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05/03/2014

For the week 4/28-5/2

[Posted from Paris, France…2:00 AM ET, Saturday]

Edition 786

Washington and Wall Street

It was an interesting week for data on the U.S. economy, beginning with the preliminary figure on first-quarter GDP which was expected to rise about 1.0% and instead came in at just 0.1%, after growing 2.6%, annualized, in the fourth quarter. Of course it was all about the weather, and deservedly so for this was truly about the worst winter, in terms of both storms and temperature, that your editor can remember. It was even cold all throughout March, but I got a kick out of those economists who pooh-poohed the weather and its potential impact on GDP who were then on Wednesday morning going, “Oh, I told you it was a bad winter and that the impact would be severe!” Right. You liars know who you are.

But the Federal Reserve looked at the data and didn’t blink as it wrapped up a two-day meeting of the Open Market Committee and continued its tapering program to the tune of another $10 billion, now down to $45 billion a month of purchases of mortgage-backed and U.S. Treasuries vs. an initial $85 billion.

The Fed said in its accompanying statement that “Growth in economic activity has picked up recently after having slowed sharply during the winter in part because of adverse weather conditions.”

Yup, it was official. Winter sucked! And the Fed was also saying it expected second-quarter GDP to come in at the 2.5% to 3.0% level most economists see it at. Chair Janet Yellen and Co. also said they would continue to pare back the bond-buying, while reiterating the benchmark funds rate would be held near zero for a “considerable time” after bond purchases end.

This last statement, while a repeat of previous Fed missives, was important when one then looked at Friday’s jobs report for April as the unemployment rate plummeted from 6.7% to 6.3% (the lowest since Sept. 2008), or below the 6.5% threshold that the Fed long ago said would be the point where it would consider lowering interest rates, only a few months ago the Fed said this would no longer be a determining figure…that it was more touchy-feely, and more about whether the inflation rate was rising above its stated 2.0% target rather than the roughly 1.0% that is currently the case.

Moreover, while the U.S. economy added a very solid, and well above consensus, 288,000 jobs, the most since January 2012, the labor participation rate fell back to 62.8%, the lowest since 1978, as there was a sharp decline in the labor force of 806,000. More have given up looking for work, while at the same time more are working part-time. That said, the broader indicator of unemployment, U6, which looks at ‘underemployment,’ did fall commensurately from 12.7% to 12.3% and that’s good. But another key Fed figure, average hourly earnings, remained unchanged for the month of April and is up just 1.9% the past year. Hardly the stuff of great recoveries and yet another reason why the Fed is maintaining rates at zero, as much as some of us feel this has been a massive hindrance for growth and verging on criminal when it comes to the nation’s savers, particularly the elderly.

But back to the first-quarter GDP report, at least consumer spending for the first three months of the year was up big, even as business spending was down 2.8%, the weakest performance since Q4 2009. Manufacturing figures from both the Chicago PMI (63.0) and the national ISM reading (54.9) were above consensus, well above in the case of the former.

And then March personal income, up 0.5%, and consumption, up 0.9%, the best in five years, were solid, while construction spending, up 0.2%, and factory orders for the month, up 1.1%, were below expectations.

Lastly on the data front, the latest on home ownership pegs it at 64.8% of families, down from the peak of 68.9% in 2006 and 65.2% at the end of 2013 despite two years of recovery in the housing market.

Europe and Asia

It was a big week for the eurozone as well as inflation data for the EA18 in the month of April showed consumer prices rose 0.7%, according to the flash estimate from Eurostat, which was better than March’s 0.5% annual rate. Which means that the European Central Bank is unlikely to lower its benchmark rate from 0.25% to 0.00% when it gathers next week because the ECB is loath to act; ECB President Mario Draghi having expressed the opinion on many an occasion that he doesn’t see deflation as being in the cards and the slight improvement in the April number gives him an excuse to wait another month, until June, before forcing the issue. Plus, while Draghi has stated he would do what it takes to ensure price stability, as in the ECB’s own round of quantitative easing, this is nowhere near as easy as the U.S. Federal Reserve had it since you have 18 nations in the eurozone, not one nation under God, indivisible, with liberty and justice for all as is the case here. In other words, it isn’t that simple in Europe.

Separately, the unemployment rate for the eurozone in March was unchanged at 11.8%, the same level as December and just a slight improvement over the past 12 months from the peak in March 2013 of 12.0%.

The unemployment rate was 5.1% in Germany (the German government calculates it differently and their figure is around 6.8% if I remember correctly), while unemployment is 10.4% in France (unchanged over the past year), 12.7% in Italy (up from 12.0% a year ago), 25.3% in Spain (down from 26.3%) and 26.7% in Greece (which is for January). I do have to note that Ireland’s jobless rate has fallen from 13.7% to 11.8% over the past year, but then many of the folks there, particularly the young, have simply left the country.

As for the youth unemployment picture, it remains incredibly sickly in the likes of Spain, 53.9%, Greece, 56.8%, and Italy, 42.7%.

Yet on Friday, Spain’s 10-year government bond traded with a yield below 3.00% (2.98%) for the first time since 2005, while Italy’s 10-year paper had a yield of 3.05%. Flat-out stupid. Sell!

As for the U.K., its manufacturing index (PMI) for April came in at a strong 57.3 vs. 55.8 in March, while first-quarter GDP rose 0.8% over the previous three months, or 3.1% on an annualized basis. Not bad…not bad at all.  Britain is now back within 0.6% of their peak GDP level of 2008 following the Great Recession.

But home-price growth there continued to scream higher, up another 1.2% in April over March and 10.9% year over year, the biggest gain since June 2007. The Bank of England on Friday warned of a crash in housing. It’s insane in the U.K., driven now by Ukrainian and Russian oligarchs desperately looking to park their assets in something outside their native lands and London real estate is the easiest choice. But I saw where a Ukrainian bought a Hyde Park flat for a record, brace yourself, over $200 million! Yup, roll out Lawrence Welk’s bubble machine.

One other item before I get to why I am in Paris; corporate earnings in Europe have been downgraded again by Thomson Reuters as its 2014 consensus reading have moved from up 13% at the start of the year to up 8%. Despite the ever-rising equity markets in Europe, the fundamentals simply don’t justify the performance in the indexes and to beat a dead horse, this is where Ukraine is critical in shaping confidence, both from a consumer and capital spending standpoint.

So I came to Paris to see Front National (National Front) leader Marine Le Pen give her annual May Day speech. I saw it while I was here three years ago and while I don’t expect all of you to understand, from a pure political science nature it is great theater and these days of major importance as we approach the European Parliament elections, May 22-25, with France's May 25.

Yes, the FN is far right, and its founder, Marine’s father, Jean-Marie Le Pen, was (and I’m assuming still is) a virulent racist, anti-Semite, who in 2002 actually qualified for the run-off to be France’s next president before getting his butt kicked 82-18 percent by Jacques Chirac.

Well his daughter Marine has been successful in moderating the FN’s message and now it’s just virulently anti-immigrant, protectionist, nationalistic, anti-Elitist and anti-European Union. It wants a France that is for the French. As Marine likes to say these days, “We have five million unemployed in this country, why do we need immigration?!”

And: “We want to assert our right to national priority. People want to live like French people in France, not like Saudis or Qataris.” Le Pen calls the European Union the “Soviet Union of Europe,” and she also labels current French President Hollande and his cabinet nothing but “donkeys.”

Joan of Arc is the inspiration for Marine and the National Front but whereas three years ago she gave her May Day speech at Joan of Arc Square, near the Louvre, this year with her legions swelling she and her father, a spry 85 years old, marched up to the Opera House after laying a bouquet at the statue of Joan of Arc (a symbol of liberation from English domination) and I was five feet away among the throng of thousands.

I am not a supporter of the FN, but if you have any interest in European politics, and the rise of the far right that I’ve written of for years, you have to understand that it exists, and, should the European economy not grow at a rate strong enough to finally tackle the continent’s severe unemployment problem, the far right, especially in the likes of France, the Netherlands, Denmark, Greece, Austria and the U.K. will continue to grow its ranks.

Each nation, though, is different. Obviously, Austria and the U.K. don’t have the unemployment issue some of the other nations above have, but they all share one common denominator…a fear of immigrants.

Marine Le Pen is a striking, 45-year-old, charismatic mother of three (twice divorced) who has been attempting to rally her far-right brethren from around Europe ahead of the Euro Parliament elections with mixed success. For example, her best partner is probably the Netherlands’ Geert Wilders and his Party for Freedom (PVV), which is virulently anti-Muslim, but also pro-gay rights, while Le Pen isn’t for the latter, so you have an issue there.

And she has tried to build an alliance with U.K. Independence Party leader Nigel Farage (who is said to be able to down a pint with the best of ‘em), but he won’t associate with Le Pen because he says the FN is still far too racist, that anti-Semitism is “in the DNA of the Party,” as he’s put it. It’s kind of ironic Farage accuses the FN of being too racist because he himself is accused of the same with his campaign literature ahead of the vote.

Neither Le Pen or Wilders (or Farage for that matter) will associate with the continent’s worst far-right parties that actually hold seats in their respective parliaments, that being Hungary’s Jobbik Party and Greece’s Golden Dawn.

But, again, what all of the above agree on in one respect or another is that there is too much immigration in their countries and they don’t want Brussels, the European Union, telling their nation what to do… “euroscepticism.”

As for Le Pen, as I walked alongside this incredibly civilized crowd up to the Opera House, a big banner came into view… “Non a Bruxelle…Oui a la France.” No to Brussels. Yes to France.

Thankfully, the rain that was forecast held off until she began to speak and while I know a smattering of French, of course I depended on news reports later. Le Pen said:

“Our country has the most urgent need to once again become its own master…It is essential to vote…don’t disappoint me!”

The main message was, “The destiny of this country is being decided in Brussels.” I could tell when she was saying this because everyone then responded with “Booo!”

Yes, I’m guessing I was the only American there. I certainly didn’t see any. But I did miss something I only learned of after. At one point I heard a commotion behind me, turned around but could only see a lot of crowd movement and couldn’t see what was actually happening so I just turned back to Marine. It turns out it was a bunch of bare-chested women, “Femen,” who were shouting “Fascist Epidemic” before they were led away. From the looks of one whose picture I saw later, I didn’t miss anything.

The European Parliament has 751 seats for the 28 states in the European Union and while parliament cannot propose new laws and has only limited say over the EU’s budget, parliament’s approval for all major EU legislation is needed and this is where the far-right can make some major noise, especially if, collectively, they get about 20% of the vote, which some think is possible.

Currently, Farage’s UKIP has 9 of Britain’s 73 seats, but Le Pen’s FN has only 3. That’s before the FN’s solid performance in France’s local elections where the National Front for the first time picked up the mayoralties in 11 towns and cities, while a coalition partner picked up another three. [All 14 were introduced on stage, Thursday.]

So we’ll see what happens. Farage is one to watch as he’s making big inroads among conservatives in Britain and is polling ahead of David Cameron…who just happens to be prime minister.

Le Pen would actually defeat Francois Hollande in a run-off herself if it were held today, according to French pollsters, but she would lose to whoever the UMP (Nicolas Sarkozy’s party) put up.

As The Economist put it early in the year:

“The contest in May 2014 will be different. The crisis of the eurozone matters to voters – be it debtor states such as Greece, creditor states such as Finland or non-euro countries like Britain. Eurocrats are intruding deeply into the economies of the eurozone, raising profound questions about democracy. So the ballot will be an important test of faith in the European project….

“Populist, anti-immigrant and extreme parties of all stripes, often united only in their hatred of the EU, will make gains. The real question is how strong they will be…. The Freedom Party of Geert Wilders, the National Front of Marine Le Pen and the U.K. Independence Party led by Nigel Farage may top the ballots in their countries. The Finns Party and the Alternative for Germany will do well, too.”

In three weeks there is a chance, even if but a small one, that the European Union will be rocked to its core. I came to Paris just to get a better sense myself of the attitudes and a look at who is supporting the far right these days.

Next week, why the movement is in some ways allied with Vladimir Putin. And this is not good at all.

Finally, turning to Asia, in China, Premier Li Keqiang said his country will implement measures to stabilize the “severe and complicated” foreign-trade situation, recognizing “arduous efforts” are needed to meet China’s full-year target of growth around 7.3%. The government reported the April PMI on manufacturing came in at 50.4 vs. 50.3 in March. Regardless of how much this number was manipulated, it’s not good. A reading on the service sector was better, 54.8 vs. 54.5 the prior month.

And in Japan, retail sales rose 11% in March from a year ago, the most since March 1997, as purchases were made ahead of the sales-tax hike from 5% to 8%. The government of Prime Minister Shinzo Abe initiated the tax increase in an attempt to prove to international market participants that it is serious about dealing with its crushing public debt load that is 230% of GDP, most in the developed world.

Street Bytes

--Stocks rallied, thus continuing a recent pattern of up, down, up, down, up weeks, with the Dow Jones advancing 0.9% to 16512, after hitting a record of 16580 earlier. The S&P 500, up 1.0%, fell short of its record of 1890 in closing at 1881. Nasdaq gained 1.2%.

--According to a study by Bankrate, 73% of Americans across all age groups and income levels say they are not more inclined to invest in stocks even after a five-year bull market, or basically unchanged from 76% in April 2012 and April 2013.

--U.S. Treasury Yields

6-mo. 0.04% 2-yr. 0.42% 10-yr. 2.58% 30-yr. 3.37%

Wild day on Friday as the yield on the 10-year rose to 2.69% in an initial response to the strong jobs report, but then cratered later in the day on a flight to safety ahead of the weekend with the deteriorating picture in Ukraine.

--In a huge win for the Obama administration, the Supreme Court ruled 6 to 2 (Judge Alito recusing himself) to uphold the Environmental Protection Agency’s authority to regulate pollution from coal-fired power plants in the Midwest and Appalachia that impacts the air quality of states on the East Coast.

This is a centerpiece of the president’s environmental agenda which Republicans and the coal industry have criticized as being a “war on coal.”

In writing the majority opinion, Justice Ginsburg said, in part, that in controlling air pollution it’s about the wind.

“Some pollutants stay within upwind states’ borders, the wind carries others to downwind states, and some subset of that group drifts to states without air quality problems.”

The utilities and 15 states on the other side of the issue argued the EPA had too much authority and placed an unfair economic burden on the polluting states.

In dissent, Justice Scalia (joined by Justice Thomas), said the regulation, as written, will require upwind polluting states to cut pollution in relation to the amounts of pollution each state produces, but also as a proportion of how affordably a state can make the cuts. Or, those who can afford it have to cut more pollution. Scalia quoted from Karl Marx’s “Communist Manifesto”:

“Indeed (such) calculation can be performed at the desk, whereas the ‘from each according to its ability’ approach requires the unwieldy field examination of many pollution-producing sources with many sorts of equipment.”

To comply, the utilities have to either add expensive pollution control equipment or simply shut them down. 

It has not been a good stretch for the coal industry, and just when it thought exporting to China could be a savior, the government in Beijing recognizes it must do more immediately to kill its own coal-fired plants.

--Bank of America had won approval a few weeks ago for its capital plans, including the first dividend increase since the crisis, but on Monday, BofA announced it had to suspend its buyback and planned dividend hike after discovering an error in how it calculated its capital ratios. It was a horrible $4 billion mistake.

As the Financial Times’ Lex column put it:

“The bank’s treatment of certain structured notes assumed as part of the 2009 acquisition of Merrill Lynch was incorrect. And key metrics for measuring its capital are lower than previously thought. Its Basel III, tier 1 common equity ratio, for example, had to be revised, falling 27 basis points to 9 percent as of the end of the first quarter. That still surpassed the 8.5 percent minimum required for BofA…(but) the Fed told BofA to halt its recently approved capital plans…BofA will have to resubmit.”

Bank of America shares were whacked to the tune of 6.3 percent on the news to $14.95, but recovered some the rest of the week and finished at $15.22.

One of BofA’s top 10 shareholders told the Financial Times: “It’s frustrating, unfortunate, it’s a stupid mistake, should have never happened. But that combined with all of BofA’s legal and regulatory headlines over the past five years, and even this year to date, it’s quite unbelievable – it’s never-ending.”

