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02/01/2014

For the week 1/27-1/31

[Posted: 12:00 AM ET]

Washington and Wall Street

George Will / Washington Post

“As undignified as it is unedifying and unnecessary, the vulgar State of the Union circus is again at our throats. The document that the Constitutional Convention sent forth from Philadelphia for ratification in 1787 was just 4,543 words long, but this was 17 too many. America would be a sweeter place if the Framers had not included this laconic provision pertaining to the president: ‘He shall from time to time give to the Congress information of the state of the union.’

“ ‘Information’? Not exactly.

“The Constitution’s mild requirement has become a tiresome exercise in political exhibitionism, the most execrable ceremony in the nation’s civic liturgy, regardless of which party’s president is abusing it. You worship bipartisanship? There is not a dime’s worth of difference between the ways the parties try to milk partisan advantage from this made-for-television political pep rally.”

I watched the president’s speech along with 33 million other Americans (according to the ratings) and what a waste of everyone’s time. I have little to say on the topic except for the issue of trade, where the president, who wasn’t as confrontational as some expected, asked Congress “to work together on tools like bipartisan trade promotion authority” to lift exports and “protect our workers.” Republicans applauded. But Democratic Senate Majority Leader Harry Reid said the next day, “I’m against fast track. I think everyone would be well-advised just not to push this right now.”

Texas Republican Sen. John Cornyn responded, “You can kiss any new trade deals goodbye. I think the majority leader’s focus is on the November elections and he doesn’t want to expose his vulnerable members to controversial votes.”

Yup. Wouldn’t want to do something good for the economy when you might be jeopardizing campaign donations from the unions.

Or as the Wall Street Journal opined:

“The sudden opposition makes us wonder if this isn’t a rigged double game. President Obama gets to appeal to Fortune 500 CEOs by pushing freer trade, while Senate Democrats drag their feet to appease unions and extort campaign cash from business in an election year. Democrats get the money but nothing gets done. That’s how House Democrats played trade deals in 2009-2010 when Mr. Obama claimed to support pacts with South Korea, Colombia and Panama, but Speaker Nancy Pelosi refused to allow a vote. The pacts finally passed in 2011 after Republicans took the House.”

It’s yet another example of why so many of us are sick of Congress. How many?

Glad you asked. According to a new NBC News/Wall Street Journal survey, Congress’ approval rating is 13%, just off the low of 12% from last July. By contrast it was 54% in January 2002.

As for the president, his approval rating remains at 43%, same as in December (and the same as a new USA TODAY/Pew Research Center survey), and down from his high in this particular poll of 61% in April 2009. [A Washington Post/ABC News poll has Obama’s approval rating at 46%, up from a low of 42% in November. Congress’ approval rating in this one is 16%, up a few from the low in October.]

On the all-important question is the country headed in the right or wrong direction, only 28% believe it is headed in the right one. But, 61% are satisfied with their own personal situation.

On ObamaCare, in the NBC/WSJ survey, 48% believe it has been a bad idea, just 34% say it’s a good one, though a majority still want to keep it.

Meanwhile, there was some economic news this week. December new home sales came in far less than expected, while December durable goods tanked to the tune of 4.3% when an increase of 1.7% was expected.

Then we had the first reading on fourth-quarter GDP and it was in line, 3.2%, after a 4.1% annualized pace in the third quarter. So the last two figures are solid, after the 1.1% (Q1) and 2.5% (Q2) #s for the first half of 2013.

On Friday the December figures for personal income and consumption were released and the former was unchanged (not good) while the latter was up a stronger-than-expected 0.4% (good).

And you had the final meeting for the Federal Reserve’s Open Market Committee under the chairmanship of Ben Bernanke, wherein the Fed continued with December’s tapering of its bond-buying program, once $85 billion a month in mortgage-backed securities and Treasuries and now, after a second $10 billion cut, still $65 billion.

The Fed chose to ignore the turmoil in emerging market currencies and instead focus on an economy where “growth in economic activity picked up” since the December meeting and thus there was no reason not to continue to pare back on the bond purchases. 

But, just as importantly, the Fed clearly is going to keep the policy (funds) rate at zero “well past” the initial target of 6.5% on the unemployment rate. There is no chance they are raising this until well into 2015 at the earliest.

As for future tapering, yes, it’s still all about the data and if the currency markets continued to be roiled and stocks took it on the chin beyond a normal 10% correction, perhaps they’d pause for a meeting, but unless you had chaos in the markets this could prove counterproductive, especially with a new Fed chairwoman, Janet Yellen. What would it say about her credibility?

True, right now it’s a bit of a vicious cycle. Investors are selling emerging market currencies, forcing some countries, such as Turkey and India most notably this week, to raise interest rates in order to stem the flight of capital, with rate hikes potentially weakening the local economy, which can weaken ours, ostensibly because of weaker sales from U.S. outfits exporting to said emerging market(s), and voila! A correction could evolve into a bear market.

But there is no cause for panic...at least not yet.

The panic could come (depending on how much unwinding had taken place beforehand) when the Federal Reserve finally is forced to raise the funds rate. If there is some emerging market turmoil with a minimal amount of tapering, which still means the Fed is buying ‘large’ each month, imagine what will happen with that first actual rate hike?

As to the Bernanke legacy....

Editorial / Wall Street Journal

“As the Federal Reserve Chairman prepared to step down, the encomiums rolled in. ‘The most successful tenure in Fed history,’ said the S&P economist. Added a former Fed Governor: ‘He has been called, and I think justifiably so, the greatest central banker in history.’ He was the man who saved the world, a genius, the maestro.

“All of that praise was heard eight years ago this month for Alan Greenspan as he prepared to step down after 20 years leading the Fed. A mere two years later views of the Greenspan monetary era were very different, as the credit boom he did so much to create turned to mania, which turned to panic, which became a deep recession.

“That reversal is worth keeping in mind now that the same extravagant praise is flowing for Ben Bernanke... There is no doubt Mr. Bernanke has been one of the most consequential Fed Chairmen in history, but his legacy is still far from clear and is at best more mixed than the effusive praise suggests.

“One way to think about the Bernanke era is to divide it into three parts: before, during and after the financial panic. His record before the crisis was a clear failure. He deserves good marks for his actions in the eye of the storm. As for his extraordinary monetary exertions since the recovery began, the legacy will depend on how it all turns out....

“The biggest test will be what happens when Mr. Bernanke’s successors are obliged to unwind his policies. If the Fed can end its bond-buying and return to a normal interest-rate regime while sustaining the recovery, his great monetary experiment will have been a success. But if it ends badly, with continued subpar growth, or bursting asset bubbles, or budding inflation that requires a rapid rise in interest rates, the Bernanke Fed won’t be able to pass the buck.”

Robert J. Samuelson / Washington Post

“As Ben Bernanke must recognize, he is the victim of the law of diminishing returns. In the initial days of the 2008-09 financial crisis, he mobilized the Fed as the lender of last resort. This helped quell an intensifying financial panic and, arguably, averted a second Great Depression. Bernanke’s role has been much praised and deserves the nation’s gratitude. It is doubtful that anyone else would have done better.

“But Bernanke’s ambition transcended calamity prevention. He sought to kick-start the economy by keeping short-term interest rates low (effectively zero since late 2008) and through massive bond-buying (called ‘quantitative easing’). The strategy was to reduce long-term interest rates, strengthen a housing revival, boost stock prices and stimulate corporate investment in plants and equipment. Here, his success is scant. Since mid-2009, the economy has grown at an anemic annual rate of 2.4 percent. Payroll jobs are still 1.2 million below their 2007 peak, and 7 million Americans have left the labor force – some retired but perhaps half, by some estimates, quit because they were discouraged about finding work....

“It is premature to judge Bernanke’s legacy. His policies will have ongoing consequences that, for good or ill, will shape his ultimate reputation....

“Through the bond-buying and ‘forward guidance’ – a loose commitment to keep short-term interest rates near zero until the job market strengthens convincingly – he has tried to instill confidence. Perhaps the lagged effects of these policies will soon boost growth. He has also argued that these policies can be withdrawn without disruption. As an academic exercise, this seems true. The real question is what happens if there are further surprises, from unanticipated inflation to another financial crisis. The Fed and others have repeatedly erred in their economic forecasts.

“Still, Bernanke’s record suggests a tentative verdict. Facing turmoil and danger, he helped stabilize the economy and reassure the public. His hallmarks have been competence, candor, decency and dignity. He was the right man at a fateful juncture.”

As for the action on Wall Street, put January in the books. It wasn’t a good one for stocks, with the Dow Jones falling 5.3%, the S&P 500 3.6% (the worst month for both since May 2012) and Nasdaq declining 1.7%. As January goes so goes the year, is the old saw, and in the case of the S&P, if January is an up month, 73% of the time you have an up year. [A lower start led to a full-year decline 58% of the time.]

What we do know is corporate earnings thus far in the reporting season have been lackluster. Oh, you keep hearing the vast majority beat on both the top and bottom line. Well most of them always do, especially if you have an investor relations department worth a damn, working in unison with the CFO in most cases, who can help “guide” analysts. It’s not for nothing that during Jack Welch’s tenure at G.E., the company magically beat by a penny virtually every quarter. Move some sales around at quarter end, hold off on a few expenses and presto!

Anyway, most importantly, the earnings conference calls and accompanying statements for many companies the past few weeks have not been good when it comes to guidance and that is what the Street was waiting for. At what point is the “all-clear” finally given and when will Corporate America finally start investing more in plant and equipment? I haven’t seen many signs this will be the case. Instead it’s been more like in the case of Caterpillar, which handily beat lowered expectations, so the stock did well this week, but it said 2014 would be similar to 2013 and 2013 wasn’t all that great. Or Big Oil, whose profits have been falling because of huge capital expenditures looking for new oil and gas fields, so they won’t be spending more, instead probably less.

And this is where the bout of turmoil in the currency markets that we’ve seen, such as in Turkey, Argentina, Ukraine, Hungary and Poland, while perhaps not too serious in terms of a systemic threat, a la 1997’s Asian and 1998’s Russian crises, is enough to give some multinationals pause, no doubt. “Bobby, let’s hold off on that Istanbul expansion for a spell.   We need to know if the government there is going to survive this.” “Roger that, Mr. Cornwinkle.” [Bobby’s an ass-kisser.]

But there was one asset that had a strong month.  U.S. Treasuries. As in the yield on the 10-year plunged from 3.03% on 12/31 to 2.64% Friday. It’s pretty simple. The flight to safety trade outweighed the initial Fed tapering, but, should the markets stabilize and the U.S. economic data the next 4-6 weeks be solid, beginning with next Friday’s jobs report for January, I can guarantee yields are headed back up.

---

Finally, on a totally different topic, I was appalled, as I’m sure many of you were, at the pictures from Atlanta following the snow and ice-storm. We all have friends there (or in Birmingham, AL, which suffered a similar nightmare), where they had nine-hour / nine-mile commutes (or worse), or a child forced to sleep over at school because they couldn’t be reached and/or the buses couldn’t leave. It seems unfathomable that city and state officials, and, yes, school boards weren’t better prepared...didn’t have action plans in place for such an event. Hadn’t “gamed” it out.

Well I’ve thought about this issue constantly. I wrote the following in this space on Aug. 4, 2007:

I take you back to the New York City blackout of Aug. 15, 2003. I made the following observation in this space the next day.

“Watching the crowd of up to 100,000 attempting to get ferries to take them from Manhattan to New Jersey during the blackout, I kept thinking, what will happen if a dirty bomb or chemical attack takes place and there’s true panic?

”Every individual in America, even those living in the most rural areas, should think through a plan for the most terrifying scenarios. In some cases, there will be little one can do, but what worries me is that many states and cities say they have firm emergency plans in place (New York, for the most part, did perform admirably this week), but no one is telling the average citizen what to really prepare for, outside of our duct tape scare. We need leadership. We can handle the truth. We can sacrifice. And as Prime Minister Howard said, we also ‘have to brace
ourselves.’”

Funny how I alluded to Australia back then, too. But as we approach the sixth anniversary of 9/11, how many of you can honestly say your local or state government has given you even rudimentary survival tips or plans? We all know it would be chaos nonetheless if a dirty bomb went off, or there was a full-scale attack on a large chemical plant, but thousands of lives can still be saved. A few weeks ago, former defense secretary William Perry addressed the unthinkable; a nuclear attack. In this instance, millions could survive, even within a relatively small radius from the blast point.  But as he pointed out, the people need to know what to do.

So where is our leadership? Why do we keep putting these pathetic figures, most of them corrupt... into positions of such high responsibility? And when are you and I going to rise up and say “Enough!” It is unconscionable that we have to think twice about driving across a bridge. It is unconscionable that there are children in Minneapolis today who lost a parent, or a spouse, over simple negligence. It will be even more unconscionable when we receive another attack on our soil and innocent lives are lost because the people didn’t have a plan. And it’s about time we began to hold those responsible accountable. Just don’t look to the White House for guidance.

Look at the chaos created by 2-3 inches of snow and ice. What would happen if the unthinkable occurred? It’s now been over 12 years since 9/11. How many of your towns and cities really have action plans in place. If a dirty bomb went off in downtown Atlanta, there are ways to limit panic.

But you need to develop a plan. And then talk about it! Force your officials to tell you what the plan is.

Europe and Asia

Some big data points were released on Friday. A flash estimate on eurozone inflation for January is expected to be 0.7%, as reported by Eurostat, the statistical arm of the European Union, down from 0.8% in December, and worrisome to the European Central Bank and the likes of the International Monetary Fund.

The ECB, as does the Federal Reserve and the Bank of Japan, wants to see inflation of around 2.0%, but whereas in the latter two this is rather cut and dry, the U.S. and Japan each being one, in the eurozone you are talking 18 distinct nations, some of which, such as Greece, have lower prices and labor costs in an attempt to become more competitive.

That said some of the inflation components are not good, such as non-energy industrial goods up just 0.2%. But the energy cost figure, -1.2%, is good. Europe, you see, is the flipside of our Polar Vortex Winter. It’s been much warmer than normal across the continent. A few years ago Europe had record cold while the United States was seeing record warmth.

Bottom line, I would say the ECB is right to be concerned. Rising prices, within reason, generally translate into stronger economic performance and one doesn’t have to worry about the ECB raising its short-term policy rate anytime soon. One of the primary reasons being the Euro area’s unemployment rate is still 12.0%, as reported Friday for the month of December, the same as October and compared with 11.9% in December 2012, or with the 6.7% official rate in the U.S. (and 7.1% in non-euro Britain).

The unemployment rate is only 5.1% in Germany, but remains 10.8% in France, 12.7% in Italy, 25.8% in Spain (down from a high of 26.4% in September), and 27.8% in Greece (October).

And you still have the sickening youth unemployment rates of 41.6% in Italy, 36.3% in Portugal, 54.3% in Spain and a record 59.2% in Greece.

Separately, the U.K. continued to report better news with GDP in the fourth quarter coming in up 0.7%, as reported by the Office for National Statistics, up 1.9% for all of 2013, the highest since 2007. British household confidence numbers are rising with increased job security.

Lastly, back to the energy topic, forget the price break Europe is receiving this winter. As the International Energy Agency warned this week, “Europe will lose a third of its global market share of energy-intensive exports over the next two decades because energy prices will stay stubbornly higher than those in the U.S.” [Pilita Clark / Financial Times]

Fatih Birol, the IEA’s chief economist, said it wasn’t just ill-conceived (my term) climate change policies that are hurting Europe’s manufacturers, but the price gap between the EU and the U.S. was going to last much longer than some expect.

“This is a new thing and it’s structural. It’s not a one-off,” Birol told the FT. “Europe didn’t realize the seriousness of this competitive issue.”

European gas imports are three times higher than in the U.S., while industrial electricity prices are twice as high and this gap, according to Birol, could last “at least 20 years.”

