence building. The IAEA / Tehran agreement was seen as an important parallel track to the P5+1.

Iran would grant the IAEA “managed access” to the plant near Arak, among other items, but, no access to the disputed military base at Parchin that I have been writing about for years at this point.

When all was said and done after last weekend, the parties took to the airwaves, and in the case of Iran, Twitter, to state their case even as talks are to resume in Geneva on Nov. 20.

Middle East allies of the U.S., and bitter foes of Iran, such as Saudi Arabia and the UAE, are furious at the deal that was almost signed were it not for the French, complaining at least behind closed doors that they haven’t been consulted enough by the U.S. There are simply growing feelings the U.S. can’t be trusted. They, like the Israelis, don’t want Iran to be able to enrich any uranium.

On Wednesday, Sec. of State Kerry met in closed door session with leading senators in an attempt to stop the move for further sanctions on Iran before negotiations have a chance to play out. But as the top Republican on the Senate Foreign Relations Committee, Sen. Bob Corker (Tenn.), said after, “It was a very unsatisfying briefing.” Democrat Robert Menendez (N.J.), chairman of the foreign relations committee, still wants new sanctions.

Kerry said, “If all of a sudden sanctions were to be increased, there are members of that coalition who have put it in place who would think that we are dealing in bad faith, and they would bolt. And then the sanctions would fall apart.”

Prime Minister Netanyahu is slated to meet with French President Hollande in Jerusalem on Sunday.

It was also revealed at week’s end that the IAEA believes Iran has virtually halted its rapid expansion of its uranium-enrichment capacity since President Rohani became president, which the White House and the West can use to their advantage in beating back opponents of a deal. The IAEA, which does have inspectors on the ground, (even if they don’t have access everywhere they want), also said in its eagerly awaited quarterly report that Iran has “more or less frozen” construction at the controversial Arak reactor.

The IAEA added that the amount of material Iran has enriched to 20% at 250 kg was still below the amount needed for a bomb if processed to 90%.

And the IAEA said Iran had installed only four more first-generation centrifuges at its Natanz plant since August, making a total of 15,240. In the previous three-month period, May-August, it added 1,800. [Jerusalem Post]

Finally, back to the French, they have been deeply disappointed with Washington, going back to the Obama administration’s hesitation in supporting France’s move in Mali, let alone the near-disaster over Syria when French fighter jets were within hours of bombing Syria to punish its use of chemical arms – only to be told by President Obama to stand down.

A senior French official told Reuters, “Our American partners used to lecture us 15 years ago. Now, when it comes to the Middle East they are filled with uncertainty and doubt. That uncertainty gives us a card to influence our policy.”

Of course France also has myriad domestic problems to deal with, including the previously noted sick economy, and currying favor with the likes of the Saudis and UAE is smart on the commercial front. Nothing wrong with picking up some arms deals to juice the French economy. Just in the last few months France has won major contracts from both the Saudis and the United Arab Emirates.

Some opinion....

Philip Stephens / Financial Times

“The who-said-what game about last weekend’s talks in Geneva has become a distraction. The six-power negotiations with Tehran to curb Iran’s nuclear program may yet succeed or fail. But wrangling between the U.S. and France on the terms of an acceptable deal should not allow the trees to obscure the forest. The organizing facts shaping the negotiations have not changed.

“The first of these is that Tehran’s acquisition of a bomb would be more than dangerous for the Middle East and for wider international security. It would most likely set off a nuclear arms race that would see Saudi Arabia, Turkey and Egypt signing up to the nuclear club. The nuclear non-proliferation treaty would be shattered. A future regional conflict could draw Israel into launching a pre-emptive nuclear strike. This is not a region obviously susceptible to cold war disciplines of deterrence.

“The second ineluctable reality is that Iran has mastered the nuclear cycle. How far it is from building a bomb remains a subject of debate. Different intelligence agencies give different answers. These depend in part on what the spooks actually know and in part on what their political masters want others to hear. The progress on an Iranian warhead program is one of the known unknowns that have often wreaked havoc in this part of the world....

