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09/21/2013

For the week 9/16-9/20

[Posted 9:00 PM ET, Friday...warning: this is 40 pages printed out...]

The Federal Reserve, the Market and Washington

What a period we are going through. We almost went to war with Syria, but the situation is far from settled; Iran has launched a major charm offensive, but it is not about to give up its ‘right’ to nuclear power; there is an important German election this Sunday; the White House and Republicans are at each other’s throats again over the budget, debt ceiling and ObamaCare; and the Federal Reserve did what most didn’t think it would...nothing. ‘Most’ did not include your editor, who is now going to do a little victory lap (part of my December half-marathon training), so let’s start there.

Week in Review 8/24/2013

“Back to the Fed, to be clear (if you’re a new reader), yes, the Fed helped save the system during the financial crisis but it’s extraordinary programs of the past two years in particular have been ineffective and Ben Bernanke and his Band of Merry Pranksters should have been pulling back long ago instead of continuing to pile $1 trillion a year onto the Fed’s balance sheet. I have also said countless times that it verges on criminal to have maintained interest rates at zero, totally screwing savers, namely the elderly, for far too long. The funds rate should be 2%. $2,000 on $100,000 in savings means a lot to many Americans, and of course it would go right back into the economy.

“But now that we’ve been stuck with QE3 and since the Fed recently began talk of tapering, a majority of economists are targeting the Sept. 17-18 confab for the Fed to begin pulling back, but Bernanke and many of the Fed governors have said it depends on the data and recent figures on the economy have been anything but stellar. The yield on the 10-year Treasury hit 2.93% on Thursday, its highest yield since July 2011, because the market was convinced the Fed is reversing course shortly, but then Friday morning we had a hideous new home sales figure of 394,000, like 106,000 below estimates, and the bond market rallied because of a renewed feeling that, hey, maybe the Fed will hold off further.

“I think the Fed will. I said so last week. I also said it’s about their credibility. They have totally misgauged the strength of the economy and while they remain optimistic on future growth, the kind that would allow them to finally get off their bond-buying addiction, the facts say otherwise.”

Week in Review 8/31/2013

“I still say that if they [Ed. the Fed] want to maintain their credibility, they can’t begin to taper in September unless we see a monster number on the labor front.”

Week in Review 9/7/2013

“Add it all up and I will stick with my prediction the Fed will not move to taper in 10 days.... 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.”

I then quoted PIMCO’s Mohamed El-Erian, who was calling for the Fed to taper on Sept. 18 and I said at the end, “I disagree with Mr. El-Erian on the taper aspect.”

Week in Review, 9/14/2013

“I weigh on the side of continued Fed caution, perhaps for just one more month. I’ve said ‘no taper’ and I’m sticking to it....

“One other issue the Fed also has to weigh now. Congress. Specifically, the House of Representatives, which was to vote this week on a continuing resolution (CR) that would have kept government open through Dec. 15 at current spending levels to buy more time for coming up with a longer-term budget and debt ceiling solution.

“But the vote was postponed until next week over the issue of ObamaCare and the insistence of some in the Republican caucus that it be defunded as part of a CR, while the Democratic-controlled Senate would block or the president would veto....

“Bottom line, further uncertainty, and I have to believe Ben Bernanke is putting this into his calculus for whether to hold off on tapering at least another month.”

So there you have it. I stayed the course and while many economists, strategists and famous portfolio managers missed it, I nailed the Fed’s decision. No taper.

I also identified what I do believe was a critical factor in the end...Congress. True, the Federal Reserve Open Market Committee, in its accompanying statement on its decision to maintain existing policy, didn’t mention the twin deadlines of the budget and debt ceiling, but in Ben Bernanke’s press conference following the Fed release, he certainly made it clear this was on the FOMC’s mind.

“A government shutdown, and perhaps even more so a failure to raise the debt limit, could have very serious consequences for the financial markets and for the economy,” he said. “The Federal Reserve’s policy is to do whatever we can to keep the economy on course.”

Bernanke added that when it came to the stimulus, The Fed is “avoiding a tightening until we can be comfortable that the economy is in fact growing the way that we want it to be growing,” this as the Fed slightly lowered its projections for future growth, such as the 2014 forecast from 3.0 to 3.5% to 2.9 to 3.1%.

But there was a lot more going on this week in Fedland. Over the weekend, Lawrence Summers withdrew his name from consideration to replace Chairman Bernanke when his term expires and investors celebrated on Monday as this was supposed to mean interest rates will remain low under Janet Yellen, current vice-chair at the Fed and the new odds-on favorite. Summers cited the prospect of an “acrimonious” confirmation hearing as a reason for his move.

The Fed said in its statement this week that one of the reasons for its staying the course was the market reaction to earlier taper talk and its impact on housing as the 30-year fixed mortgage rate rose from 3.6% to 4.8%. Home loan applications are the lowest since October 2008, and this week the figure on August housing starts was less than expected.

But existing home sales for the month came in at their best pace since Feb. 2007, 5.48 million on an annualized basis, though this remains a far cry from the 2005 peak at 7.08 million. Analysts say we rushed to close before rates went up further.

David Crook of the Wall Street Journal had an extensive piece on housing this week and looked at some of the worrying signs. To wit:

“Two of the most troubling aspects of the housing recovery, so far, have related to the outside presence of deep-pocketed Wall Street investors acting out a monumental episode of ‘Flip This House.’

“Their presence is driving price increases and sales volume even as they frequently outbid individual home buyers. Indeed, it’s a great paradox that the new real-estate boom is taking place alongside a plunging rate of homeownership. The homeownership rate has fallen from a bubble-era high of 69.2% to today’s 65%, the lowest level since 1995. (A four-percentage-point falloff is huge. The rate has been above 60% since the 1950s.)”

Meanwhile, we have this twin issue of needing to come up with a new federal budget and a looming debt ceiling. On Monday, President Obama reiterated he would not negotiate with Republicans over the latter, nor ObamaCare.

“The Affordable Care Act has been the law for three-and-a-half years now,” Obama said. “It passed both houses of Congress. The Supreme Court ruled it constitutional. It was an issue in last year’s election, and the candidate who called for repeal lost.”

As for the debt ceiling, Obama said:

“In case there’s any confusion, I will not negotiate over whether or not America keeps its word and meets its obligations; I will not negotiate over the full faith and credit of the United States. Let’s stop the threats, stop the political posturing.”

Editorial / Wall Street Journal

“President Obama likes to invoke his predecessors in the Oval Office, as all Presidents do, but in one sense he is unlike the others: Presidents traditionally try to reach a rough domestic consensus if they are faced with going to war abroad. Mr. Obama wants to smooth everything over abroad so he can get back to his favorite pursuit of declaring war at home.

“At least that’s how it’s gone the last week, as Mr. Obama all but wrapped up that ghastly business in Syria and turned his attention to the real enemy – Republicans. Backed by the good offices of Vladimir Putin and the assurances of Bashar Assad, United Nations inspectors will now remove Syria’s chemical weapons from the battlefield. Congress doesn’t even have to vote on it, and the American people can forget the recent unpleasantness. Peace in our time.

“Which means it’s now safe for Mr. Obama to begin the war he really wants to fight. The President spoke Monday afternoon at the White House in remarks pegged to the fifth anniversary of the collapse of Lehman Brothers and the financial panic of 2008. But the financial crisis was merely an excuse for Mr. Obama’s real purpose, which was to demand unconditional surrender from his domestic opposition.

“Mr. Obama assailed Republicans for an ‘ideological agenda’ that he called ‘the height of irresponsibility.' Among other crimes against humanity, he said the GOP refuses to abandon the budget restraint of the sequester spending cuts or to greet the Affordable Care Act with flowers and sweets.

“ ‘Are they really willing to hurt people just to score political points? I hope not,’ Mr. Obama said, transparently suggesting that they do want to hurt people. At least he didn’t accuse them of using chemical weapons, but when it comes to stopping atrocities like opposition to his domestic agenda, let him be clear: He doesn’t do pinpricks....

“The evidence suggests that Mr. Obama wants a showdown with Congress that ends with a government shutdown or a dance with default. He can then mount an offensive against Republicans that will rally his base, which soured on his Syrian plans and vetoed Larry Summers for the Federal Reserve. With his domestic agenda dead on Capitol Hill, Mr. Obama may also figure that stigmatizing Republicans over a shutdown-default crisis is the only way that Democrats can retake the House in 2014.

“The question is how well all of this will play with a war-weary public. Mr. Obama is no longer the fresh young idealist President, and Americans are beginning to figure out his methods. Like Assad and Mr. Putin, they may conclude that he’s no longer a President whose words they can take seriously.”

On Friday, the House passed a short-term spending plan that would continue funding government operations through mid-December but defund ObamaCare, 230-189. Automatic spending cuts known as the sequester would also remain in place. The measure now goes to the Senate.

House Speaker John Boehner said, “The House listened to the American people. Now it’s time for the United States Senate to listen to them as well.”

Senate Majority Leader Harry Reid has already said any bill that defunds ObamaCare “is dead” and “a waste of time” in the Senate.

President Obama, reacting to the House move, accused Republicans of “holding the economy hostage” by threatening not to fund the government and not to raise the debt limit.

“Unfortunately right now, the debate going on in Congress is not meeting the test of helping middle class families,” said the president. “They’re not focused on you. They’re focused on politics. They’re focused on trying to mess with me. They’re not focused on you.”

That’s a stupid statement, Mr. President.

Without any action by Sept. 30, almost every agency of the federal government will be partially shuttered, with the debt limit fast approaching.

Europe and the German Election

This weekend capital markets around the world will be watching Germany’s national vote on Sunday amid growing fears that Chancellor Angela Merkel could be upset in her reelection bid. For the better part of a year she has taken a super cautious stance, trying to get the electorate to ignore issues like Greece and further potential bailouts, and to think instead of steady leadership and a solid economy that is the envy of the eurozone.

But her opponent and former finance minister in Merkel’s first government, 2005-09, Peer Steinbruck, has been warning his countrymen that a vote for Merkel will put Germans on the hook for further bailout aid to the likes of Greece.

Merkel did win a key vote last weekend in Bavaria, as the sister party to her Christian Democrats handily remained in power, but her existing coalition partner, the pro-business Free Democrats, did not fare well and a major question for Sunday is can this party gain the 5% it needs to be seated in parliament and thus become a part of Merkel’s government again.

If the FDP does not get the magic number then Merkel has to reach out to a broader coalition, which is actually what the German people want, a return to the “grand coalition” of 2005-09 with Steinbruck’s SPD. But Steinbruck has said he doesn’t want to be part of a Merkel government again and prefers to stick with his existing coalition that contains the Greens and the Left.

One fly in the ointment is the emergence of a new anti-euro party, the AFD, that is gaining momentum and could receive the 5% threshold.

Merkel’s CDU should receive around 40% and especially if the FDP doesn’t get 5%, well, what happens then is anyone’s guess. [The SPD last polled around 25%, the Greens 9%, the Left 10%.]

Needless to say, this topic will be near the top in next week’s commentary, but as I’ve been writing, once the election is over, we get back to big picture issues in euroland, such as Greece and its finances, a desperately needed banking union that Germany continues to torpedo, and what to do with the eurozone’s sickening labor picture.

Before I get to Greece and Italy, which was back in the news this week, on the economic front car sales for the month of August were awful, down to the lowest on record (1990) with registrations off 4.9% year over year. 8-month sales are down 5.2%.

Peugeot’s were off 18% in the eurozone, Toyota’s down 4%, but Ford’s were off just 0.9% in August and GM’s were up 0.7%. [BMW’s actually advanced 9.9% year over year in Europe, while Daimler-AG’s were up 5.5%.]

European Central Bank President Mario Draghi reiterated the eurozone recovery remained “fragile.”

Turning to Greece, the public sector staged a two-day strike Wednesday and Thursday over further planned job cuts. It doesn’t help when Prime Minister Antonis Samaras makes statements such as his country could see a return to pre-crisis living standards within six years. For the nearly 28% that are unemployed, let alone the 60%+ of the youth that are, that’s hardly something to celebrate.

Yes, Greece has made some progress on the budgetary front, and tourist receipts were up 12.3% in July over last year, but further bailout funding is a certainty and that will be a big topic for October as all the players, the troika of lenders – European Commission, the European Central Bank, and the International Monetary Fund – along with the likes of Germany, weigh in. Estimates on Greece’s further funding needs range from 11 billion euro to 77 billion over the coming few years. It doesn’t help that Greece’s privatization program has fallen woefully short of expectations.

And then you have this issue of the neo-Nazi Golden Dawn party, with a sympathizer fatally stabbing a local hip-hop artist this week, which sparked large anti-Golden Dawn demonstrations.

The PanHellenic Socialist Movement, the junior party in the governing coalition, called for Golden Dawn to be outlawed, but GD is polling at 13 to 15 percent these days, putting them in third place. Golden Dawn feeds on the fears of those who are suffering most from the Depression, including its virulently anti-immigrant stance.

In Italy, former Prime Minister Silvio Berlusconi awaited the ruling of a Senate committee that is expected to expel him from parliament, though perhaps not for another few weeks. Berlusconi released a video wherein he accused leftist judges of plotting against him, saying he will not give up the leadership of the center-right and that he was “absolutely innocent” of tax fraud charges.

Berlusconi also re-launched his People of Freedom (PDL) party as Forza Italia (which he first used in 1994 when he entered politics).

Until the Senate rules, though, Berlusconi is not likely to pull his followers from the ruling coalition, but what he decides to do in October, only he knows.

In Spain, the economy minister said the country will meet its budget deficit target (though public debt has risen to 92.2% of GDP). Spain’s banks, the minister said, “don’t have an important capital need,” which I refuse to believe. Home prices declined only 0.8% in the second quarter from the first, the smallest drop since 2010, though one million unsold new homes remain in inventory, many of which are in the hands of the banks, which is why I don’t believe anything coming from the financial sector.

Ireland reported very disappointing GDP growth of just 0.4% in the second quarter, far less than expected.

In France, President Francois Hollande, in a television interview, admitted that he probably raised taxes too much and now promised a “tax pause.” French business leaders have been screaming for a break from a tax burden that government projections show will rise to 46.5% of GDP next year, one of the highest levels among developed economies. Also, as in Spain, public debt in France continues to rise, now forecast to hit 95% of GDP next year.

Lastly, in a further reflection of how things have changed in euroland, King Willem-Alexander of the Netherlands delivered a message to the Dutch people that the welfare state of the 20th century is done...over.

In its place, said the king, is an emerging “participation society,” in which people take responsibility for their own future and create their own financial safety nets, with less help from the government.

Actually, King Willem-Alexander read a speech prepared for him by Prime Minister Mark Rutte, who thought it would be better for the people to hear about a doom and gloom budget from a more popular king and queen.

Willem-Alexander’s own salary was not immune to budget cuts; 825,000 euros this year to 817,000 in 2014. [Toby Sterling / AP]

Syria and Iran

Last Saturday, Secretary of State John Kerry and his Russian counterpart, Foreign Minister Sergei Lavrov, reached an agreement on Syria’s chemical weapons program whereby the Bashar Assad regime must immediately submit an inventory of its holdings by Saturday, today, which they began to do partially on Friday, and then under U.N. auspices destroy and dispose of their WMD by mid-2014.

Speaking in Geneva, Kerry told reporters, “There can be no games, no room for avoidance or anything less than full compliance.”

But we don’t know how much Assad has, how many sites there are, where to destroy the weapons, who secures the sites and, of course, the big question, have any of his stockpiles already been moved out of the country as long rumored, most probably Iraq and/or Lebanon.

Overseeing this humongous task will be the little known Organization for the Prohibition of Chemical Weapons, a U.N.-backed agency that has about 125 inspectors when I told you over a year ago that one estimate of the needs for such a task is a military force of up to 75,000!

If there are gaps in what the Syrians are giving the OPCW, the matter is supposed to go straight to the Security Council, but Russia, with its veto power there, will prevent any harsh terms on the Assad regime as part of any resolution. It’s also already curious that the OPCW’s 41-member executive council had been scheduled to meet on Sunday to discuss ways to implement the U.S.-Russian agreement but the meeting was postponed without explanation.

Earlier,  a U.N. report from inspectors confirmed the use of sarin in the Aug. 21 attack that killed a reported 1,400, while detailing the rockets used, markings, and trajectories, all pointing to Damascus and the regime. The rebels do not have the capability described in the report.

But Russian Foreign Minister Lavrov said his country had “serious grounds” for thinking the attack was instead a rebel “provocation,” as Assad claims.

The U.N. Security Council is supposed to meet on this issue next week, but if the resolution doesn’t threaten force should Syria not fully comply, due to the Russian veto threat, what good is it? France wants to join the United States in adding a force option, with French President Hollande saying: “The military option must remain; otherwise there will be no response,” but, again, Moscow stands in the way (and possibly China, who has been remarkably quiet on this whole issue).

Russian President Vladimir Putin also by week’s end was not “100% sure” Syria’s weapons could be destroyed. For his part Assad, in an interview, said it would take a year to do so and cost $1 billion, though he insisted his country would meet the disclosure and inspection conditions set forward.

As for the rebels, they are furious. The regime has been left unpunished. Their main commander, Gen. Idriss, said, “We feel let down by the international community.”

In actuality, though, there are increasing stories that Syria is so fractured, with so many different factions fighting each other at this point, that it’s all hopeless.

But then I told you that over a year ago! It is too late, people! Enjoy the college football this weekend.

As for other events on the ground, tensions between Turkey and Syria ratcheted up another few notches as a day after Turkey shot down a Syrian helicopter that it said had crossed into its airspace, a car bomb exploded at a major crossing between the two on Tuesday, killing seven. No one claimed responsibility.

Regarding the Israeli reaction to recent movements on the diplomatic front, last weekend Secretary of State John Kerry met with Israeli Prime Minister Benjamin Netanyahu and attempted to assure the Israeli leader that “the threat of force is real.”

“We hope that the understandings reached between the U.S. and Russia on Syrian chemical weapons will yield results,” Netanyahu said.

“The world needs to ensure that radical regimes don’t have weapons of mass destruction, because as we have learned in Syria, if rogue regimes have weapons of mass destruction, they will use them. The determination the international community shows regarding Syria will have a direct impact on the Syrian regime’s patron, Iran.”

Separately, in a different venue, Netanyahu addressed Syria more specifically with regards to the U.S.-Russia agreement.

“Those understandings will be judged by the results – the total destruction of all the chemical weapon stocks that the Syrian regime used against its own citizens....

“In any case, Israel must be ready and prepared to defend itself with its own forces against any threat, and that capability and readiness is more important now than ever.”

Meanwhile, former Defense Secretary Leon Panetta said he supported a strike because Obama needed to enforce the “red line” he set over Syria’s use of chemical weapons.

“When the president of the United States draws a red line, the credibility of this country is dependent on him backing up his word,” Panetta said.

But another former defense secretary, Robert Gates, who like Panetta served under Obama, said a strike would be like “throwing gasoline on an extremely complex fire in the Middle East.”

Gates also dismissed attacking Syria to enforce a red line.

“I believe to blow a bunch of stuff up over a couple of days to underscore or validate a point or principle is not a strategy,” he said.

The National Journal polled 60 of its National Security insiders on whether Syria can be trusted to give up its chemical weapons. 75% said ‘No.’ 25% said ‘Yes.’

Some comments from this group, which includes some major heavyweights, having perused a list (comments are anonymous).

“UN or NATO inspectors must control all stockpiles, for any agreement to have a chance to succeed. Once on ground, inspectors will need security to keep weapons safe until disposition is determined.”

“It isn’t a matter of trust. It is a matter of knowing – that is, intelligence. Syria has had enough time and owns enough hidey-holes to make finding and accounting for the stuff really tough.”

“Putin and Assad have to be enjoying themselves watching Obama and Kerry turn into pretzels.”

“Syria and Russia will drag out any negotiations as long as possible until the U.S. will to strike collapses. In the end, Bashar al-Assad will not give up his chemical weapons quickly, cheaply, or easily.”

Bernard-Henri Levy / Wall Street Journal

“It would be nice to believe that Saturday’s Russian-American agreement on Syria’s chemical weapons constitutes the ‘advance’ that everyone seems to be so eager to call it.

“And one hopes that France’s firmness – the declared will of President Francois Hollande to strike Syria militarily, followed by his effort, unsuccessful, alas, to push a tough resolution through the United Nations Security Council – will eventually pay off and bring the international community into line.

“But meanwhile, what a situation!

“I am not talking about the letter of the agreement, which the experts immediately observed was: (1) Unimplementable. How, in a country at war, does one gather up and then destroy 1,000 tons of chemical weapons scattered across the entire territory?  (2) Unverifiable. According to the best estimates, the task would require 20 times more inspectors than the United Nations mustered in Syria last summer, and who, for the most part, remained shut up in their hotels or were trotted around by the regime. (3) Unaffordable. The United States has invested $8 billion to $10 billion to destroy its own chemical weapons and, 20 years later, the task is not yet finished. (4) Tied to a timetable (‘mid-2014’) that, apart from being technically meaningless, sounds like a bad joke in a country where, for two and a half years now, hundreds of civilians have been killed each day by conventional arms. (5) The equivalent of a terrible trick, the principal effect of which will be, by placing the onus on the chemical-weapons inspectors, to externalize the tragedy, so to speak, and return the world to sleeping the sleep of the Unjust.

