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For the week 9/30-10/4
Washington and Wall Street...and Iran
You know how when the No. 1-ranked college basketball team goes on the road to face, say, No. 20, and gets their butt kicked, with the home crowd chanting as the clock winds down, “O-ver ra-ted!”? That’s the United States of America these days.
Of course for various reasons I’ve been saying this for years. I recognize I’ve lost some readers over the pronouncement in the past, but I suspect not this week. Our nation is an embarrassment and everyone from Iran to France, China to Australia, Russia to Britain, is laughing at us, even if many of these same folks have their own serious issues.
We deserve it. The United States is a dysfunctional nation, with a pathetic leader, and equally pathetic opposition; with a society that feels largely entitled, a debt that will one day overwhelm us, and a foreign policy that is so helter-skelter, our enemies have no reason to fear us.
Plus, in so many ways “it’s over.” For example in dealing with Syria, I told you week after week after week...over a year ago...it was too late. Thanks to our inaction in the early stages of that war, we unleashed the whirlwind. Maybe some of Syria’s chemical weapons stockpile will now be eliminated, but it’s too late...it’s over...the Islamists, be they al-Qaeda or not, are the main opposition to Bashar Assad now, guaranteeing chaos for generations to come...but again, some of us knew that a year ago.
Regarding Iran, I have been writing for years you need know only one thing. The International Atomic Energy Agency has not been granted access to Iran’s military base at Parchin. The IAEA wanted to look into stories that nuclear trigger tests were being conducted there. Iran said, no, you can’t see it. The IAEA kept asking. Iran finally paved the place over. What more do you need to know regarding the mullahs’ true intentions? Nothing. [Though there is far more below.] It’s too late. Iran will get the bomb.
Turning to Washington, President Obama appointed the Simpson-Bowles deficit-reduction commission to look into broad-based entitlement and tax reform, it came up with a viable blueprint, a starting point for negotiations, and the president then shoved them over the cliff. Never mind.
Republicans are to blame, too, of course. They keep nominating bozos like Sharron Angle and Christine O’Donnell, in the latter case literally throwing away a senate seat in Delaware by turning out Republican moderate Michael Castle (2010) and then we wonder why it’s still going to be tough in 2014 to regain the Senate. Angle? Majority Leader Harry Reid was on the ropes in Nevada, but then Republicans tabbed this nitwit.
For years we’ve had no immigration reform, despite a respected bipartisan block of senators proposing a reasonable plan, because the political atmosphere is so poisoned, led by a president who just lies and lies to the American people, about items like the deficit, where he’s now fond of saying it is “coming down at the fastest rate in history,” yet at $700 billion for fiscal 2013 will have been the largest in U.S. history, prior to his taking office when he proceeded to run four consecutive deficits of $1 trillion+! He also says, with a straight face, that “raising the debt-ceiling has nothing to do with deficits,” but the American people are so stupid, at least 45% or so these days believe him.
I started writing this column in February 1999 (Nov. 1997 going back to my days at PIMCO Funds)...uninterrupted... a complete history of the last two American presidencies ...two total disasters...and we can’t take any more of this.
As for the current government shutdown, I know there are some who aren’t concerned that the national parks are closed, for example, and how some may not care that the Irish couple who planned their honeymoon to Yosemite long ago were shut out, but you know what’s different between this shutdown and that of 17 years ago?
Social media! 17 years ago, that Irish couple goes home, tells their neighbors how lousy America is, and maybe three or four families decide not to spend their dollars here.
Today, that same couple could impact thousands in their decisions with a few well-placed tweets or Facebook postings that rocket around the world, helping fuel anti-American sentiment.
Yes, this government shutdown, the responsibility of the Republicans, is a killer for our standing in the world. No, I am not a fan of Ted Cruz. He makes my skin crawl.
And back to our president, imagine what people in Asia are saying about his third canceled trip in three years to the region! Talk about embarrassing. This all could have been averted long ago, if he had just sat down with Republican leadership in good faith.
Regarding my theme of ‘that’s all you needed to know,’ you know how Obama has told various interviewers that he’s bent over backwards to meet with the opposition? All you need to know is one historical fact. It took him 18 months...18 months...before he sat down with Sen. Mitch McConnell, a pragmatic Republican leader in the old school mode that many of us so wish we’d have a return to throughout Congress, only now McConnell is under threat from the Tea Party wing regarding his 2014 reelection bid.
Sorry to ramble, friends. But a lot has been whirring through my mind this week, as I’m sure has been the case with many of you. I wish I could go to some of the bars and pubs I’ve been in over the past 14 years...like in Vienna, Berlin, Moscow, Hong Kong, Istanbul, Beirut...just to hear what the locals think about America today.
Of course I read a lot...so I have a pretty good idea of what the sentiment is. It’s not helpful.
As for the short-term, yes, I thought cooler heads would prevail in terms of the budget deadline and that a continuing resolution (CR) would be agreed to for at least another six weeks. Now I haven’t a clue. As to the debt ceiling issue, which comes up by Oct. 17, I am disturbed by the voices who say the Treasury can meet our obligations beyond the deadline, maybe another few days, weeks or even months. Default is different from a credit downgrade, as we had in 2011. Way different.
First, to review, on Monday, the Senate killed by a 54-46 margin the House measure that would have delayed ObamaCare for a year, specifically the individual mandate, which had passed the House 228-201. The two bodies couldn’t then reach agreement on a compromise, which would normally be settled in conference, and on Oct. 1, 800,000 federal workers were furloughed. Republicans looked around and said ‘What happened? Did we just blow ourselves up?’
Yup. But Democratic Majority Leader Reid may easily be overplaying his hand as well.
From a Washington Post/ABC News survey....41% approve of the way Obama is handling the budget mess; 26% approve of the congressional Republicans’ stance; 34% approve of congressional Democrats and their handling of it.
A CNN/ORC International poll has 46% blaming congressional Republicans for a shutdown, 36% would blame Obama. [Taken prior to the actual event.]
A Quinnipiac University survey has 72% opposing Congress for shutting down the government.
A new CBS News poll showed 44% blaming congressional Republicans for the shutdown; with 35% blaming Mr. Obama and Democratic lawmakers.
A CNN/ORC International poll has 56% saying it’s a bad thing if the debt ceiling is not raised. 38% believe this would be good.
A CNN/ORC International survey has 57% of Americans opposing ObamaCare, 38% in favor, but...11% say they oppose because it isn’t liberal enough...so in other words, really about 50/50. [President Obama’s overall approval rating in this survey was 44%. John Boehner’s approval rating was 33%. Congress overall came in at 10%.]
Back to the debt-ceiling, the U.S. Treasury warned of “catastrophic” consequences if there is no deal within weeks, while the International Monetary Fund’s Christine Lagarde said navigating a way out of the crisis was “mission critical.” As alluded to above, the two biggest fixed income managers, PIMCO and Blackrock, say no problemo, ditto Warren Buffett. Hopefully we don’t have to test the various theories if the Treasury did technically default.
“The U.S. doesn’t deserve Asia’s money, not with half of its government in financial jihad mode, damn the global consequences....
“The U.S. is playing with fire here in ways it might not recover from.
“American politicians should be particularly worried about a conversation (Chinese President) Xi had this week in Jakarta with Indonesian President Susilo Bambang Yudhoyono. Xi proposed creating a regional bank to invest in infrastructure in Southeast Asia and pledged funding from China. Asia is also gradually building a neighborhood International Monetary Fund. Where will all this cash come from? Asia’s $7 trillion in currency reserves, much of it currently in dollars.
“Asians aren’t panicking yet. Many here think U.S. lawmakers aren’t crazy enough to default on their nation’s debt, no matter how much they despise President Barack Obama’s policies.....America’s banker, Asia, is betting bond guru Bill Gross of PIMCO is right that the risk of the U.S. reneging on its debt is zero.
“A rational view? I’m not so sure....What disturbs officials here the most is that the battle is over providing health care to Americans. How, they ask, could half your government take a stand against what other developed nations view as a basic human right?
“The very nature of this question is what bothers me....
“Another dangerous assumption: Washington’s complacency about the primacy of its debt. Asia forgave Congress that first downgrade in 2011, prompted by Capital Hill’s last debt ceiling skirmish. Don’t expect the region’s central banks to look kindly on Standard & Poor’s knocking the U.S. down another peg or Moody’s Investors Service yanking away its Aaa rating.
“While Congress takes Asia’s continued support for granted partly out of smugness, it also reflects the Hobson’s choice confronting reserve managers, meaning they have no real choice. China holds $1,000 of U.S. Treasuries for each of its 1.3 billion people. If traders sensed that China was selling large blocks of them, markets would plunge, resulting in huge state losses and less growth as surging bond yields slammed American consumers. And really, what other assets could the Chinese readily buy in such incredibly large amounts at moment? So, to avoid the biggest foreign-exchange trade in history, central banks stay in dollars.
