Week in Review

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Week in Review

09/28/2013

For the week 9/23-9/27

Washington and Wall Street

Before I begin, I normally finish this column around 5:00 PM ET on Friday and then spend the night proofing it and adding any last minute breaking news. At 3:30 PM today, though, President Obama announced he had an historic phone call with Iranian President Hasan Rohani. It sounds like they talked more about New York traffic than anything else. The White House is touting it as a “15-minute” conversation but with translators they wouldn’t have time to cover much.

Bottom line, it changes none of my previously written commentary on the topic of Iran, both in the past and as noted below.

I wrote last week that in reaching my conclusion the Federal Reserve wouldn’t begin to taper its $85 billion a month bond-buying program at its Sept. 17-18 meeting, I believed the Fed was heavily weighing the shenanigans in Washington and concerns the budget and debt-ceiling debates would harm the economy, thus the Fed wanted to keep the stimulus program going full tilt until there was more clarity. 

This week New York Fed Reserve Bank President William Dudley said budget battles in Congress “loom very large right now” in their thinking. Dudley went on to say the economy’s 2% annual growth rate “might not be sufficient” to provide much real improvement in the labor market, even as the unemployment rate continues to fall. Other measures, he said, such as the pace of hiring, job openings and job-finding “indicate a much more modest improvement.”

Dudley also painted a decidedly mixed picture of the economy. Consumer spending is tepid, income growth has been weak, and the housing recovery could be blunted by higher mortgage rates.

“In my view, the economy still needs the support of a very accommodative monetary policy.”

But as to the dysfunction in Washington, it was largely the Ted Cruz show this week as the Texas Republican senator went to the floor to talk for 21 hours in an unofficial filibuster about defunding ObamaCare. The House passed a continuing resolution (CR) that would keep the government open beyond September 30, but it stripped out funding for the president’s Affordable Care Act. The Senate then sent the House back their own CR that includes ObamaCare funding and keeps government operating through Nov. 15. The vote was straight party line, 54-44, with two absent.

So now it’s up to the House this weekend and Monday, Sept. 30, to decide whether to pass a straight CR and keep government open, or whether to battle it out on ObamaCare, shut the government down, and see what happens. 

Or, as seems likely, the House passes a clean CR and goes after ObamaCare again with the Oct. 17 debt-ceiling deadline. The House could attempt to force the president to accept a one-year delay of the ACA’s mandates, taxes and benefits. Other items such as the XL pipeline could become issues for a debt-ceiling package.

But President Obama has staked out another red line, a line in the sand, in saying he will not in any way negotiate on the debt-ceiling, saying on Thursday, and Friday afternoon, in part that Republicans were trying “to blackmail” him over ObamaCare.

“Some have threatened a government shutdown if they can’t shut down this law. Others have actually threatened an economic shutdown by refusing to pay America’s bills if they can’t delay the law....

“I will not negotiate on anything when it comes to the full faith and credit of the United States of  America.”

Back to Cruz, I comment on him below but, for now, I’m extremely frustrated he has been attacking fellow Republicans while Democrats just sit back and smile. Republican Senator John McCain, for one, was incensed by Cruz’s comparison of Republicans who are not standing with him to appeasers who allowed Hitler to race through Europe.

“Elections have consequences, and those elections were clear,” McCain said. “A majority of the American people supported the president of the United States and renewed his stewardship of this country.”

Cruz maintained, “Everyone in America knows ObamaCare is destroying the economy. Where is the urgency?”

So what of ObamaCare, which has its own Oct. 1 implementation date? In the latest CNN/ORC International poll, only 39% of Americans currently favor the health-care program, compared with 51% in January.

“Many companies are cutting worker hours to below the threshold (30 hours) at which they’re required to comply with ObamaCare.

“Others are cutting workers completely to avoid compliance or to reduce costs associated with the expanded coverage.

“Many young people, unemployed or earning little, will have trouble paying premiums once open enrollment for health insurance exchanges begins Oct. 1. Even discounts won’t be enough for some, who then will face fines or have to turn to parents who face their own insurance challenges. List-price premiums for a 40-year-old buying a mid-range plan will average close to $330 per month, according to a recent Avalere Health study. For someone who is 60, premiums will run about $615 a month. Forget retirement....

“The biggest concern across all demographics is the likely effect on the larger economy. What happens when so many people lose hours and work and, therefore, income?

“Moreover, the law is being applied unfairly and unequally, with exemptions and delays offered to special groups and the brunt of the strain falling directly on middle-class Americans.

“Larger employers, for example, have been given a one-year reprieve on fines for leaving workers uncovered. No such grace for individual citizens. The incentives to cut employees and hours prompted three powerful supporters to write a strong letter of dissent to Democratic leaders. The letter writers, saying the ACA would destroy the backbone of the American middle class and ‘the very health and wellbeing of our members along with millions of other hardworking Americans,’ also lamented the falsehood that employees could keep the insurance they like. This is obviously not true, despite Obama’s repeated assurances to the contrary.

“The authors were all union leaders, including James Hoffa, president of the International Brotherhood of Teamsters....

“Delay may feel like one more Republican strategy, but that doesn’t necessarily make it unwise. If we can delay sending cruise missiles to Syria pending a better solution, perhaps there’s some sense to delaying a health-care overhaul that creates unacceptable collateral damage to citizens and that is not quite ready for public consumption.

“In the long run, delay might benefit Obama, especially if it averts a revolt once citizens fully absorb the expensive realities of ObamaCare and promises not kept. He has already demonstrated that he is comfortable with waiting when risks are disproportionate to theoretical gains.”

“The ObamaCare advocates who say the public will never go for repeal if it means losing the goodies that are being bestowed upon them are probably right. But the premium increases, layoffs and conversion of full-time jobs into part-time jobs are not coincidental; they are a direct result of the costs ObamaCare is already imposing on private insurance and on employers. In the natural order of things, the GOP’s commitment to ‘repeal and replace’ is evolving into ‘delay, dismantle and do over;’ and there is little the president can do to stop it.   Sometimes the waiting is the hardest part but, in the end, it’s going to all come tumbling down.”

“The public’s dislike of ObamaCare isn’t growing with every new poll for reasons of philosophical attachment to notions of liberty and choice. Fear of ObamaCare is growing because a cascade of news suggests that ObamaCare is an impending catastrophe.

“Big labor unions and smaller franchise restaurant owners want out. UPS dropped coverage for employed spouses. Corporations such as Walgreens and IBM are transferring employees or retirees into private insurance exchanges. Because of ObamaCare, the Cleveland Clinic has announced early retirements for staff and possible layoffs. The federal government this week made public its estimate of premium costs for the federal health-care exchanges. It is a morass, revealing the law’s underappreciated operational complexity.

“But ObamaCare’s Achilles’ heel is technology. The software glitches are going to drive people insane.

“Creating really large software for institutions is hard. Creating big software that can communicate across unrelated institutions is unimaginably hard. ObamaCare’s software has to communicate – accurately – across a mind-boggling array of institutions: HHS, the IRS, Medicare, the state-run exchanges, and a whole galaxy of private insurers’ and employers’ software systems....

“The odds of ObamaCare’s eventual self-collapse look stronger every day. After that happens, then what? Try truly universal health insurance? Not bloody likely if the aghast U.S. public has any say.

“Enacted with zero Republican votes, ObamaCare is the solely owned creation of the Democrats’ belief in their own limitless powers to fashion goodness out of legislated entitlements....

“Republicans and conservatives, instead of tilting at the defunding windmill, should be working now to present the American people with the policy ideas that will emerge inevitably when ObamaCare declines. The system of private insurance exchanges being adopted by the likes of Walgreens suggests a parallel alternative to ObamaCare may be happening already....

“The discrediting of the entitlement state begins next Tuesday. Let it happen.”

Finally, in line with some of Henninger’s comments, the Wall Street Journal had a front-page piece on Friday titled “Online Health Exchanges for Small Businesses Hit Snag.”

“The Obama administration acknowledged for the first time Thursday that a technological problem is forcing it to delay part of the rollout of the new health-care law, saying insurance exchanges won’t be ready to accept online applications from small businesses when the program launches Tuesday.

