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Week in Review

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02/15/2014

For the week 2/10-2/14

[Posted 12:00 AM ET]

Washington and Wall Street

Large swaths of the United States were more focused on the weather than the markets and the political goings on in Washington this week, and there is no doubt the weather, particularly in the eastern half of the country in the first six weeks of 2014, is having an impact on the overall economy. For example, after the retail sales figure for January came in at -0.4% when a slight gain was expected, with December being revised downward to -0.1%, many of Wall Street’s economists immediately cut their first-quarter GDP forecasts. Goldman Sachs went from 2.3% to 1.9%, Credit Suisse from 2.6% to 1.6% and Morgan Stanley from 1.9% to 0.9%.

Recall, growth in the third- and fourth-quarters was 4.1% and 3.2%, respectively. And, yes, even the weather naysayers when it comes to economic data cannot deny that when there is a big ice storm that drastically changes consumer behavior for a few days, there will be an impact on the numbers. It obviously affects auto sales, for one. And the airline industry has seen record numbers of cancellations.

Of course some of this will be reversed as soon as the weather returns to normal, which looks like this coming week, and maybe Punxsutawney Phil was full of it and spring comes early not late. He is just a rodent, after all, and dumber than his cousin the beaver, who avoided the housing bubble, but I digress.

We also had a figure on industrial production for January that was off 0.3% when the reverse was expected, a gain of like amount.

Yes, fourth-quarter earnings are up 8%, according to Bloomberg, but revenue is still up only 3%  and now you’d expect some shortfalls on the sales front when Corporate America reports their first-quarter results.

But it was nonetheless a second consecutive up week for Wall Street and there were two main factors cited; new Federal Reserve Chair Janet Yellen’s first testimony to Congress and the House and Senate voting through a debt-ceiling extension without any turmoil for the financial markets.

I choose the latter as being most important. House Speaker John Boehner took a courageous stance and brought the “clean debt ceiling” to the House floor, unencumbered by any contentious amendments after much rancorous debate inside the Republican Party, and it passed 221-201, though with only 28 Republicans voting yes. Cathy McMorris Rodgers, the No. 4 party leader, and Paul Ryan voted ‘no,’ to give you a sense of the internal squabble.

The Senate then passed it 55-43 on a party line vote after various maneuvering that allowed Republican members to still appease their base so there will be no debt-ceiling issues through March 2015. The Street likes this.

But, as everyone in Congress was forced to admit, and as your editor has consistently said would be the case, there was no serious debate on future spending and entitlements and we will pay a heavy price down the road.

As to Ms. Yellen’s testimony, the market rejoiced because she made it clear she supported the policies of her predecessor, Ben Bernanke, and that the Yellen Fed will continue to taper the level of the bond-buying program unless there are “notable changes” in the economic data. Yellen also strongly hinted the Fed will maintain short-term interest rates near zero for a long time. The markets wanted to see continuity and they received it.

But savers will continue to get crushed and no one yet knows how the Fed is going to deal with its $4 trillion balance sheet (of course they can say they’ll just let it “run off” but it won’t be that simple).

I have to note I was totally unimpressed by Ms. Yellen, having watched a fair amount of her testimony to the House committee (her Senate appearance was canceled due to the weather) as she didn’t have what I thought would be some pretty simple figures at her fingertips, as in I was thinking, “What do you do all day at the Fed, Ma’am. You’ve only been there years!”

Edward Luce / Financial Times

“Ms. Yellen’s quandary is captured in the increasingly confusing U.S. jobless numbers. Under the Fed’s existing guidance, which was communicated in early 2012, it pledged to keep interest rates at zero until unemployment fell below 6.5% or inflation exceeded 2.5%. Last month U.S. unemployment dropped to 6.6% - a month or two away from dipping below its threshold. Inflation is nowhere to be seen.

“No one believes the drop in jobless numbers reflects U.S. overheating. Most of the fall is a result of people abandoning the search for work rather than robust job creation. The same problem faces Mark Carney, the Bank of England governor, who promised to keep interest rates low until UK unemployment fell below 7%. It recently hit 7.1%. Again, he is unlikely to raise rates when joblessness dips below that level. Neither guidance has credibility with the markets, which makes them useless.

“Would any language work? Since forward guidance is basically a confidence trick, the answer is probably no. The moment one trick fails, the magician loses credibility. Ms. Yellen must now find new criteria that markets will believe. Maybe she could choose the labor force participation rate – the share of adults who are working – which is a better measure of job market health because it includes those who are discouraged or have stopped seeking work altogether.... Should she go vague and risk being ignored by the markets; or be specific and risk having to rewrite the Fed’s language – as it is already about to do? It is an unenviable choice. Yet it is the only significant one Ms. Yellen has.

“Central bankers were the heroes of the 2008 crisis. Faced with another Great Depression they reached for their bazookas and fired them. It is Ms. Yellen’s challenge to take over at a time of deep ambiguity. Not only are the threats over the horizon tough to anticipate, as they always are, but she faces them in the knowledge that the Fed’s armory is bare.”

On the ObamaCare front, the Treasury Department said employers with 50 to 99 full-time workers won’t have to comply with the Affordable Car Act’s requirement to provide insurance or pay a fine until 2016. Companies with more workers can also avoid some penalties in 2015 if they prove they are offering coverage to at least 70% of full-time workers.

But the individual mandate remains in place; carry coverage or pay a penalty. It’s a joke.

Or, as the Wall Street Journal opined:

“ ‘ObamaCare’ is useful shorthand for the Affordable Care Act not least because the law increasingly means whatever President Obama says it does on any given day. His latest lawless rewrite arrived on Monday as the White House decided to delay the law’s employer mandate for another year and in some cases forever....

“The new rule also relaxes the mandate for certain occupations and industries that were at particular risk for disruption, like volunteer firefighters, teachers, adjunct faculty members and seasonal employees....

“By now ObamaCare’s proliferating delays, exemptions and administrative retrofits are too numerous to count, most of them of dubious legality. The text of the Affordable Care Act specifically says when the mandate must take effect – ‘after December 31, 2013’ – and does not give the White House the authority to change the terms.

“Changing an unambiguous statutory mandate requires the approval of Congress, but then this President has often decided the law is whatever he says it is. His Administration’s cavalier notions about law enforcement are especially notable here for their bias for corporations over people. The White House has refused to suspend the individual insurance mandate, despite the harm caused to millions who are losing their previous coverage.

“Liberals say the law isn’t harming jobs or economic growth, but everything this White House does screams the opposite.”

Finally, back to the debt-ceiling issue, once again Texas Republican Sen. Ted Cruz riled up his base, while splitting his own caucus, forcing some Republicans to side with the Democrats on a procedural vote in order to increase the debt-ceiling.

As the Journal noted: “Democrats beat the odds and retained their Senate majority in 2010 and 2012 in part because they stuck together. If Republicans fail again this November, a big reason will be their rump kamikaze caucus.”

Europe and Asia

Eurostat, the statistics arm of the European Commission, released fourth-quarter growth figures for the eurozone and for the group GDP was up 0.3% over Q3, up 1.1% on an annualized basis.

Germany was up 0.4% (1.5% annualized), France up 0.3% over Q3 (1.2% ann.) and Italy, after 11 straight down or flat quarters, saw its economy rise a whopping 0.1% Q4 over Q3. All three were slightly better than expected.

Netherlands came in much better than expected for the quarter, up 0.7% over Q3, while Spain’s economy grew 0.3% in Q4.

One other of note...Romania’s GDP shot up 1.7% in Q4 over Q3, and up 5.1% for the quarter vs. Q4 2012. [Plus they have Count Dracula goin’ for it.]

The European Central Bank is still just projecting growth of 1.1% for the eurozone for all of 2014, after being down 0.4% for 2013, but the former could be conservative.

In other euro stats, industrial production for the month of December was down 0.7% from Nov., up 0.5% from a year earlier, with Germany down 0.7%, France down 0.3% and Italy off 0.9%, Dec. over Nov.

German car sales in January, though, were up sharply and the Bundesbank projects the German economy will grow 1.8% in 2014.

Greece’s unemployment rate rose to 28% in November, with the government reporting the youth rate is now at 61.4%, despite all the talk of a recovery in the Greek economy.

OK, you look at all the above and while there have been some mild positive surprises, 1.1% projected growth for the eurozone is hardly a robust recovery. Europe would die for the subpar renaissance the U.S. has been experiencing.

The biggest negative remains the banking sector and as I’ve been writing the looming bank stress tests are, err, stressing out some countries such as Italy, where the banks are increasingly under the spotlight with rising non-performing loans and major doubts over the asset quality on the balance sheets. Lending to small- and medium-sized businesses by these institutions has stalled as banks continue to hoard capital. That’s not good.

Last weekend, the eurozone’s new chief banking regulator, Daniele Nouy, said she wants to weaken the link between governments and the eurozone’s banks. Noting the coming stress tests, she said, “We have to accept that some banks have no future. We have to let some disappear in an orderly fashion, and not necessarily try to merge them with other institutions.”

[Nouy’s Single Supervisory Mechanism will take on the task of supervising the eurozone’s 130 largest lenders, while the thousands of smaller institutions will remain the responsibility of national regulators.]

Problems in the banking sector were a big reason why at week’s end, Italian Prime Minister Enrico Letta submitted his resignation, to be replaced by his chief party rival, 39-year-old Florence mayor Matteo Renzi, who is expected to form a new government next week. The Letta-Renzi Democratic Party is the largest in parliament but it has needed to cobble together a coalition to govern and with Letta being forced to make some compromises others, like Renzi, were against, Renzi won a power struggle.

Letta told his staff, “It’s true, Italy does break your heart.”

Renzi said, “Italy cannot stay in a situation of uncertainty, instability, in a swamp.”

The opposition in parliament blasted the Democratic Party and Renzi, while enjoying the inter-party squabble. But Renzi has received high popularity ratings nationwide.

So Italy will have its fourth government in two years. The current legislature is due to run until 2018 but if Renzi fails, new elections will be called. So it’s up to Renzi to pass urgent institutional reforms and a new electoral law, for starters. Even some of his supporters are wondering if this is all happening too quickly.

Turning to China, the economic data is often suspect, but especially around the Lunar New Year’s holiday, this time Jan. 31, so it wrapped around both January and February. That said there were a slew of releases this week.

Retail sales for January were up 13.3% vs. 14.7% last year as the anti-graft campaign continued to have a severe impact on luxury good sales. Ironically, the South China Morning Post singled out Fuzhou the other day, where sales of gifts and alcohol were down 70% in some shopping centers.

Exports rose a surprisingly strong 10.6% in January, with imports up 10%, when the former had been projected to be flat and the latter up about 4%, so this fueled talk once again of fake invoicing, let alone trying to decipher the impact of the holiday. That said if exports were even up 5% to 7% in reality that was a positive surprise.

Auto sales growth slowed to just 7% in January vs. 2013’s full-year pace of 15.7%.

And on the inflation front, producer prices, or as they like to say factory prices at the gate, fell a 23rd consecutive month, down 1.6% in January from a year earlier, not good, while consumer prices rose just 2.5% for the month, up only 3.7% on the key food metric, so that part is positive in that it leaves the government some room to stimulate.

But you want increases at the factory level, particularly in terms of corporate profits, and China’s slowing economy, falling profits and rising borrowing costs are not good. [I tell my friends that if my investment in the Fuzhou area is even in operation, I’m guessing it is losing money these days.]

Finally, the ratio of nonperforming loans at Chinese banks hit its highest level in two years at the end of 2013, while there was a $50 million default on a trust product, this one without an apparent bailout as opposed to the recent $500 million highly-publicized default, issued through China’s largest bank that invested in a coal mine and then went under, only to be bailed out by some still unknown party. Principal was returned on this one. On the smaller default, investors will get some of their money back, reading between the lines. A further sign of things to come.

Street Bytes

--Stocks sloughed off the poor economic news and staged a strong rally for their best week of the year with the Dow Jones up 2.3% to 16154, the S&P 500 up 2.3% and Nasdaq up 2.9%. Nasdaq is now up 1.6% for 2014, while the S&P is down only 0.5% and a mere 10 points shy of its all-time high. The Dow is down only 2.5%.

--U.S. Treasury Yields

6-mo. 0.07% 2-yr. 0.31% 10-yr. 2.74% 30-yr. 3.70%

--Time Warner Cable has had recent overtures from Charter Communications (fourth-largest cable operator), but TWC wanted Charter to offer $160 per share after Charter first came in at $132 and nothing got done.

Then late Wednesday, Comcast Corp. acquired Time Warner Cable’s 11 million subscribers for $159 per share in an all-stock deal that will face numerous regulatory hurdles, but, if approved, would have a combined 30 million subscribers and nearly 30% of the market in uniting the nation’s two largest cable operators.

Comcast CEO Brian Roberts said, “On the regulatory front, we believe this transaction is approvable. It is pro-consumer, pro-competitive and strongly in the public interest.” Roberts assured consumers the deal “will not reduce competition in any relevant market” since the companies did not overlap currently.

The new cable giant’s biggest competitor would be DirecTV, which has 20 million video customers. Just a little over a year ago, Comcast reshaped the U.S. media landscape after its $17 billion acquisition of NBC Universal.

Cecelia Kang of the Washington Post had a good summary of some of the other aspects of the Comcast-TWC combination.

“(The) merger would have far greater implications for the future of media and communications, with one firm controlling more fast Internet lines into American homes than any other company, along with a huge swath of content through its ownership of NBC Universal.

“The combined company would have 33 million cable subscribers and nearly as many broadband users, giving it enormous power in negotiations with networks over licensing fees and in determining what shows reach consumers on mobile devices, laptops and television sets. It could influence whether the next Apple TV or Google device gets a fair shot at replacing cable set-top boxes. Without the second-biggest cable company to help keep pressure on prices for triple-play television, Internet and phone service, Comcast would have flexibility to set the market rates....

“Analysts generally agree that Comcast is likely to win approval for the merger from antitrust regulators. The lack of overlapping markets means regulators won’t view the proposed merger with the same concerns as in AT&T’s proposed bid for T-Mobile, experts said. That deal, which regulators rejected, would have eliminated a major national carrier and given consumers fewer options.”

Comcast said it expects to win approval by year end.

--There is trouble in the farm belt with land prices having peaked. It was inevitable, though while it’s probably appropriate to call a doubling in prices from 2009 to mid-2013 in states such as Iowa a bubble, this is different from other boom-bust periods in this area. Farm income should remain strong and debt levels are far more realistic, according to USDA figures.

The problems mostly have to do with corn, which hit an all-time high in 2012, following the drought and tight supply coupled with growing demand. So farmers paid more for the land, grew more corn, leading to a record harvest, and the price of the crop dropped 40% last year.

One potential problem would be rapidly rising interest rates, though that is unlikely in the short term.

The declines in land values are minimal thus far but certainly bear watching. The USDA did forecast U.S. farm incomes would plummet 27% this year to the lowest level since 2010, though on an inflation-adjusted basis, last year’s total income was the highest since 1973.

--Bank of America announced it was cutting 450 mortgage jobs from West Coast offices due to low loan demand, the fourth time this year BofA has slashed jobs because of reduced retail originations.

--Related to the above, home prices in Southern California fell 3.8% in January over December, though the median price is up 18.4% since January 2013 to $380,000. But that figure is the lowest since May. Actual sales in the six-county Southland were at a three-year low for a January.

