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For the week 2/3-2/7
Washington and Wall Street
The week got off to a very rough start on Monday, with the Dow Jones dropping 326 points, taking its loss for the year to about 8%, but then stocks rallied back to close with small gains despite some punk economic news, including Friday’s jobs report for January.
But early on you had a very poor January ISM reading on manufacturing, 51.3 when 56.5 was expected (50 being the dividing line between growth and contraction), with the new-orders component dropping from 64.4 to 51.2, the biggest monthly decline since 1980. [The service PMI for the month, 54.0, was OK.]
Tuesday’s December factory orders number was far less than expected, and auto sales for January were down and generally less than forecast, though we quickly fell back on the weather excuse, as in who wants to shop for a car or do most anything else when the temperature in many parts of the country was zero, or worse. [Or 20 degrees below normal in the South, for example, which had the same impact.] Let alone all the storms. Weather as an excuse is warranted this winter, big time.
Retailers also continued to issue poor reports and or guidance (save for one notable exception listed below) as many such as Wal-Mart talked of lack of pricing power. ShopperTrak said retail sales at the malls were up 2.7% in January over a year earlier vs. a 4% increase in Jan. 2013 and 4.7% in Jan. 2012.
Heck, I did something I never do...read a retail ad. I’m going through my Saturday Star-Ledger and just glance at the Bloomingdale’s spots, even though I haven’t shopped at the local one in at least 30 years. What caught my eye was a one-day only sale on a high-end toaster oven, regularly $180, on sale for $50! I thought this is too good to be true, so even though I didn’t personally need one, I ran over (one-minute away, The Short Hills Mall) and asked the girl, “Can I have two?” “Sure,” she said, as two folks in front of me were doing the same thing. Bingo! My brother and parents got new toaster ovens!
Now Bloomie’s wasn’t making any money on those, you can be sure, and I didn’t buy anything else there, nor am I likely to go back, but it’s further evidence of the kind of economy we’re in.
There is other evidence the economy might have hit a little speed-bump after a decent second half of 2013. Certainly the recent housing data has been so-so at best (though the 30-year fixed mortgage rate is back below 4.30%) and Corporate America isn’t issuing a lot of statements talking up large capital expenditures, such as the recent releases from Big Oil that are moving in the opposite direction (cuts to capex).
Plus the data from China hasn’t been good and you had the turmoil in the emerging markets that quieted down some by week’s end, so it’s easy to see why the equity markets have been struggling.
Then you had Friday’s labor figures for January and they too disappointed....again.
For starters, many of us thought December’s putrid 74,000 gain was going to be revised upward significantly, at least by 25,000, but instead was revised to just 75,000 (November, though, was hiked another 33,000 to 274,000). January’s number, expected to be in the 180,000 range, was only 113,000. Another muddle-through figure leaving many wondering just what has been the impact of this awful winter of our discontent? The back-to-back gains, after all, were the weakest in three years, even though there was a 48,000 rebound in construction that had to be the result of a weather rebound from December, which made no sense.
But the participation rate rose a bit from 62.8% to 63.0%, the household survey was better, and the private sector added 142,000 in January, which isn’t awful (while government lost 29,000, which some of us think is good) so it wasn’t a surprise when the official unemployment rate ticked down further to 6.6%, the best since October 2008.
The 113,000 probably would have been worse, though, were it not for the fact the survey was conducted the one week in January when the weather across the country was generally sanguine.
[The Labor Department, by the way, updated the figures for 2013 and the economy added an average of 194,000 jobs per month, stronger than the 182,000 pace previously estimated. And a broader measure of unemployment that includes people working part time who want full-time jobs, U6, fell to 12.7% in January, down from 13.1% in December.]
So we saw how somehow the markets liked this muddled mess, but what will the Federal Reserve do with it all? Pause on the taper, take a break on reducing the bond-buying program when it next meets in March? Two Fed governors who do not vote on the Open Market Committee this year, Richmond’s Jeffrey Lacker and Chicago’s Charles Evans, said it was unlikely the Fed’s tapering program would be derailed.
“The hurdle ought to remain pretty high for pausing in tapering,” said Lacker. Evans used almost identical language in noting policy makers probably face “a high hurdle to deviate” from the $10 billion monthly cut of the last two meetings in succeeding ones.
[On the issue of how the Fed’s program is roiling emerging markets, Evans said: “Each country has a set of issues they need to deal with. The moderate pace of tapering that we laid out in conjunction with our stronger forward guidance” on the path of the federal funds rate “provides an adequate amount of accommodation for the other foreign markets.” Source: Bloomberg]
This coming week we hear from the new “chair” (as she told her staff to call her), Janet Yellen, who testifies on the state of the economy and Fed policy for the first time before House and Senate committees. Needless to say, her comments will be closely followed and picked apart, particularly as they pertain to forward guidance on the funds rate and the timing of any rate hike off the zero level.
There was one other big item this week. The nonpartisan Congressional Budget Office issued its budget outlook for this fiscal year and beyond and the figures are essentially as I’ve been writing for the past year now, since the last CBO report and revision. The budget deficit is continuing to decline from the fiscal 2009 peak of $1.4 trillion to $680 billion last year and a projected $514 billion for fiscal 2014, with a further decline to $478 billion in F2015 (reminder, the fiscal year begins Oct. 1)
The $478bn figure for 2015, though, is higher than the May 2013 estimate of $378bn and the deficit is projected to rise from there. In fact the CBO now estimates additional deficits of $1.4 trillion over the next 10 years beyond what was previously forecast.
Higher revenues due to the improving economy, as well as constrained spending (take a bow, Republicans), are the reason for the improvement in the short term, but then after 2015, higher subsidies on ObamaCare, as well as other healthcare and entitlement expenses take over in the out years as the Baby Boomers enter retirement in increasing numbers and the spending far outweighs revenue growth.
The CBO can only use current law in its projections, so their figures are subject to major revision, but it does come up with its own growth, inflation, interest rate and unemployment forecasts to plug into the equation and for GDP, the CBO projects 3.1% growth in 2014, 3.4% in 2015-16, 2.7% in 2017 and then 2.2% for 2018-24.
The CBO sees inflation of 2% or less for the period, and unemployment of 6% by 2016, but on interest rates, a major key as I’ve been touting ad nauseam, the CBO calls for a 1.8% 3-month T’bill in 2016 and 3.7% 2018-24, while on the 10-year Treasury, the CBO uses a 4.3% rate for 2016 and 5.0% for 2018-24.
Today, of course, the T’bill rate is essentially zero but the Federal Reserve will begin hiking the funds rate T’bills are pegged off sometime in 2015, one would think.
The 10-year is currently at 2.68% and 4.3% by 2016 seems to be in the cards, while 5% for 2018-24 could be drastically low.
Regular readers know why this matters. Net interest expense on the $17 trillion debt ($12.7 trillion that is held by the public...both growing) as a budget item is forecast to be $233 billion in 2014, but balloon to $755 billion in 2022, vs. the estimate from last May of $764 billion.
That’s been my point. That’s why deficits matter. It’s also a big reason why the CBO projects slower growth in 2018-24.
But the preceding is also why I wouldn’t expect Congress to address the elephant in the room, entitlements, until 2017 at this point, because the budget deficit will be going down another two years (assuming no significant new military adventure) and our fearless “leaders” will take the easy way out.
Speaking of debt, in the very short term Congress does have to extend the debt ceiling, with Treasury saying late Friday it was going to begin taking extraordinary measures to pay the bills immediately and that a solution needs to be found by month’s end because refunds on tax returns are draining cash at a rapid rate.
The report said the Affordable Care Act will result in 2.3 million fewer full-time jobs by 2021, after earlier projecting the labor-force impact would be the equivalent of 800,000 workers in 2021. Workers will either leave the workforce entirely or cut back on hours because they can obtain coverage without regard to their medical history and with a subsidy at certain levels.
