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For the week 9/2-9/6
Before I get into my own opinion of the latest regarding the Crisis in Syria, and the opinion of others, more of what I was writing...in 2012.
Week in Review, 8/26/12
[From Ireland, on a golf trip and admittedly not that focused but nonetheless observed the following.]
“In a totally embarrassing performance at an impromptu press briefing, President Barack Obama said that any Syrian use of its chemical or biological weapons would be a ‘red line’ for the U.S. and that the Pentagon had contingency plans.
“ ‘We cannot have a situation in which chemical or biological weapons are falling into the hands of the wrong people.’
“I’m guessing some of them already have, though whether those taking possession have the knowledge on how to use them is a totally different story. It’s not that simple. Plus the joke of Obama’s statement is that as I told you last week, most experts believe it would take ‘tens of thousands’ of troops to secure Syria’s vast stockpile and you well know, not only is the U.S. not prepared to put such a force on the ground, especially before the election, but outside of perhaps one or two players, such as Turkey, no NATO ally is about to help out at this time. I’m not saying there wouldn’t be military conflict should Bashar Assad choose to use chemical weapons on his own people, such as NATO airstrikes, but actually securing the weapons isn’t going to happen at this particular time.”
Week in Review, 9/1/12
“(Back) to the inept Obama administration (when it comes to Syria), with Chairman of the Joint Chiefs of Staff Gen. Martin Dempsey being an extension of same, Dempsey said that the establishment of safe havens would be ‘an agenda item’ when NATO reconvened. Turkey was forced to block refugees from crossing into the country this week as the numbers in Turkish camps on the Syrian border hit 80,000. Previously, Turkey said 100,000 was the limit it could handle. Over 200,000 refugees are now registered in Turkey, Lebanon, Iraq and Jordan.
“This is incredible. About 25,000 deaths later (this being the new estimate), many women and children, the White House is still stalling to get through Nov. 6.
“Meanwhile, French President Hollande had the guts to state that he wants the opposition to form a provisional government quickly so that he can recognize it, while warning the use of chemical weapons would be cause for military intervention.”
Week in Review, 9/8/12
“The killing continues, now estimated at anywhere from 23,000 to 26,000 in the civil war, with the UN pegging the official refugee figure at over 230,000 (the unofficial number far higher), which is destabilizing to neighbors Turkey, Iraq, Jordan and Lebanon, while there is a true humanitarian catastrophe developing in Syria itself as 1.2 million have been displaced and 2.5 million are in dire need of aid. I’ll just say this in terms of the political debate taking place in the U.S. One of the Democrats’ campaign slogans is ‘Bin Laden is dead and GM is alive.’ It needs to be pointed out that at least 20,000 of the Syrian deaths could have been prevented if the White House had taken coordinated humanitarian action with Turkey early on. Not a military invasion but just the establishment of safe havens and the Obama administration could have significantly reduced the human toll.
“It was the same situation in 2009 when President Obama missed an opportunity in Iran to support the Greens, but instead when the United States just sat back, the mullahs crushed the uprising and now look where we are there.
“It’s pathetic. It’s what infuriates me about how the president is getting a pass on his foreign policy.
“Meanwhile, there are heightening anxieties over the security of Syria’s chemical weapons stockpiles and not a lot of confidence among Western intelligence sources that they know where everything is being stored. Plus you have the collapse of government control in several Syrian provinces, so sources tell the Washington Post that preparations for securing known sites with foreign troops are being hastened. Among the chief fears are the hundreds of tons of battlefield-ready sarin, the deadly nerve agent. Remember, Syria has the world’s third-largest stockpile of chemical weapons behind the U.S. and Russia, but while both Washington and Moscow are dismantling their arsenals, Syria has been building theirs up for a war against Israel.
“In Ankara, Turkish Prime Minister Erdogan accused the outside world of indifference on Syria, adding ‘The regime in Syria has now become a terrorist state.’”
So all of the above was written a year ago. I was pleading in my own small way for Americans to give a damn about this conflict. Last Sunday on “Meet the Press,” Ann Curry, having returned from Jordan’s teeming Zaatari Refugee Camp, made the following comment to David Gregory.
“(What) they need is protection. I think that to a person, the children and the adults will say, ‘Whatever you’re going to do regarding attacking or not attacking Assad’s government, we need protection.’ And what they talk about is a need for – the children don’t say this, but the adults talk about the need for a buffer zone or maybe for a no-fly zone. The truth is the world has not responded to the needs of these children and the needs of these refugees to the degree in which they require the help.”
But as I noted in an example last week, and in my above missives of 2012, it is too late. The White House had its chance and blew it royally.
So now we’re in a box of Obama’s making, though as noted below it’s not his fault. It never is for Joe Cool. The UN said this week that there are at least two million Syrian refugees and another five million displaced in the country, a full 1/3rd of the nation’s population no longer living in their homes. 1/3rd! Imagine the entire east coast of the United States being displaced.
I watched all the testimony Secretary of State Kerry, Defense Secretary Hagel, and Joint Chiefs of Staff Chairman Dempsey gave the Senate on Tuesday and it was amazing. Kerry had the gall to say things like, “History is full of moments when people didn’t stand up.”
But this is after 100,000 have already died! Dammit.... some of us right-thinking people were saying from the beginning, establish a no-fly zone, work with our ally, Turkey, supply the opposition, which in the early days was not riddled with extremists as it is today.
And you know this week’s talk about how much humanitarian aid we are giving the Syrians? I showed you last week how it is all a bunch of bull. I am sick of President Obama and his not-ready-for-prime-time staff flat out lying to the American people...let alone the Syrians.
What aid? Prove it! On this you can trust the UN. The ‘promised’ aid, including from the Gulf States, is not pouring in.
And back to the incompetence of the troika – Kerry, Hagel and Dempsey. When questioned all three had no idea as to the size of the Syrian opposition. I do my best to keep up on the entire freakin’ world every week. One person. And these three, with staffs numbering in the hundreds, can’t give the peoples’ representatives, Congress, even a good guesstimate of the makeup of the opposition, including the al-Qaeda types?!
Republican Senator Jeff Flake of Arizona asked Sec. Kerry, “Why did we wait?” to act if we thought the cause was right?
Kerry responded, “We aren’t losing anything by waiting.” The totally worthless Dempsey, emblematic of the vastly overrated general corps in the U.S. military that I have been writing of since the first days of the Iraq War, gave the same message to President Obama.
Wednesday, the day after the Senate hearing, I went to my barber, Mike. He sees the car pull up and if he doesn’t have a customer has the chair ready as I walk in. Mike has long known what I do. His first words as I open the door:
I could get into other stuff from this week, such as President Obama’s statement in Stockholm that “my credibility isn’t on the line...the international community’s is on the line,” but it’s all covered below in the opinion pieces.
For now, Obama is returning to Washington as I go to post and is speaking to the American people on Tuesday, a first for this president on issues of such import. I’m sure he will sound impassioned, and some of the networks will give him high marks for the presentation, but even his supporters are asking themselves one simple question as he goes on about the 1,400 gassed, including 400 children.
What about the other 100,000?! You, Mr. President, could have prevented this.
Obama talked Friday in St. Petersburg of a growing coalition, but save for France, the likes of Turkey, Australia, Canada, the UK (owing to David Cameron’s gross miscalculation) and Saudi Arabia aren’t about to get involved militarily. The G20 statement doesn’t explicitly discuss military support anyway. And as for Russia, President Vladimir Putin spoke of backing Assad if the U.S. attacks.
You know that great speech Kerry gave the day before Obama cut the legs out from under him? Kerry lied, as he has countless times in his reckless fashion. Kerry spoke of how U.S. officials had intercepted communications of commanders telling Syrian units to prepare for the gas attack on Aug. 21, to which many of us mused, well why didn’t we warn the people being targeted or take out the WMD units beforehand?
It turns out the intelligence agencies did not detect the Syrian regime readying the attack as Kerry and the administration tried to sell us. They pieced the stuff together after the fact! I can do that myself. So can you.
About two weeks ago, one of the few men in the U.S. Congress that I respect, Oklahoma Republican Senator Tom Coburn, a friend of Obama’s, nonetheless talked of impeaching the president for some of his maneuvers that Coburn deems unconstitutional.
