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03/22/2014

For the week 3/17-3/21

[Posted 12:00 AM ET]

Ukraine

As I go to post, there are concerns Russian forces could move across the eastern border of Ukraine this weekend. It has been a chaotic time. But, overall, save for a few days, the global equity markets have not reacted in a big way. That can yet change in a flash.

For now, a review of the week’s events.

--On Sunday, with tens of thousands of troops facing off against each other, 96.7% of those voting in Crimea in a referendum favored breaking away and joining Russia. Turnout was said to be 83% of 1.53 million eligible to vote, according to the Electoral Commission.

President Obama said the poll would never be recognized by the United States and the international community.

--A popular Russian television journalist and crony of Putin’s, Dmitry Kiselyov, warned on his Sunday show:

“Russia is the only country in the world that is realistically capable of turning the United States into radioactive ash.”

He made the inflammatory remark in front of a photo of a mushroom cloud.

Former Soviet leader Mikhail Gorbachev told Interfax news agency that Crimea’s independence “should be welcomed and not met with the announcement of sanctions.”

--Pro-Russian demonstrators stormed the prosecutor’s office in Crimea, tearing Ukrainian flags and replacing them with Russia’s.

In Moscow, 50,000 rallied for peace in the biggest protest in two years, with the demonstrators chanting “Hands off Ukraine.” Despite Putin’s high poll numbers, millions of others fear a return of the days of Stalin.

--The status of an Organization for Security and Cooperation in Europe monitoring mission was still up in the air. Russia has yet to allow the OSCE into Crimea, which is an illegal act under a treaty between Russia and the EU.

--The United States levied sanctions against seven Russian individuals on Monday, but not the oligarchs.

--After Russian and pro-Russia forces began to move on Ukrainian military and naval bases in Crimea, the Kiev government ordered the removal of all military personnel from there and instead further reinforced the border with Russia. One Ukrainian soldier was killed. The naval chief was detained, though released a day later.

--Vice President Joe Biden paid a visit to Poland and the Balkans, assuring them they had nothing to fear, the U.S. would support them. It was taken as nothing more than a bunch of blarney.

U.S. Sen. John McCain called the crisis “the ultimate result of a feckless foreign policy where no one believes in America’s strength anymore.”

For their part, Ukrainians feel abandoned by the West. The 1994 Budapest memorandum guaranteed Ukraine’s territorial integrity.

--Moscow could eventually target the Baltics with sanctions, with all three republics receiving 100% of their natural gas from Russia. [Poland receives 63% from there.]

--On Tuesday, Putin signed a treaty making Crimea part of Russia but said he had no further designs on any other regions of Ukraine. 

“Don’t believe those who try to frighten you with Russia and who scream that other regions will follow after Crimea.... We do not need this.”

Putin reiterated, though, that “In the hearts and minds of people, Crimea has always been and remains an inseparable part of Russia.”

--Secretary of State John Kerry warned Ukraine was releasing a “nationalist fervor which could, in fact, infect in ways that could be very, very dangerous. All you have to do is go back and read in history of the lead up to World War II, and the passions that were released with that kind of nationalistic fervor.” [Paul Richter / Los Angeles Times]

--Ukrainian interim Prime Minister Yatsenyuk warned his countrymen: “The conflict is shifting from a political to a military stage.”

Acting President Turchynov said Ukraine could take measures “of a technical and technological nature” against Russia, inferring Kiev might be preparing to squeeze Crimea’s electricity, water and food supplies, most of which comes from the Ukrainian mainland.

--On Thursday, Russia’s State Duma ratified the annexation of Crimea and the Black Sea port of Sevastopol to Russia by a 443 to 1 vote.

Following the Duma action, President Obama announced a further round of sanctions against key allies of Vlad the Great, including the “Rotenberg brothers,” who secured $7 billion in contracts associated with the Sochi Olympics, and Vladimir Yakunin, who is the chairman of Russian Railways, a major state-owned enterprise, as well as Bank Rossiya. 

This prompted Moscow to announce retaliatory measures against some of Washington’s power brokers, including House Speaker John Boehner, who said in a statement he was “proud to be included on a list of those willing to stand against Putin’s aggression.” And Republican Sen. John McCain, who said, “I guess this means my spring break in Siberia is off, my Gazprom stock is lost, and my secret bank account in Moscow is frozen.”

--For its part, the European Union imposed sanctions on 12 individuals and said that any further steps by Russia to destabilize Ukraine would have “far-reaching consequences.”

German Chancellor Angela Merkel said the European Commission had been asked to prepare broader economic sanctions against Russia if the crisis escalated.

--U.N. Secretary General Ban Ki-moon expressed “deep regret” over the Ukraine crisis in a meeting with Putin at the Kremlin. He also met with Foreign Minister Sergei Lavrov, who “expressed the deep concern” of Russia in connection with “multiple violations” of the rights of Russian-speaking people in the east and southeast Ukraine, as well as with “radical groups contributing to tensions with the connivance of Kiev authorities,” the Foreign Ministry’s website reported. [Moscow Times]

--Ukrainian lawmakers, Thursday, in a statement, said in part that for the first time since World War II, “generally recognized European borders are being ‘redrawn’ by the country that guaranteed Ukraine’s territorial integrity and inviolability of its borders.

“The Ukrainian people will never, under no circumstances, stop fighting for the liberation of Crimea from the occupants, however complicated and prolonged it might be.”

Interim Ukrainian Prime Minister Yatsenyuk said he believed Russia would not stop at Crimea. “It’s crystal clear for us that Russian authorities will try to move further and escalate the situation in southern and eastern Ukraine.”

--U.S. Ambassador to the U.N., Samantha Power, said of the annexation of Crimea:

“A thief can steal property, but that does not confer the right of ownership on the thief.”

--Friday, EU leaders in Brussels signed a deal with Ukraine to draw it closer into Europe’s orbit, the same agreement that four months ago the Yanukovych government declined to sign which then triggered pro-Europe demonstrations that led to the crisis.

Interim Prime Minister Yatsenyuk said, “We want to be a part of the big European family and this is the first tremendous step in order to achieve for Ukraine its ultimate goal, as a full-fledged member.”

In Moscow, President Putin signed laws completing the annexation of Crimea after the upper house of Parliament unanimously approved the act.

But depositors were lining up to withdraw savings from branches of Bank Rossiya, though Putin tried to reassure all it was safe, saying he would place his pay into an account there, though probably not his estimated $100 billion in various holdings.

President Obama’s trip to Europe next week will be all about Ukraine.

Opinion....

Charles Krauthammer / Washington Post

“Early in the Ukraine crisis, when the Europeans were working on bringing Ukraine into the EU system and Vladimir Putin was countering with threats and bribes, one British analyst lamented that ‘we went to a knife fight with a baguette.’

“That was three months ago.  Life overtakes parody. During the Ukrainian prime minister’s visit to Washington last week, his government urgently requested military assistance. The Pentagon refused. It offered instead military ration kits.

“Putin mobilizes thousands of troops, artillery and attack helicopters on Ukraine’s borders and Washington counters with baguettes, American-style. One thing we can say for sure in these uncertain times: The invasion of Ukraine will be catered by the United States.

“Why did we deny Ukraine weapons? Because in the Barack Obama-John Kerry worldview, arming the victim might be taken as a provocation. This kind of mind-bending illogic has marked the administration’s response to the whole Crimea affair.

“Why, after all, did Obama delay responding to Putin’s infiltration, military occupation and seizure of Crimea in the first place? In order to provide Putin with a path to de-escalation, ‘an offramp,’ the preferred White House phrase.

“An offramp? Did they really think that Putin was losing, that his invasion of Crimea was a disaster from which he needed some face-saving way out? And that the principal object of American diplomacy was to craft for Putin an exit strategy?....

“As I’ve argued here before, there are things we can do: Send the secretary of defense to Kiev tomorrow to negotiate military assistance. Renew the missile-defense agreement with Poland and the Czech Republic. Announce a new policy of major U.S. exports of liquefied natural gas. Lead Europe from the front – to impose sanctions cutting off Russian enterprises from the Western banking system.

“As we speak, Putin is deciding whether to go beyond Crimea and take eastern Ukraine. Show him some seriousness, Mr. President.”

Editorial / Washington Post

“It’s easy to conclude that Vladimir Putin’s passionate defense of Russia’s takeover of Crimea ‘just didn’t jibe with reality,’ as Secretary of State John F. Kerry put it. In a speech on Tuesday, the Russian ruler repeated mendacious charges that the Ukrainian government had been hijacked by ‘nationalists, neo-Nazis, Russophobes and anti-Semites’; voiced his paranoid conspiracy theory about supposed Western sponsorship of popular revolutions, including the Arab Spring; and brazenly compared Russia’s abrupt annexation of Ukraine with the reunification of Germany.

“It’s necessary, however, to take some of what Mr. Putin said seriously, because of the implicit threat it poses to European and global security. Mr. Putin advanced a radical and dangerous argument: that the collapse of the Soviet Union left ‘the Russian nation’ as ‘one of the biggest, if not the biggest ethnic group in the world to be divided by borders.’ That, he suggested, gave Moscow the right to intervene in Crimea, and, by extension, anywhere it considers ethnic Russians or their culture to be threatened.

“Mr. Putin’s doctrine would justify Russian meddling not just in other parts of Ukraine – he claimed that ‘large sections of the historical south of Russia’ now ‘form the southeast of Ukraine’ – but also in other former Soviet republics with substantial populations of ethnic Russians.

“Western officials seem to be betting that Mr. Putin won’t dare to extend his aggression beyond Crimea. But then, just last week they were saying they did not expect Moscow to move quickly on Crimean annexation. The Obama administration and its European allies have been too slow to grasp that Mr. Putin is bent on upending the post-Cold War order in Europe and reversing Russia’s loss of dominion over Eastern Europe, the Caucasus and Central Asia....

“The two countries that Mr. Putin has invaded since 2008, Ukraine and Georgia, were rejected for NATO membership action plans that year. Can it be argued seriously that Estonia and Latvia, with their large Russian minorities, now would be less vulnerable to Russian aggression had they not joined NATO? The crisis in Europe has come about not because Western institutions expanded, but because they did not fulfill their post-Cold War promise of ‘a Europe whole and free.’”

Editorial / Wall Street Journal

“The Obama policy of gradually increasing sanctions treats Mr. Putin like a wayward son who can be brought in line if he’s grounded for a couple weeks. It ignores that he is a determined revanchist leading a nuclear-armed nation that wants to rewrite the post-Cold War order in Europe and dominate its neighbors up to the German border. Mr. Putin views gradualism as a sign of weakness.

“The better strategy is to impose enough immediate and substantial pain on Mr. Putin, his friends and the Russian economy that he’ll decide that the costs of his depredations are higher than the costs of stopping....

“Mr. Obama should also signal a commitment to end Russia’s dominance in European energy by immediately approving all U.S. natural gas export terminal applications. And he should announce that next week during his trip to Europe he and the other G-7 leaders will discuss plans to provide military aid to Ukraine and forward deploy American and European forces to front-line NATO states.”

Geoff Dyer / Financial Times

“Six months before his 2012 re-election, President Barack Obama was caught on microphone talking to his then Russian counterpart Dmitry Medvedev. When it comes to sensitive issues such as missile defense in Poland, Mr. Obama pointed out, ‘after the election, I will have more flexibility.’

“Referring to the man who would take over as Russian president a few weeks later, Mr. Medvedev responded: ‘I will transmit this information to Vladimir.’

“As Vladimir Putin has cemented his control over Crimea in recent days, those words have been re-played by political opponents of the American president who see them as evidence of a stark naivety about the nature of the Russian regime.”

Daniel Henninger / Wall Street Journal

“Sometime in the first Obama term, opinion polls began to report that the American people were experiencing what media shorthand came to call ‘fatigue’ with the affairs of the world. The U.S. should ‘mind its own business.’ The America-is-fatigued polling fit with Mr. Obama’s stated goal to lead from behind. A close observer of American politics also could notice that Republican politicians, the presumptive heirs of Reagan, began to recalibrate their worldview inward to accommodate the ‘fatigue’ in the opinion polls.

“We are of course discussing Vladimir Putin’s path to the forced annexation of Crimea. And possibly in time a move on the independence of Ukraine, Lithuania, Estonia, Latvia, Kazakhstan or Moldova. This narrative has one more point of Putin demarcation: Syria.

“Last September, every foreign chancery in the world concluded that the United States would bomb Bashar Assad’s airfields with Tomahawk missiles in reprisal for killing nearly 1,500 Syrians with chemical weapons, including sarin gas. Vladimir Putin placed a bet. He suggested to the American president that in lieu of the U.S. bombing Assad’s airfields, their two nations, in concert, could remove all of Syria’s chemical weapons. Mr. Obama accepted and stood down from bombing Assad. Six months later Vladimir Putin invaded and annexed Crimea.

“This moment is not about Barack Obama. By now we know about him. This is about Vladimir Putin and the self-delusions of Western nations and their famous ‘fatigue.’ Vladimir Putin is teaching the West and especially the United States that fatigue is not an option.”

Senator John McCain / New York Times op-ed

“The United States must look beyond Mr. Putin. His regime may appear imposing, but it is rotting inside. His Russia is not a great power on par with America. It is a gas station run by a corrupt, autocratic regime. And eventually, Russians will come for Mr. Putin in the same way and for the same reasons that Ukrainians came for Viktor Yanukovych.”

Gerald F. Seib / Wall Street Journal

“Public opinion has returned to a Cold War footing. A new Wall Street Journal/NBC News poll...reveals a stunning slide in American views of Russia. Just over a decade ago, after Russia was a sympathetic partner in opposing the extremism that produced the 9/11 attacks, 52% of Americans said they thought of Russia as an ally, while just 26% considered it an adversary.

“This month, the share calling Russia an adversary shot up to 72%, while the share calling it an ally plunged to 19%. This isn’t exactly the kind of ‘reset’ of U.S.-Russian relations that Mr. Obama once sought. ‘We shall now leave the reset behind, to be replaced by the rethink,’ says Richard Haass, president of the Council on Foreign Relations.”

Alexei Navalny, Russian opposition leader / New York Times op-ed

“As I write this, I am under house arrest. I was detained at a rally in support of anti-Putin protesters who were jailed last month.

“In September, I ran for mayor of Moscow as a pro-reform, pro-democracy opposition candidate and received almost a third of the vote despite having no access to state media. Today, my blog, which was until recently visited by over two million readers per month, has been blocked as ‘extremist’ after I called for friendly ties with Ukraine and compliance with international law....

“As a citizen and patriot, I cannot support actions against Russia that would worsen conditions for our people. Still, I recommend two options that, if successfully implemented, I believe would be welcomed by most Russians.

“First, although Mr. Putin’s invasion has already prompted the European Union to impose sanctions on 21 officials, and the United States on seven [Ed. this was written prior to Obama’s second round targeting further individuals], most of these government figures cannot be considered influential. They do not have major assets outside Russia and are irrelevant to Mr. Putin; sanctioning them will not change Russia’s policy....

“Instead, Western nations could deliver a serious blow to the luxurious lifestyles enjoyed by the Kremlin’s cronies who shuttle between Russia and the West. This means freezing the oligarch’s financial assets and seizing their property.”