Granted, the impact on BofA’s earnings is going to be marginal, but “The more enduring ramification of this blunder is that it could make both BofA and regulators more cautious about the bank’s future capital plans. Citigroup failed to win consent this year not for insufficient capital, but for an inadequate capital planning process. Clearly, banks’ procedures are as important to the Fed as the numbers themselves. And Bofa won approval only after resubmitting a revised plan. This year’s stress tests are proving to be more stressful than expected.” [FT]

The Wall Street Journal’s David Reilly asked the right question: “Too big to fail or just too complex to manage? Bank of America on Monday reminded investors it is easy for banking behemoths to be both….

“Given fears in recent years over its ability to survive multibillion-dollar legal charges tied to mortgage bonds, along with the rejection by the Federal Reserve in 2011 of its capital-return request, BofA has to constantly prove it isn’t an accident waiting to happen.”

By the way, when BofA purchased Merrill Lynch, it inherited $60 billion in structured notes that have since declined to a value of about $30 billion. Thus, as David Reilly puts it, “The sheer size of the amounts involved shows why the improper classification of some losses could lead to such a large dent.”

--Germany’s largest lender, Deutsche Bank AG, said first-quarter profits dropped 34% as revenue fell from 9.4 billion euro to 8.39 billion, owing to ongoing issues at its fixed-income unit, whose revenues fell 10%. While Deutsche Bank’s capital ratios are above the minimums, there are questions on its ability to raise capital without dilution to the common shareholders, this as the European Central Bank begins supervising Europe’s biggest banks this fall.

--Texas Gov. Rick Perry has been advertising on New York’s airwaves to get business to move to his state and the Republican has challenged New York’s Democratic Gov. Andrew Cuomo to a debate on who has the better business climate.

So Crain’s New York Business put together some facts. Such as:

Texas’ population increased 20.9% between 2000 and 2012, to 25 million. New York, meanwhile, gew 2.2% to 19.4 million.

77% of New York residents think they pay too much in state taxes. Just 39% of Texans do.

8.82%: Top New York income tax rate. New York corporations pay a flat rate of 7.1%. There are no income or corporate taxes in Texas, but companies pay a tax on gross receipts.

$19.1 billion: Value of tax breaks given to Texas corporations annually. Of the total, 78% goes toward sales-tax refunds and exemptions. New York businesses take in $1.82 billion in corporate income-tax credits, 44.8% of the total $4.06 billion business-incentive program.

The average GDP in New York is $62,000, compared with $54,000 in Texas.

Texas has seen a 10.5% growth in employment since 2009, to 12.2 million jobs. In the same time, New York has seen a 0.2% decrease in jobs, to 8.97 million. [Sources: Many]

--Well, at least New York State Comptroller Thomas DiNapoli said the booming tech sector is adding jobs three times faster than Gotham overall. The average tech salary in the city was $118,600 in 2012, almost 50% higher than the $79,500 average salary citywide.

--But back to taxes, Pfizer Inc. made a nearly $100 billion bid for the U.K.’s AstaZeneca Plc, that country’s second-biggest drugmaker, with the U.K. having a tax policy designed to attract research investment from abroad. Pfizer then raised the bid to $106 billion.

The U.K. has created incentives for the drugmakers that enables companies to apply a lower corporate tax rate to profits from patents, so, for example, AstraZeneca rival GlaxoSmithKline built its first U.K. facility in almost four decades and now Pfizer, if it pulls off the deal, would domicile itself in the U.K. for what would be the world’s largest pharmaceutical company.

But on Friday, AstraZeneca said its board turned the sweetened offer by Pfizer down because the former said it “substantially undervalued” the company. This is far from over. Pfizer wants to do a deal amicably but could turn hostile and go directly to shareholders.

--At the same time, General Electric made a bid for the energy assets of France’s Alstom SA, the company that built the French power grid, as well as manufacturing the country’s signature bullet trains, the TGVs. GE has a longstanding business relationship in France and CEO Jeffrey Immelt met this week with French officials, including President Francois Hollande, to discuss protecting Alstom’s 93,000 employees. [As an aside, as soon as my taxi from Charles De Gaulle Airport hit the highway the other day, the first two tractor trailers I saw were GE trucks.]

French officials, however, seem to favor a bid for Alstom by Germany’s Siemens AG. The government, just as is the case in the U.S., can step in to protect companies it deems of national interest.

Finance Minister Montebourg said: “GE and Alstom have their agenda, which is that of shareholders, but the French government has its own, which is that of economic sovereignty.”

--And now back to Texas…Toyota Motor Corp. is consolidating several of its units at a new headquarters in Plano, Texas, that will house 4,000 employees now scattered around the country. California is the biggest loser, with up to 3,000 jobs heading east. It’s all pretty simple. Torrance, California is too far from the automaker’s factories in Kentucky, Indiana, Mississippi and Texas.

So it’s another big coup for the Lone Star State, having won out in this case over Denver, Atlanta and Charlotte.

Back in 2006, Nissan moved its U.S. headquarters to Nashville from California. Honda Motor Co. is still headquartered in Los Angeles for U.S. sales and marketing and it said it has no plans to leave.

Oh, by the way, Texas offered Toyota an incentive of $10,000 a job to move…$40 million.

California Gov. Jerry Brown said: “We’ve got a few problems, we have lots of little burdens and regulations and taxes, but smart people figure out how to make it” in the state.

I’d add what no one else wants to…the growing realization that the Big One could be around the corner is seeping into the corporate psyche.

--Last year a U.S. Senate report said companies such as Apple paid little or no tax on tens of billions of euro in profits stashed in Irish subsidiaries.   This week it was learned that Oracle’s Irish unit paid 11 million euro in Irish taxes on 164.4 million in profits for 2013. Revenue was 7.24 billion euro. The company employs 1,100 in Ireland, 680 of whom are engaged in sales and marketing. [Irish Independent]

--Assuming Comcast is granted regulatory approval for its proposed takeover of Time Warner Cable, Comcast and Charter Communications would then close on a $20 billion deal that would involve Comcast, the United States’ largest cable operator, divesting itself of 3.9 million subscribers, or about 18% of its 22 million network. It then gets more complicated, including TWC’s network, but the bottom line is our cable bills will continue to skyrocket into the future.

--According to the American Customer Satisfaction Index, of the six major U.S. air carriers, JetBlue is No. 1, while United is No. 6.

--Governments around the world have advised computer users to use alternatives to Microsoft’s Internet Explorer browser until the company fixes a security flaw that hackers can exploit to launch attacks.

The Internet Explorer bug disclosed last weekend was the first high-profile computer threat to emerge since Microsoft said it was ending its support of Windows XP, ergo, computers running the 13-year-old operating system will remain unprotected, even after Microsoft releases updates to defend it.

I guess its versions 6 to 11 of IE that remain most vulnerable. The Department of Homeland Security’s U.S. Computer Emergency Readiness Team said in an advisory that the vulnerability could lead to “the complete compromise” of an affected system. Versions 6 to 11, according to NetMarketShare and Reuters, account for 55 percent of global market share.

One analyst told Reuters’ Jim Finkle to never use IE again if you have Windows XP.

On the other hand, this presents a sales opportunity for those hundreds of millions running XP to dump their machines for devices running something newer, including Apple’s Macs and iPads, as well as newer Windows machines.

However, late in the week Microsoft said it would send out a fix for the XP operating system, even though technically they no longer support it. That said, millions will still be looking to purchase newer devices.

--Warren Buffett named his son Howard, 59, to be the next chairman of Berkshire Hathaway upon Warren’s passing or incapacitation. Howard will have no investment management decision-making power but will ensure BH sticks to Warren’s stated culture and values.

Howard is a farmer, philanthropist and part-time deputy sheriff.

--LinkedIn issued poor guidance for future quarters after reporting revenue growth in the first quarter slowed for the fifth in a row. The shares tanked in response.

And shares in Twitter fell over 10% after the company reported only 14 million new users for the quarter, 255 million in total, up 25% from a year ago. The site’s big issue is how to keep users engaged.

EBay was another that saw its shares decline on poor guidance following its earnings report this week.

--Samsung reported a profit of $7.5 billion for the first quarter, though the company reported a 4% fall in sales at its mobile phone unit, thanks to increasing competition, which is forcing manufacturers to lower prices.

And I just saw where Samsung was ordered to pay Apple $119.6 million for infringing on two of its patents.

--Shanghai Disney Resort, Walt Disney Co. and its partners are kicking in an extra $800 million to the park’s $4 billion price tag, the new funds to be spent on additional attractions that will make it Disney’s second-largest park behind Orlando. Shanghai Disney is slated to open Dec. 31, 2015.

This is pretty incredible to think about. According to a Disney statement, the Shanghai resort will be located within a three-hour trip of “an income qualified population of 330 million people.” [Hugo Martin / Los Angeles Times]

--CNN is still cashing in on Malaysia Air flight 370 coverage, at least when it comes to its matchup against MSNBC. Fox News still dominates both but MSNBC has been sliding even more since MH370.

As reported by Bill Carter of the New York Times, in morning programming, “Fox and Friends” averaged 237,000 viewers in the key 25-54 age group recently vs. 119,000 for CNN’s “New Day” and 105,000 for MSNBC’s “Morning Joe.”

Before the plane disappeared, “Morning Joe” had a 127,000 to 79,000 lead over “New Day.”

For the month of April, in total viewers, Fox News had 988,000 per day to CNN’s 431,000 and MSNBC’s 362,000.

I watch CNN mostly from 4:00 PM to 6:00 PM, and then Fox in the evening (if I’m not watching sports). The rest of the time it’s either the first 15 minutes of the “Today Show” or CNBC. And I usually watch NBC “Nightly News,” simply out of habit since I was a little tyke.

Foreign Affairs

Ukraine: A few weeks ago, George Will quoted the late Washington state Senator Henry “Scoop” Jackson, who was a foreign policy hawk while a Democrat.

“The Soviet Union is like a burglar who goes down the hall and checks the doors to see if one is open.”

I can personally relate to the quote because in 1973, when I was in Moscow on a tour with my parents, I stayed in the hotel sick one day while my parents went out and the room phone kept ringing. I’d pick up and there would be a click. “Ring!” Click. “Ring!” Click. Of course the room attendant was looking to get in when no one was there and, sure enough, later in the visit items disappeared from my mother’s suitcase when all three of us were out.

And so it is that Russian President Vladimir Putin tried the door into Crimea, found it was open, and went in and took it. With amazing speed, and without a formal invasion, he is now doing the same in eastern and southern Ukraine. It is a sickening, dangerous, tragedy of immense proportions, as I sit here in France, which should have a memory or two from its not too distant past.

The situation worsens by the day, and it’s turning increasingly violent, with at least 34 dying in Odessa on Friday, 31 in a building fire, and others killed in disputed Slovyansk in the east, while President Obama and Angela Merkel met in Washington to discuss the issue.

This isn’t a traditional conflict. It has rapidly turned barbaric…kidnappings, hostage takings (such as the taking of the monitors for the Organization for Security and Cooperation in Europe, Russia being one of 57 nations that signed on to the OSCE, which helps mediate crises), storming of Ukrainian government buildings by armed militias and ‘separatists’ breaking up park stone walls for weapons.

By week’s end, 7 of the 8 OSCE monitors were still being held and some 50 hostages total in the town of Slovyansk, which Ukrainian government forces attempted to take back yesterday.

In Donetsk, the regional capital, Ukrainian riot police clashed with separatists and were humiliated on Thursday, unable to defend the state prosecutor’s office, forcing dozens of police guarding the building to surrender. The same day, two Ukrainian helicopters were shot down by the militants, killing two.

Earlier in the week, the United States announced a new series of sanctions targeting seven individuals and 17 companies linked to Putin’s inner circle, including the man I’ve written much of over the years, Igor Sechin, Rosneft CEO. They had their visas banned and any assets in the U.S. frozen, as well as company assets, but there will be no direct economic impact, and no real attempt was made at going after the wider Russian economy as the companies targeted do little business in the U.S. Nothing that hits Putin directly nor will change his behavior.

The next day the Europeans extended visa bans and asset freezes on 15 new targets, mostly those involved in events in Ukraine. Again, whoopty-damn-do. Trade between the EU and Russia amounted to almost $370 billion in 2012, while U.S. trade with Russia was only about $26 billion the same year, according to the New York Times.

For his part, Putin can retaliate against the likes of Exxon-Mobil and Pepsico, or BP, which has a 19.75 percent stake in Rosneft.

It doesn’t matter to Putin, as yet, that his economy is headed for recession and $60 billion in capital has fled his country. Instead, Russian Deputy Foreign Minister Ryabkov said Moscow’s response to the latest round of sanctions will be “painful for Washington.”

Oh, NATO initiated flights over the Baltics, and Canada (God bless our good neighbor) sent jets to be deployed in Romania, which is clearly a target of Putin’s down the road, and Vice President Joe Biden said the U.S. will defend its NATO allies “no ifs, ands or buts.”

Will we? Certainly the Obama administration track record in other foreign policy spheres argues otherwise.

And then you have the American people, 47% of whom, in an NBC News/Wall Street Journal survey, said the U.S. should take a less active role in world affairs, though only 37% support Obama’s handling of the Ukrainian crisis.

In a Pew/USA TODAY poll, 53% of Americans were in favor of stepping up economic sanctions (the survey taken prior to Monday’s announcement of same), but 62% said they were opposed to sending arms or military aid to Ukraine. Less than a third, 31%, said that what happened between Russia and Ukraine was “very important” to the United States; 36% said events there were “somewhat important.”

The IMF came to Ukraine’s rescue in approving $17 billion in loans, with an immediate disbursement of $3.2 billion, but it has to feel like it’s sending money down a rathole. After all, Ukraine is already being carved up. The southeastern part of the country is in a state of chaos and anarchy (and now Odessa in the southwest). The government in Kiev has virtually zero control anywhere. Ukraine’s economy will only worsen until the political situation stabilizes and, instead, it only gets worse and threatens to spread far beyond this now forsaken land.

So it was that on Thursday, in a phone conversation with German Chancellor Angela Merkel, according to an Interfax release: “Putin emphasized that it was imperative today (for Ukraine) to withdraw all military units from the southeastern regions, stop the violence and immediately launch a broad national dialogue as part of the constitutional reform process involving all regions and political forces.”

Unbelievable. Acting Ukrainian President Oleksandr V. Turchnyov conceded this week that a significant chunk of his country was already under separatist control. He also said he was reinstating military conscription while conceding Ukraine’s security forces have been plagued by “inactivity, helplessness and even criminal betrayal. It is hard to accept but it’s the truth. The majority of law enforcers in the east are incapable of performing their duties.”

Yes, Ukraine thinks it is still going to hold a presidential election on May 25, but Putin is masterfully doing everything he can to destabilize nearly half the country. He will thus be able to declare that any results should be null and void because much of the southeast will clearly not take part, and/or he’ll claim those doing so were harassed, beaten and tortured…because that’s what ex-KGB guys do. This week the Russian Foreign Ministry office blasted Ukraine for even considering a vote.

There will be no mediation, except under Putin’s terms. He’ll continue to demand constitutional changes that divide Ukraine permanently and then Ukraine will be in no position to really run into the arms of the European Union and NATO because both will wonder not only what they’re really dealing with, but when will Putin move to swallow the rest? He’s seen the ineffectiveness of Ukraine’s security forces. How much resistance would he get marching on Kiev? [This is also where Moldova’s breakaway Transnistria becomes critical as taking this, which already has 1,400 Russian troops there, pressures Ukraine from the West, and the road to Transnistria begins in Odessa.]

Friday, Obama and Merkel agreed that if Russia impedes the May 25 vote, then it will be subjected to further sanctions. 

For its part, in light of Friday’s events, Russia called an emergency meeting of the UN Security Council, declaring Ukraine’s offensive in Slovyansk to be an act against its own people that is “leading Ukraine to catastrophe.” Putin has his pretext for launching a full invasion.

Meanwhile, as Russia held its first May Day parade on Red Square for the first time since the collapse of the Soviet Union (with banners that read “In Putin We Trust” and “We’re Going to Vacation in Crimea”), the Kremlin announced it is holding a huge military parade on May 9, the 69th anniversary of Victory Day, the defeat of Nazi Germany. Putin is going to give a speech. Look out.

