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04/05/2014

For the week 3/31-4/4

[Posted: 12:00 AM ET]

Edition No. 782

Washington and Wall Street

The economic news for the week was pretty good, topped off by the March labor report, with the economy adding 192,000 jobs, in line with expectations, though the unemployment rate remained at 6.7% (the broader measure, U-6, which measures ‘underemployment,’ ticked up to 12.7%), while average hourly earnings were unchanged, not good. The private sector was the source of all the job growth. February’s figure was revised up to 197,000, so both were in keeping with the 194,000 monthly average for all of 2013.

And I do have to add that U.S. businesses have now finally replaced the 8.8 million jobs lost during the Great Recession after a dismal five-year recovery.

The ISM figure on manufacturing came in at 53.7 vs. 53.2 in February, with a solid export component; the number on the service sector was 55.3; and the Chicago purchasing managers index registered 55.9, though this was the lowest since August.

February factory orders were better than expected, up 1.6%, while construction spending for the month was in line, up 0.1%.

But back to the jobs data, it definitely wasn’t strong enough to get the Federal Reserve to change its existing policy in any fashion. Prior to the report, Fed Chair Janet Yellen gave a speech in which she made it very clear, monetary stimulus would be needed for “some time” because of “considerable slack” in the labor market, citing the plight of part-time workers, stagnant wages and longer periods of joblessness, much of which was borne out directly then in the March numbers (again, see U-6).

Yellen backpedaled a bit from her March 19 press conference when she said the Fed may raise the benchmark interest rate around next summer, following the end of quantitative easing, but she also said this week if inflation is below 2%, as it currently is, that’s a “good reason to hold the funds rate at its present range for longer.”

Bottom line, though, is while a number of Fed governors then issued statements saying, yes, the Fed isn’t hiking rates until second half of 2015 at the earliest, if the economy were to pick up, as the Fed itself says it will, the data will improve and the pressure is on to raise rates. It’s pretty simple.

ObamaCare: The White House did a victory lap on Tuesday, as President Obama appeared alongside Vice President Biden to announce 7.1 million Americans have signed up for health plans under the Affordable Care Act, which means the White House met its original target for the six-month sign-up period, which had been downgraded to 6 million because of the problems with HealthCare.gov.

“This law is doing what it’s supposed to do,” gushed Obama, who was denied a primetime slot by all the networks. “It’s working. It’s helping people from coast to coast.”

Now, yes, the 7.1 million is quite a step up from even just a few days earlier, but there were no details about how many had actually begun to pay for their new health plans, how many of the enrollees had no insurance before, and what is the critical split between young and old policy holders? Will enough healthy folk sign up to avoid big premium hikes for next year that would then make it less likely the healthy ones would re-up?

While it wasn’t official, HHS Secretary Kathleen Sebelius said Monday that at least 80% of those who have enrolled paid their first premium; California, with 1.2 million of the 7.1M, said 85% had. Aetna and Cigna said 80% of their newly enrolled members had.

But there are many big problems to come over the next few months.

Editorial / Wall Street Journal

“Suddenly ObamaCare is a roaring success, happy days are here again and liberals are euphoric, or claim to be. There are more than a few reasons to doubt this new fairy tale, not least the behavior of Senate Democrats running for re-election this year.

“In the Rose Garden Tuesday, President Obama reported that 7.1 million people had signed up so far, confirming a Monday night White House news leak. ‘That doesn’t mean all our health-care problems have been solved forever,’ he conceded with customary modesty. The government appears to have tapped heretofore-unknown reserves of bureaucratic efficiency by releasing numbers timed to this campaign-style pep rally.

“Yet for months the Health and Human Services Department has refused to disclose crucial contextual data, such as how many insurance contracts are in force, the market-by-market totals and how many beneficiaries were previously covered. Regardless of your partisan sympathies, the White House’s selective disclosure is a crime against transparency and accountable government.”

The other side...from Paul Krugman / New York Times

“Holy seven million, Batman! The Affordable Care Act, a k a ObamaCare, has made a stunning comeback from its shambolic start....

“But what does it mean? That depends on whether you ask the law’s opponents or its supporters. You see, the opponents think that it means a lot, while the law’s supporters are being very cautious. And, in this one case, the enemies of health reform are right. This is a very big deal indeed....

“Conservative thinking and Republican political strategy were based entirely on the assumption that it would always be October, that ObamaCare’s rollout would be an unremitting tale of disaster. They have no idea what to do now that it’s turning into a success story.

“So why are many reform supporters being diffident, telling us not to read too much into the figures? Well, at a technical level they’re right: The precise number of signups doesn’t matter much for the functioning of the law, and there may still be many problems despite the March surge. But I’d argue that they’re missing the forest for the trees.

“The crucial thing to understand about the Affordable Care Act is that it’s a Rube Goldberg device, a complicated way to do something inherently simple. The biggest risk to reform has always been that the scheme would founder on its complexity. And now we know that this won’t happen....

“(The) nightmare is over. It has long been clear, to anyone willing to study the issue, that the overall structure of ObamaCare made sense given the political constraints. Now we know that the technical details can be managed, too. This thing is going to work.”

Oh brother.

Peggy Noonan / Wall Street Journal

“Support it or not, you cannot look at ObamaCare and call it anything but a huge, historic mess. It is also utterly unique in the annals of American lawmaking and government administration.

“Its biggest proponent in Congress, the Democratic speaker of the House, literally said – blithely, mindlessly, but in a way forthcomingly – that we have to pass the bill to find out what’s in it. It is a cliché to note this. But really, Nancy Pelosi’s statement was a historic admission that she was fighting hard for something she herself didn’t understand, but she had every confidence regulators and bureaucratic interpreters would tell her in time what she’d done. This is how we make laws now.

“Her comments alarmed congressional Republicans but inspired Democrats, who for the next three years would carry on like blithering idiots making believe they’d read the bill and understood its implications. They were later taken aback by complaints from their constituents. The White House, on the other hand, seems to have understood what the bill would do, and lied in a way so specific it showed they knew exactly what to spin and how. ‘If you like your health-care plan, you can keep your health-care plan, period.’ ‘If you like your doctor, you can keep your doctor, period.’ That of course was the president, misrepresenting the facts of his signature legislative effort. That was historic, too. If you liked your doctor, your plan, your network, your coverage, your deductible you could not keep it. Your existing policy had to pass muster with the administration, which would fight to the death to ensure that 60-year-old women had pediatric dental coverage....

“What the bill declared it would do – insure tens of millions of uninsured Americans – it has not done. There are still tens of millions uninsured Americans. On the other hand, it has terrorized millions who did have insurance and lost it, or who still have insurance and may lose it.”

A good friend from my PIMCO days wrote in this week with the following:

“Our son, who lives in California, had his medical insurance cancelled and has not been able to replace it, in part because he cannot reach a human being to talk to thru the California ACA arrangement; and a relative of mine living outside of Atlanta has been able to enroll in a new insurance program but, because of its restrictions, her children will have to change pediatricians from the one they have used for 8 years and will have to change child psychiatrists from the one they have used for 9 years.”

Yup, we have a long way to go before the mid-term elections in November.

Incidentally, the Bureau of Economic Analysis said health care spending rose at a 5.6% annual rate in the fourth quarter, the fastest pace in 10 years. The Centers for Medicare & Medicaid Services expect health spending to rise 6.1% this year, up from about 4% in 2013.

What consumers pay in the future is the big question. Annual medical inflation was at a 50-year low in January, though according to Capitol Economics, this was partly due to the expiration of a large number of drug patents in 2011 and 2012, causing expensive branded drugs to be replaced by generics. [Paul Davidson / USA TODAY]

Europe and Asia

Lots of data this week for the eurozone. The final March PMI on manufacturing came in at 53.0 vs. 53.2 in February, so with the number being comfortably above the 50 dividing line between growth and contraction, the recovery remains in place. Spain’s manufacturing PMI was at 52.8, a 47-month high; Ireland’s 55.5, a 35-month high; France’s at 52.1, a 33-month high; but Greece’s, at 49.7, was a 3-month low. [The services PMI was 52.2 in March for the Euro set vs. 52.6 in February.]

Retail sales for the eurozone were up 0.4% in February over January, up 0.8% year over year.

And for February, the eurozone unemployment rate was 11.9%, still hideous, and just off the record 12.1%. Greece is at 27.5% (December), Spain 25.6%, France ticked up to 10.4%, Italy up to 13.0%, but Germany was at 5.1%.

The youth rate remained a sickening 58.3% in Greece (again, for December), while it was 53.6% in Spain and 42.3% in Italy, both for February.

The biggest news, however, was on the inflation front. Producer prices for February fell 0.2% over January and are down 1.7% year over year. They are down 3.5% in Greece over the 12 months, down 2.9% in Spain and 0.9% in Germany.

Consumer prices for the eurozone were up only 0.5% in March for the past 12 months, far below the European Central Bank’s (and U.S. Federal Reserve’s, and the Bank of Japan’s) 2% target.

So there was renewed talk of deflation in Euroland.

This week marked the ECB’s monthly meeting and while it once again held the line on interest rates at a record-low 0.25%, President Mario Draghi said he was prepared to fight deflation, including use of some form of quantitative easing (bond buying or asset purchases).

Even Bundesbank President Jens Weidmann, who has been resistant to bond purchases in the past, said it may be necessary to juice the economic recovery.

But Mario Draghi added he wasn’t concerned about potential deflation, saying the 0.5% number for CPI was distorted by the timing of the Easter holiday.

The biggest issue is the unemployment rate, with Draghi saying, “My biggest fear is actually to some extent a reality and that is the protracted stagnation, longer than we have in our baseline scenario.”

Separately, the Financial Times reported that while Britain is in solid recovery mode, tax revenues are not coming in as expected. The corporate tax rate is being cut to 21% and personal rates cut to offset other tax increases, but it seems low wage growth is hitting income tax revenue.

That said, demand for new cars in the U.K. is at a 10-year high, up 18% in March over a year earlier. [The slump in much of the rest of Europe appears to be over as well, with new car registrations up 5% in Germany, 8.9% in France and 4.9% in Italy.]

Germany approved the country’s first minimum wage, $11.75 an hour, to start in 2015. The wage does not cover minors, interns, trainees or long-term unemployed for their first six months at work.

The Greek parliament passed a reform package that entails further austerity by a 152-135 margin, passage being needed to gain the troika’s (ECB, European Commission and IMF) approval for a further $8.3 billion in bailout aid, which is being paid out $6.3 billion in April and $1 billion in each of June and July. I’ve noted in the past this was deemed a necessity in order to prevent the opposition from making big gains in the upcoming Euro Parliament vote end of May, which could have led to a dissolution of the government.

Alexis Tsipras, leader of opposition party Syriza, accused Greece’s leaders of “destroying the professional classes, ruining labor relations and selling the country piece by piece” through a broad-ranging program of privatizations.

Which leads me to France, where the ruling Socialist Party took a beating (except in Paris where Anne Hidalgo became the first female mayor in the city’s history) in the second round of local elections.

Nationally, the Socialists took about 40% of the vote, compared to the right’s UMP (think Nicolas Sarkozy) which tallied about 46%. The Socialists lost 155 cities and towns, so President Francois Hollande shook up his government, ditching his prime minister, Jean-Marc Ayrault, for popular Manuel Valls, the tough-talking interior minister who is seen as France’s Tony Blair for his pro-business stance, while also bringing into the cabinet Segolene Royal, who lost to Sarkozy in the presidential race of 2007 and is the mother of Hollande’s four children. Yes, Ms. Royal is the partner the president ditched for Valerie Trierweiler, who he then dumped for the actress, Julie Gayet. Only in France. 

Valls is interesting from the standpoint that he has some conservative bents and polls better than Hollande. Hollande has instructed Valls, as prime minister, to implement a program of tax cuts for business with other measures aimed at increasing household spending to get the economy moving. France is also woefully short of meeting its budget deficit target, which at 4.3% is well above the EU’s mandated 3% of GDP.

But back to the local elections. In some respects the big story was the performance of the National Front (FN) which tallied victories in 14 towns and cities, a big gain for it. While its share of the total vote was only 7%, it ran candidates in just a fraction of municipalities. The FN, led by Marine Le Pen, is thus poised to wreak havoc in the aforementioned European Parliament vote, May 22-26, with its deep anti-immigrant and anti-Muslim positions. As Ms. Le Pen recently said in an interview with the New York Times, “We have five million unemployed people – why do we allow in more immigrants?”

Le Pen is also known to say at her rallies, “People want to live like French people in France, not like Saudis or Qataris.”

Lastly, Gene Epstein of Barron’s had a good piece on the energy industry, including some facts about Russia that I realize many of you may know but bear repeating.

Oil-and-gas revenues account for 70% of Russia’s total exports, 50% of the income for the federal government. Russia exports more than seven million barrels of oil each day, second only to Saudi Arabia.

Gene Epstein:

“One key difference between Russia and the No. 1 exporter is that more than 60% of Russian oil is produced in Siberia, where costs are much higher. A fall in the world price to $75 from $100 [Ed. the broad premise of Epstein’s piece] would therefore have a much greater impact on the net revenues that Russia earns from oil than is earned by the Saudis.

“The downside of the resource curse could also be felt in Russia’s reliance on sales of natural gas. About 75% of Russia’s natural gas exports go to Western Europe, providing 30% of tis requirements, at prices that are two and three times the price in the U.S. That enormous premium stems from the fact that there is no world market for natural gas, given the prohibitive cost of shipping it in its unaltered state. Hence, the argument for accelerated approval of liquefied-natural-gas export terminals.  With abundant natural gas now available in so much of the world – including Australia, South Africa, Brazil, and Argentina – within the next five years, something resembling a global market in liquefied natural gas will likely develop. That would break the local monopoly of the Russians in their market, enabling Europeans to buy from other sources, and weighing on the premium Russian gas now commands.”

Turning to Asia, China’s government announced a new series of measures to boost growth after the official figure on manufacturing for March came in at 50.3 vs. 50.2 in February. The HSBC index is at 48.0, HSBC focusing on the private sector and small- and medium-sized businesses, while the government data is more reflective of state-operated enterprises.

So the government is going to cut taxes to small business and speed up railway construction, as well as initiate some housing programs for shantytowns.

But the biggest concern remains the credit bubble. As reported by the Financial Times, the five largest banks that “account for more than half of all loans in the country” removed $9.5 billion in bad debts from their books that could not be collected in 2013, up 127% from 2012. Profits at the five, however, did still rise 7 to 15% last year, which is healthy.

In Japan the government hiked the sales tax, VAT, to 8%, a challenge to Abenomics as everyone expects consumption to take a dive for a spell. A Kyodo News poll revealed 66% will cut spending, while 80% were worried about the economic outlook. February industrial production plunged 2.3% over January, the worst in 8 months, though snowstorms hurt.

It also appears that broadly speaking, Prime Minister Abe failed in pressuring Japanese businesses to hike wages at least 2%. The largest manufacturers are coming in under that level.

Street Bytes

--Stocks finished mixed a second straight week, with the Dow Jones adding 0.6% to close at 16412, while the S&P 500 gained 0.4% to 1865 after hitting a new record on Thursday. But Nasdaq, which was speeding along after a hiccup the week before, suddenly cratered 2.6% on Friday to close with a 0.7% loss. Momentum stocks in the Internet, social media and biotech sectors, among others, were taken out back and shot. Netflix, to cite one bloody example, closed at $337 after hitting an all-time high of $458 on March 6. Facebook has fallen from $72.50 on March 11 to $56.75. The high-flying biotech index finished down 4.1% on Friday alone. Some hedge funds have been obliterated.

--U.S. Treasury Yields

6-mo. 0.05% 2-yr. 0.41% 10-yr. 2.72% 30-yr. 3.58%

The 10-year, which had seen its yield rise to 2.80%, rallied on Friday on the heels of the tame jobs report (in terms of probable Fed action) and the stock swoon.

--It has been virtually impossible to keep up with General Motors’ auto recalls this year. Aside from the well-known 2.6 million for faulty ignition switches that the automaker admits has resulted in 13 deaths, in the past week or so, GM has also recalled 172,000 vehicles because the front-right axle can fracture and separate, and then had a recall for power steering issues on another 1.3 million.