Navalny then goes on to cite individuals who have still not been targeted, such as a man I bring up all the time, Igor Sechin, head of oil giant Rosneft. Navalny also would target Aleksei B. Miller, head of Gazprom.

“Mr. Putin has cynically raised nationalist fervor to a fever pitch; imperialist annexation is a strategic choice to bolster his regime’s survival. Mobilizing the masses by distracting them from real problems like corruption and economic stagnation can take place only beneath the banner of fighting external enemies....

“There is a common delusion among the international community that although Mr. Putin is corrupt, his leadership is necessary because his regime subdues the dark, nationalist forces that otherwise would seize power in Russia. The West should admit that it, too, has underestimated Mr. Putin’s malign intent. It is time to end the dangerous delusion that enables him.”

Holman W. Jenkins, Jr. / Wall Street Journal

“(Look) for the ride to get increasingly bumpy from here on. Mr. Putin faces election in 2018 – and it’s hard to believe he won’t try to avoid it. Too many indicators are headed the wrong way: a decline in Russia’s energy clout, capital flight and a failure to create a modern economy welcoming to global investors. He will also likely try to negate the constitution that would end his rule in 2024.

“He can’t kid himself that the apartment-bombing mystery will not at some point reignite, despite the murder or disappearance of Russian officials and dissidents who insisted on investigating an alleged ex-KGB role. And don’t overinvest in talk of Russia’s ‘legitimate interests.' Russia’s regime has interests but those interests are dictated by the nature of its regime. Its neighbors would not clamor for NATO membership if Russia were not ruled by an unpredictable kleptocracy. Mr. Putin would not fear his neighbors becoming prosperous and modern if he didn’t fear his own citizens’ demands for the same.

“Even the most hard-headed (and forgiving) realist by now must suspect that Mr. Putin is destined to become increasingly a source of instability rather than of stability.”

Washington and Wall Street

The Federal Reserve held a two-day Open Market Committee meeting and Chair Janet Yellen gave her first press conference wherein she said after the Fed’s bond-buying program ended, the Fed having opted to continue with tapering to the tune of another $10 billion a month, or down from the initial $85 billion to $55 billion, the Fed would probably be thinking of raising short-term interest rates “on the order of around six months or that type of thing.”

So, that would mean if the Fed keeps to its tapering schedule, it would wind things down late fall and perhaps begin raising the funds rate off zero around the time of June 2015. Maybe a few months earlier than what had been thought by the Street before, but hardly earth-shattering. Free money can’t last forever...though it already has longer than was appropriate.

But Wall Street had a brief conniption after Yellen’s statement and the bond market swooned (yields rose) while stocks dropped. By week’s end, however, all the major averages were up solidly.

The whole deal was incredibly stupid. Going back to 2012, the Federal Reserve had said it wouldn’t look to raise interest rates until the unemployment rate hit 6.5% and/or inflation was at 2.5%, 2.0% being the Fed’s preferred pace. 

But then the unemployment rate dropped far faster than the Fed expected, it being the worst economic forecaster on the planet, down to a current 6.7%, and it was clear by the Fed’s thinking that it couldn’t stick to 6.5% as a target for ending free money so it changed the language a bit on its statement to say it would keep rates near zero “for a considerable time,” even after bond-buying ends, and explained that from now on it will base any decisions on rates on “a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments.” As the Wall Street Journal opined, “All that and maybe the alignment of Jupiter too.”

Yes, it is squishy, mushy, you name it, incoherent. Personally, I think a better barometer would involve the New York Mets and whether they are playing meaningful games in September. If so, this would boost the New York economy and hasten the day for a rate hike.

Meanwhile, perhaps more significantly, the Fed’s new funds target is 1% end of 2015 and 2.25% by end of 2016. You know all my talk about interest expense on the federal debt? That’s where these numbers come into play. Good luck funding your pet projects down the road, sports fans.

There were a few other economic items. Industrial production for February was a stronger than expected 0.6%, February housing starts were down 0.2%, basically in line with expectations, and existing home sales for the month were also in line, though down 7% year over year.

Europe and Asia

Eurozone inflation was running at an annualized rate of just 0.7% for the month of February vs. the European Central Bank’s target of 2.0%. The CPI was 1.0% in Germany, but prices fell 1.3% (ann.) in Cyprus (not that this one is important, but the trend is) and 0.9% in Greece (which is important).

Speaking of Greece, there was some good news, maybe. Piraeus Bank became the first to sell bonds to the public since 2009, 5 ¼%, 3-year notes. Demand was strong, though buyers wanted a longer-term at that rate.

The Greek government said it reached agreement with the troika (ECB, European Commission and International Monetary Fund) that will result in another slug of bailout aid, prior to Euro Parliament elections (May 22-26) in order to send a positive signal for voters looking at the shaky Greek coalition government.

Speaking of the Euro vote, a big topic for the right-wing is immigration and the figures coming out of Italy this week were staggering. The Navy and Coast Guard rescued 2,400 migrants from North Africa in one two-day span. 5,000 have attempted to cross to Italy thus far in 2014, ten times the number at this point in 2013. The pace is only expected to pick up with improving weather for such a voyage.

The migrants are coming mostly from Libya, Eritrea, and Syria (at least the recent ones) and an Egyptian criminal network has been coordinating actions.

Separately, I’m throwing Russia in this segment. The economy there was weak before the crisis, with growth forecast at just 1% in 2014. Capital outflows have obviously been huge, but many European nations, as you are well aware by now, witness the limited Euro sanctions against Moscow, do a ton of business with Russia.

In Britain, a certain district in the financial capital is called “Londongrad,” with Russians spearheading $180 billion in deals the last two years, which you can imagine results in $billions in fees for bankers that then fuel consumption, and real estate. Russian IPOs originating in London make up 10-15% of the total flow.

Turning to China, shares of property firms fell hard after a large developer defaulted on a reported $565 million in loans, $160 million of which was owed to giant China Construction Bank Corp. This was a Zhejiang province developer. Recall, a week earlier, Chaori Solar became the first Chinese firm to default on its bonds. So this doesn’t exactly add to confidence when looking at China’s immediate prospects.

Home price appreciation is definitely slowing rapidly. Prices were up in February in 57 of 70 major cities tracked by the statistics bureau (normally it’s been 69 of 70); just 0.2% in Beijing, 0.4% in Shanghai over January, the slowest monthly pace since Oct. 2012. 

The government is reining in lending and defaults will rise. But Beijing doesn’t want growth to decelerate much below 7.0-7.5%, so the State Council (Cabinet) announced it would “accelerate preliminary work and construction on key investment projects.”

George Magnus / Financial Times

“The incidence of financial distress is rising and becoming more visible. The recent drop in the renminbi, and the sharp fall in copper and iron ore prices are the latest high-profile manifestations of China’s changing outlook. These are not random developments or bad luck, but connected parts of a complex economic transformation with deflationary consequences for the world economy and skittish financial markets.

“In the first two months of 2014, industrial confidence and output indices, retail sales, fixed asset investment, and credit creation were all weaker than expected. A slowdown in economic growth at the start of the year, coinciding with the Chinese New Year holidays, is not unusual, but in each of the past two years, the government sanctioned faster credit growth and infrastructure spending to compensate. This time, those options are not available, or much riskier, because the government is trying to change China’s economic development model....

“Slowing economic growth, chronic overcapacity and rising debt service problems in key industries are becoming more common, raising the risk of chain defaults involving suppliers and purchasers. Overcapacity recently prompted a senior executive in the Chinese Iron and Steel Association, Li Xinchuang, to say the problem was so severe it was ‘probably beyond anyone’s imagination.’”

And since I told you of my own impressions going through the eastern Chinese city of Fuzhou, during my not-so-excellent adventure late January, I have to note Andrew Browne’s take in the Wall Street Journal, regarding China’s property boom.

“Like all booms, this one is ending in a bout of crazy excess. The evidence is apparent in the massive overbuilding that strikes visitors to almost any Chinese city. In the northern industrial city of Harbin, for instance, ‘ghost suburbs’ – entire communities of unoccupied high rises – haunt the view on the way into town from the airport.*

“These empty blocks have acted as warehouses for the exploding wealth of China’s middle classes, which have few other options to invest their money. And for more than a decade, real estate has been a good bet. In megacities like Shanghai and Beijing, property values rose up as much as fivefold from 2002 to 2012.

“Now, though, some of these bets are souring....

“(The) worry is that the beginning of the end of the real-estate bonanza will help to drag down consumption – the very opposite of what the government intends as it looks to household spending to pick up the slack from a slowdown in exports and investment. That makes Premier Li Keqiang’s task of holding up flagging growth look harder by the day.”

*WIR, 1/25/2014

“On the drive back to the airport we passed through a suburb of Fuzhou (which is a large city) and there were tons of gleaming new high-rise apartment towers along the highway. I could see straight through all of them. That’s part of the China conundrum...for years to come.”

Street Bytes

--Stocks rebounded, with the Dow Jones finishing up 1.5% to 16302, the S&P 500 up 1.4% and Nasdaq up 0.7%. 

--U.S. Treasury Yields

6-mo. 0.07% 2-yr. 0.42% 10-yr. 2.74% 30-yr. 3.61%

Bonds rallied a little on Friday after getting hit on the above-noted Yellen presser.

Consumer prices for February were up 0.1% and also up 0.1% ex-food and energy. For the past 12 months, the CPI is up only 1.1%, and up 1.6% on core. But as I highlight below, food prices are surging in many categories.

--The Federal Reserve released stress tests on the nation’s 30 largest banks and all but one, Zions Bancorporation of Salt Lake City, Utah, would be financially strong enough to withstand a near depression.

Zions’ capital cushion in a sharp downturn falls below that required by the Fed, which over the coming week is expected to announce whether it will reject Zions’ capital raising plans and whether the other large banks can issue/increase dividends and/or buy back shares.

The Fed’s severe stress test assumed an 11.2% unemployment rate, a 50% drop in stock prices and a decline in home prices to 2001 levels. The Fed also asked the banks to estimate what their losses would be if their biggest trading partner went bust and Bank of America led the way in projecting losses of $49 billion; Citigroup $45.7 billion.

--General Motors’ new CEO, Mary T. Barra, conceded in a statement concerning the company’s serious safety issues that went undisclosed for over a decade, “Something went very wrong in our processes in this instance, and terrible things happened,” referring to a defect tied to 12 deaths (some say far more than that). G.M. announced it expected to take a $300 million charge for the ignition switch issue and a separate round of recalls involving 1.7 million vehicles (Buick Enclaves and GMC Acadias, as well Chevy Traverses and Saturn Outlook), that are on top of the original 1.6 million Chevy Cobalts et al.

Barra will be appearing before Congress shortly as at least two probes are set up.

--Toyota Motor Co. reached agreement with the Justice Department on a $1.2 billion settlement to close cases related to its sudden acceleration issue, thus ending a four-year federal probe involving complaints dating back to 2009. Toyota had been forced to recall millions of vehicles and pay out tens of $millions in fines and civil settlements.

Toyota, by agreeing to the settlement, will avoid criminal charges, assuming it complies with conditions imposed by the court.

The company long denied there were problems with the ignition and blamed driver error, or the gas pedal getting stuck under floor mats, for the accidents.

--Honda is recalling nearly 900,000 of its popular Odyssey minivans due to fuel leak concerns. The automaker said in a statement, “Honda is not aware of any crashes, injuries or fires related to this issue, which was discovered during warranty repairs.”

--JPMorgan Chase is selling its physical commodities trading unit to a Swiss outfit, Mercuria Energy Group, for $3.5 billion in cash. JPM was forced to do so because of the Volcker Rule, part of Dodd-Frank that restricts the ability of banks to trade for their own accounts.

Mercuria was started in 2004 by two traders, with oil the company’s core focus.

--Morningstar Inc., the leading fund-research firm, cut two of PIMCO’s key ratings after the leadership shake-up following the resignation of co-CIO and CEO Mohamed El-Erian and the stream of less-than-flattering stories on co-founder Bill Gross and the environment surrounding El-Erian’s departure.

PIMCO also was dropped as manager of a $1.3 billion bond fund offered by Columbia Management, replaced by its Southern California rival, TCW Group Inc. The size isn’t significant, but the symbolism is huge, especially with the financial advisers who sell PIMCO fixed-income products.

--According to a national survey, about 36% of workers have less than $1,000 in savings and investments for retirement, not counting their primary residence or pension plans. 60% have less than $25,000. [Employee Benefit Research Institute and Greenwald and Associates / USA TODAY]

--North Dakota’s economy continues to boom, thanks to the oil and gas sector, and the Economic Development Foundation is looking for 20,000 workers to fill positions ranging from oilfield workers to receptionists.

The biggest problem is the costs are soaring. As CNNMoney.com’s Blake Ellis notes, home prices in Williston, for example, have tripled and rents are the highest in the nation. You have people earning in the six figures who are living out of their cars.

As I’ve also noted before, crime is soaring, too.

--New Zealand’s economy grew by 2.7% last year, making it one of the fastest growing nations in the developed world, with the Kiwis having 12 consecutive quarters of growth as well.

--Yup, the following from Calum MacLeod of USA TODAY pretty well sums up the business climate for foreign companies operating in China these days.

“As more Chinese get behind the wheel, the Ford Focus has become the best-selling passenger car in China, driving Ford China sales up by 67% last month.

“General Motors broke its own record for February sales, and plans to invest $11 billion with its Chinese joint venture partners by 2016.

“But most U.S. companies surveyed by a U.S. business association have seen China growth slow in both revenue and profitability, and will scale back expansion plans this year. As labor costs rise, U.S. firms feel targeted by government campaigns, and complain that China still fails to stop local firms copying their intellectual property, the American Chamber of Commerce in China reported.”

Another issue faced by the business group should sound familiar to readers of this space, “difficulties hiring due to smog worries.”

--Chinese e-commerce giant Alibaba Group Holding Ltd. is preparing a U.S. initial public offering that would raise a reported $15 billion, rivaling Facebook’s 2012 IPO, that raised $16 billion. Alibaba chose New York over Hong Kong, though hasn’t selected between Nasdaq and the New York Stock Exchange as yet.

China’s Twitter alternative, Weibo Corp., also announced it would register an IPO in the U.S.

--Software giant Oracle announced revenues rose 4% for its fiscal third quarter vs. a year ago, below expectations, and its profit, while $2.56 billion, also fell short. The shares, however, were basically unchanged after the announcement.

--The new generation of aircraft are 20% more fuel efficient so some believe in coming years airfares may actually drop a bit. I’ll believe it when I see it, though it’s true much of the growth in aircraft sales is through the budget airlines, like EasyJet, Ryanair, and Norwegian Air Shuttle.

According to the Centre for Aviation, full-service airlines have 5,168 aircraft on order and low-cost carriers 3,582.

--FedEx blamed severe weather conditions for its poor quarterly performance, at least vs. expectations, which also forced it to lower its fiscal-year profit outlook. The harsh winter decreased operating income by about $125 million in the quarter ended February 28, the company said. Revenue rose 3% over year ago levels.

FedEx also blamed in part the online companies, with CEO Fred Smith saying many e-commerce sites were ill-prepared to handle the last-minute surge this past Christmas.