Opinion….

Sens. John McCain, John Barrasso, John Hoeven and Ron Johnson / Washington Post

“Western countries had high hopes for our relationships with Russia after the Cold War and acted on that basis. We provided billions of dollars to help Russia’s transition from communism. We created new mechanisms for consultation. We expanded trade. NATO committed not to deploy significant military capabilities onto the territory of new alliance allies, even as it expanded. In short, the West sought to include Russia in the promise of a Europe whole, free and at peace – a vision we still believe would benefit all participants.

“Unfortunately, hope of a constructive relationship with Russia under Putin has vanished. A friendly rival has become, at best, an unfriendly adversary. Putin will not compromise his quest to dominate Russia’s sovereign neighbors (not least as a cynical way to build support at home for his corrupt and autocratic rule)….Western weakness emboldens Putin. The only thing he respects, and that can change his calculus, is greater strength.

“We must make policy on this basis. In the short term, the United States must expand sanctions to major Russian banks, energy companies and other sectors of Russia’s economy – such as the arms industry – that serves as instruments of Putin’s foreign policy….Some of our European allies may hope to avoid tough sanctions, but weak measures will not stop Putin, and the costs of doing so will only grow with time….

“NATO must recommit to its core missions of deterrence and collective defense. This requires a rebalancing of the alliance’s force posture and presence….including a more robust and persistent presence in Central Europe and the Baltic countries….

“Another fact repeatedly highlighted during our trip [to the Baltics, Norway and Moldova] is that Putin is winning the war of ideas among Russian-speaking peoples in the former Soviet Union. Putin’s propaganda rests on lies, but it is effective and hardly refuted. We have all but given up on communicating the truth, in Russian, to Europe’s Russian-speaking populations. This needs to change, and the old state-run public diplomacy is not necessarily the answer….

“The United States and Europe did not seek, or deserve, this challenge from Putin’s Russia. But we must rise to it all the same. Our shared interests and values depend on our resolve.”

Editorial / Washington Post

“When (Boris) Yeltsin died, seven years ago last week, it was observed correctly that he had given rise to a society freer than any in Russian history.

“But his successor, Mr. Putin, and Mr. Putin’s friends are working overtime to dismantle this legacy, and therein lies a second tragedy of the Ukraine coercion. In the hysteria, Mr. Putin continues to tighten the noose. On April 22, (Alexei) Navalny, now an opposition leader, was hit with a court ruling that he libeled a governing party politician, which he denied and which appeared to be another in a string of politically motivated efforts to silence him. The same day, the State Duma voted to approve a bill that requires bloggers who have more than 3,000 readers to register with the state as a formal news organization and follow Russia’s restrictive press law. According to a dispatch from Post correspondent Will Englund, other legislation would make it a crime punishable by five years in prison to take part in an unsanctioned protest or to publish information that puts the government or military in an unfavorable light. Equally as disturbing, Mr. Englund described reports that Russian authorities are planning to restrict travel abroad, as was done often in Soviet times.

“The rollback of democracy is not a new story…And, hopefully, the United States will do more to help (the younger generation and opposition) get the information that Mr. Putin does not want to hear.”

Editorial / Wall Street Journal

“The beginning of strategic wisdom is to understand that Mr. Putin’s Russia is not a status quo power with a few territorial grievances. It is an authoritarian regime bent on rewriting the rules of post-Cold War Europe. Lacking democratic legitimacy and with an economy dependent mainly on fossil-fuel exports, the Kremlin must employ an increasingly virulent nationalism and foreign conquest to maintain power. Expansionism and foreign meddling aren’t limited to historic claims. They are central to the regime’s survival and if unchecked will continue beyond Ukraine.

“While the U.S. talked disarmament, and Western Europe practiced it, Russia has also upgraded its military. The Brookings Institution estimates that the Kremlin has increased military spending by 79% in the last decade, and Russian operations in Crimea impressed Western observers with their stealth and coordination. Russia is developing new mid-range nuclear missiles that could be targeted at Western Europe, in clear violation of the 1987 INF Treaty. Like France and Britain after World War I and the illusions of the 1920s, Western Europe is asleep while its adversary is rapidly re-arming.

“A coherent response has to start by talking honestly about the nature of the Putin regime. The Kremlin promotes through its domestic media an anti-Americanism that is as vicious as anything that came out of the Soviet Union. In its telling the U.S. is promoting fascism and seeks political domination in Europe. Mr. Putin’s propaganda campaign has become uglier as his domestic political control has tightened. Western leaders need to tell the truth about all this so their citizens, wary of foreign entanglements, begin to comprehend the threat.”

John Vinocur / Wall Street Journal…on Germany and Merkel

“In the conservative newspaper Die Welt, Jacques Schuster commented last week on ‘Germany experiencing a creeping de-Westernization’ and a return to the ‘old ghosts of the middle-ground.’

“That is clearly where Mr. Putin wants the Germans. So why hasn’t Mrs. Merkel, in straightforward language, marked out where she stands and where Germany must not drift? Here are the answers I have come up with.

“ 1. Not her style.

“ 2. She doesn’t want ‘to frighten’ public opinion (or alienate voters ahead of May’s European Parliament elections).

“ 3. By way of responses in question form: ‘When’s the last time America won a war?’ Or, after backing out of attacking Syria, ‘What do its redlines mean anymore?’

“All this, on the official level, comes with reassurances that Angela Merkel is truly, truly on America’s side. But you have to wonder hard about this if, as the New York Times reported last week, Mr. Obama is focused, come what may, on isolating Mr. Putin’s Russia to the point that it becomes a pariah state.

“Some observers have pointed out that Mrs. Merkel, in grasping for de-escalatory straws, got played by Mr. Putin when, at the end of March, her spokesman said she had been informed that Russia was in the process of diminishing its troop presence on the Ukrainian border. A Russian account of the telephone conversation following the German announcement didn’t contain the nonexistent good news.

“And in Brussels a senior NATO official told me flatly that, concerning projected middle- and long-term changes in the Alliance’s force posture to counter Russia’s belligerence, ‘the Germans are on the fence.’…

“About reality in April 2014: Michael Naumann, who served as the minister of culture in Gerhard Schroder’s second-term cabinet, offered me a definition in a conversation last week. ‘The Germans, now and historically, are scared of Russia,’ said Mr. Naumann, ‘and Putin knows this.’

“Mr. Obama can’t miss taking this reality into consideration as the United States comes to terms with facing Russia essentially alone.”

Editorial / New York Times

“The United States and the European Union announced another round of sanctions against Russia on Monday and Tuesday: the Americans against Russians close to President Vladimir Putin, including the president of the state-owned oil company Rosneft; and the Europeans against senior Russian officials and secessionist leaders in Ukraine. The stated reason is that Russia has fulfilled none of the commitments it made at a meeting with Ukraine, the United States and the European Union in Geneva on April 17, and that Russia’s ‘involvement in the recent violence in eastern Ukraine is indisputable.’

“The action is justified, and for all of Mr. Putin’s bluster, the economic uncertainty generated by sanctions is accelerating Russia’s slide to recession. The same Russians who are cheering Putin on are rushing to get their money out of Russia….

“Yet given Mr. Putin’s demonstrative disdain for the Geneva agreements, along with the aggressive behavior of Russian troops massed on Ukraine’s borders and the continued occupation of administrative and security buildings in southeastern Ukrainian cities by Moscow-directed secessionists, such targeted penalties are not likely to change Russia’s behavior….

“(Ukraine) is very much a European crisis. It was an accession treaty offered by the European Union that touched off the current crisis, and it is the European Union’s eastern members who are most threatened by Mr. Putin’s efforts to revise the post-Cold War order.

“Europe’s concern over the economic repercussions of broader economic sanctions are understandable. But that should not lead to any myopia about the danger Mr. Putin poses and the need to rein him in. His authoritarian behavior at home, his disdain for the Geneva agreement and, most recently, the capture of a European military observer mission in Slovyansk should persuade all European leaders that, as Foreign Minister Frank-Walter Steinmeier of Germany told the magazine Spiegel, ‘We’ve slid into the worst crisis since the end of the Cold War.’ That crisis will only get worse unless the West is prepared to unite behind serious economic sanctions that hurt Russia’s financial, energy and military sectors.”

Roger Cohen / New York Times

“Sergei Karaganov, a prominent Russian foreign policy expert at the Higher School of Economics in Moscow, recently provided a useful summation of his vast country’s sense of humiliation and encirclement. Because explosions of nationalist fervor like the one fostered by Vladimir Putin are dangerous and slow to abate, it is worth quoting this analysis at some length.

“ ‘The rupture is due to the West’s refusal to end the Cold War de facto or de jure in the quarter-century since the collapse of the Soviet Union,’ Karaganov wrote in the daily Izvestia. ‘In that time, the West has consistently sought to expand its zone of military, economic and political influence through NATO and the EU.   Russian interests and objections were flatly ignored. Russia was treated like a defeated power, though we did not see ourselves as defeated. A softer version of the Treaty of Versailles was imposed on the country. There was no outright annexation of territory or formal reparations like Germany faced after World War I, but Russia was told in no uncertain terms that it would play a modest role in the world. This policy was bound to engender a form of Weimar syndrome in a great nation whose dignity and interests had been trampled.’….

“What now? [writes Cohen] A sense of national humiliation, whether based in fact or not, is a tremendous catalyst for violence. It was in Weimar Germany, where the reparations and concessions stipulated by the Treaty of Versailles of 1919 created an explosive mood. It was in Serbia at the time of the break-up in 1991 of Yugoslavia, a country Belgrade always regarded as a Serbian extension of itself. The blinding fever drummed up by Slobodan Milosevic was based in a supposed need to reassert Serbian greatness; the means then was the ravages of his fifth columnists in Bosnia.

“That delirium took a decade to dim. It is unlikely that the Russian version will take less. Putin’s nationalist upsurge is the mask for all sorts of problems – demographic decline, corruption, a coopted judiciary, a cowed press, an oligarchic resource-based economy that has failed to diversity – but no less virulent for that.

“In the face of this assertive Russia, nothing would be more dangerous than American weakness.

“So when President Obama, in response to a recent question about whether his declaration that the United States would protect the Japan-controlled Senkaku Islands in the East China Sea risked drawing another ‘red line,’ gave an evasive answer including the hypothesis that America might not want to ‘engage militarily,’ he did something profoundly dangerous. In Asia, as in the Baltics, the Article 5 commitment to a joint military response to any attack on an ally is critical.

“The U.S. treaties must be words of truth that sound ‘like a pistol shot,’ or violent mayhem could spread well beyond East Ukraine.”

Syria: U.S. officials told the Washington Post that Syria is holding onto 27 tons of sarin precursor to use as leverage in future negotiations. A senior Western diplomat told Reuters, “We are convinced, and we have some intelligence showing, that (Syria) has not declared everything.” When asked how much the Assad regime has kept hidden, the diplomat said: “It’s substantial.”

Separately, the war raged on with airstrikes in Aleppo killing over 50, including 10 children when their school was bombed. In Homs, attacks killed at least 45, while a mortar attack in Damascus killed 14. So right there is about 110.

And it’s official…President Bashar Assad is running for reelection in the vote scheduled for June 3. After all, he has such a strong track record.

As for the logistics of holding an election with millions displaced and/or refugees in other countries, if it wasn’t so tragic it would be comical.

Iraq: The country held parliamentary elections on Wednesday as Prime Minister Nouri al-Maliki seeks a third term and the surprise was how little violence there was, after a surge in it leading up to the vote. In fact there were no attacks in Baghdad as security was extraordinary, with the government announcing a weeklong holiday so that most people stayed home, allowing security forces to clear the streets. Curfews were in place and traffic prohibited in most cities and towns so that people had to walk to the polls. The Electoral Commission estimated turnout at 60%.

It will take a number of weeks to tally the results. Maliki, one way or another, is expected to remain in power.

Iran: Reuters reports the White House wants to assist Gulf allies in fielding an integrated missile shield against Iran’s growing ballistic missile threat. Remember, Iran’s missile program is not part of the discussions on its nuclear activities. Just last weekend, Tehran reaffirmed they will not allow such weapons to be part of the nuclear talks.

Israel: Palestinian President Mahmoud Abbas said he still wants peace talks with Israel, though the formal process is finished for now. He still promises a unity government with Hamas would recognize Israel and renounce violence, though at week’s end, Hamas leader Khaled Mashaal said his organization remained committed to jihad against Israel.

Abbas said the PLO would be responsible for future peace talks, not Hamas. He stressed that in any future negotiations, “For three months we’ll discuss our map. In that period, until the map is agreed upon, all settlement activity must cease completely.”

Abbas also denounced the Holocaust as the “most heinous” modern crime, adding “The world must do its utmost to fight racism and injustice in order to bring justice and equality to oppressed people wherever they are,” to which Israel yawned. After all, the bottom line really is that Abbas is forming a unity government with a group that still seeks Israel’s annihilation.

Meanwhile, Secretary of State John Kerry vehemently denied he ever called Israel “an apartheid state” amid controversy concerning remarks he allegedly made during a private meeting with international experts.

“I will not allow my commitment to Israel to be questioned by anyone, particularly for partisan, political purposes. I do not believe, nor have I ever stated, publicly or privately, that Israel is an apartheid state or that it intends to become one.”

Kerry, ever the dunce, did say, “If I could rewind the tape, I would have chosen a different word.”

According to The Daily Beast news website, a source provided them an audio of the conversation with the Trilateral Commission wherein Kerry said:

“A two-state solution will be clearly underscored as the only real alternative. Because a unitary state winds up either being an apartheid state with second class citizens – or it ends up being a state that destroys the capacity of Israel to be a Jewish state,” Kerry said.

This breaks a longstanding taboo against comparing Israel’s treatment of the Palestinians to the apartheid-era South Africa. According to news reports, it would be the first use of the word in relation to Israel’s policies on the West Bank.

Prime Minister Netanyahu did not comment, but others in Israel called it “a new low in American diplomacy and an insult to the people of Israel and South Africa,” as a leader of an influential settler group put it. [Sources: The Telegraph, AFP]

Back to the Holocaust and Remembrance Day on Sunday, Netanyahu said in a speech at Yad Vashem that world leaders needed to heed the lessons of the 1930s and – when facing Iran – see reality as it is, not as how they would like it to be. Netanyahu retold the story of how the West was paralyzed against acting in time against Nazi Germany because it wanted to avoid conflict at all costs.

“I ask, why in the years preceding the Holocaust did the vast majority of the world’s leaders, and the vast majority of the leaders of our people, not see the threats beforehand?”

Netanyahu then turned to the topic of Iran and said those who warned about the Nazis were roundly criticized by people who dismissed them as “prophets of doom” and “warmongers.”

“I ask how it could be that so many did not understand the reality? The bitter, tragic truth is that it is not as though they did not see; they did not want to see. And the reason they chose not to see the truth is that they did not want to deal with the ramifications of that truth….

“Today we are again standing before clear facts and real dangers,” he warned.

Iran, said the prime minister, is calling for Israel’s destruction, and developing nuclear weapons, which is why it is building underground facilities to enrich uranium, and building heavy-water reactors to produce plutonium, and also why it’s ballistic program, the delivery system, speeds ahead.

“In any event,” said Netanyahu, “the people of Israel will stand strong. Against existential threats our situation is completely different than what it was in the Holocaust.

“Today we have a sovereign Jewish state. As Israel’s prime minister, I am not afraid to tell the world the truth, even to those whose eyes are blind, and ears are deaf. That is not only my right, but my obligation.” [Jerusalem Post]

Egypt: An Egyptian judge sentenced to death 683 alleged supporters of the ousted President Mohammed Morsi, saying they were involved in the murders of policemen.

Afghanistan: Over 350 were killed in a mountain landslide, with hundreds more missing.

China: The U.S. and Philippine governments worked out a new military cooperation agreement, thus paving the way for the first permanent U.S. bases there after they were evicted in the early 1990s. I’m placing this item here because of course it’s all about the Chinese threat, specifically over disputed territory in the South China Sea.

