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12/21/2013

For the week 12/16-12/20

[Posted 12:00 AM ET]

Washington and Wall Street

I was at a Christmas party on Wednesday for the service organization I belong to, a group comprised of mostly small businessmen and women (and the town council), and to a man they said business was improving. I’ve asked the group the same question since I became a member over ten years ago and the tone is as good as it’s been in some time.

So no surprise then that on Friday we had the final revision to third quarter GDP and it came in at a very solid 4.1%, up from an estimate of 3.5%. Granted, as noted before on the dynamics of the quarter, much of this boost is due to a large buildup in inventories, but you get a number like that and you wonder if those saying the fourth quarter will fall back down to 2% or lower are right. Are we buying up the inventories, for example? 4.1% is, after all, the second-fastest quarter since the recovery began in mid-2009. It’s also a nice Christmas present for President Obama. It will help turn some poll numbers. [Obama has bottomed in this respect, says your editor.]

But this was also a week where Federal Reserve Chairman Ben Bernanke and his band of free money elves got together in Washington and finally decided that with the improving labor outlook it was time to begin unwinding the record-breaking stimulus that Bernanke initiated in an attempt to break the back of the worst recession since the 1930s. The Fed opted to begin cutting its monthly bond-buying program by $10 billion, from $85 billion a month to $75 billion. Yes, tapering.

And since my equity forecast for 2013 will have missed by a mile, though at least I didn’t say we’d finish down on the year, I am going to take one helluva victory lap on the issue of the Fed.

You will not find one person, in print, including all of Wall Street’s strategists, who nailed the two critical Fed decisions of the year, September and this week, in the manner that I did. Not one. Don’t bother trying either.

For starters, when the whole world said the Fed would taper in September, I said no, it wouldn’t, along with a mere handful, literally, of others.

But what set me apart from them was that I made that pronouncement a full month before, when it was even more in the minority, and stuck by it, as I do with all my decisions, for good or bad.

This time, again, a month before, when the vast majority were saying it was too early for the Fed to begin tapering and that why would Bernanke do so when Janet Yellen will be taking over in March, I said, au contraire, mon frères. He will, with one caveat. That Congress reach a bipartisan budget agreement, which it did.

It’s in sticking my neck out, weeks ahead, and then never deviating, in both the September and December decisions, that sets me far apart from the others. 

And none of this 60-40 crap. “Oh, we’re at 60% they will, 40% they won’t.”
Got ‘em both. No wavering, weeks ahead.

I was also careful not to say anything about market reaction. Oh, I said there’d be a helluva reaction if they didn’t begin tapering, and waited until March, because the evidence would have piled up against them and the Fed’s credibility, whatever remains, would have been shredded.

Alas, Bernanke came to his senses. The data has indeed been good enough.

But $10 billion? Technically, while the Fed said it was just the beginning as long as the data continued to move in their favor, it means we’ve gone from expanding the Fed’s balance sheet (or portfolio) – which topped $4 trillion this week, up from less than $900 billion before the crisis – by $1 trillion a year to $900 billion, though, again, this figure is expected to come down and the Fed hopes it has unwound the entire $85 billion program by mid-year or shortly thereafter.

Of course the purpose of the quantitative easing was to hold down long-term interest rates and, as represented by the yield on the 10-year, that hasn’t been the case since the spring...rates have risen. While this is actually a good sign, within reason, because it shows the economy is improving, the yield on the 10-year is going to be the top story for much of 2014, as I’ll discuss in full next week as part of my new forecast.

But regarding more of the specifics behind the Fed’s move, the Open Market Committee’s statement read in part:

“If incoming information broadly supports the committee’s expectation of ongoing improvement in labor-market conditions and inflation moving back toward its longer-run objective, the committee will likely reduce the pace of asset purchases in further measured steps.”

At the same time, the Fed said it will hold its target interest rate (the funds rate) at zero “at least as long as” unemployment exceeds 6.5% (from its current 7.0%) and that it “likely will be appropriate” to refrain from raising its benchmark rate “well past the time” joblessness falls below 6.5%, especially if inflation continues to fall short of its 2% target. [This week the November consumer price data was released...unchanged, up 0.2% ex-food and energy, while for the 12 months the CPI is up only 1.2%, 1.7% on core.]

So you can see the Fed is in no rush to remove the stimulus, while savers continue to get screwed.

The Fed also issued its new economic forecast on Wednesday and it is looking for unemployment to fall to 6.3% by the end of next year, 5.8% to 6.1% by Q4 2015.

The Fed forecasts GDP next year to be 2.8% to 3.2%, in line with the consensus.

So how did Wall Street react to all this? Buy buy buy!!!

But you had been told (not by me) once the Fed decided to taper the market would react negatively. Only the market finally discounted the first move because it was inevitable, even if a large majority didn’t see it coming this month.

It’s also bullish that the Fed made its move for the simple reason that it wouldn’t have done so if it didn’t feel the economy was truly on the road to recovery and not in danger of slipping back into the gutter. The Street, at least for now, is hopeful growth could actually surprise to the upside next year and that would be good for corporate earnings.

So the Dow Jones and S&P 500 finished the week with a series of new highs, while Nasdaq is now at 4104, or less than 1000 points from its all-time mark that many considered a pipe dream for ages to come, especially in the spring of 2009. 

Switching gears, the Senate passed the budget compromise 64-36 after it had sailed through the House and after respective staffs work through some final details, President Obama will sign it by Jan. 15. It’s far from perfect, and does little to address our long-term issues (save for the cut in the rate of growth for some military pensions, which I agree with).

As to the coming debt-ceiling debate, Treasury Secretary Jack Lew formally told congressional leaders they must raise the debt limit by early March at the latest. February 7 is the date Congress established for reaching a solution though it seems certain this will be moved out some. Fun and games this winter as many Republicans, upset they had to swallow the budget compromise, vow to be tougher on the debt ceiling, though at the same time many of them are cognizant of public perceptions and next November’s elections.

Re ObamaCare, the president continues to rewrite the rules, announcing another change Thursday night that marks the first exception the administration has allowed to the so-called individual mandate. 

David Lauter / Los Angeles Times

“Under the new policy, people who have received notices that their health plans are being canceled would qualify for hardship exemptions allowed by the law. Under those exemptions, they could buy low-cost catastrophic health plans or skip buying health coverage altogether.

“The low-cost plans, which provide bare-bones coverage, are otherwise available only to some people younger than 30....

“Health insurers have insisted the mandate that everyone buy insurance is necessary to keep coverage affordable and were quick to criticize the new policy.

“The change, coming less than two weeks before new health plans take effect on Jan.1, ‘could cause significant instability in the marketplace and lead to further confusion and disruption for consumers,’ Karen Ignagni, the head of America’s Health Insurance Plans, the industry trade group, said in a statement.”

Charles Krauthammer / Washington Post

“The lie of the year, according to Politifact, is ‘If you like your health care plan, you can keep it.’ But the story of the year is a nation waking up to just how radical ObamaCare is – which is why it required such outright deception to get it passed in the first place.

“ObamaCare was sold as simply a refinement of the current system, retaining competition among independent insurers but making things more efficient, fair and generous. Free contraceptives for Sandra Fluke. Free mammograms and checkups for you and me. Free (or subsidized) insurance for some 30 million uninsured. And, mirabile dictum, not costing the government a dime.

“In fact, ObamaCare is a full-scale federal takeover. The keep-your-plan-if-you-like-your-plan ruse was a way of saying to the millions of Americans who had insurance and liked what they had: Don’t worry. You’ll be left unmolested. For you, everything goes on as before.

“That was a fraud from the very beginning....

“It wasn’t until the first cancellation notices went out in late 2013 that the deception began to be understood. And felt. Six million Americans with private insurance have just lost it. And that’s just the beginning. By the Department of Health and Human Services’ own estimates, about 75 million Americans would have plans that their employers would have the right to cancel....

“It gets worse. The dislocation extends to losing one’s doctor and drug coverage, as insurance companies narrow availability to compensate for the huge costs imposed on them by the extended coverage and ‘free’ services the new law mandates....

“ObamaCare posed as a free-market alternative to a British-style single-payer system. Then, during congressional debate, the White House ostentatiously rejected the so-called ‘public option.’ But that’s irrelevant. The whole damn thing is the public option. The federal government now runs the insurance market, dictating deadlines, procedures, rates, risk assessments and coverage requirements. It’s gotten so cocky it’s now telling insurers to cover the claims that, by law, they are not required to.

“Welcome 2014, our first taste of nationalized health care.”

According to a New York Times/CBS News poll, overall, 39% approve of the ACA while 50% disapprove. The approval figure is up from the low of 31% in November. [A USA TODAY/Pew Research Center survey has it 40% approve, 55% disapprove.]

But remember, HealthCare.gov is not secure.

Lastly, on a different issue, you can kiss prospects for true tax reform good-bye with the nomination of Democratic Sen. Max Baucus (Mont.) to be the new ambassador to China replacing Gary Locke.

Baucus and his House counterpart, Dave Camp, have been working tirelessly on comprehensive reform and Baucus, who had announced he was not seeking reelection in 2014, saw this as his legacy. He’s my kind of pragmatist, but whatever slim chances there were for tax reform are now dead.

I understand why this announcement didn’t garner more press this week, but to me it was depressing. [More below.]

Europe and Asia

The December flash composite on both the manufacturing and service sectors for the eurozone, as compiled by Markit, came in at 52.1 from 51.7 in November, while the manufacturing component was 52.7 vs. 51.6, a 31-month high. The service component was 51.0 vs. last month’s 51.2. Chief Economist Chris Williamson of Markit said:

“The rise in the PMI after two successive monthly falls is a big relief and puts the recovery back on track....

“On the downside, the PMI is signaling a mere 0.2% expansion of GDP in the fourth quarter, suggesting the recovery remains both weak and fragile.

“The upturn is also uneven. Growth is concentrated in manufacturing...while weak domestic demand led to a further slowing in service sector growth.

“However, it’s the unbalanced nature of the upturn among member states that is the most worrying. France looks increasingly like the new ‘sick man of Europe’... In contrast, the December survey data round off a solid quarter of growth in Germany.”

Markit’s flash reports contain specifics on just Germany and France and as Mr. Williamson said, France is indeed the sick man. The manufacturing PMI for December is estimated to have fallen to 47.1 from 48.4 in November, a 7-month low and still very much in contraction mode. Germany’s manufacturing PMI, on the other hand, was 54.2 vs. 52.7, a 30-month high.

Staying with Germany, parliament confirmed Angela Merkel for a third term as chancellor as the Social Democrats voted to back the coalition, with SPD chairman Sigmar Gabriel becoming deputy chancellor (which positions him as lead candidate for chancellor in his party in four years). Recall, to gain the SPD as a coalition partner, Merkel had to acquiesce on a few of their platform ideas including a new national minimum wage. Importantly, Wolfgang Schauble remains finance minister.

In the UK, the immigration issue continues to be near the top of debate, as conservatives complain the surge in immigration is straining public services to the breaking point. But while some bitch about the topic, the fact is the immigrants often do the jobs the Brits don’t want to do. 

And the British economy is doing alright, especially compared to most of the other nations in the European Union. Unemployment is down to 7.4%, the best since 2009, and average weekly earnings for the three months to October are up compared with a year earlier, even if ever so slightly.

Lastly, to the issue of an agreement within the eurozone on how to respond to failing eurozone banks, ministers agreed to establish a $75 billion fund, financed by the banking industry, over 10 years, while a new European resolution authority is being created that would decide how banks are closed. [The UK and other non-eurozone economies are not part of the deal.]

The first pillar of the banking union is the establishment of a supervisory body within the European Central Bank to monitor all 6,000 banks in the eurozone. Germany and some others want to retain their own degree of supervision over smaller banks.

But back to the failure issue, while leaders were declaring victory, Michael Barnier, the EU commissioner responsible for the reforms, warned that the emerging deal was “too complex.”

Here’s what has to be hashed out in coming months, if it ever is, given it’s the EU and eurozone. When there is a bank failure, hard decisions need to be made instantly, normally over a weekend, but that is not going to be the case in Europe. A senior EU official told the Wall Street Journal they were turning the single resolution mechanism into a “Frankenstein,” a monster of national authorities that will struggle to wind down complex institutions.

The Financial Times reports, “Even when a resolution decision is uncontested and under Mr. Barnier’s more streamlined version, a decision would involve around 107 votes from 80-90 people at the ECB supervisory board, the ECB governing council, two committees at the single resolution board and finally the European Commission.

“With the involvement of appeals and mediation panels and the need to refer a contested decision to the council of finance ministers, the number of voting participants increases by 36.”

What a [blank]storm.

Turning to Asia, HSBC’s flash estimate on China manufacturing for December came in at 50.5 vs. 50.8 in November, so there are concerns Chinese GDP is decelerating. At the same time, home prices continue to surge, despite all the curbs the government has installed to slow the market. In November, prices rose 21% from a year ago in both Shenzhen and Guangzhou, 18% in Shanghai and 16% in Beijing.

In Japan, the Tanken survey of business confidence came in at its highest level in six years as large companies plan to increase capital spending by 4.6% next year...but...this was a downward revision from 5.1% in September due to fears over the looming consumption tax hike in April (5% to 8%).

Street Bytes

--The Dow Jones, in hitting a new high of 16221, had its third-best week of the year, up 3.0%. The S&P 500 rose 2.4% to its new all-time record, 1818, and Nasdaq rose 2.6%. Nasdaq is now up 35.9% for the year.

Dow components 3M Co. and Boeing raised their dividends by 35% and 50%, respectively, while Boeing authorized the largest share buyback in its history, $10 billion. The moves of both reflected positive outlooks.

As to the Christmas shopping season, seems to me the jury is still out. Weather has not been helpful, with major storms in the Midwest and Northeast (and some nasty issues for Saturday). A Bankrate.com survey also found that 14% planned to spend more this holiday season, 38% less. 

--U.S. Treasury Yields

6-mo. 0.08% 2-yr. 0.38% 10-yr. 2.89% 30-yr. 3.82%

The 10-year hit 2.95% on Friday morning but rallied back some.

Ben Bernanke’s term at the Fed officially ends Jan. 31 so Janet Yellen, who will be confirmed when the Senate reconvenes after its recess, will hold her first policy meeting in March. Bernanke has one last confab on Jan. 28-29, but no press conference afterward.

--Just a few items on the economy not covered above. November industrial production came in stronger than expected, up 1.1%, as for the first time the U.S. economy has surpassed the prerecession peak for this category.

Housing data was mixed. November housing starts soared to an annualized rate of 1.09 million, up 22.7%, the best pace since Jan. 1990, as single-family home starts rose 21%, its best since June 2008.

But then November existing home sales came in at a less than expected rate, 4.900 million annualized, the fourth consecutive month of declines and down a sharp 4.3%.

--Target was hit by a massive theft of credit and debit card information from as many as 40 million of its customers who shopped at Target stores between Thanksgiving and this past Sunday. The theft apparently originated at roughly 40,000 card devices at store registers.

Needless to say, customers are furious and it’s a public-relations nightmare for the retailer, as it tries to reassure everyone it is doing all it can to resolve the incident. In a letter to customers on its website, Target said, “You should remain vigilant for incidents of fraud and identity theft by regularly reviewing your account statements.”