Best I can tell, including recalls prior to the ignition issue coming to the fore, GM has recalled over 5 million in just the first three months of the year, which is about seven times the figure for all of 2013.

But this week new CEO Mary Barra was under the gun during House and Senate hearings looking into the defective ignition switch. GM could have replaced the part for mere millions, but company documents show it balked at the expense. Analysts now peg the cost at $3 billion or more, including settlements with plaintiffs involved in accidents.

GM may, however, be shielded from some liabilities occurring prior to its bankruptcy filing. Kenneth Feinberg has been hired to help determine compensation for victims’ families.

As for Barra’s performance under the klieg lights, she was skewered for failing to answer some basic questions, with one senator referring to a “culture of coverup,” and another labeling GM’s practices “deception.” New Hampshire Republican Sen. Kelly Ayotte said: “I think it goes beyond unacceptable. I believe this is criminal.”

Barra repeatedly said “I am deeply sorry” for the company’s failures to respond quickly to the safety issues, but reminded lawmakers that the so-called “new GM” she now heads is nothing like the “old GM.” She also reiterated the defective ignition switch didn’t come to her attention until January 31.

[GM wasn’t the only automaker recalling large numbers of vehicles. Chrysler recalled more than 850,000 sport utility vehicles for a possible brake problem this week.]

--But despite GM’s very public issues, March sales rose 4% compared with the same month a year earlier. For all automakers, sales in the U.S. were up 5.7% to 1.54 million vehicles, an annualized pace of 16.4 million, according to Autodata.

Chrysler Group’s March was its best since 2007, up 13%, while Ford’s sales rose 3.3%.

On the import side, Toyota Motor Corp. saw its U.S. sales rise 4.9%, Nissan’s were up 8.3%, Subaru’s 21.2%, Kia’s 11.5% and Mazda’s gained 9% from year ago levels.

But Honda Motor’s fell 2% in March, ditto Hyundai. VW Group’s were flat.

--Blythe Masters, one of the pioneers of credit derivatives, described as “weapons of mass destruction” and a product at the heart of the financial crisis, resigned from JPMorgan Chase after 27 years at the bank, where she started as an 18-year-old intern.

More recently, she was in charge of JPMorgan’s physical commodities unit, which was recently sold off amid a slew of investigations involving manipulation in the California power market.

Masters’ resignation comes just a week after Mike Cavanagh’s departure, who was once thought to be the one to replace CEO Jamie Dimon, whenever Dimon steps down.

--Federal authorities have opened a criminal investigation into a recent $400 million fraud involving Citigroup’s Mexican unit, Banamex, and whether Citi’s internal controls contributed to a fraudulent loan involving an oil services company.

Citigroup recently announced it faced a separate investigation from federal prosecutors in Massachusetts on whether the bank lacked proper safeguards when it comes to clients laundering money.

In a speech this week, Preet Bharara, the United States attorney in Manhattan, said that it was important not just to investigate traders and bankers, but also the firms employing them.

“Effective deterrence sometimes requires that institutions be punished, because sometimes it is the institution that has failed.” [Ben Protess and Michael Corkery / New York Times]

--The Justice Department announced the biggest environmental cash settlement in history, with Anadarko Petroleum agreeing to pay $5.15 billion to clean up dozens of toxic sites across the country related to one of its subsidiaries, Kerr-McGee, which operated a wide range of chemical, energy and manufacturing businesses across the U.S.

The primary culprit was Tronox, a paint materials manufacturer and unit of Kerr-McGee, that went bankrupt in 2005. Kerr-McGee’s operations, among other things, contaminated Lake Mead, impacting a major water source in the southwest, as well as the Navajo Nation territory, which will receive $1 billion to clean up drinking water and address health risks.

Despite the size of the settlement, investors in Anadarko appeared relieved as the shares rose. Some analysts had a potential settlement at as much as $20 billion.

--Caterpillar, the world’s largest maker of heavy machinery, is being accused by Sen. Carl Levin (D-Mich.) of using a Swiss affiliate to defer or avoid paying $2.4 billion in U.S. taxes. The company, according to a Senate investigation, moved $8 billion in profits from the U.S. to Switzerland to take advantage of a special corporate tax rate it negotiated with the Swiss government. Obviously, our corporate tax laws have to be changed. They should have years ago. The total amount of corporate cash stashed offshore to avoid higher taxes at home is $947 billion, according to a Moody’s Investors Service report.

--Housing prices in Australia, particularly Sydney and Melbourne, continue to soar and are clearly in major bubble territory. Across the country, prices rose 11% for the 12 months ending March 31, with average gains of 15% in Sydney, this as household debt hit a record.

--PIMCO continues to bleed assets in its bond funds, with investors pulling $7.3 billion in March, a 10th straight month of redemptions, which comes amid the turmoil at the money manager following the resignation of co-chief investment officer, Mohamed El-Erian, as well as the underperformance of the Bill Gross-managed PIMCO Total Return Fund.

A major issue is the fund’s underperformance, with 94% of its peers besting it in the month of March, while Gross is in the 88th percentile for the past year, according to Morningstar data. PIMCO, in turn, says the fund (now $232 billion in assets) has outperformed its benchmark for the past six months as well as two, five and 10 years.

Separately, Bill Gross garnered some self-inflicted further bad press when he spent a fair share of the space in his monthly investment outlook newsletter on the death of his cat. If you are new to Mr. Gross, you think this is news. If you’ve followed him for decades as I have, this is par for the course. His timing, however, was pathetic and the tone should have been more focused on how he is going to turn performance around, or even discuss some of the in-house turmoil, rather than use this platform to discuss the death of “Bob.”

--Author Michael Lewis picked up a slew of publicity for his new book, “Flash Boys,” a story about the game of high-speed stock-trading, with an appearance on “60 Minutes” and then interviews on just about every major news and business outlet. The Securities and Exchange Commission hasn’t been too concerned with the issue over the years, where some super-fast computers get a split-second look, or advantage, over the competition. In 2012, the SEC said the New York Stock Exchange gave some of its customers an edge in supplying an early look, but upon close examination opted to fine the exchange just $5 million.

Lewis, though, called the market “rigged.” 

Defenders of high-frequency trading, such as Clifford Asness and Michael Mendelson in a Journal op-ed piece, say that HFTs “make markets – that is, be willing to buy or sell stock anytime for the cost of a fraction of the bid-offer spread. They make money selling at the offer and buying at the bid more often than they have to do it the other way around.”

Asness and Mendelson say that part of the problem is some institutional investors would rather not embrace electronic markets. “They think HFT costs them money.   Often when they try to trade large orders quickly, they find the trades more difficult to execute in a market that has gravitated toward more frequent trades in smaller sizes, and that the price moves away from them faster now....

“Well, sorry, but prices responding quickly – and traders not being able to buy or sell a ton without the market moving – is what is supposed to happen in a well-functioning market....

“How HFT has changed the allocation of the pie between various market professionals is hard to say. But there has been one unambiguous winner, the retail investors who trade for themselves. Their small orders are a perfect match for today’s narrow bid-offer spread, small average-trade-size market. For the first time in history, Main Street might have it rigged against Wall Street.”

There seems little doubt the algorithm (“algo”) / HFT crowd in some circumstances could have an edge. Of course if the algos are wrong, which was clearly the case during the May 2010 “flash crash,” we all suffer and that’s my main bone of contention with such trading. 

It’s not that Mrs. Jones may have paid $190.75 for her shares of IBM vs. the $190.71 that an HFT guy did because he may have had a sneak peak at Mrs. Jones’ order, which he then may have sold back to her for a few pennies gain. 

And it’s not as much that the market may be “rigged” as it is that the market is a “casino,” my long-held claim.

True, if you are a long-term investor and you believe, say, IBM, is a good holding for the next 3-5 years, you shouldn’t be the least bit concerned about the HFT game. You should be more concerned about the fundamentals of the economy, and the company, and be aware of geopolitical events that can shake things up, if for even short periods of time, which is the raison d’etre behind this column.

But the HFT folks, and computerized “program” trading in general, of course exacerbate big moves in either direction. That has been going on since the days before the 1987 Crash. There is really nothing that can be done to change this.

Again, over time, fundamentals, whether for the market overall or your individual holding, win out. But over any shorter period of time, Wall Street is a casino, pure and simple.

Now there are specific elements where it is rigged, IPOs being predominant among them. I’ve long claimed some mutual fund legends, for example, built their spectacular long-term track records largely on the heels of outsized allocations of hot deals. You can guess some of the names.

--Julius Genachowski and Gordon M. Goldstein / Wall Street Journal

“The Commerce Department announced last month that the U.S. government intends to transition its authority overseeing the Internet’s Domain Name system, which is run through a nonprofit organization called Icann (the Internet Corporation for Assigned Names and Numbers), under a contract that expires in late 2015. This announcement comes at a time when global Internet freedom has never been more important or under greater threat.

“Governments around the world are considering measures to squelch free speech or free enterprise on the Internet, including efforts to suppress Twitter, YouTube and Facebook, and restrictions on cloud computing and other Internet data services. Multilateral organizations have already taken disturbing steps. At the 2013 International Telecommunication Union treaty conference in Dubai, a majority of countries joined Russia, Iran and China in supporting a measure calling on the ITU, a United Nations agency, to play an enlarged role in ‘international Internet governance.’....

“At its next conference in South Korea in October, the ITU’s 193 member states will likely consider extending the agency’s authority to the Internet....

“A January Boston Consulting Group study of 65 countries found that reducing limitations on online activity, through enhanced broadband connectivity and access, can increase a country’s GDP by as much as 2.5%. A fragmented global network encumbered by international regulatory restrictions will only limit this potential for growth.

“The good news is there’s broad, bipartisan support for resisting measures to restrict Internet freedom. In 2012, both houses of Congress unanimously passed resolutions affirming that the policy of the U.S. is ‘to promote a global Internet free from governmental control.’ The Icann oversight transition presents a major opportunity to build on that consensus – to preserve and further Internet freedom world-wide.”

We’ll see what happens in October. This is a very serious issue.

--The 3-day strike by Lufthansa pilots resulted in the cancellation of about 3,800 flights. Pilots are demanding better pay and retirement conditions.

--Back in 1984, Charles Keating purchased Lincoln Savings and Loan of Irvine, California, which became part of a financial and real estate empire Keating built, including the Phoenician resort and various residential developments. Keating took advantage of government loopholes in the banking regulations and when the empire began to crumble, regulators seized control of his savings-and-loan company, as well as other holdings, alleging he looted them for his own gain, but at taxpayer expense.

Sen. John McCain of Arizona, along with four other senators, then became known as the “Keating Five” for intervening on Keating’s behalf. By 1990, Keating was convicted on 42 counts of fraud, and then he was convicted again and ended up serving 50 months in prison when his initial conviction was overturned on a technicality. Lincoln’s collapse cost taxpayers $3.4 billion.

A Senate Ethics panel found McCain had shown “poor judgment” in meeting with regulators, but he was cleared of all charges.

I forgot that Keating had been a great swimmer and was a former NCAA champion in the breaststroke. His grandson, Gary Hall Jr., won 10 Olympic medals, including five golds.

--The National Safety Council’s annual injury and fatality report found that the use of cellphones causes 26% of the nation’s car accidents. 5% of cellphone-related crashes occur because the driver is texting. [Gabrielle Kratsas / USA TODAY]

--Sad local story. The excellent Star-Ledger newspaper continues to bleed profusely and the owners have cut another 167 positions (as well as another 124 at some of Advance Publications’ other weeklies and dailies).

--BMW announced it was sinking $1 billion more into its Spartanburg, South Carolina plant and will add 800 jobs as a result, bringing employment at the 20-year-old facility to 8,800. This is good.

--SeaWorld Entertainment Inc. reported a 13% drop in attendance for the first three months of 2014 as it continues to suffer from the documentary film, “Blackfish,” that examines possible mistreatment of SeaWorld’s killer whales.

--Soda sales in the U.S. fell 3% in 2013, the ninth straight yearly contraction, according to Beverage Digest. Caffeinated energy drink sales, however, rose 5.5%.

Coke sales slipped 0.5%, but sales of Diet Coke plunged 6.8%.

Overall, Coca-Cola increased its U.S. market share to 42.4% from 42.0%, while PepsiCo’s share of the carbonated soft drink market fell to 27.5%. Dr. Pepper Snapple’s share edged up to 16.9%. [Wall Street Journal]

--Facebook CEO Mark Zuckerberg reaped a $3.3 billion gain last year through exercising stock options. He faces a huge tax bill, however. That said, Zuckerberg has exhausted his supply of options, but continues to own 426.3 million shares of common.

--David Letterman announced he is calling it quits when his contract expires in 2015. He is getting trounced in the ratings these days by both Jimmy Fallon and Jimmy Kimmel. Letterman has been hosting CBS’ “Late Show” since 1992.

Foreign Affairs

Ukraine: Russian Foreign Minister Sergei Lavrov and U.S. Secretary of State John Kerry met in Paris last Sunday and Lavrov said, “We have absolutely no intention – or interest in – crossing Ukraine’s borders.”

But then Lavrov demanded that the interim government in Kiev rewrite the constitution to give the provinces broad autonomy in a federal and militarily neutral Ukraine, with the promotion of Russian as an official state language alongside Ukrainian. Kerry insisted this was up to the Ukrainian authorities. “This principal is clear: no decision about Ukraine without Ukraine.”

Ukrainian leaders, already upset over how easily the 1994 Budapest Memorandum, whereby Ukraine gave up its nuclear weapons in exchange for a guarantee of territorial integrity by the United States, Britain and Russia, was ripped to shreds by Moscow, with Washington and London doing nothing in response, were even more furious with Russia’s new demand.

Ukraine’s foreign ministry issued a statement: “Russia’s proposals for federalization, a second official language, and referendums are viewed in Ukraine as nothing less than proof of Russia’s aggression,” calling Lavrov’s remarks an “ultimatum,” while adding Russia “demands only one thing – the complete capitulation of Ukraine, its dismemberment, and the destruction of Ukrainian statehood.”

NATO suspended all civilian and military cooperation with Russia. Secretary General Anders Fogh Rasmussen said the annexation of Crimea was the gravest threat to European security for a generation.

Russian President Vladimir Putin said he was ordering a partial withdrawal from the border, per NATO’s and Washington’s request, but Rasmussen said, “I cannot confirm that Russia is withdrawing its troops. This is not what we are seeing.

On the election front, with a presidential vote slated for May 25 in Ukraine, opposition leader and boxer Vitaly Klitschko pulled out of the race and threw his support to billionaire Petro Poroshenko, who supported the protesters in the Maidan from the beginning.

Poroshenko made his money in sweets and is known as the chocolatier, but if he is to have a chance, he’s going to have to convince Ukrainians to overlook a career of combining business with politics, a formula the people have soured on. Poroshenko is a vocal supporter of closer relations with the European Union.

Meanwhile, former prime minister Yulia Tymoshenko, also a candidate, has been urging the West to bolster her country’s defenses and impose “immensely strong” economic sanctions on Moscow as the only way to stop Putin.

Russian energy giant Gazprom said it was hiking the prices it charged Ukraine on April 1st by almost 50%, and noted Ukraine must immediately pay the $1.7 billion back due. Then days later, Gazprom said the hike would be more on the lines of 80% and that Ukraine owed $2.2 billion.

“Our Ukrainian counterparts should find the necessary funding to repay the debts and pay the bills because otherwise our cooperation in this sphere, as well as in other spheres, would not be possible,” Russian Prime Minister Dmitry Medvedev said, strongly hinting that Russia could cut the gas off as it did in 2009.

Ukrainian households are already facing a government increase on natural gas of 50% on May 1st as a precondition for aid from the International Monetary Fund.

Poland requested NATO station 10,000 troops on its soil. NATO, while not committing to such a move, nonetheless stepped-up military deployments in central and eastern Europe as part of its “core task” to defend members under threat. Russia accused NATO of violating “red lines” in their bilateral post-cold war agreements.

Rasmussen responded: “Russia has undermined all the principles of our relationship and therefore there can no longer be business as usual. NATO’s core task is to defend our allies and this is what we are doing.” [Financial Times]

Rasmussen added that when it came to Russian claims NATO was increasing its force levels in eastern Europe: “This is just another piece of Russian propaganda and disinformation. Russia is violating every principle and international commitment it has made, first and foremost the commitment not to invade other countries.”

