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12/07/2013

For the week 12/2-12/6

[Posted 12:00 AM ET]

Nelson Mandela, RIP

Editorial / Bloomberg

“The great conciliator is gone. Nelson Mandela, whose unbreakable spirit and shining magnanimity knit together a South Africa torn by centuries of racism and exploitation, died today at 95.

“Mandela will rightly be remembered as a paragon of reconciliation, a man who, as former U.S. President Bill Clinton put it in 2012, ‘was willing to share the future even with the people who imprisoned him.’ He was the president who accepted his former adversary, apartheid’s last president, F.W. de Klerk, as his deputy; the democratic socialist who refused calls to nationalize industries and sought to lure foreign investment; the former black prisoner who, as De Klerk said, ‘won the hearts of millions of white rugby fans’ by famously celebrating the 1995 triumph of the Springboks, South Africa’s once-boycotted rugby team

“Always his goal was to unite, not divide. His moral leadership, in turn, made possible South Africa’s rapid transition from a sanctioned pariah to an emerging-market powerhouse.”

Editorial / Washington Post

“Roosevelt, Stalin, Churchill, Hitler – these were the names that, for much of the world, defined the first half of the 20th century, the most destructive era in history.

“Gandhi, King, Mandela – these, it could be argued, are the figures who will live longest in the public consciousness as we look back on the postwar world: leaders who had no real armies to speak of and who wielded little power in office but who helped create a new ethic through the power of their ideas and the example of their lives.”

Archbishop Desmond Tutu:

“He was amazing in his selfless altruism for others, recognizing – just as did a Mahatma Gandhi or a Dalai Lama – that a true leader exists not for self-aggrandizement but for the sake of those he or she is leading.”

U.S. President Barack Obama:

“He achieved more than could be expected of any man. Today he’s gone home and we’ve lost one of the most influential, courageous and profoundly good human beings that any of us will share time with on this earth.”

Mandela, along with F.W. de Klerk, was awarded the Nobel Peace Prize in 1993. Others have deserved it, no one deserved it more. He singlehandedly prevented massive bloodshed in South Africa with his relentless efforts to reconcile his nation. A true hero. A titanic figure whose story needs to be told for centuries to come.

Washington and Wall Street

Friday’s November jobs data seemed to be what the market wanted, good news...and good news treated as good, not bad, the latter being so often the case on the Street.

In adding 203,000 jobs for November, a little better than the consensus 180,000, with a 196,000 figure for the private sector, the jobless rate also fell to 7.0%, the best since November 2008 and very near the Fed’s stated threshold of 6.5% for raising the short-term funds rate off zero. Additionally, the ‘underemployment’ rate fell from 13.8% to 13.2%. All good.

You also had another strong ISM reading on manufacturing for November, 57.3 vs. an expected figure of 55.0, thus continuing a pattern of very solid performance for the sector. [The ISM service reading of 53.9, however, was below expectations but nothing too worrisome, though emblematic of a weak retail environment.]

Thursday saw an upward revision to third quarter GDP, from 2.8% to 3.6%, far exceeding the estimate of an increase to 3.1%. This is good, right? Well, yes, for now, but the increase was the result of the biggest surge in inventories since 1998, while the consumption component (the consumer being 70% of the economy) was up only 1.4%, the smallest gain since Q4 2009. With the huge build in inventories we are taking from fourth- and first-quarter GDP, it would certainly seem, with most analysts now expecting the October-December period to reflect 1.5% to 2.0% GDP growth. That said we’ll take the 3.6%.

Auto sales for November were strong (addressed further below), and the new home sales data for October reflected the biggest one-month rise since May 1980, some 25.7%. [September’s number, released the same day due to catch-up from the government shutdown, wasn’t good.]

So thus far in our tally you have a solid jobs report, continuing a favorable trend, strong manufacturing data, a better than expected revision to GDP (with some caveats), a decent housing number (though prior months have not been too good, including going back to the summer), and strong autos.

But we’re in the midst of the Christmas shopping season and this past weekend was rather important, plus you had Cyber Monday, so here is a slew of data for the five days, Thursday (Thanksgiving) through Monday.

The National Retail Federation estimated retail sales for Thurs.-Sun. were down 2.9%, with ¼ who planned to shop over the four days doing so on Thursday. [Booo....Booo ....] The NRF, though, stands by its forecast that sales for November and December will be up 3.9% (compared with 3.5% in 2012).

ShopperTrak said that Black Friday sales were down 13.2% owing to all the stores that opened on Thursday. Thursday and Friday sales combined, though, were up 2.3%; Thurs.-Sun. up 1%. ShopperTrak sticks by its forecast that holiday retail sales (Nov. and Dec.) will rise only 2.4%.

One other...the International Council of Shopping Centers and Goldman Sachs said sales for the week ended Nov. 30 fell 2.8%.

Understand that the Thurs.-Sun. period over Thanksgiving traditionally represents 10% of total Nov.-Dec. retail sales, while the NRF says sales these two months account for 20-40% of a retailers’ annual revenues.

Then there was Cyber Monday with all the retailers hyperventilating about how well they were doing with their online operations, while 100% online retailer Amazon unleashed Jeff Bezos the night before for some brilliant P.R. on “60 Minutes” that only helped its own efforts, Amazon saying Monday was the busiest day in the company’s history. [More on them below.]

IBM Digital Analytics said Cyber Monday volume was up 20% (16.5% for Thurs.-Mon.), while some retailers said mobile accounted for 50-55% of their online traffic (IBM pegged it overall at 30%).

Now if you are the Federal Reserve, how do you interpret all this as they gear up for their December 17-18 yearend gathering?

Jobs...good and getting better
GDP...solid, but a bumpy immediate future
Autos...good
Manufacturing...very good
Housing...respectable
Retail...mediocre

I said awhile back that the Fed would begin to taper its $85 billion a month bond-buying program in December, but there is an important caveat. The House and Senate budget conferees have to reach an agreement on the current budget for fiscal 2014 (which started October 1) by Dec. 13, technically including being voted on in the House as it is supposed to recess the same day.

The conferees, headed by Republican Congressman Paul Ryan and Democratic Senator Patty Murray, are apparently close to an agreement but not necessarily one that Tea Party Republicans will agree to, a compromise on spending that will eliminate some of the sequester cuts.

What we do know is that without an agreement, the government shuts down Jan. 15 and the Federal Reserve will not taper if by the time they get together, it appears Congress will return from Christmas recess with work still to be done on the budget front. It’s that simple. The Fed would not be able to act without a deal.

But related to the topic, PIMCO’s Bill Gross had this broad warning in his latest newsletter.

“Investors are all playing the same dangerous game that depends on a near perpetual policy of cheap financing and artificially low interest rates in a desperate gamble to promote growth.”

The Fed, Bank of Japan, European Central Bank and Bank of England “are setting the example for global markets, basically telling investors that they have no alternative than to invest in riskier assets or to lever high-quality assets.”

You had the European Central Bank also warning on tapering, asking eurozone policymakers to do more to prepare for shocks.

As for ObamaCare, I checked out the new, improved HealthCare.gov and zipped through to step 4, only to refuse to give my Social Security number. Now I’m being a little dishonest with the Affordable Care folks because my own plan hasn’t been canceled yet, I’ll be surprised if it is, and so I don’t need the site...at least not yet.

But I’ve also hammered away since day one that if you didn’t need to go on the site you shouldn’t, especially when it comes to giving up a lot of personal data. It just isn’t secure, as more than one expert once again reiterated this week.

And the back-end is a freakin’ mess. You can zip along, get your policy and think you have insurance but you don’t have it until the insurance company gets the first premium check and the insurers, in many cases, still aren’t receiving accurate information from the applicant. The insurers need “clean” enrollment files by December 23 so they can process it in time for the coverage to start on January 1. As Daniel Durham of America’s Health Insurance Plans, a lobbying group for insurers, told Reuters:

“It’s a real problem for plans when the enrollment file never comes over, and then you get the consumer calling, and the plan has no record of that individual. Time is short. January 1 is coming around fairly quickly here.”

Sure is.

Now the White House, led by the administration official, Jeffrey Zients, overseeing the “improved” web site, assures us HealthCare.gov “is night and day from where it was on October 1st,” said Zients. But that’s just not telling the full truth. By their own admission, officials with the Department of Health and Human Services said the next few months would require further work to “improve and enhance the website and continue to improve the consumer experience.”

We don’t have “months.” It also may not be possible to assess how well the site is working until we approach Dec. 23.

And as the Washington Post reported: “In recent months, consumers having difficulty with the Web site have been turning to agents and brokers for help. But the system does not allow brokers to enter their identity numbers once a person has gotten a subsidy determination, or if the number has been added incorrectly in the past.

“Without those identity numbers, brokers cannot get paid by insurers or follow up on behalf of clients if there are problems with insurance claims. Regulators cannot track down brokers if there are mistakes. As of Sunday, brokers had not been informed of any fix to this issue.” 

From a separate Post piece: “The mistakes (in enrollment records) include failure to notify insurers about new customers, duplicate enrollments or cancellation notices for the same person, incorrect information about family members, and mistakes involving federal subsidies. The errors have been accumulating since HealthCare.gov opened two months ago, even as the Obama administration has been working to make it easier for consumers to sign up for coverage.” [Amy Goldstein and Juliet Eilperin, and a cast of thousands at the Post doing yeoman’s work on the topic.]

Let’s face it, it’s going to be chaos the second half of the month. I feel sorry for those scrambling for coverage.

Lastly, CNN’s Chief Medical Correspondent, Dr. Sanjay Gupta, penned a terrific piece for CNN.com on how for many, the worst thing they can do is obtain health insurance!

Gupta talks about an uncle of his who was a healthy guy that opted to go several years without insurance, but when he turned 65, he picked up Medicare and “What happened next was a little strange. He fell off the wagon. He exercised only sporadically, and paid hardly any attention to what he was eating....He’d become unhealthier....

“Two economists wrote about this exact scenario in 2006.

“They found that many men, at the time they obtained Medicare, started behaving badly. Moral, or morale, hazard is a term largely used by economists to describe the actions of people more willing to take risks because they are insulated from the cost of their actions, in this case because of their recently obtained health insurance.

“In the case of these men, when they got Medicare, they took worse care of themselves; they actually exercised less. Among those who didn’t visit the doctor after getting insurance, the effect was dramatic: Their overall physical activity dropped by 40%; they were 16% more likely to smoke cigarettes and 32% more likely to drink alcohol....

“The website may be working better now, but to me that’s not the most important issue. In my mind, the real suspense comes from whether ObamaCare will really make us a healthier America, even if it succeeds in its ambitions to dramatically expand coverage.”

As Gupta continues with his essay, “insurance, like marriage, doesn’t guarantee good health...

“A good example comes from a study in the journal Circulation. Researchers estimated that if all Americans exercised 30 minutes a day, we would reduce the number of cardiovascular events – heart attacks and strokes – by a third. A third! Just 30 minutes a day, and suddenly we are starting to get serious about a more healthy America.”

And you can break it into 10-minute chunks, Gupta adds.

“We Americans are three times as likely to be obese as the average French person – and obesity is related to just about every chronic disease imaginable.

“I think about this all the time, and here is what I tell my own patients. It is time to stop merely playing defense when it comes to your health, and time to start optimizing yourself.”

Europe

The eurozone PMI on manufacturing for November came in at 51.6, up slightly from October’s 51.3, bespeaking an economy that is recovering, but is hardly robust. [As you saw above, the U.S. was at 57.3.]

Germany’s PMI did rise to 52.7, a 29-month high, and the Netherlands rose to 56.8, the best since April 2011, but France fell to a 5-month low at 48.4, and Spain dropped to 48.6 from 50.9 in October. [Separately, the U.K. surged to 58.4 from 56.5.]

The eurozone comp (both manufacturing and services) fell in November to 51.7 vs. 51.9 in October, with France dropping to 48.0 and Italy to 48.8.

Eurozone retail sales also fell 0.2% in October following a 0.6% decline in September.

Separately, Germany’s Bundesbank raised its 2014 growth outlook to 1.7% from 1.5%, while Moody’s joined S&P in upgrading Spain’s outlook from “negative” to “stable.”

In France, President Hollande’s approval number is at 20%, owing in no small part to his stagnant economy and tax policies.

And in Slovenia, GDP is slated to decline 2.7% this year and remain negative in 2014, with bank non-performing loans continuing to soar. The Slovenian economy has cratered 11% since 2008 and despite the government’s assertions to the contrary, a bailout will be needed next year.

European banks, by the way, have eliminated 140,000 jobs in two years and according to a story in Bloomberg, further cuts could amount to as many as twice this figure. Revenue continues to plummet in areas such as investment banking and fixed income.

Lastly, I continue to follow the issue of the rise of the far-right across Europe, and the accompanying anti-immigrant sentiment. I haven’t had time to put it all together recently, but here are some headlines from articles I’ve yet to really plow through.

“Public turning against EU migrants” [64% of those surveyed in the U.K. said EU immigration had a negative impact]

“Cameron launches attack on EU migration”

“Romania’s prime minister has called on Britain not to treat Romanians as ‘second-rate citizens’ when work restrictions for Romanian and Bulgarian workers are lifted on January 1”

“France is on the brink of civil war, warns (Marine) Le Pen”

“Austerity sparks rise of far Right in Spain”

Marine Le Pen is the one to watch and the results of next spring’s European Parliament elections could be critical to the eurozone’s future, let alone the grand experiment of the European Union as a whole.

China

One economic item of note. The November PMI, as published by the government’s statistics office, came in at 51.4, same as October. HSBC’s reading was earlier reported at 50.8.