The CBO does estimate that insurance premiums on the health-care exchanges would be 15% less than originally forecast and, further, the recent slowdown in the growth of Medicare costs had been “broad and persistent” and projected “that growth will be slower than usual for some years to come.”
“The Affordable Care Act, a k a ObamaCare, became law almost four years ago. It became operational last Oct. 1. Yesterday, Feb. 4, 2014, the ACA may well have been dealt its death blow.
“The Congressional Budget Office released a major study of the government’s budget and its effect on the overall economy over the next 10 years. In dull bureaucratic language, it delivers a devastating analysis of the inefficiencies, ineffectualities and problematic social costs of ObamaCare.
“The one-two punch: Virtually as many Americans will lack health coverage in 10 years as before the law was passed – but 2 million fewer will be working than if the law hadn’t passed.
“One killer detail comes on Page 111, where the report projects: ‘As a result of the ACA, between 6 million and 7 million fewer people will have employment-based insurance coverage each year from 2016 through 2024 than would be the case in the absence of the ACA.’
“ObamaCare’s key selling point was that it would give coverage to a significant number of the 30-plus million Americans who lack it....
“Even more damaging is this projection: ‘About 31 million nonelderly residents of the United States are likely to be without health insurance in 2024, roughly one out of every nine such residents.’....
“(The) CBO is saying that in 10 years, about the same number of people will lack insurance as before. This, after new expenditures of as much as $2 trillion and a colossal disruption of the U.S. medical system....
“The White House hastened to do damage control yesterday, and the ‘senior official’ who did the background briefing for reporters said a shocking thing: The projected decline in work is good news.
“ ‘It reflects the fact that workers have a new set of options and are making the best choices that they can choose to make for themselves given these options,’ the official said.
“Really? Really? You know, if that’s the best they can do, certain American workers – those elected to Congress and their staffs – might find themselves forced to make new choices regarding their employment come this November and November 2016.
“For the past year, Obama and his supporters have taken to demanding that ObamaCare’s opponents quit trying to undo it because it’s now the law of the land.
“Not so fast: With this and the other blows it has been dealt over the past six months, and undoubtedly with new blows to come, ObamaCare really and truly may no longer be the law of the land after the president leaves office.”
“There are 7.8 million Americans working part-time who want full-time work, including a fry cook whose restaurant cut his hours to avoid Affordable Care Act mandates and confronted President Obama in an online Google Q&A last week: ‘We can’t survive. It’s not a living.’ Mr. Obama changed the subject to raising the minimum wage. But he can’t dodge reality forever as the evidence piles up that ObamaCare is harming the labor market....
“Now CBO – full of liberal-leaning economists – says the economy will lose the equivalent of two million full-time workers by 2017 and 2.5 million over the next decade, a threefold increase over its prior estimate....
“CBO’s conclusion is that ObamaCare will encourage people to supply less labor by deciding not to take a job or by working fewer hours. The law’s insurance subsidies are gradually taken away as income rises, ‘creating an implicit tax on additional earnings,’ the CBO observes. These effective marginal tax rates reduce the rewards for work – whether it be overtime, accepting a promotion, or training in the hope of higher future earnings. CBO doesn’t note, though we will, that simply extending ‘free’ coverage skews job search decisions by offering an in-kind bonus for unemployment....
“All of this is one more contradiction of the arguments that were used to sell ObamaCare. The law would reduce health-care costs and shrink the deficit, you could keep your health plan and your doctor, and businesses could hire more workers and be more competitive. All of this is turning out to be false, and now we learn that the law is a job destroyer that is removing rungs from the ladder of upward economic mobility.”
Finally, Steven Mufson and Tom Hamburger had a story in the Washington Post on how upset some labor leaders are with the White House over ObamaCare and their unsuccessful bid for special protections.
“Leaders of two major unions, including the first to endorse Obama in 2008, said they have been betrayed by an administration that wooed their support for the 2009 legislation with promises to later address the peculiar needs of union-negotiated insurance plans that cover millions of workers....
“ ‘We want to hold the president to his word: If you like your health-care coverage, you can keep it, and that just hasn’t been the case,’ said Donald ‘D.’ Taylor, president of Unite Here, the union that represents about 400,000 hotel and restaurant workers and provided a crucial boost to Obama by endorsing him just after his rival Hillary Rodham Clinton had won the New Hampshire primary.
“Taylor and Terry O’Sullivan, president of the Laborers’ International Union of North America, laid out their grievances this week in a terse letter to House Minority Leader Nancy Pelosi...saying they are ‘bitterly disappointed’ in the administration.”
Labor leaders are warning the White House can’t count on their automatic support come November.
Europe and Asia
Final figures on manufacturing for the eurozone were released and the January PMI came in at 54.0, the best since May 2011, vs. 52.7 in December. Germany’s was 56.5 (32-month high), while France edged up to 49.3 (4-mo. high). Greece came in at 51.2, the first time it was above 50 since 2009. [The manufacturing PMI in the U.K. was 56.7 vs. 57.2 in December.]
On the service side, France was at 48.9 vs. 47.8 in December, while Germany was at 53.1 vs. 53.5.
The Markit composite reading, services and manufacturing, for the eurozone in January was 52.9 vs. 52.1 in December.
Meanwhile, December retail sales fell 1.6% over November in the euro area, and were down 1.0% over Dec. 2012. December sales fell 3.6% in Spain, 2.5% in Germany, 1.0% in France, but rose 2.5% in the U.K.
Then, on Thursday, the European Central Bank held the key lending rate at 0.25% when some thought it might be cut, as ECB President Mario Draghi said: “We have to dispense with this idea of deflation. The question is – is there deflation? The answer is no.”
Eurozone inflation slowed to 0.7% in January from 0.8% in December, which had fueled the deflation talk that led to fears the recovery could be derailed.
But Draghi, who earlier said he too was concerned about deflation, said at his press conference: “There is going to be a low level of inflation for a protracted period of time, but deflation? No.
“The modest recovery is showing encouraging signs. The demand side is getting stronger, not weaker. We have to treat the recovery with extreme caution. It is very fragile. It is starting from very low levels but it is proceeding.”
Separately, in a long-awaited ruling, Germany’s top constitutional court punted on the issue of the European Central Bank’s bond-purchase program, the OMT, or Outright Monetary Transactions program, referring a decision on its legality to the European Court of Justice, which is normally sympathetic with the ECB and other EU institutions. It seems that the German court, which had veto power, deemed the topic too hot to handle.
The OMT was created in September 2012, shortly after Mario Draghi said the central bank would do “whatever it takes” to preserve the euro. Under it, the ECB can purchase open-ended amounts of government bonds of vulnerable nations like Italy and Spain, which was the controversial aspect, but the pledge was so successful, at least for now, the OMT has yet to be deployed.
The concern, though, remains that the ECB was making it easier for governments to backtrack on their fiscal commitments to reduce debt.
The ECB, in a statement after the German court ruling, said, “The ECB reiterates that the OMT program falls within its mandate.”
“There are important reasons to assume that [the OMT] exceeds the European Central Bank’s monetary policy mandate and thus infringes on the powers of the member states, and that it violates the prohibition of monetary financing of the budget.”
But the OMT was not necessarily illegal under German law, thus, it seems, the constitutional court’s ruling.
One final note...the European Commission said the extent of corruption in Europe is “breathtaking” and costs the EU economy about $160 billion annually, citing items such as public procurement procedures that were vulnerable to fraud, while in some countries party financing is the big issue, or municipal bodies were badly affected. Elsewhere patients have to pay bribes to get medical care.