“The third fact – and this one is hard for many to swallow – is that neither a negotiated settlement nor the air strikes long favored by Benjamin Netanyahu can offer the rest of the world a watertight insurance policy.

“It should be possible to construct a deal that acts as a plausible restraint...but no amount of restrictions or intrusive monitoring can offer a certain guarantee against Tehran’s future intentions....

“If there is an agreement when talks resume later this month, it will not satisfy hardliners on either side. The challenges to Mr. Obama from those in Washington who think the U.S. should be ready to start another Middle East war will be mirrored by opposition from the more reactionary elements in Tehran to any concessions to the ‘Great Satan.’ Sad to say, Mr. Obama does not have a great record in winning arguments in Congress, while no one really knows the limits of Ayatollah Khamenei’s negotiating flexibility.”

Editorial / London Times

“Iran’s record of duplicity is a huge obstacle to building trust. Since the regime accelerated its nuclear program in the late 1990s, it has been caught again and again in the act of building illicit facilities. Its uranium enrichment facility at Natanz and heavy water plant at Arak were acknowledged by the regime only when they could no longer be denied. These and other facilities are unnecessary for a civil nuclear program. They make complete sense, however, if Iran is holding out the option of a military one.

“Negotiations with Iran should have the aim of stopping a military capability. If Tehran acquires nuclear weapons, or even the credible threat of developing them, there is no security structure in the Middle East that can deter them. NATO countered the Soviet nuclear threat in the Cold War by formal treaty obligations and extensive U.S. military deployments. An Iranian Bomb will destabilize the Middle East and be a threat to the security of Israel. Pressure has brought Tehran to the negotiating table. This is no time to relax it.”

Bret Stephens / Wall Street Journal

“(The French are now) at the head of a de facto Axis of Reality, the other prominent members of which are Saudi Arabia and Israel. In this Axis, strategy is not a game of World of Warcraft conducted via avatars in a virtual reality. ‘We are not blind, and I don’t think we’re stupid,’ a defensive John Kerry said over the weekend on ‘Meet the Press,’ sounding uncomfortably like Otto West (Kevin Kline) from ‘A Fish Called Wanda.’ When you’ve reached the ‘don’t call me stupid’ stage of diplomacy, it means the rest of the world has your number.

“Now the question is whether the French were staking out a position at Geneva or simply demanding to be heard. If it’s the latter, the episode will be forgotten and Jerusalem and Riyadh will have to reach their own conclusions about how to operate in a post-American Middle East. If it’s the former, Paris has a chance to fulfill two cherished roles at once: as the de facto shaper of European policy on the global stage, and as an obstacle to Washington’s presumptions to speak for the West.”

Lastly, Reuters did an extensive investigation of the holdings of the Iranian leadership, specifically an outfit called “Setad Ejraiye Farmane Hazrate Emam” – Headquarters for Executing the Order of the Imam. Shortly before his death in 1989, Ayatollah Khomeini signed an edict spawning a new entity, Setad, to manage and sell properties abandoned in the 1979 Islamic Revolution.

Today, Ayatollah Khamenei is in charge of Setad which, as Reuters has found, “has morphed into a business juggernaut that now holds stakes in nearly every sector of Iranian industry, including finance, oil, telecommunications, the production of birth-control pills and even ostrich farming.”

Reuters estimates Setad’s total worth at $95 billion, and while Reuters found no evidence Khamenei is tapping Setad himself, he is empowered because he can dole out resources of the organization as he sees fit, as in to buy, and retain, support for 24 years.

Syria: It would appear the Syrian Army has been on a roll in recent weeks. On Wednesday it captured a contested suburb of Damascus and it has taken four other opposition strongholds south of the capital, according to state media and the Daily Star. The military has also secured most of the area around Aleppo International Airport and could reopen the facility, which has been closed due to fighting for nearly a year.

If peace talks are ever held and Assad is part of them, he’d certainly be dealing from more of a position of strength. Rebel infighting hasn’t helped their cause either.