--Wholesale prices for milk, cheese and other dairy products hit all-time highs this week amid soaring demand, at the same time while the weather, from drought to the nasty winter, has reduced inventory. Domestic supplies have been drying up in part because exports to the likes of China are surging.

--Food prices overall are forecast to rise 3.5% this year, mostly because of the drought in California and parts of the Midwest and Southwest. Drought in Brazil is impacting coffee, sugar and orange prices, while similar conditions in Southeast Asia affect palm oil.

--The IRS is urging taxpayers to be aware of the largest phone scam the agency has ever seen, one that has bilked $1 million+ from thousands.

Bogus IRS agents call victims and claim they owe back taxes and must pay with a prepaid debit card or by wire transfer.

Real IRS agents do not demand payment in such a fashion and initial contacts are almost always by mail.

--Global music sales declined 4.4 percent last year. The Japanese market, responsible for one-fifth of music dollars, declined 16.7 percent. Ex-Japan, worldwide revenue fell just 0.1 percent. [Claire Atkinson / New York Post]

--This is interesting...at least I hope you will find it interesting...95% of the world’s ATMs employ Windows XP, yet on April 8 Microsoft is going to stop issuing updates and patches for bugs. Ergo, all these ATMS will become far more vulnerable to attacks and viruses, according to Sarah Mishkin of the Financial Times. 40% of personal computers also still use XP.

--CNN’s ratings have surged as a result of its coverage of the disappearance of Malaysia Air Flight 370. In fact for the Wed. thru Friday period, March 12-14, Anderson Cooper beat Bill O’Reilly in the 8 p.m. hour for the critical 25-54 demographic. It was the first time Mr. Cooper had beaten O’Reilly over three days. [But O’Reilly still won the week.]

As for MH370, I’m sorry but I have virtually nothing to say. We don’t have any real facts, though the eventual post-mortem is not going to be kind to the Malaysian government for clearly withholding some information early on. 

It’s also irresponsible for me to comment on various conspiracy theories. In 15 years of writing this column I have steered clear of that. This is a running history of our times. When the facts are known you can be sure I’ll add my own opinion to the mix.

--Bitcoin exchange Mt. Gox, which had filed for bankruptcy, says it has found 200,000 of the 850,000 pieces of the virtual currency it said it lost last month. The found bitcoins were in a virtual “wallet.” Whatever.

--But speaking of bitcoin, the March 15 issue of The Economist, in a piece on it, notes my beloved island of Yap in Micronesia, where I have a church and some good friends.

“To understand the enthusiasm in (bitcoin), it helps to think about a very old one. Until the early 20th century the people on Yap, an island in the Pacific Ocean, used large stone disks as money for big expenses, such as a daughter’s dowry. Being very heavy, they were rarely moved when spent. Instead, they simply changed owners. Every transaction became part of an oral history of ownership, which allowed islanders to know the proprietor of each stone and made it difficult to spend the same stone twice.

“Bitcoins also don’t move around when they are transferred. They are best understood as entries in a giant ledger, the ‘blockchain,’ which contains the transaction history for every bitcoin in circulation....openness helps the system remain secure: the blockchain is public so every participant can check whether a transfer comes from the rightful owner.”

At least one hopes.

Foreign Affairs

Syria: There have been conflicting reports on just how quickly the Assad regime is removing its deadliest chemical arms, with a report by the U.N.’s Organization for the Prohibition of Chemical Weapons, which is overseeing the process, saying the regime has given up 29.5% of the deadliest substances and a significantly larger portion of lower-grade materials.

But I would counter we still don’t know if Assad’s people declared everything in the first place; odds being high they didn’t.

Nonetheless, it is true some of the batches have been placed on foreign freighters docked in Latakia, where they are then taken out to sea to be disposed of. The full arsenal is to be eliminated by the end of June, according to the OPCW.

As for the Geneva peace talks, they’re history. Forget what you may hear to the contrary. The rebels and their Western backers insist Assad must go as part of any final peace plan and the regime says that isn’t going to happen, especially with the backing of Russia. The government is also proceeding with plans to hold a presidential election in territories it controls this summer, with Assad a seeming lock to be on the ballot.

Meanwhile, the Syrian army, with the significant help of Hizbullah, took control of a critical city and suburbs surrounding the former rebel stronghold of Yabroud, which is near the Lebanese border. If the regime secures this border, that cuts off a huge source for the rebels in both fighters and weapons.

The opposition is so fractured at this point that as the Financial Times reported, “Hundreds of foreign fighters have abandoned rebel ranks...as frustration rises over bloody infighting (in the north) – a trend that suggests declining enthusiasm among hardline Sunni Muslim militants...and raises concerns among western security officials that these combatants may head to other countries.” 

Such as Lebanon, to carry the fight to Hizbullah, which is a distinct possibility. Jordan, to try to destabilize the government there, is another. They are obviously back in Iraq (see below). Many will go back to Chechnya (good luck, Vlad the Great), and I suspect Moscow itself will be a more prevalent target.

And related to the preceding, Israel’s air force attacked Syrian military positions near the border after a powerful bomb injured four Israeli paratroopers in the Golan Heights. There have been a series of incidents along both the Lebanese and Syrian borders in recent weeks. Hizbullah in particular poses a major challenge and you can imagine how concerned Israel is with the battle experience Hizbullah has been picking up in Syria. [Though at the same time the group has lost hundreds of its best fighters.]

Separately, the United States closed down Syria’s embassy to Washington and ordered its remaining diplomatic staff to leave the country if they were not U.S. citizens. Russia joined Damascus in objecting. Sec. of State Kerry said the decision was taken because “the illegitimacy of the Assad regime is so overwhelming.”

The death toll in the 3-year-old war is over 140,000 as Assad and his goons continue to “indiscriminately attack civilians,” in Kerry’s own words this week.

I saw one bombing on the city of Aleppo resulted in six children being killed. I don’t know how President Obama can sleep at night. He knows deep down a vast majority of the killing was preventable with a little leadership early on.

Oh, but we’re tired of war, my fellow Americans. We’re “fatigued.” Sorry to disturb you.

Iran: The situation in Ukraine is clearly jeopardizing talks over Iran’s nuclear program, the latest round having ended this week with no progress, though they were said by both sides to have gone smoothly, whatever that means.

Russia’s Deputy Foreign Minister Sergei Ryabkov said, “We wouldn’t like to use these talks as an element of raising the stakes, given the mood in certain European capitals, Brussels and Washington. But if we are forced to do this, we will go down the path of taking measures in response.” [Wall Street Journal]

A bipartisan group of 83 senators told the White House in a letter on Tuesday: “Should an acceptable final agreement be reached, your administration will need to work together with Congress to implement legislation to provide longer-term sanctions relief. Should negotiations fail or Iran violate the [interim] Joint Plan of Action, Congress will need to ensure that the legislative authority exists to rapidly and dramatically expand sanctions." [Diane Barnes / Global Security Newswire]

Lastly, Javad Zarif, Iran’s foreign minister, wrote an op-ed for the Financial Times that started as follows:

“At last it seems realistic to hope for a resolution to the unnecessary crisis surrounding Iran’s peaceful nuclear program. In large part that is because attitudes towards my country are changing. It is now recognized that Iranian scientists have mastered nuclear technology – and it is widely accepted that the knowledge we have attained cannot be wished away.

“There is also a growing appreciation that Iran does not have any interest in nuclear weapons. True, we live in a volatile neighborhood. Yet we have always been clear that pursuing nuclear weapons – or even being wrongly suspected of doing so – would put our national security in jeopardy.”

I just want to puke. Understand Zarif writes this B.S. the same week that Iran’s defense minister “Commended Palestinian organizations in the Gaza Strip for firing dozens of rockets into southern Israel last week, stating that ‘the operational power of the Resistance against the Zionist regime is a thousand times more than what it was before.’” [Jerusalem Post]

Israel: Palestinian President Mahmoud Abbas met with President Obama in the White House, with Obama praising Abbas for renouncing violence and working with Israel on a peace plan, which is laughable.

Abbas continues to refuse to recognize Israel as a Jewish state. I am totally on board with Israeli Prime Minister Benjamin Netanyahu on this single issue.

On a different matter, 61% of the Israeli people support legislation requiring ultra-Orthodox (haredi) to serve in the military (23% oppose), while 71% support a bill that would require a referendum before the government signs a deal to give up land inside pre-1967 Israel or land to which Israeli law has been applied since then (17% oppose).

Lebanon: There has been renewed fighting in the second city of Tripoli, with 19 being killed in clashes between supporters and opponents of Syrian President Assad. What a freakin’ disaster. It’s a mini-civil war.

Afghanistan: The Taliban was responsible for an attack on one of Kabul’s luxury hotels used by foreign nationals, the five-star Serena, that killed nine, including two children and four foreign nationals who were eating dinner when gunmen burst through with pistols hidden in their socks.

The attackers were said to be teenagers and convinced guards they were there for a special buffet. They then hid out in a restroom for three hours before launching their attack, according to BBC News and AFP. AFP said one of its journalists died, along with his wife and two children. Others among the dead were from New Zealand, Canada, Pakistan and India.

Egypt: According to the Jerusalem Post, Egyptian army chief, and future presidential candidate, Field Marshal Abdel Fattah al-Sisi, is seeking to expedite the completion of a massive arms deal with Russia. At the same time, the U.S. has been delaying the shipment of 10 Apache helicopters in a move seen as punishment for Sisi’s military coup and crackdown on former President Mohamed Morsi.

Curiously, Defense Secretary Chuck Hagel promised Sisi in a phone call to deliver the aircraft “in a few days,” saying Obama’s position was unjustified, according to the report.

Six Egyptian soldiers were killed at a checkpoint in a Cairo suburb, with the government blaming the Muslim Brotherhood.

Iraq: There was an awful situation in Ramadi (Anbar province), where at least 14 Iraqi SWAT forces were killed on Thursday when they entered a house rigged with explosives, the Iraqi military being in a three-month battle with Sunni / al-Qaeda militants for control of provincial capital Ramadi as well as Fallujah.

Earlier, shelling and clashes near Baghdad killed 37 on Wednesday.

As of March 18, violence has claimed more than 2,000 people in Iraq thus far this year! 2,000 in ten weeks. [AFP / Daily Star]

Turkey: Prime Minister Recep Tayyip Erdogan vowed to “wipe out Twitter” following allegations of corruption in his inner circle. Documents showing evidence of same had been posted on the site. 

Libya: Score one for the good guys. Navy SEALS seized the fugitive oil tanker I wrote of the other day; Libyan militants having seized it for the purposes of selling the oil on the black market. The Navy will deliver the tanker back to a Libyan port. The Libyans had requested our aid in capturing the vessel.

China: As part of the government’s “people-centered urbanization” to raise the quality of life as well as growth rates, more than 100 million Chinese are to be given documents making them official residents of the country’s cities.

The goal is to have 60% of China’s 1.36 billion people living in cities by 2020, many of whom would have equal access to social benefits such as education and health care. Roughly 53% lived in cities in 2012.

At least 23% would receive affordable housing, double 2012’s rate.

Now the issue is, can such plans be implemented, including a reduction in air pollution.   I’ve been saying this is the paramount issue in China today. Increasingly, everyone else seems to be catching on.

Writing in BloombergBusinessweek, Elizabeth Economy of the Council on Foreign Relations:

“As Peking University Professor Xie Shaodong has noted, it’s questionable whether China makes the ‘relevant assessments’ of its environmental policies in the same way that foreign governments do. Particularly when large-scale campaigns are launched, good policy can be ignored. In the push to clean up the air in Hebei province, a local township recently shuttered scores of cement factories. Not only did the air quality not appear to improve, but thousands of workers are also now without jobs.

“President Xi and Premier Li must contend with one of the greatest, if unplanned, legacies of the Hu Jintao and Wen Jiabao era: the environmental awakening of the Chinese people. With their rafts of policy pronouncements, Xi and Li signal that they recognize the changed political landscape. The question before them now is whether they’re prepared to meet the Chinese demand not simply for bold promises of change but also for change itself.”

Russia: Because of everything else going on these days, in one of the more underreported stories it seems Chechen warlord Doku Umarov has died. Now these kinds of reports on him have come out before, but this one may be real.

Umarov is the one who had threatened the Sochi Olympics and claimed responsibility for some of Russia’s deadliest terror attacks. No cause of death was given and because it was the first time the report came from the group itself, there is some credibility to it...perhaps.

France: Big election in Paris on Sunday as two women, Socialist Anne Hidalgo, and center-right Nathalie Kosciusko-Morizet, battle it out for mayor, a steppingstone to even higher office.

Both are distancing themselves from their parties and focusing more on themselves and their ideas. Hidalgo has a slight edge in the latest survey, 52-48.

Meanwhile, Sunday is also the first round of local elections across the country and while the right-wing National Front party is not on the ballot everywhere, it is expected to make a strong showing, perhaps over 20% where it is represented, which would put many of its candidates in runoffs. The National Front won zero local elections in 2008 but is looking to win the mayoralties in as many as 10 medium-sized cities.

Venezuela: Protests across the country continue with at least 31 having now died in anti-government demonstrations over the soaring murder rate, skyrocketing inflation and shortage of consumer goods. President Nicolas Maduro blames the violence on “fascist groups,” as well as the United States and other western nations.

Two opposition mayors were arrested for inciting protests. Maduro said they were planning a coup. One can only hope such plans will be carried out shortly.

By the way, the inflation rate in February hit an annualized 57%.

Nigeria: Another incredibly awful week here as at least 200 villagers were killed last weekend in a remote village in central Kaduna state, as 50 gunmen attacked Friday night, then returned the next day to continue the killing. A survivor told local media, “They fired into homes. As women and children scampered to escape, they were shot and later cut with machetes.” [Washington Post] It’s hard to tell who was responsible.

And then there is this bizarre, still developing story from 8 days ago, details of which remain murky.

Over 500 may have died in a ‘prison break.’ The government is blaming Islamists’ Boko Haram for attacking a notorious military detention center, but it appears the army may have purposefully opened the gates and then opened fire on the prisoners from the air and the ground as they rushed out.

Initially, a week ago, the government said just a few died in this ‘prison break,’ but now reputable sources are telling the New York Times and others the situation was totally different. Plus, a majority of the prisoners not only weren’t members of Boko Haram, as the government claimed, but total innocents being held without charges.

Central African Republic: I can’t help but note this statement from Navi Pillay, the U.N. high commissioner for human rights, discussing the sectarian conflict here between the Christian and Muslim communities. Pillay warned the hatred between the two groups was “at a terrifying level” and a state of near anarchy existed.

There is “no justice, no law and order apart from that provided by foreign troops,” he said.

“I cannot help thinking that if the Central African Republic were not a poor country hidden away in the heart of Africa, the terrible events that have taken place – and continue to take place – would have stimulated a far stronger and more dynamic reaction by the outside world.

“How many more children have to be decapitated, how many more women and girls will be raped, how many more acts of cannibalism must there be, before we really sit up and pay attention?”

There are 6,000 African peacekeepers and 2,000 French troops working to stabilize the country, though few are outside the capital of Bangui.