Late Friday, the CEO apologized and customers will receive a 10% discount this weekend if they shop in the stores.

--Leading technology companies met with President Obama at the White House and warned they are seeing a backlash over the NSA’s spying programs, damaging both their reputations as well as harming the broader economy. Cisco was among those complaining it is seeing overseas customers back away from doing business with it. The companies, including Google, Facebook, Microsoft and Apple, pressed the need for transparency and for limits on the NSA’s activities.

Many of these same firms pumped nearly $7.8 million into Obama’s campaign coffers for 2012, according to the Center for Responsive Politics and the Washington Post.

--Ford Motor Co. surprised the Street in forecasting lower pretax profits for 2014 vs. this year when Ford said profit would exceed $8 billion, with the automaker blaming economic conditions in Europe and South America (specifically currency-related losses in Venezuela).

--General Motors said it would spend about $1.3 billion to upgrade some of its facilities in the Midwest, on the heels of a previous Ford announcement that it is hiring 5,000 new workers for 2014. GM said its expansion plans would create or preserve about 1,000 manufacturing jobs. This is good.

--The Energy Information Administration has revised sharply higher its estimates of future U.S. oil production to about 9.5 million barrels a day in 2016, close to the record peak of 9.6m b/d in 1970 and essentially double the low point of 5m b/d in 2008. Just a year ago the EIA was saying only 7.5m b/d by end of the decade.

But sustaining the surge requires a crude price of $90 or better. Much below that and some expensive projects would be curtailed.

Electricity generation is a major use of the new production, taking away from coal as a fuel for power plants.

--A few state unemployment rates for November...

New Jersey falls to 7.8%, New York 7.4%, California 8.5%...Rhode Island and Nevada tied for worst at 9.0%.

North Dakota’s is only 2.6%, South Dakota 3.6%, Nebraska 3.7%.

--The price of bitcoin, which hit a high of $1250 last month, fell to as low as $420 this week following reports of fresh actions by the Chinese government to restrict the trade. The People’s Bank of China said 10 clearing houses have until the end of January to sever links to the country’s bitcoin exchanges. There was a report the Bank of China website was then hit with a retaliatory denial-of-service attack.

A Shanghai-based exchange was responsible for 40% of global bitcoin trading.

[Actually, I have no freakin’ idea what is going on when it comes to this topic. Though further proof of its volatility is the fact bitcoin traded at about $15 earlier this year.]

--Meanwhile, Patrick Byrne, CEO of Overstock, the online retailer, said he would become the first in his space to accept bitcoin sometime next year. Byrne said in an interview with the Financial Times, “I think a healthy monetary system at the end of the day isn’t an upside down pyramid based on the whim of a government official, but is based on something that they can’t control.”

--Chinese tycoons now top the list of the UK’s wealthiest property investors for the first time as the property market there continues to see a rush of Asian money.

--Gold fell below $1,190 this week before settling Friday at $1,205. Goldman Sachs projects the metal will fall to $1,050 by the end of next year as the Fed cuts back on its stimulus, QE. Gold finished 2012 at $1,675. Not a good year. The record high was $1,923 set back in September 2011.

--Oracle reported profits of $2.55 billion for its fiscal second-quarter, compared with $2.58 billion in the same period last year. Revenue rose only 2%, as sales from new software licenses and cloud software subscriptions were flat. Hardly Workday-type growth, snickered the editor.

--Facebook founder Mark Zuckerberg sold shares worth about $2.3 billion as part of the social media company’s first stock sale since last year’s initial public offering. Facebook is looking to stockpile cash that could be used for future deals.

--Nike’s revenues rose 8% in its fiscal second-quarter, but the company said global orders for merchandise for delivery by April increased 13%.

--As reported by Bloomberg, “Since 1998, there have been more than 100 attempts to develop an Alzheimer’s treatment, and all have failed.” Merck and its experimental drug, called MK-8931, is attempting to reverse this. Initial trials announced this week are somewhat encouraging so the drugmaker is expanding them. Within two years we should know if Merck has truly found success. The company is attempting to determine once and for all “whether the amyloid tangles that grow in the brain spur the disease or are simply an outgrowth.” [Michelle Fay Cortez and Drew Armstrong]

--According to the World Health Organization, cancer incidences rose to more than 14.1 million new cases throughout the world in 2012, compared with 12.7 million in 2008.    The number of cancer-related deaths increased from 7.6 million to 8.2 million over the same period, with the most commonly diagnosed types of cancer being lung cancer, breast cancer and colorectal cancer, which combined to make up about 35% of the total. [Yes, some of the preceding is relative given that the world population has risen from 6.7 billion in 2008 to 7.1 billion in 2012.] [U.S. News Weekly]

--IBM said its annual forecast of five ways technology would change lives in the coming five years was “being driven by a new era of cognitive systems where machines will learn, reason and engage with us in a more natural and personalized way.”

I don’t want my computer getting too personal.

Actually, it’s more about things such as doctors tailoring treatments using patient DNA, according to Bernie Meyerson, vice-president of innovation for Big Blue.

--A federal jury in Manhattan found Michael Steinberg, a top portfolio manager at Steven A. Cohen’s SAC Capital Advisors hedge fund, guilty on charges he traded on insider information. Steinberg faces a maximum 85 years in prison in what was a highly watched case coming a month after SAC agreed to pay $1.2 billion and plead guilty to fraud charges stemming from a years-long probe of insider trading at Cohen’s firm. [SAC had also previously paid $616 million to resolve related Securities and Exchange Commission charges.]

--The Association of American Publishers said recently that e-book sales had been flat or in decline for most of 2013. But hardcover sales are going to be disappointing for this year. In 2012 you had “Fifty Shades of Grey” and the “Hunger Games” series buoying sales, including for digital.

--Under terms of its EU bailout, the Greek government was forced to raise the price of heating oil, which is causing millions to burn wood instead as they freeze in their homes. Result? Awful levels of air pollution in Athens, for starters. Plus the government isn’t taking in the revenues it was expected to with the price hike and instead has cost the treasury $650 million. A local physicist told Reuters, “The toxicity levels are becoming dangerous. It’s turning Athens into a gas chamber.” It’s getting so bad, owing in part to Athens’ unique geography, that the government may be forced to shut down factories this winter. Not exactly what you want to see as the country attempts to recover from its depression.

--Cantor Fitzgerald settled with American Airlines Group’s insurers to the tune of $135 million tied to the Sept. 11, 2001, terror attacks, Cantor having lost 658 employees as it had offices in the north tower. The company had filed the lawsuit in 2004, accusing the airline of negligence in allowing the five hijackers to board Flight 11. The compensation was for business interruption and property losses incurred. American “vigorously defended itself in litigation,” according to an airline spokesman.

--Beijing banned some U.S. shellfish imports from the west coast after discovering recent shipments of clams had high levels of arsenic and a toxin that causes paralytic shellfish poisoning. According to an official with the Washington Department of Health, this is the first time such a ban has been implemented.

The closure could last for months. [South China Morning Post]

--According to a report by U.S. Trust, the U.S. leads by a wide margin in attracting inventors from other countries, 57.1% of the total. China and India lost the most. As Joseph Quinlan, chief market strategist at U.S. Trust, wrote in the report:

“Think of these people as best in class, the top brains of their respective country. They are restless, driven to create value, and at the forefront of incubating/spawning new companies or industries.”

Immigrants make up 12% of the U.S. labor force, but 25% of scientists and engineers. [Walter Hamilton / Los Angeles Times]

--The Wall Street Journal reports that McDonald’s has 10 million pounds of Mighty Wings it needs to get rid of, preferably sell, soon. They are in frozen storage, McDonald’s having failed to sell enough of them in a recent promotion.

--As part of an effort to evaluate Detroit’s assets in bankruptcy, emergency manager Kevyn Orr hired Christie’s to appraise the city’s collection at the Detroit Institute of Arts and a Pieter Bruegel the Elder 16th-century work was appraised at between $100 million and $200 million, while a Van Gogh self-portrait is worth between $80 million and $150 million.

Orr will have to make a decision whether to sell any of the DIA’s works as part of a restructuring plan. Here’s hoping he doesn’t.

--According to CarInsuranceComparison.com, the worst drivers in the country are in Louisiana, followed by South Carolina, Mississippi, Texas and Alabama.

But the state of Alabama has won the last four BCS titles, with the chance for a fifth, so it has that going for it.

Foreign Affairs

Iran: I guarantee if you ask the average American who is aware the United States and others were negotiating with Iran over its nuclear program, probably about 90% would believe the “interim agreement” was a done deal and was already being implemented.

But that is far from the case and President Obama is among those concerned a long-term deal (let alone an interim one that’s fully implemented) will ever be reached, putting the odds at “50-50.” French Foreign Minister Laurent Fabius is worried Iran will not be willing to give up its capacity to build nuclear weapons in a potential pact with the P5+1 (five permanent members of the U.N. Security Council and Germany). Even if the rules for implementing the six-month interim deal are finally established, the clock is then ticking for a final agreement and no one seems optimistic a long-term plan will ever be put in place.

Fabius told the Wall Street Journal, “My main concern is the second phase. It is unclear if the Iranians will accept to definitively abandon any capacity of getting a weapon, or only agree to interrupt the nuclear program.”

Fabius wants to see the P5+1 focus on eliminating Iran’s “breakout capacity,” the ability to build a nuke before other countries could take preventative action.

Let’s face it. The French are the only ones with balls these days, witness Mali, Central African Republic, ready to help in bombing Syria...until we weren’t... Fabius is insisting European Union nations not provide financial relief to Iran until the International Atomic Energy Agency begins daily monitoring of the atomic sites as mandated under the terms of the interim-agreement. Such inspections have yet to begin, a month after President Obama interrupted our Saturday night to announce the deal.

As for the U.S. Senate, a bipartisan group of 26 senators led by Foreign Relations Committee Chairman Robert Menendez (D-N.J.) introduced a bill threatening new sanctions on Iran, which President Obama has said he would veto, warning such legislation could disrupt the nuclear talks. The measure does allow for a 180-day suspension of sanctions to facilitate diplomacy, plus additional time if the White House deems it necessary to wrap up a final deal.

But the legislation includes language that the “government of Iran does not have an absolute or inherent right to enrichment and reprocessing capabilities and technologies,” despite past statements by Iranian leaders it does maintain such rights.

Iranian Foreign Minister Mohammad Javad Zarif said Iran can resume 20% uranium enrichment in less than 24 hours, while telling a group of students on Wednesday that the agreement signed with the P5+1 recognizes Tehran’s nuclear program, assuring them it will continue.

Then Zarif said “the structure of the sanctions and the antagonistic atmosphere created by the West against Iran is falling apart,” according to Fars.

Separately, Zarif said of the West’s insistence the heavy water reactor at Arak be closed or dismantled, “We cannot roll back the clock 20 years and ask Iran to simply get rid of a project that has been the subject of a great deal of human and material investment.”

Deputy foreign minister Abbas Araghchi said the U.S. has been creating chaos and acting indecisively since the interim agreement was reached.

Editorial / Washington Post

“President Obama said this month that he assessed the chance of reaching a permanent accord with Iran on its nuclear program as no ‘more than 50-50.’ For his part, Secretary of State John F. Kerry told Congress that he ‘came away from our preliminary negotiations’ with Tehran ‘with serious questions about whether or not they’re ready and willing to make some of the choices that have to be made.’ Events in the past week have made clear that those bearish judgments were justified.

“Iranian officials walked out of talks with the West last Friday – not the negotiations about a final accord, which have not begun in earnest, but those on the implementation of the preliminary agreement reached in Geneva in November. The pretext was an announcement by the U.S. Treasury of actions against companies that have been violating U.S. sanctions against Iran....

“By making a show of breaking off talks, Tehran was attempting to bluff the West into hollowing out the remaining sanctions by stopping their enforcement. It also delayed the time when it will have to comply with its own commitment to cut back on its enrichment of uranium and reduce the stockpile it has accumulated....

“(Iran) is sending an early message that it does not intend to bargain in good faith....

“Mr. Obama and Mr. Kerry have devoted much time since the Geneva deal to persuading Congress not to approve additional sanctions on Iran. Perhaps their time would be better spent pushing the Iranian negotiators to stop posturing and stonewalling.”

Finally, Iran supposedly sent another monkey in space, which points out a huge problem with the interim nuclear agreement signed Nov. 24. It places zero restrictions on Iran’s ballistic missile program, which continues to make strides.

Syria: I said it was over in terms of this conflict back in August 2012 and the war has only gotten worse since then. The past week saw the Assad regime dropping devastating barrel bombs on civilians in Aleppo, killing more than 100 and overwhelming the few remaining hospitals. Air strikes were also stepped up against rebel-held districts.

As for peace talks slated for Geneva, it was learned this week they would actually open in the Swiss town of Montreux because there are not enough hotel rooms left in Geneva on January 22, scheduled start of the talks, because of a luxury watchmaker convention.  Pathetic. Talks will supposedly reconvene in Geneva two days later.

The West is also indicating to the Syrian opposition that President Assad may remain in office; that talks may not lead to his removal as the opposition has long called for.

The West is saying that with the chaos created by the rise of al-Qaeda in some sectors of the country, were Assad to be removed an Islamist takeover would ensue.

Depressingly, as the Washington Post’s Joby Warrick reported, extremists allied with al-Qaeda are now training Syrian children as young as 10 as combatants. “This is the future threat,” an expert told Warrick. “These are the children of al-Qaeda.”

Fred Hiatt / Washington Post

“If you had said in 2008 that the administration of Susan Rice, John Kerry and Barack Obama would do nothing while a dictator deliberately starved more than a quarter-million of his people, no one would have believed you.

“All three had condemned the Bush administration for allowing people to starve in Darfur, Sudan, and passionately demanded action.

“Today, an equivalent humanitarian catastrophe is unfolding in Syria. Forces loyal to Bashar al-Assad have besieged as many as 290,000 people near Damascus, who are dying of hunger, according to United Nations officials.

“Fewer people have died in Syria than in the Darfur region of Sudan, but still the number exceeds 100,000. More Syrians are homeless: more than 2 million – 10 percent of the population – have fled Syria altogether, and millions more are displaced within the country.

“Yet the Obama administration, while providing aid for the refugees, has done virtually nothing for the people inside....

“Deliberate starvation of hundreds of thousands of civilians constitutes a crime against humanity.

“Sadly, that seems to leave one possibility:

It doesn’t matter to us.

“That wasn’t Obama’s posture when he contemplated the tragedy in Darfur. ‘When you read just horrendous accounts of entire villages being decimated and children being murdered...it just breaks your heart, and humanitarian concerns should be sufficient,’ he said in 2006. ‘But we also have a strong national interest. If you start seeing more and more failed states, more and more displaced persons, more and more refugees, all of that becomes a breeding ground for terrorist activity...we can’t insulate ourselves from these tragedies.’....

“Seven weeks ago, Kerry wrote plaintively: ‘The world cannot sit by watching innocents die.’

“But of course the world can and does....

“(Obama’s) America can, and does.”

The U.N. now estimates nearly 3/4s of Syria’s 22.4 million population will need humanitarian aid in 2014.