Hizbullah leader Sayyed Hassan Nasrallah said his militia will continue to fight alongside President Assad’s forces as long as necessary.

After initially saying it would not help in the dismantling of Syria’s chemical weapons stockpile, Norway announced it would send troops and ships to assist in moving the arsenal. The munitions are expected to be destroyed outside of its borders but one prospective candidate for the job, Albania, has seen large protests against such a move and on Friday said it would not participate. A big blow.

And in an example of how difficult it is to differentiate between moderate rebel forces and the Islamists, fighters linked with al-Qaeda begged for forgiveness after cutting off the head of one of their allies by mistake. In a video posted to YouTube, fighters affiliated with the Islamic State of Iraq and Syria (ISIS) were pictured holding up the head of a bearded man before a crowd in Aleppo, claiming he was an Iraqi fighting for Assad.

But others recognized the head and it turns out he was a Sunni Islamist rebel whose group fights alongside the ISIS. [London Times]

Michael Young / Daily Star

“You can sympathize with Syrians looking longingly at the extended coverage in Western media of the humanitarian catastrophe in the Philippines caused by Typhoon Haiyan. When it comes to Syria, no such concern is evident. There is an assumption that saving the Syrian people from their regime only means reinforcing Al-Qaeda....

“Credit Assad with reading quite well the Western mindset. He pushed the Al-Qaeda button from the outbreak of the revolt against his rule, and very soon Western publics believed that Assad was a brave secularist resisting a return to the dark ages. That this was the same man who headed the most sectarian of regimes, whose army and intelligence services performed with such unspeakable sectarian barbarity that they provoked a sectarian response from their victims, was lost on most people in the West. 

“Assad understood that one front in his war had to be fought over Western public opinion. This would determine the reaction of the U.S. and European governments, whose armies could destroy his. He repressed the early peaceful protests in blood, producing a military response from the opposition. Once the uprising became militarized, Assad grasped, it would quickly become more radicalized. This would do two things: it would confirm his claim that his regime was fighting armed Islamists; and it would spread panic among his Alawite brethren and other minorities, guaranteeing their continued solidarity with the regime.

“Not surprisingly, on the ground the regime has also given a wide berth to the most extreme jihadist groups, letting them gain ground and sowing dissension among rebels. Western publics, little concerned by the details and utterly credulous when it comes to the media’s jihadist focus, has swallowed the Assad version hook, line and sinker....

“Young Americans and Europeans are brought up on the memory of the Holocaust, particularly the complicity of many societies in Europe with the slaughter of Jews during World War II. One theme that keeps coming back is how blameworthy were those who preferred to look the other way on the crimes that were being perpetuated.

“Even if the Syrian situation is different, there has been an underlying self-centeredness in Western societies to avoid facing the humanitarian outrage in Syria, and this has led to a hardness when considering the situation... Al-Qaeda or no Al-Qaeda, suffering is suffering. To justify one’s lack of concern on the grounds that one fears the jihadists is no more than a convenient means to assuage an uneasy conscience.

“Who would be surprised if one day this attitude in the West pushes embittered young Syrians to strike back through violence. That’s not to say that they would be justified, but one can anticipate their anger. When Western societies portray themselves as paragons of virtue, against reality, they engage in the highest form of hypocrisy.”

Lastly, the New York-based Committee to Protect Journalists said this week that at least 30 journalists are being held in Syria and another 52 have been killed since the start of the civil war in early 2011. Paris-based Reporters Without Borders puts the number at 60 “news providers” currently being detained and more than 110 killed. [By comparison, 150 journalists were killed in Iraq between 2003 and the departure of U.S. troops in 2011.]

Israel: Under intense pressure from Washington and the European Union, Prime Minister Benjamin Netanyahu backed off plans to construct more than 20,000 homes in the West Bank. Netanyahu said the plans would create unnecessary friction, while the Palestinians had said they would appeal to the UN, warning the settlement construction would derail peace talks.

Of course this is just more of the same. And wouldn’t you know, hours later, after telling his Housing Ministry to “reconsider,” Netanyahu announced building in settlements would continue, but had to be done wisely.