The U.S. has defense treaties with Japan, South Korea and the Philippines and the U.S. has told Beijing it will not accept moves by China to unilaterally declare another air-defense identification zone or to seize disputed islands.

But just as in Ukraine (or Syria et al), how seriously does China take Washington?

On another issue, in keeping with everything I’ve been writing on the pollution topic, The Economist had a piece in the April 26 issue titled “More of the middle classes are leaving, in search of a cleaner, slower life.”

As a percentage of China’s population the numbers aren’t big, but in the past decade 1 million Chinese have obtained permanent-resident status in Canada or the U.S., placing them first in Canada and second in America behind Mexicans. About 80,000 a year are now gaining permanent residency status in America.

North Korea: Increased activity at the North’s nuclear test site continues to be picked up by satellites. While President Obama mocked North Korea’s capabilities while he was in South Korea, the Pentagon is reportedly taking the nuclear and missile threat seriously.

South Korea: The prime minister resigned over the government’s poor response to the April 16 ferry disaster, in which it was first announced everyone had been rescued. Instead more than 300 died after they were told to stay put in their cabins. President Park Geun-hye accepted the resignation of Chung Hong-won.

Meanwhile, all 15 crew members were arrested.

Australia: Former Liberal Australian prime minister Malcolm Fraser, who left politics in 1983 and is rather elderly, said Australia risks being pulled into a disastrous war against China because successive Australian governments have surrendered their nation’s strategic independence to the United States. Fraser said he had become “very uneasy” at the level of Australia’s compliance with U.S. strategic interests.

So, by his thinking, and it’s interesting, Australia would have difficulty convincing the world that it was not taking part in a U.S.-led conflict even if, formally, the government tried to stay out.

Australia has certainly pivoted to the U.S. recently, more so than President Obama has pivoted to Asia, in actuality, when you look at the deeds.

Separately, it was reported the other day that “China was building covert networks of informants at leading universities in Melbourne and Sydney to keep tabs on ethnic Chinese lecturers and students.” [John Garnaut / Sydney Morning Herald]

Chinese officials and state media vehemently denied the report from Fairfax Media.

Well of course they are. Lord knows how many informants have been planted in the U.S., let alone the spies involved in industrial espionage we already know about.

Brazil: It’s been the policy here at StocksandNews that you are a fool if you’re thinking of attending either the World Cup next month or the 2016 Rio Olympics. Will they both go off smoothly? I guess everything is possible. But why take the risk? True, Sochi wasn’t the terror disaster many feared, including yours truly, but was it worth it if you weren’t a family member? Hardly. 

So I bring this topic up again because the International Olympic Committee’s vice-president, an Australian by the name of John Coates, said preparation for the Rio Olympics are the “worst” he has ever seen and the IOC has taken the unprecedented step of placing experts in the local organizing committee to ensure the Games go ahead.

Coates has been involved in the Olympics for 40 years and he said Rio is worse than the concerns leading up to the 2004 Athens Games. Rio is “not ready in many, many ways.”

Incredibly, construction has not even begun on some venues, while infrastructure hasn’t been addressed, and then you have Brazil’s social issues, which will no doubt be on full display during the World Cup.

Northern Ireland: Sinn Fein leader Gerry Adams was arrested and jailed while under questioning for a controversial 1972 murder where a mother of 10 was killed by the IRA for supposedly informing on them. Jean McConville’s body was secretly buried and not found until 2003. Adams has long said he had nothing to do with the case, though he has long been a suspect. He also claims that while he was a sympathizer, he was never a member of the IRA, which some say will finally be revealed to be a lie. After all these years of living in fear, people are talking. Adams is a former member of the British Parliament for West Belfast.

Random Musings

--According to a new Washington Post-ABC News poll, President Obama’s approval rating is at a new low, 41%, down from 46% in the last survey. Just 42% approve of his handling of the economy, 37% approve of how he has handled ObamaCare, and just 34% approve of his handling of the situation in Ukraine.

Normally, this spells bad news for Democrats in November, but it’s still early, and Republicans have proven very capable of snatching defeat from the jaws of victory.

ObamaCare will no doubt be a big issue and 58% say the new law is causing higher costs overall, while 47% say it will make the health-care system worse.

The polling numbers from an NBC News/Wall Street Journal survey showed Obama’s approval rating actually rose from a low of 41% in March to 44% in April.

In this one, only 38% approve of the president’s foreign policy, while on the ObamaCare front, just 36% approve of the law, 46% are against.

--Jennifer Rubin / Washington Post…on the impact of the likes of Cliven Bundy.

“When right-wing politicians and extreme libertarians embrace an anti-government vision, they reduce the appeal of their message to a narrow subset of the electorate. It is impossible to expand the party to take in more African American and Hispanic voters, let alone retain middle-class moderates, with a paranoid vision of government. The purveyors of the anti-government message do not breed confidence with voters. (The reaction to the shutdown demonstrated the public’s lack of patience for those who delighted in disabling government.) To the contrary, they scare off all but the true believers and do harm to their party and the conservative movement, which is blemished by the worst characteristics of the most extreme right-wingers.

“Mainstream conservatives and the GOP as a whole should shun not only the Bundys out there, but also the politicians and media figures who defend them. If they can’t tell right away that Bundy is a nut, Snowden is a traitor and a ‘Southern Avenger’ is a racist, do we really think they will get the big questions and tough calls right?”

--F.H. Buckley, a George Mason University law professor, in an op-ed for USA TODAY.

“The idea that President Obama acts as if he is the king of the United States or a tyrant, instead of president, has become a cliché over the past five year. While to many Americans, the idea may seem over the top, it has deep roots in the American consciousness. Many Americans have long thought our Revolution simply replaced one despot with another. We moved from King George III to (insert the president of the day).

“Unlike real kings, American presidents are elected, but they nevertheless enjoy powers a king would envy. George Mason, who declined to sign our Constitution in 1787, predicted this. He said U.S. presidents would be ‘elected monarchs.’….

“(Think, for example) of the difference between the president’s ability to avoid scrutiny and the prime minister’s duty to attend parliament to answer questions thrown from every direction. The American system produces one kind of leader and parliamentary government, something different, quick on his feet and accustomed to brickbats and ridicule.

“Finally, there’s a difference between a parliamentary system that separates the head of state (the queen) from the head of government (the prime minister) and a presidential system that unites both in the president. Politicians should be figures of ridicule and not of royal reverence.

“Should we be surprised, then, if presidents make laws by regulatory diktat, unmake laws by refusing to enforce them, or make wars when they want? It’s in the nature of things in a presidential system. It is what happens when a president pokes his head through what was thought an impenetrable wall. It’s dangerous, and we must hope for a revival of congressional power that seals up the wall again. That’s what the Framers would have wanted.”

--According to the New York Daily News, “The FBI probe of last year’s (New York City) mayoral race has expanded to Mayor de Blasio’s campaign pledge to ban carriage horses…

“FBI agents have been questioning people about the pledge, which was made in March 2013, and the ad blitz launched the next month by animal rights advocates attacking de Blasio’s chief rival, Christine Quinn, two sources familiar with the investigation said.

“FBI agents also appear highly interested in a $175,000 contribution by a union tied to de Blasio’s cousin, labor leader John Wilhelm, to the animal rights group NYCLASS, the sources said.

“NYCLASS helped to bankroll the ‘Anybody But Quinn’ campaign attacking Quinn’s mayoral candidacy.”

Quinn refused to support the carriage ban. Your editor supported Quinn, who would have been the kind of pragmatic mayor the city needs.

We’re talking right after she reiterated her position, some figures gave contributions in excess of $200,000 to NYCLASS! [Greg B. Smith / New York Daily News]

--According to Brooklyn U.S. Attorney Loretta Lynch, New York Republican Congressman Michael Grimm “deliberately lied to every taxing authority to evade taxes and keep more money for himself” by paying workers at his Manhattan restaurant off the books, part of a 20-count indictment. Allegedly he hid more than $1 million in earnings by underreporting workers’ wages, many of whom were employed illegally. 

Grimm is the only Republican member of New York City’s congressional delegation and the indictment is going to make it far harder to retain the seat in November, Grimm vowing to carry on.

Previously, Grimm was investigated by the House ethics committee over whether he solicited and accepted prohibited contributions, among other things.

Grimm, who is just a creepy guy and in my mind not a good person (who hides behind the fact he is an ex-Marine and FBI agent), told reporters after he was released on $400,000 bail that it’s all a “vendetta” and “political witch hunt.”

But this is the guy who gained national attention for physically threatening a television reporter who asked him about the federal investigation into his campaign.

Grimm is one of scores of New York politicians, from both parties (and even third parties), who have been indicted over just the past year. As the New York Post opined:

“Male and female, black and white, Asian and Latino, Republican and Democrat – few have been left untainted. Somehow we suspect this is not what then-Mayor David Dinkins meant when he extolled New York’s ‘gorgeous mosaic’ of diversity.

“So while Rep. Grimm may be entitled to the presumption of innocence, we sure can’t say the same for New York politics.”

--Matea Gold of the Washington Post had an interesting, distressing, piece on campaign funding. According to analysis of data by the Sunlight Foundation, of the $37.5 million spent by the PACs of six major tea party organizations, “less than $7 million has been devoted to directly helping candidates….

“Roughly half of the money – nearly $18 million – has gone to pay for fundraising and direct mail, largely provided by Washington-area firms. Meanwhile, tea party leaders and their family members have been paid hundreds of thousands of dollars in consulting fees, while their groups have doled out large sums for airfare, a retirement plan and even interior decorating.”

For example, President Jenny Beth Martin of Tea Party Patriots vowed to support Matt Bevin, the underdog conservative challenger trying to unseat Senate Republican leader Mitch McConnell, but so far her group has “mustered just $56,000 worth of mailers in Kentucky on Bevin’s behalf – less than half the amount it has paid Martin in consulting fees since July.”

Unreal. Furthermore, Martin sets her own consulting fee, $15,000 a month for “strategic consulting,” thus the $120,000 since July, yet she also draws a salary as president of the Tea Party Patriots’ nonprofit arm – getting more than $272,000 in the 2012 fiscal year, according to the group’s most recent tax filing.

But wait…there’s more!

“Another top Tea Party Patriots official, national finance director Richard Norman, is paid $15,000 a month to oversee fundraising for the nonprofit and super PAC. At the same time, the group’s two affiliates have paid three direct mail firms run by Norman at least $2.7 million since June 2012 to help solicit funds for the groups, according to public records.”

It just makes you want to throw up all over Sean Hannity’s studio.

--I concur with NBA Commissioner Adam Silver’s decision to ban Los Angeles Clippers’ owner Donald Sterling for life (while being fined the maximum allowed, $2.5 million, under the NBA’s by-laws), and the owners seem unanimous in agreement that they’ll do their part in voting to force Sterling to sell the franchise as soon as possible, though it’s not known how aggressively Sterling will fight to retain it.

But it certainly was ‘rich’ that Al Sharpton commented on Monday, the day before Silver’s ruling, that he was “totally outraged” the NBA hadn’t disciplined Clippers owner Donald Sterling. Sharpton was outraged “they are stalling on this.”

Oh brother. But then what else would you expect charlatan Sharpton to say? It’s called “due process,” Reverend. And of course the NBA acted with unbelievable speed. 

I also hope certain parties out there understand that this move against Sterling and his ilk cuts both ways. At least it should. I don’t feel like I need to say anymore on the topic.

Then again, as President Obama said, just let the ignorant run their mouths to expose themselves. So Democratic Mississippi Congressman Bennie Thompson called Justice Clarence Thomas an “Uncle Tom,” saying his positions on the high court “have been adverse to the minority community.”

--There is good news on the education front. The National Center for Education Statistics and the U.S. Department of Education said the overall high school graduation rate has risen from 73% in 2006 to 81% in 2012. The experts think it could hit 90% by 2020.

Across the country, the graduation rates remain lower for minority students: 76% for Latinos and 68% for black students

--Applications to New York City charter schools hit a new record, 212,000, though with multiple applications filed by students it was really 70,700 students trying to get one of 21,000 openings, still a record…message sent.

--Last I saw, Mayor de Blasio did reach an agreement with New York’s teachers union, who had been working with an expired contract since 2009. They are to receive an 8% raise retroactively and annual 2% raises to 2018. It’s the retroactive part that former Mayor Bloomberg knew would break the bank. 

--The World Health Organization reiterated the problem of antibiotic overuse and the issue of antibiotic resistance, calling it now a “global emergency.” Even common urinary tract infections easily cured with antibiotics until today can be fatal as current medicines used are ineffective in as many as 70% of patients.

Hospital caused acquired infections with multi-resistant bacteria kill 80,000 a year in China and 23,000 in the United States.

--I saw guys in a bar here putting drops of something through their e-cig delivery system and thought ‘that can’t be good.’ Minutes later they seemed unusually happy.

--Other random musings from Paris…I was at a crosswalk at the Place de la Concorde and this Chinese gentleman turns to his side and spits at my feet, a favorite pastime of these people. He missed my shoes by an inch, whereupon I immediately turned to look behind him and assumed it was his wife, who got a glance from moi that I hoped pierced her skull. As in, tell your damn  husband that is not accepted behavior in the Western world. [I guess unless you’re Tiger Woods.]

Of course it was the Chinese mother about a year ago who was famously caught on video (as I wrote in this space) allowing her kid to piss in a garbage can at an upscale shopping mall in Vancouver.

So, yeah, people are jerks.

But I did notice a ton of beautiful women from Romania and Serbia here…more so than I’ve seen before.

And a lot of older Vietnamese women with old white guys…a vestige of the war, no doubt.

I hung out at an Irish pub near my hotel, Carr’s, two nights, and met some great people there; one a bartender from Scotland so we talked Scottish independence for a bit. Sean Connery is a big nationalist but was not well-liked for living most of the time in Los Angeles.

One fellow I met helped chaperone Bill Clinton on a trip through Ireland and he said a year later he was standing in the back of a room filled with people when Clinton, making a return trip, spotted Aidan and immediately made a beeline for him to thank him. As Aidan said, his people skills are unbelievable.

Another bartender at Carr’s did something I thought was way cool from a historical perspective…he once served Yassir Arafat during a formal dinner.

Hey, I’m the guy who traveled here to see Marine Le Pen, even though I don’t agree with her on much at all. Martin, the bartender, served Arafat probably about a year before he died. He didn’t drink and was very polite, were Martin’s impressions.

Shout out to Rachel, from Carr’s….Rachel had just arrived from Spain. Cool, confident girl who will go far.

--Given the probable need to get off this planet at some point, Elon Musk, founder of SpaceX, among other things, announced his rocket maker is close to making a reusable rocket – the “holy grail in rocketry,” as W.J. Hennigan phrased it in the Los Angeles Times.

Musk also said SpaceX was filing suit against the U.S. Air Force to open up competition in rocket launches. SpaceX is already delivering supplies to the International Space Station for NASA.

Needless to say, a reusable system could save $billions. The issue with the U.S. government, as opposed to SpaceX’s existing contract with NASA, involves the launching of sophisticated satellites. Boeing and Lockheed Martin – operating jointly as United Launch Alliance – have a monopoly on spy and weather satellites and such.

Separately, I watched “Gravity” again on my flight to Paris and Sandra Bullock makes it back safely a second time, seemingly to Borneo, while George Clooney heads to Mars, yet he still announced he was getting engaged this week to an attractive attorney, which means he at least reestablished communication with NASA.

--Finally, I’m going with California Chrome in the Derby. I had a split with my handicapper, J. Mac, who is taking Intense Holiday. 

---

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

God bless America.

---

Gold closed at $1302
Oil $99.76

Returns for the week 4/28-5/2

Dow Jones +0.9% [16512]
S&P 500 +1.0% [1881]
S&P MidCap +1.1%
Russell 2000 +0.5%
Nasdaq +1.2% [4123]

Returns for the period 1/1/14-5/2/14

Dow Jones -0.4%
S&P 500 +1.8%
S&P MidCap +1.4%
Russell 2000 -3.0%
Nasdaq -1.3%

Bulls 51.6
Bears 21.7 [Source: Investors Intelligence]

Have a great week. I appreciate your support.

I know I’ve left out some things. I’ll fill in the blanks next time.