Europe needs its own shale boom, which British Prime Minister David Cameron clearly recognizes when it comes to his own country. [And he doesn’t want the EU standing in the way.]

Turning to China, concerns over the shadow banking sector were at the forefront early in the week as a key investment product had to be bailed out on Monday averting a crisis, though no one knows for sure just how it was bailed out. [Thus the term shadow banking.] These are bank trust products offering high yields, with non-bank institutions (including local governments) providing the funds to risky companies who can’t borrow from banks, but most Chinese investors, attracted by returns they can’t find in bank savings instruments, let alone a declining stock market, assume the bank issuing the product is standing behind it.

So Beijing is increasingly desperate to rein the sector in with new regulations demanding more transparency, but how many other potential disasters await?

And this just in as I go to post...the Chinese government’s official Purchasing Managers’ Index for January fell to a six-month low at 50.5 vs. 51.0 for December, barely above the 50 dividing line between growth and contraction. Earlier, an HSBC reading of 49.5 for the PMI had roiled the markets. The government figure tends to focus on large state enterprises, while HSBC’s barometer is focused on the private sector.

China’s stock market, which was closed on Friday for the Lunar New Year holiday, remains closed through next Thursday, Feb. 6. It’s hard to gauge, as I saw firsthand in Fuzhou on January 22, what the statistical impact of the holiday period is on business.

In Japan, inflation accelerated in December to 1.3% (ex-fresh food, their core figure) from a year earlier, which is good as the government of Shinzo Abe and the Bank of Japan struggle to get the rate to the preferred 2.0%. What is needed, first and foremost, is wage hikes and this spring you have two things going on; annual wage negotiations between major employers and workers, and April’s sales-tax increase (from 5% to 8%). Wage gains are needed to combat the tax hike, but it will be easy for employers to say, ‘Our business is about to take a hit, how can we increase your wage?’

So Prime Minister Abe is urging companies to take the long view, increase wages and capital spending to prevent the economy from falling back into recession, which would be disastrous for all. Thus far, most businesses are just hiking prices ahead of the tax hike.

There was some other positive news, though, on the economic front. The jobless rate fell to 3.7% in December, down from 4.0% in November and the lowest rate since December 2007.

Street Bytes

--For the week the Dow Jones fell 1.1% to 15698, while the S&P lost 0.4% and Nasdaq fell 0.6%. After releasing their earnings after the close on Thursday, details of which follow below, shares in Google soared $45 to $1180, while Amazon’s fell 11%, $44, to $358.70. Is the bloom finally off the rose for Amazon? Let’s see how the stock responds next time the Street has an extended rally. That should be telling. Shares in Facebook surged $9 to $62.50 the last two days, also on earnings news. More in a bit.

--Some global figures for January...Tokyo -8.5%, London -3.5%, Frankfurt -2.6%, Paris -3.0%, Moscow -9.8%, Istanbul -8.8%, and Sao Paulo -7.5%.

--Emerging market equity outflows for the week up to January 29 were $6.3 billion, the biggest weekly withdrawal since August 2011, with the total for the month hitting $12.2 billion, according to data from EPFR Global. [Financial Times]

--U.S. Treasury Yields

6-mo. 0.05% 2-yr. 0.33% 10-yr. 2.64% 30-yr. 3.60%

--The S&P/Case-Shiller home price data for November showed a 0.1% decline in the 20-city index over October, which is not a surprise (it’s seasonal). The figure is up 13.8% year-over-year, though overall still about 20% below the peak. Dallas actually hit a new high in the month, while Denver is just 0.6% below theirs as these two obviously didn’t have the same boom-bust experiences other parts of the country had.

--Shares in Apple cratered after the company reported disappointing fiscal first-quarter results. Apple sold 51 million iPhones over the holiday quarter, which while impressive was less than the 55 million analysts expected. Overall revenue rose a less-than-exciting 6% to $57.6 billion (in line), with earnings coming in at $14.50 a share, 40 cents better than the Street projected. But Apple issued lackluster guidance for the current quarter, even though its new deal with China Mobile, the world’s largest carrier, will be kicking in.

A big problem is the smartphone market is becoming saturated, including the high-end market Apple is dominating.

Apple did sell 26 million iPads, up from 22.9 million the year before, and the company’s cash on hand grew to a staggering $158.8 billion.

But the thing is, Apple’s heady growth days are over. It needs some exciting new products.

--IDC said global smartphone shipments topped one billion for the first time in 2013, up 38% over 2012.

Samsung had the biggest market share last year, 31.3%, while second-best Apple saw its share slip to 15.3%.

--Shares in Facebook soared after the social network reported mobile ads surpassed desktop ads for the first time, mobile now comprising 53% of ad revenue, more than double what it contributed for the same quarter in 2012.

Total revenues hit $2.6 billion for the quarter, well above what the Street projected. Earnings of 31 cents per share also handily beat.

For the full year, Facebook had earnings of 88 cents with net income of $1.5 billion on revenue of $7.9 billion. 

I’d say Mark Zuckerberg and company have figured out a way to monetize the business. According to E-Marketer, Facebook is now second behind Google in U.S. digital advertising, moving ahead of Yahoo. The company turns 10 next Tuesday.

--Google gave up on its Motorola Mobility purchase after two years, selling it to China’s Lenovo for $2.9 billion, a week after Lenovo acquired IBM’s low-end server line for $2.3 billion. Google had paid $12.5 billion for the cellphone maker.

Motorola lost $1.2 billion in the past 12 months on $4.7 billion in sales. Lenovo, number four in smartphone sales, hopes to use it to make a profitable run at Apple and Samsung.

Meanwhile, Google does retain billions of dollars’ worth of patents and in essence is using Lenovo to make smartphones with its Android operating system.

As for Google’s earnings, quarterly revenue beat the Street despite a decline in the prices for its online ads, off 11%. Overall revenue, including for the Motorola unit, was $16.86 billion, up 22% on its core business, with net income of $3.38 billion. Ex-items, Google earned $12.01 per share, below estimates of $12.20. Nonetheless, the shares hit a new high.

--Amazon’s fourth-quarter profit and revenue grew but fell below analysts’ estimates on both fronts and the shares tanked. Amazon earned $239 million, 51 cents per share, up from 21 cents in the same period a year earlier as revenue grew 20% in Q4 to $25.59 billion. But the company gave tepid guidance vs. expectations for the first quarter.

Amazon is now reviewing its Prime delivery plan, where for an annual fee of $79 customers receive unlimited shipping at no extra cost. The company may now increase the fee for the first time in nine years by between $20 and $40.  But how many customers would balk?

--Yahoo’s fourth-quarter revenue was down a disconcerting 6% from a year ago, in line with expectations, but nonetheless down. Net income rose to $352 million, though part of the gain was due to a gain from the sale of patents. Revenue from display ads was also down 6%.

So CEO Marissa Mayer is under the gun after one year. She’s been on an acquisition spree that must begin to pay off. Otherwise, the only thing holding up the share price (which fell sharply on the news this week) is the 24% stake in Alibaba, the fast-growing Chinese Internet company that is expected to go public this year in a deal that could value it at $100 billion. Supposedly, Alibaba’s third-quarter revenue rose 51% compared with the previous year, while earning $800 million.

--Microsoft is set to name a new CEO next week, Satya Nadella, the company’s enterprise and cloud chief. Bill Gates is to be replaced as chairman of the board, though he will still play an active role in the company no doubt. Nadella has been with Microsoft since 1992.

--AT&T posted fourth-quarter results basically in line, though overall revenue rose just 2%, typical of results the past year for Corporate America, really. Earnings up a far greater percentage than the top line.

--306,000 Anthem Blue Cross customers in California with older insurance policies untouched by ObamaCare are seeing their premiums rise an average 16%, to go into effect April 1 – should regulators in the state be unable to convince Anthem to back down.  Some are facing 25% hikes.

Customers can switch, but then you have the problem of keeping your existing health benefits and doctor.

--California’s drought emergency grows worse by the day.

--Late Friday, the State Department issued a long-awaited review of the environmental impact of the Keystone XL pipeline and found that the project would have a negligible effect on climate change, bolstering the case for it. But now, for political reasons, President Obama could choose to delay approval for months as he sticks his finger into the wind for guidance. Much more on this next time.

--Goldman Sachs chairman and CEO Lloyd Blankfein will earn as much as $23 million in cash and prizes for 2013, up 10% over 2012, even as banker bonuses were cut. Mrs. Blankfein was once again overheard saying at a luncheon with other rich white Street wives, “I am so proud of my Lloyd!”

--After the announcement CEO and co-chief investment officer Mohamed El-Erian was leaving, which co-founder Bill Gross said this week was a surprise and disappointment, PIMCO revamped its leadership team to create six deputies to Gross.

I do have to note that last week I said El-Erian left mostly for personal reasons, and a more-balanced lifestyle. Two days later, Tom Braithwaite wrote in the Financial Times, “the grueling hours were even more important [than perceived tensions with Bill Gross], however. In his valedictory emails, perhaps wary of the cliché, Mr. El-Erian avoided saying he wanted to spend more time with his family. But that is, in fact, his main reason for leaving, according to people close to him.”

Told ya.

--Despite a poor growth rate for the overall economy, the jobless rate in Brazil is down to a record low of 5.4%. Average monthly wages rose for a ninth consecutive year in 2013, up 1.8%, this as the economy grew less than 3% for a third year. President Dilma Rousseff remains the front-runner for this October’s elections and she’s expected to announce her candidacy soon.

But I maintain the upcoming World Cup could yield some ugly pictures...massive protests that turn violent.

--Taiwan’s economy grew at a solid 2.9% annualized rate in the fourth quarter, far better than expected as exports rose. Overall, the economy grew 2.2% for 2013 vs. 1.5% the prior year.

--Exxon Mobil Corp.’s profit fell 27% in the fourth quarter to $8.35 billion...$32.6 billion for all of 2013, the lowest yearly profit since 2010. Oil and gas output fell 1.8% from a year ago in the quarter.

Exxon needs to strike it big in some of its current oil plays, including in Russia’s seas.   Thus far, its heavy exploration expenses haven’t been paying off as hoped.

As in the Wall Street Journal reported that Chevron, Exxon and Royal Dutch Shell spent more than $120 billion in 2013 drilling for oil and gas but have little to show for it. For example, a project that includes Exxon and Shell in the Caspian Sea has seen the original budget of $10 billion soar to $40 billion.

--Natural gas prices have been on a wild rollercoaster the past two weeks, rising to a 4-year high of $5.50 a million British thermal units, then down to $4.80 just two days later, including the biggest one-day percentage decline since April 2010. Nat gas finished the week at $4.94.

--The Hong Kong government culled 20,000 live chickens on Tuesday after fears grew over the spread of bird flu. Mainland China’s total number of confirmed H7N9 cases in January exceeded 110, with at least 20 dying. This week it was reported three members of one family contracted the disease.

Every story like this hurts KFC’s China sales, KFC being owned by Yum Brands.

I do have to note that in Hong Kong, I’d say about 20% of store clerks and service folks were wearing masks when I was there. [It wasn’t for the pollution, the levels of which were good during my stay.]

--Norwegian Air Shuttle is a new discount carrier that will begin flying to New York and Los Angeles from London’s Gatwick in July, on top of its existing long-hauling from Scandinavia to New York, Ft. Lauderdale and Bangkok, as well as Oakland and Orlando. So, as an example of the job market, it received more than 5,500 applications for 300 U.S.-based cabin-crew posts. 

With its existing short-haul discount market in Europe, the ambitious airline has now ordered 222 Boeing and Airbus Group planes. [Bloomberg]

--Barclays plans to close a quarter of its branches in the UK while slashing hundreds of jobs in its investment banking division. The job cuts, unknown at this point (though a guess is 400 bankers), come on top of 3,700 layoffs announced early last year.

Earlier in the week, Lloyds Banking Group said it would terminate nearly 1,100 positions.

--Last week I said the SEC was making a big mistake in going after the Chinese affiliates of Big Four accounting firms in the U.S., barring them from conducting audits of U.S.-listed Chinese companies. 

Well China did indeed warn of “consequences” as the nation’s securities body, the CSRC, said, “We hope the SEC will take into consideration the big picture of China-U.S. regulatory cooperation, make the right judgment to resolve the situation properly. The SEC should bear all responsibility to possible consequences arising from the decision.”

Bottom line...U.S. investors in legitimate Chinese operations will continue to get hosed.

--I said last time I would note the tie between China Clean Energy Inc. and Allentown, Penn.-based Air Products Corp. (APD). One of the selling points for me was that APD was a leading customer of CCGY and was listed as such in the latter’s investor kits. Then in the last filing from the company, Aug. 2012, which discussed 2011 results, Air Products is singled out as the largest foreign customer, some 6% of sales. Again, to me a big positive.

So in the fall of 2012, I contacted the company and requested a meeting with a senior executive in Allentown. He couldn’t have been more courteous as I laid out my story. I then pointed out to him how APD was violating its Code of Conduct, as in suppliers are expected to be “transparent in their reporting.” Obviously, CCGY has not been.

I shot APD a note last fall, apprising them of a move I had made with regards to Congress and in all honesty, nothing has come about with either party since. Part of it has been my own severe time constraints. But APD should understand I haven’t forgotten.

[Hedge-fund operator Bill Ackman took a position in APD last year, just as an aside.]

--A U.S.-based research firm, Demographia, said Hong Kong had the most unaffordable housing in the world for a fourth straight year, followed by Canada’s Vancouver and Honolulu. I’ve known this fact about Hong Kong for a long time and while there kept looking at the service employees, thinking, ‘How the heck can they afford to live here?’ I took to telling those who treated me particularly well (professionally with a smile) that I loved their attitude. The kids got a kick out of that.

In my many trips to Asia, including Taiwan, South Korea and Singapore, I really do like the young people. Males over 40, though, for the most part suck. It’s in the youth that Asia’s future should be secure, as long as they have the right leadership, I hasten to add.

--Diageo, the world’s biggest distiller and maker of Guinness, announced the overall Irish beer market declined 6% in the six months ended December. Diageo commands 32% of it.

Get this, globally, Guinness net sales declined 1%, driven by weakness in Nigeria, which is Guinness’ number one market by net sales in the past year. Who wudda thunk it? [Irish Independent]

--Parts of Britain experienced the wettest January since records began in 1910, with further flooding at week’s end. One weather expert said it could be the wettest winter on record owing to “a storm factory over the Atlantic.”

Of course that storm factory usually starts with coastal weather in the U.S., so expect a stormy February here...your unofficial StocksandNews forecast.

--If you read me last week, I did go to see “Gravity” (loved it) at the IMAX theater inside Hong Kong International Airport. What shocked me was the cost. Just $7! Hong Kong is strange. The world’s most unaffordable place to live, but I could still get a McDonald’s full breakfast for $3.25, the South China Morning Post for $1.25, a ride on the famous Star Ferry connecting Hong Kong Island to Kowloon for $0.75, a trip on the Peak Tram for $10.00 (not bad) and the high-speed train connecting the airport to Hong Kong Central for $14.00 round trip (excellent buy vs. $100.00 cab fare each way).

But then you have something stupid like a simple fish & chips in a hotel restaurant for $35.00. 

--You’ve gotta love this one. From David K. Li of the New York Post:

“A man in China purchased a first-class plane ticket – and used it to eat a year’s worth of free meals at the VIP lounge at Xi’an International Airport.

“The frequent diner purchased a first-class, fully refundable ticket aboard Eastern China Airline.

“He used the ticket to gain access to the airport’s VIP lounge, where high-rolling travelers dine for free....

“The man re-booked his first-class ticket over and over again and kept the gravy train rolling.

“Eastern China Airlines officials only recently figured out the man’s scheme after noticing his single ticket being re-booked 300 times over one year, according to a newspaper report.

“Airline officials admitted there was nothing they could do to stop the frequent diner.”

