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11/23/2013

For the week 11/18-11/22

[Posted 12:00 AM ET]

Washington and Wall Street

The Dow Jones closed over 16000 for the first time on Thursday, finishing the week at 16064, this despite release of the October minutes of the Federal Reserve’s Open Market Committee (FOMC) that revealed debate was vigorous on the topic of when to begin cutting back, tapering, the Fed’s $85 billion a month bond-buying program. The minutes were confusing, but tapering would begin “in coming months.”

In a speech this week, Fed Chairman Ben Bernanke said, “The FOMC remains committed to maintaining highly accommodative policies for as long as they are needed.

“I agree with the sentiment, expressed by my colleague Janet Yellen...that the surest path to a more normal approach to monetary policy is to do all we can today to promote a more robust recovery,” he said.

“The target for the federal funds rate is likely to remain near zero for a considerable time after the asset purchases end, perhaps well after” the jobless rate falls below the Fed’s current 6.5% threshold, Bernanke added.

Bernanke did say that if the labor picture continued to improve, “the FOMC will likely begin to moderate the pace of (asset) purchases.”

The Fed next meets Dec. 17-18 and I maintain they will begin to taper at that point, while lowering the unemployment benchmark for raising the funds rate off zero, perhaps to 5.5% from its current 6.5%.

But, the Fed will do nothing of the sort when it comes to quantitative easing if by Dec. 13, the 29 budget conferees fail to reach agreement on a fiscal 2014 framework that could clear the House and Senate in early January. We’d be back to square one, and with this week’s move by Majority Leader Harry Reid to squelch the filibuster on most executive branch and judicial nominations, the atmosphere in Congress has been poisoned further. [Far more on this below.] It’s going to be an intense stretch once Congress returns from its Thanksgiving recess. 

On the economic front, retail sales for October came in much better than expected, up 0.4%, while existing home sales for the month were down 3.2%, with a median home price of $199,500, up slightly from September’s level.

As for the holiday shopping season, recall, the National Retail Federation’s forecast is for a gain of 3.9% for November and December vs. a 3.5% rise in 2012. I have no problem with this.

But when it comes to profits, many retailers continue to warn of big price discounting, Best Buy being the latest to speak of margin pressures.   The likes of Target and Dollar Tree disappointed in their results this week and had nothing good to say.

But Home Depot and Deere issued solid reports and had optimistic comments regarding the outlook for future results.

Many economists are also rethinking third-quarter GDP and revising their forecasts up from the 2.8% flash estimate we received the other week, due to the inventory push in the quarter. But this comes at the expense of Q4, it is thought, so the consensus on the final quarter is for growth in the 1.5% to 2.0% range.

As for the valuation debate, I hope you’ve recognized I have not been a doom and gloomer for months now. The economy isn’t great by any stretch, but it’s not awful. It’s just that the trailing price/earnings multiple is touching 20, which is high, while the forward 12-month p/e at 15 or so is not cheap historically either.

While I’ll have much more to say at yearend, my guess today is 2014 is more of the same, or better, when it comes to the economy and the real problem will be in rising interest rates on the long end of the yield curve that the Fed will be powerless to stop. And if the 10-year is surging past, say, 3.50%, that will stop the equity market in its tracks, nor will it be good for housing. Admittedly, the speed of any rate rise will be the key. In the bond market, speed kills.

On to the elephant in the room...ObamaCare...

The Nov. 30 deadline for repairing the Healthcare.gov website is fast approaching and most experts working on the project are talking, well, it might be 80% fixed, which does no good for those trying to get health insurance. Technically, the main problems are ‘behind the scenes,’ not what we actually see on the site, which might seem like it’s working better, but the back office; the payments systems that must work properly for the insurance companies to stay in the game.

Regarding this last bit, the man overseeing the technical development of the federal health insurance marketplace, Henry Chao, told Congress 30 to 40 percent of the overall project has yet to be completed, the really important stuff.

A new Washington Post/ABC News poll has 57% opposing the Affordable Care Act, with 63% disapproving of President Obama’s handling of the rollout. [Obama’s overall job approval is at 42% for this survey, equaling the low of his presidency, while the 55% disapproving is the worst level.]

A CBS poll has a full 93% either believing changes are needed to the law (48%) or want a full repeal (45%). Only 12% of Democrats want ObamaCare “kept as is.”

We learned this week that the White House knew in March from an outside consultant, McKinsey, that the website project was not going well, including the fact the call-in center wouldn’t work properly if the site didn’t work. The Washington Post said HHS Sec. Kathleen Sebelius presented a report on April 14 to this effect to the administration.

We also continue to hear horror stories on how Healthcare.gov is simply not secure, my main point since day one of the launch. Some experts say it never will be. You’d have to start over to make it so.

In other developments...

California’s health insurance exchange voted unanimously against an extension of canceled health policies affecting about 1 million consumers in the state, a break with the president.

The Wall Street Journal reported “Insurers are slashing payments to medical practices in many of the plans they sell through the new health-law marketplaces – sparking worries that Americans signing up for coverage will have fewer doctors to choose from if low fees spark an exodus from the plans.

“UnitedHealth Group Inc. sent some New York City physicians contract amendments as recently as this month setting rates well below what doctors normally see from private insurance, including less than $40 for a typical office visit and about $20 for reading a mammogram.” [Christopher Weaver and Melinda Beck]

“Some carriers say they may not or won’t reinstate canceled policies because of a lack of time to make changes and other obstacles. Others say the one-year extensions [per the president’s fix] would come with higher rates. At least five states – New York, Washington, Massachusetts, Minnesota and Rhode Island – have rebuffed Obama. [Add California]...

“And even in states that have given the green-light, insurers face logistical challenges. Insurers say problems range from identifying and contacting canceled enrollees to working out what to charge, since rules vary from state to state....

“Blue Cross & Blue Shield in North Carolina says it wants to renew canceled policies, but it would seek rate increases of as much as 24%, in part to accommodate new fees and taxes required by the health law.” [Timothy W. Martin, Leslie Scism and Louise Radnofsky / Wall Street Journal]

As of Monday, Oregon had yet to enroll a single person in coverage through the state’s insurance exchange. It received 18,000 paper applications, at 19 pages each. [Jonathan J. Cooper / AP]

President Obama to his backers on Monday: “We’re still going to have to make sure that we don’t use the website alone to sign people up. What I want to do is make sure that everybody on the phone call understands that we’ve always understood that we’re going to have to enroll people by mail, we’re going to have to enroll people over the phone, we’re going to have to enroll people in person.”

We shall sign them up in the seas and oceans, we shall sign them up on the beaches, in the fields and in the streets!!! 

Yes, when one listens to the president talk about ObamaCare, one can’t help but think of Winston Churchill...and real leadership. Lord help us.

The president wants us to talk about ObamaCare during our Thanksgiving gatherings.  He can’t possibly mean this. That’s torture.

Europe and Asia

Before I turn to Europe, the Organization for Economic Cooperation and Development, the club of rich countries, issued its twice yearly outlook and it calls for the U.S. to grow 2.9% in 2014, but just 1.0% in the Euro area. 

The OECD is also looking for 8.2% growth in China next year, a slight decrease from its earlier forecast of 8.4%, while it significantly lowered its 2014 forecasts for India, from 6.7% to 4.7%, and Brazil, from 3.5% to 2.2% in 2014.

Global growth is expected to come in at 2.7% in 2013 and 3.6% in 2014, lower than the May forecast for both, 3.1% and 4.0%, respectively.

In Europe, Markit (sic) released its flash estimates for the month of November and the composite (manufacturing and the service sector) for the eurozone came in at 51.5 vs. 51.9 in October; 51.5 on manufacturing compared to 51.3 last month. Nothing super.

Germany’s flash comp was however a solid 54.3 vs. 53.2 in October, with manufacturing at 52.5 vs. 51.7, a 29-month high.

But France’s comp was an abysmal 48.5 compared with 50.5 in October, as the manufacturing component fell to 47.2 from 49.0 (50 being the dividing line between growth and contraction).

Italy’s flash comp and manufacturing index were both at 51.5 vs. similar performance in October.

The best news in the eurozone, and EU, was in the form of new car sales, which rose 4.6% in October from a year earlier, after rising 5.5% in September, so up two consecutive months for the first time since 2011. 10-month sales, though, remain down 3.1%.

[Car sales (“registrations” as the Euros call it) rose 34% in Spain, year over year, owing to an aggressive cash for clunkers type program.]

Back to Italy, on Friday it reported poor news on the retail sales front, down 0.3% in September over August, with year over year sales down 2.8%.

And an aside on German Chancellor Angela Merkel and her quest to wrap up a coalition with the SPD, the Social Democrats. To pave the way, she is acquiescing to a national minimum wage, a demand of the SPD, that equates to about $11.00 an hour. While Germany has a low jobless rate of just 6.9%, the DIW economic institute says 17% of the workforce earns less than the new minimum of 8.50 euros.

The Economist had the following on attitudes in France these days, which are more than a bit sour.

“In today’s French mind, the EU has become too big, too distant, too focused on austerity and trade: a constraint, not a means of salvation. Only 41% of the French now say that they are favorably disposed to the EU, according to Pew Research, far fewer than in Germany (60%) – and fewer even than in Britain (43%). Fully 77% say that European integration has weakened their economy, more than in Spain or Italy. One in three of the French would leave the EU today, according to a YouGov poll.”

In Italy, Silvio Berlusconi, beaten and battered, is going to take his resurrected Forza Italia party into opposition, though at the cost of his long-time ally Angelino Alfano, former political heir apparent to Berlusconi, who announced he is taking four other government ministers and forming a breakaway New Centre-Right party.

Alfano, deputy prime minister in Enrico Letta’s coalition government, promised to pursue a path of aggressive electoral, constitutional and economic reforms in 2014.

So the Berlusconi era is over, one would think. He and Alfano, 43, had a “father-son” relationship that the two spoke of this week, with Alfano saying he would continue to fight against Berlusconi’s expulsion.

Then again, the two talked of reforming their center-right alliance in the future. It’s Italy.

Finally, in a shocking development, Ukraine announced on Thursday it was suspending its bid to join the European Union, opting to turn East and forge better trade ties with Russia. Prime Minister Mykola Azarov said his government is turning to Moscow “with the aim of adopting measures to ensure national security.”

It came down to the fate of jailed former Prime Minister and opposition leader Yulia Tymoshenko, with Ukraine’s parliament refusing to let her leave the country for medical treatment, a precondition of a deal with the European Union.

Tymoshenko is serving seven years for corruption and misuse of power in committing Ukraine to an expensive gas deal with Russia.

The EU was looking to add Ukraine to the 28-member bloc.

Ukraine’s move is a huge coup for Russian President Vladimir Putin, who had threatened to cut off Ukraine’s gas supply if Ukraine agreed to EU membership.

Some in the EU say Ukraine still has time to reconsider before a meeting of EU members next week. It was in Vilnius that Ukraine had been expected to sign the trade and political agreements that would signal the start of a process leading to Kiev’s eventually joining the bloc.

Swedish Foreign Minister Carl Bildt slammed Ukraine for bowing “deeply to the Kremlin.”

Ukrainian opposition leader Arseniy Yatsenyuk said President Viktor Yanukovych should step down. “If Yanukovych is refusing to sign the agreement, then it is not only state treason but also grounds for the impeachment of the president and the dismissal of the government.”

Turning to China, last week I didn’t have time to review in any depth the Central Committee’s Third Plenum, details of which had just been released. Here’s what is very clear today. President Xi Jinping is China’s ‘paramount’ leader in the fashion of Deng Xiaoping. What was shocking to some of us junior Sino watchers is that the 60-page reform document that talked largely of the economy and a “decisive role” for the market was signed off on by Xi, with Premier Li Keqiang, the man supposedly in charge of the day-to-day economy, nowhere to be found. In all the succeeding editorials in the state press, as best as I can determine, Li’s name was also absent. It’s the Xi Show, sports fans. Total and complete. Coupled with his control of the security apparatus and the formulation of a national security strategy, Xi is indeed the very definition of paramount Chinese leader. No sharing of power as was the recent case of Hu Jintao and Wen Jiabao.

Li will still be in the picture, and he’ll be a spokesman on the economy, but there is little doubt who is in complete control. Is this good? Well Xi has already proved himself to be a Maoist in many respects. His crackdown on corruption within the party is popular with the people, not so much with some party members, and his handling of rival Bo Xilai could one day come back to haunt him when you least expect it.

As for the economic reform document, it contains many broad proposals, though Xi said “decisive results” are to be achieved by 2020. There is some promise contained therein, such as in plans to open the financial sector, pricing of natural resources determined by supply and demand, rural reform (including reforms on land ownership and expanded property rights), relaxation of the one-child policy (too late), and property taxes imposed more broadly.

But one of the state mouthpieces, the Global Times, warned vested interest groups had a lot to lose (i.e. reducing the hold of massive, state-owned companies).

At the same time, there will be needed reforms on the tax revenue distribution front. Currently, local governments are responsible for 80% of spending though receive only 40% of the revenues.

But as I told you would be the case prior to the plenum, there might be talk of economic reform, but there will be nothing of the kind on the political front and that indeed was the case.

There was some economic news in China this week. Home prices rose in October, up 21% in Shanghai for the month vs. October 2012, the most of 70 major cities, but due to a low base for comparisons, i.e., screwy numbers. More realistically, prices rose 0.7% in October over September for all 70.

HSBC reported its flash PMI for November on manufacturing and pegged it at 50.4, down from October’s final 50.9.

And foreign direct investment is up 5.8% thus far in 2013 vs. a comparable period in 2012, with most of the investment coming from Asia. The U.S. was just $3 billion of a $97 billion increase.

Lastly, in Japan, exports in October surged a far better than expected 18.6%, a needed shot in the arm for Prime Minister Abe after third quarter GDP came in at half the pace of Q2. Car shipments rose 31%. Abe needs strong economic data heading into next April’s increase in the VAT (national sales tax) from 5% to 8%.

Street Bytes

--The rally continued as the Dow Jones and S&P 500 rose a seventh consecutive week to close at record highs. The Dow gained 0.7% to 16064, while the S&P added 0.4% to cross 1800 for a first time, finishing at 1804. Nasdaq added just 0.1% to end the week just shy of 4000 at 3991. Just not a lot of bad news out there and the Fed remains most accommodative. 

But sentiment readings are at danger levels, with the ‘bear’ figure down below at a record low for a second straight week. Trends can remain in place, however, for a long time.

--Investors poured $172 billion in stock mutual funds in the year’s first 10 months, according to Morningstar Inc., the largest amount since they received $272 billion for all of 2000. Most of the cash, however, went into international funds but domestic flows are still the highest since 2004.

This is a partial reversal of the $1 trillion that went into fixed income during the period 2008-2012.