I would say that it’s one thing to play politics and be loose with the truth. We all accept that.
But it’s another to flat out lie to the American people and on the issue of Syria alone President Obama deserves to be under the microscope.
I can’t help but repeat for the umpteenth time, we will be paying for this administration’s actions for generations to come. It’s why I continue to end my columns the way I do. It’s as much “God help us” as “God bless America.”
“It is true that the Iranians could interpret Obama’s clear hesitancy to act in Syria as a kind of green light to move faster down the nuclear track. It is also certainly true that America’s allies in the region, including Israel, Jordan, Saudi Arabia and the United Arab Emirates, could interpret Obama’s zigzag path to a Syria strike – a strike that, as of this writing, is not at all guaranteed to take place – as a sign that he will ultimately be unwilling to act against Iran. This interpretation itself could, of course, have dire consequences: If Prime Minister Benjamin Netanyahu of Israel, in particular, comes to believe that there is no circumstance in which Obama can be trusted to act, he will no longer listen to Obama’s entreaties to resist the urge to strike at Iran himself.
“But I believe it would be a mistake to assume that just because the president is hesitant on Syria he will be hesitant on Iran. Why? Because the president has defined Iran’s nuclear program as a core threat to U.S. national security. He has made it clear that only two challenges in the Middle East rise to the level of core American national interests; the mission to destroy al-Qaeda and the goal of stopping the Iranian nuclear program. He has stated repeatedly, over many years, that it is unacceptable for Iran to cross the nuclear threshold, and his administration has worked assiduously to sanction Iran in the most punishing of ways. He has done nothing on the Iran file to suggest that he is softening his position.
“Contrast what he has said and done on Iran with what he has said about Syria: He has never argued that the continued existence of the Assad regime represents a dire threat to U.S. national security. Quite the opposite – Obama and his national security team have argued privately for some time that the rise of al-Qaeda safe havens in a disintegrating Syria (as is likely to follow the demise of the Assad regime) would represent a direct national security threat. Seen this way, his hesitancy on Syria is understandable.
“The point is this: Not all red lines are created equal. Not all security challenges are equally dire. It is not analytically sound to assume that Obama’s hesitancy in one area equals hesitancy in another. It would be a mistake on the part of the Iranian regime to believe that the president won’t strike their nuclear facilities if he judges them to be near the nuclear threshold.”
But, as Mr. Goldberg then goes on to point out, the evidence Obama is presenting against Syria is different from what he will probably bring to the people on Iran. It could “very well be murkier and more contradictory.”
So if the public is against action on Bashar Assad, even given the evidence, imagine the debate over Iran....though it is extremely unlikely this kind of action would be debated in Congress beforehand. At least I hope not.
“Perhaps historians will provide a clear understanding of Barack Obama’s head-snapping decision to pause his administration’s urgent case for military strikes in Syria to seek the formal authorization he says he doesn’t need from a Congress he disdains.
“Until then, the struggle to make sense of the Obama administration’s ad hoc decision-making and confusing rhetoric on Syria will continue. The latest twist came Wednesday, when the president tried to explain away his declaration last summer that ‘the red line for us’ would be Bashar Assad’s use of chemical weapons. ‘I didn’t set a red line,’ Mr. Obama said during a news conference in Stockholm, Sweden, claiming that he had been speaking for the entire world – even Congress.
“He was similarly considerate of Congress on Saturday, when in announcing his decision he explained that he is ‘mindful that I’m the president of the world’s oldest constitutional democracy’ and that the power of America is ‘rooted not just in our military might but in our example as a government of the people, by the people and for the people.’
“Mr. Obama hasn’t always been mindful of such things, boasting for three years of his willingness to disregard Congress. At Georgetown University three months ago, Mr. Obama announced that he would bypass Congress to address what he described as the urgent threat of climate change. Global warming, he averred, ‘is a challenge that does not pause for partisan gridlock. It demands our attention now.’ He has done the same on immigration and the economy. ‘If Congress won’t act, I will,’ he has said....
“On Aug. 20, 2012, Mr. Obama described his ‘red line’ on Syria. ‘We have been very clear to the Assad regime – but also to other players on the ground – that a red line for us is we start seeing a whole bunch of chemical weapons being moved around or being utilized. That would change my calculus.’
“But when U.S. intelligence confirmed in June that Syria had used chemical weapons, nothing changed. White House national security aide Ben Rhodes declared that this breach of Mr. Obama’s red line would trigger ‘military support’ – meaning lethal aid – from the U.S. to the Syrian opposition. On Tuesday, Secretary of State John Kerry testified that the Syrian regime had used chemical weapons 14 times.
“To believe that an Obama-led intervention will end well requires disregarding everything he’s done – or hasn’t done – over two years in favor of an illusory expectation that he’ll act with newfound determination to shape the outcome in a region ravaged by war. That’s unlikely....
“If President Obama exercises the authority he claims and launches a serious campaign to end the slaughter in Syria and change the regime in Damascus, Republicans should support him. Until he does, they should oppose him.”
“President Obama isn’t easy to follow up San Juan Hill, or for that matter even Capitol Hill. Rather than walk point on national security, he prefers to blend in with the enlisted men and women. Consider his astonishing statement on Wednesday at a press conference in Stockholm about his comments last year drawing a ‘red line’ on the use of chemical weapons by Bashar Assad in Syria.
“ ‘First of all, I didn’t set a red line,’ the President said. ‘The world set a red line. The world set a red line when governments representing 98% of the world’s population said the use of chemical weapons are abhorrent and passed a treaty forbidding their use even when countries are engaged in war.
“ ‘Congress set a red line when it ratified that treaty. Congress set a red line when it indicated that – in a piece of legislation titled the Syria Accountability Act – that some of the horrendous things that are happening on the ground there need to be answered for.’
“Then the President further blurred his own red lines by explaining whose credibility is at risk in the Syria vote in Congress; ‘Point number two, my credibility is not on the line. The international community’s credibility is on the line. And America and Congress’ credibility is on the line because we give lip service to the notion that these international norms are important.’
“If a President wants to lose a vote in Congress, this is what he would say. Minimize his personal leadership responsibility, and tell the Members of Congress that they are responsible for whatever happens if they fail to pass his resolution, as well as for the results of any military action that Mr. Obama would conduct.”
“The formidable U.S. armed forces could certainly damage Assad’s considerably less potent military. But in an astonishing irony that only the conflict in Syria could produce, American and allied cruise missiles would be degrading the capability of the regime’s military units to the benefit of the al-Qaeda-linked militants fighting Assad – the same militants whom U.S. drones are attacking regularly in places such as Yemen. Military strikes would also complicate Washington’s longer-term desire to bring stability to a country that borders Lebanon, Turkey, Iraq, Jordan and Israel.
“Unlike Yugoslavia, which ripped itself apart in the 1990s, Syria has no obvious successor states, meaning there would be violence and instability in the heart of the Middle East for many years to come.”
“ ‘Sen. Bob Corker: ‘What is it you’re seeking?’
“ ‘Gen. Martin Dempsey, chairman of the Joint Chiefs of Staff: ‘I can’t answer that, what we’re seeking.’’
“ –Senate hearing on the use of force in Syria, Sept. 3
“We have a problem. The president proposes attacking Syria, and his top military officer cannot tell you the objective. Does the commander in chief know his own objective? Why, yes. ‘A shot across the bow,’ explained Barack Obama.
“Now, a shot across the bow is a warning. Its purpose is to say: Cease and desist, or the next shot will sink you. But Obama has already told the world – and Bashar al-Assad in particular – that there will be no next shot. He has insisted time and again that the operation will be finite and highly limited. Take the shot, kill some fish, go home.
“What then is the purpose? Dempsey hasn’t a clue, but Secretary of State John Kerry says it will uphold and proclaim a norm and thus deter future use of chemical weapons. With a few Tomahawk missiles? Hitting sites that, thanks to the administration having leaked the target list, have already been scrubbed of important military assets?
“This is risible. If anything, a pinprick from which Assad emerges unscathed would simply enhance his stature and vindicate his conduct.