Separately, German Finance Minister Wolfgang Schaeuble drew parallels between annexation of Crimea and the Nazis’ pre-war seizure of Sudetenland from Czechoslovakia. Chancellor Angela Merkel quickly distanced herself from her long-time minister and Schaeuble’s office said he was not comparing Russia to the Third Reich. But of course this is a totally appropriate comparison. I said last week it was time to pull out William Shirer’s “The Rise and Fall of the Third Reich.” Hilary Clinton said on March 4: “Now if this all sounds familiar, it’s what Hitler did back in the ‘30s.”

NASA severed ties with Russia except for cooperation between the two pertaining to the International Space Station. NASA employees cannot even email their Russian colleagues. But regarding the ISS, NASA is paying $71 million a seat on Soyuz rockets after the retirement of the space shuttle, which makes the progress of the likes of Elon Musk’s SpaceX all the more important. [Frankly, I worry for Musk’s safety.]

Opinion....

Robert Legvold / Moscow Times

 “The new cold war will be different from the original. It will be a cold war between Russia and the West, not a global affair, though it will profoundly affect the entire international political system. It will not have the last one’s ideological impulse, although the political animus now congealing will substitute. And it – let’s hope – will not play out under the dense shadow of nuclear Armageddon.

“Some will add that, unlike the original Cold War, it also will not really matter, given Russia’s fundamental weaknesses and relative insignificance compared with a surging China and the scale of other challenges facing the U.S.

“They are wrong.

“Dealing with the Russia-West relationship in fundamentally adversarial terms will contaminate nearly every critical dimension of international politics, seriously warp U.S. and Russian foreign policy and exact a heavy price in lost opportunities.

“Rather than redefine NATO to better address new security challenges, the old NATO will be reinforced and pressed closer to Russia’s borders. Despite its economic limitations, Russia will answer in kind....

“Any thought of salvaging a crumbling arms control regime in Europe, reducing tactical nuclear weapons, cooperating on missile defense or taking the next steps in controlling strategic nuclear weapons – let alone, the first steps toward managing an increasingly unstable multipolar nuclear world – now becomes pure fantasy.

“Russia-West energy relations, vexed but key to the global energy economy, will take on an unadulterated geo-strategic dimension. Violence, when it erupts, say, between Armenia and Azerbaijan over Nagorno-Karabakh, in Central Asia or, worse, in Ukraine will tempt nervous adversaries to intervene against one another rather than work with one another to contain it. Dealing with vast new challenges, such as the rise of China, will be done competitively rather than cooperatively....

“In the mature, later phases of the original Cold War, management, rather than victory, came to dominate, and elements of cooperation – the 1968 Non-Proliferation Treaty, the Strategic Arms Limitation Treaties in the 1970s, the space station and the reunification of Germany in 1990 – merged with moments of dangerous tension, such as the 1973 Yom Kippur War, turmoil in the Horn of Africa and the Soviet invasion of Afghanistan. And then it was over.

“Success for the U.S. blended credible strength with a readiness to engage. It also depended on the growing realization that mistrust between the two sides mattered as much as the other side’s malevolence; that the pathologies in their interaction contributed as much as the pathology in the nature of the other side; and that Soviet behavior was more determined by events than by predetermined plans or genetic code. In the end, U.S. policy was wiser in shaping events than in trying to shape Soviet character.

“Sad as it is, we are arriving at this point because Russia and the West wasted the ‘peace dividend’ that was awarded to them by the end of the original Cold War, only to have to learn again the lessons of that costly rivalry.”

Holman Jenkins, Jr. / Wall Street Journal

“Mr. Putin fears his people taking to the streets. He fears his friends deciding their billions are no longer safe with him in control. He is not immune. Moscow is a modern city in many ways, but its elite rivalries are prosecuted through primitive and dark arts of character assassination – ‘kompromat.’ That Black Sea ‘palace’ is not a retirement home for Mr. Putin – it’s a testament to his insecurity, a recognition by Mr. Putin and his cronies that he must rule in perpetuity if they are to escape accountability for their alleged crimes.

“Of all the unanswered questions, the greatest concern what Russians call their 9/11. A supposedly Chechen-inspired terrorist bombing campaign in September 1999 killed nearly 300 apartment dwellers in Moscow and other cities and led directly to Mr. Putin’s political rise. In the free-wheeling Russian press of the day, respected journalists from Russia’s Moskovskaya Pravda, Italy’s La Stampa and Sweden’s Svenska Dagbladet reported that such a terror wave was coming – and that it would be sponsored by the Russian state.

“In the middle of the bombing campaign, Gennadiy Seleznyov, speaker of the Russian Duma, took to the rostrum on Sept. 13, 1999, to announce that an apartment building in Volgodonsk had been bombed the previous night – but the Volgodonsk bombing would not take place until three days later.

“The campaign came to an abrupt halt after three perpetrators were caught planting explosives in an apartment block in Ryazan. The three turned out to be Russian security agents. After 36 hours of contradictory statements, the Kremlin cited a training exercise.

“A crude kind of democratic accountability is not entirely dead in Russia. A Radio Free Europe survey of the media landscape describes two Russias: a ‘Television Russia,’ dominated by Putin propaganda and becoming more so, and an ‘Internet Russia,’ where the 60% of Russians with Internet access consume detailed reporting and speculation about the thievery of their betters.

“Anders Aslund, the noted Swedish economist and Russia expert, once chided the West for ignoring ‘the greatest corruption story in history.’ Western governments had reasons for ignoring it. They wanted to work with Mr. Putin. They were relying on him to keep a lid on Russia....

“The U.S., according to recent Edward Snowden leaks, can record every phone call in a target country and store them for 30 days. What do U.S. files and the files of its European allies say about Mr. Putin, whose spokesmen and associates have regularly denied all charges of wrongdoing?

“Relentless applications of the truth alone might not be enough to undermine the alleged thief, liar and murderer who rules Russia. But more than any time in history, the facts have a power of their own. The possibility shouldn’t be ruled out.”

Anne Applebaum / Washington Post

“Whether we like it or not, foreign policy choices increasingly have domestic consequences in the post-Soviet world. An alignment with Russia can bring Russian-style corruption and can inspire the rise of Russian-style xenophobia and homophobia, too. An alignment with Europe and NATO has different consequences. With Russian financial and political support, for example, Ukraine’s ousted president, Viktor Yanukovych, was able to rob his country’s coffers and destroy its army and its bureaucracy. If the new Ukrainian government stays on its current path and makes a different set of alliances – with the European Union, the International Monetary Fund, even NATO – it will end up with different domestic economic policies, too.

“There are implications further afield as well. During his Brussels speech this week, Obama also declared that Russia leads ‘no bloc of nations, no global ideology.’ This is true, up to a point: Russia’s ‘ideology’ isn’t well-defined or clear. But the U.S. president was wrong to imply that the Russian president’s rhetoric, and his annexation of Crimea, has no wider echo. Of course there were the predictable supporters of Russia in the United Nations: Cuba, Venezuela, Nicaragua, North Korea. More interesting are his new European friends. Nigel Farage, the leader of the United Kingdom Independence Party (UKIP) – an anti-European and anti-immigrant party that is gaining momentum in Britain – declared last week that the European Union has ‘blood on its hands’ for negotiating a free-trade agreement in Ukraine. Marine Le Pen, leader of the French far-right National Front, has also said she prefers France to ‘lean toward Russia’ rather than ‘submit to the United States.’ Jobbik, Hungary’s far-right party, sent a representative to the Crimean referendum and declared it ‘exemplary.’ These are all minority parties, but they are all poised to make gains in European elections this spring.

“Russia’s ideology may be mishmash: the old Soviet critique of hypocritical ‘bourgeois democracy,’ plus some anti-Europeanism, some anti-globalism and a homophobic twist for contemporary appeal. But let’s not assume that competition between ideas is absurd and old-fashioned. And let’s not pretend that ideologies don’t matter, because even if we’d prefer otherwise, they do.”

Editorial / Wall Street Journal

“Russian troops are gathering in growing numbers to the east of the Ukrainian border...some 50,000 Russian forces are concealing equipment and bringing in additional food and spare parts. In other words, they’re behaving like a military preparing to invade.

“The 25,000 Russian troops in Crimea, who include elite special forces brought in the past month, are also setting up a southern military beachhead after disarming the Ukrainian military. And to the southwest, in Moldova’s breakaway region of Transnistria, the 1,500 members of Russia’s 179th Motor Rifle Regiment have been supplemented in recent weeks with arms and some 800 additional commandos, according to Ukrainian officials.

“Altogether Russia has massed 100,000 troops around Ukraine’s borders, Andriy Parubiy, chairman of the National Security and Defense Council in Kiev, said (in a recent conference call)....

“The southern Ukrainian regions along the Black Sea are full of Russian speakers. After his Crimean conquest, Mr. Putin now could move on to claim his ‘corridor’ – another historically pregnant phrase – to link Crimea and Transnistria. He has the forces in the peninsula to do it.

“These latest Russian escalations follow President Obama’s pleas in Europe for the Kremlin to ‘de-escalate’ and try diplomacy or run the risk of further sanctions and ‘isolation’ if he takes more territory. Mr. Obama offered no new sanctions on Russia, no plans to reinforce NATO, and no arms for the Ukrainians or Moldovans.

“The White House said Friday (3/28) that Mr. Putin called Mr. Obama to discuss a possible diplomatic resolution, but it isn’t clear if Russia is offering concessions or ultimatums. If Mr. Putin does invade further, there won’t be much else to stop him or his troops.”

Masha Gessen / Washington Post

“In short, Putin intends to save the world from the West. He has started with Crimea. When he says he is protecting ethnic Russians in Ukraine, he means he is protecting them from the many terrible things that come from the West. A few days after (Putin’s annual state-of-the-federation address to parliament in December), Alexei Pushkov, head of the Duma committee on foreign relations, defined that threat on the floor of the chamber: ‘European Union advisers in practically every ministry of any significance have control over the flow of finances and over national programs, and a broadening of the sphere of gay culture, which has become the European Union’s official policy.’

“Three months later, this is exactly how Russians see the events in Ukraine: The West is literally taking over, and only Russian troops can stand between the Slavic country’s unsuspecting citizens and the homosexuals marching in from Brussels.

“Now, Russia is not leading a bloc of nations in this new anti-Western crusade – at least, not yet. But it is certainly not alone in its longing for ‘traditional values.’ Russia has been assembling an informal ‘traditional values’ bloc in the United Nations, where the Human Rights Council has passed a series of Russian-sponsored resolutions opposing gay rights over the past three years. Russia’s allies in passing these resolutions include not only its post-Soviet neighbors but also China, Ecuador, Malaysia and more than a dozen other states.

“The anti-gay agenda may seem like a thin basis for forming a militant international alliance of state-actors, but it has great unifying potential when framed in terms of a broader anti-Western effort and, indeed, a civilizational mission.

“That mission, rather than the mere desire to bite off a piece of a neighboring country, is the driving force behind Putin’s new war – and the reason the Russian public supports it so strongly. This war, they hope, will make Russia not only bigger but also make it great again.”

As the Wall Street Journal noted, Aleksandr Solzhenitsyn said the following in his 1970 Nobel lecture, accepting the prize in literature:

“The spirit of Munich has by no means retreated into the past; it was not merely a brief episode. I even venture to say that the spirit of Munich prevails... The timid civilized world has found nothing with which to oppose the onslaught of a sudden revival of barefaced barbarity, other than concessions and smiles. The spirit of Munich is a sickness of the will of successful people, it is the daily condition of those who have given themselves up to the thirst after prosperity at any price, to material well-being as the chief goal of earthly existence. Such people – and there are many in today’s world – elect passivity and retreat, just so as their accustomed life might drag on a bit longer, just so as not to step over the threshold of hardship today – and tomorrow, you’ll see, it will all be all right. (But it will never be all right! The price of cowardice will only be evil; we shall reap courage and victory only when we dare to make sacrifices.)”

Syria / Lebanon: The Syrian Observatory for Human Rights raised the death toll in the three-year civil war to 150,000, a third of them civilians.  Additionally, 38,000 rebels were killed, 58,000 pro-Assad fighters, including regular security forces and Syrian pro-government militia, as well as 364 fighters from Hizbullah. Another 18,000 were listed as missing after being detained by security forces, while 8,000 had been detained by rebel forces or kidnapped. 

There has been heavy fighting in Latakia province, the Assad stronghold where the chemical weapons are being shipped through, and we just learned, belatedly, that Syria halted the shipments two weeks ago because of the fighting. Last weekend, in a meeting with Saudi King Abdullah, Obama, while apparently not discussing it directly, hinted that the U.S. may allow shoulder-fired anti-aircraft missiles to be shipped to moderate factions of the Syrian opposition. [Only two years too late.]

Three Lebanese soldiers were killed in a suicide car bomb attack on a military post in the Bekaa Valley, while the United Nations raised the number of Syrian refugees in Lebanon to one million. 

Understand, Lebanon’s population is but 4.5 million. Imagine if the United States had 70 million refugees flooding its cities...about the same percentage. Imagine 10 million of them streaming into New York City. This is the kind of situation you have in Beirut today. It’s impossible for the Lebanese government to care for them. It’s a massive crisis that has already destabilized this critical country.

Sam Tarling, reporting for the Washington Post, wrote of one such Syrian refugee child.

“It was 10 p.m. on a chilly recent Wednesday, and the bars of Beirut were just getting into full swing. So was 10-year-old Mohammed Huzaifa’s working day.

“Clutching a vase of red roses, he scoured the outdoor tables for a softhearted target. Spotting two women deep in conversation, the round-faced boy sidled up and broke into a wide smile but was motioned away with a sharp shake of the head.

“Mohammed, shivering in an orange T-shirt, repeated the steps with other potential customers until he had sold all 10 of his flowers. A beating from his mother awaits him if he doesn’t sell out, he says, so he often roams the streets until 3 a.m.”

Editorial / Washington Post

“Five months have passed since Secretary of State John F. Kerry declared that ‘the world must act quickly’ to stop a ‘war of starvation’ being waged by the Syrian regime of Bashar al-Assad against ‘huge proportions of the population.’ It’s been nearly six weeks since the U.N. Security Council passed Resolution 2139, which ordered the regime and rebels to ‘promptly allow unhindered humanitarian access’ and threatened ‘further steps’ in the case of noncompliance.

“Since then, according to U.N. humanitarian coordinator Valerie Amos, the war of starvation has worsened. The number of Syrians cut off from international aid has grown since January by 1 million, to 3.5 million. At least 180,000 people are in areas directly blockaded by government troops, which refuse to allow in supplies of food or medicine. In direct contravention of the U.N. resolution, the Assad regime has authorized aid convoys to cross only one of eight border posts identified by U.N. relief coordinators.

“Ms. Amos reported to the Security Council on Friday that only 6 percent of the population living in besieged areas had received relief since the resolution passed. Meanwhile, she said, crimes against the population had escalated: Since Feb. 22, there had been 300 instances of sexual assault in and around Damascus.   ‘The humanitarian situation,’ she said, ‘remains bleak.’

“The U.S. ambassador to the United Nations, Samantha Power, called Ms. Amos’ report ‘harrowing.’ She said the Assad government ‘is the sole reason for the lack of progress in cross-border assistance’ that ‘would allow the U.N. and its partners’ access to almost 4 million people.’ She said; ‘The Assad regime’s murderous appetite for deploying artillery, ‘barrel bombs’ and airstrikes against civilians...is the No. 1 factor driving displacement and the broader humanitarian crisis.’

“Naturally, reporters asked Ms. Power what she was proposing for the ‘next steps’ cited in the resolution. That’s when the ambassador’s robust rhetoric suddenly went limp. ‘There’s nothing I can do and that we can do unilaterally to make the council do what we want,’ she said. ‘So I can’t make any commitments.’....

“Ms. Power and her administration colleagues instead appear content to listen to ‘harrowing’ reports from U.N. monitors, deliver angry statements and then throw up their hands because of their inability to win the cooperation of Vladimir Putin. It’s not a performance that will be judged well when historians consider why the world’s foremost power failed to stop this mass slaughter.”