--U.S. Treasury Yields

6-mo. 0.09% 2-yr. 0.28% 10-yr. 2.74% 30-yr. 3.83%

On the inflation front, the consumer price index for October fell 0.1%, ex-food and energy up 0.1%, while year over year, the CPI is up only 0.9% and 1.7% on the core. Producer prices fell 0.2% last month, up 0.2% on core, and for the 12 months rose just 0.3%, 1.4% ex-food and energy. Ergo, inflation is not part of the Fed’s equation these days. Lack of inflation, however, is a bit concerning.

Separately, Janet Yellen sailed through the Senate Banking Committee in a 14-8 vote, making her final confirmation as the next Fed chairman a certainty. Her term is likely to begin Feb. 1 and her first Fed policy meeting would be the March 18-19 confab. Bernanke’s term ends Jan. 31.

--As alluded to above, Best Buy Co. was the latest to announce it would be hit by margin pressures this holiday season as shares in the company plunged 11% Tuesday, despite handily beating on earnings. Earlier, Wal-Mart had issued a similar warning. It’s about coming price wars, especially on items like electronics.

Wal-Mart has apparently ordered 65% more televisions and twice as many tablets for Black Friday as it did last year, and plans to slash prices. For example, it may sell 32-inch flat-screen televisions for as little as $98.

--Comcast is looking into a possible bid for Time Warner Cable, this after Time Warner officials reportedly approached Comcast to ask it to make an offer that would rival much smaller Charter’s existing overtures. Neither Comcast or Time Warner commented on the situation, but the latter’s shares spiked 10% of the story.

--Shares in Tesla took a hit on word U.S. regulators had launched an investigation into the Model S sedans after a third fire. CEO Elon Musk fired back in a statement that read in part:

“(The) three Model S fires, which only occurred after very high-speed collisions and caused no serious injuries or deaths, received more national headlines than all 250,000+ gasoline fires combined (in 2012),” which resulted in over 400 deaths and approximately 1,200 serious injuries.

But on Friday, Tesla received more good news from Consumer Reports. “Owners of the Model S give it the highest satisfaction scores of any car in the magazine’s annual survey....CR says they are the highest scores it has seen in years.” [Chris Woodyard / USA TODAY]

--Boeing Co. introduced its 777X jetliner at the Dubai Airshow and picked up record orders of $100 billion, including for other models, while Airbus saw orders of $50 billion. The long-range 777X is capable of handling 350-400 passengers and lists for $350 million to $377 million. Emirates, Etihad (of Abu Dhabi), and Qatar accounted for 225 of 259 orders, with the other 34 from Deutsche Lufthansa AG, which were previously disclosed.

--JPMorgan Chase formally settled with the Justice Department for $13 billion on Tuesday, the largest sum a single company has ever paid to the government. [BP paid $4.5 billion to resolve criminal charges relating to the Deepwater Horizon oil spill.] JPMorgan admitted to failing to fully disclose the risks of buying risky mortgage securities from 2005 to 2008.

The breakdown includes a $2 billion fine to prosecutors in Sacramento and $4 billion in relief to homeowners in areas like Detroit. The other $7 billion compensates federal agencies and state attorneys general, including those in Illinois, New York and California.

But as the Wall Street Journal opined: “There’s also the detail that close to 80% of the securities at issue weren’t even sold by Morgan, but by two failing firms it bought at the government’s request, Bear Stearns and Washington Mutual....

“The only thing clear from this settlement is there will be no willing buyers during the next crisis.”

[JPM earlier agreed to pay $4.5 billion to settle a separate private lawsuit with 21 investors, though this figure may rise a bit more.]

--Johnson & Johnson agreed to pay $2.5 billion to resolve thousands of lawsuits filed by patients who had hip implants that went bad. J&J reportedly will pay $250,000 for each surgery to replace the original implants in an estimated 8,000 patients. In addition the company is setting up a substantial fund to cover other future costs, including from strokes and heart attacks sustained by the same patients.

--A Silicon Valley jury ruled that Samsung must pay $290 million to Apple for copying iPhone and iPad features in its devices. A previous jury found Samsung owed Apple $1.05 billion for copyright infringement. But the U.S. District judge ordered a retrial and as best I can determine, the $290m figure is on top of the $550m that was the result of the retrial. I think. I’ve seen stories the total is a little higher than this combination.

--Investment legend Stan Druckenmiller is ‘shorting’ IBM based on his thesis the company’s business will be replaced by cloud computing.

“It’s one of the more higher-probability shorts I have seen in years,” he told Bloomberg TV. “IBM is old technology being replaced by cloud technology.”

Can’t say I disagree. After all, as I’ve been documenting, IBM’s sales have fallen six straight quarters.

--Goldman Sachs predicts gold, iron ore, soybeans and copper will see price declines of at least 15% next year even as economic growth accelerates. In the case of gold, Goldman sees a drop to $1,050 from its current $1,245. 2013 will see the first decline in the gold price since 2000.

--Tribune Co. said it is eliminating about 700 jobs as part of a restructuring of its newspaper business. Tribune owns the Chicago Tribune and Los Angeles Times, along with six other dailies.

--Some state unemployment rates for October: California 8.7%, Florida 6.7%, Illinois 8.9%, Nevada 9.3%, New Jersey 8.4%, New York 7.7%, North Dakota 2.7%, Texas 6.2%.

--Media baron Rupert Murdoch and his soon-to-be-ex-wife Wendi Deng Murdoch parted ways with a divorce settlement that will cost Murdoch $1.7 billion, including $100 million in cash.

--The Wall Street Journal reported that “Federal investigators are probing a subsidiary of Caterpillar In. to determine whether it was dumping train parts into the ocean near the Port of Long Beach, Calif., as part of a possible scheme to bill railroad companies for unneeded repairs.”

Progress Rail allegedly was dumping items such as brake parts that were still in good shape. Needless to say, if this is true, Progress Rail was breaking environmental laws, which was the original suspicion.

--New York City Mayor Michael Bloomberg is leaving his successor, Bill de Blasio, a balanced budget, with no one can recalling another time this occurred. The city was able to close a $2 billion budget gap as a result of rising tax revenues, $500 million more than expected, better performance for the pension funds’ investments, requiring taxpayers to fork over less, and timely  property sales.

But de Blasio is inheriting a mess of a different sort, expired labor contracts for all unionized city workers, who now want retroactive pay raises conceded during the financial crisis. [Crain’s New York Business]

--Former Treasury Secretary Tim Geithner is receiving some heat for accepting a position at private equity firm Warburg Pincus. Of course he’s cashing in, say some.

But as Neil Irwin of the Washington Post notes: “(Geithner) didn’t take a mega-payout from any of the banks that he has regulated, which received government bailouts, and whose failures were proximate causes of the crisis. This isn’t like Robert Rubin joining Citigroup for a highly lucrative job with no real management responsibilities after he was treasury secretary. He also is not going to work for any of the giant asset managers that oversaw bailout programs on behalf of the government, most prominently Blackrock and PIMCO.”

There’s more to it than this, but for now I’m cutting Geithner some slack.

--I did some reading on Bitcoin this week and am slowly beginning to understand the concept. Emphasis on ‘slowly.’ The price soared this week as congressional lawmakers held a hearing, which was seen as legitimizing the virtual currency. The issue addressed by the Homeland Security Committee is how to regulate it to protect consumers.

Advocates of virtual currencies say they could transform economies in developing countries where people have little access to banks.

--The Federal Communications Commission is considering lifting its longtime ban on making cellphone calls on airplanes, saying it is time “to review our outdated and restrictive rules.” Yes, a true nightmare. One flight attendant union is already railing against the change, saying it would lead to planes full of nattering nabobs of negativism. [Channeling Spiro Agnew, even if this doesn’t exactly fit.]

--Meanwhile, the Journal had a story on the soaring cost of cashing in your frequent-flier miles. United is raising the number of miles needed for award tickets in many categories on Feb. 1. First-class awards on partner airlines climb 63% to Europe and 87% to the Middle East. So act fast, folks. 

--“Spider-Man: Turn Off the Dark,” the beleaguered Broadway extravaganza, is leaving New York in January and reopening in Las Vegas. Recently, the theater was at 75% capacity, which means it loses money. Six actors have been injured during the production which opened in June 2011.

--Finally, Maria Bartiromo’s last day at CNBC after 20 years was Friday. She’s headed to Fox Business Network, with other work for Fox News. It’s a blow for CNBC, but also Fox’s Liz Claman, who is not happy at the prospect of competing with Maria. 

CNBC still has about three times the audience of FBN, but viewership for business television overall has been sliding for quite some time.

Foreign Affairs

Iran: Friday was day three of negotiations in Geneva concerning Iran’s nuclear program. The P5+1 and Iran were struggling over what one Western diplomat said were “considerable gaps” in reaching an interim agreement, a six-month confidence building period that would then lead to a permanent agreement. But late in the day there was renewed talk a deal was near and Sec. of State John Kerry left Washington and headed back to Geneva where he would meet with some of his counterparts. As I go to post, no further word.

Earlier, President Obama got Senate leaders to hold off on voting for new sanctions until after this week, at least, but even Senate Majority Leader Harry Reid said he would support “broadening the scope” of current restrictions on Iran’s oil and trade.

Obama said any sanctions relief for Iran would be in the neighborhood of $6 billion to $7 billion, with the essence of a deal being no new advances for Iran’s program, a halt in the enrichment of uranium, halting construction at the heavy-water reactor at Arak, and the allowance of more intrusive inspections. But Iran reiterated its right to enrich uranium.

The rhetoric all week has been tough. On Sunday, speaking from Jerusalem after meeting with Prime Minister Benjamin Netanyahu, French President Francois Hollande laid out the principles of an interim agreement.

“The first demand: put all the Iranian nuclear installations under international supervision, right now. Second point: suspend enrichment to 20%. Thirdly: to reduce the existing stock.

“And finally, to halt construction of the Arak (heavy water) plant. These are the points which for us are essential to guarantee any agreement.”

Iran’s deputy foreign minister Abbas Araqchi said, “We have lost our trust,” following a row with the French. “We cannot enter serious talks until the trust is restored. But that doesn’t mean that we will stop negotiations.”

But it was the remarks of Supreme Leader Ayatollah Khamenei that drew the most attention. Speaking before thousands of volunteer Basij militiamen in Tehran, among the things Khamenei said were: “Zionist officials cannot be called humans, they are like animals, some of them. The Israeli regime is doomed to failure and annihilation.” Khamenei referred to the “Zionist regime” as the “rabid dog of the region.”

Khamenei added: “I insist that not one step backward should be taken with regard to the Iranian nation’s rights,” referring to Iran’s claim it has the right to enrich uranium. “”Some red lines and limits exist which must be respected.”

The Supreme Leader also blasted the U.S. “Instead of using threats, go and repair your devastated economy so that your government is not shut down for 15 or 16 days. Go and pay your debts.”

What was distressing to Israel is it took days for the West, in particular the U.S., to respond to Khamenei’s rants. A senior Israeli official told the Jerusalem Post, “We knew the Americans were eager, even more so than the Iranians themselves, to reach an intermediate deal in Geneva, but we did not estimate to how great an extent.”

For his part, Netanyahu flew to Moscow on Wednesday for talks with President Putin, asking for Russia’s support in appealing for tougher terms on the Iranians. Netanyahu said: “(Khamenei) called Jews ‘rabid dogs’ and said that they were not human. The public responded to him with calls of ‘Death to America! Death to Israel!’ Doesn’t this sound familiar to you? This is the real Iran! We are not confused. They must not have nuclear weapons. And I promise you that they will not have nuclear weapons.”

[Earlier in the week, Netanyahu told a German newspaper that Iran had enough low-grade uranium for five nuclear bombs.]

But talks with Putin did not go well. Israeli critics said Netanyahu should have flown to Washington and sought to change minds there, rather than Russia’s.

One last item. Iranian dissidents accused the government of building a secret facility for nuclear-development work inside of a mountain south of Tehran, as reported by Reuters.

Roger Boyes / London Times

“By next year the strategic dilemma will not be how to stop a nuclear Iran but how to contain it. A principle has been abandoned. The route to this messy outcome ran via Syria. The decision to threaten the use of force against the Assad regime and then withdraw from it has sent a signal to Iran and to the wider Arab world that the U.S. is not prepared to enforce its will. The U.S. has never looked weaker. Britain became part of that muddle when the House of Commons voted against Syrian involvement. We built the ladder down which President Obama climbed.

“If we are to salvage a Middle East strategy then it should be focused on rebuilding a Metternich-style balance of power that takes into account the relative strengths of Saudi Arabia and Iran, the great poles in the Sunni-Shia divide. Work more closely with the Saudis, and stop rewarding Iran for its ability to duck and weave.

“The longer Tehran is allowed to consider itself a nuclear power, the greater the risk of proxy wars and even a fully-fledged arms race erupting in this unhappy region.”

Charles Krauthammer / Washington Post

“A president desperate to change the subject and a secretary of state desperate to make a name for himself are reportedly on the verge of an ‘interim’ nuclear agreement with Iran. France called it a ‘sucker’s deal.’ France was being charitable.

“The only reason Iran has come to the table after a decade of contemptuous stonewalling is that economic sanctions have cut so deeply – its currency has collapsed, inflation is rampant – that the regime fears a threat to its very survival....

“Don’t worry, we are assured. This is only an interim six-month agreement to ‘build confidence’ until we reach a final one. But this makes no sense. If at this point of maximum economic pressure we can’t get Iran to accept a final deal that shuts down its nuclear program, how in God’s name do we expect to get such a deal when we have radically reduced that pressure?

“A bizarre negotiating tactic. And the content of the deal is even worse. It’s a rescue package for the mullahs.

“It widens permissible trade in oil, gold and auto parts. It releases frozen Iranian assets, increasing Iran’s foreign-exchange reserves by 25 percent while doubling its fully accessible foreign-exchange reserves. Such a massive infusion of cash would be a godsend for its staggering economy, lowering inflation, reducing shortages and halting the country’s growing demoralization. The prospective deal is already changing economic expectations. Foreign oil and other interests are reportedly preparing to reopen negotiations for a resumption of trade in anticipation of the full lifting of sanctions.

“And for what? You’d offer such relief in return for Iran giving up its pursuit of nuclear weapons. Isn’t that what the entire exercise is about?

“And yet this deal does nothing of the sort. Nothing....

“Don’t worry, we are assured. The sanctions relief is reversible. Nonsense. It was extraordinarily difficult to cobble together the current sanctions....

“Once the relaxation begins, how do you reverse it? How do you reapply sanctions? There is absolutely no appetite for this among our allies. And adding back old sanctions will be denounced as a provocation that would drive Iran to a nuclear breakout – exactly as Obama is today denouncing congressional moves to increase sanctions as a deal-breaking provocation that might lead Iran to break off talks.”

Syria: All the evidence points to considerable gains by the Syrian Army over the past few months, especially in eliminating opposition strongholds in the suburbs of Damascus, but the Wall Street Journal reported on a rebel mission that killed at least 150 Syrian soldiers in a single attack at a large base outside the capital. Rebel forces tunneled under buildings there for months, filled them with explosives and blew them up on Sunday. Rescue efforts were then hampered by heavy sniper fire. The toll was expected to rise as many of the bodies still haven’t been recovered.

