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12/28/2013

For the week 12/23-12/27

[Posted 12:00 AM ET]

Washington and Wall Street

A new AP/GfK-Times Square New Year’s Eve poll found 32% of Americans rate their own experience in 2013 more positively than negatively vs. 2012, while 20% say it was worse and 46% say the two years were really about the same.

But when it comes to the United States, 25% say 2013 was better than 2012, 25% said it was worse.

Thinking about the world at large, 30% say 2013 was worse than 2012, 20% say it was better. Those 20% must have their heads up their butt. You can certainly build a case that 2013 was better in Japan, but anywhere else? Anywhere in the Middle East?  China?  Russia? Maybe the same (Israel...and outside these regions, Australia), but nowhere near better.

Europe? In the U.K., I’d say yes. Nowhere else. The eurozone, for example, may have finally emerged from recession, ever so slightly, but the labor picture is not improved in the least.

Africa? Don’t waste my time with growth stories in obscure places there. [I’m getting a kick out of some saying Nigeria is booming. Be my guest. Go invest in a nation where the Islamists want nothing else but to kill Christians.]

South America? Ditto.

But back to our feelings about 2013 vs. 2012, it obviously wasn’t a good year for President Obama and in a Wall Street Journal op-ed, Republican strategist Karl Rove says Obama’s poll numbers, specifically his Gallup disapproval rating, will end higher than this week’s 53% come Christmas 2014. I disagree and said last week Obama’s poll numbers have bottomed. [Give me two points leeway on this. So, for example, the most recent CNN/ORC poll had Obama with just a 41% overall job approval rating. I’ll say it is solidly above this in 12 months and won’t fall in the interim more than another two points as the final bottom.]

I just think that Obama will benefit from an improving economy, which is the case, even if some Republicans for Nov. 2014 reasons don’t really want it to be. And as for ObamaCare, which I address more fully in a bit, the worst is over in terms of the next few news cycles. Yes, the number of enrollees will fall woefully short of projections, and there will be more stories of cancellations and insurance companies leaving the fold, but in terms of news that moves the electorate on a mass basis, there is nothing like a broken website to do so and it is slowly getting better (though remains terribly unsecure...as in thank god I don’t have to use it yet because I wouldn’t want to).

I’m talking about the kinds of stories that grab your attention. The launch of the website did that. But for the next few quarters I don’t think the negative stories being presented (by Fox) will carry anywhere near the same weight as we saw in October and November.

Come next fall, however, the news coverage will pick up again in a big way when insurance companies announce their premium increases for 2015, just in time for the mid-term elections.

But in coming months the better economic news will aid the president, especially since it’s clear Americans couldn’t care less about foreign policy issues that are a growing disaster. That day will come, however. It’s why I spend so much time on the geopolitical, because just as in the crashing website and its power to change sentiment, there are potential events, such as an ‘accident’ in the East China Sea causing a clash with China, or Iran eventually testing a nuclear device, that would change attitudes in a flash, to the detriment of the economy and Wall Street.

For now, though, enjoy the ride, as I believe the president will. In the very short term, though, we’ll see how the debt ceiling debate shapes up in Jan. and Feb., but that’s a discussion for when Congress returns.

Before I get to my market predictions for 2014, a few words on the minimal economic news for the week, as well as the holiday shopping season.

November figures on personal income, up 0.2%, were not good as it showed continued tepid wage growth, but consumer spending for the period was solid, up 0.5%, showing we were dipping into savings. When consumer spending is 70% of the economy this is important. Durable goods (big-ticket items) were up a better than expected 3.5% for November, while new-home sales for the month surprised to the upside vs. forecasts.

Mortgage applications, however, are down a whopping 63% from their May peak to a 13-year low, reflecting not just a cooling market but higher interest rates. Not coincidentally, mortgage rates bottomed in May on a 30-year fixed at 3.35%, as the benchmark 10-year Treasury was yielding 1.60%. This week a 30-year fixed mortgage was up to 4.48% and will rise higher still next week as the 10-year yield hit 3.00% for the first time since September. So I expect the housing data to get increasingly iffy going forward as it’s clear to me interest rates are heading higher still with an improving economy. The question is does the good (the improving economy) outweigh the bad (rising rates). For now it will. Later on it won’t, as I’ll discuss shortly.

As for the holiday shopping season, defined as November and December, there was a slew of data this week, with ShopperTrak talking of a 21% decline in foot traffic for brick-and-mortar stores for the week ending 12/22, with retail sales down 3% for the same period. ShopperTrak did say holiday sales for Nov. 1 to Dec. 22 were up 2%, close to its estimate of 2.4% for the entire two months. [ShopperTrak pegged sales last year at 3%.]

But the National Retail Federation maintains sales for November and December will rise 3.9% vs. 3.5% last year, while another analysis from Retail Metric said thus far home improvement and furnishing chains are up 7%, auto retailers up 6%, but department store chains down 1% for the season.

MasterCard Advisors SpendingPulse pegged retail sales at up 3.5% for 11/1-12/24, though holiday-related categories such as clothing and electronics were up just 2.3%.

As for online sales, we all know they are up substantially but I can’t trust any of the estimates I’ve seen thus far, though I have some data in the “Street Bytes” section.

Here’s what we do know. Discounts have been large and we are all curious to see just how negative an impact it will have on margins come earnings season, including for the online retailers offering free shipping, for example. It can’t be good.

As for the package delivery issue, more below but suffice it to say UPS has an image problem and Amazon is thinking more about drones...and alternative delivery sources.

Back to ObamaCare, we’ll soon find out how the yearend ‘crush’ truly panned out and if the insurance companies were overwhelmed and what percentage of people who think they signed up for coverage beginning Jan. 1 actually didn’t obtain same. Even with a late surge, national enrollment in private health plans will fall way short of the administration’s goal of 3 million by year end (the actual figure will probably be released around Jan. 15). Using the president’s numbers from his 12/20 press conference, we were around 1 million as of Dec. 20, including both federal and state-run exchanges. An additional 800,000 had been deemed eligible for Medicaid coverage through November.

For now, a Harris Interactive/HealthDay poll finds that 36% of all adults want a repeal of ObamaCare vs. 48% who support the Affordable Care Act, saying it either should be left as it stands or have some parts changed. 16% are undecided.

68% of Republicans call for repeal, 3/4s of Democrats support the law, while independents are split 41% for repeal, 46% supporting it.

Regardless, you can be sure the administration will be hammering away all year at how health-care inflation continues to fall (even as in some cases they will be shading the facts). Indeed, 2013 does mark three years in a row of sub-2 percent health-care inflation, according to the Department of Commerce’s GDP price indexes, and as Peter Coy of BloombergBusinessweek writes:

“The White House and Republicans predictably battled over who or what deserves credit. In September the nonpartisan actuaries of the Centers for Medicare and Medicaid Services cited the slow economy, ‘judicious’ consumers, high-deductible health plans, constraints on Medicare and Medicaid, and expiration of patents on some popular medications.”

And now 2013 and 2014...

While we still have two trading days left in the year, understand I am breaking up my 2014 outlook into two parts, the market and geopolitics. I’ll cover the foreign affairs front next time.

For now I was mercifully brief in my thoughts last year at this time concerning the market. Oh, I kept harping on the fact we aren’t addressing the long-term entitlement issue, but I didn’t foresee (nor did anyone else) the huge deficit reduction outlook from the Congressional Budget Office in May vs. their February forecast three months earlier. This was both good and bad. It gave Congress and the White House a further excuse not to take the tough steps today that would avert a serious crisis down the road, and, as the economy improves and receipts come in at a faster rate, they will have yet another reason to ignore the problem. But the deficit picture, while improving, will turn, and, let’s face it no one really has a firm idea on just how much damage will be done by ObamaCare. All we know is the cost will be far higher than what we were originally sold.

So last year at this time I said the Dow Jones and S&P 500 would finish 2013 flat and Nasdaq would rise 5%. At least I correctly said Nasdaq would outperform. I only missed about 30% of increased performance for all three. Of course if I allowed myself to change my stance at mid-year, or other times, I could massage things more but not moi! Nope. I stick the old neck out and let it lie there on the chopping block, come rain or snow, hoping someone will come along and at least cover my head. [For health purposes, you understand.] If I miss by a like amount in 2014, please just chop the head off.

But I got the Fed’s main decisions right, better than anyone, and this coming year there will be one primary topic of conversation. The yield on the 10-year Treasury.

The economy, after a down vs. third quarter performance for October thru December, will start off 2014 in fine fettle, we will continue to see solid job gains, the Fed will continue to slowly taper its bond-buying program down to zero by end of summer, and the stock market will, in fits and starts, keep heading higher. The ‘fits,’ however, will come about because of wild gyrations in the 10-year, like more than 2 or 3 days where the yield gyrates 20 basis points, a huge move, and we’ll be headed over 3.50%, which will certainly impact housing.

The 10-year will also go for a wild ride when we get consecutive data points, in one of many categories, that point to an inflation scare for the first time in years, and soon thereafter the 10-year will be over 4.00%.

But all the while the economy will be progressing, overall, Europe will have some decent data points in the first quarter, and Japan will weather an imminent bout of anti-Japanese fervor in China, as well as a tax hike.

Corporate America, assuaged to some extent by the bipartisan budget agreement, which won’t be trumped by any major debt ceiling issues, will increase capital spending for the first time in earnest in many a year, while the consumer, despite the increasingly tepid housing market, will feel better and profits will be solid.

I have never said in the past year during this recent leg of the rally off the March 2009 lows that the market, overall, is overvalued. I’ve been around a while, and I know the difference between today and 1999, when I was penning this column and poking fun at Wall Street’s bullish analysts.

That doesn’t mean the market is cheap, even if earnings pick up the first half of the year. I just know these things can run further and sentiment will be improving. [The bull/bear readings I note below each week, however, can’t get too much more bullish than they already are. I’m talking about the attitudes of Mr. and Mrs. Six-pack.]

But things are going to change in a big way after the very solid start to 2014 for reasons I’ll address next week. For the purposes of a market prediction, though, I’ll say the Dow and S&P finish down 2%, Nasdaq down 5%.  

Europe and Asia

There was virtually zero economic data this past week when it comes to Europe, but beginning Jan. 2, there will certainly be a slew of it, ditto Asia, particularly China. So I get a small break myself.

We did learn this week that in the U.K., home sales are up 24% over the past year, but the actual rate is far from the peak. That said, mortgage approvals are the highest since Sept. 2009. On the retail front, awful weather impacted Christmas sales though I’ve seen conflicting reports regarding Boxing Day (Dec. 26).

In China, the central bank infused cash to steady money markets, which have been convulsed of late, largely a seasonal issue involving “window dressing” where banks typically conserve cash at the end of the year to keep their balance sheets looking healthier, though this year authorities have been forcing banks to also hold more capital and conditions have tightened. So put it all together and the cash crunch was enough of a concern to get the government to warn the media to only report positive developments.

Separately, the government did estimate GDP would rise 7.6% for all of 2013, while a state council document listed among the looming challenges a worsening in pollution (sound familiar?) and social conflicts. 

In Japan, the Tokyo Nikkei average closed above 16000 for the first time since December 2007, finishing the week at 16178, up 56% on the year! The weaker yen continues to boost the earnings prospects for exporters, while Bank of Japan Gov. Kuroda said the economy is on a smooth recovery path.

The government is forecasting GDP will rise 1.4% for the fiscal year starting March 2014, slowing from an expected 2.6% rise in 2013, because of the looming sales tax (consumption/VAT) increase from 5% to 8% in April (and possibly to 10% the following year).

Finally, the government had a piece of good news on Friday in that wages for November were flat from a year earlier, halting a 17-month decline. Wages must rise to spur consumption and investment. It’s a start, particularly heading into the consumption tax hike. Consumer prices ex-food rose 1.2% in November from a year earlier, the fastest pace in five years as government policies to end its deflation problem seem to be taking hold. The central bank’s goal on this front, as it is in the U.S. and Europe, is 2%.

Street Bytes

--The Dow Jones and S&P 500 hit new highs on Thursday before backing off a fraction Friday. The Dow finished up 1.6% to 16478, while the S&P added 1.3% to 1841. Nasdaq also gained 1.3% to 4156. [As did the Russell 2000 and S&P MidCap.] Frankly, there is nothing better than Christmas and New Year’s falling on a Wednesday. You can take the two days before, or the two days after, though frankly you’re an idiot if you take Jan. 2 and 3 off. My rule was never take a day off until May. It’s about job security. [Actually, these days don’t take a day off until the Friday after Thanksgiving. And be very snarky about your fellow workers who take time off in the summer.]

--U.S. Street Bytes

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

The 10-year hit 3% for the first time since September, up from a May low of 1.60%. At the end of 2012, the yield stood at 1.79%.

--Shares in Twitter continued to soar amid optimism concerning the company’s advertising products, as well as short-sellers getting squeezed. The company’s shares were first priced at $26 and closed the initial day of trading, Nov. 7, at $44.90. Yet at Thursday’s close, Twitter had a market capitalization of $38.1 billion compared with Time Warner Cable’s $37.6 billion. But then Friday the stock cratered $10 to $63.00. 