Editorial / Washington Post

“It’s impossible to know what U.S. leadership could have achieved, but it’s hard to imagine a more frightful outcome. The one advantage of inaction seems to be the ability to disclaim responsibility: We didn’t break it, so we don’t own it. Even that benefit, however, may prove transient. Already the United States is the largest donor of refugee aid. As misery spreads and anti-American radicals plant roots, the Obama administration, or its successor, may find that the costs of non-involvement far exceed those that would have come with timely and measured intervention.”

Like I said, the window of opportunity shut for good 16 months ago.

Ukraine: The week started with leaders from the European Union and the U.S. Senate, specifically John McCain in the case of the latter, standing shoulder to shoulder with Ukraine’s opposition in Independence Square in Kiev. McCain, who also met with President Viktor Yanukovych, told the leader the Senate was prepared to officially sanction any individuals responsible for violence against protesters if authorities used such force again as they had the previous week.

McCain told the throng in the square: “This is about the future you want for your country. This is about the future you deserve.” Connecticut Dem. Sen. Chris Murphy told them: “Ukraine’s future stands with Europe, and the United States stands with Ukraine.”

The crowd chanted “Thank you!” in Ukrainian and English. Opposition leader Vitali Klitschko, who vacated his WBC world heavyweight title on Monday in order to pursue the presidency, stood next to McCain in what made for a great photo.

The EU suspended talks on a trade deal with Ukraine, the one Yanukovych refused to sign Nov. 21, and then Yanukovych headed to Moscow for a meeting with President Vladimir Putin.

Putin was all too happy to come to Ukraine’s aid to prevent it from moving towards the EU. Russia announced it would buy $15 billion worth of Ukrainian government bonds, while slashing the cost of Russian natural gas supplies to Ukraine by about 33%.

Putin said the assistance was not “tied to any conditions,” such as signing a new Russian-led customs union, which Ukraine could still join.

“Russia and Ukraine are...united both by many centuries of our friendship and by having lived a long time together in the same country,” said Putin.

Back in 2010, the International Monetary Fund provided Ukraine $15 billion in loans in exchange for undertaking needed economic reforms. The Ukrainian government then failed to do so. 

Now the I.M.F. is furious Russia is providing another $15 billion in loans as well as a sharp discount on natural gas prices. Yanukovych had previously been looking for further I.M.F. aid but balked at the terms, which would have included increases in household utility rates and limits on government spending.

It’s the Kremlin that now faces the risk, according to the I.M.F., because without Ukraine taking the needed steps, Russia’s money is going down a rat hole.

In his State of the State annual news conference, Putin insisted Ukraine would pay the loans back.

Editorial / Washington Post

“The good news for the majority of Ukrainians who oppose this project is that Mr. Putin’s triumph is likely to prove pyrrhic. With its own economy stalling, Russia can ill afford to spend $15 billion, a substantial portion of its sovereign wealth fund, on Ukrainian bonds, and the gas price reduction will wound the biggest producer of those funds, Gazprom. Since Mr. Yanukovych will not undertake the reform measures needed to stabilize the Ukrainian economy, the country will probably face default again in a year or two. Meanwhile, no amount of money or repression is likely to silence the rising generation of Ukrainians who aspire to Western freedoms and prosperity. Sooner or later, the attempt to create an alternative empire of autocracy and corruption in the center of 21st-century Europe will collapse of its own weight.”

Russia: At Putin’s presser, the usual four hours in length, among the items he addressed was a report Russia had placed ballistic missiles in Kaliningrad, a Russian enclave that borders NATO territory. Putin said no nuclear-capable Iskander missiles were fielded there, which was contrary to statements from the Defense Ministry. Putin admitted, however, this could be a possible response to the West’s missile defense shield, but “we have not yet made this decision yet, let them calm down.,” apparently referring to objections by the likes of the United States and Poland.

And Vlad the Great suddenly announced he was signing a decree pardoning jailed former oil tycoon Mikhail Khodorkovsky on the basis of “the principles of humanity,” the Kremlin said on Friday, a day after Putin casually mentioned he would be doing so.

Khodorkovsky was then freed after ten years in prison on charges of tax evasion and theft after funding opposition parties. [His attorney said that Putin’s claim Khodorkovsky requested a pardon was false as such a move implies an admission of guilt, but after his release, Khodorkovsky released a statement saying he had requested a pardon but that admission of guilt didn’t come up.]

Earlier, the Russian parliament approved a sweeping amnesty law that should lead to the release of activists from Greenpeace and the punk band Pussy Riot.

It’s all about Sochi and a desperate attempt by Putin to improve Russia’s image ahead of the Winter Games just around the corner. President Obama is one of many international leaders shunning the Olympics and it’s an embarrassment for Vlad.

Afghanistan: The White House is preparing to extend the Dec. 31 deadline for reaching a security agreement with Afghan President Karzai in order to get him to approve a deal that would permit 10,000 or so U.S. troops to remain in the country past 2014.

Should Karzai continue to balk (and more than a few administration officials hope he does because they don’t want the U.S. to stay), Obama may be willing to let the deadline slip all the way to the April 5 presidential election in the hopes a new president will sign an agreement.

China: The foreign ministry attacked Japanese Prime Minister Shino Abe for “malicious slander” over China’s establishment of a new air defense identification zone (ADIZ) in the East China Sea.

A statement on the foreign ministry website said: “We express strong dissatisfaction with Japan’s leader using an international occasion to maliciously slander China. The Chinese side took necessary measures to safeguard its sovereignty and territorial integrity. This is totally legitimate and irreproachable.”

At a Tokyo summit with the Association of Southeast Asian Nations (Asean), Abe said: “The (ADIZ) China has established is unjustly violating the freedom of aviation over the high seas, which is a general rule in international law. We are demanding China rescind all measures like this that unjustly violate the general rule.” [Lucy Homby / Financial Times]

Last Friday, Washington announced a U.S. Navy guided-missile cruiser, the USS Cowpens, was forced to take evasive action to avoid a collision with a ship from the People’s Liberation Army Navy. [The incident took place Dec. 5 but wasn’t immediately made public.]

At first, a Chinese newspaper, the Global Times, accused the U.S. Navy of harassing a PLA squadron before the near collision.

“If the American navy and air force always encroach near China’s doorstep, confrontation is bound to take place.”

But two days later, Beijing issued a statement from the defense ministry downplaying the standoff, explaining that the two warships only “met” each other in the South China Sea and avoided confrontation by effective and proper communication.

Then on Thursday, Defense Secretary Chuck Hagel said China acted in an “irresponsible” way in the stand-off. Hagel said the Chinese ship cut in front of the Cowpens by just 100 yards.

“That’s the kind of thing that’s very incendiary, that could be a trigger or a spark that could set off some eventual miscalculation,” said the secretary.

Meanwhile, Chinese scientists are looking at the possibility of pumping liquid nitrogen, super-cold gas into the atmosphere as a way of cleaning up air pollution. Government-funded research involves pumping the gas from large tanks into the air as a fine mist at least 10 meters above ground.

“Crystals form on the small particles of dust and other pollutants, which then fall to the ground. The belt of cooler air, less than 20 meters thick, also stops polluted air above reaching street level. The researchers said that during colder weather the belt, rich in vaporized liquid nitrogen, could remain hanging in the atmosphere for several hours.” [Stephen Chin / South China Morning Post]

Finally, we acknowledge China for the successful landing of its lunar probe, Chang’e-3, making China the third nation to land a craft on the moon. The rover – called Yutu or Jade Rabbit – has been wandering around, saying hello to all the locals, analyzing rocks and such, looking for the perfect location for a duck farm, assuming it can find water.

China has announced a mission for 2017 that would bring back lunar soil and rock samples.

North / South Korea: The two sides held talks over the South Korean-funded Kaesong industrial complex, which is located across the DMZ in the North, so this was seen as a positive. But then it was revealed Pyongyang had sent a letter to South Korean President Park Geun-hye, warning that if she didn’t stop conservative activists’ anti-North rallies in Seoul, Pyongyang could launch “retaliatory strikes without warning.”

All this following the execution of No. 2, Jang Song-thaek, Kim Jong-un’s uncle and mentor. On Tuesday, Kim presided over a mass gathering of military and party officials that was broadcast live on state television.

No one knows what Kim is up to, or how big the struggle is within the regime and whether Kim himself is at risk. Since day one of StocksandNews, I have always asked the question, ‘Just who are the people behind the Kims (father and now son)?’ The scary part is we still don’t know, even as one was done in. Who are the generals? Will one plug Kim some day?

What does seem likely today, however, is that Kim will lash out in some fashion to prove to those around him he is still the one calling the shots. Pyongyang admitted there was dissent in accusing Jang of building a “faction” in a plot to overthrow the government.

For its part, the Seoul government attempted to tamp down reports North Korea was preparing a new nuclear test.

And one other item. North Korea deleted almost all of the state news archives contained on the Korea Central News Agency website, some 35,000 articles.

Egypt: The military-backed government filed new charges against deposed president Mohamed Morsi, accusing him of participating in a terrorist plot, including leaking state secrets to Iran. Human rights groups called the allegations preposterous, according to David D. Kirkpatrick of the New York Times.

Iraq: A wave of attacks on Monday killed at least 70, the bloodiest day of violence in nearly two months.

Lebanon: A depressing piece from a friend of mine, Michael Young / Daily Star:

“Saturday evening, while walking in Sassine Square, I came upon a nauseating scene. Two young men had gotten out of their car and were furiously punching the Syrian driver of a delivery vehicle, over what appeared to be a traffic dispute.

“The Syrian protested that he had said nothing, which only brought on more blows. Eventually some bystanders broke up the altercation, and the two thugs got into their car and left. But what was most disturbing was the ease with which the men assaulted someone in the middle of Beirut, with no apparent fear that they would be arrested for their actions.

“Similarly, I recently met a young foreigner whose ankle was broken after he was hit by a car. The driver sped off, leaving his victim lying in the street. At such moments, and many more in Lebanese daily life, you cannot help but ask: What has gotten into the Lebanese?

“Traffic casts the brightest and most disquieting light on our national pathologies. The latent violence and aggression of many drivers, their rudeness, selfishness and utter indifference to the consequences of their foolish risk-taking, are but three of the familiar characteristics of what is a daily descent into Lebanon’s heart of darkness....

“Every day, it seems, Lebanon has become a vast con game, an unprincipled country where violence is given free rein, where charlatanism is rewarded, where incompetence is generalized and where legalized theft is widespread – a country which it is easy to leave and from which the young understandably seek escape.”

Saudi Arabia: Paul Sperry / New York Post:

“After the 9/11 attacks, the public was told al Qaeda acted alone, with no state sponsors.

“But the White House never let it see an entire section of Congress’ investigative report on 9/11 dealing with ‘specific sources of foreign support’ for the 19 hijackers, 15 of whom were Saudi nationals.

“It was kept secret and remains so today.

“President Bush inexplicably censored 28 full pages of the 800-page report. Text isn’t just blacked-out here and there in this critical-yet-missing middle section. The pages are completely blank, except for dotted lines where an estimated 7,200 words once stood.

“A pair of lawmakers who recently read the redacted portion say they are ‘absolutely shocked’ at the level of foreign state involvement in the attacks.

“Reps. Walter Jones (R-NC) and Stephen Lynch (D-Mass.) can’t reveal the nation identified by it without violating federal law. So they’ve proposed Congress pass a resolution asking President Obama to declassify the entire 2002 report...

“Some information already has leaked from the classified section, which is based on both CIA and FBI documents, and it points back to Saudi Arabia, a presumed ally.

“The Saudis deny any role in 9/11, but the CIA in one memo reportedly found ‘incontrovertible evidence’ that Saudi government officials – not just wealthy Saudi hardliners, but high-level diplomats and intelligence officers employed by the kingdom – helped the hijackers both financially and logistically. The intelligence files cited in the report directly implicate the Saudi embassy in Washington and consulate in Los Angeles in the attacks, making 9/11 not just an act of terrorism, but an act of war....

“This isn’t water under the bridge. The information is still relevant today. Pursuing leads further, getting to the bottom of the foreign support, could help head off another 9/11.

“As the frustrated Joint Inquiry authors warned, in an overlooked addendum to their heavily redacted 2002 report, ‘State-sponsored terrorism substantially increases the likelihood of successful and more lethal attacks within the United States.’”

Separately, former Saudi intelligence chief Prince Turki al-Faisal charged that President Obama has created “an issue of confidence” among America’s allies in the Middle East.

Said the prince: “We’ve seen several red lines put forward by the president which went along and became pinkish as time grew, and eventually ended up completely white. When that kind of assurance comes from a leader of a country like the United States, we expect him to stand by it.”

Turki remains a senior member of the royal family so his comments clearly reflect government opinion.

Editorial / New York Post

“If the Saudis are nervous, they have a right to be: along with the Israelis, they have the most to lose from a nuclear-armed Iran.

“Both these countries are longstanding U.S. allies. That Israel and Saudi Arabia now share a common interest regarding Iran and Syria is not surprising. That they share a common concern about the word of an American president is ominous.”

Yes, you combine the lead above re 9/11 with the succeeding bit and all you can say is, it’s complicated.

India: Officials are furious over the arrest of a female diplomat in Manhattan last week and initially retaliated by removing the security barriers in front of the U.S. embassy in Delhi.

India’s deputy consul general for all manner of stuff, including women’s affairs, was arrested for allegedly mistreating her female nanny.

The feds charged the diplomat lied on a visa application to get the Indian national into the country and then paid her $3.31 an hour.

Devyani Khobragade was strip-searched after being taken in (standard procedure in such matters) and India’s national security adviser branded the arrest “barbaric.”

Khobragade was released on $250,000 bail. I’m sure I’ll be writing more on this next time as Indian MPs are outraged and demanding action.

Britain: The chief of the defense staff, Sir Nicholas Houghton, warned in a lecture that he feared the UK was losing its “courageous instinct” on the international stage and at risk of stepping back from its responsibilities.

“I have recently observed with some admiration the relative ability of French forces to operate with a mindset of aggressive risk management,” he noted at one point. “We must be careful as a society and as a professional military not to lose our courageous instinct since it is one of the things which keeps us in a class apart,” he said. [Sam Jones / Financial Times]

As for the aforementioned French, they are increasingly frustrated that they seem to be the only ones in Europe with a spine.

South Africa: President Jacob Zuma is in major hot water over the refurbishment of his country home to the tune of $20 million, including a swimming pool, two helipads, an amphitheater, an underground bunker, 20 houses for policemen, and all manner of huts built for President Zuma’s many relatives. This is in an area where virtually all his neighbors have outdoor latrines, as reported by Jerome Starkey of the London Times.

Zuma claimed the improvements were necessary for security reasons, but taxpayers, who are footing the bill, are furious. It’s a growing scandal that could bring him down.

In a related vein, from an editorial in The Economist:

“(Since) Mandela left the presidency in 1999 his beloved country has disappointed under two flawed leaders, Thabo Mbeki and now Jacob Zuma. While the rest of Africa’s economy has perked up, South Africa’s has stumbled. Nigeria’s swelling GDP is closing in on South Africa’s. Corruption and patronage within the ANC have become increasingly flagrant. An authoritarian and populist tendency in ruling circles has become more strident. The racial animosity that Mr. Mandela so abhorred is infecting public discourse. The gap between rich and poor has remained stubbornly wide. Barely two-fifths of working-age people have jobs. Only 70% of those who take the basic high-school graduation exam pass it. Shockingly for a country so rich in resources, nearly a third of its people still live on less than $2 a day.”

