Stocks and News
Home | Week in Review Process | Terms of Use | About UsContact Us
   Articles Go Fund Me All-Species List Hot Spots Go Fund Me
Week in Review   |  Bar Chat    |  Hot Spots    |   Dr. Bortrum    |   Wall St. History
Week-in-Review
  Search Our Archives: 
 

 

Week in Review

http://www.gofundme.com/s3h2w8

AddThis Feed Button

   

02/22/2014

For the week 2/17-2/21

[Posted 12:00 AM ET]

Washington and Wall Street

You get a break. I have as little to say about the U.S. economy this week as I have in recent years, but I’m going to take advantage of next time being month end to summarize the first sixth of the year vs. my original expectations for 2014.

For now, the week was light on data except for the housing sector and here the news was not good. For starters, a reading on homebuilder sentiment for February took its biggest plunge on record, while the number for housing starts in January was far below expectations and down 16% over December, plus you can’t just blame the weather. Starts in the Midwest were at their worst pace since records have been kept, 1959, but they rose in the weather-battered Northeast to their best level since December 2012. Strange.

Then at week’s end we had existing home sales data for January and it cratered 5.1% to an annualized pace of just 4.62 million, the lowest level since July 2012, but this also wasn’t just weather-related because sales plunged in the West, which obviously wasn’t impacted by what the Midwest, South and Northeast faced.

The existing home median sales price, $188,900, was up 10.7% from a year earlier, but well off the June 2013 high of $214,000.

As for the retail sector, Nordstrom and Wal-Mart reported earnings essentially in line but their guidance for the first quarter was not great.

Recent economic data, while obviously influenced by the weather, has nonetheless been on the discomfiting side but by the time the Federal Reserve’s Open Market Committee next meets in March, I’m not sure we will have shaken out the anomalies in the numbers. That said, at week’s end two Fed governors said there was little reason not to keep tapering the bond-purchase program. 

What did Wall Street do with the above? Equities finished mixed on the week.

Finally, there were a few stories out on President Obama’s 2015 budget, which he’ll be releasing next month. No hints at compromise, we’re told, just a flat-out spending binge on all of the president’s pet projects, which will do nothing but increase tensions heading into the November elections. For example, gone will be the offer to slow the growth of Social Security spending by chaining the program to a new calculation of inflation.

Instead Obama’s spending initiatives are to be funded by a few spending cuts and tax increases on high-income earners.

Europe and Asia

Markit’s flash reading on manufacturing and services for the eurozone was released for February, with the manufacturing PMI at 53, down from 54 in January. The service sector reading was 51.7 vs. 51.6 the prior month.

Germany’s flash PMI manufacturing number declined to 54.7 from 56.5, while the services reading rose to 55.4 from 53.1.

In France, manufacturing fell to 48.5 from 49.3, while the services number plunged to 46.9 from 48.9, both reflecting ongoing contraction. So President Hollande is still under the gun to turn things around.

In the UK, the jobless rate ticked up to 7.2% and retail sales for January fell 1.5% from December, though December’s had surged 2.5%, and January’s figure was still a very solid 4.3% from a year earlier. Inflation is now running at just 1.9%, below the Bank of England’s 2% target.

In Spain, the government reported record exports for 2013 as the country’s competitiveness has improved with falling labor costs, and officials raised their forecast for exports in 2014 to reflect further growth of 7%.

But with an unemployment rate of 26%, domestic demand is likely to remain putrid, though at least there are distinct signs of life in Spain and, while I don’t feel it is warranted, their 10-year bond has a yield of only about 3.55%, an 8-year low.

Speaking of falling yields, Italy’s 10-year is also at an 8-year low, around 3.65%, last I checked, even as Italy’s public debt remains at 133% of GDP.

I don’t understand both Spain and Italy being treated this well by the bond market with the U.S. 10-year at 2.73%. I know, European Central Bank chief Mario Draghi issued that 2012 pledge to do whatever it takes to keep the euro and eurozone intact, but then there is reality. If you tell me Europe’s recovery will take root in earnest, with Italy and Spain participating, I’ll understand. I just believe there is still too much uncertainty, starting with the political angle and the looming European parliament elections in May that may yet result in an earthquake.

And we now have another change in government in Italy. The new prime minister-designate is 39-year-old Matteo Renzi and he is to present his new cabinet to the Italian president today, Saturday, ahead of a confidence vote that could come Monday. 

Renzi still has to pull together a coalition, let alone tackle Italy’s huge economic problems, but thus far he has the support of New Center Right leader Angelino Alfano, who broke off from Silvio Berlusconi’s Forza Italia, while Berlusconi himself said that while he will remain in opposition, he is ready to support Renzi on individual measures “if they go in the right direction for the country.” Berlusconi actually acted like a statesman this week saying, “I had the pleasure today of meeting a prime minister-designate who is exactly half my age. This seems like a good signal for the renewal of the country.”

No doubt Renzi is about generational change. But there are a myriad number of economic reforms that must be enacted for Italy to become competitive again and for this Renzi needs solid majorities in parliament. That is not guaranteed.

He also has to deal with very shaky banks, that are far more concerned about survival and the coming ECB stress tests than lending to business.

Turning to Asia, HSBC released its flash figure on manufacturing in China for February and it wasn’t good, 48.3 vs. 49.5 in January, solidly in contraction mode. But, just like the weather impacting the numbers in the U.S., you have to wait until March (or later) before you shake out the impact of China’s Lunar New Year holiday, which fell on Jan. 31, thereby straddling, and impacting, two months’ worth of data. That said the longer-term trend for manufacturing in China has not been good.

But China’s banks lent more in January than in any month in four years, a major surprise, while at the same time the government said banks’ non-performing loans were at their highest level since Sept. 2008, not good (though not unexpected).

There was a legitimate positive surprise in foreign direct investment here, up 16% in January from a year earlier. Investment from 10 Asian countries and regions, including Hong Kong, Taiwan, Japan and South Korea, rose 22.2% to $9.55 billion in January, while investment from the United States rose 34.9% to $369 million. It fell 41.3% from the European Union to $482 million.

FDI inflows into China in 2013 rose to a record $117.6 billion. [South China Morning Post]

Conversely, in December, the U.S. Treasury Department reported that China reduced its position in U.S. Treasuries by 3.6% to $1.27 trillion, though this is hardly worrisome. [Overall foreign holdings of U.S. Treasuries rose 1.4% to a record $5.79 trillion, sports fans.]

In Japan, fourth quarter GDP came in at a disappointing 1.1% annualized rate when 2.8% was expected, this after Q3 was 1.0%. Cap-ex (business spending) rose 1.3% over the previous quarter, just so-so, while consumer spending rose only 0.5%. Exports were up just 0.4%, imports up 3.5%.

What’s concerning about the GDP data is a slump for the April-June period is already in the cards when the government increases the sales tax from 5% to 8% April 1. Currently, the estimate is for the Japanese economy to contract during this period by a 4.1% annualized rate as consumers adjust.

Prime Minister Shinzo Abe still hasn’t revealed details of his secret stimulus program (or “third arrow”), while at the same time labor unions are negotiating with Japan’s larger employers on new contracts and Abe wants to see businesses hike wages 2% to 3% to help ameliorate the impact of the value-added tax increase and encourage consumer spending overall.

Separately, the Bank of Japan maintained its asset purchases program.

Street Bytes

--The Dow Jones finished down 0.3% on the holiday-shortened week to 16103, while the S&P 500 lost 0.1% and Nasdaq gained 0.5%.

--U.S. Treasury Yields

6-mo. 0.08% 2-yr. 0.31% 10-yr. 2.73% 30-yr. 3.69%

Yields were virtually unchanged.

It was inflation data week. Producer prices in January rose 0.2%, as expected, up 0.1% ex-food and energy. For the 12 months the PPI is up 1.2%, 1.3% on core. Consumer prices rose 0.1%, also 0.1% on core, and are both up 1.6% year-on-year.

--Transcripts of the Federal Reserve’s 2008 meetings were finally released on Friday, and they show Fed officials did not immediately realize the devastation that Lehman Brothers’ failure would wreak on the economy. The Fed opted to hold the line on interest rates that September, for example, with then chairman Ben Bernanke saying “our current funds rate setting is appropriate, and I don’t really see any reason to change.”

Dave Stockton, the Fed’s top forecaster, said on Sept. 16, 2008, a day after Lehman went under, “I don’t think we’ve seen a significant change in the basic outlook. We’re still expecting a very gradual pickup in GDP growth over the next year.” Nice call.

--Facebook Inc. rocked the investment world by agreeing to acquire mobile-messaging startup WhatsApp Inc. for $19 billion, including $3 billion in restricted stock for WhatsApp’s founders and staff.

WhatsApp has 450 million users and competes with Snapchat Inc., which turned down Facebook’s offer of $3 billion last year, as well as Twitter. WhatsApp’s growth has been staggering, seeing as it’s only been around since 2009. It’s very big in the developing world and, for example, 90% of instant messages in Mexico go through WhatsApp. As a story in Bloomberg points out, people are relying more on free texting applications such as this one and phone carriers, used to charging for texts, lost out on $32.5 billion in texting fees in 2013, with the figure projected to reach $54 billion by 2016.

Facebook CEO Mark Zuckerberg said in a statement: “WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable.”

But following the announcement, some WhatsApp users took to Twitter to protest the acquisition. The protests involve Facebook’s privacy issues, as well as all the ads on Facebook with the exploitation of your likes and habits. WhatsApp, on the other hand, has made a big deal of the fact it doesn’t exploit its users in any fashion.  Zuckerberg said Facebook would not run ads on WhatsApp.

Editorial / Wall Street Journal

“We guess the one thing that can be truly said about Facebook’s mind-bending $19 billion purchase of WhatsApp is that Alexander Graham Bell had it right the first time: There’s money to be made in the human species’ irrepressible need to chat with each other over long distances. Beyond that reality, virtually everything about the purchase is off the charts.

“With a valuation of $19 billion, WhatsApp, founded five years ago, is worth more than food giant ConAgra Foods, whose market cap is $12.27 billion. ConAgra employs 26,000 people. WhatsApp? Apparently it takes only 55 people to run the modern $19 billion company. As to what WhatsApp does, even press reports described it as ‘a kind of replacement for text messaging.’....

“We’ll learn in time if this acquisition makes financial sense. It makes very clear, though, that the tremendous creative drive that gave us Mr. Bell’s telephone company is up and running in (co-founder Jan) Koum’s billions of messages.”

If Facebook monetizes WhatsApp, good move. If not, one of the worst acquisitions of all time.

--Wal-Mart’s quarterly profit for the three months ended Jan. 31 came in 22% lower than last year though it met expectations. The company guided lower, however, as comp-store sales for the three months fell 0.4% in the U.S. Total revenue rose just 1.4% to $129.7 billion. The world’s largest retailer expects sales this year will grow at the lower end of its earlier forecast of 3%-5%.

--Tesla Motors Inc. reported revenue in the fourth quarter of $615.2 million from $306.3 million in the same quarter a year earlier and the shares soared to a new high (and a further outrageous valuation). 

Tesla sold 22,000 vehicles in 2013 and is forecasting sales of 35,000 Model S sedans for 2014 and by the middle of this year, CEO Elon Musk said its factory would be refitted to enable it to build 1,000 a week, or annual production of 50,000.

Within a decade, Musk expects Tesla to build half a million vehicles a year. But this will require all sorts of cooperation with parts suppliers, such as battery maker Panasonic, who will have to ramp up themselves big time. That’s not always as simple as it sounds, let alone a challenge for Tesla itself.

[Earlier in the week, Tesla shares surged on word Elon Musk had met with Apple’s acquisitions chief, though the secret meeting was last spring and just reported on by the San Francisco Chronicle. The two company’s headquarters are near each other. Past analyst comments have suggested that Apple could acquire Tesla as much to bring Musk into the Apple fold as anything else; Musk being the kind of innovator needed at Apple in the post-Steve Jobs era. Can’t disagree with that sentiment.]

--Jerry Hirsch / Los Angeles Times

“America loves trucks. California? The Prius hybrid.

“Toyota’s Prius was the best-selling vehicle in the state for the second consecutive year in 2013, highlighting California’s radically different taste in automobiles. Nationally, Ford’s F-Series truck has been the bestselling vehicle for more than three decades.

“The Prius ranked 16th in sales nationally.”

--The UAW was stunned when it lost a vote for union representation at the Volkswagen plant in Chattanooga, Tenn., which would have been its first successful organization of workers at a foreign automaker in the South.

Republican Sen. Bob Corker of Tennessee led the charge against unionization, saying that he was told VW would soon announce plans to build a new SUV in Chattanooga if workers rejected the union.

Robert J. Samuelson / Washington Post

“The United Auto Workers’ defeat, by a 712 to 626 vote...has been attributed to many causes: the South’s anti-union tradition; the outspoken opposition of some local, Republican officials, including Sen. Bob Corker, Chattanooga’s former mayor; and anti-union campaigns by conservative groups. But the deeper cause is simpler: Private-sector unions can no longer provide big benefits to members.

“On paper, unions can deliver three things: higher wages and fringe benefits; greater job security; and better working conditions, including protection against arbitrary or unlawful management practices. In the 1950s and ‘60s, unions could win these gains. Now, greater competition has eroded their leverage. Workers weighing the reduced advantages of being unionized must also consider the possibility that high-priced, rigid union labor might one day cost them their jobs. In Chattanooga, this calculus went against the UAW.

“Unions’ eclipse has been stunning. At the end of World War II, roughly a third of private-sector jobs were unionized, especially in large firms. By 2013, the comparable figure was 6.7 percent, says the Bureau of Labor Statistics. (The rate of unionization for all workers was 11.3 percent, but that figure resulted only from greater unionization – 35.3 percent – among government workers.)....

“Hardly anyone doubts that high labor costs and obsolete work rules contributed mightily to the crackup of the Big Three. VW’s workers recoiled; they kept the status quo. For the UAW, success in one era sowed failure in the next.”

--The non-partisan Congressional Budget Office said President Obama’s proposal to lift the federal minimum wage to $10.10 over two years would cause a loss of 500,000 jobs in the U.S. by the second half of 2016.