The overall death toll in the civil war is moving up from the last official estimate of 100,000 by the U.N. Now figures range from 120,000 to as high as 200,000.

As for the destruction of Syria’s chemical-weapons stockpile, with no nation stepping up to volunteer to have them destroyed on their soil, the U.S. and international officials are looking at the feasibility of destroying them on an ocean-based platform or vessel.

Lebanon: An al-Qaeda offshoot launched a dual suicide attack outside the Iranian Embassy in Beirut, one a suicide car bomber, the other on a motorcycle, killing 25 and wounding at least 150. Al-Qaeda linked groups have of course been fighting as part of the opposition in Syria, and thus against Hizbullah, which is supporting the Assad regime. Hizbullah is financed by Iran, thus the move on the Iranian Embassy.

Ralph Peters / New York Post

“To the horror of diplomats and theorists who’ve denied the role of faith in religious terrorism, we are witnesses to a regional conflict between Sunni and Shia Muslims stretching far beyond the Syrian cockpit.

“Yesterday’s suicide-bombing...in Beirut, amplified the breadth of this distinctively uncivil war within Islam. The Abdullah Azzam Brigades, a Lebanese al-Qaeda franchise, claimed responsibility, citing Iran’s use of Hizbullah Shia militiamen to support the Assad regime...

“Beyond the borders of nervous Lebanon, the slaughter has been under way for years, since Islamist extremists of multiple stripes hijacked Syria’s anti-Assad insurgency. Even earlier, the Sunni-Shia divide flared in Iraq as Iran moved to exert Shia hegemony.

“Every day, with every local massacre, sectarian lines harden. In this multi-sided conflict, atop the maelstrom of the ‘Arab Spring,’ people are killed not only for worshipping the wrong god, but for worshiping the right god in the wrong way. The unleashed hatreds are so intense that we’ve been pushed to the sidelines, still a desirable target, but far away. History’s law is that, while humans may relish hating a distant enemy, they generally prefer to kill their neighbors....

“But crises sometimes offer opportunities....

“Sanctions on Iran are biting deep. That’s why Iran is willing to talk at all. But we need to grasp that Iran’s also struggling to maintain its sphere of influence in Syria and Lebanon, and sanctions play into that, too. Iran’s stretched thin, its economy grievously wounded.

“We, not the mullahs, hold the winning hand. We would be foolish, indeed, were we to give the Iranians sanctions relief for empty promises.”

Afghanistan: President Hamid Karzai never ceases to amaze. He is the height of duplicity, but the United States has to work with the guy, at least through next spring’s presidential elections when a new Afghan leader will emerge. [Who might not be much better.]

This week, after laborious negotiations, the U.S. and Afghanistan reached agreement on a security deal that would commit the two to a military alliance lasting perhaps another decade, or more, with the U.S. retaining a force of anywhere between 7,000 and 15,000 after our formal withdrawal from combat operations by the end of next year. The remaining troops would be primarily for training and counterterrorism operations.

So on Thursday, Karzai addressed thousands of tribal leaders, assembled for a “Loya Jirga,” and Karzai began to describe his relationship with the United States as one of mutual distrust.

Then he dropped his bombshell. If the Loya Jirga approved the new security deal, he would wait until after April’s election to sign it; this after the United States told him all year that a deal had to be wrapped up by the end of December, in order to give American officials sufficient time for planning. Waiting until April, or later, puts the whole operation in jeopardy.

Afghanistan’s police and military establishments also want a deal, and soon, so they are at odds with their wacko president, too. They not only need U.S. assistance on the training end, but heavily rely on international funding.

Earlier this week, the Afghans had agreed to grant U.S. troops immunity from local prosecution, while settling on the rules of engagement for American special forces.

The Loya Jirga wraps up on Sunday and it’s possible Karzai will change his mind again.

China: The U.S.-China Economic and Security Review Commission’s annual report noted China’s military spending was soaring and the modernization of the People’s Liberation Army “is altering the security balance in the Asia-Pacific, challenging decades of U.S. military preeminence in the region.”

Chinese foreign ministry spokesman Hong Lei told reporters: “We hope this committee can stop this cold war mentality and do things that can boost mutual trust between China and the U.S.”

The congressionally mandated document said China was “rapidly expanding and diversifying its ability to strike U.S. bases, ships and aircraft” throughout the Asia-Pacific region, including areas it could not previously reach, such as Guam.

The report also said China may have 313 to 342 submarines by 2020 – including 60 that could fire intercontinental ballistic missiles or cruise missiles against ships.

Hong said China’s military was “defensive in nature.”

President Obama’s goal, as part of his “pivot” to Asia, is to station 60% of U.S. warships in the Asia-Pacific by 2020, up from 50%. [South China Morning Post]

North Korea: An 85-year-old Korean War veteran from California, visiting the North as a tourist as part of a dream journey, was pulled off a plane as he was about to leave the nation last month and hasn’t been seen or heard from since. Former New Mexico Governor Bill Richardson attempted to reach his old North Korean contacts in an attempt to secure Merrill Newman’s release but they didn’t return his calls. The U.S. government is now soliciting the help of China.

Apparently, the day before his scheduled departure from North Korea, Newman discussed the war with North Korean officials, according to Newman’s son.

Russia: Opposition leader Alexei Navalny was elected leader of a new party, the People’s Alliance, which marks the third attempt to be registered. Earlier attempts over the past 11 months have been rejected by the Justice Ministry and Navalny doesn’t expect anything different this time.

“If the People’s Alliance is not registered,” he told his followers, “it will just show that all the talk about the opposition’s access to elections is meaningless babble.”

Navalny added, “The authorities are obsessed with banning everything that is connected to my name.”

Australia/Indonesia: This is a mess. Thanks to further Edward Snowden disclosures, Indonesians are burning Aussie flags over reports Australia’s spies were tapping the phones of Indonesia’s leaders. This may not seem like a big deal, but Indonesia is the second-most popular tourist destination for Aussies after New Zealand.

Indonesian President Yudhoyono announced he was freezing military and intelligence cooperation, and this is indeed serious in this part of the world. Think Bali.

Philippines: The death toll from Typhoon Haiyan is now over 5,000.

Venezuela: Last weekend, President Nicolas Maduro intensified his crackdown on private businesses by arresting (and jailing) more than 100 “bourgeois” businessmen as part of his effort to combat an “economic war” on alleged unfair pricing. 

Then on Tuesday, Venezuelan lawmakers granted Maduro special powers allowing him to rule by decree for a period of 12 months. Among his initial steps was to limit corporate profit margins to between 15% and 30% to protect consumers from price gouging.

As a story in The Economist put it: “Mr. Maduro looks increasingly out of his depth. ‘If I’m bringing down the price of appliances by 1,000%, that has to have an impact on November’s inflation figure, right?’ he asked during a state-television broadcast. ‘Or not?’ The camera panned to government ministers, none of whom moved a muscle.”

Canada: Rob Ford’s story has exceeded its sell by date. The people of Toronto are on their own.

Random Musings

--As noted above, the Senate, led by Majority Leader Harry Reid, voted on Thursday to change long-standing rules of the chamber that required 60 votes to clear the way on executive branch and some judicial nominations. Now it’s a simple majority. In 1975, a two-thirds requirement for cutting off filibusters against legislation and all nominations was lowered to 60 votes.

So the filibuster no longer applies to judicial or executive-branch nominees. It still applies to all bills and Supreme Court nominees.

And in theory (and probably practice), the 60-vote threshold on legislation can be undone with 51 votes using various procedural measures.

Editorial / Washington Post

“The rewriting of filibuster rules by Senate Democrats on Thursday changed the legislative body in fundamental ways, and for the worse. Republicans whose unjustified recalcitrance provoked the change should be ashamed. Democrats who are celebrating will soon enough regret their decision. The radical action, a product of poisonous partisanship, will also be an accelerant of poisonous partisanship.

“Fed up with Republicans repeatedly blocking President Obama’s judicial nominees to the U.S. Court of Appeals for the District of Columbia Circuit, Democrats triggered the so-called ‘nuclear option.’ In violation of long-standing precedent, they voted by a bare majority to alter the rules of the Senate, giving the minority no voice in the procedural change. The new rule bans filibusters of presidential nominations except those for the Supreme court.

“The Democratic majority was justified in its grievance but not in its rash action. Republicans had made increasing use of the filibuster to block presidential appointments for which a majority, but not the required 60 votes, could be mustered. Most recently, they rejected three of Mr. Obama’s nominees to the D.C. Circuit without even considering their merits....

“The Democratic action sets a precedent that a future Republican majority will use to change procedures when it gets into a political jam, rather than negotiate with Democrats. The logical outcome is a Senate operating more like the House, with no rights for the minority, no reason for debate and no incentive to cooperate. For those who view that as an improvement, we offer today’s House as a counterargument.”

Of course back in 2005, then-Senator Barack Obama said, the American people “don’t expect...for one party – be it Republican or Democrat – to change the rules in the middle of the game.”

The aforementioned U.S. Court of Appeals for the District of Columbia Circuit is indeed a key issue, especially in terms of President Obama’s legacy. The panel is split currently, four Democrats and four Republicans, but Obama has three nominees that will now give the Democrats a 7-4 advantage. As Zachary A. Goldfarb of the Washington Post points out:

“The court will likely help decide whether Obama can enact new Environmental Protection Agency regulations limiting greenhouse gas emissions by power plants – a key element of his second-term plan to combat climate change – as well as a variety of other rules affecting the environment and the financial industry.”

I am all for a clean environment, but at this point in time, the EPA regulations will prove crushing on many facets of the economy. The same court would rule also on lawsuits related to elements of ObamaCare. 

John Podhoretz / New York Post

“Ordinarily, a change in Senate procedure would be too arcane for a public issue to be made of it. But given the way the public has been shaken by the exposure of just how deceitful Obama was in selling his health-care package, his brazenly self-interested flip-flop really could resonate – and degrade his tattered reputation still further.”

Thursday’s change in the rules makes the 2014 mid-terms even more critical. Or as Tennessee Republican Sen. Lamar Alexander put it, “The solution to the problem is an election.” 

--According to a Washington Post/ABC News poll, 60% of Americans say Edward Snowden’s leaking of documents detailing U.S. surveillance programs has damaged national security, up 11% from July. 52% believe he should be charged with a crime. 55% say he was wrong to expose the NSA’s intelligence-gathering efforts.

--Freshman Republican Cong. Trey Radel (Fla.) pleaded guilty to possession of cocaine and then announced he would take a leave of absence while undergoing treatment, adding he would donate his salary during this time to charity.

Radel was arrested in a sting operation on Oct. 29, but didn’t tell House Speaker John Boehner until this past Tuesday, three weeks later. It has been 30 years since a member of Congress was charged with a drug crime.

--Michael Gerson / Washington Post

“For those who expect and fear an irrepressible conflict between the tea party and the Republican establishment, Sen. Mike Lee of Utah is a hopeful anomaly. Should this anomaly become a trend, the GOP’s future would be considerably brighter.

“Lee’s tea party qualifications are beyond question. He co-founded the congressional Tea Party Caucus. He helped discover Ted Cruz. His advocacy for the government shutdown was impeccably irrational. Lee is a man in whom FreedomWorks can find no fault.

“Few have done more to burn ideological bridges within the GOP. Yet no one from the tea party side is now doing more to construct them.

“In a series of speeches, Lee made the case that populist resentment has little lasting influence without policy innovation and political outreach. ‘Frustration is not a platform,’ he recently told a Heritage Foundation audience. ‘Anger is not an agenda. And outrage, as a habit, is not even conservative... American conservatism, at its core, is about gratitude and cooperation, and trust, and above all, hope. It is also about inclusion. Successful political movements are about identifying converts, not heretics.’

“Lee has been proselytizing for a ‘comprehensive anti-poverty, upward-mobility agenda’ – making him one of the few Republican politicians talking in any sustained way about stalled economic mobility, stagnant middle-class wages and economic inequality. To this, Lee has added a dollop of populist ‘anti-cronyism,’ proposing to simplify the tax code and rein in the big banks....

“Mike Lee’s conception of the tea party’s future is hardly predominant within the movement, but it is fully consistent with Republican success. And it might even help ensure it.”

--The Associated Press obtained an unpublished Air Force study that cites “burnout” among launch officers in the nuclear missile force; those with their fingers on the triggers of 450 nukes sitting in silos in states like North Dakota and Wyoming. The report also contains “evidence of broader behavioral issues across the intercontinental ballistic missile force, including sexual assaults and domestic violence.”

The RAND Corp., a federally funded research house, was used to conduct the study and “It found a toxic mix of frustration and aggravation, heightened by a sense of being unappreciated, overworked and at constant risk of failure.”

As the AP’s Robert Burns reports:

“Every hour of every day, 90 launch officers are on duty in underground command posts that control Minuteman 3 missiles. Inside each buried capsule are two officers responsible for 10 missiles, each in a separate silo, armed with one or more nuclear warheads and ready for launch within minutes.

“They await a presidential launch order that has never arrived in the more than 50-year history of American ICBMs. The duty can be tiresome, with long hours, limited opportunities for career advancement and the constraints of life in remote areas of the north-central U.S., like Minot Air Force Base, N.D.”

Reports of spousal abuse in the ICBM force are double that of the overall Air Force.

--John Crudele of the New York Post has written numerous pieces on how the U.S. government cooks the books in terms of various economic data releases, especially when it comes to the employment reports that the market keys in on the first Friday of every month.

It was during the 2012 presidential campaign, for instance, that many of us waited to see the September employment report, with August having registered an 8.1% unemployment rate, because it was the next to last snapshot before the November vote and no doubt would influence some voters that were on the fence. 8.0% was a magical benchmark. Dipping below that would be great news for President Obama.

Alas, the data was released and it came in at 7.8%, a huge drop in the jobless rate as far as these things go.

So this is what I wrote about the release on Oct. 6, 2012 in this space:

“Friday’s jobs report for September revealed the unemployment rate fell to 7.8%, below the magic 8% figure and the lowest since Obama took office in January 2009. The unemployment rate had been above 8% since February ’09.

“Immediately, many Romney supporters cried foul. The jobless rate was supposed to rise to 8.2%, not decline to 7.8%, according to economists, and former G.E. CEO Jack Welch received more than a bit of press with his Tweet:

“ ‘Unbelievable jobs numbers…these Chicago guys will do anything… can’t debate so change numbers.’

“I won’t comment on the specifics of Welch’s remark, except to say that if the final employment number for October, released Nov. 2nd, four days before the election, is also below 8%, conspiracy theories will only grow (though by then some on the right say the damage will have already been done because of early voting). 

“Here’s what we do know. The economy, according to the Bureau of Labor Statistics, created 114,000 jobs in September, right at economists’ consensus figure of 115,000.

“The private sector created just 104,000, but the household survey showed an increase of 873,000 of which 582,000 were part-time positions. This particular number is highly volatile but was the highest single month since June 1983.