As for the fake signer at Nelson Mandela’s memorial service, a cousin and three friends say Thamsanqa Jantjie was part of a mob that accosted two men found with a stolen television and burned them to death by setting fire to tires placed around their necks (“necklacing”). Jantjie never went to trial for the 2003 killings because authorities determined he wasn’t mentally fit to stand trial. Oh brother. Three feet away from an American president. Signing gibberish. You couldn’t make this stuff up.

Chile: Left-winger Michelle Bachelet was elected president for a second time, handily winning a run-off. Bachelet first served as president from 2006-10, after which she was obliged by election law to step down.

Bachelet wants to increase taxes to offer free university education and reform economic structures dating from the Pinochet dictatorship.

Random Musings

--As I noted above, the story that President Obama intends to nominate Democratic Sen. Max Baucus as his next ambassador to China is not only about the end of any hope for true tax reform in 2014, but it could make Republican efforts to retake the Senate next year even more difficult. Now, Democratic Gov. Steve Bullock will be able to select Baucus’ replacement, most likely lieutenant governor John Walsh, who then could run for the seat as an incumbent against probable Republican nominee, freshman Rep. Steve Daines, Montana’s only House member.

Plus Baucus’ departure sets other wheels in motion, such as allowing Louisiana Sen. Mary Landrieu, considered highly vulnerable in her reelection bid, to ascend to the chairmanship of the Energy Committee, a major positive for her in her energy heavy state. [Michael A. Memoli and Paul Richter / Los Angeles Times]

Baucus’ departure with a year to go also removes a thorn in the side of his fellow Democrats. It’s Baucus, after all, who was an architect of ObamaCare but then last April famously warned of a “huge train wreck” if officials did not do a better job of explaining it. Baucus has also been harshly critical of Kathleen Sebelius.

Baucus still believes in the Affordable Care Act, but said it will take a decade before it’s ultimately embraced. Such words from the Senate floor next year obviously wouldn’t help the Democratic cause. I imagine Baucus would have been a staple of Republican campaign ads.

Meanwhile, when it comes to analyzing Congress and the election cycle, Michael Barone (and Charlie Cook) are probably the two preeminent figures in their field and Barone, commenting from his New York Post perch, notes “Republicans have plausible chances to gain as many as 11 (Senate) seats. But there are countervailing factors.”

Such as in our penchant for nominating “astonishingly weak candidates.”

“That being said, National Journal’s survey of Washington political insiders shows most Republicans and a near-majority of Democrats predicting a Republican Senate majority. [Ed. currently 55-45 Democrats.] That’s noteworthy, because these insiders, who spend so much time with incumbents, didn’t predict party takeovers in 2006 and 2010 at this point in those election cycles.

“The ObamaCare rollout has also shifted opinion on the generic vote – which party’s candidate do you support for the House of Representatives? When the shutdown ended, Democrats led 47-41 in Real Clear Politics’ average of recent polls.

“Now, Republicans lead 44-41 on the question that has often underestimated actual GOP performance. Analysts Stuart Rothenberg and Larry Sabato see more than 20 Democratic House seats at serious risk.

“All this could change if public opinion on ObamaCare – or Obama – shifts once again. But it looks like recent obituaries of the Republican Party were premature.”

--President Obama, in his effort to restore public confidence in our intelligence agencies, established the Review Group on Intelligence and Communications Technologies to review all surveillance programs and in a 300-page report, said panel has recommended new limits on the National Security Agency’s phone surveillance program. The panel also urged legislation that would prevent the FBI from obtaining your financial or phone records without first obtaining judicial approval. And it would ban warrantless NSA searches of your calls and emails that fall within large caches of communications collected as a result of targeting foreigners overseas.

But panel member Michael Morell, former deputy director of the CIA, said, “We are not in any way recommending the disarming of the intelligence community.”

Plus the recommendations are just that, recommendations, and it is not likely many of them will be adopted, including the ending of government collection and storage of bulk phone data. [Ellen Nakashima and Ashkan Soltani / Washington Post]

But, on Monday, U.S. District Judge Richard J. Leon described technology used by the NSA as “almost Orwellian,” adding the collection of phone data was “almost certainly” unconstitutional, leaving a chief proponent of intelligence reform, Dem. Sen. Ron Wyden of Oregon, to observe, “The combination of this report plus the judge’s decision...makes this a big week for the cause.”

[Edward Snowden replied, “Today, a secret program authorized by a secret court was, when exposed to the light of day, found to violate Americans’ rights. It is the first of many.”]

--In a Washington Post/ABC News poll, President Obama’s overall approval rating is 43%, disapproval at 55%, basically same as a month ago. A year ago it was 54% approval, 42% disapproval. At this point after his fifth year in office, President George W. Bush was at 47% positive, 52% negative.

Congressional approval is at 16%, up four points in the past month.

In a new CNN/ORC poll released Friday, Obama’s approval rating is 41%, matching the all-time low for CNN polling just last month. 56% disapprove, an all-time high. [The president’s approval rating stood at 55% last January.] Among independents the approval rating is just 32%.

A USA TODAY/Pew Research Center survey of Millennials (18-29) has 45% approving of the job Obama is doing, 46% disapproving. In January of this year, 67% of this group approved.

--After the Senate approved Republican Cong. Paul Ryan’s compromise budget deal, Paul Kane of the Washington Post had the following comment when looking at Ryan and Florida Sen. Marco Rubio.

“Rubio is widely viewed as positioning himself for a 2016 run and is shying away from his leadership role on the immigration bill. Ryan appears more poised and confident than ever in the Capitol and seems noticeably more comfortable here than on the trail in early presidential primary states.”

Ryan has already said he wants to be chairman of the powerful Ways and Means Committee in 2015 and that year will decide what to do in terms of a presidential run. Rubio was among those voting against the deal Ryan crafted with Dem. Sen. Patty Murray of Washington.

I gained respect for Ryan and lost some for Rubio, especially for wimping out on the immigration fight. Ryan is correctly focused on winning elections.

Kathleen Parker / Washington Post

“(Republicans) are on fire. The real story isn’t that a bipartisan budget bill has been hammered out but that House Speaker John Boehner has ignited.

“He and others of like mind obviously have decided to sacrifice party unity in the interest of national well-being. What a concept. Over a couple of days during the budget negotiations, Boehner turned both barrels on insurrectionists – both inside and outside Congress – especially the big conservative action groups that have undermined any efforts at compromise and bipartisanship.

“Depending on how things shake out in the remaining days of the jolly season, we could be witnessing the first shots of an old-guard revolution from which emerges the leader Republicans have been waiting for.

“Center stage: Paul Ryan.

“As all know, the budget deal was crafted by Ryan and Democrat Patty Murray. It’s a not-grand bargain – i.e., ‘it sucks’ – but it’s something, and it staves off another budget crisis through fiscal year 2015....

“What everyone will know soon enough is that Paul Ryan is The Guy – the missing leader the GOP has been searching for and who is clearly being groomed for 2016.”

[A Des Moines Register poll released Sunday of Iowans’ early preference for 2016 found Ryan was the most popular Republican tested, with almost 3/4s of Iowa Republicans having a favorable opinion of him, including 66% among Tea-Partiers.]

--Congress passed just 57 bills in 2013, compared with an average of 282 passed bills per year from 1973 through 2012. The House was in session 155 days this year, while the Senate logged 149. Those working a normal job with say two weeks’ vacation and all the normal federal holidays work 241 days. [Rick Newman / Yahoo Finance]

--New Jersey Gov. Chris Christie seems to be hoping that the holiday season, when some reporters get time off and many followers of the political scene have their minds elsewhere, will obscure a still developing scandal involving closing access lanes onto the George Washington Bridge, going back to last September. Then, and in other instances, ramps leading to the bridge in the borough of Fort Lee were closed without warning, leading to delays of up to six hours. Police and executives at the Port Authority, which runs the bridge, weren’t apprised ahead of time either.

The Democratic mayor of Fort Lee, Mark Sokolich, had refused to endorse Christie so he saw the sudden lane closures as retribution. “What other conclusions could we possibly reach?’ he asked.

The Port Authority’s deputy executive director, Bill Baroni, later claimed the closures were part of a traffic study, though he had zero proof of this. He resigned ten days ago.

It then was determined the closures were ordered by the Port Authority’s David Wildstein, a Christie ally and political appointee. The PA’s executive director said he knew of no traffic study. So then Wildstein resigned.

Christie’s reply was, “I worked the [traffic] cones.  Unbeknownst to anyone, I was working the cones,” he said at one news conference.

As this week ends, Christie is now confessing mistakes were made but that Democrats are making up an issue that doesn’t exist.

The Star-Ledger, though, editorialized that the Christie administration “has been so evasive and secretive that it’s obvious they have something to hide.”

Of course the Democrats know that Christie poses a major problem for them in 2016 should he receive the Republican nomination so Democratic Sen. Jay Rockefeller, chairman of the Transportation Committee, announced he would look into the matter.

This isn’t the first issue that I’ve mentioned that could torpedo Christie, and I’m not talking in a race against, say, Hillary Clinton. Christie seems to be forgetting that if he isn’t careful, it could derail him in a Republican primary debate.

--If you saw John Miller’s piece on the NSA for “60 Minutes” last week, know he is looking to rejoin his old friend Bill Bratton back at the New York Police Department. Miller has twice left the news business to serve under Bratton, first at the NYPD and then in Los Angeles.

--Literally a one-minute drive from where I live is one of the more high-end shopping complexes in the country, The Mall at Short Hills. Sunday night, a 30-year-old attorney with his wife had finished some Christmas shopping when the two went to their Range Rover in the parking garage. The man was shot and killed when he resisted a carjacking by two thugs who as of this writing have yet to be caught, though the car was found in Newark. 

So I went to the mall the following morning to see what kind of security was in place, especially as I parked in the same lot, and nothing. Inside the sweeping expanse there were just two mall cops.

I also heard from friends later that some of the surveillance cameras were not working Sunday.

--So what vitamins do you take every day? I take a vitamin C tablet, a B-12 one, and a fish oil capsule, all with my Dunkin’ Donuts chocolate frosted offering each morning. No ‘multivitamin.’

But as many of you heard this week, a supposedly definitive study by academics at Johns Hopkins University School of Medicine and the University of Warwick said the accumulation of evidence suggests that “supplementing the diet of well-nourished adults...has no clear benefit and might even be harmful.”

The scientists blamed the companies selling supplements for creating false anxieties in order to offer a cure that was not required.

For now I’m not changing my regimen because my cholesterol readings are off the charts good.

At the same time, one thing is clear. Get EXERCISE!!!!

And one other thing is also becoming increasingly clear. There is zero reason to trust that the drug/vitamin companies are manufacturing anything near what they put on the label. I think about that all the time.

--Remind me not to do anything stupid enough to land me at New York’s Rikers Island prison. As a New York Post story points out, “The city’s biggest crime spike is taking place behind bars.

“A 146 percent surge in felony assaults last month in The Bronx’s 41st Precinct is due to a raging gang war at Rikers Island, say police and jail sources.”

As in 106 assaults in November.

Also, remind me not to apply for the position of corrections officer on Rikers. Being a Mets fan is undoubtedly not helpful.

--In a poll conducted for USA TODAY, 60% of Americans say global warming is a very serious global issue and 2/3s say it will hurt future generations either a lot or a great deal if nothing is done to reduce it.

I maintain the debate continues to be mislabeled. It’s about “global pollution,” regardless of whether the Earth is warming or not.

--In his Christmas message on Wednesday, Pope Francis called on the faithful to serve the poor, telling them in his weekly audience from St. Peter’s Square “not to place ourselves above others, but rather lower ourselves, place ourselves at the service of the poor, make ourselves small and poor with them.”

Francis added, “Let us act that our brothers and sisters never feel alone! Our presence and solidarity by their side expresses not only through the words but also through the eloquence of deeds that God is close to everyone.”

Elizabeth Tenety / Washington Post

“So when Rush Limbaugh, that great arbiter of true Christianity, says that what’s coming out of the pope’s mouth is ‘pure Marxism,’ when Sarah Palin frets that Francis is ‘kind of liberal’ and when Fox News’ Adam Shaw calls him ‘the Catholic Church’s Obama,’ they’re just distorting the secular left’s dreams into their own worst nightmares.

“Both left and right need to wake up. Francis is, at his heart, a spiritual leader. His mission may have political implications, but he has come to serve God, not to advance the platform of the Democratic Party – and it’s presumptuous to imagine otherwise. Even in discussions of economic inequality, Francis sees the primacy of the faith: ‘I am firmly convinced that openness to the transcendent can bring about a new political and economic mindset that would help to break down the wall of separation between the economy and the common good of society,’ he writes in ‘Evangelii Gaudium.’ Oh, my: Sounds like Francis believes in trickle-down transcendence.

“If Francis is a radical, it is like this: By speaking the language of the common person in the year 2013, in his awareness of the inspirational power of grand, symbolic gestures, through his call for everyday Catholics to embrace the simple, radical mandates of their baptism, Francis is awakening a world that was becoming dead to Christianity.”

In an interview last Sunday with the Italian daily “La Stampa,” Francis is quoted as saying: “Marxist ideology is wrong,” while adding he has “known many Marxists who were good persons, and that’s why I don’t feel offended” by the label.

Kathleen Parker / Washington Post

“What is the successor to St. Peter supposed to do when he sees so much suffering even in free-market societies? Quote Ayn Rand?

“In a final contextual note, Francis is the pope, not the president. Like Jiminy Cricket, he is urging people to let their conscience be their guide. No one, Christian or otherwise, can escape the mirror he holds up, his eyes doubtless twinkling in anticipation of his next moonlight adventure, searching for souls in need.”

Pope Francis has been a breath of fresh air. Some of those criticizing him, such as Rush Limbaugh, also need to lighten up. Direct your fire at President Obama for his abandonment of children in Syria. Pope Francis isn’t.

--Finally...from “Calvin and Hobbes.”

Calvin: Yep, Christmas is just around the corner. And what better way to celebrate a religious holiday than with a month of frenzied consumerism!

Hobbes: I’m surprised other religions haven’t picked up on that.

Calvin: Getting loads of loot is a very spiritual experience for me.

---

Pray for the men and women of our armed forces....and all the fallen, including the six Americans who died in a helicopter crash in Afghanistan this week.

God bless America.
---

Gold closed at $1205
Oil, $99.15

Returns for the week 12/16-12/20

Dow Jones +3.0% [16221]
S&P 500 +2.4% [1818]
S&P MidCap +2.3%
Russell 2000 +3.6%
Nasdaq +2.6% [4104]

Returns for the period 1/1/13-12/20/13

Dow Jones +23.8%
S&P 500 +27.5%
S&P MidCap +29.2%
Russell 2000 +35.0%
Nasdaq +35.9%

Bulls 58.2
Bears 14.3 [Source: Investors Intelligence]

Merry Christmas!