Yes, 16.5 million workers on hourly salaries would see an increase in earnings which could flow through to aid the economy, but the net effect on jobs would be negative.

--Pretty scary piece in the New York Times by Gardiner Harris on growing U.S. unease with India and the manufacturing of over-the-counter and prescription drugs that are exported to the United States. The commissioner of the Food and Drug Administration arrived in India “to express her growing unease with the safety of Indian medicines because of ‘recent lapses in quality at a handful of pharmaceutical firms.’”

India “supplies 40 percent of over-the-counter and generic prescription drugs consumed” here. Conditions at some of the manufacturing facilities are beyond disgusting, such as flies “too numerous to count” in critical plant areas. Other facilities are first class. “The World Health Organization estimated that one in five drugs made in India are fakes.” [Gardiner Harris]

--Hewlett-Packard beat earnings in its most recent quarter as revenues came in better than expected, though still down 1% from year earlier levels. That said, HP guided higher as CEO Meg Whitman’s restructuring plan remains intact.

--Nordstrom Inc.’s sales at its department stores fell 3.3% in the fourth quarter, the third consecutive quarter of falling sales.

--Shares in Coca-Cola fell after its profit declined due to slowing sales in the U.S. and Europe.

--Natural-gas futures hit five-year highs Thursday, then fell a bit as a report showed that stockpiles are higher than expected, though still low. A return to frigid weather is in the cards for next week, however, so nat gas could soar anew.

--Net gold demand fell 15% in 2013, according to the World Gold Council, thanks to massive liquidation from bullion-backed exchange-traded funds.

But the price of the precious metal has rebounded thus far in 2014, as demand for gold jewelry, coins and bars has risen and the outflow from ETFs has tailed off.

China overtook India as the world’s biggest gold consumer, thanks to a 29-percent rise in Chinese jewelry demand and a 38-percent increase in coin and bar buying.

--Fannie Mae announced it would pay the U.S. Treasury $7.2 billion in dividends next month, meaning the total that Fannie and its smaller rival Freddie Mac will have repaid the government will be around $192.5 billion, exceeding the $187.5 billion in bailout money they received from taxpayers.

But the two remain under government control until the Treasury, their regulator and/or Congress act, which is long overdue.

--Business Wire, which publishes corporate news releases in the U.S. and is owned by Warren Buffett’s Berkshire Hathaway, announced it would stop selling direct feeds to high-speed traders. Buffett was directly involved in the decision, fearing recent publicity that the direct sales were giving high-frequency traders an unfair advantage was damaging the company’s overall reputation.

--Royal Bank of Scotland, which is 81% owned by the British government, is expected to announce a major retrenchment next week that could result in the loss of at least 30,000 jobs. RBS will withdraw from its riskier investment activities as it becomes a much smaller retail and commercial bank. [Financial Times]

--According to a National Transportation Safety Board report looking into a fatal United Parcel Service Inc. flight to Alabama last Aug. 14, Captain Cerea Beal told a fellow UPS pilot within a day of the flight that “the schedules are killing him and he could not keep this up.” Beal and the co-pilot were killed, “about six weeks after cargo airlines were exempted from new U.S. rules to limit the hours passenger-airline pilots can fly, particularly late at night.” [Bloomberg]

At an NTSB hearing, documents and testimony revealed the pilots made a number of errors as they were attempting to land at Birmingham-Shuttlesworth International Airport. Fatigue was undoubtedly a factor, though the actual travel schedules for the pilots were normal. Both just didn’t treat their final rest periods as such.

--Ferrari reported record profits in 2013, despite selling fewer cars than the year before as the company focuses on improving its profit margins. Ferrari made $363 million...not too shabby...on 6,922 sales. The U.S. remains Ferrari’s biggest market, with more than 2,000 deliveries – an increase of about 9% over 2012. [You can easily figure out the profit per car sold...but give it to your kids as a word problem.]

--I can’t say I really care about Bitcoin, but with the highly publicized problems on many of the Bitcoin exchanges the past two weeks in particular, I can’t help but note that the price on the largest exchange, Mt. Gox in Tokyo, fell from over $1,000 about a month ago to $135 on Thursday, while the average Bitcoin exchange price worldwide was somewhere around $600. As I quoted Jim Grant the other day when asked about the virtual currency, why not invest in gold, “nature’s bitcoin,” instead.

Ajay Banga, CEO of Mastercard Inc., spoke for the skeptics in a recent interview: “The world is not short of currencies, so what is this currency solving for?”

Bitcoins’ proponents says first and foremost it cuts out middlemen, like Mastercard. But with this kind of extreme volatility and it being a new favorite of hackers, it just makes sense to lay off for a spell.

--I’ve been on Twitter a few months and I have a pretty strong opinion about it that I’ll keep to myself for now. I do have to note a bit I saw in the March 2014 issue of Golf Magazine and golfer Stewart Cink, who had been known as the leader in the Twitter clubhouse, yet now goes weeks without a peep. Golf Magazine asked him, “Are you burnt out on tweeting?”

Cink: “The way I started using Twitter was by keeping a constant back and forth with my followers. Over Twitter’s life, it seems like the negativity has gotten out of control. So for someone who reads all their replies, it just gets depressing.”

GM: “Someone recently posted, ‘can’t stand watching [Cink] play’ and ‘#worstmajorwinner ever.’”

Cink: “People get a kick out of being negative. They don’t expect anybody to read it. Well, I read my replies. And it got to be pretty annoying. Twitter is still fun. If I have a fun thing or an observation I want to share with people, I’ll still do it, but I won’t go back and read any of my replies.”

[Cink has been struggling on the PGA Tour since winning the 2009 British Open, the year then 59-year-old Tom Watson broke our hearts in failing to close what would have been the best sports story of the century.]

--Dick Cabela, co-founder of Cabela’s sporting goods, died Monday at the age of 77.

David Colker / Los Angeles Times

“The Cabela’s Inc. sporting goods’ empire – with $3.1 billion in sales in 2012 from mail order and big-box retail stores – started at a kitchen table in 1961 in the small town of Chappell, Neb.

“Dick Cabela had spent $45 on nearly 3,000 hand-tied fishing lures while on a buying trip to Chicago with his father for the family hardware and furniture store. Cabela tried to sell the fishing flies in the store, but they were a dud – not one sold. Next he took out an ad in a Casper, Wyo., newspaper offering 12 of the flies for $1, and got only one sale.

“Finally, according to a Cabela’s company history, he placed an ad in Sports Afield magazine: ‘FREE Introductory offer!!! 5 popular Grade A hand-tied flies. Send 25c for postage and handling.’ The orders started pouring in – Cabela and his wife, Mary, began assembling packages of the lures in their kitchen and sending them out.

“ ‘Anyone in business is going to make mistakes,’ Cabela told Investor’s Business Daily in 2012. ‘We always learn something valuable from them.’....

“The profit from the ‘free’ fishing flies was only about 11 cents per transaction, but it gave the Cabelas something far more valuable for the future – the start of a mailing list. Mary kept a record of names and addresses on recipe cards, and Dick bought more imported gear.”

In 1963, with business growing, brother Jim was offered half ownership if he quit his job to join the venture.

It took a while, though. “In 1968 they moved operations into a former John Deere dealer in the nearby town of Sidney. Sales were booming and the catalogs went far beyond fishing to offer products for hunting, backpacking and other outdoor activities. Teams of telephone operators in the building took orders.

“In 1991 the company opened a separate 75,000-square-foot retail store in Sidney, dominated by a man-made mountain populated by stuffed, mounted animals.”

Well, the big-box stores spread around the country. RIP, Dick Cabela.

--Jimmy Fallon garnered 11.3 million viewers, including moi, for his debut on Monday night, the second-biggest audience for “The Tonight Show” since May 2009.

Foreign Affairs

Ukraine: On Friday morning, President Viktor Yanukovych said an agreement had been reached with the opposition to end the nation’s crippling crisis, though the three European foreign ministers involved in the negotiations urged caution. As part of the “road-map towards a political solution,” early elections would be held by December and an interim coalition government formed. 

The president and opposition leaders did then sign the deal later in the day, with the agreement also providing for electoral reform and constitutional changes reducing the president’s power, with the 2004 constitution being restored within 48 hours. A national unity government is to be formed within 10 days.

Parliament approved the deal and voted for a change in the law that could lead to the release of jailed former Prime Minister Yulia Tymoshenko, an arch-rival of Yanukovych.

This will be yet another classic case of “wait 24 hours,” particularly since the demand of many in the opposition that Yanukovych step down is not part of the deal. Friday night, many in Independence Square said they would stay until Yanukovych is forced out.

We also must now wait to see how Vladimir Putin will respond once the Olympics end. He could opt to withhold desperately needed, and promised, funds for Ukraine (though supposedly a second tranche of $2 billion was delivered this week...making it $5 billion thus far of $15 billion Russia committed to). Should Yanukovych leave office, Putin could resort to force to keep Ukraine in Russia’s sphere. Some say he could act on Russia’s naval interests at Odessa and Sevastopol, both with large Russian populations.

The health ministry said 77 people had been killed since Tuesday in the escalating violence, and another 577 were injured, though others place the number of dead on Thursday alone at 100.

Thursday’s demonstrations were yet another scene out of the Middle Ages, with police snipers picking off at least 20 protesters.

Thus far the Ukrainian army has stayed out of the fray, but should it be called on civil war would result. Ukraine, as I’ve noted many times before, is literally split East-West; East siding with Russia, West with Europe and the United States. Most say the population is about 60% West, 40% East. The military, you’d expect, would be split along similar lines. There is talk portions of the heavily industrialized East could seek autonomy, an act Putin would no doubt encourage.

Worrisomely, the U.S. State Department said that whereas in the past they were able to make contact with senior military leaders in Ukraine, the army is now ignoring Washington. President Yanukovych removed the head of all armed forces, just weeks after he had replaced the head of the army, both moves without explanation.

The army also may not be up to speed. Yanukovych has focused resources in recent years on building up the security forces instead, some of whom appear to be changing their allegiances.

For its part, Russia warned Yanukovych not to let opponents walk over him “like a doormat,” in the words of Prime Minister Dmitry Medvedev. The EU agreed on Thursday to impose sanctions on Ukrainian officials “responsible for violence and excessive force.”

Friday afternoon President Obama and Putin had a phone conversation that the White House wants us to believe was “constructive.”

[The following commentaries were written prior to Friday’s developments.]

Walter Russell Mead / Wall Street Journal

“The Ukrainian government’s assault on protesters in Kiev’s Independence Square over the past 48 hours shocked Europe and the world. The turmoil is also forcing both the European Union and the United States to re-examine some of their deepest assumptions about foreign policy in the post-Cold War environment.

“The Ukrainian crisis started last fall, when EU ministers thought Ukraine was about to sign an Association Agreement that would have begun the process of economic integration between Europe’s second-largest country and the European Union. This would have been a decisive step for Ukraine. Long hesitating between Moscow and Brussels, Ukraine would have seen the Association Agreement put it firmly on a Western path....

“But the diplomats in Brussels and Washington forgot to factor one man into their calculations.  For Russia’s President Vladimir Putin, the prospect that a united Ukraine might desert Russia and join Europe is completely unacceptable. Mr. Putin saw the West’s overtures to Ukraine as an existential threat to Russia’s great power status and his own political position. Sensing that the West was unprepared and unfocused, he moved quickly and effectively to block the wedding by offering Mr. Yanukovych $15 billion to leave the Europeans standing at the altar.

“European diplomats were flummoxed....

“Washington was no better prepared....

“Inside Ukraine... The western half of the country sees Moscow as a hostile, rapacious power and believes – correctly – that Mr. Putin’s vision for their country will involve the loss of democratic freedoms and destroy any hope of establishing the rule of law and transparent institutions, or of joining the EU.

“The eastern half is not so sure. Trade and cultural connections with Russia are stronger than they are with Europe, and while the EU is a good market for Ukrainian raw materials, Russia is willing to buy Ukrainian manufactured and consumer goods that Europe doesn’t much want....

“Both the EU and the U.S. made a historic blunder by underestimating Russia’s reaction to the Ukrainian trade agreement. Mr. Putin cannot let Ukraine slip out of Russia’s sphere without throwing everything he has into the fight....

“(U.S. diplomacy) with Russia has focused on order-building questions like nonproliferation, while gravely underestimating the degree to which Russia’s geopolitical interests conflict with those of the U.S....

“There are many things that Vladimir Putin doesn’t understand, but geopolitics isn’t one of them. His ability to identify and exploit the difference between the West’s rhetoric and its capabilities and intentions has allowed him to stop NATO expansion, split Georgia, subject Washington to serial humiliations in Syria and, now, to bring chaos to Ukraine.

“Mr. Putin is a master of a game that the West doesn’t want to play, and as a result he’s won game after game with weak cards. He cannot use smoke and mirrors to elevate Russia back into superpower rank, and bringing a peaceful Ukraine back into the Kremlin’s tight embrace is also probably beyond him.

“But as long as the West, beguiled by dreams of win-win solutions, fails to grapple effectively in the muddy, zero-sum world of classic geopolitics, Mr. Putin and his fellow revisionists in Beijing and Tehran will continue to wreak havoc with Western designs.”

George Will / Washington Post

“Russia is ruled by a little, strutting Mussolini – the Duce, like Putin, enjoyed being photographed with his chest bare and his biceps flexed. Putin is unreconciled to the ‘tragedy,’ as he calls it, of the Soviet Union’s demise. It was within the Soviet apparatus of oppression that he honed the skills by which he governs – censorship, corruption, brutality, oppression, assassination.

“Remember when President George W. Bush peered into Putin’s eyes and got ‘a sense of his soul’ as someone ‘very straightforward and trustworthy’? Remember when Putin fed the world the fable about rushing naked from his burning dacha – the fire started when Putin was in a sauna – before the rescue of his cherished crucifix, which had belonged to his sainted mother? Ukrainians, whose hard history has immunized them against the folly of wishful thinking, see in Putin’s ferret face the cold eyes of a prison warden....

“The Soviet Union – ‘one of modern history’s pivotal experiments,’ in the weasel words of NBC’s Olympics coverage – existed for seven miserable decades. Ukraine’s agony is a reverberation of the protracted process of cleaning up after the ‘experiment.’ So, this is perhaps the final episode of the Cold War. Does America’s unusually loquacious 44th president remember how the words of the 40th – ‘Tear down this wall!’ – helped to win it?”