Among the unthinkable atrocities that have been documented, Muslim rebels tie their victims together and throw them off bridges into rivers to drown or be eaten by crocodiles. [Daily Star]

Random Musings

--Karl Rove had some of the following potential bad news for Democrats in his Wall Street Journal op-ed:

“In a March 9 NBC News/Wall Street Journal poll, Mr. Obama had a 41% approval rating, 56% disapproval rating for his handling of the economy. His approval number is lower than all but eight of the 47 soundings this poll has taken since Mr. Obama’s first inaugural – and his disapproval rating is worse than all but seven others since January 2009.

“For context, consider that when Ronald Reagan was president in March 1986, 44% of Americans rated the economy ‘excellent’ or ‘good’ while 16% called it ‘poor,’ according to a Money Magazine survey conducted by ABC News. Just over seven months later, Republicans lost eight Senate seats and five House seats in the midterms.

“In March 2006, when George W. Bush was president, 41% rated the economy ‘excellent’ or ‘good’ while 24% called it ‘poor’ in an ABC News/Washington Post poll. Yet in that year’s midterms, Republicans lost six Senate seats and 30 House seats.

“The situation facing Democrats is more ominous. The March 2 ABC News/Washington Post survey reported a mere 28% rated the economy ‘excellent’ or ‘good’ while 28% called it ‘poor.’ Unless the Obama economy dramatically improves, it will be politically toxic for Democrats.”

--Jeremy W. Peters of the New York Times had a rather glowing review of Kentucky Republican Sen. Rand Paul’s address to a Cal-Berkeley student crowd, part of Sen. Paul’s outreach to libertarian-leaning voters, young people and minorities as he attempts, in his own way, to broaden the Republican Party’s image.

Titled “The N.S.A. vs. Your Privacy,” Paul took off after President Obama on a topic young people generally agree on, the right of privacy, and injected race into his remarks.

“I find it ironic that the first African-American president has without compunction allowed this vast exercise of raw power by the N.S.A.

“Certainly J. Edgar Hoover’s illegal spying on Martin Luther King and others in the civil rights movement should give us all pause. Now if President Obama were here, he would say he’s not J. Edgar Hoover, which is certainly true. But power must be restrained because no one knows who will next hold that power.”

--Speaking of the N.S.A., Barton Gellman and Ashkan Soltani of the Washington Post were the recipients of some new documents from Edward Snowden and according to their sources, “The National Security Agency has built a surveillance system capable of recording ‘100 percent’ of a foreign country’s telephone calls, enabling the agency to rewind and review conversations as long as a month after they take place.”

As Church Lady would say, “Well isn’t that special?!”

At the request of U.S. officials, the Post withheld the name of the country involved...and by now it could be ‘countries,’ as some of Snowden’s documents suggest. And as Gellman and Soltani report:

“Ubiquitous voice surveillance, even overseas, pulls in a great deal of content from Americans who telephone, visit and work in the target country. It may also be seen as inconsistent with Obama’s Jan. 17 pledge ‘that the United States is not spying on ordinary people who don’t threaten our national security,’ regardless of nationality, ‘and that we take their privacy concerns into account.’”

--Thomas Sowell / New York Post

“At a time when polls show public opinion turning against Democrats, some Republicans seem to be turning against each other. Even with the prospect of being able to win control of the Senate in this fall’s elections, some Republicans are busy manufacturing ammunition for their own circular firing squad.

“A Republican faction’s demonization of their own Senate minority leader, Mitch McConnell, is a classic example. If you listen to some of those who consider themselves the only true conservatives, you would never guess that Sen. McConnell received a lifetime 90 percent ranking by the American Conservative Union – and in one recent year had a 100 percent ranking....

“Someone once said that, in a war, truth is the first casualty. That seems to be the case for some in this internal war among Republicans. As the late Daniel Patrick Moynihan said, ‘You are entitled to your own opinions, but not to your own facts.’....

“The unfolding disaster of ObamaCare is only the most visible symptom of a far deeper danger from a lawless administration that unilaterally changes laws passed by Congress. President Obama has nearly three more years to continue doing irreparable damage to the fundamental basis of American government and Americans’ freedom.

“Only Republican control of the Senate can rein in the lawless Obama administration, which can otherwise load up the federal courts with lawless judges, who will be dismantling the rule of law and destroying the rights of the people, for decades after Obama is long gone from the White House....

“Only GOP control of both houses of Congress can repeal, or even seriously revise, ObamaCare. And only GOP control of both houses of Congress plus the White House can begin to reverse the many lawless, reckless and dangerous policies of the Obama administration, at home and overseas....

“Those Republicans who seem ready to jeopardize their own party’s chances of winning these two crucial elections by following a rule-or-ruin fight against fellow Republicans may claim to be following their ideals. But headstrong self-righteousness is not idealism, and it is seldom a way to advance any cause....

“If the rule-or-ruin faction among Republicans ends up giving the Democrats another Senate majority under Harry Reid, not only the Republican Party but the entire nation, and generations yet unborn, will end up paying the price.”

--As for ObamaCare, the Department of Health and Human Services this week announced more than 5 million people have signed up for health insurance through the exchanges, which sounds pretty good, but HHS doesn’t tell us how many of these folks have actually paid and how many already had insurance.

California, however, did say on Monday that of the 1,018,315 people it had signed up, 85% have paid their initial premiums.

--Back to the Senate, the Washington Post’s Chris Cillizza writes:

“Viewed broadly, there are now 11 Democratic-held seats in varying levels of peril – and 12 if you consider the Virginia seat held by Sen. Mark Warner.... That is a significant expansion of the playing field from even a few months ago – thanks largely to decisions by Rep. Cory Gardner (R-Colo.) and former U.S. senator Scott Brown (R-Mass.) to run in Colorado and New Hampshire, respectively. In each case, races that were not considered competitive immediately became so thanks to Republican recruits.”

Republicans need to gain six seats.

--I wasn’t going to comment on the furor in certain circles concerning Wisconsin Republican Congressman Paul Ryan’s comment about ten days ago on Bill Bennett’s radio program regarding the issue of poverty. Ryan offered: “We have got this tailspin of culture, in our inner cities in particular, of men not working and just generations of men not even thinking about working or learning the value and the culture of work, so there’s a cultural problem that has to be dealt with.”

Immediately, the Congressional Black Caucus called Ryan’s remark racist and Ryan was forced to apologize multiple times and will be appearing before the NAACP convention to do so again.

But I thought at the time, no way should Ryan apologize. There was nothing to apologize for. I still believe that. So I note the following from a Wall Street Journal editorial.

“Mr. Ryan put out a statement saying he had been ‘inarticulate’ but reiterated his point that ‘the predictable result’ of the poverty trap for society at large has been ‘multi-generational poverty and little opportunity.’

“But don’t take his word for it. ‘We know young black men are twice as likely as young white men to be ‘disconnected’ – not in school, not working. We’ve got to reconnect them. We’ve got to give more of these young men access to mentors. We’ve got to continue to encourage responsible fatherhood. We’ve got to provide more pathways to apply to college or find a job. We can keep them from falling through the cracks.’

“Those were the words of President Obama, speaking less than a month ago about his ‘My Brother’s Keeper’ project to help ‘groups who’ve seen fewer opportunities that have spanned generations,’ especially boys and young men of color. ‘It’s going to take time. We’re dealing with complicated issues that run deep in our history, run deep in our society, and are entrenched in our minds.’

“No less than Mr. Ryan, Mr. Obama sure sounded like he was talking about ‘a cultural problem.’...

“So even though Mr. Ryan never mentioned race, liberals attacked his off-the-cuff remarks as racist while the President’s moral lecture was hardly noticed....

“Liberals have to smear conservatives personally because they know they’re losing on the merits.”

--We note the passing of Robert S. Strauss, 95, a true American original. Strauss was the ultimate Democratic Party insider, “hopscotching among White House posts when not making millions as a lobbyist and deal maker,” as Douglas Martin put it in his New York Times obituary.

As a political junkie in my youth, I always liked the guy, a throwback to kinder, gentler politics in the capitol. However, looking back, some of his activities would no doubt be shredded under today’s klieg-lights. 

Strauss helped engineer Jimmy Carter’s 1976 victory and became one of the president’s leading advisers, serving as trade representative and a key Middle East negotiator.

As Martin notes, it was also Strauss whom Nancy Reagan “asked to tell her husband, President Ronald Reagan, that the Iran-contra arms-for-hostages scandal was corroding his administration and that he had to make changes.”

Yes, Bob Strauss was well-liked on both sides of the political aisle. President George Bush even appointed him ambassador to the Soviet Union in 1991.

Strauss probably had the biggest rolodex in Washington, and he parlayed it into mega-$millions.

But I love this story of his time as Carter’s Middle East peace negotiator in 1979.

“The first thing I’m going to do is go to Israel and court Premier Begin’s wife like she was an 18-year-old schoolgirl,” Mr. Strauss said, according to a friend, referring to Prime Minister Menachem Begin.

“Then I’ll go to Egypt and court Sadat’s wife the same way,” he continued, referring to President Anwar el-Sadat. Before long, Mr. Strauss predicted, “one of those ladies is going to turn around in bed to her husband and say: ‘You know, that Bobby Strauss is not such a bad guy. Why don’t you do something nice for him?’” [Douglas Martin]

--The number of Americans ages 50 to 64 who have had a colonoscopy has surged from 19% in 2000 to 55% in 2010, according to a new report by the American Cancer Society. So it should be no surprise then that colon cancer rates have fallen by 30% over this same period. Nonetheless, 136,800 Americans will be diagnosed with the disease this year and 50,300 will die from it.

Aside from a balanced diet, exercise is a key to avoiding the killer.

--The following is from Caroline Moss of Business Insider...reprinted in the New York Post:

“Your high school may have had different names for them, but you probably recognize what they are: school dances. A staple of American culture....

“In 2001, more than 800 students gathered in clusters on the squeaky gym floors at John Jay High School in Westchester county, bopping up and down to Nelly songs. In 2010, only 26 students showed up to the Homecoming dance in that same gym."

Ms. Moss asked her younger sister, a senior at the school she had graduated from, if she was excited about the 2014 Winter Ball.

“She rolled her eyes at me. ‘We haven’t had a Winter Ball since I was a freshman,’ Lucy said.”

An assistant principal at a neighboring high school told Moss that they don’t try to hold dances anymore, and, “Now we’re lucky if the juniors stay through dinner at the prom.”

Ms. Moss’ sister, Lucy, told her “she thought the reason students didn’t attend was because everyone would rather be home texting, Facebook messaging, or Snapchatting each other.

“ ‘Kids don’t need to go to a dance to interact with each other when they can sit in their bed with their laptop and phone and text them,’ she said. ‘It’s basically like being with that person. You don’t have to show up to a dance hoping to see someone anymore. You can literally Snapchat them and see them on Snapchat.’”

Oh, it’s depressing. Now, granted, I did not personally attend school dances, but I played poker virtually every weekend with the same group of guys and wouldn’t you know, they all remain among my best friends to this day, 40 years later. In fact today I received a bunch of old-time baseball-themed beer coasters from one of them. Now that’s a friend!

Today, I seriously doubt my gang would be playing poker if we were in high school. I’d like to think we’d all get together for pickup basketball games and such, but I don’t know. Five of the eight of us were also in the band. Would we be today? I don’t know.

What I can say with virtual certainty, however, is today’s youth aren’t having childhoods remotely close to the great ones many of my era did.

Granted, a few of today’s youth will become tech billionaires, but I imagine it’s kind of like what we told great high school basketball players from 20-30 years ago. Only a handful of you are going to the NBA, I hope you understand. And only a handful of today’s tech geniuses, molded in their formative Wonder Bread years, will go on to Zuckerdom.

The rest? Good luck, kids. You’ll need some people skills at some point along the way and a lot of you aren’t picking them up.

Plus, many of you aren’t keeping your eyes on the road!

--On a related issue, the hot topic, at least in these parts, of Pre-K funding, I read a letter to the editor in a recent issue of U.S. News Weekly by Alan W., Honolulu. 

“Excessive government funding causes a dependency that does more harm than good. Young children learn more when they are taught from home by a family member or caring friend. Reading a child a story stimulates the imagination. A simple walk can turn into an adventure when talking about the birds, plants and weather. Young children in a classroom environment don’t get the attention they need. Children grow up so fast. Teaching them about life fosters pleasant memories that will last a lifetime. Family members and friends should do more; the government should do less.”

Hear hear.

--I wrote the other day that I was uncomfortable with public figures, such as New York City Mayor Bill de Blasio, touting a reduced murder rate in his first ten weeks in office, as he did about ten days ago. Thursday, a 14-year-old fatally shot a 39-year-old fellow bus passenger to death after an argument on the behavior of several teenagers.

--It is totally appropriate that first lady Michelle Obama be blistered in the press for her trip to China, with daughters Malia and Sasha, along with her mother and an entourage of about 70, seeing as it is being paid with Americans’ tax dollars.

While I agree that some good can come of it if she connects with China’s first lady, Peng Liyuan, Mrs. Obama isn’t making it any easier on herself when she refuses to field journalists questions, which was the case last I saw.

Of course it was also Michelle who blew off Peng Liyuan when the latter accompanied her husband, President Xi Jinping, to California last June for his summit with President Obama.

--There are some people in this world who simply deserve to be fed to the lions. Such is the case with the thieves who stole a part of an ancient fresco from Pompeii, breaking into a closed area of the World Heritage landmark, the House of Neptune, where a depiction of the goddess Artemis had been “chiseled off with a metallic object,” according to the curator at the site.

Il Messaggero in Italy described the discovery as “a shame for the country,” which comes on the heels of a series of collapses at Pompeii due to heavy rains that prompted the European Union to tell Italy to “take care of Pompeii, because it is emblematic not only for Europe but also for the world.”

Pompeii needs a 100-million+ euro makeover, according to experts, which is being partially funded by the EU but according to a local daily, only 0.56 percent of the funds have been spent thus far; in case you were wondering why Italy has been operating in an overall state of inertia for years.

--On Friday, Pope Francis, speaking at a prayer vigil for relatives of those killed by the mafia, declared:

“Blood-stained money, blood-stained power, you can’t bring it with you to your next life. Repent.”

Love the man.

--According to the weather statistics, this winter was ‘just’ the 8th snowiest in New Jersey (average total across the state) in the last 120 years, but the third coldest in the last 30.

It’s the combination, and the fact the snow stuck around in my area in terms of covering lawns for over five weeks straight, since the day after the Super Bowl. No one can ever remember it this bad. And more snow is in the forecast.

I’m ready for baseball! And The Masters...a tradition unlike any other...on CBS.

---

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

God bless America.

---

Gold closed at $1336
Oil $99.46

Returns for the week 3/17-3/21

Dow Jones +1.5% [16302]
S&P 500 +1.4% [1866]
S&P MidCap +1.2%
Russell 2000 +1.0%
Nasdaq +0.7% [4276]

Returns for the period 1/1/14-3/21/14

Dow Jones -1.7%
S&P 500 +1.0%
S&P MidCap +2.8%
Russell 2000 +2.6%
Nasdaq +2.4%

Bulls 52.0
Bears 17.4 [Source: Investors Intelligence]

Have a great week. I appreciate your support.