Netanyahu’s point was that he didn’t want to waste political capital on the issue today when Israel is trying to gain support for its position on Iran.

Egypt: Ousted President Mohammed Morsi accused the military, specifically Defense Minister Gen. Sissi, that deposed him of treason in a message Morsi sent out from prison as he tries to rally his supporters. But after a severe crackdown on the Muslim Brotherhood, protests are few and far between and the military regime lifted the 3-month-old state of emergency and curfew.

On a different issue, as a consequence of the Obama administration’s totally incoherent policy towards Egypt, Cairo gave diplomats from Russia the red carpet treatment this week as there is a growing chance the Egyptians may sign a major arms deal with Moscow. Russian-Egyptian relations haven’t been good in decades, but while Egypt still needs the U.S. and its aid (some of which is currently suspended), Russia’s moves in the region bear watching.

Libya: Two years after the overthrow of Muammar Gaddafi, Libya still has no constitution and divisions between secular and Islamist forces have paralyzed the country. On Friday, Tripoli saw its worst violence in years as at least 31 were killed and 235 injured in clashes between militiamen and protesters demanding one particular militia leave.

Militias have carved out sections of the capital city and what passes for the official army is powerless to dislodge them.

Afghanistan: Various experts are warning of an Iraq-style chaos when U.S. combat forces pull out of Afghanistan. Retired Army Gen. John Keane said, “Only if the security situation is stable and the Taliban know they cannot win [in Afghanistan] can there ever be a realistic hope for a political settlement.” [Army Times]

There is still a chance the U.S. and its allies could leave as many as 20,000 troops in Afghanistan assuming an agreement is reached with Kabul that is contingent on legal immunity for U.S. troops.

Separately, it’s pathetic that many Afghan interpreters who worked alongside U.S. troops are being denied U.S. visas because the State Department “says there is no serious threat against their lives.” [Kevin Sieff / Washington Post]

Many of the interpreters live in Taliban havens and retribution seems a certainty when they know the interpreter worked with the Americans.

The Post spoke to one, Mohammad, who said he received a form letter saying he had failed to establish there was a “serious threat” against his life.

U.S. military officers have been supporting many of those seeking visas, but the State Department review board is the stumbling block.

Some 1,648 interpreters have received the Special Immigrant Visas, or SIVs, out of 8,750 allocated by Congress.

Another interpreter told the Post, “What’s a serious ongoing threat for them? Do they need someone to bring in my decapitated head?”

China: Supporters of disgraced senior politician Bo Xilai, who was recently jailed for corruption, have formed the Zhi Xian Party, “the constitution is the supreme authority” party. Bo was named “chairman for life.” The move is legal, but no word as yet what the Communist Party’s response will be.

Russia: Opposition leader Alexei Navalny’s assets were to be seized in connection to the theft and money laundering charges against him. Alexei and his brother, Oleg, are to have their assets frozen in an outrageous act of intimidation. I thought President Vladimir Putin, who had to approve of the Basmanny District court move, would wait until the end of the Sochi Winter Olympics before making such a move.

Meanwhile, 28 Greenpeace activists and two journalists were moved from the northern city of Murmansk to pre-trial detention centers in St. Petersburg following a reduction of the charges against them.

Activists were being confined for 23 hours a day in ice-cold cells, Murmansk being above the Arctic Circle.

The 30 were arrested after protesting at an oil platform owned by Gazprom. While the charges may have been reduced, they still face up to seven years in prison. Even Sir Paul McCartney is pleading for their release.

On a totally separate topic, as reported by the New York Times, a dancer from Texas who became the first American to join the Bolshoi Ballet has quit after alleging she was denied certain opportunities to perform unless she paid a bribe of $10,000. The Bolshoi has been battered by one scandal after another. The dancer, Joy Womack, said she was heartbroken to be leaving. She moved to Moscow at the age of 15, on her own, to attend the Bolshoi school and then graduated to the big time.