“With less than five days left to debug the sprawling new computer system, there are other signs of trouble: People close to the situation are also skeptical the online marketplaces for individual customers will be fully ready. The administration said it was confident they would open on time....

“Last week, the Wall Street Journal reported that the software supporting exchanges for individual consumers that the federal government is running on behalf of 36 states was miscalculating U.S. subsidies for low-income people....

“In addition, a Health and Human Services official, Julie Bataille, confirmed Thursday that the Spanish-language version of the federal marketplace’s main website, known as CuidadoDeSalud.gov, wouldn’t be ready for people to enroll until mid-October rather than Tuesday.”

Let the fun begin. Or as House Majority Leader Eric Cantor (R., Va.) offered the other day, “This law is not ready for prime time and never will be.”

Just a few notes on the economy. August durable goods rose far less than expected, up 0.1%, though personal income for the month rose a solid 0.4% and consumption came in at 0.3%.

On the housing front, new home sales for August came in less than expected, while the Case-Shiller 20-city home price index for July rose 1.8% over June, 12.4% year-over-year. Prices in Las Vegas are up 27.5%, in San Francisco up 24.8%. Concerns are growing we are entering a new bubble in some of these areas.

But on the plus side, at least for now interest rates appear to be stabilizing and mortgage rates may edge down.

Then again, aside from what happens in Congress, we have another key employment report next Friday, one that may stir up taper fears all over again.

Lastly, the latest reading on second-quarter growth came in at 2.5%, the same as last month’s figure and less than what economists expected. Growth in the first quarter was just 1.1%. Consumer spending rose at an unrevised 1.8% annual pace.

So we remain stuck in the 2% growth world that William Dudley, Ben Bernanke and others are concerned with. The outlook for the third quarter is no better. No wonder a new Bloomberg national poll has Americans losing confidence in the recovery.

Europe and the German Election

German Chancellor Angela Merkel’s Christian Democrats (and the Bavarian sister party CSU) scored 41.5% in Sunday’s election, the best for the CDU since 1994. But, her coalition, pro-business partner, the Free Democrats (FDP) failed to garner the 5% threshold needed to qualify for seats in parliament, taking 4.8% instead, so Merkel is struggling to form a coalition.

Here’s the deal. The center-left Social Democrats (SPD) picked up 25.7%. The SPD was Merkel’s partner in the 2005-09 “grand coalition” with SPD leader Peer Steinbruck as finance minister. The German people want a similar arrangement this time and Merkel is certainly amenable to it, but the SPD did not fare well as a partner in the first Merkel government and Steinbruck, for one, said there is no way he would join a new one. The SPD has not fared well in elections since because when it was in government with the chancellor it looked very much the junior partner with virtually no say in actual policy.

That said, the SPD is holding a convention this weekend and leadership announced late Friday it wanted to hold a referendum on the issue of joining Merkel. This may not take place, though, for weeks, but would have to by mid-November when the SPD holds its annual party conference. So it’s unclear how this will affect Merkel’s immediate plans and her option of looking elsewhere.

She can attempt to form a coalition with the Greens (8.4%), but forming one with the former communist Left Party (Linke, which took 8.6%) is out. 

One surprise, aside from the FDP failing to gain 5% for the first time in decades, was the performance of the Alternative fuer Deutschland (AfD), which advocates withdrawal from the euro. While it too failed to gain the needed 5% for seats, the 4.7% it received was remarkable considering the party was founded just months ago.

Back to Merkel, she said the vote was an endorsement of Germany’s responsibility in Europe. “I believe our European policy is positive about integration, and I see no reason to change it,” underlining her belief that her crisis management has been largely successful.

But the vote is also a signal that voters want the government to shift away from saving the eurozone and, as the London Times’ Roger Boyes observes, “towards rescuing the Fatherland from neglect.” You see increasing stories of a rotting German infrastructure, for one.

Merkel is also faced with soaring energy costs, the result of her plan to mothball the country’s nuclear power industry.

And you have the ongoing issue of a Eurozone banking union that is desperately needed before the next crisis hits, which for all we know could be soon. Greece is expected to receive a third bailout in November. Unemployment is still sky high there (27.6%), in Spain (26.3%) and Portugal (16.5%).

And needless to say, the above noted periphery nations, including Italy, are not happy to see Merkel and her austerity programs for another four years. A German Marshall Fund poll found 82% in Spain repudiate Merkel’s handling of the debt crisis, 65% in Portugal and 58% in Italy.

So you have another clash on the horizon. The periphery, and Ireland, has received 496 billion euros of rescue aid with Germany being far and away the biggest contributor. German voters like Merkel’s prescription of budget discipline, while the likes of Greece say they can’t take it anymore.

Meanwhile, it wasn’t all about Germany this week.  Italian Prime Minister Enrico Letta faces a serious crisis in trying to save his coalition government from collapse after Silvio Berlusconi’s supporters threatened a mass resignation from parliament.

Berlusconi, the 76-year-old former prime minister convicted last month of tax fraud, while appealing a separate conviction for paying for sex with an underage prostitute – allowed his renamed Forza Italia party to warn it would quit the government if a senate committee voted to expel Berlusconi from the upper house next month.

Only a few weeks ago, Berlusconi had offered assurances his party would continue to back the government as long as it got the reforms, and lower taxes, it wanted.

Letta was in New York for the U.N. General Assembly when he got the news that his five-month old government was in danger. Italy now faces another debt downgrade by the ratings agencies over the renewed instability, especially worrisome as Italy has to service 2 trillion euro in public debt.

President Giorgio Napolitano, the head of state, said he would not dissolve parliament and call new elections. He also rejected Berlusconi’s claim that his expulsion amounted to a coup d’etat.

Lastly, on the overall eurozone economy, a composite flash PMI of services and manufacturing for the region came in at 52.1 for September vs. 51.5 in August, though the manufacturing reading was just 51.1 vs. 51.4 the month before. Germany’s composite was 53.8 vs. 53.5 in August, but manufacturing was down from 51.8 to 51.3. France, on the other hand, showed a slight improvement in manufacturing from 48.7 to 49.5.

Add it all up and economists believe the eurozone economy in the third quarter is on pace for whopping growth of 0.2% vs. 0.3% in Q2. It doesn’t help that private sector lending among the 17 holding the currency fell for a 16th consecutive month.

China: HSBC’s flash reading on Chinese manufacturing for September came in at 51.2 vs. 50.1 in August, a six-month high. This is encouraging as HSBC focuses on the private sector in its surveys here while the government’s official numbers look primarily at state-run enterprises. Chinese industrial profits also soared 24.2% year-on-year in August, though its off a low base of comparison.

But a Beige Book survey by CCB International of more than 2,000 companies said momentum in China’s economy was going in reverse. This is not good.

Nonetheless, the International Monetary Fund looks at it all and says GDP will grow 7.75% this year. The IMF cited double-digit retail sales growth as well as stronger industrial production and fixed asset investment in maintaining its earlier 2013 forecast. Beijing’s official target is 7.5%.

Lastly, the New York Times’ Keith Bradsher had an interesting piece on China’s high-speed rail network. When it opened five years ago, there were serious concerns it would ever be used; that it was a gigantic boondoggle.

“Not anymore. Practically every train is sold out, although they leave for cities all over the country every several minutes....

“Just five years after China’s high-speed rail system opened, it is carrying nearly twice as many passengers each month as the country’s domestic airline industry. With traffic growing 28 percent a year for the last several years, China’s high-speed rail network will handle more passengers by early next year than the 54 million people a month who board domestic flights in the United States.”

A paper for the World Bank also concluded that “Chinese cities connected to the high-speed rail network, as more than 100 are already, are likely to experience broad growth in worker productivity. The productivity gains occur when companies find themselves within a couple of hours’ train ride of tens of millions of potential customers, employees and rivals.” [Bradsher]

China’s goal of relocating large numbers of families whose homes lie in the path of the tracks is also coming to fruition as new residential and commercial districts around high-speed train stations fill up.

Premier Li Keqiang has publicly endorsed the network and vowed to spend $100 billion a year on the system for years to come.