More importantly, Vice President Joe Biden was sent to China, as well as Japan and South Korea, to address China’s establishment of a new air-defense identification zone (ADIZ) over the East China Sea and some disputed islands. [The original idea of the trip was to promote trade but the agenda was hijacked by new developments.] By week’s end, after Biden held extensive discussions with Chinese officials, including President Xi Jinping, it appeared both sides were moving toward an understanding that the zone would be operated in a way that doesn’t threaten the region or endanger the lives of air passengers. 

Biden’s focus was reportedly on the “rules of engagement” between China and the likes of Japan and South Korea to prevent catastrophe. But there is no way, at least in the immediate future, that China (read Xi) is backing down and rolling back the ADIZ.

Republicans say the White House is not being tough enough. Biden, after all, did not ask China to rescind it, though he reiterated the U.S. does not recognize it.

Geoff Dyer / Financial Times

“Joe Biden began his week in Japan where politicians are furious at China; he then flew into Beijing which is seething about Tokyo’s behavior; and on Friday he is due in South Korea, which is irate at both China and Japan. Welcome, Mr. Vice President, to East Asia’s new normal.

“Two weeks ago, few people had ever heard of an ‘air defense identification zone,’ the Cold War-era set of air regulations that China has decided to put in place across a large stretch of the East China Sea. But the obscure rules have become the latest flashpoint in the region’s unresolved historical disputes....

“The air rules are part of a broader pattern: the steady procession of Chinese pressure tactics to push its claims on disputed territories, particularly the islands that Japan calls the Senkaku and China calls the Diaoyu. Since around 2008 – and especially over the past year – China has been sending ships to patrol the seas around the islands. The air defense zone extends its claims to the skies above.

“The long-term Chinese agenda is to exert control over the East China Sea and South China Sea and in the process to ease the once-dominant U.S. Navy out of large stretches of the western Pacific. China is attempting what aspiring great powers often do: to prevent another country from dominating its own region....

“In a recent speech in Beijing, Paul Keating, former Australian prime minister, laid out the dilemma China faces. Mr. Keating is one of a small group of retired Asia-Pacific leaders who believe the U.S. should do much more to accommodate China’s interests in the region and to share power with Beijing. But to his Chinese audience, he made a very different appeal. ‘There can be no stable and peaceful order in Asia unless Japan is, and feels itself to be, secure,’ he said.

“If Beijing really wants to shape the next century in Asia at the expense of the U.S., it will need friends and allies to advance its priorities and to push its agenda. Instead, if it steps up efforts to coerce its neighbors, China is setting itself up to be a very lonely great power.”

Editorial / The Economist

“(It) is possible that the announcement of the ADIZ was a blunder, an ill-considered overreaction to Japan’s threat to shoot down unmanned aircraft entering its airspace. Chinese foreign policy has sometimes seemed uncoordinated and oddly insensitive to the consequences of assertive nationalism. But in this case all the relevant arms of party and government were surely on board. And at the party meeting [Ed. the third plenum], Mr. Xi seemed to have consolidated his own power over decision-making with the announcement of a new national security council to take charge of the management of internal and external threats. Even so, China may have miscalculated in some ways: in including South Korean-claimed airspace, for example, or in including aircraft not just approaching China, but merely crossing its ADIZ; or perhaps in thinking that such a zone was enforceable at all....

“An even more fundamental explanation of China’s apparently reckless behavior is that nothing in its commitment to a peaceful rise is meant to trump the safeguarding of its national sovereignty. Mr. Xi emerged from the party’s meeting appearing all-powerful. But no Chinese leader can afford to look weak on an issue, such as the disputed islands, that China has framed as one of its own sovereignty. He will find it hard to back down.”

Charles Krauthammer / Washington Post

“China has brazenly declared a huge expansion of its airspace into waters claimed by Japan and South Korea.

“Obama’s first response – sending B-52s through that airspace without acknowledging the Chinese – was quick and firm. Japan and South Korea followed suit. But when Japan then told its civilian carriers not to comply with Chinese demands for identification, the State Department (and FAA) told U.S. air carriers to submit.

“Which, of course, left the Japanese hanging. It got worse. During Vice President Biden’s visit to China, the administration buckled. Rather than insisting on a withdrawal of China’s outrageous claim, we began urging mere non-enforcement.

“Again leaving our friends stunned. They need an ally, not an intermediary. Here is the U.S. again going over the heads of allies to accommodate a common adversary. We should be declaring the Chinese claim null and void, ordering our commercial airlines to join Japan in acting accordingly, and supplying them with joint military escorts if necessary.

“This would not be an exercise in belligerence but a demonstration that if other countries unilaterally overturn the status quo, they will meet a firm, united, multilateral response from the West.

“Led by us. From in front.”

Your editor, by the way, will be flying over the ADIZ end of January.

Street Bytes

--The Dow Jones lost 0.4% on the week to close at 16020, while the S&P 500 literally lost a fraction of one point and Nasdaq gained 3 points (0.1%) to close at 4062.

--U.S. Treasury Yields

6-mo. 0.09% 2-yr. 0.30% 10-yr. 2.86% 30-yr. 3.89%

The 10-year initially reacted to the solid labor report by moving above 2.90% but backed off some, though the yield ended up from 2.74% the prior week.

--U.S. auto sales in November were at the strongest pace in six years, up 9% to an annualized rate of 16.4 million vehicles, the best since February 2007, according to Autodata Corp. But Ford Motor Co. announced it was idling two Michigan factories an extra week during the holidays to cut back on inventories.

Nonetheless, Ford’s sales rose 7%, Chrysler’s were up 16%, and General Motors’ increased 14%. Toyota and Nissan saw gains of 10% and 11%, respectively, though Honda’s fell less than 1%. Volkswagen Group of America saw its sales plummet 16%. [See above GDP report and the surge in this category.]

--Editorial / Washington Post

“Judge Steven W. Rhodes’ decision to allow Detroit to file for municipal bankruptcy may prove to be a landmark in the history of urban America. This is only partly because it enables the fabled Motor City to make a desperately needed ‘fresh start,’ as Judge Rhodes put it. Hemorrhaging population, plagued by inadequate public services and saddled with $18 billion in debt, Detroit had little alternative but to seek permanent relief from its creditors. Now the city is that much closer to the day when it can implement emergency manager Kevyn D. Orr’s farsighted plan for reactivating vital functions such as police, street illumination and derelict housing clearance.

“The case gets its potentially historic significance from Judge Rhodes’ holding that the city may reduce pension payouts to public-union workers as part of a settlement with creditors. It’s the first time that a federal court has concluded that Chapter 9 of the federal bankruptcy code trumps state-law protections for public-worker pensions, even in states, including Michigan, that had purported to shield them via a state constitutional provision.”

Needless to say, the public employees are not happy.

--And public employees in the state of Illinois aren’t happy either as the state legislature finally passed a pension reform package to deal with the state’s $100 billion unfunded pension liability, the worst in the U.S. The bill raises retirement ages, limits the portion of salaries on which pensions are based, and reduces or suspends cost-of-living increases for retirees. Put it all together and immediately Illinois’ unfunded liability would be cut to $79 billion.

--Overall, public pension funds are recovering rapidly thanks to the soaring stock market. This is good.

--China Mobile, the world’s largest carrier by users, with over 700 million subscribers, has finally signed a deal with Apple to offer iPhones on its network, effective by end of the month, obviously a huge boost for Apple, which has struggled in China amid competition from lower-cost rivals.

Separately, according to market researcher Gartner, Samsung shipped 32.1% of all smartphones world-wide in the third quarter, unchanged from a year earlier, while Apple’s market share slipped to 12.1% from 14.3%. Samsung also has 21% of the market in China compared with Apple’s 6%. [Apple’s numbers, though, will increase in the fourth quarter because of its new product introductions.]

--IDC said global shipments of personal computers would fall 10.1% this year, the “most severe yearly contraction on record.” It’s all about tablets and smartphones.

--Yes, Amazon CEO Jeff Bezos is a brilliant marketer, taking advantage of a piece on “60 Minutes” to unveil a pet project, a drone that would deliver packages within 30 minutes of customers placing an order, though it will take years not only to perfect the technology, but also to get Federal Aviation Administration approval.

Bezos said drones could carry packages up to five pounds, which cover 86% of the items the company currently delivers.

--Gasoline prices have been rising again amid stronger demand, though for the week ended Nov. 29, the Energy Information Administration said supplies had risen significantly, too.

But OPEC kept its production ceiling unchanged Wednesday despite the threat of rising supplies, not only from U.S. shale production, but also from Iran and Iraq, both of which have vowed to boost production regardless of OPEC targets.

Iran, for example, assuming it successfully rolls back sanctions, will raise production aggressively, while Iraq plans to increase production 1 million barrels a day next year to 4m b/d.

In turn it would be Saudi Arabia, producing more than 10m b/d, that would be forced to cut back if it wanted to avoid a price war.

--Regular wages in Japan fell 0.4% in October from a year earlier, the 17th straight monthly decline, even as, overall, the country now has inflation. But this wage component is not good as Prime Minister Abe prepares the people for April’s sales tax increase; Abe relying on growth in consumption to pick up for the inevitable shortfall resulting from the tax hike.

--Australia’s economy grew by 0.6% in the third quarter over the second, 2.3% year-on-year, a little less than expected. A slowdown in mining and demand for commodities continues to hamper growth here.

--Australian airline Qantas had its credit rating cut to “junk” by S&P, this as Qantas issued a surprise profit warning and announced it was laying off 1,000. The airline is suffering from increased competition in particular. Australia’s Prime Minister Tony Abbott also indicated the government was unlikely to give Qantas any aid. While it was an iconic company, it’s a private one, said Abbott, and it “must run itself competently and profitably.” The company’s shares tanked 15% on all the news.

--South Korea’s November PMI on manufacturing rose to 50.4; Taiwan’s surged to 53.4.

--Brazil’s economy contracted a worse than expected 0.5% in Q3. Brazil has been hurt by its slumping agriculture sector. Growth for the full year is projected at about 2%.

--The European Commission fined eight banks a total of 1.7 billion euros for forming an illegal cartel to rig interest rates. UBS and Barclays would have paid huge fines but avoided them because they assisted in the investigation. The others involved were RBS, Deutsche Bank, which received the biggest fine of 725 million euros, Societe Generale, JPMorgan, Citibank and the brokers RP Martin.

--China took a tough stance on Bitcoin, ruling it is a virtual product, not a currency, and barred its banks from doing any kind of business in it, adding Bitcoin makes money laundering easy and it can be used to support terrorism. But the government stopped short of banning it altogether, saying people were free to buy and sell it at their own risk. Within an hour of the pronouncement, the Chinese value of Bitcoin plunged 10%.

--California continues to be a tale of two states, according to economists at UCLA. For example, the coastal regions are seeing solid job growth while inland areas continue to struggle. This is reflected in the housing market, where in Los Angeles County, prices are 23% under their bubble peak (16% in Orange County), but the median home price in Riverside County was 38% below the bubble peak in October.

--J.C. Penney announced late Thursday it was facing an SEC inquiry on its liquidity, cash position and debt financing. Shares fell sharply on the news, after rallying earlier in the week on word its same-store sales had risen 10% in November.

--According to the Institute for College Access and Success, more than 70% of college graduates in 2012 had student loans and their average debt surpassed $29,000 ($29,400, up from $23,450 in 2008).

--JPMorgan Chase warned 465,000 holders of pre-paid cash cards issued by the bank that their personal data may have been hacked. The attack on JPM’s network first occurred in July but wasn’t detected until September. The bank said it found no evidence money was taken from accounts, but issued the warning because it could not be sure which accounts had been breached.

--From Erik Larson / Bloomberg

“Bernard Madoff’s deputies made fake paperwork showing trading losses to save $1.7 million owed to an investor who died with ‘too much money’ in his account even as the firm was being flooded with new customers in the 1990s, the con man’s former finance chief told a jury....

“ ‘When someone dies, that’s a problem’ for the scheme, said (Frank) DiPascali.”

Madoff can’t die in prison soon enough. 

--Newsweek announced it plans to return to print form in January or February. Interesting. The magazine said it would rely on subscribers more than advertisers to pay the bills.

--According to Ghostery, a company that monitors online tracking, “Nearly 900m internet users were tracked by hundreds of third-party internet and advertising companies when they visited pornographic sites this summer.

“Those tracking details can include information about the URL of the site, how long a person stays on the site and how many clicks they make there.” [Emily Steel / Financial Times]

About a quarter of online searches, according to analyst estimates, are for porn. [Discuss amongst yourselves.]

--Former Tyco CEO Dennis Kozlowski has been scheduled for parole starting Jan. 17 after what will have been 8 1/3 years in prison for conspiracy, falsifying records and all other manner of crimes. Former CFO Mark Swartz was released in October after serving a similar sentence.

--In a global education survey known as Pisa, run by the Organization for Economic Co-operation and Development (OECD), the United States ranked 26 in math, 21 in science, and 17 in reading. China (Shanghai) was number one overall, followed by Singapore.

--In an annual survey by Transparency International, New Zealand and Denmark were ranked the least corrupt, followed by Finland, Sweden, Norway, Singapore, Switzerland, the Netherlands, Australia and Canada.

The U.S. was tied for 19 with Uruguay among 177 countries ranked. China was 80, Russia 127.

Foreign Affairs

Iran: The interim nuclear accord engineered in Geneva Nov. 24 still has not formally been implemented. Iran’s envoy to the International Atomic Energy Agency said it would begin to comply around the beginning of January after further discussions with the P5+1. The initial goal is to establish a schedule of inspections by the IAEA experts.

Meanwhile, Israeli Prime Minister Netanyahu has ordered his intelligence agencies to seek out signs of non-compliance by Iran, particularly with regards to explosives development and ballistic-missile work.