“This pyramid-scheme-like arrangement explains why U.S. government bonds are rallying. Think about the twisted logic of a giant flight-to-safety trade based on fears that the very country to which you are rushing may soon default....
“But the more the U.S. plays with fire with its Aaa rating, the more Asia will find an alternative....
“Xi’s timing in proposing a regional bank can’t be a coincidence.”
“As the partial government shutdown entered its second day Wednesday, with no quick end in sight, the repercussions were being felt well beyond the shuttered national parks and nearly 800,000 furloughed federal employees....
“Starting to feel public pressure, the House Republicans who forced the government closure as part of their quixotic quest to kill ObamaCare offered to reopen some of the most popular programs, such as parks and the Department of Veterans Affairs on a piecemeal basis.
“That might spare them some political heat. But it’s like seizing a school bus full of kids then offering to release the cutest ones. Some of the serious problems just mentioned wouldn’t be touched, nor would myriad others that will pop up in coming days....
“The mounting toll will increasingly expose the shutdown’s foolishness. The sooner the Republicans free all their hostages, the better.
“Italy has a rich cultural legacy and fantastic food but is generally considered a basket case when it comes to good governance. It is on its 62nd government since the end of World War II.
“So it was not lost on America’s critics that the United States and Italy were put in the same boat in recent days, thanks to similar political crises: the shutdown here, and the chaos caused in Rome when former Prime Minister Silvio Berlusconi pulled his center-right party out of the ruling coalition, leaving no majority to run the country.
“Nor is it being lost on people that Italy managed to get out of the boat first. It turned out that the tantrum thrown by Berlusconi, an erratic billionaire and convicted tax evader, was not backed by the more level-headed people in his party. So the party quickly did an about-face.
“Of all of the consequences of the shutdown not considered by its instigators, the worst could be the damage to America’s reputation abroad.
“For generations, U.S. leaders have sought to portray an image of strength and probity as they pursued causes ranging from standing up to tyranny, to playing the role of honest broker, to creating democratic models that others could emulate.
“Now the image is one of laughingstock. President Obama had to cut short a trip to Asia next week because the shutdown left the White House short of people to do the advance work, and it might have to cancel altogether, pulling out of an important regional summit. [Ed. this was the case.]
“Foreign leaders – including those in Iran, which is contemplating a major shift away from its belligerent posture – wonder aloud whether the United States can be trusted to negotiate anything requiring congressional approval.
“These are real costs of the shutdown, hard to quantify but impossible to overstate. When Congress proves incapable of even its most basic functions – keeping the government running and paying its bills – it undermines the American brand abroad, and with it the nation’s ability to be the shining beacon to which others look.”
“This is just an assumption here, but I’m guessing that even those Republican members of Congress who forced the government to shut down believe in the importance of exporting American goods overseas. No congressional district is completely cut off from the global economy. I’m also guessing that congressional Republicans think that Asia is an important continent, or at least in the top six.
“So it stands to reason that even the hardest of the hard core would think that it’s necessary, from time to time, for the U.S. president to visit Asia to solidify relationships with the people with whom we do business.
“This is why it’s so embarrassing that the shutdown has forced President Barack Obama to postpone trips to the Philippines and Malaysia....
“I’ve been trying to report how the government shutdown is playing overseas. One Arab official I spoke to said the impasse feeds a growing narrative across the Arab world that the sun is setting on American power. He said that when the shutdown is combined with growing isolationist sentiment across the U.S., Obama’s wavering and hesitant performance in the Syria crisis, and a sense that the White House is a bit too eager to make a deal with Iran simply to extract itself from an intractable problem, it all suggests that the U.S. has lost a bit of its confidence and its sense of national purpose.
“It isn’t a healthy situation when your allies don’t think they can rely on you, and when countries in Asia – the continent to which Obama would like to ‘pivot’ his foreign policy – think they can’t count on you to visit when you said you would.”
I wasn’t going to make a big deal of initial computer glitches in signing up under the insurance exchanges, but then I saw that after several days, California’s insurance exchange “still has no answers for people wanting to know if their doctors are included in health plans being sold on the state-run market.
“Covered California, the state’s new insurance marketplace, said Thursday that its online search tool for doctors and hospitals won’t be ready until Monday at the earliest.” [Chad Terhune / Los Angeles Times]
Of course this is as basic as it gets. We were told we’d get to keep our own doctor, remember? For me that’s decision number one, especially because in my case he’s a damn good one.
Anyway, yes, just another example of how ObamaCare was not ready for prime time, and as I noted in this column the other day, the software machinations involved in getting all kinds of corporate, state and federal computer systems to talk to each other, with accuracy, is more than daunting.
“Mr. Obama is simply not going to delay or defund his signature legislation. And the political irony is that instead of learning about the glitches and problems of the health law’s rollout this week, the public is hearing only about the GOP willingness to punish other Americans to get rid of ObamaCare. The Cruz Republicans have helped Mr. Obama change the subject from his faulty program to their political tactics.”
“After much struggle and internal strife, Republicans seeking to block ObamaCare have arrived at this achievement: Much of the government is closed – except for ObamaCare. The national parks are deserted but the health exchanges sputter and wheeze to life.
“For the most vigorous critics of President Obama’s health reform, this failure is a point of ideological no return. ‘The administration’s plan,’ said Sen. Ted Cruz (R-Tex.), ‘is to get as many Americans as possible addicted to the sugar, addicted to the subsidies. And in modern history, there has never been a major entitlement that has been implemented that has ever been unwound.... If we don’t defund it now, how do we ever successfully get rid of this train wreck of a law?’
“Cruz went on to argue that the administration’s decision to delay the employer mandate is instructive. ‘If ObamaCare were going well, if it were working, he would want it to kick in before the election. The fact that he and Democrats are very, very concerned about being held accountable at the polls for the train wreck that is ObamaCare is very revealing.’ There are two very different arguments being made here, leading to a clash of metaphors. Americans, apparently, are on the verge of being addicted to a train wreck. Voters are about to become hooked on a political disaster that Democrats wish to delay.
“Tea party conservatives have not only embarked on a legislative confrontation without an endgame, they have also made a hash of their ObamaCare critique. Both their apocalyptic urgency before implementation and their fatalism after it are rooted in a misunderstanding of the law itself.
“ObamaCare is not primarily an entitlement program. The entitlement component – the exchange subsidies – will involve about 2 percent of Americans during the first year. (Others will be added to Medicaid, which has been around since 1965.) About 20 million Americans will eventually get subsidized insurance – a check that goes not to the individual but to insurance companies. The remaining 170 million Americans will not experience ObamaCare as a sugary treat but as a series of complex regulatory changes that may make their existing insurance more costly, less generous and less secure.
“The main problem with ObamaCare is not its addictive generosity; it is its poor, unsustainable design. Its finances depend on forcing large numbers of young and healthy people to buy insurance – yet it makes their insurance more costly and securing coverage less urgent. (Because you can get coverage during each year’s enrollment period at the same price whether you’re healthy or sick, the incentive to buy coverage when healthy is much diminished.)
“Heavy insurance regulations will lead some employers to restructure their plans, dump employees into the public exchanges or make greater use of part-time workers. In order to meet a few worthy goals – helping the poor buy insurance and covering preexisting conditions – ObamaCare seems destined to destabilize much of our current health system.
“As a political matter, ObamaCare will not keep many of its initial promises. It promised universal coverage – but the Congressional Budget Office estimated it will cover only about 40 percent of the uninsured. It promised lower premiums for families – but premium costs for families look likely to broadly increase. It promised lower health costs for government – but those costs are not coming down. The Health and Human Services actuaries expect health inflation to return strongly in 2014, largely because of ObamaCare.”
“The ObamaCare/shutdown battle has spawned myriad myths. The most egregious concern the substance of the fight, the identity of the perpetrators and the origins of the current eruption....
“President Obama indignantly insists that GOP attempts to abolish or amend ObamaCare are unseemly because it is ‘settled’ law, having passed both houses of Congress, obtained his signature and passed muster with the Supreme Court.
“Yes, settledness makes for a strong argument – except from a president whose administration has unilaterally changed ObamaCare five times after its passage, including, most brazenly, a year-long suspension of the employer mandate.
“Article I of the Constitution grants the legislative power entirely to Congress. Under what constitutional principle has Obama unilaterally amended the law? Yet when the House of Representatives undertakes a constitutionally correct, i.e., legislative, procedure for suspending the other mandate – the individual mandate – this is portrayed as some extra-constitutional sabotage of the rule of law. Why is tying that amendment to a generalized spending bill an outrage, while unilateral amendment by the executive (with a Valerie Jarrett blog item for spin) is perfectly fine?”
“One claim abroad on the Right is that what Cruz & Co. did was noble because they made an issue out of ObamaCare and put it right in the center of the American debate.