Editorial / Wall Street Journal

“The Sochi Olympics have showcased the face of Russia that President Vladimir Putin wants the world to see – spanking new, an international crossroads, and a revived global power. This is a comely veneer. The real Russia is on display this week in Kiev, where Ukraine’s government prodded by the Kremlin is attacking peaceful protestors with guns and truncheons. This is the Russia that the West needs to understand and resist....

“Mr. Putin’s agenda in Ukraine is part of his larger plans to solidify his own authoritarian control and revive Greater Russia. Without Ukraine, the most important of the former Soviet satellites, a new Russian empire is impossible. With Ukraine, Greater Russia sits on the border of the EU. If Ukraine moves toward Europe with a president who isn’t a Russian satrap, it also sets a democratic example for Russians. The world is seeing that Mr. Putin will do what it takes to stop such an event, even if it risks a civil war in Ukraine.

“The Russian is willing to play this rough because he sees Western weakness. The EU is hopeless, led by a Germany so comfortable in its pacifism that it won’t risk even a diplomatic confrontation. As for the U.S., it’s no coincidence that Mr. Putin asserted himself in Ukraine not long after Mr. Obama retreated in humiliating fashion from his ‘red line’ in Syria. As always in history, such timidity invites the aggression it purports to prevent. If this American president won’t even bomb Damascus airfields to stop the use of chemical weapons, why would Mr. Putin think Mr. Obama would do anything for Eastern Europe?....

“No one wants a new Cold War, but no one should want a civil war in Eastern Europe either. Yet that is where Mr. Putin’s intervention and Western passivity are leading. Mr. Obama may still be able to stop it if he finally admits Vladimir Putin’s deep hostility to a free and democratic Europe and clearly tells protesting Ukrainians that we’re on their side.”

Syria: The unspeakable violence continued after peace talks in Geneva collapsed. At least 50 people were killed in a car bomb attack at a Syrian refugee camp near the Turkish border on Friday, with the al-Qaeda-inspired Islamic State of Iraq and Greater Syria thought to be behind it. Turkey is sheltering more than 600,000 Syrians and has kept its border open throughout the three-year-old conflict.

Saudi Arabia and other Gulf allies are beginning to supply the opposition with more sophisticated weaponry, including shoulder-fired missiles that can take down jets, according to the Wall Street Journal. The United States is giving large sums of money to pay the rebels’ salaries, according to rebel commanders receiving some of the funds.

Meanwhile, Secretary of State John Kerry said in Jakarta last weekend, Russia was “enabling Assad to double down, which is creating an enormous problem.” No kidding. Russia is winning.

Fouad Ajami / Wall Street Journal

“Sen. John McCain took to the Senate floor on Feb. 12 to shine a bright light on the plight of the Syrian people and its consequences. He had with him a sample of unforgettable images, 55,000 photographs in all, of the brutalities inflicted on 11,000 detainees of Bashar Assad’s regime. Reflections of the Balkan horrors of the 1990s – evidence of torture, starvation, systematic rape and slaughter.

“ ‘We must not look away,’ Mr. McCain said. Failure to ‘acknowledge through our sense of revulsion that what is happening in Syria today,’ he said, would be ‘a stain on the collective conscience of moral people everywhere.’

“It will be said of President Barack Obama when he leaves office that he kept the U.S. out of the Syrian ordeal. But at what price? Even the architects of his Syria policy now acknowledge its utter failure. With more than 130,000 dead [Ed. now 140,000] and millions displaced, it is too late for dissimulation and doublespeak....

“The House of Assad and its ruling cabal have behind it nearly five decades of violence and subterfuge. After five years, they have taken the measure of Mr. Obama: For a fleeting moment, they feared that American power could decapitate their regime. Once spared, they grew emboldened, openly defying the will of the U.S. and U.N.

“In the Geneva talks that ended (last) Saturday, the Assad regime said any ‘peace’ or ‘power-sharing’ agreement would not include the dictator standing down. The fence-sitters in Syria’s neighborhood could be forgiven the conclusion that Bashar Assad’s reign will outlast the presidency of Barack Obama. That would be a stain indeed.”

Professor Stephen Hawking / Washington Post

“The Greek philosopher Aristotle believed that the universe had existed forever. The reason humanity was not more developed, he believed, was that floods or other natural disasters repeatedly set civilization back to the beginning.

“Today, humans are developing ever faster. Our knowledge is growing exponentially and with it, our technology. But humans still have the instincts, and in particular the aggressive impulses, that we had in caveman days. Aggression has had definite advantages for survival, but when modern technology meets ancient aggression the entire human race and most of the rest of life on Earth is at risk.

“Today in Syria we see modern technology in the form of bombs, chemicals and other weapons being used to further so-called intelligent political ends.

“But it does not feel intelligent to watch as more than 100,000 people are killed or while children are targeted. It feels downright stupid, and worse, to prevent humanitarian supplies from reaching clinics where, as Save the Children will document in a forthcoming report, children are having limbs amputated for lack of basic facilities and newborn babies are dying in incubators for lack of power.

“What’s happening in Syria is an abomination, one that the world is watching coldly from a distance. Where is our emotional intelligence, our sense of collective justice?....

“We now know that Aristotle was wrong: The universe has not existed forever. It began about 14 billion years ago. But he was right that great disasters represent major steps backward for civilization. The war in Syria may not represent the end of humanity, but every injustice committed is a chip in the façade of what holds us together. The universal principle of justice may not be rooted in physics but it is no less fundamental to our existence. For without it, before long, human beings will surely cease to exist.”

Iran: Some progress was supposedly being made in the latest talks over Iran’s nuclear program, such as an accelerated timetable for talks, while U.N. inspectors said they have improved access to Tehran’s nuclear facilities.

But efforts to limit Iran’s ballistic missile program have been deemed non-negotiable by Iranian Foreign Minister Javad Zarif, which, just as in the case of the disputed military base at Parchin, is all you need to know about Iran’s true intentions. Tehran continues to test its weapons, arguing they are defensive, which is a bunch of b.s.

Regarding Parchin specifically, the International Atomic Energy Agency said, “Since the Agency’s first request for access (to the base) extensive activities have taken place...that will have seriously undermined the Agency’s ability to conduct effective verification.”

I told you long ago, the Iranians paved the place over! Yes, it’s been largely sanitized. And this is where, no doubt, Iran conducted nuclear trigger tests.

Prior to the resumption of talks in Vienna, Supreme Leader Ayatollah Khamenei said the session will “lead nowhere.” According to Iranian TV, while still signaling his support for President Rohani, Khamenei said, “I’m not optimistic about the nuclear talks, but not opposed to them either.” The ayatollah added Iran will “never succumb to the bullying and blackmailing of America.”

Russia is also apparently working on an oil-for-goods deal, which would undercut Western sanctions. Russia would build a second reactor at Russian-built Bushehr in exchange for 500,000 barrels of oil on a daily basis. Iran could use some of the proceeds to pay for the plant.

While the deal is unlikely as of now, should it come about it makes negotiations over Iran’s overall nuclear program impossible.

Lebanon: An al-Qaeda-linked group was responsible for two suicide bombings in Hizbullah-controlled suburbs of Beirut on Wednesday, killing four and wounding 70. One attacker was in a car, the other on a motorcycle, as al-Qaeda continues to attempt to bring the Syrian war to Lebanon, going after Hizbullah for helping Bashar Assad.

But last Saturday, out of nowhere, Prime Minister Tammam Salam formed a 24-member Cabinet, ending months of political deadlock. Presidential elections are due May 25 and the first issue is whether the security situation will be good enough to hold them on time.

Salam is a centrist, 68, and vowed that his Cabinet left no room for political disruptions. Former Prime Minister Saad Hariri congratulated Salam while praising Beirut’s MPs for their “patience and wisdom.” Hizbullah leader Sayyed Hasan Nasrallah voiced support for the “compromise” Cabinet.

Michael Young / The Daily Star

“According to the new information minister, Ramzi Joreige, President Michel Sleiman is pleased with the government of Prime Minister Tammam Salam, because it reflects the nature of the Lebanese system and was ‘made in Lebanon.’

“The Cabinet certainly reflects the nature of the political and confessional system, for good and evil, but it is far less certain that an agreement became possible because the Lebanese parties alone decided that an 11-month vacuum was intolerable. Clearly, regional governments wanted to calm the volatile Lebanese situation.

“That’s reassuring. Since we’re incapable of agreeing between ourselves, let others make us do so. Perhaps that’s the only positive thing in the Salam government, which will have little time to do much before the presidential election in May. But then the government isn’t really here to do more than generate concord and ensure that a successor to Michel Sleiman can be consensually agreed.

“Hizbullah’s haste is motivated by the situation in Syria, and the success of President Bashar Assad’s regime in regaining ground in recent months. The party seeks to reflect this by reinforcing its own dominance in Lebanon through the presidential election and parliamentary elections scheduled for November. Most important, it does not want such a project undermined by a breakout of sectarian violence in Lebanon, which is why Hizbullah has sought to contain the consequences of bombings, the latest yesterday, in Shiite areas....

“Hizbullah can control the response for a time, but it is doubtful it can do so indefinitely....

“Hizbullah will be weighing its domestic behavior against regional developments. If the Syrian rebels, who are being trained by the Americans and receiving American and Gulf Arab money and more advanced weapons, mount an offensive in spring against Damascus, the party will find itself in the forefront of the battle. This could impel Hizbullah to freeze domestic cooperation pending a clearer outcome.....

“Hizbullah will also await the result of negotiations over Iran’s nuclear program. It will try to exploit any breakthrough to consolidate its position. But with Syria increasingly imposing itself on the United States and regional actors, nuclear matters may be pushed to the back burner, even if Tehran will have to balance the gains from a nuclear deal against the economic crisis at home, made worse by Iran’s costly commitment to the Assad regime.

“Michel Sleiman may well believe that the Salam government was made in Lebanon. But wherever it was really made, it is the events in the region that will ultimately decide whether it breaks or not.”

Egypt: An explosion ripped through a bus carrying South Korean tourists in the Sinai, killing three. Insurgents are seeking ways to cripple the government by hitting the country’s vital tourism industry.

While the Egyptian military government has launched a crackdown on supporters of former President Morsi, militants have killed at least 100 police officers and soldiers since August, including more than 30 this year.

The problems in the tourism sector, though, are tragic, including the impact on animals. As reported by Ruth Pollard of the Sydney Morning Herald:

“At the Giza pyramids, animal rights groups have stepped in to feed the starving horses that used to pull tourists in carriages around the site, while along the waterfront of Dahab, tourists are so scarce that businesses are lucky to make one sale in a day.”

Tourism provides for 12.5% of Egypt’s employment and 11.3% of GDP.

Afghanistan: There is increasing talk at the Pentagon and the White House of a total withdrawal by end of the year with the relationship between Washington and Kabul at a new low. As a security expert told Andrew Tilghman of Military Times, “(Hamid) Karzai is really strengthening the hand of the anti-war elements in Washington.”

Anthony Cordesman, an influential defense strategists, said the U.S. war effort “has become a game of whack-a-mole” and that Afghanistan has “marginal strategic interest to the United States” and is “no longer...a meaningful center of international terrorism.”

North Korea: In a blistering report, a United Nation inquiry into human rights in North Korea concluded Kim Jong-Un should stand trial at the International Criminal Court for crimes against humanity.

Commissioners say the crimes include “extermination, murder, enslavement, torture, imprisonment, rape, forced abortions and other sexual violence.”

Kim’s regime is holding 80,000 to 120,000 political prisoners, a figure that is down from past estimates due to deaths in camp.

“The gravity, scale and nature of these violations reveal a state that does not have any parallel in the contemporary world. The key to the political system is the vast political and security apparatus that strategically uses surveillance, coercion, fear and punishment to preclude the expression of any dissent.”

Kim is singled out for spending large sums on luxury goods and advancing his personality cult. Military spending takes precedence over feeding the people.

The Commission of Inquiry was led by Australian judge Michael Kirby who told Reuters the crimes his team had catalogued were reminiscent of those committed by the Nazis in World War II. “Some of them are strikingly similar,” he said.

“At the end of the Second World War, so many people said: ‘If only we had known...’ Now the international community does know,” Kirby added.

Nicholas Eberstadt / Wall Street Journal

“Given the bombshell report, democratic governments and independent organizations can no longer act as if they did not know. Their dealings with Pyongyang must always be considered in light of this damning document. Now is the time for the never agains:

“Never again should Western humanitarian aid be given to North Korea to hand out at its own discretion, as if Pyongyang were a government like any other.

“Never again must Beijing – which like Pyongyang refused to cooperate with the U.N. investigation – be given a free pass for financing, enabling and protecting this most odious of all regimes. Challenge China to veto the referral for crimes against humanity on the U.N. Security Council, and let Beijing go on record defending state-sponsored mass murder. Make the Chinese veto it 20 times if they dare. Beijing is highly sensitive to public shaming, and it must be shamed and penalized for its indefensible support of Pyongyang until it cuts its client-state loose.

“Never again must South Koreans avert their eyes from the catastrophe that is befalling their compatriots across the demilitarized zone. And never again must Seoul forget that it is legally bound to grant citizenship to refugees from the nightmare to the North.

“Never again must the rest of us live comfortably with the knowledge of what is happening right now to ordinary people in North Korea.”

[I have more details of the report on my “Hot Spots” link.]

China: I am long on record as saying the Dalai Lama is one of the more overrated figures on Earth. Just look at his lack of success in improving the lot of his people for all these decades. It is a waste of time for America’s political leaders to meet with the man, but once again President Obama did so on Friday, raising the ire of Beijing, who regards the Dalai Lama as a political exile and violent anti-China Separatist.

Of course the religious leader is hardly violent and has consistently sought greater autonomy for Tibet, but he’s been totally ineffective. The U.S. should be working through other diplomatic channels to improve the lot of the Tibetan people.

Separately, on a visit to Beijing, Sec. of State Kerry reached agreement with his Beijing counterparts on an effort to work together to reduce the effects of global climate change. 