However, the Chinese government is struggling with nearly $500 billion in overall rail debt, most of it financed short term, so any increase in interest rates is particularly dangerous.

Iran: U.S. Secretary of State John Kerry said after meeting his Iranian counterpart, Mohammad Javad Zarif, he was struck by the “very different tone.” Talks on Iran’s nuclear program are now due to take place in Geneva on October 15, involving the five permanent members of the U.N. Security Council – the U.S., Russia, Britain, France and China – along with Germany, the P5+1.

Of course the talk this week was laughable. Zarif insisted Iran’s nuclear program was “nothing but peaceful” and pledged to prove it to the international community. The foreign minister also called sanctions “counterproductive” as he sought to have them lifted. Iranian President Hasan Rohani said he wants a reach to deal on the nuclear dispute in three to six months.

Rohani was indeed a busy beaver this week, so following are some of his comments, given in various forums, including his speech to the U.N. General Assembly.

“The only way forward is for a timeline to be inserted into the negotiations that are short....It’s a question of months not years.”

“Iran poses absolutely no threat to the world or the region. Nuclear weapons and other weapons of mass destruction have no place in Iran’s security and defense doctrine, and contradict our fundamental religious and ethical convictions. Our national interests make it imperative that we remove any and all reasonable concerns about Iran’s peaceful nuclear program.”

On the punitive measures taken against Iran, Rohani said, “These sanctions are violent – pure and simple.”

Rohani also called on Israel to join an international treaty banning the spread of nuclear weapons.

“Almost four decades of international efforts to establish a nuclear weapon-free zone in the Middle East have regrettably failed. No nation should possess nuclear weapons, since there are no right hands for these wrong weapons.”

But Rohani also made some statements on the Holocaust that did not play well back home. In an interview with CNN’s Christiane Amanpour he said, through a translator: “Whatever criminality they committed against the Jews we condemn,” adding, “the taking of human life is contemptible. It makes no difference if that life is Jewish life, Christian or Muslim. For us it is the same.”

But later, Fars, the Iranian news agency, said the above quotes were fabrications of CNN. And an independent translation of Rohani’s comments by the Wall Street Journal confirms that Fars, not CNN, got the Farsi right.

“So what did Mr. Rohani really say? After offering a vague indictment of ‘the crime committed by the Nazis both against the Jews and the non-Jews,’ he insisted that ‘I am not a history scholar,’ and that ‘the aspects that you talk about, clarification of these aspects is a duty of the historians and researchers.’

“Pretending that the facts of the Holocaust are a matter of serious historical dispute is a classic rhetorical evasion. Holocaust deniers commonly acknowledge that Jews were killed by the Nazis while insisting that the number of Jewish victims was relatively small and that there was no systematic effort to wipe them out.”

Earlier, in his U.N. address, President Obama said of Iran: “We are not seeking regime change, and we respect the right of the Iranian people to access peaceful nuclear energy.

“Instead, we insist that the Iranian government meet its responsibilities under the Nuclear Non-Proliferation Treaty and U.N. Security Council resolutions....

“The roadblocks may prove to be too great, but I firmly believe the diplomatic path must be tested.”

Cliff Kupchan of Eurasia Group told the Financial Times that the gravest threat posed by the nuclear program was that Iran was moving toward the capability to make 25kg of highly enriched uranium – enough for a bomb – faster than the U.S. could detect and strike the material.

“Once Iran has the fissile material, it can move it to a clandestine site and construct a weapon. At that point, Iran would have a safe breakout capability and become a de facto nuclear weapons power.”

And of course Rohani did not shake President Obama’s hand as the White House was attempting to line up.

“So it seems that Iranian President Hasan Rohani, who has undertaken a charm offensive at the United Nations this week, can’t bring himself to charm the one person he actually needs to charm, the man who has placed crippling sanctions on Iran’s economy.

“President Barack Obama was willing to shake hands with Rohani on the sidelines of the U.N. General Assembly today, but the Iranian president wasn’t ready for such a dramatic encounter – even an unphotographed one.

“This doesn’t suggest xenophobia on Rohani’s part, but weakness. He’s obviously afraid of being seen as overly conciliatory to the Great Satan by hardliners in his own government. Which, of course, means that Iran may not be ready for the conversation it claims to want to have about its nuclear program.”

“As diplomatic humiliations go, Hasan Rohani’s refusal to accept President Obama’s offer of an informal ‘encounter’ and historic photo-op at Tuesday’s meeting of the U.N. General Aseembly may not be the most consequential. But it is among the most telling....

“For days before the U.N. conclave, White House aides had broadcast the President’s desire to shake Mr. Rohani’s hand. By Monday, the press was overflowing with leaked accounts of where and how it would happen. Having thus turned down the lights and turned up the mood music, it made the snub that followed especially potent. What the Administration is trying to spin as a function of complex Iranian politics was, in blunt fact, an expression of lordly contempt for what Iranian leaders consider to be an overeager suitor from an unworthy nation....

“In his speech, Mr. Obama reiterated that ‘we will not tolerate the development or use of weapons of mass destruction.’ It could not have been lost on the Iranians that Mr. Obama is in the process of tolerating exactly that in Syria. Mr. Obama also said that it is ‘in the security interest of the United States and the world to meaningfully enforce a prohibition’ against the use of chemical weapons. But the lack of meaningful enforcement has been the President’s policy for nearly a year.

“Politics in the normal sense doesn’t exist in Tehran, where the rules are set and the players chosen by Supreme Leader Ayatollah Khamenei, who is accountable to nobody. What Iran’s leaders do understand is how to humiliate adversaries they consider to be weak.”

“In a 43-minute speech, Obama managed to tell the U.N. General Assembly more about the dilemmas facing a leader of the country formerly known as the world’s only superpower than he did about our next moves on Iran (let alone Syria).

“But, hey, we know he’s resolute about trying to bring peace to the Mideast.

“The United States acts, our president told world leaders, with ‘a hard-earned humility when it comes to our ability to determine events inside other countries.’

“On the other hand, the real danger for the globe is that ‘America may disengage, creating a vacuum of leadership that no other nation is ready to fill.’

“So should America, which is ‘rightly concerned about issues back home,’ intervene in the world or not? Lead, or turn inward?

“Unlike Obama, Rohani was very clear in stating his goals in his U.N. speech Tuesday. He expects to ‘hear a consistent voice from Washington,’ rather than that of the ‘narrow interests of war-mongering pressure groups.’

“Mostly, after repeating the old mantra that Iran won’t seek nuclear weapons because it’s against the religion, Rohani said he expected an end to sanctions, which he called ‘Violence, pure and simple.’”

“Sanctions have hurt Iran more than it expected and more, incidentally, than the U.S. had dared to hope. Tehran’s objective now is to secure a quick relaxation of sanctions while retaining as much freedom as possible over its nuclear program. That means continuing to enrich uranium with minimal international control and oversight.

“The best guess of the U.S. is that Iran’s supreme leader Ayatollah Ali Khamenei has not made a decision to acquire nuclear weapons. But the evidence of past defiance of the U.N. points to an ambition to set the clock at one minute before midnight.

“The U.S. and the Europeans have accepted that Iran can continue to enrich uranium as part of a civilian program. The Israeli government dissents but it is hard to imagine it launching air strikes while Tehran is talking to the six world powers charged with the nuclear dossier.”

“The search, now 30 years old, for Iranian ‘moderates’ goes on. Amid the enthusiasm of the latest sighting, it’s worth remembering that the highlight of the Iran-contra arms-for-hostages debacle was the secret trip to Tehran taken by Robert McFarlane, President Reagan’s former national security adviser. He brought a key-shaped cake symbolizing the new relations he was opening with the ‘moderates.’

“Three decades later, the mirage reappears in the form of Hasan Rohani. Strange resume for a moderate: 35 years of unswervingly loyal service to the Islamic Republic as a close aide to Ayatollahs Khomeini and Khamenei. Moreover, Rohani was one of only six presidential candidates, another 678 having been disqualified by the regime as ideologically unsound. That puts him in the 99th centile for fealty.