“What I am talking about is Bashar Assad, who has been transformed, as if by magic, from a war criminal and enemy of humanity (in the words of U.N. Secretary General Ban Ki-moon) into an unavoidable, nay, legitimate, negotiating partner – whose spirit of cooperation and responsibility I fear we will soon hear being widely praised.

“I’m talking about Vladimir Putin, who brought off the tour de force of posing as a peacemaker – getting everyone to forget, in the process, his own crimes in Georgia, Chechnya and Russia – with the same aplomb that he has showed when playing the superman athlete who brings down whales, tigers and giant pike....

“I’m talking about North Korea and Iran, which will have good reason to believe, from here on out, that the West’s word, its warnings, the promises it makes to its allies, aren’t worth a thing. Can you blame them for thinking that? And will those who presently are granting Assad his license to kill finally rouse themselves to anger when they see the ayatollahs crossing the nuclear threshold? Maybe. But the fact that one even has to wonder – the fact that this or that Islamist fanatic or crazy dictator might be encouraged to think that he could, in future, act with impunity, Damascus-style – constitutes a source of misunderstanding and confusion in international relations. The result is an instability far greater than anything that might have accompanied the warning shot planned, then abandoned, by the U.S. and France.

“And, finally, I’m thinking about the civilians in Syria not yet killed by shelling or made to flee, and who now more than ever find themselves trapped. They are caught in a vise between the regime’s army – supported by Russian advisers, Hizbullah auxiliaries and Revolutionary Guards from Tehran – and the jihadists who draw strength from the West’s abdication and who increasingly are able to present themselves, despite poisonous future results not difficult to imagine, as the last hope of a people pushed to the brink....

“Because history has more imagination than do human beings, let us suppose that Assad, heady from his unexpected reprieve, commits another massacre that the world deems excessive. Or let us suppose that the Syrian tragedy meter passes a certain point (150,000 dead? 200,000?) and that public opinion, which is now the arbiter of war and peace, suddenly finds this intolerable. Or let us suppose that the chemical-weapons inspections take a dramatic turn, requiring a response and military strikes. When one of the above happens, we will remember Winston Churchill’s famous and fateful phrase, adapted to the present context: ‘You were given the choice between strikes and dishonor. You chose dishonor and you will have strikes.’”

Masha Gessen / New York Times

“As he lay dying in a London hospital in November 2006, the Russian secret-police whistleblower Alexander Litvinenko dictated his final statement, addressed to President Vladimir Putin: ‘You have shown yourself to be as barbaric and ruthless as your most hostile critics have claimed. You have shown yourself to have no respect for life, liberty or any civilized value. You have shown yourself to be unworthy of your office, to be unworthy of the trust of civilized men and women.’

“Litvinenko’s death was the world’s first confirmed case of death by poisoning with polonium-210, a rare and highly radioactive isotope. The substance itself was traceable to Russia, where it is manufactured in small quantities for industrial use, and to two Russian men who had met with Litvinenko shortly before he fell ill. Attempts to investigate the death have been stymied by Russia’s refusal to extradite the men and by pressure the Kremlin has apparently exerted on the British government.

“Still, amid the many tragedies that have marked Putin’s 14-year tenure as Russia’s leader, Litvinenko’s death remains the biggest smoking gun; Polonium is such a highly controlled substance that many believe people it could not have been released and used as a weapon of terror without authorization from the Kremlin.

“Now the man who is widely suspected of allowing a nuclear weapon to be used to silence a single opponent of his regime has put himself forward as the broker in the project of disabling the chemical weapons arsenal of his ally Bashar al-Assad, who has used these weapons against his own domestic opponents.”

Douglas J. Feith / Wall Street Journal

“Bashar Assad may have pulled off the most successful use of chemical weapons in history. For the two years leading up to the Aug. 21, Damascus sarin gas attack, President Obama was saying that the Syrian dictator ‘must go.’ No longer. In one month, Assad has risen from outlaw butcher to partner in disarmament.

“America’s Syria policy today focuses not on mass murder, or on the metastasizing humanitarian and refugee crisis, or on combating the interests of Iran and its Hizbullah proxies in keeping Assad in power. Rather, with Russian President Vladimir Putin’s help, U.S. policy under President Obama is concentrating on chemical-weapons disarmament.

“Secretary of State John Kerry labors to enlist Assad in an arms-control project even while alleging that the dictator has used nerve gas in violation of Syria’s obligations under the 1925 Geneva Protocol. U.S. policy is not to oust the Assad regime or even to encourage the Syrian people to do so. President Obama has now created a U.S. interest in preserving Assad in power.

“This means Assad must stay, not go, for he is needed to negotiate and implement an arrangement to destroy Syria’s chemical weapons. The arrangement, if successfully negotiated, will take years to implement.  Arms control evidently means never having to say you’re sorry.

“Meanwhile, the Syrian rebels are exasperated and mistrustful, having seen Washington dangle the prospect of U.S. military strikes, only to back away. The Iranians are drawing comforting lessons about the lengths that the Obama administration will go to avoid military action in the Middle East. The Russians have been promoted from reprehensible accomplices in Assad’s evil to indispensable peace negotiators – while they remain accomplices to that evil.”

Tim Montgomerie / London Times

“A presidency that began with such high expectations is confirming America’s decline as a world power.

“He was going to end wars. Slash unemployment. Heal America’s racial divides. In one giddy moment Barack Obama even promised that his election ‘was the moment when the rise of the oceans began to slow and our planet began to heal.’ Verily, verily, the political messiah had arrived!

“Except, of course, he hadn’t. In the words of two Hollywood blockbusters that, this summer, have portrayed disastrous events at 1600 Pennsylvania Avenue, Olympus has fallen. It’s White House Down. Barack Obama’s approval ratings aren’t yet disastrous – although they are as bad as George W. Bush’s were at the same stage of his second term – but he’s lost the respect of America’s opinion-formers and it’s likely that wider public disillusionment will follow....

“The mess originates from Mr. Obama’s initial decision to draw a red line against any use of poison gas. In August last year he made it ‘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 moving around or being utilized.’ It was never an honest position. He only drew the red line because the U.S. State Department had assured him that it would not be crossed. Assad wouldn’t, officials calculated, use chemicals weapons. Russia, the Syrian regime’s protector and arms supplier, wouldn’t let him. The chemical weapons red line lent Mr. Obama – a president determined to focus on the economy – a position of moral high-mindedness that disguised his perhaps understandable unwillingness to intervene in Syria’s civil war.

“Fast forward to the last month and Mr. Obama began to distance himself from his own red line. It wasn’t my red line, he pleaded, but the world’s. There have been almost too many flip-flops to mention. John Kerry, Mr. Obama’s Secretary of State, first said that any military strikes would be ‘unbelievably small, limited.’ Mr. Obama had to disown him by asserting that the ‘U.S. military doesn’t do pin pricks.’ After Mr. Kerry had opened the door to ‘boots on the ground,’ Mr. Obama ruled them out.

“Then, after Mr. Kerry had perhaps accidentally floated the possibility of allowing Assad to decommission his chemical arsenal, a State Department official described Mr. Kerry’s words as entirely ‘rhetorical.’ She went on to explain: ‘This brutal dictator with a history of playing fast and loose with the facts cannot be trusted to turn over chemical weapons.’ But America is now trusting him to disarm. Worse, the channel for this trust is Vladimir Putin, a man trained by the KGB to lie and deceive....

“Mr. Obama is the third successive two-term president who has seen America’s global leadership erode. From 1993 to 2001 under Bill Clinton America enjoyed an infamous holiday from history. It did not deal with the simmering terrorist threat that exploded on 9/11. From 2001 to 2009 George W. Bush wielded American power, but clumsily. Then came Mr. Obama. America’s 44th president hasn’t been able to deliver any of his signature foreign policy commitments. There’s been no progress on climate change or free trade. Russia’s influence in the Middle East is at a new high. China’s cyber war against Western interests is almost unchallenged. Iran is ever closer to acquiring nuclear weapons....

“The anti-Americans will welcome a humbler, withdrawn America but expect the loudest cheers from those nations who have always hated American values. Without a policeman on the world stage, expect more trouble and more vigilantism. It won’t just be the likes of Damascus and Pyongyang who will have noticed America’s weakness. So will have Tel Aviv. You can be sure Israel won’t be relying on Mr. Obama to stop Iran acquiring a nuclear weapon.”

Philip Stevens / Financial Times

“The latest turns in the Syrian crisis have thrown up a search for wider lessons. One inference might be that the U.S. president should, in future, be more decisive in the use of force. An intelligent conclusion would be that the deal to rid Syria of chemical weapons underscores a need for the more forceful deployment of U.S. diplomacy across the Middle East. President Barack Obama could make a start by shaking hands with his Iranian counterpart Hasan Rohani....

“There is a more important carry-over from Syria to Iran. True to form, Benjamin Netanyahu, Israel’s prime minister, would have us believe the U.S. should now rush to attack Tehran. The reverse is true. To recover credibility, the U.S. needs legitimacy. Mr. Obama cannot contemplate war unless and until all other avenues have been exhausted – and are seen to have been exhausted.

“At this point, I sometimes hear U.S. officials say they have done as much as could be expected to try to negotiate with Iran. Did not Mr. Obama ‘reach out’ at the start of his presidency with a promise of honest and mutually respectful engagement? Has not the administration stuck with the talks process between Iran and the six world powers? And alongside a tightening of sanctions, Washington has made a series of unpublicized bilateral overtures.

“Maybe so. The effort, though, has lacked two vital ingredients: the first is recognition of Tehran’s fear that the U.S. wants regime change – probably the main driver of the nuclear program; the second is an offer of an everything-on-the-table dialogue reaching beyond the nuclear issue to a normalization of relations.

“Negotiations, of course, would not carry a guarantee of success. But, bombing or no bombing, it should be clear by now that Tehran will not give up the right to a civilian nuclear program. Sanctions have hurt, but they have also proved Iran’s resilience. The discussion that matters is about whether it will choose to cross the threshold to become a nuclear weapons state.

“Mr. Rohani has struck the right tone, but the new president is more a pragmatist than a moderate, and must defer ultimately to Ayatollah Ali Khamenei, the supreme leader. Talks, though, are a precondition for everything and anything else. Mr. Obama has exchanged letters with the Iranian president. The next step is for the two men to talk. The meeting next week of the UN General Assembly in New York provides the opportunity.”

Editorial / Wall Street Journal

“Two weeks ago, Secretary of State John Kerry called Assad ‘a thug and a murderer’ who had ‘used those weapons multiple times this year.’ Today, we are told he has been knocked off his tank on the road to the Damascus suburbs and will come clean about his entire CW stockpile in a week and then lead U.N. inspectors to every cache. All of this is supposed to be guaranteed by the Russians who for two years have protected Assad from any international sanction and still insist he didn’t use chemical weapons.

“Merely stating these expectations underscores their implausibility, and already the Russians are disputing U.S. information about where and how much poison gas Assad holds. There are a hundred ways to cheat on this agreement, starting with the declaration....

“U.S. officials are insisting that Mr. Obama reserves the right to use force without U.N. approval, but the prospect of that is vanishingly small. The President leapt at Mr. Putin’s diplomatic offer precisely because he knew he was headed for defeat in Congress. The Russians and Assad know Mr. Obama won’t take that political risk again.”

Iran: In an interview with ABC’s “This Week,” President Obama had some of the following thoughts on Iran, drawing another ‘red line’ on Iranian nukes.

“My suspicion is that the Iranians recognize they shouldn’t draw a lesson that we haven’t struck [Syria] to think we won’t strike Iran....

“I think what the Iranians understand is that the nuclear issue is a far larger issue for us than the chemical-weapons issue, that the threat against Israel, that a nuclear Iran poses, is much closer to our core interests,” he said.

But this week all we saw was a major charm offensive on the part of Iran’s leadership, led by new President Hasan Rohani, who is heading to New York for the U.N. General Assembly where he will make a closely watched speech.

In an interview with NBC News, Rohani said Iran had “never pursued or sought a nuclear bomb and we are not going to do so.”

“We have time and again said that under no circumstances would we seek any weapons of mass destruction, including nuclear weapons, nor will we ever.”

Rohani added: “In its nuclear program, this government enters with full power and has complete authority. We have sufficient political latitude to solve this problem.”

Rohani also spoke of a “commission for citizens’ rights.”

“In today’s world, having access to information and the right of free dialogue and the right to think freely is the right of all people, including the people of Iran,” he said in his interview with NBC’s Ann Curry.

The White House on Wednesday gave details of a recent exchange of letters between Presidents Obama and Rohani.

“In his letter the president indicated that the U.S. is ready to resolve the nuclear issue in a way that allows Iran to demonstrate that its nuclear program is for exclusively peaceful purposes,” said White House spokesman Jay Carney.

“The letter also conveyed the need to act with a sense of urgency to address this issue because, as we have long said, the window of opportunity for resolving this diplomatically is open, but it will not remain open indefinitely,” Carney added.

On Tuesday, Supreme Leader Ayatollah Ali Khamenei gave the strongest hint yet of Iran’s possible flexibility in future talks with the West.

In a speech to the Revolutionary Guards, Khamenei said: “I don’t oppose diplomacy. I am in favor of showing a champion’s leniency. A wrestler may give way for tactical reasons, but should remember who is its opponent and enemy.”

The head of Iran’s nuclear agency, Ali Akbar Salehi, told reporters on Wednesday, “We are very optimistic about the process that has started to resolve the nuclear issue.”

As part of the charm offensive, political prisoner Nasrin Sotoudeh, who was arrested in 2010 and jailed for six years on charges of acting against national security, was released along with ten others.

Of course all of the above on the part of Iran is designed to get it out from under the crippling sanctions.

Hasan Rohani wrote an op-ed for the Washington Post this week (similar to Vladimir Putin’s missive in the New York Times) and Rohani’s essay is nothing but garbage. We all know that if Iran had a peaceful nuclear program all these years, then why was it trying to hide it at all costs? Why did it literally pave over the nuclear trigger test site at the military base of Parchin that the International Atomic Energy Agency has been denied access to? I don’t need to say any more than this.

But, just as I urged the United States to negotiate with former Iranian leader Rafsanjani through back channels going back over ten years ago, we should talk to Rohani, though we cannot let Iran’s stall game go on forever. I just have zero confidence that President Obama will do the right thing.

As for Russia’s role, Foreign Minister Sergei Lavrov apparently “mentioned the possibility of Iran ‘voluntarily’ suspending uranium enrichment above the 20 percent level in exchange for full recognition of its right to enrich uranium,” this according to Amir Taheri in an op-ed for the New York Post.

Taheri:

“Lavrov’s plan offers great advantages to Iran.

“First, if America buys into it, it will abandon its freedom to develop a policy of its own on Iran.

“Second, the five Security Council resolutions imposing sanctions on Iran would be set aside.

“Third, the fact that Iran has been violating the Nuclear Non-Proliferation Treaty for more than 20 years will be forgotten – just as Assad’s use of chemical weapons, a war crime and a crime against humanity, is not mentioned in the Russo-American accord.

“Fourth, Iran will get to keep almost all of the 4,000 kilograms of uranium it has illegally enriched. To give Obama something to chew upon, Tehran may agree to transfer to Russia the uranium enriched to 20 percent. This would provide TV footage to create the illusion that Obama achieved something.

“Fifth, as Lavrov made clear, the Iranian move would be reciprocated by a lifting of sanctions against the Islamic Republic – including the U.S. and European Union sanctions that go beyond those imposed by the United Nations....

“The ease with which Russia managed to seize control of U.S. policy on Syria has encouraged Rohani that similar results could be obtained on the Iranian issue....

“At next week’s U.N. General Assembly, Rohani will be all smiles and will do his utmost to appear moderate and reasonable. Lobbyists have already fixed a series of media appearances and private meetings for him, including with select Jewish figures in New York....

“The view in Tehran is that, since Obama proved ready to eat humble pie on Syria, he should be helped to do the same on Iran.”

Editorial / New York Post

“(Sanctions have taken a toll), and Iran now seeks relief. Its leaders reason, no doubt, that if Syria could use dialogue and a mere promise to turn over its chemical weapons to escape reprisal for having used them, Iran might similarly jaw-jaw some benefits for itself – and buy yet more time to build its bombs.

“Down that path lies great peril.

“If Tehran is truly well-intentioned and ready to make concessions, well, who’s stopping it? Forget talks; Iran can simply end its nuke program (and show proof) – instead of continuing to deny it has one.”

Editorial / London Times

“Mr. Obama’s eagerness to embrace a diplomatic alternative to military strikes on Damascus has been seized on by hawks in Tehran as a signal of weakness that they, too, should exploit. In a worst-case scenario they may succeed, using talks to play for time to bring Iran to nuclear capability. This makes it all the more important that Mr. Obama needs the real lesson of Syria for U.S. foreign policy and for the civilized world’s efforts to deny Iran the bomb. That lesson is that when dealing with rogue regimes no meaningful diplomatic breakthrough is achievable if not backed up by a credible military threat.

“One of Mr. Obama’s strengths as a campaigner – his belief in the power of words alone – is one of his weaknesses as a leader. As he ponders what to say in New York on the same day as Mr. Rohani’s maiden speech to the U.N., there is real risk that he will let fantasy eclipse reality. In dealings with Iran, there is no breakthrough until the uranium enrichment has stopped.”

Israel’s Prime Minister’s Office in a statement:

“One should not be taken in by Rohani’s deceptive words. The same Rohani boasted in the past how he deceived the international community with nuclear talks, even as Iran was continuing with its nuclear program....

“Only a combination of stopping uranium enrichment, removing all enriched uranium, dismantling the nuclear facility at Qom and stopping the plutonium track will constitute a real halt to the nuclear program.

“Until these four steps are taken, the international community needs to intensify the pressure on Iran.

“The test is not Rohani’s words, but rather the Iranian regime’s actions. Even while Rohani was being interviewed, Iran was moving forward energetically with its nuclear program,” it said.

Rohani, in the same NBC News interview, said Iran was not seeking war, but slammed Israel for bringing “instability” to the Middle East. He called Israel “an occupier, a usurper government that does injustice to the people of the region,” and that is “has brought instability to the region with its war-mongering policies.”

Michael Young / Daily Star

“Within a week, one story – punishing Bashar Assad for his probable use of chemical weapons against civilians in the Ghouta region – has been pushed aside by another: the possibility of a rapprochement between Iran and the United States, even as Washington is coordinating its policies toward Syria with another adversary, Russia.

“It’s best in these cases not to get carried away by optimism. Diplomacy and dialogue are not ends in themselves. Yet the potential opportunities are great, whether for Syria or the rest of the Middle East, if broader understandings can be reached between the main regional and global actors. And tectonic shifts, if they occur, may ultimately ensure that Assad is politically disposable.

“Iranian President Hasan Rohani has made normalization with the West a central plank of his political program. Critically, he seems to have the support of the supreme leader, Ali Khamenei. On Tuesday, Khamenei endorsed Rohani’s position, saying Iran should embrace diplomacy over militarism and that it was time for ‘heroic leniency.’

“In remarks to the Iranian Revolutionary Guard Corps, Khamenei said, ‘[It] is not necessary for the IRGC to be active in the political field, but defending the revolution requires that they understand political realities.’ This appeared to be Khamenei’s way of legitimizing Rohani’s opening in front of an institution that, potentially, may pose problems for the president down the road.

“From the Obama administration’s perspective, bringing Iran into negotiations on Syria’s future is necessary, even if the pitfalls are many. Supporting Assad’s regime has become a burden even for his closest partners, who might welcome a transition away from the Syrian president if it means they can preserve their interests in Syria.

“The Obama administration has no intention of challenging this logic, as it searches for a cure for its Syrian headache. The notion that the U.S. will seek to deny Moscow and Tehran a political foothold in Syria seems absurd, as the Americans view Russia, and probably Iran, as parties that can help deliver a peaceful outcome in the country.

“Still, Russian and Iranian interests in Syria do differ, and the U.S. can play on this to its advantage in formulating postwar preferences. At the same time, American, Russian and Iranian interests are not as far apart as they appear. All three want a political solution; all are wary of the emergence of jihadist groups; and all perceive that the side they are backing in Syria is probably unable to win a military victory.

“They must also sense that Assad today is the primary obstacle to a political solution. Iran has poured much money into the war on Assad’s behalf, and has instructed Hizbullah to bolster his regime militarily. While this allowed Assad to regain his balance, it has not brought victory, while Hizbullah has been transformed into the Assad regime’s cannon fodder, a situation the party cannot relish.”