Various surveys show Americans supporting the interim deal by about 2-to-1, while in a poll of Israelis conducted by the Israel Democracy Institute (IDI) and Tel Aviv University, only 18% said they believe the agreement will lead to the end of Iran’s nuclear weapons program, while 77% think the deal will fail.

As for Congress, the Senate returns Monday and debate on further sanctions will pick up again, though most believe any new ones would not take effect until after the interim agreement period, six months, runs its course. During the six months all parties are supposed to be working on a final deal.

David Albright, a former weapons inspector and founder of the Institute for Science and International Security, a think-tank in Washington, D.C., “says a final deal will have to require Iran to abandon the Arak reactor – perhaps replacing it with one of a different design that has safeguards built in – and close its Fordow enrichment site, which is buried deep beneath a mountain and thus very hard to bomb. Iran would also have to adhere to the Additional Protocol of the NPT (Nuclear Non-Proliferation Treaty), giving IAEA inspectors enhanced rights of access to ensure that it is not cheating.” [The Economist]

George Will / Washington Post

“Critics of the agreement with Iran concerning its nuclear program are right about most things but wrong about the most important things. They understand the agreement’s manifest and manifold defects and its probable futility. Crucial components of Iran’s nuclear infrastructure remain. U.S. concessions intended to cultivate the Iranian regime’s ‘moderates’ are another version of the fatal conceit that U.S. policy can manipulate other societies. As is the hope that easing economic sanctions would create an Iranian constituency demanding nuclear retreat in exchange for yet more economic relief. Critics are, however, wrong in thinking that any agreement could control Iran’s nuclear aspirations. And what critics consider the agreement’s three worst consequences are actually benefits.

“The six-month agreement, with ongoing negotiations, makes it impossible for the United States to attack its negotiating partner. Hence the agreement constrains Israel, which lacks the military capacity to be certain of a success commensurate with the risks of attacking Iran. Therefore there is no alternative to a policy of containment of a nuclear Iran....

“The agreement will not stop Iran from acquiring nuclear weapons; only a highly unlikely Iranian choice can do that. The agreement may, however, prevent a war to prevent Iran from acquiring such weapons....we have two choices, war or containment. Those who prefer the former have an obligation to clearly say why its consequences would be more predictable and less dire than those in the disastrous war with Iraq.”

Jeffrey Goldberg / Bloomberg

“Why support (the interim agreement)? Because, so far, the remote possibility that this agreement will lead to the denuclearization of Iran beats the alternative: military action by the U.S. or, worse, by Israel. All options should be on the table, but, really, the military option could be disastrous.

“Here are six reasons to be worried about the strength of this interim deal...

“1. The deal isn’t done. Remember the photos from Geneva of smiling foreign ministers slapping backs and hugging in celebration of their epic achievement? Well, nothing was actually signed. The deal is not, as of this moment, even operational....

“2. Momentum for sanctions is waning. It’s true that the economic relief the Iranians will receive in this deal is modest, but it is also true that many nations, many companies and the Iranians themselves are seeing this agreement as the beginning of the end of the sanctions regime. [Ed. see Iran’s moves on the OPEC front above.]....

“3. The (still unenforced) document agreed to in Geneva promises Iran an eventual exit from nuclear monitoring.... This is not a comforting idea.

“4. The biggest concession to the Iranians might have already been made. Although it is the West’s position that it has not granted Iran the so-called right to enrich, the text of the interim agreement states that the permanent deal will ‘involve a mutually defined enrichment program with mutually agreed parameters.’ Essentially, Barack Obama’s administration has already conceded, before the main round of negotiations, that Iran is going to end up with the right to enrich.....

“5. The Geneva agreement only makes the most elliptical references to two indispensable components of any nuclear-weapons program. The entire agreement is focused on the fuel cycle, but there is no promise by Iran in this interim deal to abstain from pursuing work on ballistic missiles or on weaponization. A nuclear weapons program has three main components: the fuel, the warhead and the delivery system. Iran is free, in the coming six-month period of the interim deal, to do whatever it pleases on missiles and warhead development.

“6. The Iranians are so close to reaching the nuclear threshold anyway – defined here as the ability to make a dash to a bomb within one or two months from the moment the supreme leader decides he wants one – that freezing in place much of the nuclear program seems increasingly futile. When asked this week by al-Jazeera about the impact of sanctions, the very smart Iranian foreign minister, Mohammad Javad Zarif, said, ‘When sanctions started Iran had less than 200 centrifuges. Today Iran has 19,000 centrifuges so the net product of the sanctions has been about 18,800 centrifuges that has been added to Iran’s stock of centrifuges, so sanctions have utterly failed.’....

“One of Israel’s most prominent experts on the Iranian nuclear program, a former military intelligence chief named Amos Yadlin, said this week that ‘Iran is on the verge of producing a bomb. It’s sad, but it’s a fact.’ Yadlin suggested that no one, and no agreement, can stop Iran from reaching the nuclear threshold. I fear he is right.”

Yadlin is. Just as I told you in August 2012 it was already too late in Syria, it has long been too late with regards to Iran’s nuclear program.

Israeli Finance Minister Yair Lapid, echoing Prime Minister Netanyahu:

“When people wonder why we have been so loud against this agreement with Iran it is because for us it is not academic or theoretical, it is existential. Here is a regime that has been loud, not about a dispute with Israel, but rather about its wish and commitment to the destruction of Israel.” [Jerusalem Post]

Syria: The head of the Free Syrian Army, the official rebel force, General Salim Idriss, said the battlefield in Syria was now a three-way tussle between the regime, the rebels and groups linked to al-Qaeda. Idriss, perhaps significantly, signaled he no longer required President Assad’s removal from power as a precondition of peace talks, saying his rebel force had declared war on al-Qaeda and was willing to join arms with government forces to defeat them once Assad has been ousted.

Idriss is intriguing from the standpoint that he appears to be sending a message to the military that they wouldn’t “suffer the kind of de-Baathification that disbanded the Iraqi Army after the fall of Saddam Hussein, with disastrous consequences.” [Tom Coghlan and Catherine Philp / London Times]

Meanwhile, the United Nations warned the number of Syrian children deemed to be at risk has grown to 4.3 million, with a further 1.2 million being refugees...5.5 million out of a pre-conflict population of 9 million.

Additionally, the U.N. commissioner for human rights, Navi Pillay, said investigators had “produced massive evidence” of atrocities and abuses perpetrated by both sides in the war, adding “evidence indicates responsibility at the highest level of government, including the head of state.”

The Syrian Observatory for Human Rights said the death toll had risen to at least 125,000, with at least a third of those killed civilians.

Daniel Henninger / Wall Street Journal

“ ‘We have communicated in no uncertain terms with every player in the region that that’s a red line for us and that there would be enormous consequences if we start seeing movement on the chemical weapons front or the use of chemical weapons.’ – Barack Obama, Aug. 20, 2012....

“What would you rather be: an American lost inside an ObamaCare exchange or a Syrian rebel? No matter who gets touched by the helping hand of Barack Obama, the problem is not merely the broken promise but the chaos that follows the break....

“In August, Bashar Assad gassed and killed some 1,400 people, many children. He crossed the famous Obama ‘red line.’ John Kerry, Susan Rice and Samantha Power gave powerful speeches about the need to respond. Policy makers in Washington, Paris, Riyadh, Jerusalem and Damascus expected the U.S. to hit Assad’s air-force assets.

“Didn’t happen. Mr. Obama pivoted to Russian President Vladimir Putin’s idea that Assad would let his cache of chemical weapons be destroyed.

“The first tangible result of this post-red-line deal was that the Syrian civil war evaporated from the news. The war didn’t stop; it vanished.”

So as I’ve been writing, now that we have hold of the chemical weapons, we need to destroy them but not one country stepped up to accept them.

Henninger:

“So on Sunday of Thanksgiving weekend the Obama White House put out Plan B.

“It’s somehow going to move the most lethal chemicals – mustard gas, sarin, VX – to a ship outfitted ‘with field deployable hydrolysis system technology,’ sail out onto the ocean somewhere and destroy the stuff with neutralizing caustic chemicals. Where are the save-the-whales people when you need them? Even the ocean has to take the fall for another Obama policy lurch.”

Lebanon: A top Hizbullah commander was assassinated outside his home near Beirut, with Hizbullah immediately blaming Israel. Israel denied it was involved, though apparently has tried to take out al-Lakkis before.

Instead, a group calling itself the “Free Sunni Brigades in Baalbek” claimed responsibility for “this heroic, jihadist operation.” Further confusing matters, Lakkis was buried in Baalbek.

Whoever carried it out, the killing was all about the war in Syria and Hizbullah’s ongoing support of Bashar Assad.

Separately, the Lebanese Army was struggling to gain control in second-city Tripoli after violence between pro- and anti-Assad forces took at least another 12 lives in the latest fighting.

Iraq: The death toll is over 8,000 this year with the U.N. seeing a rise in “execution-style” killings, another sign the country is sliding back into full-scale civil war between Sunni and Shiite factions.

Ukraine: Protests grew in Kiev over the government’s decision to reject a historic pact with the European Union with President Yanukovych trying to stamp out the biggest demonstrations since 2004’s Orange Revolution. Significantly, three former leaders, Leonid Kravchuk, Leonid Kuchma and Viktor Yushchenko, signed a joint statement that read in part:

“We express solidarity with the peaceful civic actions of hundreds of thousands of young Ukrainians. For the first time, the Ukrainian people have come out on the streets with an apolitical demand that has unprecedented mass support.”

Yanukovych survived a no-confidence vote in parliament after some members demanded his resignation.

World heavyweight boxing champion Vitali Klitschko said he was ready to lead the opposition movement. Klitschko had founded his own political party, Udar – Punch - three years ago but many say he’s not ready for prime time, though at 6’ 7”, he certainly presents a towering figure at Independence Square in Kiev. It was he who last Sunday, when protests turned violent, waded into the crowds to urge calm and it worked.

Asked if he was prepared to assume command of the protesters, Klitschko said: “I am ready to take responsibility. I know that we are fighting for the future in our country and I know it’s a very tough fight and a fight without rules.”

At week’s end, President Yanukovych appeared to be ready to bring forward the scheduled 2015 presidential elections as a way of defusing the crisis, while Russian Foreign Minister Sergei Lavrov slammed NATO for issuing a resolution condemning the “excessive use of force” by Ukrainian police against the protesters. “We encourage everybody not to interfere” in the situation in Ukraine, he said, adding, “I do not understand why NATO adopts such statements.”

For his part, President Putin rewarded Ukraine for its refusal to sign the pact with the EU by granting it a massive credit line for its gas imports this winter.

[Lavrov also said the nuclear agreement with Iran makes a missile defense shield in Europe unnecessary. This is going to be a big issue over the coming six months.]

Charles Krauthammer / Washington Post

“After years of negotiations for a major trading agreement with the European Union, Ukraine succumbed to characteristically blunt and brutal economic threats from Russia and abruptly walked away. Ukraine is instead considering joining the Moscow-centered Customs Union with Russia’s fellow dictatorships Belarus and Kazakhstan.

“This is no trivial matter. Ukraine is not just the largest European country, it’s the linchpin for Vladimir Putin’s dream of a renewed imperial Russia, hegemonic in its neighborhood and rolling back the quarter-century advancement of the ‘Europe whole and free’ bequeathed by America’s victory in the Cold War.

“The U.S. response? Almost imperceptible. As with Iran’s ruthlessly crushed Green Revolution of 2009, the hundreds of thousands of protesters who’ve turned out to reverse this betrayal of Ukrainian independence have found no voice in Washington. Can’t this administration even rhetorically support those seeking a democratic future, as we did during Ukraine’s Orange Revolution of 2004?

“A Post online headline explains: ‘With Russia in mind, U.S. takes cautious approach on Ukraine unrest.’ We must not offend Putin. We must not jeopardize Obama’s precious ‘reset,’ a farce that has yielded nothing but the well-earned distrust of allies such as Poland and the Czech Republic whom we wantonly undercut in a vain effort to appease Russia on missile defense.”

Meanwhile, former prime minister Yulia Tymoshenko remains in prison.

China, part deux: Pollution in Shanghai was at record levels on Friday. At one point, children and the elderly were advised to say home. It’s so bad that a cold front that you would think would blow the pollutants out to sea instead brought more into the region and expanded the smog, according to the South China Morning Post. Even in Fujian, which is not a heavily industrialized province south of Shanghai, had visibility reduced to 500 meters in parts of the territory. China’s pollutants also continue to spread to South Korea and Japan.

Back to Vice President Biden’s trip, he raised the issue of American journalists in China who are facing increasing pressures, with some two dozen about to be expelled, according to the New York Times.

“Innovation thrives where people breathe freely, speak freely, are able to challenge orthodoxy, where newspapers can report the truth without fear of consequences,” Biden said in a speech to an American business group.

China has not acted to renew two dozen visas of reporters with the Times and Bloomberg that are up this month.

North Korea: Kim Jong Un’s uncle, Jang Song Thaek, who was thought to be de facto No. 2 in importance in the Hermit Kingdom, is believed to have been purged, with two of his associates executed, though South Korean intelligence officials have no idea why Jang fell out of favor.

What’s clear is that there is an ongoing power struggle and if Kim feels insecure, he could decide to lash out at South Korea to deflect attention away from his internal problems.

Separately, Pyongyang opted to "deport" 85-year-old American Merrill Newman on Friday in what appears to be a case of mistaken identity...the North Koreans believing they had a different Merrill Newman, both of whom served in the Korean War.

South Korea: U.S. Democratic Senators Dianne Feinstein and Robert Menendez, respectively the chairs of the Senate’s intelligence and foreign affairs committees, issued a joint letter objecting to a deal signed in South Korea by Huawei Technologies, the Chinese telecommunications giant, saying that “maintaining the integrity of telecommunications infrastructure” was critical to the U.S.-South Korea alliance.