Catch me on Twitter @stocksandnews

Brian Trumbore



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-03/22/2014-      
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Week in Review

03/22/2014

For the week 3/17-3/21

[Posted 12:00 AM ET]

Ukraine

As I go to post, there are concerns Russian forces could move across the eastern border of Ukraine this weekend. It has been a chaotic time. But, overall, save for a few days, the global equity markets have not reacted in a big way. That can yet change in a flash.

For now, a review of the week’s events.

--On Sunday, with tens of thousands of troops facing off against each other, 96.7% of those voting in Crimea in a referendum favored breaking away and joining Russia. Turnout was said to be 83% of 1.53 million eligible to vote, according to the Electoral Commission.

President Obama said the poll would never be recognized by the United States and the international community.

--A popular Russian television journalist and crony of Putin’s, Dmitry Kiselyov, warned on his Sunday show:

“Russia is the only country in the world that is realistically capable of turning the United States into radioactive ash.”

He made the inflammatory remark in front of a photo of a mushroom cloud.

Former Soviet leader Mikhail Gorbachev told Interfax news agency that Crimea’s independence “should be welcomed and not met with the announcement of sanctions.”

--Pro-Russian demonstrators stormed the prosecutor’s office in Crimea, tearing Ukrainian flags and replacing them with Russia’s.

In Moscow, 50,000 rallied for peace in the biggest protest in two years, with the demonstrators chanting “Hands off Ukraine.” Despite Putin’s high poll numbers, millions of others fear a return of the days of Stalin.

--The status of an Organization for Security and Cooperation in Europe monitoring mission was still up in the air. Russia has yet to allow the OSCE into Crimea, which is an illegal act under a treaty between Russia and the EU.

--The United States levied sanctions against seven Russian individuals on Monday, but not the oligarchs.

--After Russian and pro-Russia forces began to move on Ukrainian military and naval bases in Crimea, the Kiev government ordered the removal of all military personnel from there and instead further reinforced the border with Russia. One Ukrainian soldier was killed. The naval chief was detained, though released a day later.

--Vice President Joe Biden paid a visit to Poland and the Balkans, assuring them they had nothing to fear, the U.S. would support them. It was taken as nothing more than a bunch of blarney.

U.S. Sen. John McCain called the crisis “the ultimate result of a feckless foreign policy where no one believes in America’s strength anymore.”

For their part, Ukrainians feel abandoned by the West. The 1994 Budapest memorandum guaranteed Ukraine’s territorial integrity.

--Moscow could eventually target the Baltics with sanctions, with all three republics receiving 100% of their natural gas from Russia. [Poland receives 63% from there.]

--On Tuesday, Putin signed a treaty making Crimea part of Russia but said he had no further designs on any other regions of Ukraine. 

“Don’t believe those who try to frighten you with Russia and who scream that other regions will follow after Crimea.... We do not need this.”

Putin reiterated, though, that “In the hearts and minds of people, Crimea has always been and remains an inseparable part of Russia.”

--Secretary of State John Kerry warned Ukraine was releasing a “nationalist fervor which could, in fact, infect in ways that could be very, very dangerous. All you have to do is go back and read in history of the lead up to World War II, and the passions that were released with that kind of nationalistic fervor.” [Paul Richter / Los Angeles Times]

--Ukrainian interim Prime Minister Yatsenyuk warned his countrymen: “The conflict is shifting from a political to a military stage.”

Acting President Turchynov said Ukraine could take measures “of a technical and technological nature” against Russia, inferring Kiev might be preparing to squeeze Crimea’s electricity, water and food supplies, most of which comes from the Ukrainian mainland.

--On Thursday, Russia’s State Duma ratified the annexation of Crimea and the Black Sea port of Sevastopol to Russia by a 443 to 1 vote.

Following the Duma action, President Obama announced a further round of sanctions against key allies of Vlad the Great, including the “Rotenberg brothers,” who secured $7 billion in contracts associated with the Sochi Olympics, and Vladimir Yakunin, who is the chairman of Russian Railways, a major state-owned enterprise, as well as Bank Rossiya. 

This prompted Moscow to announce retaliatory measures against some of Washington’s power brokers, including House Speaker John Boehner, who said in a statement he was “proud to be included on a list of those willing to stand against Putin’s aggression.” And Republican Sen. John McCain, who said, “I guess this means my spring break in Siberia is off, my Gazprom stock is lost, and my secret bank account in Moscow is frozen.”

--For its part, the European Union imposed sanctions on 12 individuals and said that any further steps by Russia to destabilize Ukraine would have “far-reaching consequences.”

German Chancellor Angela Merkel said the European Commission had been asked to prepare broader economic sanctions against Russia if the crisis escalated.

--U.N. Secretary General Ban Ki-moon expressed “deep regret” over the Ukraine crisis in a meeting with Putin at the Kremlin. He also met with Foreign Minister Sergei Lavrov, who “expressed the deep concern” of Russia in connection with “multiple violations” of the rights of Russian-speaking people in the east and southeast Ukraine, as well as with “radical groups contributing to tensions with the connivance of Kiev authorities,” the Foreign Ministry’s website reported. [Moscow Times]

--Ukrainian lawmakers, Thursday, in a statement, said in part that for the first time since World War II, “generally recognized European borders are being ‘redrawn’ by the country that guaranteed Ukraine’s territorial integrity and inviolability of its borders.

“The Ukrainian people will never, under no circumstances, stop fighting for the liberation of Crimea from the occupants, however complicated and prolonged it might be.”

Interim Ukrainian Prime Minister Yatsenyuk said he believed Russia would not stop at Crimea. “It’s crystal clear for us that Russian authorities will try to move further and escalate the situation in southern and eastern Ukraine.”

--U.S. Ambassador to the U.N., Samantha Power, said of the annexation of Crimea:

“A thief can steal property, but that does not confer the right of ownership on the thief.”

--Friday, EU leaders in Brussels signed a deal with Ukraine to draw it closer into Europe’s orbit, the same agreement that four months ago the Yanukovych government declined to sign which then triggered pro-Europe demonstrations that led to the crisis.

Interim Prime Minister Yatsenyuk said, “We want to be a part of the big European family and this is the first tremendous step in order to achieve for Ukraine its ultimate goal, as a full-fledged member.”

In Moscow, President Putin signed laws completing the annexation of Crimea after the upper house of Parliament unanimously approved the act.

But depositors were lining up to withdraw savings from branches of Bank Rossiya, though Putin tried to reassure all it was safe, saying he would place his pay into an account there, though probably not his estimated $100 billion in various holdings.

President Obama’s trip to Europe next week will be all about Ukraine.

Opinion....

Charles Krauthammer / Washington Post

“Early in the Ukraine crisis, when the Europeans were working on bringing Ukraine into the EU system and Vladimir Putin was countering with threats and bribes, one British analyst lamented that ‘we went to a knife fight with a baguette.’

“That was three months ago.  Life overtakes parody. During the Ukrainian prime minister’s visit to Washington last week, his government urgently requested military assistance. The Pentagon refused. It offered instead military ration kits.

“Putin mobilizes thousands of troops, artillery and attack helicopters on Ukraine’s borders and Washington counters with baguettes, American-style. One thing we can say for sure in these uncertain times: The invasion of Ukraine will be catered by the United States.

“Why did we deny Ukraine weapons? Because in the Barack Obama-John Kerry worldview, arming the victim might be taken as a provocation. This kind of mind-bending illogic has marked the administration’s response to the whole Crimea affair.

“Why, after all, did Obama delay responding to Putin’s infiltration, military occupation and seizure of Crimea in the first place? In order to provide Putin with a path to de-escalation, ‘an offramp,’ the preferred White House phrase.

“An offramp? Did they really think that Putin was losing, that his invasion of Crimea was a disaster from which he needed some face-saving way out? And that the principal object of American diplomacy was to craft for Putin an exit strategy?....

“As I’ve argued here before, there are things we can do: Send the secretary of defense to Kiev tomorrow to negotiate military assistance. Renew the missile-defense agreement with Poland and the Czech Republic. Announce a new policy of major U.S. exports of liquefied natural gas. Lead Europe from the front – to impose sanctions cutting off Russian enterprises from the Western banking system.

“As we speak, Putin is deciding whether to go beyond Crimea and take eastern Ukraine. Show him some seriousness, Mr. President.”

Editorial / Washington Post

“It’s easy to conclude that Vladimir Putin’s passionate defense of Russia’s takeover of Crimea ‘just didn’t jibe with reality,’ as Secretary of State John F. Kerry put it. In a speech on Tuesday, the Russian ruler repeated mendacious charges that the Ukrainian government had been hijacked by ‘nationalists, neo-Nazis, Russophobes and anti-Semites’; voiced his paranoid conspiracy theory about supposed Western sponsorship of popular revolutions, including the Arab Spring; and brazenly compared Russia’s abrupt annexation of Ukraine with the reunification of Germany.

“It’s necessary, however, to take some of what Mr. Putin said seriously, because of the implicit threat it poses to European and global security. Mr. Putin advanced a radical and dangerous argument: that the collapse of the Soviet Union left ‘the Russian nation’ as ‘one of the biggest, if not the biggest ethnic group in the world to be divided by borders.’ That, he suggested, gave Moscow the right to intervene in Crimea, and, by extension, anywhere it considers ethnic Russians or their culture to be threatened.

“Mr. Putin’s doctrine would justify Russian meddling not just in other parts of Ukraine – he claimed that ‘large sections of the historical south of Russia’ now ‘form the southeast of Ukraine’ – but also in other former Soviet republics with substantial populations of ethnic Russians.

“Western officials seem to be betting that Mr. Putin won’t dare to extend his aggression beyond Crimea. But then, just last week they were saying they did not expect Moscow to move quickly on Crimean annexation. The Obama administration and its European allies have been too slow to grasp that Mr. Putin is bent on upending the post-Cold War order in Europe and reversing Russia’s loss of dominion over Eastern Europe, the Caucasus and Central Asia....

“The two countries that Mr. Putin has invaded since 2008, Ukraine and Georgia, were rejected for NATO membership action plans that year. Can it be argued seriously that Estonia and Latvia, with their large Russian minorities, now would be less vulnerable to Russian aggression had they not joined NATO? The crisis in Europe has come about not because Western institutions expanded, but because they did not fulfill their post-Cold War promise of ‘a Europe whole and free.’”

Editorial / Wall Street Journal

“The Obama policy of gradually increasing sanctions treats Mr. Putin like a wayward son who can be brought in line if he’s grounded for a couple weeks. It ignores that he is a determined revanchist leading a nuclear-armed nation that wants to rewrite the post-Cold War order in Europe and dominate its neighbors up to the German border. Mr. Putin views gradualism as a sign of weakness.

“The better strategy is to impose enough immediate and substantial pain on Mr. Putin, his friends and the Russian economy that he’ll decide that the costs of his depredations are higher than the costs of stopping....

“Mr. Obama should also signal a commitment to end Russia’s dominance in European energy by immediately approving all U.S. natural gas export terminal applications. And he should announce that next week during his trip to Europe he and the other G-7 leaders will discuss plans to provide military aid to Ukraine and forward deploy American and European forces to front-line NATO states.”

Geoff Dyer / Financial Times

“Six months before his 2012 re-election, President Barack Obama was caught on microphone talking to his then Russian counterpart Dmitry Medvedev. When it comes to sensitive issues such as missile defense in Poland, Mr. Obama pointed out, ‘after the election, I will have more flexibility.’

“Referring to the man who would take over as Russian president a few weeks later, Mr. Medvedev responded: ‘I will transmit this information to Vladimir.’

“As Vladimir Putin has cemented his control over Crimea in recent days, those words have been re-played by political opponents of the American president who see them as evidence of a stark naivety about the nature of the Russian regime.”

Daniel Henninger / Wall Street Journal

“Sometime in the first Obama term, opinion polls began to report that the American people were experiencing what media shorthand came to call ‘fatigue’ with the affairs of the world. The U.S. should ‘mind its own business.’ The America-is-fatigued polling fit with Mr. Obama’s stated goal to lead from behind. A close observer of American politics also could notice that Republican politicians, the presumptive heirs of Reagan, began to recalibrate their worldview inward to accommodate the ‘fatigue’ in the opinion polls.

“We are of course discussing Vladimir Putin’s path to the forced annexation of Crimea. And possibly in time a move on the independence of Ukraine, Lithuania, Estonia, Latvia, Kazakhstan or Moldova. This narrative has one more point of Putin demarcation: Syria.

“Last September, every foreign chancery in the world concluded that the United States would bomb Bashar Assad’s airfields with Tomahawk missiles in reprisal for killing nearly 1,500 Syrians with chemical weapons, including sarin gas. Vladimir Putin placed a bet. He suggested to the American president that in lieu of the U.S. bombing Assad’s airfields, their two nations, in concert, could remove all of Syria’s chemical weapons. Mr. Obama accepted and stood down from bombing Assad. Six months later Vladimir Putin invaded and annexed Crimea.

“This moment is not about Barack Obama. By now we know about him. This is about Vladimir Putin and the self-delusions of Western nations and their famous ‘fatigue.’ Vladimir Putin is teaching the West and especially the United States that fatigue is not an option.”

Senator John McCain / New York Times op-ed

“The United States must look beyond Mr. Putin. His regime may appear imposing, but it is rotting inside. His Russia is not a great power on par with America. It is a gas station run by a corrupt, autocratic regime. And eventually, Russians will come for Mr. Putin in the same way and for the same reasons that Ukrainians came for Viktor Yanukovych.”

Gerald F. Seib / Wall Street Journal

“Public opinion has returned to a Cold War footing. A new Wall Street Journal/NBC News poll...reveals a stunning slide in American views of Russia. Just over a decade ago, after Russia was a sympathetic partner in opposing the extremism that produced the 9/11 attacks, 52% of Americans said they thought of Russia as an ally, while just 26% considered it an adversary.

“This month, the share calling Russia an adversary shot up to 72%, while the share calling it an ally plunged to 19%. This isn’t exactly the kind of ‘reset’ of U.S.-Russian relations that Mr. Obama once sought. ‘We shall now leave the reset behind, to be replaced by the rethink,’ says Richard Haass, president of the Council on Foreign Relations.”

Alexei Navalny, Russian opposition leader / New York Times op-ed

“As I write this, I am under house arrest. I was detained at a rally in support of anti-Putin protesters who were jailed last month.

“In September, I ran for mayor of Moscow as a pro-reform, pro-democracy opposition candidate and received almost a third of the vote despite having no access to state media. Today, my blog, which was until recently visited by over two million readers per month, has been blocked as ‘extremist’ after I called for friendly ties with Ukraine and compliance with international law....

“As a citizen and patriot, I cannot support actions against Russia that would worsen conditions for our people. Still, I recommend two options that, if successfully implemented, I believe would be welcomed by most Russians.

“First, although Mr. Putin’s invasion has already prompted the European Union to impose sanctions on 21 officials, and the United States on seven [Ed. this was written prior to Obama’s second round targeting further individuals], most of these government figures cannot be considered influential. They do not have major assets outside Russia and are irrelevant to Mr. Putin; sanctioning them will not change Russia’s policy....

“Instead, Western nations could deliver a serious blow to the luxurious lifestyles enjoyed by the Kremlin’s cronies who shuttle between Russia and the West. This means freezing the oligarch’s financial assets and seizing their property.”