Alas, he was confronted and “the human meal ticket stopped chowing down.” He then cashed in the fully-refundable ticket and got all his money back.

--The nearest Wal-Mart to where I live is about 15 minutes away but I never think of going there. However, I see where they are going to continue purchasing Alaskan wild salmon after a review of the state’s Responsible Fisheries Management program.

I’ve been looking for a reliable source of Alaskan salmon, ever since my online source went out of business (due to the catch limitations), so I could become a Wal-Mart regular for “Salmon Sunday.”

[Wal-Mart also announced it was laying off 2,300 employees at Sam’s Club and warned on upcoming earnings results.]

Foreign Affairs

Syria: The United States made the announcement that Syria had moved only 4% of the chemical weapons the government had declared. Defense Secretary Chuck Hagel said he was “concerned.”

This is unreal. We’ve been fed nothing but a bunch of merde on this topic. To wit:

Syria’s chemical weapon stockpiles were due to be removed and destroyed by June 30. Instead the Assad regime is stalling for time, “bargaining” for unneeded security gear such as “armored jackets for shipping containers, electronic countermeasures and detectors for improvised explosive devices” to help transport its chemicals to the coastal city of Latakia, according to Robert Mikulak, Washington’s ambassador to the Organization for the Prohibition of Chemical Weapons in the Hague.

As Mikulak told the 41-nation OPCW Executive Council, such pleas “are without merit” and threaten compliance with the June deadline. [Diane Barnes / Global Security Newswire]

Editorial / Wall Street Journal

“ ‘American diplomacy, backed by the threat of force, is why Syria’s chemical weapons are being eliminated.’ That was President Obama in his State of the Union Tuesday, boasting about what he regards as one of his signature achievements from 2013. Well, not so fast.

“On Wednesday Reuters reported how much of Syria’s chemical stockpile has been handed over for destruction: 4.1%. That comes to about 59 tons of chemical weapons surrendered out of a stockpile of 1,433 tons. Oh, and that’s the stockpile that the Bashar Assad regime officially declared. In September we reported that U.S. intelligence believes the regime disclosed only 32 of an estimated 50 chemical sites....

“It was predictable that as soon as Assad became a partner in his own chemical disarmament he would seize every opportunity to postpone and prevaricate. The regime now insists it needs armored vehicles and communications equipment to move the weapons. Next they’ll demand that the stockpile will only be moved when it has new tanks and attack helicopters to escort the convoys, or perhaps when the rebels lay down their arms.

“A State Department spokesman reacted to this with the mildest of scoldings that ‘the delay is increasing the cost to nations’ for shipping and other removal efforts. Shipping costs? Don’t expect the Administration to trumpet these violations at the U.N., where China and Russia have shielded Assad, or in Congress, which played its own role in looking away from the dictator’s predations. And nobody should expect Mr. Obama to make good on his pledge – hollow even when he made it in September – to renew the threat of military action ‘if diplomacy fails.’

“But neither should the President get away with treating his Syrian debacle as a victory. Americans may want to wash their hands of the Mideast’s many imbroglios. But one consequence of inaction is another despot who sleeps securely in the knowledge that a diffident superpower will exact no price on those who gas their own people.”

Separately, delegates from the Assad regime and the opposition have been attending peace talks in Geneva and using U.N. mediator Lakdar Brahimi to speak through. At first we were told some progress might have been achieved on smaller issues like getting aid convoys into Homs and perhaps swapping prisoners as a way of building confidence before they even begin to address the elephant in the room, what to do with Assad himself.

But then nothing happened. The Syrian government said it didn’t want relief supplies falling into the hands of “terrorists,” its catch-all label for everyone in the opposition.

And in a report from Human Rights Watch, the Syrian government has been accused of “deliberately and unlawfully” demolishing thousands of homes in opposition strongholds.

Finally, in a report that almost seems hard to believe given the total destruction in Syria, Jane’s Defense Weekly has concluded the Assad regime has been able to resume manufacturing missiles at a pace that existed before the 2011 start of the Syrian civil war, as reported initially by the Times of Israel. A major reason for this is the desire to aid Hizbullah in its efforts to continue stockpiling weapons for its next war against Israel.

Jane’s judges the new missiles to be more lethal, Syria’s military collaborating with both Iran and North Korea to enhance the Scud D ballistic missile that has a range of 435 miles.

Iran: In his State of the Union, President Obama reiterated he would veto any attempt by Congress to impose new sanctions on Iran as he wants current negotiations on a final agreement on Tehran’s nuclear program to continue unimpeded. Comprehensive talks are to begin in New York among the P5+1 and Iran on Feb. 18.

The guidelines have not changed. Congress and the Israelis demand Iran’s nuclear infrastructure be dismantled in any final agreement. But Iranian President Rohani has vowed not to do so.

Obama said in the SOTU, “Any long-term deal we agree to must be based on verifiable action that convinces us and the international community that Iran is not building a nuclear bomb.”

But what if this isn’t achieved? More sanctions? It was Obama, after all, who opposed the stringent actions Congress forced on him, the very moves that brought Iran to the negotiating table in the first place.

Meanwhile, International Atomic Energy Agency Director General Yukiya Amano said he would update the organization’s board in early March as to whether Iran is cooperating with the IAEA on its requests that run parallel to the P5+1’s interim framework.

As I’ve been writing, the IAEA is still trying to determine whether Iran carried out activities in the past relevant to the potential weaponization of its nuclear program and Amano and crew still haven’t been granted access to Parchin.

Regarding Iran and Syria and the Obama foreign policy, the Washington Post’s Jennifer Rubin had the following take:

“(Obama) again gave himself a pat on the back for getting out of Iraq and Afghanistan, ignoring the turmoil in the Middle East and the collapse, specifically, of Iraq. He talked about taking America off war-footing even as he conceded al-Qaeda is spreading throughout North Africa and the NSA is needed to do ‘the vital work of our intelligence community.’ He offered the false choice between ‘open-ended’ deployment of ground troops (who precisely is for that?!) and retrenchment.

“As for Iran, he was in full appeasement mode, revealing the intellectual inconsistency of his Iran policy. ‘The sanctions that we put in place helped make this opportunity possible.   But let me be clear: If this Congress sends me a new sanctions bill now that threatens to derail these talks, I will veto it. For the sake of our national security, we must give diplomacy a chance to succeed.’ A nuclear-armed Iran used to be ‘unacceptable’; now preventing that is a ‘goal.’

“His foreign policy remarks aptly convey his lack of interest in world leadership and conviction that avoidance of conflict is his highest duty. You’d never guess as many as 200,000 Syrians are dead and Bashar al-Assad is firmly in power. (‘American diplomacy, backed by the threat of force, is why Syria’s chemical weapons are being eliminated, and we will continue to work with the international community to usher in the future the Syrian people deserve – a future free of dictatorship, terror and fear.’) The killing by conventional means goes on unabated. In Tehran, Damascus and Moscow tyrants are laughing.”

[It’s estimated 1,900 were killed in Syria while ‘peace’ talks were taking place in Geneva.]

Egypt: The military-backed government announced it intended to hold presidential elections by mid-April, at which time it is expected Gen. Abdel Fattah Sisi will become the president, Sisi having the full backing of his military underlings. The recently approved new constitution gives the military sweeping powers so Sisi will have all the authority his little heart desires. Clashes last weekend between police and government opponents resulted in at least 49 deaths, hundreds of injuries, and more than 1,000 arrests.

But there were also a slew of attacks on the Egyptian military, particularly in volatile Sinai, with four Egyptian soldiers dying in an attack on their bus, and five being killed in a helicopter crash where it appears it was shot down by militants.

On another issue the Egyptian government has told the world press, ‘don’t worry,’ even though it has charged 20 employees of Qatar-based Al Jazeera news network with a range of trumped up offenses, including for joining a terrorist organization while alleging the network doctored footage to depict Egypt as being in a state of “civil war.” Eight of the 20 are in custody while 12 remain at large.

Israel: According to a poll conducted by the Palestinian Center for Policy and Survey Research, 50% of Palestinians support the PLO’s decision to resume peace talks with Israel, 47% oppose. 53% support the two-state solution, 46% oppose.

68% said that the chances for the establishment of a Palestinian state in the next five years are slim or nonexistent.

76% oppose a permanent solution if it includes a 10-year transitional period during which the IDF remains deployed in the Jordan Valley.

If the Palestinian Authority held a presidential election today, Mahmoud Abbas would receive 52% of the vote, while Hamas leader Ismail Haniyeh would get 42%. [Jerusalem Post]

Ukraine: One word sums up what is happening in this country and that’s chaos. President Viktor Yanukovych accepted the resignation of Prime Minister Azarov and his cabinet and then took sick leave for a respiratory issue. Anti-government protesters demanding Yanukovych’s resignation have been occupying government buildings while continuing to man barricades in the capital of Kiev. But protests have been spreading to other big cities in the country, while it was learned a leading Ukrainian opposition activist, who had disappeared for eight days, was abducted and tortured by men Dmytro Bulatov said spoke with Russian accents. He had been severely beaten and was left to die in the cold.

Ukraine’s first post-independence president, Leonid Kravchuk (1991-94), opened a debate in parliament this week by urging everyone involved to “act with the greatest responsibility,” having said, “all the world acknowledges and Ukraine acknowledges that the state is on the brink of civil war.”

Legislators did scrap the just instituted laws banning protests and dissent.

As for Russia’s role, President Vladimir Putin received a frosty reception in Brussels in a meeting with the European Union as the latter sought to present a hard line on Ukraine, with each side claiming the other is meddling in Ukraine’s affairs.

But now Putin and Prime Minister Medvedev have said they will wait to see what happens with Ukraine’s government before honoring agreements reached in December to reduce natural gas prices and supply further aid as part of a $15 billion rescue package for Kiev. Medvedev said this week that Ukraine told him “Even at reduced prices (for nat gas)...they can’t pay.”

Afghanistan: As reported by Kevin Sieff of the Washington Post, President Hamid Karzai, behind the scenes, “has been building a (broad case) against the Americans, suggesting that they may have aided or conducted shadowy insurgent-style attacks to undermine his government, according to senior Afghan officials.”

The bastard even says the recent Taliban attack on a Lebanese restaurant in Kabul that killed 21 was carried off with U.S. government involvement.

Needless to say, U.S. officials are outraged. What appears the most likely answer, to me, after reading the different theories, is a simple one. Self-preservation, hedging his bets in case the Taliban take over once the U.S. leaves. Karzai knows otherwise he’ll be killed, though he’ll attempt to flea beforehand with the $billions he has stolen.

So, with the above one shouldn’t expect Karzai to sign the Bilateral Security Agreement that would give legal basis for America’s continued presence beyond 2014. We are going to have to roll the dice with whomever wins the April presidential election.

Separately, a USA TODAY/Pew Research Center poll reveals that by nearly identical majorities, Americans now say the U.S. mostly failed to achieve its goals in both Afghanistan and Iraq, 52-38 in the former, 52-37 in the latter. In 2011, a month after Osama bin Laden was killed, a majority predicted the war would succeed.

Americans do say by a 51-41 margin it was the right decision to take military action in Afghanistan, but whereas Americans initially supported the war in Iraq by a 3-1 margin, now they call the decision to invade the wrong one, 50% to 38%.

Editorial / Washington Post

“President Obama returned in his State of the Union address to a familiar slogan: The war in Afghanistan ‘is finally coming to an end.’ That, of course, is not true: As 29 million Afghans could testify, there is no end to the conflict in sight. Mr. Obama equates the end of the war with the end of U.S. combat operations. ‘Together with our allies,’ he told Congress on Tuesday, ‘we will complete our mission there by the end of this year.’

“Even that is not true – at least, not according to the president’s announced plan. Mr. Obama reiterated his commitment to leave behind U.S. trainers and logistical support to assist the Afghan army, as well as a counterterrorism force to ‘pursue any remnants of al-Qaeda’ – which presumably would involve military action....

“The continuing mission has overwhelming logic in its favor, both for Afghanistan and for the United States. Both have a vital interest in preserving the hard-won gains of the past dozen years....

“(But the president is communicating) the wrong message to Americans with speeches proclaiming ‘the end of America’s longest war.’ If a continued U.S. mission is to be supported by the public and funded by Congress – which just slashed this year’s Afghanistan funding – Mr. Obama must make the case why it is in the national interest for troops to remain. That he does virtually the opposite makes him complicit with Mr. Karzai in undermining a major national security interest.”

Turkey: With the turmoil in his country, Prime Minister Erdogan’s approval number has fallen to 39% from 48% in December, a significant decline. The combination of the bad economic news and the corruption investigation that exploded in December is ahead of a series of elections this year; first local ones in March, followed by a presidential vote in August and parliamentary elections next year. It was thought Erdogan would run for president and then strengthen the office, but a poor showing in local elections by his AKP could force Erdogan to attempt to change the rules and allow him to serve a fourth term as prime minister.

China: According to a report by the International Consortium of Investigative Journalists (ICIJ), relatives of at least five current and former members of China’s top leadership, including former leaders Hu Jintao and Wen Jiabao, are shareholders in many offshore companies, allowing them to conceal their assets. While in and of itself this is not necessarily illegal, the timing is awful as President Xi Jinping has taken such a hard line on corruption and graft.

On a different issue, relations between Japan and China, Japanese Prime Minister Shinzo Abe told CNN last weekend in an interview from Davos, “it is important for China to recognize that any attempts to change the status quo by force or coercion cannot be accepted.”

While Abe said he has no intention of countering China militarily, “I am responsible for protecting Japanese waters, territory and Japanese lives and property. And I intend to exercise those responsibilities.”

A follow-up to last week’s mention of the trial of activist Xu Zhiyong. He was sentenced to four years in prison, convicted of “gathering a crowd to disturb public order.”

And on the pollution front, December was the most polluted month of the year in China. Residents living in the 25 cities in the Yangtze River Delta saw only five days during the month when smog levels were within safe limits, according to the Ministry of Environmental Protection.

Russia: Hard to believe the Sochi Games start this coming Friday with the Opening Ceremonies. Opposition leader Alexei Navalny published an investigation into the construction of Olympic facilities that shows contracts were repeatedly altered to inflate their costs, allowing “friends of Putin” (Navalny’s description) to embezzle billions. Earlier accusations by opposition politicians Boris Nemtsov and Leonid Martynyuk claim between $25 billion and $30 billion had been stolen in Sochi.

A Swiss member of the IOC and president of the International Ski Federation, Gian-Franco Kasper, accused Russian authorities of embezzling $18 billion of the funds allocated to prepare for the Games.

Sally Jenkins / Washington Post

“The Olympics aren’t supposed to kill people. They’re supposed to exalt them. But it’s too late to take the dangerous, despoiling Winter Games away from the thugocracy that is Vladimir Putin’s Russian regime, so the only option is to count on the man’s bulging biceps and hope it’s an adequate ‘ring of steel’ that can keep people safe in Sochi. It’s a cold hard fact that these Olympics have become an agent of death.

“Sochi already is a catastrophe, and if it becomes a tragedy too, it will be because the International Olympic Committee has become the tool of ‘colossal authoritarian branding,’ to borrow a phrase from Russia scholar Leon Aron.

“The choice is an ugly one: Removing the Games at this late date would devastate Russians who have invested national self-worth in them, and the athletes who have trained for them. Therefore the only option is to watch Sochi become a contest for prestige between two warring parties; a corrupt strongman who wants to flex his political authority, and the murderous jihadists who have vowed to strike in Sochi.

“Why should the Olympics lend its prestige to either? But that’s exactly what’s happening....

“The Olympics are supposed to be about ‘human dignity,’ in the words of the Olympic charter. But in these Games, the humans are shields.”

On a different matter, as reported by the New York Times’ Michael R. Gordon, “The United States informed its NATO allies this month that Russia had tested a new ground-launched cruise missile, raising concerns about Moscow’s compliance with a landmark arms control accord.