I have been writing forever that Barack Obama’s foreign policy will drag his legacy, and the rest of us, into the gutter. It’s all here...all the bloody facts.

But the American people are “tired.” It’s beyond pathetic. We are a nation obsessed by selfies. Wake up, America!

Israel: The Middle East peace efforts that Sec. of State Kerry has been shepherding are close to total collapse today. [The White House announced on Friday they were on indefinite pause.] On Thursday, Israel abruptly called off a release of Palestinian prisoners, this after the Palestinians renewed a push for membership in United Nations agencies that they’ve been long-warned would scuttle peace talks.

Israel’s chief negotiator, Tzipi Livni, said the Palestinians’ decision to seek accession to 15 international conventions through the U.N. violated the terms of the promised prisoner release, which were to be the fourth, and last since talks resumed last summer.

John Podhoretz / New York Post

“On Tuesday, the Palestinians took eight months of relentless work by Kerry and threw it in the garbage. Palestinian Authority President Mahmoud Abbas announced he will seek membership for ‘Palestine’ in various international forums and treaties as the equivalent of a sovereign nation.

“That move violates the central concept of the co-called ‘two-state solution,’ according to which the Israelis and Palestinians need to come to mutual agreement on the borders of a Palestinian state....

“According to various leaks, Prime Minister Benjamin Netanyahu had signaled his willingness to agree to a freeze on new settlement construction. That’s ‘movement,’ if movement is what you expect.

“What Bibi wasn’t willing to do was release a fourth batch of Palestinian terrorists from Israeli jails. He came under near-universal condemnation in Israel when he released the first batch last June, and again (but to a lesser degree) when he let tranches two and three go.

“This time he decided not to. Why? Because, Israelis have said on background, the Palestinians haven’t made a single substantive move in the negotiations since October. No one who knows anything about what has gone on says otherwise.

“What’s more, the Israelis said they would go ahead with a prisoner release if the Palestinians agreed to stay at the negotiating table beyond the end of April, when the talks were scheduled to conclude. This was a clear effort to call the Palestinian bluff – to see if the only reason they were even pretending to talk was to get those prisoners released and nothing else.

“Looks like it.”

Earlier, the administration offered the possibility that Jonathan Pollard, a former Navy intelligence officer serving a life sentence in the United States for espionage, whose release Israel has long sought, could be part of a deal whereby Israel would release the fourth batch of Palestinian prisoners in order to keep talks alive. But Pollard is due for parole in 2015 anyway.

Charles Krauthammer / Washington Post

“When has a secretary of state been involved in so many disastrous, self-initiated negotiations? First, John Kerry convenes – against all advice and holding no cards – Geneva negotiations to resolve the Syria conflict and supposedly remove Bashar al-Assad from power. The talks collapse in acrimony and confusion.

“Kerry’s response? A second Geneva conference that – surprise! – breaks up in acrimony and confusion.

“Then, even as Russian special forces are taking over Crimea, Kerry goes chasing after Russian Foreign Minister Sergei Lavrov – first to Paris, then to Rome, then London – offering a diplomatic ‘offramp.’ Lavrov shrugs him off. Russia annexes Crimea.

“The crowning piece of diplomatic futility, however, is Kerry’s frantic effort to salvage the Arab-Israeli negotiations he launched, also against all odds and sentient advice. He’s made 12 trips to the region, aiming to produce a final Middle East peace within nine months.

“It is month nine. The talks have gone nowhere.... There never was any chance of Palestinian leader Mahmoud Abbas concluding a final peace.”

Iran: Tehran and Moscow are nearing completion on a deal discussed for weeks that could have Iran sending Russia 500,000 barrels of Iranian petroleum each day in exchange for goods valued at up to $20 billion. And what would be an example of the goods? Missiles, for one, as well as help in constructing two new atomic facilities.

Separately, in one of his last trips abroad as Israel’s president, Shimon Peres said of Iran it posed the greatest threat to world peace. “They are building nuclear missiles that can go 2,000 kilometers. What for? Nobody in the world is threatening Iran.” Peres added, “Nobody wants to see another Hiroshima in our time.”

Afghanistan: I don’t think there is anyone who knows how the Afghan presidential election will come out, with the first round of voting on Saturday. With a large number of candidates on the ballot, a run-off seems guaranteed but few expect the vote to go off without it being marred by violence and/or fraud, the latter the main component of 2009’s poll.

Michele Flournoy, a former senior Pentagon official in the Obama administration, told the Financial Times: “If there is rampant fraud and a refusal to engage in negotiations, you could see political support disappear in the U.S. and other countries. That would put whatever government emerges in a crisis situation.”

The three frontrunners, including my man Abdullah Abdullah, a former foreign minister, have all committed to signing an agreement leaving some American troops in country beyond end of 2014 – a deal President Hamid Karzai has blocked.

But one of the top three, Zalmai Rassoul, is seen as Karzai’s favored candidate (Karzai’s brother, once a candidate himself, having thrown his support to Rassoul).

Turkey: The high court unblocked Twitter, but Prime Minister Recep Tayyip Erdogan said that while he would have to comply, he didn’t respect it. Erdogan had previously vowed to “rip out the roots” of Twitter for allowing postings suggesting government corruption.

Earlier, Erdogan declared victory in local polls that were viewed as a referendum on his rule. He wasn’t exactly magnanimous, saying he would “enter the lair” of enemies who have accused him of corruption and leaked state secrets. “From tomorrow,” he declared in an address from AKP headquarters, “there may be some who flee.” [Jerusalem Post]

Egypt: A date has been set for the presidential election that Abdel Fattah al-Sisi is expected to win handily, May 25-26. There will be no second round. I’m awaiting my invite to the inaugural ball.

Pakistan: Former President Pervez Musharraf, who is on trial for treason, survived another assassination attempt when a bomb exploded near his convoy. When he returned to the country last year, the Pakistani Taliban vowed to take him out.

North Korea: Kim Jong Un warned again that his armed forces would “thoroughly crush the hostile U.S. policy against the North,” as put forward by the nation’s official propaganda arm. Pyongyang also talked this week of a “new” kind of nuclear test, this after North and South Korea exchanged artillery fire near their respective borders, though with no casualties. A new nuclear test would be more than a bit disconcerting. [For its part, the South tested a new mid-range missile.]

The head of U.S. forces on the Korean Peninsula, Army Gen. Curtis Scaparrotti, told the House Armed Services Committee that “The Kim Jong Un regime is dangerous and has the capability...to attack South Korea with little or no warning.”

Separately, as reported by Global Security Newswire:

“Experts Niklo Milonopoulous and Edward Blandford found a number of reasons stemming from North Korea’s international isolation and poverty that could contribute to a nuclear meltdown at the (Yongbyon complex), including potentially flawed reactor safety blueprints and possibly shoddy construction work.”

China: President Obama is heading to the Philippines, South Korea and Japan in coming weeks and his goal is to convince our allies that the U.S. “pivot” to Asia has teeth, but those in the region believe for now it’s nothing more than rhetoric, which the White House is quite good at, as we’ve seen. Administration officials have been warning China not to think that just because Russia took Crimea, it can draw the conclusion there wouldn’t be consequences for its own territorial ambitions in Southeast and East Asia.

Speaking in Paris, with French President Hollande in attendance, Chinese President Xi Jinping said: “Today, the lion has woken up. But it is peaceful, pleasant and civilized.” As noted in the South China Morning Post, a curious metaphor, the proverbial “king of the jungle.”

On Taiwan, over 100,000 took to the streets of Taipei to protest a controversial trade agreement with the mainland that demonstrators say ties Taiwan too closely to China and makes them too economically dependent on it. President Ma says Taiwanese companies will be granted greater access to the Chinese market.

And with China’s anti-corruption drive, former Chinese president Jiang Zemin warned the current president, Xi, not to carry it too far and threaten the interests and networks of Communist party elders.   The latest big target is Zhou Yongkang, former head of the domestic security apparatus. Zhou was arrested late last year along with hundreds of family members and allies throughout the security services, as well as other industries such as energy. In the coming weeks, formal charges are to be revealed.

Japan: On Monday the International Court of Justice in The Hague ruled against Japan’s annual whale hunt, saying the ‘scientific output’ Japan always claims as the reason for conducting it “appears limited.” So on Wednesday, Japan announced it was canceling the hunt. Nationalist legislators in Japan say the prohibition tramples on Japanese culture. Get over it. This has been a sham for decades and is one issue where I have backed environmental activists to the hilt. Major kudos to the Australian government for pursuing the case.

West Africa: The Ebola outbreak that has killed at least 80 was initially thought to be contained in four remote towns in south Guinea, but the country’s Ministry of Health confirmed eight cases in the capital, Conarkry, which has a population of 2 million. So this still bears watching. Ebola is highly contagious and in slum conditions could spread like wildfire. There remains no vaccine or cure, with 90% of those contracting it dying. Bats are believed to be the prime natural carrier. Among the symptoms is bleeding through the eyes, ears and nose. It’s for reasons like this, folks, that the word Ebola generates such fear.

Random Musings

--The Supreme Court, by another 5-4 vote, struck down some caps on political contributions Wednesday, throwing out the current $123,200 limit on what an individual can give to all federal candidates and political committees over a two-year election cycle. The lead opinion by Chief Justice John Roberts said the caps infringed on free-speech rights.

“There is no right more basic in our democracy than the right to participate in electing our political leaders. Citizens can exercise that right in a variety of ways: They can run for office themselves, vote, urge others to vote for a particular candidate, volunteer to work on a campaign, and contribute to a candidate’s campaign. This case is about the last of those options.

“The right to participate in democracy through political contributions is protected by the First Amendment, but that right is not absolute. Our cases have held that Congress may regulate campaign contributions to protect against corruption or the appearance of corruption. At the same time, we have made clear that Congress may not regulate contributions simply to reduce the amount of money in politics, or to restrict the political participation of some in order to enhance the relative influence of others.”

The court left intact limits on how much an individual can give to specific candidates and political committees, $2,600 for each primary or general election ($5,200 for the cycle). The big beneficiaries appear to be political parties.

As the Wall Street Journal’s Jess Bravin and Colleen McCain Nelson reported:

“Sen Patrick Leahy (D-Vt.) said striking down the aggregate limits would empower billionaires to drown out the voices of everyday Americans.

“In the 2012 election, an estimated 644 individuals donated the maximum amount allowed by law to candidates and political parties, with about 60% of the money going to Republican causes, according to the nonpartisan Center for Responsive Politics. Their $93.4 million in contributions were a tiny fraction of the overall amount of money spent on elections.

“Roughly 1.2 million Americans made donations of $200 or more in the 2012 election. In all, those donations accounted for $2.8 billion, or 64% of the amount of money spent on the 2012 election, according to the Center for Responsive Politics.”

--New York Democratic Gov. Andrew Cuomo and the state legislature reached agreement on a new budget that eviscerates virtually all of New York City Bill de Blasio’s plans to begin eliminating charter schools. Instead the new budget mandates that New York City find space for them or provide a $3,000 per-pupil subsidy for private space.

--New York City Police Commissioner Bill Bratton took a shot at his predecessor, Ray Kelly, in saying morale had been “awful” on the force, adding Kelly used stop and frisk “too extensively.”

But a few days later, Bratton pulled back, saying in an interview, “It’s quite clear that we have a difference of opinion about the stop, question and frisk effectiveness and procedures. I have my opinion about that, I state it. (But) I should make it very clear that I have the greatest respect for Commissioner Kelly and Mayor Bloomberg for what they did.”

Bratton then criticized the media for creating a “tempest in a teapot” over the comments and said he wouldn’t provide “additional fuel for the fire.”

The only reason I’m bringing this up is because the nudnik mayor, Mr. de Blasio, proceeded to do just that.

“The stop-and-frisk policy was broken. And it created in many neighborhoods a rift between police and community. And it also made the job of the police officer more difficult.”

Then de Blasio said morale in the police department had been awful for years.

--I’ve been telling you about the latest chapter by the Intergovernmental Panel on Climate Change, the second chapter as released formally on Monday, and Secretary of State John Kerry said the document sounded an alarm that could not be ignored.

“Unless we act dramatically and quickly, science tells us our climate and our way of life are literally in jeopardy,” Kerry said. “Denial of the science is malpractice.

“There are those who say we can’t afford to act. But waiting is truly unaffordable. The costs of inaction are catastrophic,” he added.

Look, I have been consistent since Day One of StocksandNews. This debate has been grossly mislabeled. It’s about global pollution, not global warming. If it had been identified as such, the level of support would have been far higher than it is today.

My point has always been, if it looks like crap, it is. And that means it’s harmful.

But too many of us have been caught up in the whole temperature game. Thus, we’ve been having a totally dishonest discussion and that has cost those waging the good fight support.

As the report notes, there are some simple steps for all to take, like building parks in cities and reducing water wastage (ask California).

--This isn’t exactly the way the approval of marijuana for sale in Colorado was supposed to work. 

“A Wyoming college student visiting Denver on spring break jumped to his death after eating a marijuana cookie that his friend legally purchased in one of Colorado’s recreational pot shops, authorities said Wednesday.

“An autopsy report lists marijuana intoxication as a ‘significant contributing factor’ in the death of (the 19-year-old).” [AP]

Colorado law bans the sale of recreational marijuana products to people under 21.

--I have to note the passing of a local, H.W. William Caming, 94, whose obituary was just in the local paper though he passed away weeks earlier. My father knew him well from his local Old Guard and I met the man once.

Bill Caming, aside from being prominent in telecom law and privacy, was chief prosecutor and deputy director of the Political Ministries Division in the Office of the U.S. Chief Counsel for War Crimes from 1946 to 1949.

You see, Bill Caming prosecuted the cases of 21 German military and civilian leaders charged with war crimes and crimes against humanity in the longest and last phase of the Nuremberg trials. Pretty awesome. He then had a distinguished career as senior counsel at AT&T.

--Archaeologists and forensic scientists examining the cause of the Black Death in the mid-14th Century have “cast serious doubt on ‘facts’ that every schoolchild has learned for decades: that the epidemic was caused by a highly contagious strain spread by the fleas on rats.

“Now evidence taken from the human remains found during excavations carried out as part of the construction of a rail line have suggested a different cause: only an airborne infection could have spread so fast and killed so quickly....

“According to scientists working at Public Health England, for any plague to spread at such a pace it must have gotten into the lungs of those victims who were most malnourished and then spread by coughs and sneezes. It was therefore a pneumonic plague rather than a bubonic plague.” [Vanessa Thorpe / Sunday Independent]

--Speaking of rats, check this out...from Howard Blume / Los Angeles Times

“New York City Chancellor Carmen Farina oversees more than a million students, 1,700 schools and a budget the size of many states. Her pay: $412,193.

“Los Angeles Unified Supt. John Deasy has half a million students, 1,000-plus schools, a $7-billion budget – and made $393,106 last year.

“Supt. Jose Fernandez’s South Bay school district has just 6,600 students, five high schools and a $70-million budget.

“His earnings: $674,559 last year.

“ ‘I don’t know of anybody, in any major city, who makes anything close to that, even with extra bonuses or compensation,’ said Michael Casserly, executive director of the Council of the Great City Schools, based in Washington.”

--Scientists examining data from NASA’s Cassini space probe have concluded one of Saturn’s smallest moons, Enceladus, harbors a lake equal to the size of any on Earth. Vladimir Putin may create a provocation as an excuse to annex the entire moon, much to the chagrin of the Enceladians and Saturn’s leadership.

---

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

God bless America.

---

Gold closed at $1303
Oil $101.14

Returns for the week 3/31-4/4

Dow Jones +0.6% [16412]
S&P 500 +0.4% [1865]
S&P MidCap +0.7%
Russell 2000 +0.1%
Nasdaq -0.7% [4127]

Returns for the period 1/1/14-4/4/14

Dow Jones -1.0%
S&P 500 +0.9%
S&P MidCap +1.8%
Russell 2000 -0.9%
Nasdaq -1.2%

Bulls 50.5
Bears 18.6 [Source: Investors Intelligence]

Dr. Bortrum has a new column up.

Have a great week. I appreciate your support.

Catch me on Twitter @stocksandnews.