“Deterrence depends entirely on perception, and the perception in the Middle East is universal: Obama wants no part of Syria.
“Assad has to go, says Obama, and then lifts not a finger for two years. Obama lays down a ‘red line,’ and then ignores it. Shamed finally by a massive poison gas attack, he sends Kerry to make an impassioned case for righteous and urgent retaliation – and the very next day, Obama undermines everything by declaring an indefinite timeout to seek congressional approval.
“This stunning zigzag, following months of hesitation, ambivalence, contradiction and studied delay, left our regional allies shocked and our enemies gleeful....
“When Obama tells the nation what he told McCain and Lindsey Graham in private – that he plans to degrade Assad’s forces, upgrade the resistance and alter the balance of forces – Congress might well consider authorizing the use of force. But until then, it’s no.”
“The American people do not support military action. A Reuters-Ipsos poll had support for military action at 20%, Pew at 29%. Members of Congress have been struck, in some cases shocked, by the depth of opposition from their constituents. A great nation cannot go to war – and that’s what a strike on Syria, a sovereign nation, is, an act of war – without some rough unity as to the rightness of the decision. Widespread public opposition is in itself reason not to go forward.
“Can the president change minds? Yes, and he’ll try. But it hasn’t worked so far. This thing has jelled earlier than anyone thought....
“What are the American people thinking? Probably some variation of: Wrong time, wrong place, wrong plan, wrong man.
“Twelve years of war. A sense that we’re snakebit in the Mideast. Iraq and Afghanistan didn’t go well, Libya is lawless. In Egypt we threw over a friend of 30 years to embrace the future. The future held the Muslim Brotherhood, unrest and a military coup. Americans have grown more hard-eyed – more bottom-line and realistic, less romantic about foreign endeavors, and more concerned about an America whose culture and infrastructure seem to be crumbling around them....
“There is the issue of U.S. credibility. We speak of this constantly and in public, which has the effect of reducing its power. If we bomb Syria, will the world say, ‘Oh, how credible America is!’ or will they say, ‘They just bombed people because they think they have to prove they’re credible’?
“We are, and everyone knows we are, the most militarily powerful and technologically able nation on earth. And at the end of the day America is America. We don’t have to bow to the claim that if we don’t attack Syria we are over as a great power.
“Are North Korea and Iran watching? Sure. They’ll always be watching. And no, they won’t say, ‘Huh, that settles it, if America didn’t move against Syria they’ll never move against us. All our worries are over.’ In fact their worries, and ours, will continue.
“Sometimes it shows strength to hold your fire. All my life people have been saying we’ve got to demonstrate our credibility – that if we, and the world, don’t know we are powerful by now we, and they, will never know....
“In the Syria argument, the moderating influence is the public, which doesn’t seem to have even basic confidence in Washington’s higher wisdom.
“That would be a comment on more than Iraq. That would be a comment on the past five years, too.”
“Perhaps the most misleading phrase in the debate over Syria is ‘war weary.’ Americans, say commentators and politicians across the political spectrum, are exhausted by a decade of fighting in Iraq and Afghanistan, with sideshows in Libya and Yemen. Now Syria? Where does it stop? Americans must be weary.
“The truth is that for most Americans, the constant combat has imposed no burdens, required no sacrifices and involved no disruptions. True, the money spent has been substantial. From 2001 to 2012, reckons the Congressional Budget Office, the wars in Iraq and Afghanistan along with related operations cost $1.4 trillion. Although that’s a lot even by Washington standards, it pales next to all federal spending and the economy’s total production. From 2001 to 2012, federal spending totaled $33.3 trillion; the wars were 4 percent of that. Over the same period, the American economy produced $163 trillion of goods and services. War spending equaled one-tenths of 1 percent of that.
“As important, no special tax was ever imposed to pay war costs. They were simply added to budget deficits, so that few, if any, Americans suffered a loss of income. It’s doubtful that much other government spending was crowded out by the wars.
“The largest cost, of course, involves Americans killed and those who suffered life-altering wounds, both physical and mental. As of Sept. 3, the Pentagon counted 4,489 deaths connected to the war in Iraq and 2,266 connected to the war in Afghanistan, including some U.S. civilians.... Through September 2011, according to the CBO, 740,000 veterans from deployments in Iraq and Afghanistan had received treatment from the Veterans Health Administration. In a study of veterans treated from 2004 to 2009, the CBO found that 21 percent were diagnosed with post-traumatic stress disorder, 2 percent with traumatic brain injury and another 5 percent with both.
“The pain, suffering, sorrow and anguish of these and other losses are borne by a tiny sliver of Americans: those who joined the volunteer military, plus their families and close friends. There was no draft. There was no shared sacrifice, as there was in World War II, Korea and (to a lesser extent) even Vietnam. Those who have made the sacrifices have a right to feel ‘weary.’ For the rest of us, it’s a self-indulgence....
“Whatever we do in Syria must spring from a sober calculation of national interest so that it commands broad public support. The worst outcome would be a retreat justified by nothing more than an exaggerated and artificial sense of ‘war weariness.’”
Washington and Wall Street
As I noted before, the Syria crisis could not have come at a worse time as in just three weeks, Congress and the White House, aside from debating going to war with the risk of unintended consequences, still need to come up with a new budget, deal with the sequester and confront the debt ceiling, while other issues loom such as the implementation of Obamacare, immigration reform, and the potential for renewed turmoil in the eurozone after the German elections.
[There is a chance House Republicans will vote to keep the government funded through Dec. 15 at current levels, meaning the sequester would remain in place, but funding of Obamacare is up in the air.]
For now, the Street has been eagerly awaiting the last big data point, Friday’s August jobs report, that the Federal Reserve’s Open Market Committee will weigh heavily when it decides at its next meeting, Sept. 17-18, whether or not to begin winding down the $85 billion a month bond-buying program, QE3.
August non-farm payrolls came in with an increase of just 169,000, less than expected, plus there were downward revisions to July (now with a gain of 104,000) and June (revised to 172,000). The private sector also reported a gain of just 152,000 for August after a revised increase of 127,000 in July, both of which were weaker than expected.
The average monthly job gain this year – 180,000 – is lower than last year’s overall pace.
The unemployment rate, though, ticked down to 7.3%, the lowest since December 2008, but this was because more Americans gave up the search as the labor participation rate declined to 63.2 percent, the lowest since August 1978.
Earlier, two readings on manufacturing and the service economy, the ISM, came in at 55.7 and 58.6, respectively. The manufacturing figure was the best since June 2011, while the 58.6 service reading was the best since January 2008. Separately, figures for July construction spending, up 0.6%, and July factory orders, down 2.4%, with more or less in line. Additionally, the Fed’s Beige Book of regional economic activity showed a “modest to moderate” pace of expansion, the same language that was used the prior month.
Add it all up and I will stick with my prediction the Fed will not move to taper in 10 days, but will make it clear they will begin to do so shortly ‘given further improvement in the labor market.’ At least this is the kind of language I think they will use. Again, Chairman Ben Bernanke has stressed he needs to see significant improvement in the jobs picture before he moves to pull back the stimulus and while the labor market remains putrid, especially given the makeup of the jobs being added, the Fed can hang its hat on the actual unemployment rate and its gradual decline to its initial target of 6.5% before it said it would consider raising the federal funds rate from zero.
“While successful in bolstering financial asset markets and turbo-charging the housing recovery, the Fed’s unconventional monetary policy has failed to trigger a robust-enough real economic response. Given a persistently unbalanced U.S. economic policy mix, the resulting disconnect between artificially-bolstered asset prices and still-sluggish fundamentals is not one that can be imposed for an exceptionally long time without risking resource misallocations, excessive risk-taking and negative international spillover effects....
“Unfortunately, (this week’s numbers) are unlikely to point to anything more encouraging than an economy that is moving forward only in second gear – i.e., one that is expanding too tepidly to decisively overcome the combined pressures of inadequate aggregate demand, lukewarm supply responsiveness and remaining pockets of overleverage.