“This is so absurd it’s almost impossible not to laugh at the claim. ObamaCare has been the most important legislative issue in U.S. politics for four years now – and it would’ve been front and center this week in any case, since its so-called ‘exchanges’ rolled out Tuesday (to disastrous and comic effect).
“It’s not clear whether the Cruzians deluded themselves into believing they were in a stronger position to prevail against Obama this week than was the case, or whether they were acting out of more cynical motives.
“After all, Cruz has presidential ambitions. And the groups supporting him are seeking to achieve ideological and financial dominance in the weakened Republican Party orbit going forward.
“Principled or cynical, what they’ve done is tarnish the GOP brand and make themselves and the party look silly at best and crazy at worst – and the only means by which ObamaCare can be derailed is if Republicans can win enough Senate seats in 2014 and 2016 and win the presidency in 2016 as well.
“What happened this week made that harder to achieve. Or, to put it another way: A vote with Ted Cruz was a vote for ObamaCare.”
Israeli Prime Minister Benjamin Netanyahu...speech to the U.N. General Assembly, Oct. 1, 2013.
“Today, our hope for the future is challenged by a nuclear-armed Iran that seeks our destruction....
“(Since the revolution in 1979), Presidents of Iran have come and gone. Some presidents were considered moderates, others hardliners. But they’ve all served that same unforgiving creed, that same unforgetting regime – that creed that is espoused and enforced by the real power in Iran, the dictator known in Iran as the Supreme Leader, first Ayatollah Khomeini and now Ayatollah Khamenei. President Rohani, like the presidents who came before him is a loyal servant of the regime. He was one of only six candidates the regime permitted to run for office. Nearly 700 other candidates were rejected.
“So what made him acceptable? Well, Rohani headed Iran’s Supreme National Security Council from 1989 through 2003. During that time, Iran’s henchmen gunned down opposition leaders in a Berlin restaurant. They murdered 85 people at the Jewish Community Center in Buenos Aires. They killed 19 American soldiers by blowing up the Khobar Towers in Saudi Arabia.
“Are we to believe that Rohani, the National Security Advisor of Iran at the time, knew nothing about these attacks?
“Just as 30 years ago, Iran’s security chiefs knew about the bombings in Beirut that killed 241 American Marines and 58 French Paratroopers.
“Rohani was also Iran’s chief nuclear negotiator between 2003 and 2005. He masterminded the strategy which enabled Iran to advance its nuclear weapons program behind a smokescreen of diplomatic engagement and very soothing rhetoric. Now I know Rohani does not sound like Ahmadinejad. But when it comes to Iran’s nuclear weapons program, the only difference between them is this: Ahmadinejad was a wolf in wolf’s clothing and Rohani is a wolf in sheep’s clothing – a wolf who thinks he can pull the wool over the eyes of the international community....
“Ladies and Gentlemen, I wish I could believe Rohani, but I don’t because facts are stubborn things. And the facts are that Iran’s savage record flatly contradicts Rohani’s soothing rhetoric.
“Last Friday, Rohani assured us that in pursuit of its nuclear program, Iran has ‘never chosen deceit...and secrecy.’ Never chosen deceit and secrecy?
“Well, in 2002, Iran was caught red-handed secretly building an underground centrifuge facility at Natanz. Then in 2009, Iran was again caught red-handed secretly building a huge underground nuclear facility for uranium enrichment in a mountain near Qom. Rohani tells us not to worry; he assures us that all this is not intended for nuclear weapons. Do any of you believe that? If you believe that, here’s a few questions that you might want to ask:
“Why would a country that claims to only want peaceful nuclear energy, why would such a country build hidden underground enrichment facilities?
“Why would a country with vast natural energy reserves invest billions in developing nuclear energy?
“Why would a country intent on merely civilian nuclear programs continue to defy multiple Security Council resolutions and incur the costs of crippling sanctions on its economy?
“And why would a country with a peaceful nuclear program develop intercontinental ballistic missiles whose sole purpose is to deliver nuclear warheads? You don’t build ICBMs to carry TNT thousands of miles away. You build them for one purpose – to carry nuclear warheads. And Iran is now building ICBMs that the United States says can reach this city [New York] in three or four years.
“Why would they do all this? The answer is simple. Iran is not building a peaceful nuclear program. Iran is developing nuclear weapons....
“The last century has taught us that when a radical regime with global ambitions gets awesome power, sooner or later, its appetite for aggression knows no bounds. That’s the central lesson of the 20th century. Now, we cannot forget it.
“Iran’s fanaticism is not bluster. It’s real. This fanatic regime must never be allowed to arm itself with nuclear weapons....
“The international community has Iran on the ropes. If you want to knockout Iran’s nuclear weapons program peacefully, don’t let up the pressure. Keep it up....
“Ladies and Gentlemen, Israel will never acquiesce to nuclear arms in the hands of a rogue regime that repeatedly promises to wipe us off the map. Against such a threat, Israel will have no choice but to defend itself. I want there to be no confusion on this point: Israel will not allow Iran to get nuclear weapons. If Israel is forced to stand alone, Israel will stand alone.” [Jerusalem Post]
In response, Iranian Foreign Minister Mohammad Javad Zarif said of the meeting between Obama and Netanyahu that Obama “needs consistency to promote mutual confidence. Flip-flop destroys trust and undermines U.S. credibility,” this after Obama told Netanyahu that the use of force was still on the table.
On Sunday, Zarif told ABC’s “This Week,” “Mr. Netanyahu and his colleagues have been saying since 1991 that Iran is six months away from a nuclear weapon. And we are how many years, 22 years after that? And they are still saying we are six months away from nuclear weapons.”
But at the same time, about a dozen members of Iran’s parliament visited the underground Fordow facility on Monday in a clear move to endorse Iran’s enrichment activities. Esmaeil Kosari, an MP, said, “The centrifuges have all been installed and uranium enrichment at 20 percent purity is under way without any default.” Kosari vowed Iran would never shut down Fordow, amid speculation this would be one of the international demands in any future talks.
Amos Yadlin, a former general and head of Israeli military intelligence, warned in a research paper published on Monday that Netanyahu should not “paint himself into a corner and become the obstacle to an agreement” with Iran.
“Israel pressed long and hard for harsh sanctions: now that the sanctions have proven themselves as an effective tool for a possible agreement, Israel should not regret the option of solving the crisis by an agreement,” Yadlin wrote. [Financial Times]
Before leaving the U.S. on Thursday, Netanyahu indicated the U.S. and Israel were working on steps Iran could take that would be “verifiable and meaningful” and indicate they are serious about stopping their nuclear program. The Israeli prime minister also indicated he held three hours of talks with President Obama on Monday, “an open conversation between open minded people,” as he told PBS/CBS interviewer Charlie Rose, one of eight high-profile sit-downs Netanyahu granted while in New York and Washington.
Netanyahu’s chief concern is that the P5+1 (Russia, France, Britain, China, the United States and Germany) reach a partial deal that would enable Iran to make some minor concessions that fail to hurt materially their nuclear infrastructure in return for sanctions relief. The prime minister likened Iran to a suicide bomber, who “as he’s driving on the way to board the bus, he obeys the traffic laws, he says the right things. Once he gets on the bus, bam.”
It’s also true that recent talks between Iran and the International Atomic Energy Agency appeared to go nowhere, despite positive statements by both sides.
Last Friday’s (Sept. 27) meeting was the 11th between the two sides since early last year to consider potential ground rules for looking into intelligence findings that Iran was conducting scientific activities relevant to nuclear arms development, including, you guessed it, the nuclear-bomb trigger tests suspected at Parchin.
Meanwhile, in a poll of Israelis taken for their Channel 10 news magazine, 64% believe Iran will get the bomb, 21% think it will not, 15% had no opinion. By a 49-40 margin, Israelis said they believe Netanyahu’s statement Israel would act alone if necessary.
“(While) Iran may be convinced of U.S. gullibility, Israel is holding the U.S. feet to the fire. Obama may be eager to throw out sanctions, but Netanyahu isn’t going to accept a phony agreement in exchange for sanctions relief. (‘Rohani thinks he can have his yellowcake and eat it too. And he has another reason to believe that he can get away with this. And that reason is called North Korea.’) He warned against falling for Rohani’s predictable routine, no doubt with the U.S. Congress clearly in mind:
“So here is what the international community must do: First, keep up the sanctions. If Iran advances its nuclear weapons program during negotiations, strengthen the sanctions.
“Second, don’t’ agree to a partial deal. A partial deal would lift international sanctions that have taken years to put in place in exchange for cosmetic concessions that will take only weeks for Iran to reverse.
“Third, lift the sanctions only when Iran fully dismantles its nuclear weapons program.
“But ultimately, as it always is with a rogue state, it is only the threat of force which causes capitulation. And in that regard Netanyahu will not bank on Obama’s shattered credibility: ‘Israel will not allow Iran to get nuclear weapons. If Israel is forced to stand alone, Israel will stand alone. Yet, in standing alone, Israel will know that we will be defending many, many others.’”