Brian Trumbore



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Week in Review

04/05/2014

For the week 3/31-4/4

[Posted: 12:00 AM ET]

Edition No. 782

Washington and Wall Street

The economic news for the week was pretty good, topped off by the March labor report, with the economy adding 192,000 jobs, in line with expectations, though the unemployment rate remained at 6.7% (the broader measure, U-6, which measures ‘underemployment,’ ticked up to 12.7%), while average hourly earnings were unchanged, not good. The private sector was the source of all the job growth. February’s figure was revised up to 197,000, so both were in keeping with the 194,000 monthly average for all of 2013.

And I do have to add that U.S. businesses have now finally replaced the 8.8 million jobs lost during the Great Recession after a dismal five-year recovery.

The ISM figure on manufacturing came in at 53.7 vs. 53.2 in February, with a solid export component; the number on the service sector was 55.3; and the Chicago purchasing managers index registered 55.9, though this was the lowest since August.

February factory orders were better than expected, up 1.6%, while construction spending for the month was in line, up 0.1%.

But back to the jobs data, it definitely wasn’t strong enough to get the Federal Reserve to change its existing policy in any fashion. Prior to the report, Fed Chair Janet Yellen gave a speech in which she made it very clear, monetary stimulus would be needed for “some time” because of “considerable slack” in the labor market, citing the plight of part-time workers, stagnant wages and longer periods of joblessness, much of which was borne out directly then in the March numbers (again, see U-6).

Yellen backpedaled a bit from her March 19 press conference when she said the Fed may raise the benchmark interest rate around next summer, following the end of quantitative easing, but she also said this week if inflation is below 2%, as it currently is, that’s a “good reason to hold the funds rate at its present range for longer.”

Bottom line, though, is while a number of Fed governors then issued statements saying, yes, the Fed isn’t hiking rates until second half of 2015 at the earliest, if the economy were to pick up, as the Fed itself says it will, the data will improve and the pressure is on to raise rates. It’s pretty simple.

ObamaCare: The White House did a victory lap on Tuesday, as President Obama appeared alongside Vice President Biden to announce 7.1 million Americans have signed up for health plans under the Affordable Care Act, which means the White House met its original target for the six-month sign-up period, which had been downgraded to 6 million because of the problems with HealthCare.gov.

“This law is doing what it’s supposed to do,” gushed Obama, who was denied a primetime slot by all the networks. “It’s working. It’s helping people from coast to coast.”

Now, yes, the 7.1 million is quite a step up from even just a few days earlier, but there were no details about how many had actually begun to pay for their new health plans, how many of the enrollees had no insurance before, and what is the critical split between young and old policy holders? Will enough healthy folk sign up to avoid big premium hikes for next year that would then make it less likely the healthy ones would re-up?

While it wasn’t official, HHS Secretary Kathleen Sebelius said Monday that at least 80% of those who have enrolled paid their first premium; California, with 1.2 million of the 7.1M, said 85% had. Aetna and Cigna said 80% of their newly enrolled members had.

But there are many big problems to come over the next few months.

Editorial / Wall Street Journal

“Suddenly ObamaCare is a roaring success, happy days are here again and liberals are euphoric, or claim to be. There are more than a few reasons to doubt this new fairy tale, not least the behavior of Senate Democrats running for re-election this year.

“In the Rose Garden Tuesday, President Obama reported that 7.1 million people had signed up so far, confirming a Monday night White House news leak. ‘That doesn’t mean all our health-care problems have been solved forever,’ he conceded with customary modesty. The government appears to have tapped heretofore-unknown reserves of bureaucratic efficiency by releasing numbers timed to this campaign-style pep rally.

“Yet for months the Health and Human Services Department has refused to disclose crucial contextual data, such as how many insurance contracts are in force, the market-by-market totals and how many beneficiaries were previously covered. Regardless of your partisan sympathies, the White House’s selective disclosure is a crime against transparency and accountable government.”

The other side...from Paul Krugman / New York Times

“Holy seven million, Batman! The Affordable Care Act, a k a ObamaCare, has made a stunning comeback from its shambolic start....

“But what does it mean? That depends on whether you ask the law’s opponents or its supporters. You see, the opponents think that it means a lot, while the law’s supporters are being very cautious. And, in this one case, the enemies of health reform are right. This is a very big deal indeed....

“Conservative thinking and Republican political strategy were based entirely on the assumption that it would always be October, that ObamaCare’s rollout would be an unremitting tale of disaster. They have no idea what to do now that it’s turning into a success story.

“So why are many reform supporters being diffident, telling us not to read too much into the figures? Well, at a technical level they’re right: The precise number of signups doesn’t matter much for the functioning of the law, and there may still be many problems despite the March surge. But I’d argue that they’re missing the forest for the trees.

“The crucial thing to understand about the Affordable Care Act is that it’s a Rube Goldberg device, a complicated way to do something inherently simple. The biggest risk to reform has always been that the scheme would founder on its complexity. And now we know that this won’t happen....

“(The) nightmare is over. It has long been clear, to anyone willing to study the issue, that the overall structure of ObamaCare made sense given the political constraints. Now we know that the technical details can be managed, too. This thing is going to work.”

Oh brother.

Peggy Noonan / Wall Street Journal

“Support it or not, you cannot look at ObamaCare and call it anything but a huge, historic mess. It is also utterly unique in the annals of American lawmaking and government administration.

“Its biggest proponent in Congress, the Democratic speaker of the House, literally said – blithely, mindlessly, but in a way forthcomingly – that we have to pass the bill to find out what’s in it. It is a cliché to note this. But really, Nancy Pelosi’s statement was a historic admission that she was fighting hard for something she herself didn’t understand, but she had every confidence regulators and bureaucratic interpreters would tell her in time what she’d done. This is how we make laws now.

“Her comments alarmed congressional Republicans but inspired Democrats, who for the next three years would carry on like blithering idiots making believe they’d read the bill and understood its implications. They were later taken aback by complaints from their constituents. The White House, on the other hand, seems to have understood what the bill would do, and lied in a way so specific it showed they knew exactly what to spin and how. ‘If you like your health-care plan, you can keep your health-care plan, period.’ ‘If you like your doctor, you can keep your doctor, period.’ That of course was the president, misrepresenting the facts of his signature legislative effort. That was historic, too. If you liked your doctor, your plan, your network, your coverage, your deductible you could not keep it. Your existing policy had to pass muster with the administration, which would fight to the death to ensure that 60-year-old women had pediatric dental coverage....

“What the bill declared it would do – insure tens of millions of uninsured Americans – it has not done. There are still tens of millions uninsured Americans. On the other hand, it has terrorized millions who did have insurance and lost it, or who still have insurance and may lose it.”

A good friend from my PIMCO days wrote in this week with the following:

“Our son, who lives in California, had his medical insurance cancelled and has not been able to replace it, in part because he cannot reach a human being to talk to thru the California ACA arrangement; and a relative of mine living outside of Atlanta has been able to enroll in a new insurance program but, because of its restrictions, her children will have to change pediatricians from the one they have used for 8 years and will have to change child psychiatrists from the one they have used for 9 years.”

Yup, we have a long way to go before the mid-term elections in November.

Incidentally, the Bureau of Economic Analysis said health care spending rose at a 5.6% annual rate in the fourth quarter, the fastest pace in 10 years. The Centers for Medicare & Medicaid Services expect health spending to rise 6.1% this year, up from about 4% in 2013.

What consumers pay in the future is the big question. Annual medical inflation was at a 50-year low in January, though according to Capitol Economics, this was partly due to the expiration of a large number of drug patents in 2011 and 2012, causing expensive branded drugs to be replaced by generics. [Paul Davidson / USA TODAY]

Europe and Asia

Lots of data this week for the eurozone. The final March PMI on manufacturing came in at 53.0 vs. 53.2 in February, so with the number being comfortably above the 50 dividing line between growth and contraction, the recovery remains in place. Spain’s manufacturing PMI was at 52.8, a 47-month high; Ireland’s 55.5, a 35-month high; France’s at 52.1, a 33-month high; but Greece’s, at 49.7, was a 3-month low. [The services PMI was 52.2 in March for the Euro set vs. 52.6 in February.]

Retail sales for the eurozone were up 0.4% in February over January, up 0.8% year over year.

And for February, the eurozone unemployment rate was 11.9%, still hideous, and just off the record 12.1%. Greece is at 27.5% (December), Spain 25.6%, France ticked up to 10.4%, Italy up to 13.0%, but Germany was at 5.1%.

The youth rate remained a sickening 58.3% in Greece (again, for December), while it was 53.6% in Spain and 42.3% in Italy, both for February.

The biggest news, however, was on the inflation front. Producer prices for February fell 0.2% over January and are down 1.7% year over year. They are down 3.5% in Greece over the 12 months, down 2.9% in Spain and 0.9% in Germany.

Consumer prices for the eurozone were up only 0.5% in March for the past 12 months, far below the European Central Bank’s (and U.S. Federal Reserve’s, and the Bank of Japan’s) 2% target.

So there was renewed talk of deflation in Euroland.

This week marked the ECB’s monthly meeting and while it once again held the line on interest rates at a record-low 0.25%, President Mario Draghi said he was prepared to fight deflation, including use of some form of quantitative easing (bond buying or asset purchases).

Even Bundesbank President Jens Weidmann, who has been resistant to bond purchases in the past, said it may be necessary to juice the economic recovery.

But Mario Draghi added he wasn’t concerned about potential deflation, saying the 0.5% number for CPI was distorted by the timing of the Easter holiday.

The biggest issue is the unemployment rate, with Draghi saying, “My biggest fear is actually to some extent a reality and that is the protracted stagnation, longer than we have in our baseline scenario.”

Separately, the Financial Times reported that while Britain is in solid recovery mode, tax revenues are not coming in as expected. The corporate tax rate is being cut to 21% and personal rates cut to offset other tax increases, but it seems low wage growth is hitting income tax revenue.

That said, demand for new cars in the U.K. is at a 10-year high, up 18% in March over a year earlier. [The slump in much of the rest of Europe appears to be over as well, with new car registrations up 5% in Germany, 8.9% in France and 4.9% in Italy.]

Germany approved the country’s first minimum wage, $11.75 an hour, to start in 2015. The wage does not cover minors, interns, trainees or long-term unemployed for their first six months at work.

The Greek parliament passed a reform package that entails further austerity by a 152-135 margin, passage being needed to gain the troika’s (ECB, European Commission and IMF) approval for a further $8.3 billion in bailout aid, which is being paid out $6.3 billion in April and $1 billion in each of June and July. I’ve noted in the past this was deemed a necessity in order to prevent the opposition from making big gains in the upcoming Euro Parliament vote end of May, which could have led to a dissolution of the government.

Alexis Tsipras, leader of opposition party Syriza, accused Greece’s leaders of “destroying the professional classes, ruining labor relations and selling the country piece by piece” through a broad-ranging program of privatizations.

Which leads me to France, where the ruling Socialist Party took a beating (except in Paris where Anne Hidalgo became the first female mayor in the city’s history) in the second round of local elections.

Nationally, the Socialists took about 40% of the vote, compared to the right’s UMP (think Nicolas Sarkozy) which tallied about 46%. The Socialists lost 155 cities and towns, so President Francois Hollande shook up his government, ditching his prime minister, Jean-Marc Ayrault, for popular Manuel Valls, the tough-talking interior minister who is seen as France’s Tony Blair for his pro-business stance, while also bringing into the cabinet Segolene Royal, who lost to Sarkozy in the presidential race of 2007 and is the mother of Hollande’s four children. Yes, Ms. Royal is the partner the president ditched for Valerie Trierweiler, who he then dumped for the actress, Julie Gayet. Only in France. 

Valls is interesting from the standpoint that he has some conservative bents and polls better than Hollande. Hollande has instructed Valls, as prime minister, to implement a program of tax cuts for business with other measures aimed at increasing household spending to get the economy moving. France is also woefully short of meeting its budget deficit target, which at 4.3% is well above the EU’s mandated 3% of GDP.

But back to the local elections. In some respects the big story was the performance of the National Front (FN) which tallied victories in 14 towns and cities, a big gain for it. While its share of the total vote was only 7%, it ran candidates in just a fraction of municipalities. The FN, led by Marine Le Pen, is thus poised to wreak havoc in the aforementioned European Parliament vote, May 22-26, with its deep anti-immigrant and anti-Muslim positions. As Ms. Le Pen recently said in an interview with the New York Times, “We have five million unemployed people – why do we allow in more immigrants?”

Le Pen is also known to say at her rallies, “People want to live like French people in France, not like Saudis or Qataris.”

Lastly, Gene Epstein of Barron’s had a good piece on the energy industry, including some facts about Russia that I realize many of you may know but bear repeating.

Oil-and-gas revenues account for 70% of Russia’s total exports, 50% of the income for the federal government. Russia exports more than seven million barrels of oil each day, second only to Saudi Arabia.

Gene Epstein:

“One key difference between Russia and the No. 1 exporter is that more than 60% of Russian oil is produced in Siberia, where costs are much higher. A fall in the world price to $75 from $100 [Ed. the broad premise of Epstein’s piece] would therefore have a much greater impact on the net revenues that Russia earns from oil than is earned by the Saudis.

“The downside of the resource curse could also be felt in Russia’s reliance on sales of natural gas. About 75% of Russia’s natural gas exports go to Western Europe, providing 30% of tis requirements, at prices that are two and three times the price in the U.S. That enormous premium stems from the fact that there is no world market for natural gas, given the prohibitive cost of shipping it in its unaltered state. Hence, the argument for accelerated approval of liquefied-natural-gas export terminals.  With abundant natural gas now available in so much of the world – including Australia, South Africa, Brazil, and Argentina – within the next five years, something resembling a global market in liquefied natural gas will likely develop. That would break the local monopoly of the Russians in their market, enabling Europeans to buy from other sources, and weighing on the premium Russian gas now commands.”

Turning to Asia, China’s government announced a new series of measures to boost growth after the official figure on manufacturing for March came in at 50.3 vs. 50.2 in February. The HSBC index is at 48.0, HSBC focusing on the private sector and small- and medium-sized businesses, while the government data is more reflective of state-operated enterprises.

So the government is going to cut taxes to small business and speed up railway construction, as well as initiate some housing programs for shantytowns.

But the biggest concern remains the credit bubble. As reported by the Financial Times, the five largest banks that “account for more than half of all loans in the country” removed $9.5 billion in bad debts from their books that could not be collected in 2013, up 127% from 2012. Profits at the five, however, did still rise 7 to 15% last year, which is healthy.

In Japan the government hiked the sales tax, VAT, to 8%, a challenge to Abenomics as everyone expects consumption to take a dive for a spell. A Kyodo News poll revealed 66% will cut spending, while 80% were worried about the economic outlook. February industrial production plunged 2.3% over January, the worst in 8 months, though snowstorms hurt.

It also appears that broadly speaking, Prime Minister Abe failed in pressuring Japanese businesses to hike wages at least 2%. The largest manufacturers are coming in under that level.

Street Bytes

--Stocks finished mixed a second straight week, with the Dow Jones adding 0.6% to close at 16412, while the S&P 500 gained 0.4% to 1865 after hitting a new record on Thursday. But Nasdaq, which was speeding along after a hiccup the week before, suddenly cratered 2.6% on Friday to close with a 0.7% loss. Momentum stocks in the Internet, social media and biotech sectors, among others, were taken out back and shot. Netflix, to cite one bloody example, closed at $337 after hitting an all-time high of $458 on March 6. Facebook has fallen from $72.50 on March 11 to $56.75. The high-flying biotech index finished down 4.1% on Friday alone. Some hedge funds have been obliterated.

--U.S. Treasury Yields

6-mo. 0.05% 2-yr. 0.41% 10-yr. 2.72% 30-yr. 3.58%

The 10-year, which had seen its yield rise to 2.80%, rallied on Friday on the heels of the tame jobs report (in terms of probable Fed action) and the stock swoon.

--It has been virtually impossible to keep up with General Motors’ auto recalls this year. Aside from the well-known 2.6 million for faulty ignition switches that the automaker admits has resulted in 13 deaths, in the past week or so, GM has also recalled 172,000 vehicles because the front-right axle can fracture and separate, and then had a recall for power steering issues on another 1.3 million.