--Britain’s second-largest bank, Barclays, is laying off 12,000 as profit at its key investment banking unit slumped 37% in 2013, though it is increasing bonus payments by 10%. CEO Antony Jenkins said, “We pay for performance and we pay competitively. It goes back to having the best talent across the world to serve our clients and customers.” Around half the job losses will be in Britain. Barclays employs 140,000 around the world.

--Toyota is recalling 1.9 million Prius hybrids over a software issue that could cause the vehicle to slow down suddenly. The bulk of the problems were cropping up in Japan and North America and affect sedans made since March 2009.

--General Motors said it was recalling 778,000 Chevy Cobalts and Pontiacs G5s in North America covering model years 2005 to 2007 because of an ignition switch problem.

--CBS Corp. continued to report solid earnings, with net income up 19% in the fourth quarter to $470 million, while revenue rose 6%. Even revenue at its Simon & Schuster book publisher rose 5%.

--McDonald’s announced same-store global comps rose 1.2% in January, but were down 3.3% in the U.S. They get a weather pass, but it doesn’t explain such a huge drop in the States.

--I eat a lot of Campbell’s soup and was happy to see its U.S. soup sales rose a solid 5% in the last quarter.

--Shares in Weight Watchers plunged 25% on Friday as the company issued poor guidance, citing new competition from diet apps.

--Home Depot announced it would add 80,000 seasonal positions this spring, its peak hiring season. Overall, the retail chain employs 340,000 in its 2,200 stores nationwide. You can apply at www.careers.homedepot.com with the opportunity to make an impression and get asked to stay on permanently.

--Fidelity Investments reported the average 401(k) in its managed accounts reached a record $89,300 in the fourth quarter of 2013, 15.5% higher than a year earlier and almost double the low of $46,200 set in 2009.

For pre-retirees 55 and older the number is $165,200. [USA TODAY]

--The jobless rate has shot up to 6% in Australia, its highest level in more than a decade. It’s mostly about cutbacks in the mining industry.

Plus Toyota became the latest to announce it was ending car production in Australia by the end of 2017, which effectively marks the end of the country’s auto industry. Last year, Ford and GM’s Holden unit announced plans to stop producing cars Down Under. Toyota, like the others, attributed the move to high manufacturing costs. 2,500 jobs will be lost. [Ford and GM’s combined losses were 4,000.]

--The world’s largest PC maker, China’s Lenovo, posted record third-quarter profit on higher sales of laptops and mobile devices in emerging markets. Revenue jumped 15% to a record $10.8 billion, led by sales in China.

Lenovo in recent weeks paid nearly $5 billion to acquire IBM’s low-end server business and Motorola Mobility.

--Cisco Systems had another desultory quarter with revenues falling 8% and the network equipment maker forecasting a further decline of 6% to 8% in the current quarter. Cisco said it is struggling with falling demand from emerging markets in its core router business. Shares fell over 3% as analysts were also concerned about falling profit margins.

--Activist investor Carl Icahn announced he saw “no reason to persist” in his attempt to force Apple to buy back $50 billion of its shares, saying he was satisfied with CEO Tim Cook’s plans to return cash to investors. Apple recently said it was aggressively buying back shares but wanted to do it on its own schedule. [The shares rose on the news.]

--Hackers went after the two largest bitcoin-trading exchanges Tuesday, leaving customers unable to withdraw their money.  Slovenia-based Bitstamp and Bulgaria-based BTC-e were the victims, both calling it a denial of service attack. Last week it was Tokyo-based Mt. Gox exchange that was forced to halt withdrawals over a software flaw. Bitcoin prices have been sliding sharply in response.

And Russian authorities said they were preparing to crackdown on Bitcoin and “cryptocurrencies” in general that “are money substitutes and cannot be used by individuals and legal persons.”

I’m not a gold bug, but I liked what Jim Grant said the other day in an interview on CNBC when asked about bitcoin. “Gold is nature’s own bitcoin.” [Gold is rallying smartly thus far in 2014.]

--Outdoor-gear retailer Cabela’s, in reporting a 10% decline in fourth-quarter sales, cited rapidly declining gun sales. CEO Thomas Milner said, “The surge in firearms and ammunition is clearly winding down.” Through the first six weeks of 2014, sales of firearms and ammunition were down about 50% from a year earlier.

--This lousy winter (the cold as much as the snow...the cold keeping the snow around, which adds to the depression), is straining state and municipal budgets in a huge way. For example, prior to this week’s big one, “New York City crews filled 69,000 potholes in the first five weeks of the year – nearly twice as many as the same period in 2013.”

In New Jersey, in January alone, the New Jersey Turnpike Authority spent $14.5 million for snow removal on the Turnpike and Garden State Parkway vs. $24.7 million for all of 2013.

--Facebook founder Mark Zuckerberg and his wife Priscilla Chan were named joint top U.S. philanthropists for 2013, having donated more than $970 million in Facebook stock (now worth over $1 billion), the largest donation in the U.S. The money/stock was given to the Silicon Valley Community Foundation, a charity that manages and distributes charitable funds, primarily to education and health, such as for a health clinic in East Palo Alto.

Foreign Affairs

Syria: The latest round of peace talks in Geneva were essentially scuttled when Russia explicitly rejected a proposal to discuss the eventual removal of President Bashar al-Assad from power during any political transition. All talks have done thus far is yield a halting deal to relieve the siege on the embattled city of Homs.

The discussions are thus largely useless. U.N. negotiator Lakhdar Brahimi (a truly heroic figure who doesn’t deserve this) asked the Russian chief diplomat whether Moscow will discuss a political transition and Deputy Foreign Minister Gennady Gatilov said, “No.”

So zero reason to continue, though late Friday the two sides kept the door open.

On the ground, Syrian activists said government shelling and airstrikes with barrel bombs have killed over 400 in Aleppo so far this month. Violence across the country has only escalated as peace talks were taking place. The Britain-based Observatory for Human Rights said overall at least 4,959 have died in Syria in the three-week period since Jan. 22, when the first round of face-to-face meetings took place in Geneva, the highest death toll since the uprising against Assad began, March 2011.

In Homs, there have been sporadic evacuations during a ceasefire, which then expired. The U.N. did say enough food, medical supplies and hygiene items have been delivered for 2,500 people.

In other news, U.S. Defense Intelligence Agency Director Lt. Gen. Michael Flynn said in testimony before the Senate Armed Services Committee, “The current instability in Syria presents a perfect opportunity for al-Qaeda and associated groups to acquire [weapons of mass destruction] or their components, and that there was a ‘very real’ risk they could gain control of chemical or biological weapons.

“There is also the very real possibility that extremists in the Syrian opposition could overrun and exploit chemical and biological weapons storage facilities before all of these materials are removed.” [After a third chemical-arms cache was removed this week, less than 5% of the total has been.]

In an interview with USA TODAY’s Oren Dorell, Max Boot, an analyst at the Council on Foreign Relations, said:

“Letting the fighting continue indefinitely and letting al-Qaeda and the Iranians split the country between them, that’s not a good outcome. Syrian soil would become a launching pad for Iranian interests in the region and a launching pad for al-Qaeda, which is a grim outcome.”

The U.S. and NATO may soon be forced to put “boots on the ground” to prevent Syria from not only becoming an al-Qaeda safe haven, but also an anti-American axis of a nuclear Iran aligned with a brutal Syrian regime and a missile-laden Hizbullah in Lebanon, says Boot.

To be fair and balanced, there is a competing viewpoint. As Zachary Keck, an associate editor for The Diplomat, a foreign affairs magazine for the Asia-Pacific region says, the United States is winning in Syria by standing by.

The war is costing Iran billions, Hizbullah is losing hundreds of fighters, and both are losing standing in the Arab world because of their support of the slaughter of Sunnis.

“From a purely strategic standpoint, no country has benefited more from the horrible tragedy in Syria than the United States,” Keck says.

While his facts are accurate, his conclusion isn’t. In no way is the spread of the war into Iraq and Lebanon, let alone the ticking time bomb of the refugee crisis in Jordan, for starters, a positive.

It’s also now estimated there are as many as 30,000 al-Qaeda-linked fighters in Syria.

Iran: Last weekend, Tehran agreed to supply the International Atomic Energy Agency with new information on allegations Iran once pursued experiments related to nuclear-arms development. For years, as I’ve written constantly, the IAEA has been trying to clarify what Iran’s intent was with some suspected operations, including at the disputed military base of Parchin.

But by week’s end, Iran was demanding the IAEA be the one to provide documents justifying its suspicions. Iran’s Atomic Energy Organization head Ali Akbar Salehi said, “The authenticity of each allegation should be proven first, then the person who submitted it to the agency should give us the genuine document. When we are assured of the authenticity, then we can talk to the agency.”

It’s thought Washington provided the IAEA the records, while the agency will only say they came from a “member state” and “participants in a clandestine nuclear supply network.” [Global Security Newswire]

Separately, a leading Iranian adviser on international affairs was quoted by Iran’s Fars News Agency as saying, “Hizbullah has tens of thousands of missiles ready to be fired at Israel” that make Israel’s Iron Dome anti-missile system “a theoretical joke.” [Jerusalem Post]

And this week Iran’s armed forces chief of staff General Hassan Firouzabadi said, “We are ready for the decisive battle with America and the Zionist regime,” warning Iran’s neighbors in the Gulf not to allow a U.S. attack on Iran from their territory.

Further, this week Iran’s Navy Commander Ali Fadavi was quoted by the Fars News agency as saying, “The Americans can fully expect that their warship [and] aircraft carrier will be sunk with all 5,000 crew aboard, in combat against Iran, and they could find its hulk in the depths of the sea.”

Iran for the first time is sending warships into the Atlantic Ocean, according to their officials, though as I go to post I haven’t seen this confirmed by the Pentagon.

Sounds like the perfect atmosphere for constructive talks on the nuclear program, doesn’t it?

Jennifer Rubin / Washington Post

“By now, the self-description of the Obama administration as the ‘most transparent in history’ is regarded as a joke by the press. To the contrary, whether it is photographic access, freedom of information requests, civil answers to legitimate questions or any other aspect of openness, President Obama and his advisers seem to believe less is more and none is best.

“When concerns about transparency and access come up in an administration, it usually concerns domestic policy, but this administration is often astonishingly unforthcoming when it comes to foreign policy....

“This is no truer than with Iran policy. Not only does (the president) not tell the American people what is going on, but he also has an annoying practice of keeping critical allies – Israel and Saudi Arabia – out of the loop. Hence the negative reaction when he finally announced our behind-the-scenes (and backs) negotiations that seemed to change the entire framework for a deal (e.g. allowing Iran’s ‘right to enrichment’). He has, let’s remember, told Congress and the American people to trust him. Give diplomacy and peace a chance, and all that. But the interim agreement is still being closely guarded. The Israel Project reports:

“ ‘Controversy swirled yesterday regarding the Obama administration’s decision to withhold from the public the text describing how the interim Joint Plan of Action (JPA) with Iran is to be implemented... Top Iranian figures have repeatedly and explicitly accused the White House of mischaracterizing the degree to which Iran committed to making concessions on its nuclear program under the JPA. Analysts and journalists have been unable to evaluate the Iranians’ claims because the White House has refused to allow the text to be publicly scrutinized.’

“The agreement is not classified, but the Obama team is acting like it is....

“Moreover, the secrecy surrounding the deal fuels the suspicion the president is willing to make a bad deal to get out of making good on his own policy (all options on the table, Iranian nukes are ‘unacceptable,’ etc.) Former ambassador to the United Nations John Bolton observes, ‘If it is innocuous, why not release it? If it is not innocuous, what have we given up?’....

“In any other administration, this would be a scandal. In this one it’s par for the course.”

Finally, there does remain a divide between Iran’s Revolutionary Guard, the hardliners, and the politicians. For now, Supreme Leader Ayatollah Ali Khamenei is siding with President Rohani, urging patience with as he calls it “the statesmen” and their negotiations with the P5+1.

Afghanistan: The United States condemned President Hamid Karzai’s decision to free 65 “dangerous” inmates from a prison. The group consists of a number of individuals “directly linked to attacks killing or wounding 32 U.S. or coalition personnel and 23 Afghan security personnel or civilians,” a statement issued by NATO’s International Security Assistance Force warned.

“It remains the position of [U.S. forces in Afghanistan] that violent criminals who harm Afghans and threaten the peace and security of Afghanistan should face justice in the Afghan courts, where a fair and transparent trial would determine their guilt or innocence,” the statement said. [AP]

When the 65 were released Thursday, a prison spokesman told the Associated Press, they were laughing and smiling as they boarded a bus to leave the prison.

A Pentagon spokesman, Army Col. Steve Warren, said:   “These are bad men. They’ve got a lot of blood on their hands. A lot of blood.”

The U.S. military and the White House are resigned to waiting until after the April election and Karzai’s departure months later in the hopes of signing a security agreement with the new president allowing a post-2014 presence.

But while the U.S. can wait until summer, our NATO allies may not be able to.

Meanwhile, Karzai’s brother, Abdul Qayum Karzai, said he would sign the bilateral security agreement with the U.S. if he wins the presidential vote, though no one believes he has a chance. At least he said the right words.

“Without the BSA, there is no security and everything is gone. We still need the help of the international community and the U.S., and I am sure anybody who gets elected will sign the BSA if our president does not sign it.”

There are 11 candidates in the race, including my favorite, Abdullah Abdullah, a former foreign minister and seemingly pro-West. As no one is likely to receive 50%, there will then have to be a runoff.

I’ve written all I care to on Hamid Karzai. He thinks he can save his skin by turning to the Taliban. A year from now he’ll be headless, even if he’s initially granted exile.

Egypt: Russian President Vladimir Putin has no trouble involving himself in the coming Egyptian presidential election, saying he supports military chief Field Marshal Abdul Fattah al-Sisi, who is running for president (though as yet there has been no formal announcement). “I wish you luck both from myself personally and from the Russian people,” said Vlad the Great.

Sisi was in Moscow this week to negotiate a $2 billion arms deal with Russia.

Lebanon: Michael Young / The Daily Star

“Apparently, a girl who exposes her breasts can agitate some Lebanese much more than a man who clubs his wife to death.

“Lebanese (Olympic) alpine skier Jackie Chamoun Tuesday was forced to issue an apology on her Facebook page because she appeared topless in the video of a photo shoot three years ago for a sports calendar.

“Chamoun’s photos for the calendar were far less explicit than what appeared in the video. So Chamoun, with her teammate Chirine Njeim, is essentially being held responsible for how she appeared in her off-camera moments.

“Chamoun wrote, ‘I want to apologize to all of you. I know that Lebanon is a conservative country and this is not the image that reflects our culture. I fully understand if you want to criticize this.’

“Chamoun did nothing for which to apologize... Whether Lebanon is conservative or not should be irrelevant here, and whatever its culture, Chamoun has not been accused of breaking any laws.

“In response, caretaker Sports and Youth Minister Faisal Karami asked the head of Lebanon’s Olympic Committee to initiate the ‘necessary inquiries’ into the incident....

“What made the reaction even more absurd was that similar outrage was absent when Mohammad al-Nhaily recently beat his wife Manal Assi to death with a pressure cooker in front of their daughters. While the crime was taking place, a neighbor called the police to intervene. They refused, arguing that this was a family matter.

“What a pity the interior minister did not launch an investigation into why the police failed to enforce the law.”

Meanwhile, there was a report from The Daily Star this week that the Ain al-Hilweh Palestinian refugee camp, located near the Lebanese city of Sidon, is being overrun by fundamentalist groups, including from Chechnya, Egypt, Tunisia and Syria. This is the largest Palestinian camp in Lebanon, around 70,000, and a distressing development.