“American officials believe Russia began conducting flight tests of the missile as early as 2008. Such tests are prohibited by the treaty banning medium-range missiles that was signed in 1987 by President Ronald Reagan and Mikhail S. Gorbachev, the Soviet leader at the time, and that has long been viewed as one of the bedrock accords that brought an end to the Cold War.”

This is bad news, but hardly surprising given Russia’s history.

North Korea: In written testimony to the Senate Intelligence Committee, Director of National Intelligence James Clapper said North Korea has expanded the size of the uranium enrichment facility at Yongbyon and restarted a reactor that was used for plutonium production before it was shut down in 2007.

The findings concur with assessments published last summer by various think tanks monitoring Pyongyang’s nuke program.

Separately, South Korean news agency Yonhap reported that all relatives of Kim Jong Un’s uncle, Jang Song Thaek, who was executed in December, “have been put to death, including even children.”

One of those executed was Jang’s sister, North Korea’s ambassador to Cuba.

Thailand: The government insisted on pressing ahead with parliamentary elections on Sunday, because it knows it will win convincingly, but fingers are crossed in terms of whether they are largely peaceful or not. The main opposition party has vowed to boycott the vote.

Denmark: Barack Obama’s girlfriend, Denmark’s Prime Minister Helle Thorning-Schmidt, is in deep trouble over a Goldman Sachs investment, a 19% stake in a state-owned utility, Dong Energy. Goldman itself was surprised by the bitter feelings of the Danish people upon learning of the bank’s stake and they’ve taken it out on Thorning-Schmidt. With one of three parties in her thin coalition having pulled out this week, the striking prime minister (it’s Web Sweeps Week) and her remaining partner control just 61 of 179 seats in parliament. No word from Obama on whether they are exchanging selfies.

Venezuela: According to private estimates, inflation here is more than 56%.

France: President Francois Hollande split with his companion, Valerie Trierweiler, leaving France, for the time being, without a First Lady. Zut alors!

I can’t take Trierweiler’s side in this matter because I’ve read a lot about her and she’s just not likable. Hollande, though, certainly didn’t distinguish himself.

Random Musings

--Peggy Noonan / Wall Street Journal

“The State of the Union was a spectacle of delusion and self-congratulation in which a Congress nobody likes rose to cheer a president nobody really likes. It marked the continued degeneration of a great and useful tradition. Viewership was down, to the lowest level since 2000. This year’s innovation was the Parade of Hacks. It used to be the networks only showed the president walking down the aisle after his presence was dramatically announced. Now every cabinet-level officeholder marches in, shaking hands and high-fiving with breathless congressmen. And why not? No matter how bland and banal they may look, they do have the power to destroy your life – to declare the house you just built as in violation of EPA wetland regulations, to pull your kid’s school placement, to define your medical coverage out of existence. So by all means attention must be paid and faces seen.

“I watched at home and thought: They hate it. They being the people, whom we’re now supposed to refer to as the folks. But you look at the polls at how people view Washington – one, in October, had almost 9 in 10 disapproving – and you watch a kabuki-like event like this and you know the distance, the psychic, emotional and experiential distance, between Washington and America, between the people and their federal government, is not only real but, actually, carries dangers. History will make more of the distance than we do. Someday in the future we will see it most vividly when a truly bad thing happens and the people suddenly need to trust what Washington says, and will not, to everyone’s loss.”

--Daniel Henninger / Wall Street Journal

“The 2008 campaign phrase ‘hope and change’ will haunt future histories of the Obama presidency.

“Many Americans voted Barack Obama into the White House for that reason alone. That reason is gone. The notion that this president would unify the nation by allowing people to summon their better spirits, as he promised, faded fast.

“Even Mr. Obama’s supporters see now that his operating method wasn’t unification, but political and social division. Support for the president among the independents who gave him 52% of their vote in 2008 has fallen into the 30s...

“The pollsters at Gallup wrote last week that ‘Obama is on course to have the most politically polarized approval ratings of any president.’ Segments of the U.S. population see themselves not just in disagreement with the Obama administration, but as the target of its policies.

“This includes not only the famous 1%, but also the upper-middle class, Southern states, charter schools, politically active conservatives, private businesses, the Catholic church, electric utilities, doctors driven out of ObamaCare’s health networks and those famous partisans, the Little Sisters of the Poor.

“All have been vilified, investigated, audited or sued by the president himself, Eric Holder’s Justice Department, the National Labor Relations Board, the Securities and Exchange Commission, the Environmental Protection Agency and, not least, the Internal Revenue Service....

“How can this be good, if the price is more national disunion than we have now? Disunion is a dangerous political virus that sends a nation as complex as the U.S. toward a state of permanent, embittered opposition, which can be difficult for mere politicians to set right. We’re about there.”

--According to a Washington Post/ABC News poll, Hillary Clinton leads her potential primary rivals by a rather large margin; 73% to Joe Biden’s 12% and Sen. Elizabeth Warren’s 8%. [Among Democratic and Democratic-leaning independents.]

On the GOP side, though, six register between 10% and 20%, with Gov. Chris Christie now trailing in third at 13%, behind Rep. Paul Ryan, 20% and former Florida Gov. Jeb Bush at 18%. Sens. Ted Cruz, Rand Paul and Marco Rubio are between 10% and 12%. [Cruz leads among those identifying themselves as Tea Partiers with 28% to Ryan’s 18%.]

In a theoretical head-to-head, Clinton leads Christie among registered voters 53-41 percent. In 2012, President Obama beat Mitt Romney 51-47, and in 2008 the margin over John McCain was 53-46.

In the above mentioned NBC News/Wall Street Journal survey, 44% believe Christie is not telling the truth re Bridgegate, while 42% say he is. Worrisomely for the governor, more view him negatively than positively, 29-22, when it was the reverse in October, 17-33.

Speaking of Bridgegate, a new lawsuit accuses Hoboken Democratic Mayor Dawn Zimmer of threatening to fire Carmelo Garcia, director of the local housing authority, and a Democratic assemblyman, unless he hired politically connected contractors in a situation involving Zimmer’s husband, Stanley Grossbard. According to court documents, Garcia secretly recorded meetings he had with Grossbard, though it’s not clear who was shaking down who, in my cursory glance at them.

But on Friday afternoon, David Wildstein, the Port Authority political appointee who oversaw the GW Bridge lane closures, said through his attorney that he has evidence proving Gov. Christie was aware of the closings as they happened, only Wildstein hasn’t produced the actual documents as I go to post and the New Jersey Democrat in charge of the state legislature’s investigation is frustrated because he thought he had been given everything through a subpoena issued to Wildstein.

Yes, of course. If Wildstein has the goods, Christie has to resign. It’s pretty simple. What we do know is that in various polls, such as the one cited above (there’s another in Florida that has Christie trailing Hillary 51-35 when the gap was just 4 in November), the Christie brand has already suffered perhaps irreparable damage.

--Sen. Cruz is vowing to wage a fight on the debt ceiling. “We should not raise the debt ceiling without significant structural reforms that address the out of control spending and out of control debt in Washington. The debt ceiling...has historically been the most effective lever point to doing so.”

What did I say two weeks ago? For once would some of these folks be intellectually honest? Spending, on the discretionary side, is no longer out of control. It’s at levels of the George W. Bush presidency. Be more specific.   “Entitlement spending” is out of control and will do us in one day.

But understand, Senator. Nothing is going to get done on entitlement spending this year. Get that through your head. Just win the Senate.

It’s going to be very interesting to see how Cruz handles these next few weeks. I know he will make some good points. I just want him to deal with the 2014 realities and not screw things up for those of us who want 51 elephants in the upper chamber.

--California Democrat Henry Waxman, in the House since 1974 and a powerful figure on a number of key issues, announced his retirement, joining fellow 40-year California Democrat George Miller in eschewing a run next fall. Both, however, are secure seats for the donkeys.

Waxman is the 30th House member who’s announced plans to retire at the end of the year. Too bad it’s not 400.

--America’s top spy chiefs, in their annual report to Congress, now list insiders like Edward Snowden (and Chelsea Manning) and their leaking of secrets about sensitive U.S. intelligence programs as posing a greater danger to national security than terrorists. Cyberattacks on crucial infrastructure remain the No. 1 risk.

Appearing before the Senate Intelligence Committee, James Clapper reiterated Snowden’s leaks represented the “most damaging theft of intelligence information in our history.”

Army Lt. Gen. Michael Flynn, head of the Defense Intelligence Agency, said the leaks endangered the lives of intelligence operatives and troops. [Ken Dilanian / Los Angeles Times]

--Meanwhile, Snowden, responding to reports the U.S. government would let him return home if he would face the music, said he cannot go back because “there’s no chance to have a fair trial” and instead urged the U.S. to strengthen its protections for whistle-blowers.

--U.S. Defense Secretary Chuck Hagel conducted a review of the missile-launch force after various scandals have been revealed, including one involving cheating on a routine proficiency exam for nuclear-launch operations, and the secretary suggested the test might be too hard with the consequences of a poor score probably leading to the cheating. The Air Force then announced on Thursday that it had suspended 92 officers at Malmstrom Air Force Base – nearly half of the nuclear launch crew there.

The remaining 100 launch officers will have to perform extra duty.

Separately, Hagel told reporters he was “deeply concerned” about the “overall health and the professionalism, and discipline of our strategic forces” and that he would be addressing the situation.

When this whole mess first broke last year, including the drug investigation that proved to be the tip of the iceberg, I said what is so worrisome is how these crews are subject to blackmail. A terrorist cell, working with just, say, three of the U.S. missile launch crew members, including outside security, could conceivably gain access to the capsules.

And back to the test and whether it is too hard, Loren Thompson of the Lexington Institute told the New York Times, “The consequences of a mistake in the handling of nuclear weapons are far greater than in problems that could happen with anything else. One hundred percent is necessary on these tests because one mistake could be very catastrophic.”

--Editorial / Washington Post

“The next time you’re in Los Angeles, take a deep breath. A significant portion of the pollution you’ll breathe into your lungs came from across the Pacific Ocean.

“Decades ago, Angelenos’ respiratory tracts may have been burned by the accumulation of local pollutants in and around Southern California’s valleys and basins. Since then, federal and state pollution controls did much to clean up the air. But a study in the Proceedings of the National Academy of Sciences finds that neither federal nor state authorities can as effectively restrain one pollution source: China.

“Chinese and American researchers estimated the amount and ultimate destination of smog-forming gases and particulates that Chinese factories pumped out in their production of export goods. Up to a quarter of the sulfate pollution in the western United States wafted over from those factories. Their emissions add a day of substandard air in the Los Angeles area every year.

“And those are just the fraction of Chinese emissions associated with world trade. Nations closer to China suffer much more. The health and well-being of many people in many countries, not just those choking on thick, brown air in Beijing, depend on China developing into not merely a great economic power but also one that manages its massive impact on the planet.”

--There is a positive from the record cold this winter. It’s killed off a lot of insects. I’ve been thinking here in New Jersey that it certainly augers for less mosquitoes come next summer. But I saw in a piece in the Star-Ledger that New Jersey’s pine barrens may be catching a break. The Southern pine beetle had migrated north to devastate 30,000 acres of this precious natural resource, “choking trees to death as they burrow deep into their trunks.

“But temperatures reached a potentially magical minus 10 degrees in northern portions of the Pinelands last week and have been sub-zero on another occasion, leading to hopes that some of the population may have died off and could be more easily managed come spring.”

The magic number for a pine beetle is supposedly minus 8. But I love this part.

“What’s’ more, ricocheting temperatures – sometimes changing more than 60 degrees in 24 hours – may provide even more help, building then melting ice crystals inside the insects that could destroy their cells over time.”

Yesss! Take ‘em out, Mother Nature!

--In a survey by UMR research, 83% of Australians haven’t changed how often they swim, surf or take part in other recreational activities in the ocean because of the risk of shark attack.

Why mention this? Because there is a controversial shark cull going on in West Australia that has torqued off some folks there. 82% don’t think sharks should be killed and say people enter the water at their own risk. [Philip Dorling / Sydney Morning Herald]

Of course for that other column I have a hand in (the one not signed), we love shark attacks. It helps juice traffic.

--I had a big problem with jet lag this week. I kept falling asleep during the day and didn’t have a normal night’s sleep until the fourth night after my return. I only bring this up because I had clipped out an article from a China paper when I was in Hong Kong that I specifically didn’t look at until now (aside from reading the headline) and a recent study at Surrey University in England “found evidence that jet lag causes ‘profound disruption’ to more than a 1,000 genes, including many that are normally drawn upon to maintain, repair and protect the body.”

But... “The findings will have an impact far beyond research into jet lag and shift work. John Hogenesch, an expert on the effects of circadian clocks on physiology at the University of Pennsylvania, said such disruption to gene activity could affect how well people’s drugs work.

“Many common drugs work properly only if they are taken at the right time. For example, Mevacor, a cholesterol-cutting statin, works best at night because levels of the enzyme it targets are highest then. The same goes for the use of low-dose aspirin to lower blood pressure.” [South China Morning Post / The Guardian]

Pretty cool...but I’m still tired.

--Actually, in all seriousness, aside from the fact I never get enough sleep, this has been such a [lousy] winter, I’ve haven’t gotten any exercise outside since mid-December...and that means no vitamin D, sports fans.

I also have never heard more comments, including notes from you, on how we have never looked more forward to spring than we are today. I know I can’t wait to get back into my jogging routine.

--Editorial / New York Post

“ ‘Songs are weapons,’ Pete Seeger used to say. For more than seven decades, he led America in sing-alongs, even as most of his audiences remained blissfully unaware of the messages behind many of his songs.

“Take the now-iconic ‘If I Had a Hammer.’ Today, it is admired as a call to justice. In fact, it was written for a 1949 testimonial dinner for top leaders of the U.S. Communist Party, then on trial for advocating the violent overthrow of our government.

“Such facts are missing from the tributes to the former Communist Party member, who died Monday at age 94. President Obama, for example, hailed him as ‘America’s tuning fork,’ while Mayor de Blasio urged everyone to ‘sing a song for justice.’

“Some will argue Seeger’s music should not be judged by the dubious movements he aligned himself with. But to Seeger himself they were inseparable.

“Yes, he sang about ‘justice’ and ‘freedom’ and ‘peace.’ But when Hitler and Stalin signed their pact in 1939, Seeger followed the party line, abandoning anti-fascism to sing out against ‘warmongering’ by FDR – only to reverse himself, as the party did, when Hitler invaded the Soviet Union....

“However brilliant a musical artist Pete Seeger may have been, honesty requires acknowledging that ‘America’s national treasure’ was a tarnished gem.”

Editorial / New York Sun...in noting that Seeger later on finally acknowledged Stalin’s crimes:

“What Pete Seeger really stood for above all other things is the transcendent power of music and its ability to communicate – politics, narrative, spirituality, and all the noble emotions.”

--The number of U.S. war dead in Afghanistan officially crossed the 2,300 mark the other day, according to the count kept in Army Times.

---

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

God bless America.

---

Gold closed at $1240
Oil $97.49

Returns for the week 1/27-1/31

Dow Jones -1.1% [15698]
S&P 500 -0.4% [1782]
S&P MidCap -0.1%
Russell 2000 -1.2%
Nasdaq -0.6% [4103]

Returns for the period 1/1/14-1/31/14

Dow Jones -5.3%
S&P 500 -3.6%
S&P MidCap -2.2%
Russell 2000 -2.8%
Nasdaq -1.7%

Bulls 53.1
Bears 15.3 [Source: Investors Intelligence...*recall, the bulls peaked at 61.6 on Dec. 31 with the S&P at 1848...just sayin’...this is exactly how this contrarian indicator is supposed to work, but for long stretches the past 15 years in particular it’s been meaningless.]

Have a great week. I appreciate your support.

Denver wins 24-13. 