“Rohani hopes to convince the world that Iran’s nuclear intentions are peaceful and that his country is a rational, thoughtful player on the global stage and, therefore, please give us access once again to the international banking system.
“Here are some reasons to doubt the sincerity of Iran’s protestations.
“ 1. Rohani, so far at least, hasn’t indicated that Iran is open to reversing course on its nuclear program. He has actually said the regime will not even talk about suspending uranium enrichment.
“ 2. Compared with the previous president of Iran...Rohani is a moderate, likable figure. But this is an example of defining deviancy down. Rohani obviously looks moderate when compared with a Holocaust-denying lunatic.
“ 3. Having a nuclear arsenal is in the best interests of Iran’s rulers. Put yourself in the shoes of the supreme leader for a moment. You’re surrounded by enemies: Almost the entire Sunni Muslim world despises you. The Jewish state, for which you have a pathological hatred, is trying to undermine your security. And behind them all stands the United States, the country formerly known as the ‘Great Satan,’ whose president says he isn’t interested in regime change – but can you actually trust an American president? Of course not. A nuclear weapon in your hands does two vital things. It protects you from external efforts to overthrow your government, and it allows you to project your power across the Middle East. You’ve seen what happens to Middle Eastern leaders who don’t have nuclear capabilities – Saddam Hussein and Moammar Gaddafi – and you don’t want to share their fate. Getting an atomic weapon is difficult, but once Iran crosses the finish line, the world will accept it as a nuclear power and the sanctions will dissolve over time....
“Reuel Marc Gerecht, the former Central Intelligence Agency officer and an Iran expert, said that in Khamenei’s eyes, ‘He would disgrace himself before God and his praetorians, the Revolutionary Guards,’ if he were to give up his nuclear ambitions in exchange for an easing of sanctions. ‘He has invested everything in the nuclear program. It is the core of the Islamic Republic’s defense against America. Khamenei would be saying to all that America and the rest of the West had defeated him. He would forfeit the Islamic revolution and quite likely his rule.’....
“Does this mean the United States shouldn’t negotiate? Absolutely not. The Obama administration should test the Iranians immediately. They are, in fact, squeezed by sanctions. Perhaps the squeeze is more damaging than we even think. But these negotiations should be time-limited, and sanctions shouldn’t be lifted prematurely – the sanctions are what brought the crisis to this point.
“One other thing the administration should do: Listen to its former arms control expert, Gary Samore, who, according to Foreign Policy magazine, said this about the regime: ‘Nobody is fooled by the charm offense; everybody understands the supreme leader is seeking nuclear weapons. No matter how many times Rohani smiles, it doesn’t change the basic objective of the program.’”
Talks between Iran and the P5+1 are scheduled for Geneva, Oct. 15 and 16. The next chapter will be written then.
Europe and Asia
Before I turn to Italy and Greece, the final PMI on manufacturing for the eurozone in September came in at 51.1, in line with the flash estimate, vs. 51.4 in August. The PMI for the service sector improved from 50.7 in August to 52.2 last month. Consumer prices rose 1.1% in September and the European Central Bank opted not to change monetary policy at its monthly meeting. The ECB is still tepid on its growth outlook for the rest of the year and forecasts growth of just 1% in 2014.
“Europe’s political leaders have seized on the first uptick in European economic indicators as evidence that their policies are working. Who would have thought that?
“Eurozone gross domestic product expanded 0.3% in the second quarter of this year. It will probably have expanded again in the third quarter. So if you define the end of a recession as two consecutive quarters of positive growth, you might be tempted to forecast that the recession will end at precisely midnight on Monday with the end of the quarter. If you do this, you are either a fool or someone with an agenda to peddle – or both....
“(The) single largest constraint on the resumption of eurozone growth is not fiscal policy – which is broadly neutral at present across the single currency area – but the continued failure to clean up the banks. The growth rate of loans to the non-financial sector turned negative in 2009, showed some intermittent improvements, only to then deteriorate again last year. Things have not improved since: in August this year loans to the private sector were down 2% over the past year....
“The monetary and banking data are telling us that the economy will teeter on the brink of zero or low growth for the foreseeable future because the financial sector is not supplying the economy with sufficient funds to expand.”
And so it is that ECB President Mario Draghi continued to warn the eurozone recovery remains “weak, fragile, uneven,” saying further support for the banking sector could not be ruled out.
As for the crisis in Italy, after former Prime Minister Silvio Berlusconi, facing expulsion from the Senate and a year under house arrest, convinced five ministers under his flag to abandon the coalition government, a split emerged in his People of Freedom center-right party and Berlusconi suddenly made a U-turn and announced he would support the Prime Minister Enrico Letta and the coalition government just as he was seeking to bring it down.
“Italy needs a government that can produce structural and institutional reforms that the country need to modernize. We have decided, not without some internal strife, to support the government,” he said.
For Berlusconi it was probably a final humiliation after effectively losing control of his party after two decades in which he has dominated Italian politics. After a Senate panel voted to expel him on Friday, a full Senate vote will do the same in a few weeks’ time and he is slated to begin serving his sentence on October 16. Berlusconi had demanded a pardon from the president, Giorgio Napolitano, but this was not granted.
As many as 50 of the party’s 99 senators were prepared to defy their leader before he abruptly changed course.
So Letta won his no-confidence vote gamble, but Italy is far from being out of the woods. For starters, the coalition remains fragile and immediate action on taxes and labor reforms must be taken. An example is the case of Fiat, which has its factories operating at less than 50% of capacity amid plunging car sales in Italy because it can’t reach agreements with the unions to close factories. Italian labor costs are 30% higher than in Spain, to cite another example, and companies are fleeing Italy in droves.
Meanwhile, in Greece, the leader of the far-right Golden Dawn party was arrested after the fatal stabbing of a young anti-fascist rapper, allegedly by a Golden Dawn supporter. Police then issued warrants on 35 other party members and legislators, Golden Dawn holding 18 of 300 seats in parliament. The leader was charged with running a criminal enterprise. This is obviously a big deal, Golden Dawn receiving 13% to 15% in recent opinion polls prior to the move, with a system geared to helping the poor with food aid, while bashing immigrants, literally. As of this writing, however, there has yet to be any backlash but I can’t see party members just disappearing into the woodwork.
In Germany, there has been a post-election lull as the center-left Social Democrats agreed to open exploratory talks on joining Chancellor Angela Merkel’s center-right Christian Democrats. The SPD, though, would only agree to talks under the condition that if leadership agreed to join Merkel, as it did in 2005-09, any final deal would have to be approved by a party referendum. So it’s going to take some time for all this to play out. German voters continue to voice their preference for such a grand coalition; 58% supporting such an outcome in one poll I saw.
Lastly, representatives from the IMF, European Commission and the ECB approved Portugal’s plan for its economy, the ongoing program of cuts and reforms that were called for in order to qualify for another round of bailout funds, though the government is looking for help (not forthcoming) with its deficit target for next year.
In China, one week ago, the HSBC/Markit flash estimate of manufacturing in China for September came in at 51.2, which was good, but then the final reading was just 50.2 (the biggest difference ever between the estimate and final reading for this indicator...no explanation given). The government’s PMI for manufacturing was 51.1 vs. 51.0 in August. The PMI for the service sector, as posted by Beijing, was a strong 55.4 in Sept. vs. 53.9 in August. [HSBC releases this figure Oct. 8. Remember, the government PMI data focuses on state enterprises, while the HSBC/Markit surveys are primarily for the private sector.] Third-quarter GDP is reported on Oct. 18 and is expected to come in around 7.7%.
And in Japan, Prime Minister Shinzo Abe, as expected, authorized an increase in the national sales tax in April from 5% to 8%.
“To maintain faith in the country, and to pass on a sustainable social security system to the next generation, I have decided to raise the combined national and regional consumption tax rate from 5% to 8%.”
Abe was able to take the controversial step because Abenomics is working; the economy rebounding, with business confidence soaring. The prime minister will also institute some stimulus measures to blunt the negative impact of the tax hike. Of course it can still backfire.
--Stocks finished mixed again with the Dow Jones registering a second straight 1.2% decline to 15072, while Nasdaq rose for a fifth straight week, up 0.7% to 3807. Suddenly, Nasdaq’s all-time closing high of 5048 doesn’t look too far away. The S&P 500 lost a point, 0.1%, to 1690.
It’s now earnings season. Will there finally be some top-line, revenue growth? Doubtful. And it’s doubtful the guidance will be anything special. Don’t think you’re going to hear too many comments from corporate CEOs such as, “Gee, I have never been more optimistic about the state of our business and this great country of ours.”
--After Tuesday’s Nasdaq rally, the index was up 200% from its March 9, 2009, bear market low. As of the same day, the Dow and S&P were up 132% and 150%, respectively, during the same period.