Best I can tell, including recalls prior to the ignition issue coming to the fore, GM has recalled over 5 million in just the first three months of the year, which is about seven times the figure for all of 2013.

But this week new CEO Mary Barra was under the gun during House and Senate hearings looking into the defective ignition switch. GM could have replaced the part for mere millions, but company documents show it balked at the expense. Analysts now peg the cost at $3 billion or more, including settlements with plaintiffs involved in accidents.

GM may, however, be shielded from some liabilities occurring prior to its bankruptcy filing. Kenneth Feinberg has been hired to help determine compensation for victims’ families.

As for Barra’s performance under the klieg lights, she was skewered for failing to answer some basic questions, with one senator referring to a “culture of coverup,” and another labeling GM’s practices “deception.” New Hampshire Republican Sen. Kelly Ayotte said: “I think it goes beyond unacceptable. I believe this is criminal.”

Barra repeatedly said “I am deeply sorry” for the company’s failures to respond quickly to the safety issues, but reminded lawmakers that the so-called “new GM” she now heads is nothing like the “old GM.” She also reiterated the defective ignition switch didn’t come to her attention until January 31.

[GM wasn’t the only automaker recalling large numbers of vehicles. Chrysler recalled more than 850,000 sport utility vehicles for a possible brake problem this week.]

--But despite GM’s very public issues, March sales rose 4% compared with the same month a year earlier. For all automakers, sales in the U.S. were up 5.7% to 1.54 million vehicles, an annualized pace of 16.4 million, according to Autodata.

Chrysler Group’s March was its best since 2007, up 13%, while Ford’s sales rose 3.3%.

On the import side, Toyota Motor Corp. saw its U.S. sales rise 4.9%, Nissan’s were up 8.3%, Subaru’s 21.2%, Kia’s 11.5% and Mazda’s gained 9% from year ago levels.

But Honda Motor’s fell 2% in March, ditto Hyundai. VW Group’s were flat.

--Blythe Masters, one of the pioneers of credit derivatives, described as “weapons of mass destruction” and a product at the heart of the financial crisis, resigned from JPMorgan Chase after 27 years at the bank, where she started as an 18-year-old intern.

More recently, she was in charge of JPMorgan’s physical commodities unit, which was recently sold off amid a slew of investigations involving manipulation in the California power market.

Masters’ resignation comes just a week after Mike Cavanagh’s departure, who was once thought to be the one to replace CEO Jamie Dimon, whenever Dimon steps down.

--Federal authorities have opened a criminal investigation into a recent $400 million fraud involving Citigroup’s Mexican unit, Banamex, and whether Citi’s internal controls contributed to a fraudulent loan involving an oil services company.

Citigroup recently announced it faced a separate investigation from federal prosecutors in Massachusetts on whether the bank lacked proper safeguards when it comes to clients laundering money.

In a speech this week, Preet Bharara, the United States attorney in Manhattan, said that it was important not just to investigate traders and bankers, but also the firms employing them.

“Effective deterrence sometimes requires that institutions be punished, because sometimes it is the institution that has failed.” [Ben Protess and Michael Corkery / New York Times]

--The Justice Department announced the biggest environmental cash settlement in history, with Anadarko Petroleum agreeing to pay $5.15 billion to clean up dozens of toxic sites across the country related to one of its subsidiaries, Kerr-McGee, which operated a wide range of chemical, energy and manufacturing businesses across the U.S.

The primary culprit was Tronox, a paint materials manufacturer and unit of Kerr-McGee, that went bankrupt in 2005. Kerr-McGee’s operations, among other things, contaminated Lake Mead, impacting a major water source in the southwest, as well as the Navajo Nation territory, which will receive $1 billion to clean up drinking water and address health risks.

Despite the size of the settlement, investors in Anadarko appeared relieved as the shares rose. Some analysts had a potential settlement at as much as $20 billion.

--Caterpillar, the world’s largest maker of heavy machinery, is being accused by Sen. Carl Levin (D-Mich.) of using a Swiss affiliate to defer or avoid paying $2.4 billion in U.S. taxes. The company, according to a Senate investigation, moved $8 billion in profits from the U.S. to Switzerland to take advantage of a special corporate tax rate it negotiated with the Swiss government. Obviously, our corporate tax laws have to be changed. They should have years ago. The total amount of corporate cash stashed offshore to avoid higher taxes at home is $947 billion, according to a Moody’s Investors Service report.

--Housing prices in Australia, particularly Sydney and Melbourne, continue to soar and are clearly in major bubble territory. Across the country, prices rose 11% for the 12 months ending March 31, with average gains of 15% in Sydney, this as household debt hit a record.

--PIMCO continues to bleed assets in its bond funds, with investors pulling $7.3 billion in March, a 10th straight month of redemptions, which comes amid the turmoil at the money manager following the resignation of co-chief investment officer, Mohamed El-Erian, as well as the underperformance of the Bill Gross-managed PIMCO Total Return Fund.

A major issue is the fund’s underperformance, with 94% of its peers besting it in the month of March, while Gross is in the 88th percentile for the past year, according to Morningstar data. PIMCO, in turn, says the fund (now $232 billion in assets) has outperformed its benchmark for the past six months as well as two, five and 10 years.

Separately, Bill Gross garnered some self-inflicted further bad press when he spent a fair share of the space in his monthly investment outlook newsletter on the death of his cat. If you are new to Mr. Gross, you think this is news. If you’ve followed him for decades as I have, this is par for the course. His timing, however, was pathetic and the tone should have been more focused on how he is going to turn performance around, or even discuss some of the in-house turmoil, rather than use this platform to discuss the death of “Bob.”

--Author Michael Lewis picked up a slew of publicity for his new book, “Flash Boys,” a story about the game of high-speed stock-trading, with an appearance on “60 Minutes” and then interviews on just about every major news and business outlet. The Securities and Exchange Commission hasn’t been too concerned with the issue over the years, where some super-fast computers get a split-second look, or advantage, over the competition. In 2012, the SEC said the New York Stock Exchange gave some of its customers an edge in supplying an early look, but upon close examination opted to fine the exchange just $5 million.

Lewis, though, called the market “rigged.” 

Defenders of high-frequency trading, such as Clifford Asness and Michael Mendelson in a Journal op-ed piece, say that HFTs “make markets – that is, be willing to buy or sell stock anytime for the cost of a fraction of the bid-offer spread. They make money selling at the offer and buying at the bid more often than they have to do it the other way around.”

Asness and Mendelson say that part of the problem is some institutional investors would rather not embrace electronic markets. “They think HFT costs them money.   Often when they try to trade large orders quickly, they find the trades more difficult to execute in a market that has gravitated toward more frequent trades in smaller sizes, and that the price moves away from them faster now....

“Well, sorry, but prices responding quickly – and traders not being able to buy or sell a ton without the market moving – is what is supposed to happen in a well-functioning market....

“How HFT has changed the allocation of the pie between various market professionals is hard to say. But there has been one unambiguous winner, the retail investors who trade for themselves. Their small orders are a perfect match for today’s narrow bid-offer spread, small average-trade-size market. For the first time in history, Main Street might have it rigged against Wall Street.”

There seems little doubt the algorithm (“algo”) / HFT crowd in some circumstances could have an edge. Of course if the algos are wrong, which was clearly the case during the May 2010 “flash crash,” we all suffer and that’s my main bone of contention with such trading. 

It’s not that Mrs. Jones may have paid $190.75 for her shares of IBM vs. the $190.71 that an HFT guy did because he may have had a sneak peak at Mrs. Jones’ order, which he then may have sold back to her for a few pennies gain. 

And it’s not as much that the market may be “rigged” as it is that the market is a “casino,” my long-held claim.

True, if you are a long-term investor and you believe, say, IBM, is a good holding for the next 3-5 years, you shouldn’t be the least bit concerned about the HFT game. You should be more concerned about the fundamentals of the economy, and the company, and be aware of geopolitical events that can shake things up, if for even short periods of time, which is the raison d’etre behind this column.

But the HFT folks, and computerized “program” trading in general, of course exacerbate big moves in either direction. That has been going on since the days before the 1987 Crash. There is really nothing that can be done to change this.

Again, over time, fundamentals, whether for the market overall or your individual holding, win out. But over any shorter period of time, Wall Street is a casino, pure and simple.

Now there are specific elements where it is rigged, IPOs being predominant among them. I’ve long claimed some mutual fund legends, for example, built their spectacular long-term track records largely on the heels of outsized allocations of hot deals. You can guess some of the names.

--Julius Genachowski and Gordon M. Goldstein / Wall Street Journal

“The Commerce Department announced last month that the U.S. government intends to transition its authority overseeing the Internet’s Domain Name system, which is run through a nonprofit organization called Icann (the Internet Corporation for Assigned Names and Numbers), under a contract that expires in late 2015. This announcement comes at a time when global Internet freedom has never been more important or under greater threat.

“Governments around the world are considering measures to squelch free speech or free enterprise on the Internet, including efforts to suppress Twitter, YouTube and Facebook, and restrictions on cloud computing and other Internet data services. Multilateral organizations have already taken disturbing steps. At the 2013 International Telecommunication Union treaty conference in Dubai, a majority of countries joined Russia, Iran and China in supporting a measure calling on the ITU, a United Nations agency, to play an enlarged role in ‘international Internet governance.’....

“At its next conference in South Korea in October, the ITU’s 193 member states will likely consider extending the agency’s authority to the Internet....

“A January Boston Consulting Group study of 65 countries found that reducing limitations on online activity, through enhanced broadband connectivity and access, can increase a country’s GDP by as much as 2.5%. A fragmented global network encumbered by international regulatory restrictions will only limit this potential for growth.

“The good news is there’s broad, bipartisan support for resisting measures to restrict Internet freedom. In 2012, both houses of Congress unanimously passed resolutions affirming that the policy of the U.S. is ‘to promote a global Internet free from governmental control.’ The Icann oversight transition presents a major opportunity to build on that consensus – to preserve and further Internet freedom world-wide.”

We’ll see what happens in October. This is a very serious issue.

--The 3-day strike by Lufthansa pilots resulted in the cancellation of about 3,800 flights. Pilots are demanding better pay and retirement conditions.

--Back in 1984, Charles Keating purchased Lincoln Savings and Loan of Irvine, California, which became part of a financial and real estate empire Keating built, including the Phoenician resort and various residential developments. Keating took advantage of government loopholes in the banking regulations and when the empire began to crumble, regulators seized control of his savings-and-loan company, as well as other holdings, alleging he looted them for his own gain, but at taxpayer expense.

Sen. John McCain of Arizona, along with four other senators, then became known as the “Keating Five” for intervening on Keating’s behalf. By 1990, Keating was convicted on 42 counts of fraud, and then he was convicted again and ended up serving 50 months in prison when his initial conviction was overturned on a technicality. Lincoln’s collapse cost taxpayers $3.4 billion.

A Senate Ethics panel found McCain had shown “poor judgment” in meeting with regulators, but he was cleared of all charges.

I forgot that Keating had been a great swimmer and was a former NCAA champion in the breaststroke. His grandson, Gary Hall Jr., won 10 Olympic medals, including five golds.

--The National Safety Council’s annual injury and fatality report found that the use of cellphones causes 26% of the nation’s car accidents. 5% of cellphone-related crashes occur because the driver is texting. [Gabrielle Kratsas / USA TODAY]

--Sad local story. The excellent Star-Ledger newspaper continues to bleed profusely and the owners have cut another 167 positions (as well as another 124 at some of Advance Publications’ other weeklies and dailies).

--BMW announced it was sinking $1 billion more into its Spartanburg, South Carolina plant and will add 800 jobs as a result, bringing employment at the 20-year-old facility to 8,800. This is good.

--SeaWorld Entertainment Inc. reported a 13% drop in attendance for the first three months of 2014 as it continues to suffer from the documentary film, “Blackfish,” that examines possible mistreatment of SeaWorld’s killer whales.

--Soda sales in the U.S. fell 3% in 2013, the ninth straight yearly contraction, according to Beverage Digest. Caffeinated energy drink sales, however, rose 5.5%.

Coke sales slipped 0.5%, but sales of Diet Coke plunged 6.8%.

Overall, Coca-Cola increased its U.S. market share to 42.4% from 42.0%, while PepsiCo’s share of the carbonated soft drink market fell to 27.5%. Dr. Pepper Snapple’s share edged up to 16.9%. [Wall Street Journal]

--Facebook CEO Mark Zuckerberg reaped a $3.3 billion gain last year through exercising stock options. He faces a huge tax bill, however. That said, Zuckerberg has exhausted his supply of options, but continues to own 426.3 million shares of common.

--David Letterman announced he is calling it quits when his contract expires in 2015. He is getting trounced in the ratings these days by both Jimmy Fallon and Jimmy Kimmel. Letterman has been hosting CBS’ “Late Show” since 1992.

Foreign Affairs

Ukraine: Russian Foreign Minister Sergei Lavrov and U.S. Secretary of State John Kerry met in Paris last Sunday and Lavrov said, “We have absolutely no intention – or interest in – crossing Ukraine’s borders.”

But then Lavrov demanded that the interim government in Kiev rewrite the constitution to give the provinces broad autonomy in a federal and militarily neutral Ukraine, with the promotion of Russian as an official state language alongside Ukrainian. Kerry insisted this was up to the Ukrainian authorities. “This principal is clear: no decision about Ukraine without Ukraine.”

Ukrainian leaders, already upset over how easily the 1994 Budapest Memorandum, whereby Ukraine gave up its nuclear weapons in exchange for a guarantee of territorial integrity by the United States, Britain and Russia, was ripped to shreds by Moscow, with Washington and London doing nothing in response, were even more furious with Russia’s new demand.

Ukraine’s foreign ministry issued a statement: “Russia’s proposals for federalization, a second official language, and referendums are viewed in Ukraine as nothing less than proof of Russia’s aggression,” calling Lavrov’s remarks an “ultimatum,” while adding Russia “demands only one thing – the complete capitulation of Ukraine, its dismemberment, and the destruction of Ukrainian statehood.”

NATO suspended all civilian and military cooperation with Russia. Secretary General Anders Fogh Rasmussen said the annexation of Crimea was the gravest threat to European security for a generation.

Russian President Vladimir Putin said he was ordering a partial withdrawal from the border, per NATO’s and Washington’s request, but Rasmussen said, “I cannot confirm that Russia is withdrawing its troops. This is not what we are seeing.

On the election front, with a presidential vote slated for May 25 in Ukraine, opposition leader and boxer Vitaly Klitschko pulled out of the race and threw his support to billionaire Petro Poroshenko, who supported the protesters in the Maidan from the beginning.

Poroshenko made his money in sweets and is known as the chocolatier, but if he is to have a chance, he’s going to have to convince Ukrainians to overlook a career of combining business with politics, a formula the people have soured on. Poroshenko is a vocal supporter of closer relations with the European Union.

Meanwhile, former prime minister Yulia Tymoshenko, also a candidate, has been urging the West to bolster her country’s defenses and impose “immensely strong” economic sanctions on Moscow as the only way to stop Putin.

Russian energy giant Gazprom said it was hiking the prices it charged Ukraine on April 1st by almost 50%, and noted Ukraine must immediately pay the $1.7 billion back due. Then days later, Gazprom said the hike would be more on the lines of 80% and that Ukraine owed $2.2 billion.

“Our Ukrainian counterparts should find the necessary funding to repay the debts and pay the bills because otherwise our cooperation in this sphere, as well as in other spheres, would not be possible,” Russian Prime Minister Dmitry Medvedev said, strongly hinting that Russia could cut the gas off as it did in 2009.

Ukrainian households are already facing a government increase on natural gas of 50% on May 1st as a precondition for aid from the International Monetary Fund.

Poland requested NATO station 10,000 troops on its soil. NATO, while not committing to such a move, nonetheless stepped-up military deployments in central and eastern Europe as part of its “core task” to defend members under threat. Russia accused NATO of violating “red lines” in their bilateral post-cold war agreements.

Rasmussen responded: “Russia has undermined all the principles of our relationship and therefore there can no longer be business as usual. NATO’s core task is to defend our allies and this is what we are doing.” [Financial Times]

Rasmussen added that when it came to Russian claims NATO was increasing its force levels in eastern Europe: “This is just another piece of Russian propaganda and disinformation. Russia is violating every principle and international commitment it has made, first and foremost the commitment not to invade other countries.”