The Daily Star reports: “According to sources, an unnamed Arab intelligence department told a Lebanese security body that Palestinian Hashem Mahmoud received financial aid from an al-Qaeda terrorist group, money that was meant to revive dormant cells loyal to the group and from other bodies that could stage attacks in Beirut, the Bekaa Valley and Tripoli.

“The well-informed sources told The Daily Star that the deteriorating situation in Ain al-Hilweh had reached a new peak, with regional, local and sectarian circumstances further encouraging terrorist groups there to act.”

Lastly, the latest efforts to form an “all-embracing political government” collapsed. This country has been dysfunctional for years.

Iraq: There was a positive development here this week...though also one speaking to the threat.

22 Islamic State of Iraq and the Levant (ISIL) militants were killed while attending a suicide bombing training class north of Baghdad when their commander unwittingly conducted a demonstration with a belt that was packed with explosives. 15 others were wounded. That gives you just a small sense of how many are willing to serve the “cause.”

Russia: I am bored to tears by the Sochi Olympics, but much of this is my age and a struggle to get into the X-Games aspect. Plus when you know the results that takes away a lot of the fun.

But I’ll be watching the U.S. men’s hockey team’s quest for a medal, such as in Russia-USA in a few hours.

Sally Jenkins / Washington Post

“The grim and the gorgeous coexist side by side at the Sochi Olympics. Anyone who thinks that what’s happening here is comparable to the excesses of other sports events in other places simply hasn’t seen or felt these Winter Games firsthand. The $51 billion colossus is an act of destructive grandiosity that threatens to make us all queasily complicit in crime yet simultaneously awed and intimidated.

“The most expensive Olympics in history are partly a Potemkin village, an elaborate façade built to impress foreign passersby and to enhance the image of a small, odd, chill-faced man who likes to pose menacingly shirtless in order to seem much taller than he actually is. It’s also a heist: Somewhere along the line, according to Vladimir Putin’s critics, as much as $30 billion disappeared, and it didn’t go into the hotels, where the carpets look like scraps from an old office, unless it went into the surveillance that gives new meaning to the phrase bedbugs. Mainly it seems to have gone into creating scale, breathtaking but needlessly immense structures with columns that loom hundreds of feet high, dwarfing individuals into specks. And that’s exactly the point, isn’t it, to make the ordinary citizen quail with helplessness at the power of the ‘new’ Russian state.

“It’s the most troubling, complicated Olympics of our time, full of suppression, apprehension, active borderland insurgencies, gay scapegoating, Internet hacking, and farce, which peaked before the Opening Ceremonies when IOC President and arch-enabler Thomas Bach said there were no problems here, only ‘a couple of hiccups.’”

Holman W. Jenkins, Jr. / Wall Street Journal

“Vladimir Putin always seemed likely to leave office the way Stalin did, horizontally inclined. It still seems likely. Way ahead of themselves are opponents who imagine corruption or terrorist threats or gay-rights protests or even journalists unhappy with their Sochi hotel rooms mark the beginning of the end of Putin rule....

“Mr. Putin’s own citizens don’t care about Western standards of civility: His gay baiting is popular at home. As for corruption, he appeared genuinely puzzled when ABC News recently inquired about malfeasance in Olympic construction. Who would have imagined there wasn’t corruption? The average Russian is not naïve on this score.

“His permanence in power was underlined during the shell game of 2008. Having exhausted his constitutional two terms, he set up his handpicked factotum as president and then continued to rule as prime minister. In 2012, he resumed the presidency under a new law that will allow him to serve 12 years, so Russia can expect to be stuck with Mr. Putin at least until 2024. Perhaps longer given the still-unexplained string of murderous apartment bombings that aided his rise*....

*Ed. first brought this up 15 years ago.

“Only a serious and prolonged decline in oil prices might shake his rule. By various Western estimates, the regime gravy train requires a long-term oil price of $115 per barrel to avoid becoming needy of Western borrowing. Nor is an oil crash implausible in a world of rising shale energy, persistently slow Western growth and a Mideast ‘instability premium’ of perhaps $20 a barrel that begins to seem a tad overdone....

“A military adventure gone wrong – a botched intervention in a Ukrainian civil war – is another way Mr. Putin might shorten his tenure. The eternal problem of Putin-style autocratic leaders is their progressive divorce from reality and propensity to miscalculate.”

Gabriel Schoenfeld / Washington Post [Schoenfeld is a senior fellow at the Hudson Institute]

“(Edward) Snowden has taken sanctuary in Russia, a country that, when it was under communist control, epitomized the idea of a surveillance state, complete with a secret police force – the KGB – that worked assiduously to monitor and control the population. Today Russia is a quasi-democracy that has retained some features of its communist past. Over the past decade or so, under the tutelage of President Vladimir Putin, a former KGB officer, it has been sliding ever deeper back into authoritarianism.

“That authoritarianism is maintained in part by a domestic surveillance system. Two intrepid Russian journalists, Andrei Soldatov and Irina Borogan, explain in the fall 2013 issue of World Policy Journal how it works. They show that the Federal Security Service (FSB), the successor organization to the KGB, has invested in technology that allows it to monitor telephone and Internet communications and to collect and store not just metadata – information about call destination and durations – but also the content of communications. The Russian state uses that technology to engage in essentially unchecked surveillance of telephone calls, e-mail traffic, blogs, online bulletin boards and Web sites. Soldatov and Borogan conclude that over the past two years ‘the Kremlin has transformed Russia into a surveillance state – at a level that would have made the Soviet KGB...envious.’....

“(Snowden’s) silence about the quasi-dictatorship where he has taken sanctuary is telling. It is yet more evidence, if evidence were needed, that he is not a whistleblower at all. It suggests that, instead of being a brave speaker of truths, he fears American justice, and not only American justice. It also suggests he is a hypocrite, with principles that he applies selectively against the democracy he has betrayed.”

Ukraine: President Yanukovych met with Vladimir Putin at the opening of the Sochi Olympics and it was a relatively quiet week back home, though behind the scenes opposition groups are forming their own security forces to deal with the police. Friday, the government did release 243 prisoners taken into custody during three months of protests, though they will remain under house arrest. In exchange, the opposition agreed to take down some barriers in Kiev.

Parliament reconvenes next week and some say Yanukovych is waiting for the end of the Olympics before introducing new tougher measures.

A judge who sentenced several antigovernment protesters was shot to death on Wednesday. No claim of responsibility as yet.

China: Secretary of State John Kerry arrived in Beijing for high-level talks, hoping to pressure China on North Korea and the issue of territorial disputes in the East and South China Seas.

Kerry wants China to do more to keep Pyongyang in line and a Chinese foreign ministry spokesman said it already is in working for a solution through six-party nuclear talks.

Thursday, the commander of the U.S. Navy said the United States would come to the aid of the Philippines in any dispute with China in the South China Sea, to which the foreign ministry spokesman said, “The United States is not a party in the South China Sea dispute, and should... be careful in its words and actions, and do more that will benefit true peace and stability in the region rather than the opposite.” [South China Morning Post]

On other issues, the government announced $1.6 billion is being set aside this year to reward cities and regions making significant progress in controlling air pollution, highlighting just how much the issue has become a priority, as your editor has long noted. Pollution will bring down the government in a few years if there is no large-scale improvement.

A meeting of the State Council led by Premier Li Keqiang said controlling pollutants such as particulate matter in the air will be a key task.

The money is to be rewarded rather than offer subsidies for the prevention and control of it.

According to a Blue Paper for World Cities report, Beijing was hit by severe levels of pollution at least once every week last year.

China also held talks with Taiwan at the highest level since the end of the Chinese civil war in 1949. No agenda was released but the get together is widely seen as a confidence-building measure. Cross-strait ties have improved since Taiwan’s President Ma was elected in 2008, the same year flights between the two began.

But Ma is unpopular today and his party likely to lose elections later this year.

Tensions remain, no doubt. China refuses to retract its longstanding threat to retake Taiwan, and I know from my experience with Fujian province that this is where most of the missiles targeting Taiwan are.

On a lighter note, China’s troubled Jade Rabbit lunar rover sprang to life on its own, though space officials said its functions “could not be fully restored.”

North / South Korea: The two agreed to high-level talks on Wednesday that are likely to focus on upcoming military drills that the North opposes. Pyongyang will reiterate its demand the annual U.S.-South Korean maneuvers be canceled but Washington is adamant they will proceed.

Separately, South Korea’s defense minister told parliament that North Korea appears to be ready to conduct a new atomic test and/or missile launch at a moments’ notice. Construction on a big new launch tower appears complete.

Brazil: The run-up to the World Cup continues to go miserably. Massive protests have been taking place around the country, some violent, and in the Amazon city of Manaus (the one place you do not want to go if someone is holding a gun to your head, demanding you attend one World Cup match), a construction worker died while working on the stadium there and now others employed are threatening to go on strike. Work at this particular site is way behind less than four months before the opening match.

[Friday, Brazil’s central bank said preliminary data puts the nation in recession for the second half of 2013, not good for President Dilma Rousseff, who faces an election this year.]

Britain: Severe flooding along the River Thames continues with thousands of homes inundated after the wettest January since 1766, yes 250 years ago.

Said the managing director of Network Rail, whose team is monitoring “several hundred” sites across England, “This isn’t now just flooding, this is groundwater. The land is so saturated we have got water rising up, just as much as flowing on to it. So it is difficult.”

Switzerland: Swiss voters by the narrowest of margins (50.3%) backed a referendum that invalidates the Swiss-EU agreement on freedom of movement and brings back strict quotas for immigration from European Union countries. [Remember, Switzerland is not a member of the EU, though it has adopted many EU policies.]

The European Commission responded it regretted that an “initiative for the introduction of quantitative limits to immigration has been passed by this vote.

“This goes against the principle of free movement of persons between the EU and Switzerland.”

The Swiss economy is doing great, but the people are concerned about immigration. A quarter of the 8-million-strong population is foreign, and last year 80,000 new immigrants arrived.

A coalition led by the right-wing Swiss People’s Party is behind the move to reverse a 2000 referendum giving EU residents equal footing with locals in the Swiss job market.

It’s a classic example of the debate taking place throughout Europe and the U.S., for that matter. Supporters of quotas in Switzerland argue free movement has put pressure on housing, health, education and other areas, such as the belief foreign workers are driving down salaries.

Swiss business leaders and the government, on the other hand, say free movement has been a key to the country’s success, allowing employers to pick up skilled workers from all over Europe.

Random Musings

--George Will / Washington Post

“Barack Obama, the first president shaped by the celebratory culture in which every child who plays soccer gets a trophy and the first whose campaign speeches were his qualification for the office, perhaps should not be blamed for thinking that saying things is tantamount to accomplishing things, and that good intentions are good deeds. So, his presidency is useful after all, because it illustrates the perils of government run by believers in magic words and numbers....

“Thirty months have passed since Obama said: ‘The time has come for President Assad to step aside.’ Today, James Clapper, director of national intelligence, says Bashar al-Assad’s grip on power has ‘strengthened.’ In last month’s State of the Union address, Obama defined success down by changing the subject: ‘American diplomacy, backed by the threat of force, is why Syria’s chemical weapons are being eliminated.’ If saying so makes it so, all is well....

“The English Civil War was not finally ended by negotiations between Oliver Cromwell and Charles I; Cromwell seized power and Charles lost his head. America’s Civil War ended when Robert E. Lee capitulated to U.S. (‘Unconditional Surrender’) Grant. Russia’s civil war ended when Leon Trotsky’s Red Army defeated the White forces. Spain’s civil war ended with Francisco Franco in Madrid and remnants of the loyalist forces straggling across the Pyrenees into France. China’s civil war ended when Chiang Kai-shek skedaddled to Formosa (now Taiwan), leaving the mainland to Mao. But Syria’s civil war – after the massacres, torture, chemical weapons – supposedly will be resolved by a negotiated regime change: with words. Next, words will supposedly result in Iran ending the decades-old and hugely expensive nuclear weapons program that it says is nonexistent, and will proceed.”

--At a conference in London, 50 nations signed a declaration to end the illegal wildlife trade. But as the London Times editorialized:

“As they debate the issue, about 100 elephants will die. At least one rhino will be killed for its horn, worth more than its weight in gold on the black market thanks to baseless beliefs in China and Vietnam about its medicinal properties.

“International conferences on urgent environmental issues have a way of promising more than they deliver. This one must be the exception. The Prince of Wales, who helped to conceive the event, has urged those attending to treat the struggle against the illegal wildlife trade as a battle. It is more like a prolonged war.

“Poachers operate in paramilitary units with assault rifles, night vision goggles and helicopters that can move ivory from the savanna of inland Africa to the ports of Kenya and Somalia overnight. The images of carnage they leave behind are often too sickening to print. The profits made by middlemen in a trade worth ($20 billion) a year are often recycled by crime syndicates engaged in drugs, people trafficking and terrorism.

“The numbers are horrifying. According to Tanzania’s Wildlife Research Institute, the elephant population of the Selous game reserve has fallen from 43,000 to 13,000 in only three years. In Central Africa the number of forest elephants has plunged by more than 60 percent in ten years. At this rate of slaughter the sub-species will be extinct within another decade. Even in South Africa, where poachers have hitherto met their match in heavily-armed rangers, the killing is out of control. More than 1,000 rhinos were killed there last year alone, compared with only 13 in 2007....

“Prince Charles, Prince William and Downing Street want this conference to produce a ‘high-level political commitment’ to act on three fronts: to cut Asian demand for ivory and rhino horns; to bring poachers to justice; and to give those African communities that have become dependent on poaching alternative sources of income.

“The goals are worthy. A herculean re-education project in China is especially urgent and the actor Jackie Cha, among others, deserves credit for lending his name to it. But the conference will bring no new money to the fight, and money is what is most urgently needed on the front line. In Kenya, which fields only 350 wildlife rangers, the head of the national wildlife service fumes: ‘We don’t need conferences...we need boots on the ground.’ The truth is both are needed, and much else besides. As Prince William said by way of welcome to the conference delegates, if his generation fails to stop the slaughter, it will be too late.”

Separately, the Obama administration did ban commercial trade of elephant ivory in a letter accompanying the new National Strategy to Combat Wildlife Trafficking.

“The entire world has a stake in protecting the world’s iconic animals, and the United States is strongly committed to meeting its obligation,” wrote the president.

The law does not impact antiques and heirlooms. But to qualify as an antique, an item must be more than 100 years old and meet other requirements under the Endangered Species Act.

--Jordan’s King Abdullah II was in Washington this week but President Obama is going to have dinner with him in California on Friday night. Why? As the New York Times’ Mark Landler reported this seems rather strange. Obama and Abdullah could have met in Washington, right? True, the president was occupied with France’s Hollande, but the King did meet with Vice President Biden, while in Washington. According to a statement from the White House, the two discussed “how best to address the growing threat of violent extremism fueled by the Syrian conflict.”

Which is what King Abdullah and Obama will be discussing on Friday, and, oh, by the way, Abdullah is apparently only going to California to meet with the president.

You see, boys and girls, Obama wants to play golf.  The two are having dinner at Sunnylands, the Annenberg estate used by Obama for his informal summit with President Xi Jinping of China last year and Sunnylands has recently refurbished its golf course. Prior to his dinner with the King, Obama will have a photo op with farmers and local officials in Fresno to discuss the drought and the White House is scrambling to make sure this is the focus.