I’m kind of shocked that four out of 10 businesses surveyed described corruption as an obstacle to doing business in Europe. Even in Sweden, 18% of people surveyed said they knew someone who had received a bribe, compared with a European average of 12%; yet Sweden has the least problem with corruption overall.
Turning to Asia, in China, the National Statistics Office released its final figure on manufacturing for January, 50.5, which was not good, while the non-manufacturing number came in at 53.4, down from December’s 54.6, both in keeping with the deceleration in the Chinese economy that has so many worried. The Chinese stock market was closed from 1/31-2/6 for the Lunar New Year holiday and there is no doubt some figures are distorted because of the overall 40-day holiday period, as I saw firsthand in my trip there.
And when it comes to the numbers themselves, I’ve always said I focus on the trends, not the actual figures, because few believe the ‘official’ data. PIMCO’s Bill Gross, for example, this week told Bloomberg, “I call China the mystery meat of emerging-market countries. Nobody knows what’s there and there’s a little bit of bologna.” In terms of its growth, “Is it 6%? Is it 7%? Is it 5%?”
Through my personal experiences, I know much of the story is real. Once you’ve been there, you cannot deny the spectacular growth in the country in terms of building and infrastructure. But as the government itself knows, at a certain point on some infrastructure issues you reach a saturation point and that is why Beijing recognizes it must shift to a consumer society as some fixed investment spending inevitably slows.
But you cannot make blanket statements about China, as many try to do. It depends on what part of the country you are talking about, to a large extent.
It’s why I think the Macau gambling revenue indicator is as good as any (see below).
[If you missed it, I commented on “shadow banking” last time.]
In Japan, the Nikkei fell early on to a level about 15% off the yearend high (2013 being one in which the Nikkei rose 57%), as not only was a correction to be expected but there are concerns the coming sales tax hike from 5% to 8% in April will send the economy hurtling back into recession.
The key, as I’ve been discussing, is wage talks that commenced this week between companies and the unions. There was another indicator the other day pointing to zero wage growth in 2013 despite better performance by the exporters; in fact the labor ministry said base wages adjusted for inflation matched 2009. Prime Minister Shinzo Abe continues to urge industry to hike wages to blunt the tax hike, which would also instill confidence and encourage the consumer to spend.
The next few months are going to be very interesting here.
[One other tidbit...staying in the region...Taiwan’s manufacturing PMI for January was a solid 55.5, a 33-month high. This is good.]
--After the sickening action on Monday, the major averages recovered with the Dow rallying 188 and 165 points on Thursday and Friday to close the week with a 0.6% gain to 15794. The S&P 500 rose 0.8% and Nasdaq added 0.5%. But the S&P MidCap and Russell 2000 finished down.
Normally you have a 10% correction every 230 days and now, with the market rebound at week’s end, we still haven’t had one in over 850.
[Traditional U.S. stock mutual funds and exchange-traded funds together saw their biggest weekly withdrawals on record for the week ended Feb. 5, $18.8 billion, this after U.S. stock funds attracted $172 billion in 2013. Taxable bond funds and ETFs, conversely, had their biggest intake on record, $10.7 billion, as reported by the Wall Street Journal. Of course with the reversal on 2/6 and 2/7, this looks dumb.]
--U.S. Treasury Yields
6-mo. 0.08% 2-yr. 0.30% 10-yr. 2.68% 30-yr. 3.67%
The long end of the yield curve rose a bit in yield as money returned to stocks. At this point it’s not more complicated than that. But we’ll see how Yellen’s testimony is received, while I can already tell you February’s jobs report on March 7 will be critical as we attempt to shake out the data with regards to the impact of the weather. I guarantee you’ll get tired of hearing that.
--Auto sales were clearly impacted by the weather in January. Ford’s fell 7.5%, GM’s were down 11.9% and Toyota’s fell 7%. Volkswagen AG said its brands dropped 19% compared with a year earlier.
Fiat Chrysler Automobiles (the official new name) saw its sales rise 8%, while Nissan’s increased 11%.
Worrisomely, inventories are swelling, with Ford’s at 111 days worth of supply and GM’s at 114.
--As expected Microsoft announced Satya Nadella will be its next chief executive, replacing Steve Ballmer. But Bill Gates is taking up a new role as a technology adviser and Ballmer remains on the board so the issue now is, just how much independence will Nadella have, especially with Gates back in the picture. Independent director John Thompson will take over as chairman.
--Shares in Twitter fell 24% on Thursday after the microblogging site reported slower growth in user numbers. Twitter averaged 241 million monthly users in the last quarter of the year, up just 3.8% on the previous quarter, this after all the hoopla surrounding its November IPO. The growth rate was 10% at the beginning of 2013.
The company reported a loss of $645 million for all of 2013, expected, and revenues did rise 110% last year to reach $665 million.
[Twitter also accounted for 3.2% of U.S. mobile ad revenue in 2013, compared with 16% for Facebook and 41.5% for Google, according to eMarketer. To close the gap, Twitter needs to keep adding users.]
Stuart Miles, CEO of a tech website Pocket-lint.com, had some interesting comments for BBC News. “Apart from professionals like journalists, the typical user gets on to Twitter, messes around, doesn’t quite get it, leaves it a while and then comes back a year or two later. But that translates into very slow growth.
“The classic example of this is Satya Nadella, the new head of Microsoft. He used Twitter in 2010, then gave up for four years, and now is using it because he thinks it’s the way to communicate now he’s the chief executive,” he added.
I finally started playing around with Twitter the past few months. Half of my skeleton crew of followers are fake...hookers (hackers looking to deliver some malware) go on for a few hours, then drop off when you don’t respond. I wrote the other week about the outfits selling, say, 500 followers for a few bucks. But I knew of this kind of fraud from way back...when no one had the guts to write about it.
--Former SAC Capital Advisors LP fund manager Mathew Martoma was found guilty in the biggest insider-trading scheme ever, $275 million, as Manhattan U.S. Attorney Preet Bharaa and his team of federal prosecutors racked up a seventh consecutive conviction in their probe of billionaire hedge fund king Steven Cohen.
Martoma was found to have used secret tips on clinical trials of an Alzheimer’s drug to trade Wyeth and Elan Corp. shares. Rather than agree to a plea bargain, he now faces up to 20 years in prison.
But Martoma could receive leniency if he agrees to cooperate against big fish Cohen, though Martoma’s credibility is shot after it was disclosed he had been expelled from Harvard Law School for creating a phony transcript.
--Apple Inc. CEO Tim Cook said the company bought $14 billion of its own shares in the two weeks since reporting financial results. Cook said Apple was surprised by the negative reaction that saw shares drop 8% the day after it reported lower iPhone sales than projected and warned on revenue in the current quarter. Over the past 12 months, Cook said Apple had purchased more than $40 billion of its shares, a record for any company over that span.
Activist investor Carl Icahn continues to strongly urge the company to do more, including buying additional shares to hike the value of the stock. [Apple closed Friday at $519.70, up $19 on the week.]
--Coca-Cola Co. took a 10% stake in Green Mountain Coffee Roasters, with Coke planning on teaming up with the maker of the Keurig single-serve coffee brewer to develop a do-it-yourself countertop Coke machine. The number one home soda maker, SodaStream, said Coke’s announcement “serves as further validation of the relevance of our unique business model.”
But how many folks want another machine on their kitchen counter, one for coffee, one for soda, along with the toaster, the mixer, the little TV....my Mr. Met bobblehead doll...
[Meanwhile, coffee prices surged 26% in seven sessions amid reports of drought in Brazil during a key part of the growing season, with some predicting big crop losses.]
--Talk about killing it, luxury retailer Michael Kors reported earnings of $229.6 million for its fiscal third quarter, up from $130 million in the prior year, as revenue rose 59% to $1.01 billion. The shares soared on the news.