Brian Trumbore



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Week in Review

05/03/2014

For the week 4/28-5/2

[Posted from Paris, France…2:00 AM ET, Saturday]

Edition 786

Washington and Wall Street

It was an interesting week for data on the U.S. economy, beginning with the preliminary figure on first-quarter GDP which was expected to rise about 1.0% and instead came in at just 0.1%, after growing 2.6%, annualized, in the fourth quarter. Of course it was all about the weather, and deservedly so for this was truly about the worst winter, in terms of both storms and temperature, that your editor can remember. It was even cold all throughout March, but I got a kick out of those economists who pooh-poohed the weather and its potential impact on GDP who were then on Wednesday morning going, “Oh, I told you it was a bad winter and that the impact would be severe!” Right. You liars know who you are.

But the Federal Reserve looked at the data and didn’t blink as it wrapped up a two-day meeting of the Open Market Committee and continued its tapering program to the tune of another $10 billion, now down to $45 billion a month of purchases of mortgage-backed and U.S. Treasuries vs. an initial $85 billion.

The Fed said in its accompanying statement that “Growth in economic activity has picked up recently after having slowed sharply during the winter in part because of adverse weather conditions.”

Yup, it was official. Winter sucked! And the Fed was also saying it expected second-quarter GDP to come in at the 2.5% to 3.0% level most economists see it at. Chair Janet Yellen and Co. also said they would continue to pare back the bond-buying, while reiterating the benchmark funds rate would be held near zero for a “considerable time” after bond purchases end.

This last statement, while a repeat of previous Fed missives, was important when one then looked at Friday’s jobs report for April as the unemployment rate plummeted from 6.7% to 6.3% (the lowest since Sept. 2008), or below the 6.5% threshold that the Fed long ago said would be the point where it would consider lowering interest rates, only a few months ago the Fed said this would no longer be a determining figure…that it was more touchy-feely, and more about whether the inflation rate was rising above its stated 2.0% target rather than the roughly 1.0% that is currently the case.

Moreover, while the U.S. economy added a very solid, and well above consensus, 288,000 jobs, the most since January 2012, the labor participation rate fell back to 62.8%, the lowest since 1978, as there was a sharp decline in the labor force of 806,000. More have given up looking for work, while at the same time more are working part-time. That said, the broader indicator of unemployment, U6, which looks at ‘underemployment,’ did fall commensurately from 12.7% to 12.3% and that’s good. But another key Fed figure, average hourly earnings, remained unchanged for the month of April and is up just 1.9% the past year. Hardly the stuff of great recoveries and yet another reason why the Fed is maintaining rates at zero, as much as some of us feel this has been a massive hindrance for growth and verging on criminal when it comes to the nation’s savers, particularly the elderly.

But back to the first-quarter GDP report, at least consumer spending for the first three months of the year was up big, even as business spending was down 2.8%, the weakest performance since Q4 2009. Manufacturing figures from both the Chicago PMI (63.0) and the national ISM reading (54.9) were above consensus, well above in the case of the former.

And then March personal income, up 0.5%, and consumption, up 0.9%, the best in five years, were solid, while construction spending, up 0.2%, and factory orders for the month, up 1.1%, were below expectations.

Lastly on the data front, the latest on home ownership pegs it at 64.8% of families, down from the peak of 68.9% in 2006 and 65.2% at the end of 2013 despite two years of recovery in the housing market.

Europe and Asia

It was a big week for the eurozone as well as inflation data for the EA18 in the month of April showed consumer prices rose 0.7%, according to the flash estimate from Eurostat, which was better than March’s 0.5% annual rate. Which means that the European Central Bank is unlikely to lower its benchmark rate from 0.25% to 0.00% when it gathers next week because the ECB is loath to act; ECB President Mario Draghi having expressed the opinion on many an occasion that he doesn’t see deflation as being in the cards and the slight improvement in the April number gives him an excuse to wait another month, until June, before forcing the issue. Plus, while Draghi has stated he would do what it takes to ensure price stability, as in the ECB’s own round of quantitative easing, this is nowhere near as easy as the U.S. Federal Reserve had it since you have 18 nations in the eurozone, not one nation under God, indivisible, with liberty and justice for all as is the case here. In other words, it isn’t that simple in Europe.

Separately, the unemployment rate for the eurozone in March was unchanged at 11.8%, the same level as December and just a slight improvement over the past 12 months from the peak in March 2013 of 12.0%.

The unemployment rate was 5.1% in Germany (the German government calculates it differently and their figure is around 6.8% if I remember correctly), while unemployment is 10.4% in France (unchanged over the past year), 12.7% in Italy (up from 12.0% a year ago), 25.3% in Spain (down from 26.3%) and 26.7% in Greece (which is for January). I do have to note that Ireland’s jobless rate has fallen from 13.7% to 11.8% over the past year, but then many of the folks there, particularly the young, have simply left the country.

As for the youth unemployment picture, it remains incredibly sickly in the likes of Spain, 53.9%, Greece, 56.8%, and Italy, 42.7%.

Yet on Friday, Spain’s 10-year government bond traded with a yield below 3.00% (2.98%) for the first time since 2005, while Italy’s 10-year paper had a yield of 3.05%. Flat-out stupid. Sell!

As for the U.K., its manufacturing index (PMI) for April came in at a strong 57.3 vs. 55.8 in March, while first-quarter GDP rose 0.8% over the previous three months, or 3.1% on an annualized basis. Not bad…not bad at all.  Britain is now back within 0.6% of their peak GDP level of 2008 following the Great Recession.

But home-price growth there continued to scream higher, up another 1.2% in April over March and 10.9% year over year, the biggest gain since June 2007. The Bank of England on Friday warned of a crash in housing. It’s insane in the U.K., driven now by Ukrainian and Russian oligarchs desperately looking to park their assets in something outside their native lands and London real estate is the easiest choice. But I saw where a Ukrainian bought a Hyde Park flat for a record, brace yourself, over $200 million! Yup, roll out Lawrence Welk’s bubble machine.

One other item before I get to why I am in Paris; corporate earnings in Europe have been downgraded again by Thomson Reuters as its 2014 consensus reading have moved from up 13% at the start of the year to up 8%. Despite the ever-rising equity markets in Europe, the fundamentals simply don’t justify the performance in the indexes and to beat a dead horse, this is where Ukraine is critical in shaping confidence, both from a consumer and capital spending standpoint.

So I came to Paris to see Front National (National Front) leader Marine Le Pen give her annual May Day speech. I saw it while I was here three years ago and while I don’t expect all of you to understand, from a pure political science nature it is great theater and these days of major importance as we approach the European Parliament elections, May 22-25, with France's May 25.

Yes, the FN is far right, and its founder, Marine’s father, Jean-Marie Le Pen, was (and I’m assuming still is) a virulent racist, anti-Semite, who in 2002 actually qualified for the run-off to be France’s next president before getting his butt kicked 82-18 percent by Jacques Chirac.

Well his daughter Marine has been successful in moderating the FN’s message and now it’s just virulently anti-immigrant, protectionist, nationalistic, anti-Elitist and anti-European Union. It wants a France that is for the French. As Marine likes to say these days, “We have five million unemployed in this country, why do we need immigration?!”

And: “We want to assert our right to national priority. People want to live like French people in France, not like Saudis or Qataris.” Le Pen calls the European Union the “Soviet Union of Europe,” and she also labels current French President Hollande and his cabinet nothing but “donkeys.”

Joan of Arc is the inspiration for Marine and the National Front but whereas three years ago she gave her May Day speech at Joan of Arc Square, near the Louvre, this year with her legions swelling she and her father, a spry 85 years old, marched up to the Opera House after laying a bouquet at the statue of Joan of Arc (a symbol of liberation from English domination) and I was five feet away among the throng of thousands.

I am not a supporter of the FN, but if you have any interest in European politics, and the rise of the far right that I’ve written of for years, you have to understand that it exists, and, should the European economy not grow at a rate strong enough to finally tackle the continent’s severe unemployment problem, the far right, especially in the likes of France, the Netherlands, Denmark, Greece, Austria and the U.K. will continue to grow its ranks.

Each nation, though, is different. Obviously, Austria and the U.K. don’t have the unemployment issue some of the other nations above have, but they all share one common denominator…a fear of immigrants.

Marine Le Pen is a striking, 45-year-old, charismatic mother of three (twice divorced) who has been attempting to rally her far-right brethren from around Europe ahead of the Euro Parliament elections with mixed success. For example, her best partner is probably the Netherlands’ Geert Wilders and his Party for Freedom (PVV), which is virulently anti-Muslim, but also pro-gay rights, while Le Pen isn’t for the latter, so you have an issue there.

And she has tried to build an alliance with U.K. Independence Party leader Nigel Farage (who is said to be able to down a pint with the best of ‘em), but he won’t associate with Le Pen because he says the FN is still far too racist, that anti-Semitism is “in the DNA of the Party,” as he’s put it. It’s kind of ironic Farage accuses the FN of being too racist because he himself is accused of the same with his campaign literature ahead of the vote.

Neither Le Pen or Wilders (or Farage for that matter) will associate with the continent’s worst far-right parties that actually hold seats in their respective parliaments, that being Hungary’s Jobbik Party and Greece’s Golden Dawn.

But, again, what all of the above agree on in one respect or another is that there is too much immigration in their countries and they don’t want Brussels, the European Union, telling their nation what to do… “euroscepticism.”

As for Le Pen, as I walked alongside this incredibly civilized crowd up to the Opera House, a big banner came into view… “Non a Bruxelle…Oui a la France.” No to Brussels. Yes to France.

Thankfully, the rain that was forecast held off until she began to speak and while I know a smattering of French, of course I depended on news reports later. Le Pen said:

“Our country has the most urgent need to once again become its own master…It is essential to vote…don’t disappoint me!”

The main message was, “The destiny of this country is being decided in Brussels.” I could tell when she was saying this because everyone then responded with “Booo!”

Yes, I’m guessing I was the only American there. I certainly didn’t see any. But I did miss something I only learned of after. At one point I heard a commotion behind me, turned around but could only see a lot of crowd movement and couldn’t see what was actually happening so I just turned back to Marine. It turns out it was a bunch of bare-chested women, “Femen,” who were shouting “Fascist Epidemic” before they were led away. From the looks of one whose picture I saw later, I didn’t miss anything.

The European Parliament has 751 seats for the 28 states in the European Union and while parliament cannot propose new laws and has only limited say over the EU’s budget, parliament’s approval for all major EU legislation is needed and this is where the far-right can make some major noise, especially if, collectively, they get about 20% of the vote, which some think is possible.

Currently, Farage’s UKIP has 9 of Britain’s 73 seats, but Le Pen’s FN has only 3. That’s before the FN’s solid performance in France’s local elections where the National Front for the first time picked up the mayoralties in 11 towns and cities, while a coalition partner picked up another three. [All 14 were introduced on stage, Thursday.]

So we’ll see what happens. Farage is one to watch as he’s making big inroads among conservatives in Britain and is polling ahead of David Cameron…who just happens to be prime minister.

Le Pen would actually defeat Francois Hollande in a run-off herself if it were held today, according to French pollsters, but she would lose to whoever the UMP (Nicolas Sarkozy’s party) put up.

As The Economist put it early in the year:

“The contest in May 2014 will be different. The crisis of the eurozone matters to voters – be it debtor states such as Greece, creditor states such as Finland or non-euro countries like Britain. Eurocrats are intruding deeply into the economies of the eurozone, raising profound questions about democracy. So the ballot will be an important test of faith in the European project….

“Populist, anti-immigrant and extreme parties of all stripes, often united only in their hatred of the EU, will make gains. The real question is how strong they will be…. The Freedom Party of Geert Wilders, the National Front of Marine Le Pen and the U.K. Independence Party led by Nigel Farage may top the ballots in their countries. The Finns Party and the Alternative for Germany will do well, too.”

In three weeks there is a chance, even if but a small one, that the European Union will be rocked to its core. I came to Paris just to get a better sense myself of the attitudes and a look at who is supporting the far right these days.

Next week, why the movement is in some ways allied with Vladimir Putin. And this is not good at all.

Finally, turning to Asia, in China, Premier Li Keqiang said his country will implement measures to stabilize the “severe and complicated” foreign-trade situation, recognizing “arduous efforts” are needed to meet China’s full-year target of growth around 7.3%. The government reported the April PMI on manufacturing came in at 50.4 vs. 50.3 in March. Regardless of how much this number was manipulated, it’s not good. A reading on the service sector was better, 54.8 vs. 54.5 the prior month.

And in Japan, retail sales rose 11% in March from a year ago, the most since March 1997, as purchases were made ahead of the sales-tax hike from 5% to 8%. The government of Prime Minister Shinzo Abe initiated the tax increase in an attempt to prove to international market participants that it is serious about dealing with its crushing public debt load that is 230% of GDP, most in the developed world.

Street Bytes

--Stocks rallied, thus continuing a recent pattern of up, down, up, down, up weeks, with the Dow Jones advancing 0.9% to 16512, after hitting a record of 16580 earlier. The S&P 500, up 1.0%, fell short of its record of 1890 in closing at 1881. Nasdaq gained 1.2%.

--According to a study by Bankrate, 73% of Americans across all age groups and income levels say they are not more inclined to invest in stocks even after a five-year bull market, or basically unchanged from 76% in April 2012 and April 2013.

--U.S. Treasury Yields

6-mo. 0.04% 2-yr. 0.42% 10-yr. 2.58% 30-yr. 3.37%

Wild day on Friday as the yield on the 10-year rose to 2.69% in an initial response to the strong jobs report, but then cratered later in the day on a flight to safety ahead of the weekend with the deteriorating picture in Ukraine.

--In a huge win for the Obama administration, the Supreme Court ruled 6 to 2 (Judge Alito recusing himself) to uphold the Environmental Protection Agency’s authority to regulate pollution from coal-fired power plants in the Midwest and Appalachia that impacts the air quality of states on the East Coast.

This is a centerpiece of the president’s environmental agenda which Republicans and the coal industry have criticized as being a “war on coal.”

In writing the majority opinion, Justice Ginsburg said, in part, that in controlling air pollution it’s about the wind.

“Some pollutants stay within upwind states’ borders, the wind carries others to downwind states, and some subset of that group drifts to states without air quality problems.”

The utilities and 15 states on the other side of the issue argued the EPA had too much authority and placed an unfair economic burden on the polluting states.

In dissent, Justice Scalia (joined by Justice Thomas), said the regulation, as written, will require upwind polluting states to cut pollution in relation to the amounts of pollution each state produces, but also as a proportion of how affordably a state can make the cuts. Or, those who can afford it have to cut more pollution. Scalia quoted from Karl Marx’s “Communist Manifesto”:

“Indeed (such) calculation can be performed at the desk, whereas the ‘from each according to its ability’ approach requires the unwieldy field examination of many pollution-producing sources with many sorts of equipment.”

To comply, the utilities have to either add expensive pollution control equipment or simply shut them down. 

It has not been a good stretch for the coal industry, and just when it thought exporting to China could be a savior, the government in Beijing recognizes it must do more immediately to kill its own coal-fired plants.

--Bank of America had won approval a few weeks ago for its capital plans, including the first dividend increase since the crisis, but on Monday, BofA announced it had to suspend its buyback and planned dividend hike after discovering an error in how it calculated its capital ratios. It was a horrible $4 billion mistake.

As the Financial Times’ Lex column put it:

“The bank’s treatment of certain structured notes assumed as part of the 2009 acquisition of Merrill Lynch was incorrect. And key metrics for measuring its capital are lower than previously thought. Its Basel III, tier 1 common equity ratio, for example, had to be revised, falling 27 basis points to 9 percent as of the end of the first quarter. That still surpassed the 8.5 percent minimum required for BofA…(but) the Fed told BofA to halt its recently approved capital plans…BofA will have to resubmit.”

Bank of America shares were whacked to the tune of 6.3 percent on the news to $14.95, but recovered some the rest of the week and finished at $15.22.

One of BofA’s top 10 shareholders told the Financial Times: “It’s frustrating, unfortunate, it’s a stupid mistake, should have never happened. But that combined with all of BofA’s legal and regulatory headlines over the past five years, and even this year to date, it’s quite unbelievable – it’s never-ending.”