Twitter is retargeting its ad initiative with more advertising tailored to big brands’ interests, including tools for conversion tracking for marketers to understand their return from ad spending.

But as for the company’s profitability, don’t look for black figures on the bottom line for quite some time to come.

--UPS’ image has taken a major hit this holiday season as thousands of packages were not delivered as promised, on time, ahead of Christmas. The world’s largest package delivery company was simply overwhelmed by an unexpected crush as shopping online surged. The air hub in Louisville was the primary source of problems as the company admitted some packages promised before Christmas wouldn’t arrive until Friday.

UPS had expected demand to increase 8% this season and it turned out to be far greater than that, plus bad weather in many parts of the country didn’t help.

Now the big concern for UPS is how retailers that use them will react, particularly Amazon, which sent an email to affected customers offering shipping refunds and $20 gift cards to compensate. Amazon also said it was “reviewing the performance of the delivery carriers.”

Meanwhile, the U.S. Postal Service, or FedEx, didn’t appear to have the same issues.

A National Retail Federation survey found that about a third of retail companies offered free or upgraded shipping promotions that gave their customers until Sat., Dec. 21, to order for Christmas delivery, and 17% pushed it to Monday.

The retailers are saying, hey, we met our obligations to get the items to the shippers on time. Nordstrom was among those saying it would reconsider its business with UPS.

--Separately, Amazon.com said it sold almost 37 million items on Cyber Monday, a pace of 426 a second. The company also reported that 50% of its customers used mobile devices to do their holiday shopping. And it signed up more than 1 million new customers during the third week of December for its Prime service, leaving it with “tens of millions” of customers at this level. [But they lose money on a lot of these folks.]

--The issues with UPS helped take the spotlight off Target, which now faces a slew of lawsuits over the security breach that saw details of more than 40 million customer cards stolen. One security researcher, Brian Krebs, said there was evidence card numbers stolen in the Target attack had shown up on underground markets where such details are traded.

Late Friday, of course (always release bad news on Friday), Target said encrypted debit card PIN data was indeed among the information accessed by dirtballs during the peak shopping period. The company is trying to convince customers there is still no need to worry – saying the ‘key’ necessary to decrypt the data has never existed within the Target system – but are you going to believe these guys?  Hell no.

--Apple finally struck a long-awaited distribution deal with China Mobile, with Apple being able to sell the iPhone 5s and 5c as of Jan. 17 in China Mobile’s retail network for the first time. CM is the world’s largest mobile carrier with more than 750 million customers.

--Saudi Oil Minister Ali Al-Naimi said at a meeting of OPEC ministers that the cartel needn’t cut production next year to make room for additional supplies from the likes of Iran and U.S. shale oil. Kuwait’s oil minister said, “don’t make shale oil a scarecrow for OPEC and other producers.” [Bloomberg]

In Libya, rebel groups have kept oil export ports closed and the government said it would force them to reopen the facilities. Good luck.

--A Chinese government think tank says the urbanization rate is expected to hit 60% by 2018, two years ahead of previous official expectations. Last year China crossed the 50% mark for the first time. Leaders are pushing urbanization to fuel growth. 25 million a year are expected to move to cities.

--Despite improvements in the Irish job market, there has been no let-up in emigration as 250 people a day leave the country, with a surge in those heading to Canada. Official Central Statistics Office data show 89,000 left in the 12 months to April 2013. [Irish Independent]

And despite the emigration, the housing industry in Ireland is facing a shortfall of up to 16,000 homes next year that could lead to home price spikes of 20% or more, especially in parts of Dublin.

--Research by the Employee Benefit Research Institute shows that the share of workers saving for retirement in the U.S. has declined to 57% today from 64% in 2008 – and that the share of workers who have more than $25,000 set aside has declined over the same period to 43% from 51%. [Gerald Seib / Wall Street Journal]

--Among the ‘statistics of 2013’ cited by the Washington Post’s Robert Samuelson... A low-end iPhone has 240,000 times the memory of the computers on Voyager 1, which is now nearly 12 billion miles from Earth. [New York Times]

A leaf blower with a two-stroke engine emits 299 times the hydrocarbons of a Ford Raptor pickup truck. [Washington Post]

And 72% of online Americans use social networking sites, up from 8% in 2005. [Pew Internet & American Life Project]

--With the recent storms in Europe, France has been a beneficiary with heavy snowfalls in the Alps. I forgot that France is the world’s biggest ski destination with 57.9 million days of skiing sold in the 2012-13 season, ahead of the U.S. with 56.9 million days and Austria with 54.2 million. [Rudy Ruitenberg / Bloomberg]

--This is scary. As reported by BBC News’ Leo Kelion, there is a virulent form of ransomware that has infected about a quarter of a million Windows computers, with the U.S. and U.K. the most affected.

This particular form is particularly problematic because it makes files inaccessible.

Bottom line, it appears to be spread via spam emails that ask the user to click on a Zip-archived extension identified as being a customer complaint about the recipient’s organization, or a problem clearing a check.

--I will see “The Wolf of Wall Street” at some point. I got a kick out of the factoid that the real-life crook behind the story, Jordan Belfort, had his first official day on Wall Street as a stock broker’s assistant on Black Monday, the market crash of 1987. A good friend of mine, David P., also started that day and he reminisced this week that his pitch to open accounts involved an MFS closed-end fund yielding 9%. Yup, different interest rate environment back then, among other things.

--The cost of a first-class stamp is going up from 46 to 49 cents, starting Jan. 26. So buy a ton of Forever stamps today, sports fans! Think of the savings! [250 Forever stamps purchased now will eventually save you $7.50, the cost of a six-pack of many premium beers. 300 for Shiner Bock (the domestic premium) or Stella in my neighborhood.]

Foreign Affairs

Turkey: The widening corruption probe that threatens the government of Prime Minister Recep Tayyip Erdogan is now targeting his son. The probe has led to a major Cabinet reshuffle after three ministers resigned. The three stepped down after learning their sons were among dozens detained on Dec. 17 as part of an investigation into procurement practices, gold smuggling and money laundering. 

Erdogan is facing the biggest crisis of his 11 years in power and responded on Wednesday by replacing half his 20-member Cabinet with loyalists, while investors have been fleeing and dumping Turkish bonds, helping to threaten the country’s economic turnaround. The currency, the lira, weakened to a record low against the dollar. The yield on a two-year bond is 10%, up nearly 4% this year.

The prime minister is calling the probe an attempted coup, as well as blaming Western interests. “They want to reach me,” he said Thursday. “If they try and aim at Tayyip Erdogan through this, they will (be left empty-handed).” The prosecutor who initiated the investigation into his son was removed from his post after the announcement. Erdogan has also begun a purge of the country’s police force, which prosecutors say is severely impeding their investigation as the police loyal to Erdogan refuse to press ahead.

The first allegations of corruption emerged last week in a police sweep on the offices of businessmen with close ties to Erdogan. In one instance, shoe boxes allegedly containing $4.5 million were found in the home of the head of a state bank, police said, along with bank notes in the bedroom of a government minister’s son. [London Times]

Further allegations include bribes paid to assist an al-Qaeda suspect.

The whole investigation is seen as a power struggle between Erdogan’s AK Party (AKP) and supporters of the cleric Fethullah Gulen, now in self-imposed exile in Pennsylvania. The two were once close friends but the relationship grew bitter as Erdogan became more authoritarian and began closing down private schools run by Gulen’s organization, Hizmet. [Los Angeles Times]

Key local elections are being held in three months.

Iran: Talks between Iran and the P5+1 paused for the Christmas holiday and may resume before the New Year as discussions continue on how to implement last month’s interim accord on Iran’s nuclear program. National Security Adviser Susan Rice told “60 Minutes” last Sunday, “We will not construct a deal or accept a deal in which we cannot verify exactly what (the Iranians) are doing.”:

Rice said that if international authorities, such as the International Atomic Energy Agency, catch the Iranians violating a future deal, “we will ensure that the pressure is reimposed on them.”

But in some respects it’s too late. Western companies are rushing to reestablish relationships with Tehran and I believe Iran’s foreign minister, who recently told students the sanctions are already crumbling.

It’s why clearer heads, such as in the case of Democratic Senators Charles Schumer (N.Y.) and Robert Menendez (N.J.) have proposed legislation that would add new sanctions on Iran if it fails to cooperate in coming negotiations, while the White House says, just give us more time and everything will be alright.

For their part, Iranian lawmakers have threatened retaliation if the Senate effort, which could come to a head as soon it returns from recess, succeeds, which would likely mean attempting to overturn a presidential veto.

Syria: Pope Francis used his first Christmas Day message to urge access for humanitarian aid in Syria.

Editorial / Washington Post

“It was astonishing to hear President Obama, in the preamble to his end-of-year news conference last week, cite Syria as one of his foreign policy successes. [Ed. See my “Hot Spots” link.]

“ ‘(Just) as we’re strengthening our position here at home, we’re also standing up for our interests around the world,’ Mr. Obama said. ‘This year we’ve demonstrated that with clear-eyed, principled diplomacy, we can pursue new paths to a world that’s more secure, a future where Iran does not build a nuclear weapon, a future where Syria’s chemical weapons stockpiles are destroyed.’

“Unfortunately, the White House press corps was not as struck by this boast as were we, and there were no follow-up questions. Here’s what we would have asked:

“ ‘Mr. President, Syria is in the process of giving up its chemical weapons, as you say. At the same time, it’s been more than two years since you both predicted and demanded the resignation of Syria’s dictator Bashar al-Assad. Yet he has strengthened his position and continues to commit war crimes.

“ ‘His forces are besieging hundreds of thousands of people, deliberately starving them to death, according to your secretary of state. His helicopters are dropping ‘barrel bombs’ on apartment buildings in Aleppo, bombs ‘typically packed with screws, scrap metal, old car parts, blades and explosives,’ as one activist told the Wall Street Journal. More than 9 million Syrians – better than a third of the country – have been driven from their homes. Is this record consistent with ‘standing up for our interests around the world’?’”

Lebanon: A powerful car bomb in the central business district of Beirut on Friday killed six, including a senior aide to former Lebanese Prime Minister Saad Hariri. Mohammed Chatah, his driver, and four others, were killed in the explosion that wounded at least 70.

Chatah, a former ambassador to the U.S., was one of the closest aides to former Prime Minister Rafik Hariri, who was killed in a truck bombing in Beirut in 2005, not far from Friday’s explosion. [Ed. I went to the 2005 site, a month later, and know the second.] Chatah then became finance minister when Hariri’s son, Saad, took over the premiership.

Prior to Friday’s bombing, there had been a series of bombings and attacks near the Syrian border and in the Bekaa Valley, targeting both Hizbullah and the Lebanese Army.

Michael Young / Daily Star...prior to Friday’s attack...

“President Bashar Assad must be delighted. Reports this week indicate that the Syrian National Coalition has been told by Western governments that the Montreux conference in January should not lead to the removal of the Syrian president, for fear that jihadists would exploit the ensuing vacuum. The SNC had said that it would not attend the conference unless it led to a transition away from Assad, so what this will mean for its participation remains unclear.

“Ultimately the political mess in Syria benefits both Assad and al-Qaeda in the medium term. The paradox is that Hizbullah, the Assad regime and the United States are all, implicitly, on the same side – which is precisely the conclusion the Assad regime wanted everyone to reach when it allowed the jihadists to thrive.

“The only problem is that Hizbullah now finds itself transformed into cannon fodder in a battle against al-Qaeda, when its initial goal was merely to defend Assad rule. Sayyed Hassan Nasrallah has claimed that his party’s aim is to fight the ‘takfiris.’ However, far more effective forces than his have failed to triumph over al-Qaeda. The only success came when the United States collaborated with the Sunni Awakening movement in Iraq to push the jihadists onto the defensive.

“Hizbullah doesn’t have that capacity. The party has imported the Syrian war to Lebanon, even if it is not the only one to do so. Its hubris has been a curse to the country, and will remain so for some time.”

Egypt: Security authorities launched a sweep of arrests of Muslim Brotherhood members on Thursday, threatening the death penalty for those in leadership, this after the government officially declared the Brotherhood a terrorist organization in response to a suicide attack that killed 16 people in the Nile Delta, accusing them of carrying it out.

The Brotherhood’s followers are fighting back, with a bomb attack in a busy intersection in Cairo being blamed on Islamic militants (no one was killed) but it sent a signal. The Brotherhood has vowed to “qualitatively” escalate its protests against the military-backed interim government.

So on Friday, three people were killed in fresh clashes between the Brotherhood and police in three different locations, while some 265 Brotherhood supporters have been arrested, according to the interior ministry.

Egypt faces a potential surge in violence by al-Qaeda inspired militants ahead of a key Jan. 14-15 referendum on a revised constitution.

Japan / China / South Korea: Japanese Prime Minister Shinzo Abe did exactly what the United States, China and South Korea warned him not to do; visit a shrine linked to the country’s militarist past.