Catch me on Twitter @stocksandnews

Brian Trumbore



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Week in Review

02/01/2014

For the week 1/27-1/31

[Posted: 12:00 AM ET]

Washington and Wall Street

George Will / Washington Post

“As undignified as it is unedifying and unnecessary, the vulgar State of the Union circus is again at our throats. The document that the Constitutional Convention sent forth from Philadelphia for ratification in 1787 was just 4,543 words long, but this was 17 too many. America would be a sweeter place if the Framers had not included this laconic provision pertaining to the president: ‘He shall from time to time give to the Congress information of the state of the union.’

“ ‘Information’? Not exactly.

“The Constitution’s mild requirement has become a tiresome exercise in political exhibitionism, the most execrable ceremony in the nation’s civic liturgy, regardless of which party’s president is abusing it. You worship bipartisanship? There is not a dime’s worth of difference between the ways the parties try to milk partisan advantage from this made-for-television political pep rally.”

I watched the president’s speech along with 33 million other Americans (according to the ratings) and what a waste of everyone’s time. I have little to say on the topic except for the issue of trade, where the president, who wasn’t as confrontational as some expected, asked Congress “to work together on tools like bipartisan trade promotion authority” to lift exports and “protect our workers.” Republicans applauded. But Democratic Senate Majority Leader Harry Reid said the next day, “I’m against fast track. I think everyone would be well-advised just not to push this right now.”

Texas Republican Sen. John Cornyn responded, “You can kiss any new trade deals goodbye. I think the majority leader’s focus is on the November elections and he doesn’t want to expose his vulnerable members to controversial votes.”

Yup. Wouldn’t want to do something good for the economy when you might be jeopardizing campaign donations from the unions.

Or as the Wall Street Journal opined:

“The sudden opposition makes us wonder if this isn’t a rigged double game. President Obama gets to appeal to Fortune 500 CEOs by pushing freer trade, while Senate Democrats drag their feet to appease unions and extort campaign cash from business in an election year. Democrats get the money but nothing gets done. That’s how House Democrats played trade deals in 2009-2010 when Mr. Obama claimed to support pacts with South Korea, Colombia and Panama, but Speaker Nancy Pelosi refused to allow a vote. The pacts finally passed in 2011 after Republicans took the House.”

It’s yet another example of why so many of us are sick of Congress. How many?

Glad you asked. According to a new NBC News/Wall Street Journal survey, Congress’ approval rating is 13%, just off the low of 12% from last July. By contrast it was 54% in January 2002.

As for the president, his approval rating remains at 43%, same as in December (and the same as a new USA TODAY/Pew Research Center survey), and down from his high in this particular poll of 61% in April 2009. [A Washington Post/ABC News poll has Obama’s approval rating at 46%, up from a low of 42% in November. Congress’ approval rating in this one is 16%, up a few from the low in October.]

On the all-important question is the country headed in the right or wrong direction, only 28% believe it is headed in the right one. But, 61% are satisfied with their own personal situation.

On ObamaCare, in the NBC/WSJ survey, 48% believe it has been a bad idea, just 34% say it’s a good one, though a majority still want to keep it.

Meanwhile, there was some economic news this week. December new home sales came in far less than expected, while December durable goods tanked to the tune of 4.3% when an increase of 1.7% was expected.

Then we had the first reading on fourth-quarter GDP and it was in line, 3.2%, after a 4.1% annualized pace in the third quarter. So the last two figures are solid, after the 1.1% (Q1) and 2.5% (Q2) #s for the first half of 2013.

On Friday the December figures for personal income and consumption were released and the former was unchanged (not good) while the latter was up a stronger-than-expected 0.4% (good).

And you had the final meeting for the Federal Reserve’s Open Market Committee under the chairmanship of Ben Bernanke, wherein the Fed continued with December’s tapering of its bond-buying program, once $85 billion a month in mortgage-backed securities and Treasuries and now, after a second $10 billion cut, still $65 billion.

The Fed chose to ignore the turmoil in emerging market currencies and instead focus on an economy where “growth in economic activity picked up” since the December meeting and thus there was no reason not to continue to pare back on the bond purchases. 

But, just as importantly, the Fed clearly is going to keep the policy (funds) rate at zero “well past” the initial target of 6.5% on the unemployment rate. There is no chance they are raising this until well into 2015 at the earliest.

As for future tapering, yes, it’s still all about the data and if the currency markets continued to be roiled and stocks took it on the chin beyond a normal 10% correction, perhaps they’d pause for a meeting, but unless you had chaos in the markets this could prove counterproductive, especially with a new Fed chairwoman, Janet Yellen. What would it say about her credibility?

True, right now it’s a bit of a vicious cycle. Investors are selling emerging market currencies, forcing some countries, such as Turkey and India most notably this week, to raise interest rates in order to stem the flight of capital, with rate hikes potentially weakening the local economy, which can weaken ours, ostensibly because of weaker sales from U.S. outfits exporting to said emerging market(s), and voila! A correction could evolve into a bear market.

But there is no cause for panic...at least not yet.

The panic could come (depending on how much unwinding had taken place beforehand) when the Federal Reserve finally is forced to raise the funds rate. If there is some emerging market turmoil with a minimal amount of tapering, which still means the Fed is buying ‘large’ each month, imagine what will happen with that first actual rate hike?

As to the Bernanke legacy....

Editorial / Wall Street Journal

“As the Federal Reserve Chairman prepared to step down, the encomiums rolled in. ‘The most successful tenure in Fed history,’ said the S&P economist. Added a former Fed Governor: ‘He has been called, and I think justifiably so, the greatest central banker in history.’ He was the man who saved the world, a genius, the maestro.

“All of that praise was heard eight years ago this month for Alan Greenspan as he prepared to step down after 20 years leading the Fed. A mere two years later views of the Greenspan monetary era were very different, as the credit boom he did so much to create turned to mania, which turned to panic, which became a deep recession.

“That reversal is worth keeping in mind now that the same extravagant praise is flowing for Ben Bernanke... There is no doubt Mr. Bernanke has been one of the most consequential Fed Chairmen in history, but his legacy is still far from clear and is at best more mixed than the effusive praise suggests.

“One way to think about the Bernanke era is to divide it into three parts: before, during and after the financial panic. His record before the crisis was a clear failure. He deserves good marks for his actions in the eye of the storm. As for his extraordinary monetary exertions since the recovery began, the legacy will depend on how it all turns out....

“The biggest test will be what happens when Mr. Bernanke’s successors are obliged to unwind his policies. If the Fed can end its bond-buying and return to a normal interest-rate regime while sustaining the recovery, his great monetary experiment will have been a success. But if it ends badly, with continued subpar growth, or bursting asset bubbles, or budding inflation that requires a rapid rise in interest rates, the Bernanke Fed won’t be able to pass the buck.”

Robert J. Samuelson / Washington Post

“As Ben Bernanke must recognize, he is the victim of the law of diminishing returns. In the initial days of the 2008-09 financial crisis, he mobilized the Fed as the lender of last resort. This helped quell an intensifying financial panic and, arguably, averted a second Great Depression. Bernanke’s role has been much praised and deserves the nation’s gratitude. It is doubtful that anyone else would have done better.

“But Bernanke’s ambition transcended calamity prevention. He sought to kick-start the economy by keeping short-term interest rates low (effectively zero since late 2008) and through massive bond-buying (called ‘quantitative easing’). The strategy was to reduce long-term interest rates, strengthen a housing revival, boost stock prices and stimulate corporate investment in plants and equipment. Here, his success is scant. Since mid-2009, the economy has grown at an anemic annual rate of 2.4 percent. Payroll jobs are still 1.2 million below their 2007 peak, and 7 million Americans have left the labor force – some retired but perhaps half, by some estimates, quit because they were discouraged about finding work....

“It is premature to judge Bernanke’s legacy. His policies will have ongoing consequences that, for good or ill, will shape his ultimate reputation....

“Through the bond-buying and ‘forward guidance’ – a loose commitment to keep short-term interest rates near zero until the job market strengthens convincingly – he has tried to instill confidence. Perhaps the lagged effects of these policies will soon boost growth. He has also argued that these policies can be withdrawn without disruption. As an academic exercise, this seems true. The real question is what happens if there are further surprises, from unanticipated inflation to another financial crisis. The Fed and others have repeatedly erred in their economic forecasts.

“Still, Bernanke’s record suggests a tentative verdict. Facing turmoil and danger, he helped stabilize the economy and reassure the public. His hallmarks have been competence, candor, decency and dignity. He was the right man at a fateful juncture.”

As for the action on Wall Street, put January in the books. It wasn’t a good one for stocks, with the Dow Jones falling 5.3%, the S&P 500 3.6% (the worst month for both since May 2012) and Nasdaq declining 1.7%. As January goes so goes the year, is the old saw, and in the case of the S&P, if January is an up month, 73% of the time you have an up year. [A lower start led to a full-year decline 58% of the time.]

What we do know is corporate earnings thus far in the reporting season have been lackluster. Oh, you keep hearing the vast majority beat on both the top and bottom line. Well most of them always do, especially if you have an investor relations department worth a damn, working in unison with the CFO in most cases, who can help “guide” analysts. It’s not for nothing that during Jack Welch’s tenure at G.E., the company magically beat by a penny virtually every quarter. Move some sales around at quarter end, hold off on a few expenses and presto!

Anyway, most importantly, the earnings conference calls and accompanying statements for many companies the past few weeks have not been good when it comes to guidance and that is what the Street was waiting for. At what point is the “all-clear” finally given and when will Corporate America finally start investing more in plant and equipment? I haven’t seen many signs this will be the case. Instead it’s been more like in the case of Caterpillar, which handily beat lowered expectations, so the stock did well this week, but it said 2014 would be similar to 2013 and 2013 wasn’t all that great. Or Big Oil, whose profits have been falling because of huge capital expenditures looking for new oil and gas fields, so they won’t be spending more, instead probably less.

And this is where the bout of turmoil in the currency markets that we’ve seen, such as in Turkey, Argentina, Ukraine, Hungary and Poland, while perhaps not too serious in terms of a systemic threat, a la 1997’s Asian and 1998’s Russian crises, is enough to give some multinationals pause, no doubt. “Bobby, let’s hold off on that Istanbul expansion for a spell.   We need to know if the government there is going to survive this.” “Roger that, Mr. Cornwinkle.” [Bobby’s an ass-kisser.]

But there was one asset that had a strong month.  U.S. Treasuries. As in the yield on the 10-year plunged from 3.03% on 12/31 to 2.64% Friday. It’s pretty simple. The flight to safety trade outweighed the initial Fed tapering, but, should the markets stabilize and the U.S. economic data the next 4-6 weeks be solid, beginning with next Friday’s jobs report for January, I can guarantee yields are headed back up.

---

Finally, on a totally different topic, I was appalled, as I’m sure many of you were, at the pictures from Atlanta following the snow and ice-storm. We all have friends there (or in Birmingham, AL, which suffered a similar nightmare), where they had nine-hour / nine-mile commutes (or worse), or a child forced to sleep over at school because they couldn’t be reached and/or the buses couldn’t leave. It seems unfathomable that city and state officials, and, yes, school boards weren’t better prepared...didn’t have action plans in place for such an event. Hadn’t “gamed” it out.

Well I’ve thought about this issue constantly. I wrote the following in this space on Aug. 4, 2007:

I take you back to the New York City blackout of Aug. 15, 2003. I made the following observation in this space the next day.

“Watching the crowd of up to 100,000 attempting to get ferries to take them from Manhattan to New Jersey during the blackout, I kept thinking, what will happen if a dirty bomb or chemical attack takes place and there’s true panic?

”Every individual in America, even those living in the most rural areas, should think through a plan for the most terrifying scenarios. In some cases, there will be little one can do, but what worries me is that many states and cities say they have firm emergency plans in place (New York, for the most part, did perform admirably this week), but no one is telling the average citizen what to really prepare for, outside of our duct tape scare. We need leadership. We can handle the truth. We can sacrifice. And as Prime Minister Howard said, we also ‘have to brace
ourselves.’”

Funny how I alluded to Australia back then, too. But as we approach the sixth anniversary of 9/11, how many of you can honestly say your local or state government has given you even rudimentary survival tips or plans? We all know it would be chaos nonetheless if a dirty bomb went off, or there was a full-scale attack on a large chemical plant, but thousands of lives can still be saved. A few weeks ago, former defense secretary William Perry addressed the unthinkable; a nuclear attack. In this instance, millions could survive, even within a relatively small radius from the blast point.  But as he pointed out, the people need to know what to do.

So where is our leadership? Why do we keep putting these pathetic figures, most of them corrupt... into positions of such high responsibility? And when are you and I going to rise up and say “Enough!” It is unconscionable that we have to think twice about driving across a bridge. It is unconscionable that there are children in Minneapolis today who lost a parent, or a spouse, over simple negligence. It will be even more unconscionable when we receive another attack on our soil and innocent lives are lost because the people didn’t have a plan. And it’s about time we began to hold those responsible accountable. Just don’t look to the White House for guidance.

Look at the chaos created by 2-3 inches of snow and ice. What would happen if the unthinkable occurred? It’s now been over 12 years since 9/11. How many of your towns and cities really have action plans in place. If a dirty bomb went off in downtown Atlanta, there are ways to limit panic.

But you need to develop a plan. And then talk about it! Force your officials to tell you what the plan is.

Europe and Asia

Some big data points were released on Friday. A flash estimate on eurozone inflation for January is expected to be 0.7%, as reported by Eurostat, the statistical arm of the European Union, down from 0.8% in December, and worrisome to the European Central Bank and the likes of the International Monetary Fund.

The ECB, as does the Federal Reserve and the Bank of Japan, wants to see inflation of around 2.0%, but whereas in the latter two this is rather cut and dry, the U.S. and Japan each being one, in the eurozone you are talking 18 distinct nations, some of which, such as Greece, have lower prices and labor costs in an attempt to become more competitive.

That said some of the inflation components are not good, such as non-energy industrial goods up just 0.2%. But the energy cost figure, -1.2%, is good. Europe, you see, is the flipside of our Polar Vortex Winter. It’s been much warmer than normal across the continent. A few years ago Europe had record cold while the United States was seeing record warmth.

Bottom line, I would say the ECB is right to be concerned. Rising prices, within reason, generally translate into stronger economic performance and one doesn’t have to worry about the ECB raising its short-term policy rate anytime soon. One of the primary reasons being the Euro area’s unemployment rate is still 12.0%, as reported Friday for the month of December, the same as October and compared with 11.9% in December 2012, or with the 6.7% official rate in the U.S. (and 7.1% in non-euro Britain).

The unemployment rate is only 5.1% in Germany, but remains 10.8% in France, 12.7% in Italy, 25.8% in Spain (down from a high of 26.4% in September), and 27.8% in Greece (October).

And you still have the sickening youth unemployment rates of 41.6% in Italy, 36.3% in Portugal, 54.3% in Spain and a record 59.2% in Greece.

Separately, the U.K. continued to report better news with GDP in the fourth quarter coming in up 0.7%, as reported by the Office for National Statistics, up 1.9% for all of 2013, the highest since 2007. British household confidence numbers are rising with increased job security.

Lastly, back to the energy topic, forget the price break Europe is receiving this winter. As the International Energy Agency warned this week, “Europe will lose a third of its global market share of energy-intensive exports over the next two decades because energy prices will stay stubbornly higher than those in the U.S.” [Pilita Clark / Financial Times]

Fatih Birol, the IEA’s chief economist, said it wasn’t just ill-conceived (my term) climate change policies that are hurting Europe’s manufacturers, but the price gap between the EU and the U.S. was going to last much longer than some expect.

“This is a new thing and it’s structural. It’s not a one-off,” Birol told the FT. “Europe didn’t realize the seriousness of this competitive issue.”

European gas imports are three times higher than in the U.S., while industrial electricity prices are twice as high and this gap, according to Birol, could last “at least 20 years.”