Catch me on Twitter @stocksandnews

Brian Trumbore



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-12/21/2013-      
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Week in Review

12/21/2013

For the week 12/16-12/20

[Posted 12:00 AM ET]

Washington and Wall Street

I was at a Christmas party on Wednesday for the service organization I belong to, a group comprised of mostly small businessmen and women (and the town council), and to a man they said business was improving. I’ve asked the group the same question since I became a member over ten years ago and the tone is as good as it’s been in some time.

So no surprise then that on Friday we had the final revision to third quarter GDP and it came in at a very solid 4.1%, up from an estimate of 3.5%. Granted, as noted before on the dynamics of the quarter, much of this boost is due to a large buildup in inventories, but you get a number like that and you wonder if those saying the fourth quarter will fall back down to 2% or lower are right. Are we buying up the inventories, for example? 4.1% is, after all, the second-fastest quarter since the recovery began in mid-2009. It’s also a nice Christmas present for President Obama. It will help turn some poll numbers. [Obama has bottomed in this respect, says your editor.]

But this was also a week where Federal Reserve Chairman Ben Bernanke and his band of free money elves got together in Washington and finally decided that with the improving labor outlook it was time to begin unwinding the record-breaking stimulus that Bernanke initiated in an attempt to break the back of the worst recession since the 1930s. The Fed opted to begin cutting its monthly bond-buying program by $10 billion, from $85 billion a month to $75 billion. Yes, tapering.

And since my equity forecast for 2013 will have missed by a mile, though at least I didn’t say we’d finish down on the year, I am going to take one helluva victory lap on the issue of the Fed.

You will not find one person, in print, including all of Wall Street’s strategists, who nailed the two critical Fed decisions of the year, September and this week, in the manner that I did. Not one. Don’t bother trying either.

For starters, when the whole world said the Fed would taper in September, I said no, it wouldn’t, along with a mere handful, literally, of others.

But what set me apart from them was that I made that pronouncement a full month before, when it was even more in the minority, and stuck by it, as I do with all my decisions, for good or bad.

This time, again, a month before, when the vast majority were saying it was too early for the Fed to begin tapering and that why would Bernanke do so when Janet Yellen will be taking over in March, I said, au contraire, mon frères. He will, with one caveat. That Congress reach a bipartisan budget agreement, which it did.

It’s in sticking my neck out, weeks ahead, and then never deviating, in both the September and December decisions, that sets me far apart from the others. 

And none of this 60-40 crap. “Oh, we’re at 60% they will, 40% they won’t.”
Got ‘em both. No wavering, weeks ahead.

I was also careful not to say anything about market reaction. Oh, I said there’d be a helluva reaction if they didn’t begin tapering, and waited until March, because the evidence would have piled up against them and the Fed’s credibility, whatever remains, would have been shredded.

Alas, Bernanke came to his senses. The data has indeed been good enough.

But $10 billion? Technically, while the Fed said it was just the beginning as long as the data continued to move in their favor, it means we’ve gone from expanding the Fed’s balance sheet (or portfolio) – which topped $4 trillion this week, up from less than $900 billion before the crisis – by $1 trillion a year to $900 billion, though, again, this figure is expected to come down and the Fed hopes it has unwound the entire $85 billion program by mid-year or shortly thereafter.

Of course the purpose of the quantitative easing was to hold down long-term interest rates and, as represented by the yield on the 10-year, that hasn’t been the case since the spring...rates have risen. While this is actually a good sign, within reason, because it shows the economy is improving, the yield on the 10-year is going to be the top story for much of 2014, as I’ll discuss in full next week as part of my new forecast.

But regarding more of the specifics behind the Fed’s move, the Open Market Committee’s statement read in part:

“If incoming information broadly supports the committee’s expectation of ongoing improvement in labor-market conditions and inflation moving back toward its longer-run objective, the committee will likely reduce the pace of asset purchases in further measured steps.”

At the same time, the Fed said it will hold its target interest rate (the funds rate) at zero “at least as long as” unemployment exceeds 6.5% (from its current 7.0%) and that it “likely will be appropriate” to refrain from raising its benchmark rate “well past the time” joblessness falls below 6.5%, especially if inflation continues to fall short of its 2% target. [This week the November consumer price data was released...unchanged, up 0.2% ex-food and energy, while for the 12 months the CPI is up only 1.2%, 1.7% on core.]

So you can see the Fed is in no rush to remove the stimulus, while savers continue to get screwed.

The Fed also issued its new economic forecast on Wednesday and it is looking for unemployment to fall to 6.3% by the end of next year, 5.8% to 6.1% by Q4 2015.

The Fed forecasts GDP next year to be 2.8% to 3.2%, in line with the consensus.

So how did Wall Street react to all this? Buy buy buy!!!

But you had been told (not by me) once the Fed decided to taper the market would react negatively. Only the market finally discounted the first move because it was inevitable, even if a large majority didn’t see it coming this month.

It’s also bullish that the Fed made its move for the simple reason that it wouldn’t have done so if it didn’t feel the economy was truly on the road to recovery and not in danger of slipping back into the gutter. The Street, at least for now, is hopeful growth could actually surprise to the upside next year and that would be good for corporate earnings.

So the Dow Jones and S&P 500 finished the week with a series of new highs, while Nasdaq is now at 4104, or less than 1000 points from its all-time mark that many considered a pipe dream for ages to come, especially in the spring of 2009. 

Switching gears, the Senate passed the budget compromise 64-36 after it had sailed through the House and after respective staffs work through some final details, President Obama will sign it by Jan. 15. It’s far from perfect, and does little to address our long-term issues (save for the cut in the rate of growth for some military pensions, which I agree with).

As to the coming debt-ceiling debate, Treasury Secretary Jack Lew formally told congressional leaders they must raise the debt limit by early March at the latest. February 7 is the date Congress established for reaching a solution though it seems certain this will be moved out some. Fun and games this winter as many Republicans, upset they had to swallow the budget compromise, vow to be tougher on the debt ceiling, though at the same time many of them are cognizant of public perceptions and next November’s elections.

Re ObamaCare, the president continues to rewrite the rules, announcing another change Thursday night that marks the first exception the administration has allowed to the so-called individual mandate. 

David Lauter / Los Angeles Times

“Under the new policy, people who have received notices that their health plans are being canceled would qualify for hardship exemptions allowed by the law. Under those exemptions, they could buy low-cost catastrophic health plans or skip buying health coverage altogether.

“The low-cost plans, which provide bare-bones coverage, are otherwise available only to some people younger than 30....

“Health insurers have insisted the mandate that everyone buy insurance is necessary to keep coverage affordable and were quick to criticize the new policy.

“The change, coming less than two weeks before new health plans take effect on Jan.1, ‘could cause significant instability in the marketplace and lead to further confusion and disruption for consumers,’ Karen Ignagni, the head of America’s Health Insurance Plans, the industry trade group, said in a statement.”

Charles Krauthammer / Washington Post

“The lie of the year, according to Politifact, is ‘If you like your health care plan, you can keep it.’ But the story of the year is a nation waking up to just how radical ObamaCare is – which is why it required such outright deception to get it passed in the first place.

“ObamaCare was sold as simply a refinement of the current system, retaining competition among independent insurers but making things more efficient, fair and generous. Free contraceptives for Sandra Fluke. Free mammograms and checkups for you and me. Free (or subsidized) insurance for some 30 million uninsured. And, mirabile dictum, not costing the government a dime.

“In fact, ObamaCare is a full-scale federal takeover. The keep-your-plan-if-you-like-your-plan ruse was a way of saying to the millions of Americans who had insurance and liked what they had: Don’t worry. You’ll be left unmolested. For you, everything goes on as before.

“That was a fraud from the very beginning....

“It wasn’t until the first cancellation notices went out in late 2013 that the deception began to be understood. And felt. Six million Americans with private insurance have just lost it. And that’s just the beginning. By the Department of Health and Human Services’ own estimates, about 75 million Americans would have plans that their employers would have the right to cancel....

“It gets worse. The dislocation extends to losing one’s doctor and drug coverage, as insurance companies narrow availability to compensate for the huge costs imposed on them by the extended coverage and ‘free’ services the new law mandates....

“ObamaCare posed as a free-market alternative to a British-style single-payer system. Then, during congressional debate, the White House ostentatiously rejected the so-called ‘public option.’ But that’s irrelevant. The whole damn thing is the public option. The federal government now runs the insurance market, dictating deadlines, procedures, rates, risk assessments and coverage requirements. It’s gotten so cocky it’s now telling insurers to cover the claims that, by law, they are not required to.

“Welcome 2014, our first taste of nationalized health care.”

According to a New York Times/CBS News poll, overall, 39% approve of the ACA while 50% disapprove. The approval figure is up from the low of 31% in November. [A USA TODAY/Pew Research Center survey has it 40% approve, 55% disapprove.]

But remember, HealthCare.gov is not secure.

Lastly, on a different issue, you can kiss prospects for true tax reform good-bye with the nomination of Democratic Sen. Max Baucus (Mont.) to be the new ambassador to China replacing Gary Locke.

Baucus and his House counterpart, Dave Camp, have been working tirelessly on comprehensive reform and Baucus, who had announced he was not seeking reelection in 2014, saw this as his legacy. He’s my kind of pragmatist, but whatever slim chances there were for tax reform are now dead.

I understand why this announcement didn’t garner more press this week, but to me it was depressing. [More below.]

Europe and Asia

The December flash composite on both the manufacturing and service sectors for the eurozone, as compiled by Markit, came in at 52.1 from 51.7 in November, while the manufacturing component was 52.7 vs. 51.6, a 31-month high. The service component was 51.0 vs. last month’s 51.2. Chief Economist Chris Williamson of Markit said:

“The rise in the PMI after two successive monthly falls is a big relief and puts the recovery back on track....

“On the downside, the PMI is signaling a mere 0.2% expansion of GDP in the fourth quarter, suggesting the recovery remains both weak and fragile.

“The upturn is also uneven. Growth is concentrated in manufacturing...while weak domestic demand led to a further slowing in service sector growth.

“However, it’s the unbalanced nature of the upturn among member states that is the most worrying. France looks increasingly like the new ‘sick man of Europe’... In contrast, the December survey data round off a solid quarter of growth in Germany.”

Markit’s flash reports contain specifics on just Germany and France and as Mr. Williamson said, France is indeed the sick man. The manufacturing PMI for December is estimated to have fallen to 47.1 from 48.4 in November, a 7-month low and still very much in contraction mode. Germany’s manufacturing PMI, on the other hand, was 54.2 vs. 52.7, a 30-month high.

Staying with Germany, parliament confirmed Angela Merkel for a third term as chancellor as the Social Democrats voted to back the coalition, with SPD chairman Sigmar Gabriel becoming deputy chancellor (which positions him as lead candidate for chancellor in his party in four years). Recall, to gain the SPD as a coalition partner, Merkel had to acquiesce on a few of their platform ideas including a new national minimum wage. Importantly, Wolfgang Schauble remains finance minister.

In the UK, the immigration issue continues to be near the top of debate, as conservatives complain the surge in immigration is straining public services to the breaking point. But while some bitch about the topic, the fact is the immigrants often do the jobs the Brits don’t want to do. 

And the British economy is doing alright, especially compared to most of the other nations in the European Union. Unemployment is down to 7.4%, the best since 2009, and average weekly earnings for the three months to October are up compared with a year earlier, even if ever so slightly.

Lastly, to the issue of an agreement within the eurozone on how to respond to failing eurozone banks, ministers agreed to establish a $75 billion fund, financed by the banking industry, over 10 years, while a new European resolution authority is being created that would decide how banks are closed. [The UK and other non-eurozone economies are not part of the deal.]

The first pillar of the banking union is the establishment of a supervisory body within the European Central Bank to monitor all 6,000 banks in the eurozone. Germany and some others want to retain their own degree of supervision over smaller banks.

But back to the failure issue, while leaders were declaring victory, Michael Barnier, the EU commissioner responsible for the reforms, warned that the emerging deal was “too complex.”

Here’s what has to be hashed out in coming months, if it ever is, given it’s the EU and eurozone. When there is a bank failure, hard decisions need to be made instantly, normally over a weekend, but that is not going to be the case in Europe. A senior EU official told the Wall Street Journal they were turning the single resolution mechanism into a “Frankenstein,” a monster of national authorities that will struggle to wind down complex institutions.

The Financial Times reports, “Even when a resolution decision is uncontested and under Mr. Barnier’s more streamlined version, a decision would involve around 107 votes from 80-90 people at the ECB supervisory board, the ECB governing council, two committees at the single resolution board and finally the European Commission.

“With the involvement of appeals and mediation panels and the need to refer a contested decision to the council of finance ministers, the number of voting participants increases by 36.”

What a [blank]storm.

Turning to Asia, HSBC’s flash estimate on China manufacturing for December came in at 50.5 vs. 50.8 in November, so there are concerns Chinese GDP is decelerating. At the same time, home prices continue to surge, despite all the curbs the government has installed to slow the market. In November, prices rose 21% from a year ago in both Shenzhen and Guangzhou, 18% in Shanghai and 16% in Beijing.

In Japan, the Tanken survey of business confidence came in at its highest level in six years as large companies plan to increase capital spending by 4.6% next year...but...this was a downward revision from 5.1% in September due to fears over the looming consumption tax hike in April (5% to 8%).

Street Bytes

--The Dow Jones, in hitting a new high of 16221, had its third-best week of the year, up 3.0%. The S&P 500 rose 2.4% to its new all-time record, 1818, and Nasdaq rose 2.6%. Nasdaq is now up 35.9% for the year.

Dow components 3M Co. and Boeing raised their dividends by 35% and 50%, respectively, while Boeing authorized the largest share buyback in its history, $10 billion. The moves of both reflected positive outlooks.

As to the Christmas shopping season, seems to me the jury is still out. Weather has not been helpful, with major storms in the Midwest and Northeast (and some nasty issues for Saturday). A Bankrate.com survey also found that 14% planned to spend more this holiday season, 38% less. 

--U.S. Treasury Yields

6-mo. 0.08% 2-yr. 0.38% 10-yr. 2.89% 30-yr. 3.82%

The 10-year hit 2.95% on Friday morning but rallied back some.

Ben Bernanke’s term at the Fed officially ends Jan. 31 so Janet Yellen, who will be confirmed when the Senate reconvenes after its recess, will hold her first policy meeting in March. Bernanke has one last confab on Jan. 28-29, but no press conference afterward.

--Just a few items on the economy not covered above. November industrial production came in stronger than expected, up 1.1%, as for the first time the U.S. economy has surpassed the prerecession peak for this category.

Housing data was mixed. November housing starts soared to an annualized rate of 1.09 million, up 22.7%, the best pace since Jan. 1990, as single-family home starts rose 21%, its best since June 2008.

But then November existing home sales came in at a less than expected rate, 4.900 million annualized, the fourth consecutive month of declines and down a sharp 4.3%.

--Target was hit by a massive theft of credit and debit card information from as many as 40 million of its customers who shopped at Target stores between Thanksgiving and this past Sunday. The theft apparently originated at roughly 40,000 card devices at store registers.

Needless to say, customers are furious and it’s a public-relations nightmare for the retailer, as it tries to reassure everyone it is doing all it can to resolve the incident. In a letter to customers on its website, Target said, “You should remain vigilant for incidents of fraud and identity theft by regularly reviewing your account statements.”