“Yet, it is probable that these data will still prove sufficient to convince the Fed to go forward on September 17-18 with three measures: first, taper its monthly purchases of $85 billion; second, focus the reduction on the Treasury component in order to minimize the adverse impact on the housing sector; and third, stress a major qualification – namely, that the Fed stands ready to reverse course and increase purchases should the economy weaken materially. The central bank may also seek to evolve its forward policy guidance to offset some of the contractionary impact of the taper.
“This month’s policy adjustments should not be taken as a signal of the Fed’s strong confidence in the economic recovery. Instead, it would likely be an inevitably-imperfect response to the twin issues of moderate economic healing and the increasing threat of policy-induced distortions.”
I disagree with Mr. El-Erian on the taper aspect. More next week as we head to this critical confab.
Europe and Asia
While the Federal Reserve is focused on U.S. growth and the labor picture, it obviously can’t ignore the outlook for the rest of the world. In the run-up to the G20 summit, the Organization for Economic Cooperation and Development said the advanced economies would grow at the stronger rates of the second quarter for the balance of the year, with growth “proceeding at encouraging rates in North America, Japan and the UK,” while the eurozone was “out of recession, although output remains weak in a number of economies.” The OECD also said the Federal Reserve should begin to taper its latest quantitative easing efforts as the U.S. recovery was firmly established.
For 2013, the OECD now thinks U.S. growth will be 1.7%, with Japan at 1.6%, 0.7% in Germany, 0.3% in France and 1.5% in the UK, but -1.8% in Italy; most of these being significant upward revisions from the organization’s May forecasts.
The International Monetary Fund, though, was forced to do a U-turn on some of its predictions from its spring meeting in April, dropping its view that the emerging economies were the dynamic engine of the world economy after the recent financial turmoil in same related to capital flight with rising interest rates in the likes of the U.S.
In April, Olivier Blanchard, the IMF’s chief economist, singled out the UK as needing to lighten up on austerity, but now the fund recommends that countries follow Britain’s policy of “achieving structural fiscal targets and allowing automatic stabilizers to play freely.”
Meanwhile, in holding the line on its key lending rate at 0.50%, European Central Bank President Mario Draghi said that despite the improved tone in the eurozone economy, he was “very, very cautious about the recovery,” surprisingly dour given the recent data. “I can’t share the enthusiasm. It is just the beginning. Let’s see, these shoots are still very, very green.”
While the ECB did acknowledge the eurozone outlook had improved, it expects the single-currency area to still shrink 0.4% in 2013 compared to its June forecast of a 0.6% contraction. And it is only calling for growth of 1.0% in 2014.
One item that Draghi focused on as inhibiting a robust recovery can’t be ignored, that being the still awful employment picture, with July’s jobless rate remaining unchanged at 12.1% for the eurozone, up from 11.5% in July 2012, while youth unemployment rates of 56.1% in Spain, 62.9% in Greece, and 39.5% in Italy are beyond tragic.
But you did have a slew of positive data points. The August PMI for manufacturing in the eurozone came in at a final 51.4 vs. 50.3 in July, a 26-month high. The new orders index was a solid 53.3. The service sector PMI hit 50.7 vs. July’s 49.8, while eurozone exports rose 1.6% in the second quarter.
Individually, Germany’s August manufacturing PMI was 51.8 vs. 50.7 in July; the Netherlands hit a 27-month high at 53.5; Spain’s figure was 51.1, the highest since April 2011 (the service PMI was 50.4); Italy’s PMI was 51.3 (though its service sector reading was 48.8 for August); France’s PMI was unchanged at a disappointing 49.7; and Greece’s manufacturing sector came in at 48.7, which while below the 50 dividing line between growth and contraction was nonetheless a 44-month high.
Meanwhile, in the UK, its August PMI was 57.2, the best since February 2011, with new orders at their best pace in 19 years. It’s a “boom.” Plus the service PMI was 60.5 for the month, the best since 2006.
So add all the above up and a recovery for the region, writ large, seems to be in place, right?
Well why then would Draghi be so downbeat? Because there are still some major issues below the surface (and above it).
At week’s end, for example, a report on Spain’s industrial output for July fell for a 23rd straight month and, more importantly, Spain’s budget deficit is going to miss its ECB targets badly, with Spain on the verge of losing its investment grade status as tax revenues are not coming in as strong as expected and Social Security is doing worse, requiring increasing government subsidies. I also keep telling you that Spain’s banks continue to lie about their books and their real estate exposures. Plus you have the overall unemployment rate of 27% that the IMF says won’t fall to 25% until 2018!
Italy’s political crisis is coming to a head as a Senate committee will begin weighing the issue of whether to expel Silvio Berlusconi from parliament after Italy’s top court upheld his conviction on tax-fraud. Berlusconi’s People of Liberty is the second-biggest party and part of the ruling coalition. Should the Senate remove him, the coalition could come tumbling down, though Prime Minister Enrico Letta’s party seems to be trying to reach some accommodation with Berlusconi, such as delaying the impeachment procedure in order to buy time for Berlusconi to decide on his next move. The entire process could yet take months. The uncertainty, however, has been having a negative impact on Italy’s bond market as the yields on government paper have been rising.
Then of course there is Germany and its September 22 election. Chancellor Angela Merkel and her Social Democrat opponent Peer Steinbruck held their only televised debate on Sunday and by all accounts it was a draw, with Steinbruck not making a dent in what appears to be a 15-point lead for Merkel and her Christian Democrats, though at least he didn’t embarrass himself.
Steinbruck was Merkel’s finance minister in the 2005-09 “grand coalition” between left and right but has said he will not agree to a similar deal even as Germans would like to see such an arrangement. For now, he continues to hammer away at Merkel’s handling of the European debt crisis.
“I would have followed a different strategy,” he said on Sunday. “Of course there must be budget consolidation in these countries, but not a deadly dose. Germany once got help too and we must not forget that. Germany was massively helped after the Second World War with the Marshall Plan.” [Ah yes, George Marshall....one of the five greatest Americans of all time...but I digress...OK... Washington, Jefferson, Lincoln, FDR, Marshall...a different list from greatest presidents...which would substitute Ike for Marshall...and my man, James Polk, the most underrated president of all time, would be in the top ten in that ranking....now where was I?]
Anyway, Merkel reminded Steinbruck, “You voted for everything,” pointing out the SPD did indeed support her policies in parliament.
One problem Merkel faces is her current coalition partner, the liberal Free Democrats, may not reach the 5% threshold required to gain seats and should this be the case, Merkel and Steinbruck may be forced to work together after all.
Merkel has been stressing Germany’s economic success, calling her nation “the motor of growth” in Europe, but she also continues to run away from the reality of Greece, which will require additional financial assistance or debt relief shortly after the 9/22 vote. In a recent poll of German voters, 70% object to any suggestion of further direct aid to eurozone partners, while 52% oppose further loans.
Finally, there were two other economic data points that pointed to a slowdown in the German economy after its solid rebound in the second quarter; July industrial output fell 1.7% from June, while exports unexpectedly fell in the month, 1.1% from June.
On to Asia, and as the IMF offered up, they got this region wrong. While China and Japan have shown signs of solid growth, the rest of Asia is in trouble.
First the good news. China’s official government reading on the PMI for the manufacturing sector in August came in at 51.0 vs. 50.3 in July, the best in 16 months, with HSBC’s PMI at 50.1 vs. 47.7 in July; HSBC focusing more on smaller enterprises while the government hones in on the large state-owned operations. HSBC’s service sector reading for August was a strong 52.8 vs. 51.3 the prior month.
In Japan, the August manufacturing PMI was 52.2 vs. 50.7 in July, but wages were down a 14th consecutive month. Nonetheless, the Bank of Japan upgraded its assessment of the economy, saying the recovery is on track, which should make it easier for Prime Minister Abe to go ahead with the plan for hiking the sales tax next April, a decision he will make over the coming weeks.
But in the rest of the region, Indonesia’s PMI for August was 48.5, a 15-month low; South Korea’s was just 47.5, a slight improvement from July’s 47.2; and India’s was 48.5, the first contraction in the manufacturing sector here in more than four years. [Taiwan improved to 50.0 from 48.6 in July.] India’s data continues to be most troublesome. It’s a broken economy...a broken country in desperate need of major reform with a prime minister who is about to turn 81.