Roger Boyes / London Times

“Israel is right to be worried. For sure, a Syria shorn of chemical weapons is a good thing for its southern neighbor. There is a legitimate fear, though, that barrels of chemicals could soon be heading for the Hizbullah militias in Lebanon before U.N. inspectors get to work. More disturbing, the Russians look set to link their role persuading Assad to declare his weapons with a broader push to get Israel to admit to its own nuclear program. Moscow is arguing for a regional disarmament that could take in Israel – surely a step too far even for the Obama Administration.

“U.S. official complain privately about Israel’s lack of trust in Washington. By putting this on display, they say, Israel further undermines American credibility. Israelis themselves admit to chronic over-anxiety about Mr. Obama but conclude that paranoia is to be in possession of all the facts. Fact 1: under a weakened Assad, Iranian tutelage over Syria is growing fast. Fact 2: Sinai is becoming dangerously radicalized. Fact 3: Hizbullah units are being strengthened by the Syrian crisis. Fact 4: The U.S. is not helping significantly in any of these spheres, although they all directly threaten Israel.

“Benjamin Netanyahu will use a trip to the U.S. this month to warn that the Syria formula – threat of force prompts disarmament – won’t work when applied to Iran. Will President Obama listen? Almost certainly not. If Israel acts pre-emptively against Iran, it will be acting alone. That is the only sensible reading of U.S. behavior over the past two years....

“For the Israeli political class an Iranian bomb remains an existential issue. With or without America it has to be stopped. Indeed Israel has been discussing comments by its air force chief Amir Eschel, which reflected how air power should be used in a moral cause. Since these were public musings of the man who would plan a possible attack on Iran, they were delivered in code.

“In the spring of 1944, he said, the Allies had achieved air supremacy over Auschwitz-Birkenau, they had accurate intelligence – and they knew that a trainload of Hungarian Jews was en route to the concentration camp. Politicians decided not to act. Not because they were anti-Semites but because, he said, it was ‘easier not to bomb than to bomb.’

“It is harsh to say Mr. Obama has been taking the easy road in not striking Syria. Nothing in the Middle East has come easy to him. The region – and above all Israel – would like to know, however, where U.S. policy is heading, because that part of the world has rarely seemed so precarious, so ready to slip into chaos.”

Street Bytes

--Stocks rose for a third consecutive week, despite the Dow Jones’ 185-point drubbing on Friday owing to the uncertainty in Washington over the budget, debt ceiling and ObamaCare. For the week the Dow nonetheless rose 0.5% to 15451, after hitting a new all-time closing high on Wednesday, following the Fed announcement, of 15676. The S&P 500 rose 1.3% to 1709, hitting its own all-time high at 1725 along the way. And Nasdaq continued its string of strong performances, up another 1.4% to 3774. The tech barometer is up an even 25% on the year.

Monday, Goldman Sachs, Visa and Nike replace Alcoa, Hewlett-Packard and Bank of America in the Dow Jones Industrial Average, which will make for a far more volatile index as it’s price-weighted.

--U.S. Treasury Yields

6-mo. 0.04% 2-yr. 0.33% 10-yr. 2.73% 30-yr. 3.76%

Treasuries rallied strongly on the Fed’s decision not to taper, but 2.70% on the 10-year seems to be a new key level to watch.

The August consumer price index came in at 0.1%, ditto ex-food and energy. For the 12 months the CPI is up 1.5%, 1.8% on the core. I didn’t have a chance last time to report on the producer price data, which came in up 0.3%, unchanged on core, while year over year, the PPI was up 1.4%, up 1.2% ex-the stuff we need. [I also need to note for the record that last Friday’s retail sales came in at a less than expected rise of 0.2%.]

--China’s increased its holdings of Treasuries in July by $1.5 billion to $1.277 trillion, after declining the prior month, according to Treasury Department data. Treasuries held by Japanese investors, who have the second largest stake in U.S. government debt, rose to a record $1.135 trillion.

All foreign investors own 48.7 percent of the marketable debt, the least since Feb. 2007. [Bloomberg]

--Chinese property prices rose again in August...up in 69 of 70 major cities, the fourth month in a row with this ratio. Prices in Beijing rose 14.9% from a year earlier, while in Shanghai they increased 15.4%. Authorities continue to introduce measures designed to cool the bubble (not everyone believes it is one) but they’ve met with mixed results.

--Japan’s exports rose the most since 2010 in August, up 14.7% from a year earlier, the sixth straight advance, thus boosting Prime Minister Shinzo Abe’s growth drive. Shipments to the U.S. jumped 21% from August 2012, while those to China, Japan’s biggest trading partner, surged 16%.

--ObamaCare

According to a Washington Post-ABC News poll, six in ten Americans say they do not have the information necessary to understand the changes the law will bring. [A Wall Street Journal/NBC News poll found that nearly 70% said they didn’t understand the health-care overhaul or only understood a part of it. Only 31% said they thought it was a good idea.]

Meanwhile, from the Wall Street Journal:

“Less than two weeks before the launch of insurance marketplaces created by the federal health overhaul, the government’s software can’t reliably determine how much people need to pay for coverage, according to insurance executives and people familiar with the program.

“Government officials and insurers were scrambling to iron out the pricing quirks quickly, according to the people, to avoid alienating the initial wave of consumers.”

From Alex Nussbaum / Bloomberg:

“Barack Obama wanted to change American health care as we know it. And he is, in ways that go far beyond the goals of the Affordable Care Act.

“For weeks, headlines have cataloged the upheaval at private employers: UPS dropping coverage for employed spouses, IBM reworking retiree benefits. Yesterday came the biggest change; Walgreen Co., the largest U.S. drugstore chain, told 160,000 workers they must buy insurance through a private exchange rather than having the company arrange their coverage.

“None of the moves was dictated by the health-care law. All, though, have occurred in an environment shaped by ObamaCare, which has pushed businesses and governments to reexamine their health-care role as costs soar and national priorities shift. The act now is giving businesses cover to loosen the decades-old link between jobs and health insurance, a shift that may further cloud the outlook for an already unpopular law.”

Stanford University researchers concluded in a study last week that an unintended consequence of the law will be higher taxpayer costs. “Rising premiums could drive workers from employer plans to coverage under the health law, they wrote in a report, boosting costs for the government by as much as $6.7 billion.” [Alex Nussbaum]

Independent economists at the federal Centers for Medicare and Medicaid Services estimate that total U.S. spending on healthcare will surge over the next decade, hitting $5 trillion in 2022, up from $2.9 trillion this year and it will push healthcare spending to nearly 20% of the U.S. economy by the next decade. [Chad Terhune / Los Angeles Times]

The rate of increase in health-care spending has dropped in recent years, as you’ve seen the president claim credit for, but everyone agrees spending will jump by over 6% next year, though this is less than first projected and below the 9% pace of 2001-03.

57% of Americans opposed the health-care law in a poll this month by CNN/ORC, a turnaround from January when the survey found 51% in support.

--JPMorgan Chase admitted it broke the law, a rarity on Wall Street, in agreeing to pay fines of $920 million as part of the settlement over the “London Whale” trading fiasco. Various regulatory agencies, including the Securities and Exchange Commission, alleged the bank suffered from widespread breakdowns in controls and management.

In the old days, Wall Street could settle on a case without admitting or denying guilt, but under new SEC Chairwoman Mary Jo White, that has changed.

The “Whale” trades were in complex derivatives and resulted in losses of more than $6 billion once they came to light in 2012.

Critics of the settlement note that no individual executives were named as part of the fine.

But having admitted guilt, JPMorgan opens itself up to a slew of civil lawsuits and further government investigations.

For its part, JPM said it has added 4,000 employees dedicated to its control efforts since the beginning of last year, including 3,000 in 2013.

In a memo to employees on Tuesday, CEO Jamie Dimon said in part:

“If you don’t acknowledge mistakes, you can’t learn from them.... One key initiative across our enterprise has been to simplify our business and refocus our priorities.”

--FedEx Corp. shares jumped as the company reported better than expected earnings and announced it would be able to raise rates next year due to improving global economic conditions, particularly in Europe and China. This is good.

--A few unemployment rates for August, as just released by the government on Friday.

California 8.9%
Illinois 9.2%
Nevada 9.5% [highest]
New Jersey 8.5%
New York 7.6%
North Dakota 3.0% [lowest]
Texas 6.4%

--ShopperTrak, which measures store traffic in 60,000 locations world-wide, expects retail sales in November and December to rise by 2.4% from a year earlier, less than the 3% increase in 2012 and below the gains of 4% in 2010 and 2011. This estimate could change considerably over the course of October for all manner of reasons, including what happens in Washington.

--BlackBerry launched its biggest smartphone to date, the Z30, which features a 5-inch screen and a larger battery the company says should last more than two days between charges.

But of course the company is struggling mightily, accounting for just 1.7% of all smartphones shipped to the U.S. during the first half of the year. And so it’s no surprise that BlackBerry Ltd. also announced it was cutting staff by a whopping 40% by the end of the year. Currently it has about 12,700 employees. 5,000 jobs were lost last year.

Then late Friday the company reported a nearly $1 billion second-quarter loss, a week earlier than expected, and the shares dropped about 20% on the news.

--Of course once popular BlackBerry lost out over the years in a big way to the likes of Apple, which on Friday rolled out the latest iPhone models around the world and by all reports sales were quite brisk, though it also seems there are supply issues.

[Pssst...I still have a Palm...which is like owning an Edsel...]

--While cloud computing companies Salesforce.com and Workday kick butt, Oracle Corp. continued to suffer from lackluster growth, with the company reporting revenue rose a meager 2% in the fiscal period ended August 31, less than Street expectations, though profit rose 8%.

Oracle is frantically trying to play catch-up, while Larry Ellison worries more about his America’s Cup entry, which is down 8-3 as of late Friday, with Emirates Team New Zealand needing just one more win.

We also learned Friday that Ellison’s pay package was down 18% for fiscal 2013...to $78.4 million.  It’s enough to make you want to throw up.

[Salesforce and Workday announced an increased partnership this week...a lethal combination, one would think.]

--Air France, part of the Air France KLM group, announced plans to cut a further 2,800 jobs through voluntary layoffs, this on top of 5,100 earlier announced cuts.

--Kaja Whitehouse / New York Post

“Ten months after the Justice Department hired an expert to distribute $2.3 billion in recovered Bernie Madoff loot, the cash is sitting in a bank account with no clear plan for it to be distributed to victims.

“In fact, for burned investors of the convicted Ponzi king, it may be later rather than sooner before they are reunited with their lost investments, according to a recent update posted on the Madoff Victim Fund website.

“In the controversial update, Richard Breeden, the former chairman of the Securities and Exchange Commission who was retained last December to distribute the cash, said he has not yet devised a process to determine who gets paid.”

These assets are different from those recovered by Irving Picard, the trustee assigned to marshal assets left behind by the bankruptcy of Bernard L. Madoff Securities. Picard has distributed $4.76 billion of $9.35 billion recovered to date. $20 billion was lost by investors in Madoff’s funds as of Aug. 20.

--The national U.S. average gasoline price was above $3 a gallon for a record 1,000th consecutive day, Tuesday, according to AAA.

But new vehicles are more fuel efficient and we’re driving less, the latter a response to the prices.

--North Dakota set all manner of energy-related records for the month of July. A record number of wells were in production (9,322), oil production hit a new high (108,258 barrels per day), and natural gas production set a record (970 million cubic feet per day).

North Dakota is No. 2 behind Texas in terms of production of natural resources in the United States. Remarkable.

--Saudi Arabia is producing oil at a pace not seen since at least the 1970s, 10.2 million barrels a day, or more than $1bn a day in export revenues.

--The New York Times’ Jeff Sommer had a piece highlighting the work of Salil Mehta, a statistician and econometrician who was director of analytics in the Treasury Department, and is now an independent consultant and adjunct professor at Georgetown University.

Among Mehta’s findings: Five of the 10 worst days since the Dow’s inception have occurred in October, along with one in November, and one in the first half of December. And six of the 10 worst days were Mondays.

So then he looked at the 1 percent of days with the biggest stock declines, the cutoff for which turned out to be a daily drop of 3.2 percent. On average, there have been five declines that big every two years, although we haven’t had one since November 2011.

“Of the 294 days that make up the worst 1 percent of market declines, 45 occurred in October, 33 in September and 43 in November. Thirty such days occurred in December. That compares with an average of 17.9 for the other eight months.” [Jeff Sommer]

85 of the 294 occurred on Mondays.

--According to a Census Bureau report, women earned 76.5 cents for every dollar that men did last year, essentially the same as 2011 and pretty much in line with the past decade, after women made steady gains in the 1980s and 1990s. [It was 60.2 cents in 1980, specifically.]

--Ty Warner, the billionaire creator of Beanie Babies toys, faces up to five years in prison after agreeing to admit to a charge of tax evasion. Federal prosecutors said Warner “went to great lengths” to hide more than $3 million of income in a secret Swiss bank account. Warner agreed to pay a $53 million fine. Warner is one of those clients of UBS who set up the Swiss accounts that allowed them to hide income from U.S. tax authorities.

--I posted a good look back at the 2008 financial crisis on my “Wall Street History” link, utilizing my own “Week in Review” archives.

--Stocks of sea bass have declined to the lowest point for two decades, according to the International Council for the Exploration of the Sea, which recommends a 36% cut in catches throughout the English Channel, Irish Sea and southern Northern Sea. [This is virtually impossible to enforce.]

Just beware of fake sea bass on the menu, folks. It’s probably crappy [or ‘crappie’ for aficionados.]

Foreign Affairs, part deux

Israel: The United States is upset with a call by Arab leaders to single out Israel for criticism over its assumed nuclear arsenal. Iran said Israel’s nuclear activities “seriously threaten regional peace and security.” [That’s rich.]

An analysis by the Federation of American Scientists concludes Israel holds a nuclear arsenal of 80 weapons that were manufactured no later than 2004. Israel is believed to have enough nuclear-weapons material for between 115 and 190 warheads, but the report provides no explanation for why Israel stopped warhead production at 80.

Iraq: The violence continues, with a wave of car bombings on Sunday killing at least 58 in mostly Shiite-majority cities. 4,000 have been killed since April. 800 in August, according to the United Nations.

Libya: A report delivered to the U.N. General Assembly addressed the increasing violence in Libya, with oil exports crippled by armed militias and eastern regions threatening to break away.

The trial of Saif al-Islam Gaddafi, the son of the former dictator, is due to begin in Tripoli, but last I saw there was no guarantee the Zintan militia holding him would deliver their prisoner to court.

The report said the central government faced anarchy. The country’s justice minister noted:

“If you don’t have security, you lose everything. You cannot have a functioning state without security.”

Back to the oil situation:

“Guard units for oilfields in the eastern Benghazi region unilaterally closed oil terminals last month, causing the country’s oil output to fall from 1.6 million barrels a day to fewer than 100,000.”   [AFP]

Lebanon: According to a World Bank report, the war in Syria and the influx of nearly 1 million refugees into Lebanon has cost the country billions of dollars. Government officials complain the international community has not stepped up with support. On top of this, economic losses to Lebanon resulting from the Syrian war are estimated at $7.5 billion. The World Bank says GDP has shrunk by 2.9 percent annually in the past three years.

Separately, Lebanon’s parliament was told commercial activity across the country has declined between 15 and 70 percent. 15% in Beirut...70% in Baalbek (Hizbullah territory near the Syrian border).

Yemen: We got a reminder on Friday that this place still matters in terms of being a hotbed of al-Qaeda activity as militants killed at least 38 Yemeni soldiers in a series of attacks in the southern province. It seems al-Qaeda took advantage of heavy fog to surprise troops in their barracks.

Pakistan: The Taliban assassinated a major Pakistani general, saying afterwards it did so “to show that there is no cease-fire.”

Russia: Vladimir Putin gave a major speech this week wherein he said among other things:

“Sovereignty, independence, the integrity of Russia – those are red lines that no one is allowed to cross,” he warned.

Putin said Russia needed to avoid the example of many in Europe who were “going away from their roots,” such as on social issues and excessive “political correctness.”

“A policy is being conducted of putting on the same level multi-child families and single-sex partnerships, belief in God and belief in Satan The excesses of political correctness are leading to the point where people are talking seriously about registering parties whose goal is legalizing the propaganda of paedophilia,” Mr. Putin claimed.

“People in many European countries are ashamed, and are afraid of talking about their religious convictions. Religious holidays are being taken away or called something else, shamefully hiding the essence of the holiday,” Putin added.

“We need to respect the rights of minorities to be different, but the rights of the majority should not be in question.”

Putin defended the Russian law banning promotion of homosexuality.

Meanwhile, Republican Sen. John McCain was allowed the opportunity to respond to Vladimir Putin’s New York Times op-ed, penning a piece of his own in the Pravda newspaper. McCain wrote:

“I am pro-Russian, more pro-Russian than the regime that misrules you today. I make that claim because I respect your dignity and your right to self-determination.

“President Putin doesn’t believe in these values because he doesn’t believe in you. He doesn’t believe that human nature at liberty can rise above its weaknesses and build just, peaceful, prosperous societies. Or, at least, he doesn’t believe Russians can. So he rules by using those weaknesses, by corruption, repression and violence. He rules for himself, not you.”

McCain criticized Putin specifically for the death in prison of Russian lawyer Sergei Magnitsky, as well as for siding with Bashar Assad.

Pravda posted it online Thursday in English and in Russian.

As for American attitudes towards Russia, a Gallup poll released Wednesday shows that only 44% consider it an ally or friendly, down from 52% in June. Only 19% of Americans surveyed rate Putin favorably.

China: The central government established its first provincial-level coal-reduction targets in a bid to clean up its air.

The industrial region surrounding Beijing, for example, will be required to make cuts in its coal use and phase out the dirtiest industries under the new mandates.

Mexico: Well you can kiss tourism in Acapulco goodbye for years to come and the real tragedy will be all the locals out of work, as Tropical Storm Manuel destroyed the resort and its infrastructure. Where do you begin to clean up a place like that, already fighting an image of rampant crime? At what point do you as a tourist want to believe everything you eat and touch would be safe, for starters?

Brazil: President Dilma Rousseff called off a state visit to Washington next month over allegations of U.S. spying on her nation, including supposed NSA intercepts of emails and messages from Ms. Rousseff, her aides and the state oil company, Petrobras.

The allegations come via Edward Snowden. President Obama telephoned Rousseff this week to discuss the issue.

Random Musings

--David Rothkopf / Financial Times

“Barack Obama had an eventful presidency. He came into office during the worst financial crisis in three generations, helped stabilize the American economy, oversaw healthcare reform, pulled the U.S. out of two wars, gave the order to kill Osama bin Laden, won the Nobel Prize, hosted some state dinners and played some golf. Many occupants of the Oval office boast a lot less. But unless something major changes, his presidency is stalled.

“As the events of recent months have weakened the president, revealed his weaknesses and shown deep flaws in the U.S. political system, Mr. Obama now runs the risk of becoming a lame duck very prematurely. Of course, he remains powerful. Some external event – a war, a disaster, a foreign upset or opportunity, or a major misstep by his opponents in the U.S. – could restore life to his presidency. But barring a sea-change, he may achieve little more than he already has.

“Recent events illustrate the situation and offer clues as to the reasons behind it. Mr. Obama began the year with modest aspirations. Hoping that his 2012 election victory had given him a mandate, he sought to advance a limited agenda: immigration reform, resolving budget problems, perhaps some corporate tax changes and investment in infrastructure. Internationally, his goals were even simpler: get out of the wars he inherited and keep us out of trouble. He has faltered in almost all areas of this agenda....

“Arrogance and ambivalence have undercut the promise of Mr. Obama’s oratory and, indeed, of his earnest, intelligent, seemingly good character. Flashes of promise have been subsumed by circumstances, by his opponents and by the president’s own inability to build upon them. This hints at perhaps Mr. Obama’s greatest problem.

“He was such a convincing campaigner with such a great personal story that our expectations were set unreasonably high. In the end, he may prove an old maxim of U.S. politics. The people vote hoping for the brilliance of a George Washington or Abraham Lincoln. But in the end, most of the time they get a Rutherford B. Hayes – leaders who failed to live up to the aspirations of the voters or their times.”

--Maureen Dowd / New York Times...on the response to the Navy Yard tragedy...

“On the most deadly day here since Sept. 11, 2001, with the capital reeling over the sadly familiar scene of a mass shooting by a madman, the chief executive stepped to the microphones and captured the heartbreak.

“It wasn’t the chief executive of the nation. It was Dr. Janis Orlowski, the chief operating officer of MedStar Washington Hospital Center, where three of those injured were being treated.

“ ‘There’s something evil in our society that we as Americans have to work to try and eradicate,’ she said, her voice stoic but laced with emotion. On the day when she announced only hours earlier that she had submitted her resignation to take another job, she continued: ‘There’s something wrong here when we have these multiple shootings, these multiple injuries. There is something wrong, and the only thing that I can say is we have to work together to get rid of it. I would like you to put my trauma center out of business. I really would. I would like to not be an expert on gunshots.’

“Calling it ‘a challenge to all of us,’ she concluded: ‘This is not America.’