But this weekend, Obama is sticking around Sunnylands for a few rounds. As for Valentine’s Day, Michelle and the kids were going to be away on their own trip over the holiday weekend.

--Sen. Rand Paul announced he’s suing President Obama and top national security officials over the government’s sweeping electronic surveillance program.

According to the suit, which includes the conservative group Freedom Works, plaintiffs are seeking a declaration that bulk metadata collection is unconstitutional and the purging of data already stored that’s related to those filing the suit and any joining the class-action. This is something that will take years to resolve.

A recent Quinnipiac survey indicated 48% of registered voters support the metadata program and 47% oppose the collection process.

--Editorial / Bloomberg News

“Twenty states plus the District of Columbia now allow the sale of medical marijuana, while Colorado and Washington have legalized the drug for recreational use. Yet federal law still prohibits the possession, use, and sale of marijuana for any reason. This dichotomy explains why some banks are reluctant to accept the big cash deposits that pot purveyors generate – even if the cash is legal under state law.

“U.S. Attorney General Eric Holder has promised to issue guidelines to make it easier for marijuana sellers who are operating in accordance with their state laws to use the banking system. Large amounts of cash ‘just kind of lying around with no place for it to be appropriately deposited,’ Holder mused, ‘is something that would worry me, from a law enforcement perspective.’

“The fact is, Holder encouraged those bundles of unbanked cash to be assembled in the first place. Last year he said the Department of Justice wouldn’t seek to overturn the Colorado and Washington measures or interfere with the 20 states that allow medical marijuana, leaving it to local authorities to enforce marijuana laws.

“All of which raises the question: When did it become acceptable for the country’s top law enforcement officer to decide which federal statues to enforce and which to ignore? Even those who agree with the broader policy of marijuana legalization should be left uneasy by open defiance of the rule of law.

“Under the 1970 Controlled Substances Act, marijuana is classified as a Schedule I drug, which means it has high potential for abuse, serves no medical purpose, and isn’t safe even under a doctor’s supervision. As recently as 2005, the U.S. Supreme Court ruled that, even in states that allow medical marijuana sales, sellers and users can be prosecuted.

“Whether or not a law is outmoded or unpopular, the attorney general doesn’t have the authority to ignore it....

“Congress should decide whether to keep the national ban or turn the question of marijuana decriminalization over to the states. What shouldn’t be an option is for the Department of Justice to look the other way.”

*On Friday, the government offered guidance to those banks who want to accept cash from legitimate marijuana businesses.

--From an editorial in The Economist:

“America is expelling illegal immigrants at nine times the rate of 20 years ago; nearly 2m so far under Barack Obama, easily outpacing any previous president. Border patrol agents no longer just patrol the border; they scour the country for illegals to eject. The deportation machine costs more than all other areas of federal criminal law-enforcement combined. It tears families apart and impoverishes America...

“Why would a supposedly liberal president oversee something so illiberal, cruel and pointless? The Machiavellian explanation is that it motivates Latinos, who associate such barbarism with Republicans, to keep voting for the Democrats. Mr. Obama’s defenders prefer two other excuses.

“First, he is merely following laws written by nativist Republicans. This is a cop-out. As president he sets priorities for the executive branch, which cannot catch and prosecute everyone who breaks any of the gazillions of federal rules....

“The second excuse is that this is all part of Mr. Obama’s grand strategy to secure immigration reform this year, including a path to legal status for the 12m illegal immigrants now in the country. There is room for a deal....

“Immigration reform is indeed a great prize. But die-hard nativists are unlikely to be swayed, no matter how tough the laws, and reform can pass without their voices. There are very few things about America that are as vindictive and self-defeating as its deportation machine. Rather than making excuses for keeping it, Mr. Obama should be exposing its awfulness and leading the campaign to de-fang it.”

--Editorial / Washington Post

“Noah Bryson Mamet is a political consultant who raised at least $500,000 for President Obama and the Democratic Party in the 2012 election cycle. As of last week, he had never visited Argentina – which helps explain the ambassador-designate’s spotty performance before the Senate Foreign Relations Committee at his confirmation hearing. Mr. Mamet repeatedly described Argentina as a U.S. ally, said it was ‘a mature democracy’ and praised its record on human rights.

“That provoked a bipartisan tongue-lashing from Sens. Robert Menendez (D-N.J.), the committee chairman, and Marco Rubio (R-Fla.), who pointed out that the Argentine government under Cristina Fernandez de Kirchner has compromised freedom of the press and the judiciary, refused to pay debts to the U.S. government and American bondholders, seized equipment from a U.S. military training mission, undermined an investigation of an Iranian-sponsored terrorist bombing and aligned itself with the rabidly anti-American governments of Cuba and Venezuela. ‘This is the most unique ally I think we have in the world,’ Mr. Rubio dryly noted.

“Mr. Mamet probably was only retailing, clumsily, talking points given to him by the State Department, which has a policy of avoiding criticism of Latin America’s populist authoritarians. But his glaring lack of familiarity with the nation where he will soon be the top U.S. official was another illustration of the cavalier nature of President Obama’s recent ambassadorial appointments....

“Mr. Obama’s new ambassador to Norway, George Tsunis, raised $1.3 million for the Democratic Party in 2012 but didn’t know at the time of his hearing last month that Norway has a king but not a president.

“Ambassadorial appointments for small allies such as Norway or tough partners including Hungary and Argentina matter because their governments rarely receive the attention of high-level officials in Washington and yet require skilled diplomacy... (Obama’s) use of the Buenos Aires embassy and so many others as political plums signals a disregard for U.S. foreign interests.”

--Despite New Jersey Gov. Chris Christie’s problems with Bridgegate, he remains chairman of the Republican Governors Association and in January it raised a record $6 million. Christie also helped raised $1.5 million in a swing through Texas last week.

Onetime ally and former Republican Congressman Joe Scarborough of MSNBC said, “I trust Chris. I still take him at his word. But...the fact is, right now, he’s a distraction to the RGA.”

But on Fox News, Karl Rove said “reports of his demise are premature.”

Nonetheless, Hillary Clinton is killing him in the hypothetical polls, such as a recent Marist survey that has her whipping him 58-37.

--Former New Orleans Mayor Ray Nagin was convicted for taking part in a $500,000 bribery and conspiracy scheme, with a federal ground jury finding him guilty on 20 of 21 counts. The bad behavior was post-Katrina. He faces about 20 years in prison.

Nagin’s case centered around the post-hurricane rebuilding effort and kickbacks to Nagin from vendors and other associates. After the verdict was read on Wednesday, he maintained his innocence.

--Editorial / New York Post

“During his mayoral campaign, Bill de Blasio railed against ‘special favors for well-connected corporations.’ But now we’re learning the mayor dispenses his own favors for the well-connected.

“Ask Bishop Orlando Findlayter, pastor of the New Hope Christian church in Queens. Findlayter was part of de Blasio’s transition committee and one of his early backers in the African-American community.

“Late Monday night, Findlayter was taken into custody following a routine traffic stop when cops found two outstanding warrants against him relating to an earlier civil-disobedience arrest. Because he couldn’t get before an arraignment court in time, he was told he would spend the night in jail.

“Local clergy called the mayor – who in turn phoned an official in the NYPD press office to request ‘clarification.’ And the bishop was released for the night.

“Officials insist de Blasio never asked for the bishop’s release, and that the cops were in the process of giving him a desk appearance ticket. But when a mayor personally calls the cops about a case, he’s expressing more than routine curiosity.

“Of course, knowing Bill de Blasio has always had its benefits. As a City Councilman, he made it a ‘high priority’ to have officials reduce the water bill of Dan Cantor, head of the critical Working Families Party. And he intervened to help the nephew of another key politico, Rep. Yvette Clarke, get into the school of her choice.

“For all his preaching about inequality, it turns out that, in de Blasio’s New York, friends of Bill are more equal than others.”

--Meanwhile, Mayor de Blasio took major heat for keeping New York City’s schools open Thursday, with the worst of the storm hitting at the height of the morning rush. NBC’s Al Roker tweeted his astonishment (and added de Blasio would be a one-term mayor...a comment Roker later apologized for...he needn’t have...), while Michael Mulgrew, president of the United Federation of Teachers, blasted the mayor: “Having students, parents and staff traveling in these conditions was unwarranted.”

The situation was compounded when Chancellor Carmen Farina defended the call to keep classes open, declaring it “a beautiful day out there” when the snow had stopped.

Only 45% of the students went to class, compared with 90% on an average school day.

At the press conference Thursday afternoon, de Blasio insisted he made the right call, saying, “There is the illusion you can have perfect information and perfect decisions.” 

But then he said, “We don’t second-guess the National Weather Service.” And then he did just that. “The low end of their estimate suggested that by the time kids were walking in the door of schools, there might have been two or three inches of snow.

“That was not an overwhelming figure from our point of view. The high-end figure was more problematic – but not enough to close school.”

One thing is for sure. Bill de Blasio is simply a jerk. I said more than once that New York City voters were idiots, so they get what they voted for. Four years of jerkdom.

Or as the New York Post editorialized:

“By managing to tick off everyone with his boneheaded decision, he has finally made good on his promise to create One New York.

“If you catch our drift.”

--Col. Bradford Parkinson, the architect of modern navigation, is warning about the vulnerability to attack of the Global Positioning System, on which everything from cars to banking to weapons guidance is dependent.

Parkinson, now a professor at Stanford University, created GPS in the 1970s on behalf of the U.S. military – who still control the satellite system today.

But while the military has protections in place, civilian systems do not, Parkinson told the Financial Times.

“We have to make it more robust... our cellphone towers are timed with GPS. If they lose that time, they lose sync and pretty soon they don’t operate. Our power grid is synchronized with GPS [and] our banking system.”

The UK government released a report this week warning “the conditions are present for a catastrophic ‘Black Swan’ event” that would knock out one or more critical GPS systems.

South Korea has witnessed huge jamming attacks against its GPS systems, launched by North Korea. “More than 1,000 ships and 250 planes had their travel disrupted by North Korean jamming attacks in 2012.” [Sam Jones and Carola Hoyos / Financial Times]

When a ship loses GPS, multiple systems fail.

--Pilita Clark / Financial Times

“Researchers have cast new light on one of the most baffling riddles in climate science: why has global warming stalled when emissions of the greenhouse gases blamed for climate change have kept soaring?

“The explanation lies in an unprecedented strengthening of Pacific trade winds over the past 20 years, according to a study by U.S. and Australian scientists.

“These easterly winds, which blow across the tropics, have speeded up ocean circulation at the equator, pushing heat deep down into the ocean’s depths and bringing cooler water up to the surface.

“This has driven more cooling in other regions and accounts for much of the reason why global average air surface temperatures have stayed virtually steady since 2001, says the paper, published in this week’s Nature Climate Change journal.

“This pause could persist for much of the present decade if the strong trade winds continue, but the paper warns that once they slow down ‘rapid warming is expected to resume.’”

--Astronomers in Australia have identified what they believe to be the oldest known star, estimating in an article for the science journal Nature that it was formed 13.6 billion years ago.

But it’s relatively close to us, sports fans. Around 6,000 light years away. Currently it is dubbed “SMSS J031300.36-670839.3.”

Well, that’s a mouthful, let alone hard on the brain, so I respectfully submit that in light of a certain announcement made this week by a future Hall of Fame baseball player, we name it “Derek Jeter.”

--Two of the bigger dirtballs on Planet Earth these days are the sons of Martin Luther King Jr.; Dexter and Martin III, who have filed suit to force their sister, Bernice, to turn over their father’s Nobel Peace Prize and his traveling Bible so that they can sell them to a private owner.

The problem goes back to an agreement reached in 1995 wherein MLK’s heirs were to turn their inheritance over to a corporate entity, the estate of Martin Luther King Jr. Inc., where Martin III  is chairman of the board.

Bernice, in a statement last week, said she is “appalled,” “ashamed” and “disappointed” by her brothers’ behavior. “It reveals a desperation beyond comprehension.” Their father, she adds, “MUST be turning in his grave.”

As syndicated columnist Leonard Pitts Jr. writes:
“Turning? Martin Luther King must be spinning like a record album.

“Not just because of this, but because over the years his family has missed no opportunity to pimp his legacy. That verb is used advisedly. I am mindful of its racial freight, but frankly, no other word adequately describes the behavior of this family with regard to its most celebrated member.

“Every year, they remind us to respect his legacy, but it seems increasingly apparent they don’t respect – or even fully understand – it themselves.”

Amen.

--In a survey of 12,000 Catholics in 12 countries, commissioned by Univision, among the findings:

40% of Catholics in the United States oppose gay marriage, compared with 99% in Africa.

More than 90% of Catholics in Argentina, Colombia, Brazil, Spain and France support the use of contraception. Only 44% in Congo and 43% in Uganda do. [79% in the United States do.]

87% of Catholics around the world say Pope Francis is doing an excellent or good job. 

76% of Catholics in the U.S. believe in abortion rights in some or all cases.  In the Philippines, just 27% of Catholics said abortion should be allowed under certain circumstances.

--I’ve written in the past of the crime wave in the Caribbean and how tourists need to be on their guard at all times, especially if they are renting out homes. A local Scotch Plains, N.J. man, 41, was killed while vacationing on St. John, Jan. 18, and his parents are having an awful time getting details from incredibly incompetent law enforcement, which is always the case in these parts. It seems it was a robbery / home invasion gone bad. The victim was stabbed in his neck and not found until a day later by a groundskeeper. The police had searched the main house but stupidly failed to look into the guest house where the victim was. The robbers took his cellphone, television, cash and his car.

--The most popular child movie star of all time, Shirley Temple Black, passed away at the age of 85. Among her best known of 40 films by the time she turned 12 were four that co-starred Bill “Bojangles” Robinson, the black dancer 50 years her senior. From 1935 through 1938, Shirley Temple was the top box-office draw in America.

She later had an extensive public service career, running unsuccessfully for a California congressional seat in 1967, but two years later she was appointed the U.S. delegate to the United Nations by President Nixon, and then was U.S. ambassador to Ghana and Czechoslovakia, as well as serving as White House chief of protocol for President Ford.

In 1972, after undergoing a modified radical mastectomy, Temple held a televised news conference from her hospital room to encourage other women to have check-ups, which ironically is in the news again this week as the medical community seems split on just what age mammograms should be recommended.

As the New York Post editorialized:

“President Clinton probably summed her up best in 1998 when he noted she had done ‘a masterful job’ as ambassador, which made her beloved in Ghana and led her to make common cause with Vaclav Havel in the Velvet Revolution. ‘From her childhood to the present day,’ Clinton said, ‘Shirley has always been an ambassador for what is best about America.’ RIP.”

--Finally, this week marks 15 years of StocksandNews. No celebration. I just move on to the next column.

---

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

God bless America.

---

Gold closed at $1319...up $56 on the week
Oil $100.30

Returns for the week 2/10-2/14

Dow Jones +2.3% [16154]
S&P 500 +2.3% [1838]
S&P MidCap +2.9%
Russell 2000 +2.9%
Nasdaq +2.9% [4244]

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

Dow Jones -2.5%
S&P 500 -0.5%
S&P MidCap +0.3%
Russell 2000 -1.2%
Nasdaq +1.6%

Bulls 41.8
Bears 17.4 [Source: Investors Intelligence]

Have a great week. I appreciate your support.

Catch me on Twitter @stocksandnews

Reminder: I do have an iPad app.

Pitchers and catchers are reporting!!!