Lastly, a word on Australia, where voters go to the polls today to select a new government and prime minister, Liberal-National coalition leader Tony Abbott, thus ejecting the Labor party, currently headed by Kevin Rudd, after six years in power. [Abbott led by 8 points in the final surveys.]
The Aussie economy, despite marking 22 years of growth with second quarter GDP coming in at 0.6% over the prior three months (2.6% on an annualized basis), has been in a state of upheaval because of its heavy reliance on the mining sector and growth in China. There are few signs business and consumer spending are set to become the new growth engines.
--After four straight down weeks, the Dow Jones rallied 0.8% to 14922, while the S&P 500 gained 1.4% and Nasdaq added 1.9% as the market rallied mainly on the hope there would be no military action in Syria, even as oil prices hit a multi-year high. Friday’s jobs report had zero impact. In other words, a really stupid week.
--U.S. Treasury Yields
6-mo. 0.05% 2-yr. 0.45% 10-yr. 2.93% 30-yr. 3.87%
The 10-year hit 3.00%, fell on the labor number Friday morning, with the thinking being the Fed will hold off on tapering, but then closed the week 15 basis points above the previous Friday’s 2.78% mark.
--The average age of an auto on the road in the U.S. is still about 11 years old, so with easier finance terms and an improved job market, it’s no surprise that the auto sector is cooking. But August was better than expected, some 1.5 million vehicles purchased, up 17% from a year ago. Virtually every automaker had a great month. GM’s sales rose 15% from a year ago, Ford’s and Chrysler’s were both up 12%. Other brands exhibited even stronger growth. Toyota up 23%, Honda 27%, Nissan 22%, Hyundai 8% (oops) and BMW soared 36% over a year earlier. Honda and Nissan had their best August ever. Chrysler’s have risen 41 straight months.
August’s sales translated to an annualized pace of over 16 million, the best since November 2007. A year ago it was 14.5 million, which was seen as very solid. The peak was 2000 when 17.4 million vehicles were sold. The Big 3 are also employing over 90,000 fewer workers than five years ago, before the recession hit. Profits are soaring. This is good!
--Microsoft announced a $7.2 billion deal to acquire Nokia’s struggling handset business, in what is likely to be CEO Steve Ballmer’s last big move before he retires, an effort to play catch-up in a mobile market dominated by Samsung and Apple. Among the 32,000 Nokia employees that are part of the deal is CEO Stephen Elop, a former Microsoft executive, who is now seen as a leading contender for Ballmer’s job.
“It’s a bold step into the future – a win-win for employees, shareholders and consumers of both companies,” Ballmer said in a statement.
“Tragedies end badly. Nokia makes the point with a vengeance. The mobile phone maker once carried a market capitalization of more than $300 billion. Now it proposes to flog off its core mobile devices business (together with a long-term patent license) to Microsoft – on which it has become increasingly dependent – for $7 billion. This is value destruction of a rare order, and it cannot be blamed solely on former management’s misjudgments about smartphone developments. The $300 billion market cap dates to 2001, but in 2008 Nokia was still valued at over $130 billion. In the three years since former Microsoft executive Stephen Elop took Nokia’s helm, the group’s stock market worth has halved.” [Ed. as of Friday, $20bn.]
“When Nokia’s stock-market value peaked at some $300 billion in the year 2000, it was the biggest mobile-phone maker in the world, with more than a quarter of the global handset market....
“Nokia was caught in the tech-stock downdraft in 2000, but it still had believers. After a big selloff in its stock that summer, one investment-bank analyst declared that ‘the longer-term outlook is tremendous.’ He added: ‘If you believe in the mobile wireless Internet world where your mobile communications device is your primary Internet access device and so on, whoever dominates that market will have significant revenues for a very long time to come.’
“He was right, except for the role that Nokia would play in that world. Apple’s market cap in December 2000 was $6.5 billion and it didn’t make its first phone until 2007, but it ushered in the smartphone revolution that Nokia had tried to pioneer. Samsung has since used Google’s Android operating system to become the largest handset maker in the world.
“At the time Nokia was peaking, Microsoft was also considered so dominant that regulators around the world argued that its position was all but unassailable. They filed antitrust lawsuits and even tried to break it up, a la AT&T in the 1980s....
“These regulators and pundits merely missed the rise of the Internet, Google, wireless telephony, the cloud, and so much more....
“At its peak in 1999, Microsoft’s market cap was $620 billion, a record at the time in nominal dollars. Today, its stock value is $263.8 billion, while Apple’s is about $445 billion. Microsoft CEO Steve Ballmer is retiring next year to give someone else the chance to return the company to its former glory. The Nokia acquisition is an attempt, arguably too belated, to catch up to the Apples and Samsungs in smartphone hardware and mobile computing.
“None of this was forecast by the economic models that antitrust and other regulators use to justify their crusades against the fleeting dominance of whichever company is on top. They had also failed to foresee Microsoft’s emergence via the personal computer from the shadow of IBM’s mainframe dominance in the 1980s.”
“Two-and-a-half years ago, the then recently recruited Nokia chief executive Stephen Elop fired off an email to his staff which became known as the ‘burning platform’ memo.
“The email spelt out the uncomfortable truth: Nokia, the one-time mobile phone industry leader, was on the ropes and faced some difficult decisions.
“Those choices, he explained using a metaphor, were not unlike those facing a man working on a North Sea oil rig that had just caught fire.
“ ‘As the fire approached him, the man had mere seconds to react. He could stand on the platform, and inevitably be consumed by the burning flames. Or he could plunge 30 meters into the freezing waters,’ Elop wrote....
“Nokia, Elop said, also found itself on a burning platform, and like the man on the oil rig, it had the choice of doing nothing and facing certain death or taking the plunge.
“Nokia subsequently shed thousands of jobs and abandoned its legacy operating systems as it opted to partner with Microsoft, the company Elop had left to join Nokia....
“But with (this) deal, Nokia is leaping from one burning platform to another, one that threatens to engulf Microsoft.
“In buying Nokia’s core assets, Microsoft is trying to secure its future in a mobile world. It is circling the wagons around its also-ran Windows Mobile platform, which runs a distant third behind Apple’s iOS and Google’s Android systems – a pecking order that may never change.
“Microsoft may not yet be in the same kind of financial mess that Nokia found itself in, but the warning signs are there. The cash cows of the Windows operating system and Office applications are slowing down in a post-PC era where cheaper alternatives abound....
“Writing in Vanity Fair last year, Kurt Eichenwald made this illuminating observation about Microsoft’s corporate culture:
“ ‘For what began as a lean competition machine led by young visionaries of unparalleled talent has mutated into something bloated and bureaucracy-laden, with an internal culture that unintentionally rewards managers who strangle innovative ideas that might threaten the established order of things.’....
“If Elop does ascend to the throne at Microsoft, he may well need to goad his new charges into making another, more perilous, leap into the icy void.
“Because after years of internecine warfare and innovation atrophy, it may be the only way for Microsoft to save itself from becoming another Nokia.”
--Vodafone sold its remaining 45% stake in Verizon Wireless to Verizon in a deal worth around $130 billion, which would make it the third biggest takeover in history. About half will be distributed to Vodafone shareholders. The takeover is to be financed in part with $40 to $50 billion in bonds issued over the next year.
--Samsung unveiled its watch-phone, the Galaxy Gear, the latest in “wearable” devices. It is expected to go on sale Sept. 25 for $299, which comes ahead of Apple’s expected smartwatch. Apple is unveiling its latest iPhone this coming week. Qualcomm Inc. also announced plans to ship a new smartwatch, the Toq, in the fourth quarter. I’ll pass.
--Russia’s manufacturing PMI for August was just 49.4 vs. 49.2 in July, while Brazil’s was also just 49.4. [Call this the completion of your BRIC update...earlier I gave you China and India.]