“President Obama also gave a speech Monday, talking at the White House while the drama unfolded at the supposedly secure Navy Yard nearby. He could have posted his original remarks on the White House Web site and replaced them with a Cri de Coeur on gun control, or comfort for the shaken city. The 12 who died were, after all, under his aegis as workers in a federal building.

“But, jarringly, the president went ahead with his political attack, briefly addressing the slaughter before moving on to jab Republicans over the corporate tax rate and resistance to ObamaCare.

“Just as with the address to the nation on Syria last week, the president went ahead with a speech overtaken by events. It was out of joint, given that the Senate was put into lockdown and the Washington Nationals delayed a night game against the Atlanta Braves, noting on its Web site, ‘Postponed: Tragedy.’

“The man who connected so electrically and facilely in 2008, causing Americans to overlook his thin resume, cannot seem to connect anymore.

“With a shrinking circle of trust inside the White House, Obama is having trouble establishing trust outside with once reliable factions: grass-roots Democrats and liberals in Congress.

“As Peter Baker wrote in The Times, the president is finding himself increasingly ‘frustrated’ by the defiance of Democrats who are despairing of his passive, reactive leadership.”

--Daniel Henninger / Wall Street Journal

“We should admit the obvious: Barack Obama is the most anti-political president the United States has had in the post-war era. Truman, Eisenhower, Kennedy, Johnson, Nixon, Ford, Carter (even), Reagan, Bush, Clinton, Bush. All practiced politics inside the tensions between Congress and the presidency that were designed into the system by the Founding Fathers. Not Barack Obama. He told us he was different. He is.

“Mr. Obama doesn’t do Washington’s politics. Disappointed acolytes say it is because he is ‘passive.’ That underestimates him. For Mr. Obama, the affairs of state are wholly a function of whatever is inside his mind....

“From where he sits, it is the job of the political world outside to adjust and conform to the course of the president’s mental orbit. Those who won’t adjust are dealt with by the president himself. They are attacked publicly until they are too weak politically to oppose what is on his mind.

“This is the unique Obama M.O. For historians of the Obama presidency, this September has been a case study in the 44th president’s modus operandi.

“Early in September, President Obama surprised Washington by announcing he would seek a congressional vote of support for taking action against Bashar Assad in Syria. This came after the red line went.....

“After meeting with the president, two significant political figures in Washington expressed public support for his announced plans to act against Assad – House Speaker John Boehner and Majority Leader Eric Cantor.

“The president’s decision to intervene wasn’t popular with the American public or with members of Congress, so the Boehner-Cantor commitment was a big deal....

“A week and a half later, Mr. Obama reversed course. He would not seek congressional approval. Instead it occurred to him that he could negotiate a Syrian chemical-arms reduction agreement with Russian President Vladimir Putin. The merits of that decision aside...neither Mr. Boehner nor Mr. Cantor got a heads up from the White House on the U-turn toward Russia.

“Throw a dart at the names of the other 11 post-war U.S. presidents. Would any of them have hung a Speaker of the House out to dry just before heading into negotiations with that speaker on funding the government, extending the debt ceiling or the future of your legacy achievement – ObamaCare? Barack Obama did. No problem.

“On Monday, Mr. Obama delivered what the White House called ‘Remarks by the President at the Five-Year Anniversary of the Financial Crisis.’ After waving in the direction of the Navy Yard shooting and then the 2008 financial crisis, Mr. Obama spent most of the speech’s nearly 4,000 words ripping into the congressional Republicans....

“Twice he announces, ‘I will not negotiate.’ But he is negotiating with Vladimir Putin something infinitely more difficult than a debt deal with John Boehner.

“Trace elements of normal politics are inevitable in any presidency. But this one over five years has floated beyond the American political tradition. The Obama modus operandi is reducible to this: I think, therefore you do. Everyone else who still does real politics – from one side to the other – is left to gape.”

--Once again we had an example this week in the Navy Yard shootings that claimed 12 innocent lives and the shooter, Aaron Alexis, of just how overrated America is. For starters, we had the usual rush to judgment among reporters, fed by our insatiable desire to declare every incident of this kind terrorism before any of the facts are in, and then, invariably, we learn there were missed signals that could have prevented this, be it terrorism or not.

In this case, officials at the Navy base in Newport, R.I., failed to forward a report from local police that Alexis had serious mental issues. Newport police did their job. Everyone else didn’t. Base security “did not deem Alexis to pose a threat to himself or others based on his alleged conduct at the hotel that night,” according to a Navy source who spoke to USA TODAY.

So then Navy officials in Washington weren’t alerted.

Defense Secretary Chuck Hagel said Wednesday there appeared to be “red flags” in Alexis’ background that were not acted on.

“Should we have picked them up? Why didn’t we? How could we?  All those questions need to be answered. Obviously something went wrong.”

Alexis had a secret security clearance from his time in the Navy Reserves; a clearance that normally lasts 10 years unless something of an adverse nature pops up and the employer notices.

[I was watching Greta the other night and she interviewed Rollie Chance, the man initially falsely accused by some media outlets of being the killer. My heart goes out to this innocent soul who for good reason was on the verge of tears during his interview. He didn’t deserve this.]

--In line with the above, Elaine M. Grossman / Global Security Newswire

“A two-star Air Force general responsible for overseeing atomic matters on Tuesday voiced confidence in security at service bases housing nuclear-tipped ground-based ballistic missiles and gravity bombs, following Monday’s deadly shooting at the Navy Yard in Washington.

“Asked if the Air Force would review its contractor security clearances and base-access procedures – given revelations that alleged killer Aaron Alexis had a history of mental-health problems and gun-related incidents – Maj. Gen. Garrett Harencak played down the idea that similar security gaps could affect his service’s stewardship of two-thirds of the nation’s nuclear arsenal.

“ ‘We never stop doing that,’ said Harencak, the Air Force assistant chief of staff for strategic deterrence and nuclear integration. ‘We’re always constantly self-assessing our security procedures; we’re always testing our security procedures.’”

You believe him? I sure as hell don’t. Given all the security breaches we’ve had in the past year or so? Bradley Manning, Edward Snowden et al? This nation is increasingly a bad joke.

--Awful story in Austria this week, proving we aren’t the only country with gun and mass murder issues. A “poacher” and hunter, Alois Huber, killed three police and a paramedic before setting his house on fire during a police siege of the property. Huber died in the blaze.

This fellow was known to hunt illegally, often leaving the heads of dead animals on roads. He’s now in hell.

--The first poll in the New York City mayoral race following the primaries shows why some of us have been focusing on the Democratic side, even though Gotham voters have elected a Republican or Independent for 20 years (despite a 6-1 Dems over Republicans advantage in the voting rolls). The News4/Marist/Wall Street Journal survey has Democrat Bill de Blasio with 65% to Republican Joe Lhota’s 22%. [I told you Lhota was “a loser.”] So it’s all over but the shouting. New Yorkers are primed for change, which gives me cause to once again say the majority of them are idiots.

But Mayor Michael Bloomberg has given critics ammunition in his decision not to endorse Lhota, as much as he has said de Blasio would be dangerous for the city.

Michael Goodwin / New York Post

“There’s no sense looking for logic in Mayor Bloomberg’s explanation for why he won’t make an endorsement in the mayoral race. The only way to understand the irresponsible decision is to realize the mayor thinks it’s not good for his next life to take sides in this one.

“Fearing that his philosophical ally, Republican Joe Lhota, can’t win, Bloomberg doesn’t want to get beaten up in the election and be tainted by a Lhota loss. So the mayor played Mr. Humble, saying he’s ‘never been a partisan guy’ and that ‘my job is to govern and then to help the next guy.’....

“It is especially odd to claim that New York’s interests are best served by his neutrality. His first campaign, in 2001, was successful largely because Rudy Giuliani endorsed him. Had Giuliani stayed silent, far-left Democrat Mark Green would have been mayor.

“That scary thought should compel Bloomberg to man up because this race is a sequel to 2001....

“When he endorsed Bloomberg in 2001, Giuliani was dealing with the aftermath of 9/11. He, too, was concerned about the transition to a next mayor, and refused to criticize Green when he made his choice nine days before the general election.

“ ‘I wasn’t sure it was the right time to enter into any form of partisan politics,’ Giuliani said then. ‘I have to continue to run the city. I have to continue to keep the city together.’

“Giuliani found a way to balance politics and governing in those awful days, and Bloomberg has a clear duty to find one now. It’s part of the job.”

--The Star-Ledger’s veteran political reporter, Tom Moran, wrote a devastating piece last Sunday on New Jersey Gov. Chris Christie.

“He’s got nearly all he wanted in his first two years, and it didn’t work.

“If you leave New Jersey for a weekend, be ready for people to ask you about Gov. Chris Christie.

“He’s the hottest property in American politics and the most compelling personality the state has produced since Tony Soprano. Polls say he is now the front-runner for the Republican presidential nomination.

“But if they ask, be sure to tell them this as well: He is the most overrated governor in America.

“Yes, he’s a skilled politician and a talented deal-maker who, for his first two years in office, got nearly everything he wanted from the Democratic Legislature.

“But it hasn’t worked. New Jersey’s economy is a mess, even compared with its neighbors. The property tax burden is up sharply. Poverty is rising. And the state’s credit rating has dropped on Christie’s watch as the long-range outlook deteriorates. His successor will inherit a bigger mess than he did.

“Crime is spiking in several of New Jersey’s hard-pressed cities, where loss of state aid has forced massive police layoffs. The state’s home foreclosure rate is the second highest in the nation and Christie fumbled a federal aid program intended to soften the blow. Yet he tried to raid a fund earmarked for affordable housing until the courts stopped him.”

As Mr. Moran further points out....

New Jersey ranks 44th in job growth since Christie took office. The unemployment rate is 8.6* percent, compared with the national rate of 7.3 percent.

*Ticked down to 8.5%, per the above noted report issued Friday.

The property tax burden grew by 18.6 percent during Christie’s first three years in office for the average family, thanks to steep cuts in rebates. That’s triple the growth rate during the final three years of his predecessor, Jon Corzine.

New Jersey’s bond rating is among the lowest in the country, and all three major rating agencies have lowered it on Christie’s watch. In April, Standard & Poor’s warned that it may lower the rating again.

Yet the voters don’t seem to care. Or as Moran writes:

“The political mystery of the year is how Christie can be so popular when the state’s economy is so rotten. Only 11 percent of New Jerseyans say they are better off than when he took office.”

Personally, I couldn’t give a damn anymore about the guy and I know already I wouldn’t support him for president.

However, when it comes to his reelection, he will still get my vote over an incredibly weak Democratic opponent.

So, in the latest Rutgers-Eagleton poll, Christie is leading his Democratic challenger, state Sen. Barbara Buono, 55% to 35%. Christie’s favorability rating remains a strong 60% in this survey.

--Newark mayor and Democratic Senate candidate Cory Booker is receiving intensified coverage of his past statements concerning “T-Bone,” an alleged drug dealer who Booker says threatened his life upon his arrival in Newark, only to come sobbing on his shoulder for help years later.

T-Bone has been a feature in many Booker speeches over the years, but the questions today are about whether the character actually exists. 

Booker says, such as he did in a recent interview, “There’s no reason to make up a story like that.”

But he can’t prove the guy is real.

And then you have increasing scrutiny into his real estate holdings, as well as annual income in excess of $500,000 in each of the last three years. Booker says most of his wealth is tied up in the startup he co-founded, Waywire, and that the stock he owns was donated to charity.

--Former majority leader Tom DeLay’s conviction on criminal charges of conspiring to funnel corporate money to state legislative candidates was overturned by a three-judge appeals court panel 2 to 1 along party lines Thursday. It’s been about eight years since DeLay was forced to leave after being indicted on the charges. He was convicted in 2010 and later sentenced to three years in prison, though he remained free while the case was on appeal.

This is one of the more complicated figures of the last 50 years in American politics. I think I commented long ago that for one thing he wrote some of the great speeches on American history, ever. But I can’t say I liked the guy.

--So I’m on the Jesuit mailing list and printed out a very long interview Pope Francis gave an Italian Jesuit journal, America, and I haven’t had a chance to read it in full yet.

But the initial headlines are truly a bombshell, as the Pope says the Church has been too focused on the issues of abortion, gay marriage and contraception and that it needs to find a “new balance.”

“The teaching of the Church....is clear and I am a son of the church, but it is not necessary to talk about these issues all the time....

“The church’s pastoral ministry cannot be obsessed with the transmission of a disjointed multitude of doctrines to be imposed insistently....

“The thing the church needs most today is the ability to heal wounds and to warm the hearts of the faithful; it needs nearness, proximity. I see the church as a field hospital after battle.”

We also learn in the interview his favorite composer is Mozart, so expect his CD sales to soar up the Billboard charts. [Half-kidding...that would be way cool if it ever happened.]

[On Friday during an audience with Catholic gynecologists, Pope Francis did denounce abortions as a symptom of today’s “throw-away culture.”]

--Bits and pieces of an extensive UN climate change report, scheduled for release in stages through next year, the first of which will be next week in Stockholm, have been leaking out the past few months. 800 scientists from around the world have been working on it for four years and while some of the language will change before the final/final report is issued, little of the 31-page summary for policy makers is expected to be.

“It is extremely likely that human influence on climate caused more than half of the observed increase in global average surface temperature from 1951-2010,” the draft says.

“There is high confidence that this has warmed the ocean, melted snow and ice, raised global mean sea level and changed some climate extremes in the second half of the 20th century.”

As reported by the Financial Times, “The report also contains new projections of how fast global sea levels will rise because scientists have gained a better understanding of how the Greenland and Antarctic ice sheets are likely to influence such an increase....

“The question of when the Arctic’s summer sea ice will vanish has...been contentious.

“Last year the summer sea ice shrank to its lowest level on record.

“This summer, the ice has failed to decline at such a spectacular rate, which many sea ice experts had expected.

“Some scientists, such as Professor Peter Wadhams of Cambridge University, predict it will vanish as soon as 2015.

“Others say it is more likely to take decades rather than years.”

--A report from the federal Centers for Disease Control and Prevention (CDC) concludes that the overuse of antibiotics has caused three kinds of bacteria – one that causes life-threatening diarrhea, one that causes bloodstream infections and one that transmits sexually – to become urgent threats to human health in the United States.

CDC Director Tom Frieden said, “It’s not too late” for the nation to rein in the infections by reserving the antibiotics for when they are truly needed, but, “If we are not careful and we don’t take urgent action, the medicine cabinet may be empty for patients with life-threatening infections in the coming months and years.”

One step that can be taken is something I have talked about since day one of this site...wash your freakin’ hands! And that applies to you, too, healthcare professionals. Handling food safely is another easy one. In this area I confess to not being smart enough with prepackaged salad. It says ‘prewashed,’ but I haven’t then been rinsing it again, as you’re supposed to.   [So I’m fining myself one beer...a domestic.]

Separately, the CDC estimates that at least two million Americans fall ill from antibiotic-resistant bacteria every year and that at least 23,000 die from those infections. This is actually far lower than previous estimates, such as a 2007 CDC study that pegged the tally at 100,000 every year.

One other item. As reported by the New York Times, a study in JAMA Internal Medicine, via the work of researchers from Johns Hopkins Bloomberg School of Public Health, “sifted through health records of more than 440,000 people in the Geisinger Health System, which operates a network of clinics and hospitals in Pennsylvania, and found that patients who lived near farms and areas where manure was dumped were 38 percent more likely to develop a MRSA infection, particularly of soft tissue or skin, researchers found.” [Sabrina Tavernise]

But you get farm fresh eggs and bacon, sports fans!!! There are always tradeoffs.

--Back to beer, and health, a potentially lethal bacteria has been found in the waste water at the Warsteiner brewer, the largest family-owned beer maker in Germany, right before Oktoberfest.

As reported by the Financial Times’ Quentin Peel, “Tourists who once flocked to the little town of Warstein in the picturesque Sauerland region to visit their favorite brewery have been warned to stay away because of the danger of the virulent Legionnaire’s disease.”

Legionella bacteria has infected 165 people and caused two deaths in the town. The discovery of it in the waste water has been described by a local newspaper as “a catastrophe.”

--What a scary deal in St. Bernard Parish, near New Orleans, as residents of one neighborhood were warned that their household water supplies contain a deadly “brain-eating” amoeba that infects its victims by swimming up their nostrils.

The single-celled organism was identified as the cause of death of a four-year-old boy last month. The thing is, the water is not dangerous when drunk but poses a deadly risk if inhaled.

How deadly? The infection, primary amoebic meningoencephalitis, is usually fatal within 12 days.

Only 128 cases have been documented in the U.S. between 1962 and 2012, but there is only one known survivor.

I mean think about it. When you wash your face, of course the water is touching your nose. Ditto bathing or showering. “Don’t let kids play unsupervised with hoses or sprinklers, which may accidentally squirt water up their nose,” reads one of the local warnings.

Actually, last week a 12-year-old Arkansas girl became the second known survivor. She is believed to have contracted the amoeba during a visit to a water park.

Doctors said the girl survived thanks to an experimental treatment that included the use of a breast cancer drug – “as well as the persistence of her mother, who refused to accept that her daughter was suffering from a ‘normal’ illness.” [Rhys Blakely / London Times]

--Thankfully the Costa Concordia was righted without breaking up and I’m assuming (since I haven’t read to the contrary) that the “toxic soup of rotting food, chemicals and other debris” didn’t spill out in large quantities during the procedure.

As reported by the Daily Telegraph, “Trapped inside the upturned hull are more than 10,800 kilograms of fish, nearly 2,500kg of cheese, 5,700 liters of ice cream in tubs, 10,800kg pasta, 900kg of onions, more than 2,000 pots of jam and nearly 17,000 tea bags. Rotting beneath the waterline are more than 7,700kg of raw beef, nearly 11,000 eggs, 2,346 hot dog buns, 370kg of rabbit meat and more than 3,785 liters of milk.

Among the food and drink that was sealed is 18,000 bottles of wine and 46,000 miniature bottles of spirits.

There was also 38 liters of insecticide. At least the engine oil and diesel was previously removed.

Oh, and you have two bodies in there (still not recovered as of Friday).

--As reported by Makiko Kitamura of Bloomberg, a study of 35 men published in the Lancet medical journal found that comprehensive lifestyle changes, including more fruits and vegetables, along with moderate exercise and meditation, “were shown to reverse signs of aging at the cellular level for the first time.” No previous studies have shown this.

The research was led by Dean Ornish, founder of the Preventive Medicine Research Institute.  Ornish’s Lifestyle Heart Trial, published in 1998, showed a reversal of coronary heart disease over five years.

The diet is all about whole foods, a plant-based regimen of fruit, veggies, whole grains and legumes, with few refined carbohydrates. Ornish said it isn’t designed to be strictly vegetarian or vegan.

“If you indulge yourself one day, just eat healthier the next.”

Veal cutlet with spaetzle, that’s what I’m talkin’ about![OK...once a month, I guess.]

--I didn’t have a chance to report on this last time but a survey of New Jersey “digital natives” – the first generation born into a digital world – found that texting while driving and using a phone without hands-free technology are rampant among their peers.

In a study of 1,000 N.J. drivers between the ages of 17 and 25 by Plymouth Rock Assurance, 73% of respondents witnessed a friend texting while driving, and 70% saw a friend using a phone without hands-free technology.

But, 57% said they witnessed a parent using a phone without hands-free technology while driving and 25% saw a parent texting while driving.

--I spent last weekend at the Jersey Shore, hard-hit Mantoloking which is still recovering from Sandy. My friend Tony has a beautiful place on the beach that suffered major damage, but unlike some of his neighbors his home is still standing and it was comfortable for the eight of us who have all been friends for over 40 years. 

One thing is for sure. Much of the region is totally unprepared for another storm. A big northeaster this winter would do major damage to many of these same communities who simply haven’t had the time (or political will) to rebuild their dune systems in the right way.

Mantoloking is a few miles north of Seaside Heights, which suffered the awful boardwalk fire about ten days ago. At first there was talk of arson, but now it’s been determined the cause was electrical wiring underneath the boardwalk that was corrupted by Sandy.

The thing is it was inaccessible, and thus not properly inspected after the storm, so you can imagine all the communities in the area with similar boardwalks are scrambling big time.

--Finally...on the social media front....I am slowly but surely emerging from the Stone Age and hired Daniele W. to get me going. I said last time I would talk about it at length today. Well, try next week. We’re playing around with a few things right now. This particular column, however, will always be my main focus.

---

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

God bless America.

---

Gold closed at $1332
Oil, $104.67

Returns for the week 9/16-9/20

Dow Jones +0.5% [15451]
S&P 500 +1.3% [1709]
S&P MidCap +1.3%
Russell 2000 +1.8%
Nasdaq +1.4% [3774]

Returns for the period 1/1/13-9/20/13

Dow Jones +17.9%
S&P 500 +19.9%
S&P MidCap +22.0%
Russell 2000 +26.3%
Nasdaq +25.0%

Bulls 42.3
Bears 21.6 [Source: Investors Intelligence]

Have a great week. I appreciate your support.