France: To say President Francois Hollande is reeling would be an understatement. S&P cut his country’s credit rating, there have been increasingly violent street protests over taxation, the debt continues to rise, the economy has stalled out, and there is nothing on the horizon that would make one optimistic about the future.

Hollande also faces an open revolt in his own Socialist party. Some are even talking of a snap parliamentary election.

Socialist party members want Hollande to replace Prime Minister Jean-Marc Ayrault with someone like hard-line Interior Minister Manuel Valls, who is the most popular figure in the nation these days.

But Hollande apparently wants to wait to make a move on prime minister until after next spring’s European elections, but the Socialists could go down in flames at the hands of Marine Le Pen’s far-right National Front.

The National Front is now the country’s most popular party in the latest polls. Le Pen said in an interview with Bloomberg that “We will be in power in the next 10 years. Votes now flow from the left to the Front as much as they flow from the right to the Front. A year after rejecting Nicolas Sarkozy, the French are asking, ‘what’s the difference.’”

The latest poll on the European elections in May show the Front’s candidates gaining 24%, Sarkozy’s Union for Popular Movement 22%, and 19% for the Socialists.

As noted before, the right wing’s influence is spreading well beyond France and Le Pen is trying to forge alliances with like-minded parties in Austria, the Netherlands, Britain and Finland, among others.

Germany: One major concern following the Edward Snowden revelations of U.S. spying on Germany, including tapping into Chancellor Angela Merkel’s cellphone, is that Germany would retaliate by turning the World Wide Web into the “Internetz,” an entirely German internet. Deutsche Telekom, which controls most of the nation’s cable infrastructure, is working on such a project, which would keep Germans’ emails and surfing habits away from the prying eyes of the NSA.

But this would lead to the Balkanization of the internet, according to many. Others say such a structure isn’t the least bit practicable and is more about public relations.

On the stolen art issue in Germany, under international pressure, particularly from the U.S., the German government announced it would release a list of 590 works it believes may have been looted by the Nazis. A total of 1,400 works were discovered in a Munich apartment, the collection of a former Nazi art dealer. The U.S. says release a full catalogue.

Philippines: If the situation wasn’t so serious, it would have been comical when the Chinese government announced it would give $100,000 in emergency aid to the Philippines. Even the Beijing-based government mouthpiece Global Times said this was a mistake.

“If China gives meager aid to the Philippines this time, our own losses may well outweigh the losses inflicted upon them by insufficient aid,” the paper editorialized.

Days later the government announced it was kicking in another $1.5 million.

As for conditions on the ground, a week after Typhoon Haiyan hit, you’ve all seen the depressing news reports. Your heart aches for these people. The government has projects budgeted for, such as for flood control and earthquake monitoring, but little has been completed. And then when a Haiyan strikes, there are zero disaster management plans.

Venezuela: Daka is an electronics chain store that is the equivalent of Best Buy in Venezuela and last weekend the government ordered a military “occupation” of the company’s stores as President Nicolas Maduro continued his crackdown on an “economic war” he claims is being waged against his country by the likes of Washington. The government forced the chain to charge customers “fair” prices and thousands swooped into the stores looking for bargains.

Maduro took to state television proclaiming, “Leave nothing on the shelves, nothing in the warehouses... Let nothing remain in stock!”

Some store managers were arrested.

Canada: The saga of Toronto Mayor Rob Ford continues, even after he admitted to smoking crack cocaine and buying illegal drugs. The vast majority of the City Council wants him to step down, but as I noted the other day, there is currently no legal way to remove him. So on Friday, the Council began to strip Ford of his powers, one vote at a time.

Random Musings

--Fouad Ajami / Wall Street Journal

“If Barack Obama seems like a man alone, with nervous Democrats up for re-election next year running for cover, and away from him, this was the world he made. No advisers of stature can question his policies; the price of access in the Obama court is quiescence before the leader’s will. The imperial presidency is in full bloom.

“There are no stars in the Obama cabinet today, men and women of independent stature and outlook. It was after a walk on the White House grounds with his chief of staff, Denis McDonough, that Mr. Obama called off the attacks on the Syrian regime that he had threatened. If he had taken that walk with Henry Kissinger or George Shultz, one of those skilled statesmen might have explained to him the consequences of so abject a retreat. But Mr. Obama needs no sage advice, he rules through political handlers.