“So once again…in this Twitterized world of ours that your editor truly can’t stand [Ed. now I’ve joined that same world], my mantra since day one of this column being ‘wait 24 hours,’ the picture changed drastically for both Republicans and Democrats from Wednesday evening to Friday morning. Euphoria turned into dismay for elephants. Donkeys who were baying on Wednesday could crow on Friday. For his part, President Obama immediately took the household survey and worked into his new stump speech that it was the best single month since Ronald Reagan was president.

“Meanwhile, the truth is job growth remains putrid for this stage of an economic recovery and the percentage of those underemployed remains at 14.7%, unchanged from August.

“Back to Jack Welch, while I no doubt have my own right-of-center tilt when it comes to my beliefs, as much as possible I believe in being fair, which is why on the bigger issues...I try to present both sides.

“But I found Welch’s comment particularly amusing. I mean this is a guy who was notorious for beating earnings estimates every quarter by a penny, at a time when that was critical in terms of share performance. Every quarter. It’s all in my archives and if I ever get around to it will be part of my book. Of course G.E. was massaging the numbers to accomplish this…probably nothing illegal, but the company was master of the game…take a little revenue from the next quarter, or keep it off the books to add in the subsequent release…it’s what everyone did in the late 90s, early 2000s before all the accounting scandals began to hit.”

Back to Crudele, he claims the Census Bureau now admits the numbers were manipulated, which if true is a scandal of immense proportions.

I’m not going to comment further on the topic for now. A House committee said it would investigate the charges and we’ll see what shakes out, if anything. I did write the following on Nov. 3, 2012, after release of the October jobs data, days prior to the election. [Reminder, this was also in the aftermath of Superstorm Sandy and President Obama’s appearance with Gov. Christie.]

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

--Bret Stephens / Wall Street Journal

“Barack Obama is not scheduled to be present at Gettysburg on Tuesday to commemorate the 150th anniversary of the address. Maybe he figured that the world would little note, nor long remember, what he said there. Maybe he thought the comparisons with the original were bound to be invidious, and rightly so.

“If that’s the case, it would be the beginning of wisdom for this presidency. Better late than never.

“Mr. Obama’s political career has always and naturally inspired thoughts about the 16th president: the lawyer from Illinois, blazing a sudden trail from obscurity to eminence; the first black president, redeeming the deep promise of the new birth of freedom. The associations create a reservoir of pride in the 44th president even among his political opponents.

“But, then, has there ever been a president who so completely over-salted his own brand as Barack Obama? ‘I never compare myself to Lincoln,’ the president told NBC’s David Gregory last year. Except that he announced his presidential candidacy from the Old State Capitol building in Springfield, Ill. And that he traveled by train to Washington from Philadelphia for his first inauguration along the same route Lincoln took in the spring of 1861. And that he twice swore his oaths of office on the Lincoln Bible. ‘Lincoln – they used to talk about him almost as bad as they talk about me,’ he said in Iowa in 2011.

“No, this has not been a president who has ever shied away from grandiose historical comparisons.... ‘I would put our legislative and foreign policy accomplishments in our first two years against any president – with the possible exceptions of Johnson, FDR, and Lincoln,’ the president told ’60 Minutes’ in 2011. Note the word possible.

“But now that has started to change. The president has been humbled; he’s pleading incompetence against charges of dishonesty; the media, mainstream as well as alternative, smell blood in the water.

“And his problems on that score are just beginning: ObamaCare is really a political self-punching machine, slugging itself with every botched rollout, missed deadline, postponed mandate, higher deductible, canceled insurance policy and jury-rigged administrative fix....

“There is a common view that good policy and good rhetoric have little intrinsic connection. Not so. President Obama’s stupendously shallow rhetoric betrays a remarkably superficial mind. Superficial minds designed ObamaCare. Superficial minds are now astounded by its elementary failures, and will continue to be astounded by the failures to come.

“Is there a remedy? Probably not. Then again, the president’s no-show at Gettysburg suggests he might be trying to follow Old Abe’s counsel in a fruitful way: ‘Better to remain silent and be thought a fool,’ the Great Emancipator is reported to have said, ‘than to speak and to remove all doubt.’”

--George Will / Washington Post...on the prospects of an Elizabeth Warren candidacy:

“Before she sank to a senator’s salary, she was among the 1 percenters, whose annual incomes now begin at $394,000. Hillary Clinton recently made more than that from two speeches, five days apart, for Goldman Sachs, a prowling Wall Street carnivore that Warren presumably wants to domesticate. Between Warren, hot in pursuit of malefactors of great wealth, and Clinton, hot in pursuit of great wealth, which candidate would be more fun for the kind of people who compose the Democrats’ nominating electorate?

“Such people are in politics for, among other satisfactions, the fun of it....Most Americans most of the time have better things to do than feel strongly (aggrieved or otherwise) about politics. They are not as angry about goings-on in Washington as they say they are, or imagine themselves to be, or think they ought to be when a pollster takes their emotional temperature....

“Analyses of Chris Christie’s appeal are neglecting something: He has fun seeking and wielding power, and his fun is infectious.

“Can Democratic activists, for whom politics is catnip, cheerfully contemplate the uncontested nomination of someone who will be 69 on Election Day 2016, who will have been conspicuous in the nation’s life for a quarter of a century, and who cultivates nostalgia for the last decade of the previous century? Can forward-leaning, clench-fisted MSNBC viewers really work themselves into a lather of excitement about the supposed feminist triumph of smashing the ultimate ‘glass ceiling’ for a woman whose marriage took her to the upper reaches of politics? Do Democrats, ankle-deep in the rubble of ObamaCare’s paternalism, really want to nominate the author of Hillarycare? Before a Democratic-controlled Congress spurned it, she explained her health-care plan this way (a delicious quotation excavated by the Wall Street Journal’s Holman Jenkins):

“ ‘We just think people will be too focused on saving money and they won’t get the care for their children and themselves that they need... The money has to go to the federal government because the federal government will spend that money better.’

“Come 2016, Clinton may be the one thing no successful candidate can be, and something Warren (or some other avatar of what Howard Dean in 2003 called ‘the Democratic wing of the Democratic Party’) would not be: boring.”

Run, Elizabeth, Run! I want to have fun, too!

--This ‘Knockout Game’ garbage has to stop. For starters, it’s going to make race relations demonstrably worse. It’s also depressing as hell that this ‘game’ is seemingly exploding in the inner cities and now some suburbs.

I would give President Obama major marks if he condemned the thugs as part of an opening statement prior to his next formal press conference, which should be in prime time, by the way.

--Related to the above, the Wall Street Journal quoted William Bratton, former New York City Police Commissioner, who spoke of the era before he and Rudy Giuliani first tackled the crime issue in the city, and how we can go back to those days if the incoming mayor doesn’t take the progress made, and the job required to maintain it, seriously.

“To give you an idea of how things have changed, in 1990, I didn’t go anywhere without a gun, because as the chief of the transit police, I did not feel secure anywhere, including in the subways. In Los Angeles, when I was chief of police there, I also had to carry a gun everywhere, because of the gang violence. I don’t carry a gun now. I haven’t for a while. It’s locked away. I just don’t feel the need for it. And I like it that I can do that.”

--Michael Goodwin / New York Post...on Police Commissioner Ray Kelly

“He will leave his post with dignity and a record unmatched in fighting crime and saving lives. New Yorkers, even those who betrayed him, are forever in his debt.

“Godspeed, Commissioner.”

As a suburban visitor of the Big Apple, who loves the city, Commissioner Kelly, you were the best.

--Bill Cosby in Parade Magazine last weekend.

Parade: You’ve been a critic of black pop culture, but some say you’re criticizing poor people for being poor.

Cosby: People who say that are full of it. I was on a panel and somebody said, “It takes a village.” Yes. And there are some idiots in the village.

--So you know those new statin recommendations from a week ago? It turns out the guidelines issued by the American Heart Assn. and the American College of Cardiology were accompanied by a “risk calculator” that a Harvard University cardiologist and his collaborator argue is formulated with unreliable data and that the calculations that were supposed to identify those at risk of either a stroke or a heart attack over the next 10 years, and thus which patients should take statins, are wildly off base, as reported by the Los Angeles Times’ Melissa Healy.

What I find ironic, and something I haven’t seen anywhere else, is does this story and a Harvard connection ring a bell? It should.

Earlier this year, Harvard economists Ken Rogoff and Carmen Reinhardt were discovered to have used an incorrect calculation in their highly-influential treatise that when a country’s debt rises above 90% of GDP, that spells a kind of death knell for future economic growth, thus it was a call for austerity. Someone outside of Harvard discovered the flawed data being used by Rogoff and Reinhardt and they’ve been scrambling to rebuild their shattered credibility ever since. [I myself pounded the table on austerity, using their paper. I stand by my position, though, that excessive government debt load is dangerous.]

In the case of the statin guidelines, this time it was Harvard that uncovered the faulty data.

Let this be some kind of lesson, boys and girls.

--If you like to ride a motorcycle without a helmet (because your state allows it), consider the following from The Economist:

“Staff at the Madonna Rehabilitation Hospital in Lincoln, Nebraska can sometimes guess the home state of the motorcyclists they treat. Nebraska obliges all riders to wear helmets; neighboring Iowa, Kansas and South Dakota do not. The helmetless are distinctive, says Dr. Lori Terryberry-Spohr (I swear, sic): they suffer ‘diffuse’ internal bleeding and cell death across large areas. Such patients typically run up $1.3 million in direct costs. Fewer than a third work again. A study of helmet-shunning bikers admitted to one large hospital, cited by the Centers for Disease Control, found that taxpayers paid for 63% of their care.”

--An extensive Harvard study of 119,000 men and women over 30 years found that those who ate nuts roughly every day were 20% less likely to die during the study period than those who never ate nuts. 

“The risk of dying of heart disease dropped 29 percent and the risk of dying of cancer fell 11 percent among those who had nuts seven or more times a week compared with people who never ate them.

“The benefits were seen from peanuts as well as from pistachios, almonds, walnuts and other tree nuts. The researchers did not look at how the nuts were prepared – oiled or salted, raw or roasted.” [AP]

And get this...nut eaters actually stayed slimmer, which goes against perception.

One doctor, Ralph Sacco, Univ. of Miami neurologist who is also a former heart association president, said that some of the benefit of eating nuts may come from not eating other foods.

“Sometimes when you eat nuts you eat less of something else like potato chips,” so the benefit may come from avoiding an unhealthy food.

Actually, it was back in 2003 that the FDA first said “a fistful of nuts a day...may reduce the risk of heart disease.” 

--Re: the Cheney daughters’ feud, you know my attitude these days on the topic. I don’t give a damn what you do...just don’t text and drive.

--Since Pope Francis was selected about eight months ago, church attendance in Britain is up 20%. Catholic leaders around the world are reporting solid growth as well.

Heck, the Pope is drawing 85,000 for Sunday audiences in Rome (vs. 5,000 for Pope Benedict XVI). [London Times]

--Billionaire Dennis Tito revealed plans this week for launching two astronauts to Mars as early as December 2017. From Joel Achenbach of the Washington Post:

“Dubbed ‘Inspiration Mars,’ the fly-by mission would exploit a rare alignment of Earth and Mars that minimizes the time and the fuel it would take to get to Mars and back home again. The astronauts would come within 100 miles of the Martian surface before being slung back to Earth.”

Tito testified at a House subcommittee on space. If the United States doesn’t exploit the opportunity, he said, China will do so first.

Tito would require extensive cooperation from NASA, including use of a new jumbo rocket the agency is building for 2017. The mission would have to commence between Christmas Day 2017 and Jan. 5, 2018 to take advantage of the planetary lineup. No word on what the baggage fees will be. Nor anything on whether Ryanair is handling the food concessions.

--Finally, thoughts on 11/22/63. I was 5 ½ years of age and the family was headed to the Pittsburgh area to visit relatives. We stopped first in Mechanisburg, Pa., for lunch with my grandparents that Friday and it wasn’t until we got to the Pennsylvania Turnpike that my brother (as he reminded me the other day), noticed the flags were at half-staff at the entrance.

But we didn’t know why until we turned on the car radio and first heard a discussion about Lincoln. Then we learned of the events in Dallas. That entire weekend I was glued to the television just like everyone else and vividly remember Jack Ruby taking out Oswald.

I’ll also never forget the funeral and the drum cadence. My Aunt Rose, whose place we normally stayed at in Greensburg, Pa., was a huge Kennedy fan and ever after I remember her putting on “Camelot” each time we visited. [Actually, I was probably the one putting it on. My all-time favorite.]

I wrote in my Wall Street History column long ago, in looking back at the Hunt Brothers and their cornering of the silver market, that there was a sidebar concerning this family and JFK.

“On the morning of November 22, 1963, President John F. Kennedy was shown an inflammatory full page advertisement that appeared in that day’s Dallas Morning News. The ad asked twelve loaded questions, including: ‘Why did you host, salute and entertain Tito – Moscow’s Trojan Horse?’ ‘Why has the Foreign Policy of the U.S. degenerated to the point that the CIA is arranging coups and having staunch Anti-Communist Allies of the U.S. bloodily exterminated?’ Jackie Kennedy was sickened by the display. JFK said to an aide, ‘We’re heading into nut country today.’ Hours later he was assassinated.

“The ad was the responsibility of Nelson Bunker Hunt (and an associate). H.L. Hunt was a leader of the John Birch Society, to some an extremist organization.”

My piece on the Hunt Brothers and the silver bubble is normally at the top of the list when you Google the topic. But I am ticked that some of the early listings don’t include this last tidbit, though I can’t get into the reason why.

It’s history, courtesy of the great author Richard Reeves and his “Profile of Power.”

In viewing the CBS special on JFK’s assassination last Saturday night, Bob Schieffer summed it up well.

“John F. Kennedy would have been 96 this year, but in our memories he is forever young.”

But those memories are also stark and jarring. As in secret service agent Clint Hill’s recollections this week, in his many interviews, that when he climbed the back of JFK’s limo to protect the president, Jackie was leaning back at the same time to pick something off the trunk. I never heard her first words to Hill before this week. “I have his brains in my hand.”

The rest of the decade was a scrambled mess as well.
---

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

We remember John Fitzgerald Kennedy.

God bless America. 
---

Gold closed at $1244
Oil, $94.84

Returns for the week 11/18-11/22

Dow Jones +0.7% [16064]
S&P 500 +0.4% [1804]
S&P MidCap -0.2%
Russell 2000 +0.8%
Nasdaq +0.1% [3991]

Returns for the period 1/1/13-11/22/13

Dow Jones +22.6%
S&P 500 +26.5%
S&P MidCap +28.3%
Russell 2000 +32.4%
Nasdaq +32.2%

Bulls 53.6
Bears 15.5 [Source: Investors Intelligence]

Have a great week and a super Thanksgiving. Don’t go shopping.