Brian Trumbore

 



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-02/15/2014-      
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Week in Review

02/15/2014

For the week 2/10-2/14

[Posted 12:00 AM ET]

Washington and Wall Street

Large swaths of the United States were more focused on the weather than the markets and the political goings on in Washington this week, and there is no doubt the weather, particularly in the eastern half of the country in the first six weeks of 2014, is having an impact on the overall economy. For example, after the retail sales figure for January came in at -0.4% when a slight gain was expected, with December being revised downward to -0.1%, many of Wall Street’s economists immediately cut their first-quarter GDP forecasts. Goldman Sachs went from 2.3% to 1.9%, Credit Suisse from 2.6% to 1.6% and Morgan Stanley from 1.9% to 0.9%.

Recall, growth in the third- and fourth-quarters was 4.1% and 3.2%, respectively. And, yes, even the weather naysayers when it comes to economic data cannot deny that when there is a big ice storm that drastically changes consumer behavior for a few days, there will be an impact on the numbers. It obviously affects auto sales, for one. And the airline industry has seen record numbers of cancellations.

Of course some of this will be reversed as soon as the weather returns to normal, which looks like this coming week, and maybe Punxsutawney Phil was full of it and spring comes early not late. He is just a rodent, after all, and dumber than his cousin the beaver, who avoided the housing bubble, but I digress.

We also had a figure on industrial production for January that was off 0.3% when the reverse was expected, a gain of like amount.

Yes, fourth-quarter earnings are up 8%, according to Bloomberg, but revenue is still up only 3%  and now you’d expect some shortfalls on the sales front when Corporate America reports their first-quarter results.

But it was nonetheless a second consecutive up week for Wall Street and there were two main factors cited; new Federal Reserve Chair Janet Yellen’s first testimony to Congress and the House and Senate voting through a debt-ceiling extension without any turmoil for the financial markets.

I choose the latter as being most important. House Speaker John Boehner took a courageous stance and brought the “clean debt ceiling” to the House floor, unencumbered by any contentious amendments after much rancorous debate inside the Republican Party, and it passed 221-201, though with only 28 Republicans voting yes. Cathy McMorris Rodgers, the No. 4 party leader, and Paul Ryan voted ‘no,’ to give you a sense of the internal squabble.

The Senate then passed it 55-43 on a party line vote after various maneuvering that allowed Republican members to still appease their base so there will be no debt-ceiling issues through March 2015. The Street likes this.

But, as everyone in Congress was forced to admit, and as your editor has consistently said would be the case, there was no serious debate on future spending and entitlements and we will pay a heavy price down the road.

As to Ms. Yellen’s testimony, the market rejoiced because she made it clear she supported the policies of her predecessor, Ben Bernanke, and that the Yellen Fed will continue to taper the level of the bond-buying program unless there are “notable changes” in the economic data. Yellen also strongly hinted the Fed will maintain short-term interest rates near zero for a long time. The markets wanted to see continuity and they received it.

But savers will continue to get crushed and no one yet knows how the Fed is going to deal with its $4 trillion balance sheet (of course they can say they’ll just let it “run off” but it won’t be that simple).

I have to note I was totally unimpressed by Ms. Yellen, having watched a fair amount of her testimony to the House committee (her Senate appearance was canceled due to the weather) as she didn’t have what I thought would be some pretty simple figures at her fingertips, as in I was thinking, “What do you do all day at the Fed, Ma’am. You’ve only been there years!”

Edward Luce / Financial Times

“Ms. Yellen’s quandary is captured in the increasingly confusing U.S. jobless numbers. Under the Fed’s existing guidance, which was communicated in early 2012, it pledged to keep interest rates at zero until unemployment fell below 6.5% or inflation exceeded 2.5%. Last month U.S. unemployment dropped to 6.6% - a month or two away from dipping below its threshold. Inflation is nowhere to be seen.

“No one believes the drop in jobless numbers reflects U.S. overheating. Most of the fall is a result of people abandoning the search for work rather than robust job creation. The same problem faces Mark Carney, the Bank of England governor, who promised to keep interest rates low until UK unemployment fell below 7%. It recently hit 7.1%. Again, he is unlikely to raise rates when joblessness dips below that level. Neither guidance has credibility with the markets, which makes them useless.

“Would any language work? Since forward guidance is basically a confidence trick, the answer is probably no. The moment one trick fails, the magician loses credibility. Ms. Yellen must now find new criteria that markets will believe. Maybe she could choose the labor force participation rate – the share of adults who are working – which is a better measure of job market health because it includes those who are discouraged or have stopped seeking work altogether.... Should she go vague and risk being ignored by the markets; or be specific and risk having to rewrite the Fed’s language – as it is already about to do? It is an unenviable choice. Yet it is the only significant one Ms. Yellen has.

“Central bankers were the heroes of the 2008 crisis. Faced with another Great Depression they reached for their bazookas and fired them. It is Ms. Yellen’s challenge to take over at a time of deep ambiguity. Not only are the threats over the horizon tough to anticipate, as they always are, but she faces them in the knowledge that the Fed’s armory is bare.”

On the ObamaCare front, the Treasury Department said employers with 50 to 99 full-time workers won’t have to comply with the Affordable Car Act’s requirement to provide insurance or pay a fine until 2016. Companies with more workers can also avoid some penalties in 2015 if they prove they are offering coverage to at least 70% of full-time workers.

But the individual mandate remains in place; carry coverage or pay a penalty. It’s a joke.

Or, as the Wall Street Journal opined:

“ ‘ObamaCare’ is useful shorthand for the Affordable Care Act not least because the law increasingly means whatever President Obama says it does on any given day. His latest lawless rewrite arrived on Monday as the White House decided to delay the law’s employer mandate for another year and in some cases forever....

“The new rule also relaxes the mandate for certain occupations and industries that were at particular risk for disruption, like volunteer firefighters, teachers, adjunct faculty members and seasonal employees....

“By now ObamaCare’s proliferating delays, exemptions and administrative retrofits are too numerous to count, most of them of dubious legality. The text of the Affordable Care Act specifically says when the mandate must take effect – ‘after December 31, 2013’ – and does not give the White House the authority to change the terms.

“Changing an unambiguous statutory mandate requires the approval of Congress, but then this President has often decided the law is whatever he says it is. His Administration’s cavalier notions about law enforcement are especially notable here for their bias for corporations over people. The White House has refused to suspend the individual insurance mandate, despite the harm caused to millions who are losing their previous coverage.

“Liberals say the law isn’t harming jobs or economic growth, but everything this White House does screams the opposite.”

Finally, back to the debt-ceiling issue, once again Texas Republican Sen. Ted Cruz riled up his base, while splitting his own caucus, forcing some Republicans to side with the Democrats on a procedural vote in order to increase the debt-ceiling.

As the Journal noted: “Democrats beat the odds and retained their Senate majority in 2010 and 2012 in part because they stuck together. If Republicans fail again this November, a big reason will be their rump kamikaze caucus.”

Europe and Asia

Eurostat, the statistics arm of the European Commission, released fourth-quarter growth figures for the eurozone and for the group GDP was up 0.3% over Q3, up 1.1% on an annualized basis.

Germany was up 0.4% (1.5% annualized), France up 0.3% over Q3 (1.2% ann.) and Italy, after 11 straight down or flat quarters, saw its economy rise a whopping 0.1% Q4 over Q3. All three were slightly better than expected.

Netherlands came in much better than expected for the quarter, up 0.7% over Q3, while Spain’s economy grew 0.3% in Q4.

One other of note...Romania’s GDP shot up 1.7% in Q4 over Q3, and up 5.1% for the quarter vs. Q4 2012. [Plus they have Count Dracula goin’ for it.]

The European Central Bank is still just projecting growth of 1.1% for the eurozone for all of 2014, after being down 0.4% for 2013, but the former could be conservative.

In other euro stats, industrial production for the month of December was down 0.7% from Nov., up 0.5% from a year earlier, with Germany down 0.7%, France down 0.3% and Italy off 0.9%, Dec. over Nov.

German car sales in January, though, were up sharply and the Bundesbank projects the German economy will grow 1.8% in 2014.

Greece’s unemployment rate rose to 28% in November, with the government reporting the youth rate is now at 61.4%, despite all the talk of a recovery in the Greek economy.

OK, you look at all the above and while there have been some mild positive surprises, 1.1% projected growth for the eurozone is hardly a robust recovery. Europe would die for the subpar renaissance the U.S. has been experiencing.

The biggest negative remains the banking sector and as I’ve been writing the looming bank stress tests are, err, stressing out some countries such as Italy, where the banks are increasingly under the spotlight with rising non-performing loans and major doubts over the asset quality on the balance sheets. Lending to small- and medium-sized businesses by these institutions has stalled as banks continue to hoard capital. That’s not good.

Last weekend, the eurozone’s new chief banking regulator, Daniele Nouy, said she wants to weaken the link between governments and the eurozone’s banks. Noting the coming stress tests, she said, “We have to accept that some banks have no future. We have to let some disappear in an orderly fashion, and not necessarily try to merge them with other institutions.”

[Nouy’s Single Supervisory Mechanism will take on the task of supervising the eurozone’s 130 largest lenders, while the thousands of smaller institutions will remain the responsibility of national regulators.]

Problems in the banking sector were a big reason why at week’s end, Italian Prime Minister Enrico Letta submitted his resignation, to be replaced by his chief party rival, 39-year-old Florence mayor Matteo Renzi, who is expected to form a new government next week. The Letta-Renzi Democratic Party is the largest in parliament but it has needed to cobble together a coalition to govern and with Letta being forced to make some compromises others, like Renzi, were against, Renzi won a power struggle.

Letta told his staff, “It’s true, Italy does break your heart.”

Renzi said, “Italy cannot stay in a situation of uncertainty, instability, in a swamp.”

The opposition in parliament blasted the Democratic Party and Renzi, while enjoying the inter-party squabble. But Renzi has received high popularity ratings nationwide.

So Italy will have its fourth government in two years. The current legislature is due to run until 2018 but if Renzi fails, new elections will be called. So it’s up to Renzi to pass urgent institutional reforms and a new electoral law, for starters. Even some of his supporters are wondering if this is all happening too quickly.

Turning to China, the economic data is often suspect, but especially around the Lunar New Year’s holiday, this time Jan. 31, so it wrapped around both January and February. That said there were a slew of releases this week.

Retail sales for January were up 13.3% vs. 14.7% last year as the anti-graft campaign continued to have a severe impact on luxury good sales. Ironically, the South China Morning Post singled out Fuzhou the other day, where sales of gifts and alcohol were down 70% in some shopping centers.

Exports rose a surprisingly strong 10.6% in January, with imports up 10%, when the former had been projected to be flat and the latter up about 4%, so this fueled talk once again of fake invoicing, let alone trying to decipher the impact of the holiday. That said if exports were even up 5% to 7% in reality that was a positive surprise.

Auto sales growth slowed to just 7% in January vs. 2013’s full-year pace of 15.7%.

And on the inflation front, producer prices, or as they like to say factory prices at the gate, fell a 23rd consecutive month, down 1.6% in January from a year earlier, not good, while consumer prices rose just 2.5% for the month, up only 3.7% on the key food metric, so that part is positive in that it leaves the government some room to stimulate.

But you want increases at the factory level, particularly in terms of corporate profits, and China’s slowing economy, falling profits and rising borrowing costs are not good. [I tell my friends that if my investment in the Fuzhou area is even in operation, I’m guessing it is losing money these days.]

Finally, the ratio of nonperforming loans at Chinese banks hit its highest level in two years at the end of 2013, while there was a $50 million default on a trust product, this one without an apparent bailout as opposed to the recent $500 million highly-publicized default, issued through China’s largest bank that invested in a coal mine and then went under, only to be bailed out by some still unknown party. Principal was returned on this one. On the smaller default, investors will get some of their money back, reading between the lines. A further sign of things to come.

Street Bytes

--Stocks sloughed off the poor economic news and staged a strong rally for their best week of the year with the Dow Jones up 2.3% to 16154, the S&P 500 up 2.3% and Nasdaq up 2.9%. Nasdaq is now up 1.6% for 2014, while the S&P is down only 0.5% and a mere 10 points shy of its all-time high. The Dow is down only 2.5%.

--U.S. Treasury Yields

6-mo. 0.07% 2-yr. 0.31% 10-yr. 2.74% 30-yr. 3.70%

--Time Warner Cable has had recent overtures from Charter Communications (fourth-largest cable operator), but TWC wanted Charter to offer $160 per share after Charter first came in at $132 and nothing got done.

Then late Wednesday, Comcast Corp. acquired Time Warner Cable’s 11 million subscribers for $159 per share in an all-stock deal that will face numerous regulatory hurdles, but, if approved, would have a combined 30 million subscribers and nearly 30% of the market in uniting the nation’s two largest cable operators.

Comcast CEO Brian Roberts said, “On the regulatory front, we believe this transaction is approvable. It is pro-consumer, pro-competitive and strongly in the public interest.” Roberts assured consumers the deal “will not reduce competition in any relevant market” since the companies did not overlap currently.

The new cable giant’s biggest competitor would be DirecTV, which has 20 million video customers. Just a little over a year ago, Comcast reshaped the U.S. media landscape after its $17 billion acquisition of NBC Universal.

Cecelia Kang of the Washington Post had a good summary of some of the other aspects of the Comcast-TWC combination.

“(The) merger would have far greater implications for the future of media and communications, with one firm controlling more fast Internet lines into American homes than any other company, along with a huge swath of content through its ownership of NBC Universal.

“The combined company would have 33 million cable subscribers and nearly as many broadband users, giving it enormous power in negotiations with networks over licensing fees and in determining what shows reach consumers on mobile devices, laptops and television sets. It could influence whether the next Apple TV or Google device gets a fair shot at replacing cable set-top boxes. Without the second-biggest cable company to help keep pressure on prices for triple-play television, Internet and phone service, Comcast would have flexibility to set the market rates....

“Analysts generally agree that Comcast is likely to win approval for the merger from antitrust regulators. The lack of overlapping markets means regulators won’t view the proposed merger with the same concerns as in AT&T’s proposed bid for T-Mobile, experts said. That deal, which regulators rejected, would have eliminated a major national carrier and given consumers fewer options.”

Comcast said it expects to win approval by year end.

--There is trouble in the farm belt with land prices having peaked. It was inevitable, though while it’s probably appropriate to call a doubling in prices from 2009 to mid-2013 in states such as Iowa a bubble, this is different from other boom-bust periods in this area. Farm income should remain strong and debt levels are far more realistic, according to USDA figures.

The problems mostly have to do with corn, which hit an all-time high in 2012, following the drought and tight supply coupled with growing demand. So farmers paid more for the land, grew more corn, leading to a record harvest, and the price of the crop dropped 40% last year.

One potential problem would be rapidly rising interest rates, though that is unlikely in the short term.

The declines in land values are minimal thus far but certainly bear watching. The USDA did forecast U.S. farm incomes would plummet 27% this year to the lowest level since 2010, though on an inflation-adjusted basis, last year’s total income was the highest since 1973.

--Bank of America announced it was cutting 450 mortgage jobs from West Coast offices due to low loan demand, the fourth time this year BofA has slashed jobs because of reduced retail originations.

--Related to the above, home prices in Southern California fell 3.8% in January over December, though the median price is up 18.4% since January 2013 to $380,000. But that figure is the lowest since May. Actual sales in the six-county Southland were at a three-year low for a January.