But Kerry made no breakthroughs on easing tensions in the East and South China Seas.

In other words, it was another failed foreign adventure for the secretary, even as reports emerge that China has been training for a “short, sharp war” against Japan in the East China Sea, according to a senior U.S. military officer at a navy conference in San Diego.

Captain James Farrell, director of intelligence for the U.S. Pacific Fleet, said, “We witnessed the massive amphibious and cross military region enterprise...(and) concluded that the PLA (People’s Liberation Army) has been given the new task of being able to conduct a short sharp war to destroy Japanese forces in the East China Sea following with what can only be an expected seizure of the Senkakus,” the disputed islands claimed by both.

Lastly, acclaimed primatologist Jane Goodall said China is exploiting Africa’s resources just like European colonizers did, with disastrous effects for the environment.

China, said Goodall on the eve of her 80th birthday, has been investing heavily in African natural resources and paying little attention to the environmental impact.

But when it comes to poaching for ivory, Goodall is optimistic, citing the recent destruction of illegal stockpiles. On this score, Goodall is a bit naïve, but hopefully a year from now I’m able to say I’m optimistic too.

Thailand: Clashes between anti-government protesters and police killed at least five in Bangkok as the opposition refuses to negotiate with the government of Prime Minister Yingluck Shinawatra.

Venezuela: Protests have spread nationwide against the rule of President Nicolas Maduro, while the leader of the opposition, Henrique Capriles, has called for a fresh, peaceful anti-government march on Saturday. Capriles added the government was not responding to his calls for dialogue. At least eight have died thus far, including a 22-year-old beauty queen. Just the other week, a former 2004 Miss Venezuela and her ex-husband were killed in a highway robbery.

Maduro took to state TV to accuse his opponents of promoting violence, lashing out against foreign news organizations, including CNN.

“Enough war propaganda, I won’t accept war propaganda against Venezuela. If they don’t rectify themselves, out of Venezuela, CNN, out,” he said. [Apparently, late Friday Maduro expelled the network.]

Earlier in the week, Maduro ordered the expulsion of three U.S. diplomats. President Obama responded that the Venezuelan government should address “legitimate grievances” of the country instead of “making up false accusations” against U.S. officials.

Opposition politician Leopoldo Lopez turned himself in after being charged with inciting violence and conspiracy and a state court ordered he remain in custody. Maduro called Lopez a “murderer” and alleged he is being paid by the CIA.

Maduro, one of the truly awful (and stupid) people on the planet, will not last much longer.

Britain: Want to know the terror threat here? 250 British-based jihadis who went to train and fight in Syria have returned home, senior British security officials revealed this week – five times the figure previously reported. [London Times]

Random Musings

--According to a new Gallup Poll, China is now America’s No. 1 enemy, followed by Iran and North Korea, tied for second, and Russia fourth. 52% of Americans see China’s growing economic power as a “critical threat” to “the vital interests” of the United States in the next decade.

--Bret Stephens / Wall Street Journal

“The weirdest thing about John Kerry’s weekend speech on climate-change – other than the fact that this is the same guy who in 1997 voted to forbid the U.S. from signing the Kyoto Protocol – is that it begins by quoting something Maurice Strong said at the U.N.’s 1992 Earth Summit in Rio de Janeiro: ‘Every bit of evidence I’ve seen persuades me that we are on a course leading to tragedy.’

“Maurice who?

“Mr. Strong, a former oil executive from Canada (he was Pierre Trudeau’s pick to run state-owned Petro-Canada in the mid-1970s), was for many years the U.N.’s ultimate mandarin. He organized many of its environmental mega-confabs, including the 1972 Stockholm Conference and the 1992 Rio summit, before rising to become Kofi Annan’s right-hand man....

“In 2005 it emerged that Mr. Strong, who was the chairman of the U.N. panel that created the Office of the Iraq Program, had accepted a check for close to $1 million from a South Korean businessman named Tongsun Park, who in the 1970s had been involved in an effort to bribe U.S. politicians. Mr. Strong claimed that the check, from a Jordanian bank, was meant as an investment in a family company that later went bankrupt. Mr. Park (who also sublet office space from Mr. Strong) later went to prison for trying to bribe U.N. officials overseeing the Oil-for-Food program that was propping up Saddam Hussein’s regime in Iraq. Mr. Strong was accused of no wrongdoing and has denied involvement in Oil-for-Food. He left the U.N. that year and moved to Beijing.

“Draw your own conclusions. Ask yourself: Is this a guy who deserves a shout-out from the U.S. Secretary of State?....

“The secretary devoted much of his speech to venting spleen at those in the ‘Flat Earth Society’ who dispute the 97% of climate scientists who believe in man-made global warming. ‘We should not allow a tiny minority of shoddy scientist and science and extreme ideologues to compete with scientific fact,’ he said. Once upon a time people understood that skepticism was essential to good science. Now Mr. Kerry is trying to invoke a specious democracy among scientists to shut down democratic debate for everyone else....

“It is now the dogma of the left that any hint of doubt when it comes to predictions of climate doom is evidence of greed, stupidity, moral turpitude or psychological derangement. ‘Climate denial’ is intended to be the equivalent of Holocaust denial. And yet the only people who’ve predicted anything right so far are those who foresaw that the Kyoto Protocol would fail, that renewable energies didn’t really work, and that climate bureaucrats accountable to nobody but their own sense of virtue and taste for profit were a danger to everyone.”

--Pallab Ghosh / BBC News

“New research suggests that the main system that helps determine the weather over Northern Europe and North America may be changing.

“The study shows that the so-called jet stream has increasingly taken a longer, meandering path.

“This has resulted in weather remaining the same for more prolonged periods.

“The work was presented at the annual meeting of the American Association for the Advancement of Science (AAAS) in Chicago.

“The observation could be as a result of the recent warming of the Arctic. Temperatures there have been rising two to three times faster than the rest of the globe.

“According to Prof. Jennifer Francis of Rutgers University in New Jersey: ‘This does seem to suggest that weather patterns are changing and people are noticing that the weather in their area is not what it used to be.’

“The meandering jet stream has accounted for the recent stormy weather over the UK and the bitter winter weather in the U.S. Mid-West remaining longer than it otherwise would have.

“ ‘We can expect more of the same and we can expect it to happen more frequently,’ says Prof. Francis.”

The jet stream is fueled in part by the temperature differential between the Arctic and the mid-latitudes.

“If the differential is large then the jet stream speeds up, and like a river flowing down a steep hill, it ploughs through any obstacles – such as areas of high pressure that might be in its way.

“If the temperature differential reduces because of a warming Arctic then the jet stream weakens and, again, like a river on a flat bed, it will meander every time it comes across an obstacle.

“This results in weather patterns tending to becoming stuck over areas for weeks on end. It also drives cold weather further south and warm weather further north.”

So you’ve seen this winter that the cold has been driven south and lingered longer, but warm weather has been directed north, so Alaska and Scandinavia have had exceptionally warm conditions.

As to whether any of this is a result of climate change, Prof. Francis said it is too soon to tell.

“The Arctic has been warming rapidly only for the past 15 years,” she says. Too little data.

--Meanwhile, despite January’s bitter cold in much of the U.S., globally, it was the fourth warmest January since record keeping began in 1880, according to the National Oceanic and Atmospheric Administration. The month was warmer in 2002, 2003 and 2007.

Sea-ice levels at the top and bottom were a mixed bag: Arctic Ocean ice extent was the fourth-smallest on record last month, while Antarctic sea ice was the second-largest.

Back to the U.S., January was deceiving. It was very warm and dry in the West and in Alaska, so for the nation overall the month was only slightly cooler than normal. [Doyle Rice / USA TODAY]

--Kimberley A. Strassel / Wall Street Journal

“A rump band of Beltway conservatives has seen the enemy and it is not Harry Reid. It is Mitch McConnell, whose scalp is apparently worth blowing yet another shot at a Republican Senate majority.

“There’s a new dividing line in the conservative movement – between a majority who’d like to win against President Obama, and a handful who’d like to win some scalps. It was on vivid display last week during the Senate debt-ceiling vote. Republicans were looking to avoid a fight they were destined to lose. Democrats had the votes to pass the bill with a simple majority, meaning they also would have owned their president’s refusal to tackle the debt.

“In walked Texas Sen. Ted Cruz to demand a 60-vote majority to pass the increase. Mr. Cruz has subsequently claimed he alone was attempting to get Mr. Obama to agree to spending reforms. Odd, given that he didn’t publicly present any reforms to attach to the debt bill. He didn’t take to the floor to escalate the issue. To the contrary, he agreed to speed up the vote.

“There was only one point to Mr. Cruz’s action: To force Republican colleagues, in particular Mr. McConnell, into voting ‘yes’ to proceed to the actual bill. Mr. Cruz has admitted as much, bragging to radio host Mark Levin the next day that his colleagues’ ‘heads exploded’ because he’d ‘forced’ them to ‘tell the truth’ – namely, that they ‘wanted’ to give Barack Obama a ‘blank check to raise our debt.’ Never mind that every Republican, once past the Cruz show vote, opposed the increase on final passage.

“Members of Congress routinely cook up situations that force opposing parties to take ‘tough votes.’ This may be the first time a senator did so solely to damage his own party....

“Republicans have fumbled their last two Senate takeover chances, mostly thanks to infighting. But this latest movement – to take down incumbents over tactics – is a new low. If the GOP remains a minority, this will be why.”

Couldn’t agree more. Some of my fellow elephants are absolute idiots.

--I’ve never been one to say President Obama isn’t entitled to a nice vacation, though last week I couldn’t help but be snarky about his trip to California and Sunnylands in Rancho Mirage to play golf (and have dinner with King Abdullah of Jordan, even though the two could have met days earlier in Washington), but as the White House talks up the ‘inequality’ theme, it is kind of outrageous that Michelle Obama took the kids to Aspen for the Presidents Day weekend. Granted, she did the same thing the previous two years as well. It’s just the kind of ‘in your face’ arrogance that drives some of us crazy.

--The Star-Ledger’s David Giambusso reported on yet another example of massive corruption in my home state. Linda Watkins-Brashear headed what was called the Newark Watershed Conservation Development Corporation, which managed the city’s 35,000 acres of reservoirs and treated water for more than 500,000 customers in northern New Jersey, until a judge ordered it shut down last year.

But now the state comptroller alleges that Watkins-Brashear and others looted $millions of public dollars between 2008 and 2011.

The comptroller’s office issued a statement: “This report documents an egregious and yet preventable abuse of public funds that was allowed to continue unfettered for years because of poor oversight.”

Watkins-Brashear “wrote unreported checks to herself to the tune of $200,000, was awarded $700,000 in two severance packages, gave more than $1 million in contracts to her friends and ex-husband, and lost $500,000 in dubious stock ventures, the report states.”

Watkins-Brashear invoked the Fifth.

Now I bring this up because former Newark mayor, now Sen. Cory Booker, was a friend of Watkins-Brashear and received campaign donations from her. It turns out over the years the Star-Ledger reported on a series of financial misdeeds at the agency, but the Booker administration, which allowed every aspect of the city’s water infrastructure to be managed by the NWDC, “continued to fund no-bid contracts to the agency at the rate of roughly $10 million a year. The city was the agency’s only customer, meaning all of its funding came from public dollars.”

It wasn’t until last year, though, that the Booker administration asked a Newark Superior Court Judge to dissolve the agency.

Picture that in 2010, for example, “Newark laid off more than 160 police officers and about 800 other employees, (even as) Watkins-Brashear treated herself and 20 guests to a $1,400 feast in Atlantic City during the annual League of Municipalities conference, the report states.” But as noted above this is a mere pittance compared to how Watkins-Brashear treated the agency as her personal cookie jar.

Our criminal justice system is so screwed up. This woman should serve life in prison without parole. I’ve said since day one of StocksandNews that having penalties of that kind for public corruption would put an end to it (or diminish it greatly) right away.

But to me this particular case is big because down the road it could (should) bite Cory Booker in the butt. He was “ex-officio chairman” of the NWDC, yet the report notes he did not attend any board meetings and the failures are on him.

--A Quinnipiac University poll of Ohio voters found Chris Christie trailing Hillary Clinton 49-36 in that key swing state. In November the two were deadlocked. Congressman Paul Ryan would lose to Clinton 49-40. Clearly, Ohioans are aware of the traffic scandal.

President Obama, by the way, has a negative approval rating with Ohio voters 40% to 55%, an improvement over November when the split was 34-61.

[Christie did receive high marks for a town hall meeting he held in Monmouth County on Thursday, his first lengthy meeting with voters since Bridgegate broke.]

--By an 83-14 margin, New Yorkers aged 18 to 29 support making pot legal in small amounts for personal use, according to a new Quinnipiac survey. New Yorkers as a whole back legalization 57% to 39%.

--Finally, New York City Mayor Bill de Blasio’s official vehicle was caught blowing through two stop signs, changing lanes without signaling, and driving over the speed limit by a WCBS-TV/Channel 2 news crew immediately after De Blasio held a press conference in Queens about the city’s pothole repairs as well as a crackdown on dangerous driving that has seen a large increase in pedestrian deaths ( in most cases the fault of the pedestrian, by the way).

From the New York Daily News: “If a driver had been ticketed for all the violations, he would have racked up 13 points on his license – more than the 11 that trigger a suspension, Channel 2’s Marcia Kramer reported.”

But wait...there’s more! The very next day the New York Post caught the mayor jaywalking, which New Yorkers know is a big deal because in January, the NYPD launched an aggressive program to ticket jaywalkers, one that had De Blasio’s support.

New Yorkers have 46 more months of this jerk’s mayoralty. They are getting what they deserve. Recall, I supported Christine Quinn in the Democratic primary.

---

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

God bless America.
---

Gold closed at $1323
Oil $102.20

Returns for the week 2/17-2/21

Dow Jones -0.3% [16103]
S&P 500 -0.1% [1836]
S&P MidCap +0.7%
Russell 2000 +1.3%
Nasdaq +0.5% [4263]

Returns for the period 1/1/14-2/21/14

Dow Jones -2.9%
S&P 500 -0.7%
S&P MidCap +1.0%
Russell 2000 +0.1%
Nasdaq +2.1%

Bulls 46.5
Bears 17.2 [Source: Investors Intelligence]

Have a great week. I appreciate your support.