Brian Trumbore



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Week in Review

09/21/2013

For the week 9/16-9/20

[Posted 9:00 PM ET, Friday...warning: this is 40 pages printed out...]

The Federal Reserve, the Market and Washington

What a period we are going through. We almost went to war with Syria, but the situation is far from settled; Iran has launched a major charm offensive, but it is not about to give up its ‘right’ to nuclear power; there is an important German election this Sunday; the White House and Republicans are at each other’s throats again over the budget, debt ceiling and ObamaCare; and the Federal Reserve did what most didn’t think it would...nothing. ‘Most’ did not include your editor, who is now going to do a little victory lap (part of my December half-marathon training), so let’s start there.

Week in Review 8/24/2013

“Back to the Fed, to be clear (if you’re a new reader), yes, the Fed helped save the system during the financial crisis but it’s extraordinary programs of the past two years in particular have been ineffective and Ben Bernanke and his Band of Merry Pranksters should have been pulling back long ago instead of continuing to pile $1 trillion a year onto the Fed’s balance sheet. I have also said countless times that it verges on criminal to have maintained interest rates at zero, totally screwing savers, namely the elderly, for far too long. The funds rate should be 2%. $2,000 on $100,000 in savings means a lot to many Americans, and of course it would go right back into the economy.

“But now that we’ve been stuck with QE3 and since the Fed recently began talk of tapering, a majority of economists are targeting the Sept. 17-18 confab for the Fed to begin pulling back, but Bernanke and many of the Fed governors have said it depends on the data and recent figures on the economy have been anything but stellar. The yield on the 10-year Treasury hit 2.93% on Thursday, its highest yield since July 2011, because the market was convinced the Fed is reversing course shortly, but then Friday morning we had a hideous new home sales figure of 394,000, like 106,000 below estimates, and the bond market rallied because of a renewed feeling that, hey, maybe the Fed will hold off further.

“I think the Fed will. I said so last week. I also said it’s about their credibility. They have totally misgauged the strength of the economy and while they remain optimistic on future growth, the kind that would allow them to finally get off their bond-buying addiction, the facts say otherwise.”

Week in Review 8/31/2013

“I still say that if they [Ed. the Fed] want to maintain their credibility, they can’t begin to taper in September unless we see a monster number on the labor front.”

Week in Review 9/7/2013

“Add it all up and I will stick with my prediction the Fed will not move to taper in 10 days.... 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.”

I then quoted PIMCO’s Mohamed El-Erian, who was calling for the Fed to taper on Sept. 18 and I said at the end, “I disagree with Mr. El-Erian on the taper aspect.”

Week in Review, 9/14/2013

“I weigh on the side of continued Fed caution, perhaps for just one more month. I’ve said ‘no taper’ and I’m sticking to it....

“One other issue the Fed also has to weigh now. Congress. Specifically, the House of Representatives, which was to vote this week on a continuing resolution (CR) that would have kept government open through Dec. 15 at current spending levels to buy more time for coming up with a longer-term budget and debt ceiling solution.

“But the vote was postponed until next week over the issue of ObamaCare and the insistence of some in the Republican caucus that it be defunded as part of a CR, while the Democratic-controlled Senate would block or the president would veto....

“Bottom line, further uncertainty, and I have to believe Ben Bernanke is putting this into his calculus for whether to hold off on tapering at least another month.”

So there you have it. I stayed the course and while many economists, strategists and famous portfolio managers missed it, I nailed the Fed’s decision. No taper.

I also identified what I do believe was a critical factor in the end...Congress. True, the Federal Reserve Open Market Committee, in its accompanying statement on its decision to maintain existing policy, didn’t mention the twin deadlines of the budget and debt ceiling, but in Ben Bernanke’s press conference following the Fed release, he certainly made it clear this was on the FOMC’s mind.

“A government shutdown, and perhaps even more so a failure to raise the debt limit, could have very serious consequences for the financial markets and for the economy,” he said. “The Federal Reserve’s policy is to do whatever we can to keep the economy on course.”

Bernanke added that when it came to the stimulus, The Fed is “avoiding a tightening until we can be comfortable that the economy is in fact growing the way that we want it to be growing,” this as the Fed slightly lowered its projections for future growth, such as the 2014 forecast from 3.0 to 3.5% to 2.9 to 3.1%.

But there was a lot more going on this week in Fedland. Over the weekend, Lawrence Summers withdrew his name from consideration to replace Chairman Bernanke when his term expires and investors celebrated on Monday as this was supposed to mean interest rates will remain low under Janet Yellen, current vice-chair at the Fed and the new odds-on favorite. Summers cited the prospect of an “acrimonious” confirmation hearing as a reason for his move.

The Fed said in its statement this week that one of the reasons for its staying the course was the market reaction to earlier taper talk and its impact on housing as the 30-year fixed mortgage rate rose from 3.6% to 4.8%. Home loan applications are the lowest since October 2008, and this week the figure on August housing starts was less than expected.

But existing home sales for the month came in at their best pace since Feb. 2007, 5.48 million on an annualized basis, though this remains a far cry from the 2005 peak at 7.08 million. Analysts say we rushed to close before rates went up further.

David Crook of the Wall Street Journal had an extensive piece on housing this week and looked at some of the worrying signs. To wit:

“Two of the most troubling aspects of the housing recovery, so far, have related to the outside presence of deep-pocketed Wall Street investors acting out a monumental episode of ‘Flip This House.’

“Their presence is driving price increases and sales volume even as they frequently outbid individual home buyers. Indeed, it’s a great paradox that the new real-estate boom is taking place alongside a plunging rate of homeownership. The homeownership rate has fallen from a bubble-era high of 69.2% to today’s 65%, the lowest level since 1995. (A four-percentage-point falloff is huge. The rate has been above 60% since the 1950s.)”

Meanwhile, we have this twin issue of needing to come up with a new federal budget and a looming debt ceiling. On Monday, President Obama reiterated he would not negotiate with Republicans over the latter, nor ObamaCare.

“The Affordable Care Act has been the law for three-and-a-half years now,” Obama said. “It passed both houses of Congress. The Supreme Court ruled it constitutional. It was an issue in last year’s election, and the candidate who called for repeal lost.”

As for the debt ceiling, Obama said:

“In case there’s any confusion, I will not negotiate over whether or not America keeps its word and meets its obligations; I will not negotiate over the full faith and credit of the United States. Let’s stop the threats, stop the political posturing.”

Editorial / Wall Street Journal

“President Obama likes to invoke his predecessors in the Oval Office, as all Presidents do, but in one sense he is unlike the others: Presidents traditionally try to reach a rough domestic consensus if they are faced with going to war abroad. Mr. Obama wants to smooth everything over abroad so he can get back to his favorite pursuit of declaring war at home.

“At least that’s how it’s gone the last week, as Mr. Obama all but wrapped up that ghastly business in Syria and turned his attention to the real enemy – Republicans. Backed by the good offices of Vladimir Putin and the assurances of Bashar Assad, United Nations inspectors will now remove Syria’s chemical weapons from the battlefield. Congress doesn’t even have to vote on it, and the American people can forget the recent unpleasantness. Peace in our time.

“Which means it’s now safe for Mr. Obama to begin the war he really wants to fight. The President spoke Monday afternoon at the White House in remarks pegged to the fifth anniversary of the collapse of Lehman Brothers and the financial panic of 2008. But the financial crisis was merely an excuse for Mr. Obama’s real purpose, which was to demand unconditional surrender from his domestic opposition.

“Mr. Obama assailed Republicans for an ‘ideological agenda’ that he called ‘the height of irresponsibility.' Among other crimes against humanity, he said the GOP refuses to abandon the budget restraint of the sequester spending cuts or to greet the Affordable Care Act with flowers and sweets.

“ ‘Are they really willing to hurt people just to score political points? I hope not,’ Mr. Obama said, transparently suggesting that they do want to hurt people. At least he didn’t accuse them of using chemical weapons, but when it comes to stopping atrocities like opposition to his domestic agenda, let him be clear: He doesn’t do pinpricks....

“The evidence suggests that Mr. Obama wants a showdown with Congress that ends with a government shutdown or a dance with default. He can then mount an offensive against Republicans that will rally his base, which soured on his Syrian plans and vetoed Larry Summers for the Federal Reserve. With his domestic agenda dead on Capitol Hill, Mr. Obama may also figure that stigmatizing Republicans over a shutdown-default crisis is the only way that Democrats can retake the House in 2014.

“The question is how well all of this will play with a war-weary public. Mr. Obama is no longer the fresh young idealist President, and Americans are beginning to figure out his methods. Like Assad and Mr. Putin, they may conclude that he’s no longer a President whose words they can take seriously.”

On Friday, the House passed a short-term spending plan that would continue funding government operations through mid-December but defund ObamaCare, 230-189. Automatic spending cuts known as the sequester would also remain in place. The measure now goes to the Senate.

House Speaker John Boehner said, “The House listened to the American people. Now it’s time for the United States Senate to listen to them as well.”

Senate Majority Leader Harry Reid has already said any bill that defunds ObamaCare “is dead” and “a waste of time” in the Senate.

President Obama, reacting to the House move, accused Republicans of “holding the economy hostage” by threatening not to fund the government and not to raise the debt limit.

“Unfortunately right now, the debate going on in Congress is not meeting the test of helping middle class families,” said the president. “They’re not focused on you. They’re focused on politics. They’re focused on trying to mess with me. They’re not focused on you.”

That’s a stupid statement, Mr. President.

Without any action by Sept. 30, almost every agency of the federal government will be partially shuttered, with the debt limit fast approaching.

Europe and the German Election

This weekend capital markets around the world will be watching Germany’s national vote on Sunday amid growing fears that Chancellor Angela Merkel could be upset in her reelection bid. For the better part of a year she has taken a super cautious stance, trying to get the electorate to ignore issues like Greece and further potential bailouts, and to think instead of steady leadership and a solid economy that is the envy of the eurozone.

But her opponent and former finance minister in Merkel’s first government, 2005-09, Peer Steinbruck, has been warning his countrymen that a vote for Merkel will put Germans on the hook for further bailout aid to the likes of Greece.

Merkel did win a key vote last weekend in Bavaria, as the sister party to her Christian Democrats handily remained in power, but her existing coalition partner, the pro-business Free Democrats, did not fare well and a major question for Sunday is can this party gain the 5% it needs to be seated in parliament and thus become a part of Merkel’s government again.

If the FDP does not get the magic number then Merkel has to reach out to a broader coalition, which is actually what the German people want, a return to the “grand coalition” of 2005-09 with Steinbruck’s SPD. But Steinbruck has said he doesn’t want to be part of a Merkel government again and prefers to stick with his existing coalition that contains the Greens and the Left.

One fly in the ointment is the emergence of a new anti-euro party, the AFD, that is gaining momentum and could receive the 5% threshold.

Merkel’s CDU should receive around 40% and especially if the FDP doesn’t get 5%, well, what happens then is anyone’s guess. [The SPD last polled around 25%, the Greens 9%, the Left 10%.]

Needless to say, this topic will be near the top in next week’s commentary, but as I’ve been writing, once the election is over, we get back to big picture issues in euroland, such as Greece and its finances, a desperately needed banking union that Germany continues to torpedo, and what to do with the eurozone’s sickening labor picture.

Before I get to Greece and Italy, which was back in the news this week, on the economic front car sales for the month of August were awful, down to the lowest on record (1990) with registrations off 4.9% year over year. 8-month sales are down 5.2%.

Peugeot’s were off 18% in the eurozone, Toyota’s down 4%, but Ford’s were off just 0.9% in August and GM’s were up 0.7%. [BMW’s actually advanced 9.9% year over year in Europe, while Daimler-AG’s were up 5.5%.]

European Central Bank President Mario Draghi reiterated the eurozone recovery remained “fragile.”

Turning to Greece, the public sector staged a two-day strike Wednesday and Thursday over further planned job cuts. It doesn’t help when Prime Minister Antonis Samaras makes statements such as his country could see a return to pre-crisis living standards within six years. For the nearly 28% that are unemployed, let alone the 60%+ of the youth that are, that’s hardly something to celebrate.

Yes, Greece has made some progress on the budgetary front, and tourist receipts were up 12.3% in July over last year, but further bailout funding is a certainty and that will be a big topic for October as all the players, the troika of lenders – European Commission, the European Central Bank, and the International Monetary Fund – along with the likes of Germany, weigh in. Estimates on Greece’s further funding needs range from 11 billion euro to 77 billion over the coming few years. It doesn’t help that Greece’s privatization program has fallen woefully short of expectations.

And then you have this issue of the neo-Nazi Golden Dawn party, with a sympathizer fatally stabbing a local hip-hop artist this week, which sparked large anti-Golden Dawn demonstrations.

The PanHellenic Socialist Movement, the junior party in the governing coalition, called for Golden Dawn to be outlawed, but GD is polling at 13 to 15 percent these days, putting them in third place. Golden Dawn feeds on the fears of those who are suffering most from the Depression, including its virulently anti-immigrant stance.

In Italy, former Prime Minister Silvio Berlusconi awaited the ruling of a Senate committee that is expected to expel him from parliament, though perhaps not for another few weeks. Berlusconi released a video wherein he accused leftist judges of plotting against him, saying he will not give up the leadership of the center-right and that he was “absolutely innocent” of tax fraud charges.

Berlusconi also re-launched his People of Freedom (PDL) party as Forza Italia (which he first used in 1994 when he entered politics).

Until the Senate rules, though, Berlusconi is not likely to pull his followers from the ruling coalition, but what he decides to do in October, only he knows.

In Spain, the economy minister said the country will meet its budget deficit target (though public debt has risen to 92.2% of GDP). Spain’s banks, the minister said, “don’t have an important capital need,” which I refuse to believe. Home prices declined only 0.8% in the second quarter from the first, the smallest drop since 2010, though one million unsold new homes remain in inventory, many of which are in the hands of the banks, which is why I don’t believe anything coming from the financial sector.

Ireland reported very disappointing GDP growth of just 0.4% in the second quarter, far less than expected.

In France, President Francois Hollande, in a television interview, admitted that he probably raised taxes too much and now promised a “tax pause.” French business leaders have been screaming for a break from a tax burden that government projections show will rise to 46.5% of GDP next year, one of the highest levels among developed economies. Also, as in Spain, public debt in France continues to rise, now forecast to hit 95% of GDP next year.

Lastly, in a further reflection of how things have changed in euroland, King Willem-Alexander of the Netherlands delivered a message to the Dutch people that the welfare state of the 20th century is done...over.

In its place, said the king, is an emerging “participation society,” in which people take responsibility for their own future and create their own financial safety nets, with less help from the government.

Actually, King Willem-Alexander read a speech prepared for him by Prime Minister Mark Rutte, who thought it would be better for the people to hear about a doom and gloom budget from a more popular king and queen.

Willem-Alexander’s own salary was not immune to budget cuts; 825,000 euros this year to 817,000 in 2014. [Toby Sterling / AP]

Syria and Iran

Last Saturday, Secretary of State John Kerry and his Russian counterpart, Foreign Minister Sergei Lavrov, reached an agreement on Syria’s chemical weapons program whereby the Bashar Assad regime must immediately submit an inventory of its holdings by Saturday, today, which they began to do partially on Friday, and then under U.N. auspices destroy and dispose of their WMD by mid-2014.

Speaking in Geneva, Kerry told reporters, “There can be no games, no room for avoidance or anything less than full compliance.”

But we don’t know how much Assad has, how many sites there are, where to destroy the weapons, who secures the sites and, of course, the big question, have any of his stockpiles already been moved out of the country as long rumored, most probably Iraq and/or Lebanon.

Overseeing this humongous task will be the little known Organization for the Prohibition of Chemical Weapons, a U.N.-backed agency that has about 125 inspectors when I told you over a year ago that one estimate of the needs for such a task is a military force of up to 75,000!

If there are gaps in what the Syrians are giving the OPCW, the matter is supposed to go straight to the Security Council, but Russia, with its veto power there, will prevent any harsh terms on the Assad regime as part of any resolution. It’s also already curious that the OPCW’s 41-member executive council had been scheduled to meet on Sunday to discuss ways to implement the U.S.-Russian agreement but the meeting was postponed without explanation.

Earlier,  a U.N. report from inspectors confirmed the use of sarin in the Aug. 21 attack that killed a reported 1,400, while detailing the rockets used, markings, and trajectories, all pointing to Damascus and the regime. The rebels do not have the capability described in the report.

But Russian Foreign Minister Lavrov said his country had “serious grounds” for thinking the attack was instead a rebel “provocation,” as Assad claims.

The U.N. Security Council is supposed to meet on this issue next week, but if the resolution doesn’t threaten force should Syria not fully comply, due to the Russian veto threat, what good is it? France wants to join the United States in adding a force option, with French President Hollande saying: “The military option must remain; otherwise there will be no response,” but, again, Moscow stands in the way (and possibly China, who has been remarkably quiet on this whole issue).

Russian President Vladimir Putin also by week’s end was not “100% sure” Syria’s weapons could be destroyed. For his part Assad, in an interview, said it would take a year to do so and cost $1 billion, though he insisted his country would meet the disclosure and inspection conditions set forward.

As for the rebels, they are furious. The regime has been left unpunished. Their main commander, Gen. Idriss, said, “We feel let down by the international community.”

In actuality, though, there are increasing stories that Syria is so fractured, with so many different factions fighting each other at this point, that it’s all hopeless.

But then I told you that over a year ago! It is too late, people! Enjoy the college football this weekend.

As for other events on the ground, tensions between Turkey and Syria ratcheted up another few notches as a day after Turkey shot down a Syrian helicopter that it said had crossed into its airspace, a car bomb exploded at a major crossing between the two on Tuesday, killing seven. No one claimed responsibility.

Regarding the Israeli reaction to recent movements on the diplomatic front, last weekend Secretary of State John Kerry met with Israeli Prime Minister Benjamin Netanyahu and attempted to assure the Israeli leader that “the threat of force is real.”

“We hope that the understandings reached between the U.S. and Russia on Syrian chemical weapons will yield results,” Netanyahu said.

“The world needs to ensure that radical regimes don’t have weapons of mass destruction, because as we have learned in Syria, if rogue regimes have weapons of mass destruction, they will use them. The determination the international community shows regarding Syria will have a direct impact on the Syrian regime’s patron, Iran.”

Separately, in a different venue, Netanyahu addressed Syria more specifically with regards to the U.S.-Russia agreement.

“Those understandings will be judged by the results – the total destruction of all the chemical weapon stocks that the Syrian regime used against its own citizens....

“In any case, Israel must be ready and prepared to defend itself with its own forces against any threat, and that capability and readiness is more important now than ever.”

Meanwhile, former Defense Secretary Leon Panetta said he supported a strike because Obama needed to enforce the “red line” he set over Syria’s use of chemical weapons.

“When the president of the United States draws a red line, the credibility of this country is dependent on him backing up his word,” Panetta said.

But another former defense secretary, Robert Gates, who like Panetta served under Obama, said a strike would be like “throwing gasoline on an extremely complex fire in the Middle East.”

Gates also dismissed attacking Syria to enforce a red line.

“I believe to blow a bunch of stuff up over a couple of days to underscore or validate a point or principle is not a strategy,” he said.

The National Journal polled 60 of its National Security insiders on whether Syria can be trusted to give up its chemical weapons. 75% said ‘No.’ 25% said ‘Yes.’

Some comments from this group, which includes some major heavyweights, having perused a list (comments are anonymous).

“UN or NATO inspectors must control all stockpiles, for any agreement to have a chance to succeed. Once on ground, inspectors will need security to keep weapons safe until disposition is determined.”

“It isn’t a matter of trust. It is a matter of knowing – that is, intelligence. Syria has had enough time and owns enough hidey-holes to make finding and accounting for the stuff really tough.”

“Putin and Assad have to be enjoying themselves watching Obama and Kerry turn into pretzels.”

“Syria and Russia will drag out any negotiations as long as possible until the U.S. will to strike collapses. In the end, Bashar al-Assad will not give up his chemical weapons quickly, cheaply, or easily.”

Bernard-Henri Levy / Wall Street Journal

“It would be nice to believe that Saturday’s Russian-American agreement on Syria’s chemical weapons constitutes the ‘advance’ that everyone seems to be so eager to call it.

“And one hopes that France’s firmness – the declared will of President Francois Hollande to strike Syria militarily, followed by his effort, unsuccessful, alas, to push a tough resolution through the United Nations Security Council – will eventually pay off and bring the international community into line.

“But meanwhile, what a situation!

“I am not talking about the letter of the agreement, which the experts immediately observed was: (1) Unimplementable. How, in a country at war, does one gather up and then destroy 1,000 tons of chemical weapons scattered across the entire territory?  (2) Unverifiable. According to the best estimates, the task would require 20 times more inspectors than the United Nations mustered in Syria last summer, and who, for the most part, remained shut up in their hotels or were trotted around by the regime. (3) Unaffordable. The United States has invested $8 billion to $10 billion to destroy its own chemical weapons and, 20 years later, the task is not yet finished. (4) Tied to a timetable (‘mid-2014’) that, apart from being technically meaningless, sounds like a bad joke in a country where, for two and a half years now, hundreds of civilians have been killed each day by conventional arms. (5) The equivalent of a terrible trick, the principal effect of which will be, by placing the onus on the chemical-weapons inspectors, to externalize the tragedy, so to speak, and return the world to sleeping the sleep of the Unjust.