Congress has long objected to Huawei expanding in the United States but I am very uncomfortable with what Feinstein and Menendez are doing in relation to an ally.

It is probably right to have suspicions about Huawei, but with the recent Snowden revelations on U.S. spying on our allies, it is a bit hypocritical, and dangerous, to take such a stance against the likes of South Korea.

For one simple reason...it will boomerang on us in terms of U.S. business interests, particularly in high tech. The likes of Cisco Systems and IBM have already seen substantial slowdowns in their business with China.

Thailand: Anti-government protesters took time off to celebrate their beloved King’s birthday. We’ll see if demonstrations resume this weekend.

Russia: U.S. prosecutors in Manhattan brought charges against 49 current and former Russian diplomats and their family members for participating in a scheme to get health benefits (through Medicaid) intended for the poor by lying about their income. U.S. Attorney Preet Bharara said, “Diplomacy should be about extending hands, not picking pockets in the host country.”

Britain: I like Prime Minister David Cameron, but talk about a suck up. He went to Beijing and was practically licking their boots, pledging to lead a “dialogue of mutual respect and understanding,” Cameron wrote in a Chinese news magazine prior to his visit: “Put simply, there is no country in the western world more open to Chinese investment, more able to meet the demands of Chinese consumers, or more willing to make the case for economic openness in the G8, the G20 and the European Union.”

Yemen: Al-Qaeda claimed responsibility for a coordinated suicide attack on the Defense Ministry that killed 52 on Thursday, including two German and two Vietnamese doctors.

Brazil: The World Cup is going to be a disaster next year. After the construction accident at the main stadium about ten days ago, soccer’s ruling body, FIFA, said three of the World Cup stadiums will not be ready by the end of December as requested. The venue in Sao Paulo where the crane collapsed won’t be ready until it would seem March, with the Cup opening June 12.

But the biggest issue facing organizers is going to be dealing with the mass protests surrounding the event that are bound to break out; demonstrations about the money being spent on both the World Cup and the 2016 Olympics that should be spent on the poor and infrastructure, such will be the theme.

Venezuela: Sunday’s local elections are a huge test for the Maduro government. I have no read on this.

Mexico: A truck carrying medical radioactive material, Cobalt-60, was stolen and then recovered, though the protective covering had been removed, with the International Atomic Energy Agency saying this guaranteed that whoever did so, unwittingly, will die. Theoretically, the material could be used in a dirty bomb, but because the protective covering was so carelessly removed, that does not appear to have been the intent.

And this just in...six suspects were arrested and were placed in the hospital. No word on their condition.

Random Musings

--In an attempt to direct attention away from the ObamaCare re-launch, the president gave remarks on Wednesday in which he laid out his agenda for his remaining 37 months in office, including pressing for a higher minimum wage, more spending on childhood education and an overhaul of immigration laws.

“We know that people’s frustrations run deeper than these most recent political battles. Their frustration is rooted in their own daily battles, to make ends meet, to pay for college, buy a home, save for retirement. It’s rooted in the nagging sense that no matter how hard they work, the deck is stacked against them. And it’s rooted in the fear that their kids won’t be better off than they were.”

They won’t be. Just don’t tell ‘em.

But as the Washington Post’s Zachary A. Goldfarb noted, “the president offered little sense of how he might achieve his long-sought economic goals. Instead, the speech – coming at the end of a difficult and politically damaging year – was designed to help define a populist argument that he and other Democrats can carry into upcoming legislative battles and into next year’s midterm elections.”

Needless to say some centrists in the Democratic Party, especially those in tight races, can’t be pleased.

Brendan Buck, spokesman for House Speaker John Boehner, said in an e-mail Wednesday:

“It should be no surprise why (Obama’s) approach has left more Americans struggling to get ahead. The president’s economic policies promote government reliance rather than economic mobility. Rather than tackling income inequality by lifting people up, he’s been fixated on taking some down.”

Obama also had to acknowledge widening income inequality and declining mobility have worsened under his watch.

Editorial / Wall Street Journal

“Mr. Obama returned to his favorite theme of rising income inequality on Wednesday, which he called ‘the defining challenge of our time.’ He ought to know since few presidents have done more to increase inequality than he has. Median household income has fallen since the economic recovery began, while the rich who own capital assets have done very well thanks to the Federal Reserve’s focus on reflating stock and home prices. Mr. Obama is the Chief Economist of Nottingham posing as Robin Hood.

“The president’s political purpose here is what the pros call rallying your base. Many Democrats are as dismayed as Republicans at ObamaCare’s rollout, so the White House wants to change the subject and give MSNBC viewers something else to debate. Mr. Obama didn’t have much new to offer that would help the economy or the middle class, so instead he’s decided to escalate that hardy liberal perennial, the minimum wage....

“Economist David Neumark, an expert on minimum-wage economic studies, says that an economic rule-of-thumb is that every 10% increase in the minimum wage reduces teen employment by about 1% to 3%. In October the U.S. teen jobless rate was 22.2% and for black teens it was 36%. The Obama minimum wage combined with the health mandate could mean up to a 10% reduction in jobs for the poor and young. Liberals must care deeply about inequality because their policies do so much to increase it....

“Steve Israel, who runs the Democratic Congressional Campaign Committee, is telling donors that the minimum-wage issue will lift liberal voter turnout in 2014, help Americans forget about losing their health insurance, and save the jobs of imperiled Democrats. If that means fewer jobs for the young and least skilled, so be it.”

--Barton Gellman and Ashkan Soltani / Washington Post

“The National Security Agency is gathering nearly 5 billion records a day on the whereabouts of cellphones around the world, according to top-secret documents and interviews with U.S. intelligence officials, enabling the agency to track the movements of individuals – and map their relationships – in ways that would have been previously unimaginable.”

Yes, more documents released by Edward Snowden, in this instance to the Post.

“The NSA does not target Americans’ location data by design, but the agency acquires a substantial amount of information on the whereabouts of domestic cellphones ‘incidentally,’ a legal term that connotes a foreseeable but not deliberate result....

“In scale, scope and potential impact on privacy, the efforts to collect and analyze location data may be unsurpassed among the NSA surveillance programs that have been disclosed since June. Analysts can find cellphones anywhere in the world, retrace their movements and expose hidden relationships among the people using them.”

Of course officials say this is only about developing intelligence about foreign targets. Yeah, right.

But this in no way means I support what Snowden has done. To the contrary, his releases have been most destructive to U.S. foreign policy, and I do not doubt, as stories hinted this past week, that what he is holding back is potentially multiple times more damaging.

As for the role of the press in the disclosures, a British parliamentary committee grilled Guardian editor Alan Rusbridger for distributing documents received from Snowden. At one point Rusbridger was asked whether he loved his country and if he would have told the Nazis that Britain had cracked the Enigma code.

Under the UK’s Terrorism Act, it is a crime to communicate information about a member of the intelligence services “which is of a kind likely to be useful to a person committing or preparing an act of terrorism.” [Sydney Morning Herald]

Lastly, Tim Berners-Lee, the inventor of the worldwide web, has joined a campaign to encourage people to fight back against government censorship and surveillance. Lee (Sir Tim, to be proper), has been warning for years about governments moving away from the founding principles of the web, which turns 25 in 2014.

--In a CNN/ORC International poll, New Jersey Republican Gov. Chris Christie receives 24% of Republicans and independents for 2016 vs. 13% for Kentucky Sen. Rand Paul. Texas Sen. Ted Cruz was at 10% and Florida Sen. Marco Rubio 9%.

On the Democratic side, Hillary Clinton drew 63% vs. a miniscule percentage for Joe Biden (and 7% for Elizabeth Warren).

--President Obama has headlined 38 events for the major Democratic Party committees this year, twice as many as 2009. [Julie Bykowicz / Bloomberg]

--In a depressing analysis from Alzheimer’s Disease International ahead of the G8 dementia summit in London next week, the number of people living with dementia worldwide is set to triple by 2050.

The organization says increasing life expectancies will lead to a surge in dementia in poor and middle-income countries, particularly in Southeast Asia and Africa. 71% of cases by 2050 are expected to be in such countries.

Professor Igor Rudan, a professor of epidemiology at the University of Edinburgh in Scotland, who does work with the World Health Organization, had an interesting point in relation to his work on new data emerging from China; it just may be that the human brain isn’t designed to function well past age 85, when about 40% of people have dementia.

“It seems to be our own biological limit,” he said. “It will affect us all, and unless we figure out what to do about it, we are going to be in trouble.” [Karen Weintraub / USA TODAY]

--Interesting piece by Justin Juozapavicius of the AP on how Oklahoma is stepping up precautions for earthquakes. As in I had no idea that from 1975-2008, the state had just a handful of 3.0 or greater quakes.

“But the average grew to around 40 annual earthquakes from 2009 to 2013.”

More than 200 magnitude-3.0 or greater earthquakes have hit the state’s midsection since 2009. Many are centered near Oklahoma City.

[It’s not necessarily about drilling for oil and gas... researchers aren’t sure what the cause is.]

--London’s Daily Mail reported that for much of the 1960s and 1970s, the secret launch code for unleashing U.S. strategic nuclear missiles “was shockingly simple: 00000000.”   [Global Security Newswire]

Bruce Blair, noted nuke expert who was also an Air Force ICBM launch-control officer back in the day, said: “Our launch checklist in fact instructed us, the firing crew, to double-check the locking panel in our underground launch bunker to ensure that no digits other than zero had been inadvertently dialed into the panel.”

As the National Journal reported: “Blair in 1977 wrote an article theorizing that just four terrorists could be capable of gaining control of a Minuteman nuclear missile launch-control bunker. The secret launch code was changed the same year.”

--New York City Mayor-elect Bill de Blasio selected William Bratton as his police commissioner, a good move. This will be Bratton’s second stint in the position. When he first became commissioner in 1994, the city had seen 1,946 homicides the prior year. This year there have been 307 through Monday. Bratton, at least initially, is being charged by de Blasio with improving community relations, in light of the stop-and-frisk controversy that de Blasio trumpeted in his campaign.

Of course these days Bratton’s real primary job is on the counterterrorism front.

--Pope Francis is establishing a special commission to advise the Catholic Church on the sexual abuse of children, a major step. Speaking for the pope, Cardinal Sean O’Malley of Boston said the panel would include both laypeople and clergy.

--I have been railing about China and it not doing enough to stop the poaching of elephants, seeing as the vast majority of ivory is headed there, but this week China agreed to define the trade of elephant tusks as a serious crime. China is among 30 nations that supposedly will coordinate their efforts, including Kenya, Zambia, Botswana, Zimbabwe and Vietnam, the last one being a major transit state.

At last half a ton of ivory has been found in 18 separate seizures around the world thus far this year.

--What a tragedy on the Metro-North Railroad and the train crash Sunday morning, with the train hurtling off the rails when it was traveling 82 miles per hour entering a 30 mph zone. At last word, the engineer fell asleep. He had recently changed the time of his shift. There are new (and even old) technologies that could have helped, if not prevent the crash, but Metro-North has never been an operation to readily adopt the latest in high-tech and it shows. It has an abysmal recent safety record.

So Friday the feds stepped in and announced they were cracking down on the railroad and demanding changes.

--Iceland has a population of about 320,000. On Monday, police shot dead a gunman who had been threatening his neighbors. It was the first time armed police have killed someone in the nation. Ever. 

--So what happened to comet ISON? We’ll learn more this coming week, but it seems much of it was indeed destroyed on its trip around the sun. Oh well. Stuff happens.

--Nelson Mandela was a highly successful one-term president, just like one of the most underrated Americans of all time, the 11th president of the United States, James K. Polk.

--I’m getting a kick out of those who are saying, ‘But Mandela was a Marxist...and Mandela praised Fidel Castro...and....’

I saw Bill Clinton being interviewed by Wolf Blitzer and Wolf asked Clinton about the Castro comments. Clinton said Mandela was “fiercely loyal” to those who supported him while he was in prison. 

That’s all I need. If you were stuck in a cell for 27 years and you heard someone was supporting you, you’d be loyal to them too. Remember, many of America’s leaders were supporters of the apartheid government.

--Nelson Mandel on poverty, July 2005:

“Overcoming poverty is not a gesture of charity. It is an act of justice. It is the protection of a fundamental human right, the right to dignity and a decent life. While poverty persists, there is no true freedom.”

--Finally, I quoted Pope Francis extensively last week to give you some food for thought. I also provided some balance with a countering opinion. Sure, it’s liberal thinking, but Rush Limbaugh’s critique verged on the comical. Limbaugh, who isn’t Catholic (as I am), said he admires the faith “profoundly,” as well as the Pope, “up until this.” 

I will have some personal thoughts in two weeks as part of a Christmas message.

For now, there was a story circulating this week that Pope Francis has been venturing out unannounced in the middle of the night to give money to the poor of Rome, in keeping with his time ministering to the poor of Buenos Aires.

---

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

God bless America.

---

Gold closed at $1230
Oil, $97.65...up $5

Returns for the week 12/2-12/6

Dow Jones -0.4% [16020]
S&P 500 -0.0% [1805]
S&P MidCap +0.4%
Russell 2000 -1.0%
Nasdaq +0.1% [4062]

Returns for the period 1/1/13-12/6/13

Dow Jones +22.2%
S&P 500 +26.6%
S&P MidCap +28.3%
Russell 2000 +33.2%
Nasdaq +34.5%

Bulls 57.1
Bears 14.3 [Source: Investors Intelligence...another all-time low]

Dr. Bortrum posted a new column.

Next week I’m coming to you from Kiawah, S.C. [Won’t be too focused on work, I must say.]