Catch me on Twitter @stocksandnews

Brian Trumbore



AddThis Feed Button

-02/22/2014-      
Web Epoch NJ Web Design  |  (c) Copyright 2016 StocksandNews.com, LLC.

Week in Review

02/22/2014

For the week 2/17-2/21

[Posted 12:00 AM ET]

Washington and Wall Street

You get a break. I have as little to say about the U.S. economy this week as I have in recent years, but I’m going to take advantage of next time being month end to summarize the first sixth of the year vs. my original expectations for 2014.

For now, the week was light on data except for the housing sector and here the news was not good. For starters, a reading on homebuilder sentiment for February took its biggest plunge on record, while the number for housing starts in January was far below expectations and down 16% over December, plus you can’t just blame the weather. Starts in the Midwest were at their worst pace since records have been kept, 1959, but they rose in the weather-battered Northeast to their best level since December 2012. Strange.

Then at week’s end we had existing home sales data for January and it cratered 5.1% to an annualized pace of just 4.62 million, the lowest level since July 2012, but this also wasn’t just weather-related because sales plunged in the West, which obviously wasn’t impacted by what the Midwest, South and Northeast faced.

The existing home median sales price, $188,900, was up 10.7% from a year earlier, but well off the June 2013 high of $214,000.

As for the retail sector, Nordstrom and Wal-Mart reported earnings essentially in line but their guidance for the first quarter was not great.

Recent economic data, while obviously influenced by the weather, has nonetheless been on the discomfiting side but by the time the Federal Reserve’s Open Market Committee next meets in March, I’m not sure we will have shaken out the anomalies in the numbers. That said, at week’s end two Fed governors said there was little reason not to keep tapering the bond-purchase program. 

What did Wall Street do with the above? Equities finished mixed on the week.

Finally, there were a few stories out on President Obama’s 2015 budget, which he’ll be releasing next month. No hints at compromise, we’re told, just a flat-out spending binge on all of the president’s pet projects, which will do nothing but increase tensions heading into the November elections. For example, gone will be the offer to slow the growth of Social Security spending by chaining the program to a new calculation of inflation.

Instead Obama’s spending initiatives are to be funded by a few spending cuts and tax increases on high-income earners.

Europe and Asia

Markit’s flash reading on manufacturing and services for the eurozone was released for February, with the manufacturing PMI at 53, down from 54 in January. The service sector reading was 51.7 vs. 51.6 the prior month.

Germany’s flash PMI manufacturing number declined to 54.7 from 56.5, while the services reading rose to 55.4 from 53.1.

In France, manufacturing fell to 48.5 from 49.3, while the services number plunged to 46.9 from 48.9, both reflecting ongoing contraction. So President Hollande is still under the gun to turn things around.

In the UK, the jobless rate ticked up to 7.2% and retail sales for January fell 1.5% from December, though December’s had surged 2.5%, and January’s figure was still a very solid 4.3% from a year earlier. Inflation is now running at just 1.9%, below the Bank of England’s 2% target.

In Spain, the government reported record exports for 2013 as the country’s competitiveness has improved with falling labor costs, and officials raised their forecast for exports in 2014 to reflect further growth of 7%.

But with an unemployment rate of 26%, domestic demand is likely to remain putrid, though at least there are distinct signs of life in Spain and, while I don’t feel it is warranted, their 10-year bond has a yield of only about 3.55%, an 8-year low.

Speaking of falling yields, Italy’s 10-year is also at an 8-year low, around 3.65%, last I checked, even as Italy’s public debt remains at 133% of GDP.

I don’t understand both Spain and Italy being treated this well by the bond market with the U.S. 10-year at 2.73%. I know, European Central Bank chief Mario Draghi issued that 2012 pledge to do whatever it takes to keep the euro and eurozone intact, but then there is reality. If you tell me Europe’s recovery will take root in earnest, with Italy and Spain participating, I’ll understand. I just believe there is still too much uncertainty, starting with the political angle and the looming European parliament elections in May that may yet result in an earthquake.

And we now have another change in government in Italy. The new prime minister-designate is 39-year-old Matteo Renzi and he is to present his new cabinet to the Italian president today, Saturday, ahead of a confidence vote that could come Monday. 

Renzi still has to pull together a coalition, let alone tackle Italy’s huge economic problems, but thus far he has the support of New Center Right leader Angelino Alfano, who broke off from Silvio Berlusconi’s Forza Italia, while Berlusconi himself said that while he will remain in opposition, he is ready to support Renzi on individual measures “if they go in the right direction for the country.” Berlusconi actually acted like a statesman this week saying, “I had the pleasure today of meeting a prime minister-designate who is exactly half my age. This seems like a good signal for the renewal of the country.”

No doubt Renzi is about generational change. But there are a myriad number of economic reforms that must be enacted for Italy to become competitive again and for this Renzi needs solid majorities in parliament. That is not guaranteed.

He also has to deal with very shaky banks, that are far more concerned about survival and the coming ECB stress tests than lending to business.

Turning to Asia, HSBC released its flash figure on manufacturing in China for February and it wasn’t good, 48.3 vs. 49.5 in January, solidly in contraction mode. But, just like the weather impacting the numbers in the U.S., you have to wait until March (or later) before you shake out the impact of China’s Lunar New Year holiday, which fell on Jan. 31, thereby straddling, and impacting, two months’ worth of data. That said the longer-term trend for manufacturing in China has not been good.

But China’s banks lent more in January than in any month in four years, a major surprise, while at the same time the government said banks’ non-performing loans were at their highest level since Sept. 2008, not good (though not unexpected).

There was a legitimate positive surprise in foreign direct investment here, up 16% in January from a year earlier. Investment from 10 Asian countries and regions, including Hong Kong, Taiwan, Japan and South Korea, rose 22.2% to $9.55 billion in January, while investment from the United States rose 34.9% to $369 million. It fell 41.3% from the European Union to $482 million.

FDI inflows into China in 2013 rose to a record $117.6 billion. [South China Morning Post]

Conversely, in December, the U.S. Treasury Department reported that China reduced its position in U.S. Treasuries by 3.6% to $1.27 trillion, though this is hardly worrisome. [Overall foreign holdings of U.S. Treasuries rose 1.4% to a record $5.79 trillion, sports fans.]

In Japan, fourth quarter GDP came in at a disappointing 1.1% annualized rate when 2.8% was expected, this after Q3 was 1.0%. Cap-ex (business spending) rose 1.3% over the previous quarter, just so-so, while consumer spending rose only 0.5%. Exports were up just 0.4%, imports up 3.5%.

What’s concerning about the GDP data is a slump for the April-June period is already in the cards when the government increases the sales tax from 5% to 8% April 1. Currently, the estimate is for the Japanese economy to contract during this period by a 4.1% annualized rate as consumers adjust.

Prime Minister Shinzo Abe still hasn’t revealed details of his secret stimulus program (or “third arrow”), while at the same time labor unions are negotiating with Japan’s larger employers on new contracts and Abe wants to see businesses hike wages 2% to 3% to help ameliorate the impact of the value-added tax increase and encourage consumer spending overall.

Separately, the Bank of Japan maintained its asset purchases program.

Street Bytes

--The Dow Jones finished down 0.3% on the holiday-shortened week to 16103, while the S&P 500 lost 0.1% and Nasdaq gained 0.5%.

--U.S. Treasury Yields

6-mo. 0.08% 2-yr. 0.31% 10-yr. 2.73% 30-yr. 3.69%

Yields were virtually unchanged.

It was inflation data week. Producer prices in January rose 0.2%, as expected, up 0.1% ex-food and energy. For the 12 months the PPI is up 1.2%, 1.3% on core. Consumer prices rose 0.1%, also 0.1% on core, and are both up 1.6% year-on-year.

--Transcripts of the Federal Reserve’s 2008 meetings were finally released on Friday, and they show Fed officials did not immediately realize the devastation that Lehman Brothers’ failure would wreak on the economy. The Fed opted to hold the line on interest rates that September, for example, with then chairman Ben Bernanke saying “our current funds rate setting is appropriate, and I don’t really see any reason to change.”

Dave Stockton, the Fed’s top forecaster, said on Sept. 16, 2008, a day after Lehman went under, “I don’t think we’ve seen a significant change in the basic outlook. We’re still expecting a very gradual pickup in GDP growth over the next year.” Nice call.

--Facebook Inc. rocked the investment world by agreeing to acquire mobile-messaging startup WhatsApp Inc. for $19 billion, including $3 billion in restricted stock for WhatsApp’s founders and staff.

WhatsApp has 450 million users and competes with Snapchat Inc., which turned down Facebook’s offer of $3 billion last year, as well as Twitter. WhatsApp’s growth has been staggering, seeing as it’s only been around since 2009. It’s very big in the developing world and, for example, 90% of instant messages in Mexico go through WhatsApp. As a story in Bloomberg points out, people are relying more on free texting applications such as this one and phone carriers, used to charging for texts, lost out on $32.5 billion in texting fees in 2013, with the figure projected to reach $54 billion by 2016.

Facebook CEO Mark Zuckerberg said in a statement: “WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable.”

But following the announcement, some WhatsApp users took to Twitter to protest the acquisition. The protests involve Facebook’s privacy issues, as well as all the ads on Facebook with the exploitation of your likes and habits. WhatsApp, on the other hand, has made a big deal of the fact it doesn’t exploit its users in any fashion.  Zuckerberg said Facebook would not run ads on WhatsApp.

Editorial / Wall Street Journal

“We guess the one thing that can be truly said about Facebook’s mind-bending $19 billion purchase of WhatsApp is that Alexander Graham Bell had it right the first time: There’s money to be made in the human species’ irrepressible need to chat with each other over long distances. Beyond that reality, virtually everything about the purchase is off the charts.

“With a valuation of $19 billion, WhatsApp, founded five years ago, is worth more than food giant ConAgra Foods, whose market cap is $12.27 billion. ConAgra employs 26,000 people. WhatsApp? Apparently it takes only 55 people to run the modern $19 billion company. As to what WhatsApp does, even press reports described it as ‘a kind of replacement for text messaging.’....

“We’ll learn in time if this acquisition makes financial sense. It makes very clear, though, that the tremendous creative drive that gave us Mr. Bell’s telephone company is up and running in (co-founder Jan) Koum’s billions of messages.”

If Facebook monetizes WhatsApp, good move. If not, one of the worst acquisitions of all time.

--Wal-Mart’s quarterly profit for the three months ended Jan. 31 came in 22% lower than last year though it met expectations. The company guided lower, however, as comp-store sales for the three months fell 0.4% in the U.S. Total revenue rose just 1.4% to $129.7 billion. The world’s largest retailer expects sales this year will grow at the lower end of its earlier forecast of 3%-5%.

--Tesla Motors Inc. reported revenue in the fourth quarter of $615.2 million from $306.3 million in the same quarter a year earlier and the shares soared to a new high (and a further outrageous valuation). 

Tesla sold 22,000 vehicles in 2013 and is forecasting sales of 35,000 Model S sedans for 2014 and by the middle of this year, CEO Elon Musk said its factory would be refitted to enable it to build 1,000 a week, or annual production of 50,000.

Within a decade, Musk expects Tesla to build half a million vehicles a year. But this will require all sorts of cooperation with parts suppliers, such as battery maker Panasonic, who will have to ramp up themselves big time. That’s not always as simple as it sounds, let alone a challenge for Tesla itself.

[Earlier in the week, Tesla shares surged on word Elon Musk had met with Apple’s acquisitions chief, though the secret meeting was last spring and just reported on by the San Francisco Chronicle. The two company’s headquarters are near each other. Past analyst comments have suggested that Apple could acquire Tesla as much to bring Musk into the Apple fold as anything else; Musk being the kind of innovator needed at Apple in the post-Steve Jobs era. Can’t disagree with that sentiment.]

--Jerry Hirsch / Los Angeles Times

“America loves trucks. California? The Prius hybrid.

“Toyota’s Prius was the best-selling vehicle in the state for the second consecutive year in 2013, highlighting California’s radically different taste in automobiles. Nationally, Ford’s F-Series truck has been the bestselling vehicle for more than three decades.

“The Prius ranked 16th in sales nationally.”

--The UAW was stunned when it lost a vote for union representation at the Volkswagen plant in Chattanooga, Tenn., which would have been its first successful organization of workers at a foreign automaker in the South.

Republican Sen. Bob Corker of Tennessee led the charge against unionization, saying that he was told VW would soon announce plans to build a new SUV in Chattanooga if workers rejected the union.

Robert J. Samuelson / Washington Post

“The United Auto Workers’ defeat, by a 712 to 626 vote...has been attributed to many causes: the South’s anti-union tradition; the outspoken opposition of some local, Republican officials, including Sen. Bob Corker, Chattanooga’s former mayor; and anti-union campaigns by conservative groups. But the deeper cause is simpler: Private-sector unions can no longer provide big benefits to members.

“On paper, unions can deliver three things: higher wages and fringe benefits; greater job security; and better working conditions, including protection against arbitrary or unlawful management practices. In the 1950s and ‘60s, unions could win these gains. Now, greater competition has eroded their leverage. Workers weighing the reduced advantages of being unionized must also consider the possibility that high-priced, rigid union labor might one day cost them their jobs. In Chattanooga, this calculus went against the UAW.

“Unions’ eclipse has been stunning. At the end of World War II, roughly a third of private-sector jobs were unionized, especially in large firms. By 2013, the comparable figure was 6.7 percent, says the Bureau of Labor Statistics. (The rate of unionization for all workers was 11.3 percent, but that figure resulted only from greater unionization – 35.3 percent – among government workers.)....

“Hardly anyone doubts that high labor costs and obsolete work rules contributed mightily to the crackup of the Big Three. VW’s workers recoiled; they kept the status quo. For the UAW, success in one era sowed failure in the next.”

--The non-partisan Congressional Budget Office said President Obama’s proposal to lift the federal minimum wage to $10.10 over two years would cause a loss of 500,000 jobs in the U.S. by the second half of 2016.

Yes, 16.5 million workers on hourly salaries would see an increase in earnings which could flow through to aid the economy, but the net effect on jobs would be negative.