The average U.S. diversified stock fund rose 7.7% in the third quarter, according to Lipper. [preliminary]
--U.S. Treasury Yields
6-mo. 0.04% 2-yr. 0.33% 10-yr. 2.64% 30-yr. 3.72%
Yields were largely unchanged on the week, though the 10-year hit a seven-week low of 2.59%.
While we didn’t have a September jobs report on Friday due to the government shutdown, earlier in the week the September Chicago PMI came in at a strong 55.7, while the ISM manufacturing reading for the month was 56.2, the best since April 2011. The ISM service sector figure, however, at 54.4, was far less than expected.
“The Fed will have to taper, cease and then desist someday. They can’t just keep adding one trillion dollars to their balance sheet every year without something negative happening – either accelerating inflation, a tanking dollar or a continued unwillingness on the part of corporations to invest because of the resultant low and unacceptable returns on investment. QE (quantitative easing) has to die sometime.”
But once QE is gone and the policy rate becomes the focus, “fed funds will then stay lower than expected for a long, long time. Right now the market (and the Fed forecasts) expects fed funds to be 1% higher by late 2015 and 1% higher still by December 2016. Bet against that.”
[On the fund front, Gross’ rival, Jeffrey Gundlach of DoubleLine, saw clients pull an estimated $2.1 billion from his flagship $35.1 billion Total Return Bond Fund in September.] [Bloomberg]
--The Asia Development Bank (ADB) cut its 2013 growth forecast for the region, which encompasses 45 nations, to 6% from 6.6%. It also revised down its 2014 outlook to 6.2% from an earlier projection of 6.7%.
--The National Retail Federation forecast holiday sales in November and December will be up 3.9% over last year. 2012 sales rose 3.5%. The average increase over the past decade is 3.3%. The NRF forecasts online sales growth of between 13% and 15%.
Outside of Amazon announcing it would hire 40% more seasonal workers than last year, most other big retailers are holding the line at 2012 levels. Target is hiring 20% less.
Earlier, ShopperTrak forecast holiday sales would rise just a little more than 2%.
--U.S. auto sales were lackluster in the month of September, depressed because the Labor Day weekend occurred early in the month, and many cars sold tied to that weekend were counted in August rather than September, which I didn’t know when I relayed August numbers! The sales pace for the industry was 15.28 million vs. 16.09 million vehicles for August on an annualized basis and represented the end of a 27-month streak of year-over-year gains.
GM sales fell 11%, while Ford’s rose 6% over a year ago, and Chrysler’s were up a fraction, 0.7%.
Toyota’s fell 4.3%, Nissan’s 5.5%, and Honda’s were off nearly 10%.
[In Japan, vehicle sales rose the most in 14 months, further proof of the economic recovery there. South Korea’s domestic sales, however, were down 13%.]
--A Wall Street Journal analysis of global data “shows that the U.S. is on track to pass Russia as the world’s largest producer of oil and gas combined this year – if it hasn’t already....
“The U.S. produced the equivalent of about 22 million barrels a day of oil, natural gas and related fuels in July, according to figures from the EIA and the International Energy Agency. Neither agency has data for Russia’s gas output this year, but Moscow’s forecast for 2013 oil-and-gas production works out to about 21.8 million barrels a day.”
I love how President Obama increasingly works such data into his stump speeches, even as he has had zero to do with it.
[Saudi Arabia remains the world’s largest supplier of crude oil, 11.7 million barrels a day, according to the IEA. Russia was second at 10.8 and the U.S., third, at 10.3 million.]
--BP finally secured a victory in its legal campaign to have limits put on its settlements over the 2010 Deepwater Horizon disaster, after the Fifth Circuit appeals court in New Orleans on Wednesday approved an injunction to stop payments to businesses that had not “experienced actual injury traceable to lose” from the accident. This overturned earlier decisions by the district court that rejected BP’s calls for an injunction.
If a business had already received compensation that it did not deserve, then it could be forced to cough it up. Good! I was down to the region twice in the year after the disaster and I know there were a ton of crooks and charlatans seeking money. [There were also a ton of businesses that deserved it.]
It wasn’t a total victory for BP when it came to businesses having to show a “match” between revenues and costs incurred to generate the revenues. That’s probably fair as well.
It is pretty easy to prove fraud in many of these cases but BP was hamstrung. Hopefully this court ruling helps the company.
--Shares in Tesla Motors fell more than 6% after one of its cars caught fire, following video of the incident that emerged on an automobile blog Jalopnik. Tesla confirmed the authenticity of the images.
A Tesla spokeswoman said: “The fire was caused by the direct impact of a large metallic object to one of the 16 modules within the Model S battery pack. Because each module within the battery pack is, by design, isolated by fire barriers to limit any potential damage, the fire in the battery pack was contained to a small section in the front of the vehicle.”
Of course this is a potential nightmare for the electric car manufacturer that has received glowing press and a soaring stock price even though its actual sales, while fine for a start-up, clearly don’t warrant the valuation accorded the company by the Street.
But shares finished the week down just $10 to $181, as CEO Elon Musk aggressively defended the car, while the owner of the auto that caught fire had only good things to say about Tesla.
--Twitter laid out its plans for its $1 billion initial public offering on Thursday, revealing in its formal filing that revenues tripled in 2012 but that it has never turned a profit during its seven-year history. At an estimated valuation of $12 billion, co-founder and largest shareholder Evan Williams’ stake would be worth up to $1.4 billion and its creator and chairman, Jack Dorsey, would see his shares valued at about $590 million. [Another report has these two totals at $1.2 billion and $480 million, respectively, depending on the valuation.]
Revenues last year were $316.9 million. The company warned that stock-based compensation would have a “significant negative impact” on its ability to become profitable before the end of 2014.
But as the Wall Street Journal points out, the Twitter world is “populated by millions of accounts of questionable legitimacy.
“They range from entirely robotic (and often incomprehensible) spammers to more cleverly programmed accounts spitting out tweets designed to find their way into the occasional search results or discussion thread.”
In the IPO filing, Twitter estimates that ‘false or spam accounts’ make up less than 5% of the site’s 215 million monthly active users.
Twitter hopes to complete its offering by Thanksgiving, with the roadshow in three weeks.
--Samsung Electronics, the world’s biggest mobile phone and TV maker, forecast record profits for the July-to-September quarter, $9.4 billion, a 25% jump from a year ago, ahead of Street expectations.
--German industrial giant Siemens is slashing 15,000 jobs, or about 4% of its 370,000-strong workforce. 5,000 will be cut in Germany, 10,000 abroad.
--Toshiba is halving the number of staff in its TV division to 3,000. It will also close two of its three overseas manufacturing facilities as the company focuses on emerging markets in Asia and Africa.
--According to Interbrand, a corporate identity and brand consulting company owned by Omnicom Group, Apple is the new most valuable brand in the world, moving ahead of Coca-Cola, which fell to No. 3. Google is now No. 2. IBM is No. 4 and Microsoft No. 5.
Coke had been No. 1 for the 13 years the Best Global Brands report has been released.
--Hedge-fund manager Bill Ackman told investors in a letter Oct. 2 that he had taken a $2 billion hit through his stakes in J.C. Penney and Herbalife. The $2 billion represents a 15% drop in assets under management.
--Manhattan condominium and co-op sales surged 30% from a year earlier in the third quarter to the highest level since 2007 as buyers sought to make deals before mortgage rates rose further. The median prices, according to one source, increased 7% to $895,000.
Separately, the average monthly rental in New York City is now $3,049 vs. a national average of $1,073, according to real-estate research firm Reis Inc., which excludes Staten Island. [Manhattan’s average rent is $3,859.]
--This was one of the stupider stories of the week. Some of Microsoft’s biggest shareholders have asked for Bill Gates to step down as chairman, essentially because they don’t want his large stake in the company to influence the search for a successor to CEO Steve Ballmer.
There is no doubt that Microsoft has been a huge disappointment for shareholders, but it is still making gobs of money.
More importantly, Bill Gates founded the freakin’ company and as long as he wants some say, in the form of remaining chairman, so be it. He is doing great things with his money. That is to be admired. As opposed to Larry Ellison, who has a Ponzi scheme going with his stock options and spends a $billion on a stupid yacht race that could have gone to, oh, I don’t know, scholarships for poor kids...or clean drinking water in Africa, as one of Gates’ projects attempts to do.
I have never, ever, begrudged what Bill Gates has because of what he created...even if his ‘greatest software’ has had holes in it.
As for Ballmer, his combined salary and bonus for the fiscal year ending June 30 was just $1.3 million. Ballmer has always requested relatively low pay because his considerable wealth ($11 billion+) is already tied up in Microsoft’s fortunes.
--Meanwhile, Oracle is fighting back against a potential shareholder revolt over CEO Ellison’s pay. Because he is granted an award of 7 million stock options a year, for the last six, at least, he has realized gains of $851 million since the end of Oracle’s fiscal 2007.