Abe visited the Yasukuni Shrine on Thursday, triggering strong criticism from Beijing and Seoul, and disapproval from Washington.

Yasukuni, in honoring Japan’s war dead, also honors some convicted World War II war criminals.

The U.S. Embassy in Tokyo said in a statement, “The United States is disappointed that Japan’s leadership has taken an action that will exacerbate tensions with Japan’s neighbors.”

Abe, who regretted not visiting the shrine during his first term as prime minister from 2006 to 2007, said, “I offered my respects to those who lost their precious lives for our country, and prayed that their souls may rest in peace. I have no intention at all of hurting the feelings of the Chinese or the South Korean people.”

China’s foreign minister said Abe’s visit glosses over Japan’s militaristic past. “Under these conditions, not only does the Japanese leader not show restraint, but instead makes things worse by manufacturing another incident over history. Japan must bear all the consequences arising from this.”

Separately, a foreign ministry spokesman said Abe’s visit “brought a serious political hindrance to improvement and development of bilateral relations.”

And official Chinese media warned China will become a “paper tiger” if countermeasures against Japan are not taken, “excessive” counter-measures in one editorial by the Global Times.

‘People are getting tired of such futile ‘strong condemnations’...

“China needs to take appropriate, even slightly excessive countermeasures” or else “be seen as a ‘paper tiger,’....

“In the eyes of China, Abe, behaving like a political villain, is much like the terrorists and fascists on the commonly seen blacklists.”

A South Korean spokesman said, “Our government cannot but deplore and express anger about (Abe’s) visit.”

A Seoul official told the Washington Post, “I don’t understand why he paid the visit. It casts doubt on the trust and sincerity of the Japanese government.”

What is so idiotic about Abe’s move is economic relations between China and Japan were improving despite the controversy surrounding the territorial dispute in the East China Sea, but now both China and South Korea will be forced to respond.

Abe has yet to visit the two, while paying his personal respects to all the others in the Association of Southeast Asian Nations (Asean).

Editorial / Wall Street Journal

“Mr. Abe’s visit (the first by a sitting prime minister since 2006) is a gift to Chinese leaders who like to use the supposed specter of Japanese military resurgence as an excuse to expand their own power. Internationally, Beijing is aggressively threatening Japanese control of territory in the East China Sea while protesting Japanese plans to increase defense spending by a tiny amount compared with China’s own expenditures. At home, Beijing stokes anti-Japanese nationalism to buttress the legitimacy of its one-party state...

“In days ahead, watch for riots and boycotts against Japanese-owned businesses in China, often with tacit government support....

“South Korea is a different case – a fellow liberal democracy that will likely demonstrate its bitterness toward Japan in diplomatic iciness more than lawless rioting. But the consequences of such diplomatic difficulty are enormous when China’s assertiveness makes regional cooperation imperative, especially among wealthy U.S. allies with the most potential to deter Chinese hegemony.

“This is crucial context to the Yasukuni story. It is troubling enough that some senior Japanese officials persist – due to personal belief, political pandering or both – in whitewashing the truth about chemical weapons, sex slavery and other wartime atrocities. But Japan’s offenses against truth become strategic liabilities when they hurt the ability of like-minded states to promote a peaceful, liberal regional order.

“Mr. Abe, who is generally clear-eyed about the dangers of an authoritarian China, may bear this in mind when Tokyo inevitably considers its next proposal for a new, secular war memorial untainted by the darker details of Yasukuni.”

Thailand: Street protests continued, killing one police officer and injuring 100 on Thursday as the election commission called for delaying upcoming polls due to the deteriorating security situation. The government of Prime Minister Yingluck Shinawatra wants the February 2 polls to take place as scheduled, expecting to win handily and earn a new mandate. The violence, though, could force her to take a tougher stand, which would only encourage further demonstrations.

The government says the Feb. 2 date is firm, part of a previous agreement that dissolved parliament.

China: Pollution continues to be a huge issue. Shanghai once again hit dangerous levels and the government warned children and the elderly to stay indoors. Shanghai was long thought to have cleaner air than other Chinese cities, particularly Beijing, but the past few months have seen it hit as hard as any and this obviously threatens to undermine plans to attract foreign investment and multinational firms. As I keep hammering home, if you’re an American businessman, for example, why would you accept a position there (unless your boss was holding a gun to your head)?

On the issue of the power of Premier Li Keqiang, historically the premier has had control of the economy, but, as has been seen early on in the first year of President Xi Jinping’s tenure, Xi is instead assuming primary oversight in this realm, including briefing foreign leaders on the topic, not Li, as reported by the Wall Street Journal last weekend. [I did write of this months ago.]

So Xi has consolidated his control over the Party, the military and now the economy. But the Journal hastens to note, there doesn’t appear to be any discord between the two.

[I’m headed to the region in four weeks.]

North Korea: Various reports, including from the New York Times, say that Kim Jong-un and his uncle Jang Song-thaek, fought over control of the nation’s lucrative shellfish exports, culminating in a firefight between their forces in recent months.

Kim apparently ordered Jang to give up control of seafood farms previously run by the military, but the uncle refused.

Most of the goods were exported to China, a country with whom Jang had deep ties.

Kim became “enraged” when he saw his troops were underfed, due in part to Jang controlling the profits. Kim then apparently sent 100 troops to the seafood farms and his troops were “badly” defeated by Jang’s loyalists. That was the last straw for Kim. [South China Morning Post]

Separately, the Daily Telegraph reported more than a hundred of Jang’s relations have been rounded up and sent to prison camps. Apparently, Jang’s widow, a blood relation to Kim, has thus far been spared punishment.

As for Dennis Rodman’s latest visit to Pyongyang, his “awesome” friend, Kim, dissed him. Rodman said “I am not worried about it. I’ll see him again.”

Ukraine: There has been relative calm this week. It won’t remain so for long.

Russia: The Winter Olympic Games open in Sochi on Feb. 7 and the main stadium hosting the opening and closing ceremonies is still not open.

Meanwhile, the temperature in Moscow on Christmas Day was the warmest since 1910, 38 F.

And regarding Mikhail Khodorkovsky, he requested a three-month visa in Switzerland, where he had business interests before his arrest, and it’s where his sons go to school.

In a press conference in Berlin, following his release from a decade in prison, Khodorkovsky thanked German Chancellor Angela Merkel, who apparently played a role in convincing President Vladimir Putin to make the move.

Khodorkovsky also told reporters “the struggle for power is not for me,” but made clear he would put pressure on Putin and urged world leaders to do the same.

“We need to work further so that there would be no more political prisoners left in Russia and other countries. I am going to do my utmost in this regard.”

Putin also released two Pussy Riot members from prison on Monday, but both derided the move as a PR stunt ahead of the Olympics.

As David M. Herszenhorn and Steven Lee Myers of the New York Times wrote in a piece on Putin, the freeing of Khodorkovsky “capped a remarkable string of single-handed decisions of late.”

The $15 billion deal with Ukraine undercutting the West, the passage of the amnesty bill that could free thousands of prisoners, the pardoning of Khodorkovsky, the takeover of the semi-independent state news agency (replaced by a Putin loyalist), the granting of temporary asylum to Edward Snowden...but all these moves carry big risks, especially in the case of Khodorkovsky and Ukraine could easily backfire.

South Sudan: More than 1,000 people have been killed and 60,000 civilians are gathering in U.N. peacekeeping compounds in an attempt to escape a tribal civil war spreading across the country. The rebels have seized the oil fields (most of which goes to China, by the way), which makes an armed intervention from Sudan to the north more likely.

But on Friday, the government apparently agreed to an immediate end to fighting with rebels but as I go to post there is no confirmation of this, nor what the rebel stance will be.

Central African Republic: On Thursday, 44 bodies were recovered by the Red Cross from the streets of the capital, Bangui, as fighting between Christians and Muslims continues. Six Chadian peacekeepers were also killed, while a mass grave of 30 bodies was uncovered, many of them showing signs of torture. France has deployed a 1,600-strong peacekeeping force in its former colony under a U.N. mandate to protect civilians. [Vive la France!]

Benny Avni / New York Post

“For the past few Christmases, this column has shined a light on the horrific plight of Christian communities across the Middle East, Africa and elsewhere. This year, a Christian majority in a small African nation and Muslims there are waging brutal attacks on each other – but it’s all being fanned by Islamist fanatics from outside the borders.

“The killing field in question is the Central African Republic, where a year-long civil war has taken a monstrous toll. This month alone, it’s exacted hundreds of deaths. Tens of thousands are being made homeless. Maiming by machete, rape and beatings are routine. There’s no end in sight....

“To counter Muslim atrocities, Christians formed their own brutal militias... They, too, have inflicted unmentionable pain in mosques and on randomly selected Muslim families.

“The unprecedented atrocities, feelings of discrimination and victimhood and religious zealotry make for a ripe environment for Islamist outsiders that thrive on chaos and religious enmity.”

But once again, despite the pleas of America’s ambassador to the United Nations, President Obama is content to lead from behind.

Benny Avni:

“True, we can’t expect an administration that has all but ignored a war in the heart of the Middle East, that has killed at least 120,000 Syrians and counting, to experience a sudden awakening over a religious flare-up in some obscure African country. But think of it this way: If Boko Haram and fellow Islamist zealots win the war, the CAR could become their next base for global terror.

“Then there’s the Islamist government of Sudan, which might learn from the use of anti-Christian fervor in the CAR and use similar tactics to ransack its breakaway neighbor, South Sudan. For now, the budding civil war in South Sudan, the world’s newest country, has little to do with religion. But Khartoum would love nothing more than to reincorporate its oil-rich neighbor, and since South Sudan is mostly Christian, why not use religious hatred to help in that effort?

“Anti-Christian zealotry is a useful tool for Africa’s Islamists, who are on the march. But preventing the spread of religious-fueled wars is an American interest – not just Christmas time, but always.”

On the same general topic...Michael Gerson / Washington Post

“In some parts of the world, Herod’s massacre of the innocents is a living tradition. On Christmas Day in Iraq, 37 people were killed in bomb attacks in Christian districts of Baghdad. Radical Islamists mark – and stain – the season with brutality and intolerance.

“The violence, of course, is not restricted by the calendar. In recent months, we’ve seen Coptic Christians gunned down in Cairo and churches burned. Thousands of Syrian Christians have fled to Turkey....

“ ‘We won’t resign ourselves,’ says Pope Francis, ‘to a Middle East without Christians.’

“The most passionate advocate has been Prince Charles – an often underestimated, consistently thoughtful figure. ‘For 20 years,’ he said in a recent speech, ‘I have tried to build bridges between Islam and Christianity and to dispel ignorance and misunderstanding. The point though, surely, is that we have now reached a crisis where the bridges are rapidly being deliberately destroyed by those with a vested interest in doing so.’”

[Regarding Iraq, there was also an awful bomb attack that killed 15 officers and soldiers taking part in an operation against al-Qaeda linked militants, one of the victims being the commander of an Iraqi army division. It was unclear whether there were suicide bombers or the building being used for a meeting had been booby-trapped.]

Random Musings

--I posted my last column late Friday night and wrote the following:

“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.”

Later on I wrote of how the selection impacted next fall’s Senate races:

“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.”

48 hours later, the Wall Street Journal opined for its Monday print edition.

“How worried is President Obama about losing the Senate next year? Worried enough that he is willing to maneuver Montana Democrat Max Baucus out of his seat prematurely to become Ambassador to China and take with him any chance of tax reform in this Congress.

“On Friday the White House said it will nominate Mr. Baucus, who isn’t seeking re-election in November, to be the U.S. envoy to Beijing.... We don’t begrudge his chance at this late-career opportunity....

“But none of that reduces the political calculations behind the move....

“Montana’s Democratic Governor Steve Bullock will be able to nominate a successor to serve through the next election, and the expectation is he’ll nominate his Lieutenant Governor John Walsh....

“The China gambit means that tax reform is almost surely dead for this Congress. Granted its prospects were already faltering, but as Senate Finance Chairman was working with House Ways and Means Chairman Dave Camp on a bipartisan way forward. That may be one reason the White House and Senate Majority Leader Harry Reid preferred to see Mr. Baucus relocated across the Pacific. The evidence is building that they plan to run a populist, class-war campaign in 2014 to change the subject from ObamaCare, and tax reform doesn’t fit that name.”

--Editorial / USA TODAY

“To look at the political scene these days is to see incessant squabbles, partisan gamesmanship and ultimatums that don’t even rise to the level of small-mindedness. Members of Congress and many state legislators spend their days in pointless trench warfare, apparently unaware that the only thing they are accomplishing is undermining the public’s faith. They are egged on by special interests, purity enforcement groups, and talk radio and cable TV hosts....

“In the Christmas spirit of reflection, we suggest that those in and around politics look at themselves and ask why they are held in such low esteem. What they find is something akin to what Francis saw when he became pope – an institution failing at its core mission because it is bogged down in the trivial.

“For government leaders, their core mission should be a patriotic one, to make the USA a better place, to lay the groundwork for peace and prosperity, to compromise without giving up core principles. Difficult tasks, to be sure, it’s so much easier, after all, to fight about Duck Dynasty.