Catch me on Twitter @stocksandnews

Brian Trumbore




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Week in Review

12/07/2013

For the week 12/2-12/6

[Posted 12:00 AM ET]

Nelson Mandela, RIP

Editorial / Bloomberg

“The great conciliator is gone. Nelson Mandela, whose unbreakable spirit and shining magnanimity knit together a South Africa torn by centuries of racism and exploitation, died today at 95.

“Mandela will rightly be remembered as a paragon of reconciliation, a man who, as former U.S. President Bill Clinton put it in 2012, ‘was willing to share the future even with the people who imprisoned him.’ He was the president who accepted his former adversary, apartheid’s last president, F.W. de Klerk, as his deputy; the democratic socialist who refused calls to nationalize industries and sought to lure foreign investment; the former black prisoner who, as De Klerk said, ‘won the hearts of millions of white rugby fans’ by famously celebrating the 1995 triumph of the Springboks, South Africa’s once-boycotted rugby team

“Always his goal was to unite, not divide. His moral leadership, in turn, made possible South Africa’s rapid transition from a sanctioned pariah to an emerging-market powerhouse.”

Editorial / Washington Post

“Roosevelt, Stalin, Churchill, Hitler – these were the names that, for much of the world, defined the first half of the 20th century, the most destructive era in history.

“Gandhi, King, Mandela – these, it could be argued, are the figures who will live longest in the public consciousness as we look back on the postwar world: leaders who had no real armies to speak of and who wielded little power in office but who helped create a new ethic through the power of their ideas and the example of their lives.”

Archbishop Desmond Tutu:

“He was amazing in his selfless altruism for others, recognizing – just as did a Mahatma Gandhi or a Dalai Lama – that a true leader exists not for self-aggrandizement but for the sake of those he or she is leading.”

U.S. President Barack Obama:

“He achieved more than could be expected of any man. Today he’s gone home and we’ve lost one of the most influential, courageous and profoundly good human beings that any of us will share time with on this earth.”

Mandela, along with F.W. de Klerk, was awarded the Nobel Peace Prize in 1993. Others have deserved it, no one deserved it more. He singlehandedly prevented massive bloodshed in South Africa with his relentless efforts to reconcile his nation. A true hero. A titanic figure whose story needs to be told for centuries to come.

Washington and Wall Street

Friday’s November jobs data seemed to be what the market wanted, good news...and good news treated as good, not bad, the latter being so often the case on the Street.

In adding 203,000 jobs for November, a little better than the consensus 180,000, with a 196,000 figure for the private sector, the jobless rate also fell to 7.0%, the best since November 2008 and very near the Fed’s stated threshold of 6.5% for raising the short-term funds rate off zero. Additionally, the ‘underemployment’ rate fell from 13.8% to 13.2%. All good.

You also had another strong ISM reading on manufacturing for November, 57.3 vs. an expected figure of 55.0, thus continuing a pattern of very solid performance for the sector. [The ISM service reading of 53.9, however, was below expectations but nothing too worrisome, though emblematic of a weak retail environment.]

Thursday saw an upward revision to third quarter GDP, from 2.8% to 3.6%, far exceeding the estimate of an increase to 3.1%. This is good, right? Well, yes, for now, but the increase was the result of the biggest surge in inventories since 1998, while the consumption component (the consumer being 70% of the economy) was up only 1.4%, the smallest gain since Q4 2009. With the huge build in inventories we are taking from fourth- and first-quarter GDP, it would certainly seem, with most analysts now expecting the October-December period to reflect 1.5% to 2.0% GDP growth. That said we’ll take the 3.6%.

Auto sales for November were strong (addressed further below), and the new home sales data for October reflected the biggest one-month rise since May 1980, some 25.7%. [September’s number, released the same day due to catch-up from the government shutdown, wasn’t good.]

So thus far in our tally you have a solid jobs report, continuing a favorable trend, strong manufacturing data, a better than expected revision to GDP (with some caveats), a decent housing number (though prior months have not been too good, including going back to the summer), and strong autos.

But we’re in the midst of the Christmas shopping season and this past weekend was rather important, plus you had Cyber Monday, so here is a slew of data for the five days, Thursday (Thanksgiving) through Monday.

The National Retail Federation estimated retail sales for Thurs.-Sun. were down 2.9%, with ¼ who planned to shop over the four days doing so on Thursday. [Booo....Booo ....] The NRF, though, stands by its forecast that sales for November and December will be up 3.9% (compared with 3.5% in 2012).

ShopperTrak said that Black Friday sales were down 13.2% owing to all the stores that opened on Thursday. Thursday and Friday sales combined, though, were up 2.3%; Thurs.-Sun. up 1%. ShopperTrak sticks by its forecast that holiday retail sales (Nov. and Dec.) will rise only 2.4%.

One other...the International Council of Shopping Centers and Goldman Sachs said sales for the week ended Nov. 30 fell 2.8%.

Understand that the Thurs.-Sun. period over Thanksgiving traditionally represents 10% of total Nov.-Dec. retail sales, while the NRF says sales these two months account for 20-40% of a retailers’ annual revenues.

Then there was Cyber Monday with all the retailers hyperventilating about how well they were doing with their online operations, while 100% online retailer Amazon unleashed Jeff Bezos the night before for some brilliant P.R. on “60 Minutes” that only helped its own efforts, Amazon saying Monday was the busiest day in the company’s history. [More on them below.]

IBM Digital Analytics said Cyber Monday volume was up 20% (16.5% for Thurs.-Mon.), while some retailers said mobile accounted for 50-55% of their online traffic (IBM pegged it overall at 30%).

Now if you are the Federal Reserve, how do you interpret all this as they gear up for their December 17-18 yearend gathering?

Jobs...good and getting better
GDP...solid, but a bumpy immediate future
Autos...good
Manufacturing...very good
Housing...respectable
Retail...mediocre

I said awhile back that the Fed would begin to taper its $85 billion a month bond-buying program in December, but there is an important caveat. The House and Senate budget conferees have to reach an agreement on the current budget for fiscal 2014 (which started October 1) by Dec. 13, technically including being voted on in the House as it is supposed to recess the same day.

The conferees, headed by Republican Congressman Paul Ryan and Democratic Senator Patty Murray, are apparently close to an agreement but not necessarily one that Tea Party Republicans will agree to, a compromise on spending that will eliminate some of the sequester cuts.

What we do know is that without an agreement, the government shuts down Jan. 15 and the Federal Reserve will not taper if by the time they get together, it appears Congress will return from Christmas recess with work still to be done on the budget front. It’s that simple. The Fed would not be able to act without a deal.

But related to the topic, PIMCO’s Bill Gross had this broad warning in his latest newsletter.

“Investors are all playing the same dangerous game that depends on a near perpetual policy of cheap financing and artificially low interest rates in a desperate gamble to promote growth.”

The Fed, Bank of Japan, European Central Bank and Bank of England “are setting the example for global markets, basically telling investors that they have no alternative than to invest in riskier assets or to lever high-quality assets.”

You had the European Central Bank also warning on tapering, asking eurozone policymakers to do more to prepare for shocks.

As for ObamaCare, I checked out the new, improved HealthCare.gov and zipped through to step 4, only to refuse to give my Social Security number. Now I’m being a little dishonest with the Affordable Care folks because my own plan hasn’t been canceled yet, I’ll be surprised if it is, and so I don’t need the site...at least not yet.

But I’ve also hammered away since day one that if you didn’t need to go on the site you shouldn’t, especially when it comes to giving up a lot of personal data. It just isn’t secure, as more than one expert once again reiterated this week.

And the back-end is a freakin’ mess. You can zip along, get your policy and think you have insurance but you don’t have it until the insurance company gets the first premium check and the insurers, in many cases, still aren’t receiving accurate information from the applicant. The insurers need “clean” enrollment files by December 23 so they can process it in time for the coverage to start on January 1. As Daniel Durham of America’s Health Insurance Plans, a lobbying group for insurers, told Reuters:

“It’s a real problem for plans when the enrollment file never comes over, and then you get the consumer calling, and the plan has no record of that individual. Time is short. January 1 is coming around fairly quickly here.”

Sure is.

Now the White House, led by the administration official, Jeffrey Zients, overseeing the “improved” web site, assures us HealthCare.gov “is night and day from where it was on October 1st,” said Zients. But that’s just not telling the full truth. By their own admission, officials with the Department of Health and Human Services said the next few months would require further work to “improve and enhance the website and continue to improve the consumer experience.”

We don’t have “months.” It also may not be possible to assess how well the site is working until we approach Dec. 23.

And as the Washington Post reported: “In recent months, consumers having difficulty with the Web site have been turning to agents and brokers for help. But the system does not allow brokers to enter their identity numbers once a person has gotten a subsidy determination, or if the number has been added incorrectly in the past.

“Without those identity numbers, brokers cannot get paid by insurers or follow up on behalf of clients if there are problems with insurance claims. Regulators cannot track down brokers if there are mistakes. As of Sunday, brokers had not been informed of any fix to this issue.” 

From a separate Post piece: “The mistakes (in enrollment records) include failure to notify insurers about new customers, duplicate enrollments or cancellation notices for the same person, incorrect information about family members, and mistakes involving federal subsidies. The errors have been accumulating since HealthCare.gov opened two months ago, even as the Obama administration has been working to make it easier for consumers to sign up for coverage.” [Amy Goldstein and Juliet Eilperin, and a cast of thousands at the Post doing yeoman’s work on the topic.]

Let’s face it, it’s going to be chaos the second half of the month. I feel sorry for those scrambling for coverage.

Lastly, CNN’s Chief Medical Correspondent, Dr. Sanjay Gupta, penned a terrific piece for CNN.com on how for many, the worst thing they can do is obtain health insurance!

Gupta talks about an uncle of his who was a healthy guy that opted to go several years without insurance, but when he turned 65, he picked up Medicare and “What happened next was a little strange. He fell off the wagon. He exercised only sporadically, and paid hardly any attention to what he was eating....He’d become unhealthier....

“Two economists wrote about this exact scenario in 2006.

“They found that many men, at the time they obtained Medicare, started behaving badly. Moral, or morale, hazard is a term largely used by economists to describe the actions of people more willing to take risks because they are insulated from the cost of their actions, in this case because of their recently obtained health insurance.

“In the case of these men, when they got Medicare, they took worse care of themselves; they actually exercised less. Among those who didn’t visit the doctor after getting insurance, the effect was dramatic: Their overall physical activity dropped by 40%; they were 16% more likely to smoke cigarettes and 32% more likely to drink alcohol....

“The website may be working better now, but to me that’s not the most important issue. In my mind, the real suspense comes from whether ObamaCare will really make us a healthier America, even if it succeeds in its ambitions to dramatically expand coverage.”

As Gupta continues with his essay, “insurance, like marriage, doesn’t guarantee good health...

“A good example comes from a study in the journal Circulation. Researchers estimated that if all Americans exercised 30 minutes a day, we would reduce the number of cardiovascular events – heart attacks and strokes – by a third. A third! Just 30 minutes a day, and suddenly we are starting to get serious about a more healthy America.”

And you can break it into 10-minute chunks, Gupta adds.

“We Americans are three times as likely to be obese as the average French person – and obesity is related to just about every chronic disease imaginable.

“I think about this all the time, and here is what I tell my own patients. It is time to stop merely playing defense when it comes to your health, and time to start optimizing yourself.”

Europe

The eurozone PMI on manufacturing for November came in at 51.6, up slightly from October’s 51.3, bespeaking an economy that is recovering, but is hardly robust. [As you saw above, the U.S. was at 57.3.]

Germany’s PMI did rise to 52.7, a 29-month high, and the Netherlands rose to 56.8, the best since April 2011, but France fell to a 5-month low at 48.4, and Spain dropped to 48.6 from 50.9 in October. [Separately, the U.K. surged to 58.4 from 56.5.]

The eurozone comp (both manufacturing and services) fell in November to 51.7 vs. 51.9 in October, with France dropping to 48.0 and Italy to 48.8.

Eurozone retail sales also fell 0.2% in October following a 0.6% decline in September.

Separately, Germany’s Bundesbank raised its 2014 growth outlook to 1.7% from 1.5%, while Moody’s joined S&P in upgrading Spain’s outlook from “negative” to “stable.”

In France, President Hollande’s approval number is at 20%, owing in no small part to his stagnant economy and tax policies.

And in Slovenia, GDP is slated to decline 2.7% this year and remain negative in 2014, with bank non-performing loans continuing to soar. The Slovenian economy has cratered 11% since 2008 and despite the government’s assertions to the contrary, a bailout will be needed next year.

European banks, by the way, have eliminated 140,000 jobs in two years and according to a story in Bloomberg, further cuts could amount to as many as twice this figure. Revenue continues to plummet in areas such as investment banking and fixed income.

Lastly, I continue to follow the issue of the rise of the far-right across Europe, and the accompanying anti-immigrant sentiment. I haven’t had time to put it all together recently, but here are some headlines from articles I’ve yet to really plow through.

“Public turning against EU migrants” [64% of those surveyed in the U.K. said EU immigration had a negative impact]

“Cameron launches attack on EU migration”

“Romania’s prime minister has called on Britain not to treat Romanians as ‘second-rate citizens’ when work restrictions for Romanian and Bulgarian workers are lifted on January 1”

“France is on the brink of civil war, warns (Marine) Le Pen”

“Austerity sparks rise of far Right in Spain”

Marine Le Pen is the one to watch and the results of next spring’s European Parliament elections could be critical to the eurozone’s future, let alone the grand experiment of the European Union as a whole.

China

One economic item of note. The November PMI, as published by the government’s statistics office, came in at 51.4, same as October. HSBC’s reading was earlier reported at 50.8.