“Rohani is Khamenei’s agent but, with a smile and style, he’s now hailed as the face of Iranian moderation. Why? Because Rohani wants better relations with the West.

“Well, what leader would not want relief from Western sanctions that have sunk Iran’s economy, devalued its currency and caused widespread hardship? The test of moderation is not what you want but what you’re willing to give. After all, sanctions were not slapped on Iran for amusement. It was to enforce multiple U.N. Security Council resolutions demanding a halt to uranium enrichment.

“Yet in his lovey-dovey Post op-ed, his U.N. speech and various interviews, Rohani gives not an inch on uranium enrichment. Indeed, he has repeatedly denied that Iran is pursuing nuclear weapons at all. Or ever has. Such a transparent falsehood – what country swimming in oil would sacrifice its economy just to produce nuclear electricity that advanced countries such as Germany are already abandoning? – is hardly the basis for a successful negotiation.”

Of course it’s all about buying time, as well as sanctions relief.

As for Israel’s immediate reaction, Prime Minister Benjamin Netanyahu, who is speaking before the General Assembly on Tuesday and meeting with President Obama in the coming days, said Israel will not be fooled by Rohani’s international outreach, and the world must not either, describing Rohani’s remarks further as “cynical...full of hypocrisy.”

Street Bytes

--Stocks finished mixed with the Dow Jones losing 1.2% to 15258, and the S&P 500 1.1%, but Nasdaq gained 0.2%, owing in no small part to the continued surge in Facebook shares, which closed the week at a new high of $51.18, while Yahoo finished at $33.55, its highest level since 2007.

--U.S. Treasury Yields

6-mo. 0.03% 2-yr. 0.33% 10-yr. 2.62% 30-yr. 3.69%

The 10-year Treasury, so important to the setting of mortgage rates, was at 3.00% intraday just a few weeks ago but has rallied back some on the uncertainty in Washington and the Fed’s recent decision not to taper.

Separately, Richard Fisher, president of the Federal Reserve Bank of Dallas, said the White House botched the nomination for Ben Bernanke’s successor.

“The White House has mishandled this terribly. This should not be a public debate,” adding the Fed “must never be a political instrument.”

Fisher did comment that Janet Yellen “would make a great chairperson,” though he and Yellen “differ on policy.”

--Not that we will see a repeat of the debt-ceiling debacle of 2011, but as Barron’s Jim McTague pointed out, the week of Aug. 7 that year was rather wild. “On Monday, Aug. 8, the Dow industrials fell 635 points. On Tuesday, it rose 430 points. On Wednesday, it slid 520 points. On Thursday, the Dow rose 423, and on Friday, Aug. 12, it climbed 126 points.”

--Japan’s consumer price index increased 0.9% year-on-year in August, its biggest annual rise since November 2008. Prime Minister Shinzo Abe has made it a goal of his government to get inflation to the 2% level after years of deflation. But much of the rise can be attributed to the rising cost of imports, particularly energy. The government is pushing the private sector to raise wages to stimulate consumer spending.

Separately, Abe is going to announce his decision on hiking the sales tax Oct. 1. The current rate of 5% would rise to 8% in April and then 10% in 2015. This week, the head of a panel advising Japan’s pension fund, the world’s largest, said the sales tax must rise to at least 20% by 2020 to avert a “disaster” in its bond market. Japan’s debt to GDP will grow to 245% this year, compared with Greece’s 179% and Italy’s 131%.

--JPMorgan Chase CEO Jamie Dimon met with U.S. Attorney General Eric Holder on Thursday to try to wrap up a settlement for the bank’s alleged mis-selling of mortgage-backed securities. The Justice Department is pressuring JPM to give up $7 billion in cash and relief for homeowners or investors valued at $4 billion. JPMorgan is arguing over the extent to which it should be held responsible for the actions of Bear Stearns and Washington Mutual, both of which JPMorgan acquired during the financial crisis at the behest of the government.

“Government lawyers are backing up the truck again at J.P. Morgan Chase to extract another haul from the country’s largest bank. State and federal attorneys have burrowed close enough to J.P. Morgan’s vault that the bank is considering a staggering $11 billion settlement related to mortgage-backed securities, including one of the largest fines ever against a single company.

“Trying to keep an accurate tally of the government investigations of J.P. Morgan has become a full-time job. This week the New York Times counted investigations in at least seven federal agencies, while the Journal counted seven investigations in the Justice Department alone, plus inquiries at other agencies.

“Keep in mind that this is one bank that did not need taxpayer assistance in 2008 or since. And this partly explains why Morgan CEO Jamie Dimon is the Obama Administration’s favorite Wall Street target. Washington in this era prefers dependent banks that quietly accept their role as money pots to be raided when politics demands. Mr. Dimon keeps deviating from the Obama script....

“(The) current charges include alleged wrongdoing by Bear Stearns before regulators begged J.P. Morgan to rescue it, as well as alleged wrongdoing by Washington Mutual before regulators begged Morgan to buy that bank too. In the heat of the crisis in September 2008, few big banks were healthy enough to buy WaMu. Then-FDIC Chairman Sheila Bair said the situation ‘could have posed significant challenges without a ready buyer.’ Referring to J.P. Morgan’s willingness to step forward, Ms. Bair said, ‘Some are coming to Washington for help, others are coming to Washington to help.’ Now Washington is suing Morgan for having helped....

“Who would have guessed that five years later the great villain of the mortgage crisis would be the guy who not only didn’t create it but helped to end it?”

--Citigroup is laying off around 1,000 people in its mortgage business, owing to slumping refinancing volumes.

Separately, the Financial Times reported that Citi “has suffered a significant decline in trading revenues that threatens to depress its earnings.” They aren’t alone in this regard after a sharper-than-expected summer slowdown on the Street.

--J.C. Penney Co. was forced to raise as much as $800 million by selling stock ahead of what promises to be a difficult holiday season for the retailer. While Penney is seeing some improvement in sales, creditors are concerned. Plus the new CEO didn’t exactly endear himself with the Street when just one day before the company sold the stock, he told a gathering they didn’t need to raise any new capital.

--BlackBerry agreed to be bought by a consortium of Canadian investment companies for $4.7 billion cash and taken private in what is viewed as a last-ditch effort to ensure survival. Back in 2008, BlackBerry’s market value was $83 billion. Now it’s barely above $4 billion, as the company announced a week ago it would lay off 4,500 workers and then on Friday reported a loss of $965 million, mostly due to a write-down of inventory for unwanted phones as sales plunged 49% from the previous quarter.

--Meanwhile, Apple said it sold nine million of its new iPhone models in the first three days.

--Target said it plans to hire 70,000 workers for the holiday season, 20% fewer than it did last year. Earlier, Kohl’s said it plans to hire 53,000 for the season, which is about the same as 2012. Most other major retailers are holding the line at best.

--Irish home prices rose by 2.8% in August, the highest annual rise since 2007, according to the Central Statistics Office. Property prices in Dublin rose by 10.6% in August compared to a year earlier, but they are still 50% below their level at the height of the bubble.

--So last time, as I have many occasions in the past, I commented on Oracle CEO Larry Ellison’s pay and it was kind of funny how this week the issue came to the forefront again, with a possible shareholder showdown at the company’s Oct. 31 annual meeting.

As the Wall Street Journal reported, “Some shareholders complain that Mr. Ellison, who founded the software giant and beneficially owns a quarter of the company’s shares, continues to receive tens of millions of dollars of stock options every year, even when Oracle’s performance has been mixed.”

Exactly. Again, Ellison received compensation of $76.9 million for the fiscal year that ended in May. Yes, Oracle’s stock rose 28% in those 12 months, but has fallen sharply since reporting lackluster sales for a second straight quarter.

Sadly, Ellison’s Oracle Team USA staged a historic comeback in the America’s Cup to defeat New Zealand’s entry. This was also the week for Oracle OpenWorld, a huge customer event, but because of the race  Ellison failed to show for his keynote presentation. Incredibly bad form that had thousands walking out upon learning of his no-show.

--Federal Reserve data shows that rebounding home prices and a rising stock market helped boost household wealth by more than $1.3 trillion in the second quarter of this year to an all-time high (4% below the peak if you adjust for inflation).