--Shares in LinkedIn, the social network for professionals, and semi-professionals such as yours truly, fell about 6% after investors were disappointed by a subdued outlook for 2014. But the shares were up 80% in the last year. The company earned $26.7 million for 2013, up 24%.
--General Motors missed profit expectations badly, net income of $3.77 billion for 2013, down from $4.86 billion in 2012, and a rise of only 2% in the fourth quarter. GM cited currency issues, particularly in Argentina and Venezuela. Why it even operates in these two hellholes I’ll never know. It also lost $800 million for the full year in Europe, but this was far better than 2012.
In North America, GM reported record earnings of $7.5 billion for the full year. That’s more like it. It is also doing very well in China.
--Sony is cutting as many as 5,000 jobs while selling its PC business as the company focuses more on tablets and smartphones. It is in talks to sell the Vaio PC business to Japan Industrial Partners. 3,500 of the job losses will be overseas, 1,500 in Japan.
At least sales in Sony’s fiscal third quarter rose 24%, helped by a weak yen and launch of the PlayStation 4 video-game console.
But Sony also predicted it would lose about $1 billion in the current financial year after previously projecting a small profit.
--Shares in Walt Disney rose as the company was boosted by higher revenues from its film business, specifically “Frozen” and “Thor: The Dark World”. Revenue for the quarter surged a solid 8.5% to $12.31 billion in the fourth quarter. ESPN also continues to perform well.
Frozen took in more than $864 million in box office receipts around the world.
--I noted last time how I caught “Gravity” at an Imax theater in Hong Kong International Airport. This week the New York Times’ Michael Cieply had a piece discussing how Imax Corp. has charged in several courts on the mainland that the Chinese system being employed “relies on technology that was blatantly stolen from its offices in Canada.”
For example, Imax is starting a 2-D version of “RoboCop” on Feb. 12 in the U.S., but the same film opens 16 days later, in 3-D, on a competing set of large screens in the China market (previews for which I saw in Hong Kong). This could get very ugly.
A former Imax software engineer, Gary Tsui, is accused of taking the company’s technology “and using it to found or provide engineering help to low-cost Chinese rivals.”
--Barclays CEO Antony (sic) Jenkins turned down his 2013 bonus, saying it would be inappropriate given the bank’s hefty legal bill. He could have received $4.4 million and instead waived it for a second year since becoming CEO in August 2012. Jenkins is keen to distance himself from his predecessor, Bob Diamond, who paid himself tens of $millions even as the problems piled up.
--Doctors warned about yet another bird flu strain, this one the H10N8 virus, only this one has some warning of a pandemic because the bug jumped to humans for the first time in December. A research team in Beijing said in a paper published in The Lancet medical journal, “The pandemic potential of this novel virus should not be underestimated. [The latest case] reveals that the H10N8 virus has continued to circulate and may cause more human infections in the future.”
--Speaking of bird flu, Yum Brands called 2013 a “challenging year” as its KFC unit dealt with poultry issues in China. The company, though, said it was “not seeing any impact nationally on our sales in China” from the latest reports of avian flu.
Same-store sales in China fell 4% during the quarter, 13% for the full year.
Yum’s China restaurant group is the country’s largest western presence, with more than 4,400 KFC outlets alone. China contributes around half of Yum’s total revenues.
--CVS, the nation’s second-largest pharmacy chain, announced it would stop selling all cigarettes and tobacco products nationwide by October. It’s an expensive move, one that will cost the company $2 billion in annual revenue, or about six to nine cents a share this year and 17 cents annually from next year on; though by comparison, CVS projects earnings in 2014 of $4.36 to $4.50.
CEO Larry Merlo said, “Cigarettes have no place in an environment where health care is being delivered.”
The move comes as the U.S. Surgeon General issued a report last month reiterating just how awful smoking is, linked to 480,000 deaths annually in America, with at least $289 billion in annual costs, including $150 billion for lost productivity and $130 billion in medical care.
Gas stations, by the way, are responsible for 50% of all cigarette sales (48% to be exact, according to the Wall Street Journal).
--A major study published in the JAMA Internal Medicine and released by the U.S. Centers for Disease control and Prevention suggests sugar is deadly, at least when it comes to fatal heart problems. Most Americans eat more than the safest amount.
“Having a cinnamon roll with your morning coffee, a super-sized sugary soda at lunch and a scoop of ice cream after dinner would put you in the highest risk category in the study. That means your chance of dying prematurely from heart problems is nearly three times greater than for people who eat only foods with little added sugar.” [Lindsey Tanner / AP]
Even consuming two 12-ounce cans of soda substantially increases the risk.
I don’t drink soda but I eat a lot of bread and there is a ton of sugar in processed foods as well.
--Continuing with health watch, the World Health Organization warned of a “tidal wave” of cancer, calling for restrictions on alcohol and sugar. Dr. Chris Wild, director of the WHO’s International Agency for Research on Cancer, told the BBC: “If we look at the cost of treatment of cancers, it is spiraling out of control, even for the high-income countries. Prevention is absolutely critical and it’s been somewhat neglected.”
So much of it is about diet – veggies, fruit, and wholegrains; cutting down on alcohol and red meat; and junking processed meat completely, according to the World Cancer Research Fund.
--The Senate finally approved a farm bill, 68-32, the first comprehensive farm policy package since 2008, $956 billion in spending over 10 years that ends direct payments of $5 billion to farmers, regardless of crop prices or farm incomes, while trimming $8 billion over 10 years from food-stamp funding.
“Congress has sent a $956 billion farm bill larded with subsidies for agribusiness to President Obama, who issued a statement Tuesday praising it.
“Maybe he should first have reread his fiscal 2014 budget proposal. ‘The farm sector continues to be one of the strongest sectors of the U.S. economy, with net farm income expected to increase 13.6 percent to $128.2 billion in 2013, which would be the highest inflation-adjusted amount since 1973,’ it pointed out. ‘With the value of both crop and livestock production at all-time highs, income support payments based upon historical levels of production can no longer be justified.’
“It is a depressing measure of political reality in Washington that Mr. Obama is expected to sign the bill, even though it achieves less than half of the $37.8 billion in savings (over 10 years) that his budget called for....
“The bill’s authors urge support because it eliminates egregious ‘direct payment’ subsidies and makes a few other incremental reforms. But for every step the bill takes toward better federal agriculture policy, it takes two or three steps in the other direction.”
--United Continental Holdings Inc. announced it would cut 60% of its flights from its Cleveland hub by June, a big blow for that city as the number of daily departures drops from about 200 to 70. United said it was simply losing tens of $millions in recent years and Cleveland hasn’t been profitable in over a decade.
Meanwhile, the airline industry is facing a severe shortage of qualified pilots sooner than expected. The shortage results from “both a long-anticipated wave of pilot retirements and recently enacted rules that require an increase in training for new pilots and more rest for existing aviators at passenger airlines.” [Wall Street Journal]
One forecast calls for 2,650 pilot retirements at major airlines in 2020, compared with 560 in 2012.
American has already announced it expected to hire 1,500 new pilots over the next five years. [And received 10,000 applications for those jobs in just six weeks.]
--Shares in Alcatel-Lucent traded at $1.27 last April and are now at $4.48 as the French telecom-equipment maker continues with its solid comeback. The immediate debt pressures have been alleviated, profitability and cash flow has returned, its cost-saving plans are on track, and ALU is beginning to win back business from the big U.S. wireless customers.
I noted last summer that my local Lucent lawn indicator was essentially forecasting the turnaround as the grounds at its Murray Hill, N.J., North American headquarters never looked better. At the height of the company’s problems, the lawn looked like merde. The company does need to eliminate the geese, however.
--Macau saw gambling revenues rise only 7% in January, the lowest growth rate since October 2012 and far below expectations, but the Lunar New Year definitely plays into this as gambling is subdued ahead of the holiday, which started on Jan. 31.