More importantly, Vice President Joe Biden was sent to China, as well as Japan and South Korea, to address China’s establishment of a new air-defense identification zone (ADIZ) over the East China Sea and some disputed islands. [The original idea of the trip was to promote trade but the agenda was hijacked by new developments.] By week’s end, after Biden held extensive discussions with Chinese officials, including President Xi Jinping, it appeared both sides were moving toward an understanding that the zone would be operated in a way that doesn’t threaten the region or endanger the lives of air passengers. 

Biden’s focus was reportedly on the “rules of engagement” between China and the likes of Japan and South Korea to prevent catastrophe. But there is no way, at least in the immediate future, that China (read Xi) is backing down and rolling back the ADIZ.

Republicans say the White House is not being tough enough. Biden, after all, did not ask China to rescind it, though he reiterated the U.S. does not recognize it.

Geoff Dyer / Financial Times

“Joe Biden began his week in Japan where politicians are furious at China; he then flew into Beijing which is seething about Tokyo’s behavior; and on Friday he is due in South Korea, which is irate at both China and Japan. Welcome, Mr. Vice President, to East Asia’s new normal.

“Two weeks ago, few people had ever heard of an ‘air defense identification zone,’ the Cold War-era set of air regulations that China has decided to put in place across a large stretch of the East China Sea. But the obscure rules have become the latest flashpoint in the region’s unresolved historical disputes....

“The air rules are part of a broader pattern: the steady procession of Chinese pressure tactics to push its claims on disputed territories, particularly the islands that Japan calls the Senkaku and China calls the Diaoyu. Since around 2008 – and especially over the past year – China has been sending ships to patrol the seas around the islands. The air defense zone extends its claims to the skies above.

“The long-term Chinese agenda is to exert control over the East China Sea and South China Sea and in the process to ease the once-dominant U.S. Navy out of large stretches of the western Pacific. China is attempting what aspiring great powers often do: to prevent another country from dominating its own region....

“In a recent speech in Beijing, Paul Keating, former Australian prime minister, laid out the dilemma China faces. Mr. Keating is one of a small group of retired Asia-Pacific leaders who believe the U.S. should do much more to accommodate China’s interests in the region and to share power with Beijing. But to his Chinese audience, he made a very different appeal. ‘There can be no stable and peaceful order in Asia unless Japan is, and feels itself to be, secure,’ he said.

“If Beijing really wants to shape the next century in Asia at the expense of the U.S., it will need friends and allies to advance its priorities and to push its agenda. Instead, if it steps up efforts to coerce its neighbors, China is setting itself up to be a very lonely great power.”

Editorial / The Economist

“(It) is possible that the announcement of the ADIZ was a blunder, an ill-considered overreaction to Japan’s threat to shoot down unmanned aircraft entering its airspace. Chinese foreign policy has sometimes seemed uncoordinated and oddly insensitive to the consequences of assertive nationalism. But in this case all the relevant arms of party and government were surely on board. And at the party meeting [Ed. the third plenum], Mr. Xi seemed to have consolidated his own power over decision-making with the announcement of a new national security council to take charge of the management of internal and external threats. Even so, China may have miscalculated in some ways: in including South Korean-claimed airspace, for example, or in including aircraft not just approaching China, but merely crossing its ADIZ; or perhaps in thinking that such a zone was enforceable at all....

“An even more fundamental explanation of China’s apparently reckless behavior is that nothing in its commitment to a peaceful rise is meant to trump the safeguarding of its national sovereignty. Mr. Xi emerged from the party’s meeting appearing all-powerful. But no Chinese leader can afford to look weak on an issue, such as the disputed islands, that China has framed as one of its own sovereignty. He will find it hard to back down.”

Charles Krauthammer / Washington Post

“China has brazenly declared a huge expansion of its airspace into waters claimed by Japan and South Korea.

“Obama’s first response – sending B-52s through that airspace without acknowledging the Chinese – was quick and firm. Japan and South Korea followed suit. But when Japan then told its civilian carriers not to comply with Chinese demands for identification, the State Department (and FAA) told U.S. air carriers to submit.

“Which, of course, left the Japanese hanging. It got worse. During Vice President Biden’s visit to China, the administration buckled. Rather than insisting on a withdrawal of China’s outrageous claim, we began urging mere non-enforcement.

“Again leaving our friends stunned. They need an ally, not an intermediary. Here is the U.S. again going over the heads of allies to accommodate a common adversary. We should be declaring the Chinese claim null and void, ordering our commercial airlines to join Japan in acting accordingly, and supplying them with joint military escorts if necessary.

“This would not be an exercise in belligerence but a demonstration that if other countries unilaterally overturn the status quo, they will meet a firm, united, multilateral response from the West.

“Led by us. From in front.”

Your editor, by the way, will be flying over the ADIZ end of January.

Street Bytes

--The Dow Jones lost 0.4% on the week to close at 16020, while the S&P 500 literally lost a fraction of one point and Nasdaq gained 3 points (0.1%) to close at 4062.

--U.S. Treasury Yields

6-mo. 0.09% 2-yr. 0.30% 10-yr. 2.86% 30-yr. 3.89%

The 10-year initially reacted to the solid labor report by moving above 2.90% but backed off some, though the yield ended up from 2.74% the prior week.

--U.S. auto sales in November were at the strongest pace in six years, up 9% to an annualized rate of 16.4 million vehicles, the best since February 2007, according to Autodata Corp. But Ford Motor Co. announced it was idling two Michigan factories an extra week during the holidays to cut back on inventories.

Nonetheless, Ford’s sales rose 7%, Chrysler’s were up 16%, and General Motors’ increased 14%. Toyota and Nissan saw gains of 10% and 11%, respectively, though Honda’s fell less than 1%. Volkswagen Group of America saw its sales plummet 16%. [See above GDP report and the surge in this category.]

--Editorial / Washington Post

“Judge Steven W. Rhodes’ decision to allow Detroit to file for municipal bankruptcy may prove to be a landmark in the history of urban America. This is only partly because it enables the fabled Motor City to make a desperately needed ‘fresh start,’ as Judge Rhodes put it. Hemorrhaging population, plagued by inadequate public services and saddled with $18 billion in debt, Detroit had little alternative but to seek permanent relief from its creditors. Now the city is that much closer to the day when it can implement emergency manager Kevyn D. Orr’s farsighted plan for reactivating vital functions such as police, street illumination and derelict housing clearance.

“The case gets its potentially historic significance from Judge Rhodes’ holding that the city may reduce pension payouts to public-union workers as part of a settlement with creditors. It’s the first time that a federal court has concluded that Chapter 9 of the federal bankruptcy code trumps state-law protections for public-worker pensions, even in states, including Michigan, that had purported to shield them via a state constitutional provision.”

Needless to say, the public employees are not happy.

--And public employees in the state of Illinois aren’t happy either as the state legislature finally passed a pension reform package to deal with the state’s $100 billion unfunded pension liability, the worst in the U.S. The bill raises retirement ages, limits the portion of salaries on which pensions are based, and reduces or suspends cost-of-living increases for retirees. Put it all together and immediately Illinois’ unfunded liability would be cut to $79 billion.

--Overall, public pension funds are recovering rapidly thanks to the soaring stock market. This is good.

--China Mobile, the world’s largest carrier by users, with over 700 million subscribers, has finally signed a deal with Apple to offer iPhones on its network, effective by end of the month, obviously a huge boost for Apple, which has struggled in China amid competition from lower-cost rivals.

Separately, according to market researcher Gartner, Samsung shipped 32.1% of all smartphones world-wide in the third quarter, unchanged from a year earlier, while Apple’s market share slipped to 12.1% from 14.3%. Samsung also has 21% of the market in China compared with Apple’s 6%. [Apple’s numbers, though, will increase in the fourth quarter because of its new product introductions.]

--IDC said global shipments of personal computers would fall 10.1% this year, the “most severe yearly contraction on record.” It’s all about tablets and smartphones.

--Yes, Amazon CEO Jeff Bezos is a brilliant marketer, taking advantage of a piece on “60 Minutes” to unveil a pet project, a drone that would deliver packages within 30 minutes of customers placing an order, though it will take years not only to perfect the technology, but also to get Federal Aviation Administration approval.

Bezos said drones could carry packages up to five pounds, which cover 86% of the items the company currently delivers.

--Gasoline prices have been rising again amid stronger demand, though for the week ended Nov. 29, the Energy Information Administration said supplies had risen significantly, too.

But OPEC kept its production ceiling unchanged Wednesday despite the threat of rising supplies, not only from U.S. shale production, but also from Iran and Iraq, both of which have vowed to boost production regardless of OPEC targets.

Iran, for example, assuming it successfully rolls back sanctions, will raise production aggressively, while Iraq plans to increase production 1 million barrels a day next year to 4m b/d.

In turn it would be Saudi Arabia, producing more than 10m b/d, that would be forced to cut back if it wanted to avoid a price war.

--Regular wages in Japan fell 0.4% in October from a year earlier, the 17th straight monthly decline, even as, overall, the country now has inflation. But this wage component is not good as Prime Minister Abe prepares the people for April’s sales tax increase; Abe relying on growth in consumption to pick up for the inevitable shortfall resulting from the tax hike.

--Australia’s economy grew by 0.6% in the third quarter over the second, 2.3% year-on-year, a little less than expected. A slowdown in mining and demand for commodities continues to hamper growth here.

--Australian airline Qantas had its credit rating cut to “junk” by S&P, this as Qantas issued a surprise profit warning and announced it was laying off 1,000. The airline is suffering from increased competition in particular. Australia’s Prime Minister Tony Abbott also indicated the government was unlikely to give Qantas any aid. While it was an iconic company, it’s a private one, said Abbott, and it “must run itself competently and profitably.” The company’s shares tanked 15% on all the news.

--South Korea’s November PMI on manufacturing rose to 50.4; Taiwan’s surged to 53.4.

--Brazil’s economy contracted a worse than expected 0.5% in Q3. Brazil has been hurt by its slumping agriculture sector. Growth for the full year is projected at about 2%.

--The European Commission fined eight banks a total of 1.7 billion euros for forming an illegal cartel to rig interest rates. UBS and Barclays would have paid huge fines but avoided them because they assisted in the investigation. The others involved were RBS, Deutsche Bank, which received the biggest fine of 725 million euros, Societe Generale, JPMorgan, Citibank and the brokers RP Martin.

--China took a tough stance on Bitcoin, ruling it is a virtual product, not a currency, and barred its banks from doing any kind of business in it, adding Bitcoin makes money laundering easy and it can be used to support terrorism. But the government stopped short of banning it altogether, saying people were free to buy and sell it at their own risk. Within an hour of the pronouncement, the Chinese value of Bitcoin plunged 10%.

--California continues to be a tale of two states, according to economists at UCLA. For example, the coastal regions are seeing solid job growth while inland areas continue to struggle. This is reflected in the housing market, where in Los Angeles County, prices are 23% under their bubble peak (16% in Orange County), but the median home price in Riverside County was 38% below the bubble peak in October.

--J.C. Penney announced late Thursday it was facing an SEC inquiry on its liquidity, cash position and debt financing. Shares fell sharply on the news, after rallying earlier in the week on word its same-store sales had risen 10% in November.

--According to the Institute for College Access and Success, more than 70% of college graduates in 2012 had student loans and their average debt surpassed $29,000 ($29,400, up from $23,450 in 2008).

--JPMorgan Chase warned 465,000 holders of pre-paid cash cards issued by the bank that their personal data may have been hacked. The attack on JPM’s network first occurred in July but wasn’t detected until September. The bank said it found no evidence money was taken from accounts, but issued the warning because it could not be sure which accounts had been breached.

--From Erik Larson / Bloomberg

“Bernard Madoff’s deputies made fake paperwork showing trading losses to save $1.7 million owed to an investor who died with ‘too much money’ in his account even as the firm was being flooded with new customers in the 1990s, the con man’s former finance chief told a jury....

“ ‘When someone dies, that’s a problem’ for the scheme, said (Frank) DiPascali.”

Madoff can’t die in prison soon enough. 

--Newsweek announced it plans to return to print form in January or February. Interesting. The magazine said it would rely on subscribers more than advertisers to pay the bills.

--According to Ghostery, a company that monitors online tracking, “Nearly 900m internet users were tracked by hundreds of third-party internet and advertising companies when they visited pornographic sites this summer.

“Those tracking details can include information about the URL of the site, how long a person stays on the site and how many clicks they make there.” [Emily Steel / Financial Times]

About a quarter of online searches, according to analyst estimates, are for porn. [Discuss amongst yourselves.]

--Former Tyco CEO Dennis Kozlowski has been scheduled for parole starting Jan. 17 after what will have been 8 1/3 years in prison for conspiracy, falsifying records and all other manner of crimes. Former CFO Mark Swartz was released in October after serving a similar sentence.

--In a global education survey known as Pisa, run by the Organization for Economic Co-operation and Development (OECD), the United States ranked 26 in math, 21 in science, and 17 in reading. China (Shanghai) was number one overall, followed by Singapore.

--In an annual survey by Transparency International, New Zealand and Denmark were ranked the least corrupt, followed by Finland, Sweden, Norway, Singapore, Switzerland, the Netherlands, Australia and Canada.

The U.S. was tied for 19 with Uruguay among 177 countries ranked. China was 80, Russia 127.

Foreign Affairs

Iran: The interim nuclear accord engineered in Geneva Nov. 24 still has not formally been implemented. Iran’s envoy to the International Atomic Energy Agency said it would begin to comply around the beginning of January after further discussions with the P5+1. The initial goal is to establish a schedule of inspections by the IAEA experts.

Meanwhile, Israeli Prime Minister Netanyahu has ordered his intelligence agencies to seek out signs of non-compliance by Iran, particularly with regards to explosives development and ballistic-missile work.