--Pretty scary piece in the New York Times by Gardiner Harris on growing U.S. unease with India and the manufacturing of over-the-counter and prescription drugs that are exported to the United States. The commissioner of the Food and Drug Administration arrived in India “to express her growing unease with the safety of Indian medicines because of ‘recent lapses in quality at a handful of pharmaceutical firms.’”

India “supplies 40 percent of over-the-counter and generic prescription drugs consumed” here. Conditions at some of the manufacturing facilities are beyond disgusting, such as flies “too numerous to count” in critical plant areas. Other facilities are first class. “The World Health Organization estimated that one in five drugs made in India are fakes.” [Gardiner Harris]

--Hewlett-Packard beat earnings in its most recent quarter as revenues came in better than expected, though still down 1% from year earlier levels. That said, HP guided higher as CEO Meg Whitman’s restructuring plan remains intact.

--Nordstrom Inc.’s sales at its department stores fell 3.3% in the fourth quarter, the third consecutive quarter of falling sales.

--Shares in Coca-Cola fell after its profit declined due to slowing sales in the U.S. and Europe.

--Natural-gas futures hit five-year highs Thursday, then fell a bit as a report showed that stockpiles are higher than expected, though still low. A return to frigid weather is in the cards for next week, however, so nat gas could soar anew.

--Net gold demand fell 15% in 2013, according to the World Gold Council, thanks to massive liquidation from bullion-backed exchange-traded funds.

But the price of the precious metal has rebounded thus far in 2014, as demand for gold jewelry, coins and bars has risen and the outflow from ETFs has tailed off.

China overtook India as the world’s biggest gold consumer, thanks to a 29-percent rise in Chinese jewelry demand and a 38-percent increase in coin and bar buying.

--Fannie Mae announced it would pay the U.S. Treasury $7.2 billion in dividends next month, meaning the total that Fannie and its smaller rival Freddie Mac will have repaid the government will be around $192.5 billion, exceeding the $187.5 billion in bailout money they received from taxpayers.

But the two remain under government control until the Treasury, their regulator and/or Congress act, which is long overdue.

--Business Wire, which publishes corporate news releases in the U.S. and is owned by Warren Buffett’s Berkshire Hathaway, announced it would stop selling direct feeds to high-speed traders. Buffett was directly involved in the decision, fearing recent publicity that the direct sales were giving high-frequency traders an unfair advantage was damaging the company’s overall reputation.

--Royal Bank of Scotland, which is 81% owned by the British government, is expected to announce a major retrenchment next week that could result in the loss of at least 30,000 jobs. RBS will withdraw from its riskier investment activities as it becomes a much smaller retail and commercial bank. [Financial Times]

--According to a National Transportation Safety Board report looking into a fatal United Parcel Service Inc. flight to Alabama last Aug. 14, Captain Cerea Beal told a fellow UPS pilot within a day of the flight that “the schedules are killing him and he could not keep this up.” Beal and the co-pilot were killed, “about six weeks after cargo airlines were exempted from new U.S. rules to limit the hours passenger-airline pilots can fly, particularly late at night.” [Bloomberg]

At an NTSB hearing, documents and testimony revealed the pilots made a number of errors as they were attempting to land at Birmingham-Shuttlesworth International Airport. Fatigue was undoubtedly a factor, though the actual travel schedules for the pilots were normal. Both just didn’t treat their final rest periods as such.

--Ferrari reported record profits in 2013, despite selling fewer cars than the year before as the company focuses on improving its profit margins. Ferrari made $363 million...not too shabby...on 6,922 sales. The U.S. remains Ferrari’s biggest market, with more than 2,000 deliveries – an increase of about 9% over 2012. [You can easily figure out the profit per car sold...but give it to your kids as a word problem.]

--I can’t say I really care about Bitcoin, but with the highly publicized problems on many of the Bitcoin exchanges the past two weeks in particular, I can’t help but note that the price on the largest exchange, Mt. Gox in Tokyo, fell from over $1,000 about a month ago to $135 on Thursday, while the average Bitcoin exchange price worldwide was somewhere around $600. As I quoted Jim Grant the other day when asked about the virtual currency, why not invest in gold, “nature’s bitcoin,” instead.

Ajay Banga, CEO of Mastercard Inc., spoke for the skeptics in a recent interview: “The world is not short of currencies, so what is this currency solving for?”

Bitcoins’ proponents says first and foremost it cuts out middlemen, like Mastercard. But with this kind of extreme volatility and it being a new favorite of hackers, it just makes sense to lay off for a spell.

--I’ve been on Twitter a few months and I have a pretty strong opinion about it that I’ll keep to myself for now. I do have to note a bit I saw in the March 2014 issue of Golf Magazine and golfer Stewart Cink, who had been known as the leader in the Twitter clubhouse, yet now goes weeks without a peep. Golf Magazine asked him, “Are you burnt out on tweeting?”

Cink: “The way I started using Twitter was by keeping a constant back and forth with my followers. Over Twitter’s life, it seems like the negativity has gotten out of control. So for someone who reads all their replies, it just gets depressing.”

GM: “Someone recently posted, ‘can’t stand watching [Cink] play’ and ‘#worstmajorwinner ever.’”

Cink: “People get a kick out of being negative. They don’t expect anybody to read it. Well, I read my replies. And it got to be pretty annoying. Twitter is still fun. If I have a fun thing or an observation I want to share with people, I’ll still do it, but I won’t go back and read any of my replies.”

[Cink has been struggling on the PGA Tour since winning the 2009 British Open, the year then 59-year-old Tom Watson broke our hearts in failing to close what would have been the best sports story of the century.]

--Dick Cabela, co-founder of Cabela’s sporting goods, died Monday at the age of 77.

David Colker / Los Angeles Times

“The Cabela’s Inc. sporting goods’ empire – with $3.1 billion in sales in 2012 from mail order and big-box retail stores – started at a kitchen table in 1961 in the small town of Chappell, Neb.

“Dick Cabela had spent $45 on nearly 3,000 hand-tied fishing lures while on a buying trip to Chicago with his father for the family hardware and furniture store. Cabela tried to sell the fishing flies in the store, but they were a dud – not one sold. Next he took out an ad in a Casper, Wyo., newspaper offering 12 of the flies for $1, and got only one sale.

“Finally, according to a Cabela’s company history, he placed an ad in Sports Afield magazine: ‘FREE Introductory offer!!! 5 popular Grade A hand-tied flies. Send 25c for postage and handling.’ The orders started pouring in – Cabela and his wife, Mary, began assembling packages of the lures in their kitchen and sending them out.

“ ‘Anyone in business is going to make mistakes,’ Cabela told Investor’s Business Daily in 2012. ‘We always learn something valuable from them.’....

“The profit from the ‘free’ fishing flies was only about 11 cents per transaction, but it gave the Cabelas something far more valuable for the future – the start of a mailing list. Mary kept a record of names and addresses on recipe cards, and Dick bought more imported gear.”

In 1963, with business growing, brother Jim was offered half ownership if he quit his job to join the venture.

It took a while, though. “In 1968 they moved operations into a former John Deere dealer in the nearby town of Sidney. Sales were booming and the catalogs went far beyond fishing to offer products for hunting, backpacking and other outdoor activities. Teams of telephone operators in the building took orders.

“In 1991 the company opened a separate 75,000-square-foot retail store in Sidney, dominated by a man-made mountain populated by stuffed, mounted animals.”

Well, the big-box stores spread around the country. RIP, Dick Cabela.

--Jimmy Fallon garnered 11.3 million viewers, including moi, for his debut on Monday night, the second-biggest audience for “The Tonight Show” since May 2009.

Foreign Affairs

Ukraine: On Friday morning, President Viktor Yanukovych said an agreement had been reached with the opposition to end the nation’s crippling crisis, though the three European foreign ministers involved in the negotiations urged caution. As part of the “road-map towards a political solution,” early elections would be held by December and an interim coalition government formed. 

The president and opposition leaders did then sign the deal later in the day, with the agreement also providing for electoral reform and constitutional changes reducing the president’s power, with the 2004 constitution being restored within 48 hours. A national unity government is to be formed within 10 days.

Parliament approved the deal and voted for a change in the law that could lead to the release of jailed former Prime Minister Yulia Tymoshenko, an arch-rival of Yanukovych.

This will be yet another classic case of “wait 24 hours,” particularly since the demand of many in the opposition that Yanukovych step down is not part of the deal. Friday night, many in Independence Square said they would stay until Yanukovych is forced out.

We also must now wait to see how Vladimir Putin will respond once the Olympics end. He could opt to withhold desperately needed, and promised, funds for Ukraine (though supposedly a second tranche of $2 billion was delivered this week...making it $5 billion thus far of $15 billion Russia committed to). Should Yanukovych leave office, Putin could resort to force to keep Ukraine in Russia’s sphere. Some say he could act on Russia’s naval interests at Odessa and Sevastopol, both with large Russian populations.

The health ministry said 77 people had been killed since Tuesday in the escalating violence, and another 577 were injured, though others place the number of dead on Thursday alone at 100.

Thursday’s demonstrations were yet another scene out of the Middle Ages, with police snipers picking off at least 20 protesters.

Thus far the Ukrainian army has stayed out of the fray, but should it be called on civil war would result. Ukraine, as I’ve noted many times before, is literally split East-West; East siding with Russia, West with Europe and the United States. Most say the population is about 60% West, 40% East. The military, you’d expect, would be split along similar lines. There is talk portions of the heavily industrialized East could seek autonomy, an act Putin would no doubt encourage.

Worrisomely, the U.S. State Department said that whereas in the past they were able to make contact with senior military leaders in Ukraine, the army is now ignoring Washington. President Yanukovych removed the head of all armed forces, just weeks after he had replaced the head of the army, both moves without explanation.

The army also may not be up to speed. Yanukovych has focused resources in recent years on building up the security forces instead, some of whom appear to be changing their allegiances.

For its part, Russia warned Yanukovych not to let opponents walk over him “like a doormat,” in the words of Prime Minister Dmitry Medvedev. The EU agreed on Thursday to impose sanctions on Ukrainian officials “responsible for violence and excessive force.”

Friday afternoon President Obama and Putin had a phone conversation that the White House wants us to believe was “constructive.”

[The following commentaries were written prior to Friday’s developments.]

Walter Russell Mead / Wall Street Journal

“The Ukrainian government’s assault on protesters in Kiev’s Independence Square over the past 48 hours shocked Europe and the world. The turmoil is also forcing both the European Union and the United States to re-examine some of their deepest assumptions about foreign policy in the post-Cold War environment.

“The Ukrainian crisis started last fall, when EU ministers thought Ukraine was about to sign an Association Agreement that would have begun the process of economic integration between Europe’s second-largest country and the European Union. This would have been a decisive step for Ukraine. Long hesitating between Moscow and Brussels, Ukraine would have seen the Association Agreement put it firmly on a Western path....

“But the diplomats in Brussels and Washington forgot to factor one man into their calculations.  For Russia’s President Vladimir Putin, the prospect that a united Ukraine might desert Russia and join Europe is completely unacceptable. Mr. Putin saw the West’s overtures to Ukraine as an existential threat to Russia’s great power status and his own political position. Sensing that the West was unprepared and unfocused, he moved quickly and effectively to block the wedding by offering Mr. Yanukovych $15 billion to leave the Europeans standing at the altar.

“European diplomats were flummoxed....

“Washington was no better prepared....

“Inside Ukraine... The western half of the country sees Moscow as a hostile, rapacious power and believes – correctly – that Mr. Putin’s vision for their country will involve the loss of democratic freedoms and destroy any hope of establishing the rule of law and transparent institutions, or of joining the EU.

“The eastern half is not so sure. Trade and cultural connections with Russia are stronger than they are with Europe, and while the EU is a good market for Ukrainian raw materials, Russia is willing to buy Ukrainian manufactured and consumer goods that Europe doesn’t much want....

“Both the EU and the U.S. made a historic blunder by underestimating Russia’s reaction to the Ukrainian trade agreement. Mr. Putin cannot let Ukraine slip out of Russia’s sphere without throwing everything he has into the fight....

“(U.S. diplomacy) with Russia has focused on order-building questions like nonproliferation, while gravely underestimating the degree to which Russia’s geopolitical interests conflict with those of the U.S....

“There are many things that Vladimir Putin doesn’t understand, but geopolitics isn’t one of them. His ability to identify and exploit the difference between the West’s rhetoric and its capabilities and intentions has allowed him to stop NATO expansion, split Georgia, subject Washington to serial humiliations in Syria and, now, to bring chaos to Ukraine.

“Mr. Putin is a master of a game that the West doesn’t want to play, and as a result he’s won game after game with weak cards. He cannot use smoke and mirrors to elevate Russia back into superpower rank, and bringing a peaceful Ukraine back into the Kremlin’s tight embrace is also probably beyond him.

“But as long as the West, beguiled by dreams of win-win solutions, fails to grapple effectively in the muddy, zero-sum world of classic geopolitics, Mr. Putin and his fellow revisionists in Beijing and Tehran will continue to wreak havoc with Western designs.”

George Will / Washington Post

“Russia is ruled by a little, strutting Mussolini – the Duce, like Putin, enjoyed being photographed with his chest bare and his biceps flexed. Putin is unreconciled to the ‘tragedy,’ as he calls it, of the Soviet Union’s demise. It was within the Soviet apparatus of oppression that he honed the skills by which he governs – censorship, corruption, brutality, oppression, assassination.

“Remember when President George W. Bush peered into Putin’s eyes and got ‘a sense of his soul’ as someone ‘very straightforward and trustworthy’? Remember when Putin fed the world the fable about rushing naked from his burning dacha – the fire started when Putin was in a sauna – before the rescue of his cherished crucifix, which had belonged to his sainted mother? Ukrainians, whose hard history has immunized them against the folly of wishful thinking, see in Putin’s ferret face the cold eyes of a prison warden....

“The Soviet Union – ‘one of modern history’s pivotal experiments,’ in the weasel words of NBC’s Olympics coverage – existed for seven miserable decades. Ukraine’s agony is a reverberation of the protracted process of cleaning up after the ‘experiment.’ So, this is perhaps the final episode of the Cold War. Does America’s unusually loquacious 44th president remember how the words of the 40th – ‘Tear down this wall!’ – helped to win it?”