--According to consulting firm IHS, the domestic energy industry now supports 1.2 million jobs, directly or indirectly, but this number will grow to 3.3 million by 2020. Introduction of technologies like hydraulic fracking and horizontal drilling “has helped drive a 58% increase in natural gas reserves since 2007, cut the price of natural gas by nearly three-fourths, and sparked more than $120 billion in U.S.-based investment last year, IHS said.” [Tim Mullaney / USA TODAY]
--The Treasury Department appears likely to clear the $4.7 billion acquisition of Smithfield Foods by Shuanghui International in what would be the largest ever Chinese takeover of a U.S. company. I have no problem with this. When it comes to Chinese attempts to take over natural resources or high-tech companies, however, Cfius, the Committee on Foreign Investment in the United States, will undoubtedly slam the door.
--JPMorgan Chase is exiting the student loan business. Bank of America and Citigroup are among those who did so earlier.
--We note with glee that Larry Ellison’s Oracle Team USA entrant in the America’s Cup, the competition for which begins Saturday, was fined $250,000 by an international jury for making illegal modifications to its yacht. Three team members have been excluded from this year’s race as well, though none of its senior members.
I’ve never been a fan of Mr. Ellison, and now a good friend, Jimbo, works for competitor Workday. So, you know....Go Team New Zealand! [I was in Auckland in 2003 when the competition was being held there and saw the actual trophy, the oldest of its kind in the world, I think, which was kind of cool. Beer tasted great there as well.]
--According to the Census Bureau, just 71% of households had landlines in 2011, down from 96% 15 years ago. Cellphone ownership is up to 89%. I still have a landline and hate talking to my friends on their s----- cellphones.
--CBS Corp. finally reached a new broadcasting rights agreement with Time Warner Cable, ending the month-long blackout of the network’s shows in several key markets...just in time for the opening week of the NFL season. Terms of their new retransmission contract were not disclosed, but CBS had said it deserves to be paid more for its programming given its shows’ popularity.
--The world’s biggest mutual fund, PIMCO Total Return Fund managed by Bill Gross, lost $41 billion in assets through losses and investor withdrawals in the past four months. Investors redeemed about $26 billion of the total. The fund has lost about 4% this year.
--The average home price in New Jersey rose 4.1% in July over last year, according to CoreLogic, compared with a nationwide average appreciation of 12.4% between July 2012 and July 2013. Arizona and California led the way, with jumps of 27% and 23%, respectively.
--Real-estate developer Stephen M. Ross is giving $200 million to his alma mater University of Michigan, the single largest in school history, which will be split between the business school and athletics department. Ross, who owns the Miami Dolphins, wants to boost athletes who aren’t part of Michigan’s marquee sports, namely football and basketball.
Foreign Affairs, cont’d....
Egypt: The government has decided to press for the legal dissolution of the Muslim Brotherhood “within days,” while the state prosecutor said he has referred former President Mohamed Morsi and 14 of his aides and colleagues in the Brotherhood for trial on charges of inciting the murder of protesters. Then on Thursday, Egypt’s Interior Minister Mohamed Ibrahim survived an assassination attempt, the bomb exploding at a distance from his convoy. About 20 were hurt. It was the first attack targeting such a high-ranking government official. Ibrahim is in charge of the country’s police force. But throughout the country, a period of relative calm has returned to the streets.
“The debate over Syria has obscured another critical decision about Middle East policy that President Obama and Congress must soon make: whether to sustain aid to the military-backed government that has been consolidating power in Egypt. An administration policy review was nearing completion when the chemical weapons attack near Damascus was detected; as we understand it, the options include a substantial cut in the $1.3 billion in annual U.S. aid provided to the Egyptian armed forces. The White House tells us that Mr. Obama ‘has not made a decision to suspend or terminate our assistance to Egypt beyond what the administration has already announced’: delays in the delivery of F-16 fighters and other weapons and the cancellation of a planned exercise.
“It’s understandable if the president’s hand has been stayed by the new crisis; nonetheless, it is important that Mr. Obama act soon. While Washington has been fixed on Syria, the Egyptian regime of Gen. Abdel Fatah al- Sisi has moved steadily toward constructing an autocracy that would reverse Egypt’s 2011 revolution and its subsequent move toward democracy.
“In the past week alone, the Sisi regime has stepped up its arrests and prosecution of leading figures of the Muslim Brotherhood, including Mohamed Morsi, the democratically elected president ousted in a July 3 coup. Dozens have already been tried and sentenced in military courts under a state-of-emergency law that was the underpinning of the former autocracy of Hosni Mubarak.... Meanwhile, authorities are taking steps toward formally banning the Muslim Brotherhood, excluding parties with a religious identity from the political system and returning to the Mubarak-era system for electing parliamentary representatives, which was weighted against opposition parties. All that would make the elections the regime is promising next year a sham....
“The Obama administration has been pressing the government to reconcile with the Islamists, release Mr. Morsi and other political prisoners and carry out a transition to a genuine democracy. That these appeals are ignored while the government indulges in grotesque anti-American propaganda reflects the generals’ conviction that the administration will ultimately tolerate a new dictatorship while maintaining U.S. aid. It follows that the only means to exert U.S. leverage is to suspend the aid programs, while linking their resumption to the restoration of democracy. Not just Syria but Egypt requires a ‘shot across the bow’; Mr. Obama should take it before it is too late.”
I disagree. Fund the military one more year...but let them know we want to see authentic progress on the political front by end of 2014 or the aid is cut off. [Actually, the way this works, I think it would be Sept. 30, 2014.]
Iran: President Hasan Rohani will be attending the opening session of the United Nations General Assembly this month and is tentatively slated to speak Sept. 24.
Israel: According to a Hebrew-language report quoted by the Times of Israel, a former top Israeli official said U.S. concerns had prompted his country to drop plans to launch an armed offensive about a year ago against nuclear installations in Iran. One-time Israeli national security adviser Giora Eiland said President Obama asked Prime Minister Benjamin Netanyahu to scuttle plans to conduct an attack last September or October.
“When an issue involves something of American interest, we cannot act against their will,” the article quoted Eiland as saying. Eiland later attempted to backtrack on his comments.
Iraq: A coordinated series of blasts in Baghdad on Tuesday killed at least 67 people. 11 neighborhoods were struck in less than two hours. Iraqi officials correctly maintain the civil war in Syria is fueling the surge in violence in Iraq.
Abu Mohamed al-Adnani, official spokesman of the Islamic State of Iraq and the Levant, which is battling the Shia-led government, called for Egyptians, Syrians and Iraqis to “renounce peaceful calls and to carry weapons and join jihad for the sake of God.”
[I have to add, I do not support the Iraqi government.]
Lebanon: Christian Lebanese Forces leader Samir Geagea said Hizbullah “opened the gates of hell” in Lebanon.
“Lebanon is passing its worst days because an armed party decided, on behalf of the Lebanese and contrary to their will, to seize national decisions and act as it pleases...opening the gates of hell for the Lebanese.”
Geagea has been most prominent in trying to outline a new government for his country. This man is good.
China: Authorities announced a corruption investigation into Jiang Jiemin, the head of the commission that oversees state-owned companies. Jiang is suspected of a “serious violation of discipline.” Meanwhile, the verdict in the trial of disgraced senior party leader Bo Xilai is still due any day now....or maybe they’ll let him twist in the wind.
Separately, a Chinese official affiliated with a state-owned company was allegedly drowned by Communist Party investigators during interrogation, according to a state-run newspaper. Yu Qiyi’s head was held in a tub of icy water by six investigators attempting to extract a confession, as reported by the Beijing Times. The investigators will be tried for intentional assault.
A nationwide survey has revealed that 11.6 percent of Chinese adults, or 114 million, have diabetes, a far worse figure than previously estimated. The finding was published in the Journal of the American Medical Association. Said a director of the International Diabetes Federation, “The booming economy in China has brought with it a medical problem which could bankrupt the health system. The big question is the capacity in China to deal with a health problem of such magnitude.”
And in the latest pollution disaster, “hundreds of thousands of dead fish were left floating in a Chinese river after a chemical discharge” in Wuhan, the capital of Hubei province. A chemical company later confessed the fish kill was the result of a sewage release “that exceeded standard levels.” Don’t buy fish from China...ever! [South China Morning Post]
Finally, a report from the World Resources Institute, as noted by Bloomberg, concludes, “To maintain its economic growth and provide for its massive population, China must reconcile two powerful, converging trends: energy demand and resource scarcity. One prime example of this tension is the country’s coal use and water supply.