“What I am talking about is Bashar Assad, who has been transformed, as if by magic, from a war criminal and enemy of humanity (in the words of U.N. Secretary General Ban Ki-moon) into an unavoidable, nay, legitimate, negotiating partner – whose spirit of cooperation and responsibility I fear we will soon hear being widely praised.

“I’m talking about Vladimir Putin, who brought off the tour de force of posing as a peacemaker – getting everyone to forget, in the process, his own crimes in Georgia, Chechnya and Russia – with the same aplomb that he has showed when playing the superman athlete who brings down whales, tigers and giant pike....

“I’m talking about North Korea and Iran, which will have good reason to believe, from here on out, that the West’s word, its warnings, the promises it makes to its allies, aren’t worth a thing. Can you blame them for thinking that? And will those who presently are granting Assad his license to kill finally rouse themselves to anger when they see the ayatollahs crossing the nuclear threshold? Maybe. But the fact that one even has to wonder – the fact that this or that Islamist fanatic or crazy dictator might be encouraged to think that he could, in future, act with impunity, Damascus-style – constitutes a source of misunderstanding and confusion in international relations. The result is an instability far greater than anything that might have accompanied the warning shot planned, then abandoned, by the U.S. and France.

“And, finally, I’m thinking about the civilians in Syria not yet killed by shelling or made to flee, and who now more than ever find themselves trapped. They are caught in a vise between the regime’s army – supported by Russian advisers, Hizbullah auxiliaries and Revolutionary Guards from Tehran – and the jihadists who draw strength from the West’s abdication and who increasingly are able to present themselves, despite poisonous future results not difficult to imagine, as the last hope of a people pushed to the brink....

“Because history has more imagination than do human beings, let us suppose that Assad, heady from his unexpected reprieve, commits another massacre that the world deems excessive. Or let us suppose that the Syrian tragedy meter passes a certain point (150,000 dead? 200,000?) and that public opinion, which is now the arbiter of war and peace, suddenly finds this intolerable. Or let us suppose that the chemical-weapons inspections take a dramatic turn, requiring a response and military strikes. When one of the above happens, we will remember Winston Churchill’s famous and fateful phrase, adapted to the present context: ‘You were given the choice between strikes and dishonor. You chose dishonor and you will have strikes.’”

Masha Gessen / New York Times

“As he lay dying in a London hospital in November 2006, the Russian secret-police whistleblower Alexander Litvinenko dictated his final statement, addressed to President Vladimir Putin: ‘You have shown yourself to be as barbaric and ruthless as your most hostile critics have claimed. You have shown yourself to have no respect for life, liberty or any civilized value. You have shown yourself to be unworthy of your office, to be unworthy of the trust of civilized men and women.’

“Litvinenko’s death was the world’s first confirmed case of death by poisoning with polonium-210, a rare and highly radioactive isotope. The substance itself was traceable to Russia, where it is manufactured in small quantities for industrial use, and to two Russian men who had met with Litvinenko shortly before he fell ill. Attempts to investigate the death have been stymied by Russia’s refusal to extradite the men and by pressure the Kremlin has apparently exerted on the British government.

“Still, amid the many tragedies that have marked Putin’s 14-year tenure as Russia’s leader, Litvinenko’s death remains the biggest smoking gun; Polonium is such a highly controlled substance that many believe people it could not have been released and used as a weapon of terror without authorization from the Kremlin.

“Now the man who is widely suspected of allowing a nuclear weapon to be used to silence a single opponent of his regime has put himself forward as the broker in the project of disabling the chemical weapons arsenal of his ally Bashar al-Assad, who has used these weapons against his own domestic opponents.”

Douglas J. Feith / Wall Street Journal

“Bashar Assad may have pulled off the most successful use of chemical weapons in history. For the two years leading up to the Aug. 21, Damascus sarin gas attack, President Obama was saying that the Syrian dictator ‘must go.’ No longer. In one month, Assad has risen from outlaw butcher to partner in disarmament.

“America’s Syria policy today focuses not on mass murder, or on the metastasizing humanitarian and refugee crisis, or on combating the interests of Iran and its Hizbullah proxies in keeping Assad in power. Rather, with Russian President Vladimir Putin’s help, U.S. policy under President Obama is concentrating on chemical-weapons disarmament.

“Secretary of State John Kerry labors to enlist Assad in an arms-control project even while alleging that the dictator has used nerve gas in violation of Syria’s obligations under the 1925 Geneva Protocol. U.S. policy is not to oust the Assad regime or even to encourage the Syrian people to do so. President Obama has now created a U.S. interest in preserving Assad in power.

“This means Assad must stay, not go, for he is needed to negotiate and implement an arrangement to destroy Syria’s chemical weapons. The arrangement, if successfully negotiated, will take years to implement.  Arms control evidently means never having to say you’re sorry.

“Meanwhile, the Syrian rebels are exasperated and mistrustful, having seen Washington dangle the prospect of U.S. military strikes, only to back away. The Iranians are drawing comforting lessons about the lengths that the Obama administration will go to avoid military action in the Middle East. The Russians have been promoted from reprehensible accomplices in Assad’s evil to indispensable peace negotiators – while they remain accomplices to that evil.”

Tim Montgomerie / London Times

“A presidency that began with such high expectations is confirming America’s decline as a world power.

“He was going to end wars. Slash unemployment. Heal America’s racial divides. In one giddy moment Barack Obama even promised that his election ‘was the moment when the rise of the oceans began to slow and our planet began to heal.’ Verily, verily, the political messiah had arrived!

“Except, of course, he hadn’t. In the words of two Hollywood blockbusters that, this summer, have portrayed disastrous events at 1600 Pennsylvania Avenue, Olympus has fallen. It’s White House Down. Barack Obama’s approval ratings aren’t yet disastrous – although they are as bad as George W. Bush’s were at the same stage of his second term – but he’s lost the respect of America’s opinion-formers and it’s likely that wider public disillusionment will follow....

“The mess originates from Mr. Obama’s initial decision to draw a red line against any use of poison gas. In August last year he made it ‘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 moving around or being utilized.’ It was never an honest position. He only drew the red line because the U.S. State Department had assured him that it would not be crossed. Assad wouldn’t, officials calculated, use chemicals weapons. Russia, the Syrian regime’s protector and arms supplier, wouldn’t let him. The chemical weapons red line lent Mr. Obama – a president determined to focus on the economy – a position of moral high-mindedness that disguised his perhaps understandable unwillingness to intervene in Syria’s civil war.

“Fast forward to the last month and Mr. Obama began to distance himself from his own red line. It wasn’t my red line, he pleaded, but the world’s. There have been almost too many flip-flops to mention. John Kerry, Mr. Obama’s Secretary of State, first said that any military strikes would be ‘unbelievably small, limited.’ Mr. Obama had to disown him by asserting that the ‘U.S. military doesn’t do pin pricks.’ After Mr. Kerry had opened the door to ‘boots on the ground,’ Mr. Obama ruled them out.

“Then, after Mr. Kerry had perhaps accidentally floated the possibility of allowing Assad to decommission his chemical arsenal, a State Department official described Mr. Kerry’s words as entirely ‘rhetorical.’ She went on to explain: ‘This brutal dictator with a history of playing fast and loose with the facts cannot be trusted to turn over chemical weapons.’ But America is now trusting him to disarm. Worse, the channel for this trust is Vladimir Putin, a man trained by the KGB to lie and deceive....

“Mr. Obama is the third successive two-term president who has seen America’s global leadership erode. From 1993 to 2001 under Bill Clinton America enjoyed an infamous holiday from history. It did not deal with the simmering terrorist threat that exploded on 9/11. From 2001 to 2009 George W. Bush wielded American power, but clumsily. Then came Mr. Obama. America’s 44th president hasn’t been able to deliver any of his signature foreign policy commitments. There’s been no progress on climate change or free trade. Russia’s influence in the Middle East is at a new high. China’s cyber war against Western interests is almost unchallenged. Iran is ever closer to acquiring nuclear weapons....

“The anti-Americans will welcome a humbler, withdrawn America but expect the loudest cheers from those nations who have always hated American values. Without a policeman on the world stage, expect more trouble and more vigilantism. It won’t just be the likes of Damascus and Pyongyang who will have noticed America’s weakness. So will have Tel Aviv. You can be sure Israel won’t be relying on Mr. Obama to stop Iran acquiring a nuclear weapon.”

Philip Stevens / Financial Times

“The latest turns in the Syrian crisis have thrown up a search for wider lessons. One inference might be that the U.S. president should, in future, be more decisive in the use of force. An intelligent conclusion would be that the deal to rid Syria of chemical weapons underscores a need for the more forceful deployment of U.S. diplomacy across the Middle East. President Barack Obama could make a start by shaking hands with his Iranian counterpart Hasan Rohani....

“There is a more important carry-over from Syria to Iran. True to form, Benjamin Netanyahu, Israel’s prime minister, would have us believe the U.S. should now rush to attack Tehran. The reverse is true. To recover credibility, the U.S. needs legitimacy. Mr. Obama cannot contemplate war unless and until all other avenues have been exhausted – and are seen to have been exhausted.

“At this point, I sometimes hear U.S. officials say they have done as much as could be expected to try to negotiate with Iran. Did not Mr. Obama ‘reach out’ at the start of his presidency with a promise of honest and mutually respectful engagement? Has not the administration stuck with the talks process between Iran and the six world powers? And alongside a tightening of sanctions, Washington has made a series of unpublicized bilateral overtures.

“Maybe so. The effort, though, has lacked two vital ingredients: the first is recognition of Tehran’s fear that the U.S. wants regime change – probably the main driver of the nuclear program; the second is an offer of an everything-on-the-table dialogue reaching beyond the nuclear issue to a normalization of relations.

“Negotiations, of course, would not carry a guarantee of success. But, bombing or no bombing, it should be clear by now that Tehran will not give up the right to a civilian nuclear program. Sanctions have hurt, but they have also proved Iran’s resilience. The discussion that matters is about whether it will choose to cross the threshold to become a nuclear weapons state.

“Mr. Rohani has struck the right tone, but the new president is more a pragmatist than a moderate, and must defer ultimately to Ayatollah Ali Khamenei, the supreme leader. Talks, though, are a precondition for everything and anything else. Mr. Obama has exchanged letters with the Iranian president. The next step is for the two men to talk. The meeting next week of the UN General Assembly in New York provides the opportunity.”

Editorial / Wall Street Journal

“Two weeks ago, Secretary of State John Kerry called Assad ‘a thug and a murderer’ who had ‘used those weapons multiple times this year.’ Today, we are told he has been knocked off his tank on the road to the Damascus suburbs and will come clean about his entire CW stockpile in a week and then lead U.N. inspectors to every cache. All of this is supposed to be guaranteed by the Russians who for two years have protected Assad from any international sanction and still insist he didn’t use chemical weapons.

“Merely stating these expectations underscores their implausibility, and already the Russians are disputing U.S. information about where and how much poison gas Assad holds. There are a hundred ways to cheat on this agreement, starting with the declaration....

“U.S. officials are insisting that Mr. Obama reserves the right to use force without U.N. approval, but the prospect of that is vanishingly small. The President leapt at Mr. Putin’s diplomatic offer precisely because he knew he was headed for defeat in Congress. The Russians and Assad know Mr. Obama won’t take that political risk again.”

Iran: In an interview with ABC’s “This Week,” President Obama had some of the following thoughts on Iran, drawing another ‘red line’ on Iranian nukes.

“My suspicion is that the Iranians recognize they shouldn’t draw a lesson that we haven’t struck [Syria] to think we won’t strike Iran....

“I think what the Iranians understand is that the nuclear issue is a far larger issue for us than the chemical-weapons issue, that the threat against Israel, that a nuclear Iran poses, is much closer to our core interests,” he said.

But this week all we saw was a major charm offensive on the part of Iran’s leadership, led by new President Hasan Rohani, who is heading to New York for the U.N. General Assembly where he will make a closely watched speech.

In an interview with NBC News, Rohani said Iran had “never pursued or sought a nuclear bomb and we are not going to do so.”

“We have time and again said that under no circumstances would we seek any weapons of mass destruction, including nuclear weapons, nor will we ever.”

Rohani added: “In its nuclear program, this government enters with full power and has complete authority. We have sufficient political latitude to solve this problem.”

Rohani also spoke of a “commission for citizens’ rights.”

“In today’s world, having access to information and the right of free dialogue and the right to think freely is the right of all people, including the people of Iran,” he said in his interview with NBC’s Ann Curry.

The White House on Wednesday gave details of a recent exchange of letters between Presidents Obama and Rohani.

“In his letter the president indicated that the U.S. is ready to resolve the nuclear issue in a way that allows Iran to demonstrate that its nuclear program is for exclusively peaceful purposes,” said White House spokesman Jay Carney.

“The letter also conveyed the need to act with a sense of urgency to address this issue because, as we have long said, the window of opportunity for resolving this diplomatically is open, but it will not remain open indefinitely,” Carney added.

On Tuesday, Supreme Leader Ayatollah Ali Khamenei gave the strongest hint yet of Iran’s possible flexibility in future talks with the West.

In a speech to the Revolutionary Guards, Khamenei said: “I don’t oppose diplomacy. I am in favor of showing a champion’s leniency. A wrestler may give way for tactical reasons, but should remember who is its opponent and enemy.”

The head of Iran’s nuclear agency, Ali Akbar Salehi, told reporters on Wednesday, “We are very optimistic about the process that has started to resolve the nuclear issue.”

As part of the charm offensive, political prisoner Nasrin Sotoudeh, who was arrested in 2010 and jailed for six years on charges of acting against national security, was released along with ten others.

Of course all of the above on the part of Iran is designed to get it out from under the crippling sanctions.

Hasan Rohani wrote an op-ed for the Washington Post this week (similar to Vladimir Putin’s missive in the New York Times) and Rohani’s essay is nothing but garbage. We all know that if Iran had a peaceful nuclear program all these years, then why was it trying to hide it at all costs? Why did it literally pave over the nuclear trigger test site at the military base of Parchin that the International Atomic Energy Agency has been denied access to? I don’t need to say any more than this.

But, just as I urged the United States to negotiate with former Iranian leader Rafsanjani through back channels going back over ten years ago, we should talk to Rohani, though we cannot let Iran’s stall game go on forever. I just have zero confidence that President Obama will do the right thing.

As for Russia’s role, Foreign Minister Sergei Lavrov apparently “mentioned the possibility of Iran ‘voluntarily’ suspending uranium enrichment above the 20 percent level in exchange for full recognition of its right to enrich uranium,” this according to Amir Taheri in an op-ed for the New York Post.

Taheri:

“Lavrov’s plan offers great advantages to Iran.

“First, if America buys into it, it will abandon its freedom to develop a policy of its own on Iran.

“Second, the five Security Council resolutions imposing sanctions on Iran would be set aside.

“Third, the fact that Iran has been violating the Nuclear Non-Proliferation Treaty for more than 20 years will be forgotten – just as Assad’s use of chemical weapons, a war crime and a crime against humanity, is not mentioned in the Russo-American accord.

“Fourth, Iran will get to keep almost all of the 4,000 kilograms of uranium it has illegally enriched. To give Obama something to chew upon, Tehran may agree to transfer to Russia the uranium enriched to 20 percent. This would provide TV footage to create the illusion that Obama achieved something.

“Fifth, as Lavrov made clear, the Iranian move would be reciprocated by a lifting of sanctions against the Islamic Republic – including the U.S. and European Union sanctions that go beyond those imposed by the United Nations....

“The ease with which Russia managed to seize control of U.S. policy on Syria has encouraged Rohani that similar results could be obtained on the Iranian issue....

“At next week’s U.N. General Assembly, Rohani will be all smiles and will do his utmost to appear moderate and reasonable. Lobbyists have already fixed a series of media appearances and private meetings for him, including with select Jewish figures in New York....

“The view in Tehran is that, since Obama proved ready to eat humble pie on Syria, he should be helped to do the same on Iran.”

Editorial / New York Post

“(Sanctions have taken a toll), and Iran now seeks relief. Its leaders reason, no doubt, that if Syria could use dialogue and a mere promise to turn over its chemical weapons to escape reprisal for having used them, Iran might similarly jaw-jaw some benefits for itself – and buy yet more time to build its bombs.

“Down that path lies great peril.

“If Tehran is truly well-intentioned and ready to make concessions, well, who’s stopping it? Forget talks; Iran can simply end its nuke program (and show proof) – instead of continuing to deny it has one.”

Editorial / London Times

“Mr. Obama’s eagerness to embrace a diplomatic alternative to military strikes on Damascus has been seized on by hawks in Tehran as a signal of weakness that they, too, should exploit. In a worst-case scenario they may succeed, using talks to play for time to bring Iran to nuclear capability. This makes it all the more important that Mr. Obama needs the real lesson of Syria for U.S. foreign policy and for the civilized world’s efforts to deny Iran the bomb. That lesson is that when dealing with rogue regimes no meaningful diplomatic breakthrough is achievable if not backed up by a credible military threat.

“One of Mr. Obama’s strengths as a campaigner – his belief in the power of words alone – is one of his weaknesses as a leader. As he ponders what to say in New York on the same day as Mr. Rohani’s maiden speech to the U.N., there is real risk that he will let fantasy eclipse reality. In dealings with Iran, there is no breakthrough until the uranium enrichment has stopped.”

Israel’s Prime Minister’s Office in a statement:

“One should not be taken in by Rohani’s deceptive words. The same Rohani boasted in the past how he deceived the international community with nuclear talks, even as Iran was continuing with its nuclear program....

“Only a combination of stopping uranium enrichment, removing all enriched uranium, dismantling the nuclear facility at Qom and stopping the plutonium track will constitute a real halt to the nuclear program.

“Until these four steps are taken, the international community needs to intensify the pressure on Iran.

“The test is not Rohani’s words, but rather the Iranian regime’s actions. Even while Rohani was being interviewed, Iran was moving forward energetically with its nuclear program,” it said.

Rohani, in the same NBC News interview, said Iran was not seeking war, but slammed Israel for bringing “instability” to the Middle East. He called Israel “an occupier, a usurper government that does injustice to the people of the region,” and that is “has brought instability to the region with its war-mongering policies.”

Michael Young / Daily Star

“Within a week, one story – punishing Bashar Assad for his probable use of chemical weapons against civilians in the Ghouta region – has been pushed aside by another: the possibility of a rapprochement between Iran and the United States, even as Washington is coordinating its policies toward Syria with another adversary, Russia.

“It’s best in these cases not to get carried away by optimism. Diplomacy and dialogue are not ends in themselves. Yet the potential opportunities are great, whether for Syria or the rest of the Middle East, if broader understandings can be reached between the main regional and global actors. And tectonic shifts, if they occur, may ultimately ensure that Assad is politically disposable.

“Iranian President Hasan Rohani has made normalization with the West a central plank of his political program. Critically, he seems to have the support of the supreme leader, Ali Khamenei. On Tuesday, Khamenei endorsed Rohani’s position, saying Iran should embrace diplomacy over militarism and that it was time for ‘heroic leniency.’

“In remarks to the Iranian Revolutionary Guard Corps, Khamenei said, ‘[It] is not necessary for the IRGC to be active in the political field, but defending the revolution requires that they understand political realities.’ This appeared to be Khamenei’s way of legitimizing Rohani’s opening in front of an institution that, potentially, may pose problems for the president down the road.

“From the Obama administration’s perspective, bringing Iran into negotiations on Syria’s future is necessary, even if the pitfalls are many. Supporting Assad’s regime has become a burden even for his closest partners, who might welcome a transition away from the Syrian president if it means they can preserve their interests in Syria.

“The Obama administration has no intention of challenging this logic, as it searches for a cure for its Syrian headache. The notion that the U.S. will seek to deny Moscow and Tehran a political foothold in Syria seems absurd, as the Americans view Russia, and probably Iran, as parties that can help deliver a peaceful outcome in the country.

“Still, Russian and Iranian interests in Syria do differ, and the U.S. can play on this to its advantage in formulating postwar preferences. At the same time, American, Russian and Iranian interests are not as far apart as they appear. All three want a political solution; all are wary of the emergence of jihadist groups; and all perceive that the side they are backing in Syria is probably unable to win a military victory.

“They must also sense that Assad today is the primary obstacle to a political solution. Iran has poured much money into the war on Assad’s behalf, and has instructed Hizbullah to bolster his regime militarily. While this allowed Assad to regain his balance, it has not brought victory, while Hizbullah has been transformed into the Assad regime’s cannon fodder, a situation the party cannot relish.”