Editorial / Wall Street Journal

“The Sochi Olympics have showcased the face of Russia that President Vladimir Putin wants the world to see – spanking new, an international crossroads, and a revived global power. This is a comely veneer. The real Russia is on display this week in Kiev, where Ukraine’s government prodded by the Kremlin is attacking peaceful protestors with guns and truncheons. This is the Russia that the West needs to understand and resist....

“Mr. Putin’s agenda in Ukraine is part of his larger plans to solidify his own authoritarian control and revive Greater Russia. Without Ukraine, the most important of the former Soviet satellites, a new Russian empire is impossible. With Ukraine, Greater Russia sits on the border of the EU. If Ukraine moves toward Europe with a president who isn’t a Russian satrap, it also sets a democratic example for Russians. The world is seeing that Mr. Putin will do what it takes to stop such an event, even if it risks a civil war in Ukraine.

“The Russian is willing to play this rough because he sees Western weakness. The EU is hopeless, led by a Germany so comfortable in its pacifism that it won’t risk even a diplomatic confrontation. As for the U.S., it’s no coincidence that Mr. Putin asserted himself in Ukraine not long after Mr. Obama retreated in humiliating fashion from his ‘red line’ in Syria. As always in history, such timidity invites the aggression it purports to prevent. If this American president won’t even bomb Damascus airfields to stop the use of chemical weapons, why would Mr. Putin think Mr. Obama would do anything for Eastern Europe?....

“No one wants a new Cold War, but no one should want a civil war in Eastern Europe either. Yet that is where Mr. Putin’s intervention and Western passivity are leading. Mr. Obama may still be able to stop it if he finally admits Vladimir Putin’s deep hostility to a free and democratic Europe and clearly tells protesting Ukrainians that we’re on their side.”

Syria: The unspeakable violence continued after peace talks in Geneva collapsed. At least 50 people were killed in a car bomb attack at a Syrian refugee camp near the Turkish border on Friday, with the al-Qaeda-inspired Islamic State of Iraq and Greater Syria thought to be behind it. Turkey is sheltering more than 600,000 Syrians and has kept its border open throughout the three-year-old conflict.

Saudi Arabia and other Gulf allies are beginning to supply the opposition with more sophisticated weaponry, including shoulder-fired missiles that can take down jets, according to the Wall Street Journal. The United States is giving large sums of money to pay the rebels’ salaries, according to rebel commanders receiving some of the funds.

Meanwhile, Secretary of State John Kerry said in Jakarta last weekend, Russia was “enabling Assad to double down, which is creating an enormous problem.” No kidding. Russia is winning.

Fouad Ajami / Wall Street Journal

“Sen. John McCain took to the Senate floor on Feb. 12 to shine a bright light on the plight of the Syrian people and its consequences. He had with him a sample of unforgettable images, 55,000 photographs in all, of the brutalities inflicted on 11,000 detainees of Bashar Assad’s regime. Reflections of the Balkan horrors of the 1990s – evidence of torture, starvation, systematic rape and slaughter.

“ ‘We must not look away,’ Mr. McCain said. Failure to ‘acknowledge through our sense of revulsion that what is happening in Syria today,’ he said, would be ‘a stain on the collective conscience of moral people everywhere.’

“It will be said of President Barack Obama when he leaves office that he kept the U.S. out of the Syrian ordeal. But at what price? Even the architects of his Syria policy now acknowledge its utter failure. With more than 130,000 dead [Ed. now 140,000] and millions displaced, it is too late for dissimulation and doublespeak....

“The House of Assad and its ruling cabal have behind it nearly five decades of violence and subterfuge. After five years, they have taken the measure of Mr. Obama: For a fleeting moment, they feared that American power could decapitate their regime. Once spared, they grew emboldened, openly defying the will of the U.S. and U.N.

“In the Geneva talks that ended (last) Saturday, the Assad regime said any ‘peace’ or ‘power-sharing’ agreement would not include the dictator standing down. The fence-sitters in Syria’s neighborhood could be forgiven the conclusion that Bashar Assad’s reign will outlast the presidency of Barack Obama. That would be a stain indeed.”

Professor Stephen Hawking / Washington Post

“The Greek philosopher Aristotle believed that the universe had existed forever. The reason humanity was not more developed, he believed, was that floods or other natural disasters repeatedly set civilization back to the beginning.

“Today, humans are developing ever faster. Our knowledge is growing exponentially and with it, our technology. But humans still have the instincts, and in particular the aggressive impulses, that we had in caveman days. Aggression has had definite advantages for survival, but when modern technology meets ancient aggression the entire human race and most of the rest of life on Earth is at risk.

“Today in Syria we see modern technology in the form of bombs, chemicals and other weapons being used to further so-called intelligent political ends.

“But it does not feel intelligent to watch as more than 100,000 people are killed or while children are targeted. It feels downright stupid, and worse, to prevent humanitarian supplies from reaching clinics where, as Save the Children will document in a forthcoming report, children are having limbs amputated for lack of basic facilities and newborn babies are dying in incubators for lack of power.

“What’s happening in Syria is an abomination, one that the world is watching coldly from a distance. Where is our emotional intelligence, our sense of collective justice?....

“We now know that Aristotle was wrong: The universe has not existed forever. It began about 14 billion years ago. But he was right that great disasters represent major steps backward for civilization. The war in Syria may not represent the end of humanity, but every injustice committed is a chip in the façade of what holds us together. The universal principle of justice may not be rooted in physics but it is no less fundamental to our existence. For without it, before long, human beings will surely cease to exist.”

Iran: Some progress was supposedly being made in the latest talks over Iran’s nuclear program, such as an accelerated timetable for talks, while U.N. inspectors said they have improved access to Tehran’s nuclear facilities.

But efforts to limit Iran’s ballistic missile program have been deemed non-negotiable by Iranian Foreign Minister Javad Zarif, which, just as in the case of the disputed military base at Parchin, is all you need to know about Iran’s true intentions. Tehran continues to test its weapons, arguing they are defensive, which is a bunch of b.s.

Regarding Parchin specifically, the International Atomic Energy Agency said, “Since the Agency’s first request for access (to the base) extensive activities have taken place...that will have seriously undermined the Agency’s ability to conduct effective verification.”

I told you long ago, the Iranians paved the place over! Yes, it’s been largely sanitized. And this is where, no doubt, Iran conducted nuclear trigger tests.

Prior to the resumption of talks in Vienna, Supreme Leader Ayatollah Khamenei said the session will “lead nowhere.” According to Iranian TV, while still signaling his support for President Rohani, Khamenei said, “I’m not optimistic about the nuclear talks, but not opposed to them either.” The ayatollah added Iran will “never succumb to the bullying and blackmailing of America.”

Russia is also apparently working on an oil-for-goods deal, which would undercut Western sanctions. Russia would build a second reactor at Russian-built Bushehr in exchange for 500,000 barrels of oil on a daily basis. Iran could use some of the proceeds to pay for the plant.

While the deal is unlikely as of now, should it come about it makes negotiations over Iran’s overall nuclear program impossible.

Lebanon: An al-Qaeda-linked group was responsible for two suicide bombings in Hizbullah-controlled suburbs of Beirut on Wednesday, killing four and wounding 70. One attacker was in a car, the other on a motorcycle, as al-Qaeda continues to attempt to bring the Syrian war to Lebanon, going after Hizbullah for helping Bashar Assad.

But last Saturday, out of nowhere, Prime Minister Tammam Salam formed a 24-member Cabinet, ending months of political deadlock. Presidential elections are due May 25 and the first issue is whether the security situation will be good enough to hold them on time.

Salam is a centrist, 68, and vowed that his Cabinet left no room for political disruptions. Former Prime Minister Saad Hariri congratulated Salam while praising Beirut’s MPs for their “patience and wisdom.” Hizbullah leader Sayyed Hasan Nasrallah voiced support for the “compromise” Cabinet.

Michael Young / The Daily Star

“According to the new information minister, Ramzi Joreige, President Michel Sleiman is pleased with the government of Prime Minister Tammam Salam, because it reflects the nature of the Lebanese system and was ‘made in Lebanon.’

“The Cabinet certainly reflects the nature of the political and confessional system, for good and evil, but it is far less certain that an agreement became possible because the Lebanese parties alone decided that an 11-month vacuum was intolerable. Clearly, regional governments wanted to calm the volatile Lebanese situation.

“That’s reassuring. Since we’re incapable of agreeing between ourselves, let others make us do so. Perhaps that’s the only positive thing in the Salam government, which will have little time to do much before the presidential election in May. But then the government isn’t really here to do more than generate concord and ensure that a successor to Michel Sleiman can be consensually agreed.

“Hizbullah’s haste is motivated by the situation in Syria, and the success of President Bashar Assad’s regime in regaining ground in recent months. The party seeks to reflect this by reinforcing its own dominance in Lebanon through the presidential election and parliamentary elections scheduled for November. Most important, it does not want such a project undermined by a breakout of sectarian violence in Lebanon, which is why Hizbullah has sought to contain the consequences of bombings, the latest yesterday, in Shiite areas....

“Hizbullah can control the response for a time, but it is doubtful it can do so indefinitely....

“Hizbullah will be weighing its domestic behavior against regional developments. If the Syrian rebels, who are being trained by the Americans and receiving American and Gulf Arab money and more advanced weapons, mount an offensive in spring against Damascus, the party will find itself in the forefront of the battle. This could impel Hizbullah to freeze domestic cooperation pending a clearer outcome.....

“Hizbullah will also await the result of negotiations over Iran’s nuclear program. It will try to exploit any breakthrough to consolidate its position. But with Syria increasingly imposing itself on the United States and regional actors, nuclear matters may be pushed to the back burner, even if Tehran will have to balance the gains from a nuclear deal against the economic crisis at home, made worse by Iran’s costly commitment to the Assad regime.

“Michel Sleiman may well believe that the Salam government was made in Lebanon. But wherever it was really made, it is the events in the region that will ultimately decide whether it breaks or not.”

Egypt: An explosion ripped through a bus carrying South Korean tourists in the Sinai, killing three. Insurgents are seeking ways to cripple the government by hitting the country’s vital tourism industry.

While the Egyptian military government has launched a crackdown on supporters of former President Morsi, militants have killed at least 100 police officers and soldiers since August, including more than 30 this year.

The problems in the tourism sector, though, are tragic, including the impact on animals. As reported by Ruth Pollard of the Sydney Morning Herald:

“At the Giza pyramids, animal rights groups have stepped in to feed the starving horses that used to pull tourists in carriages around the site, while along the waterfront of Dahab, tourists are so scarce that businesses are lucky to make one sale in a day.”

Tourism provides for 12.5% of Egypt’s employment and 11.3% of GDP.

Afghanistan: There is increasing talk at the Pentagon and the White House of a total withdrawal by end of the year with the relationship between Washington and Kabul at a new low. As a security expert told Andrew Tilghman of Military Times, “(Hamid) Karzai is really strengthening the hand of the anti-war elements in Washington.”

Anthony Cordesman, an influential defense strategists, said the U.S. war effort “has become a game of whack-a-mole” and that Afghanistan has “marginal strategic interest to the United States” and is “no longer...a meaningful center of international terrorism.”

North Korea: In a blistering report, a United Nation inquiry into human rights in North Korea concluded Kim Jong-Un should stand trial at the International Criminal Court for crimes against humanity.

Commissioners say the crimes include “extermination, murder, enslavement, torture, imprisonment, rape, forced abortions and other sexual violence.”

Kim’s regime is holding 80,000 to 120,000 political prisoners, a figure that is down from past estimates due to deaths in camp.

“The gravity, scale and nature of these violations reveal a state that does not have any parallel in the contemporary world. The key to the political system is the vast political and security apparatus that strategically uses surveillance, coercion, fear and punishment to preclude the expression of any dissent.”

Kim is singled out for spending large sums on luxury goods and advancing his personality cult. Military spending takes precedence over feeding the people.

The Commission of Inquiry was led by Australian judge Michael Kirby who told Reuters the crimes his team had catalogued were reminiscent of those committed by the Nazis in World War II. “Some of them are strikingly similar,” he said.

“At the end of the Second World War, so many people said: ‘If only we had known...’ Now the international community does know,” Kirby added.

Nicholas Eberstadt / Wall Street Journal

“Given the bombshell report, democratic governments and independent organizations can no longer act as if they did not know. Their dealings with Pyongyang must always be considered in light of this damning document. Now is the time for the never agains:

“Never again should Western humanitarian aid be given to North Korea to hand out at its own discretion, as if Pyongyang were a government like any other.

“Never again must Beijing – which like Pyongyang refused to cooperate with the U.N. investigation – be given a free pass for financing, enabling and protecting this most odious of all regimes. Challenge China to veto the referral for crimes against humanity on the U.N. Security Council, and let Beijing go on record defending state-sponsored mass murder. Make the Chinese veto it 20 times if they dare. Beijing is highly sensitive to public shaming, and it must be shamed and penalized for its indefensible support of Pyongyang until it cuts its client-state loose.

“Never again must South Koreans avert their eyes from the catastrophe that is befalling their compatriots across the demilitarized zone. And never again must Seoul forget that it is legally bound to grant citizenship to refugees from the nightmare to the North.

“Never again must the rest of us live comfortably with the knowledge of what is happening right now to ordinary people in North Korea.”

[I have more details of the report on my “Hot Spots” link.]

China: I am long on record as saying the Dalai Lama is one of the more overrated figures on Earth. Just look at his lack of success in improving the lot of his people for all these decades. It is a waste of time for America’s political leaders to meet with the man, but once again President Obama did so on Friday, raising the ire of Beijing, who regards the Dalai Lama as a political exile and violent anti-China Separatist.

Of course the religious leader is hardly violent and has consistently sought greater autonomy for Tibet, but he’s been totally ineffective. The U.S. should be working through other diplomatic channels to improve the lot of the Tibetan people.

Separately, on a visit to Beijing, Sec. of State Kerry reached agreement with his Beijing counterparts on an effort to work together to reduce the effects of global climate change. 

But Kerry made no breakthroughs on easing tensions in the East and South China Seas.