“The problem is not that Republicans and Democrats are gridlocked over different approaches to accomplishing their core mission. It is that they have become so engaged in partisanship, so invested in the culture wars, that confrontation has supplanted all else to become the de facto mission.

“Sometimes it takes someone new to look around and come to the obvious conclusion that an approach isn’t working. Pope Francis has done that for the Catholic Church. And maybe he could help show the way for other struggling institutions as well.”

--Michael Barone / New York Post:

“As the fifth year of the Obama presidency draws to a close, it may be time to examine the unspoken but powerful assumption behind the policies of the president and his party.

“That is the assumption that in times of economic distress Americans would be, more than usual, supportive of or amenable to Big Government programs.

“The assumption was widely shared, and not just by Democrats. And it has pretty well been disproven, insofar as any abstract proposition can be disproven, in the five years of the Obama presidency...

“Gallup reports that 72% of Americans see big government, not big business or big labor, as the biggest threat to the nation’s future – the highest number since the question was first asked in 1965.

“The Obama Democrats assumed Americans would embrace big government policies. They seem to have proved the opposite.”

--Edward Snowden granted the Washington Post’s Barton Gellman an exclusive, lengthy interview in Moscow, where Snowden proclaimed:

“For me, in terms of personal satisfaction, the mission’s already accomplished. I already won. As soon as the journalists were able to work, everything that I had been trying to do was validated. Because, remember, I didn’t want to change society. I wanted to give society a chance to determine if it should change itself....

“All I wanted was for the public to be able to have a say in how they are governed,” he added. “That is a milestone we left a long time ago. Right now, all we are looking at are stretch goals.”

And Snowden said: “I am not trying to bring down the NSA, I am working to improve the NSA. I am still working for the NSA right now. They are the only ones who don’t realize it.”

For their part, the NSA told the Washington Post that “we have not found any evidence to support Mr. Snowden’s contention that he brought these matters to anyone’s attention,” as he claims.

Barton Gellman saw no signs of Russian authorities keeping an eye on him during their private interviews. “Snowden neither tried to communicate furtively nor asked that his visitor do so. He has had continuous Internet access and has talked to his attorneys and to journalists daily, from his first day in the transit lounge at Sheremetyevo airport.”

“I have no relationship with the Russian government,” he said. “I have not entered into any agreements with them.”

Meanwhile, the Director of National Intelligence, James Clapper, declassified several documents last weekend related to the practice of collecting bulk phone and Internet records. Clapper said in a statement that President George W. Bush first authorized the spying in October 2001, as part of the Terrorist Surveillance Program, weeks after 9/11.

“President Bush issued authorizations approximately every 30-60 days. Although the precise terms changed over time, each presidential authorization required the minimization of information collected concerning American citizens to the extent consistent with the effective accomplishment of the mission of detection and prevention of acts of terrorism within the United States. NSA also applied additional internal constraints on the presidentially-authorized activities.”

Approval for the bulk collection was eventually shifted to the Foreign Surveillance Intelligence Court, the secret court that considers government requests for electronic surveillance for intelligence-gathering purposes.

And on Friday, a federal district judge in Manhattan, William Pauley, upheld the constitutionality of the NSA’s massive collection program from telephone calls, sharply disagreeing with the earlier ruling by U.S. District Judge Leon. Pauley’s decision can be appealed.

--In a Wall Street Journal story by Julia Angwin, William Binney, creator of some of the computer code used by the National Security Agency to snoop on internet traffic, commented at a recent conference, “What (the NSA is doing) is making themselves dysfunctional by taking all this data in.”

Binney claims all the data they are taking in harms the agency’s ability to conduct legitimate surveillance.

But the NSA needs more space so you’ve seen the new storage center being built in Utah that will eventually be able to hold “100,000 times as much as the contents of printed materials in the Library of Congress, according to outside experts.” [Julia Angwin]

A presidential panel has recommended the NSA shut down its bulk collection of telephone-call records of all Americans because the panel concluded, the federal government can obtain the data querying phone companies.

Along with other recommendations, President Obama said the other day he would use his time on the beach to contemplate what he will accept and what he won’t.

--Last week I alluded to a provision in the $1 trillion Bipartisan Budget Act on Dec. 18 that reduces the annual cost-of-living adjustment, or COLA, for military pensions of retirees under age 62. They would get 1 percentage point below any increase in consumer prices. At age 62, they would then receive a one-time ‘catch-up,’ under which their retired pay would be restored to the level it would have been without the caps.

Editorial / Army Times

“Lawmakers are predictably – and appropriately – backtracking on a small but explosive provision in the recent budget deal that would roll back annual increases to military pension payments for working-age retirees.

“Under the logic in play, most retirees under 62 hold jobs in second careers and hardly will feel the effect of capping their yearly military retirement pay increases at 1 point below the annual cost-of-living adjustment.

“Yet troops, retirees and supporters immediately lashed out after news broke about the COLA reduction, projected to save the cash-strapped government $6 billion over 10 years.

“Shaving off that percentage point will mean a loss of tens of thousands of dollars over the lifetime of many military retirees’ pension payouts. But most complaints centered not on the personal financial hit, but on what was roundly excoriated as a ‘broken promise’ on a bedrock benefit of serving a military career....

“Outrage continued building as word spread that the provision did not even exempt wounded warriors who are medically retired from the military with less than 20 years of service.

“Sen. Patty Murray, D-Wash., who co-authored the Bipartisan Budget Act...called that omission ‘a technical error’ and vowed to fix it next year....

“After years of ignoring report after report about the ineffective way it develops and buys weapons systems, Congress must look to rein in the waste.

“In 2012, the Pentagon ran a collective $411 billion over initial budget estimates on its 85 major acquisition systems – enough to virtually wipe out sequestration for eight of its planned 10 years.

“Troops and retirees are keenly aware of the nation’s economic difficulties and willing to make sacrifices. But to be targeted like this feels unfair and arbitrary.”

Writing in Defense One, former assistant secretary of defense Lawrence Korb, a fellow with the Center for American Progress, argued that the plan does not “break faith with the vast majority,” namely because so few people actually serve 20 years in the military – only 17% of the force – and those who do typically go on to work at second careers.

“When working-age retirees reach the age of 62, their retired pay would be readjusted back to the full amount they would have gotten if they had received the full COLA each year. ...In other words, the COLA reduction is temporary, affecting only those who retire from the military but are still young enough to work,” Korb wrote.

“Even with the proposed slight adjustment in annual cost of living adjustments, military retirees are compensated generously.”

Editorial / Washington Post

“Of all the reactions to the bipartisan budget pact that passed Congress this week, none is less justifiable than the outrage of certain supposed Republican budget hawks at the plan’s miniscule trim to military retirement pay.

“Essentially, the bill would reduce the annual cost-of-living adjustment by a single percentage point a year on pensions for working-age retirees, up to the age of 62. For a man who enlisted at age 18 and retired as an Army sergeant first class at 38, lifetime retirement pay would decline from $1.734 million to $1.626 million, according to House Budget Committee staff. The cut would save $6 billion over 10 years, helping to pay for much-needed current missions. Yet GOP senators including Kelly Ayotte (N.H.), Jeff Sessions (Ala.) and Lindsey Graham (S.C.) lined up to denounce the plan; Mr. Graham said it ‘screws’ military retirees.

“Men and women who choose serving in uniform as a career deserve to be compensated in keeping with the sacrifices they and their families make. But the cost of health care and pensions for those who retire after 20 years – most of whom then go on to have lengthy civilian careers – is consuming a growing share of defense budget dollars. The tab for military pensions was $51.7 billion in 2012; it’s on course to hit $59 billion by 2022, even though the number of retirees will remain constant at roughly 2.3 million, according to official estimates....

“Actually, military retiree benefits need much greater reforms. Pensions are not even the biggest concern: that would be health care for retirees, both working-age and Medicare-eligible, and their families, which has been projected to account for nearly two-thirds of all Pentagon health spending by 2015....President Obama has proposed saving $12.8 billion over five years by gradually increasing the out-of-pocket contribution working-age retirees are expected to make, which would still leave them a far better deal than civilians with employer-paid insurance have. Congress shot the idea down like an enemy aircraft.”

--There was a rather startling local news story released conveniently on Christmas Eve. Incoming New York City mayor Bill de Blasio’s daughter, Chiara, who is 19, discussed her drug and alcohol abuse in a video.

This from the same family that masterfully used 17-year-old son Dante, the smiling kid with the big afro, as a campaign prop that turned what promised to be a tight race into a rout.

Mike Lupica / New York Daily News

“This...wasn’t as much about the bravery of de Blasio’s daughter, as much as it was de Blasio and his rather cynical handlers getting out in front of the young woman’s story. And the way the whole thing was handled wasn’t as much about her as it was about her father and political expediency.

“It is why it all coming about Chiara de Blasio on Christmas Eve, for a Christmas Day news cycle in the newspapers, ends up looking like old-time politicking, from a politician who acts as if everything he does is brand new....

“But what happens now with de Blasio and his daughter shows you what happens when you use your family as much as he did to help himself first win the Democratic nomination and then win the election the way he did, which means going away. Maybe de Blasio has finally figured out that he doesn’t get to decide what is public and what is private with that family....

“It comes out now, because de Blasio knew it would come out eventually, trying to stop a story like this is like trying to stop the ocean....

“You want nothing but the best for his children and especially the young woman who discusses an intensely private struggle in a public way on the day before Christmas. Chiara de Blasio spoke of how she hoped everybody would watch the video, because it speaks for itself. Her father spoke of ‘incredible wisdom for someone who’s only 19 years old.’

“Certainly that is what both of them, and the people who handle Bill de Blasio, want us to believe. But the idea that they released this during the holiday season because it would help others battling substance abuse during the holiday season is just another political fairy tale.”

--Mikhail Kalashnikov, the designer of the AK47 assault rifle, died at the age of 94 in Russia. He made little money from his gun, which became popular because it was cheap to manufacture, reliable and easy to maintain. He once said he would have been better off designing a lawn mower.

Kalashnikov also said in 2008, “It is painful for me to see when criminal elements of all kinds fire from my weapon.” [Tens of thousands attended his funeral.]

--For the record, hours after I posted last time, authorities arrested four men in connection with the fatal carjacking at the Mall at Short Hills here by my home.

So police issued some reminders for avoiding a similar fate.

“Walk with purpose. Always approach your car with your keys in hand.

“Pay attention to your surroundings, and be alert to nearby activity.

“Always check the back seat before opening your car.

“To avoid other thefts that sometimes follow carjackings, separate your car keys from your house and office keys. In addition, do not leave your registration, insurance information, or any information identifying your home or work address in your glove box or car interior. Always keep that information on your person.”

Aside from this fatal incident at such a high-profile mall, in nearby Newark and Irvington, there were a rash of murders Christmas Eve and Christmas Day. In Newark, a 13- and 15-year-old were killed and a 14-year-old paralyzed in one attack. Newark has had over 100 murders this year. It has a population of under 300,000. And in Irvington, three were killed at a Go-Go bar.

--The older you get, the best part of Christmas is Christmas Eve, when everyone you meet over the course of that day, including total strangers, says “Merry Christmas.” I was fortunate to spend both Christmas Eve and Christmas Day with family as we all still live close by. And I went to Mass Christmas Day for the first time in quite a while. Give Pope Francis a little credit on that score. [I normally go New Year’s Day....my own small tradition.]

Anyway, in a poll by Fairleigh Dickinson University PublicMind, 67% of Americans prefer to say Merry Christmas, while 18% pick Happy Holidays. 82% of Republicans prefer saying Merry Christmas, compared to 55% of Democrats.

--Lastly, you know of my fascination with space and so I note Peggy Noonan’s column in the Wall Street Journal, wherein she asked a cross-section of folks what was the best thing that happened this year, some breakthrough, some joy, some encouraging sign. Most had personal thoughts, such as the birth of a grandchild.

The comment I most liked, though, was from Journal columnist Mary Anastasia O’Grady, “who found herself thinking something wondrous that maybe didn’t get quite enough attention. ‘A spacecraft called Voyager I went beyond the solar system this year, marking a mind-boggling milestone in human progress.’”

Amen.
---

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

God bless America.
---

Gold closed at $1216
Oil $100.32

Returns for the week 12/23-12/27

Dow Jones +1.6% [16478]
S&P 500 +1.3% [1848]
S&P MidCap +1.3%
Russell 2000 +1.3%
Nasdaq +1.3% [4156]

Returns for the period 1/1/13-12/27/13

Dow Jones +25.7%
S&P 500 +29.1%
S&P MidCap +30.9%
Russell 2000 +36.7%
Nasdaq +37.7%

Bulls 59.6
Bears 14.1 [Source: Investors Intelligence...new low for bears since March 1987]

Happy New Year! Thank you for your support in 2013.

And Happy Birthday to our own Dr. Bortrum!

Next week...geopolitics and 2014.