--I forgot to pass along a piece from Phil W. and his Charlotte housing market last time. In line with previous statements of mine concerning nationwide trends, institutional investors are responsible for one in five Charlotte-area home purchases, according to a report from RealtyTrac. Only the Atlanta region had a larger proportion, 24%.

Wall Street-backed investors have been targeting bank-owned and foreclosure properties, as well as nondistressed homes. “On average, they’ve sought properties in good condition that they can buy for around $150,000 and convert into rentals,” as reported by the Charlotte Observer’s Deon Roberts. Blackstone Group is among the large investors.

--Activist investor William Ackman has had a tough year but he convinced Air Products & Chemicals Inc. to shake up its board and replace its CEO, John McGlade, who will retire next year. Ackman will have a say in the new CEO and was able to select two of three new board members. The shares have risen 9% since the company disclosed in July that a then unknown large investor had been accumulating a large stake. [One of these days I’ll find the time to unload on APD as it deserves to be. It’s personal.]

--Twitter has apparently selected the New York Stock Exchange over Nasdaq for its initial public offering. Goldman Sachs is believed to have nabbed the lead role, with JPMorgan and Morgan Stanley following behind.

--This sucks. As reported by Bloomberg, “Food-safety advocates are raising alarms over a decision by the Obama administration to permit chicken processed in China to be sold in the U.S. even after several high-profile incidents of food contamination.” 

The issue is part of a decade-long trade dispute over farm imports, and the U.S. Department of Agriculture said it will now allow “poultry slaughtered in the U.S. and Canada to be processed in China and returned to the U.S. for consumption.”

It’s complicated but any chicken processed in China, would have to be labeled as such if it returned to the U.S. However, if it’s used as chicken nuggets in a restaurant, there’s zero guarantee you’d know.

“Increasingly popular bathroom wipes – pre-moistened towelettes that are often advertised as flushable – are being blamed for creating clogs and backups in sewer systems around the U.S.

“Wastewater authorities say wipes may go down the toilet, but even many labeled flushable aren’t breaking down as they course through the sewer system. That’s costing some municipalities millions of dollars to dispatch crews to unclog pipes and pumps and to replace and upgrade machinery.

“The problem got worldwide attention in July when London sewer officials reported removing a 15-ton ‘bus-sized lump’ of wrongly flushed grease and wet wipes, dubbed the ‘fatberg.’”

Foreign Affairs

Syria: After weeks of diplomatic stalemate, the United States and Russia reached an agreement on Thursday on a draft U.N. Security Council resolution aimed at dismantling Syria’s chemicals weapons program. Western powers on the Security Council backed away from their demand that the resolution fall under Chapter 7 of the U.N. charter, which gives the authority to enforce its decisions with military force. The compromise draft resolution makes the measure legally binding but with no means for automatic enforcement with sanctions or force.

So much for President Obama’s threat from weeks ago, but the resolution should ensure action be taken quickly. 

Earlier in the week, Russian Foreign Minister Sergei Lavrov accused the United States of blackmailing Russia over a tough U.N. resolution against Syria.

Meanwhile, Syrian President Bashar Assad, in a warning to Israel, said on Thursday, “We now possess deterrent weapons that are more important and more sophisticated than chemical weapons...We have weapons that can blind in an instant.”

Assad said of his chemical stockpile, it “has become a burden to us since its destruction costs a great deal of money and could take years to destroy.” [I edited his statement a bit.] He also said his government won’t have “any problem” taking experts to sites where the weapons are kept but some of the places may be difficult to reach due to ongoing fighting.

As reported by the Washington Post’s Joby Warrick, “U.S. and Russian officials now believe that the vast majority of Syria’s nerve agent stockpile consists of ‘unweaponized’ liquid precursors that could be neutralized relatively quickly, lowering the risk that the toxins could be hidden away by the regime or stolen by terrorists.”

One assessment concludes Syria’s entire arsenal could be destroyed in nine months, assuming access is granted by the Syrian government, and any opposition forces in the way.

Russia has said it is prepared to provide troops to guard the chemicals as they are being destroyed.

But in another important development on the war front, a group of powerful rebel groups have rejected the authority of the Western-backed Syrian opposition leadership abroad and called for it to reorganize under an Islamic framework; as in the 13 rebel factions include the likes of the al-Qaeda-linked Nusra Front and two powerful Islamist battalions Ahrar Asham and the Tawheed Brigade.

Lastly, Hizbullah leader Hasan Nasrallah denied claims his group had received a large quantity of chemical weapons from Syria.

“Not on a single day did our brothers in Syria discuss with us the provision of chemical weapons nor did we ask for chemical weapons,” Nasrallah said. Just a tad disingenuous, don’t you think?

Egypt: Authorities shut down the headquarters of the Muslim Brotherhood’s newspaper in Cairo, days after an Egyptian court issued an injunction dissolving the group and confiscating its assets, a major escalation of the crackdown since the military ousted its ally, President Mohamed Morsi, whose whereabouts still aren’t clear.

Since Morsi was placed under arrest, the new government has killed more than 1,000 Brotherhood members in protests and imprisoned thousands more, including virtually every leader.

The state newspaper Al Ahram said the court found the Brotherhood had “violated the rights of the citizens, who found only oppression and arrogance during their reign” – until fatigued citizens had risen up this summer “under the protection of the armed forces, the sword of the homeland inseparable from their people in the confrontation with an unjust regime.” [David D. Kirkpatrick / New York Times]

So Egypt is not exactly an experiment in democracy these days. Interim Foreign Minister Nabil Fahmy also labeled relations with the United States as “unsettled.”

Regarding President Obama’s speech at the U.N. this week, and related to his handling of Egypt, the Washington Post editorialized:

“In what may be the most morally crimped speech by a president in modern times, Mr. Obama explicitly ruled out the promotion of liberty as a core interest of the United States. Instead, he told the U.N. General Assembly on Tuesday, America’s core interests consist of resisting aggression against allies; protecting the free flow of energy; dismantling terrorist networks ‘that threaten our people’ and stopping the development and use of weapons of mass destruction.

“No president should cite democracy promotion as the United States’ only core interest or even, invariably, its first priority. A superpower always must juggle competing concerns of security and commerce. But has a president ever boasted that promoting democracy will not be a core interest? To say that America cares more about the flow of oil than the rights of men and women is to diminish the U.S. soldiers and diplomats who have sacrificed to far higher purpose than Mr. Obama would acknowledge. It is to cede the exceptionalism argument to Vladimir Putin....

“As a practical matter, if a president signals that democracy is not a core interest, if it ranks fifth or lower on his list of priorities, it won’t be promoted at all. Mr. Obama made that clear in his discussion of Egypt’s military government, which, since overthrowing a democratically elected government, has slaughtered hundreds and stifled freedom of the press and association. Mr. Obama noted that ‘we have not proceeded with the delivery of certain military systems,’ but he reassured the generals that the United States will continue working with them on ‘core interests like the Camp David accords and counterterrorism.’ The president insisted that ‘we will not stop asserting principles that are consistent with our ideals.’ But if the generals know that those principles don’t count among U.S. ‘core interests,’ why would they pay any attention to Mr. Obama’s ‘assertions’?”

Israel: As Secretary of State Kerry pushes Israel and the Palestinians towards a peace agreement, a new poll out of Ramallah shows two-thirds of Palestinians don’t believe talks will be successful. At the same time, Hamas and Islamic Jihad called for a new intifada against Israel, with Hamas’ armed wing threatening to resume suicide bombings.

Kenya: In another classic case of ‘wait 24 hours,’ we are still missing many of the details of the shopping mall massacre in Nairobi perpetrated by the al-Qaeda linked al-Shabaab terror organization. All we know is that at least 67 died (including six Kenyan soldiers), though the toll could yet rise much higher owing to all the rubble that must be cleared first at the upscale Westgate mall. [Late Friday there were reports of 61 missing.]

To make matters worse, militants killed three near the border with Somalia on Thursday, including two police officers in two separate attacks. Al-Shabaab was blamed for these as well.