“According to a new WRI analysis, more than half of China’s proposed coal-fired power plants are slated to be built in areas of high or extremely high water stress. If these plants are built, they could further strain already-scarce resources, threatening water security for China’s farms, other industries, and communities.” Short China. Much more on this topic in coming weeks. [And watch out Air Products and Chemicals Inc. of Allentown, PA.]
North Korea: China is urging Pyongyang to agree to hold semiformal six-nation talks on the North’s nuclear weapons program, the last round of formal six-nation negotiations having been held in December 2008. Man, time flies.
Japan: Prime Minister Shinzo Abe urged a reset in relations with China at his first face-to-face meeting with Chinese President Xi Jinping on the sidelines of the G20 summit. But they only spoke for about five minutes.
Abe has his hands full back home with the crippled Fukushima nuclear plant, with reports now saying radiation levels are 18 times higher than previously estimated. The radiation is high enough to prove lethal within four hours of exposure.
This is unreal. Tokyo Electric Power Company (Tepco) originally said the radiation emitted by the leaking water was around 100 millisieverts an hour. However, the company then confessed the equipment used to make that recording could only read measurements of up to 100 millisieverts! Using a more sensitive device, the new recording showed 1,800 millisieverts an hour.
So imagine the workers there who had no idea they were receiving radiation doses far greater than they were told.
The government announced plans to spend an estimated $500 million through the end of 2014 on an ice wall and upgraded water treatment units that would supposedly remove most of the radioactive elements. The ice wall would block contaminated water from escaping the facility’s immediate surroundings.
Pakistan: The government insisted it has measures in place that “ensure the safety and security” of its nuclear facilities, following disclosure of documents to the Washington Post (through Edward Snowden) that the United States is far more concerned than it publicly admits about extremists potentially targeting Pakistan’s atomic weapons and materials. I wrote a few weeks ago this is inevitable.
Russia: Moscow’s mayoral election is Sunday and the only question is can activist opposition leader Alexei Navalny reach 20%, and then what does the Kremlin do with the guy afterwards, Navalny currently out on appeal following his conviction on trumped up embezzlement charges.
Venezuela: For about 24 hours, much of the country suffered a blackout after an apparent failure in high voltage transmission lines. President Nicolas Maduro blamed the opposition for engineering an “electricity coup.” One power systems consultant told the Los Angeles Times that it was probably human error, as the national grid had been unstable for 48 hours leading up to the collapse. It’s never too late to ‘short’ this hellhole. The problem for us, though, is Hizbullah and Iranian terror cells are based here.
--Big Apple Public Advocate Bill de Blasio continues to surge in the polls ahead of the Sept. 10 Democratic primary in the race to replace New York City Mayor Michael Bloomberg. De Blasio has 43% in the latest Quinnipiac University poll and if he wins 40% next Tuesday, he avoids a runoff. The commercials he’s been running with his son, Dante, have helped de Blasio open up a 22-point lead among black voters over former City Comptroller Bill Thompson, who is black, and receives 20% overall.
“Dante’s big afro is the campaign image everyone remembers,” said the director of polling for Quinnipiac. Pathetic. And further proof that as I’ve long said, the majority of New Yorkers are total idiots.
I was long on the record of favoring City Council Speaker Christine Quinn, assuming a Democrat would win in November, just because I thought in the end she’d be pragmatic compared to the rest of the field. But after being the frontrunner since the beginning, she is now at just 18%. A. Weiner has drooped to 7% (down from 26% in July).
On the Republican side, former transit head Joe Lhota, the favorite of Rudy Giuliani, leads billionaire John Catsimatidis, 48-24. I like Catsimatidis. Lhota’s a loser.
“Welcome back from your summer escape. Did the sight of the skyline thrill you? Then let this scare you: an all-too-plausible, worst-case scenario for the election.
“Meet the City Hall from hell: Mayor Bill de Blasio, Comptroller Eliot Spitzer, City Council Speaker Inez Dickens – and NYPD “Commissioner” Shira Scheindlin.
“Many who are wary of a return to the crime-ridden, crumbling and alienated metropolis of the past fear one possibility or another – Spitzer in charge of the treasury! Cops afraid to do their jobs!
“Twenty years of epic growth and crime reduction under Rudy Giuliani and Michael Bloomberg made the town so alluring, those moving here outnumber those leaving for the first time in eons.
“Now, we’re threatened with a new ‘Gang of Four’ hell-bent on repudiating that legacy....
“Socialist-minded de Blasio wants to close the gap between New York’s ‘two cities’ by soaking the ‘rich’ with more taxes and dismantling as much of the Giuliani-Bloomberg legacy as he can.
“Prostitute-patronizing, real-estate scion Spitzer carries a chip on his shoulder for Wall Street, the driver of the city’s economy. He’s signaled he intends to ‘punish’ it by going far beyond the comptroller’s office’s statutory powers.
“Ethically challenged Dickens plays footsie with old-guard Harlem powerbrokers who long stifled investment by ‘interlopers.’ The Post recently revealed she’s a tax-deadbeat slumlord at violations-prone buildings she owns.
“With no countervailing influence, the unholy trio would have free rein to roll back Bloomberg’s educational gains, give the store away to unions and further diminish the NYPD’s effectiveness....
“Pax Bloombergana might be less fragile than thugs wish for and conservatives fear. The social fabric is far more widely woven. Middle-class migration revived dead neighborhoods. Crowds can be as effective a crime deterrent as the NYPD – at least in the short run.
“If the fabric starts to unravel even a little, voters will throw the bums out. But expect the next four years to make us miss the battles over bikes and sugary drinks.”
--In the closely followed Democratic primary race for City Comptroller, Manhattan Borough President Scott Stringer and former Gov. Eliot Spitzer are in a virtual dead heat, according to the latest Quinnipiac University poll; Stringer’s 47-45 lead being within the margin of error.
--Newark, New Jersey witnessed a staggering ten murders over a ten-day period, with none of the ten being linked according to police. No. 10 was a 14-year-old boy. At least half involved the drug trade. It’s too bad Republicans don’t have a stronger candidate to go up against Newark Mayor Cory Booker in the senate race.
--The Wall Street Journal’s Paul Sonne had an extensive interview with Russian security cybersecurity expert Eugene Kaspersky, commonly thought to be the best in the world. Forget that he works extensively with the Russian Federal Security Service, he’s like a classic double (triple) agent. He routinely works for U.S. government agencies and other governments worldwide as well.
WSJ: What is the biggest cyberthreat to government, businesses and consumers?
Kaspersky: I think the major threat to the Internet at the moment is cybersabotage attacks or cyber terrorism. We depend on IT in all our critical infrastructure – like power plants, power grid, transportation, health care, finances. Unfortunately it’s not difficult to attack these systems – and we’ve had examples in the past.... For enterprises, I think the second thing for them is espionage attacks because there are so many, and it’s a very serious problem. I’m not surprised if all the data in the world has been stolen already, at least twice. For consumers, I think the next issue is mobile security on smartphones and tablets.
WSJ: Which is the bigger target: Apple Inc.’s iPhones or devices using Google Inc.’s Android software?
Kaspersky: Android is the most probable. Now we have a little noise with malware, and I’m afraid that sooner or later we will have a serious problem with security for Android.
But the most dangerous scenario, I am afraid, is with iPhones. It’s less probable because it is very difficult to develop malware for iPhones, because the [operating] system is closed [for outside programmers]. But every system has a vulnerability. If it happens – in the worst case scenario, if millions of the devices are infected – there is no antivirus, because antivirus companies don’t have any rights to develop true end-point security [for Apple].
WSJ: Have the NSA revelations made people hesitant about U.S. antivirus products?
Kaspersky: I’m 99.9% sure that antivirus companies don’t send big data [to the NSA]. For Internet companies, it’s much simpler, because they have [client] data on their servers. To have some back door in [an antivirus] product, if this secret is open, that is the end of the business. It will damage the reputation. I am 99.9% sure that antivirus companies don’t have [such back doors] in their products.
Kaspersky was also asked what he thought about Vladimir Putin, personally, and had this interesting reply.