Europe needs its own shale boom, which British Prime Minister David Cameron clearly recognizes when it comes to his own country. [And he doesn’t want the EU standing in the way.]

Turning to China, concerns over the shadow banking sector were at the forefront early in the week as a key investment product had to be bailed out on Monday averting a crisis, though no one knows for sure just how it was bailed out. [Thus the term shadow banking.] These are bank trust products offering high yields, with non-bank institutions (including local governments) providing the funds to risky companies who can’t borrow from banks, but most Chinese investors, attracted by returns they can’t find in bank savings instruments, let alone a declining stock market, assume the bank issuing the product is standing behind it.

So Beijing is increasingly desperate to rein the sector in with new regulations demanding more transparency, but how many other potential disasters await?

And this just in as I go to post...the Chinese government’s official Purchasing Managers’ Index for January fell to a six-month low at 50.5 vs. 51.0 for December, barely above the 50 dividing line between growth and contraction. Earlier, an HSBC reading of 49.5 for the PMI had roiled the markets. The government figure tends to focus on large state enterprises, while HSBC’s barometer is focused on the private sector.

China’s stock market, which was closed on Friday for the Lunar New Year holiday, remains closed through next Thursday, Feb. 6. It’s hard to gauge, as I saw firsthand in Fuzhou on January 22, what the statistical impact of the holiday period is on business.

In Japan, inflation accelerated in December to 1.3% (ex-fresh food, their core figure) from a year earlier, which is good as the government of Shinzo Abe and the Bank of Japan struggle to get the rate to the preferred 2.0%. What is needed, first and foremost, is wage hikes and this spring you have two things going on; annual wage negotiations between major employers and workers, and April’s sales-tax increase (from 5% to 8%). Wage gains are needed to combat the tax hike, but it will be easy for employers to say, ‘Our business is about to take a hit, how can we increase your wage?’

So Prime Minister Abe is urging companies to take the long view, increase wages and capital spending to prevent the economy from falling back into recession, which would be disastrous for all. Thus far, most businesses are just hiking prices ahead of the tax hike.

There was some other positive news, though, on the economic front. The jobless rate fell to 3.7% in December, down from 4.0% in November and the lowest rate since December 2007.

Street Bytes

--For the week the Dow Jones fell 1.1% to 15698, while the S&P lost 0.4% and Nasdaq fell 0.6%. After releasing their earnings after the close on Thursday, details of which follow below, shares in Google soared $45 to $1180, while Amazon’s fell 11%, $44, to $358.70. Is the bloom finally off the rose for Amazon? Let’s see how the stock responds next time the Street has an extended rally. That should be telling. Shares in Facebook surged $9 to $62.50 the last two days, also on earnings news. More in a bit.

--Some global figures for January...Tokyo -8.5%, London -3.5%, Frankfurt -2.6%, Paris -3.0%, Moscow -9.8%, Istanbul -8.8%, and Sao Paulo -7.5%.

--Emerging market equity outflows for the week up to January 29 were $6.3 billion, the biggest weekly withdrawal since August 2011, with the total for the month hitting $12.2 billion, according to data from EPFR Global. [Financial Times]

--U.S. Treasury Yields

6-mo. 0.05% 2-yr. 0.33% 10-yr. 2.64% 30-yr. 3.60%

--The S&P/Case-Shiller home price data for November showed a 0.1% decline in the 20-city index over October, which is not a surprise (it’s seasonal). The figure is up 13.8% year-over-year, though overall still about 20% below the peak. Dallas actually hit a new high in the month, while Denver is just 0.6% below theirs as these two obviously didn’t have the same boom-bust experiences other parts of the country had.

--Shares in Apple cratered after the company reported disappointing fiscal first-quarter results. Apple sold 51 million iPhones over the holiday quarter, which while impressive was less than the 55 million analysts expected. Overall revenue rose a less-than-exciting 6% to $57.6 billion (in line), with earnings coming in at $14.50 a share, 40 cents better than the Street projected. But Apple issued lackluster guidance for the current quarter, even though its new deal with China Mobile, the world’s largest carrier, will be kicking in.

A big problem is the smartphone market is becoming saturated, including the high-end market Apple is dominating.

Apple did sell 26 million iPads, up from 22.9 million the year before, and the company’s cash on hand grew to a staggering $158.8 billion.

But the thing is, Apple’s heady growth days are over. It needs some exciting new products.

--IDC said global smartphone shipments topped one billion for the first time in 2013, up 38% over 2012.

Samsung had the biggest market share last year, 31.3%, while second-best Apple saw its share slip to 15.3%.

--Shares in Facebook soared after the social network reported mobile ads surpassed desktop ads for the first time, mobile now comprising 53% of ad revenue, more than double what it contributed for the same quarter in 2012.

Total revenues hit $2.6 billion for the quarter, well above what the Street projected. Earnings of 31 cents per share also handily beat.

For the full year, Facebook had earnings of 88 cents with net income of $1.5 billion on revenue of $7.9 billion. 

I’d say Mark Zuckerberg and company have figured out a way to monetize the business. According to E-Marketer, Facebook is now second behind Google in U.S. digital advertising, moving ahead of Yahoo. The company turns 10 next Tuesday.

--Google gave up on its Motorola Mobility purchase after two years, selling it to China’s Lenovo for $2.9 billion, a week after Lenovo acquired IBM’s low-end server line for $2.3 billion. Google had paid $12.5 billion for the cellphone maker.

Motorola lost $1.2 billion in the past 12 months on $4.7 billion in sales. Lenovo, number four in smartphone sales, hopes to use it to make a profitable run at Apple and Samsung.

Meanwhile, Google does retain billions of dollars’ worth of patents and in essence is using Lenovo to make smartphones with its Android operating system.

As for Google’s earnings, quarterly revenue beat the Street despite a decline in the prices for its online ads, off 11%. Overall revenue, including for the Motorola unit, was $16.86 billion, up 22% on its core business, with net income of $3.38 billion. Ex-items, Google earned $12.01 per share, below estimates of $12.20. Nonetheless, the shares hit a new high.

--Amazon’s fourth-quarter profit and revenue grew but fell below analysts’ estimates on both fronts and the shares tanked. Amazon earned $239 million, 51 cents per share, up from 21 cents in the same period a year earlier as revenue grew 20% in Q4 to $25.59 billion. But the company gave tepid guidance vs. expectations for the first quarter.

Amazon is now reviewing its Prime delivery plan, where for an annual fee of $79 customers receive unlimited shipping at no extra cost. The company may now increase the fee for the first time in nine years by between $20 and $40.  But how many customers would balk?

--Yahoo’s fourth-quarter revenue was down a disconcerting 6% from a year ago, in line with expectations, but nonetheless down. Net income rose to $352 million, though part of the gain was due to a gain from the sale of patents. Revenue from display ads was also down 6%.

So CEO Marissa Mayer is under the gun after one year. She’s been on an acquisition spree that must begin to pay off. Otherwise, the only thing holding up the share price (which fell sharply on the news this week) is the 24% stake in Alibaba, the fast-growing Chinese Internet company that is expected to go public this year in a deal that could value it at $100 billion. Supposedly, Alibaba’s third-quarter revenue rose 51% compared with the previous year, while earning $800 million.

--Microsoft is set to name a new CEO next week, Satya Nadella, the company’s enterprise and cloud chief. Bill Gates is to be replaced as chairman of the board, though he will still play an active role in the company no doubt. Nadella has been with Microsoft since 1992.

--AT&T posted fourth-quarter results basically in line, though overall revenue rose just 2%, typical of results the past year for Corporate America, really. Earnings up a far greater percentage than the top line.

--306,000 Anthem Blue Cross customers in California with older insurance policies untouched by ObamaCare are seeing their premiums rise an average 16%, to go into effect April 1 – should regulators in the state be unable to convince Anthem to back down.  Some are facing 25% hikes.

Customers can switch, but then you have the problem of keeping your existing health benefits and doctor.

--California’s drought emergency grows worse by the day.

--Late Friday, the State Department issued a long-awaited review of the environmental impact of the Keystone XL pipeline and found that the project would have a negligible effect on climate change, bolstering the case for it. But now, for political reasons, President Obama could choose to delay approval for months as he sticks his finger into the wind for guidance. Much more on this next time.

--Goldman Sachs chairman and CEO Lloyd Blankfein will earn as much as $23 million in cash and prizes for 2013, up 10% over 2012, even as banker bonuses were cut. Mrs. Blankfein was once again overheard saying at a luncheon with other rich white Street wives, “I am so proud of my Lloyd!”

--After the announcement CEO and co-chief investment officer Mohamed El-Erian was leaving, which co-founder Bill Gross said this week was a surprise and disappointment, PIMCO revamped its leadership team to create six deputies to Gross.

I do have to note that last week I said El-Erian left mostly for personal reasons, and a more-balanced lifestyle. Two days later, Tom Braithwaite wrote in the Financial Times, “the grueling hours were even more important [than perceived tensions with Bill Gross], however. In his valedictory emails, perhaps wary of the cliché, Mr. El-Erian avoided saying he wanted to spend more time with his family. But that is, in fact, his main reason for leaving, according to people close to him.”

Told ya.

--Despite a poor growth rate for the overall economy, the jobless rate in Brazil is down to a record low of 5.4%. Average monthly wages rose for a ninth consecutive year in 2013, up 1.8%, this as the economy grew less than 3% for a third year. President Dilma Rousseff remains the front-runner for this October’s elections and she’s expected to announce her candidacy soon.

But I maintain the upcoming World Cup could yield some ugly pictures...massive protests that turn violent.

--Taiwan’s economy grew at a solid 2.9% annualized rate in the fourth quarter, far better than expected as exports rose. Overall, the economy grew 2.2% for 2013 vs. 1.5% the prior year.

--Exxon Mobil Corp.’s profit fell 27% in the fourth quarter to $8.35 billion...$32.6 billion for all of 2013, the lowest yearly profit since 2010. Oil and gas output fell 1.8% from a year ago in the quarter.

Exxon needs to strike it big in some of its current oil plays, including in Russia’s seas.   Thus far, its heavy exploration expenses haven’t been paying off as hoped.

As in the Wall Street Journal reported that Chevron, Exxon and Royal Dutch Shell spent more than $120 billion in 2013 drilling for oil and gas but have little to show for it. For example, a project that includes Exxon and Shell in the Caspian Sea has seen the original budget of $10 billion soar to $40 billion.

--Natural gas prices have been on a wild rollercoaster the past two weeks, rising to a 4-year high of $5.50 a million British thermal units, then down to $4.80 just two days later, including the biggest one-day percentage decline since April 2010. Nat gas finished the week at $4.94.

--The Hong Kong government culled 20,000 live chickens on Tuesday after fears grew over the spread of bird flu. Mainland China’s total number of confirmed H7N9 cases in January exceeded 110, with at least 20 dying. This week it was reported three members of one family contracted the disease.

Every story like this hurts KFC’s China sales, KFC being owned by Yum Brands.

I do have to note that in Hong Kong, I’d say about 20% of store clerks and service folks were wearing masks when I was there. [It wasn’t for the pollution, the levels of which were good during my stay.]

--Norwegian Air Shuttle is a new discount carrier that will begin flying to New York and Los Angeles from London’s Gatwick in July, on top of its existing long-hauling from Scandinavia to New York, Ft. Lauderdale and Bangkok, as well as Oakland and Orlando. So, as an example of the job market, it received more than 5,500 applications for 300 U.S.-based cabin-crew posts. 

With its existing short-haul discount market in Europe, the ambitious airline has now ordered 222 Boeing and Airbus Group planes. [Bloomberg]

--Barclays plans to close a quarter of its branches in the UK while slashing hundreds of jobs in its investment banking division. The job cuts, unknown at this point (though a guess is 400 bankers), come on top of 3,700 layoffs announced early last year.

Earlier in the week, Lloyds Banking Group said it would terminate nearly 1,100 positions.

--Last week I said the SEC was making a big mistake in going after the Chinese affiliates of Big Four accounting firms in the U.S., barring them from conducting audits of U.S.-listed Chinese companies. 

Well China did indeed warn of “consequences” as the nation’s securities body, the CSRC, said, “We hope the SEC will take into consideration the big picture of China-U.S. regulatory cooperation, make the right judgment to resolve the situation properly. The SEC should bear all responsibility to possible consequences arising from the decision.”

Bottom line...U.S. investors in legitimate Chinese operations will continue to get hosed.

--I said last time I would note the tie between China Clean Energy Inc. and Allentown, Penn.-based Air Products Corp. (APD). One of the selling points for me was that APD was a leading customer of CCGY and was listed as such in the latter’s investor kits. Then in the last filing from the company, Aug. 2012, which discussed 2011 results, Air Products is singled out as the largest foreign customer, some 6% of sales. Again, to me a big positive.

So in the fall of 2012, I contacted the company and requested a meeting with a senior executive in Allentown. He couldn’t have been more courteous as I laid out my story. I then pointed out to him how APD was violating its Code of Conduct, as in suppliers are expected to be “transparent in their reporting.” Obviously, CCGY has not been.

I shot APD a note last fall, apprising them of a move I had made with regards to Congress and in all honesty, nothing has come about with either party since. Part of it has been my own severe time constraints. But APD should understand I haven’t forgotten.

[Hedge-fund operator Bill Ackman took a position in APD last year, just as an aside.]

--A U.S.-based research firm, Demographia, said Hong Kong had the most unaffordable housing in the world for a fourth straight year, followed by Canada’s Vancouver and Honolulu. I’ve known this fact about Hong Kong for a long time and while there kept looking at the service employees, thinking, ‘How the heck can they afford to live here?’ I took to telling those who treated me particularly well (professionally with a smile) that I loved their attitude. The kids got a kick out of that.

In my many trips to Asia, including Taiwan, South Korea and Singapore, I really do like the young people. Males over 40, though, for the most part suck. It’s in the youth that Asia’s future should be secure, as long as they have the right leadership, I hasten to add.

--Diageo, the world’s biggest distiller and maker of Guinness, announced the overall Irish beer market declined 6% in the six months ended December. Diageo commands 32% of it.

Get this, globally, Guinness net sales declined 1%, driven by weakness in Nigeria, which is Guinness’ number one market by net sales in the past year. Who wudda thunk it? [Irish Independent]

--Parts of Britain experienced the wettest January since records began in 1910, with further flooding at week’s end. One weather expert said it could be the wettest winter on record owing to “a storm factory over the Atlantic.”

Of course that storm factory usually starts with coastal weather in the U.S., so expect a stormy February here...your unofficial StocksandNews forecast.

--If you read me last week, I did go to see “Gravity” (loved it) at the IMAX theater inside Hong Kong International Airport. What shocked me was the cost. Just $7! Hong Kong is strange. The world’s most unaffordable place to live, but I could still get a McDonald’s full breakfast for $3.25, the South China Morning Post for $1.25, a ride on the famous Star Ferry connecting Hong Kong Island to Kowloon for $0.75, a trip on the Peak Tram for $10.00 (not bad) and the high-speed train connecting the airport to Hong Kong Central for $14.00 round trip (excellent buy vs. $100.00 cab fare each way).

But then you have something stupid like a simple fish & chips in a hotel restaurant for $35.00. 

--You’ve gotta love this one. From David K. Li of the New York Post:

“A man in China purchased a first-class plane ticket – and used it to eat a year’s worth of free meals at the VIP lounge at Xi’an International Airport.

“The frequent diner purchased a first-class, fully refundable ticket aboard Eastern China Airline.

“He used the ticket to gain access to the airport’s VIP lounge, where high-rolling travelers dine for free....

“The man re-booked his first-class ticket over and over again and kept the gravy train rolling.

“Eastern China Airlines officials only recently figured out the man’s scheme after noticing his single ticket being re-booked 300 times over one year, according to a newspaper report.

“Airline officials admitted there was nothing they could do to stop the frequent diner.”