“Valerie Jarrett, the president’s most trusted, probably most powerful, aide, once said in admiration that Mr. Obama has been bored his whole life. The implication was that he is above things, a man alone, and anointed. Perhaps this moment – a presidency coming apart, the incompetent social engineering of an entire health-care system – will now claim Mr. Obama’s attention.” [Ajami wrote this prior to Thursday.]

--Michael Goodwin / New York Post

“When I first saw the headline saying Bill Clinton was advising President Obama to ‘honor his commitment,’ I had to laugh. The idea of Monica Lewinsky’s boyfriend as moral referee always cracks me up.

“Then I got to wondering. Which commitment was Clinton talking about?

“Is it the one Obama made to the Israeli people, that he had their backs and would never let Iran get a nuclear weapon? Or was it his promise to enforce a ‘red line’ in Syria?

“Or maybe it was Obama’s promise to ‘never rest’ until we caught the terrorists who killed our ambassador and three other Americans in Libya?

“Or was Clinton talking about the many times the president said he would ‘never rest’ until every American who wanted a job had one?

“Or maybe he was talking about the pledge to change the tone in Washington? Or to go through the budget ‘line by line’ and cross out the waste driving up the deficit?

“You get the picture – any of those whoppers would qualify. But, of course, Clinton was talking about the broken promise of the moment, the one where Obama vowed that ‘if you like your health insurance, you can keep it.’

“It ranks as one of the biggest presidential lies of modern times, all the more so because Obama repeated it 30 times. The fallout of millions being forced from their policies, an experience exacerbated by the hapless Web site, has created a crisis of confidence so vast, it threatens to swallow the second term....

“(Clinton) knows the Big Lie is shredding Obama’s ace in the hole – his personal credibility.”

--Joe Scarborough / TIME

“Yes, the fervor of Tea Party activists in 2009 fueled the rise of candidates who rocked the Washington establishment and led the GOP to its greatest legislative victories in half a century. It also led to the elevation of extreme candidates who cost Republicans control of the U.S. Senate and damaged the party’s brand nationwide.

“To win again – to make America great and growing again – requires a return to the spirit and substance of Eisenhower and Reagan. We Republicans will not win national elections if we do not broaden our appeal in the way these giants did. Nor will we govern well if we refuse to make principled compromises when necessary, the kinds of compromises that led Ike and Reagan to historical greatness.”

--The Economist...on New York City Mayor-elect Bill de Blasio, who promises he will be the mayor for “the 99%,” proclaiming New York is a tale of two cities.

“(De Blasio) vowed to tax the rich to pay for universal pre-school. This is a worthy project, but New York’s public school system is not obviously short of cash – spending per pupil is nearly $20,000, far more than some private schools spend.

“And New York’s tax base is precarious. The top 1% of earners (about 35,000 people) pay 43% of the city’s income taxes. Including federal and state taxes, they already face a top marginal rate of 55% or so. Bumping that up by half a percentage point (he would raise the top city rate from 3.9% to 4.4%) may not, in itself, cause them to flee to Florida.    But Mr. de Blasio’s rhetoric makes many nervous, and his lack of executive experience makes some wonder if he will be competent.”

Meanwhile, in an interview with Playboy, NYPD Commissioner Ray Kelly accused the mayor-elect and his fellow Democratic mayoral hopefuls of pandering for votes this fall by attacking the NYPD’s stop-and-frisk tactic. [A New York Daily News front page story on Friday concerning the interview was very deceptive and won’t be repeated here.]

--Tom Kean was the very popular two-term Republican governor of New Jersey from 1982 to 1990. His son, Tom Jr., is the state Senate Minority Leader. He’s also my state representative.

But despite Chris Christie’s romp in the gubernatorial election, Republicans failed to pick up a single seat in the Senate in an effort led by Kean Jr. The Democrats retain a 24-16 majority.