Roger Boyes / London Times

“Israel is right to be worried. For sure, a Syria shorn of chemical weapons is a good thing for its southern neighbor. There is a legitimate fear, though, that barrels of chemicals could soon be heading for the Hizbullah militias in Lebanon before U.N. inspectors get to work. More disturbing, the Russians look set to link their role persuading Assad to declare his weapons with a broader push to get Israel to admit to its own nuclear program. Moscow is arguing for a regional disarmament that could take in Israel – surely a step too far even for the Obama Administration.

“U.S. official complain privately about Israel’s lack of trust in Washington. By putting this on display, they say, Israel further undermines American credibility. Israelis themselves admit to chronic over-anxiety about Mr. Obama but conclude that paranoia is to be in possession of all the facts. Fact 1: under a weakened Assad, Iranian tutelage over Syria is growing fast. Fact 2: Sinai is becoming dangerously radicalized. Fact 3: Hizbullah units are being strengthened by the Syrian crisis. Fact 4: The U.S. is not helping significantly in any of these spheres, although they all directly threaten Israel.

“Benjamin Netanyahu will use a trip to the U.S. this month to warn that the Syria formula – threat of force prompts disarmament – won’t work when applied to Iran. Will President Obama listen? Almost certainly not. If Israel acts pre-emptively against Iran, it will be acting alone. That is the only sensible reading of U.S. behavior over the past two years....

“For the Israeli political class an Iranian bomb remains an existential issue. With or without America it has to be stopped. Indeed Israel has been discussing comments by its air force chief Amir Eschel, which reflected how air power should be used in a moral cause. Since these were public musings of the man who would plan a possible attack on Iran, they were delivered in code.

“In the spring of 1944, he said, the Allies had achieved air supremacy over Auschwitz-Birkenau, they had accurate intelligence – and they knew that a trainload of Hungarian Jews was en route to the concentration camp. Politicians decided not to act. Not because they were anti-Semites but because, he said, it was ‘easier not to bomb than to bomb.’

“It is harsh to say Mr. Obama has been taking the easy road in not striking Syria. Nothing in the Middle East has come easy to him. The region – and above all Israel – would like to know, however, where U.S. policy is heading, because that part of the world has rarely seemed so precarious, so ready to slip into chaos.”

Street Bytes

--Stocks rose for a third consecutive week, despite the Dow Jones’ 185-point drubbing on Friday owing to the uncertainty in Washington over the budget, debt ceiling and ObamaCare. For the week the Dow nonetheless rose 0.5% to 15451, after hitting a new all-time closing high on Wednesday, following the Fed announcement, of 15676. The S&P 500 rose 1.3% to 1709, hitting its own all-time high at 1725 along the way. And Nasdaq continued its string of strong performances, up another 1.4% to 3774. The tech barometer is up an even 25% on the year.

Monday, Goldman Sachs, Visa and Nike replace Alcoa, Hewlett-Packard and Bank of America in the Dow Jones Industrial Average, which will make for a far more volatile index as it’s price-weighted.

--U.S. Treasury Yields

6-mo. 0.04% 2-yr. 0.33% 10-yr. 2.73% 30-yr. 3.76%

Treasuries rallied strongly on the Fed’s decision not to taper, but 2.70% on the 10-year seems to be a new key level to watch.

The August consumer price index came in at 0.1%, ditto ex-food and energy. For the 12 months the CPI is up 1.5%, 1.8% on the core. I didn’t have a chance last time to report on the producer price data, which came in up 0.3%, unchanged on core, while year over year, the PPI was up 1.4%, up 1.2% ex-the stuff we need. [I also need to note for the record that last Friday’s retail sales came in at a less than expected rise of 0.2%.]

--China’s increased its holdings of Treasuries in July by $1.5 billion to $1.277 trillion, after declining the prior month, according to Treasury Department data. Treasuries held by Japanese investors, who have the second largest stake in U.S. government debt, rose to a record $1.135 trillion.

All foreign investors own 48.7 percent of the marketable debt, the least since Feb. 2007. [Bloomberg]

--Chinese property prices rose again in August...up in 69 of 70 major cities, the fourth month in a row with this ratio. Prices in Beijing rose 14.9% from a year earlier, while in Shanghai they increased 15.4%. Authorities continue to introduce measures designed to cool the bubble (not everyone believes it is one) but they’ve met with mixed results.

--Japan’s exports rose the most since 2010 in August, up 14.7% from a year earlier, the sixth straight advance, thus boosting Prime Minister Shinzo Abe’s growth drive. Shipments to the U.S. jumped 21% from August 2012, while those to China, Japan’s biggest trading partner, surged 16%.

--ObamaCare

According to a Washington Post-ABC News poll, six in ten Americans say they do not have the information necessary to understand the changes the law will bring. [A Wall Street Journal/NBC News poll found that nearly 70% said they didn’t understand the health-care overhaul or only understood a part of it. Only 31% said they thought it was a good idea.]

Meanwhile, from the Wall Street Journal:

“Less than two weeks before the launch of insurance marketplaces created by the federal health overhaul, the government’s software can’t reliably determine how much people need to pay for coverage, according to insurance executives and people familiar with the program.

“Government officials and insurers were scrambling to iron out the pricing quirks quickly, according to the people, to avoid alienating the initial wave of consumers.”

From Alex Nussbaum / Bloomberg:

“Barack Obama wanted to change American health care as we know it. And he is, in ways that go far beyond the goals of the Affordable Care Act.

“For weeks, headlines have cataloged the upheaval at private employers: UPS dropping coverage for employed spouses, IBM reworking retiree benefits. Yesterday came the biggest change; Walgreen Co., the largest U.S. drugstore chain, told 160,000 workers they must buy insurance through a private exchange rather than having the company arrange their coverage.

“None of the moves was dictated by the health-care law. All, though, have occurred in an environment shaped by ObamaCare, which has pushed businesses and governments to reexamine their health-care role as costs soar and national priorities shift. The act now is giving businesses cover to loosen the decades-old link between jobs and health insurance, a shift that may further cloud the outlook for an already unpopular law.”

Stanford University researchers concluded in a study last week that an unintended consequence of the law will be higher taxpayer costs. “Rising premiums could drive workers from employer plans to coverage under the health law, they wrote in a report, boosting costs for the government by as much as $6.7 billion.” [Alex Nussbaum]

Independent economists at the federal Centers for Medicare and Medicaid Services estimate that total U.S. spending on healthcare will surge over the next decade, hitting $5 trillion in 2022, up from $2.9 trillion this year and it will push healthcare spending to nearly 20% of the U.S. economy by the next decade. [Chad Terhune / Los Angeles Times]

The rate of increase in health-care spending has dropped in recent years, as you’ve seen the president claim credit for, but everyone agrees spending will jump by over 6% next year, though this is less than first projected and below the 9% pace of 2001-03.

57% of Americans opposed the health-care law in a poll this month by CNN/ORC, a turnaround from January when the survey found 51% in support.

--JPMorgan Chase admitted it broke the law, a rarity on Wall Street, in agreeing to pay fines of $920 million as part of the settlement over the “London Whale” trading fiasco. Various regulatory agencies, including the Securities and Exchange Commission, alleged the bank suffered from widespread breakdowns in controls and management.

In the old days, Wall Street could settle on a case without admitting or denying guilt, but under new SEC Chairwoman Mary Jo White, that has changed.

The “Whale” trades were in complex derivatives and resulted in losses of more than $6 billion once they came to light in 2012.

Critics of the settlement note that no individual executives were named as part of the fine.

But having admitted guilt, JPMorgan opens itself up to a slew of civil lawsuits and further government investigations.

For its part, JPM said it has added 4,000 employees dedicated to its control efforts since the beginning of last year, including 3,000 in 2013.

In a memo to employees on Tuesday, CEO Jamie Dimon said in part:

“If you don’t acknowledge mistakes, you can’t learn from them.... One key initiative across our enterprise has been to simplify our business and refocus our priorities.”

--FedEx Corp. shares jumped as the company reported better than expected earnings and announced it would be able to raise rates next year due to improving global economic conditions, particularly in Europe and China. This is good.

--A few unemployment rates for August, as just released by the government on Friday.

California 8.9%
Illinois 9.2%
Nevada 9.5% [highest]
New Jersey 8.5%
New York 7.6%
North Dakota 3.0% [lowest]
Texas 6.4%

--ShopperTrak, which measures store traffic in 60,000 locations world-wide, expects retail sales in November and December to rise by 2.4% from a year earlier, less than the 3% increase in 2012 and below the gains of 4% in 2010 and 2011. This estimate could change considerably over the course of October for all manner of reasons, including what happens in Washington.

--BlackBerry launched its biggest smartphone to date, the Z30, which features a 5-inch screen and a larger battery the company says should last more than two days between charges.

But of course the company is struggling mightily, accounting for just 1.7% of all smartphones shipped to the U.S. during the first half of the year. And so it’s no surprise that BlackBerry Ltd. also announced it was cutting staff by a whopping 40% by the end of the year. Currently it has about 12,700 employees. 5,000 jobs were lost last year.

Then late Friday the company reported a nearly $1 billion second-quarter loss, a week earlier than expected, and the shares dropped about 20% on the news.

--Of course once popular BlackBerry lost out over the years in a big way to the likes of Apple, which on Friday rolled out the latest iPhone models around the world and by all reports sales were quite brisk, though it also seems there are supply issues.

[Pssst...I still have a Palm...which is like owning an Edsel...]

--While cloud computing companies Salesforce.com and Workday kick butt, Oracle Corp. continued to suffer from lackluster growth, with the company reporting revenue rose a meager 2% in the fiscal period ended August 31, less than Street expectations, though profit rose 8%.

Oracle is frantically trying to play catch-up, while Larry Ellison worries more about his America’s Cup entry, which is down 8-3 as of late Friday, with Emirates Team New Zealand needing just one more win.

We also learned Friday that Ellison’s pay package was down 18% for fiscal 2013...to $78.4 million.  It’s enough to make you want to throw up.

[Salesforce and Workday announced an increased partnership this week...a lethal combination, one would think.]

--Air France, part of the Air France KLM group, announced plans to cut a further 2,800 jobs through voluntary layoffs, this on top of 5,100 earlier announced cuts.

--Kaja Whitehouse / New York Post

“Ten months after the Justice Department hired an expert to distribute $2.3 billion in recovered Bernie Madoff loot, the cash is sitting in a bank account with no clear plan for it to be distributed to victims.

“In fact, for burned investors of the convicted Ponzi king, it may be later rather than sooner before they are reunited with their lost investments, according to a recent update posted on the Madoff Victim Fund website.

“In the controversial update, Richard Breeden, the former chairman of the Securities and Exchange Commission who was retained last December to distribute the cash, said he has not yet devised a process to determine who gets paid.”

These assets are different from those recovered by Irving Picard, the trustee assigned to marshal assets left behind by the bankruptcy of Bernard L. Madoff Securities. Picard has distributed $4.76 billion of $9.35 billion recovered to date. $20 billion was lost by investors in Madoff’s funds as of Aug. 20.

--The national U.S. average gasoline price was above $3 a gallon for a record 1,000th consecutive day, Tuesday, according to AAA.

But new vehicles are more fuel efficient and we’re driving less, the latter a response to the prices.

--North Dakota set all manner of energy-related records for the month of July. A record number of wells were in production (9,322), oil production hit a new high (108,258 barrels per day), and natural gas production set a record (970 million cubic feet per day).

North Dakota is No. 2 behind Texas in terms of production of natural resources in the United States. Remarkable.

--Saudi Arabia is producing oil at a pace not seen since at least the 1970s, 10.2 million barrels a day, or more than $1bn a day in export revenues.

--The New York Times’ Jeff Sommer had a piece highlighting the work of Salil Mehta, a statistician and econometrician who was director of analytics in the Treasury Department, and is now an independent consultant and adjunct professor at Georgetown University.

Among Mehta’s findings: Five of the 10 worst days since the Dow’s inception have occurred in October, along with one in November, and one in the first half of December. And six of the 10 worst days were Mondays.

So then he looked at the 1 percent of days with the biggest stock declines, the cutoff for which turned out to be a daily drop of 3.2 percent. On average, there have been five declines that big every two years, although we haven’t had one since November 2011.

“Of the 294 days that make up the worst 1 percent of market declines, 45 occurred in October, 33 in September and 43 in November. Thirty such days occurred in December. That compares with an average of 17.9 for the other eight months.” [Jeff Sommer]

85 of the 294 occurred on Mondays.

--According to a Census Bureau report, women earned 76.5 cents for every dollar that men did last year, essentially the same as 2011 and pretty much in line with the past decade, after women made steady gains in the 1980s and 1990s. [It was 60.2 cents in 1980, specifically.]

--Ty Warner, the billionaire creator of Beanie Babies toys, faces up to five years in prison after agreeing to admit to a charge of tax evasion. Federal prosecutors said Warner “went to great lengths” to hide more than $3 million of income in a secret Swiss bank account. Warner agreed to pay a $53 million fine. Warner is one of those clients of UBS who set up the Swiss accounts that allowed them to hide income from U.S. tax authorities.

--I posted a good look back at the 2008 financial crisis on my “Wall Street History” link, utilizing my own “Week in Review” archives.

--Stocks of sea bass have declined to the lowest point for two decades, according to the International Council for the Exploration of the Sea, which recommends a 36% cut in catches throughout the English Channel, Irish Sea and southern Northern Sea. [This is virtually impossible to enforce.]

Just beware of fake sea bass on the menu, folks. It’s probably crappy [or ‘crappie’ for aficionados.]

Foreign Affairs, part deux

Israel: The United States is upset with a call by Arab leaders to single out Israel for criticism over its assumed nuclear arsenal. Iran said Israel’s nuclear activities “seriously threaten regional peace and security.” [That’s rich.]

An analysis by the Federation of American Scientists concludes Israel holds a nuclear arsenal of 80 weapons that were manufactured no later than 2004. Israel is believed to have enough nuclear-weapons material for between 115 and 190 warheads, but the report provides no explanation for why Israel stopped warhead production at 80.

Iraq: The violence continues, with a wave of car bombings on Sunday killing at least 58 in mostly Shiite-majority cities. 4,000 have been killed since April. 800 in August, according to the United Nations.

Libya: A report delivered to the U.N. General Assembly addressed the increasing violence in Libya, with oil exports crippled by armed militias and eastern regions threatening to break away.

The trial of Saif al-Islam Gaddafi, the son of the former dictator, is due to begin in Tripoli, but last I saw there was no guarantee the Zintan militia holding him would deliver their prisoner to court.

The report said the central government faced anarchy. The country’s justice minister noted:

“If you don’t have security, you lose everything. You cannot have a functioning state without security.”

Back to the oil situation:

“Guard units for oilfields in the eastern Benghazi region unilaterally closed oil terminals last month, causing the country’s oil output to fall from 1.6 million barrels a day to fewer than 100,000.”   [AFP]

Lebanon: According to a World Bank report, the war in Syria and the influx of nearly 1 million refugees into Lebanon has cost the country billions of dollars. Government officials complain the international community has not stepped up with support. On top of this, economic losses to Lebanon resulting from the Syrian war are estimated at $7.5 billion. The World Bank says GDP has shrunk by 2.9 percent annually in the past three years.

Separately, Lebanon’s parliament was told commercial activity across the country has declined between 15 and 70 percent. 15% in Beirut...70% in Baalbek (Hizbullah territory near the Syrian border).

Yemen: We got a reminder on Friday that this place still matters in terms of being a hotbed of al-Qaeda activity as militants killed at least 38 Yemeni soldiers in a series of attacks in the southern province. It seems al-Qaeda took advantage of heavy fog to surprise troops in their barracks.

Pakistan: The Taliban assassinated a major Pakistani general, saying afterwards it did so “to show that there is no cease-fire.”

Russia: Vladimir Putin gave a major speech this week wherein he said among other things:

“Sovereignty, independence, the integrity of Russia – those are red lines that no one is allowed to cross,” he warned.

Putin said Russia needed to avoid the example of many in Europe who were “going away from their roots,” such as on social issues and excessive “political correctness.”

“A policy is being conducted of putting on the same level multi-child families and single-sex partnerships, belief in God and belief in Satan The excesses of political correctness are leading to the point where people are talking seriously about registering parties whose goal is legalizing the propaganda of paedophilia,” Mr. Putin claimed.

“People in many European countries are ashamed, and are afraid of talking about their religious convictions. Religious holidays are being taken away or called something else, shamefully hiding the essence of the holiday,” Putin added.

“We need to respect the rights of minorities to be different, but the rights of the majority should not be in question.”

Putin defended the Russian law banning promotion of homosexuality.

Meanwhile, Republican Sen. John McCain was allowed the opportunity to respond to Vladimir Putin’s New York Times op-ed, penning a piece of his own in the Pravda newspaper. McCain wrote:

“I am pro-Russian, more pro-Russian than the regime that misrules you today. I make that claim because I respect your dignity and your right to self-determination.

“President Putin doesn’t believe in these values because he doesn’t believe in you. He doesn’t believe that human nature at liberty can rise above its weaknesses and build just, peaceful, prosperous societies. Or, at least, he doesn’t believe Russians can. So he rules by using those weaknesses, by corruption, repression and violence. He rules for himself, not you.”

McCain criticized Putin specifically for the death in prison of Russian lawyer Sergei Magnitsky, as well as for siding with Bashar Assad.

Pravda posted it online Thursday in English and in Russian.

As for American attitudes towards Russia, a Gallup poll released Wednesday shows that only 44% consider it an ally or friendly, down from 52% in June. Only 19% of Americans surveyed rate Putin favorably.

China: The central government established its first provincial-level coal-reduction targets in a bid to clean up its air.

The industrial region surrounding Beijing, for example, will be required to make cuts in its coal use and phase out the dirtiest industries under the new mandates.

Mexico: Well you can kiss tourism in Acapulco goodbye for years to come and the real tragedy will be all the locals out of work, as Tropical Storm Manuel destroyed the resort and its infrastructure. Where do you begin to clean up a place like that, already fighting an image of rampant crime? At what point do you as a tourist want to believe everything you eat and touch would be safe, for starters?

Brazil: President Dilma Rousseff called off a state visit to Washington next month over allegations of U.S. spying on her nation, including supposed NSA intercepts of emails and messages from Ms. Rousseff, her aides and the state oil company, Petrobras.

The allegations come via Edward Snowden. President Obama telephoned Rousseff this week to discuss the issue.

Random Musings

--David Rothkopf / Financial Times

“Barack Obama had an eventful presidency. He came into office during the worst financial crisis in three generations, helped stabilize the American economy, oversaw healthcare reform, pulled the U.S. out of two wars, gave the order to kill Osama bin Laden, won the Nobel Prize, hosted some state dinners and played some golf. Many occupants of the Oval office boast a lot less. But unless something major changes, his presidency is stalled.

“As the events of recent months have weakened the president, revealed his weaknesses and shown deep flaws in the U.S. political system, Mr. Obama now runs the risk of becoming a lame duck very prematurely. Of course, he remains powerful. Some external event – a war, a disaster, a foreign upset or opportunity, or a major misstep by his opponents in the U.S. – could restore life to his presidency. But barring a sea-change, he may achieve little more than he already has.

“Recent events illustrate the situation and offer clues as to the reasons behind it. Mr. Obama began the year with modest aspirations. Hoping that his 2012 election victory had given him a mandate, he sought to advance a limited agenda: immigration reform, resolving budget problems, perhaps some corporate tax changes and investment in infrastructure. Internationally, his goals were even simpler: get out of the wars he inherited and keep us out of trouble. He has faltered in almost all areas of this agenda....

“Arrogance and ambivalence have undercut the promise of Mr. Obama’s oratory and, indeed, of his earnest, intelligent, seemingly good character. Flashes of promise have been subsumed by circumstances, by his opponents and by the president’s own inability to build upon them. This hints at perhaps Mr. Obama’s greatest problem.

“He was such a convincing campaigner with such a great personal story that our expectations were set unreasonably high. In the end, he may prove an old maxim of U.S. politics. The people vote hoping for the brilliance of a George Washington or Abraham Lincoln. But in the end, most of the time they get a Rutherford B. Hayes – leaders who failed to live up to the aspirations of the voters or their times.”

--Maureen Dowd / New York Times...on the response to the Navy Yard tragedy...

“On the most deadly day here since Sept. 11, 2001, with the capital reeling over the sadly familiar scene of a mass shooting by a madman, the chief executive stepped to the microphones and captured the heartbreak.

“It wasn’t the chief executive of the nation. It was Dr. Janis Orlowski, the chief operating officer of MedStar Washington Hospital Center, where three of those injured were being treated.

“ ‘There’s something evil in our society that we as Americans have to work to try and eradicate,’ she said, her voice stoic but laced with emotion. On the day when she announced only hours earlier that she had submitted her resignation to take another job, she continued: ‘There’s something wrong here when we have these multiple shootings, these multiple injuries. There is something wrong, and the only thing that I can say is we have to work together to get rid of it. I would like you to put my trauma center out of business. I really would. I would like to not be an expert on gunshots.’

“Calling it ‘a challenge to all of us,’ she concluded: ‘This is not America.’

