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12/06/2014

For the week 12/1-12/5

[Posted 12:00 AM ET]

Edition 817

Washington and Wall Street

Stocks around the world continued to soar, based on existing easy money policies, perceived easy money policies to come, sheer greed, or actual fundamentals.

The Dow Jones and S&P 500 continued to hit one new high after another and while the Federal Reserve’s zero interest rate policy has a lot to do with this, there was some good economic news to trumpet. The Labor Department released its nonfarm payroll figure for November and it showed a seasonally adjusted gain of 321,000, the strongest month since January 2012, and the 10th consecutive monthly gain of 200,000+. October’s figure was revised up to 243,000 and September’s to 271,000. Economists had been expecting November’s figure to be in the 225,000 range.

The unemployment rate was 5.8%, unchanged, though still at the lowest level since mid-2008.

For 2014, the economy is on track to produce the strongest annual payroll growth since 1999. Couple this with the GDP reports of the last two quarters, up 4.6% and 3.9%, and Democrats (as New York Democratic Sen. Charles Schumer said the other day) have to be kicking themselves for having the wrong message for the mid-term election, though it’s unclear just how many races a change in strategy would have been truly impacted.

One other positive from the jobs report was average hourly earnings rose 0.4%, a solid gain, and are now up 2.1% year over year. I’ve been saying wages would pick up, thus forcing the Federal Reserve’s hand earlier than expected, and we’ll see if there is any follow through in the December and January data.

But despite all the good news, the employment report still shows that labor force participation remains at levels last seen in the 1970s, 62.8%, unchanged from October, while U-6, the measurement of those who seek full-time employment but are only working part-time, if at all, was 11.4%, though this is down from 13.1% in November 2013.

In other economic news, the November ISM reading on manufacturing came in at a solid 58.7, while the services figure was 56.2. October construction spending was up a solid 1.1%, better than expected. [October factory orders were down 0.7% but there were some anomalies in the data related to lower oil prices.]

As for the holiday sales season, I said I would go with the National Retail Federation’s outlook for a 4.1% increase in sales for November and December and I’ll stick with this. As some of you know I live a minute drive from The Mall at Short Hills and went on Tuesday to do my own channel check survey and the place was packed. But it’s also a location with over the top, high end stores so it’s hard to judge overall trends using this one as a barometer.

As for the Thanksgiving weekend, a few numbers. The NRF said it estimated spending was down 11% over the four days, while ShopperTrak, a research group, had sales down 0.5% for Thursday and Friday. Clearly some stores have been holding sales since mid-November so if we’ve learned anything from this year, it’s that “Black Friday” no longer means that much, since more and more choose to do their shopping on Thanksgiving or earlier.

As for online sales, IBM tracks 800 retail stores and reported sales on Black Friday were up 9.5%. Amazon said its sales were up 24% that day, and ComScore said online sales were up 15% for Thursday and Friday. For Cyber Monday, IBM had sales rising 8.5%. Adobe tracks the top 25 retailers and it reported a Cyber Monday gain of 25%.

One other item; auto sales were up big for November as I detail below.

On the energy front, you all have continued to see plummeting prices at the pump. With energy doing its part to keep inflation down, it’s yet another reason why central banks can keep interest rates low.

I will just say that my own take on plunging oil prices of last week, that should the trend continue there will be pain in the sector, remains the same; though, again, if we stabilize in the $80 range in a few months, everything is fine. I also continue to maintain many are in a state of denial should oil, say, tumble to $60 or below, which is where the Saudis said it could land in comments by their oil minister this week.

Separately, Bill Gross, in his latest investment outlook from his new perch at Janus, wrote:

“Markets are reaching the point of low return and diminishing liquidity. Investors may want to begin to take some chips off the table: raise asset quality, reduce duration and prepare for at least a halt of asset appreciation engineered upon a false central bank premise of artificial yields, QE and the trickling down of faux wealth to the working class.”

Of central bankers Gross wrote:

“How could policymakers have allowed so much debt to be created in the first place, and then failed to regulate their own system accordingly? How could they have thought that money printing and debt creation could create wealth instead of just more and more debt?”

Lastly, it is expected that Congress will meet the scheduled Dec. 11 deadline on funding the government, and potentially other matters. House Speaker John Boehner wants funding through the end of the fiscal year, Sept. 30, but with caveats that remain to be worked out at the last hour.

Europe and Asia

European share prices rose to their highest level in almost seven years as, once again, the European Central Bank said it will consider quantitative easing and the buying of sovereign debt, though it pushed off any real move until January at the earliest. ECB President Mario Draghi has been stringing the eurozone along since mid-2012, and it’s worked.

Aside from the broad-based Stoxx Europe 600 Index climbing to a new record on Friday, Germany’s DAX Index hit a record of its own. German factory orders climbed 2.5% in October after a revised increase of 1.1% in September, far better than expected, and that helped the tone on Friday, but what of the other data?

The final manufacturing PMI for the eurozone in November came in at just 50.1 vs. October’s 50.6, so barely above the 50 dividing line between growth and contraction.

Ireland’s was 56.2 and the Netherlands’ at 54.6 was a 9-month high, but Germany was 49.5, a 17-month low, Italy clocked in at 49.0, Greece 49.1, and France 48.4.

A November composite reading that includes new orders and the service sector was 51.1 vs. 52.1 in October, the lowest for the eurozone in 16 months.