Christie has never been a fan of Kean Jr. and sought to have him replaced with a key ally in the Legislature, state Sen. Kevin O’Toole. But Republican senators bucked Christie, and Kean retained his leadership position 10-6.

I admit to not following state politics much at all (at the legislature level), but I was struck how Christie did not reach out to Gov. Kean beforehand to say he was moving against his son. Very bad form. It’s also well-known Christie gets along with Senate President Stephen Sweeney, the lead Democrat in the state, who in turn hates (not too strong a word) Kean Jr.

Christie’s relationship with Gov. Kean isn’t irreparably harmed. But in doing Sweeney’s bidding, it’s something that perhaps comes back to haunt Christie in an early 2016 primary battle. “You’re hardly loyal to your party, Governor,” Sen. Cruz, Paul or Rubio will say at a debate in Iowa. “I’m out to get things done for my state, Senator. And I was trying to build the Republican brand at the same time. I beat my opponent by over 20 points, yet we didn’t pick up one Republican senate seat. I thought a change needed to be made.”

They say Christie is a brilliant political strategist and is thinking 3 or 4 steps ahead of the rest of us. I’m just trying to think maybe two steps ahead.

I also greatly admire the Kean family.

--Polls on 2016 will be all over the board the next two years, for starters, but interesting for the archives. An NBC News poll has Hillary Clinton beating Gov. Christie in a hypothetical matchup 44-34. Exit poll surveys from Nov. 5 had it 48-44 and 49-43, Clinton.

--Oh yeah, it’s early, but talk of Elizabeth Warren challenging Hillary Clinton for the Democratic nomination is interesting. As Chris Cillizza wrote in the Washington Post:

“Clinton represents the head of the Democratic party. But Warren is its heart....

“Embracing Warren as the next ‘one’ is, in part, a way of getting over Obama; she provides an optimistic distraction from the fact that under our current president, too little has changed, for reasons having to do both with the limitations of the political system and the limitations of the man. She makes people forget that estimations of him were too overheated, trust in his powers too fervid.”

Warren has already signed a letter supporting Clinton for president, but no one would hold that against her.

--I read a few articles on the new health guidelines for using statins and frankly found it all rather confusing. So I agree with Dr. Steven E. Nissen, cardiologist at the Cleveland Clinic, who was not a member of the committee coming up with the guidelines, that he thought it would take years for doctors to change their practices.

It does seem, to this layman, however, that blood pressure level is more important in the new calculations doctors will be looking at for prescribing the right level of statins.

--Nick Squires / Irish Independent

“In one of his strongest homilies since he was elected in March, the Pontiff (Pope Francis) said Christians who led ‘a double life’ by giving money to the church while stealing from the state were sinners who deserved to be punished.

“Quoting from the Gospel of St. Luke in the New Testament, he said: ‘Jesus says it would be better for him if a millstone were put around his neck and he be thrown into the sea.’

“While he did not allude directly to corruption within the Roman Catholic Church, his remarks yesterday came just days after a scandal erupted inside an ancient religious order linked to the Vatican, and as he forged ahead with a determined effort to root out cronyism within the Holy See and financial irregularities in the scandal-tainted Vatican bank.

“The Pope described people engaged in corruption as ‘whitewashed tombs,’ explaining that ‘they appear beautiful from the outside, but inside they are full of dead bones and putrefaction.’ A life based on corruption was ‘varnished putrefaction,’ he said.”

The prior week, Pope Francis blasted those who grew wealthy from graft and then showered their children with lavish gifts. “Those who take kickbacks have lost their dignity and give their children dirty bread.”

--U.S. officials destroyed more than 6 tons of confiscated ivory tusks, carvings and jewelry and urged others to follow suit to fight the $10 billion global trade that results in the slaughter of 20-30,000 elephants a year (32,000 last year).

This week, the U.S. State Department offered a $1 million reward for information leading to the dismantling of a Laos-based criminal syndicate that poaches elephants for ivory. 