Late Friday, the CEO apologized and customers will receive a 10% discount this weekend if they shop in the stores.

--Leading technology companies met with President Obama at the White House and warned they are seeing a backlash over the NSA’s spying programs, damaging both their reputations as well as harming the broader economy. Cisco was among those complaining it is seeing overseas customers back away from doing business with it. The companies, including Google, Facebook, Microsoft and Apple, pressed the need for transparency and for limits on the NSA’s activities.

Many of these same firms pumped nearly $7.8 million into Obama’s campaign coffers for 2012, according to the Center for Responsive Politics and the Washington Post.

--Ford Motor Co. surprised the Street in forecasting lower pretax profits for 2014 vs. this year when Ford said profit would exceed $8 billion, with the automaker blaming economic conditions in Europe and South America (specifically currency-related losses in Venezuela).

--General Motors said it would spend about $1.3 billion to upgrade some of its facilities in the Midwest, on the heels of a previous Ford announcement that it is hiring 5,000 new workers for 2014. GM said its expansion plans would create or preserve about 1,000 manufacturing jobs. This is good.

--The Energy Information Administration has revised sharply higher its estimates of future U.S. oil production to about 9.5 million barrels a day in 2016, close to the record peak of 9.6m b/d in 1970 and essentially double the low point of 5m b/d in 2008. Just a year ago the EIA was saying only 7.5m b/d by end of the decade.

But sustaining the surge requires a crude price of $90 or better. Much below that and some expensive projects would be curtailed.

Electricity generation is a major use of the new production, taking away from coal as a fuel for power plants.

--A few state unemployment rates for November...

New Jersey falls to 7.8%, New York 7.4%, California 8.5%...Rhode Island and Nevada tied for worst at 9.0%.

North Dakota’s is only 2.6%, South Dakota 3.6%, Nebraska 3.7%.

--The price of bitcoin, which hit a high of $1250 last month, fell to as low as $420 this week following reports of fresh actions by the Chinese government to restrict the trade. The People’s Bank of China said 10 clearing houses have until the end of January to sever links to the country’s bitcoin exchanges. There was a report the Bank of China website was then hit with a retaliatory denial-of-service attack.

A Shanghai-based exchange was responsible for 40% of global bitcoin trading.

[Actually, I have no freakin’ idea what is going on when it comes to this topic. Though further proof of its volatility is the fact bitcoin traded at about $15 earlier this year.]

--Meanwhile, Patrick Byrne, CEO of Overstock, the online retailer, said he would become the first in his space to accept bitcoin sometime next year. Byrne said in an interview with the Financial Times, “I think a healthy monetary system at the end of the day isn’t an upside down pyramid based on the whim of a government official, but is based on something that they can’t control.”

--Chinese tycoons now top the list of the UK’s wealthiest property investors for the first time as the property market there continues to see a rush of Asian money.

--Gold fell below $1,190 this week before settling Friday at $1,205. Goldman Sachs projects the metal will fall to $1,050 by the end of next year as the Fed cuts back on its stimulus, QE. Gold finished 2012 at $1,675. Not a good year. The record high was $1,923 set back in September 2011.

--Oracle reported profits of $2.55 billion for its fiscal second-quarter, compared with $2.58 billion in the same period last year. Revenue rose only 2%, as sales from new software licenses and cloud software subscriptions were flat. Hardly Workday-type growth, snickered the editor.

--Facebook founder Mark Zuckerberg sold shares worth about $2.3 billion as part of the social media company’s first stock sale since last year’s initial public offering. Facebook is looking to stockpile cash that could be used for future deals.

--Nike’s revenues rose 8% in its fiscal second-quarter, but the company said global orders for merchandise for delivery by April increased 13%.

--As reported by Bloomberg, “Since 1998, there have been more than 100 attempts to develop an Alzheimer’s treatment, and all have failed.” Merck and its experimental drug, called MK-8931, is attempting to reverse this. Initial trials announced this week are somewhat encouraging so the drugmaker is expanding them. Within two years we should know if Merck has truly found success. The company is attempting to determine once and for all “whether the amyloid tangles that grow in the brain spur the disease or are simply an outgrowth.” [Michelle Fay Cortez and Drew Armstrong]

--According to the World Health Organization, cancer incidences rose to more than 14.1 million new cases throughout the world in 2012, compared with 12.7 million in 2008.    The number of cancer-related deaths increased from 7.6 million to 8.2 million over the same period, with the most commonly diagnosed types of cancer being lung cancer, breast cancer and colorectal cancer, which combined to make up about 35% of the total. [Yes, some of the preceding is relative given that the world population has risen from 6.7 billion in 2008 to 7.1 billion in 2012.] [U.S. News Weekly]

--IBM said its annual forecast of five ways technology would change lives in the coming five years was “being driven by a new era of cognitive systems where machines will learn, reason and engage with us in a more natural and personalized way.”

I don’t want my computer getting too personal.

Actually, it’s more about things such as doctors tailoring treatments using patient DNA, according to Bernie Meyerson, vice-president of innovation for Big Blue.

--A federal jury in Manhattan found Michael Steinberg, a top portfolio manager at Steven A. Cohen’s SAC Capital Advisors hedge fund, guilty on charges he traded on insider information. Steinberg faces a maximum 85 years in prison in what was a highly watched case coming a month after SAC agreed to pay $1.2 billion and plead guilty to fraud charges stemming from a years-long probe of insider trading at Cohen’s firm. [SAC had also previously paid $616 million to resolve related Securities and Exchange Commission charges.]

--The Association of American Publishers said recently that e-book sales had been flat or in decline for most of 2013. But hardcover sales are going to be disappointing for this year. In 2012 you had “Fifty Shades of Grey” and the “Hunger Games” series buoying sales, including for digital.

--Under terms of its EU bailout, the Greek government was forced to raise the price of heating oil, which is causing millions to burn wood instead as they freeze in their homes. Result? Awful levels of air pollution in Athens, for starters. Plus the government isn’t taking in the revenues it was expected to with the price hike and instead has cost the treasury $650 million. A local physicist told Reuters, “The toxicity levels are becoming dangerous. It’s turning Athens into a gas chamber.” It’s getting so bad, owing in part to Athens’ unique geography, that the government may be forced to shut down factories this winter. Not exactly what you want to see as the country attempts to recover from its depression.

--Cantor Fitzgerald settled with American Airlines Group’s insurers to the tune of $135 million tied to the Sept. 11, 2001, terror attacks, Cantor having lost 658 employees as it had offices in the north tower. The company had filed the lawsuit in 2004, accusing the airline of negligence in allowing the five hijackers to board Flight 11. The compensation was for business interruption and property losses incurred. American “vigorously defended itself in litigation,” according to an airline spokesman.

--Beijing banned some U.S. shellfish imports from the west coast after discovering recent shipments of clams had high levels of arsenic and a toxin that causes paralytic shellfish poisoning. According to an official with the Washington Department of Health, this is the first time such a ban has been implemented.

The closure could last for months. [South China Morning Post]

--According to a report by U.S. Trust, the U.S. leads by a wide margin in attracting inventors from other countries, 57.1% of the total. China and India lost the most. As Joseph Quinlan, chief market strategist at U.S. Trust, wrote in the report:

“Think of these people as best in class, the top brains of their respective country. They are restless, driven to create value, and at the forefront of incubating/spawning new companies or industries.”

Immigrants make up 12% of the U.S. labor force, but 25% of scientists and engineers. [Walter Hamilton / Los Angeles Times]

--The Wall Street Journal reports that McDonald’s has 10 million pounds of Mighty Wings it needs to get rid of, preferably sell, soon. They are in frozen storage, McDonald’s having failed to sell enough of them in a recent promotion.

--As part of an effort to evaluate Detroit’s assets in bankruptcy, emergency manager Kevyn Orr hired Christie’s to appraise the city’s collection at the Detroit Institute of Arts and a Pieter Bruegel the Elder 16th-century work was appraised at between $100 million and $200 million, while a Van Gogh self-portrait is worth between $80 million and $150 million.

Orr will have to make a decision whether to sell any of the DIA’s works as part of a restructuring plan. Here’s hoping he doesn’t.

--According to CarInsuranceComparison.com, the worst drivers in the country are in Louisiana, followed by South Carolina, Mississippi, Texas and Alabama.

But the state of Alabama has won the last four BCS titles, with the chance for a fifth, so it has that going for it.

Foreign Affairs

Iran: I guarantee if you ask the average American who is aware the United States and others were negotiating with Iran over its nuclear program, probably about 90% would believe the “interim agreement” was a done deal and was already being implemented.

But that is far from the case and President Obama is among those concerned a long-term deal (let alone an interim one that’s fully implemented) will ever be reached, putting the odds at “50-50.” French Foreign Minister Laurent Fabius is worried Iran will not be willing to give up its capacity to build nuclear weapons in a potential pact with the P5+1 (five permanent members of the U.N. Security Council and Germany). Even if the rules for implementing the six-month interim deal are finally established, the clock is then ticking for a final agreement and no one seems optimistic a long-term plan will ever be put in place.

Fabius told the Wall Street Journal, “My main concern is the second phase. It is unclear if the Iranians will accept to definitively abandon any capacity of getting a weapon, or only agree to interrupt the nuclear program.”

Fabius wants to see the P5+1 focus on eliminating Iran’s “breakout capacity,” the ability to build a nuke before other countries could take preventative action.

Let’s face it. The French are the only ones with balls these days, witness Mali, Central African Republic, ready to help in bombing Syria...until we weren’t... Fabius is insisting European Union nations not provide financial relief to Iran until the International Atomic Energy Agency begins daily monitoring of the atomic sites as mandated under the terms of the interim-agreement. Such inspections have yet to begin, a month after President Obama interrupted our Saturday night to announce the deal.

As for the U.S. Senate, a bipartisan group of 26 senators led by Foreign Relations Committee Chairman Robert Menendez (D-N.J.) introduced a bill threatening new sanctions on Iran, which President Obama has said he would veto, warning such legislation could disrupt the nuclear talks. The measure does allow for a 180-day suspension of sanctions to facilitate diplomacy, plus additional time if the White House deems it necessary to wrap up a final deal.

But the legislation includes language that the “government of Iran does not have an absolute or inherent right to enrichment and reprocessing capabilities and technologies,” despite past statements by Iranian leaders it does maintain such rights.

Iranian Foreign Minister Mohammad Javad Zarif said Iran can resume 20% uranium enrichment in less than 24 hours, while telling a group of students on Wednesday that the agreement signed with the P5+1 recognizes Tehran’s nuclear program, assuring them it will continue.

Then Zarif said “the structure of the sanctions and the antagonistic atmosphere created by the West against Iran is falling apart,” according to Fars.

Separately, Zarif said of the West’s insistence the heavy water reactor at Arak be closed or dismantled, “We cannot roll back the clock 20 years and ask Iran to simply get rid of a project that has been the subject of a great deal of human and material investment.”

Deputy foreign minister Abbas Araghchi said the U.S. has been creating chaos and acting indecisively since the interim agreement was reached.

Editorial / Washington Post

“President Obama said this month that he assessed the chance of reaching a permanent accord with Iran on its nuclear program as no ‘more than 50-50.’ For his part, Secretary of State John F. Kerry told Congress that he ‘came away from our preliminary negotiations’ with Tehran ‘with serious questions about whether or not they’re ready and willing to make some of the choices that have to be made.’ Events in the past week have made clear that those bearish judgments were justified.

“Iranian officials walked out of talks with the West last Friday – not the negotiations about a final accord, which have not begun in earnest, but those on the implementation of the preliminary agreement reached in Geneva in November. The pretext was an announcement by the U.S. Treasury of actions against companies that have been violating U.S. sanctions against Iran....

“By making a show of breaking off talks, Tehran was attempting to bluff the West into hollowing out the remaining sanctions by stopping their enforcement. It also delayed the time when it will have to comply with its own commitment to cut back on its enrichment of uranium and reduce the stockpile it has accumulated....

“(Iran) is sending an early message that it does not intend to bargain in good faith....

“Mr. Obama and Mr. Kerry have devoted much time since the Geneva deal to persuading Congress not to approve additional sanctions on Iran. Perhaps their time would be better spent pushing the Iranian negotiators to stop posturing and stonewalling.”

Finally, Iran supposedly sent another monkey in space, which points out a huge problem with the interim nuclear agreement signed Nov. 24. It places zero restrictions on Iran’s ballistic missile program, which continues to make strides.

Syria: I said it was over in terms of this conflict back in August 2012 and the war has only gotten worse since then. The past week saw the Assad regime dropping devastating barrel bombs on civilians in Aleppo, killing more than 100 and overwhelming the few remaining hospitals. Air strikes were also stepped up against rebel-held districts.

As for peace talks slated for Geneva, it was learned this week they would actually open in the Swiss town of Montreux because there are not enough hotel rooms left in Geneva on January 22, scheduled start of the talks, because of a luxury watchmaker convention.  Pathetic. Talks will supposedly reconvene in Geneva two days later.

The West is also indicating to the Syrian opposition that President Assad may remain in office; that talks may not lead to his removal as the opposition has long called for.

The West is saying that with the chaos created by the rise of al-Qaeda in some sectors of the country, were Assad to be removed an Islamist takeover would ensue.

Depressingly, as the Washington Post’s Joby Warrick reported, extremists allied with al-Qaeda are now training Syrian children as young as 10 as combatants. “This is the future threat,” an expert told Warrick. “These are the children of al-Qaeda.”

Fred Hiatt / Washington Post

“If you had said in 2008 that the administration of Susan Rice, John Kerry and Barack Obama would do nothing while a dictator deliberately starved more than a quarter-million of his people, no one would have believed you.

“All three had condemned the Bush administration for allowing people to starve in Darfur, Sudan, and passionately demanded action.

“Today, an equivalent humanitarian catastrophe is unfolding in Syria. Forces loyal to Bashar al-Assad have besieged as many as 290,000 people near Damascus, who are dying of hunger, according to United Nations officials.

“Fewer people have died in Syria than in the Darfur region of Sudan, but still the number exceeds 100,000. More Syrians are homeless: more than 2 million – 10 percent of the population – have fled Syria altogether, and millions more are displaced within the country.

“Yet the Obama administration, while providing aid for the refugees, has done virtually nothing for the people inside....

“Deliberate starvation of hundreds of thousands of civilians constitutes a crime against humanity.

“Sadly, that seems to leave one possibility:

It doesn’t matter to us.

“That wasn’t Obama’s posture when he contemplated the tragedy in Darfur. ‘When you read just horrendous accounts of entire villages being decimated and children being murdered...it just breaks your heart, and humanitarian concerns should be sufficient,’ he said in 2006. ‘But we also have a strong national interest. If you start seeing more and more failed states, more and more displaced persons, more and more refugees, all of that becomes a breeding ground for terrorist activity...we can’t insulate ourselves from these tragedies.’....

“Seven weeks ago, Kerry wrote plaintively: ‘The world cannot sit by watching innocents die.’

“But of course the world can and does....

“(Obama’s) America can, and does.”

The U.N. now estimates nearly 3/4s of Syria’s 22.4 million population will need humanitarian aid in 2014.