Granted, the impact on BofA’s earnings is going to be marginal, but “The more enduring ramification of this blunder is that it could make both BofA and regulators more cautious about the bank’s future capital plans. Citigroup failed to win consent this year not for insufficient capital, but for an inadequate capital planning process. Clearly, banks’ procedures are as important to the Fed as the numbers themselves. And Bofa won approval only after resubmitting a revised plan. This year’s stress tests are proving to be more stressful than expected.” [FT]

The Wall Street Journal’s David Reilly asked the right question: “Too big to fail or just too complex to manage? Bank of America on Monday reminded investors it is easy for banking behemoths to be both….

“Given fears in recent years over its ability to survive multibillion-dollar legal charges tied to mortgage bonds, along with the rejection by the Federal Reserve in 2011 of its capital-return request, BofA has to constantly prove it isn’t an accident waiting to happen.”

By the way, when BofA purchased Merrill Lynch, it inherited $60 billion in structured notes that have since declined to a value of about $30 billion. Thus, as David Reilly puts it, “The sheer size of the amounts involved shows why the improper classification of some losses could lead to such a large dent.”

--Germany’s largest lender, Deutsche Bank AG, said first-quarter profits dropped 34% as revenue fell from 9.4 billion euro to 8.39 billion, owing to ongoing issues at its fixed-income unit, whose revenues fell 10%. While Deutsche Bank’s capital ratios are above the minimums, there are questions on its ability to raise capital without dilution to the common shareholders, this as the European Central Bank begins supervising Europe’s biggest banks this fall.

--Texas Gov. Rick Perry has been advertising on New York’s airwaves to get business to move to his state and the Republican has challenged New York’s Democratic Gov. Andrew Cuomo to a debate on who has the better business climate.

So Crain’s New York Business put together some facts. Such as:

Texas’ population increased 20.9% between 2000 and 2012, to 25 million. New York, meanwhile, gew 2.2% to 19.4 million.

77% of New York residents think they pay too much in state taxes. Just 39% of Texans do.

8.82%: Top New York income tax rate. New York corporations pay a flat rate of 7.1%. There are no income or corporate taxes in Texas, but companies pay a tax on gross receipts.

$19.1 billion: Value of tax breaks given to Texas corporations annually. Of the total, 78% goes toward sales-tax refunds and exemptions. New York businesses take in $1.82 billion in corporate income-tax credits, 44.8% of the total $4.06 billion business-incentive program.

The average GDP in New York is $62,000, compared with $54,000 in Texas.

Texas has seen a 10.5% growth in employment since 2009, to 12.2 million jobs. In the same time, New York has seen a 0.2% decrease in jobs, to 8.97 million. [Sources: Many]

--Well, at least New York State Comptroller Thomas DiNapoli said the booming tech sector is adding jobs three times faster than Gotham overall. The average tech salary in the city was $118,600 in 2012, almost 50% higher than the $79,500 average salary citywide.

--But back to taxes, Pfizer Inc. made a nearly $100 billion bid for the U.K.’s AstaZeneca Plc, that country’s second-biggest drugmaker, with the U.K. having a tax policy designed to attract research investment from abroad. Pfizer then raised the bid to $106 billion.

The U.K. has created incentives for the drugmakers that enables companies to apply a lower corporate tax rate to profits from patents, so, for example, AstraZeneca rival GlaxoSmithKline built its first U.K. facility in almost four decades and now Pfizer, if it pulls off the deal, would domicile itself in the U.K. for what would be the world’s largest pharmaceutical company.

But on Friday, AstraZeneca said its board turned the sweetened offer by Pfizer down because the former said it “substantially undervalued” the company. This is far from over. Pfizer wants to do a deal amicably but could turn hostile and go directly to shareholders.

--At the same time, General Electric made a bid for the energy assets of France’s Alstom SA, the company that built the French power grid, as well as manufacturing the country’s signature bullet trains, the TGVs. GE has a longstanding business relationship in France and CEO Jeffrey Immelt met this week with French officials, including President Francois Hollande, to discuss protecting Alstom’s 93,000 employees. [As an aside, as soon as my taxi from Charles De Gaulle Airport hit the highway the other day, the first two tractor trailers I saw were GE trucks.]

French officials, however, seem to favor a bid for Alstom by Germany’s Siemens AG. The government, just as is the case in the U.S., can step in to protect companies it deems of national interest.

Finance Minister Montebourg said: “GE and Alstom have their agenda, which is that of shareholders, but the French government has its own, which is that of economic sovereignty.”

--And now back to Texas…Toyota Motor Corp. is consolidating several of its units at a new headquarters in Plano, Texas, that will house 4,000 employees now scattered around the country. California is the biggest loser, with up to 3,000 jobs heading east. It’s all pretty simple. Torrance, California is too far from the automaker’s factories in Kentucky, Indiana, Mississippi and Texas.

So it’s another big coup for the Lone Star State, having won out in this case over Denver, Atlanta and Charlotte.

Back in 2006, Nissan moved its U.S. headquarters to Nashville from California. Honda Motor Co. is still headquartered in Los Angeles for U.S. sales and marketing and it said it has no plans to leave.

Oh, by the way, Texas offered Toyota an incentive of $10,000 a job to move…$40 million.

California Gov. Jerry Brown said: “We’ve got a few problems, we have lots of little burdens and regulations and taxes, but smart people figure out how to make it” in the state.

I’d add what no one else wants to…the growing realization that the Big One could be around the corner is seeping into the corporate psyche.

--Last year a U.S. Senate report said companies such as Apple paid little or no tax on tens of billions of euro in profits stashed in Irish subsidiaries.   This week it was learned that Oracle’s Irish unit paid 11 million euro in Irish taxes on 164.4 million in profits for 2013. Revenue was 7.24 billion euro. The company employs 1,100 in Ireland, 680 of whom are engaged in sales and marketing. [Irish Independent]

--Assuming Comcast is granted regulatory approval for its proposed takeover of Time Warner Cable, Comcast and Charter Communications would then close on a $20 billion deal that would involve Comcast, the United States’ largest cable operator, divesting itself of 3.9 million subscribers, or about 18% of its 22 million network. It then gets more complicated, including TWC’s network, but the bottom line is our cable bills will continue to skyrocket into the future.

--According to the American Customer Satisfaction Index, of the six major U.S. air carriers, JetBlue is No. 1, while United is No. 6.

--Governments around the world have advised computer users to use alternatives to Microsoft’s Internet Explorer browser until the company fixes a security flaw that hackers can exploit to launch attacks.

The Internet Explorer bug disclosed last weekend was the first high-profile computer threat to emerge since Microsoft said it was ending its support of Windows XP, ergo, computers running the 13-year-old operating system will remain unprotected, even after Microsoft releases updates to defend it.

I guess its versions 6 to 11 of IE that remain most vulnerable. The Department of Homeland Security’s U.S. Computer Emergency Readiness Team said in an advisory that the vulnerability could lead to “the complete compromise” of an affected system. Versions 6 to 11, according to NetMarketShare and Reuters, account for 55 percent of global market share.

One analyst told Reuters’ Jim Finkle to never use IE again if you have Windows XP.

On the other hand, this presents a sales opportunity for those hundreds of millions running XP to dump their machines for devices running something newer, including Apple’s Macs and iPads, as well as newer Windows machines.

However, late in the week Microsoft said it would send out a fix for the XP operating system, even though technically they no longer support it. That said, millions will still be looking to purchase newer devices.

--Warren Buffett named his son Howard, 59, to be the next chairman of Berkshire Hathaway upon Warren’s passing or incapacitation. Howard will have no investment management decision-making power but will ensure BH sticks to Warren’s stated culture and values.

Howard is a farmer, philanthropist and part-time deputy sheriff.

--LinkedIn issued poor guidance for future quarters after reporting revenue growth in the first quarter slowed for the fifth in a row. The shares tanked in response.

And shares in Twitter fell over 10% after the company reported only 14 million new users for the quarter, 255 million in total, up 25% from a year ago. The site’s big issue is how to keep users engaged.

EBay was another that saw its shares decline on poor guidance following its earnings report this week.

--Samsung reported a profit of $7.5 billion for the first quarter, though the company reported a 4% fall in sales at its mobile phone unit, thanks to increasing competition, which is forcing manufacturers to lower prices.

And I just saw where Samsung was ordered to pay Apple $119.6 million for infringing on two of its patents.

--Shanghai Disney Resort, Walt Disney Co. and its partners are kicking in an extra $800 million to the park’s $4 billion price tag, the new funds to be spent on additional attractions that will make it Disney’s second-largest park behind Orlando. Shanghai Disney is slated to open Dec. 31, 2015.

This is pretty incredible to think about. According to a Disney statement, the Shanghai resort will be located within a three-hour trip of “an income qualified population of 330 million people.” [Hugo Martin / Los Angeles Times]

--CNN is still cashing in on Malaysia Air flight 370 coverage, at least when it comes to its matchup against MSNBC. Fox News still dominates both but MSNBC has been sliding even more since MH370.

As reported by Bill Carter of the New York Times, in morning programming, “Fox and Friends” averaged 237,000 viewers in the key 25-54 age group recently vs. 119,000 for CNN’s “New Day” and 105,000 for MSNBC’s “Morning Joe.”

Before the plane disappeared, “Morning Joe” had a 127,000 to 79,000 lead over “New Day.”

For the month of April, in total viewers, Fox News had 988,000 per day to CNN’s 431,000 and MSNBC’s 362,000.

I watch CNN mostly from 4:00 PM to 6:00 PM, and then Fox in the evening (if I’m not watching sports). The rest of the time it’s either the first 15 minutes of the “Today Show” or CNBC. And I usually watch NBC “Nightly News,” simply out of habit since I was a little tyke.

Foreign Affairs

Ukraine: A few weeks ago, George Will quoted the late Washington state Senator Henry “Scoop” Jackson, who was a foreign policy hawk while a Democrat.

“The Soviet Union is like a burglar who goes down the hall and checks the doors to see if one is open.”

I can personally relate to the quote because in 1973, when I was in Moscow on a tour with my parents, I stayed in the hotel sick one day while my parents went out and the room phone kept ringing. I’d pick up and there would be a click. “Ring!” Click. “Ring!” Click. Of course the room attendant was looking to get in when no one was there and, sure enough, later in the visit items disappeared from my mother’s suitcase when all three of us were out.

And so it is that Russian President Vladimir Putin tried the door into Crimea, found it was open, and went in and took it. With amazing speed, and without a formal invasion, he is now doing the same in eastern and southern Ukraine. It is a sickening, dangerous, tragedy of immense proportions, as I sit here in France, which should have a memory or two from its not too distant past.

The situation worsens by the day, and it’s turning increasingly violent, with at least 34 dying in Odessa on Friday, 31 in a building fire, and others killed in disputed Slovyansk in the east, while President Obama and Angela Merkel met in Washington to discuss the issue.

This isn’t a traditional conflict. It has rapidly turned barbaric…kidnappings, hostage takings (such as the taking of the monitors for the Organization for Security and Cooperation in Europe, Russia being one of 57 nations that signed on to the OSCE, which helps mediate crises), storming of Ukrainian government buildings by armed militias and ‘separatists’ breaking up park stone walls for weapons.

By week’s end, 7 of the 8 OSCE monitors were still being held and some 50 hostages total in the town of Slovyansk, which Ukrainian government forces attempted to take back yesterday.

In Donetsk, the regional capital, Ukrainian riot police clashed with separatists and were humiliated on Thursday, unable to defend the state prosecutor’s office, forcing dozens of police guarding the building to surrender. The same day, two Ukrainian helicopters were shot down by the militants, killing two.

Earlier in the week, the United States announced a new series of sanctions targeting seven individuals and 17 companies linked to Putin’s inner circle, including the man I’ve written much of over the years, Igor Sechin, Rosneft CEO. They had their visas banned and any assets in the U.S. frozen, as well as company assets, but there will be no direct economic impact, and no real attempt was made at going after the wider Russian economy as the companies targeted do little business in the U.S. Nothing that hits Putin directly nor will change his behavior.

The next day the Europeans extended visa bans and asset freezes on 15 new targets, mostly those involved in events in Ukraine. Again, whoopty-damn-do. Trade between the EU and Russia amounted to almost $370 billion in 2012, while U.S. trade with Russia was only about $26 billion the same year, according to the New York Times.

For his part, Putin can retaliate against the likes of Exxon-Mobil and Pepsico, or BP, which has a 19.75 percent stake in Rosneft.

It doesn’t matter to Putin, as yet, that his economy is headed for recession and $60 billion in capital has fled his country. Instead, Russian Deputy Foreign Minister Ryabkov said Moscow’s response to the latest round of sanctions will be “painful for Washington.”

Oh, NATO initiated flights over the Baltics, and Canada (God bless our good neighbor) sent jets to be deployed in Romania, which is clearly a target of Putin’s down the road, and Vice President Joe Biden said the U.S. will defend its NATO allies “no ifs, ands or buts.”

Will we? Certainly the Obama administration track record in other foreign policy spheres argues otherwise.

And then you have the American people, 47% of whom, in an NBC News/Wall Street Journal survey, said the U.S. should take a less active role in world affairs, though only 37% support Obama’s handling of the Ukrainian crisis.

In a Pew/USA TODAY poll, 53% of Americans were in favor of stepping up economic sanctions (the survey taken prior to Monday’s announcement of same), but 62% said they were opposed to sending arms or military aid to Ukraine. Less than a third, 31%, said that what happened between Russia and Ukraine was “very important” to the United States; 36% said events there were “somewhat important.”

The IMF came to Ukraine’s rescue in approving $17 billion in loans, with an immediate disbursement of $3.2 billion, but it has to feel like it’s sending money down a rathole. After all, Ukraine is already being carved up. The southeastern part of the country is in a state of chaos and anarchy (and now Odessa in the southwest). The government in Kiev has virtually zero control anywhere. Ukraine’s economy will only worsen until the political situation stabilizes and, instead, it only gets worse and threatens to spread far beyond this now forsaken land.

So it was that on Thursday, in a phone conversation with German Chancellor Angela Merkel, according to an Interfax release: “Putin emphasized that it was imperative today (for Ukraine) to withdraw all military units from the southeastern regions, stop the violence and immediately launch a broad national dialogue as part of the constitutional reform process involving all regions and political forces.”

Unbelievable. Acting Ukrainian President Oleksandr V. Turchnyov conceded this week that a significant chunk of his country was already under separatist control. He also said he was reinstating military conscription while conceding Ukraine’s security forces have been plagued by “inactivity, helplessness and even criminal betrayal. It is hard to accept but it’s the truth. The majority of law enforcers in the east are incapable of performing their duties.”

Yes, Ukraine thinks it is still going to hold a presidential election on May 25, but Putin is masterfully doing everything he can to destabilize nearly half the country. He will thus be able to declare that any results should be null and void because much of the southeast will clearly not take part, and/or he’ll claim those doing so were harassed, beaten and tortured…because that’s what ex-KGB guys do. This week the Russian Foreign Ministry office blasted Ukraine for even considering a vote.

There will be no mediation, except under Putin’s terms. He’ll continue to demand constitutional changes that divide Ukraine permanently and then Ukraine will be in no position to really run into the arms of the European Union and NATO because both will wonder not only what they’re really dealing with, but when will Putin move to swallow the rest? He’s seen the ineffectiveness of Ukraine’s security forces. How much resistance would he get marching on Kiev? [This is also where Moldova’s breakaway Transnistria becomes critical as taking this, which already has 1,400 Russian troops there, pressures Ukraine from the West, and the road to Transnistria begins in Odessa.]

Friday, Obama and Merkel agreed that if Russia impedes the May 25 vote, then it will be subjected to further sanctions. 

For its part, in light of Friday’s events, Russia called an emergency meeting of the UN Security Council, declaring Ukraine’s offensive in Slovyansk to be an act against its own people that is “leading Ukraine to catastrophe.” Putin has his pretext for launching a full invasion.

Meanwhile, as Russia held its first May Day parade on Red Square for the first time since the collapse of the Soviet Union (with banners that read “In Putin We Trust” and “We’re Going to Vacation in Crimea”), the Kremlin announced it is holding a huge military parade on May 9, the 69th anniversary of Victory Day, the defeat of Nazi Germany. Putin is going to give a speech. Look out.