Catch me on Twitter @stocksandnews

Brian Trumbore

 



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-12/28/2013-      
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Week in Review

12/28/2013

For the week 12/23-12/27

[Posted 12:00 AM ET]

Washington and Wall Street

A new AP/GfK-Times Square New Year’s Eve poll found 32% of Americans rate their own experience in 2013 more positively than negatively vs. 2012, while 20% say it was worse and 46% say the two years were really about the same.

But when it comes to the United States, 25% say 2013 was better than 2012, 25% said it was worse.

Thinking about the world at large, 30% say 2013 was worse than 2012, 20% say it was better. Those 20% must have their heads up their butt. You can certainly build a case that 2013 was better in Japan, but anywhere else? Anywhere in the Middle East?  China?  Russia? Maybe the same (Israel...and outside these regions, Australia), but nowhere near better.

Europe? In the U.K., I’d say yes. Nowhere else. The eurozone, for example, may have finally emerged from recession, ever so slightly, but the labor picture is not improved in the least.

Africa? Don’t waste my time with growth stories in obscure places there. [I’m getting a kick out of some saying Nigeria is booming. Be my guest. Go invest in a nation where the Islamists want nothing else but to kill Christians.]

South America? Ditto.

But back to our feelings about 2013 vs. 2012, it obviously wasn’t a good year for President Obama and in a Wall Street Journal op-ed, Republican strategist Karl Rove says Obama’s poll numbers, specifically his Gallup disapproval rating, will end higher than this week’s 53% come Christmas 2014. I disagree and said last week Obama’s poll numbers have bottomed. [Give me two points leeway on this. So, for example, the most recent CNN/ORC poll had Obama with just a 41% overall job approval rating. I’ll say it is solidly above this in 12 months and won’t fall in the interim more than another two points as the final bottom.]

I just think that Obama will benefit from an improving economy, which is the case, even if some Republicans for Nov. 2014 reasons don’t really want it to be. And as for ObamaCare, which I address more fully in a bit, the worst is over in terms of the next few news cycles. Yes, the number of enrollees will fall woefully short of projections, and there will be more stories of cancellations and insurance companies leaving the fold, but in terms of news that moves the electorate on a mass basis, there is nothing like a broken website to do so and it is slowly getting better (though remains terribly unsecure...as in thank god I don’t have to use it yet because I wouldn’t want to).

I’m talking about the kinds of stories that grab your attention. The launch of the website did that. But for the next few quarters I don’t think the negative stories being presented (by Fox) will carry anywhere near the same weight as we saw in October and November.

Come next fall, however, the news coverage will pick up again in a big way when insurance companies announce their premium increases for 2015, just in time for the mid-term elections.

But in coming months the better economic news will aid the president, especially since it’s clear Americans couldn’t care less about foreign policy issues that are a growing disaster. That day will come, however. It’s why I spend so much time on the geopolitical, because just as in the crashing website and its power to change sentiment, there are potential events, such as an ‘accident’ in the East China Sea causing a clash with China, or Iran eventually testing a nuclear device, that would change attitudes in a flash, to the detriment of the economy and Wall Street.

For now, though, enjoy the ride, as I believe the president will. In the very short term, though, we’ll see how the debt ceiling debate shapes up in Jan. and Feb., but that’s a discussion for when Congress returns.

Before I get to my market predictions for 2014, a few words on the minimal economic news for the week, as well as the holiday shopping season.

November figures on personal income, up 0.2%, were not good as it showed continued tepid wage growth, but consumer spending for the period was solid, up 0.5%, showing we were dipping into savings. When consumer spending is 70% of the economy this is important. Durable goods (big-ticket items) were up a better than expected 3.5% for November, while new-home sales for the month surprised to the upside vs. forecasts.

Mortgage applications, however, are down a whopping 63% from their May peak to a 13-year low, reflecting not just a cooling market but higher interest rates. Not coincidentally, mortgage rates bottomed in May on a 30-year fixed at 3.35%, as the benchmark 10-year Treasury was yielding 1.60%. This week a 30-year fixed mortgage was up to 4.48% and will rise higher still next week as the 10-year yield hit 3.00% for the first time since September. So I expect the housing data to get increasingly iffy going forward as it’s clear to me interest rates are heading higher still with an improving economy. The question is does the good (the improving economy) outweigh the bad (rising rates). For now it will. Later on it won’t, as I’ll discuss shortly.

As for the holiday shopping season, defined as November and December, there was a slew of data this week, with ShopperTrak talking of a 21% decline in foot traffic for brick-and-mortar stores for the week ending 12/22, with retail sales down 3% for the same period. ShopperTrak did say holiday sales for Nov. 1 to Dec. 22 were up 2%, close to its estimate of 2.4% for the entire two months. [ShopperTrak pegged sales last year at 3%.]

But the National Retail Federation maintains sales for November and December will rise 3.9% vs. 3.5% last year, while another analysis from Retail Metric said thus far home improvement and furnishing chains are up 7%, auto retailers up 6%, but department store chains down 1% for the season.

MasterCard Advisors SpendingPulse pegged retail sales at up 3.5% for 11/1-12/24, though holiday-related categories such as clothing and electronics were up just 2.3%.

As for online sales, we all know they are up substantially but I can’t trust any of the estimates I’ve seen thus far, though I have some data in the “Street Bytes” section.

Here’s what we do know. Discounts have been large and we are all curious to see just how negative an impact it will have on margins come earnings season, including for the online retailers offering free shipping, for example. It can’t be good.

As for the package delivery issue, more below but suffice it to say UPS has an image problem and Amazon is thinking more about drones...and alternative delivery sources.

Back to ObamaCare, we’ll soon find out how the yearend ‘crush’ truly panned out and if the insurance companies were overwhelmed and what percentage of people who think they signed up for coverage beginning Jan. 1 actually didn’t obtain same. Even with a late surge, national enrollment in private health plans will fall way short of the administration’s goal of 3 million by year end (the actual figure will probably be released around Jan. 15). Using the president’s numbers from his 12/20 press conference, we were around 1 million as of Dec. 20, including both federal and state-run exchanges. An additional 800,000 had been deemed eligible for Medicaid coverage through November.

For now, a Harris Interactive/HealthDay poll finds that 36% of all adults want a repeal of ObamaCare vs. 48% who support the Affordable Care Act, saying it either should be left as it stands or have some parts changed. 16% are undecided.

68% of Republicans call for repeal, 3/4s of Democrats support the law, while independents are split 41% for repeal, 46% supporting it.

Regardless, you can be sure the administration will be hammering away all year at how health-care inflation continues to fall (even as in some cases they will be shading the facts). Indeed, 2013 does mark three years in a row of sub-2 percent health-care inflation, according to the Department of Commerce’s GDP price indexes, and as Peter Coy of BloombergBusinessweek writes:

“The White House and Republicans predictably battled over who or what deserves credit. In September the nonpartisan actuaries of the Centers for Medicare and Medicaid Services cited the slow economy, ‘judicious’ consumers, high-deductible health plans, constraints on Medicare and Medicaid, and expiration of patents on some popular medications.”

And now 2013 and 2014...

While we still have two trading days left in the year, understand I am breaking up my 2014 outlook into two parts, the market and geopolitics. I’ll cover the foreign affairs front next time.

For now I was mercifully brief in my thoughts last year at this time concerning the market. Oh, I kept harping on the fact we aren’t addressing the long-term entitlement issue, but I didn’t foresee (nor did anyone else) the huge deficit reduction outlook from the Congressional Budget Office in May vs. their February forecast three months earlier. This was both good and bad. It gave Congress and the White House a further excuse not to take the tough steps today that would avert a serious crisis down the road, and, as the economy improves and receipts come in at a faster rate, they will have yet another reason to ignore the problem. But the deficit picture, while improving, will turn, and, let’s face it no one really has a firm idea on just how much damage will be done by ObamaCare. All we know is the cost will be far higher than what we were originally sold.

So last year at this time I said the Dow Jones and S&P 500 would finish 2013 flat and Nasdaq would rise 5%. At least I correctly said Nasdaq would outperform. I only missed about 30% of increased performance for all three. Of course if I allowed myself to change my stance at mid-year, or other times, I could massage things more but not moi! Nope. I stick the old neck out and let it lie there on the chopping block, come rain or snow, hoping someone will come along and at least cover my head. [For health purposes, you understand.] If I miss by a like amount in 2014, please just chop the head off.

But I got the Fed’s main decisions right, better than anyone, and this coming year there will be one primary topic of conversation. The yield on the 10-year Treasury.

The economy, after a down vs. third quarter performance for October thru December, will start off 2014 in fine fettle, we will continue to see solid job gains, the Fed will continue to slowly taper its bond-buying program down to zero by end of summer, and the stock market will, in fits and starts, keep heading higher. The ‘fits,’ however, will come about because of wild gyrations in the 10-year, like more than 2 or 3 days where the yield gyrates 20 basis points, a huge move, and we’ll be headed over 3.50%, which will certainly impact housing.

The 10-year will also go for a wild ride when we get consecutive data points, in one of many categories, that point to an inflation scare for the first time in years, and soon thereafter the 10-year will be over 4.00%.

But all the while the economy will be progressing, overall, Europe will have some decent data points in the first quarter, and Japan will weather an imminent bout of anti-Japanese fervor in China, as well as a tax hike.

Corporate America, assuaged to some extent by the bipartisan budget agreement, which won’t be trumped by any major debt ceiling issues, will increase capital spending for the first time in earnest in many a year, while the consumer, despite the increasingly tepid housing market, will feel better and profits will be solid.

I have never said in the past year during this recent leg of the rally off the March 2009 lows that the market, overall, is overvalued. I’ve been around a while, and I know the difference between today and 1999, when I was penning this column and poking fun at Wall Street’s bullish analysts.

That doesn’t mean the market is cheap, even if earnings pick up the first half of the year. I just know these things can run further and sentiment will be improving. [The bull/bear readings I note below each week, however, can’t get too much more bullish than they already are. I’m talking about the attitudes of Mr. and Mrs. Six-pack.]

But things are going to change in a big way after the very solid start to 2014 for reasons I’ll address next week. For the purposes of a market prediction, though, I’ll say the Dow and S&P finish down 2%, Nasdaq down 5%.  

Europe and Asia

There was virtually zero economic data this past week when it comes to Europe, but beginning Jan. 2, there will certainly be a slew of it, ditto Asia, particularly China. So I get a small break myself.

We did learn this week that in the U.K., home sales are up 24% over the past year, but the actual rate is far from the peak. That said, mortgage approvals are the highest since Sept. 2009. On the retail front, awful weather impacted Christmas sales though I’ve seen conflicting reports regarding Boxing Day (Dec. 26).

In China, the central bank infused cash to steady money markets, which have been convulsed of late, largely a seasonal issue involving “window dressing” where banks typically conserve cash at the end of the year to keep their balance sheets looking healthier, though this year authorities have been forcing banks to also hold more capital and conditions have tightened. So put it all together and the cash crunch was enough of a concern to get the government to warn the media to only report positive developments.

Separately, the government did estimate GDP would rise 7.6% for all of 2013, while a state council document listed among the looming challenges a worsening in pollution (sound familiar?) and social conflicts. 

In Japan, the Tokyo Nikkei average closed above 16000 for the first time since December 2007, finishing the week at 16178, up 56% on the year! The weaker yen continues to boost the earnings prospects for exporters, while Bank of Japan Gov. Kuroda said the economy is on a smooth recovery path.

The government is forecasting GDP will rise 1.4% for the fiscal year starting March 2014, slowing from an expected 2.6% rise in 2013, because of the looming sales tax (consumption/VAT) increase from 5% to 8% in April (and possibly to 10% the following year).

Finally, the government had a piece of good news on Friday in that wages for November were flat from a year earlier, halting a 17-month decline. Wages must rise to spur consumption and investment. It’s a start, particularly heading into the consumption tax hike. Consumer prices ex-food rose 1.2% in November from a year earlier, the fastest pace in five years as government policies to end its deflation problem seem to be taking hold. The central bank’s goal on this front, as it is in the U.S. and Europe, is 2%.

Street Bytes

--The Dow Jones and S&P 500 hit new highs on Thursday before backing off a fraction Friday. The Dow finished up 1.6% to 16478, while the S&P added 1.3% to 1841. Nasdaq also gained 1.3% to 4156. [As did the Russell 2000 and S&P MidCap.] Frankly, there is nothing better than Christmas and New Year’s falling on a Wednesday. You can take the two days before, or the two days after, though frankly you’re an idiot if you take Jan. 2 and 3 off. My rule was never take a day off until May. It’s about job security. [Actually, these days don’t take a day off until the Friday after Thanksgiving. And be very snarky about your fellow workers who take time off in the summer.]

--U.S. Street Bytes

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

The 10-year hit 3% for the first time since September, up from a May low of 1.60%. At the end of 2012, the yield stood at 1.79%.

--Shares in Twitter continued to soar amid optimism concerning the company’s advertising products, as well as short-sellers getting squeezed. The company’s shares were first priced at $26 and closed the initial day of trading, Nov. 7, at $44.90. Yet at Thursday’s close, Twitter had a market capitalization of $38.1 billion compared with Time Warner Cable’s $37.6 billion. But then Friday the stock cratered $10 to $63.00. 