Navalny then goes on to cite individuals who have still not been targeted, such as a man I bring up all the time, Igor Sechin, head of oil giant Rosneft. Navalny also would target Aleksei B. Miller, head of Gazprom.

“Mr. Putin has cynically raised nationalist fervor to a fever pitch; imperialist annexation is a strategic choice to bolster his regime’s survival. Mobilizing the masses by distracting them from real problems like corruption and economic stagnation can take place only beneath the banner of fighting external enemies....

“There is a common delusion among the international community that although Mr. Putin is corrupt, his leadership is necessary because his regime subdues the dark, nationalist forces that otherwise would seize power in Russia. The West should admit that it, too, has underestimated Mr. Putin’s malign intent. It is time to end the dangerous delusion that enables him.”

Holman W. Jenkins, Jr. / Wall Street Journal

“(Look) for the ride to get increasingly bumpy from here on. Mr. Putin faces election in 2018 – and it’s hard to believe he won’t try to avoid it. Too many indicators are headed the wrong way: a decline in Russia’s energy clout, capital flight and a failure to create a modern economy welcoming to global investors. He will also likely try to negate the constitution that would end his rule in 2024.

“He can’t kid himself that the apartment-bombing mystery will not at some point reignite, despite the murder or disappearance of Russian officials and dissidents who insisted on investigating an alleged ex-KGB role. And don’t overinvest in talk of Russia’s ‘legitimate interests.' Russia’s regime has interests but those interests are dictated by the nature of its regime. Its neighbors would not clamor for NATO membership if Russia were not ruled by an unpredictable kleptocracy. Mr. Putin would not fear his neighbors becoming prosperous and modern if he didn’t fear his own citizens’ demands for the same.

“Even the most hard-headed (and forgiving) realist by now must suspect that Mr. Putin is destined to become increasingly a source of instability rather than of stability.”

Washington and Wall Street

The Federal Reserve held a two-day Open Market Committee meeting and Chair Janet Yellen gave her first press conference wherein she said after the Fed’s bond-buying program ended, the Fed having opted to continue with tapering to the tune of another $10 billion a month, or down from the initial $85 billion to $55 billion, the Fed would probably be thinking of raising short-term interest rates “on the order of around six months or that type of thing.”

So, that would mean if the Fed keeps to its tapering schedule, it would wind things down late fall and perhaps begin raising the funds rate off zero around the time of June 2015. Maybe a few months earlier than what had been thought by the Street before, but hardly earth-shattering. Free money can’t last forever...though it already has longer than was appropriate.

But Wall Street had a brief conniption after Yellen’s statement and the bond market swooned (yields rose) while stocks dropped. By week’s end, however, all the major averages were up solidly.

The whole deal was incredibly stupid. Going back to 2012, the Federal Reserve had said it wouldn’t look to raise interest rates until the unemployment rate hit 6.5% and/or inflation was at 2.5%, 2.0% being the Fed’s preferred pace. 

But then the unemployment rate dropped far faster than the Fed expected, it being the worst economic forecaster on the planet, down to a current 6.7%, and it was clear by the Fed’s thinking that it couldn’t stick to 6.5% as a target for ending free money so it changed the language a bit on its statement to say it would keep rates near zero “for a considerable time,” even after bond-buying ends, and explained that from now on it will base any decisions on rates on “a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments.” As the Wall Street Journal opined, “All that and maybe the alignment of Jupiter too.”

Yes, it is squishy, mushy, you name it, incoherent. Personally, I think a better barometer would involve the New York Mets and whether they are playing meaningful games in September. If so, this would boost the New York economy and hasten the day for a rate hike.

Meanwhile, perhaps more significantly, the Fed’s new funds target is 1% end of 2015 and 2.25% by end of 2016. You know all my talk about interest expense on the federal debt? That’s where these numbers come into play. Good luck funding your pet projects down the road, sports fans.

There were a few other economic items. Industrial production for February was a stronger than expected 0.6%, February housing starts were down 0.2%, basically in line with expectations, and existing home sales for the month were also in line, though down 7% year over year.

Europe and Asia

Eurozone inflation was running at an annualized rate of just 0.7% for the month of February vs. the European Central Bank’s target of 2.0%. The CPI was 1.0% in Germany, but prices fell 1.3% (ann.) in Cyprus (not that this one is important, but the trend is) and 0.9% in Greece (which is important).

Speaking of Greece, there was some good news, maybe. Piraeus Bank became the first to sell bonds to the public since 2009, 5 ¼%, 3-year notes. Demand was strong, though buyers wanted a longer-term at that rate.

The Greek government said it reached agreement with the troika (ECB, European Commission and International Monetary Fund) that will result in another slug of bailout aid, prior to Euro Parliament elections (May 22-26) in order to send a positive signal for voters looking at the shaky Greek coalition government.

Speaking of the Euro vote, a big topic for the right-wing is immigration and the figures coming out of Italy this week were staggering. The Navy and Coast Guard rescued 2,400 migrants from North Africa in one two-day span. 5,000 have attempted to cross to Italy thus far in 2014, ten times the number at this point in 2013. The pace is only expected to pick up with improving weather for such a voyage.

The migrants are coming mostly from Libya, Eritrea, and Syria (at least the recent ones) and an Egyptian criminal network has been coordinating actions.

Separately, I’m throwing Russia in this segment. The economy there was weak before the crisis, with growth forecast at just 1% in 2014. Capital outflows have obviously been huge, but many European nations, as you are well aware by now, witness the limited Euro sanctions against Moscow, do a ton of business with Russia.

In Britain, a certain district in the financial capital is called “Londongrad,” with Russians spearheading $180 billion in deals the last two years, which you can imagine results in $billions in fees for bankers that then fuel consumption, and real estate. Russian IPOs originating in London make up 10-15% of the total flow.

Turning to China, shares of property firms fell hard after a large developer defaulted on a reported $565 million in loans, $160 million of which was owed to giant China Construction Bank Corp. This was a Zhejiang province developer. Recall, a week earlier, Chaori Solar became the first Chinese firm to default on its bonds. So this doesn’t exactly add to confidence when looking at China’s immediate prospects.

Home price appreciation is definitely slowing rapidly. Prices were up in February in 57 of 70 major cities tracked by the statistics bureau (normally it’s been 69 of 70); just 0.2% in Beijing, 0.4% in Shanghai over January, the slowest monthly pace since Oct. 2012. 

The government is reining in lending and defaults will rise. But Beijing doesn’t want growth to decelerate much below 7.0-7.5%, so the State Council (Cabinet) announced it would “accelerate preliminary work and construction on key investment projects.”

George Magnus / Financial Times

“The incidence of financial distress is rising and becoming more visible. The recent drop in the renminbi, and the sharp fall in copper and iron ore prices are the latest high-profile manifestations of China’s changing outlook. These are not random developments or bad luck, but connected parts of a complex economic transformation with deflationary consequences for the world economy and skittish financial markets.

“In the first two months of 2014, industrial confidence and output indices, retail sales, fixed asset investment, and credit creation were all weaker than expected. A slowdown in economic growth at the start of the year, coinciding with the Chinese New Year holidays, is not unusual, but in each of the past two years, the government sanctioned faster credit growth and infrastructure spending to compensate. This time, those options are not available, or much riskier, because the government is trying to change China’s economic development model....

“Slowing economic growth, chronic overcapacity and rising debt service problems in key industries are becoming more common, raising the risk of chain defaults involving suppliers and purchasers. Overcapacity recently prompted a senior executive in the Chinese Iron and Steel Association, Li Xinchuang, to say the problem was so severe it was ‘probably beyond anyone’s imagination.’”

And since I told you of my own impressions going through the eastern Chinese city of Fuzhou, during my not-so-excellent adventure late January, I have to note Andrew Browne’s take in the Wall Street Journal, regarding China’s property boom.

“Like all booms, this one is ending in a bout of crazy excess. The evidence is apparent in the massive overbuilding that strikes visitors to almost any Chinese city. In the northern industrial city of Harbin, for instance, ‘ghost suburbs’ – entire communities of unoccupied high rises – haunt the view on the way into town from the airport.*

“These empty blocks have acted as warehouses for the exploding wealth of China’s middle classes, which have few other options to invest their money. And for more than a decade, real estate has been a good bet. In megacities like Shanghai and Beijing, property values rose up as much as fivefold from 2002 to 2012.

“Now, though, some of these bets are souring....

“(The) worry is that the beginning of the end of the real-estate bonanza will help to drag down consumption – the very opposite of what the government intends as it looks to household spending to pick up the slack from a slowdown in exports and investment. That makes Premier Li Keqiang’s task of holding up flagging growth look harder by the day.”

*WIR, 1/25/2014

“On the drive back to the airport we passed through a suburb of Fuzhou (which is a large city) and there were tons of gleaming new high-rise apartment towers along the highway. I could see straight through all of them. That’s part of the China conundrum...for years to come.”

Street Bytes

--Stocks rebounded, with the Dow Jones finishing up 1.5% to 16302, the S&P 500 up 1.4% and Nasdaq up 0.7%. 

--U.S. Treasury Yields

6-mo. 0.07% 2-yr. 0.42% 10-yr. 2.74% 30-yr. 3.61%

Bonds rallied a little on Friday after getting hit on the above-noted Yellen presser.

Consumer prices for February were up 0.1% and also up 0.1% ex-food and energy. For the past 12 months, the CPI is up only 1.1%, and up 1.6% on core. But as I highlight below, food prices are surging in many categories.

--The Federal Reserve released stress tests on the nation’s 30 largest banks and all but one, Zions Bancorporation of Salt Lake City, Utah, would be financially strong enough to withstand a near depression.

Zions’ capital cushion in a sharp downturn falls below that required by the Fed, which over the coming week is expected to announce whether it will reject Zions’ capital raising plans and whether the other large banks can issue/increase dividends and/or buy back shares.

The Fed’s severe stress test assumed an 11.2% unemployment rate, a 50% drop in stock prices and a decline in home prices to 2001 levels. The Fed also asked the banks to estimate what their losses would be if their biggest trading partner went bust and Bank of America led the way in projecting losses of $49 billion; Citigroup $45.7 billion.

--General Motors’ new CEO, Mary T. Barra, conceded in a statement concerning the company’s serious safety issues that went undisclosed for over a decade, “Something went very wrong in our processes in this instance, and terrible things happened,” referring to a defect tied to 12 deaths (some say far more than that). G.M. announced it expected to take a $300 million charge for the ignition switch issue and a separate round of recalls involving 1.7 million vehicles (Buick Enclaves and GMC Acadias, as well Chevy Traverses and Saturn Outlook), that are on top of the original 1.6 million Chevy Cobalts et al.

Barra will be appearing before Congress shortly as at least two probes are set up.

--Toyota Motor Co. reached agreement with the Justice Department on a $1.2 billion settlement to close cases related to its sudden acceleration issue, thus ending a four-year federal probe involving complaints dating back to 2009. Toyota had been forced to recall millions of vehicles and pay out tens of $millions in fines and civil settlements.

Toyota, by agreeing to the settlement, will avoid criminal charges, assuming it complies with conditions imposed by the court.

The company long denied there were problems with the ignition and blamed driver error, or the gas pedal getting stuck under floor mats, for the accidents.

--Honda is recalling nearly 900,000 of its popular Odyssey minivans due to fuel leak concerns. The automaker said in a statement, “Honda is not aware of any crashes, injuries or fires related to this issue, which was discovered during warranty repairs.”

--JPMorgan Chase is selling its physical commodities trading unit to a Swiss outfit, Mercuria Energy Group, for $3.5 billion in cash. JPM was forced to do so because of the Volcker Rule, part of Dodd-Frank that restricts the ability of banks to trade for their own accounts.

Mercuria was started in 2004 by two traders, with oil the company’s core focus.

--Morningstar Inc., the leading fund-research firm, cut two of PIMCO’s key ratings after the leadership shake-up following the resignation of co-CIO and CEO Mohamed El-Erian and the stream of less-than-flattering stories on co-founder Bill Gross and the environment surrounding El-Erian’s departure.

PIMCO also was dropped as manager of a $1.3 billion bond fund offered by Columbia Management, replaced by its Southern California rival, TCW Group Inc. The size isn’t significant, but the symbolism is huge, especially with the financial advisers who sell PIMCO fixed-income products.

--According to a national survey, about 36% of workers have less than $1,000 in savings and investments for retirement, not counting their primary residence or pension plans. 60% have less than $25,000. [Employee Benefit Research Institute and Greenwald and Associates / USA TODAY]

--North Dakota’s economy continues to boom, thanks to the oil and gas sector, and the Economic Development Foundation is looking for 20,000 workers to fill positions ranging from oilfield workers to receptionists.

The biggest problem is the costs are soaring. As CNNMoney.com’s Blake Ellis notes, home prices in Williston, for example, have tripled and rents are the highest in the nation. You have people earning in the six figures who are living out of their cars.

As I’ve also noted before, crime is soaring, too.

--New Zealand’s economy grew by 2.7% last year, making it one of the fastest growing nations in the developed world, with the Kiwis having 12 consecutive quarters of growth as well.

--Yup, the following from Calum MacLeod of USA TODAY pretty well sums up the business climate for foreign companies operating in China these days.

“As more Chinese get behind the wheel, the Ford Focus has become the best-selling passenger car in China, driving Ford China sales up by 67% last month.

“General Motors broke its own record for February sales, and plans to invest $11 billion with its Chinese joint venture partners by 2016.

“But most U.S. companies surveyed by a U.S. business association have seen China growth slow in both revenue and profitability, and will scale back expansion plans this year. As labor costs rise, U.S. firms feel targeted by government campaigns, and complain that China still fails to stop local firms copying their intellectual property, the American Chamber of Commerce in China reported.”

Another issue faced by the business group should sound familiar to readers of this space, “difficulties hiring due to smog worries.”

--Chinese e-commerce giant Alibaba Group Holding Ltd. is preparing a U.S. initial public offering that would raise a reported $15 billion, rivaling Facebook’s 2012 IPO, that raised $16 billion. Alibaba chose New York over Hong Kong, though hasn’t selected between Nasdaq and the New York Stock Exchange as yet.

China’s Twitter alternative, Weibo Corp., also announced it would register an IPO in the U.S.

--Software giant Oracle announced revenues rose 4% for its fiscal third quarter vs. a year ago, below expectations, and its profit, while $2.56 billion, also fell short. The shares, however, were basically unchanged after the announcement.

--The new generation of aircraft are 20% more fuel efficient so some believe in coming years airfares may actually drop a bit. I’ll believe it when I see it, though it’s true much of the growth in aircraft sales is through the budget airlines, like EasyJet, Ryanair, and Norwegian Air Shuttle.

According to the Centre for Aviation, full-service airlines have 5,168 aircraft on order and low-cost carriers 3,582.

--FedEx blamed severe weather conditions for its poor quarterly performance, at least vs. expectations, which also forced it to lower its fiscal-year profit outlook. The harsh winter decreased operating income by about $125 million in the quarter ended February 28, the company said. Revenue rose 3% over year ago levels.

FedEx also blamed in part the online companies, with CEO Fred Smith saying many e-commerce sites were ill-prepared to handle the last-minute surge this past Christmas.