Opinion….

Sens. John McCain, John Barrasso, John Hoeven and Ron Johnson / Washington Post

“Western countries had high hopes for our relationships with Russia after the Cold War and acted on that basis. We provided billions of dollars to help Russia’s transition from communism. We created new mechanisms for consultation. We expanded trade. NATO committed not to deploy significant military capabilities onto the territory of new alliance allies, even as it expanded. In short, the West sought to include Russia in the promise of a Europe whole, free and at peace – a vision we still believe would benefit all participants.

“Unfortunately, hope of a constructive relationship with Russia under Putin has vanished. A friendly rival has become, at best, an unfriendly adversary. Putin will not compromise his quest to dominate Russia’s sovereign neighbors (not least as a cynical way to build support at home for his corrupt and autocratic rule)….Western weakness emboldens Putin. The only thing he respects, and that can change his calculus, is greater strength.

“We must make policy on this basis. In the short term, the United States must expand sanctions to major Russian banks, energy companies and other sectors of Russia’s economy – such as the arms industry – that serves as instruments of Putin’s foreign policy….Some of our European allies may hope to avoid tough sanctions, but weak measures will not stop Putin, and the costs of doing so will only grow with time….

“NATO must recommit to its core missions of deterrence and collective defense. This requires a rebalancing of the alliance’s force posture and presence….including a more robust and persistent presence in Central Europe and the Baltic countries….

“Another fact repeatedly highlighted during our trip [to the Baltics, Norway and Moldova] is that Putin is winning the war of ideas among Russian-speaking peoples in the former Soviet Union. Putin’s propaganda rests on lies, but it is effective and hardly refuted. We have all but given up on communicating the truth, in Russian, to Europe’s Russian-speaking populations. This needs to change, and the old state-run public diplomacy is not necessarily the answer….

“The United States and Europe did not seek, or deserve, this challenge from Putin’s Russia. But we must rise to it all the same. Our shared interests and values depend on our resolve.”

Editorial / Washington Post

“When (Boris) Yeltsin died, seven years ago last week, it was observed correctly that he had given rise to a society freer than any in Russian history.

“But his successor, Mr. Putin, and Mr. Putin’s friends are working overtime to dismantle this legacy, and therein lies a second tragedy of the Ukraine coercion. In the hysteria, Mr. Putin continues to tighten the noose. On April 22, (Alexei) Navalny, now an opposition leader, was hit with a court ruling that he libeled a governing party politician, which he denied and which appeared to be another in a string of politically motivated efforts to silence him. The same day, the State Duma voted to approve a bill that requires bloggers who have more than 3,000 readers to register with the state as a formal news organization and follow Russia’s restrictive press law. According to a dispatch from Post correspondent Will Englund, other legislation would make it a crime punishable by five years in prison to take part in an unsanctioned protest or to publish information that puts the government or military in an unfavorable light. Equally as disturbing, Mr. Englund described reports that Russian authorities are planning to restrict travel abroad, as was done often in Soviet times.

“The rollback of democracy is not a new story…And, hopefully, the United States will do more to help (the younger generation and opposition) get the information that Mr. Putin does not want to hear.”

Editorial / Wall Street Journal

“The beginning of strategic wisdom is to understand that Mr. Putin’s Russia is not a status quo power with a few territorial grievances. It is an authoritarian regime bent on rewriting the rules of post-Cold War Europe. Lacking democratic legitimacy and with an economy dependent mainly on fossil-fuel exports, the Kremlin must employ an increasingly virulent nationalism and foreign conquest to maintain power. Expansionism and foreign meddling aren’t limited to historic claims. They are central to the regime’s survival and if unchecked will continue beyond Ukraine.

“While the U.S. talked disarmament, and Western Europe practiced it, Russia has also upgraded its military. The Brookings Institution estimates that the Kremlin has increased military spending by 79% in the last decade, and Russian operations in Crimea impressed Western observers with their stealth and coordination. Russia is developing new mid-range nuclear missiles that could be targeted at Western Europe, in clear violation of the 1987 INF Treaty. Like France and Britain after World War I and the illusions of the 1920s, Western Europe is asleep while its adversary is rapidly re-arming.

“A coherent response has to start by talking honestly about the nature of the Putin regime. The Kremlin promotes through its domestic media an anti-Americanism that is as vicious as anything that came out of the Soviet Union. In its telling the U.S. is promoting fascism and seeks political domination in Europe. Mr. Putin’s propaganda campaign has become uglier as his domestic political control has tightened. Western leaders need to tell the truth about all this so their citizens, wary of foreign entanglements, begin to comprehend the threat.”

John Vinocur / Wall Street Journal…on Germany and Merkel

“In the conservative newspaper Die Welt, Jacques Schuster commented last week on ‘Germany experiencing a creeping de-Westernization’ and a return to the ‘old ghosts of the middle-ground.’

“That is clearly where Mr. Putin wants the Germans. So why hasn’t Mrs. Merkel, in straightforward language, marked out where she stands and where Germany must not drift? Here are the answers I have come up with.

“ 1. Not her style.

“ 2. She doesn’t want ‘to frighten’ public opinion (or alienate voters ahead of May’s European Parliament elections).

“ 3. By way of responses in question form: ‘When’s the last time America won a war?’ Or, after backing out of attacking Syria, ‘What do its redlines mean anymore?’

“All this, on the official level, comes with reassurances that Angela Merkel is truly, truly on America’s side. But you have to wonder hard about this if, as the New York Times reported last week, Mr. Obama is focused, come what may, on isolating Mr. Putin’s Russia to the point that it becomes a pariah state.

“Some observers have pointed out that Mrs. Merkel, in grasping for de-escalatory straws, got played by Mr. Putin when, at the end of March, her spokesman said she had been informed that Russia was in the process of diminishing its troop presence on the Ukrainian border. A Russian account of the telephone conversation following the German announcement didn’t contain the nonexistent good news.

“And in Brussels a senior NATO official told me flatly that, concerning projected middle- and long-term changes in the Alliance’s force posture to counter Russia’s belligerence, ‘the Germans are on the fence.’…

“About reality in April 2014: Michael Naumann, who served as the minister of culture in Gerhard Schroder’s second-term cabinet, offered me a definition in a conversation last week. ‘The Germans, now and historically, are scared of Russia,’ said Mr. Naumann, ‘and Putin knows this.’

“Mr. Obama can’t miss taking this reality into consideration as the United States comes to terms with facing Russia essentially alone.”

Editorial / New York Times

“The United States and the European Union announced another round of sanctions against Russia on Monday and Tuesday: the Americans against Russians close to President Vladimir Putin, including the president of the state-owned oil company Rosneft; and the Europeans against senior Russian officials and secessionist leaders in Ukraine. The stated reason is that Russia has fulfilled none of the commitments it made at a meeting with Ukraine, the United States and the European Union in Geneva on April 17, and that Russia’s ‘involvement in the recent violence in eastern Ukraine is indisputable.’

“The action is justified, and for all of Mr. Putin’s bluster, the economic uncertainty generated by sanctions is accelerating Russia’s slide to recession. The same Russians who are cheering Putin on are rushing to get their money out of Russia….

“Yet given Mr. Putin’s demonstrative disdain for the Geneva agreements, along with the aggressive behavior of Russian troops massed on Ukraine’s borders and the continued occupation of administrative and security buildings in southeastern Ukrainian cities by Moscow-directed secessionists, such targeted penalties are not likely to change Russia’s behavior….

“(Ukraine) is very much a European crisis. It was an accession treaty offered by the European Union that touched off the current crisis, and it is the European Union’s eastern members who are most threatened by Mr. Putin’s efforts to revise the post-Cold War order.

“Europe’s concern over the economic repercussions of broader economic sanctions are understandable. But that should not lead to any myopia about the danger Mr. Putin poses and the need to rein him in. His authoritarian behavior at home, his disdain for the Geneva agreement and, most recently, the capture of a European military observer mission in Slovyansk should persuade all European leaders that, as Foreign Minister Frank-Walter Steinmeier of Germany told the magazine Spiegel, ‘We’ve slid into the worst crisis since the end of the Cold War.’ That crisis will only get worse unless the West is prepared to unite behind serious economic sanctions that hurt Russia’s financial, energy and military sectors.”

Roger Cohen / New York Times

“Sergei Karaganov, a prominent Russian foreign policy expert at the Higher School of Economics in Moscow, recently provided a useful summation of his vast country’s sense of humiliation and encirclement. Because explosions of nationalist fervor like the one fostered by Vladimir Putin are dangerous and slow to abate, it is worth quoting this analysis at some length.

“ ‘The rupture is due to the West’s refusal to end the Cold War de facto or de jure in the quarter-century since the collapse of the Soviet Union,’ Karaganov wrote in the daily Izvestia. ‘In that time, the West has consistently sought to expand its zone of military, economic and political influence through NATO and the EU.   Russian interests and objections were flatly ignored. Russia was treated like a defeated power, though we did not see ourselves as defeated. A softer version of the Treaty of Versailles was imposed on the country. There was no outright annexation of territory or formal reparations like Germany faced after World War I, but Russia was told in no uncertain terms that it would play a modest role in the world. This policy was bound to engender a form of Weimar syndrome in a great nation whose dignity and interests had been trampled.’….

“What now? [writes Cohen] A sense of national humiliation, whether based in fact or not, is a tremendous catalyst for violence. It was in Weimar Germany, where the reparations and concessions stipulated by the Treaty of Versailles of 1919 created an explosive mood. It was in Serbia at the time of the break-up in 1991 of Yugoslavia, a country Belgrade always regarded as a Serbian extension of itself. The blinding fever drummed up by Slobodan Milosevic was based in a supposed need to reassert Serbian greatness; the means then was the ravages of his fifth columnists in Bosnia.

“That delirium took a decade to dim. It is unlikely that the Russian version will take less. Putin’s nationalist upsurge is the mask for all sorts of problems – demographic decline, corruption, a coopted judiciary, a cowed press, an oligarchic resource-based economy that has failed to diversity – but no less virulent for that.

“In the face of this assertive Russia, nothing would be more dangerous than American weakness.

“So when President Obama, in response to a recent question about whether his declaration that the United States would protect the Japan-controlled Senkaku Islands in the East China Sea risked drawing another ‘red line,’ gave an evasive answer including the hypothesis that America might not want to ‘engage militarily,’ he did something profoundly dangerous. In Asia, as in the Baltics, the Article 5 commitment to a joint military response to any attack on an ally is critical.

“The U.S. treaties must be words of truth that sound ‘like a pistol shot,’ or violent mayhem could spread well beyond East Ukraine.”

Syria: U.S. officials told the Washington Post that Syria is holding onto 27 tons of sarin precursor to use as leverage in future negotiations. A senior Western diplomat told Reuters, “We are convinced, and we have some intelligence showing, that (Syria) has not declared everything.” When asked how much the Assad regime has kept hidden, the diplomat said: “It’s substantial.”

Separately, the war raged on with airstrikes in Aleppo killing over 50, including 10 children when their school was bombed. In Homs, attacks killed at least 45, while a mortar attack in Damascus killed 14. So right there is about 110.

And it’s official…President Bashar Assad is running for reelection in the vote scheduled for June 3. After all, he has such a strong track record.

As for the logistics of holding an election with millions displaced and/or refugees in other countries, if it wasn’t so tragic it would be comical.

Iraq: The country held parliamentary elections on Wednesday as Prime Minister Nouri al-Maliki seeks a third term and the surprise was how little violence there was, after a surge in it leading up to the vote. In fact there were no attacks in Baghdad as security was extraordinary, with the government announcing a weeklong holiday so that most people stayed home, allowing security forces to clear the streets. Curfews were in place and traffic prohibited in most cities and towns so that people had to walk to the polls. The Electoral Commission estimated turnout at 60%.

It will take a number of weeks to tally the results. Maliki, one way or another, is expected to remain in power.

Iran: Reuters reports the White House wants to assist Gulf allies in fielding an integrated missile shield against Iran’s growing ballistic missile threat. Remember, Iran’s missile program is not part of the discussions on its nuclear activities. Just last weekend, Tehran reaffirmed they will not allow such weapons to be part of the nuclear talks.

Israel: Palestinian President Mahmoud Abbas said he still wants peace talks with Israel, though the formal process is finished for now. He still promises a unity government with Hamas would recognize Israel and renounce violence, though at week’s end, Hamas leader Khaled Mashaal said his organization remained committed to jihad against Israel.

Abbas said the PLO would be responsible for future peace talks, not Hamas. He stressed that in any future negotiations, “For three months we’ll discuss our map. In that period, until the map is agreed upon, all settlement activity must cease completely.”

Abbas also denounced the Holocaust as the “most heinous” modern crime, adding “The world must do its utmost to fight racism and injustice in order to bring justice and equality to oppressed people wherever they are,” to which Israel yawned. After all, the bottom line really is that Abbas is forming a unity government with a group that still seeks Israel’s annihilation.

Meanwhile, Secretary of State John Kerry vehemently denied he ever called Israel “an apartheid state” amid controversy concerning remarks he allegedly made during a private meeting with international experts.

“I will not allow my commitment to Israel to be questioned by anyone, particularly for partisan, political purposes. I do not believe, nor have I ever stated, publicly or privately, that Israel is an apartheid state or that it intends to become one.”

Kerry, ever the dunce, did say, “If I could rewind the tape, I would have chosen a different word.”

According to The Daily Beast news website, a source provided them an audio of the conversation with the Trilateral Commission wherein Kerry said:

“A two-state solution will be clearly underscored as the only real alternative. Because a unitary state winds up either being an apartheid state with second class citizens – or it ends up being a state that destroys the capacity of Israel to be a Jewish state,” Kerry said.

This breaks a longstanding taboo against comparing Israel’s treatment of the Palestinians to the apartheid-era South Africa. According to news reports, it would be the first use of the word in relation to Israel’s policies on the West Bank.

Prime Minister Netanyahu did not comment, but others in Israel called it “a new low in American diplomacy and an insult to the people of Israel and South Africa,” as a leader of an influential settler group put it. [Sources: The Telegraph, AFP]

Back to the Holocaust and Remembrance Day on Sunday, Netanyahu said in a speech at Yad Vashem that world leaders needed to heed the lessons of the 1930s and – when facing Iran – see reality as it is, not as how they would like it to be. Netanyahu retold the story of how the West was paralyzed against acting in time against Nazi Germany because it wanted to avoid conflict at all costs.

“I ask, why in the years preceding the Holocaust did the vast majority of the world’s leaders, and the vast majority of the leaders of our people, not see the threats beforehand?”

Netanyahu then turned to the topic of Iran and said those who warned about the Nazis were roundly criticized by people who dismissed them as “prophets of doom” and “warmongers.”

“I ask how it could be that so many did not understand the reality? The bitter, tragic truth is that it is not as though they did not see; they did not want to see. And the reason they chose not to see the truth is that they did not want to deal with the ramifications of that truth….

“Today we are again standing before clear facts and real dangers,” he warned.

Iran, said the prime minister, is calling for Israel’s destruction, and developing nuclear weapons, which is why it is building underground facilities to enrich uranium, and building heavy-water reactors to produce plutonium, and also why it’s ballistic program, the delivery system, speeds ahead.

“In any event,” said Netanyahu, “the people of Israel will stand strong. Against existential threats our situation is completely different than what it was in the Holocaust.

“Today we have a sovereign Jewish state. As Israel’s prime minister, I am not afraid to tell the world the truth, even to those whose eyes are blind, and ears are deaf. That is not only my right, but my obligation.” [Jerusalem Post]

Egypt: An Egyptian judge sentenced to death 683 alleged supporters of the ousted President Mohammed Morsi, saying they were involved in the murders of policemen.

Afghanistan: Over 350 were killed in a mountain landslide, with hundreds more missing.

China: The U.S. and Philippine governments worked out a new military cooperation agreement, thus paving the way for the first permanent U.S. bases there after they were evicted in the early 1990s. I’m placing this item here because of course it’s all about the Chinese threat, specifically over disputed territory in the South China Sea.