--Britain’s second-largest bank, Barclays, is laying off 12,000 as profit at its key investment banking unit slumped 37% in 2013, though it is increasing bonus payments by 10%. CEO Antony Jenkins said, “We pay for performance and we pay competitively. It goes back to having the best talent across the world to serve our clients and customers.” Around half the job losses will be in Britain. Barclays employs 140,000 around the world.

--Toyota is recalling 1.9 million Prius hybrids over a software issue that could cause the vehicle to slow down suddenly. The bulk of the problems were cropping up in Japan and North America and affect sedans made since March 2009.

--General Motors said it was recalling 778,000 Chevy Cobalts and Pontiacs G5s in North America covering model years 2005 to 2007 because of an ignition switch problem.

--CBS Corp. continued to report solid earnings, with net income up 19% in the fourth quarter to $470 million, while revenue rose 6%. Even revenue at its Simon & Schuster book publisher rose 5%.

--McDonald’s announced same-store global comps rose 1.2% in January, but were down 3.3% in the U.S. They get a weather pass, but it doesn’t explain such a huge drop in the States.

--I eat a lot of Campbell’s soup and was happy to see its U.S. soup sales rose a solid 5% in the last quarter.

--Shares in Weight Watchers plunged 25% on Friday as the company issued poor guidance, citing new competition from diet apps.

--Home Depot announced it would add 80,000 seasonal positions this spring, its peak hiring season. Overall, the retail chain employs 340,000 in its 2,200 stores nationwide. You can apply at www.careers.homedepot.com with the opportunity to make an impression and get asked to stay on permanently.

--Fidelity Investments reported the average 401(k) in its managed accounts reached a record $89,300 in the fourth quarter of 2013, 15.5% higher than a year earlier and almost double the low of $46,200 set in 2009.

For pre-retirees 55 and older the number is $165,200. [USA TODAY]

--The jobless rate has shot up to 6% in Australia, its highest level in more than a decade. It’s mostly about cutbacks in the mining industry.

Plus Toyota became the latest to announce it was ending car production in Australia by the end of 2017, which effectively marks the end of the country’s auto industry. Last year, Ford and GM’s Holden unit announced plans to stop producing cars Down Under. Toyota, like the others, attributed the move to high manufacturing costs. 2,500 jobs will be lost. [Ford and GM’s combined losses were 4,000.]

--The world’s largest PC maker, China’s Lenovo, posted record third-quarter profit on higher sales of laptops and mobile devices in emerging markets. Revenue jumped 15% to a record $10.8 billion, led by sales in China.

Lenovo in recent weeks paid nearly $5 billion to acquire IBM’s low-end server business and Motorola Mobility.

--Cisco Systems had another desultory quarter with revenues falling 8% and the network equipment maker forecasting a further decline of 6% to 8% in the current quarter. Cisco said it is struggling with falling demand from emerging markets in its core router business. Shares fell over 3% as analysts were also concerned about falling profit margins.

--Activist investor Carl Icahn announced he saw “no reason to persist” in his attempt to force Apple to buy back $50 billion of its shares, saying he was satisfied with CEO Tim Cook’s plans to return cash to investors. Apple recently said it was aggressively buying back shares but wanted to do it on its own schedule. [The shares rose on the news.]

--Hackers went after the two largest bitcoin-trading exchanges Tuesday, leaving customers unable to withdraw their money.  Slovenia-based Bitstamp and Bulgaria-based BTC-e were the victims, both calling it a denial of service attack. Last week it was Tokyo-based Mt. Gox exchange that was forced to halt withdrawals over a software flaw. Bitcoin prices have been sliding sharply in response.

And Russian authorities said they were preparing to crackdown on Bitcoin and “cryptocurrencies” in general that “are money substitutes and cannot be used by individuals and legal persons.”

I’m not a gold bug, but I liked what Jim Grant said the other day in an interview on CNBC when asked about bitcoin. “Gold is nature’s own bitcoin.” [Gold is rallying smartly thus far in 2014.]

--Outdoor-gear retailer Cabela’s, in reporting a 10% decline in fourth-quarter sales, cited rapidly declining gun sales. CEO Thomas Milner said, “The surge in firearms and ammunition is clearly winding down.” Through the first six weeks of 2014, sales of firearms and ammunition were down about 50% from a year earlier.

--This lousy winter (the cold as much as the snow...the cold keeping the snow around, which adds to the depression), is straining state and municipal budgets in a huge way. For example, prior to this week’s big one, “New York City crews filled 69,000 potholes in the first five weeks of the year – nearly twice as many as the same period in 2013.”

In New Jersey, in January alone, the New Jersey Turnpike Authority spent $14.5 million for snow removal on the Turnpike and Garden State Parkway vs. $24.7 million for all of 2013.

--Facebook founder Mark Zuckerberg and his wife Priscilla Chan were named joint top U.S. philanthropists for 2013, having donated more than $970 million in Facebook stock (now worth over $1 billion), the largest donation in the U.S. The money/stock was given to the Silicon Valley Community Foundation, a charity that manages and distributes charitable funds, primarily to education and health, such as for a health clinic in East Palo Alto.

Foreign Affairs

Syria: The latest round of peace talks in Geneva were essentially scuttled when Russia explicitly rejected a proposal to discuss the eventual removal of President Bashar al-Assad from power during any political transition. All talks have done thus far is yield a halting deal to relieve the siege on the embattled city of Homs.

The discussions are thus largely useless. U.N. negotiator Lakhdar Brahimi (a truly heroic figure who doesn’t deserve this) asked the Russian chief diplomat whether Moscow will discuss a political transition and Deputy Foreign Minister Gennady Gatilov said, “No.”

So zero reason to continue, though late Friday the two sides kept the door open.

On the ground, Syrian activists said government shelling and airstrikes with barrel bombs have killed over 400 in Aleppo so far this month. Violence across the country has only escalated as peace talks were taking place. The Britain-based Observatory for Human Rights said overall at least 4,959 have died in Syria in the three-week period since Jan. 22, when the first round of face-to-face meetings took place in Geneva, the highest death toll since the uprising against Assad began, March 2011.

In Homs, there have been sporadic evacuations during a ceasefire, which then expired. The U.N. did say enough food, medical supplies and hygiene items have been delivered for 2,500 people.

In other news, U.S. Defense Intelligence Agency Director Lt. Gen. Michael Flynn said in testimony before the Senate Armed Services Committee, “The current instability in Syria presents a perfect opportunity for al-Qaeda and associated groups to acquire [weapons of mass destruction] or their components, and that there was a ‘very real’ risk they could gain control of chemical or biological weapons.

“There is also the very real possibility that extremists in the Syrian opposition could overrun and exploit chemical and biological weapons storage facilities before all of these materials are removed.” [After a third chemical-arms cache was removed this week, less than 5% of the total has been.]

In an interview with USA TODAY’s Oren Dorell, Max Boot, an analyst at the Council on Foreign Relations, said:

“Letting the fighting continue indefinitely and letting al-Qaeda and the Iranians split the country between them, that’s not a good outcome. Syrian soil would become a launching pad for Iranian interests in the region and a launching pad for al-Qaeda, which is a grim outcome.”

The U.S. and NATO may soon be forced to put “boots on the ground” to prevent Syria from not only becoming an al-Qaeda safe haven, but also an anti-American axis of a nuclear Iran aligned with a brutal Syrian regime and a missile-laden Hizbullah in Lebanon, says Boot.

To be fair and balanced, there is a competing viewpoint. As Zachary Keck, an associate editor for The Diplomat, a foreign affairs magazine for the Asia-Pacific region says, the United States is winning in Syria by standing by.

The war is costing Iran billions, Hizbullah is losing hundreds of fighters, and both are losing standing in the Arab world because of their support of the slaughter of Sunnis.

“From a purely strategic standpoint, no country has benefited more from the horrible tragedy in Syria than the United States,” Keck says.

While his facts are accurate, his conclusion isn’t. In no way is the spread of the war into Iraq and Lebanon, let alone the ticking time bomb of the refugee crisis in Jordan, for starters, a positive.

It’s also now estimated there are as many as 30,000 al-Qaeda-linked fighters in Syria.

Iran: Last weekend, Tehran agreed to supply the International Atomic Energy Agency with new information on allegations Iran once pursued experiments related to nuclear-arms development. For years, as I’ve written constantly, the IAEA has been trying to clarify what Iran’s intent was with some suspected operations, including at the disputed military base of Parchin.

But by week’s end, Iran was demanding the IAEA be the one to provide documents justifying its suspicions. Iran’s Atomic Energy Organization head Ali Akbar Salehi said, “The authenticity of each allegation should be proven first, then the person who submitted it to the agency should give us the genuine document. When we are assured of the authenticity, then we can talk to the agency.”

It’s thought Washington provided the IAEA the records, while the agency will only say they came from a “member state” and “participants in a clandestine nuclear supply network.” [Global Security Newswire]

Separately, a leading Iranian adviser on international affairs was quoted by Iran’s Fars News Agency as saying, “Hizbullah has tens of thousands of missiles ready to be fired at Israel” that make Israel’s Iron Dome anti-missile system “a theoretical joke.” [Jerusalem Post]

And this week Iran’s armed forces chief of staff General Hassan Firouzabadi said, “We are ready for the decisive battle with America and the Zionist regime,” warning Iran’s neighbors in the Gulf not to allow a U.S. attack on Iran from their territory.

Further, this week Iran’s Navy Commander Ali Fadavi was quoted by the Fars News agency as saying, “The Americans can fully expect that their warship [and] aircraft carrier will be sunk with all 5,000 crew aboard, in combat against Iran, and they could find its hulk in the depths of the sea.”

Iran for the first time is sending warships into the Atlantic Ocean, according to their officials, though as I go to post I haven’t seen this confirmed by the Pentagon.

Sounds like the perfect atmosphere for constructive talks on the nuclear program, doesn’t it?

Jennifer Rubin / Washington Post

“By now, the self-description of the Obama administration as the ‘most transparent in history’ is regarded as a joke by the press. To the contrary, whether it is photographic access, freedom of information requests, civil answers to legitimate questions or any other aspect of openness, President Obama and his advisers seem to believe less is more and none is best.

“When concerns about transparency and access come up in an administration, it usually concerns domestic policy, but this administration is often astonishingly unforthcoming when it comes to foreign policy....

“This is no truer than with Iran policy. Not only does (the president) not tell the American people what is going on, but he also has an annoying practice of keeping critical allies – Israel and Saudi Arabia – out of the loop. Hence the negative reaction when he finally announced our behind-the-scenes (and backs) negotiations that seemed to change the entire framework for a deal (e.g. allowing Iran’s ‘right to enrichment’). He has, let’s remember, told Congress and the American people to trust him. Give diplomacy and peace a chance, and all that. But the interim agreement is still being closely guarded. The Israel Project reports:

“ ‘Controversy swirled yesterday regarding the Obama administration’s decision to withhold from the public the text describing how the interim Joint Plan of Action (JPA) with Iran is to be implemented... Top Iranian figures have repeatedly and explicitly accused the White House of mischaracterizing the degree to which Iran committed to making concessions on its nuclear program under the JPA. Analysts and journalists have been unable to evaluate the Iranians’ claims because the White House has refused to allow the text to be publicly scrutinized.’

“The agreement is not classified, but the Obama team is acting like it is....

“Moreover, the secrecy surrounding the deal fuels the suspicion the president is willing to make a bad deal to get out of making good on his own policy (all options on the table, Iranian nukes are ‘unacceptable,’ etc.) Former ambassador to the United Nations John Bolton observes, ‘If it is innocuous, why not release it? If it is not innocuous, what have we given up?’....

“In any other administration, this would be a scandal. In this one it’s par for the course.”

Finally, there does remain a divide between Iran’s Revolutionary Guard, the hardliners, and the politicians. For now, Supreme Leader Ayatollah Ali Khamenei is siding with President Rohani, urging patience with as he calls it “the statesmen” and their negotiations with the P5+1.

Afghanistan: The United States condemned President Hamid Karzai’s decision to free 65 “dangerous” inmates from a prison. The group consists of a number of individuals “directly linked to attacks killing or wounding 32 U.S. or coalition personnel and 23 Afghan security personnel or civilians,” a statement issued by NATO’s International Security Assistance Force warned.

“It remains the position of [U.S. forces in Afghanistan] that violent criminals who harm Afghans and threaten the peace and security of Afghanistan should face justice in the Afghan courts, where a fair and transparent trial would determine their guilt or innocence,” the statement said. [AP]

When the 65 were released Thursday, a prison spokesman told the Associated Press, they were laughing and smiling as they boarded a bus to leave the prison.

A Pentagon spokesman, Army Col. Steve Warren, said:   “These are bad men. They’ve got a lot of blood on their hands. A lot of blood.”

The U.S. military and the White House are resigned to waiting until after the April election and Karzai’s departure months later in the hopes of signing a security agreement with the new president allowing a post-2014 presence.

But while the U.S. can wait until summer, our NATO allies may not be able to.

Meanwhile, Karzai’s brother, Abdul Qayum Karzai, said he would sign the bilateral security agreement with the U.S. if he wins the presidential vote, though no one believes he has a chance. At least he said the right words.

“Without the BSA, there is no security and everything is gone. We still need the help of the international community and the U.S., and I am sure anybody who gets elected will sign the BSA if our president does not sign it.”

There are 11 candidates in the race, including my favorite, Abdullah Abdullah, a former foreign minister and seemingly pro-West. As no one is likely to receive 50%, there will then have to be a runoff.

I’ve written all I care to on Hamid Karzai. He thinks he can save his skin by turning to the Taliban. A year from now he’ll be headless, even if he’s initially granted exile.

Egypt: Russian President Vladimir Putin has no trouble involving himself in the coming Egyptian presidential election, saying he supports military chief Field Marshal Abdul Fattah al-Sisi, who is running for president (though as yet there has been no formal announcement). “I wish you luck both from myself personally and from the Russian people,” said Vlad the Great.

Sisi was in Moscow this week to negotiate a $2 billion arms deal with Russia.

Lebanon: Michael Young / The Daily Star

“Apparently, a girl who exposes her breasts can agitate some Lebanese much more than a man who clubs his wife to death.

“Lebanese (Olympic) alpine skier Jackie Chamoun Tuesday was forced to issue an apology on her Facebook page because she appeared topless in the video of a photo shoot three years ago for a sports calendar.

“Chamoun’s photos for the calendar were far less explicit than what appeared in the video. So Chamoun, with her teammate Chirine Njeim, is essentially being held responsible for how she appeared in her off-camera moments.

“Chamoun wrote, ‘I want to apologize to all of you. I know that Lebanon is a conservative country and this is not the image that reflects our culture. I fully understand if you want to criticize this.’

“Chamoun did nothing for which to apologize... Whether Lebanon is conservative or not should be irrelevant here, and whatever its culture, Chamoun has not been accused of breaking any laws.

“In response, caretaker Sports and Youth Minister Faisal Karami asked the head of Lebanon’s Olympic Committee to initiate the ‘necessary inquiries’ into the incident....

“What made the reaction even more absurd was that similar outrage was absent when Mohammad al-Nhaily recently beat his wife Manal Assi to death with a pressure cooker in front of their daughters. While the crime was taking place, a neighbor called the police to intervene. They refused, arguing that this was a family matter.

“What a pity the interior minister did not launch an investigation into why the police failed to enforce the law.”

Meanwhile, there was a report from The Daily Star this week that the Ain al-Hilweh Palestinian refugee camp, located near the Lebanese city of Sidon, is being overrun by fundamentalist groups, including from Chechnya, Egypt, Tunisia and Syria. This is the largest Palestinian camp in Lebanon, around 70,000, and a distressing development.