Catch me on Twitter @stocksandnews

Brian Trumbore



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-11/23/2013-      
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Week in Review

11/23/2013

For the week 11/18-11/22

[Posted 12:00 AM ET]

Washington and Wall Street

The Dow Jones closed over 16000 for the first time on Thursday, finishing the week at 16064, this despite release of the October minutes of the Federal Reserve’s Open Market Committee (FOMC) that revealed debate was vigorous on the topic of when to begin cutting back, tapering, the Fed’s $85 billion a month bond-buying program. The minutes were confusing, but tapering would begin “in coming months.”

In a speech this week, Fed Chairman Ben Bernanke said, “The FOMC remains committed to maintaining highly accommodative policies for as long as they are needed.

“I agree with the sentiment, expressed by my colleague Janet Yellen...that the surest path to a more normal approach to monetary policy is to do all we can today to promote a more robust recovery,” he said.

“The target for the federal funds rate is likely to remain near zero for a considerable time after the asset purchases end, perhaps well after” the jobless rate falls below the Fed’s current 6.5% threshold, Bernanke added.

Bernanke did say that if the labor picture continued to improve, “the FOMC will likely begin to moderate the pace of (asset) purchases.”

The Fed next meets Dec. 17-18 and I maintain they will begin to taper at that point, while lowering the unemployment benchmark for raising the funds rate off zero, perhaps to 5.5% from its current 6.5%.

But, the Fed will do nothing of the sort when it comes to quantitative easing if by Dec. 13, the 29 budget conferees fail to reach agreement on a fiscal 2014 framework that could clear the House and Senate in early January. We’d be back to square one, and with this week’s move by Majority Leader Harry Reid to squelch the filibuster on most executive branch and judicial nominations, the atmosphere in Congress has been poisoned further. [Far more on this below.] It’s going to be an intense stretch once Congress returns from its Thanksgiving recess. 

On the economic front, retail sales for October came in much better than expected, up 0.4%, while existing home sales for the month were down 3.2%, with a median home price of $199,500, up slightly from September’s level.

As for the holiday shopping season, recall, the National Retail Federation’s forecast is for a gain of 3.9% for November and December vs. a 3.5% rise in 2012. I have no problem with this.

But when it comes to profits, many retailers continue to warn of big price discounting, Best Buy being the latest to speak of margin pressures.   The likes of Target and Dollar Tree disappointed in their results this week and had nothing good to say.

But Home Depot and Deere issued solid reports and had optimistic comments regarding the outlook for future results.

Many economists are also rethinking third-quarter GDP and revising their forecasts up from the 2.8% flash estimate we received the other week, due to the inventory push in the quarter. But this comes at the expense of Q4, it is thought, so the consensus on the final quarter is for growth in the 1.5% to 2.0% range.

As for the valuation debate, I hope you’ve recognized I have not been a doom and gloomer for months now. The economy isn’t great by any stretch, but it’s not awful. It’s just that the trailing price/earnings multiple is touching 20, which is high, while the forward 12-month p/e at 15 or so is not cheap historically either.

While I’ll have much more to say at yearend, my guess today is 2014 is more of the same, or better, when it comes to the economy and the real problem will be in rising interest rates on the long end of the yield curve that the Fed will be powerless to stop. And if the 10-year is surging past, say, 3.50%, that will stop the equity market in its tracks, nor will it be good for housing. Admittedly, the speed of any rate rise will be the key. In the bond market, speed kills.

On to the elephant in the room...ObamaCare...

The Nov. 30 deadline for repairing the Healthcare.gov website is fast approaching and most experts working on the project are talking, well, it might be 80% fixed, which does no good for those trying to get health insurance. Technically, the main problems are ‘behind the scenes,’ not what we actually see on the site, which might seem like it’s working better, but the back office; the payments systems that must work properly for the insurance companies to stay in the game.

Regarding this last bit, the man overseeing the technical development of the federal health insurance marketplace, Henry Chao, told Congress 30 to 40 percent of the overall project has yet to be completed, the really important stuff.

A new Washington Post/ABC News poll has 57% opposing the Affordable Care Act, with 63% disapproving of President Obama’s handling of the rollout. [Obama’s overall job approval is at 42% for this survey, equaling the low of his presidency, while the 55% disapproving is the worst level.]

A CBS poll has a full 93% either believing changes are needed to the law (48%) or want a full repeal (45%). Only 12% of Democrats want ObamaCare “kept as is.”

We learned this week that the White House knew in March from an outside consultant, McKinsey, that the website project was not going well, including the fact the call-in center wouldn’t work properly if the site didn’t work. The Washington Post said HHS Sec. Kathleen Sebelius presented a report on April 14 to this effect to the administration.

We also continue to hear horror stories on how Healthcare.gov is simply not secure, my main point since day one of the launch. Some experts say it never will be. You’d have to start over to make it so.

In other developments...

California’s health insurance exchange voted unanimously against an extension of canceled health policies affecting about 1 million consumers in the state, a break with the president.

The Wall Street Journal reported “Insurers are slashing payments to medical practices in many of the plans they sell through the new health-law marketplaces – sparking worries that Americans signing up for coverage will have fewer doctors to choose from if low fees spark an exodus from the plans.

“UnitedHealth Group Inc. sent some New York City physicians contract amendments as recently as this month setting rates well below what doctors normally see from private insurance, including less than $40 for a typical office visit and about $20 for reading a mammogram.” [Christopher Weaver and Melinda Beck]

“Some carriers say they may not or won’t reinstate canceled policies because of a lack of time to make changes and other obstacles. Others say the one-year extensions [per the president’s fix] would come with higher rates. At least five states – New York, Washington, Massachusetts, Minnesota and Rhode Island – have rebuffed Obama. [Add California]...

“And even in states that have given the green-light, insurers face logistical challenges. Insurers say problems range from identifying and contacting canceled enrollees to working out what to charge, since rules vary from state to state....

“Blue Cross & Blue Shield in North Carolina says it wants to renew canceled policies, but it would seek rate increases of as much as 24%, in part to accommodate new fees and taxes required by the health law.” [Timothy W. Martin, Leslie Scism and Louise Radnofsky / Wall Street Journal]

As of Monday, Oregon had yet to enroll a single person in coverage through the state’s insurance exchange. It received 18,000 paper applications, at 19 pages each. [Jonathan J. Cooper / AP]

President Obama to his backers on Monday: “We’re still going to have to make sure that we don’t use the website alone to sign people up. What I want to do is make sure that everybody on the phone call understands that we’ve always understood that we’re going to have to enroll people by mail, we’re going to have to enroll people over the phone, we’re going to have to enroll people in person.”

We shall sign them up in the seas and oceans, we shall sign them up on the beaches, in the fields and in the streets!!! 

Yes, when one listens to the president talk about ObamaCare, one can’t help but think of Winston Churchill...and real leadership. Lord help us.

The president wants us to talk about ObamaCare during our Thanksgiving gatherings.  He can’t possibly mean this. That’s torture.

Europe and Asia

Before I turn to Europe, the Organization for Economic Cooperation and Development, the club of rich countries, issued its twice yearly outlook and it calls for the U.S. to grow 2.9% in 2014, but just 1.0% in the Euro area. 

The OECD is also looking for 8.2% growth in China next year, a slight decrease from its earlier forecast of 8.4%, while it significantly lowered its 2014 forecasts for India, from 6.7% to 4.7%, and Brazil, from 3.5% to 2.2% in 2014.

Global growth is expected to come in at 2.7% in 2013 and 3.6% in 2014, lower than the May forecast for both, 3.1% and 4.0%, respectively.

In Europe, Markit (sic) released its flash estimates for the month of November and the composite (manufacturing and the service sector) for the eurozone came in at 51.5 vs. 51.9 in October; 51.5 on manufacturing compared to 51.3 last month. Nothing super.

Germany’s flash comp was however a solid 54.3 vs. 53.2 in October, with manufacturing at 52.5 vs. 51.7, a 29-month high.

But France’s comp was an abysmal 48.5 compared with 50.5 in October, as the manufacturing component fell to 47.2 from 49.0 (50 being the dividing line between growth and contraction).

Italy’s flash comp and manufacturing index were both at 51.5 vs. similar performance in October.

The best news in the eurozone, and EU, was in the form of new car sales, which rose 4.6% in October from a year earlier, after rising 5.5% in September, so up two consecutive months for the first time since 2011. 10-month sales, though, remain down 3.1%.

[Car sales (“registrations” as the Euros call it) rose 34% in Spain, year over year, owing to an aggressive cash for clunkers type program.]

Back to Italy, on Friday it reported poor news on the retail sales front, down 0.3% in September over August, with year over year sales down 2.8%.

And an aside on German Chancellor Angela Merkel and her quest to wrap up a coalition with the SPD, the Social Democrats. To pave the way, she is acquiescing to a national minimum wage, a demand of the SPD, that equates to about $11.00 an hour. While Germany has a low jobless rate of just 6.9%, the DIW economic institute says 17% of the workforce earns less than the new minimum of 8.50 euros.

The Economist had the following on attitudes in France these days, which are more than a bit sour.

“In today’s French mind, the EU has become too big, too distant, too focused on austerity and trade: a constraint, not a means of salvation. Only 41% of the French now say that they are favorably disposed to the EU, according to Pew Research, far fewer than in Germany (60%) – and fewer even than in Britain (43%). Fully 77% say that European integration has weakened their economy, more than in Spain or Italy. One in three of the French would leave the EU today, according to a YouGov poll.”

In Italy, Silvio Berlusconi, beaten and battered, is going to take his resurrected Forza Italia party into opposition, though at the cost of his long-time ally Angelino Alfano, former political heir apparent to Berlusconi, who announced he is taking four other government ministers and forming a breakaway New Centre-Right party.

Alfano, deputy prime minister in Enrico Letta’s coalition government, promised to pursue a path of aggressive electoral, constitutional and economic reforms in 2014.

So the Berlusconi era is over, one would think. He and Alfano, 43, had a “father-son” relationship that the two spoke of this week, with Alfano saying he would continue to fight against Berlusconi’s expulsion.

Then again, the two talked of reforming their center-right alliance in the future. It’s Italy.

Finally, in a shocking development, Ukraine announced on Thursday it was suspending its bid to join the European Union, opting to turn East and forge better trade ties with Russia. Prime Minister Mykola Azarov said his government is turning to Moscow “with the aim of adopting measures to ensure national security.”

It came down to the fate of jailed former Prime Minister and opposition leader Yulia Tymoshenko, with Ukraine’s parliament refusing to let her leave the country for medical treatment, a precondition of a deal with the European Union.

Tymoshenko is serving seven years for corruption and misuse of power in committing Ukraine to an expensive gas deal with Russia.

The EU was looking to add Ukraine to the 28-member bloc.

Ukraine’s move is a huge coup for Russian President Vladimir Putin, who had threatened to cut off Ukraine’s gas supply if Ukraine agreed to EU membership.

Some in the EU say Ukraine still has time to reconsider before a meeting of EU members next week. It was in Vilnius that Ukraine had been expected to sign the trade and political agreements that would signal the start of a process leading to Kiev’s eventually joining the bloc.

Swedish Foreign Minister Carl Bildt slammed Ukraine for bowing “deeply to the Kremlin.”

Ukrainian opposition leader Arseniy Yatsenyuk said President Viktor Yanukovych should step down. “If Yanukovych is refusing to sign the agreement, then it is not only state treason but also grounds for the impeachment of the president and the dismissal of the government.”

Turning to China, last week I didn’t have time to review in any depth the Central Committee’s Third Plenum, details of which had just been released. Here’s what is very clear today. President Xi Jinping is China’s ‘paramount’ leader in the fashion of Deng Xiaoping. What was shocking to some of us junior Sino watchers is that the 60-page reform document that talked largely of the economy and a “decisive role” for the market was signed off on by Xi, with Premier Li Keqiang, the man supposedly in charge of the day-to-day economy, nowhere to be found. In all the succeeding editorials in the state press, as best as I can determine, Li’s name was also absent. It’s the Xi Show, sports fans. Total and complete. Coupled with his control of the security apparatus and the formulation of a national security strategy, Xi is indeed the very definition of paramount Chinese leader. No sharing of power as was the recent case of Hu Jintao and Wen Jiabao.

Li will still be in the picture, and he’ll be a spokesman on the economy, but there is little doubt who is in complete control. Is this good? Well Xi has already proved himself to be a Maoist in many respects. His crackdown on corruption within the party is popular with the people, not so much with some party members, and his handling of rival Bo Xilai could one day come back to haunt him when you least expect it.

As for the economic reform document, it contains many broad proposals, though Xi said “decisive results” are to be achieved by 2020. There is some promise contained therein, such as in plans to open the financial sector, pricing of natural resources determined by supply and demand, rural reform (including reforms on land ownership and expanded property rights), relaxation of the one-child policy (too late), and property taxes imposed more broadly.

But one of the state mouthpieces, the Global Times, warned vested interest groups had a lot to lose (i.e. reducing the hold of massive, state-owned companies).

At the same time, there will be needed reforms on the tax revenue distribution front. Currently, local governments are responsible for 80% of spending though receive only 40% of the revenues.

But as I told you would be the case prior to the plenum, there might be talk of economic reform, but there will be nothing of the kind on the political front and that indeed was the case.

There was some economic news in China this week. Home prices rose in October, up 21% in Shanghai for the month vs. October 2012, the most of 70 major cities, but due to a low base for comparisons, i.e., screwy numbers. More realistically, prices rose 0.7% in October over September for all 70.

HSBC reported its flash PMI for November on manufacturing and pegged it at 50.4, down from October’s final 50.9.

And foreign direct investment is up 5.8% thus far in 2013 vs. a comparable period in 2012, with most of the investment coming from Asia. The U.S. was just $3 billion of a $97 billion increase.

Lastly, in Japan, exports in October surged a far better than expected 18.6%, a needed shot in the arm for Prime Minister Abe after third quarter GDP came in at half the pace of Q2. Car shipments rose 31%. Abe needs strong economic data heading into next April’s increase in the VAT (national sales tax) from 5% to 8%.

Street Bytes

--The rally continued as the Dow Jones and S&P 500 rose a seventh consecutive week to close at record highs. The Dow gained 0.7% to 16064, while the S&P added 0.4% to cross 1800 for a first time, finishing at 1804. Nasdaq added just 0.1% to end the week just shy of 4000 at 3991. Just not a lot of bad news out there and the Fed remains most accommodative. 

But sentiment readings are at danger levels, with the ‘bear’ figure down below at a record low for a second straight week. Trends can remain in place, however, for a long time.

--Investors poured $172 billion in stock mutual funds in the year’s first 10 months, according to Morningstar Inc., the largest amount since they received $272 billion for all of 2000. Most of the cash, however, went into international funds but domestic flows are still the highest since 2004.

This is a partial reversal of the $1 trillion that went into fixed income during the period 2008-2012.