In other words, it was another failed foreign adventure for the secretary, even as reports emerge that China has been training for a “short, sharp war” against Japan in the East China Sea, according to a senior U.S. military officer at a navy conference in San Diego.

Captain James Farrell, director of intelligence for the U.S. Pacific Fleet, said, “We witnessed the massive amphibious and cross military region enterprise...(and) concluded that the PLA (People’s Liberation Army) has been given the new task of being able to conduct a short sharp war to destroy Japanese forces in the East China Sea following with what can only be an expected seizure of the Senkakus,” the disputed islands claimed by both.

Lastly, acclaimed primatologist Jane Goodall said China is exploiting Africa’s resources just like European colonizers did, with disastrous effects for the environment.

China, said Goodall on the eve of her 80th birthday, has been investing heavily in African natural resources and paying little attention to the environmental impact.

But when it comes to poaching for ivory, Goodall is optimistic, citing the recent destruction of illegal stockpiles. On this score, Goodall is a bit naïve, but hopefully a year from now I’m able to say I’m optimistic too.

Thailand: Clashes between anti-government protesters and police killed at least five in Bangkok as the opposition refuses to negotiate with the government of Prime Minister Yingluck Shinawatra.

Venezuela: Protests have spread nationwide against the rule of President Nicolas Maduro, while the leader of the opposition, Henrique Capriles, has called for a fresh, peaceful anti-government march on Saturday. Capriles added the government was not responding to his calls for dialogue. At least eight have died thus far, including a 22-year-old beauty queen. Just the other week, a former 2004 Miss Venezuela and her ex-husband were killed in a highway robbery.

Maduro took to state TV to accuse his opponents of promoting violence, lashing out against foreign news organizations, including CNN.

“Enough war propaganda, I won’t accept war propaganda against Venezuela. If they don’t rectify themselves, out of Venezuela, CNN, out,” he said. [Apparently, late Friday Maduro expelled the network.]

Earlier in the week, Maduro ordered the expulsion of three U.S. diplomats. President Obama responded that the Venezuelan government should address “legitimate grievances” of the country instead of “making up false accusations” against U.S. officials.

Opposition politician Leopoldo Lopez turned himself in after being charged with inciting violence and conspiracy and a state court ordered he remain in custody. Maduro called Lopez a “murderer” and alleged he is being paid by the CIA.

Maduro, one of the truly awful (and stupid) people on the planet, will not last much longer.

Britain: Want to know the terror threat here? 250 British-based jihadis who went to train and fight in Syria have returned home, senior British security officials revealed this week – five times the figure previously reported. [London Times]

Random Musings

--According to a new Gallup Poll, China is now America’s No. 1 enemy, followed by Iran and North Korea, tied for second, and Russia fourth. 52% of Americans see China’s growing economic power as a “critical threat” to “the vital interests” of the United States in the next decade.

--Bret Stephens / Wall Street Journal

“The weirdest thing about John Kerry’s weekend speech on climate-change – other than the fact that this is the same guy who in 1997 voted to forbid the U.S. from signing the Kyoto Protocol – is that it begins by quoting something Maurice Strong said at the U.N.’s 1992 Earth Summit in Rio de Janeiro: ‘Every bit of evidence I’ve seen persuades me that we are on a course leading to tragedy.’

“Maurice who?

“Mr. Strong, a former oil executive from Canada (he was Pierre Trudeau’s pick to run state-owned Petro-Canada in the mid-1970s), was for many years the U.N.’s ultimate mandarin. He organized many of its environmental mega-confabs, including the 1972 Stockholm Conference and the 1992 Rio summit, before rising to become Kofi Annan’s right-hand man....

“In 2005 it emerged that Mr. Strong, who was the chairman of the U.N. panel that created the Office of the Iraq Program, had accepted a check for close to $1 million from a South Korean businessman named Tongsun Park, who in the 1970s had been involved in an effort to bribe U.S. politicians. Mr. Strong claimed that the check, from a Jordanian bank, was meant as an investment in a family company that later went bankrupt. Mr. Park (who also sublet office space from Mr. Strong) later went to prison for trying to bribe U.N. officials overseeing the Oil-for-Food program that was propping up Saddam Hussein’s regime in Iraq. Mr. Strong was accused of no wrongdoing and has denied involvement in Oil-for-Food. He left the U.N. that year and moved to Beijing.

“Draw your own conclusions. Ask yourself: Is this a guy who deserves a shout-out from the U.S. Secretary of State?....

“The secretary devoted much of his speech to venting spleen at those in the ‘Flat Earth Society’ who dispute the 97% of climate scientists who believe in man-made global warming. ‘We should not allow a tiny minority of shoddy scientist and science and extreme ideologues to compete with scientific fact,’ he said. Once upon a time people understood that skepticism was essential to good science. Now Mr. Kerry is trying to invoke a specious democracy among scientists to shut down democratic debate for everyone else....

“It is now the dogma of the left that any hint of doubt when it comes to predictions of climate doom is evidence of greed, stupidity, moral turpitude or psychological derangement. ‘Climate denial’ is intended to be the equivalent of Holocaust denial. And yet the only people who’ve predicted anything right so far are those who foresaw that the Kyoto Protocol would fail, that renewable energies didn’t really work, and that climate bureaucrats accountable to nobody but their own sense of virtue and taste for profit were a danger to everyone.”

--Pallab Ghosh / BBC News

“New research suggests that the main system that helps determine the weather over Northern Europe and North America may be changing.

“The study shows that the so-called jet stream has increasingly taken a longer, meandering path.

“This has resulted in weather remaining the same for more prolonged periods.

“The work was presented at the annual meeting of the American Association for the Advancement of Science (AAAS) in Chicago.

“The observation could be as a result of the recent warming of the Arctic. Temperatures there have been rising two to three times faster than the rest of the globe.

“According to Prof. Jennifer Francis of Rutgers University in New Jersey: ‘This does seem to suggest that weather patterns are changing and people are noticing that the weather in their area is not what it used to be.’

“The meandering jet stream has accounted for the recent stormy weather over the UK and the bitter winter weather in the U.S. Mid-West remaining longer than it otherwise would have.

“ ‘We can expect more of the same and we can expect it to happen more frequently,’ says Prof. Francis.”

The jet stream is fueled in part by the temperature differential between the Arctic and the mid-latitudes.

“If the differential is large then the jet stream speeds up, and like a river flowing down a steep hill, it ploughs through any obstacles – such as areas of high pressure that might be in its way.

“If the temperature differential reduces because of a warming Arctic then the jet stream weakens and, again, like a river on a flat bed, it will meander every time it comes across an obstacle.

“This results in weather patterns tending to becoming stuck over areas for weeks on end. It also drives cold weather further south and warm weather further north.”

So you’ve seen this winter that the cold has been driven south and lingered longer, but warm weather has been directed north, so Alaska and Scandinavia have had exceptionally warm conditions.

As to whether any of this is a result of climate change, Prof. Francis said it is too soon to tell.

“The Arctic has been warming rapidly only for the past 15 years,” she says. Too little data.

--Meanwhile, despite January’s bitter cold in much of the U.S., globally, it was the fourth warmest January since record keeping began in 1880, according to the National Oceanic and Atmospheric Administration. The month was warmer in 2002, 2003 and 2007.

Sea-ice levels at the top and bottom were a mixed bag: Arctic Ocean ice extent was the fourth-smallest on record last month, while Antarctic sea ice was the second-largest.

Back to the U.S., January was deceiving. It was very warm and dry in the West and in Alaska, so for the nation overall the month was only slightly cooler than normal. [Doyle Rice / USA TODAY]

--Kimberley A. Strassel / Wall Street Journal

“A rump band of Beltway conservatives has seen the enemy and it is not Harry Reid. It is Mitch McConnell, whose scalp is apparently worth blowing yet another shot at a Republican Senate majority.

“There’s a new dividing line in the conservative movement – between a majority who’d like to win against President Obama, and a handful who’d like to win some scalps. It was on vivid display last week during the Senate debt-ceiling vote. Republicans were looking to avoid a fight they were destined to lose. Democrats had the votes to pass the bill with a simple majority, meaning they also would have owned their president’s refusal to tackle the debt.

“In walked Texas Sen. Ted Cruz to demand a 60-vote majority to pass the increase. Mr. Cruz has subsequently claimed he alone was attempting to get Mr. Obama to agree to spending reforms. Odd, given that he didn’t publicly present any reforms to attach to the debt bill. He didn’t take to the floor to escalate the issue. To the contrary, he agreed to speed up the vote.

“There was only one point to Mr. Cruz’s action: To force Republican colleagues, in particular Mr. McConnell, into voting ‘yes’ to proceed to the actual bill. Mr. Cruz has admitted as much, bragging to radio host Mark Levin the next day that his colleagues’ ‘heads exploded’ because he’d ‘forced’ them to ‘tell the truth’ – namely, that they ‘wanted’ to give Barack Obama a ‘blank check to raise our debt.’ Never mind that every Republican, once past the Cruz show vote, opposed the increase on final passage.

“Members of Congress routinely cook up situations that force opposing parties to take ‘tough votes.’ This may be the first time a senator did so solely to damage his own party....

“Republicans have fumbled their last two Senate takeover chances, mostly thanks to infighting. But this latest movement – to take down incumbents over tactics – is a new low. If the GOP remains a minority, this will be why.”

Couldn’t agree more. Some of my fellow elephants are absolute idiots.

--I’ve never been one to say President Obama isn’t entitled to a nice vacation, though last week I couldn’t help but be snarky about his trip to California and Sunnylands in Rancho Mirage to play golf (and have dinner with King Abdullah of Jordan, even though the two could have met days earlier in Washington), but as the White House talks up the ‘inequality’ theme, it is kind of outrageous that Michelle Obama took the kids to Aspen for the Presidents Day weekend. Granted, she did the same thing the previous two years as well. It’s just the kind of ‘in your face’ arrogance that drives some of us crazy.

--The Star-Ledger’s David Giambusso reported on yet another example of massive corruption in my home state. Linda Watkins-Brashear headed what was called the Newark Watershed Conservation Development Corporation, which managed the city’s 35,000 acres of reservoirs and treated water for more than 500,000 customers in northern New Jersey, until a judge ordered it shut down last year.

But now the state comptroller alleges that Watkins-Brashear and others looted $millions of public dollars between 2008 and 2011.

The comptroller’s office issued a statement: “This report documents an egregious and yet preventable abuse of public funds that was allowed to continue unfettered for years because of poor oversight.”

Watkins-Brashear “wrote unreported checks to herself to the tune of $200,000, was awarded $700,000 in two severance packages, gave more than $1 million in contracts to her friends and ex-husband, and lost $500,000 in dubious stock ventures, the report states.”

Watkins-Brashear invoked the Fifth.

Now I bring this up because former Newark mayor, now Sen. Cory Booker, was a friend of Watkins-Brashear and received campaign donations from her. It turns out over the years the Star-Ledger reported on a series of financial misdeeds at the agency, but the Booker administration, which allowed every aspect of the city’s water infrastructure to be managed by the NWDC, “continued to fund no-bid contracts to the agency at the rate of roughly $10 million a year. The city was the agency’s only customer, meaning all of its funding came from public dollars.”

It wasn’t until last year, though, that the Booker administration asked a Newark Superior Court Judge to dissolve the agency.

Picture that in 2010, for example, “Newark laid off more than 160 police officers and about 800 other employees, (even as) Watkins-Brashear treated herself and 20 guests to a $1,400 feast in Atlantic City during the annual League of Municipalities conference, the report states.” But as noted above this is a mere pittance compared to how Watkins-Brashear treated the agency as her personal cookie jar.

Our criminal justice system is so screwed up. This woman should serve life in prison without parole. I’ve said since day one of StocksandNews that having penalties of that kind for public corruption would put an end to it (or diminish it greatly) right away.

But to me this particular case is big because down the road it could (should) bite Cory Booker in the butt. He was “ex-officio chairman” of the NWDC, yet the report notes he did not attend any board meetings and the failures are on him.

--A Quinnipiac University poll of Ohio voters found Chris Christie trailing Hillary Clinton 49-36 in that key swing state. In November the two were deadlocked. Congressman Paul Ryan would lose to Clinton 49-40. Clearly, Ohioans are aware of the traffic scandal.

President Obama, by the way, has a negative approval rating with Ohio voters 40% to 55%, an improvement over November when the split was 34-61.

[Christie did receive high marks for a town hall meeting he held in Monmouth County on Thursday, his first lengthy meeting with voters since Bridgegate broke.]

--By an 83-14 margin, New Yorkers aged 18 to 29 support making pot legal in small amounts for personal use, according to a new Quinnipiac survey. New Yorkers as a whole back legalization 57% to 39%.

--Finally, New York City Mayor Bill de Blasio’s official vehicle was caught blowing through two stop signs, changing lanes without signaling, and driving over the speed limit by a WCBS-TV/Channel 2 news crew immediately after De Blasio held a press conference in Queens about the city’s pothole repairs as well as a crackdown on dangerous driving that has seen a large increase in pedestrian deaths ( in most cases the fault of the pedestrian, by the way).

From the New York Daily News: “If a driver had been ticketed for all the violations, he would have racked up 13 points on his license – more than the 11 that trigger a suspension, Channel 2’s Marcia Kramer reported.”

But wait...there’s more! The very next day the New York Post caught the mayor jaywalking, which New Yorkers know is a big deal because in January, the NYPD launched an aggressive program to ticket jaywalkers, one that had De Blasio’s support.

New Yorkers have 46 more months of this jerk’s mayoralty. They are getting what they deserve. Recall, I supported Christine Quinn in the Democratic primary.

---

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

God bless America.
---

Gold closed at $1323
Oil $102.20

Returns for the week 2/17-2/21

Dow Jones -0.3% [16103]
S&P 500 -0.1% [1836]
S&P MidCap +0.7%
Russell 2000 +1.3%
Nasdaq +0.5% [4263]

Returns for the period 1/1/14-2/21/14

Dow Jones -2.9%
S&P 500 -0.7%
S&P MidCap +1.0%
Russell 2000 +0.1%
Nasdaq +2.1%

Bulls 46.5
Bears 17.2 [Source: Investors Intelligence]

Have a great week. I appreciate your support.

Catch me on Twitter @stocksandnews

Brian Trumbore