--Robert Lee Hotz of the Wall Street Journal had a piece on sunspot activity, as in “Scientists say that solar activity is stranger than in a century or more, with the sun producing barely half the number of sunspots as expected and its magnetic poles oddly out of sync.”

Andres Munoz-Jaramillo of the Harvard-Smithsonian Center for Astrophysics, notes, “There is no scientist alive who has seen a solar cycle as weak as this one.”

And the sun “also is undergoing one of its oddest magnetic reversals on record,” writes Mr. Hotz.

“Scientists said they are puzzled, but not concerned.”

Hey, screw the ObamaCare issue. I take no comfort from the statement scientists are not concerned. They clearly have no clue what is going on.

So I’m thinking one day next spring, some of us will be looking out the window thinking, ‘Gee, I thought the sun was supposed to rise ten minutes ago....uh oh....’

--Last Sunday morning there was an event providing a glimmer of hope for Planet Earth. They ran the Beirut Marathon and more than 36,000 representing 104 countries participated. The first Beirut Marathon was run in 2003 with just 6,000 runners. Apparently the race is very well organized...in a country that otherwise is totally dysfunctional.

--With Veterans Day this past Monday, we note that of the 16.1 million World War II vets, fewer than 1.7 million are still alive and they are dying at a rate of more than 600 a day. Bill Sternberg, deputy editorial page editor of USA TODAY, noted, on Sept. 22, Lawrence Aaron Sternberg, his father, was one of them. Mr. Sternberg landed on Omaha Beach a few days after D-Day and was at the Battle of the Bulge.

“We watched Jeopardy together for the last time in the hospital on a Friday evening. The Final Jeopardy category that day was ‘French Geography.’ The answer had to do with the eight countries that border modern-day France, but all I could think of was how different the geography would be if not for the veterans who saved the world from fascism.

“Dad lived another two days after that Final Jeopardy. Losing him was painful. But I’m sure if you had told him when he landed in France in 1944 that he’d get out of the war alive, have another 69 good years and six really bad weeks at the end, he’d have taken that deal in a New York minute.”

--Daniel Henninger / Wall Street Journal

“The White House recently whispered out the back door that President Obama would not appear in Pennsylvania next Tuesday at the ceremonies for the 150th anniversary of Abraham Lincoln’s Gettysburg Address. The political betting had been that this was a big-speech venue whose glow Mr. Obama would not want to miss. The higher-road expectation was that this particular Civil War anniversary required the presence of this particular American president. It’s not happening. The administration’s official attendee will be Secretary of the Interior Sally Jewell.

“The White House offered no explanation beyond Jay Carney’s bloodless reply to a reporter: ‘I think Americans will take the appropriate time to consider the speech that was delivered there. I would simply say that I have no updates on the president’s schedule.’

“What was he supposed to say? Once the president – or whoever – decided he wouldn’t attend, no possible explanation was going to suffice for the Gettysburg no-show....

“(Maybe) it’s just as well we won’t hear Mr. Obama’s thoughts on the Gettysburg Address. Those words were about a renewal of the nation’s unity, and five years into the Obama presidency, the United States is about as politically divided as it can get. The division is so intense that Americans paint their political beliefs in one of two colors: blue or red.

“That this division exists in 2013, 150 years after Lincoln wrote those words, is ironic, to say the least.”

---

Pray for the men and women of our armed forces...and all the fallen, including the four victims of the tragic accident at Camp Pendleton.

God bless America.
---

Gold closed at $1287
Oil, $93.84

Returns for the week 11/11-11/15

Dow Jones +1.3% [15961]
S&P 500 +1.6% [1798]
S&P MidCap +2.0%
Russell 2000 +1.5%
Nasdaq +1.7% [3985]

Returns for the period 1/1/13-11/15/13

Dow Jones +21.8%
S&P 500 +26.1%
S&P MidCap +28.5%
Russell 2000 +31.4%
Nasdaq +32.0%

Bulls 52.6
Bears 15.5 [Source: Investors Intelligence]

Have a great week. I appreciate your support.

I am committed to Twitter, finally... @stocksandnews

Brian Trumbore