--The weather has just been dreadful in Britain and Ireland with record rainfalls and flooding. This week storms washed away a 260-foot stretch of the Great Western rail route in the U.K., severing the counties of Devon and Cornwall from the network. A section of the sea wall that had stood the test of time for 150 years collapsed.
--Vice President Joe Biden said that if he blindfolded someone and took him to New York’s LaGuardia Airport he’d think he was in “some Third World country.”
Biden compared LaGuardia with Hong Kong International and its modern facilities as he gave a speech in Philadelphia on stressing the need for infrastructure improvement.
Now how funny is that, your editor having just spent a week at Hong Kong’s airport while singing its praises. So, yes, couldn’t agree more with the Veep.
--New Jersey, specifically New Jersey Transit, could not have screwed up the post-Super Bowl game crush more with an estimated 29,000 traveling by train (other figures have it as high as 32,000) because of stupid travel restrictions imposed by the a-holes at the NFL. The league had estimated 8,000 to 12,000 fans (NJT 12,000-15,000) would use the trains and some fans had to wait three hours to get one.
But it’s come to light that NJ Transit could have used 100 buses that were staged just six miles away but were never deployed. Total idiots. Chants of “Jersey Sucks!” were warranted, wrote your editor from a perch about 20 miles from the Meadowlands as the crow flies.
--CBS won the TV network rights for Thursday Night Football, reportedly paying close to $300 million to air eight games early in the season. The remaining games will be carried by the NFL Network, but will be produced by CBS Sports and feature Jim Nantz and Phil Simms.
--Baileys sales in China surged 40% in the first six months of 2013. Young Chinese women in particular love it.
--Beijing had its first snow of the season in 107 days on Friday.
--Of all the weather tidbits I’ve seen recently, I love the one where in Minnesota in January, “temperatures dipped to -42F, colder than Gale Crater on Mars, where the NASA robotic rover Curiosity is stationed.” [NOAA / WSJ]
--According to a new report by Nielsen Audio, millennials (the 18-34 age group) listen to an average of 11.5 hours of radio a week, less than Generation X (35-49) and baby boomer (50-64) categories, who average 14 hours and 14.5 hours a week, respectively.
For millennials and Gen X-ers, country music radio was the most popular format. Country is also the most popular format in general, with 14.8% of all radio listening. News and talk were second at 11.3%, followed by pop contemporary hits with 8%. [Ryan Faughnder / Los Angeles Times]
--I meant to honor the PGA Tour last time for passing the $2 billion mark in funds raised for local charities. Remember when the Obama administration vilified those sponsoring tour events following the financial crisis? [I’m biting my tongue.]
--Jay Leno came in on top and is exiting the same way, the comedian giving way for Jimmy Fallon on the “Tonight” show after 22 years. Fallon is bringing the show back to New York for the first time since 1972.
--With Sunday being the 50th anniversary of the Beatles’ appearance on the “Ed Sullivan Show,” consider this when thinking how big America was for the 4 Lads from Liverpool. According to data from RIAA, Apple Records and EMI, the Beatles have sold 209.1 million albums in the U.S., 7.5 million in the U.K. [U.S. News Weekly]
I have some great stuff on the Beatles in my 2/6 edition of Bar Chat.
Syria: The regime of Bashar Assad reached a deal with the United Nations to evacuate civilians from parts of besieged Homs and allow food deliveries to those remaining in rebel-held areas. Thousands have been under siege by government forces for 18 months.
This is supposed to be seen as an act of goodwill ahead of further talks in Geneva, but throughout the rest of Syria the war continues in brutal fashion, including a large-scale attack by Islamists on a regime-controlled prison in the northern city of Aleppo; the prison containing some 3,000 inmates, including many detained for opposition to Assad. [It’s unclear who is in control now.] Assad’s goons also continue to drop barrel bombs on Aleppo and elsewhere, with 150 being killed in four days there due to this barbaric weapon.
As for the removal of the chemical weapons, the leader of the joint mission of the U.N. and the Organization for the Prohibition of Chemical Weapons told the U.N. Security Council that the June 30 deadline for removal of the stockpile can still be met. The Syrian government denies claims by the U.S. and others that it is stalling, which of course it is.
And while the Obama administration has had to admit that Assad has been strengthened since the chemical weapons agreement, the West and the Gulf states are funding a new military offensive by rebel forces in an attempt to keep Assad off-balance ahead of the second round of peace talks.
“It’s difficult to identify anything the United States has done right in Syria.
“For most Americans, including President Barack Obama, the benchmark of success is whether they can stay out of the Syrian conflict. But statements by U.S. officials suggest that this ostrichlike approach, with America’s head firmly in the sand, could backfire.
“That, at least, is what one gets out of the statement released Tuesday by James Clapper, the director of national intelligence. Clapper admitted that President Bashar Assad had ‘strengthened’ his hold on power in Syria and that his regime had taken advantage of an agreement approved by the Obama administration to abandon his chemical weapons. More ominously, this came as anxiety has risen that some of the more extremist groups in Syria, which are gaining in potency as the chaos there persists, might one day target the U.S....
“Welcome to wrestling with the Assad regime. The Obama administration has been a bumbling, stupid giant in the face of a Syrian regime that has defined cynicism in its quest for political survival and a Russian leadership that has delighted in exploiting the impotence and anti-war mood in Washington and Europe....
“The chemical deal with Russia was designed to derail an American attack. The Assad regime’s effective encouragement of jihadist groups was intended to scare the Americans and Europeans and discredit the Syrian opposition. And Assad’s agreement to go to Geneva was a sop to Russia, so that it could keep the Americans engaged in a ‘process,’ because process, whether successful or unsuccessful, has become the standard for American diplomatic seriousness....
“One person apparently displeased with the administration’s policy is Secretary of State John Kerry, whom Senator Lindsey Graham described as frustrated with Russia and Assad after the secretary held a closed-door meeting on Sunday with congressional leaders.
“Pity Kerry. He was once under the illusion that Assad could be a force for reform in the Middle East, this at a time when the Syrian leader was dispatching jihadists to Iraq to kill American soldiers and was seeking to reimpose Syrian hegemony over Lebanon. But now that Kerry is inside the ring, he can see how thoroughly the U.S. has been taken for a ride, and how Obama’s standoffishness, even indifference, toward the Middle East has encouraged this.
“To put it bluntly, not one of America’s objectives in Syria has been achieved, even as the Syrian conflict has destabilized the region....
“With Clapper and Kerry stating that America is being hoodwinked over Syria, including by its supposed Russian partner, Obama has to wake up.”
“Mr. Obama has disparaged the al-Qaeda threat in Syria, calling it a ‘JV team.’ U.S. intelligence agencies apparently disagree... James R. Clapper Jr., told Congress that Syrian al-Qaeda forces aspired to carry out attacks against the U.S. homeland and compared the areas under the terrorists’ control to Pakistan’s tribal territories.
“Mr. Obama could address this threat by returning to a plan he embraced and then dropped last year: accelerating the arming and training of moderate opposition forces. The administration’s exaggerated emphasis on the failing Geneva peace talks has obscured the reality that fighting on the ground is likely to determine Syria’s near-term future as well as any eventual settlement....
“U.S. inaction over the past three years has left the administration with more difficult options. But options still exist. It is not too late to stand against the regime’s atrocities and the growing terrorist threat.”
Back to Sen. Graham, he told reporters that Kerry gave the distinct impression Syria is out of control and that “the al-Qaeda threat is real, it is getting out of hand.”
Iran: Ahead of renewed talks on Tehran’s nuclear program Feb. 18, the U.S. Treasury Department accused Iran of allowing senior al-Qaeda members to use the country as a financial and logistical hub from which it is moving militants into Syria. At the same time many in Congress, as well as our allies, are increasingly concerned the relaxation of sanctions as part of the interim agreement has opened the floodgates of investment before Iran has made any major concessions. But it also appears pressure in Congress for new sanctions against Iran has lost momentum, with the Obama administration insisting any fresh sanctions could derail negotiations.