Twitter is retargeting its ad initiative with more advertising tailored to big brands’ interests, including tools for conversion tracking for marketers to understand their return from ad spending.

But as for the company’s profitability, don’t look for black figures on the bottom line for quite some time to come.

--UPS’ image has taken a major hit this holiday season as thousands of packages were not delivered as promised, on time, ahead of Christmas. The world’s largest package delivery company was simply overwhelmed by an unexpected crush as shopping online surged. The air hub in Louisville was the primary source of problems as the company admitted some packages promised before Christmas wouldn’t arrive until Friday.

UPS had expected demand to increase 8% this season and it turned out to be far greater than that, plus bad weather in many parts of the country didn’t help.

Now the big concern for UPS is how retailers that use them will react, particularly Amazon, which sent an email to affected customers offering shipping refunds and $20 gift cards to compensate. Amazon also said it was “reviewing the performance of the delivery carriers.”

Meanwhile, the U.S. Postal Service, or FedEx, didn’t appear to have the same issues.

A National Retail Federation survey found that about a third of retail companies offered free or upgraded shipping promotions that gave their customers until Sat., Dec. 21, to order for Christmas delivery, and 17% pushed it to Monday.

The retailers are saying, hey, we met our obligations to get the items to the shippers on time. Nordstrom was among those saying it would reconsider its business with UPS.

--Separately, Amazon.com said it sold almost 37 million items on Cyber Monday, a pace of 426 a second. The company also reported that 50% of its customers used mobile devices to do their holiday shopping. And it signed up more than 1 million new customers during the third week of December for its Prime service, leaving it with “tens of millions” of customers at this level. [But they lose money on a lot of these folks.]

--The issues with UPS helped take the spotlight off Target, which now faces a slew of lawsuits over the security breach that saw details of more than 40 million customer cards stolen. One security researcher, Brian Krebs, said there was evidence card numbers stolen in the Target attack had shown up on underground markets where such details are traded.

Late Friday, of course (always release bad news on Friday), Target said encrypted debit card PIN data was indeed among the information accessed by dirtballs during the peak shopping period. The company is trying to convince customers there is still no need to worry – saying the ‘key’ necessary to decrypt the data has never existed within the Target system – but are you going to believe these guys?  Hell no.

--Apple finally struck a long-awaited distribution deal with China Mobile, with Apple being able to sell the iPhone 5s and 5c as of Jan. 17 in China Mobile’s retail network for the first time. CM is the world’s largest mobile carrier with more than 750 million customers.

--Saudi Oil Minister Ali Al-Naimi said at a meeting of OPEC ministers that the cartel needn’t cut production next year to make room for additional supplies from the likes of Iran and U.S. shale oil. Kuwait’s oil minister said, “don’t make shale oil a scarecrow for OPEC and other producers.” [Bloomberg]

In Libya, rebel groups have kept oil export ports closed and the government said it would force them to reopen the facilities. Good luck.

--A Chinese government think tank says the urbanization rate is expected to hit 60% by 2018, two years ahead of previous official expectations. Last year China crossed the 50% mark for the first time. Leaders are pushing urbanization to fuel growth. 25 million a year are expected to move to cities.

--Despite improvements in the Irish job market, there has been no let-up in emigration as 250 people a day leave the country, with a surge in those heading to Canada. Official Central Statistics Office data show 89,000 left in the 12 months to April 2013. [Irish Independent]

And despite the emigration, the housing industry in Ireland is facing a shortfall of up to 16,000 homes next year that could lead to home price spikes of 20% or more, especially in parts of Dublin.

--Research by the Employee Benefit Research Institute shows that the share of workers saving for retirement in the U.S. has declined to 57% today from 64% in 2008 – and that the share of workers who have more than $25,000 set aside has declined over the same period to 43% from 51%. [Gerald Seib / Wall Street Journal]

--Among the ‘statistics of 2013’ cited by the Washington Post’s Robert Samuelson... A low-end iPhone has 240,000 times the memory of the computers on Voyager 1, which is now nearly 12 billion miles from Earth. [New York Times]

A leaf blower with a two-stroke engine emits 299 times the hydrocarbons of a Ford Raptor pickup truck. [Washington Post]

And 72% of online Americans use social networking sites, up from 8% in 2005. [Pew Internet & American Life Project]

--With the recent storms in Europe, France has been a beneficiary with heavy snowfalls in the Alps. I forgot that France is the world’s biggest ski destination with 57.9 million days of skiing sold in the 2012-13 season, ahead of the U.S. with 56.9 million days and Austria with 54.2 million. [Rudy Ruitenberg / Bloomberg]

--This is scary. As reported by BBC News’ Leo Kelion, there is a virulent form of ransomware that has infected about a quarter of a million Windows computers, with the U.S. and U.K. the most affected.

This particular form is particularly problematic because it makes files inaccessible.

Bottom line, it appears to be spread via spam emails that ask the user to click on a Zip-archived extension identified as being a customer complaint about the recipient’s organization, or a problem clearing a check.

--I will see “The Wolf of Wall Street” at some point. I got a kick out of the factoid that the real-life crook behind the story, Jordan Belfort, had his first official day on Wall Street as a stock broker’s assistant on Black Monday, the market crash of 1987. A good friend of mine, David P., also started that day and he reminisced this week that his pitch to open accounts involved an MFS closed-end fund yielding 9%. Yup, different interest rate environment back then, among other things.

--The cost of a first-class stamp is going up from 46 to 49 cents, starting Jan. 26. So buy a ton of Forever stamps today, sports fans! Think of the savings! [250 Forever stamps purchased now will eventually save you $7.50, the cost of a six-pack of many premium beers. 300 for Shiner Bock (the domestic premium) or Stella in my neighborhood.]

Foreign Affairs

Turkey: The widening corruption probe that threatens the government of Prime Minister Recep Tayyip Erdogan is now targeting his son. The probe has led to a major Cabinet reshuffle after three ministers resigned. The three stepped down after learning their sons were among dozens detained on Dec. 17 as part of an investigation into procurement practices, gold smuggling and money laundering. 

Erdogan is facing the biggest crisis of his 11 years in power and responded on Wednesday by replacing half his 20-member Cabinet with loyalists, while investors have been fleeing and dumping Turkish bonds, helping to threaten the country’s economic turnaround. The currency, the lira, weakened to a record low against the dollar. The yield on a two-year bond is 10%, up nearly 4% this year.

The prime minister is calling the probe an attempted coup, as well as blaming Western interests. “They want to reach me,” he said Thursday. “If they try and aim at Tayyip Erdogan through this, they will (be left empty-handed).” The prosecutor who initiated the investigation into his son was removed from his post after the announcement. Erdogan has also begun a purge of the country’s police force, which prosecutors say is severely impeding their investigation as the police loyal to Erdogan refuse to press ahead.

The first allegations of corruption emerged last week in a police sweep on the offices of businessmen with close ties to Erdogan. In one instance, shoe boxes allegedly containing $4.5 million were found in the home of the head of a state bank, police said, along with bank notes in the bedroom of a government minister’s son. [London Times]

Further allegations include bribes paid to assist an al-Qaeda suspect.

The whole investigation is seen as a power struggle between Erdogan’s AK Party (AKP) and supporters of the cleric Fethullah Gulen, now in self-imposed exile in Pennsylvania. The two were once close friends but the relationship grew bitter as Erdogan became more authoritarian and began closing down private schools run by Gulen’s organization, Hizmet. [Los Angeles Times]

Key local elections are being held in three months.

Iran: Talks between Iran and the P5+1 paused for the Christmas holiday and may resume before the New Year as discussions continue on how to implement last month’s interim accord on Iran’s nuclear program. National Security Adviser Susan Rice told “60 Minutes” last Sunday, “We will not construct a deal or accept a deal in which we cannot verify exactly what (the Iranians) are doing.”:

Rice said that if international authorities, such as the International Atomic Energy Agency, catch the Iranians violating a future deal, “we will ensure that the pressure is reimposed on them.”

But in some respects it’s too late. Western companies are rushing to reestablish relationships with Tehran and I believe Iran’s foreign minister, who recently told students the sanctions are already crumbling.

It’s why clearer heads, such as in the case of Democratic Senators Charles Schumer (N.Y.) and Robert Menendez (N.J.) have proposed legislation that would add new sanctions on Iran if it fails to cooperate in coming negotiations, while the White House says, just give us more time and everything will be alright.

For their part, Iranian lawmakers have threatened retaliation if the Senate effort, which could come to a head as soon it returns from recess, succeeds, which would likely mean attempting to overturn a presidential veto.

Syria: Pope Francis used his first Christmas Day message to urge access for humanitarian aid in Syria.

Editorial / Washington Post

“It was astonishing to hear President Obama, in the preamble to his end-of-year news conference last week, cite Syria as one of his foreign policy successes. [Ed. See my “Hot Spots” link.]

“ ‘(Just) as we’re strengthening our position here at home, we’re also standing up for our interests around the world,’ Mr. Obama said. ‘This year we’ve demonstrated that with clear-eyed, principled diplomacy, we can pursue new paths to a world that’s more secure, a future where Iran does not build a nuclear weapon, a future where Syria’s chemical weapons stockpiles are destroyed.’

“Unfortunately, the White House press corps was not as struck by this boast as were we, and there were no follow-up questions. Here’s what we would have asked:

“ ‘Mr. President, Syria is in the process of giving up its chemical weapons, as you say. At the same time, it’s been more than two years since you both predicted and demanded the resignation of Syria’s dictator Bashar al-Assad. Yet he has strengthened his position and continues to commit war crimes.

“ ‘His forces are besieging hundreds of thousands of people, deliberately starving them to death, according to your secretary of state. His helicopters are dropping ‘barrel bombs’ on apartment buildings in Aleppo, bombs ‘typically packed with screws, scrap metal, old car parts, blades and explosives,’ as one activist told the Wall Street Journal. More than 9 million Syrians – better than a third of the country – have been driven from their homes. Is this record consistent with ‘standing up for our interests around the world’?’”

Lebanon: A powerful car bomb in the central business district of Beirut on Friday killed six, including a senior aide to former Lebanese Prime Minister Saad Hariri. Mohammed Chatah, his driver, and four others, were killed in the explosion that wounded at least 70.

Chatah, a former ambassador to the U.S., was one of the closest aides to former Prime Minister Rafik Hariri, who was killed in a truck bombing in Beirut in 2005, not far from Friday’s explosion. [Ed. I went to the 2005 site, a month later, and know the second.] Chatah then became finance minister when Hariri’s son, Saad, took over the premiership.

Prior to Friday’s bombing, there had been a series of bombings and attacks near the Syrian border and in the Bekaa Valley, targeting both Hizbullah and the Lebanese Army.

Michael Young / Daily Star...prior to Friday’s attack...

“President Bashar Assad must be delighted. Reports this week indicate that the Syrian National Coalition has been told by Western governments that the Montreux conference in January should not lead to the removal of the Syrian president, for fear that jihadists would exploit the ensuing vacuum. The SNC had said that it would not attend the conference unless it led to a transition away from Assad, so what this will mean for its participation remains unclear.

“Ultimately the political mess in Syria benefits both Assad and al-Qaeda in the medium term. The paradox is that Hizbullah, the Assad regime and the United States are all, implicitly, on the same side – which is precisely the conclusion the Assad regime wanted everyone to reach when it allowed the jihadists to thrive.

“The only problem is that Hizbullah now finds itself transformed into cannon fodder in a battle against al-Qaeda, when its initial goal was merely to defend Assad rule. Sayyed Hassan Nasrallah has claimed that his party’s aim is to fight the ‘takfiris.’ However, far more effective forces than his have failed to triumph over al-Qaeda. The only success came when the United States collaborated with the Sunni Awakening movement in Iraq to push the jihadists onto the defensive.

“Hizbullah doesn’t have that capacity. The party has imported the Syrian war to Lebanon, even if it is not the only one to do so. Its hubris has been a curse to the country, and will remain so for some time.”

Egypt: Security authorities launched a sweep of arrests of Muslim Brotherhood members on Thursday, threatening the death penalty for those in leadership, this after the government officially declared the Brotherhood a terrorist organization in response to a suicide attack that killed 16 people in the Nile Delta, accusing them of carrying it out.

The Brotherhood’s followers are fighting back, with a bomb attack in a busy intersection in Cairo being blamed on Islamic militants (no one was killed) but it sent a signal. The Brotherhood has vowed to “qualitatively” escalate its protests against the military-backed interim government.

So on Friday, three people were killed in fresh clashes between the Brotherhood and police in three different locations, while some 265 Brotherhood supporters have been arrested, according to the interior ministry.

Egypt faces a potential surge in violence by al-Qaeda inspired militants ahead of a key Jan. 14-15 referendum on a revised constitution.

Japan / China / South Korea: Japanese Prime Minister Shinzo Abe did exactly what the United States, China and South Korea warned him not to do; visit a shrine linked to the country’s militarist past.