It seems Oracle has a rather friendly compensation committee.
--Corn prices slid to a three-year low as a government report showed higher-than-expected domestic stockpiles amid the biggest harvest in U.S. history. Soybean futures also continued to take a hit.
--Ross William Ulbricht, who runs the “Silk Road Hidden Website,” which I can’t say I’ve ever perused, was charged in federal court in New York with running a “sprawling black-market bazaar” that trafficked in narcotics, computer hacking conspiracy and money laundering. Plus he tried to kill a user for attempting to extort money from the site.
But here’s the clincher. The transactions were conducted in Bitcoins, which is nothing more than software that is untraceable, making it perfect for all his illicit activity.
So following his arrest, the price for a unit of the crap dropped to about $85 from $127, according to Olga Kharif of Bloomberg. It did recover some later in the week.
[I wouldn’t ordinarily have a clue as to the price, using domestic beer as my currency of choice. “Hey, Bob. Trade you two six-packs of Coors Light for that Maserati.....Bob?”]
--NBCU announced it has sold $800 million in advertising for the 2014 Winter Olympics thus far, a record for the winter games. It anticipates an eventual total of around $970 million. London 2012 set the record for Summer Olympics with more than $1 billion in ad sales. [Michael McCarthy / AdAge.com]
--Beer sales rose 3.5% in 2012 (up 1.2% on total volume), though craft beer sales grew a whopping 14.4% and now account for 6.3% of the category.
Light beer remains the largest seller, though sales of Bud Light were flat. Coors Light sales grew, however, due to my ongoing consumption of same.
[In Russia, as the government fights endemic alcoholism there, beer production is slated to fall 25% to 30% from 2008 to the end of 2014.]
--Finally, this was a potentially devastating week for my hometown of Summit. But first I take you back to last October, “Week in Review, 10/13/12.”
“Merck is moving its global headquarters from one location in New Jersey to Summit, right across the street from where your humble editor resides. So this means increased traffic for my Dunkin’ Donuts, among other local retailers, as Merck is adding about 300-400 workers to the existing 1,800.”
But this week, totally out of left field, the company reversed itself and said it was moving its headquarters to the same Kenilworth, N.J. facility it was said to be abandoning, and moving the Summit employees to either Kenilworth or eastern Pennsylvania. That is if you aren’t among the 8,500 employees the company also announced it was laying off, which comes on top of 7,500 previously announced cuts. Overall, about 20% of its workforce.
The move comes amid growing investor pressure on the company to generate new drugs to replace bestsellers such as Januvia for diabetes that face competition from generics as the patents expire.
But back to the Summit situation, my family and I moved here back in 1965 when I was 7 and there has always been a large pharmaceutical company on the massive Merck site. It’s been a corporate pillar for the community, regardless of the ownership.
For Merck to reverse itself, however, is beyond disgraceful. Imagine that little things, such as an elaborate crosswalk from the Merck campus to my multi-use building was just completed, as well as a now highly irritating new stop light on another road bordering the Merck facility around the corner.
Imagine the shock of business owners who have long relied on Merck’s nearly 2,000 employees for breakfast and lunchtime traffic. I know some of my retail neighbors down below clearly selected the site because of this. The trickle-down effect is huge.
No doubt Merck has some major issues and many question whether the company was quick enough to adapt to the times.
Oh, and CEO Kenneth Frazier took down $15 million in compensation the past year.
There is one potential saving grace for the Merck facility, however. Celgene, also headquartered in Summit and apparently bursting at the seams in its current location, might be interested in taking over the Merck property. [Pssst....but parts of the site are tainted, boys and girls...don’t go fishing in the Passaic River down the hill.]
Foreign Affairs, part deux
Syria: After I went to post Friday night, the U.N. Security Council adopted a resolution demanding eradication of Syria’s chemical weapons but does not threaten automatic punitive action against President Bashar Assad’s government if it does not comply. The vote was unanimous among the 15-member council. President Obama called the draft resolution a “potentially huge victory for the international community.” Syria’s U.N. Ambassador Ja’afari said the Syrian government was “fully committed” to attending a proposed November peace conference in Geneva aimed at ending the civil war. [Not that the opposition would then attend.]
By Thursday, the U.N.’s chemical disarmament team arrived in Damascus and began their work, though a recent intensification of the war certainly will impede any progress, let alone the fact the inspection team members lives will be in constant danger. One wonders just how the U.N. and the world community will handle what seems inevitable...an attack on the inspectors. Are they then immediately pulled?
At the same time, a Security Council statement urged the Assad regime to “take immediate steps to facilitate the expansion of humanitarian relief operations,” but there were reports the regime was doing its best to do the opposite, including starving out the Damascus suburbs that were gassed in August by refusing to allow food aid through.
At the same time, the infighting between the Islamists and rebels is intensifying, with more than 40 Islamist groups fighting against the Syrian regime having come together with the backing of Saudi Arabia in an attempt to halt the advance of an al-Qaeda faction closing in on Damascus. Divisions within the rebel ranks have severely hampered the battle against the regime.
The Saudis are increasingly alarmed with the rise of the Islamic State of Iraq and Sham, (ISIS) a transnational jihadist group born as al-Qaeda in Iraq and now based in northern Syria, as reported by the London Times.
The failure of the West to support the secularist opposition forces has led to the rise of the Islamists. Just miles from the presidential palace, ISIS forces can be seen patrolling the streets of Ghouta, a retaliatory offensive for the gas attacks. [Which is now why the regime is trying to keep food from getting into the area.]
But how will the West respond to the Saudi effort to help Islamists? They’ll ignore it. The West has done practically nothing to date to truly help the secular opposition.
And this week, Joint Chiefs Chairman Gen. Martin Dempsey told reporters on a trip to South Korea, that the challenges in Syria will not be solved any time soon. “I think we’re looking at a decade of challenges in the region with Syria being the epicenter.”
“The U.N. deal caps a successful few weeks for the Syrian dictator. He faced down the world’s last superpower. His regime may or may not have to give up its chemical weapons, but he’s bought himself time to continue to use Iranian arms and Hizbullah fighters to defeat the opposition. With U.S. Tomahawks taken off standby, Syria’s fighter jets and helicopters have been redeployed against the rebels. Conventional weapons have killed the vast majority of the more than 100,000 dead in Syria.
“Administration defenders say this chemical deal may be a diplomatic bridge to a larger Syrian peace. A negotiated peace is desirable, but it’s hard to see how sparing Assad from the fear of a Western attack will make him any more likely to negotiate. He and his Iranian patrons think they can win.
“As for the Syrian opposition, they see all of this as an Assad victory and a Western betrayal. Earlier this week, 13 rebel groups broke with the Turkish-based, moderate Syrian Supreme Military Council and are expected to align with the Islamist fighters affiliated with al-Qaeda. Far from leading to a larger peace, the chemical weapons diplomacy seems to have radicalized both sides.”
Dmitri Trenin / Financial Times...on Russia’s intentions...
“The Russians side with Mr. Assad not because he is their man, but because his forces are killing Islamist extremists, whom Moscow now considers to be its most dangerous enemies. But for him, al-Qaeda’s allies would have turned Syria into a base for international terrorism. Russians play down the fact that Mr. Assad’s Russian-made weapons are also killing innocent civilians, and thus breed more jihadis.
“While the Kremlin has long decided on its goals, the White House has so far demonstrated only two aims: it wants to see Mr. Assad go and is reluctant to become involved militarily. Sensing this, Russia has sought to engage the U.S. on Syria’s chemical disarmament and a wider political settlement of the crisis. These are less about Syria than about achieving Mr. Putin’s most far-reaching, even improbable goal in foreign affairs: restoring equality to the U.S.-Russia relationship.
“The U.S. is unlikely to accept Moscow as a peer, but Russia will not settle for less, making even U.S.-Russia co-operation a hard-fought act. Today, Syria is a mere playground in this bigger game.”
One last item. Foreign ministers from Lebanon, Jordan, Turkey and Iraq met at a meeting in Geneva, pleading for help with their respective refugee crises. Despite what President Obama keeps telling the American people, the aid money, both from Washington and elsewhere, is not flooding into those nations most needing it. This too is part of Obama’s legacy and historians, when examining this element, will excoriate his administration and the failure of the United States to lead.
Iran, cont’d: There were reports the head of Iran’s Cyber War unit was assassinated. Iran’s Revolutionary Guards admitted Mojtaba Ahmadi had died but wouldn’t confirm the method. If it was an assassination, this comes after a similar end for five Iranian nuclear scientists since 2007.
Iraq: Nearly 1,000 Iraqis were killed in September, one of the worst months since 2008. 887 of the 979 killed were civilians, while the rest were security forces and Iraqi troops. 418 people were killed in Baghdad alone, in case you thought you had been given the all-clear to travel there for your next vacation. July’s 1,057 is this year’s highest monthly toll.