Various surveys show Americans supporting the interim deal by about 2-to-1, while in a poll of Israelis conducted by the Israel Democracy Institute (IDI) and Tel Aviv University, only 18% said they believe the agreement will lead to the end of Iran’s nuclear weapons program, while 77% think the deal will fail.

As for Congress, the Senate returns Monday and debate on further sanctions will pick up again, though most believe any new ones would not take effect until after the interim agreement period, six months, runs its course. During the six months all parties are supposed to be working on a final deal.

David Albright, a former weapons inspector and founder of the Institute for Science and International Security, a think-tank in Washington, D.C., “says a final deal will have to require Iran to abandon the Arak reactor – perhaps replacing it with one of a different design that has safeguards built in – and close its Fordow enrichment site, which is buried deep beneath a mountain and thus very hard to bomb. Iran would also have to adhere to the Additional Protocol of the NPT (Nuclear Non-Proliferation Treaty), giving IAEA inspectors enhanced rights of access to ensure that it is not cheating.” [The Economist]

George Will / Washington Post

“Critics of the agreement with Iran concerning its nuclear program are right about most things but wrong about the most important things. They understand the agreement’s manifest and manifold defects and its probable futility. Crucial components of Iran’s nuclear infrastructure remain. U.S. concessions intended to cultivate the Iranian regime’s ‘moderates’ are another version of the fatal conceit that U.S. policy can manipulate other societies. As is the hope that easing economic sanctions would create an Iranian constituency demanding nuclear retreat in exchange for yet more economic relief. Critics are, however, wrong in thinking that any agreement could control Iran’s nuclear aspirations. And what critics consider the agreement’s three worst consequences are actually benefits.

“The six-month agreement, with ongoing negotiations, makes it impossible for the United States to attack its negotiating partner. Hence the agreement constrains Israel, which lacks the military capacity to be certain of a success commensurate with the risks of attacking Iran. Therefore there is no alternative to a policy of containment of a nuclear Iran....

“The agreement will not stop Iran from acquiring nuclear weapons; only a highly unlikely Iranian choice can do that. The agreement may, however, prevent a war to prevent Iran from acquiring such weapons....we have two choices, war or containment. Those who prefer the former have an obligation to clearly say why its consequences would be more predictable and less dire than those in the disastrous war with Iraq.”

Jeffrey Goldberg / Bloomberg

“Why support (the interim agreement)? Because, so far, the remote possibility that this agreement will lead to the denuclearization of Iran beats the alternative: military action by the U.S. or, worse, by Israel. All options should be on the table, but, really, the military option could be disastrous.

“Here are six reasons to be worried about the strength of this interim deal...

“1. The deal isn’t done. Remember the photos from Geneva of smiling foreign ministers slapping backs and hugging in celebration of their epic achievement? Well, nothing was actually signed. The deal is not, as of this moment, even operational....

“2. Momentum for sanctions is waning. It’s true that the economic relief the Iranians will receive in this deal is modest, but it is also true that many nations, many companies and the Iranians themselves are seeing this agreement as the beginning of the end of the sanctions regime. [Ed. see Iran’s moves on the OPEC front above.]....

“3. The (still unenforced) document agreed to in Geneva promises Iran an eventual exit from nuclear monitoring.... This is not a comforting idea.

“4. The biggest concession to the Iranians might have already been made. Although it is the West’s position that it has not granted Iran the so-called right to enrich, the text of the interim agreement states that the permanent deal will ‘involve a mutually defined enrichment program with mutually agreed parameters.’ Essentially, Barack Obama’s administration has already conceded, before the main round of negotiations, that Iran is going to end up with the right to enrich.....

“5. The Geneva agreement only makes the most elliptical references to two indispensable components of any nuclear-weapons program. The entire agreement is focused on the fuel cycle, but there is no promise by Iran in this interim deal to abstain from pursuing work on ballistic missiles or on weaponization. A nuclear weapons program has three main components: the fuel, the warhead and the delivery system. Iran is free, in the coming six-month period of the interim deal, to do whatever it pleases on missiles and warhead development.

“6. The Iranians are so close to reaching the nuclear threshold anyway – defined here as the ability to make a dash to a bomb within one or two months from the moment the supreme leader decides he wants one – that freezing in place much of the nuclear program seems increasingly futile. When asked this week by al-Jazeera about the impact of sanctions, the very smart Iranian foreign minister, Mohammad Javad Zarif, said, ‘When sanctions started Iran had less than 200 centrifuges. Today Iran has 19,000 centrifuges so the net product of the sanctions has been about 18,800 centrifuges that has been added to Iran’s stock of centrifuges, so sanctions have utterly failed.’....

“One of Israel’s most prominent experts on the Iranian nuclear program, a former military intelligence chief named Amos Yadlin, said this week that ‘Iran is on the verge of producing a bomb. It’s sad, but it’s a fact.’ Yadlin suggested that no one, and no agreement, can stop Iran from reaching the nuclear threshold. I fear he is right.”

Yadlin is. Just as I told you in August 2012 it was already too late in Syria, it has long been too late with regards to Iran’s nuclear program.

Israeli Finance Minister Yair Lapid, echoing Prime Minister Netanyahu:

“When people wonder why we have been so loud against this agreement with Iran it is because for us it is not academic or theoretical, it is existential. Here is a regime that has been loud, not about a dispute with Israel, but rather about its wish and commitment to the destruction of Israel.” [Jerusalem Post]

Syria: The head of the Free Syrian Army, the official rebel force, General Salim Idriss, said the battlefield in Syria was now a three-way tussle between the regime, the rebels and groups linked to al-Qaeda. Idriss, perhaps significantly, signaled he no longer required President Assad’s removal from power as a precondition of peace talks, saying his rebel force had declared war on al-Qaeda and was willing to join arms with government forces to defeat them once Assad has been ousted.

Idriss is intriguing from the standpoint that he appears to be sending a message to the military that they wouldn’t “suffer the kind of de-Baathification that disbanded the Iraqi Army after the fall of Saddam Hussein, with disastrous consequences.” [Tom Coghlan and Catherine Philp / London Times]

Meanwhile, the United Nations warned the number of Syrian children deemed to be at risk has grown to 4.3 million, with a further 1.2 million being refugees...5.5 million out of a pre-conflict population of 9 million.

Additionally, the U.N. commissioner for human rights, Navi Pillay, said investigators had “produced massive evidence” of atrocities and abuses perpetrated by both sides in the war, adding “evidence indicates responsibility at the highest level of government, including the head of state.”

The Syrian Observatory for Human Rights said the death toll had risen to at least 125,000, with at least a third of those killed civilians.

Daniel Henninger / Wall Street Journal

“ ‘We have communicated in no uncertain terms with every player in the region that that’s a red line for us and that there would be enormous consequences if we start seeing movement on the chemical weapons front or the use of chemical weapons.’ – Barack Obama, Aug. 20, 2012....

“What would you rather be: an American lost inside an ObamaCare exchange or a Syrian rebel? No matter who gets touched by the helping hand of Barack Obama, the problem is not merely the broken promise but the chaos that follows the break....

“In August, Bashar Assad gassed and killed some 1,400 people, many children. He crossed the famous Obama ‘red line.’ John Kerry, Susan Rice and Samantha Power gave powerful speeches about the need to respond. Policy makers in Washington, Paris, Riyadh, Jerusalem and Damascus expected the U.S. to hit Assad’s air-force assets.

“Didn’t happen. Mr. Obama pivoted to Russian President Vladimir Putin’s idea that Assad would let his cache of chemical weapons be destroyed.

“The first tangible result of this post-red-line deal was that the Syrian civil war evaporated from the news. The war didn’t stop; it vanished.”

So as I’ve been writing, now that we have hold of the chemical weapons, we need to destroy them but not one country stepped up to accept them.

Henninger:

“So on Sunday of Thanksgiving weekend the Obama White House put out Plan B.

“It’s somehow going to move the most lethal chemicals – mustard gas, sarin, VX – to a ship outfitted ‘with field deployable hydrolysis system technology,’ sail out onto the ocean somewhere and destroy the stuff with neutralizing caustic chemicals. Where are the save-the-whales people when you need them? Even the ocean has to take the fall for another Obama policy lurch.”

Lebanon: A top Hizbullah commander was assassinated outside his home near Beirut, with Hizbullah immediately blaming Israel. Israel denied it was involved, though apparently has tried to take out al-Lakkis before.

Instead, a group calling itself the “Free Sunni Brigades in Baalbek” claimed responsibility for “this heroic, jihadist operation.” Further confusing matters, Lakkis was buried in Baalbek.

Whoever carried it out, the killing was all about the war in Syria and Hizbullah’s ongoing support of Bashar Assad.

Separately, the Lebanese Army was struggling to gain control in second-city Tripoli after violence between pro- and anti-Assad forces took at least another 12 lives in the latest fighting.

Iraq: The death toll is over 8,000 this year with the U.N. seeing a rise in “execution-style” killings, another sign the country is sliding back into full-scale civil war between Sunni and Shiite factions.

Ukraine: Protests grew in Kiev over the government’s decision to reject a historic pact with the European Union with President Yanukovych trying to stamp out the biggest demonstrations since 2004’s Orange Revolution. Significantly, three former leaders, Leonid Kravchuk, Leonid Kuchma and Viktor Yushchenko, signed a joint statement that read in part:

“We express solidarity with the peaceful civic actions of hundreds of thousands of young Ukrainians. For the first time, the Ukrainian people have come out on the streets with an apolitical demand that has unprecedented mass support.”

Yanukovych survived a no-confidence vote in parliament after some members demanded his resignation.

World heavyweight boxing champion Vitali Klitschko said he was ready to lead the opposition movement. Klitschko had founded his own political party, Udar – Punch - three years ago but many say he’s not ready for prime time, though at 6’ 7”, he certainly presents a towering figure at Independence Square in Kiev. It was he who last Sunday, when protests turned violent, waded into the crowds to urge calm and it worked.

Asked if he was prepared to assume command of the protesters, Klitschko said: “I am ready to take responsibility. I know that we are fighting for the future in our country and I know it’s a very tough fight and a fight without rules.”

At week’s end, President Yanukovych appeared to be ready to bring forward the scheduled 2015 presidential elections as a way of defusing the crisis, while Russian Foreign Minister Sergei Lavrov slammed NATO for issuing a resolution condemning the “excessive use of force” by Ukrainian police against the protesters. “We encourage everybody not to interfere” in the situation in Ukraine, he said, adding, “I do not understand why NATO adopts such statements.”

For his part, President Putin rewarded Ukraine for its refusal to sign the pact with the EU by granting it a massive credit line for its gas imports this winter.

[Lavrov also said the nuclear agreement with Iran makes a missile defense shield in Europe unnecessary. This is going to be a big issue over the coming six months.]

Charles Krauthammer / Washington Post

“After years of negotiations for a major trading agreement with the European Union, Ukraine succumbed to characteristically blunt and brutal economic threats from Russia and abruptly walked away. Ukraine is instead considering joining the Moscow-centered Customs Union with Russia’s fellow dictatorships Belarus and Kazakhstan.

“This is no trivial matter. Ukraine is not just the largest European country, it’s the linchpin for Vladimir Putin’s dream of a renewed imperial Russia, hegemonic in its neighborhood and rolling back the quarter-century advancement of the ‘Europe whole and free’ bequeathed by America’s victory in the Cold War.

“The U.S. response? Almost imperceptible. As with Iran’s ruthlessly crushed Green Revolution of 2009, the hundreds of thousands of protesters who’ve turned out to reverse this betrayal of Ukrainian independence have found no voice in Washington. Can’t this administration even rhetorically support those seeking a democratic future, as we did during Ukraine’s Orange Revolution of 2004?

“A Post online headline explains: ‘With Russia in mind, U.S. takes cautious approach on Ukraine unrest.’ We must not offend Putin. We must not jeopardize Obama’s precious ‘reset,’ a farce that has yielded nothing but the well-earned distrust of allies such as Poland and the Czech Republic whom we wantonly undercut in a vain effort to appease Russia on missile defense.”

Meanwhile, former prime minister Yulia Tymoshenko remains in prison.

China, part deux: Pollution in Shanghai was at record levels on Friday. At one point, children and the elderly were advised to say home. It’s so bad that a cold front that you would think would blow the pollutants out to sea instead brought more into the region and expanded the smog, according to the South China Morning Post. Even in Fujian, which is not a heavily industrialized province south of Shanghai, had visibility reduced to 500 meters in parts of the territory. China’s pollutants also continue to spread to South Korea and Japan.

Back to Vice President Biden’s trip, he raised the issue of American journalists in China who are facing increasing pressures, with some two dozen about to be expelled, according to the New York Times.

“Innovation thrives where people breathe freely, speak freely, are able to challenge orthodoxy, where newspapers can report the truth without fear of consequences,” Biden said in a speech to an American business group.

China has not acted to renew two dozen visas of reporters with the Times and Bloomberg that are up this month.

North Korea: Kim Jong Un’s uncle, Jang Song Thaek, who was thought to be de facto No. 2 in importance in the Hermit Kingdom, is believed to have been purged, with two of his associates executed, though South Korean intelligence officials have no idea why Jang fell out of favor.

What’s clear is that there is an ongoing power struggle and if Kim feels insecure, he could decide to lash out at South Korea to deflect attention away from his internal problems.

Separately, Pyongyang opted to "deport" 85-year-old American Merrill Newman on Friday in what appears to be a case of mistaken identity...the North Koreans believing they had a different Merrill Newman, both of whom served in the Korean War.

South Korea: U.S. Democratic Senators Dianne Feinstein and Robert Menendez, respectively the chairs of the Senate’s intelligence and foreign affairs committees, issued a joint letter objecting to a deal signed in South Korea by Huawei Technologies, the Chinese telecommunications giant, saying that “maintaining the integrity of telecommunications infrastructure” was critical to the U.S.-South Korea alliance.