Separately, German Finance Minister Wolfgang Schaeuble drew parallels between annexation of Crimea and the Nazis’ pre-war seizure of Sudetenland from Czechoslovakia. Chancellor Angela Merkel quickly distanced herself from her long-time minister and Schaeuble’s office said he was not comparing Russia to the Third Reich. But of course this is a totally appropriate comparison. I said last week it was time to pull out William Shirer’s “The Rise and Fall of the Third Reich.” Hilary Clinton said on March 4: “Now if this all sounds familiar, it’s what Hitler did back in the ‘30s.”

NASA severed ties with Russia except for cooperation between the two pertaining to the International Space Station. NASA employees cannot even email their Russian colleagues. But regarding the ISS, NASA is paying $71 million a seat on Soyuz rockets after the retirement of the space shuttle, which makes the progress of the likes of Elon Musk’s SpaceX all the more important. [Frankly, I worry for Musk’s safety.]

Opinion....

Robert Legvold / Moscow Times

 “The new cold war will be different from the original. It will be a cold war between Russia and the West, not a global affair, though it will profoundly affect the entire international political system. It will not have the last one’s ideological impulse, although the political animus now congealing will substitute. And it – let’s hope – will not play out under the dense shadow of nuclear Armageddon.

“Some will add that, unlike the original Cold War, it also will not really matter, given Russia’s fundamental weaknesses and relative insignificance compared with a surging China and the scale of other challenges facing the U.S.

“They are wrong.

“Dealing with the Russia-West relationship in fundamentally adversarial terms will contaminate nearly every critical dimension of international politics, seriously warp U.S. and Russian foreign policy and exact a heavy price in lost opportunities.

“Rather than redefine NATO to better address new security challenges, the old NATO will be reinforced and pressed closer to Russia’s borders. Despite its economic limitations, Russia will answer in kind....

“Any thought of salvaging a crumbling arms control regime in Europe, reducing tactical nuclear weapons, cooperating on missile defense or taking the next steps in controlling strategic nuclear weapons – let alone, the first steps toward managing an increasingly unstable multipolar nuclear world – now becomes pure fantasy.

“Russia-West energy relations, vexed but key to the global energy economy, will take on an unadulterated geo-strategic dimension. Violence, when it erupts, say, between Armenia and Azerbaijan over Nagorno-Karabakh, in Central Asia or, worse, in Ukraine will tempt nervous adversaries to intervene against one another rather than work with one another to contain it. Dealing with vast new challenges, such as the rise of China, will be done competitively rather than cooperatively....

“In the mature, later phases of the original Cold War, management, rather than victory, came to dominate, and elements of cooperation – the 1968 Non-Proliferation Treaty, the Strategic Arms Limitation Treaties in the 1970s, the space station and the reunification of Germany in 1990 – merged with moments of dangerous tension, such as the 1973 Yom Kippur War, turmoil in the Horn of Africa and the Soviet invasion of Afghanistan. And then it was over.

“Success for the U.S. blended credible strength with a readiness to engage. It also depended on the growing realization that mistrust between the two sides mattered as much as the other side’s malevolence; that the pathologies in their interaction contributed as much as the pathology in the nature of the other side; and that Soviet behavior was more determined by events than by predetermined plans or genetic code. In the end, U.S. policy was wiser in shaping events than in trying to shape Soviet character.

“Sad as it is, we are arriving at this point because Russia and the West wasted the ‘peace dividend’ that was awarded to them by the end of the original Cold War, only to have to learn again the lessons of that costly rivalry.”

Holman Jenkins, Jr. / Wall Street Journal

“Mr. Putin fears his people taking to the streets. He fears his friends deciding their billions are no longer safe with him in control. He is not immune. Moscow is a modern city in many ways, but its elite rivalries are prosecuted through primitive and dark arts of character assassination – ‘kompromat.’ That Black Sea ‘palace’ is not a retirement home for Mr. Putin – it’s a testament to his insecurity, a recognition by Mr. Putin and his cronies that he must rule in perpetuity if they are to escape accountability for their alleged crimes.

“Of all the unanswered questions, the greatest concern what Russians call their 9/11. A supposedly Chechen-inspired terrorist bombing campaign in September 1999 killed nearly 300 apartment dwellers in Moscow and other cities and led directly to Mr. Putin’s political rise. In the free-wheeling Russian press of the day, respected journalists from Russia’s Moskovskaya Pravda, Italy’s La Stampa and Sweden’s Svenska Dagbladet reported that such a terror wave was coming – and that it would be sponsored by the Russian state.

“In the middle of the bombing campaign, Gennadiy Seleznyov, speaker of the Russian Duma, took to the rostrum on Sept. 13, 1999, to announce that an apartment building in Volgodonsk had been bombed the previous night – but the Volgodonsk bombing would not take place until three days later.

“The campaign came to an abrupt halt after three perpetrators were caught planting explosives in an apartment block in Ryazan. The three turned out to be Russian security agents. After 36 hours of contradictory statements, the Kremlin cited a training exercise.

“A crude kind of democratic accountability is not entirely dead in Russia. A Radio Free Europe survey of the media landscape describes two Russias: a ‘Television Russia,’ dominated by Putin propaganda and becoming more so, and an ‘Internet Russia,’ where the 60% of Russians with Internet access consume detailed reporting and speculation about the thievery of their betters.

“Anders Aslund, the noted Swedish economist and Russia expert, once chided the West for ignoring ‘the greatest corruption story in history.’ Western governments had reasons for ignoring it. They wanted to work with Mr. Putin. They were relying on him to keep a lid on Russia....

“The U.S., according to recent Edward Snowden leaks, can record every phone call in a target country and store them for 30 days. What do U.S. files and the files of its European allies say about Mr. Putin, whose spokesmen and associates have regularly denied all charges of wrongdoing?

“Relentless applications of the truth alone might not be enough to undermine the alleged thief, liar and murderer who rules Russia. But more than any time in history, the facts have a power of their own. The possibility shouldn’t be ruled out.”

Anne Applebaum / Washington Post

“Whether we like it or not, foreign policy choices increasingly have domestic consequences in the post-Soviet world. An alignment with Russia can bring Russian-style corruption and can inspire the rise of Russian-style xenophobia and homophobia, too. An alignment with Europe and NATO has different consequences. With Russian financial and political support, for example, Ukraine’s ousted president, Viktor Yanukovych, was able to rob his country’s coffers and destroy its army and its bureaucracy. If the new Ukrainian government stays on its current path and makes a different set of alliances – with the European Union, the International Monetary Fund, even NATO – it will end up with different domestic economic policies, too.

“There are implications further afield as well. During his Brussels speech this week, Obama also declared that Russia leads ‘no bloc of nations, no global ideology.’ This is true, up to a point: Russia’s ‘ideology’ isn’t well-defined or clear. But the U.S. president was wrong to imply that the Russian president’s rhetoric, and his annexation of Crimea, has no wider echo. Of course there were the predictable supporters of Russia in the United Nations: Cuba, Venezuela, Nicaragua, North Korea. More interesting are his new European friends. Nigel Farage, the leader of the United Kingdom Independence Party (UKIP) – an anti-European and anti-immigrant party that is gaining momentum in Britain – declared last week that the European Union has ‘blood on its hands’ for negotiating a free-trade agreement in Ukraine. Marine Le Pen, leader of the French far-right National Front, has also said she prefers France to ‘lean toward Russia’ rather than ‘submit to the United States.’ Jobbik, Hungary’s far-right party, sent a representative to the Crimean referendum and declared it ‘exemplary.’ These are all minority parties, but they are all poised to make gains in European elections this spring.

“Russia’s ideology may be mishmash: the old Soviet critique of hypocritical ‘bourgeois democracy,’ plus some anti-Europeanism, some anti-globalism and a homophobic twist for contemporary appeal. But let’s not assume that competition between ideas is absurd and old-fashioned. And let’s not pretend that ideologies don’t matter, because even if we’d prefer otherwise, they do.”

Editorial / Wall Street Journal

“Russian troops are gathering in growing numbers to the east of the Ukrainian border...some 50,000 Russian forces are concealing equipment and bringing in additional food and spare parts. In other words, they’re behaving like a military preparing to invade.

“The 25,000 Russian troops in Crimea, who include elite special forces brought in the past month, are also setting up a southern military beachhead after disarming the Ukrainian military. And to the southwest, in Moldova’s breakaway region of Transnistria, the 1,500 members of Russia’s 179th Motor Rifle Regiment have been supplemented in recent weeks with arms and some 800 additional commandos, according to Ukrainian officials.

“Altogether Russia has massed 100,000 troops around Ukraine’s borders, Andriy Parubiy, chairman of the National Security and Defense Council in Kiev, said (in a recent conference call)....

“The southern Ukrainian regions along the Black Sea are full of Russian speakers. After his Crimean conquest, Mr. Putin now could move on to claim his ‘corridor’ – another historically pregnant phrase – to link Crimea and Transnistria. He has the forces in the peninsula to do it.

“These latest Russian escalations follow President Obama’s pleas in Europe for the Kremlin to ‘de-escalate’ and try diplomacy or run the risk of further sanctions and ‘isolation’ if he takes more territory. Mr. Obama offered no new sanctions on Russia, no plans to reinforce NATO, and no arms for the Ukrainians or Moldovans.

“The White House said Friday (3/28) that Mr. Putin called Mr. Obama to discuss a possible diplomatic resolution, but it isn’t clear if Russia is offering concessions or ultimatums. If Mr. Putin does invade further, there won’t be much else to stop him or his troops.”

Masha Gessen / Washington Post

“In short, Putin intends to save the world from the West. He has started with Crimea. When he says he is protecting ethnic Russians in Ukraine, he means he is protecting them from the many terrible things that come from the West. A few days after (Putin’s annual state-of-the-federation address to parliament in December), Alexei Pushkov, head of the Duma committee on foreign relations, defined that threat on the floor of the chamber: ‘European Union advisers in practically every ministry of any significance have control over the flow of finances and over national programs, and a broadening of the sphere of gay culture, which has become the European Union’s official policy.’

“Three months later, this is exactly how Russians see the events in Ukraine: The West is literally taking over, and only Russian troops can stand between the Slavic country’s unsuspecting citizens and the homosexuals marching in from Brussels.

“Now, Russia is not leading a bloc of nations in this new anti-Western crusade – at least, not yet. But it is certainly not alone in its longing for ‘traditional values.’ Russia has been assembling an informal ‘traditional values’ bloc in the United Nations, where the Human Rights Council has passed a series of Russian-sponsored resolutions opposing gay rights over the past three years. Russia’s allies in passing these resolutions include not only its post-Soviet neighbors but also China, Ecuador, Malaysia and more than a dozen other states.

“The anti-gay agenda may seem like a thin basis for forming a militant international alliance of state-actors, but it has great unifying potential when framed in terms of a broader anti-Western effort and, indeed, a civilizational mission.

“That mission, rather than the mere desire to bite off a piece of a neighboring country, is the driving force behind Putin’s new war – and the reason the Russian public supports it so strongly. This war, they hope, will make Russia not only bigger but also make it great again.”

As the Wall Street Journal noted, Aleksandr Solzhenitsyn said the following in his 1970 Nobel lecture, accepting the prize in literature:

“The spirit of Munich has by no means retreated into the past; it was not merely a brief episode. I even venture to say that the spirit of Munich prevails... The timid civilized world has found nothing with which to oppose the onslaught of a sudden revival of barefaced barbarity, other than concessions and smiles. The spirit of Munich is a sickness of the will of successful people, it is the daily condition of those who have given themselves up to the thirst after prosperity at any price, to material well-being as the chief goal of earthly existence. Such people – and there are many in today’s world – elect passivity and retreat, just so as their accustomed life might drag on a bit longer, just so as not to step over the threshold of hardship today – and tomorrow, you’ll see, it will all be all right. (But it will never be all right! The price of cowardice will only be evil; we shall reap courage and victory only when we dare to make sacrifices.)”

Syria / Lebanon: The Syrian Observatory for Human Rights raised the death toll in the three-year civil war to 150,000, a third of them civilians.  Additionally, 38,000 rebels were killed, 58,000 pro-Assad fighters, including regular security forces and Syrian pro-government militia, as well as 364 fighters from Hizbullah. Another 18,000 were listed as missing after being detained by security forces, while 8,000 had been detained by rebel forces or kidnapped. 

There has been heavy fighting in Latakia province, the Assad stronghold where the chemical weapons are being shipped through, and we just learned, belatedly, that Syria halted the shipments two weeks ago because of the fighting. Last weekend, in a meeting with Saudi King Abdullah, Obama, while apparently not discussing it directly, hinted that the U.S. may allow shoulder-fired anti-aircraft missiles to be shipped to moderate factions of the Syrian opposition. [Only two years too late.]

Three Lebanese soldiers were killed in a suicide car bomb attack on a military post in the Bekaa Valley, while the United Nations raised the number of Syrian refugees in Lebanon to one million. 

Understand, Lebanon’s population is but 4.5 million. Imagine if the United States had 70 million refugees flooding its cities...about the same percentage. Imagine 10 million of them streaming into New York City. This is the kind of situation you have in Beirut today. It’s impossible for the Lebanese government to care for them. It’s a massive crisis that has already destabilized this critical country.

Sam Tarling, reporting for the Washington Post, wrote of one such Syrian refugee child.

“It was 10 p.m. on a chilly recent Wednesday, and the bars of Beirut were just getting into full swing. So was 10-year-old Mohammed Huzaifa’s working day.

“Clutching a vase of red roses, he scoured the outdoor tables for a softhearted target. Spotting two women deep in conversation, the round-faced boy sidled up and broke into a wide smile but was motioned away with a sharp shake of the head.

“Mohammed, shivering in an orange T-shirt, repeated the steps with other potential customers until he had sold all 10 of his flowers. A beating from his mother awaits him if he doesn’t sell out, he says, so he often roams the streets until 3 a.m.”

Editorial / Washington Post

“Five months have passed since Secretary of State John F. Kerry declared that ‘the world must act quickly’ to stop a ‘war of starvation’ being waged by the Syrian regime of Bashar al-Assad against ‘huge proportions of the population.’ It’s been nearly six weeks since the U.N. Security Council passed Resolution 2139, which ordered the regime and rebels to ‘promptly allow unhindered humanitarian access’ and threatened ‘further steps’ in the case of noncompliance.

“Since then, according to U.N. humanitarian coordinator Valerie Amos, the war of starvation has worsened. The number of Syrians cut off from international aid has grown since January by 1 million, to 3.5 million. At least 180,000 people are in areas directly blockaded by government troops, which refuse to allow in supplies of food or medicine. In direct contravention of the U.N. resolution, the Assad regime has authorized aid convoys to cross only one of eight border posts identified by U.N. relief coordinators.

“Ms. Amos reported to the Security Council on Friday that only 6 percent of the population living in besieged areas had received relief since the resolution passed. Meanwhile, she said, crimes against the population had escalated: Since Feb. 22, there had been 300 instances of sexual assault in and around Damascus.   ‘The humanitarian situation,’ she said, ‘remains bleak.’

“The U.S. ambassador to the United Nations, Samantha Power, called Ms. Amos’ report ‘harrowing.’ She said the Assad government ‘is the sole reason for the lack of progress in cross-border assistance’ that ‘would allow the U.N. and its partners’ access to almost 4 million people.’ She said; ‘The Assad regime’s murderous appetite for deploying artillery, ‘barrel bombs’ and airstrikes against civilians...is the No. 1 factor driving displacement and the broader humanitarian crisis.’

“Naturally, reporters asked Ms. Power what she was proposing for the ‘next steps’ cited in the resolution. That’s when the ambassador’s robust rhetoric suddenly went limp. ‘There’s nothing I can do and that we can do unilaterally to make the council do what we want,’ she said. ‘So I can’t make any commitments.’....

“Ms. Power and her administration colleagues instead appear content to listen to ‘harrowing’ reports from U.N. monitors, deliver angry statements and then throw up their hands because of their inability to win the cooperation of Vladimir Putin. It’s not a performance that will be judged well when historians consider why the world’s foremost power failed to stop this mass slaughter.”