Editorial / Washington Post

“It’s impossible to know what U.S. leadership could have achieved, but it’s hard to imagine a more frightful outcome. The one advantage of inaction seems to be the ability to disclaim responsibility: We didn’t break it, so we don’t own it. Even that benefit, however, may prove transient. Already the United States is the largest donor of refugee aid. As misery spreads and anti-American radicals plant roots, the Obama administration, or its successor, may find that the costs of non-involvement far exceed those that would have come with timely and measured intervention.”

Like I said, the window of opportunity shut for good 16 months ago.

Ukraine: The week started with leaders from the European Union and the U.S. Senate, specifically John McCain in the case of the latter, standing shoulder to shoulder with Ukraine’s opposition in Independence Square in Kiev. McCain, who also met with President Viktor Yanukovych, told the leader the Senate was prepared to officially sanction any individuals responsible for violence against protesters if authorities used such force again as they had the previous week.

McCain told the throng in the square: “This is about the future you want for your country. This is about the future you deserve.” Connecticut Dem. Sen. Chris Murphy told them: “Ukraine’s future stands with Europe, and the United States stands with Ukraine.”

The crowd chanted “Thank you!” in Ukrainian and English. Opposition leader Vitali Klitschko, who vacated his WBC world heavyweight title on Monday in order to pursue the presidency, stood next to McCain in what made for a great photo.

The EU suspended talks on a trade deal with Ukraine, the one Yanukovych refused to sign Nov. 21, and then Yanukovych headed to Moscow for a meeting with President Vladimir Putin.

Putin was all too happy to come to Ukraine’s aid to prevent it from moving towards the EU. Russia announced it would buy $15 billion worth of Ukrainian government bonds, while slashing the cost of Russian natural gas supplies to Ukraine by about 33%.

Putin said the assistance was not “tied to any conditions,” such as signing a new Russian-led customs union, which Ukraine could still join.

“Russia and Ukraine are...united both by many centuries of our friendship and by having lived a long time together in the same country,” said Putin.

Back in 2010, the International Monetary Fund provided Ukraine $15 billion in loans in exchange for undertaking needed economic reforms. The Ukrainian government then failed to do so. 

Now the I.M.F. is furious Russia is providing another $15 billion in loans as well as a sharp discount on natural gas prices. Yanukovych had previously been looking for further I.M.F. aid but balked at the terms, which would have included increases in household utility rates and limits on government spending.

It’s the Kremlin that now faces the risk, according to the I.M.F., because without Ukraine taking the needed steps, Russia’s money is going down a rat hole.

In his State of the State annual news conference, Putin insisted Ukraine would pay the loans back.

Editorial / Washington Post

“The good news for the majority of Ukrainians who oppose this project is that Mr. Putin’s triumph is likely to prove pyrrhic. With its own economy stalling, Russia can ill afford to spend $15 billion, a substantial portion of its sovereign wealth fund, on Ukrainian bonds, and the gas price reduction will wound the biggest producer of those funds, Gazprom. Since Mr. Yanukovych will not undertake the reform measures needed to stabilize the Ukrainian economy, the country will probably face default again in a year or two. Meanwhile, no amount of money or repression is likely to silence the rising generation of Ukrainians who aspire to Western freedoms and prosperity. Sooner or later, the attempt to create an alternative empire of autocracy and corruption in the center of 21st-century Europe will collapse of its own weight.”

Russia: At Putin’s presser, the usual four hours in length, among the items he addressed was a report Russia had placed ballistic missiles in Kaliningrad, a Russian enclave that borders NATO territory. Putin said no nuclear-capable Iskander missiles were fielded there, which was contrary to statements from the Defense Ministry. Putin admitted, however, this could be a possible response to the West’s missile defense shield, but “we have not yet made this decision yet, let them calm down.,” apparently referring to objections by the likes of the United States and Poland.

And Vlad the Great suddenly announced he was signing a decree pardoning jailed former oil tycoon Mikhail Khodorkovsky on the basis of “the principles of humanity,” the Kremlin said on Friday, a day after Putin casually mentioned he would be doing so.

Khodorkovsky was then freed after ten years in prison on charges of tax evasion and theft after funding opposition parties. [His attorney said that Putin’s claim Khodorkovsky requested a pardon was false as such a move implies an admission of guilt, but after his release, Khodorkovsky released a statement saying he had requested a pardon but that admission of guilt didn’t come up.]

Earlier, the Russian parliament approved a sweeping amnesty law that should lead to the release of activists from Greenpeace and the punk band Pussy Riot.

It’s all about Sochi and a desperate attempt by Putin to improve Russia’s image ahead of the Winter Games just around the corner. President Obama is one of many international leaders shunning the Olympics and it’s an embarrassment for Vlad.

Afghanistan: The White House is preparing to extend the Dec. 31 deadline for reaching a security agreement with Afghan President Karzai in order to get him to approve a deal that would permit 10,000 or so U.S. troops to remain in the country past 2014.

Should Karzai continue to balk (and more than a few administration officials hope he does because they don’t want the U.S. to stay), Obama may be willing to let the deadline slip all the way to the April 5 presidential election in the hopes a new president will sign an agreement.

China: The foreign ministry attacked Japanese Prime Minister Shino Abe for “malicious slander” over China’s establishment of a new air defense identification zone (ADIZ) in the East China Sea.

A statement on the foreign ministry website said: “We express strong dissatisfaction with Japan’s leader using an international occasion to maliciously slander China. The Chinese side took necessary measures to safeguard its sovereignty and territorial integrity. This is totally legitimate and irreproachable.”

At a Tokyo summit with the Association of Southeast Asian Nations (Asean), Abe said: “The (ADIZ) China has established is unjustly violating the freedom of aviation over the high seas, which is a general rule in international law. We are demanding China rescind all measures like this that unjustly violate the general rule.” [Lucy Homby / Financial Times]

Last Friday, Washington announced a U.S. Navy guided-missile cruiser, the USS Cowpens, was forced to take evasive action to avoid a collision with a ship from the People’s Liberation Army Navy. [The incident took place Dec. 5 but wasn’t immediately made public.]

At first, a Chinese newspaper, the Global Times, accused the U.S. Navy of harassing a PLA squadron before the near collision.

“If the American navy and air force always encroach near China’s doorstep, confrontation is bound to take place.”

But two days later, Beijing issued a statement from the defense ministry downplaying the standoff, explaining that the two warships only “met” each other in the South China Sea and avoided confrontation by effective and proper communication.

Then on Thursday, Defense Secretary Chuck Hagel said China acted in an “irresponsible” way in the stand-off. Hagel said the Chinese ship cut in front of the Cowpens by just 100 yards.

“That’s the kind of thing that’s very incendiary, that could be a trigger or a spark that could set off some eventual miscalculation,” said the secretary.

Meanwhile, Chinese scientists are looking at the possibility of pumping liquid nitrogen, super-cold gas into the atmosphere as a way of cleaning up air pollution. Government-funded research involves pumping the gas from large tanks into the air as a fine mist at least 10 meters above ground.

“Crystals form on the small particles of dust and other pollutants, which then fall to the ground. The belt of cooler air, less than 20 meters thick, also stops polluted air above reaching street level. The researchers said that during colder weather the belt, rich in vaporized liquid nitrogen, could remain hanging in the atmosphere for several hours.” [Stephen Chin / South China Morning Post]

Finally, we acknowledge China for the successful landing of its lunar probe, Chang’e-3, making China the third nation to land a craft on the moon. The rover – called Yutu or Jade Rabbit – has been wandering around, saying hello to all the locals, analyzing rocks and such, looking for the perfect location for a duck farm, assuming it can find water.

China has announced a mission for 2017 that would bring back lunar soil and rock samples.

North / South Korea: The two sides held talks over the South Korean-funded Kaesong industrial complex, which is located across the DMZ in the North, so this was seen as a positive. But then it was revealed Pyongyang had sent a letter to South Korean President Park Geun-hye, warning that if she didn’t stop conservative activists’ anti-North rallies in Seoul, Pyongyang could launch “retaliatory strikes without warning.”

All this following the execution of No. 2, Jang Song-thaek, Kim Jong-un’s uncle and mentor. On Tuesday, Kim presided over a mass gathering of military and party officials that was broadcast live on state television.

No one knows what Kim is up to, or how big the struggle is within the regime and whether Kim himself is at risk. Since day one of StocksandNews, I have always asked the question, ‘Just who are the people behind the Kims (father and now son)?’ The scary part is we still don’t know, even as one was done in. Who are the generals? Will one plug Kim some day?

What does seem likely today, however, is that Kim will lash out in some fashion to prove to those around him he is still the one calling the shots. Pyongyang admitted there was dissent in accusing Jang of building a “faction” in a plot to overthrow the government.

For its part, the Seoul government attempted to tamp down reports North Korea was preparing a new nuclear test.

And one other item. North Korea deleted almost all of the state news archives contained on the Korea Central News Agency website, some 35,000 articles.

Egypt: The military-backed government filed new charges against deposed president Mohamed Morsi, accusing him of participating in a terrorist plot, including leaking state secrets to Iran. Human rights groups called the allegations preposterous, according to David D. Kirkpatrick of the New York Times.

Iraq: A wave of attacks on Monday killed at least 70, the bloodiest day of violence in nearly two months.

Lebanon: A depressing piece from a friend of mine, Michael Young / Daily Star:

“Saturday evening, while walking in Sassine Square, I came upon a nauseating scene. Two young men had gotten out of their car and were furiously punching the Syrian driver of a delivery vehicle, over what appeared to be a traffic dispute.

“The Syrian protested that he had said nothing, which only brought on more blows. Eventually some bystanders broke up the altercation, and the two thugs got into their car and left. But what was most disturbing was the ease with which the men assaulted someone in the middle of Beirut, with no apparent fear that they would be arrested for their actions.

“Similarly, I recently met a young foreigner whose ankle was broken after he was hit by a car. The driver sped off, leaving his victim lying in the street. At such moments, and many more in Lebanese daily life, you cannot help but ask: What has gotten into the Lebanese?

“Traffic casts the brightest and most disquieting light on our national pathologies. The latent violence and aggression of many drivers, their rudeness, selfishness and utter indifference to the consequences of their foolish risk-taking, are but three of the familiar characteristics of what is a daily descent into Lebanon’s heart of darkness....

“Every day, it seems, Lebanon has become a vast con game, an unprincipled country where violence is given free rein, where charlatanism is rewarded, where incompetence is generalized and where legalized theft is widespread – a country which it is easy to leave and from which the young understandably seek escape.”

Saudi Arabia: Paul Sperry / New York Post:

“After the 9/11 attacks, the public was told al Qaeda acted alone, with no state sponsors.

“But the White House never let it see an entire section of Congress’ investigative report on 9/11 dealing with ‘specific sources of foreign support’ for the 19 hijackers, 15 of whom were Saudi nationals.

“It was kept secret and remains so today.

“President Bush inexplicably censored 28 full pages of the 800-page report. Text isn’t just blacked-out here and there in this critical-yet-missing middle section. The pages are completely blank, except for dotted lines where an estimated 7,200 words once stood.

“A pair of lawmakers who recently read the redacted portion say they are ‘absolutely shocked’ at the level of foreign state involvement in the attacks.

“Reps. Walter Jones (R-NC) and Stephen Lynch (D-Mass.) can’t reveal the nation identified by it without violating federal law. So they’ve proposed Congress pass a resolution asking President Obama to declassify the entire 2002 report...

“Some information already has leaked from the classified section, which is based on both CIA and FBI documents, and it points back to Saudi Arabia, a presumed ally.

“The Saudis deny any role in 9/11, but the CIA in one memo reportedly found ‘incontrovertible evidence’ that Saudi government officials – not just wealthy Saudi hardliners, but high-level diplomats and intelligence officers employed by the kingdom – helped the hijackers both financially and logistically. The intelligence files cited in the report directly implicate the Saudi embassy in Washington and consulate in Los Angeles in the attacks, making 9/11 not just an act of terrorism, but an act of war....

“This isn’t water under the bridge. The information is still relevant today. Pursuing leads further, getting to the bottom of the foreign support, could help head off another 9/11.

“As the frustrated Joint Inquiry authors warned, in an overlooked addendum to their heavily redacted 2002 report, ‘State-sponsored terrorism substantially increases the likelihood of successful and more lethal attacks within the United States.’”

Separately, former Saudi intelligence chief Prince Turki al-Faisal charged that President Obama has created “an issue of confidence” among America’s allies in the Middle East.

Said the prince: “We’ve seen several red lines put forward by the president which went along and became pinkish as time grew, and eventually ended up completely white. When that kind of assurance comes from a leader of a country like the United States, we expect him to stand by it.”

Turki remains a senior member of the royal family so his comments clearly reflect government opinion.

Editorial / New York Post

“If the Saudis are nervous, they have a right to be: along with the Israelis, they have the most to lose from a nuclear-armed Iran.

“Both these countries are longstanding U.S. allies. That Israel and Saudi Arabia now share a common interest regarding Iran and Syria is not surprising. That they share a common concern about the word of an American president is ominous.”

Yes, you combine the lead above re 9/11 with the succeeding bit and all you can say is, it’s complicated.

India: Officials are furious over the arrest of a female diplomat in Manhattan last week and initially retaliated by removing the security barriers in front of the U.S. embassy in Delhi.

India’s deputy consul general for all manner of stuff, including women’s affairs, was arrested for allegedly mistreating her female nanny.

The feds charged the diplomat lied on a visa application to get the Indian national into the country and then paid her $3.31 an hour.

Devyani Khobragade was strip-searched after being taken in (standard procedure in such matters) and India’s national security adviser branded the arrest “barbaric.”

Khobragade was released on $250,000 bail. I’m sure I’ll be writing more on this next time as Indian MPs are outraged and demanding action.

Britain: The chief of the defense staff, Sir Nicholas Houghton, warned in a lecture that he feared the UK was losing its “courageous instinct” on the international stage and at risk of stepping back from its responsibilities.

“I have recently observed with some admiration the relative ability of French forces to operate with a mindset of aggressive risk management,” he noted at one point. “We must be careful as a society and as a professional military not to lose our courageous instinct since it is one of the things which keeps us in a class apart,” he said. [Sam Jones / Financial Times]

As for the aforementioned French, they are increasingly frustrated that they seem to be the only ones in Europe with a spine.

South Africa: President Jacob Zuma is in major hot water over the refurbishment of his country home to the tune of $20 million, including a swimming pool, two helipads, an amphitheater, an underground bunker, 20 houses for policemen, and all manner of huts built for President Zuma’s many relatives. This is in an area where virtually all his neighbors have outdoor latrines, as reported by Jerome Starkey of the London Times.

Zuma claimed the improvements were necessary for security reasons, but taxpayers, who are footing the bill, are furious. It’s a growing scandal that could bring him down.

In a related vein, from an editorial in The Economist:

“(Since) Mandela left the presidency in 1999 his beloved country has disappointed under two flawed leaders, Thabo Mbeki and now Jacob Zuma. While the rest of Africa’s economy has perked up, South Africa’s has stumbled. Nigeria’s swelling GDP is closing in on South Africa’s. Corruption and patronage within the ANC have become increasingly flagrant. An authoritarian and populist tendency in ruling circles has become more strident. The racial animosity that Mr. Mandela so abhorred is infecting public discourse. The gap between rich and poor has remained stubbornly wide. Barely two-fifths of working-age people have jobs. Only 70% of those who take the basic high-school graduation exam pass it. Shockingly for a country so rich in resources, nearly a third of its people still live on less than $2 a day.”