Iran seems determined to have all the sanctions dismantled as part of a long-term solution, while the U.S. Congress wants the nuclear program dismantled and there is no middle ground.
On the issue of centrifuges the U.S. wants Iran to significantly cut back from its existing 20,000 level, while Iranian President Rohani recently said Iran would not destroy any of them.
So maybe the talks just totally break down, but while negotiations continue, for now, I note the following from Gabriel Schoenfel of the Hudson Institute in the Feb. 10 issue of The Weekly Standard.
“For more than 20 years, Iran has violated IAEA safeguard agreements, developed covert nuclear facilities, and sought to mislead the West about the scope and pace of its activities. As the American people weigh the value of an agreement with a regime that has a consistent record of cheating on international accords – not to mention lying, inciting hatred, terrorizing, and murdering – they would do well to understand that if the agreement is violated, we may not find out until it is far too late to rectify our oversight, for at that point, Iran will already have achieved its terrible goal.”
Iraq: Extreme violence continues to rock the country. On Wednesday, multiple explosions hit Baghdad, killing at least 34. [The United Nations said last Saturday that at least 733 Iraqis were killed during violence in January, which excludes deaths from fighting in Anbar due to verification problems.] Not a lot of international correspondents there anymore, as you’ve undoubtedly noticed.
According to the Iraqi Defense Ministry, since the government and allied tribes launched an offensive to take back the western Anbar province cities of Ramadi and Fallujah, more than 200 militants have been killed, but didn’t say how many of its own forces have died. It seems that Ramadi is gradually being taken back, but Fallujah is a different story.
Separately, the general command of Al-Qaeda, angered by the growing power and autonomy of the Islamic State of Iraq and Syria, one of the more successful affiliates, is distancing itself from the group, saying ISIS is “not a branch of Al-Qaeda” and has no “organizational relationship” with Al-Qaeda.
The Pakistan based leadership under the control of Ayman Zawahiri previously told ISIS to cease operations because it was wrongly targeting Muslims who did not support it.
ISIS had merged with the Al Nusra Front, which has been wreaking havoc in Syria. Both groups primarily employ car bombs. But there has also been infighting between ISIS and Al Nusra, which Al-Qaeda in Pakistan condemns as well.
Afghanistan: The New York Times reported that President Hamid Karzai has been engaged in secret talks with the Taliban, without the knowledge of the U.S. and its allies, which helps explain Karzai’s recent vitriol against Washington.
Israel: Want to know why I write so little about the Palestinian issue and the latest U.S. efforts to broker a settlement? Because it’s a freakin’ waste of time...mine and yours.
There is a simple issue that needs to be addressed first before any talks between the Israelis and Palestinians can really continue in earnest...the question of recognizing the Jewish state.
Israeli Prime Minister Benjamin Netanyahu insists the Palestinians recognize Israel, while Palestinian leader Mahmoud Abbas continues to say such a move is “out of the question,” as he told the New York Times last weekend.
In the latest poll by the Israel Democracy Institute and Tel Aviv University, 77% of Israeli Jews believe it is important that the Palestinians recognize Israel as the state of the Jewish people, while 21% believe it is not important.
On the flip side, 81% of Israeli Jews oppose allowing a limited number of Palestinian refugees to return to Israel as part of a final peace agreement. [Jerusalem Post]
Separately, Netanyahu blasted Sec. of State Kerry for saying the risk of boycotts would intensify should the current peace effort fail. Kerry’s people then said he always opposed calls for boycotts.
Russia: We all have our fingers crossed.
“In its wisdom, the International Olympic Committee in 2007 awarded the winter games to the one subtropical spot in chilly Russia, which happens to sit right next to terrorist safe havens and active war zones in the Caucasus. What could go wrong?
“The choice of Peter the Great to headline (the opening ceremonies) speaks to Mr. Putin’s self-perception, but in Sochi he has been more of a latter-day Potemkin. Russia estimated the cost of converting a beach resort into a world-class ski and winter sport center at $12 billion. The final tab came to $50 billion, more than every previous Winter Olympics combined and even the 2008 Beijing summer games.
“The games are proving to be a case study in the Putin political and economic method. Boyars close to the Kremlin won the construction tenders, which – surprise – ran well over estimates. The road up from the coast to the Krasnaya Polyana ski resort cost $9.4 billion, or $200 million per kilometer, which according to opposition politician Boris Nemtsov makes it the most expensive road in the world. ‘They may as well have paved it in platinum or caviar,’ he says. Mr. Nemtsov estimates some $30 billion was lost to corruption, which explains why Russians call this Olympiad the Korumpiad.”
On a different issue, the U.S. ambassador to Russia, Michael McFaul, announced he was stepping down, citing family reasons. His outspoken approach was not popular with the Kremlin.
And I hope you saw NBC’s Richard Engel and his piece on how quickly two new PCs and a smartphone were hacked once he got to Russia. We are talking within minutes of being connected to the Internet. I watched this and thought, wow, I really was hacked when I was in Moscow twice since I started writing this column. Well, I don’t do online banking nor purchase items off my travel laptop so whatever. Plus it’s not like the maids / KGB agents couldn’t have at it while I was out of the room, laptop in plain view.
Ukraine: The Kremlin was clearly responsible for leaked recordings of top American diplomats discussing the situation in Ukraine. In an audio clip posted on YouTube, voices resembling those of U.S. assistant secretary of state Victoria Nuland, and Geoffrey Pyatt, ambassador to Ukraine, are heard talking by telephone about how to resolve the standoff and at one point a voice presumed to be Nuland’s says “F**k the EU.”
Nuland and Pyatt discuss how they want opposition leader Arseny Yatseniuk to be part of a new government, but she says Vitali Klitschko, the former heavyweight boxer, is inexperienced and needed to “do his political homework.”
White House spokesman Jay Carney said it was clear Russia had a role in the disclosure and posting, while a State Dept. spokeswoman said the incident represented a “new low in Russian tradecraft.”
One Western diplomat in Kiev told the Financial Times, “It’s disturbing and smells like Belarus,” which is allied with Russia and Ukraine’s neighbor.
Earlier, Russia told the opposition to end their campaign of “ultimatums and threats” and to negotiate with the government. The opposition continues to demand the removal of President Yanukovych, who returned on Monday after four days of sick leave.
At a security summit in Munich, Russian Foreign Minister Sergei Lavrov accused the West of double standards over Ukraine’s violent protest, while Sec. of State Kerry said: “The aspirations of citizens are once again being trampled beneath corrupt, oligarchic interests – interests that use money to stifle political opposition and dissent, to buy politicians and media outlets, and to weaken judicial independence.”
Kerry added: “Nowhere is the fight for a democratic, European future more important today than in Ukraine. The United States and EU stand with the people of Ukraine in that fight.”
Lavrov said: “What does incitement of violent street protests have to do with the promotion of democracy? Why do we not hear condemnation of those who seize government buildings and attack police and use racist, anti-Semitic and Nazi slogans?” [BBC News]
Tensions between Ukraine's Russian-speaking east and Ukrainian-speaking west are rising, this much is clear, while relations between the West and the Kremlin are at a low point, with Ukraine the biggest state lying between Europe and Russia. Any broad instability could easily spiral out of control and beyond Kiev.
Japan: Prime Minister Shinzo Abe continues to seek changes to the pacifist constitution that would allow for broader deployment abilities to come to the aid of its allies, telling parliament this week that “it’s about whether we can exercise this right that every country has." According to a poll by Kyodo News, however, 54% of Japanese are against the change. Such a change would also further antagonize China and South Korea.