The FBI and Britain’s MI5 are helping Kenyan officials with the Westgate investigation, including in the identity of any bodies of the terrorists. It is of great concern if any are from the West, with British officials particularly interested in the role, if any, of a British citizen, Samantha Lewthwaite, the “White Widow.”

Some of the victims at the mall were apparently beheaded and butchered with knives, according to Kenyan sources, though officials haven’t confirmed this. Kenya’s president said that five attackers were shot dead and 11 were in custody.

Back to the FBI and MI5, both are concerned with any links on their respective home fronts. MI5 is aggressively attempting to identify Britons with links to extremists in Somali amid concerns over follow-up attacks in the U.K., while the FBI has long been exploring al-Shabaab’s recruitment efforts in the U.S., particularly in the Minneapolis area, which is home to the largest Somali community in the country. Since 2007, at least 22 young men have left Minnesota to join al-Shabaab, according to the AP.

Pakistan: It was an awful weekend for Planet Earth. Hours after the terror attack on Nairobi’s Westgate mall, a pair of suicide bombers killed 81 people outside a church in northwestern Pakistan in the deadliest attack yet on the Christian minority. A spokesman for the Taliban wing Jundullah told the Associated Press, “All non-Muslims in Pakistan are our target, and they will remain our target as long as America fails to stop drone strikes in our country.” The West’s failure to condemn in the strongest terms such attacks on oppressed Christian minorities in the entire region is pathetic.

Iraq: Last Saturday another wave of attacks killed at least 96, including 72 in an attack on a funeral procession in Sadr City. Unreal. At least 490 have died in violent attacks in September, according to an Associated Press tally.

China: Disgraced former politician Bo Xilai was sentenced to life in prison on Sunday after being found guilty of bribery, embezzlement and abuse of power. He is appealing, having vigorously denied all charges in his trial. Bo’s downfall is the biggest political shakeup to hit China’s ruling elite in decades.

A commentary in the party-run People’s Daily said: “The resolute punishment of Bo Xilai according to law has fully shown that there are no exceptions in the face of party discipline and state laws.”

Bo, however, has many followers and reportedly he erupted in anger at the reading of the sentence. With the punishment also being more severe than expected, it would seem there is little chance of his being rehabilitated, such as has been the case throughout China’s history. In fact Bo’s father, a communist leader, was purged in the 1966 Cultural Revolution, but then freed and rehabilitated in the 1970s, becoming one of the party’s “immortals.”

North Korea: A study by the Rand Corp., the U.S. research institute, said the United States should consider negotiating a separation line with China in a collapsed North Korea, warning of catastrophic consequences should Kim Jong-Un’s regime suddenly fall. You would have a humanitarian crisis of mammoth proportions owing to severe famine, plus the issue of hundreds of thousands of prisoners, and as the U.S. and South Korea intervened, China would of course become alarmed and send its own troops into the North, thus risking confrontation and escalation.

The study’s author, Bruce Bennett, admits “Establishing a line...is really not a good idea – it’s politically bad – but on the other hand, having a war with China is even worse, I think.” 

Massive food distribution efforts would have to be mounted as well as securing the weapons of mass destruction. [South China Morning Post]

Separately, two American nuclear arms experts believe North Korean scientists have the ability to build crucial equipment for uranium-based nuclear bombs on their own, meaning this reduces the need for imports. It’s the import factor that has allowed outsiders to monitor the country’s secretive program. This is not good. As Joshua Pollack, one of the two experts, put it, “If they’re not importing these goods in the first place, then we can’t catch them in the act.” [AP]

Russia: Not for nothing, but the Russian city of Sochi, site of the upcoming Winter Olympic Games, suffered devastating flooding this week, but the Coordination Commission of the IOC essentially said, ‘No problemo.’ [Didn’t seem that way to me, from what I was reading.]

Then the IOC dismissed concerns over Russia’s law banning gay propaganda, saying it doesn’t violate the Olympic charter’s anti-discrimination clause. Right.

Jean-Claude Killy (yeah, that Jean-Claude Killy), chief of the IOC Coordination Commission, said “the IOC doesn’t have the right to discuss the laws that are in place in the country hosting the Games, so unless the charter is violated we are fully satisfied.”

Meanwhile, up in Moscow, President Putin said he may run for a fourth term, which would have him leading the country until 2024. Of course everyone is expecting this. Putin is also getting his own chapter in Russia’s official history textbook. And Putin’s spokesman Dmitry Peskov denied speculation Putin had married former gymnast Alina Kabaeva at a secret wedding last weekend. Putin, recall, startled his countrymen when he announced in June that he was divorcing his wife, Lyudmila, after 29 years of marriage.

France: Interior Minister Manuel Valls caught some heat this week for saying the country’s Roma (Gypsies) needed to be expelled. Few Roma could ever integrate into French society and “the majority” should be sent “back to the borders,” Valls said, as reported by BBC News.

Amnesty International says 10,000 Roma were evicted from temporary camps in the first half of the year.

Valls, a rising politician in President Hollande’s administration, said he saw no reason to correct his comments.  “My remarks only shock those who don’t know the subject....I’d remind you of [former Socialist premier] Michel Rocard’s statement: ‘It’s not France’s job to deal with the misery of the whole world.’”

I’ve told you of my own experiences with the Roma in Europe, particularly in Paris. I’m not a fan.

Afghanistan: Three U.S. soldiers were killed last Saturday in an insider attack. Thus far in 2013, 11 foreign soldiers have been killed in seven such attacks, compared with 62 deaths last year in 47 incidents.

Random Musings

--The GOP needs to pick up six seats to take back the Senate in 2014 and with 21 Democrat and 14 Republican seats up for grabs, Republicans were thought to have a solid shot at accomplishing their goal. But now I’m not so sure as the likes of Oklahoma Republican Sen. Tom Coburn say Ted Cruz’ move and the mission of defunding ObamaCare is a political ploy, while Sen. Minority Leader Mitch McConnell faces a primary fight because he’s criticized for working with the president from time to time.

What many of us also don’t understand is why Sen. Cruz attacked his fellow Republicans while Democrats’ phone banks were largely silent.

“The biggest question facing the senator now is not whether he will win the support of the most conservative elements of his party, but whether he is taking the Republican party in a direction that will win the approval of a majority of voters.

“Mark McKinnon, the former strategist for George W. Bush, says he ‘hardly recognizes’ the man who he always thought of as a ‘thoughtful, really smart guy’ when he was helping the former president’s campaign and later became an official at the Federal Trade Commission.

“ ‘Cruz is a flame thrower. He’s just trying to create heat and set the place on fire. And doesn’t particularly care what goes up in the blaze,’ Mr. McKinnon says.

“After hours of heated rhetoric, it was Harry Reid who summed up the view not just of Democrats, but of Republicans who are seething about Mr. Cruz, who in just a few months has commandeered the party, but not necessarily in a direction they approve.

“ ‘We all admire the senator from Texas for his desire to talk,’ the Democratic Senate leader said. ‘It has been a big waste of time.’”

[Just quoted the above for the record, sports fans. You know I don’t particularly care for Mr. Reid.]

“A Congressional Research Service analysis, provided at the request of Sen. Tom Coburn, has demonstrated that most of the health law would still be implemented even if Congress excluded funds for it from a temporary spending bill. Meanwhile, that bill, whose ultimate passage Mr. Cruz is obstructing, would peg the overall budget at the truncated level set in the sequester – a limitation that we regard as indiscriminate and ill-advised but that the GOP could trumpet to its grass roots as a victory for small government, if not for Mr. Cruz’s noisy crusade. And, of course, there’s the public backlash that might hit Republicans if Congress can’t pass the bill by Sept. 30, forcing a partial government shutdown.”

“With most Americans undeniably dissatisfied with the direction of their government, why would some congressional conservatives insist on identifying Republicans as unyielding defenders of a broken status quo? Their implacable obsession with uprooting ObamaCare and their die-hard resistance to immigration reform all but guarantee near-term legislative defeats and long-term devastation to future party prospects....