As for the fake signer at Nelson Mandela’s memorial service, a cousin and three friends say Thamsanqa Jantjie was part of a mob that accosted two men found with a stolen television and burned them to death by setting fire to tires placed around their necks (“necklacing”). Jantjie never went to trial for the 2003 killings because authorities determined he wasn’t mentally fit to stand trial. Oh brother. Three feet away from an American president. Signing gibberish. You couldn’t make this stuff up.

Chile: Left-winger Michelle Bachelet was elected president for a second time, handily winning a run-off. Bachelet first served as president from 2006-10, after which she was obliged by election law to step down.

Bachelet wants to increase taxes to offer free university education and reform economic structures dating from the Pinochet dictatorship.

Random Musings

--As I noted above, the story that President Obama intends to nominate Democratic Sen. Max Baucus as his next ambassador to China is not only about the end of any hope for true tax reform in 2014, but it could make Republican efforts to retake the Senate next year even more difficult. Now, Democratic Gov. Steve Bullock will be able to select Baucus’ replacement, most likely lieutenant governor John Walsh, who then could run for the seat as an incumbent against probable Republican nominee, freshman Rep. Steve Daines, Montana’s only House member.

Plus Baucus’ departure sets other wheels in motion, such as allowing Louisiana Sen. Mary Landrieu, considered highly vulnerable in her reelection bid, to ascend to the chairmanship of the Energy Committee, a major positive for her in her energy heavy state. [Michael A. Memoli and Paul Richter / Los Angeles Times]

Baucus’ departure with a year to go also removes a thorn in the side of his fellow Democrats. It’s Baucus, after all, who was an architect of ObamaCare but then last April famously warned of a “huge train wreck” if officials did not do a better job of explaining it. Baucus has also been harshly critical of Kathleen Sebelius.

Baucus still believes in the Affordable Care Act, but said it will take a decade before it’s ultimately embraced. Such words from the Senate floor next year obviously wouldn’t help the Democratic cause. I imagine Baucus would have been a staple of Republican campaign ads.

Meanwhile, when it comes to analyzing Congress and the election cycle, Michael Barone (and Charlie Cook) are probably the two preeminent figures in their field and Barone, commenting from his New York Post perch, notes “Republicans have plausible chances to gain as many as 11 (Senate) seats. But there are countervailing factors.”

Such as in our penchant for nominating “astonishingly weak candidates.”

“That being said, National Journal’s survey of Washington political insiders shows most Republicans and a near-majority of Democrats predicting a Republican Senate majority. [Ed. currently 55-45 Democrats.] That’s noteworthy, because these insiders, who spend so much time with incumbents, didn’t predict party takeovers in 2006 and 2010 at this point in those election cycles.

“The ObamaCare rollout has also shifted opinion on the generic vote – which party’s candidate do you support for the House of Representatives? When the shutdown ended, Democrats led 47-41 in Real Clear Politics’ average of recent polls.

“Now, Republicans lead 44-41 on the question that has often underestimated actual GOP performance. Analysts Stuart Rothenberg and Larry Sabato see more than 20 Democratic House seats at serious risk.

“All this could change if public opinion on ObamaCare – or Obama – shifts once again. But it looks like recent obituaries of the Republican Party were premature.”

--President Obama, in his effort to restore public confidence in our intelligence agencies, established the Review Group on Intelligence and Communications Technologies to review all surveillance programs and in a 300-page report, said panel has recommended new limits on the National Security Agency’s phone surveillance program. The panel also urged legislation that would prevent the FBI from obtaining your financial or phone records without first obtaining judicial approval. And it would ban warrantless NSA searches of your calls and emails that fall within large caches of communications collected as a result of targeting foreigners overseas.

But panel member Michael Morell, former deputy director of the CIA, said, “We are not in any way recommending the disarming of the intelligence community.”

Plus the recommendations are just that, recommendations, and it is not likely many of them will be adopted, including the ending of government collection and storage of bulk phone data. [Ellen Nakashima and Ashkan Soltani / Washington Post]

But, on Monday, U.S. District Judge Richard J. Leon described technology used by the NSA as “almost Orwellian,” adding the collection of phone data was “almost certainly” unconstitutional, leaving a chief proponent of intelligence reform, Dem. Sen. Ron Wyden of Oregon, to observe, “The combination of this report plus the judge’s decision...makes this a big week for the cause.”

[Edward Snowden replied, “Today, a secret program authorized by a secret court was, when exposed to the light of day, found to violate Americans’ rights. It is the first of many.”]

--In a Washington Post/ABC News poll, President Obama’s overall approval rating is 43%, disapproval at 55%, basically same as a month ago. A year ago it was 54% approval, 42% disapproval. At this point after his fifth year in office, President George W. Bush was at 47% positive, 52% negative.

Congressional approval is at 16%, up four points in the past month.

In a new CNN/ORC poll released Friday, Obama’s approval rating is 41%, matching the all-time low for CNN polling just last month. 56% disapprove, an all-time high. [The president’s approval rating stood at 55% last January.] Among independents the approval rating is just 32%.

A USA TODAY/Pew Research Center survey of Millennials (18-29) has 45% approving of the job Obama is doing, 46% disapproving. In January of this year, 67% of this group approved.

--After the Senate approved Republican Cong. Paul Ryan’s compromise budget deal, Paul Kane of the Washington Post had the following comment when looking at Ryan and Florida Sen. Marco Rubio.

“Rubio is widely viewed as positioning himself for a 2016 run and is shying away from his leadership role on the immigration bill. Ryan appears more poised and confident than ever in the Capitol and seems noticeably more comfortable here than on the trail in early presidential primary states.”

Ryan has already said he wants to be chairman of the powerful Ways and Means Committee in 2015 and that year will decide what to do in terms of a presidential run. Rubio was among those voting against the deal Ryan crafted with Dem. Sen. Patty Murray of Washington.

I gained respect for Ryan and lost some for Rubio, especially for wimping out on the immigration fight. Ryan is correctly focused on winning elections.

Kathleen Parker / Washington Post

“(Republicans) are on fire. The real story isn’t that a bipartisan budget bill has been hammered out but that House Speaker John Boehner has ignited.

“He and others of like mind obviously have decided to sacrifice party unity in the interest of national well-being. What a concept. Over a couple of days during the budget negotiations, Boehner turned both barrels on insurrectionists – both inside and outside Congress – especially the big conservative action groups that have undermined any efforts at compromise and bipartisanship.

“Depending on how things shake out in the remaining days of the jolly season, we could be witnessing the first shots of an old-guard revolution from which emerges the leader Republicans have been waiting for.

“Center stage: Paul Ryan.

“As all know, the budget deal was crafted by Ryan and Democrat Patty Murray. It’s a not-grand bargain – i.e., ‘it sucks’ – but it’s something, and it staves off another budget crisis through fiscal year 2015....

“What everyone will know soon enough is that Paul Ryan is The Guy – the missing leader the GOP has been searching for and who is clearly being groomed for 2016.”

[A Des Moines Register poll released Sunday of Iowans’ early preference for 2016 found Ryan was the most popular Republican tested, with almost 3/4s of Iowa Republicans having a favorable opinion of him, including 66% among Tea-Partiers.]

--Congress passed just 57 bills in 2013, compared with an average of 282 passed bills per year from 1973 through 2012. The House was in session 155 days this year, while the Senate logged 149. Those working a normal job with say two weeks’ vacation and all the normal federal holidays work 241 days. [Rick Newman / Yahoo Finance]

--New Jersey Gov. Chris Christie seems to be hoping that the holiday season, when some reporters get time off and many followers of the political scene have their minds elsewhere, will obscure a still developing scandal involving closing access lanes onto the George Washington Bridge, going back to last September. Then, and in other instances, ramps leading to the bridge in the borough of Fort Lee were closed without warning, leading to delays of up to six hours. Police and executives at the Port Authority, which runs the bridge, weren’t apprised ahead of time either.

The Democratic mayor of Fort Lee, Mark Sokolich, had refused to endorse Christie so he saw the sudden lane closures as retribution. “What other conclusions could we possibly reach?’ he asked.

The Port Authority’s deputy executive director, Bill Baroni, later claimed the closures were part of a traffic study, though he had zero proof of this. He resigned ten days ago.

It then was determined the closures were ordered by the Port Authority’s David Wildstein, a Christie ally and political appointee. The PA’s executive director said he knew of no traffic study. So then Wildstein resigned.

Christie’s reply was, “I worked the [traffic] cones.  Unbeknownst to anyone, I was working the cones,” he said at one news conference.

As this week ends, Christie is now confessing mistakes were made but that Democrats are making up an issue that doesn’t exist.

The Star-Ledger, though, editorialized that the Christie administration “has been so evasive and secretive that it’s obvious they have something to hide.”

Of course the Democrats know that Christie poses a major problem for them in 2016 should he receive the Republican nomination so Democratic Sen. Jay Rockefeller, chairman of the Transportation Committee, announced he would look into the matter.

This isn’t the first issue that I’ve mentioned that could torpedo Christie, and I’m not talking in a race against, say, Hillary Clinton. Christie seems to be forgetting that if he isn’t careful, it could derail him in a Republican primary debate.

--If you saw John Miller’s piece on the NSA for “60 Minutes” last week, know he is looking to rejoin his old friend Bill Bratton back at the New York Police Department. Miller has twice left the news business to serve under Bratton, first at the NYPD and then in Los Angeles.

--Literally a one-minute drive from where I live is one of the more high-end shopping complexes in the country, The Mall at Short Hills. Sunday night, a 30-year-old attorney with his wife had finished some Christmas shopping when the two went to their Range Rover in the parking garage. The man was shot and killed when he resisted a carjacking by two thugs who as of this writing have yet to be caught, though the car was found in Newark. 

So I went to the mall the following morning to see what kind of security was in place, especially as I parked in the same lot, and nothing. Inside the sweeping expanse there were just two mall cops.

I also heard from friends later that some of the surveillance cameras were not working Sunday.

--So what vitamins do you take every day? I take a vitamin C tablet, a B-12 one, and a fish oil capsule, all with my Dunkin’ Donuts chocolate frosted offering each morning. No ‘multivitamin.’

But as many of you heard this week, a supposedly definitive study by academics at Johns Hopkins University School of Medicine and the University of Warwick said the accumulation of evidence suggests that “supplementing the diet of well-nourished adults...has no clear benefit and might even be harmful.”

The scientists blamed the companies selling supplements for creating false anxieties in order to offer a cure that was not required.

For now I’m not changing my regimen because my cholesterol readings are off the charts good.

At the same time, one thing is clear. Get EXERCISE!!!!

And one other thing is also becoming increasingly clear. There is zero reason to trust that the drug/vitamin companies are manufacturing anything near what they put on the label. I think about that all the time.

--Remind me not to do anything stupid enough to land me at New York’s Rikers Island prison. As a New York Post story points out, “The city’s biggest crime spike is taking place behind bars.

“A 146 percent surge in felony assaults last month in The Bronx’s 41st Precinct is due to a raging gang war at Rikers Island, say police and jail sources.”

As in 106 assaults in November.

Also, remind me not to apply for the position of corrections officer on Rikers. Being a Mets fan is undoubtedly not helpful.

--In a poll conducted for USA TODAY, 60% of Americans say global warming is a very serious global issue and 2/3s say it will hurt future generations either a lot or a great deal if nothing is done to reduce it.

I maintain the debate continues to be mislabeled. It’s about “global pollution,” regardless of whether the Earth is warming or not.

--In his Christmas message on Wednesday, Pope Francis called on the faithful to serve the poor, telling them in his weekly audience from St. Peter’s Square “not to place ourselves above others, but rather lower ourselves, place ourselves at the service of the poor, make ourselves small and poor with them.”

Francis added, “Let us act that our brothers and sisters never feel alone! Our presence and solidarity by their side expresses not only through the words but also through the eloquence of deeds that God is close to everyone.”

Elizabeth Tenety / Washington Post

“So when Rush Limbaugh, that great arbiter of true Christianity, says that what’s coming out of the pope’s mouth is ‘pure Marxism,’ when Sarah Palin frets that Francis is ‘kind of liberal’ and when Fox News’ Adam Shaw calls him ‘the Catholic Church’s Obama,’ they’re just distorting the secular left’s dreams into their own worst nightmares.

“Both left and right need to wake up. Francis is, at his heart, a spiritual leader. His mission may have political implications, but he has come to serve God, not to advance the platform of the Democratic Party – and it’s presumptuous to imagine otherwise. Even in discussions of economic inequality, Francis sees the primacy of the faith: ‘I am firmly convinced that openness to the transcendent can bring about a new political and economic mindset that would help to break down the wall of separation between the economy and the common good of society,’ he writes in ‘Evangelii Gaudium.’ Oh, my: Sounds like Francis believes in trickle-down transcendence.

“If Francis is a radical, it is like this: By speaking the language of the common person in the year 2013, in his awareness of the inspirational power of grand, symbolic gestures, through his call for everyday Catholics to embrace the simple, radical mandates of their baptism, Francis is awakening a world that was becoming dead to Christianity.”

In an interview last Sunday with the Italian daily “La Stampa,” Francis is quoted as saying: “Marxist ideology is wrong,” while adding he has “known many Marxists who were good persons, and that’s why I don’t feel offended” by the label.

Kathleen Parker / Washington Post

“What is the successor to St. Peter supposed to do when he sees so much suffering even in free-market societies? Quote Ayn Rand?

“In a final contextual note, Francis is the pope, not the president. Like Jiminy Cricket, he is urging people to let their conscience be their guide. No one, Christian or otherwise, can escape the mirror he holds up, his eyes doubtless twinkling in anticipation of his next moonlight adventure, searching for souls in need.”

Pope Francis has been a breath of fresh air. Some of those criticizing him, such as Rush Limbaugh, also need to lighten up. Direct your fire at President Obama for his abandonment of children in Syria. Pope Francis isn’t.

--Finally...from “Calvin and Hobbes.”

Calvin: Yep, Christmas is just around the corner. And what better way to celebrate a religious holiday than with a month of frenzied consumerism!

Hobbes: I’m surprised other religions haven’t picked up on that.

Calvin: Getting loads of loot is a very spiritual experience for me.

---

Pray for the men and women of our armed forces....and all the fallen, including the six Americans who died in a helicopter crash in Afghanistan this week.

God bless America.
---

Gold closed at $1205
Oil, $99.15

Returns for the week 12/16-12/20

Dow Jones +3.0% [16221]
S&P 500 +2.4% [1818]
S&P MidCap +2.3%
Russell 2000 +3.6%
Nasdaq +2.6% [4104]

Returns for the period 1/1/13-12/20/13

Dow Jones +23.8%
S&P 500 +27.5%
S&P MidCap +29.2%
Russell 2000 +35.0%
Nasdaq +35.9%

Bulls 58.2
Bears 14.3 [Source: Investors Intelligence]

Merry Christmas!

Catch me on Twitter @stocksandnews

Brian Trumbore