--U.S. Treasury Yields

6-mo. 0.09% 2-yr. 0.28% 10-yr. 2.74% 30-yr. 3.83%

On the inflation front, the consumer price index for October fell 0.1%, ex-food and energy up 0.1%, while year over year, the CPI is up only 0.9% and 1.7% on the core. Producer prices fell 0.2% last month, up 0.2% on core, and for the 12 months rose just 0.3%, 1.4% ex-food and energy. Ergo, inflation is not part of the Fed’s equation these days. Lack of inflation, however, is a bit concerning.

Separately, Janet Yellen sailed through the Senate Banking Committee in a 14-8 vote, making her final confirmation as the next Fed chairman a certainty. Her term is likely to begin Feb. 1 and her first Fed policy meeting would be the March 18-19 confab. Bernanke’s term ends Jan. 31.

--As alluded to above, Best Buy Co. was the latest to announce it would be hit by margin pressures this holiday season as shares in the company plunged 11% Tuesday, despite handily beating on earnings. Earlier, Wal-Mart had issued a similar warning. It’s about coming price wars, especially on items like electronics.

Wal-Mart has apparently ordered 65% more televisions and twice as many tablets for Black Friday as it did last year, and plans to slash prices. For example, it may sell 32-inch flat-screen televisions for as little as $98.

--Comcast is looking into a possible bid for Time Warner Cable, this after Time Warner officials reportedly approached Comcast to ask it to make an offer that would rival much smaller Charter’s existing overtures. Neither Comcast or Time Warner commented on the situation, but the latter’s shares spiked 10% of the story.

--Shares in Tesla took a hit on word U.S. regulators had launched an investigation into the Model S sedans after a third fire. CEO Elon Musk fired back in a statement that read in part:

“(The) three Model S fires, which only occurred after very high-speed collisions and caused no serious injuries or deaths, received more national headlines than all 250,000+ gasoline fires combined (in 2012),” which resulted in over 400 deaths and approximately 1,200 serious injuries.

But on Friday, Tesla received more good news from Consumer Reports. “Owners of the Model S give it the highest satisfaction scores of any car in the magazine’s annual survey....CR says they are the highest scores it has seen in years.” [Chris Woodyard / USA TODAY]

--Boeing Co. introduced its 777X jetliner at the Dubai Airshow and picked up record orders of $100 billion, including for other models, while Airbus saw orders of $50 billion. The long-range 777X is capable of handling 350-400 passengers and lists for $350 million to $377 million. Emirates, Etihad (of Abu Dhabi), and Qatar accounted for 225 of 259 orders, with the other 34 from Deutsche Lufthansa AG, which were previously disclosed.

--JPMorgan Chase formally settled with the Justice Department for $13 billion on Tuesday, the largest sum a single company has ever paid to the government. [BP paid $4.5 billion to resolve criminal charges relating to the Deepwater Horizon oil spill.] JPMorgan admitted to failing to fully disclose the risks of buying risky mortgage securities from 2005 to 2008.

The breakdown includes a $2 billion fine to prosecutors in Sacramento and $4 billion in relief to homeowners in areas like Detroit. The other $7 billion compensates federal agencies and state attorneys general, including those in Illinois, New York and California.

But as the Wall Street Journal opined: “There’s also the detail that close to 80% of the securities at issue weren’t even sold by Morgan, but by two failing firms it bought at the government’s request, Bear Stearns and Washington Mutual....

“The only thing clear from this settlement is there will be no willing buyers during the next crisis.”

[JPM earlier agreed to pay $4.5 billion to settle a separate private lawsuit with 21 investors, though this figure may rise a bit more.]

--Johnson & Johnson agreed to pay $2.5 billion to resolve thousands of lawsuits filed by patients who had hip implants that went bad. J&J reportedly will pay $250,000 for each surgery to replace the original implants in an estimated 8,000 patients. In addition the company is setting up a substantial fund to cover other future costs, including from strokes and heart attacks sustained by the same patients.

--A Silicon Valley jury ruled that Samsung must pay $290 million to Apple for copying iPhone and iPad features in its devices. A previous jury found Samsung owed Apple $1.05 billion for copyright infringement. But the U.S. District judge ordered a retrial and as best I can determine, the $290m figure is on top of the $550m that was the result of the retrial. I think. I’ve seen stories the total is a little higher than this combination.

--Investment legend Stan Druckenmiller is ‘shorting’ IBM based on his thesis the company’s business will be replaced by cloud computing.

“It’s one of the more higher-probability shorts I have seen in years,” he told Bloomberg TV. “IBM is old technology being replaced by cloud technology.”

Can’t say I disagree. After all, as I’ve been documenting, IBM’s sales have fallen six straight quarters.

--Goldman Sachs predicts gold, iron ore, soybeans and copper will see price declines of at least 15% next year even as economic growth accelerates. In the case of gold, Goldman sees a drop to $1,050 from its current $1,245. 2013 will see the first decline in the gold price since 2000.

--Tribune Co. said it is eliminating about 700 jobs as part of a restructuring of its newspaper business. Tribune owns the Chicago Tribune and Los Angeles Times, along with six other dailies.

--Some state unemployment rates for October: California 8.7%, Florida 6.7%, Illinois 8.9%, Nevada 9.3%, New Jersey 8.4%, New York 7.7%, North Dakota 2.7%, Texas 6.2%.

--Media baron Rupert Murdoch and his soon-to-be-ex-wife Wendi Deng Murdoch parted ways with a divorce settlement that will cost Murdoch $1.7 billion, including $100 million in cash.

--The Wall Street Journal reported that “Federal investigators are probing a subsidiary of Caterpillar In. to determine whether it was dumping train parts into the ocean near the Port of Long Beach, Calif., as part of a possible scheme to bill railroad companies for unneeded repairs.”

Progress Rail allegedly was dumping items such as brake parts that were still in good shape. Needless to say, if this is true, Progress Rail was breaking environmental laws, which was the original suspicion.

--New York City Mayor Michael Bloomberg is leaving his successor, Bill de Blasio, a balanced budget, with no one can recalling another time this occurred. The city was able to close a $2 billion budget gap as a result of rising tax revenues, $500 million more than expected, better performance for the pension funds’ investments, requiring taxpayers to fork over less, and timely  property sales.

But de Blasio is inheriting a mess of a different sort, expired labor contracts for all unionized city workers, who now want retroactive pay raises conceded during the financial crisis. [Crain’s New York Business]

--Former Treasury Secretary Tim Geithner is receiving some heat for accepting a position at private equity firm Warburg Pincus. Of course he’s cashing in, say some.

But as Neil Irwin of the Washington Post notes: “(Geithner) didn’t take a mega-payout from any of the banks that he has regulated, which received government bailouts, and whose failures were proximate causes of the crisis. This isn’t like Robert Rubin joining Citigroup for a highly lucrative job with no real management responsibilities after he was treasury secretary. He also is not going to work for any of the giant asset managers that oversaw bailout programs on behalf of the government, most prominently Blackrock and PIMCO.”

There’s more to it than this, but for now I’m cutting Geithner some slack.

--I did some reading on Bitcoin this week and am slowly beginning to understand the concept. Emphasis on ‘slowly.’ The price soared this week as congressional lawmakers held a hearing, which was seen as legitimizing the virtual currency. The issue addressed by the Homeland Security Committee is how to regulate it to protect consumers.

Advocates of virtual currencies say they could transform economies in developing countries where people have little access to banks.

--The Federal Communications Commission is considering lifting its longtime ban on making cellphone calls on airplanes, saying it is time “to review our outdated and restrictive rules.” Yes, a true nightmare. One flight attendant union is already railing against the change, saying it would lead to planes full of nattering nabobs of negativism. [Channeling Spiro Agnew, even if this doesn’t exactly fit.]

--Meanwhile, the Journal had a story on the soaring cost of cashing in your frequent-flier miles. United is raising the number of miles needed for award tickets in many categories on Feb. 1. First-class awards on partner airlines climb 63% to Europe and 87% to the Middle East. So act fast, folks. 

--“Spider-Man: Turn Off the Dark,” the beleaguered Broadway extravaganza, is leaving New York in January and reopening in Las Vegas. Recently, the theater was at 75% capacity, which means it loses money. Six actors have been injured during the production which opened in June 2011.

--Finally, Maria Bartiromo’s last day at CNBC after 20 years was Friday. She’s headed to Fox Business Network, with other work for Fox News. It’s a blow for CNBC, but also Fox’s Liz Claman, who is not happy at the prospect of competing with Maria. 

CNBC still has about three times the audience of FBN, but viewership for business television overall has been sliding for quite some time.

Foreign Affairs

Iran: Friday was day three of negotiations in Geneva concerning Iran’s nuclear program. The P5+1 and Iran were struggling over what one Western diplomat said were “considerable gaps” in reaching an interim agreement, a six-month confidence building period that would then lead to a permanent agreement. But late in the day there was renewed talk a deal was near and Sec. of State John Kerry left Washington and headed back to Geneva where he would meet with some of his counterparts. As I go to post, no further word.

Earlier, President Obama got Senate leaders to hold off on voting for new sanctions until after this week, at least, but even Senate Majority Leader Harry Reid said he would support “broadening the scope” of current restrictions on Iran’s oil and trade.

Obama said any sanctions relief for Iran would be in the neighborhood of $6 billion to $7 billion, with the essence of a deal being no new advances for Iran’s program, a halt in the enrichment of uranium, halting construction at the heavy-water reactor at Arak, and the allowance of more intrusive inspections. But Iran reiterated its right to enrich uranium.

The rhetoric all week has been tough. On Sunday, speaking from Jerusalem after meeting with Prime Minister Benjamin Netanyahu, French President Francois Hollande laid out the principles of an interim agreement.

“The first demand: put all the Iranian nuclear installations under international supervision, right now. Second point: suspend enrichment to 20%. Thirdly: to reduce the existing stock.

“And finally, to halt construction of the Arak (heavy water) plant. These are the points which for us are essential to guarantee any agreement.”

Iran’s deputy foreign minister Abbas Araqchi said, “We have lost our trust,” following a row with the French. “We cannot enter serious talks until the trust is restored. But that doesn’t mean that we will stop negotiations.”

But it was the remarks of Supreme Leader Ayatollah Khamenei that drew the most attention. Speaking before thousands of volunteer Basij militiamen in Tehran, among the things Khamenei said were: “Zionist officials cannot be called humans, they are like animals, some of them. The Israeli regime is doomed to failure and annihilation.” Khamenei referred to the “Zionist regime” as the “rabid dog of the region.”

Khamenei added: “I insist that not one step backward should be taken with regard to the Iranian nation’s rights,” referring to Iran’s claim it has the right to enrich uranium. “”Some red lines and limits exist which must be respected.”

The Supreme Leader also blasted the U.S. “Instead of using threats, go and repair your devastated economy so that your government is not shut down for 15 or 16 days. Go and pay your debts.”

What was distressing to Israel is it took days for the West, in particular the U.S., to respond to Khamenei’s rants. A senior Israeli official told the Jerusalem Post, “We knew the Americans were eager, even more so than the Iranians themselves, to reach an intermediate deal in Geneva, but we did not estimate to how great an extent.”

For his part, Netanyahu flew to Moscow on Wednesday for talks with President Putin, asking for Russia’s support in appealing for tougher terms on the Iranians. Netanyahu said: “(Khamenei) called Jews ‘rabid dogs’ and said that they were not human. The public responded to him with calls of ‘Death to America! Death to Israel!’ Doesn’t this sound familiar to you? This is the real Iran! We are not confused. They must not have nuclear weapons. And I promise you that they will not have nuclear weapons.”

[Earlier in the week, Netanyahu told a German newspaper that Iran had enough low-grade uranium for five nuclear bombs.]

But talks with Putin did not go well. Israeli critics said Netanyahu should have flown to Washington and sought to change minds there, rather than Russia’s.

One last item. Iranian dissidents accused the government of building a secret facility for nuclear-development work inside of a mountain south of Tehran, as reported by Reuters.

Roger Boyes / London Times

“By next year the strategic dilemma will not be how to stop a nuclear Iran but how to contain it. A principle has been abandoned. The route to this messy outcome ran via Syria. The decision to threaten the use of force against the Assad regime and then withdraw from it has sent a signal to Iran and to the wider Arab world that the U.S. is not prepared to enforce its will. The U.S. has never looked weaker. Britain became part of that muddle when the House of Commons voted against Syrian involvement. We built the ladder down which President Obama climbed.

“If we are to salvage a Middle East strategy then it should be focused on rebuilding a Metternich-style balance of power that takes into account the relative strengths of Saudi Arabia and Iran, the great poles in the Sunni-Shia divide. Work more closely with the Saudis, and stop rewarding Iran for its ability to duck and weave.

“The longer Tehran is allowed to consider itself a nuclear power, the greater the risk of proxy wars and even a fully-fledged arms race erupting in this unhappy region.”

Charles Krauthammer / Washington Post

“A president desperate to change the subject and a secretary of state desperate to make a name for himself are reportedly on the verge of an ‘interim’ nuclear agreement with Iran. France called it a ‘sucker’s deal.’ France was being charitable.

“The only reason Iran has come to the table after a decade of contemptuous stonewalling is that economic sanctions have cut so deeply – its currency has collapsed, inflation is rampant – that the regime fears a threat to its very survival....

“Don’t worry, we are assured. This is only an interim six-month agreement to ‘build confidence’ until we reach a final one. But this makes no sense. If at this point of maximum economic pressure we can’t get Iran to accept a final deal that shuts down its nuclear program, how in God’s name do we expect to get such a deal when we have radically reduced that pressure?

“A bizarre negotiating tactic. And the content of the deal is even worse. It’s a rescue package for the mullahs.

“It widens permissible trade in oil, gold and auto parts. It releases frozen Iranian assets, increasing Iran’s foreign-exchange reserves by 25 percent while doubling its fully accessible foreign-exchange reserves. Such a massive infusion of cash would be a godsend for its staggering economy, lowering inflation, reducing shortages and halting the country’s growing demoralization. The prospective deal is already changing economic expectations. Foreign oil and other interests are reportedly preparing to reopen negotiations for a resumption of trade in anticipation of the full lifting of sanctions.

“And for what? You’d offer such relief in return for Iran giving up its pursuit of nuclear weapons. Isn’t that what the entire exercise is about?

“And yet this deal does nothing of the sort. Nothing....

“Don’t worry, we are assured. The sanctions relief is reversible. Nonsense. It was extraordinarily difficult to cobble together the current sanctions....

“Once the relaxation begins, how do you reverse it? How do you reapply sanctions? There is absolutely no appetite for this among our allies. And adding back old sanctions will be denounced as a provocation that would drive Iran to a nuclear breakout – exactly as Obama is today denouncing congressional moves to increase sanctions as a deal-breaking provocation that might lead Iran to break off talks.”

Syria: All the evidence points to considerable gains by the Syrian Army over the past few months, especially in eliminating opposition strongholds in the suburbs of Damascus, but the Wall Street Journal reported on a rebel mission that killed at least 150 Syrian soldiers in a single attack at a large base outside the capital. Rebel forces tunneled under buildings there for months, filled them with explosives and blew them up on Sunday. Rescue efforts were then hampered by heavy sniper fire. The toll was expected to rise as many of the bodies still haven’t been recovered.