“Rather than confronting these incontestable realities, too many conservatives choose to embrace the role of sure losers. To use a military analogy, there is no glory in charging recklessly up a hill when you know your forces will be mowed down by enemy fire before reaching the top. Glory comes in making the enemy lose. The GOP shouldn’t pursue noble defeat while standing on principle. You build momentum for a movement by achieving legislative victories, not by racking up high-profile losses....

“On ObamaCare and immigration reform, too many Republicans have cast themselves as classic villains in a heart-tugging melodrama of Democratic design. Liberal Democrats play the do-gooders trying to give something to the American people, while conservative Republicans look like misers determined to take it away. Conservatives rightly deploy many details in these sweeping legislative packages. But like many politicians, the public hasn’t read the legislation either and instead focuses on the contrast between liberal ‘reformers’ and conservatives who would rather leave things broken....

“In 1955, William F. Buckley Jr. memorably defined conservatism as a willingness to ‘stand athwart history yelling Stop.’ At the current juncture, with the road ahead perilous and uncertain, it still makes sense to slow onrushing traffic. But yelling ‘Stop’ isn’t enough. The GOP must supplement that warning by offering clear directions for a better route to American revival.”

“(Obama) will have one more underappreciated advantage. When he truly believes in something, he’s still the best communicator in Washington.”

“When the president spoke to the General Assembly, his speech was dignified and had, at certain points, a certain sternness of tone. But after a while, as he spoke, it took on the flavor of re-enactment. He had impressed these men and women once. In the cutaways on C-Span, some of the delegates in attendance seemed distracted, not alert, not sitting as if they were witnessing something important. One delegate seemed to be scrolling down on a BlackBerry, one rifled through notes. Two officials seated behind the president as he spoke seemed engaged in humorous banter. At the end, the applause was polite, appropriate and brief.

“The president spoke of Iran and nuclear weapons – ‘we should be able to achieve a resolution’ of the question. ‘We are encouraged’ by signs of a more moderate course. ‘I am directing John Kerry to pursue this effort.’

“But his spokesmen had suggested the possibility of a brief meeting or handshake between Messrs. Obama and Rohani. When that didn’t happen there was a sense the American president had been snubbed. For all the world to see.

--Suddenly, a Quinnipiac poll of likely voters (a better gauge than ‘registered voters’) has Republican Steve Lonegan narrowing the gap with Newark Democratic Mayor Cory Booker for the October 16 special election to fill New Jersey’s senate seat. According to this survey, Lonegan trails by only 53-41.

And the issue of Booker’s truthfulness won’t go away.

“If you thought you knew Cory Booker, you might want to think again.

“Ever since he challenged Newark boss Sharpe James for the mayorship, Booker’s been a media darling. But now that he’s a candidate for the U.S. Senate, serious questions have emerged: about his taxes, about his mayorship and whether the stories he likes to tell have any grounding in truth....

“One story involves a local drug dealer called T-Bone who turns out not to exist. Another fiction seems to be his account of a kid who died in his arms.

“Then there’s the Booker story about how he delivered Pampers to a snowbound Newark resident. This one’s true, but as the woman told The Post, she needed help only because her street was unplowed: ‘If he’d done his job,’ she says, ‘I would have been able to do it for myself.’

“Even more substantive are questions about Booker’s tax returns. Thus far he’s gone the Eliot Spitzer route, showing them to a limited group of journalists who were not allowed to make copies. Even so there are questions about the $700,000 he got from his old law firm while it was doing business with two Newark city agencies.

“Was Booker directly involved in the law firm’s operations? His partners say no, but Booker’s own tax returns say yes, which suggests a pretty strong conflict of interest.”

But the election is only three weeks away. Don’t look for Booker to reveal the truth beforehand.

--The UN’s Intergovernmental Panel on Climate Change issued its executive summary of a four-year study compiled by 259 scientists from 39 countries and they are more sure than ever about how and why many aspects of the climate have changed. As in it is “extremely likely” humans caused most of the increase in temperatures since 1951.

Uncertainties remain, however, including an explanation of why the rate of warming the past 15 years has been significantly slower than what it was in previous decades, even as concentrations of carbon dioxide have reached record levels. Ergo, is the climate really that sensitive to the stuff?

--The College Board says just 43% of SAT takers in the high school class of 2013 earned a score that indicates they will succeed in the first year of college, “virtually unchanged” for at least five years.

An earlier report from the folks who put out the ACT found just 26% of high school graduates met college readiness benchmarks, up only slightly from 23% five years ago. [Mary Beth Marklein / USA TODAY]

“For the last 70 years, American higher education was assumed to be the pathway to upper mobility and a rich shared-learning experience.

“Young Americans for four years took a common core of classes, learned to look at the world dispassionately, and gained the concrete knowledge to make informed arguments logically. The result was a more skilled workforce and a competent democratic citizenry.

“That ideal may still be true at our flagship universities, with their enormous endowments and stellar world rankings. Yet most elsewhere, something went terribly wrong with that model....

“The four-year campus experience is simply vanishing. At the California State University system, the largest university complex in the world, well under 20 percent of students graduate in four years despite massive student aid. Fewer than half graduate in six years.

“College acceptance was supposed to be a reward for hard work and proven excellence in high school, not a guaranteed entitlement of open admission. Yet more than half of incoming first-year students require remediation in Math and English during, rather than before attending, college. That may explain why six years and hundreds of millions of dollars later, about the same number never graduate....

“Apart from our elite private schools, the picture of our postmodern campus that emerges is one of increasing failure – a perception hotly denied on campus but matter-of-factly accepted off campus, where most of the reforms will have to originate.

“Even more online courses will entice students away from campuses through taped lectures from top teachers, together with interactive follow-up from teaching assistants – all at a fraction of current tuition costs.

“Technical schools that dispense with therapeutic, hyphenated ‘studies’ courses will offer students marketable skills far more cheaply and efficiently. Periodic teaching contracts, predicated on meeting teaching and research obligations, will probably replace lifelong tenure.

“Public attitudes will also probably change. The indebted social science major in his mid-20s with or without a diploma will not enjoy the old cachet accorded a college-educated elite – at least in comparison with the debt-free, fully employed and higher-paid electrician, plumber or skilled computer programmer without a college degree....

“The college experience morphed into a costly sort of prolonged adolescence, a political arena and a social laboratory – something quite different from a serious place to acquire both practical and humanistic knowledge. No wonder that it is now financially unsustainable and going the way of the dinosaurs.”

--One movie I want to see is “The Fifth Estate,” a Disney / DreamWorks film that chronicles the birth of WikiLeaks and its founder, Julian Assange.

The flick doesn’t come out until October 18 but Assange has already blasted it, apparently posting the script online while calling it “a massive propaganda attack.” He disputes every facet of the film, the screenplay for which is partly based on “Inside WikiLeaks: My Time With Julian Assange and the World’s Most Dangerous Website,” by Daniel Domscheit-Berg, an early WikiLeaks collaborator who publicly and bitterly fell out with Assange, and “WikiLeaks: Inside Julian Assange’s War on Secrecy” by two British journalists.

Seeing has how Assange’s people went after me, I’m happy to see him so upset.

--Speaking of creeps, the IRS’ Lois Lerner resigned Monday as the agency’s director of Exempt Organizations. She has been on paid administrative leave since May after it was learned the IRS had been singling out conservative groups applying for tax exempt status.

“Not a bad deal, getting paid not to work – so why resign now? One answer is that this gets ahead of a recently completed but still not released IRS personnel review that we hear criticizes her job performance and recommends she be fired. By resigning now, she will collect her full pension and benefits, though she still refuses to answer questions from Congress.

“Her cause wasn’t helped by the recently disclosed emails she sent in February 2011 advising her staff that the tea party matter is ‘very dangerous’ and that ‘Cincy should probably NOT have these cases.’ That’s contrary to the IRS’s narrative that Cincinnati drove the boat while Washington officials only learned about the political targeting of conservatives when they read the newspaper.

“In a House Ways and Means Committee hearing last week, Louisiana Republican Charles Boustany asked IRS Acting Commissioner Danny Werfel whether Lois Lerner sought ‘to intervene in the examinations process or audit process?’ Mr. Werfel responded that ‘There were emails we turned over to you, based on your request,’ adding that ‘there are certain documents that raise questions. And, when I looked at them, I thought they raised questions.’