Abe visited the Yasukuni Shrine on Thursday, triggering strong criticism from Beijing and Seoul, and disapproval from Washington.

Yasukuni, in honoring Japan’s war dead, also honors some convicted World War II war criminals.

The U.S. Embassy in Tokyo said in a statement, “The United States is disappointed that Japan’s leadership has taken an action that will exacerbate tensions with Japan’s neighbors.”

Abe, who regretted not visiting the shrine during his first term as prime minister from 2006 to 2007, said, “I offered my respects to those who lost their precious lives for our country, and prayed that their souls may rest in peace. I have no intention at all of hurting the feelings of the Chinese or the South Korean people.”

China’s foreign minister said Abe’s visit glosses over Japan’s militaristic past. “Under these conditions, not only does the Japanese leader not show restraint, but instead makes things worse by manufacturing another incident over history. Japan must bear all the consequences arising from this.”

Separately, a foreign ministry spokesman said Abe’s visit “brought a serious political hindrance to improvement and development of bilateral relations.”

And official Chinese media warned China will become a “paper tiger” if countermeasures against Japan are not taken, “excessive” counter-measures in one editorial by the Global Times.

‘People are getting tired of such futile ‘strong condemnations’...

“China needs to take appropriate, even slightly excessive countermeasures” or else “be seen as a ‘paper tiger,’....

“In the eyes of China, Abe, behaving like a political villain, is much like the terrorists and fascists on the commonly seen blacklists.”

A South Korean spokesman said, “Our government cannot but deplore and express anger about (Abe’s) visit.”

A Seoul official told the Washington Post, “I don’t understand why he paid the visit. It casts doubt on the trust and sincerity of the Japanese government.”

What is so idiotic about Abe’s move is economic relations between China and Japan were improving despite the controversy surrounding the territorial dispute in the East China Sea, but now both China and South Korea will be forced to respond.

Abe has yet to visit the two, while paying his personal respects to all the others in the Association of Southeast Asian Nations (Asean).

Editorial / Wall Street Journal

“Mr. Abe’s visit (the first by a sitting prime minister since 2006) is a gift to Chinese leaders who like to use the supposed specter of Japanese military resurgence as an excuse to expand their own power. Internationally, Beijing is aggressively threatening Japanese control of territory in the East China Sea while protesting Japanese plans to increase defense spending by a tiny amount compared with China’s own expenditures. At home, Beijing stokes anti-Japanese nationalism to buttress the legitimacy of its one-party state...

“In days ahead, watch for riots and boycotts against Japanese-owned businesses in China, often with tacit government support....

“South Korea is a different case – a fellow liberal democracy that will likely demonstrate its bitterness toward Japan in diplomatic iciness more than lawless rioting. But the consequences of such diplomatic difficulty are enormous when China’s assertiveness makes regional cooperation imperative, especially among wealthy U.S. allies with the most potential to deter Chinese hegemony.

“This is crucial context to the Yasukuni story. It is troubling enough that some senior Japanese officials persist – due to personal belief, political pandering or both – in whitewashing the truth about chemical weapons, sex slavery and other wartime atrocities. But Japan’s offenses against truth become strategic liabilities when they hurt the ability of like-minded states to promote a peaceful, liberal regional order.

“Mr. Abe, who is generally clear-eyed about the dangers of an authoritarian China, may bear this in mind when Tokyo inevitably considers its next proposal for a new, secular war memorial untainted by the darker details of Yasukuni.”

Thailand: Street protests continued, killing one police officer and injuring 100 on Thursday as the election commission called for delaying upcoming polls due to the deteriorating security situation. The government of Prime Minister Yingluck Shinawatra wants the February 2 polls to take place as scheduled, expecting to win handily and earn a new mandate. The violence, though, could force her to take a tougher stand, which would only encourage further demonstrations.

The government says the Feb. 2 date is firm, part of a previous agreement that dissolved parliament.

China: Pollution continues to be a huge issue. Shanghai once again hit dangerous levels and the government warned children and the elderly to stay indoors. Shanghai was long thought to have cleaner air than other Chinese cities, particularly Beijing, but the past few months have seen it hit as hard as any and this obviously threatens to undermine plans to attract foreign investment and multinational firms. As I keep hammering home, if you’re an American businessman, for example, why would you accept a position there (unless your boss was holding a gun to your head)?

On the issue of the power of Premier Li Keqiang, historically the premier has had control of the economy, but, as has been seen early on in the first year of President Xi Jinping’s tenure, Xi is instead assuming primary oversight in this realm, including briefing foreign leaders on the topic, not Li, as reported by the Wall Street Journal last weekend. [I did write of this months ago.]

So Xi has consolidated his control over the Party, the military and now the economy. But the Journal hastens to note, there doesn’t appear to be any discord between the two.

[I’m headed to the region in four weeks.]

North Korea: Various reports, including from the New York Times, say that Kim Jong-un and his uncle Jang Song-thaek, fought over control of the nation’s lucrative shellfish exports, culminating in a firefight between their forces in recent months.

Kim apparently ordered Jang to give up control of seafood farms previously run by the military, but the uncle refused.

Most of the goods were exported to China, a country with whom Jang had deep ties.

Kim became “enraged” when he saw his troops were underfed, due in part to Jang controlling the profits. Kim then apparently sent 100 troops to the seafood farms and his troops were “badly” defeated by Jang’s loyalists. That was the last straw for Kim. [South China Morning Post]

Separately, the Daily Telegraph reported more than a hundred of Jang’s relations have been rounded up and sent to prison camps. Apparently, Jang’s widow, a blood relation to Kim, has thus far been spared punishment.

As for Dennis Rodman’s latest visit to Pyongyang, his “awesome” friend, Kim, dissed him. Rodman said “I am not worried about it. I’ll see him again.”

Ukraine: There has been relative calm this week. It won’t remain so for long.

Russia: The Winter Olympic Games open in Sochi on Feb. 7 and the main stadium hosting the opening and closing ceremonies is still not open.

Meanwhile, the temperature in Moscow on Christmas Day was the warmest since 1910, 38 F.

And regarding Mikhail Khodorkovsky, he requested a three-month visa in Switzerland, where he had business interests before his arrest, and it’s where his sons go to school.

In a press conference in Berlin, following his release from a decade in prison, Khodorkovsky thanked German Chancellor Angela Merkel, who apparently played a role in convincing President Vladimir Putin to make the move.

Khodorkovsky also told reporters “the struggle for power is not for me,” but made clear he would put pressure on Putin and urged world leaders to do the same.

“We need to work further so that there would be no more political prisoners left in Russia and other countries. I am going to do my utmost in this regard.”

Putin also released two Pussy Riot members from prison on Monday, but both derided the move as a PR stunt ahead of the Olympics.

As David M. Herszenhorn and Steven Lee Myers of the New York Times wrote in a piece on Putin, the freeing of Khodorkovsky “capped a remarkable string of single-handed decisions of late.”

The $15 billion deal with Ukraine undercutting the West, the passage of the amnesty bill that could free thousands of prisoners, the pardoning of Khodorkovsky, the takeover of the semi-independent state news agency (replaced by a Putin loyalist), the granting of temporary asylum to Edward Snowden...but all these moves carry big risks, especially in the case of Khodorkovsky and Ukraine could easily backfire.

South Sudan: More than 1,000 people have been killed and 60,000 civilians are gathering in U.N. peacekeeping compounds in an attempt to escape a tribal civil war spreading across the country. The rebels have seized the oil fields (most of which goes to China, by the way), which makes an armed intervention from Sudan to the north more likely.

But on Friday, the government apparently agreed to an immediate end to fighting with rebels but as I go to post there is no confirmation of this, nor what the rebel stance will be.

Central African Republic: On Thursday, 44 bodies were recovered by the Red Cross from the streets of the capital, Bangui, as fighting between Christians and Muslims continues. Six Chadian peacekeepers were also killed, while a mass grave of 30 bodies was uncovered, many of them showing signs of torture. France has deployed a 1,600-strong peacekeeping force in its former colony under a U.N. mandate to protect civilians. [Vive la France!]

Benny Avni / New York Post

“For the past few Christmases, this column has shined a light on the horrific plight of Christian communities across the Middle East, Africa and elsewhere. This year, a Christian majority in a small African nation and Muslims there are waging brutal attacks on each other – but it’s all being fanned by Islamist fanatics from outside the borders.

“The killing field in question is the Central African Republic, where a year-long civil war has taken a monstrous toll. This month alone, it’s exacted hundreds of deaths. Tens of thousands are being made homeless. Maiming by machete, rape and beatings are routine. There’s no end in sight....

“To counter Muslim atrocities, Christians formed their own brutal militias... They, too, have inflicted unmentionable pain in mosques and on randomly selected Muslim families.

“The unprecedented atrocities, feelings of discrimination and victimhood and religious zealotry make for a ripe environment for Islamist outsiders that thrive on chaos and religious enmity.”

But once again, despite the pleas of America’s ambassador to the United Nations, President Obama is content to lead from behind.

Benny Avni:

“True, we can’t expect an administration that has all but ignored a war in the heart of the Middle East, that has killed at least 120,000 Syrians and counting, to experience a sudden awakening over a religious flare-up in some obscure African country. But think of it this way: If Boko Haram and fellow Islamist zealots win the war, the CAR could become their next base for global terror.

“Then there’s the Islamist government of Sudan, which might learn from the use of anti-Christian fervor in the CAR and use similar tactics to ransack its breakaway neighbor, South Sudan. For now, the budding civil war in South Sudan, the world’s newest country, has little to do with religion. But Khartoum would love nothing more than to reincorporate its oil-rich neighbor, and since South Sudan is mostly Christian, why not use religious hatred to help in that effort?

“Anti-Christian zealotry is a useful tool for Africa’s Islamists, who are on the march. But preventing the spread of religious-fueled wars is an American interest – not just Christmas time, but always.”

On the same general topic...Michael Gerson / Washington Post

“In some parts of the world, Herod’s massacre of the innocents is a living tradition. On Christmas Day in Iraq, 37 people were killed in bomb attacks in Christian districts of Baghdad. Radical Islamists mark – and stain – the season with brutality and intolerance.

“The violence, of course, is not restricted by the calendar. In recent months, we’ve seen Coptic Christians gunned down in Cairo and churches burned. Thousands of Syrian Christians have fled to Turkey....

“ ‘We won’t resign ourselves,’ says Pope Francis, ‘to a Middle East without Christians.’

“The most passionate advocate has been Prince Charles – an often underestimated, consistently thoughtful figure. ‘For 20 years,’ he said in a recent speech, ‘I have tried to build bridges between Islam and Christianity and to dispel ignorance and misunderstanding. The point though, surely, is that we have now reached a crisis where the bridges are rapidly being deliberately destroyed by those with a vested interest in doing so.’”

[Regarding Iraq, there was also an awful bomb attack that killed 15 officers and soldiers taking part in an operation against al-Qaeda linked militants, one of the victims being the commander of an Iraqi army division. It was unclear whether there were suicide bombers or the building being used for a meeting had been booby-trapped.]

Random Musings

--I posted my last column late Friday night and wrote the following:

“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.”

Later on I wrote of how the selection impacted next fall’s Senate races:

“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.”

48 hours later, the Wall Street Journal opined for its Monday print edition.

“How worried is President Obama about losing the Senate next year? Worried enough that he is willing to maneuver Montana Democrat Max Baucus out of his seat prematurely to become Ambassador to China and take with him any chance of tax reform in this Congress.

“On Friday the White House said it will nominate Mr. Baucus, who isn’t seeking re-election in November, to be the U.S. envoy to Beijing.... We don’t begrudge his chance at this late-career opportunity....

“But none of that reduces the political calculations behind the move....

“Montana’s Democratic Governor Steve Bullock will be able to nominate a successor to serve through the next election, and the expectation is he’ll nominate his Lieutenant Governor John Walsh....

“The China gambit means that tax reform is almost surely dead for this Congress. Granted its prospects were already faltering, but as Senate Finance Chairman was working with House Ways and Means Chairman Dave Camp on a bipartisan way forward. That may be one reason the White House and Senate Majority Leader Harry Reid preferred to see Mr. Baucus relocated across the Pacific. The evidence is building that they plan to run a populist, class-war campaign in 2014 to change the subject from ObamaCare, and tax reform doesn’t fit that name.”

--Editorial / USA TODAY

“To look at the political scene these days is to see incessant squabbles, partisan gamesmanship and ultimatums that don’t even rise to the level of small-mindedness. Members of Congress and many state legislators spend their days in pointless trench warfare, apparently unaware that the only thing they are accomplishing is undermining the public’s faith. They are egged on by special interests, purity enforcement groups, and talk radio and cable TV hosts....

“In the Christmas spirit of reflection, we suggest that those in and around politics look at themselves and ask why they are held in such low esteem. What they find is something akin to what Francis saw when he became pope – an institution failing at its core mission because it is bogged down in the trivial.

“For government leaders, their core mission should be a patriotic one, to make the USA a better place, to lay the groundwork for peace and prosperity, to compromise without giving up core principles. Difficult tasks, to be sure, it’s so much easier, after all, to fight about Duck Dynasty.