--Wholesale prices for milk, cheese and other dairy products hit all-time highs this week amid soaring demand, at the same time while the weather, from drought to the nasty winter, has reduced inventory. Domestic supplies have been drying up in part because exports to the likes of China are surging.

--Food prices overall are forecast to rise 3.5% this year, mostly because of the drought in California and parts of the Midwest and Southwest. Drought in Brazil is impacting coffee, sugar and orange prices, while similar conditions in Southeast Asia affect palm oil.

--The IRS is urging taxpayers to be aware of the largest phone scam the agency has ever seen, one that has bilked $1 million+ from thousands.

Bogus IRS agents call victims and claim they owe back taxes and must pay with a prepaid debit card or by wire transfer.

Real IRS agents do not demand payment in such a fashion and initial contacts are almost always by mail.

--Global music sales declined 4.4 percent last year. The Japanese market, responsible for one-fifth of music dollars, declined 16.7 percent. Ex-Japan, worldwide revenue fell just 0.1 percent. [Claire Atkinson / New York Post]

--This is interesting...at least I hope you will find it interesting...95% of the world’s ATMs employ Windows XP, yet on April 8 Microsoft is going to stop issuing updates and patches for bugs. Ergo, all these ATMS will become far more vulnerable to attacks and viruses, according to Sarah Mishkin of the Financial Times. 40% of personal computers also still use XP.

--CNN’s ratings have surged as a result of its coverage of the disappearance of Malaysia Air Flight 370. In fact for the Wed. thru Friday period, March 12-14, Anderson Cooper beat Bill O’Reilly in the 8 p.m. hour for the critical 25-54 demographic. It was the first time Mr. Cooper had beaten O’Reilly over three days. [But O’Reilly still won the week.]

As for MH370, I’m sorry but I have virtually nothing to say. We don’t have any real facts, though the eventual post-mortem is not going to be kind to the Malaysian government for clearly withholding some information early on. 

It’s also irresponsible for me to comment on various conspiracy theories. In 15 years of writing this column I have steered clear of that. This is a running history of our times. When the facts are known you can be sure I’ll add my own opinion to the mix.

--Bitcoin exchange Mt. Gox, which had filed for bankruptcy, says it has found 200,000 of the 850,000 pieces of the virtual currency it said it lost last month. The found bitcoins were in a virtual “wallet.” Whatever.

--But speaking of bitcoin, the March 15 issue of The Economist, in a piece on it, notes my beloved island of Yap in Micronesia, where I have a church and some good friends.

“To understand the enthusiasm in (bitcoin), it helps to think about a very old one. Until the early 20th century the people on Yap, an island in the Pacific Ocean, used large stone disks as money for big expenses, such as a daughter’s dowry. Being very heavy, they were rarely moved when spent. Instead, they simply changed owners. Every transaction became part of an oral history of ownership, which allowed islanders to know the proprietor of each stone and made it difficult to spend the same stone twice.

“Bitcoins also don’t move around when they are transferred. They are best understood as entries in a giant ledger, the ‘blockchain,’ which contains the transaction history for every bitcoin in circulation....openness helps the system remain secure: the blockchain is public so every participant can check whether a transfer comes from the rightful owner.”

At least one hopes.

Foreign Affairs

Syria: There have been conflicting reports on just how quickly the Assad regime is removing its deadliest chemical arms, with a report by the U.N.’s Organization for the Prohibition of Chemical Weapons, which is overseeing the process, saying the regime has given up 29.5% of the deadliest substances and a significantly larger portion of lower-grade materials.

But I would counter we still don’t know if Assad’s people declared everything in the first place; odds being high they didn’t.

Nonetheless, it is true some of the batches have been placed on foreign freighters docked in Latakia, where they are then taken out to sea to be disposed of. The full arsenal is to be eliminated by the end of June, according to the OPCW.

As for the Geneva peace talks, they’re history. Forget what you may hear to the contrary. The rebels and their Western backers insist Assad must go as part of any final peace plan and the regime says that isn’t going to happen, especially with the backing of Russia. The government is also proceeding with plans to hold a presidential election in territories it controls this summer, with Assad a seeming lock to be on the ballot.

Meanwhile, the Syrian army, with the significant help of Hizbullah, took control of a critical city and suburbs surrounding the former rebel stronghold of Yabroud, which is near the Lebanese border. If the regime secures this border, that cuts off a huge source for the rebels in both fighters and weapons.

The opposition is so fractured at this point that as the Financial Times reported, “Hundreds of foreign fighters have abandoned rebel ranks...as frustration rises over bloody infighting (in the north) – a trend that suggests declining enthusiasm among hardline Sunni Muslim militants...and raises concerns among western security officials that these combatants may head to other countries.” 

Such as Lebanon, to carry the fight to Hizbullah, which is a distinct possibility. Jordan, to try to destabilize the government there, is another. They are obviously back in Iraq (see below). Many will go back to Chechnya (good luck, Vlad the Great), and I suspect Moscow itself will be a more prevalent target.

And related to the preceding, Israel’s air force attacked Syrian military positions near the border after a powerful bomb injured four Israeli paratroopers in the Golan Heights. There have been a series of incidents along both the Lebanese and Syrian borders in recent weeks. Hizbullah in particular poses a major challenge and you can imagine how concerned Israel is with the battle experience Hizbullah has been picking up in Syria. [Though at the same time the group has lost hundreds of its best fighters.]

Separately, the United States closed down Syria’s embassy to Washington and ordered its remaining diplomatic staff to leave the country if they were not U.S. citizens. Russia joined Damascus in objecting. Sec. of State Kerry said the decision was taken because “the illegitimacy of the Assad regime is so overwhelming.”

The death toll in the 3-year-old war is over 140,000 as Assad and his goons continue to “indiscriminately attack civilians,” in Kerry’s own words this week.

I saw one bombing on the city of Aleppo resulted in six children being killed. I don’t know how President Obama can sleep at night. He knows deep down a vast majority of the killing was preventable with a little leadership early on.

Oh, but we’re tired of war, my fellow Americans. We’re “fatigued.” Sorry to disturb you.

Iran: The situation in Ukraine is clearly jeopardizing talks over Iran’s nuclear program, the latest round having ended this week with no progress, though they were said by both sides to have gone smoothly, whatever that means.

Russia’s Deputy Foreign Minister Sergei Ryabkov said, “We wouldn’t like to use these talks as an element of raising the stakes, given the mood in certain European capitals, Brussels and Washington. But if we are forced to do this, we will go down the path of taking measures in response.” [Wall Street Journal]

A bipartisan group of 83 senators told the White House in a letter on Tuesday: “Should an acceptable final agreement be reached, your administration will need to work together with Congress to implement legislation to provide longer-term sanctions relief. Should negotiations fail or Iran violate the [interim] Joint Plan of Action, Congress will need to ensure that the legislative authority exists to rapidly and dramatically expand sanctions." [Diane Barnes / Global Security Newswire]

Lastly, Javad Zarif, Iran’s foreign minister, wrote an op-ed for the Financial Times that started as follows:

“At last it seems realistic to hope for a resolution to the unnecessary crisis surrounding Iran’s peaceful nuclear program. In large part that is because attitudes towards my country are changing. It is now recognized that Iranian scientists have mastered nuclear technology – and it is widely accepted that the knowledge we have attained cannot be wished away.

“There is also a growing appreciation that Iran does not have any interest in nuclear weapons. True, we live in a volatile neighborhood. Yet we have always been clear that pursuing nuclear weapons – or even being wrongly suspected of doing so – would put our national security in jeopardy.”

I just want to puke. Understand Zarif writes this B.S. the same week that Iran’s defense minister “Commended Palestinian organizations in the Gaza Strip for firing dozens of rockets into southern Israel last week, stating that ‘the operational power of the Resistance against the Zionist regime is a thousand times more than what it was before.’” [Jerusalem Post]

Israel: Palestinian President Mahmoud Abbas met with President Obama in the White House, with Obama praising Abbas for renouncing violence and working with Israel on a peace plan, which is laughable.

Abbas continues to refuse to recognize Israel as a Jewish state. I am totally on board with Israeli Prime Minister Benjamin Netanyahu on this single issue.

On a different matter, 61% of the Israeli people support legislation requiring ultra-Orthodox (haredi) to serve in the military (23% oppose), while 71% support a bill that would require a referendum before the government signs a deal to give up land inside pre-1967 Israel or land to which Israeli law has been applied since then (17% oppose).

Lebanon: There has been renewed fighting in the second city of Tripoli, with 19 being killed in clashes between supporters and opponents of Syrian President Assad. What a freakin’ disaster. It’s a mini-civil war.

Afghanistan: The Taliban was responsible for an attack on one of Kabul’s luxury hotels used by foreign nationals, the five-star Serena, that killed nine, including two children and four foreign nationals who were eating dinner when gunmen burst through with pistols hidden in their socks.

The attackers were said to be teenagers and convinced guards they were there for a special buffet. They then hid out in a restroom for three hours before launching their attack, according to BBC News and AFP. AFP said one of its journalists died, along with his wife and two children. Others among the dead were from New Zealand, Canada, Pakistan and India.

Egypt: According to the Jerusalem Post, Egyptian army chief, and future presidential candidate, Field Marshal Abdel Fattah al-Sisi, is seeking to expedite the completion of a massive arms deal with Russia. At the same time, the U.S. has been delaying the shipment of 10 Apache helicopters in a move seen as punishment for Sisi’s military coup and crackdown on former President Mohamed Morsi.

Curiously, Defense Secretary Chuck Hagel promised Sisi in a phone call to deliver the aircraft “in a few days,” saying Obama’s position was unjustified, according to the report.

Six Egyptian soldiers were killed at a checkpoint in a Cairo suburb, with the government blaming the Muslim Brotherhood.

Iraq: There was an awful situation in Ramadi (Anbar province), where at least 14 Iraqi SWAT forces were killed on Thursday when they entered a house rigged with explosives, the Iraqi military being in a three-month battle with Sunni / al-Qaeda militants for control of provincial capital Ramadi as well as Fallujah.

Earlier, shelling and clashes near Baghdad killed 37 on Wednesday.

As of March 18, violence has claimed more than 2,000 people in Iraq thus far this year! 2,000 in ten weeks. [AFP / Daily Star]

Turkey: Prime Minister Recep Tayyip Erdogan vowed to “wipe out Twitter” following allegations of corruption in his inner circle. Documents showing evidence of same had been posted on the site. 

Libya: Score one for the good guys. Navy SEALS seized the fugitive oil tanker I wrote of the other day; Libyan militants having seized it for the purposes of selling the oil on the black market. The Navy will deliver the tanker back to a Libyan port. The Libyans had requested our aid in capturing the vessel.

China: As part of the government’s “people-centered urbanization” to raise the quality of life as well as growth rates, more than 100 million Chinese are to be given documents making them official residents of the country’s cities.

The goal is to have 60% of China’s 1.36 billion people living in cities by 2020, many of whom would have equal access to social benefits such as education and health care. Roughly 53% lived in cities in 2012.

At least 23% would receive affordable housing, double 2012’s rate.

Now the issue is, can such plans be implemented, including a reduction in air pollution.   I’ve been saying this is the paramount issue in China today. Increasingly, everyone else seems to be catching on.

Writing in BloombergBusinessweek, Elizabeth Economy of the Council on Foreign Relations:

“As Peking University Professor Xie Shaodong has noted, it’s questionable whether China makes the ‘relevant assessments’ of its environmental policies in the same way that foreign governments do. Particularly when large-scale campaigns are launched, good policy can be ignored. In the push to clean up the air in Hebei province, a local township recently shuttered scores of cement factories. Not only did the air quality not appear to improve, but thousands of workers are also now without jobs.

“President Xi and Premier Li must contend with one of the greatest, if unplanned, legacies of the Hu Jintao and Wen Jiabao era: the environmental awakening of the Chinese people. With their rafts of policy pronouncements, Xi and Li signal that they recognize the changed political landscape. The question before them now is whether they’re prepared to meet the Chinese demand not simply for bold promises of change but also for change itself.”

Russia: Because of everything else going on these days, in one of the more underreported stories it seems Chechen warlord Doku Umarov has died. Now these kinds of reports on him have come out before, but this one may be real.

Umarov is the one who had threatened the Sochi Olympics and claimed responsibility for some of Russia’s deadliest terror attacks. No cause of death was given and because it was the first time the report came from the group itself, there is some credibility to it...perhaps.

France: Big election in Paris on Sunday as two women, Socialist Anne Hidalgo, and center-right Nathalie Kosciusko-Morizet, battle it out for mayor, a steppingstone to even higher office.

Both are distancing themselves from their parties and focusing more on themselves and their ideas. Hidalgo has a slight edge in the latest survey, 52-48.

Meanwhile, Sunday is also the first round of local elections across the country and while the right-wing National Front party is not on the ballot everywhere, it is expected to make a strong showing, perhaps over 20% where it is represented, which would put many of its candidates in runoffs. The National Front won zero local elections in 2008 but is looking to win the mayoralties in as many as 10 medium-sized cities.

Venezuela: Protests across the country continue with at least 31 having now died in anti-government demonstrations over the soaring murder rate, skyrocketing inflation and shortage of consumer goods. President Nicolas Maduro blames the violence on “fascist groups,” as well as the United States and other western nations.

Two opposition mayors were arrested for inciting protests. Maduro said they were planning a coup. One can only hope such plans will be carried out shortly.

By the way, the inflation rate in February hit an annualized 57%.

Nigeria: Another incredibly awful week here as at least 200 villagers were killed last weekend in a remote village in central Kaduna state, as 50 gunmen attacked Friday night, then returned the next day to continue the killing. A survivor told local media, “They fired into homes. As women and children scampered to escape, they were shot and later cut with machetes.” [Washington Post] It’s hard to tell who was responsible.

And then there is this bizarre, still developing story from 8 days ago, details of which remain murky.

Over 500 may have died in a ‘prison break.’ The government is blaming Islamists’ Boko Haram for attacking a notorious military detention center, but it appears the army may have purposefully opened the gates and then opened fire on the prisoners from the air and the ground as they rushed out.

Initially, a week ago, the government said just a few died in this ‘prison break,’ but now reputable sources are telling the New York Times and others the situation was totally different. Plus, a majority of the prisoners not only weren’t members of Boko Haram, as the government claimed, but total innocents being held without charges.

Central African Republic: I can’t help but note this statement from Navi Pillay, the U.N. high commissioner for human rights, discussing the sectarian conflict here between the Christian and Muslim communities. Pillay warned the hatred between the two groups was “at a terrifying level” and a state of near anarchy existed.

There is “no justice, no law and order apart from that provided by foreign troops,” he said.

“I cannot help thinking that if the Central African Republic were not a poor country hidden away in the heart of Africa, the terrible events that have taken place – and continue to take place – would have stimulated a far stronger and more dynamic reaction by the outside world.

“How many more children have to be decapitated, how many more women and girls will be raped, how many more acts of cannibalism must there be, before we really sit up and pay attention?”

There are 6,000 African peacekeepers and 2,000 French troops working to stabilize the country, though few are outside the capital of Bangui.