I have been writing forever that Barack Obama’s foreign policy will drag his legacy, and the rest of us, into the gutter. It’s all here...all the bloody facts.

But the American people are “tired.” It’s beyond pathetic. We are a nation obsessed by selfies. Wake up, America!

Israel: The Middle East peace efforts that Sec. of State Kerry has been shepherding are close to total collapse today. [The White House announced on Friday they were on indefinite pause.] On Thursday, Israel abruptly called off a release of Palestinian prisoners, this after the Palestinians renewed a push for membership in United Nations agencies that they’ve been long-warned would scuttle peace talks.

Israel’s chief negotiator, Tzipi Livni, said the Palestinians’ decision to seek accession to 15 international conventions through the U.N. violated the terms of the promised prisoner release, which were to be the fourth, and last since talks resumed last summer.

John Podhoretz / New York Post

“On Tuesday, the Palestinians took eight months of relentless work by Kerry and threw it in the garbage. Palestinian Authority President Mahmoud Abbas announced he will seek membership for ‘Palestine’ in various international forums and treaties as the equivalent of a sovereign nation.

“That move violates the central concept of the co-called ‘two-state solution,’ according to which the Israelis and Palestinians need to come to mutual agreement on the borders of a Palestinian state....

“According to various leaks, Prime Minister Benjamin Netanyahu had signaled his willingness to agree to a freeze on new settlement construction. That’s ‘movement,’ if movement is what you expect.

“What Bibi wasn’t willing to do was release a fourth batch of Palestinian terrorists from Israeli jails. He came under near-universal condemnation in Israel when he released the first batch last June, and again (but to a lesser degree) when he let tranches two and three go.

“This time he decided not to. Why? Because, Israelis have said on background, the Palestinians haven’t made a single substantive move in the negotiations since October. No one who knows anything about what has gone on says otherwise.

“What’s more, the Israelis said they would go ahead with a prisoner release if the Palestinians agreed to stay at the negotiating table beyond the end of April, when the talks were scheduled to conclude. This was a clear effort to call the Palestinian bluff – to see if the only reason they were even pretending to talk was to get those prisoners released and nothing else.

“Looks like it.”

Earlier, the administration offered the possibility that Jonathan Pollard, a former Navy intelligence officer serving a life sentence in the United States for espionage, whose release Israel has long sought, could be part of a deal whereby Israel would release the fourth batch of Palestinian prisoners in order to keep talks alive. But Pollard is due for parole in 2015 anyway.

Charles Krauthammer / Washington Post

“When has a secretary of state been involved in so many disastrous, self-initiated negotiations? First, John Kerry convenes – against all advice and holding no cards – Geneva negotiations to resolve the Syria conflict and supposedly remove Bashar al-Assad from power. The talks collapse in acrimony and confusion.

“Kerry’s response? A second Geneva conference that – surprise! – breaks up in acrimony and confusion.

“Then, even as Russian special forces are taking over Crimea, Kerry goes chasing after Russian Foreign Minister Sergei Lavrov – first to Paris, then to Rome, then London – offering a diplomatic ‘offramp.’ Lavrov shrugs him off. Russia annexes Crimea.

“The crowning piece of diplomatic futility, however, is Kerry’s frantic effort to salvage the Arab-Israeli negotiations he launched, also against all odds and sentient advice. He’s made 12 trips to the region, aiming to produce a final Middle East peace within nine months.

“It is month nine. The talks have gone nowhere.... There never was any chance of Palestinian leader Mahmoud Abbas concluding a final peace.”

Iran: Tehran and Moscow are nearing completion on a deal discussed for weeks that could have Iran sending Russia 500,000 barrels of Iranian petroleum each day in exchange for goods valued at up to $20 billion. And what would be an example of the goods? Missiles, for one, as well as help in constructing two new atomic facilities.

Separately, in one of his last trips abroad as Israel’s president, Shimon Peres said of Iran it posed the greatest threat to world peace. “They are building nuclear missiles that can go 2,000 kilometers. What for? Nobody in the world is threatening Iran.” Peres added, “Nobody wants to see another Hiroshima in our time.”

Afghanistan: I don’t think there is anyone who knows how the Afghan presidential election will come out, with the first round of voting on Saturday. With a large number of candidates on the ballot, a run-off seems guaranteed but few expect the vote to go off without it being marred by violence and/or fraud, the latter the main component of 2009’s poll.

Michele Flournoy, a former senior Pentagon official in the Obama administration, told the Financial Times: “If there is rampant fraud and a refusal to engage in negotiations, you could see political support disappear in the U.S. and other countries. That would put whatever government emerges in a crisis situation.”

The three frontrunners, including my man Abdullah Abdullah, a former foreign minister, have all committed to signing an agreement leaving some American troops in country beyond end of 2014 – a deal President Hamid Karzai has blocked.

But one of the top three, Zalmai Rassoul, is seen as Karzai’s favored candidate (Karzai’s brother, once a candidate himself, having thrown his support to Rassoul).

Turkey: The high court unblocked Twitter, but Prime Minister Recep Tayyip Erdogan said that while he would have to comply, he didn’t respect it. Erdogan had previously vowed to “rip out the roots” of Twitter for allowing postings suggesting government corruption.

Earlier, Erdogan declared victory in local polls that were viewed as a referendum on his rule. He wasn’t exactly magnanimous, saying he would “enter the lair” of enemies who have accused him of corruption and leaked state secrets. “From tomorrow,” he declared in an address from AKP headquarters, “there may be some who flee.” [Jerusalem Post]

Egypt: A date has been set for the presidential election that Abdel Fattah al-Sisi is expected to win handily, May 25-26. There will be no second round. I’m awaiting my invite to the inaugural ball.

Pakistan: Former President Pervez Musharraf, who is on trial for treason, survived another assassination attempt when a bomb exploded near his convoy. When he returned to the country last year, the Pakistani Taliban vowed to take him out.

North Korea: Kim Jong Un warned again that his armed forces would “thoroughly crush the hostile U.S. policy against the North,” as put forward by the nation’s official propaganda arm. Pyongyang also talked this week of a “new” kind of nuclear test, this after North and South Korea exchanged artillery fire near their respective borders, though with no casualties. A new nuclear test would be more than a bit disconcerting. [For its part, the South tested a new mid-range missile.]

The head of U.S. forces on the Korean Peninsula, Army Gen. Curtis Scaparrotti, told the House Armed Services Committee that “The Kim Jong Un regime is dangerous and has the capability...to attack South Korea with little or no warning.”

Separately, as reported by Global Security Newswire:

“Experts Niklo Milonopoulous and Edward Blandford found a number of reasons stemming from North Korea’s international isolation and poverty that could contribute to a nuclear meltdown at the (Yongbyon complex), including potentially flawed reactor safety blueprints and possibly shoddy construction work.”

China: President Obama is heading to the Philippines, South Korea and Japan in coming weeks and his goal is to convince our allies that the U.S. “pivot” to Asia has teeth, but those in the region believe for now it’s nothing more than rhetoric, which the White House is quite good at, as we’ve seen. Administration officials have been warning China not to think that just because Russia took Crimea, it can draw the conclusion there wouldn’t be consequences for its own territorial ambitions in Southeast and East Asia.

Speaking in Paris, with French President Hollande in attendance, Chinese President Xi Jinping said: “Today, the lion has woken up. But it is peaceful, pleasant and civilized.” As noted in the South China Morning Post, a curious metaphor, the proverbial “king of the jungle.”

On Taiwan, over 100,000 took to the streets of Taipei to protest a controversial trade agreement with the mainland that demonstrators say ties Taiwan too closely to China and makes them too economically dependent on it. President Ma says Taiwanese companies will be granted greater access to the Chinese market.

And with China’s anti-corruption drive, former Chinese president Jiang Zemin warned the current president, Xi, not to carry it too far and threaten the interests and networks of Communist party elders.   The latest big target is Zhou Yongkang, former head of the domestic security apparatus. Zhou was arrested late last year along with hundreds of family members and allies throughout the security services, as well as other industries such as energy. In the coming weeks, formal charges are to be revealed.

Japan: On Monday the International Court of Justice in The Hague ruled against Japan’s annual whale hunt, saying the ‘scientific output’ Japan always claims as the reason for conducting it “appears limited.” So on Wednesday, Japan announced it was canceling the hunt. Nationalist legislators in Japan say the prohibition tramples on Japanese culture. Get over it. This has been a sham for decades and is one issue where I have backed environmental activists to the hilt. Major kudos to the Australian government for pursuing the case.

West Africa: The Ebola outbreak that has killed at least 80 was initially thought to be contained in four remote towns in south Guinea, but the country’s Ministry of Health confirmed eight cases in the capital, Conarkry, which has a population of 2 million. So this still bears watching. Ebola is highly contagious and in slum conditions could spread like wildfire. There remains no vaccine or cure, with 90% of those contracting it dying. Bats are believed to be the prime natural carrier. Among the symptoms is bleeding through the eyes, ears and nose. It’s for reasons like this, folks, that the word Ebola generates such fear.

Random Musings

--The Supreme Court, by another 5-4 vote, struck down some caps on political contributions Wednesday, throwing out the current $123,200 limit on what an individual can give to all federal candidates and political committees over a two-year election cycle. The lead opinion by Chief Justice John Roberts said the caps infringed on free-speech rights.

“There is no right more basic in our democracy than the right to participate in electing our political leaders. Citizens can exercise that right in a variety of ways: They can run for office themselves, vote, urge others to vote for a particular candidate, volunteer to work on a campaign, and contribute to a candidate’s campaign. This case is about the last of those options.

“The right to participate in democracy through political contributions is protected by the First Amendment, but that right is not absolute. Our cases have held that Congress may regulate campaign contributions to protect against corruption or the appearance of corruption. At the same time, we have made clear that Congress may not regulate contributions simply to reduce the amount of money in politics, or to restrict the political participation of some in order to enhance the relative influence of others.”

The court left intact limits on how much an individual can give to specific candidates and political committees, $2,600 for each primary or general election ($5,200 for the cycle). The big beneficiaries appear to be political parties.

As the Wall Street Journal’s Jess Bravin and Colleen McCain Nelson reported:

“Sen Patrick Leahy (D-Vt.) said striking down the aggregate limits would empower billionaires to drown out the voices of everyday Americans.

“In the 2012 election, an estimated 644 individuals donated the maximum amount allowed by law to candidates and political parties, with about 60% of the money going to Republican causes, according to the nonpartisan Center for Responsive Politics. Their $93.4 million in contributions were a tiny fraction of the overall amount of money spent on elections.

“Roughly 1.2 million Americans made donations of $200 or more in the 2012 election. In all, those donations accounted for $2.8 billion, or 64% of the amount of money spent on the 2012 election, according to the Center for Responsive Politics.”

--New York Democratic Gov. Andrew Cuomo and the state legislature reached agreement on a new budget that eviscerates virtually all of New York City Bill de Blasio’s plans to begin eliminating charter schools. Instead the new budget mandates that New York City find space for them or provide a $3,000 per-pupil subsidy for private space.

--New York City Police Commissioner Bill Bratton took a shot at his predecessor, Ray Kelly, in saying morale had been “awful” on the force, adding Kelly used stop and frisk “too extensively.”

But a few days later, Bratton pulled back, saying in an interview, “It’s quite clear that we have a difference of opinion about the stop, question and frisk effectiveness and procedures. I have my opinion about that, I state it. (But) I should make it very clear that I have the greatest respect for Commissioner Kelly and Mayor Bloomberg for what they did.”

Bratton then criticized the media for creating a “tempest in a teapot” over the comments and said he wouldn’t provide “additional fuel for the fire.”

The only reason I’m bringing this up is because the nudnik mayor, Mr. de Blasio, proceeded to do just that.

“The stop-and-frisk policy was broken. And it created in many neighborhoods a rift between police and community. And it also made the job of the police officer more difficult.”

Then de Blasio said morale in the police department had been awful for years.

--I’ve been telling you about the latest chapter by the Intergovernmental Panel on Climate Change, the second chapter as released formally on Monday, and Secretary of State John Kerry said the document sounded an alarm that could not be ignored.

“Unless we act dramatically and quickly, science tells us our climate and our way of life are literally in jeopardy,” Kerry said. “Denial of the science is malpractice.

“There are those who say we can’t afford to act. But waiting is truly unaffordable. The costs of inaction are catastrophic,” he added.

Look, I have been consistent since Day One of StocksandNews. This debate has been grossly mislabeled. It’s about global pollution, not global warming. If it had been identified as such, the level of support would have been far higher than it is today.

My point has always been, if it looks like crap, it is. And that means it’s harmful.

But too many of us have been caught up in the whole temperature game. Thus, we’ve been having a totally dishonest discussion and that has cost those waging the good fight support.

As the report notes, there are some simple steps for all to take, like building parks in cities and reducing water wastage (ask California).

--This isn’t exactly the way the approval of marijuana for sale in Colorado was supposed to work. 

“A Wyoming college student visiting Denver on spring break jumped to his death after eating a marijuana cookie that his friend legally purchased in one of Colorado’s recreational pot shops, authorities said Wednesday.

“An autopsy report lists marijuana intoxication as a ‘significant contributing factor’ in the death of (the 19-year-old).” [AP]

Colorado law bans the sale of recreational marijuana products to people under 21.

--I have to note the passing of a local, H.W. William Caming, 94, whose obituary was just in the local paper though he passed away weeks earlier. My father knew him well from his local Old Guard and I met the man once.

Bill Caming, aside from being prominent in telecom law and privacy, was chief prosecutor and deputy director of the Political Ministries Division in the Office of the U.S. Chief Counsel for War Crimes from 1946 to 1949.

You see, Bill Caming prosecuted the cases of 21 German military and civilian leaders charged with war crimes and crimes against humanity in the longest and last phase of the Nuremberg trials. Pretty awesome. He then had a distinguished career as senior counsel at AT&T.

--Archaeologists and forensic scientists examining the cause of the Black Death in the mid-14th Century have “cast serious doubt on ‘facts’ that every schoolchild has learned for decades: that the epidemic was caused by a highly contagious strain spread by the fleas on rats.

“Now evidence taken from the human remains found during excavations carried out as part of the construction of a rail line have suggested a different cause: only an airborne infection could have spread so fast and killed so quickly....

“According to scientists working at Public Health England, for any plague to spread at such a pace it must have gotten into the lungs of those victims who were most malnourished and then spread by coughs and sneezes. It was therefore a pneumonic plague rather than a bubonic plague.” [Vanessa Thorpe / Sunday Independent]

--Speaking of rats, check this out...from Howard Blume / Los Angeles Times

“New York City Chancellor Carmen Farina oversees more than a million students, 1,700 schools and a budget the size of many states. Her pay: $412,193.

“Los Angeles Unified Supt. John Deasy has half a million students, 1,000-plus schools, a $7-billion budget – and made $393,106 last year.

“Supt. Jose Fernandez’s South Bay school district has just 6,600 students, five high schools and a $70-million budget.

“His earnings: $674,559 last year.

“ ‘I don’t know of anybody, in any major city, who makes anything close to that, even with extra bonuses or compensation,’ said Michael Casserly, executive director of the Council of the Great City Schools, based in Washington.”

--Scientists examining data from NASA’s Cassini space probe have concluded one of Saturn’s smallest moons, Enceladus, harbors a lake equal to the size of any on Earth. Vladimir Putin may create a provocation as an excuse to annex the entire moon, much to the chagrin of the Enceladians and Saturn’s leadership.

---

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

God bless America.

---

Gold closed at $1303
Oil $101.14

Returns for the week 3/31-4/4

Dow Jones +0.6% [16412]
S&P 500 +0.4% [1865]
S&P MidCap +0.7%
Russell 2000 +0.1%
Nasdaq -0.7% [4127]

Returns for the period 1/1/14-4/4/14

Dow Jones -1.0%
S&P 500 +0.9%
S&P MidCap +1.8%
Russell 2000 -0.9%
Nasdaq -1.2%

Bulls 50.5
Bears 18.6 [Source: Investors Intelligence]

Dr. Bortrum has a new column up.

Have a great week. I appreciate your support.

Catch me on Twitter @stocksandnews.

Brian Trumbore