“The problem is not that Republicans and Democrats are gridlocked over different approaches to accomplishing their core mission. It is that they have become so engaged in partisanship, so invested in the culture wars, that confrontation has supplanted all else to become the de facto mission.

“Sometimes it takes someone new to look around and come to the obvious conclusion that an approach isn’t working. Pope Francis has done that for the Catholic Church. And maybe he could help show the way for other struggling institutions as well.”

--Michael Barone / New York Post:

“As the fifth year of the Obama presidency draws to a close, it may be time to examine the unspoken but powerful assumption behind the policies of the president and his party.

“That is the assumption that in times of economic distress Americans would be, more than usual, supportive of or amenable to Big Government programs.

“The assumption was widely shared, and not just by Democrats. And it has pretty well been disproven, insofar as any abstract proposition can be disproven, in the five years of the Obama presidency...

“Gallup reports that 72% of Americans see big government, not big business or big labor, as the biggest threat to the nation’s future – the highest number since the question was first asked in 1965.

“The Obama Democrats assumed Americans would embrace big government policies. They seem to have proved the opposite.”

--Edward Snowden granted the Washington Post’s Barton Gellman an exclusive, lengthy interview in Moscow, where Snowden proclaimed:

“For me, in terms of personal satisfaction, the mission’s already accomplished. I already won. As soon as the journalists were able to work, everything that I had been trying to do was validated. Because, remember, I didn’t want to change society. I wanted to give society a chance to determine if it should change itself....

“All I wanted was for the public to be able to have a say in how they are governed,” he added. “That is a milestone we left a long time ago. Right now, all we are looking at are stretch goals.”

And Snowden said: “I am not trying to bring down the NSA, I am working to improve the NSA. I am still working for the NSA right now. They are the only ones who don’t realize it.”

For their part, the NSA told the Washington Post that “we have not found any evidence to support Mr. Snowden’s contention that he brought these matters to anyone’s attention,” as he claims.

Barton Gellman saw no signs of Russian authorities keeping an eye on him during their private interviews. “Snowden neither tried to communicate furtively nor asked that his visitor do so. He has had continuous Internet access and has talked to his attorneys and to journalists daily, from his first day in the transit lounge at Sheremetyevo airport.”

“I have no relationship with the Russian government,” he said. “I have not entered into any agreements with them.”

Meanwhile, the Director of National Intelligence, James Clapper, declassified several documents last weekend related to the practice of collecting bulk phone and Internet records. Clapper said in a statement that President George W. Bush first authorized the spying in October 2001, as part of the Terrorist Surveillance Program, weeks after 9/11.

“President Bush issued authorizations approximately every 30-60 days. Although the precise terms changed over time, each presidential authorization required the minimization of information collected concerning American citizens to the extent consistent with the effective accomplishment of the mission of detection and prevention of acts of terrorism within the United States. NSA also applied additional internal constraints on the presidentially-authorized activities.”

Approval for the bulk collection was eventually shifted to the Foreign Surveillance Intelligence Court, the secret court that considers government requests for electronic surveillance for intelligence-gathering purposes.

And on Friday, a federal district judge in Manhattan, William Pauley, upheld the constitutionality of the NSA’s massive collection program from telephone calls, sharply disagreeing with the earlier ruling by U.S. District Judge Leon. Pauley’s decision can be appealed.

--In a Wall Street Journal story by Julia Angwin, William Binney, creator of some of the computer code used by the National Security Agency to snoop on internet traffic, commented at a recent conference, “What (the NSA is doing) is making themselves dysfunctional by taking all this data in.”

Binney claims all the data they are taking in harms the agency’s ability to conduct legitimate surveillance.

But the NSA needs more space so you’ve seen the new storage center being built in Utah that will eventually be able to hold “100,000 times as much as the contents of printed materials in the Library of Congress, according to outside experts.” [Julia Angwin]

A presidential panel has recommended the NSA shut down its bulk collection of telephone-call records of all Americans because the panel concluded, the federal government can obtain the data querying phone companies.

Along with other recommendations, President Obama said the other day he would use his time on the beach to contemplate what he will accept and what he won’t.

--Last week I alluded to a provision in the $1 trillion Bipartisan Budget Act on Dec. 18 that reduces the annual cost-of-living adjustment, or COLA, for military pensions of retirees under age 62. They would get 1 percentage point below any increase in consumer prices. At age 62, they would then receive a one-time ‘catch-up,’ under which their retired pay would be restored to the level it would have been without the caps.

Editorial / Army Times

“Lawmakers are predictably – and appropriately – backtracking on a small but explosive provision in the recent budget deal that would roll back annual increases to military pension payments for working-age retirees.

“Under the logic in play, most retirees under 62 hold jobs in second careers and hardly will feel the effect of capping their yearly military retirement pay increases at 1 point below the annual cost-of-living adjustment.

“Yet troops, retirees and supporters immediately lashed out after news broke about the COLA reduction, projected to save the cash-strapped government $6 billion over 10 years.

“Shaving off that percentage point will mean a loss of tens of thousands of dollars over the lifetime of many military retirees’ pension payouts. But most complaints centered not on the personal financial hit, but on what was roundly excoriated as a ‘broken promise’ on a bedrock benefit of serving a military career....

“Outrage continued building as word spread that the provision did not even exempt wounded warriors who are medically retired from the military with less than 20 years of service.

“Sen. Patty Murray, D-Wash., who co-authored the Bipartisan Budget Act...called that omission ‘a technical error’ and vowed to fix it next year....

“After years of ignoring report after report about the ineffective way it develops and buys weapons systems, Congress must look to rein in the waste.

“In 2012, the Pentagon ran a collective $411 billion over initial budget estimates on its 85 major acquisition systems – enough to virtually wipe out sequestration for eight of its planned 10 years.

“Troops and retirees are keenly aware of the nation’s economic difficulties and willing to make sacrifices. But to be targeted like this feels unfair and arbitrary.”

Writing in Defense One, former assistant secretary of defense Lawrence Korb, a fellow with the Center for American Progress, argued that the plan does not “break faith with the vast majority,” namely because so few people actually serve 20 years in the military – only 17% of the force – and those who do typically go on to work at second careers.

“When working-age retirees reach the age of 62, their retired pay would be readjusted back to the full amount they would have gotten if they had received the full COLA each year. ...In other words, the COLA reduction is temporary, affecting only those who retire from the military but are still young enough to work,” Korb wrote.

“Even with the proposed slight adjustment in annual cost of living adjustments, military retirees are compensated generously.”

Editorial / Washington Post

“Of all the reactions to the bipartisan budget pact that passed Congress this week, none is less justifiable than the outrage of certain supposed Republican budget hawks at the plan’s miniscule trim to military retirement pay.

“Essentially, the bill would reduce the annual cost-of-living adjustment by a single percentage point a year on pensions for working-age retirees, up to the age of 62. For a man who enlisted at age 18 and retired as an Army sergeant first class at 38, lifetime retirement pay would decline from $1.734 million to $1.626 million, according to House Budget Committee staff. The cut would save $6 billion over 10 years, helping to pay for much-needed current missions. Yet GOP senators including Kelly Ayotte (N.H.), Jeff Sessions (Ala.) and Lindsey Graham (S.C.) lined up to denounce the plan; Mr. Graham said it ‘screws’ military retirees.

“Men and women who choose serving in uniform as a career deserve to be compensated in keeping with the sacrifices they and their families make. But the cost of health care and pensions for those who retire after 20 years – most of whom then go on to have lengthy civilian careers – is consuming a growing share of defense budget dollars. The tab for military pensions was $51.7 billion in 2012; it’s on course to hit $59 billion by 2022, even though the number of retirees will remain constant at roughly 2.3 million, according to official estimates....

“Actually, military retiree benefits need much greater reforms. Pensions are not even the biggest concern: that would be health care for retirees, both working-age and Medicare-eligible, and their families, which has been projected to account for nearly two-thirds of all Pentagon health spending by 2015....President Obama has proposed saving $12.8 billion over five years by gradually increasing the out-of-pocket contribution working-age retirees are expected to make, which would still leave them a far better deal than civilians with employer-paid insurance have. Congress shot the idea down like an enemy aircraft.”

--There was a rather startling local news story released conveniently on Christmas Eve. Incoming New York City mayor Bill de Blasio’s daughter, Chiara, who is 19, discussed her drug and alcohol abuse in a video.

This from the same family that masterfully used 17-year-old son Dante, the smiling kid with the big afro, as a campaign prop that turned what promised to be a tight race into a rout.

Mike Lupica / New York Daily News

“This...wasn’t as much about the bravery of de Blasio’s daughter, as much as it was de Blasio and his rather cynical handlers getting out in front of the young woman’s story. And the way the whole thing was handled wasn’t as much about her as it was about her father and political expediency.

“It is why it all coming about Chiara de Blasio on Christmas Eve, for a Christmas Day news cycle in the newspapers, ends up looking like old-time politicking, from a politician who acts as if everything he does is brand new....

“But what happens now with de Blasio and his daughter shows you what happens when you use your family as much as he did to help himself first win the Democratic nomination and then win the election the way he did, which means going away. Maybe de Blasio has finally figured out that he doesn’t get to decide what is public and what is private with that family....

“It comes out now, because de Blasio knew it would come out eventually, trying to stop a story like this is like trying to stop the ocean....

“You want nothing but the best for his children and especially the young woman who discusses an intensely private struggle in a public way on the day before Christmas. Chiara de Blasio spoke of how she hoped everybody would watch the video, because it speaks for itself. Her father spoke of ‘incredible wisdom for someone who’s only 19 years old.’

“Certainly that is what both of them, and the people who handle Bill de Blasio, want us to believe. But the idea that they released this during the holiday season because it would help others battling substance abuse during the holiday season is just another political fairy tale.”

--Mikhail Kalashnikov, the designer of the AK47 assault rifle, died at the age of 94 in Russia. He made little money from his gun, which became popular because it was cheap to manufacture, reliable and easy to maintain. He once said he would have been better off designing a lawn mower.

Kalashnikov also said in 2008, “It is painful for me to see when criminal elements of all kinds fire from my weapon.” [Tens of thousands attended his funeral.]

--For the record, hours after I posted last time, authorities arrested four men in connection with the fatal carjacking at the Mall at Short Hills here by my home.

So police issued some reminders for avoiding a similar fate.

“Walk with purpose. Always approach your car with your keys in hand.

“Pay attention to your surroundings, and be alert to nearby activity.

“Always check the back seat before opening your car.

“To avoid other thefts that sometimes follow carjackings, separate your car keys from your house and office keys. In addition, do not leave your registration, insurance information, or any information identifying your home or work address in your glove box or car interior. Always keep that information on your person.”

Aside from this fatal incident at such a high-profile mall, in nearby Newark and Irvington, there were a rash of murders Christmas Eve and Christmas Day. In Newark, a 13- and 15-year-old were killed and a 14-year-old paralyzed in one attack. Newark has had over 100 murders this year. It has a population of under 300,000. And in Irvington, three were killed at a Go-Go bar.

--The older you get, the best part of Christmas is Christmas Eve, when everyone you meet over the course of that day, including total strangers, says “Merry Christmas.” I was fortunate to spend both Christmas Eve and Christmas Day with family as we all still live close by. And I went to Mass Christmas Day for the first time in quite a while. Give Pope Francis a little credit on that score. [I normally go New Year’s Day....my own small tradition.]

Anyway, in a poll by Fairleigh Dickinson University PublicMind, 67% of Americans prefer to say Merry Christmas, while 18% pick Happy Holidays. 82% of Republicans prefer saying Merry Christmas, compared to 55% of Democrats.

--Lastly, you know of my fascination with space and so I note Peggy Noonan’s column in the Wall Street Journal, wherein she asked a cross-section of folks what was the best thing that happened this year, some breakthrough, some joy, some encouraging sign. Most had personal thoughts, such as the birth of a grandchild.

The comment I most liked, though, was from Journal columnist Mary Anastasia O’Grady, “who found herself thinking something wondrous that maybe didn’t get quite enough attention. ‘A spacecraft called Voyager I went beyond the solar system this year, marking a mind-boggling milestone in human progress.’”

Amen.
---

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

God bless America.
---

Gold closed at $1216
Oil $100.32

Returns for the week 12/23-12/27

Dow Jones +1.6% [16478]
S&P 500 +1.3% [1848]
S&P MidCap +1.3%
Russell 2000 +1.3%
Nasdaq +1.3% [4156]

Returns for the period 1/1/13-12/27/13

Dow Jones +25.7%
S&P 500 +29.1%
S&P MidCap +30.9%
Russell 2000 +36.7%
Nasdaq +37.7%

Bulls 59.6
Bears 14.1 [Source: Investors Intelligence...new low for bears since March 1987]

Happy New Year! Thank you for your support in 2013.

And Happy Birthday to our own Dr. Bortrum!

Next week...geopolitics and 2014.

Catch me on Twitter @stocksandnews

Brian Trumbore