The Daily Star reports: “According to sources, an unnamed Arab intelligence department told a Lebanese security body that Palestinian Hashem Mahmoud received financial aid from an al-Qaeda terrorist group, money that was meant to revive dormant cells loyal to the group and from other bodies that could stage attacks in Beirut, the Bekaa Valley and Tripoli.

“The well-informed sources told The Daily Star that the deteriorating situation in Ain al-Hilweh had reached a new peak, with regional, local and sectarian circumstances further encouraging terrorist groups there to act.”

Lastly, the latest efforts to form an “all-embracing political government” collapsed. This country has been dysfunctional for years.

Iraq: There was a positive development here this week...though also one speaking to the threat.

22 Islamic State of Iraq and the Levant (ISIL) militants were killed while attending a suicide bombing training class north of Baghdad when their commander unwittingly conducted a demonstration with a belt that was packed with explosives. 15 others were wounded. That gives you just a small sense of how many are willing to serve the “cause.”

Russia: I am bored to tears by the Sochi Olympics, but much of this is my age and a struggle to get into the X-Games aspect. Plus when you know the results that takes away a lot of the fun.

But I’ll be watching the U.S. men’s hockey team’s quest for a medal, such as in Russia-USA in a few hours.

Sally Jenkins / Washington Post

“The grim and the gorgeous coexist side by side at the Sochi Olympics. Anyone who thinks that what’s happening here is comparable to the excesses of other sports events in other places simply hasn’t seen or felt these Winter Games firsthand. The $51 billion colossus is an act of destructive grandiosity that threatens to make us all queasily complicit in crime yet simultaneously awed and intimidated.

“The most expensive Olympics in history are partly a Potemkin village, an elaborate façade built to impress foreign passersby and to enhance the image of a small, odd, chill-faced man who likes to pose menacingly shirtless in order to seem much taller than he actually is. It’s also a heist: Somewhere along the line, according to Vladimir Putin’s critics, as much as $30 billion disappeared, and it didn’t go into the hotels, where the carpets look like scraps from an old office, unless it went into the surveillance that gives new meaning to the phrase bedbugs. Mainly it seems to have gone into creating scale, breathtaking but needlessly immense structures with columns that loom hundreds of feet high, dwarfing individuals into specks. And that’s exactly the point, isn’t it, to make the ordinary citizen quail with helplessness at the power of the ‘new’ Russian state.

“It’s the most troubling, complicated Olympics of our time, full of suppression, apprehension, active borderland insurgencies, gay scapegoating, Internet hacking, and farce, which peaked before the Opening Ceremonies when IOC President and arch-enabler Thomas Bach said there were no problems here, only ‘a couple of hiccups.’”

Holman W. Jenkins, Jr. / Wall Street Journal

“Vladimir Putin always seemed likely to leave office the way Stalin did, horizontally inclined. It still seems likely. Way ahead of themselves are opponents who imagine corruption or terrorist threats or gay-rights protests or even journalists unhappy with their Sochi hotel rooms mark the beginning of the end of Putin rule....

“Mr. Putin’s own citizens don’t care about Western standards of civility: His gay baiting is popular at home. As for corruption, he appeared genuinely puzzled when ABC News recently inquired about malfeasance in Olympic construction. Who would have imagined there wasn’t corruption? The average Russian is not naïve on this score.

“His permanence in power was underlined during the shell game of 2008. Having exhausted his constitutional two terms, he set up his handpicked factotum as president and then continued to rule as prime minister. In 2012, he resumed the presidency under a new law that will allow him to serve 12 years, so Russia can expect to be stuck with Mr. Putin at least until 2024. Perhaps longer given the still-unexplained string of murderous apartment bombings that aided his rise*....

*Ed. first brought this up 15 years ago.

“Only a serious and prolonged decline in oil prices might shake his rule. By various Western estimates, the regime gravy train requires a long-term oil price of $115 per barrel to avoid becoming needy of Western borrowing. Nor is an oil crash implausible in a world of rising shale energy, persistently slow Western growth and a Mideast ‘instability premium’ of perhaps $20 a barrel that begins to seem a tad overdone....

“A military adventure gone wrong – a botched intervention in a Ukrainian civil war – is another way Mr. Putin might shorten his tenure. The eternal problem of Putin-style autocratic leaders is their progressive divorce from reality and propensity to miscalculate.”

Gabriel Schoenfeld / Washington Post [Schoenfeld is a senior fellow at the Hudson Institute]

“(Edward) Snowden has taken sanctuary in Russia, a country that, when it was under communist control, epitomized the idea of a surveillance state, complete with a secret police force – the KGB – that worked assiduously to monitor and control the population. Today Russia is a quasi-democracy that has retained some features of its communist past. Over the past decade or so, under the tutelage of President Vladimir Putin, a former KGB officer, it has been sliding ever deeper back into authoritarianism.

“That authoritarianism is maintained in part by a domestic surveillance system. Two intrepid Russian journalists, Andrei Soldatov and Irina Borogan, explain in the fall 2013 issue of World Policy Journal how it works. They show that the Federal Security Service (FSB), the successor organization to the KGB, has invested in technology that allows it to monitor telephone and Internet communications and to collect and store not just metadata – information about call destination and durations – but also the content of communications. The Russian state uses that technology to engage in essentially unchecked surveillance of telephone calls, e-mail traffic, blogs, online bulletin boards and Web sites. Soldatov and Borogan conclude that over the past two years ‘the Kremlin has transformed Russia into a surveillance state – at a level that would have made the Soviet KGB...envious.’....

“(Snowden’s) silence about the quasi-dictatorship where he has taken sanctuary is telling. It is yet more evidence, if evidence were needed, that he is not a whistleblower at all. It suggests that, instead of being a brave speaker of truths, he fears American justice, and not only American justice. It also suggests he is a hypocrite, with principles that he applies selectively against the democracy he has betrayed.”

Ukraine: President Yanukovych met with Vladimir Putin at the opening of the Sochi Olympics and it was a relatively quiet week back home, though behind the scenes opposition groups are forming their own security forces to deal with the police. Friday, the government did release 243 prisoners taken into custody during three months of protests, though they will remain under house arrest. In exchange, the opposition agreed to take down some barriers in Kiev.

Parliament reconvenes next week and some say Yanukovych is waiting for the end of the Olympics before introducing new tougher measures.

A judge who sentenced several antigovernment protesters was shot to death on Wednesday. No claim of responsibility as yet.

China: Secretary of State John Kerry arrived in Beijing for high-level talks, hoping to pressure China on North Korea and the issue of territorial disputes in the East and South China Seas.

Kerry wants China to do more to keep Pyongyang in line and a Chinese foreign ministry spokesman said it already is in working for a solution through six-party nuclear talks.

Thursday, the commander of the U.S. Navy said the United States would come to the aid of the Philippines in any dispute with China in the South China Sea, to which the foreign ministry spokesman said, “The United States is not a party in the South China Sea dispute, and should... be careful in its words and actions, and do more that will benefit true peace and stability in the region rather than the opposite.” [South China Morning Post]

On other issues, the government announced $1.6 billion is being set aside this year to reward cities and regions making significant progress in controlling air pollution, highlighting just how much the issue has become a priority, as your editor has long noted. Pollution will bring down the government in a few years if there is no large-scale improvement.

A meeting of the State Council led by Premier Li Keqiang said controlling pollutants such as particulate matter in the air will be a key task.

The money is to be rewarded rather than offer subsidies for the prevention and control of it.

According to a Blue Paper for World Cities report, Beijing was hit by severe levels of pollution at least once every week last year.

China also held talks with Taiwan at the highest level since the end of the Chinese civil war in 1949. No agenda was released but the get together is widely seen as a confidence-building measure. Cross-strait ties have improved since Taiwan’s President Ma was elected in 2008, the same year flights between the two began.

But Ma is unpopular today and his party likely to lose elections later this year.

Tensions remain, no doubt. China refuses to retract its longstanding threat to retake Taiwan, and I know from my experience with Fujian province that this is where most of the missiles targeting Taiwan are.

On a lighter note, China’s troubled Jade Rabbit lunar rover sprang to life on its own, though space officials said its functions “could not be fully restored.”

North / South Korea: The two agreed to high-level talks on Wednesday that are likely to focus on upcoming military drills that the North opposes. Pyongyang will reiterate its demand the annual U.S.-South Korean maneuvers be canceled but Washington is adamant they will proceed.

Separately, South Korea’s defense minister told parliament that North Korea appears to be ready to conduct a new atomic test and/or missile launch at a moments’ notice. Construction on a big new launch tower appears complete.

Brazil: The run-up to the World Cup continues to go miserably. Massive protests have been taking place around the country, some violent, and in the Amazon city of Manaus (the one place you do not want to go if someone is holding a gun to your head, demanding you attend one World Cup match), a construction worker died while working on the stadium there and now others employed are threatening to go on strike. Work at this particular site is way behind less than four months before the opening match.

[Friday, Brazil’s central bank said preliminary data puts the nation in recession for the second half of 2013, not good for President Dilma Rousseff, who faces an election this year.]

Britain: Severe flooding along the River Thames continues with thousands of homes inundated after the wettest January since 1766, yes 250 years ago.

Said the managing director of Network Rail, whose team is monitoring “several hundred” sites across England, “This isn’t now just flooding, this is groundwater. The land is so saturated we have got water rising up, just as much as flowing on to it. So it is difficult.”

Switzerland: Swiss voters by the narrowest of margins (50.3%) backed a referendum that invalidates the Swiss-EU agreement on freedom of movement and brings back strict quotas for immigration from European Union countries. [Remember, Switzerland is not a member of the EU, though it has adopted many EU policies.]

The European Commission responded it regretted that an “initiative for the introduction of quantitative limits to immigration has been passed by this vote.

“This goes against the principle of free movement of persons between the EU and Switzerland.”

The Swiss economy is doing great, but the people are concerned about immigration. A quarter of the 8-million-strong population is foreign, and last year 80,000 new immigrants arrived.

A coalition led by the right-wing Swiss People’s Party is behind the move to reverse a 2000 referendum giving EU residents equal footing with locals in the Swiss job market.

It’s a classic example of the debate taking place throughout Europe and the U.S., for that matter. Supporters of quotas in Switzerland argue free movement has put pressure on housing, health, education and other areas, such as the belief foreign workers are driving down salaries.

Swiss business leaders and the government, on the other hand, say free movement has been a key to the country’s success, allowing employers to pick up skilled workers from all over Europe.

Random Musings

--George Will / Washington Post

“Barack Obama, the first president shaped by the celebratory culture in which every child who plays soccer gets a trophy and the first whose campaign speeches were his qualification for the office, perhaps should not be blamed for thinking that saying things is tantamount to accomplishing things, and that good intentions are good deeds. So, his presidency is useful after all, because it illustrates the perils of government run by believers in magic words and numbers....

“Thirty months have passed since Obama said: ‘The time has come for President Assad to step aside.’ Today, James Clapper, director of national intelligence, says Bashar al-Assad’s grip on power has ‘strengthened.’ In last month’s State of the Union address, Obama defined success down by changing the subject: ‘American diplomacy, backed by the threat of force, is why Syria’s chemical weapons are being eliminated.’ If saying so makes it so, all is well....

“The English Civil War was not finally ended by negotiations between Oliver Cromwell and Charles I; Cromwell seized power and Charles lost his head. America’s Civil War ended when Robert E. Lee capitulated to U.S. (‘Unconditional Surrender’) Grant. Russia’s civil war ended when Leon Trotsky’s Red Army defeated the White forces. Spain’s civil war ended with Francisco Franco in Madrid and remnants of the loyalist forces straggling across the Pyrenees into France. China’s civil war ended when Chiang Kai-shek skedaddled to Formosa (now Taiwan), leaving the mainland to Mao. But Syria’s civil war – after the massacres, torture, chemical weapons – supposedly will be resolved by a negotiated regime change: with words. Next, words will supposedly result in Iran ending the decades-old and hugely expensive nuclear weapons program that it says is nonexistent, and will proceed.”

--At a conference in London, 50 nations signed a declaration to end the illegal wildlife trade. But as the London Times editorialized:

“As they debate the issue, about 100 elephants will die. At least one rhino will be killed for its horn, worth more than its weight in gold on the black market thanks to baseless beliefs in China and Vietnam about its medicinal properties.

“International conferences on urgent environmental issues have a way of promising more than they deliver. This one must be the exception. The Prince of Wales, who helped to conceive the event, has urged those attending to treat the struggle against the illegal wildlife trade as a battle. It is more like a prolonged war.

“Poachers operate in paramilitary units with assault rifles, night vision goggles and helicopters that can move ivory from the savanna of inland Africa to the ports of Kenya and Somalia overnight. The images of carnage they leave behind are often too sickening to print. The profits made by middlemen in a trade worth ($20 billion) a year are often recycled by crime syndicates engaged in drugs, people trafficking and terrorism.

“The numbers are horrifying. According to Tanzania’s Wildlife Research Institute, the elephant population of the Selous game reserve has fallen from 43,000 to 13,000 in only three years. In Central Africa the number of forest elephants has plunged by more than 60 percent in ten years. At this rate of slaughter the sub-species will be extinct within another decade. Even in South Africa, where poachers have hitherto met their match in heavily-armed rangers, the killing is out of control. More than 1,000 rhinos were killed there last year alone, compared with only 13 in 2007....

“Prince Charles, Prince William and Downing Street want this conference to produce a ‘high-level political commitment’ to act on three fronts: to cut Asian demand for ivory and rhino horns; to bring poachers to justice; and to give those African communities that have become dependent on poaching alternative sources of income.

“The goals are worthy. A herculean re-education project in China is especially urgent and the actor Jackie Cha, among others, deserves credit for lending his name to it. But the conference will bring no new money to the fight, and money is what is most urgently needed on the front line. In Kenya, which fields only 350 wildlife rangers, the head of the national wildlife service fumes: ‘We don’t need conferences...we need boots on the ground.’ The truth is both are needed, and much else besides. As Prince William said by way of welcome to the conference delegates, if his generation fails to stop the slaughter, it will be too late.”

Separately, the Obama administration did ban commercial trade of elephant ivory in a letter accompanying the new National Strategy to Combat Wildlife Trafficking.

“The entire world has a stake in protecting the world’s iconic animals, and the United States is strongly committed to meeting its obligation,” wrote the president.

The law does not impact antiques and heirlooms. But to qualify as an antique, an item must be more than 100 years old and meet other requirements under the Endangered Species Act.

--Jordan’s King Abdullah II was in Washington this week but President Obama is going to have dinner with him in California on Friday night. Why? As the New York Times’ Mark Landler reported this seems rather strange. Obama and Abdullah could have met in Washington, right? True, the president was occupied with France’s Hollande, but the King did meet with Vice President Biden, while in Washington. According to a statement from the White House, the two discussed “how best to address the growing threat of violent extremism fueled by the Syrian conflict.”

Which is what King Abdullah and Obama will be discussing on Friday, and, oh, by the way, Abdullah is apparently only going to California to meet with the president.

You see, boys and girls, Obama wants to play golf.  The two are having dinner at Sunnylands, the Annenberg estate used by Obama for his informal summit with President Xi Jinping of China last year and Sunnylands has recently refurbished its golf course. Prior to his dinner with the King, Obama will have a photo op with farmers and local officials in Fresno to discuss the drought and the White House is scrambling to make sure this is the focus.