“ ‘Questions’ is putting it mildly. Ms. Lerner’s resignation under duress reflects the IRS’s acknowledgment that her actions profoundly discredited the agency. Let’s hope the rest of the reckoning isn’t as long in coming.”

--Police in France just released the news of a huge cocaine haul at Charles de Gaulle airport back on Sept. 11. 1.3 tons of pure cocaine valued at $270 million! Good lord. It was the biggest drug haul ever made in the Paris area. The drugs were found packed inside 30 suitcases that arrived on an Air France flight from Caracas. Six were arrested. The drugs were meant for sale in France, so there are a lot of addicts there quivering in a corner.

“As the 50th anniversary of the JFK assassination approaches, so does the merchandising onslaught – books, movies, commemorative magazines.

“But there is one aspect of this commercialism that remains surprising: The most shameless huckster of Kennedy mythology and memorabilia is Caroline Kennedy Schlossberg.

“Her public image is that of the classy, quiet keeper of the Kennedy legacy, the civic-minded former lawyer who publishes books on poetry while her cousins crash into trees and kick nurses. With the bar for Kennedy comportment set so low, it’s almost impossible for Caroline not to look good.

“Look closer, though, and it’s clear that Caroline’s image is as fake and manufactured as her father’s: She is a profit-minded serial holder of non-jobs, culminating in her appointment to one of our ultimate non-jobs, ambassador to Japan.

“During her confirmation hearing last week, her accomplishments, such as they are, were listed by Sen. Chuck Schumer: lawyer (she’s never practiced law), author (more on that in a moment) and philanthropist. He noted, with disproportionate awe, Caroline’s recent completion of a three-mile swim in the Hudson River. ‘I’m not sure either of us could have accomplished this feat,’ he said to Sen. Bob Menendez. Well then – confirm her!

“Caroline’s disastrous flirtation with taking Hillary Clinton’s vacated Senate seat – a damning interview revealed her capable of little more than like’s and you know’s, her entitlement off-putting – has long been forgotten.”

Ms. Callahan goes on and on, documenting the truly pathetic ways that Caroline (and frankly John Jr. when he was still alive) were/are making money off the Kennedy name, including the auctioning off of everything Jackie Kennedy Onassis owned, just two years after her death. Like worthless foot stools that they managed to sell for $33,350. The auction’s total haul was $34.5 million, seemingly split between the two siblings. There are countless examples of this. But this one really irks me.

“In 2011, Caroline sold the recorded interviews that her mother gave to Arthur Schlesinger in the wake of JFK’s assassination – tapes that Jackie had sealed and stored at the John F. Kennedy Library in Boston. Jackie ordered the tapes kept secret until 50 years after her death, and the implication was these recordings were part of American history – that they belonged to all of us and would be released for free.

“But Caroline took those tapes and sold them to her publisher, Hyperion, only 17 years after her mother’s death. The transcripts were packaged with CDs, and Caroline also sold the rights to ABC for a TV special.

“ I think people really need to understand the purpose of an oral history,’ Caroline told ABC’s George Stephanopoulos, explaining her magnanimity. ‘And it really – the value of it is immediate, it is honest.’ The value was also $60 retail....

“As the 50th anniversary of her father’s assassination approaches, Caroline is keeping things low-key. This year, she’s selling off two parcels of undeveloped land on her late mother’s Martha’s Vineyard estate.

“ ‘Simply magnificent is the only way to describe this pristine waterfront parcel,’ reads the listing. Caroline, who is currently worth an estimated $271 million, expects to get $45 million for it.

“She’s also publishing a new book, ‘Rose Kennedy’s Family Album: From the Fitzgerald Kennedy Private Collection, 1878-1946.’ It’s available for pre-order at Amazon now.”

What a piece of work. And what a shame, given that her father is rightfully getting a proper reassessment as the anniversary approaches.

Kenneth T. Walsh / U.S. News & World Report Weekly

“President Obama could learn a few lessons from Kennedy and not just how to demonstrate wit and grace under pressure, says political scientist Bill Galston of the Brookings Institution. Many political analysts believe that ‘one of the most disappointing things about the Obama presidency is how little Obama has grown in office,’ notes Galston, who was a senior White House adviser to Bill Clinton. ‘Kennedy didn’t start out in office any more ready than Obama was when he took over. Kennedy got rolled a lot by his own government, by [Soviet Premier Nikita] Khrushchev, by the barons of Congress. He learned from what he conceded were his mistakes. The Obama you see is what you get. There is a sense he is very intelligent, very reflective but not terribly good at working the machinery of government, not terribly good at persuading people who disagree with him.... He seems to be someone who probably needs a wider range of advice.’

“Kennedy’s death shook the nation’s belief that the United States was a blessed place where leaders could solve seemingly intractable problems and where everything would work out in the end. JFK didn’t demonize his opponents, and in most cases they didn’t demonize him. There were disagreements, but rarely did the nation’s leaders get disagreeable with each other, and compromise was not a dirty word as it so often seems to be today in Washington.

“A longing to recapture this Kennedy-style, get-it-done optimism are among the reasons why JFK’s mystique remains so powerful. Americans still want to believe they live in a magical country where all citizens can strive to make their lives better. It’s no wonder that many historians have echoed Jackie Kennedy’s reference to her husband’s presidency as ‘Camelot,’ a wistful nod to the legend and idealism of King Arthur and his round table of heroic knights. The belief that JFK embodied American hopefulness and achievement remains strong.”

--Robert Samuelson / Washington Post...on the idea of “American exceptionalism,” in light of Vladimir Putin’s recent statement:

“It is extremely dangerous to encourage people to see themselves as exceptional, whatever the motivation.”

Samuelson notes that back in 1927, Joseph Stalin attacked “the heresy of American exceptionalism.”

“Historically, the American experiment was exceptional, as historian and conservative commentator Charles Murray shows in an elegant essay published by the American Enterprise Institute. The United States, writes Murray, was the ‘first nation in the world [to] translate an ideology of individual liberty into a governing creed.’ Democracies were thought to be ‘impracticable and unstable.’ Only monarchies, often claiming divine authority, could impose social order....

“By contrast, Americans believed that the power to govern derived from the governed. Lincoln’s celebration in the Gettysburg Address of ‘government of the people, by the people, for the people’ strikes us as a rhetorical flourish. But for early Americans, the survival of such a government was an obsession. It made the United States special.

“What also made America special was its core beliefs, starting with ‘all men are created equal.’ In other countries, rigid economic hierarchies reigned. Birth was often fate. Citizenship depended on ethnicity, heritage, religion. In the United States, success and citizenship were open-ended. The equality was not one of outcomes, writes Murray, but ‘of human dignity.’ It rejected the notion that ‘meaningful happiness could be achieved only by the superior few.’ Individuals – and individual effort – mattered....

“Murray thinks American exceptionalism is eroding. In part, American values – equality, democracy – have spread abroad. In part, foreign ideas have spread here. Americans distrust government, but the Founders’ preference for limited government is gone. For the nation’s first 140 years, federal spending never, except in wartime, exceeded 4 percent of the economy, says Murray. Now, it regularly tops 20 percent. The U.S. welfare state resembles the European....

“Still, these portents can be overdone. Compared to many, Americans are more optimistic, more individualistic, more confident of progress. What the late historian Richard Hofstadter once said remains true: ‘It has been our fate as a nation not to have ideologies, but to be one.’”

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

God bless America.

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Gold closed at $1338
Oil, $102.87

Returns for the week 9/23-9/27

Dow Jones -1.2% [15258]
S&P 500 -1.1% [1691]
S&P MidCap -0.1%
Russell 2000 +0.1%
Nasdaq +0.2% [3781]

Returns for the period 1/1/13-9/27/13

Dow Jones +16.4%
S&P 500 +18.6%
S&P MidCap +21.9%
Russell 2000 +26.5%
Nasdaq +25.2%

Bulls 44.3
Bears 20.6 [Source: Investors Intelligence]

Have a great week. I appreciate your support.

Brian Trumbore

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