Egypt: The Egyptian army is making plans to attack extremist groups in the Gaza Strip in the event the security situation in the northern Sinai Peninsula deteriorates further. The plan is to attack from the air.
Russia: 30 members of the environmental group Greenpeace were placed under arrest on piracy charges after staging a protest at an offshore oil platform in the Arctic, investigators said on Thursday. Incredibly, they could all receive up to 15 years in prison if convicted. Greenpeace has dismissed the charges as absurd, saying the protest was a peaceful one designed to draw attention to the dangers of drilling in the fragile environment. Russian energy giant Gazprom is due to begin drilling at the targeted site shortly. I would side with Greenpeace on the issue that, undoubtedly, Gazprom is unprepared to deal with a spill there...for the simple reason they don’t care...which is the feeling of many Russians when it comes to their environment.
This week we also learn the fate of activist and recently defeated Moscow mayoral candidate Alexei Navalny, who faces five years in prison on embezzlement charges unless he convinces a court on Oct. 9 of his innocence. Recall, Navalny was only allowed to run, picking up a surprisingly strong 27% of the vote, because he was out on appeal with the Kremlin having given its blessing.
Elsewhere, gunmen stormed the Russian Embassy in the Libyan capital of Tripoli, a suspected revenge attack for the killing a day earlier of a Libyan air force pilot by a Russian (or Ukrainian) woman, who the gunman thought had taken refuge inside the embassy. No Russians were injured in the attack which was repelled with the help of Libyan security forces. No motive for the killing was given.
North Korea: New satellite imagery reveals further signs Pyongyang has restarted a nuclear reactor capable of producing plutonium for bombs, according to the U.S.-Korea Institute at Johns Hopkins School of Advanced International Studies.
Pakistan: The violence in northwest Pakistan continues to escalate. In Peshawar, car bombings and suicide attacks claimed over 150 lives in about an eight-day span, including the attack on the Christian church that killed 85.
At least on the sidelines of the U.N. General Assembly, Pakistani Prime Minister Nawaz Sharif and Indian Prime Minister Manmohan Singh held productive talks aimed at reducing tensions between the two nuclear-armed neighbors.
Kenya: A top Kenya government official said the number of attackers at the Westgate Mall may have been fewer than the initial count of 10-15 terrorists. We’ve also learned that the government had been warned, including by Israel, of the high risk of an attack on the mall. Israeli intelligence services are playing a leading role in the investigation.
And there were disturbing stories of massive looting of the mall by Kenyan security forces. In August, the poorly paid troops were accused of the same following the big fire at Nairobi’s main airport.
This is classic...employees of a book store returned to find the cash registers yanked out and the cash gone, laptops stolen, but the books not touched.
Store owners now must give the same security forces who stole their goods a list of same.
Lastly, some of the terrorists may have escaped, blending in with the wounded. The British terrorist “White Widow” (she was actually born in Ireland), who some say was part of the attack on Westgate, may have smeared herself in blood and walked out. It seems she had rented a unit at the mall months ago in preparation for the assault.
Frankly, I don’t know what to believe on this story anymore. The death toll has been stuck on 67, for example.
Italy: Friday was a national day of mourning as up to 300 African migrants may have died in a boat accident off the southern Italian island of Lampedusa as the passengers, mostly from Somalia and Eritrea, were forced to abandon ship when a fire broke out on board.
The ship took off from Libya and when the overcrowded boat’s motor stopped working, passengers, in an attempt to draw the attention of passing ships, set fire to a piece of material that then set fire to the rest of the boat. Then when the migrants all moved to one side to avoid the flames, the boat capsized.
Back in July, Pope Francis visited the island known for being the main initial destination point for refugees, condemning the “global indifference” to the plight of migrants trying to arrive in Italy and Spain for a better life.
Austria: The right-wing Freedom Party, founded by the late Jorg Haider, took 21.4% of the vote in Austria’s parliamentary elections, good enough for third, though this was less than expected. Austria’s two main pro-European parties maintained their 1-2 positions and Chancellor Werner Faymann will return to lead the grand-coalition. Austrians have no reason to want change. The economy is growing and unemployment is very low.
Spain: Animal rights groups were up in arms when parliament voted to protect bullfighting by awarding it special cultural status. I’ve told you before that when I attended a bullfight in Spain way back in 1970, it scared the heck out of me. Incredibly intense. Sympathies to the bull and his family. Bullfighting has been in decline in recent years amid waning interest on the part of the younger generation, which for starters is unemployed.
Venezuela: President Nicolas Maduro, a total buffoon, expelled three U.S. diplomats he claimed had conspired with local conservatives to sabotage the country’s power grid and economy. The State Department rejected the claims and said the Obama administration was considering retaliatory action. Maduro’s nation is falling apart at light speed and he needs scapegoats.
Vietnam: Vietnamese general Vo Nguyen Giap died. He was 102. From a pure military standpoint, he was a tremendous leader, going all the way back to his defeat of French forces at Dien Bien Phu in 1954, as well as playing a key role in the 1968 Tet Offensive. As a reflection of the tremendous respect this man commanded, Sen. John McCain tweeted upon learning of his passing that Gen. Giap was a “brilliant military strategist who once told me that we were an honorable enemy.”
--Some of us Republicans just want to take back the Senate and none of what has transpired in Washington recently helps in this task. But at least the latest Washington Post/ABC News poll had 54% of independents expressing a negative opinion of ObamaCare, while 42% had a positive view. Republicans don’t have a chance without gaining the majority of independent voters.
--A Monmouth University poll has New Jersey Gov. Chris Christie leading his Democratic challenger Barbara Buono, 56 to 37 percent; so the 20-point lead hasn’t changed.
Separately, after a Superior Court judge ruled last week that same-sex couples in New Jersey were being denied equal rights, Gov. Christie sought a delay in the Oct. 21 start date the judge set for such couples to be allowed to be married and asked the state Supreme Court to fast-track an appeal.
I so couldn’t give a damn about this issue anymore. Do what you want. Just don’t text and drive.
--Monmouth also released its latest survey of the New Jersey Senate race, with Newark Democratic Mayor Cory Booker leading Republican Steve Lonegan, 53 to 40 percent. [A Quinnipiac University survey earlier had Booker up by 12, both polls exhibiting far smaller margins than before, though this special election to fill the seat of the late Frank Lautenberg is Oct. 16.]
It’s too bad Lonegan doesn’t have even a few weeks more because Booker’s favorability rating is dropping, amid increasing reports of how he loves to spin tall tales.
--In the New York City mayoral race, Democrat Bill de Blasio is up on Republican Joseph Lhota by a whopping 68-19 margin among likely voters, according to a New York Times/Siena College poll. A Quinnipiac University survey has it 71-21. [De Blasio has a 90-6 lead among African-Americans in this one.]
The thing is, nearly half of New Yorkers support the Police Department’s stop-and-frisk tactic that de Blasio promises to get rid of.
But at least it seems de Blasio would consider former NYPD Commissioner Bill Bratton to replace Ray Kelly, which might save Gotham from utter despair and destruction.
--The Marines sacked two generals for negligence after the Taliban were able to breach security at a British-run base in Afghanistan, Sept. 14-15, 2012 (noted in my “Week in Review” of 9/22/12), resulting in the deaths of two U.S. Marines, while five RAF officers were injured in the ensuing battle that also resulted in the destruction of military aircraft valued at $200 million.
Prince Harry was on the base at Camp Bastion, Helmand province, at the time and six Harrier jets were lost when a group of 15 insurgents staged the night-time raid.
Having read various accounts in both GQ magazine (American journalist Matthieu Aikens alleged warnings of an imminent attack were ignored) as well as accounts in Army Times, this was an inexcusable assault, the Marines having cut their force patrolling the outer perimeters of the massive base from 325 men to 100.
The actual site where the attack occurred, though, was under British control and had been turned over to a tiny Tongan force that American forces had allegedly caught sleeping on the job from time to time.
The U.S. Central Command concluded that Major-General Charles Gurganus, the top Marine commander in southern Afghanistan at the time, and Major-General Gregg Sturdevant, the senior Marine aviation officer in the area, “failed to exercise the level of judgment expected of commanders of their rank” in not taking sufficient action to safeguard the base from possible assault.
It is the first time a general has been fired for negligence after a successful enemy attack since the Vietnam War.
My remembrances of this battle, from the various accounts I read, was that there was one truly heroic American and little of the same from the British soldiers. This may not be fair but it’s my take.
--The No. 2 officer at U.S. Strategic Command, that which is in charge of all U.S. nuclear war-fighting forces, has been suspended amid an investigation related to gambling. Navy Vice Adm. Tim Giardina was suspended by Air Force Gen. Robert Kehler following a months-long inquiry. The action was taken about three weeks ago but just made public the other day.