The overall death toll in the civil war is moving up from the last official estimate of 100,000 by the U.N. Now figures range from 120,000 to as high as 200,000.

As for the destruction of Syria’s chemical-weapons stockpile, with no nation stepping up to volunteer to have them destroyed on their soil, the U.S. and international officials are looking at the feasibility of destroying them on an ocean-based platform or vessel.

Lebanon: An al-Qaeda offshoot launched a dual suicide attack outside the Iranian Embassy in Beirut, one a suicide car bomber, the other on a motorcycle, killing 25 and wounding at least 150. Al-Qaeda linked groups have of course been fighting as part of the opposition in Syria, and thus against Hizbullah, which is supporting the Assad regime. Hizbullah is financed by Iran, thus the move on the Iranian Embassy.

Ralph Peters / New York Post

“To the horror of diplomats and theorists who’ve denied the role of faith in religious terrorism, we are witnesses to a regional conflict between Sunni and Shia Muslims stretching far beyond the Syrian cockpit.

“Yesterday’s suicide-bombing...in Beirut, amplified the breadth of this distinctively uncivil war within Islam. The Abdullah Azzam Brigades, a Lebanese al-Qaeda franchise, claimed responsibility, citing Iran’s use of Hizbullah Shia militiamen to support the Assad regime...

“Beyond the borders of nervous Lebanon, the slaughter has been under way for years, since Islamist extremists of multiple stripes hijacked Syria’s anti-Assad insurgency. Even earlier, the Sunni-Shia divide flared in Iraq as Iran moved to exert Shia hegemony.

“Every day, with every local massacre, sectarian lines harden. In this multi-sided conflict, atop the maelstrom of the ‘Arab Spring,’ people are killed not only for worshipping the wrong god, but for worshiping the right god in the wrong way. The unleashed hatreds are so intense that we’ve been pushed to the sidelines, still a desirable target, but far away. History’s law is that, while humans may relish hating a distant enemy, they generally prefer to kill their neighbors....

“But crises sometimes offer opportunities....

“Sanctions on Iran are biting deep. That’s why Iran is willing to talk at all. But we need to grasp that Iran’s also struggling to maintain its sphere of influence in Syria and Lebanon, and sanctions play into that, too. Iran’s stretched thin, its economy grievously wounded.

“We, not the mullahs, hold the winning hand. We would be foolish, indeed, were we to give the Iranians sanctions relief for empty promises.”

Afghanistan: President Hamid Karzai never ceases to amaze. He is the height of duplicity, but the United States has to work with the guy, at least through next spring’s presidential elections when a new Afghan leader will emerge. [Who might not be much better.]

This week, after laborious negotiations, the U.S. and Afghanistan reached agreement on a security deal that would commit the two to a military alliance lasting perhaps another decade, or more, with the U.S. retaining a force of anywhere between 7,000 and 15,000 after our formal withdrawal from combat operations by the end of next year. The remaining troops would be primarily for training and counterterrorism operations.

So on Thursday, Karzai addressed thousands of tribal leaders, assembled for a “Loya Jirga,” and Karzai began to describe his relationship with the United States as one of mutual distrust.

Then he dropped his bombshell. If the Loya Jirga approved the new security deal, he would wait until after April’s election to sign it; this after the United States told him all year that a deal had to be wrapped up by the end of December, in order to give American officials sufficient time for planning. Waiting until April, or later, puts the whole operation in jeopardy.

Afghanistan’s police and military establishments also want a deal, and soon, so they are at odds with their wacko president, too. They not only need U.S. assistance on the training end, but heavily rely on international funding.

Earlier this week, the Afghans had agreed to grant U.S. troops immunity from local prosecution, while settling on the rules of engagement for American special forces.

The Loya Jirga wraps up on Sunday and it’s possible Karzai will change his mind again.

China: The U.S.-China Economic and Security Review Commission’s annual report noted China’s military spending was soaring and the modernization of the People’s Liberation Army “is altering the security balance in the Asia-Pacific, challenging decades of U.S. military preeminence in the region.”

Chinese foreign ministry spokesman Hong Lei told reporters: “We hope this committee can stop this cold war mentality and do things that can boost mutual trust between China and the U.S.”

The congressionally mandated document said China was “rapidly expanding and diversifying its ability to strike U.S. bases, ships and aircraft” throughout the Asia-Pacific region, including areas it could not previously reach, such as Guam.

The report also said China may have 313 to 342 submarines by 2020 – including 60 that could fire intercontinental ballistic missiles or cruise missiles against ships.

Hong said China’s military was “defensive in nature.”

President Obama’s goal, as part of his “pivot” to Asia, is to station 60% of U.S. warships in the Asia-Pacific by 2020, up from 50%. [South China Morning Post]

North Korea: An 85-year-old Korean War veteran from California, visiting the North as a tourist as part of a dream journey, was pulled off a plane as he was about to leave the nation last month and hasn’t been seen or heard from since. Former New Mexico Governor Bill Richardson attempted to reach his old North Korean contacts in an attempt to secure Merrill Newman’s release but they didn’t return his calls. The U.S. government is now soliciting the help of China.

Apparently, the day before his scheduled departure from North Korea, Newman discussed the war with North Korean officials, according to Newman’s son.

Russia: Opposition leader Alexei Navalny was elected leader of a new party, the People’s Alliance, which marks the third attempt to be registered. Earlier attempts over the past 11 months have been rejected by the Justice Ministry and Navalny doesn’t expect anything different this time.

“If the People’s Alliance is not registered,” he told his followers, “it will just show that all the talk about the opposition’s access to elections is meaningless babble.”

Navalny added, “The authorities are obsessed with banning everything that is connected to my name.”

Australia/Indonesia: This is a mess. Thanks to further Edward Snowden disclosures, Indonesians are burning Aussie flags over reports Australia’s spies were tapping the phones of Indonesia’s leaders. This may not seem like a big deal, but Indonesia is the second-most popular tourist destination for Aussies after New Zealand.

Indonesian President Yudhoyono announced he was freezing military and intelligence cooperation, and this is indeed serious in this part of the world. Think Bali.

Philippines: The death toll from Typhoon Haiyan is now over 5,000.

Venezuela: Last weekend, President Nicolas Maduro intensified his crackdown on private businesses by arresting (and jailing) more than 100 “bourgeois” businessmen as part of his effort to combat an “economic war” on alleged unfair pricing. 

Then on Tuesday, Venezuelan lawmakers granted Maduro special powers allowing him to rule by decree for a period of 12 months. Among his initial steps was to limit corporate profit margins to between 15% and 30% to protect consumers from price gouging.

As a story in The Economist put it: “Mr. Maduro looks increasingly out of his depth. ‘If I’m bringing down the price of appliances by 1,000%, that has to have an impact on November’s inflation figure, right?’ he asked during a state-television broadcast. ‘Or not?’ The camera panned to government ministers, none of whom moved a muscle.”

Canada: Rob Ford’s story has exceeded its sell by date. The people of Toronto are on their own.

Random Musings

--As noted above, the Senate, led by Majority Leader Harry Reid, voted on Thursday to change long-standing rules of the chamber that required 60 votes to clear the way on executive branch and some judicial nominations. Now it’s a simple majority. In 1975, a two-thirds requirement for cutting off filibusters against legislation and all nominations was lowered to 60 votes.

So the filibuster no longer applies to judicial or executive-branch nominees. It still applies to all bills and Supreme Court nominees.

And in theory (and probably practice), the 60-vote threshold on legislation can be undone with 51 votes using various procedural measures.

Editorial / Washington Post

“The rewriting of filibuster rules by Senate Democrats on Thursday changed the legislative body in fundamental ways, and for the worse. Republicans whose unjustified recalcitrance provoked the change should be ashamed. Democrats who are celebrating will soon enough regret their decision. The radical action, a product of poisonous partisanship, will also be an accelerant of poisonous partisanship.

“Fed up with Republicans repeatedly blocking President Obama’s judicial nominees to the U.S. Court of Appeals for the District of Columbia Circuit, Democrats triggered the so-called ‘nuclear option.’ In violation of long-standing precedent, they voted by a bare majority to alter the rules of the Senate, giving the minority no voice in the procedural change. The new rule bans filibusters of presidential nominations except those for the Supreme court.

“The Democratic majority was justified in its grievance but not in its rash action. Republicans had made increasing use of the filibuster to block presidential appointments for which a majority, but not the required 60 votes, could be mustered. Most recently, they rejected three of Mr. Obama’s nominees to the D.C. Circuit without even considering their merits....

“The Democratic action sets a precedent that a future Republican majority will use to change procedures when it gets into a political jam, rather than negotiate with Democrats. The logical outcome is a Senate operating more like the House, with no rights for the minority, no reason for debate and no incentive to cooperate. For those who view that as an improvement, we offer today’s House as a counterargument.”

Of course back in 2005, then-Senator Barack Obama said, the American people “don’t expect...for one party – be it Republican or Democrat – to change the rules in the middle of the game.”

The aforementioned U.S. Court of Appeals for the District of Columbia Circuit is indeed a key issue, especially in terms of President Obama’s legacy. The panel is split currently, four Democrats and four Republicans, but Obama has three nominees that will now give the Democrats a 7-4 advantage. As Zachary A. Goldfarb of the Washington Post points out:

“The court will likely help decide whether Obama can enact new Environmental Protection Agency regulations limiting greenhouse gas emissions by power plants – a key element of his second-term plan to combat climate change – as well as a variety of other rules affecting the environment and the financial industry.”

I am all for a clean environment, but at this point in time, the EPA regulations will prove crushing on many facets of the economy. The same court would rule also on lawsuits related to elements of ObamaCare. 

John Podhoretz / New York Post

“Ordinarily, a change in Senate procedure would be too arcane for a public issue to be made of it. But given the way the public has been shaken by the exposure of just how deceitful Obama was in selling his health-care package, his brazenly self-interested flip-flop really could resonate – and degrade his tattered reputation still further.”

Thursday’s change in the rules makes the 2014 mid-terms even more critical. Or as Tennessee Republican Sen. Lamar Alexander put it, “The solution to the problem is an election.” 

--According to a Washington Post/ABC News poll, 60% of Americans say Edward Snowden’s leaking of documents detailing U.S. surveillance programs has damaged national security, up 11% from July. 52% believe he should be charged with a crime. 55% say he was wrong to expose the NSA’s intelligence-gathering efforts.

--Freshman Republican Cong. Trey Radel (Fla.) pleaded guilty to possession of cocaine and then announced he would take a leave of absence while undergoing treatment, adding he would donate his salary during this time to charity.

Radel was arrested in a sting operation on Oct. 29, but didn’t tell House Speaker John Boehner until this past Tuesday, three weeks later. It has been 30 years since a member of Congress was charged with a drug crime.

--Michael Gerson / Washington Post

“For those who expect and fear an irrepressible conflict between the tea party and the Republican establishment, Sen. Mike Lee of Utah is a hopeful anomaly. Should this anomaly become a trend, the GOP’s future would be considerably brighter.

“Lee’s tea party qualifications are beyond question. He co-founded the congressional Tea Party Caucus. He helped discover Ted Cruz. His advocacy for the government shutdown was impeccably irrational. Lee is a man in whom FreedomWorks can find no fault.

“Few have done more to burn ideological bridges within the GOP. Yet no one from the tea party side is now doing more to construct them.

“In a series of speeches, Lee made the case that populist resentment has little lasting influence without policy innovation and political outreach. ‘Frustration is not a platform,’ he recently told a Heritage Foundation audience. ‘Anger is not an agenda. And outrage, as a habit, is not even conservative... American conservatism, at its core, is about gratitude and cooperation, and trust, and above all, hope. It is also about inclusion. Successful political movements are about identifying converts, not heretics.’

“Lee has been proselytizing for a ‘comprehensive anti-poverty, upward-mobility agenda’ – making him one of the few Republican politicians talking in any sustained way about stalled economic mobility, stagnant middle-class wages and economic inequality. To this, Lee has added a dollop of populist ‘anti-cronyism,’ proposing to simplify the tax code and rein in the big banks....

“Mike Lee’s conception of the tea party’s future is hardly predominant within the movement, but it is fully consistent with Republican success. And it might even help ensure it.”

--The Associated Press obtained an unpublished Air Force study that cites “burnout” among launch officers in the nuclear missile force; those with their fingers on the triggers of 450 nukes sitting in silos in states like North Dakota and Wyoming. The report also contains “evidence of broader behavioral issues across the intercontinental ballistic missile force, including sexual assaults and domestic violence.”

The RAND Corp., a federally funded research house, was used to conduct the study and “It found a toxic mix of frustration and aggravation, heightened by a sense of being unappreciated, overworked and at constant risk of failure.”

As the AP’s Robert Burns reports:

“Every hour of every day, 90 launch officers are on duty in underground command posts that control Minuteman 3 missiles. Inside each buried capsule are two officers responsible for 10 missiles, each in a separate silo, armed with one or more nuclear warheads and ready for launch within minutes.

“They await a presidential launch order that has never arrived in the more than 50-year history of American ICBMs. The duty can be tiresome, with long hours, limited opportunities for career advancement and the constraints of life in remote areas of the north-central U.S., like Minot Air Force Base, N.D.”

Reports of spousal abuse in the ICBM force are double that of the overall Air Force.

--John Crudele of the New York Post has written numerous pieces on how the U.S. government cooks the books in terms of various economic data releases, especially when it comes to the employment reports that the market keys in on the first Friday of every month.

It was during the 2012 presidential campaign, for instance, that many of us waited to see the September employment report, with August having registered an 8.1% unemployment rate, because it was the next to last snapshot before the November vote and no doubt would influence some voters that were on the fence. 8.0% was a magical benchmark. Dipping below that would be great news for President Obama.

Alas, the data was released and it came in at 7.8%, a huge drop in the jobless rate as far as these things go.

So this is what I wrote about the release on Oct. 6, 2012 in this space:

“Friday’s jobs report for September revealed the unemployment rate fell to 7.8%, below the magic 8% figure and the lowest since Obama took office in January 2009. The unemployment rate had been above 8% since February ’09.

“Immediately, many Romney supporters cried foul. The jobless rate was supposed to rise to 8.2%, not decline to 7.8%, according to economists, and former G.E. CEO Jack Welch received more than a bit of press with his Tweet:

“ ‘Unbelievable jobs numbers…these Chicago guys will do anything… can’t debate so change numbers.’

“I won’t comment on the specifics of Welch’s remark, except to say that if the final employment number for October, released Nov. 2nd, four days before the election, is also below 8%, conspiracy theories will only grow (though by then some on the right say the damage will have already been done because of early voting). 

“Here’s what we do know. The economy, according to the Bureau of Labor Statistics, created 114,000 jobs in September, right at economists’ consensus figure of 115,000.

“The private sector created just 104,000, but the household survey showed an increase of 873,000 of which 582,000 were part-time positions. This particular number is highly volatile but was the highest single month since June 1983.