Separately, Sea Shepherd said one of their ships was rammed during “aggressive” and “unprovoked” confrontations with a Japanese whaling fleet. You’ve gotta love the name of the vessel that was struck...the Bob Barker. [Talk about a charmed life...and a good man.]
China: According to IHS Jane’s, a defense industry consultant, China will spend $148 billion on its military this year, up from $139 billion in 2013. By next year China will spend more on defense than Britain, France and Germany combined, though will still significantly lag the U.S., which is slated to spend $574 billion this year – down from $664 billion in 2012 after the sequester cuts.
Officially the Chinese government will release its figures next month, not that you’ll be able to believe them.
Philippines: President Benigno Aquino III called for nations around the world to support the Philippines in resisting China’s claims to the seas near his country, saying in an interview in the presidential palace with the New York Times:
“If we say yes to something we believe is wrong now, what guarantee is there that the wrong will not be further exacerbated down the line?....
“At what point do you say, ‘Enough is enough?’ Well, the world has to say it. Remember that the Sudetenland was given in an attempt to appease Hitler to prevent World War II.”
So official Chinese news agency Xinhua responded, calling Aquino a “disgraced” politician for comparing China’s efforts to claim disputed territories with those of Nazi Germany.
Brazil: Still thinking of going to the World Cup there? Do you have rocks in your head? As reported by the London Times, killings leapt 50% in Rio de Janeiro last year. It’s so bad that patients at a hospital were “robbed by a rampaging gang in an attack that is another sign of an alarming rise in crime in the city.”
Brazil has a murder rate of 50,000 people a year, the highest homicide number in absolute terms in the world.
Thailand: National elections were held and results were inconclusive as voting was disrupted in 11% of electoral districts by protests.
Greece: Far-right Golden Dawn announced the formation of a new political party in an attempt to circumvent the government’s efforts to outlaw the organization ahead of European elections. It will now be called National Dawn which could allow its candidates to run in May. If elections were held today, the last poll had Golden Dawn’s support at 10%, third behind anti-austerity Syriza with 32%, and New Democracy, which heads the current government and is favored by 28%.
--House Speaker John Boehner told reporters, “There’s widespread doubt about whether (the Obama) administration can be trusted to enforce our laws. It’s going to be difficult to move any immigration legislation until that changes.”
So seeing as it’s an election year, Republicans who are divided on the issue are choosing not to give the president a legislative victory. It’s possible the issue could still come up in the summer, after some contentious Republican primaries are held, or Republicans can wait until next year in the hopes they’ll control the Senate.
--Regarding the Keystone XL Pipeline and the recent report by the State Department that concluded the pipeline from the Canadian border to interconnections in Nebraska for the Gulf of Mexico would have no marginal effect on climate or oil and gas development in the Alberta oil sands...pause...the White House has been “studying” the project for about 1,965 days. Really.
I’m guessing President Obama is going to pause some more to see how some key Senate races play out in terms of the polls the next few months, specifically Democratic Sens. Mary Landrieu of Louisiana, Mark Begich of Alaska and Mark Pryor of Arkansas, all supporters of Keystone who face tough re-election battles this fall.
On the flip side, Obama feels compelled to listen to the likes of the Natural Resources Defense Council, whose international program director recently said, “Piping the dirtiest oil on the planet through the heart of America would endanger our farms, our communities, our fresh water and our climate. That is absolutely not in our national interest.”
I, on the other hand, worry first and foremost about how we’ve screwed a great ally in Canada.
--New Jersey Republican Gov. Chris Christie’s supporters lashed out at the New York Times piece from Jan. 31 that caused a political firestorm, as former Port Authority political appointee David Wildstein claimed, through a letter from his attorney, that evidence exists Christie knew about the George Washington Bridge lane closures from last September. The Times’ own public editor later disputed how the story was originally reported. Specifically, the governor’s administration called the Times report “sloppy” and “misleading” and indeed it was.
The text was changed 20 minutes after being posted to reflect that Wildstein said the evidence existed, not that he had it as was originally reported, after which Public Editor Margaret Kelly commented: “My take: This change was more than a nuance. Some sort of notice was due to the reader that the initial story had changed in a substantial way.”
But Christie’s staff stupidly attacked Wildstein’s high-school days. Republican strategist Steve Schmidt told the Star-ledger, “Generally speaking the donor community and the national GOP thought Chris Christie has acquitted himself well until he attacked the high school record of David Wildstein. That’s an action that makes them look not ready for prime time.”
Wildstein still hasn’t produced any evidence Christie knew of the GWB situation, while Christie reiterated in a live radio appearance on Monday he “had nothing to do with” the closures that triggered massive jams.
Separately, former deputy chief of staff Bridget Kelly is refusing to produce documents and information requested under subpoena by the state legislative committee investigating Bridgegate, citing her Fifth Amendment right against self-incrimination as well as her Fourth Amendment privacy rights.
Bottom line, this scandal will go on and on and Christie’s support, both in New Jersey and nationally, will continue to wither.
--Evan Halper of the Los Angeles Times is the latest to report on the dangers caused by a massive solar flare, or terrorists, generating an electromagnetic pulse that could fry the electrical grid. Previously, former House Speaker Newt Gingrich has issued warnings that the power system is seriously at risk.
Trevor Maynard, head of exposure management at Lloyd’s of London, offered, “We definitely think this is a risk. It is one of those hazards you just know is going to happen, just like you know a major Miami hurricane will happen.”
As Halper writes: “In the case of electronic pulses, the most sober warnings come from government weather scientists.” William Murtagh of the federal Space Weather Prediction Center described the dangers of a massive solar storm that is, as Lloyd’s describes, “almost inevitable.”
Such storms take place every 150 years and the last one was 155 years ago, the “Carrington event” of 1859, that induced a surge that “knocked out the switching system of the New York Central Railroad below 125th Street and caused the control tower to catch fire. News reports told of telegraph wires going berserk.”
More recently you had the 1989 incident with Hydro-Quebec in Canada when the power grid collapsed in less than two minutes after a solar storm. “Six million people were without power for nine hours.”
Lloyd’s worst-case scenario would be cataclysmic. “20 to 40 million Americans losing electricity for as long as a year or two, ‘resulting in major and widespread social unrest, riots and theft.’”
Just a year and a half ago, a massive solar storm headed toward Earth, the size of Carrington’s, and missed Earth’s orbital position by seven days.
The terrorism aspect, as promulgated by the likes of Gingrich and former CIA Director James Woolsey, involves a group with a nuclear weapon unleashing a high-altitude explosion that would create a pulse large enough to mimic the impact of a massive solar storm.
--I have written tons on the illegal ivory trade and how I wish the likes of China would do more to prevent it, with the government beginning to take some small steps in the past few months.
But as a piece in the Washington Post by Johan Bergenas and Monica Medina points out, “Poaching of endangered elephants and rhinos has become a conservation crisis, and profits from wildlife crimes are filling the coffers of terrorist organizations. The twin crises should be cause for alarm for military leaders, not just conservation groups. They need to start working together before it is too late....
“Illegal wildlife trade generates an estimated $19 billion a year – more than the illicit trafficking of small arms, diamonds, gold or oil.... Sadly, poaching elephants and rhinos in Africa is easy money for terrorists, and they are cashing in.
“One Elephant Action League undercover investigation in Kenya concluded that illegal ivory funds as much as 40 percent of the operations of al-Shabab, the group behind the November attack at a Nairobi shopping mall where 60 people were killed....
“Last May, President Obama called for a new strategy to fight al-Qaeda and its affiliates. To be effective, these counterterrorism plans must engage not only African defense leaders but also conservation and development leaders. U.S. military plans for Africa should include ending elephant and rhino poaching to cut off a key source of funds for al-Qaeda and other terrorists.”