“President Obama also gave a speech Monday, talking at the White House while the drama unfolded at the supposedly secure Navy Yard nearby. He could have posted his original remarks on the White House Web site and replaced them with a Cri de Coeur on gun control, or comfort for the shaken city. The 12 who died were, after all, under his aegis as workers in a federal building.

“But, jarringly, the president went ahead with his political attack, briefly addressing the slaughter before moving on to jab Republicans over the corporate tax rate and resistance to ObamaCare.

“Just as with the address to the nation on Syria last week, the president went ahead with a speech overtaken by events. It was out of joint, given that the Senate was put into lockdown and the Washington Nationals delayed a night game against the Atlanta Braves, noting on its Web site, ‘Postponed: Tragedy.’

“The man who connected so electrically and facilely in 2008, causing Americans to overlook his thin resume, cannot seem to connect anymore.

“With a shrinking circle of trust inside the White House, Obama is having trouble establishing trust outside with once reliable factions: grass-roots Democrats and liberals in Congress.

“As Peter Baker wrote in The Times, the president is finding himself increasingly ‘frustrated’ by the defiance of Democrats who are despairing of his passive, reactive leadership.”

--Daniel Henninger / Wall Street Journal

“We should admit the obvious: Barack Obama is the most anti-political president the United States has had in the post-war era. Truman, Eisenhower, Kennedy, Johnson, Nixon, Ford, Carter (even), Reagan, Bush, Clinton, Bush. All practiced politics inside the tensions between Congress and the presidency that were designed into the system by the Founding Fathers. Not Barack Obama. He told us he was different. He is.

“Mr. Obama doesn’t do Washington’s politics. Disappointed acolytes say it is because he is ‘passive.’ That underestimates him. For Mr. Obama, the affairs of state are wholly a function of whatever is inside his mind....

“From where he sits, it is the job of the political world outside to adjust and conform to the course of the president’s mental orbit. Those who won’t adjust are dealt with by the president himself. They are attacked publicly until they are too weak politically to oppose what is on his mind.

“This is the unique Obama M.O. For historians of the Obama presidency, this September has been a case study in the 44th president’s modus operandi.

“Early in September, President Obama surprised Washington by announcing he would seek a congressional vote of support for taking action against Bashar Assad in Syria. This came after the red line went.....

“After meeting with the president, two significant political figures in Washington expressed public support for his announced plans to act against Assad – House Speaker John Boehner and Majority Leader Eric Cantor.

“The president’s decision to intervene wasn’t popular with the American public or with members of Congress, so the Boehner-Cantor commitment was a big deal....

“A week and a half later, Mr. Obama reversed course. He would not seek congressional approval. Instead it occurred to him that he could negotiate a Syrian chemical-arms reduction agreement with Russian President Vladimir Putin. The merits of that decision aside...neither Mr. Boehner nor Mr. Cantor got a heads up from the White House on the U-turn toward Russia.

“Throw a dart at the names of the other 11 post-war U.S. presidents. Would any of them have hung a Speaker of the House out to dry just before heading into negotiations with that speaker on funding the government, extending the debt ceiling or the future of your legacy achievement – ObamaCare? Barack Obama did. No problem.

“On Monday, Mr. Obama delivered what the White House called ‘Remarks by the President at the Five-Year Anniversary of the Financial Crisis.’ After waving in the direction of the Navy Yard shooting and then the 2008 financial crisis, Mr. Obama spent most of the speech’s nearly 4,000 words ripping into the congressional Republicans....

“Twice he announces, ‘I will not negotiate.’ But he is negotiating with Vladimir Putin something infinitely more difficult than a debt deal with John Boehner.

“Trace elements of normal politics are inevitable in any presidency. But this one over five years has floated beyond the American political tradition. The Obama modus operandi is reducible to this: I think, therefore you do. Everyone else who still does real politics – from one side to the other – is left to gape.”

--Once again we had an example this week in the Navy Yard shootings that claimed 12 innocent lives and the shooter, Aaron Alexis, of just how overrated America is. For starters, we had the usual rush to judgment among reporters, fed by our insatiable desire to declare every incident of this kind terrorism before any of the facts are in, and then, invariably, we learn there were missed signals that could have prevented this, be it terrorism or not.

In this case, officials at the Navy base in Newport, R.I., failed to forward a report from local police that Alexis had serious mental issues. Newport police did their job. Everyone else didn’t. Base security “did not deem Alexis to pose a threat to himself or others based on his alleged conduct at the hotel that night,” according to a Navy source who spoke to USA TODAY.

So then Navy officials in Washington weren’t alerted.

Defense Secretary Chuck Hagel said Wednesday there appeared to be “red flags” in Alexis’ background that were not acted on.

“Should we have picked them up? Why didn’t we? How could we?  All those questions need to be answered. Obviously something went wrong.”

Alexis had a secret security clearance from his time in the Navy Reserves; a clearance that normally lasts 10 years unless something of an adverse nature pops up and the employer notices.

[I was watching Greta the other night and she interviewed Rollie Chance, the man initially falsely accused by some media outlets of being the killer. My heart goes out to this innocent soul who for good reason was on the verge of tears during his interview. He didn’t deserve this.]

--In line with the above, Elaine M. Grossman / Global Security Newswire

“A two-star Air Force general responsible for overseeing atomic matters on Tuesday voiced confidence in security at service bases housing nuclear-tipped ground-based ballistic missiles and gravity bombs, following Monday’s deadly shooting at the Navy Yard in Washington.

“Asked if the Air Force would review its contractor security clearances and base-access procedures – given revelations that alleged killer Aaron Alexis had a history of mental-health problems and gun-related incidents – Maj. Gen. Garrett Harencak played down the idea that similar security gaps could affect his service’s stewardship of two-thirds of the nation’s nuclear arsenal.

“ ‘We never stop doing that,’ said Harencak, the Air Force assistant chief of staff for strategic deterrence and nuclear integration. ‘We’re always constantly self-assessing our security procedures; we’re always testing our security procedures.’”

You believe him? I sure as hell don’t. Given all the security breaches we’ve had in the past year or so? Bradley Manning, Edward Snowden et al? This nation is increasingly a bad joke.

--Awful story in Austria this week, proving we aren’t the only country with gun and mass murder issues. A “poacher” and hunter, Alois Huber, killed three police and a paramedic before setting his house on fire during a police siege of the property. Huber died in the blaze.

This fellow was known to hunt illegally, often leaving the heads of dead animals on roads. He’s now in hell.

--The first poll in the New York City mayoral race following the primaries shows why some of us have been focusing on the Democratic side, even though Gotham voters have elected a Republican or Independent for 20 years (despite a 6-1 Dems over Republicans advantage in the voting rolls). The News4/Marist/Wall Street Journal survey has Democrat Bill de Blasio with 65% to Republican Joe Lhota’s 22%. [I told you Lhota was “a loser.”] So it’s all over but the shouting. New Yorkers are primed for change, which gives me cause to once again say the majority of them are idiots.

But Mayor Michael Bloomberg has given critics ammunition in his decision not to endorse Lhota, as much as he has said de Blasio would be dangerous for the city.

Michael Goodwin / New York Post

“There’s no sense looking for logic in Mayor Bloomberg’s explanation for why he won’t make an endorsement in the mayoral race. The only way to understand the irresponsible decision is to realize the mayor thinks it’s not good for his next life to take sides in this one.

“Fearing that his philosophical ally, Republican Joe Lhota, can’t win, Bloomberg doesn’t want to get beaten up in the election and be tainted by a Lhota loss. So the mayor played Mr. Humble, saying he’s ‘never been a partisan guy’ and that ‘my job is to govern and then to help the next guy.’....

“It is especially odd to claim that New York’s interests are best served by his neutrality. His first campaign, in 2001, was successful largely because Rudy Giuliani endorsed him. Had Giuliani stayed silent, far-left Democrat Mark Green would have been mayor.

“That scary thought should compel Bloomberg to man up because this race is a sequel to 2001....

“When he endorsed Bloomberg in 2001, Giuliani was dealing with the aftermath of 9/11. He, too, was concerned about the transition to a next mayor, and refused to criticize Green when he made his choice nine days before the general election.

“ ‘I wasn’t sure it was the right time to enter into any form of partisan politics,’ Giuliani said then. ‘I have to continue to run the city. I have to continue to keep the city together.’

“Giuliani found a way to balance politics and governing in those awful days, and Bloomberg has a clear duty to find one now. It’s part of the job.”

--The Star-Ledger’s veteran political reporter, Tom Moran, wrote a devastating piece last Sunday on New Jersey Gov. Chris Christie.

“He’s got nearly all he wanted in his first two years, and it didn’t work.

“If you leave New Jersey for a weekend, be ready for people to ask you about Gov. Chris Christie.

“He’s the hottest property in American politics and the most compelling personality the state has produced since Tony Soprano. Polls say he is now the front-runner for the Republican presidential nomination.

“But if they ask, be sure to tell them this as well: He is the most overrated governor in America.

“Yes, he’s a skilled politician and a talented deal-maker who, for his first two years in office, got nearly everything he wanted from the Democratic Legislature.

“But it hasn’t worked. New Jersey’s economy is a mess, even compared with its neighbors. The property tax burden is up sharply. Poverty is rising. And the state’s credit rating has dropped on Christie’s watch as the long-range outlook deteriorates. His successor will inherit a bigger mess than he did.

“Crime is spiking in several of New Jersey’s hard-pressed cities, where loss of state aid has forced massive police layoffs. The state’s home foreclosure rate is the second highest in the nation and Christie fumbled a federal aid program intended to soften the blow. Yet he tried to raid a fund earmarked for affordable housing until the courts stopped him.”

As Mr. Moran further points out....

New Jersey ranks 44th in job growth since Christie took office. The unemployment rate is 8.6* percent, compared with the national rate of 7.3 percent.

*Ticked down to 8.5%, per the above noted report issued Friday.

The property tax burden grew by 18.6 percent during Christie’s first three years in office for the average family, thanks to steep cuts in rebates. That’s triple the growth rate during the final three years of his predecessor, Jon Corzine.

New Jersey’s bond rating is among the lowest in the country, and all three major rating agencies have lowered it on Christie’s watch. In April, Standard & Poor’s warned that it may lower the rating again.

Yet the voters don’t seem to care. Or as Moran writes:

“The political mystery of the year is how Christie can be so popular when the state’s economy is so rotten. Only 11 percent of New Jerseyans say they are better off than when he took office.”

Personally, I couldn’t give a damn anymore about the guy and I know already I wouldn’t support him for president.

However, when it comes to his reelection, he will still get my vote over an incredibly weak Democratic opponent.

So, in the latest Rutgers-Eagleton poll, Christie is leading his Democratic challenger, state Sen. Barbara Buono, 55% to 35%. Christie’s favorability rating remains a strong 60% in this survey.

--Newark mayor and Democratic Senate candidate Cory Booker is receiving intensified coverage of his past statements concerning “T-Bone,” an alleged drug dealer who Booker says threatened his life upon his arrival in Newark, only to come sobbing on his shoulder for help years later.

T-Bone has been a feature in many Booker speeches over the years, but the questions today are about whether the character actually exists. 

Booker says, such as he did in a recent interview, “There’s no reason to make up a story like that.”

But he can’t prove the guy is real.

And then you have increasing scrutiny into his real estate holdings, as well as annual income in excess of $500,000 in each of the last three years. Booker says most of his wealth is tied up in the startup he co-founded, Waywire, and that the stock he owns was donated to charity.

--Former majority leader Tom DeLay’s conviction on criminal charges of conspiring to funnel corporate money to state legislative candidates was overturned by a three-judge appeals court panel 2 to 1 along party lines Thursday. It’s been about eight years since DeLay was forced to leave after being indicted on the charges. He was convicted in 2010 and later sentenced to three years in prison, though he remained free while the case was on appeal.

This is one of the more complicated figures of the last 50 years in American politics. I think I commented long ago that for one thing he wrote some of the great speeches on American history, ever. But I can’t say I liked the guy.

--So I’m on the Jesuit mailing list and printed out a very long interview Pope Francis gave an Italian Jesuit journal, America, and I haven’t had a chance to read it in full yet.

But the initial headlines are truly a bombshell, as the Pope says the Church has been too focused on the issues of abortion, gay marriage and contraception and that it needs to find a “new balance.”

“The teaching of the Church....is clear and I am a son of the church, but it is not necessary to talk about these issues all the time....

“The church’s pastoral ministry cannot be obsessed with the transmission of a disjointed multitude of doctrines to be imposed insistently....

“The thing the church needs most today is the ability to heal wounds and to warm the hearts of the faithful; it needs nearness, proximity. I see the church as a field hospital after battle.”

We also learn in the interview his favorite composer is Mozart, so expect his CD sales to soar up the Billboard charts. [Half-kidding...that would be way cool if it ever happened.]

[On Friday during an audience with Catholic gynecologists, Pope Francis did denounce abortions as a symptom of today’s “throw-away culture.”]

--Bits and pieces of an extensive UN climate change report, scheduled for release in stages through next year, the first of which will be next week in Stockholm, have been leaking out the past few months. 800 scientists from around the world have been working on it for four years and while some of the language will change before the final/final report is issued, little of the 31-page summary for policy makers is expected to be.

“It is extremely likely that human influence on climate caused more than half of the observed increase in global average surface temperature from 1951-2010,” the draft says.

“There is high confidence that this has warmed the ocean, melted snow and ice, raised global mean sea level and changed some climate extremes in the second half of the 20th century.”

As reported by the Financial Times, “The report also contains new projections of how fast global sea levels will rise because scientists have gained a better understanding of how the Greenland and Antarctic ice sheets are likely to influence such an increase....

“The question of when the Arctic’s summer sea ice will vanish has...been contentious.

“Last year the summer sea ice shrank to its lowest level on record.

“This summer, the ice has failed to decline at such a spectacular rate, which many sea ice experts had expected.

“Some scientists, such as Professor Peter Wadhams of Cambridge University, predict it will vanish as soon as 2015.

“Others say it is more likely to take decades rather than years.”

--A report from the federal Centers for Disease Control and Prevention (CDC) concludes that the overuse of antibiotics has caused three kinds of bacteria – one that causes life-threatening diarrhea, one that causes bloodstream infections and one that transmits sexually – to become urgent threats to human health in the United States.

CDC Director Tom Frieden said, “It’s not too late” for the nation to rein in the infections by reserving the antibiotics for when they are truly needed, but, “If we are not careful and we don’t take urgent action, the medicine cabinet may be empty for patients with life-threatening infections in the coming months and years.”

One step that can be taken is something I have talked about since day one of this site...wash your freakin’ hands! And that applies to you, too, healthcare professionals. Handling food safely is another easy one. In this area I confess to not being smart enough with prepackaged salad. It says ‘prewashed,’ but I haven’t then been rinsing it again, as you’re supposed to.   [So I’m fining myself one beer...a domestic.]

Separately, the CDC estimates that at least two million Americans fall ill from antibiotic-resistant bacteria every year and that at least 23,000 die from those infections. This is actually far lower than previous estimates, such as a 2007 CDC study that pegged the tally at 100,000 every year.

One other item. As reported by the New York Times, a study in JAMA Internal Medicine, via the work of researchers from Johns Hopkins Bloomberg School of Public Health, “sifted through health records of more than 440,000 people in the Geisinger Health System, which operates a network of clinics and hospitals in Pennsylvania, and found that patients who lived near farms and areas where manure was dumped were 38 percent more likely to develop a MRSA infection, particularly of soft tissue or skin, researchers found.” [Sabrina Tavernise]

But you get farm fresh eggs and bacon, sports fans!!! There are always tradeoffs.

--Back to beer, and health, a potentially lethal bacteria has been found in the waste water at the Warsteiner brewer, the largest family-owned beer maker in Germany, right before Oktoberfest.

As reported by the Financial Times’ Quentin Peel, “Tourists who once flocked to the little town of Warstein in the picturesque Sauerland region to visit their favorite brewery have been warned to stay away because of the danger of the virulent Legionnaire’s disease.”

Legionella bacteria has infected 165 people and caused two deaths in the town. The discovery of it in the waste water has been described by a local newspaper as “a catastrophe.”

--What a scary deal in St. Bernard Parish, near New Orleans, as residents of one neighborhood were warned that their household water supplies contain a deadly “brain-eating” amoeba that infects its victims by swimming up their nostrils.

The single-celled organism was identified as the cause of death of a four-year-old boy last month. The thing is, the water is not dangerous when drunk but poses a deadly risk if inhaled.

How deadly? The infection, primary amoebic meningoencephalitis, is usually fatal within 12 days.

Only 128 cases have been documented in the U.S. between 1962 and 2012, but there is only one known survivor.

I mean think about it. When you wash your face, of course the water is touching your nose. Ditto bathing or showering. “Don’t let kids play unsupervised with hoses or sprinklers, which may accidentally squirt water up their nose,” reads one of the local warnings.

Actually, last week a 12-year-old Arkansas girl became the second known survivor. She is believed to have contracted the amoeba during a visit to a water park.

Doctors said the girl survived thanks to an experimental treatment that included the use of a breast cancer drug – “as well as the persistence of her mother, who refused to accept that her daughter was suffering from a ‘normal’ illness.” [Rhys Blakely / London Times]

--Thankfully the Costa Concordia was righted without breaking up and I’m assuming (since I haven’t read to the contrary) that the “toxic soup of rotting food, chemicals and other debris” didn’t spill out in large quantities during the procedure.

As reported by the Daily Telegraph, “Trapped inside the upturned hull are more than 10,800 kilograms of fish, nearly 2,500kg of cheese, 5,700 liters of ice cream in tubs, 10,800kg pasta, 900kg of onions, more than 2,000 pots of jam and nearly 17,000 tea bags. Rotting beneath the waterline are more than 7,700kg of raw beef, nearly 11,000 eggs, 2,346 hot dog buns, 370kg of rabbit meat and more than 3,785 liters of milk.

Among the food and drink that was sealed is 18,000 bottles of wine and 46,000 miniature bottles of spirits.

There was also 38 liters of insecticide. At least the engine oil and diesel was previously removed.

Oh, and you have two bodies in there (still not recovered as of Friday).

--As reported by Makiko Kitamura of Bloomberg, a study of 35 men published in the Lancet medical journal found that comprehensive lifestyle changes, including more fruits and vegetables, along with moderate exercise and meditation, “were shown to reverse signs of aging at the cellular level for the first time.” No previous studies have shown this.

The research was led by Dean Ornish, founder of the Preventive Medicine Research Institute.  Ornish’s Lifestyle Heart Trial, published in 1998, showed a reversal of coronary heart disease over five years.

The diet is all about whole foods, a plant-based regimen of fruit, veggies, whole grains and legumes, with few refined carbohydrates. Ornish said it isn’t designed to be strictly vegetarian or vegan.

“If you indulge yourself one day, just eat healthier the next.”

Veal cutlet with spaetzle, that’s what I’m talkin’ about![OK...once a month, I guess.]

--I didn’t have a chance to report on this last time but a survey of New Jersey “digital natives” – the first generation born into a digital world – found that texting while driving and using a phone without hands-free technology are rampant among their peers.

In a study of 1,000 N.J. drivers between the ages of 17 and 25 by Plymouth Rock Assurance, 73% of respondents witnessed a friend texting while driving, and 70% saw a friend using a phone without hands-free technology.

But, 57% said they witnessed a parent using a phone without hands-free technology while driving and 25% saw a parent texting while driving.

--I spent last weekend at the Jersey Shore, hard-hit Mantoloking which is still recovering from Sandy. My friend Tony has a beautiful place on the beach that suffered major damage, but unlike some of his neighbors his home is still standing and it was comfortable for the eight of us who have all been friends for over 40 years. 

One thing is for sure. Much of the region is totally unprepared for another storm. A big northeaster this winter would do major damage to many of these same communities who simply haven’t had the time (or political will) to rebuild their dune systems in the right way.

Mantoloking is a few miles north of Seaside Heights, which suffered the awful boardwalk fire about ten days ago. At first there was talk of arson, but now it’s been determined the cause was electrical wiring underneath the boardwalk that was corrupted by Sandy.

The thing is it was inaccessible, and thus not properly inspected after the storm, so you can imagine all the communities in the area with similar boardwalks are scrambling big time.

--Finally...on the social media front....I am slowly but surely emerging from the Stone Age and hired Daniele W. to get me going. I said last time I would talk about it at length today. Well, try next week. We’re playing around with a few things right now. This particular column, however, will always be my main focus.

---

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

God bless America.

---

Gold closed at $1332
Oil, $104.67

Returns for the week 9/16-9/20

Dow Jones +0.5% [15451]
S&P 500 +1.3% [1709]
S&P MidCap +1.3%
Russell 2000 +1.8%
Nasdaq +1.4% [3774]

Returns for the period 1/1/13-9/20/13

Dow Jones +17.9%
S&P 500 +19.9%
S&P MidCap +22.0%
Russell 2000 +26.3%
Nasdaq +25.0%

Bulls 42.3
Bears 21.6 [Source: Investors Intelligence]

Have a great week. I appreciate your support.

Brian Trumbore