It was last spring that 17 launch control officers were pulled off duty at the nuclear missile unit at Minot Air Force Base, N.D., after a problematic inspection. And in August, a nuclear missile unit at Malmstrom Air Force Base, Mont., failed a nuclear safety and security inspection.
The rest of us would hope those of you responsible for the nuclear forces get your act together.
--CNN and NBC dropped plans for documentaries/films on Hillary Clinton. In the case of CNN, the filmmaker charged that the Democrat’s camp froze him out while Republicans bitched about meddling in the 2016 presidential race.
For its part, NBC said it canceled its mini-series “after reviewing and prioritizing our slate of movie/mini-series development.” The network denied there had been any pressure from either the Clinton camp nor the Republican National Committee.
--The first major survey of American Jews in more than 10 years (out of the Pew Research Center) found that 58% now marry outside the faith, compared with 1970, when only 17% of Jews did. “Two-thirds of Jews do not belong to a synagogue, one-fourth do not believe in God and one-third had a Christmas tree in their home last year.” [Laurie Goodstein / New York Times]
Alan Cooperman, deputy director of the Pew religion project, said in a Times interview, “It’s very stark. Older Jews are Jews by religion. Younger Jews are Jews of no religion.”
Another involved in the survey, Laurence Kotler-Berkowitz, said the trends portend a “growing polarization” between religious and nonreligious Jews.
I bring this up because, broadly speaking, you have the same trends in Israel itself and it’s why I have written from time to time of the danger of the far-right in Israel; the same far-right from which Yitzhak Rabin’s assassin came from.
--Like I said from the first reports on the Edward Snowden releases, never trust the government. I sure as hell don’t when it comes to the likes of the National Security Agency, as I made clear then, and with each week there seems to be another revelation confirming my beliefs.
As in this one from James Risen and Laura Poitras of the New York Times:
“Since 2010, the National Security Agency has been exploiting its huge collections of data to create sophisticated graphs of some Americans’ social connections that can identify their associates, their locations at certain times, their traveling companions and other personal information, according to newly disclosed documents and interviews with officials.”
In the latest release of documents provided by Snowden, “The spy agency began allowing the analysis of phone calls and e-mail logs in November 2010 to examine Americans’ networks of associations for foreign intelligence purposes.” Can’t do this, sports fans.
“Over the years, many state-university systems – and even states themselves – have shifted more of their financial aid away from students who need it toward those whose resumes merit it. The share of state aid that’s not based on need has nearly tripled in the last two decades, to 29 percent per full-time student in 2010-11. The stated rationale, of course, is that merit scholarships motivate high-school achievement and keep talented students in state. The consequence, however, is that more aid is helping kids who need it less. Merit metrics like SAT scores tend to closely correlate with family income; about 1 in 5 students from households with income over $250,000 receives merit aid from his or her school. For families making less than $30,000, it’s 1 in 10.
“Schools don’t seem to mind. After years of state-funding cuts, many recognize that wealthy students can bring in more money even after getting a discount. Raising the tuition and then offering a 25 percent scholarship to four wealthier kids who might otherwise have gone to private school generates more revenue than giving a free ride to one who truly needs it. Incidentally, enticing these students also helps boost a school’s rankings.”
Well, this sucks for students who really need the help.
--Related to the above, there is a local private university, Drew, in Madison, N.J., that is instituting a unique plan.
Drew is as expensive as Princeton with undergraduate tuition of $43,000 per year, and another $12,000 in room and board. But it has a new dual admissions agreement with Raritan Valley Community College whereby those Raritan Valley students who graduate with a GPA of at least 3.0, and receive an associate’s degree in an approved program, are guaranteed admission to Drew. Plus the Raritan Valley students can try Drew out before they start by taking one class there at the lower community college tuition rate.
While only a dozen or so Raritan students are expected to pursue this path each year, as an official there put it, “An agreement like this makes it possible for a student of more modest means to be able to afford a private education.”
Transferees enter Drew as juniors. Hopefully this kind of program becomes a trend. It makes terrific sense. [Jeanette Rundquist / Star-Ledger]
--One other item on education. Amanda Ripley has an extensive piece on the value of high school sports (or lack thereof) in the October 2013 issue of The Atlantic.
I’m just going to note the first four paragraphs, understanding I am a huge proponent of sports in high school myself. But...am I right to feel this way?
“Every year, thousands of teenagers move to the United States from all over the world, for all kinds of reasons. They observe everything in their new country with fresh eyes, including basic features of American life that most of us never stop to consider.
“One element of our education system consistently surprises them: ‘Sports are a big deal here,’ says Jenny, who moved to America from South Korea with her family in 2011. Shawnee High, her public school in southern New Jersey, fields teams in 18 sports over the course of the school year, including golf and bowling. Its campus has lush grass fields, six tennis courts, and an athletic Hall of Fame. ‘They have days when teams dress up in Hawaiian clothes or pajamas just because – ‘We’re the soccer team!,’ Jenny says.
“By contrast, in South Korea, whose 15-year-olds rank fourth in the world (behind China, Singapore, and Hong Kong) on a test of critical thinking in math, Jenny’s classmates played pickup soccer on a dirt field at lunchtime. They brought badminton rackets from home and pretended there was a net. If they made it into the newspaper, it was usually for their academic accomplishments.
“Sports are embedded in American schools in a way they are not almost anywhere else. Yet this difference hardly ever comes up in domestic debates about America’s international mediocrity in education. (The U.S. ranks 31st on the same international math test.) The challenges we do talk about are real ones, from undertrained teachers to entrenched poverty. But what to make of this other glaring reality, and the signal it sends to children, parents, and teachers about the very purpose of school?”
I do just have to say that from all I’ve read, South Korean kids are hopelessly screwed up due to their being hooked on video games, far worse than ours are, if that’s possible.
--One of Pope Francis’ first steps was to put together a group of eight cardinals to look at revising the Vatican constitution, with the goal of giving more power to the bishops; part of Francis’ vast reform agenda.
But last weekend, Francis also gave an indication he was tired of Vatican intrigue and gossip so he told Vatican police to crack down on it, as well as looking for intruders.
Francis defined gossip as the devil’s work, “a forbidden language” and “a war waged with the tongue,” as he told a gathering of gendarmes for Mass. Francis told them that they are to confront the gossipers: “Here, there can be none of that: walk out of St. Anne’s Gate. Go outside and talk there!” [Tom Kington / Daily Telegraph]
The pope is rockin’ and rollin’ and most of us Catholics love it.
--A large study conducted by scientists at the London School of Economics, Harvard Medical School and Stanford University School of Medicine looked at hundreds of trials involving nearly 340,000 patients and found that exercise can be as good a medicine as pills for people with conditions such as heart disease. Experts aren’t saying ditch the drugs (I would), but rather use them in tandem with exercise.
Research in England, for example, found that the average number of prescriptions for every person in the U.K. was 17.7 in 2010, compared with 11.2 in 2000, yet only a third of people in England do the recommended amount of moderate-intensity activity each week. [BBC News]
--According to a study by Vanderbilt University researchers, staying in an intensive care unit is bad for your brain and that mental loss persists for as long as a year afterward. “Hospitals need to do a better job of keeping ICU patients alert, getting them out of their beds when possible and recognizing that drug-induced comas can do more harm than good, according to the study’s authors.” [USA TODAY / The Tennessean]
--A review of the world’s oceans by the International Program on the State of the Oceans (IPSO), warns they are facing multiple threats, including overfishing, pollution and climate change. Fertilizer run-off is a big issue, creating dead zones.
Forget about the variability of air temperatures. The oceans are warming regardless, acidification the big problem, it impacting coral reefs, for example.
However, global warming that leads to melting sea ice can increase fisheries near the poles, while “stratification of warmer waters in the tropics would reduce mixing of nutrients and lead to lower production,” according to Professor Alex Rogers of Oxford University.” [BBC News]
--We note the passing of author Tom Clancy, 66. Estimates from his publisher, Penguin Group (USA), of his worldwide sales are more than 100 million. Not bad for the former insurance salesman whose first book, “The Hunt for Red October,” was a massive hit during the Cold War. Sales of this one were helped by President Ronald Reagan when he quipped at a dinner that he was losing sleep because he couldn’t put the book down. A lot of us felt the same way.
Pray for the men and women of our armed forces...and all the fallen.
God bless America.
Gold closed at $1309
Returns for the week 9/30-10/4
Dow Jones -1.2% 
S&P 500 -0.1% 
S&P MidCap +0.9%
Russell 2000 +0.4%
Nasdaq +0.7% 
Returns for the period 1/1/13-10/4/13
Dow Jones +15.0%
S&P 500 +18.5%
S&P MidCap +23.0%
Russell 2000 +26.9%
Bears 18.6 [Source: Investors Intelligence]
*Dr. Bortrum has a new column up.
Have a great week. I appreciate your support.