Alas, he was confronted and “the human meal ticket stopped chowing down.” He then cashed in the fully-refundable ticket and got all his money back.

--The nearest Wal-Mart to where I live is about 15 minutes away but I never think of going there. However, I see where they are going to continue purchasing Alaskan wild salmon after a review of the state’s Responsible Fisheries Management program.

I’ve been looking for a reliable source of Alaskan salmon, ever since my online source went out of business (due to the catch limitations), so I could become a Wal-Mart regular for “Salmon Sunday.”

[Wal-Mart also announced it was laying off 2,300 employees at Sam’s Club and warned on upcoming earnings results.]

Foreign Affairs

Syria: The United States made the announcement that Syria had moved only 4% of the chemical weapons the government had declared. Defense Secretary Chuck Hagel said he was “concerned.”

This is unreal. We’ve been fed nothing but a bunch of merde on this topic. To wit:

Syria’s chemical weapon stockpiles were due to be removed and destroyed by June 30. Instead the Assad regime is stalling for time, “bargaining” for unneeded security gear such as “armored jackets for shipping containers, electronic countermeasures and detectors for improvised explosive devices” to help transport its chemicals to the coastal city of Latakia, according to Robert Mikulak, Washington’s ambassador to the Organization for the Prohibition of Chemical Weapons in the Hague.

As Mikulak told the 41-nation OPCW Executive Council, such pleas “are without merit” and threaten compliance with the June deadline. [Diane Barnes / Global Security Newswire]

Editorial / Wall Street Journal

“ ‘American diplomacy, backed by the threat of force, is why Syria’s chemical weapons are being eliminated.’ That was President Obama in his State of the Union Tuesday, boasting about what he regards as one of his signature achievements from 2013. Well, not so fast.

“On Wednesday Reuters reported how much of Syria’s chemical stockpile has been handed over for destruction: 4.1%. That comes to about 59 tons of chemical weapons surrendered out of a stockpile of 1,433 tons. Oh, and that’s the stockpile that the Bashar Assad regime officially declared. In September we reported that U.S. intelligence believes the regime disclosed only 32 of an estimated 50 chemical sites....

“It was predictable that as soon as Assad became a partner in his own chemical disarmament he would seize every opportunity to postpone and prevaricate. The regime now insists it needs armored vehicles and communications equipment to move the weapons. Next they’ll demand that the stockpile will only be moved when it has new tanks and attack helicopters to escort the convoys, or perhaps when the rebels lay down their arms.

“A State Department spokesman reacted to this with the mildest of scoldings that ‘the delay is increasing the cost to nations’ for shipping and other removal efforts. Shipping costs? Don’t expect the Administration to trumpet these violations at the U.N., where China and Russia have shielded Assad, or in Congress, which played its own role in looking away from the dictator’s predations. And nobody should expect Mr. Obama to make good on his pledge – hollow even when he made it in September – to renew the threat of military action ‘if diplomacy fails.’

“But neither should the President get away with treating his Syrian debacle as a victory. Americans may want to wash their hands of the Mideast’s many imbroglios. But one consequence of inaction is another despot who sleeps securely in the knowledge that a diffident superpower will exact no price on those who gas their own people.”

Separately, delegates from the Assad regime and the opposition have been attending peace talks in Geneva and using U.N. mediator Lakdar Brahimi to speak through. At first we were told some progress might have been achieved on smaller issues like getting aid convoys into Homs and perhaps swapping prisoners as a way of building confidence before they even begin to address the elephant in the room, what to do with Assad himself.

But then nothing happened. The Syrian government said it didn’t want relief supplies falling into the hands of “terrorists,” its catch-all label for everyone in the opposition.

And in a report from Human Rights Watch, the Syrian government has been accused of “deliberately and unlawfully” demolishing thousands of homes in opposition strongholds.

Finally, in a report that almost seems hard to believe given the total destruction in Syria, Jane’s Defense Weekly has concluded the Assad regime has been able to resume manufacturing missiles at a pace that existed before the 2011 start of the Syrian civil war, as reported initially by the Times of Israel. A major reason for this is the desire to aid Hizbullah in its efforts to continue stockpiling weapons for its next war against Israel.

Jane’s judges the new missiles to be more lethal, Syria’s military collaborating with both Iran and North Korea to enhance the Scud D ballistic missile that has a range of 435 miles.

Iran: In his State of the Union, President Obama reiterated he would veto any attempt by Congress to impose new sanctions on Iran as he wants current negotiations on a final agreement on Tehran’s nuclear program to continue unimpeded. Comprehensive talks are to begin in New York among the P5+1 and Iran on Feb. 18.

The guidelines have not changed. Congress and the Israelis demand Iran’s nuclear infrastructure be dismantled in any final agreement. But Iranian President Rohani has vowed not to do so.

Obama said in the SOTU, “Any long-term deal we agree to must be based on verifiable action that convinces us and the international community that Iran is not building a nuclear bomb.”

But what if this isn’t achieved? More sanctions? It was Obama, after all, who opposed the stringent actions Congress forced on him, the very moves that brought Iran to the negotiating table in the first place.

Meanwhile, International Atomic Energy Agency Director General Yukiya Amano said he would update the organization’s board in early March as to whether Iran is cooperating with the IAEA on its requests that run parallel to the P5+1’s interim framework.

As I’ve been writing, the IAEA is still trying to determine whether Iran carried out activities in the past relevant to the potential weaponization of its nuclear program and Amano and crew still haven’t been granted access to Parchin.

Regarding Iran and Syria and the Obama foreign policy, the Washington Post’s Jennifer Rubin had the following take:

“(Obama) again gave himself a pat on the back for getting out of Iraq and Afghanistan, ignoring the turmoil in the Middle East and the collapse, specifically, of Iraq. He talked about taking America off war-footing even as he conceded al-Qaeda is spreading throughout North Africa and the NSA is needed to do ‘the vital work of our intelligence community.’ He offered the false choice between ‘open-ended’ deployment of ground troops (who precisely is for that?!) and retrenchment.

“As for Iran, he was in full appeasement mode, revealing the intellectual inconsistency of his Iran policy. ‘The sanctions that we put in place helped make this opportunity possible.   But let me be clear: If this Congress sends me a new sanctions bill now that threatens to derail these talks, I will veto it. For the sake of our national security, we must give diplomacy a chance to succeed.’ A nuclear-armed Iran used to be ‘unacceptable’; now preventing that is a ‘goal.’

“His foreign policy remarks aptly convey his lack of interest in world leadership and conviction that avoidance of conflict is his highest duty. You’d never guess as many as 200,000 Syrians are dead and Bashar al-Assad is firmly in power. (‘American diplomacy, backed by the threat of force, is why Syria’s chemical weapons are being eliminated, and we will continue to work with the international community to usher in the future the Syrian people deserve – a future free of dictatorship, terror and fear.’) The killing by conventional means goes on unabated. In Tehran, Damascus and Moscow tyrants are laughing.”

[It’s estimated 1,900 were killed in Syria while ‘peace’ talks were taking place in Geneva.]

Egypt: The military-backed government announced it intended to hold presidential elections by mid-April, at which time it is expected Gen. Abdel Fattah Sisi will become the president, Sisi having the full backing of his military underlings. The recently approved new constitution gives the military sweeping powers so Sisi will have all the authority his little heart desires. Clashes last weekend between police and government opponents resulted in at least 49 deaths, hundreds of injuries, and more than 1,000 arrests.

But there were also a slew of attacks on the Egyptian military, particularly in volatile Sinai, with four Egyptian soldiers dying in an attack on their bus, and five being killed in a helicopter crash where it appears it was shot down by militants.

On another issue the Egyptian government has told the world press, ‘don’t worry,’ even though it has charged 20 employees of Qatar-based Al Jazeera news network with a range of trumped up offenses, including for joining a terrorist organization while alleging the network doctored footage to depict Egypt as being in a state of “civil war.” Eight of the 20 are in custody while 12 remain at large.

Israel: According to a poll conducted by the Palestinian Center for Policy and Survey Research, 50% of Palestinians support the PLO’s decision to resume peace talks with Israel, 47% oppose. 53% support the two-state solution, 46% oppose.

68% said that the chances for the establishment of a Palestinian state in the next five years are slim or nonexistent.

76% oppose a permanent solution if it includes a 10-year transitional period during which the IDF remains deployed in the Jordan Valley.

If the Palestinian Authority held a presidential election today, Mahmoud Abbas would receive 52% of the vote, while Hamas leader Ismail Haniyeh would get 42%. [Jerusalem Post]

Ukraine: One word sums up what is happening in this country and that’s chaos. President Viktor Yanukovych accepted the resignation of Prime Minister Azarov and his cabinet and then took sick leave for a respiratory issue. Anti-government protesters demanding Yanukovych’s resignation have been occupying government buildings while continuing to man barricades in the capital of Kiev. But protests have been spreading to other big cities in the country, while it was learned a leading Ukrainian opposition activist, who had disappeared for eight days, was abducted and tortured by men Dmytro Bulatov said spoke with Russian accents. He had been severely beaten and was left to die in the cold.

Ukraine’s first post-independence president, Leonid Kravchuk (1991-94), opened a debate in parliament this week by urging everyone involved to “act with the greatest responsibility,” having said, “all the world acknowledges and Ukraine acknowledges that the state is on the brink of civil war.”

Legislators did scrap the just instituted laws banning protests and dissent.

As for Russia’s role, President Vladimir Putin received a frosty reception in Brussels in a meeting with the European Union as the latter sought to present a hard line on Ukraine, with each side claiming the other is meddling in Ukraine’s affairs.

But now Putin and Prime Minister Medvedev have said they will wait to see what happens with Ukraine’s government before honoring agreements reached in December to reduce natural gas prices and supply further aid as part of a $15 billion rescue package for Kiev. Medvedev said this week that Ukraine told him “Even at reduced prices (for nat gas)...they can’t pay.”

Afghanistan: As reported by Kevin Sieff of the Washington Post, President Hamid Karzai, behind the scenes, “has been building a (broad case) against the Americans, suggesting that they may have aided or conducted shadowy insurgent-style attacks to undermine his government, according to senior Afghan officials.”

The bastard even says the recent Taliban attack on a Lebanese restaurant in Kabul that killed 21 was carried off with U.S. government involvement.

Needless to say, U.S. officials are outraged. What appears the most likely answer, to me, after reading the different theories, is a simple one. Self-preservation, hedging his bets in case the Taliban take over once the U.S. leaves. Karzai knows otherwise he’ll be killed, though he’ll attempt to flea beforehand with the $billions he has stolen.

So, with the above one shouldn’t expect Karzai to sign the Bilateral Security Agreement that would give legal basis for America’s continued presence beyond 2014. We are going to have to roll the dice with whomever wins the April presidential election.

Separately, a USA TODAY/Pew Research Center poll reveals that by nearly identical majorities, Americans now say the U.S. mostly failed to achieve its goals in both Afghanistan and Iraq, 52-38 in the former, 52-37 in the latter. In 2011, a month after Osama bin Laden was killed, a majority predicted the war would succeed.

Americans do say by a 51-41 margin it was the right decision to take military action in Afghanistan, but whereas Americans initially supported the war in Iraq by a 3-1 margin, now they call the decision to invade the wrong one, 50% to 38%.

Editorial / Washington Post

“President Obama returned in his State of the Union address to a familiar slogan: The war in Afghanistan ‘is finally coming to an end.’ That, of course, is not true: As 29 million Afghans could testify, there is no end to the conflict in sight. Mr. Obama equates the end of the war with the end of U.S. combat operations. ‘Together with our allies,’ he told Congress on Tuesday, ‘we will complete our mission there by the end of this year.’

“Even that is not true – at least, not according to the president’s announced plan. Mr. Obama reiterated his commitment to leave behind U.S. trainers and logistical support to assist the Afghan army, as well as a counterterrorism force to ‘pursue any remnants of al-Qaeda’ – which presumably would involve military action....

“The continuing mission has overwhelming logic in its favor, both for Afghanistan and for the United States. Both have a vital interest in preserving the hard-won gains of the past dozen years....

“(But the president is communicating) the wrong message to Americans with speeches proclaiming ‘the end of America’s longest war.’ If a continued U.S. mission is to be supported by the public and funded by Congress – which just slashed this year’s Afghanistan funding – Mr. Obama must make the case why it is in the national interest for troops to remain. That he does virtually the opposite makes him complicit with Mr. Karzai in undermining a major national security interest.”

Turkey: With the turmoil in his country, Prime Minister Erdogan’s approval number has fallen to 39% from 48% in December, a significant decline. The combination of the bad economic news and the corruption investigation that exploded in December is ahead of a series of elections this year; first local ones in March, followed by a presidential vote in August and parliamentary elections next year. It was thought Erdogan would run for president and then strengthen the office, but a poor showing in local elections by his AKP could force Erdogan to attempt to change the rules and allow him to serve a fourth term as prime minister.

China: According to a report by the International Consortium of Investigative Journalists (ICIJ), relatives of at least five current and former members of China’s top leadership, including former leaders Hu Jintao and Wen Jiabao, are shareholders in many offshore companies, allowing them to conceal their assets. While in and of itself this is not necessarily illegal, the timing is awful as President Xi Jinping has taken such a hard line on corruption and graft.

On a different issue, relations between Japan and China, Japanese Prime Minister Shinzo Abe told CNN last weekend in an interview from Davos, “it is important for China to recognize that any attempts to change the status quo by force or coercion cannot be accepted.”

While Abe said he has no intention of countering China militarily, “I am responsible for protecting Japanese waters, territory and Japanese lives and property. And I intend to exercise those responsibilities.”

A follow-up to last week’s mention of the trial of activist Xu Zhiyong. He was sentenced to four years in prison, convicted of “gathering a crowd to disturb public order.”

And on the pollution front, December was the most polluted month of the year in China. Residents living in the 25 cities in the Yangtze River Delta saw only five days during the month when smog levels were within safe limits, according to the Ministry of Environmental Protection.

Russia: Hard to believe the Sochi Games start this coming Friday with the Opening Ceremonies. Opposition leader Alexei Navalny published an investigation into the construction of Olympic facilities that shows contracts were repeatedly altered to inflate their costs, allowing “friends of Putin” (Navalny’s description) to embezzle billions. Earlier accusations by opposition politicians Boris Nemtsov and Leonid Martynyuk claim between $25 billion and $30 billion had been stolen in Sochi.

A Swiss member of the IOC and president of the International Ski Federation, Gian-Franco Kasper, accused Russian authorities of embezzling $18 billion of the funds allocated to prepare for the Games.

Sally Jenkins / Washington Post

“The Olympics aren’t supposed to kill people. They’re supposed to exalt them. But it’s too late to take the dangerous, despoiling Winter Games away from the thugocracy that is Vladimir Putin’s Russian regime, so the only option is to count on the man’s bulging biceps and hope it’s an adequate ‘ring of steel’ that can keep people safe in Sochi. It’s a cold hard fact that these Olympics have become an agent of death.

“Sochi already is a catastrophe, and if it becomes a tragedy too, it will be because the International Olympic Committee has become the tool of ‘colossal authoritarian branding,’ to borrow a phrase from Russia scholar Leon Aron.

“The choice is an ugly one: Removing the Games at this late date would devastate Russians who have invested national self-worth in them, and the athletes who have trained for them. Therefore the only option is to watch Sochi become a contest for prestige between two warring parties; a corrupt strongman who wants to flex his political authority, and the murderous jihadists who have vowed to strike in Sochi.

“Why should the Olympics lend its prestige to either? But that’s exactly what’s happening....

“The Olympics are supposed to be about ‘human dignity,’ in the words of the Olympic charter. But in these Games, the humans are shields.”

On a different matter, as reported by the New York Times’ Michael R. Gordon, “The United States informed its NATO allies this month that Russia had tested a new ground-launched cruise missile, raising concerns about Moscow’s compliance with a landmark arms control accord.