Later this month Prince Charles and British Prime Minister David Cameron are convening a high-level summit on wildlife crimes.
“Last year Congress gave the Pentagon permission to combat the Lord’s Resistance Army’s poaching and human-trafficking activities. That authority should be expanded to cover all terrorist groups, including al-Shabab.”
--About 36 hours before Philip Seymour Hoffman’s body was discovered with a hypodermic needle in his arm, Terence Corcoran and Shawn Cohen of The (Westchester County, N.Y.) Journal News, which was forwarded by USA TODAY, started their article with the following, which I printed out at the time for reference in this space this week.
“A heroin epidemic claiming the lives of young adults locally and across the nation is continuing despite a crackdown on suppliers and increased efforts to warn users of the drug’s deadly effects.
“This week in the Lower Hudson Valley, there were three deaths – [Ed. I’m leaving out their names but the victims were 23, 28 and 19] – suspected to be from heroin overdoses, though toxicology results have not yet confirmed the causes.
“Dozens of area young people have died of heroin overdoses in the past few years...
“In western Pennsylvania, at least 17 recent deaths have been blamed on tainted heroin.... And in Vermont, Gov. Peter Shumlin devoted his entire State of the State address to what he called Vermont’s ‘full-blown heroin crisis.’”
“Many teens start out stealing their parents’ prescription drugs, then graduate to stronger narcotics, including the opiate-based painkiller oxycodone. But those pills can cost $30 or more each on the street.
“ ‘They go to heroin because it’s cheaper. Now you’re seeing people you would never expect to see getting hooked,’ said Capt. William Barbera of the Rockland County Sheriff’s Office.”
So I was going to bring up the topic in the hope maybe it convinces one or two of you to have a serious conversation with your kids.
But in the case of Philip Seymour Hoffman, I wish some of the stories were more balanced. He left three young children after all.
--And regarding the above, it can’t be encouraging to note a recent study in the Wall Street Journal, examining participation in the four most-popular team sports – basketball, soccer, baseball and football – to see that it fell by 4% from 2008 to 2012, when looking at data from youth leagues, school-sports groups and industry associations.
As Ryan Wallerson wrote, “The causes of declines in youth sports aren’t clear. Experts cite everything from increasing cost to excessive pressure on kids in youth sports to cuts in school physical-education programs.
In Ohio, high-school participation in basketball fell 15% during the five years ended last spring. Says a high-school hoops coach in Powell, Ohio, “the less-elite players are going missing. The kid who practices hard and who takes pride in being part of the team but who gets only a few minutes a game – that kid has too many other options.”
That’s the same kid who six years earlier was awarded a trophy when his team finished last. I participated in high-school track and cross country because of the camaraderie, number one.
Ryan Wallerson also adds, “Social networking, videogames and other technology may be drawing children away from sports. [Ed. Obviously.] As many as 140 kids used to try out for 45 slots on the baseball team at Shawnee Mission North High School in Overland Park, Kan. Today, fewer than 45 kids try out, says George Sallas, the school’s athletic director.
“ ‘Kids are more trained now to stay at home and play videogames,’ he says. ‘Sports don’t intrigue them.’”
And then you have Michael Bergeron, Executive Director of the National Youth Sports Health & Safety Institute. The main reason kids fall away from youth sports “is that the sport isn’t fun to the child. We have to be aware of single sport specialization, overuse, overworking kids searching for the elite athletes; all of these things are causing kids to leave youth sport and not return.”
Anyone who thinks any of the above is good, burnished by all the technology developments of the past decade in particular, is nuts.
Then you had my recent trip to Hong Kong. I was floored. Over the course of all the reading I do, I clip out, print out, tons of stories that aren’t germane to my week-to-week work but are on topics of interest and I toss them in my laptop case to read on flights. I hop on a plane and am probably the only one who never puts on headphones as I sit there reading. In the old days, if the person sitting next to me seemed like the engaging type, I might strike up a conversation (I have gained a few long-time readers that way), but these days everyone just puts on their headphones and there is no interaction whatsoever.
But I went 15 ½ hours one way, 15 hours the other, without saying anything more to my seatmates outside of ‘hello’ when they sat down next to me. That’s incredible. They both just sat down, put on their headphones for the entire flight, and said nothing (plus they were both total jerks for the flight attendants to deal with because the passengers seemed irritated they were being interrupted for a service question).
--Meanwhile, while I’m in a sour mood, here is a real a-hole. Sorry, there is no other way to describe Cardinal Stanislaw Dziwisz’ actions. You see, Pope John Paul II entrusted Cardinal Dziwisz to burn his personal notes as part of his last will and testament, yet Dziwisz decided to publish them as a book, telling reporters he “did not have the courage” to follow John Paul’s orders, which according to the New York Times’ Dan Bilefsky “contain religious meditations” written from July 1962 to March 2003.
Rev. Tadeusz Isakowicz-Zaleski, an expert on the Catholic Church’s role during the Communist era in Poland, said, “In European culture, a final will is always binding, as long as its realization isn’t against the law and morality. This is required not just by legal statutes and good manners, but also by respect for the dead. This public act of disobedience is a form of anti-witness, and can’t be justified by any explanation that it’s for the good of the church. Does a clergyman serving as a secretary know better than St. Peter’s successor?”
The other day, Ken Ham, the founder of the Creation Museum, who believes the Earth was created 6,000 years ago and that the Bible tells the factual account of the universe’s beginnings and the creation of humans, debated TV’s “Science Guy,” Bill Nye.
“I just want to remind us all there are billions of people in the world who are deeply religious, who get enriched by the wonderful sense of community by their religion,” said Nye. “But these same people do not embrace the extraordinary view that the Earth is somehow only 6,000 years old....
“If we continue to eschew science...we are not going to move forward. We will not embrace natural laws. We will not make discoveries. We will not invent and innovate and stay ahead.”
Ham said, “Creation is the only viable model of historical science confirmed by observational science in today’s modern scientific era... I (also) believe the word ‘science’ has been high-jacked by secularists.” [Associated Press]
--Finally, I note the passing of a friend, Mubby Swain. About 20 years ago, something drew me to a story in the Star-Ledger about a terrific high-school basketball player in Newark who was going to a Catholic school there. One thing led to another and I ended up giving Mubby and his mother some support over the ensuing years, including for Mary’s super gospel group, and in return they gave me friendship and a stronger knowledge of some of the issues facing the inner city and Black Americans. I have to admit, I was a little scared sometimes when I went to visit. They didn’t always live in the best neighborhoods, but Mubby, Mary and their extended family always treated me beautifully. Mary and I went to many a college basketball game watching Mub, who was a classic “scorer,” for hoops fans. After transferring from Fairleigh Dickinson, he lit it up at William Paterson for a spell. And, oh, the ladies loved him. He was a stud.
Mubby worked for the city of Newark and I was always proud of him for staying out of trouble. He was a good kid...a good guy.
For her part, Mary always checked in to see how my love life was going. She’s terrific, now retired after working hard all her life to keep a roof over their heads.
Wednesday, Mary called me. Mubby died hours earlier after a short illness. I know from too many experiences with Mary’s family just how much hospitals in Newark suck.
Pray for the men and women of our armed forces...and all the fallen.
Gold closed at $1263
Returns for the week 2/3-2/7
Dow Jones +0.6% 
S&P 500 +0.8% 
S&P MidCap -0.4%
Russell 2000 -1.3%
Nasdaq +0.5% 
Returns for the period 1/1/14-2/7/14
Dow Jones -4.7%
S&P 500 -2.8%
S&P MidCap -2.5%
Russell 2000 -4.0%
Bears 17.4 [Source: Investors Intelligence]
Have a great week. I appreciate your support.
Dr. Bortrum has a new column.
Catch me on Twitter @stocksandnews