“So once again…in this Twitterized world of ours that your editor truly can’t stand [Ed. now I’ve joined that same world], my mantra since day one of this column being ‘wait 24 hours,’ the picture changed drastically for both Republicans and Democrats from Wednesday evening to Friday morning. Euphoria turned into dismay for elephants. Donkeys who were baying on Wednesday could crow on Friday. For his part, President Obama immediately took the household survey and worked into his new stump speech that it was the best single month since Ronald Reagan was president.

“Meanwhile, the truth is job growth remains putrid for this stage of an economic recovery and the percentage of those underemployed remains at 14.7%, unchanged from August.

“Back to Jack Welch, while I no doubt have my own right-of-center tilt when it comes to my beliefs, as much as possible I believe in being fair, which is why on the bigger issues...I try to present both sides.

“But I found Welch’s comment particularly amusing. I mean this is a guy who was notorious for beating earnings estimates every quarter by a penny, at a time when that was critical in terms of share performance. Every quarter. It’s all in my archives and if I ever get around to it will be part of my book. Of course G.E. was massaging the numbers to accomplish this…probably nothing illegal, but the company was master of the game…take a little revenue from the next quarter, or keep it off the books to add in the subsequent release…it’s what everyone did in the late 90s, early 2000s before all the accounting scandals began to hit.”

Back to Crudele, he claims the Census Bureau now admits the numbers were manipulated, which if true is a scandal of immense proportions.

I’m not going to comment further on the topic for now. A House committee said it would investigate the charges and we’ll see what shakes out, if anything. I did write the following on Nov. 3, 2012, after release of the October jobs data, days prior to the election. [Reminder, this was also in the aftermath of Superstorm Sandy and President Obama’s appearance with Gov. Christie.]

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

--Bret Stephens / Wall Street Journal

“Barack Obama is not scheduled to be present at Gettysburg on Tuesday to commemorate the 150th anniversary of the address. Maybe he figured that the world would little note, nor long remember, what he said there. Maybe he thought the comparisons with the original were bound to be invidious, and rightly so.

“If that’s the case, it would be the beginning of wisdom for this presidency. Better late than never.

“Mr. Obama’s political career has always and naturally inspired thoughts about the 16th president: the lawyer from Illinois, blazing a sudden trail from obscurity to eminence; the first black president, redeeming the deep promise of the new birth of freedom. The associations create a reservoir of pride in the 44th president even among his political opponents.

“But, then, has there ever been a president who so completely over-salted his own brand as Barack Obama? ‘I never compare myself to Lincoln,’ the president told NBC’s David Gregory last year. Except that he announced his presidential candidacy from the Old State Capitol building in Springfield, Ill. And that he traveled by train to Washington from Philadelphia for his first inauguration along the same route Lincoln took in the spring of 1861. And that he twice swore his oaths of office on the Lincoln Bible. ‘Lincoln – they used to talk about him almost as bad as they talk about me,’ he said in Iowa in 2011.

“No, this has not been a president who has ever shied away from grandiose historical comparisons.... ‘I would put our legislative and foreign policy accomplishments in our first two years against any president – with the possible exceptions of Johnson, FDR, and Lincoln,’ the president told ’60 Minutes’ in 2011. Note the word possible.

“But now that has started to change. The president has been humbled; he’s pleading incompetence against charges of dishonesty; the media, mainstream as well as alternative, smell blood in the water.

“And his problems on that score are just beginning: ObamaCare is really a political self-punching machine, slugging itself with every botched rollout, missed deadline, postponed mandate, higher deductible, canceled insurance policy and jury-rigged administrative fix....

“There is a common view that good policy and good rhetoric have little intrinsic connection. Not so. President Obama’s stupendously shallow rhetoric betrays a remarkably superficial mind. Superficial minds designed ObamaCare. Superficial minds are now astounded by its elementary failures, and will continue to be astounded by the failures to come.

“Is there a remedy? Probably not. Then again, the president’s no-show at Gettysburg suggests he might be trying to follow Old Abe’s counsel in a fruitful way: ‘Better to remain silent and be thought a fool,’ the Great Emancipator is reported to have said, ‘than to speak and to remove all doubt.’”

--George Will / Washington Post...on the prospects of an Elizabeth Warren candidacy:

“Before she sank to a senator’s salary, she was among the 1 percenters, whose annual incomes now begin at $394,000. Hillary Clinton recently made more than that from two speeches, five days apart, for Goldman Sachs, a prowling Wall Street carnivore that Warren presumably wants to domesticate. Between Warren, hot in pursuit of malefactors of great wealth, and Clinton, hot in pursuit of great wealth, which candidate would be more fun for the kind of people who compose the Democrats’ nominating electorate?

“Such people are in politics for, among other satisfactions, the fun of it....Most Americans most of the time have better things to do than feel strongly (aggrieved or otherwise) about politics. They are not as angry about goings-on in Washington as they say they are, or imagine themselves to be, or think they ought to be when a pollster takes their emotional temperature....

“Analyses of Chris Christie’s appeal are neglecting something: He has fun seeking and wielding power, and his fun is infectious.

“Can Democratic activists, for whom politics is catnip, cheerfully contemplate the uncontested nomination of someone who will be 69 on Election Day 2016, who will have been conspicuous in the nation’s life for a quarter of a century, and who cultivates nostalgia for the last decade of the previous century? Can forward-leaning, clench-fisted MSNBC viewers really work themselves into a lather of excitement about the supposed feminist triumph of smashing the ultimate ‘glass ceiling’ for a woman whose marriage took her to the upper reaches of politics? Do Democrats, ankle-deep in the rubble of ObamaCare’s paternalism, really want to nominate the author of Hillarycare? Before a Democratic-controlled Congress spurned it, she explained her health-care plan this way (a delicious quotation excavated by the Wall Street Journal’s Holman Jenkins):

“ ‘We just think people will be too focused on saving money and they won’t get the care for their children and themselves that they need... The money has to go to the federal government because the federal government will spend that money better.’

“Come 2016, Clinton may be the one thing no successful candidate can be, and something Warren (or some other avatar of what Howard Dean in 2003 called ‘the Democratic wing of the Democratic Party’) would not be: boring.”

Run, Elizabeth, Run! I want to have fun, too!

--This ‘Knockout Game’ garbage has to stop. For starters, it’s going to make race relations demonstrably worse. It’s also depressing as hell that this ‘game’ is seemingly exploding in the inner cities and now some suburbs.

I would give President Obama major marks if he condemned the thugs as part of an opening statement prior to his next formal press conference, which should be in prime time, by the way.

--Related to the above, the Wall Street Journal quoted William Bratton, former New York City Police Commissioner, who spoke of the era before he and Rudy Giuliani first tackled the crime issue in the city, and how we can go back to those days if the incoming mayor doesn’t take the progress made, and the job required to maintain it, seriously.

“To give you an idea of how things have changed, in 1990, I didn’t go anywhere without a gun, because as the chief of the transit police, I did not feel secure anywhere, including in the subways. In Los Angeles, when I was chief of police there, I also had to carry a gun everywhere, because of the gang violence. I don’t carry a gun now. I haven’t for a while. It’s locked away. I just don’t feel the need for it. And I like it that I can do that.”

--Michael Goodwin / New York Post...on Police Commissioner Ray Kelly

“He will leave his post with dignity and a record unmatched in fighting crime and saving lives. New Yorkers, even those who betrayed him, are forever in his debt.

“Godspeed, Commissioner.”

As a suburban visitor of the Big Apple, who loves the city, Commissioner Kelly, you were the best.

--Bill Cosby in Parade Magazine last weekend.

Parade: You’ve been a critic of black pop culture, but some say you’re criticizing poor people for being poor.

Cosby: People who say that are full of it. I was on a panel and somebody said, “It takes a village.” Yes. And there are some idiots in the village.

--So you know those new statin recommendations from a week ago? It turns out the guidelines issued by the American Heart Assn. and the American College of Cardiology were accompanied by a “risk calculator” that a Harvard University cardiologist and his collaborator argue is formulated with unreliable data and that the calculations that were supposed to identify those at risk of either a stroke or a heart attack over the next 10 years, and thus which patients should take statins, are wildly off base, as reported by the Los Angeles Times’ Melissa Healy.

What I find ironic, and something I haven’t seen anywhere else, is does this story and a Harvard connection ring a bell? It should.

Earlier this year, Harvard economists Ken Rogoff and Carmen Reinhardt were discovered to have used an incorrect calculation in their highly-influential treatise that when a country’s debt rises above 90% of GDP, that spells a kind of death knell for future economic growth, thus it was a call for austerity. Someone outside of Harvard discovered the flawed data being used by Rogoff and Reinhardt and they’ve been scrambling to rebuild their shattered credibility ever since. [I myself pounded the table on austerity, using their paper. I stand by my position, though, that excessive government debt load is dangerous.]

In the case of the statin guidelines, this time it was Harvard that uncovered the faulty data.

Let this be some kind of lesson, boys and girls.

--If you like to ride a motorcycle without a helmet (because your state allows it), consider the following from The Economist:

“Staff at the Madonna Rehabilitation Hospital in Lincoln, Nebraska can sometimes guess the home state of the motorcyclists they treat. Nebraska obliges all riders to wear helmets; neighboring Iowa, Kansas and South Dakota do not. The helmetless are distinctive, says Dr. Lori Terryberry-Spohr (I swear, sic): they suffer ‘diffuse’ internal bleeding and cell death across large areas. Such patients typically run up $1.3 million in direct costs. Fewer than a third work again. A study of helmet-shunning bikers admitted to one large hospital, cited by the Centers for Disease Control, found that taxpayers paid for 63% of their care.”

--An extensive Harvard study of 119,000 men and women over 30 years found that those who ate nuts roughly every day were 20% less likely to die during the study period than those who never ate nuts. 

“The risk of dying of heart disease dropped 29 percent and the risk of dying of cancer fell 11 percent among those who had nuts seven or more times a week compared with people who never ate them.

“The benefits were seen from peanuts as well as from pistachios, almonds, walnuts and other tree nuts. The researchers did not look at how the nuts were prepared – oiled or salted, raw or roasted.” [AP]

And get this...nut eaters actually stayed slimmer, which goes against perception.

One doctor, Ralph Sacco, Univ. of Miami neurologist who is also a former heart association president, said that some of the benefit of eating nuts may come from not eating other foods.

“Sometimes when you eat nuts you eat less of something else like potato chips,” so the benefit may come from avoiding an unhealthy food.

Actually, it was back in 2003 that the FDA first said “a fistful of nuts a day...may reduce the risk of heart disease.” 

--Re: the Cheney daughters’ feud, you know my attitude these days on the topic. I don’t give a damn what you do...just don’t text and drive.

--Since Pope Francis was selected about eight months ago, church attendance in Britain is up 20%. Catholic leaders around the world are reporting solid growth as well.

Heck, the Pope is drawing 85,000 for Sunday audiences in Rome (vs. 5,000 for Pope Benedict XVI). [London Times]

--Billionaire Dennis Tito revealed plans this week for launching two astronauts to Mars as early as December 2017. From Joel Achenbach of the Washington Post:

“Dubbed ‘Inspiration Mars,’ the fly-by mission would exploit a rare alignment of Earth and Mars that minimizes the time and the fuel it would take to get to Mars and back home again. The astronauts would come within 100 miles of the Martian surface before being slung back to Earth.”

Tito testified at a House subcommittee on space. If the United States doesn’t exploit the opportunity, he said, China will do so first.

Tito would require extensive cooperation from NASA, including use of a new jumbo rocket the agency is building for 2017. The mission would have to commence between Christmas Day 2017 and Jan. 5, 2018 to take advantage of the planetary lineup. No word on what the baggage fees will be. Nor anything on whether Ryanair is handling the food concessions.

--Finally, thoughts on 11/22/63. I was 5 ½ years of age and the family was headed to the Pittsburgh area to visit relatives. We stopped first in Mechanisburg, Pa., for lunch with my grandparents that Friday and it wasn’t until we got to the Pennsylvania Turnpike that my brother (as he reminded me the other day), noticed the flags were at half-staff at the entrance.

But we didn’t know why until we turned on the car radio and first heard a discussion about Lincoln. Then we learned of the events in Dallas. That entire weekend I was glued to the television just like everyone else and vividly remember Jack Ruby taking out Oswald.

I’ll also never forget the funeral and the drum cadence. My Aunt Rose, whose place we normally stayed at in Greensburg, Pa., was a huge Kennedy fan and ever after I remember her putting on “Camelot” each time we visited. [Actually, I was probably the one putting it on. My all-time favorite.]

I wrote in my Wall Street History column long ago, in looking back at the Hunt Brothers and their cornering of the silver market, that there was a sidebar concerning this family and JFK.

“On the morning of November 22, 1963, President John F. Kennedy was shown an inflammatory full page advertisement that appeared in that day’s Dallas Morning News. The ad asked twelve loaded questions, including: ‘Why did you host, salute and entertain Tito – Moscow’s Trojan Horse?’ ‘Why has the Foreign Policy of the U.S. degenerated to the point that the CIA is arranging coups and having staunch Anti-Communist Allies of the U.S. bloodily exterminated?’ Jackie Kennedy was sickened by the display. JFK said to an aide, ‘We’re heading into nut country today.’ Hours later he was assassinated.

“The ad was the responsibility of Nelson Bunker Hunt (and an associate). H.L. Hunt was a leader of the John Birch Society, to some an extremist organization.”

My piece on the Hunt Brothers and the silver bubble is normally at the top of the list when you Google the topic. But I am ticked that some of the early listings don’t include this last tidbit, though I can’t get into the reason why.

It’s history, courtesy of the great author Richard Reeves and his “Profile of Power.”

In viewing the CBS special on JFK’s assassination last Saturday night, Bob Schieffer summed it up well.

“John F. Kennedy would have been 96 this year, but in our memories he is forever young.”

But those memories are also stark and jarring. As in secret service agent Clint Hill’s recollections this week, in his many interviews, that when he climbed the back of JFK’s limo to protect the president, Jackie was leaning back at the same time to pick something off the trunk. I never heard her first words to Hill before this week. “I have his brains in my hand.”

The rest of the decade was a scrambled mess as well.
---

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

We remember John Fitzgerald Kennedy.

God bless America. 
---

Gold closed at $1244
Oil, $94.84

Returns for the week 11/18-11/22

Dow Jones +0.7% [16064]
S&P 500 +0.4% [1804]
S&P MidCap -0.2%
Russell 2000 +0.8%
Nasdaq +0.1% [3991]

Returns for the period 1/1/13-11/22/13

Dow Jones +22.6%
S&P 500 +26.5%
S&P MidCap +28.3%
Russell 2000 +32.4%
Nasdaq +32.2%

Bulls 53.6
Bears 15.5 [Source: Investors Intelligence]

Have a great week and a super Thanksgiving. Don’t go shopping.

Catch me on Twitter @stocksandnews

Brian Trumbore