“Let’s have a list of Russian leaders for the last century: Nikolai II, Lenin, Stalin, Khrushchev, Brezhnev, Chernenko, Andropov, Gorbachev, Yeltsin, Putin, Medvedev. So who are the best? On this list, Putin and Medvedev are the best.”
Not quite, Mr. Kaspersky. If you care about personal freedom, you can’t possibly include Putin.
--Edward Snowden passed along another trove of data, this time to the Washington Post, providing new evidence the Obama administration’s cyberwarriors have been infiltrating and disrupting foreign computer networks.
“Additionally, under an extensive effort code-named GENIE, U.S. computer specialists break into foreign networks so that they can be put under surreptitious U.S. control. Budget documents say the $652 million project has placed ‘covert implants,’ sophisticated malware transmitted from far away, in computers, routers and firewalls on tens of thousands of machines every year, with plans to expand those numbers into the millions.
“The documents provided by Snowden and interviews with former U.S. officials describe a campaign of computer intrusions that is far broader and more aggressive than previously understood. The Obama administration treats all such cyber-operations as clandestine and declines to acknowledge them.” [Barton Gellman and Ellen Nakashima / Washington Post]
Stuxnet, the computer worm reportedly developed by the U.S. and Israel to go after Iran’s nuclear centrifuge program, successfully, remains the highest profile use of a cyberweapon to date...that we are aware of.
Of course I have no problem with the use of Stuxnet, but as described at the time, there are dangers. It can be turned around and used on us, for example, which is why some upon learning of it were very leery.
I also know that there are some in the U.S. who read the above and think, ‘So what? They do the same thing to us.’
True, but this is where Snowden has done irreparable harm to American interests. I can understand why the publics in Germany, for example, or in Brazil (where we apparently have an extensive intelligence operation) can be upset. It harms our image just like Abu Ghraib did.
It certainly makes it more difficult for future American presidents to get cooperation on various military adventures, to cite an obvious example.
Meanwhile, part of the trove handed the Washington Post was the revelation of the $52.6 billion “black budget,” disclosed in detail for the first time. The CIA receives $14.7 billion of it, one of 16 intelligence agencies funded in this fashion. The CIA’s share has grown more than 50% since 2004.
We’ve become so used to such large numbers, like talk of $trillion deficits, that $14.7 billion seems like a drop in the bucket to moi.
Finally, as revealed in documents that Snowden passed on to the New York Times:
“The National Security Agency is winning its long-running secret war on encryption, using supercomputers, technical trickery, court orders and behind-the-scenes persuasion to undermine the major tools protecting the privacy of everyday communications in the Internet age.
“The agency has circumvented or cracked much of the encryption, or digital scrambling, that guards global commerce and banking systems, protects sensitive data like trade secrets and medical records, and automatically secures the e-mails, Web searches, Internet chats and phone calls of Americans and others around the world, the documents show.”
And note to President Obama. Stop lying about what the NSA does or does not do.
--A new study from the U.S. Geological Survey concludes a tsunami generated by a massive earthquake off Alaska could force 750,000 Californians to evacuate, as well as devastate the economy. One third of all boats in the marinas, for starters, would be lost, while major ports would struggle to get huge cargo vessels out to sea in time to avoid being buffeted by the waves.
Granted, the study is based on a “hypothetical but plausible” 9.1 magnitude quake. The 750,000 figure includes 90,000 tourists; a figure that would increase to millions in the event of a tsunami in summer months.
But as is the case in Oregon, much of the California coastline is cliffs and thus immune, though there are still a ton of key economic zones that would be highly vulnerable, from San Francisco Bay to Los Angeles/Long Beach to San Diego.
The Japanese tsunami disaster was the result of a 9.0 temblor off the coast.
--Ariel Castro committed suicide. Because he was under protective custody, he was checked every 30 minutes, but for some reason wasn’t on suicide watch which entails constant observation. Remarkable. Criminal authorities in Cuyahoga County looked awful through this whole horrible case and now the state looks equally incompetent. But they saved a lot of money in the end.
It turns out Castro’s suicide was the second high-profile one in an Ohio prison in a month. Earlier a death row inmate was found hanged in his cell just days before his scheduled execution.
--The Rim fire that has burned in and around Yosemite National Park was started by a hunter, whose illegal fire got out of control. There had been rumors it was initiated by a marijuana growing operation. The hunter has not been arrested, which sucks.
--Teen births in 2012 were half what they were in 1991, according to the National Center for Health Statistics. The birthrate for teens, ages 15 to 19, dropped 6% from 31.3 births per 1,000 teen girls in 2011 to 29.4 in 2012. It’s the lowest birthrate since 1940 when data on teen births started being collected. The rates are down for all racial and ethnic groups. In 1991, the figure was 61.8 per 1,000 teen girls.
--We note the passing of British broadcaster David Frost, who died aboard the ocean liner Queen Elizabeth of a heart attack. He was 74.
Always liked Mr. Frost (Sir David Frost, I should say). I used to watch his syndicated talk show as a kid and wish he had had a forum here lo these many decades since. Of course in America in particular he is best known for the interviews with Richard Nixon, broadcast in 1977.
“At one point Mr. Frost asked about Mr. Nixon’s abuses of presidential power, prompting this answer: ‘Well, when the president does it, that means that it is not illegal.’
“ ‘Upon hearing that sentence, I could scarcely believe my ears,’ Mr. Frost wrote in a 2007 book about the interview, published to coincide with the ‘Frost/Nixon’ movie. Mr. Frost said his task then ‘was to keep him talking on this theme for as long as possible.’....
“On the last day, Mr. Frost pressed Mr. Nixon to acknowledge the mistakes of the Watergate period. ‘Unless you say it, you’re going to be haunted for the rest of your life,’ Mr. Frost said.
“ ‘That was totally ad-lib,’ Mr. Frost recalled. ‘In fact, I threw my clipboard down just to indicate that it was not prepared in any way.’ He added: ‘I just knew at that moment that Richard Nixon was more vulnerable than he’d ever be in his life. And I knew I had to get it right.’
“Mr. Nixon apologized for putting ‘the American people through two years of needless agony,’ adding, ‘I let the American people down and I have to carry that burden with me for the rest of my life.’”
--Finally, about five months from now I will hit the 15th anniversary of StocksandNews. I’ll have a lot to say on that date, but ever since I created this monster one of the chief regrets I have is that I have zero time to just read a book. In all seriousness, I’m guessing I have read about three in their entirety during this time.
One recent book I’ve mentioned, though, that I hope to read before I die, including his full trilogy, is that of Rick Atkinson and his “The Guns at Last Light,” the completion of his series on the liberation of Western Europe. Everyone, and I’ve read a ton of reviews, has written glowingly of Mr. Atkinson’s work. So I note the beginning of George Will’s recent Washington Post op-ed on same.
“On Oct. 27, 1947, thousands of caskets were unloaded from a ship in New York. The bodies of U.S. soldiers from the European theater, writes Rick Atkinson, ‘then traveled by rail in a great diaspora across the republic for burial in their hometowns.’ Three young men, killed between the Battle of the Bulge in December 1944 and April 1945 in Germany two weeks before the war in Europe ended, were destined for Henry Wright’s Missouri farm.
“ ‘Gray and stooped, the elder Wright watched as the caskets were carried into the rustic bedroom where each boy had been born. Neighbors kept vigil overnight, carpeting the floor with roses, and in the morning they bore the brothers to Hilltop Cemetery for burial side by side by side beneath an iron sky.’”
Pray for the men and women of our armed forces...and all the fallen.
Gold closed at $1386
Oil, $110.53...highest weekly close since April 2011
Returns for the week 9/2-9/6
Dow Jones +0.8% 
S&P 500 +1.4% 
S&P MidCap +1.2%
Russell 2000 +1.8%
Nasdaq +1.9% 
Returns for the period 1/1/13-9/6/13
Dow Jones +13.9%
S&P 500 +16.1%
S&P MidCap +17.5%
Russell 2000 +21.2%
Bears 23.7 [Source: Investors Intelligence]
Dr. Bortrum has posted a new column.
Next week is my annual poker/golf gathering and not sure when I’m posting, frankly. Hopefully by 6:00 a.m. Saturday.