“American officials believe Russia began conducting flight tests of the missile as early as 2008. Such tests are prohibited by the treaty banning medium-range missiles that was signed in 1987 by President Ronald Reagan and Mikhail S. Gorbachev, the Soviet leader at the time, and that has long been viewed as one of the bedrock accords that brought an end to the Cold War.”

This is bad news, but hardly surprising given Russia’s history.

North Korea: In written testimony to the Senate Intelligence Committee, Director of National Intelligence James Clapper said North Korea has expanded the size of the uranium enrichment facility at Yongbyon and restarted a reactor that was used for plutonium production before it was shut down in 2007.

The findings concur with assessments published last summer by various think tanks monitoring Pyongyang’s nuke program.

Separately, South Korean news agency Yonhap reported that all relatives of Kim Jong Un’s uncle, Jang Song Thaek, who was executed in December, “have been put to death, including even children.”

One of those executed was Jang’s sister, North Korea’s ambassador to Cuba.

Thailand: The government insisted on pressing ahead with parliamentary elections on Sunday, because it knows it will win convincingly, but fingers are crossed in terms of whether they are largely peaceful or not. The main opposition party has vowed to boycott the vote.

Denmark: Barack Obama’s girlfriend, Denmark’s Prime Minister Helle Thorning-Schmidt, is in deep trouble over a Goldman Sachs investment, a 19% stake in a state-owned utility, Dong Energy. Goldman itself was surprised by the bitter feelings of the Danish people upon learning of the bank’s stake and they’ve taken it out on Thorning-Schmidt. With one of three parties in her thin coalition having pulled out this week, the striking prime minister (it’s Web Sweeps Week) and her remaining partner control just 61 of 179 seats in parliament. No word from Obama on whether they are exchanging selfies.

Venezuela: According to private estimates, inflation here is more than 56%.

France: President Francois Hollande split with his companion, Valerie Trierweiler, leaving France, for the time being, without a First Lady. Zut alors!

I can’t take Trierweiler’s side in this matter because I’ve read a lot about her and she’s just not likable. Hollande, though, certainly didn’t distinguish himself.

Random Musings

--Peggy Noonan / Wall Street Journal

“The State of the Union was a spectacle of delusion and self-congratulation in which a Congress nobody likes rose to cheer a president nobody really likes. It marked the continued degeneration of a great and useful tradition. Viewership was down, to the lowest level since 2000. This year’s innovation was the Parade of Hacks. It used to be the networks only showed the president walking down the aisle after his presence was dramatically announced. Now every cabinet-level officeholder marches in, shaking hands and high-fiving with breathless congressmen. And why not? No matter how bland and banal they may look, they do have the power to destroy your life – to declare the house you just built as in violation of EPA wetland regulations, to pull your kid’s school placement, to define your medical coverage out of existence. So by all means attention must be paid and faces seen.

“I watched at home and thought: They hate it. They being the people, whom we’re now supposed to refer to as the folks. But you look at the polls at how people view Washington – one, in October, had almost 9 in 10 disapproving – and you watch a kabuki-like event like this and you know the distance, the psychic, emotional and experiential distance, between Washington and America, between the people and their federal government, is not only real but, actually, carries dangers. History will make more of the distance than we do. Someday in the future we will see it most vividly when a truly bad thing happens and the people suddenly need to trust what Washington says, and will not, to everyone’s loss.”

--Daniel Henninger / Wall Street Journal

“The 2008 campaign phrase ‘hope and change’ will haunt future histories of the Obama presidency.

“Many Americans voted Barack Obama into the White House for that reason alone. That reason is gone. The notion that this president would unify the nation by allowing people to summon their better spirits, as he promised, faded fast.

“Even Mr. Obama’s supporters see now that his operating method wasn’t unification, but political and social division. Support for the president among the independents who gave him 52% of their vote in 2008 has fallen into the 30s...

“The pollsters at Gallup wrote last week that ‘Obama is on course to have the most politically polarized approval ratings of any president.’ Segments of the U.S. population see themselves not just in disagreement with the Obama administration, but as the target of its policies.

“This includes not only the famous 1%, but also the upper-middle class, Southern states, charter schools, politically active conservatives, private businesses, the Catholic church, electric utilities, doctors driven out of ObamaCare’s health networks and those famous partisans, the Little Sisters of the Poor.

“All have been vilified, investigated, audited or sued by the president himself, Eric Holder’s Justice Department, the National Labor Relations Board, the Securities and Exchange Commission, the Environmental Protection Agency and, not least, the Internal Revenue Service....

“How can this be good, if the price is more national disunion than we have now? Disunion is a dangerous political virus that sends a nation as complex as the U.S. toward a state of permanent, embittered opposition, which can be difficult for mere politicians to set right. We’re about there.”

--According to a Washington Post/ABC News poll, Hillary Clinton leads her potential primary rivals by a rather large margin; 73% to Joe Biden’s 12% and Sen. Elizabeth Warren’s 8%. [Among Democratic and Democratic-leaning independents.]

On the GOP side, though, six register between 10% and 20%, with Gov. Chris Christie now trailing in third at 13%, behind Rep. Paul Ryan, 20% and former Florida Gov. Jeb Bush at 18%. Sens. Ted Cruz, Rand Paul and Marco Rubio are between 10% and 12%. [Cruz leads among those identifying themselves as Tea Partiers with 28% to Ryan’s 18%.]

In a theoretical head-to-head, Clinton leads Christie among registered voters 53-41 percent. In 2012, President Obama beat Mitt Romney 51-47, and in 2008 the margin over John McCain was 53-46.

In the above mentioned NBC News/Wall Street Journal survey, 44% believe Christie is not telling the truth re Bridgegate, while 42% say he is. Worrisomely for the governor, more view him negatively than positively, 29-22, when it was the reverse in October, 17-33.

Speaking of Bridgegate, a new lawsuit accuses Hoboken Democratic Mayor Dawn Zimmer of threatening to fire Carmelo Garcia, director of the local housing authority, and a Democratic assemblyman, unless he hired politically connected contractors in a situation involving Zimmer’s husband, Stanley Grossbard. According to court documents, Garcia secretly recorded meetings he had with Grossbard, though it’s not clear who was shaking down who, in my cursory glance at them.

But on Friday afternoon, David Wildstein, the Port Authority political appointee who oversaw the GW Bridge lane closures, said through his attorney that he has evidence proving Gov. Christie was aware of the closings as they happened, only Wildstein hasn’t produced the actual documents as I go to post and the New Jersey Democrat in charge of the state legislature’s investigation is frustrated because he thought he had been given everything through a subpoena issued to Wildstein.

Yes, of course. If Wildstein has the goods, Christie has to resign. It’s pretty simple. What we do know is that in various polls, such as the one cited above (there’s another in Florida that has Christie trailing Hillary 51-35 when the gap was just 4 in November), the Christie brand has already suffered perhaps irreparable damage.

--Sen. Cruz is vowing to wage a fight on the debt ceiling. “We should not raise the debt ceiling without significant structural reforms that address the out of control spending and out of control debt in Washington. The debt ceiling...has historically been the most effective lever point to doing so.”

What did I say two weeks ago? For once would some of these folks be intellectually honest? Spending, on the discretionary side, is no longer out of control. It’s at levels of the George W. Bush presidency. Be more specific.   “Entitlement spending” is out of control and will do us in one day.

But understand, Senator. Nothing is going to get done on entitlement spending this year. Get that through your head. Just win the Senate.

It’s going to be very interesting to see how Cruz handles these next few weeks. I know he will make some good points. I just want him to deal with the 2014 realities and not screw things up for those of us who want 51 elephants in the upper chamber.

--California Democrat Henry Waxman, in the House since 1974 and a powerful figure on a number of key issues, announced his retirement, joining fellow 40-year California Democrat George Miller in eschewing a run next fall. Both, however, are secure seats for the donkeys.

Waxman is the 30th House member who’s announced plans to retire at the end of the year. Too bad it’s not 400.

--America’s top spy chiefs, in their annual report to Congress, now list insiders like Edward Snowden (and Chelsea Manning) and their leaking of secrets about sensitive U.S. intelligence programs as posing a greater danger to national security than terrorists. Cyberattacks on crucial infrastructure remain the No. 1 risk.

Appearing before the Senate Intelligence Committee, James Clapper reiterated Snowden’s leaks represented the “most damaging theft of intelligence information in our history.”

Army Lt. Gen. Michael Flynn, head of the Defense Intelligence Agency, said the leaks endangered the lives of intelligence operatives and troops. [Ken Dilanian / Los Angeles Times]

--Meanwhile, Snowden, responding to reports the U.S. government would let him return home if he would face the music, said he cannot go back because “there’s no chance to have a fair trial” and instead urged the U.S. to strengthen its protections for whistle-blowers.

--U.S. Defense Secretary Chuck Hagel conducted a review of the missile-launch force after various scandals have been revealed, including one involving cheating on a routine proficiency exam for nuclear-launch operations, and the secretary suggested the test might be too hard with the consequences of a poor score probably leading to the cheating. The Air Force then announced on Thursday that it had suspended 92 officers at Malmstrom Air Force Base – nearly half of the nuclear launch crew there.

The remaining 100 launch officers will have to perform extra duty.

Separately, Hagel told reporters he was “deeply concerned” about the “overall health and the professionalism, and discipline of our strategic forces” and that he would be addressing the situation.

When this whole mess first broke last year, including the drug investigation that proved to be the tip of the iceberg, I said what is so worrisome is how these crews are subject to blackmail. A terrorist cell, working with just, say, three of the U.S. missile launch crew members, including outside security, could conceivably gain access to the capsules.

And back to the test and whether it is too hard, Loren Thompson of the Lexington Institute told the New York Times, “The consequences of a mistake in the handling of nuclear weapons are far greater than in problems that could happen with anything else. One hundred percent is necessary on these tests because one mistake could be very catastrophic.”

--Editorial / Washington Post

“The next time you’re in Los Angeles, take a deep breath. A significant portion of the pollution you’ll breathe into your lungs came from across the Pacific Ocean.

“Decades ago, Angelenos’ respiratory tracts may have been burned by the accumulation of local pollutants in and around Southern California’s valleys and basins. Since then, federal and state pollution controls did much to clean up the air. But a study in the Proceedings of the National Academy of Sciences finds that neither federal nor state authorities can as effectively restrain one pollution source: China.

“Chinese and American researchers estimated the amount and ultimate destination of smog-forming gases and particulates that Chinese factories pumped out in their production of export goods. Up to a quarter of the sulfate pollution in the western United States wafted over from those factories. Their emissions add a day of substandard air in the Los Angeles area every year.

“And those are just the fraction of Chinese emissions associated with world trade. Nations closer to China suffer much more. The health and well-being of many people in many countries, not just those choking on thick, brown air in Beijing, depend on China developing into not merely a great economic power but also one that manages its massive impact on the planet.”

--There is a positive from the record cold this winter. It’s killed off a lot of insects. I’ve been thinking here in New Jersey that it certainly augers for less mosquitoes come next summer. But I saw in a piece in the Star-Ledger that New Jersey’s pine barrens may be catching a break. The Southern pine beetle had migrated north to devastate 30,000 acres of this precious natural resource, “choking trees to death as they burrow deep into their trunks.

“But temperatures reached a potentially magical minus 10 degrees in northern portions of the Pinelands last week and have been sub-zero on another occasion, leading to hopes that some of the population may have died off and could be more easily managed come spring.”

The magic number for a pine beetle is supposedly minus 8. But I love this part.

“What’s’ more, ricocheting temperatures – sometimes changing more than 60 degrees in 24 hours – may provide even more help, building then melting ice crystals inside the insects that could destroy their cells over time.”

Yesss! Take ‘em out, Mother Nature!

--In a survey by UMR research, 83% of Australians haven’t changed how often they swim, surf or take part in other recreational activities in the ocean because of the risk of shark attack.

Why mention this? Because there is a controversial shark cull going on in West Australia that has torqued off some folks there. 82% don’t think sharks should be killed and say people enter the water at their own risk. [Philip Dorling / Sydney Morning Herald]

Of course for that other column I have a hand in (the one not signed), we love shark attacks. It helps juice traffic.

--I had a big problem with jet lag this week. I kept falling asleep during the day and didn’t have a normal night’s sleep until the fourth night after my return. I only bring this up because I had clipped out an article from a China paper when I was in Hong Kong that I specifically didn’t look at until now (aside from reading the headline) and a recent study at Surrey University in England “found evidence that jet lag causes ‘profound disruption’ to more than a 1,000 genes, including many that are normally drawn upon to maintain, repair and protect the body.”

But... “The findings will have an impact far beyond research into jet lag and shift work. John Hogenesch, an expert on the effects of circadian clocks on physiology at the University of Pennsylvania, said such disruption to gene activity could affect how well people’s drugs work.

“Many common drugs work properly only if they are taken at the right time. For example, Mevacor, a cholesterol-cutting statin, works best at night because levels of the enzyme it targets are highest then. The same goes for the use of low-dose aspirin to lower blood pressure.” [South China Morning Post / The Guardian]

Pretty cool...but I’m still tired.

--Actually, in all seriousness, aside from the fact I never get enough sleep, this has been such a [lousy] winter, I’ve haven’t gotten any exercise outside since mid-December...and that means no vitamin D, sports fans.

I also have never heard more comments, including notes from you, on how we have never looked more forward to spring than we are today. I know I can’t wait to get back into my jogging routine.

--Editorial / New York Post

“ ‘Songs are weapons,’ Pete Seeger used to say. For more than seven decades, he led America in sing-alongs, even as most of his audiences remained blissfully unaware of the messages behind many of his songs.

“Take the now-iconic ‘If I Had a Hammer.’ Today, it is admired as a call to justice. In fact, it was written for a 1949 testimonial dinner for top leaders of the U.S. Communist Party, then on trial for advocating the violent overthrow of our government.

“Such facts are missing from the tributes to the former Communist Party member, who died Monday at age 94. President Obama, for example, hailed him as ‘America’s tuning fork,’ while Mayor de Blasio urged everyone to ‘sing a song for justice.’

“Some will argue Seeger’s music should not be judged by the dubious movements he aligned himself with. But to Seeger himself they were inseparable.

“Yes, he sang about ‘justice’ and ‘freedom’ and ‘peace.’ But when Hitler and Stalin signed their pact in 1939, Seeger followed the party line, abandoning anti-fascism to sing out against ‘warmongering’ by FDR – only to reverse himself, as the party did, when Hitler invaded the Soviet Union....

“However brilliant a musical artist Pete Seeger may have been, honesty requires acknowledging that ‘America’s national treasure’ was a tarnished gem.”

Editorial / New York Sun...in noting that Seeger later on finally acknowledged Stalin’s crimes:

“What Pete Seeger really stood for above all other things is the transcendent power of music and its ability to communicate – politics, narrative, spirituality, and all the noble emotions.”

--The number of U.S. war dead in Afghanistan officially crossed the 2,300 mark the other day, according to the count kept in Army Times.

---

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

God bless America.

---

Gold closed at $1240
Oil $97.49

Returns for the week 1/27-1/31

Dow Jones -1.1% [15698]
S&P 500 -0.4% [1782]
S&P MidCap -0.1%
Russell 2000 -1.2%
Nasdaq -0.6% [4103]

Returns for the period 1/1/14-1/31/14

Dow Jones -5.3%
S&P 500 -3.6%
S&P MidCap -2.2%
Russell 2000 -2.8%
Nasdaq -1.7%

Bulls 53.1
Bears 15.3 [Source: Investors Intelligence...*recall, the bulls peaked at 61.6 on Dec. 31 with the S&P at 1848...just sayin’...this is exactly how this contrarian indicator is supposed to work, but for long stretches the past 15 years in particular it’s been meaningless.]

Have a great week. I appreciate your support.

Denver wins 24-13. 

Catch me on Twitter @stocksandnews

Brian Trumbore