But this weekend, Obama is sticking around Sunnylands for a few rounds. As for Valentine’s Day, Michelle and the kids were going to be away on their own trip over the holiday weekend.

--Sen. Rand Paul announced he’s suing President Obama and top national security officials over the government’s sweeping electronic surveillance program.

According to the suit, which includes the conservative group Freedom Works, plaintiffs are seeking a declaration that bulk metadata collection is unconstitutional and the purging of data already stored that’s related to those filing the suit and any joining the class-action. This is something that will take years to resolve.

A recent Quinnipiac survey indicated 48% of registered voters support the metadata program and 47% oppose the collection process.

--Editorial / Bloomberg News

“Twenty states plus the District of Columbia now allow the sale of medical marijuana, while Colorado and Washington have legalized the drug for recreational use. Yet federal law still prohibits the possession, use, and sale of marijuana for any reason. This dichotomy explains why some banks are reluctant to accept the big cash deposits that pot purveyors generate – even if the cash is legal under state law.

“U.S. Attorney General Eric Holder has promised to issue guidelines to make it easier for marijuana sellers who are operating in accordance with their state laws to use the banking system. Large amounts of cash ‘just kind of lying around with no place for it to be appropriately deposited,’ Holder mused, ‘is something that would worry me, from a law enforcement perspective.’

“The fact is, Holder encouraged those bundles of unbanked cash to be assembled in the first place. Last year he said the Department of Justice wouldn’t seek to overturn the Colorado and Washington measures or interfere with the 20 states that allow medical marijuana, leaving it to local authorities to enforce marijuana laws.

“All of which raises the question: When did it become acceptable for the country’s top law enforcement officer to decide which federal statues to enforce and which to ignore? Even those who agree with the broader policy of marijuana legalization should be left uneasy by open defiance of the rule of law.

“Under the 1970 Controlled Substances Act, marijuana is classified as a Schedule I drug, which means it has high potential for abuse, serves no medical purpose, and isn’t safe even under a doctor’s supervision. As recently as 2005, the U.S. Supreme Court ruled that, even in states that allow medical marijuana sales, sellers and users can be prosecuted.

“Whether or not a law is outmoded or unpopular, the attorney general doesn’t have the authority to ignore it....

“Congress should decide whether to keep the national ban or turn the question of marijuana decriminalization over to the states. What shouldn’t be an option is for the Department of Justice to look the other way.”

*On Friday, the government offered guidance to those banks who want to accept cash from legitimate marijuana businesses.

--From an editorial in The Economist:

“America is expelling illegal immigrants at nine times the rate of 20 years ago; nearly 2m so far under Barack Obama, easily outpacing any previous president. Border patrol agents no longer just patrol the border; they scour the country for illegals to eject. The deportation machine costs more than all other areas of federal criminal law-enforcement combined. It tears families apart and impoverishes America...

“Why would a supposedly liberal president oversee something so illiberal, cruel and pointless? The Machiavellian explanation is that it motivates Latinos, who associate such barbarism with Republicans, to keep voting for the Democrats. Mr. Obama’s defenders prefer two other excuses.

“First, he is merely following laws written by nativist Republicans. This is a cop-out. As president he sets priorities for the executive branch, which cannot catch and prosecute everyone who breaks any of the gazillions of federal rules....

“The second excuse is that this is all part of Mr. Obama’s grand strategy to secure immigration reform this year, including a path to legal status for the 12m illegal immigrants now in the country. There is room for a deal....

“Immigration reform is indeed a great prize. But die-hard nativists are unlikely to be swayed, no matter how tough the laws, and reform can pass without their voices. There are very few things about America that are as vindictive and self-defeating as its deportation machine. Rather than making excuses for keeping it, Mr. Obama should be exposing its awfulness and leading the campaign to de-fang it.”

--Editorial / Washington Post

“Noah Bryson Mamet is a political consultant who raised at least $500,000 for President Obama and the Democratic Party in the 2012 election cycle. As of last week, he had never visited Argentina – which helps explain the ambassador-designate’s spotty performance before the Senate Foreign Relations Committee at his confirmation hearing. Mr. Mamet repeatedly described Argentina as a U.S. ally, said it was ‘a mature democracy’ and praised its record on human rights.

“That provoked a bipartisan tongue-lashing from Sens. Robert Menendez (D-N.J.), the committee chairman, and Marco Rubio (R-Fla.), who pointed out that the Argentine government under Cristina Fernandez de Kirchner has compromised freedom of the press and the judiciary, refused to pay debts to the U.S. government and American bondholders, seized equipment from a U.S. military training mission, undermined an investigation of an Iranian-sponsored terrorist bombing and aligned itself with the rabidly anti-American governments of Cuba and Venezuela. ‘This is the most unique ally I think we have in the world,’ Mr. Rubio dryly noted.

“Mr. Mamet probably was only retailing, clumsily, talking points given to him by the State Department, which has a policy of avoiding criticism of Latin America’s populist authoritarians. But his glaring lack of familiarity with the nation where he will soon be the top U.S. official was another illustration of the cavalier nature of President Obama’s recent ambassadorial appointments....

“Mr. Obama’s new ambassador to Norway, George Tsunis, raised $1.3 million for the Democratic Party in 2012 but didn’t know at the time of his hearing last month that Norway has a king but not a president.

“Ambassadorial appointments for small allies such as Norway or tough partners including Hungary and Argentina matter because their governments rarely receive the attention of high-level officials in Washington and yet require skilled diplomacy... (Obama’s) use of the Buenos Aires embassy and so many others as political plums signals a disregard for U.S. foreign interests.”

--Despite New Jersey Gov. Chris Christie’s problems with Bridgegate, he remains chairman of the Republican Governors Association and in January it raised a record $6 million. Christie also helped raised $1.5 million in a swing through Texas last week.

Onetime ally and former Republican Congressman Joe Scarborough of MSNBC said, “I trust Chris. I still take him at his word. But...the fact is, right now, he’s a distraction to the RGA.”

But on Fox News, Karl Rove said “reports of his demise are premature.”

Nonetheless, Hillary Clinton is killing him in the hypothetical polls, such as a recent Marist survey that has her whipping him 58-37.

--Former New Orleans Mayor Ray Nagin was convicted for taking part in a $500,000 bribery and conspiracy scheme, with a federal ground jury finding him guilty on 20 of 21 counts. The bad behavior was post-Katrina. He faces about 20 years in prison.

Nagin’s case centered around the post-hurricane rebuilding effort and kickbacks to Nagin from vendors and other associates. After the verdict was read on Wednesday, he maintained his innocence.

--Editorial / New York Post

“During his mayoral campaign, Bill de Blasio railed against ‘special favors for well-connected corporations.’ But now we’re learning the mayor dispenses his own favors for the well-connected.

“Ask Bishop Orlando Findlayter, pastor of the New Hope Christian church in Queens. Findlayter was part of de Blasio’s transition committee and one of his early backers in the African-American community.

“Late Monday night, Findlayter was taken into custody following a routine traffic stop when cops found two outstanding warrants against him relating to an earlier civil-disobedience arrest. Because he couldn’t get before an arraignment court in time, he was told he would spend the night in jail.

“Local clergy called the mayor – who in turn phoned an official in the NYPD press office to request ‘clarification.’ And the bishop was released for the night.

“Officials insist de Blasio never asked for the bishop’s release, and that the cops were in the process of giving him a desk appearance ticket. But when a mayor personally calls the cops about a case, he’s expressing more than routine curiosity.

“Of course, knowing Bill de Blasio has always had its benefits. As a City Councilman, he made it a ‘high priority’ to have officials reduce the water bill of Dan Cantor, head of the critical Working Families Party. And he intervened to help the nephew of another key politico, Rep. Yvette Clarke, get into the school of her choice.

“For all his preaching about inequality, it turns out that, in de Blasio’s New York, friends of Bill are more equal than others.”

--Meanwhile, Mayor de Blasio took major heat for keeping New York City’s schools open Thursday, with the worst of the storm hitting at the height of the morning rush. NBC’s Al Roker tweeted his astonishment (and added de Blasio would be a one-term mayor...a comment Roker later apologized for...he needn’t have...), while Michael Mulgrew, president of the United Federation of Teachers, blasted the mayor: “Having students, parents and staff traveling in these conditions was unwarranted.”

The situation was compounded when Chancellor Carmen Farina defended the call to keep classes open, declaring it “a beautiful day out there” when the snow had stopped.

Only 45% of the students went to class, compared with 90% on an average school day.

At the press conference Thursday afternoon, de Blasio insisted he made the right call, saying, “There is the illusion you can have perfect information and perfect decisions.” 

But then he said, “We don’t second-guess the National Weather Service.” And then he did just that. “The low end of their estimate suggested that by the time kids were walking in the door of schools, there might have been two or three inches of snow.

“That was not an overwhelming figure from our point of view. The high-end figure was more problematic – but not enough to close school.”

One thing is for sure. Bill de Blasio is simply a jerk. I said more than once that New York City voters were idiots, so they get what they voted for. Four years of jerkdom.

Or as the New York Post editorialized:

“By managing to tick off everyone with his boneheaded decision, he has finally made good on his promise to create One New York.

“If you catch our drift.”

--Col. Bradford Parkinson, the architect of modern navigation, is warning about the vulnerability to attack of the Global Positioning System, on which everything from cars to banking to weapons guidance is dependent.

Parkinson, now a professor at Stanford University, created GPS in the 1970s on behalf of the U.S. military – who still control the satellite system today.

But while the military has protections in place, civilian systems do not, Parkinson told the Financial Times.

“We have to make it more robust... our cellphone towers are timed with GPS. If they lose that time, they lose sync and pretty soon they don’t operate. Our power grid is synchronized with GPS [and] our banking system.”

The UK government released a report this week warning “the conditions are present for a catastrophic ‘Black Swan’ event” that would knock out one or more critical GPS systems.

South Korea has witnessed huge jamming attacks against its GPS systems, launched by North Korea. “More than 1,000 ships and 250 planes had their travel disrupted by North Korean jamming attacks in 2012.” [Sam Jones and Carola Hoyos / Financial Times]

When a ship loses GPS, multiple systems fail.

--Pilita Clark / Financial Times

“Researchers have cast new light on one of the most baffling riddles in climate science: why has global warming stalled when emissions of the greenhouse gases blamed for climate change have kept soaring?

“The explanation lies in an unprecedented strengthening of Pacific trade winds over the past 20 years, according to a study by U.S. and Australian scientists.

“These easterly winds, which blow across the tropics, have speeded up ocean circulation at the equator, pushing heat deep down into the ocean’s depths and bringing cooler water up to the surface.

“This has driven more cooling in other regions and accounts for much of the reason why global average air surface temperatures have stayed virtually steady since 2001, says the paper, published in this week’s Nature Climate Change journal.

“This pause could persist for much of the present decade if the strong trade winds continue, but the paper warns that once they slow down ‘rapid warming is expected to resume.’”

--Astronomers in Australia have identified what they believe to be the oldest known star, estimating in an article for the science journal Nature that it was formed 13.6 billion years ago.

But it’s relatively close to us, sports fans. Around 6,000 light years away. Currently it is dubbed “SMSS J031300.36-670839.3.”

Well, that’s a mouthful, let alone hard on the brain, so I respectfully submit that in light of a certain announcement made this week by a future Hall of Fame baseball player, we name it “Derek Jeter.”

--Two of the bigger dirtballs on Planet Earth these days are the sons of Martin Luther King Jr.; Dexter and Martin III, who have filed suit to force their sister, Bernice, to turn over their father’s Nobel Peace Prize and his traveling Bible so that they can sell them to a private owner.

The problem goes back to an agreement reached in 1995 wherein MLK’s heirs were to turn their inheritance over to a corporate entity, the estate of Martin Luther King Jr. Inc., where Martin III  is chairman of the board.

Bernice, in a statement last week, said she is “appalled,” “ashamed” and “disappointed” by her brothers’ behavior. “It reveals a desperation beyond comprehension.” Their father, she adds, “MUST be turning in his grave.”

As syndicated columnist Leonard Pitts Jr. writes:
“Turning? Martin Luther King must be spinning like a record album.

“Not just because of this, but because over the years his family has missed no opportunity to pimp his legacy. That verb is used advisedly. I am mindful of its racial freight, but frankly, no other word adequately describes the behavior of this family with regard to its most celebrated member.

“Every year, they remind us to respect his legacy, but it seems increasingly apparent they don’t respect – or even fully understand – it themselves.”

Amen.

--In a survey of 12,000 Catholics in 12 countries, commissioned by Univision, among the findings:

40% of Catholics in the United States oppose gay marriage, compared with 99% in Africa.

More than 90% of Catholics in Argentina, Colombia, Brazil, Spain and France support the use of contraception. Only 44% in Congo and 43% in Uganda do. [79% in the United States do.]

87% of Catholics around the world say Pope Francis is doing an excellent or good job. 

76% of Catholics in the U.S. believe in abortion rights in some or all cases.  In the Philippines, just 27% of Catholics said abortion should be allowed under certain circumstances.

--I’ve written in the past of the crime wave in the Caribbean and how tourists need to be on their guard at all times, especially if they are renting out homes. A local Scotch Plains, N.J. man, 41, was killed while vacationing on St. John, Jan. 18, and his parents are having an awful time getting details from incredibly incompetent law enforcement, which is always the case in these parts. It seems it was a robbery / home invasion gone bad. The victim was stabbed in his neck and not found until a day later by a groundskeeper. The police had searched the main house but stupidly failed to look into the guest house where the victim was. The robbers took his cellphone, television, cash and his car.

--The most popular child movie star of all time, Shirley Temple Black, passed away at the age of 85. Among her best known of 40 films by the time she turned 12 were four that co-starred Bill “Bojangles” Robinson, the black dancer 50 years her senior. From 1935 through 1938, Shirley Temple was the top box-office draw in America.

She later had an extensive public service career, running unsuccessfully for a California congressional seat in 1967, but two years later she was appointed the U.S. delegate to the United Nations by President Nixon, and then was U.S. ambassador to Ghana and Czechoslovakia, as well as serving as White House chief of protocol for President Ford.

In 1972, after undergoing a modified radical mastectomy, Temple held a televised news conference from her hospital room to encourage other women to have check-ups, which ironically is in the news again this week as the medical community seems split on just what age mammograms should be recommended.

As the New York Post editorialized:

“President Clinton probably summed her up best in 1998 when he noted she had done ‘a masterful job’ as ambassador, which made her beloved in Ghana and led her to make common cause with Vaclav Havel in the Velvet Revolution. ‘From her childhood to the present day,’ Clinton said, ‘Shirley has always been an ambassador for what is best about America.’ RIP.”

--Finally, this week marks 15 years of StocksandNews. No celebration. I just move on to the next column.

---

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

God bless America.

---

Gold closed at $1319...up $56 on the week
Oil $100.30

Returns for the week 2/10-2/14

Dow Jones +2.3% [16154]
S&P 500 +2.3% [1838]
S&P MidCap +2.9%
Russell 2000 +2.9%
Nasdaq +2.9% [4244]

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

Dow Jones -2.5%
S&P 500 -0.5%
S&P MidCap +0.3%
Russell 2000 -1.2%
Nasdaq +1.6%

Bulls 41.8
Bears 17.4 [Source: Investors Intelligence]

Have a great week. I appreciate your support.

Catch me on Twitter @stocksandnews

Reminder: I do have an iPad app.

Pitchers and catchers are reporting!!!

Brian Trumbore