Among the unthinkable atrocities that have been documented, Muslim rebels tie their victims together and throw them off bridges into rivers to drown or be eaten by crocodiles. [Daily Star]

Random Musings

--Karl Rove had some of the following potential bad news for Democrats in his Wall Street Journal op-ed:

“In a March 9 NBC News/Wall Street Journal poll, Mr. Obama had a 41% approval rating, 56% disapproval rating for his handling of the economy. His approval number is lower than all but eight of the 47 soundings this poll has taken since Mr. Obama’s first inaugural – and his disapproval rating is worse than all but seven others since January 2009.

“For context, consider that when Ronald Reagan was president in March 1986, 44% of Americans rated the economy ‘excellent’ or ‘good’ while 16% called it ‘poor,’ according to a Money Magazine survey conducted by ABC News. Just over seven months later, Republicans lost eight Senate seats and five House seats in the midterms.

“In March 2006, when George W. Bush was president, 41% rated the economy ‘excellent’ or ‘good’ while 24% called it ‘poor’ in an ABC News/Washington Post poll. Yet in that year’s midterms, Republicans lost six Senate seats and 30 House seats.

“The situation facing Democrats is more ominous. The March 2 ABC News/Washington Post survey reported a mere 28% rated the economy ‘excellent’ or ‘good’ while 28% called it ‘poor.’ Unless the Obama economy dramatically improves, it will be politically toxic for Democrats.”

--Jeremy W. Peters of the New York Times had a rather glowing review of Kentucky Republican Sen. Rand Paul’s address to a Cal-Berkeley student crowd, part of Sen. Paul’s outreach to libertarian-leaning voters, young people and minorities as he attempts, in his own way, to broaden the Republican Party’s image.

Titled “The N.S.A. vs. Your Privacy,” Paul took off after President Obama on a topic young people generally agree on, the right of privacy, and injected race into his remarks.

“I find it ironic that the first African-American president has without compunction allowed this vast exercise of raw power by the N.S.A.

“Certainly J. Edgar Hoover’s illegal spying on Martin Luther King and others in the civil rights movement should give us all pause. Now if President Obama were here, he would say he’s not J. Edgar Hoover, which is certainly true. But power must be restrained because no one knows who will next hold that power.”

--Speaking of the N.S.A., Barton Gellman and Ashkan Soltani of the Washington Post were the recipients of some new documents from Edward Snowden and according to their sources, “The National Security Agency has built a surveillance system capable of recording ‘100 percent’ of a foreign country’s telephone calls, enabling the agency to rewind and review conversations as long as a month after they take place.”

As Church Lady would say, “Well isn’t that special?!”

At the request of U.S. officials, the Post withheld the name of the country involved...and by now it could be ‘countries,’ as some of Snowden’s documents suggest. And as Gellman and Soltani report:

“Ubiquitous voice surveillance, even overseas, pulls in a great deal of content from Americans who telephone, visit and work in the target country. It may also be seen as inconsistent with Obama’s Jan. 17 pledge ‘that the United States is not spying on ordinary people who don’t threaten our national security,’ regardless of nationality, ‘and that we take their privacy concerns into account.’”

--Thomas Sowell / New York Post

“At a time when polls show public opinion turning against Democrats, some Republicans seem to be turning against each other. Even with the prospect of being able to win control of the Senate in this fall’s elections, some Republicans are busy manufacturing ammunition for their own circular firing squad.

“A Republican faction’s demonization of their own Senate minority leader, Mitch McConnell, is a classic example. If you listen to some of those who consider themselves the only true conservatives, you would never guess that Sen. McConnell received a lifetime 90 percent ranking by the American Conservative Union – and in one recent year had a 100 percent ranking....

“Someone once said that, in a war, truth is the first casualty. That seems to be the case for some in this internal war among Republicans. As the late Daniel Patrick Moynihan said, ‘You are entitled to your own opinions, but not to your own facts.’....

“The unfolding disaster of ObamaCare is only the most visible symptom of a far deeper danger from a lawless administration that unilaterally changes laws passed by Congress. President Obama has nearly three more years to continue doing irreparable damage to the fundamental basis of American government and Americans’ freedom.

“Only Republican control of the Senate can rein in the lawless Obama administration, which can otherwise load up the federal courts with lawless judges, who will be dismantling the rule of law and destroying the rights of the people, for decades after Obama is long gone from the White House....

“Only GOP control of both houses of Congress can repeal, or even seriously revise, ObamaCare. And only GOP control of both houses of Congress plus the White House can begin to reverse the many lawless, reckless and dangerous policies of the Obama administration, at home and overseas....

“Those Republicans who seem ready to jeopardize their own party’s chances of winning these two crucial elections by following a rule-or-ruin fight against fellow Republicans may claim to be following their ideals. But headstrong self-righteousness is not idealism, and it is seldom a way to advance any cause....

“If the rule-or-ruin faction among Republicans ends up giving the Democrats another Senate majority under Harry Reid, not only the Republican Party but the entire nation, and generations yet unborn, will end up paying the price.”

--As for ObamaCare, the Department of Health and Human Services this week announced more than 5 million people have signed up for health insurance through the exchanges, which sounds pretty good, but HHS doesn’t tell us how many of these folks have actually paid and how many already had insurance.

California, however, did say on Monday that of the 1,018,315 people it had signed up, 85% have paid their initial premiums.

--Back to the Senate, the Washington Post’s Chris Cillizza writes:

“Viewed broadly, there are now 11 Democratic-held seats in varying levels of peril – and 12 if you consider the Virginia seat held by Sen. Mark Warner.... That is a significant expansion of the playing field from even a few months ago – thanks largely to decisions by Rep. Cory Gardner (R-Colo.) and former U.S. senator Scott Brown (R-Mass.) to run in Colorado and New Hampshire, respectively. In each case, races that were not considered competitive immediately became so thanks to Republican recruits.”

Republicans need to gain six seats.

--I wasn’t going to comment on the furor in certain circles concerning Wisconsin Republican Congressman Paul Ryan’s comment about ten days ago on Bill Bennett’s radio program regarding the issue of poverty. Ryan offered: “We have got this tailspin of culture, in our inner cities in particular, of men not working and just generations of men not even thinking about working or learning the value and the culture of work, so there’s a cultural problem that has to be dealt with.”

Immediately, the Congressional Black Caucus called Ryan’s remark racist and Ryan was forced to apologize multiple times and will be appearing before the NAACP convention to do so again.

But I thought at the time, no way should Ryan apologize. There was nothing to apologize for. I still believe that. So I note the following from a Wall Street Journal editorial.

“Mr. Ryan put out a statement saying he had been ‘inarticulate’ but reiterated his point that ‘the predictable result’ of the poverty trap for society at large has been ‘multi-generational poverty and little opportunity.’

“But don’t take his word for it. ‘We know young black men are twice as likely as young white men to be ‘disconnected’ – not in school, not working. We’ve got to reconnect them. We’ve got to give more of these young men access to mentors. We’ve got to continue to encourage responsible fatherhood. We’ve got to provide more pathways to apply to college or find a job. We can keep them from falling through the cracks.’

“Those were the words of President Obama, speaking less than a month ago about his ‘My Brother’s Keeper’ project to help ‘groups who’ve seen fewer opportunities that have spanned generations,’ especially boys and young men of color. ‘It’s going to take time. We’re dealing with complicated issues that run deep in our history, run deep in our society, and are entrenched in our minds.’

“No less than Mr. Ryan, Mr. Obama sure sounded like he was talking about ‘a cultural problem.’...

“So even though Mr. Ryan never mentioned race, liberals attacked his off-the-cuff remarks as racist while the President’s moral lecture was hardly noticed....

“Liberals have to smear conservatives personally because they know they’re losing on the merits.”

--We note the passing of Robert S. Strauss, 95, a true American original. Strauss was the ultimate Democratic Party insider, “hopscotching among White House posts when not making millions as a lobbyist and deal maker,” as Douglas Martin put it in his New York Times obituary.

As a political junkie in my youth, I always liked the guy, a throwback to kinder, gentler politics in the capitol. However, looking back, some of his activities would no doubt be shredded under today’s klieg-lights. 

Strauss helped engineer Jimmy Carter’s 1976 victory and became one of the president’s leading advisers, serving as trade representative and a key Middle East negotiator.

As Martin notes, it was also Strauss whom Nancy Reagan “asked to tell her husband, President Ronald Reagan, that the Iran-contra arms-for-hostages scandal was corroding his administration and that he had to make changes.”

Yes, Bob Strauss was well-liked on both sides of the political aisle. President George Bush even appointed him ambassador to the Soviet Union in 1991.

Strauss probably had the biggest rolodex in Washington, and he parlayed it into mega-$millions.

But I love this story of his time as Carter’s Middle East peace negotiator in 1979.

“The first thing I’m going to do is go to Israel and court Premier Begin’s wife like she was an 18-year-old schoolgirl,” Mr. Strauss said, according to a friend, referring to Prime Minister Menachem Begin.

“Then I’ll go to Egypt and court Sadat’s wife the same way,” he continued, referring to President Anwar el-Sadat. Before long, Mr. Strauss predicted, “one of those ladies is going to turn around in bed to her husband and say: ‘You know, that Bobby Strauss is not such a bad guy. Why don’t you do something nice for him?’” [Douglas Martin]

--The number of Americans ages 50 to 64 who have had a colonoscopy has surged from 19% in 2000 to 55% in 2010, according to a new report by the American Cancer Society. So it should be no surprise then that colon cancer rates have fallen by 30% over this same period. Nonetheless, 136,800 Americans will be diagnosed with the disease this year and 50,300 will die from it.

Aside from a balanced diet, exercise is a key to avoiding the killer.

--The following is from Caroline Moss of Business Insider...reprinted in the New York Post:

“Your high school may have had different names for them, but you probably recognize what they are: school dances. A staple of American culture....

“In 2001, more than 800 students gathered in clusters on the squeaky gym floors at John Jay High School in Westchester county, bopping up and down to Nelly songs. In 2010, only 26 students showed up to the Homecoming dance in that same gym."

Ms. Moss asked her younger sister, a senior at the school she had graduated from, if she was excited about the 2014 Winter Ball.

“She rolled her eyes at me. ‘We haven’t had a Winter Ball since I was a freshman,’ Lucy said.”

An assistant principal at a neighboring high school told Moss that they don’t try to hold dances anymore, and, “Now we’re lucky if the juniors stay through dinner at the prom.”

Ms. Moss’ sister, Lucy, told her “she thought the reason students didn’t attend was because everyone would rather be home texting, Facebook messaging, or Snapchatting each other.

“ ‘Kids don’t need to go to a dance to interact with each other when they can sit in their bed with their laptop and phone and text them,’ she said. ‘It’s basically like being with that person. You don’t have to show up to a dance hoping to see someone anymore. You can literally Snapchat them and see them on Snapchat.’”

Oh, it’s depressing. Now, granted, I did not personally attend school dances, but I played poker virtually every weekend with the same group of guys and wouldn’t you know, they all remain among my best friends to this day, 40 years later. In fact today I received a bunch of old-time baseball-themed beer coasters from one of them. Now that’s a friend!

Today, I seriously doubt my gang would be playing poker if we were in high school. I’d like to think we’d all get together for pickup basketball games and such, but I don’t know. Five of the eight of us were also in the band. Would we be today? I don’t know.

What I can say with virtual certainty, however, is today’s youth aren’t having childhoods remotely close to the great ones many of my era did.

Granted, a few of today’s youth will become tech billionaires, but I imagine it’s kind of like what we told great high school basketball players from 20-30 years ago. Only a handful of you are going to the NBA, I hope you understand. And only a handful of today’s tech geniuses, molded in their formative Wonder Bread years, will go on to Zuckerdom.

The rest? Good luck, kids. You’ll need some people skills at some point along the way and a lot of you aren’t picking them up.

Plus, many of you aren’t keeping your eyes on the road!

--On a related issue, the hot topic, at least in these parts, of Pre-K funding, I read a letter to the editor in a recent issue of U.S. News Weekly by Alan W., Honolulu. 

“Excessive government funding causes a dependency that does more harm than good. Young children learn more when they are taught from home by a family member or caring friend. Reading a child a story stimulates the imagination. A simple walk can turn into an adventure when talking about the birds, plants and weather. Young children in a classroom environment don’t get the attention they need. Children grow up so fast. Teaching them about life fosters pleasant memories that will last a lifetime. Family members and friends should do more; the government should do less.”

Hear hear.

--I wrote the other day that I was uncomfortable with public figures, such as New York City Mayor Bill de Blasio, touting a reduced murder rate in his first ten weeks in office, as he did about ten days ago. Thursday, a 14-year-old fatally shot a 39-year-old fellow bus passenger to death after an argument on the behavior of several teenagers.

--It is totally appropriate that first lady Michelle Obama be blistered in the press for her trip to China, with daughters Malia and Sasha, along with her mother and an entourage of about 70, seeing as it is being paid with Americans’ tax dollars.

While I agree that some good can come of it if she connects with China’s first lady, Peng Liyuan, Mrs. Obama isn’t making it any easier on herself when she refuses to field journalists questions, which was the case last I saw.

Of course it was also Michelle who blew off Peng Liyuan when the latter accompanied her husband, President Xi Jinping, to California last June for his summit with President Obama.

--There are some people in this world who simply deserve to be fed to the lions. Such is the case with the thieves who stole a part of an ancient fresco from Pompeii, breaking into a closed area of the World Heritage landmark, the House of Neptune, where a depiction of the goddess Artemis had been “chiseled off with a metallic object,” according to the curator at the site.

Il Messaggero in Italy described the discovery as “a shame for the country,” which comes on the heels of a series of collapses at Pompeii due to heavy rains that prompted the European Union to tell Italy to “take care of Pompeii, because it is emblematic not only for Europe but also for the world.”

Pompeii needs a 100-million+ euro makeover, according to experts, which is being partially funded by the EU but according to a local daily, only 0.56 percent of the funds have been spent thus far; in case you were wondering why Italy has been operating in an overall state of inertia for years.

--On Friday, Pope Francis, speaking at a prayer vigil for relatives of those killed by the mafia, declared:

“Blood-stained money, blood-stained power, you can’t bring it with you to your next life. Repent.”

Love the man.

--According to the weather statistics, this winter was ‘just’ the 8th snowiest in New Jersey (average total across the state) in the last 120 years, but the third coldest in the last 30.

It’s the combination, and the fact the snow stuck around in my area in terms of covering lawns for over five weeks straight, since the day after the Super Bowl. No one can ever remember it this bad. And more snow is in the forecast.

I’m ready for baseball! And The Masters...a tradition unlike any other...on CBS.

---

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

God bless America.

---

Gold closed at $1336
Oil $99.46

Returns for the week 3/17-3/21

Dow Jones +1.5% [16302]
S&P 500 +1.4% [1866]
S&P MidCap +1.2%
Russell 2000 +1.0%
Nasdaq +0.7% [4276]

Returns for the period 1/1/14-3/21/14

Dow Jones -1.7%
S&P 500 +1.0%
S&P MidCap +2.8%
Russell 2000 +2.6%
Nasdaq +2.4%

Bulls 52.0
Bears 17.4 [Source: Investors Intelligence]

Have a great week. I appreciate your support.

Catch me on Twitter @stocksandnews

Brian Trumbore