Congress has long objected to Huawei expanding in the United States but I am very uncomfortable with what Feinstein and Menendez are doing in relation to an ally.

It is probably right to have suspicions about Huawei, but with the recent Snowden revelations on U.S. spying on our allies, it is a bit hypocritical, and dangerous, to take such a stance against the likes of South Korea.

For one simple reason...it will boomerang on us in terms of U.S. business interests, particularly in high tech. The likes of Cisco Systems and IBM have already seen substantial slowdowns in their business with China.

Thailand: Anti-government protesters took time off to celebrate their beloved King’s birthday. We’ll see if demonstrations resume this weekend.

Russia: U.S. prosecutors in Manhattan brought charges against 49 current and former Russian diplomats and their family members for participating in a scheme to get health benefits (through Medicaid) intended for the poor by lying about their income. U.S. Attorney Preet Bharara said, “Diplomacy should be about extending hands, not picking pockets in the host country.”

Britain: I like Prime Minister David Cameron, but talk about a suck up. He went to Beijing and was practically licking their boots, pledging to lead a “dialogue of mutual respect and understanding,” Cameron wrote in a Chinese news magazine prior to his visit: “Put simply, there is no country in the western world more open to Chinese investment, more able to meet the demands of Chinese consumers, or more willing to make the case for economic openness in the G8, the G20 and the European Union.”

Yemen: Al-Qaeda claimed responsibility for a coordinated suicide attack on the Defense Ministry that killed 52 on Thursday, including two German and two Vietnamese doctors.

Brazil: The World Cup is going to be a disaster next year. After the construction accident at the main stadium about ten days ago, soccer’s ruling body, FIFA, said three of the World Cup stadiums will not be ready by the end of December as requested. The venue in Sao Paulo where the crane collapsed won’t be ready until it would seem March, with the Cup opening June 12.

But the biggest issue facing organizers is going to be dealing with the mass protests surrounding the event that are bound to break out; demonstrations about the money being spent on both the World Cup and the 2016 Olympics that should be spent on the poor and infrastructure, such will be the theme.

Venezuela: Sunday’s local elections are a huge test for the Maduro government. I have no read on this.

Mexico: A truck carrying medical radioactive material, Cobalt-60, was stolen and then recovered, though the protective covering had been removed, with the International Atomic Energy Agency saying this guaranteed that whoever did so, unwittingly, will die. Theoretically, the material could be used in a dirty bomb, but because the protective covering was so carelessly removed, that does not appear to have been the intent.

And this just in...six suspects were arrested and were placed in the hospital. No word on their condition.

Random Musings

--In an attempt to direct attention away from the ObamaCare re-launch, the president gave remarks on Wednesday in which he laid out his agenda for his remaining 37 months in office, including pressing for a higher minimum wage, more spending on childhood education and an overhaul of immigration laws.

“We know that people’s frustrations run deeper than these most recent political battles. Their frustration is rooted in their own daily battles, to make ends meet, to pay for college, buy a home, save for retirement. It’s rooted in the nagging sense that no matter how hard they work, the deck is stacked against them. And it’s rooted in the fear that their kids won’t be better off than they were.”

They won’t be. Just don’t tell ‘em.

But as the Washington Post’s Zachary A. Goldfarb noted, “the president offered little sense of how he might achieve his long-sought economic goals. Instead, the speech – coming at the end of a difficult and politically damaging year – was designed to help define a populist argument that he and other Democrats can carry into upcoming legislative battles and into next year’s midterm elections.”

Needless to say some centrists in the Democratic Party, especially those in tight races, can’t be pleased.

Brendan Buck, spokesman for House Speaker John Boehner, said in an e-mail Wednesday:

“It should be no surprise why (Obama’s) approach has left more Americans struggling to get ahead. The president’s economic policies promote government reliance rather than economic mobility. Rather than tackling income inequality by lifting people up, he’s been fixated on taking some down.”

Obama also had to acknowledge widening income inequality and declining mobility have worsened under his watch.

Editorial / Wall Street Journal

“Mr. Obama returned to his favorite theme of rising income inequality on Wednesday, which he called ‘the defining challenge of our time.’ He ought to know since few presidents have done more to increase inequality than he has. Median household income has fallen since the economic recovery began, while the rich who own capital assets have done very well thanks to the Federal Reserve’s focus on reflating stock and home prices. Mr. Obama is the Chief Economist of Nottingham posing as Robin Hood.

“The president’s political purpose here is what the pros call rallying your base. Many Democrats are as dismayed as Republicans at ObamaCare’s rollout, so the White House wants to change the subject and give MSNBC viewers something else to debate. Mr. Obama didn’t have much new to offer that would help the economy or the middle class, so instead he’s decided to escalate that hardy liberal perennial, the minimum wage....

“Economist David Neumark, an expert on minimum-wage economic studies, says that an economic rule-of-thumb is that every 10% increase in the minimum wage reduces teen employment by about 1% to 3%. In October the U.S. teen jobless rate was 22.2% and for black teens it was 36%. The Obama minimum wage combined with the health mandate could mean up to a 10% reduction in jobs for the poor and young. Liberals must care deeply about inequality because their policies do so much to increase it....

“Steve Israel, who runs the Democratic Congressional Campaign Committee, is telling donors that the minimum-wage issue will lift liberal voter turnout in 2014, help Americans forget about losing their health insurance, and save the jobs of imperiled Democrats. If that means fewer jobs for the young and least skilled, so be it.”

--Barton Gellman and Ashkan Soltani / Washington Post

“The National Security Agency is gathering nearly 5 billion records a day on the whereabouts of cellphones around the world, according to top-secret documents and interviews with U.S. intelligence officials, enabling the agency to track the movements of individuals – and map their relationships – in ways that would have been previously unimaginable.”

Yes, more documents released by Edward Snowden, in this instance to the Post.

“The NSA does not target Americans’ location data by design, but the agency acquires a substantial amount of information on the whereabouts of domestic cellphones ‘incidentally,’ a legal term that connotes a foreseeable but not deliberate result....

“In scale, scope and potential impact on privacy, the efforts to collect and analyze location data may be unsurpassed among the NSA surveillance programs that have been disclosed since June. Analysts can find cellphones anywhere in the world, retrace their movements and expose hidden relationships among the people using them.”

Of course officials say this is only about developing intelligence about foreign targets. Yeah, right.

But this in no way means I support what Snowden has done. To the contrary, his releases have been most destructive to U.S. foreign policy, and I do not doubt, as stories hinted this past week, that what he is holding back is potentially multiple times more damaging.

As for the role of the press in the disclosures, a British parliamentary committee grilled Guardian editor Alan Rusbridger for distributing documents received from Snowden. At one point Rusbridger was asked whether he loved his country and if he would have told the Nazis that Britain had cracked the Enigma code.

Under the UK’s Terrorism Act, it is a crime to communicate information about a member of the intelligence services “which is of a kind likely to be useful to a person committing or preparing an act of terrorism.” [Sydney Morning Herald]

Lastly, Tim Berners-Lee, the inventor of the worldwide web, has joined a campaign to encourage people to fight back against government censorship and surveillance. Lee (Sir Tim, to be proper), has been warning for years about governments moving away from the founding principles of the web, which turns 25 in 2014.

--In a CNN/ORC International poll, New Jersey Republican Gov. Chris Christie receives 24% of Republicans and independents for 2016 vs. 13% for Kentucky Sen. Rand Paul. Texas Sen. Ted Cruz was at 10% and Florida Sen. Marco Rubio 9%.

On the Democratic side, Hillary Clinton drew 63% vs. a miniscule percentage for Joe Biden (and 7% for Elizabeth Warren).

--President Obama has headlined 38 events for the major Democratic Party committees this year, twice as many as 2009. [Julie Bykowicz / Bloomberg]

--In a depressing analysis from Alzheimer’s Disease International ahead of the G8 dementia summit in London next week, the number of people living with dementia worldwide is set to triple by 2050.

The organization says increasing life expectancies will lead to a surge in dementia in poor and middle-income countries, particularly in Southeast Asia and Africa. 71% of cases by 2050 are expected to be in such countries.

Professor Igor Rudan, a professor of epidemiology at the University of Edinburgh in Scotland, who does work with the World Health Organization, had an interesting point in relation to his work on new data emerging from China; it just may be that the human brain isn’t designed to function well past age 85, when about 40% of people have dementia.

“It seems to be our own biological limit,” he said. “It will affect us all, and unless we figure out what to do about it, we are going to be in trouble.” [Karen Weintraub / USA TODAY]

--Interesting piece by Justin Juozapavicius of the AP on how Oklahoma is stepping up precautions for earthquakes. As in I had no idea that from 1975-2008, the state had just a handful of 3.0 or greater quakes.

“But the average grew to around 40 annual earthquakes from 2009 to 2013.”

More than 200 magnitude-3.0 or greater earthquakes have hit the state’s midsection since 2009. Many are centered near Oklahoma City.

[It’s not necessarily about drilling for oil and gas... researchers aren’t sure what the cause is.]

--London’s Daily Mail reported that for much of the 1960s and 1970s, the secret launch code for unleashing U.S. strategic nuclear missiles “was shockingly simple: 00000000.”   [Global Security Newswire]

Bruce Blair, noted nuke expert who was also an Air Force ICBM launch-control officer back in the day, said: “Our launch checklist in fact instructed us, the firing crew, to double-check the locking panel in our underground launch bunker to ensure that no digits other than zero had been inadvertently dialed into the panel.”

As the National Journal reported: “Blair in 1977 wrote an article theorizing that just four terrorists could be capable of gaining control of a Minuteman nuclear missile launch-control bunker. The secret launch code was changed the same year.”

--New York City Mayor-elect Bill de Blasio selected William Bratton as his police commissioner, a good move. This will be Bratton’s second stint in the position. When he first became commissioner in 1994, the city had seen 1,946 homicides the prior year. This year there have been 307 through Monday. Bratton, at least initially, is being charged by de Blasio with improving community relations, in light of the stop-and-frisk controversy that de Blasio trumpeted in his campaign.

Of course these days Bratton’s real primary job is on the counterterrorism front.

--Pope Francis is establishing a special commission to advise the Catholic Church on the sexual abuse of children, a major step. Speaking for the pope, Cardinal Sean O’Malley of Boston said the panel would include both laypeople and clergy.

--I have been railing about China and it not doing enough to stop the poaching of elephants, seeing as the vast majority of ivory is headed there, but this week China agreed to define the trade of elephant tusks as a serious crime. China is among 30 nations that supposedly will coordinate their efforts, including Kenya, Zambia, Botswana, Zimbabwe and Vietnam, the last one being a major transit state.

At last half a ton of ivory has been found in 18 separate seizures around the world thus far this year.

--What a tragedy on the Metro-North Railroad and the train crash Sunday morning, with the train hurtling off the rails when it was traveling 82 miles per hour entering a 30 mph zone. At last word, the engineer fell asleep. He had recently changed the time of his shift. There are new (and even old) technologies that could have helped, if not prevent the crash, but Metro-North has never been an operation to readily adopt the latest in high-tech and it shows. It has an abysmal recent safety record.

So Friday the feds stepped in and announced they were cracking down on the railroad and demanding changes.

--Iceland has a population of about 320,000. On Monday, police shot dead a gunman who had been threatening his neighbors. It was the first time armed police have killed someone in the nation. Ever. 

--So what happened to comet ISON? We’ll learn more this coming week, but it seems much of it was indeed destroyed on its trip around the sun. Oh well. Stuff happens.

--Nelson Mandela was a highly successful one-term president, just like one of the most underrated Americans of all time, the 11th president of the United States, James K. Polk.

--I’m getting a kick out of those who are saying, ‘But Mandela was a Marxist...and Mandela praised Fidel Castro...and....’

I saw Bill Clinton being interviewed by Wolf Blitzer and Wolf asked Clinton about the Castro comments. Clinton said Mandela was “fiercely loyal” to those who supported him while he was in prison. 

That’s all I need. If you were stuck in a cell for 27 years and you heard someone was supporting you, you’d be loyal to them too. Remember, many of America’s leaders were supporters of the apartheid government.

--Nelson Mandel on poverty, July 2005:

“Overcoming poverty is not a gesture of charity. It is an act of justice. It is the protection of a fundamental human right, the right to dignity and a decent life. While poverty persists, there is no true freedom.”

--Finally, I quoted Pope Francis extensively last week to give you some food for thought. I also provided some balance with a countering opinion. Sure, it’s liberal thinking, but Rush Limbaugh’s critique verged on the comical. Limbaugh, who isn’t Catholic (as I am), said he admires the faith “profoundly,” as well as the Pope, “up until this.” 

I will have some personal thoughts in two weeks as part of a Christmas message.

For now, there was a story circulating this week that Pope Francis has been venturing out unannounced in the middle of the night to give money to the poor of Rome, in keeping with his time ministering to the poor of Buenos Aires.

---

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

God bless America.

---

Gold closed at $1230
Oil, $97.65...up $5

Returns for the week 12/2-12/6

Dow Jones -0.4% [16020]
S&P 500 -0.0% [1805]
S&P MidCap +0.4%
Russell 2000 -1.0%
Nasdaq +0.1% [4062]

Returns for the period 1/1/13-12/6/13

Dow Jones +22.2%
S&P 500 +26.6%
S&P MidCap +28.3%
Russell 2000 +33.2%
Nasdaq +34.5%

Bulls 57.1
Bears 14.3 [Source: Investors Intelligence...another all-time low]

Dr. Bortrum posted a new column.

Next week I’m coming to you from Kiawah, S.C. [Won’t be too focused on work, I must say.]

Catch me on Twitter @stocksandnews

Brian Trumbore