The U.S. has defense treaties with Japan, South Korea and the Philippines and the U.S. has told Beijing it will not accept moves by China to unilaterally declare another air-defense identification zone or to seize disputed islands.

But just as in Ukraine (or Syria et al), how seriously does China take Washington?

On another issue, in keeping with everything I’ve been writing on the pollution topic, The Economist had a piece in the April 26 issue titled “More of the middle classes are leaving, in search of a cleaner, slower life.”

As a percentage of China’s population the numbers aren’t big, but in the past decade 1 million Chinese have obtained permanent-resident status in Canada or the U.S., placing them first in Canada and second in America behind Mexicans. About 80,000 a year are now gaining permanent residency status in America.

North Korea: Increased activity at the North’s nuclear test site continues to be picked up by satellites. While President Obama mocked North Korea’s capabilities while he was in South Korea, the Pentagon is reportedly taking the nuclear and missile threat seriously.

South Korea: The prime minister resigned over the government’s poor response to the April 16 ferry disaster, in which it was first announced everyone had been rescued. Instead more than 300 died after they were told to stay put in their cabins. President Park Geun-hye accepted the resignation of Chung Hong-won.

Meanwhile, all 15 crew members were arrested.

Australia: Former Liberal Australian prime minister Malcolm Fraser, who left politics in 1983 and is rather elderly, said Australia risks being pulled into a disastrous war against China because successive Australian governments have surrendered their nation’s strategic independence to the United States. Fraser said he had become “very uneasy” at the level of Australia’s compliance with U.S. strategic interests.

So, by his thinking, and it’s interesting, Australia would have difficulty convincing the world that it was not taking part in a U.S.-led conflict even if, formally, the government tried to stay out.

Australia has certainly pivoted to the U.S. recently, more so than President Obama has pivoted to Asia, in actuality, when you look at the deeds.

Separately, it was reported the other day that “China was building covert networks of informants at leading universities in Melbourne and Sydney to keep tabs on ethnic Chinese lecturers and students.” [John Garnaut / Sydney Morning Herald]

Chinese officials and state media vehemently denied the report from Fairfax Media.

Well of course they are. Lord knows how many informants have been planted in the U.S., let alone the spies involved in industrial espionage we already know about.

Brazil: It’s been the policy here at StocksandNews that you are a fool if you’re thinking of attending either the World Cup next month or the 2016 Rio Olympics. Will they both go off smoothly? I guess everything is possible. But why take the risk? True, Sochi wasn’t the terror disaster many feared, including yours truly, but was it worth it if you weren’t a family member? Hardly. 

So I bring this topic up again because the International Olympic Committee’s vice-president, an Australian by the name of John Coates, said preparation for the Rio Olympics are the “worst” he has ever seen and the IOC has taken the unprecedented step of placing experts in the local organizing committee to ensure the Games go ahead.

Coates has been involved in the Olympics for 40 years and he said Rio is worse than the concerns leading up to the 2004 Athens Games. Rio is “not ready in many, many ways.”

Incredibly, construction has not even begun on some venues, while infrastructure hasn’t been addressed, and then you have Brazil’s social issues, which will no doubt be on full display during the World Cup.

Northern Ireland: Sinn Fein leader Gerry Adams was arrested and jailed while under questioning for a controversial 1972 murder where a mother of 10 was killed by the IRA for supposedly informing on them. Jean McConville’s body was secretly buried and not found until 2003. Adams has long said he had nothing to do with the case, though he has long been a suspect. He also claims that while he was a sympathizer, he was never a member of the IRA, which some say will finally be revealed to be a lie. After all these years of living in fear, people are talking. Adams is a former member of the British Parliament for West Belfast.

Random Musings

--According to a new Washington Post-ABC News poll, President Obama’s approval rating is at a new low, 41%, down from 46% in the last survey. Just 42% approve of his handling of the economy, 37% approve of how he has handled ObamaCare, and just 34% approve of his handling of the situation in Ukraine.

Normally, this spells bad news for Democrats in November, but it’s still early, and Republicans have proven very capable of snatching defeat from the jaws of victory.

ObamaCare will no doubt be a big issue and 58% say the new law is causing higher costs overall, while 47% say it will make the health-care system worse.

The polling numbers from an NBC News/Wall Street Journal survey showed Obama’s approval rating actually rose from a low of 41% in March to 44% in April.

In this one, only 38% approve of the president’s foreign policy, while on the ObamaCare front, just 36% approve of the law, 46% are against.

--Jennifer Rubin / Washington Post…on the impact of the likes of Cliven Bundy.

“When right-wing politicians and extreme libertarians embrace an anti-government vision, they reduce the appeal of their message to a narrow subset of the electorate. It is impossible to expand the party to take in more African American and Hispanic voters, let alone retain middle-class moderates, with a paranoid vision of government. The purveyors of the anti-government message do not breed confidence with voters. (The reaction to the shutdown demonstrated the public’s lack of patience for those who delighted in disabling government.) To the contrary, they scare off all but the true believers and do harm to their party and the conservative movement, which is blemished by the worst characteristics of the most extreme right-wingers.

“Mainstream conservatives and the GOP as a whole should shun not only the Bundys out there, but also the politicians and media figures who defend them. If they can’t tell right away that Bundy is a nut, Snowden is a traitor and a ‘Southern Avenger’ is a racist, do we really think they will get the big questions and tough calls right?”

--F.H. Buckley, a George Mason University law professor, in an op-ed for USA TODAY.

“The idea that President Obama acts as if he is the king of the United States or a tyrant, instead of president, has become a cliché over the past five year. While to many Americans, the idea may seem over the top, it has deep roots in the American consciousness. Many Americans have long thought our Revolution simply replaced one despot with another. We moved from King George III to (insert the president of the day).

“Unlike real kings, American presidents are elected, but they nevertheless enjoy powers a king would envy. George Mason, who declined to sign our Constitution in 1787, predicted this. He said U.S. presidents would be ‘elected monarchs.’….

“(Think, for example) of the difference between the president’s ability to avoid scrutiny and the prime minister’s duty to attend parliament to answer questions thrown from every direction. The American system produces one kind of leader and parliamentary government, something different, quick on his feet and accustomed to brickbats and ridicule.

“Finally, there’s a difference between a parliamentary system that separates the head of state (the queen) from the head of government (the prime minister) and a presidential system that unites both in the president. Politicians should be figures of ridicule and not of royal reverence.

“Should we be surprised, then, if presidents make laws by regulatory diktat, unmake laws by refusing to enforce them, or make wars when they want? It’s in the nature of things in a presidential system. It is what happens when a president pokes his head through what was thought an impenetrable wall. It’s dangerous, and we must hope for a revival of congressional power that seals up the wall again. That’s what the Framers would have wanted.”

--According to the New York Daily News, “The FBI probe of last year’s (New York City) mayoral race has expanded to Mayor de Blasio’s campaign pledge to ban carriage horses…

“FBI agents have been questioning people about the pledge, which was made in March 2013, and the ad blitz launched the next month by animal rights advocates attacking de Blasio’s chief rival, Christine Quinn, two sources familiar with the investigation said.

“FBI agents also appear highly interested in a $175,000 contribution by a union tied to de Blasio’s cousin, labor leader John Wilhelm, to the animal rights group NYCLASS, the sources said.

“NYCLASS helped to bankroll the ‘Anybody But Quinn’ campaign attacking Quinn’s mayoral candidacy.”

Quinn refused to support the carriage ban. Your editor supported Quinn, who would have been the kind of pragmatic mayor the city needs.

We’re talking right after she reiterated her position, some figures gave contributions in excess of $200,000 to NYCLASS! [Greg B. Smith / New York Daily News]

--According to Brooklyn U.S. Attorney Loretta Lynch, New York Republican Congressman Michael Grimm “deliberately lied to every taxing authority to evade taxes and keep more money for himself” by paying workers at his Manhattan restaurant off the books, part of a 20-count indictment. Allegedly he hid more than $1 million in earnings by underreporting workers’ wages, many of whom were employed illegally. 

Grimm is the only Republican member of New York City’s congressional delegation and the indictment is going to make it far harder to retain the seat in November, Grimm vowing to carry on.

Previously, Grimm was investigated by the House ethics committee over whether he solicited and accepted prohibited contributions, among other things.

Grimm, who is just a creepy guy and in my mind not a good person (who hides behind the fact he is an ex-Marine and FBI agent), told reporters after he was released on $400,000 bail that it’s all a “vendetta” and “political witch hunt.”

But this is the guy who gained national attention for physically threatening a television reporter who asked him about the federal investigation into his campaign.

Grimm is one of scores of New York politicians, from both parties (and even third parties), who have been indicted over just the past year. As the New York Post opined:

“Male and female, black and white, Asian and Latino, Republican and Democrat – few have been left untainted. Somehow we suspect this is not what then-Mayor David Dinkins meant when he extolled New York’s ‘gorgeous mosaic’ of diversity.

“So while Rep. Grimm may be entitled to the presumption of innocence, we sure can’t say the same for New York politics.”

--Matea Gold of the Washington Post had an interesting, distressing, piece on campaign funding. According to analysis of data by the Sunlight Foundation, of the $37.5 million spent by the PACs of six major tea party organizations, “less than $7 million has been devoted to directly helping candidates….

“Roughly half of the money – nearly $18 million – has gone to pay for fundraising and direct mail, largely provided by Washington-area firms. Meanwhile, tea party leaders and their family members have been paid hundreds of thousands of dollars in consulting fees, while their groups have doled out large sums for airfare, a retirement plan and even interior decorating.”

For example, President Jenny Beth Martin of Tea Party Patriots vowed to support Matt Bevin, the underdog conservative challenger trying to unseat Senate Republican leader Mitch McConnell, but so far her group has “mustered just $56,000 worth of mailers in Kentucky on Bevin’s behalf – less than half the amount it has paid Martin in consulting fees since July.”

Unreal. Furthermore, Martin sets her own consulting fee, $15,000 a month for “strategic consulting,” thus the $120,000 since July, yet she also draws a salary as president of the Tea Party Patriots’ nonprofit arm – getting more than $272,000 in the 2012 fiscal year, according to the group’s most recent tax filing.

But wait…there’s more!

“Another top Tea Party Patriots official, national finance director Richard Norman, is paid $15,000 a month to oversee fundraising for the nonprofit and super PAC. At the same time, the group’s two affiliates have paid three direct mail firms run by Norman at least $2.7 million since June 2012 to help solicit funds for the groups, according to public records.”

It just makes you want to throw up all over Sean Hannity’s studio.

--I concur with NBA Commissioner Adam Silver’s decision to ban Los Angeles Clippers’ owner Donald Sterling for life (while being fined the maximum allowed, $2.5 million, under the NBA’s by-laws), and the owners seem unanimous in agreement that they’ll do their part in voting to force Sterling to sell the franchise as soon as possible, though it’s not known how aggressively Sterling will fight to retain it.

But it certainly was ‘rich’ that Al Sharpton commented on Monday, the day before Silver’s ruling, that he was “totally outraged” the NBA hadn’t disciplined Clippers owner Donald Sterling. Sharpton was outraged “they are stalling on this.”

Oh brother. But then what else would you expect charlatan Sharpton to say? It’s called “due process,” Reverend. And of course the NBA acted with unbelievable speed. 

I also hope certain parties out there understand that this move against Sterling and his ilk cuts both ways. At least it should. I don’t feel like I need to say anymore on the topic.

Then again, as President Obama said, just let the ignorant run their mouths to expose themselves. So Democratic Mississippi Congressman Bennie Thompson called Justice Clarence Thomas an “Uncle Tom,” saying his positions on the high court “have been adverse to the minority community.”

--There is good news on the education front. The National Center for Education Statistics and the U.S. Department of Education said the overall high school graduation rate has risen from 73% in 2006 to 81% in 2012. The experts think it could hit 90% by 2020.

Across the country, the graduation rates remain lower for minority students: 76% for Latinos and 68% for black students

--Applications to New York City charter schools hit a new record, 212,000, though with multiple applications filed by students it was really 70,700 students trying to get one of 21,000 openings, still a record…message sent.

--Last I saw, Mayor de Blasio did reach an agreement with New York’s teachers union, who had been working with an expired contract since 2009. They are to receive an 8% raise retroactively and annual 2% raises to 2018. It’s the retroactive part that former Mayor Bloomberg knew would break the bank. 

--The World Health Organization reiterated the problem of antibiotic overuse and the issue of antibiotic resistance, calling it now a “global emergency.” Even common urinary tract infections easily cured with antibiotics until today can be fatal as current medicines used are ineffective in as many as 70% of patients.

Hospital caused acquired infections with multi-resistant bacteria kill 80,000 a year in China and 23,000 in the United States.

--I saw guys in a bar here putting drops of something through their e-cig delivery system and thought ‘that can’t be good.’ Minutes later they seemed unusually happy.

--Other random musings from Paris…I was at a crosswalk at the Place de la Concorde and this Chinese gentleman turns to his side and spits at my feet, a favorite pastime of these people. He missed my shoes by an inch, whereupon I immediately turned to look behind him and assumed it was his wife, who got a glance from moi that I hoped pierced her skull. As in, tell your damn  husband that is not accepted behavior in the Western world. [I guess unless you’re Tiger Woods.]

Of course it was the Chinese mother about a year ago who was famously caught on video (as I wrote in this space) allowing her kid to piss in a garbage can at an upscale shopping mall in Vancouver.

So, yeah, people are jerks.

But I did notice a ton of beautiful women from Romania and Serbia here…more so than I’ve seen before.

And a lot of older Vietnamese women with old white guys…a vestige of the war, no doubt.

I hung out at an Irish pub near my hotel, Carr’s, two nights, and met some great people there; one a bartender from Scotland so we talked Scottish independence for a bit. Sean Connery is a big nationalist but was not well-liked for living most of the time in Los Angeles.

One fellow I met helped chaperone Bill Clinton on a trip through Ireland and he said a year later he was standing in the back of a room filled with people when Clinton, making a return trip, spotted Aidan and immediately made a beeline for him to thank him. As Aidan said, his people skills are unbelievable.

Another bartender at Carr’s did something I thought was way cool from a historical perspective…he once served Yassir Arafat during a formal dinner.

Hey, I’m the guy who traveled here to see Marine Le Pen, even though I don’t agree with her on much at all. Martin, the bartender, served Arafat probably about a year before he died. He didn’t drink and was very polite, were Martin’s impressions.

Shout out to Rachel, from Carr’s….Rachel had just arrived from Spain. Cool, confident girl who will go far.

--Given the probable need to get off this planet at some point, Elon Musk, founder of SpaceX, among other things, announced his rocket maker is close to making a reusable rocket – the “holy grail in rocketry,” as W.J. Hennigan phrased it in the Los Angeles Times.

Musk also said SpaceX was filing suit against the U.S. Air Force to open up competition in rocket launches. SpaceX is already delivering supplies to the International Space Station for NASA.

Needless to say, a reusable system could save $billions. The issue with the U.S. government, as opposed to SpaceX’s existing contract with NASA, involves the launching of sophisticated satellites. Boeing and Lockheed Martin – operating jointly as United Launch Alliance – have a monopoly on spy and weather satellites and such.

Separately, I watched “Gravity” again on my flight to Paris and Sandra Bullock makes it back safely a second time, seemingly to Borneo, while George Clooney heads to Mars, yet he still announced he was getting engaged this week to an attractive attorney, which means he at least reestablished communication with NASA.

--Finally, I’m going with California Chrome in the Derby. I had a split with my handicapper, J. Mac, who is taking Intense Holiday. 

---

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

God bless America.

---

Gold closed at $1302
Oil $99.76

Returns for the week 4/28-5/2

Dow Jones +0.9% [16512]
S&P 500 +1.0% [1881]
S&P MidCap +1.1%
Russell 2000 +0.5%
Nasdaq +1.2% [4123]

Returns for the period 1/1/14-5/2/14

Dow Jones -0.4%
S&P 500 +1.8%
S&P MidCap +1.4%
Russell 2000 -3.0%
Nasdaq -1.3%

Bulls 51.6
Bears 21.7 [Source: Investors Intelligence]

Have a great week. I appreciate your support.

I know I’ve left out some things. I’ll fill in the blanks next time.

Brian Trumbore