Chris Williamson, chief economist at Markit:

“With the final PMI coming in below the flash reading, the situation in euro area manufacturing is worse than previously thought. Not only is the performance of the sector the worst seen since mid-2013, there is a risk that renewed rot is spreading across the region from the core. The sector has more or less stagnated since August, but we are now seeing, for the first time in nearly 1 ½ years, the three largest economies all suffering manufacturing downturns.

“Germany’s export engine has stalled, causing the steepest deterioration of new orders in the country since December 2012, and new business is also falling in both France and Italy, boding ill for production in coming months.

“Spain, Ireland and the Netherlands remain bright spots, but the worry is that these countries will, like Greece and Austria, struggle to continue to expand unless demand picks up in the region’s largest member states.”

Separately, October retail sales rose 0.4% in the region, but were down in France and Spain.

Eurozone industrial producer prices declined 0.4% in October compared with September.

And then on Friday we learned GDP for the eurozone in the third quarter was 0.2% over the second quarter, matching an initial estimate published last month per Eurostat, the EU’s statistics arm. Mario Draghi had said earlier the outlook has worsened.

So in the third quarter, for the 12 months the economy grew 0.8%.

The central bank, as part of its yearend meeting, cut its 2015 GDP forecast from 1.6% to 1.0%; 2016 to 1.5% growth from 1.9%. It also sees inflation of 0.5% this year and only 0.7% next year, well below the 2% target.

As for the euro bond markets, they all continued to rally on speculation the ECB is readying QE, even if the moves are totally unwarranted. Italy’s 10-year yield, for example, dropped to another record at week’s end, 1.97%, even as Standard & Poor’s lowered the nation’s long-term credit rating, citing zero growth (it’s in recession) and government debt that is nearing 135% of GDP, or $2.8 trillion worth by the end of 2017.

Separately, the yield on Spain’s 10-year fell to 1.82%, while Greece’s hit 7.00%, despite the fact there continues to be major political turmoil in the country with an election coming up in a matter of four months that could rock the eurozone.

And back to Germany, despite the stronger October factory output, the Bundesbank cut its growth forecast for next year to 1% from June’s 2% outlook.

On the labor front, German airline Lufthansa cancelled half of its long-haul flights as pilots went on strike for the second time in a week over retirement benefits. It is the 10th strike for the airline since April. Currently, pilots are able to retire at the age of 55 and receive up to 60% of their pay until the standard retirement age of 65, which management wants to phase out. The airline is struggling to remain competitive against budget carriers such as Ryanair and Easyjet.

Turning to Asia...in China, HSBC’s final reading on the November manufacturing PMI was 50.0, a 6-mo. low and down from 50.4 in October. The services reading was 53.0 vs. 52.9. The government’s official manufacturing PMI was 50.3, an 8-mo. low, vs. 50.8. Services were 53.9 vs. 53.8.

Japan’s manufacturing PMI for November was 52.0 vs. 52.4 the prior month, while wages in October were down 2.8% year over year (adjusted for inflation), a 16th straight drop.

[While I’m on the topic, Taiwan’s November PMI was 51.4 vs. 52.0, a 15-mo. low; South Korea’s was 49.0 in November vs. 48.7.]

As for Japanese Prime Minister Shinzo Abe and his reelection bid, Dec. 14, in the snap vote he called for, polls say he will receive the mandate he is looking for to pursue his economic agenda.

Street Bytes

--The Dow and S&P 500 rose a seventh straight week, with the Dow gaining 0.7% to 17958 after flirting with 18000 all day Friday. The S&P tacked on 0.4% to 2075. Both are up 11% off the mid-October lows (back when your editor’s yearend predictions were looking great...cough cough). Nasdaq, however, had its six-week winning streak snapped, losing 0.2% to 4780.

--U.S. Treasury Yields

6-mo. 0.08% 2-yr. 0.64% 10-yr. 2.31% 30-yr. 2.97%

On the heels of the strong jobs report, yields snapped back with the 10-year rising 14 basis points on the week to get back into its 2.30% to 2.38% range of recent weeks. The two-year rose from 0.48% to 0.64%.

So with the Federal Reserve holding its yearend meeting on Dec. 16-17, what kinds of changes in the accompanying statement might we see, knowing it’s still not until 2015 that they will consider raising rates?   Fed vice-chairman Stanley Fischer said in an interview with the Wall Street Journal that the Fed might drop the assurance that it would not raise them for a “considerable time,” replacing it with alternative language that is more flexible.

Separately, in a speech this week, Federal Reserve Bank of New York President William C. Dudley said investors’ expectations for a Fed rate increase in mid-2015 are reasonable, and that the pace at which the Fed tightens is dependent on financial market conditions and the economy. Dudley added lower energy costs “should be a strong spur to consumer spending.”

--Ebola remains both a human tragedy as well as an economic story which is why I’ll continue to slot it here. The World Health Organization said 6,055 people have died as of earlier this past week in Liberia, Sierra Leone and Guinea, while Medecins Sans Frontieres (Doctors Without Borders) has described the international response as patchy and slow. The U.K. in Sierra Leone and China in Liberia have been building treatment centers, but as MSF notes these were sometimes in the wrong places and using under-qualified local staff.

The U.N., meanwhile, has been giving more upbeat public reports, even as privately it is saying Sierra Leone is not coping at all, but this is all “off the record.”

President Obama said this week, in asking for $6 billion in emergency funding, “Every hotspot is an ember that if not contained can become a new fire, so we cannot let down our guard even for a minute. And we can’t just fight this epidemic, we have to extinguish it.” [BBC News]

One interesting sidebar on the Ebola story. The Washington Post’s Lena H. Sun and Brady Dennis had a piece that starts out: “U.S. officials trying to set up a network of hospitals in this country to care for Ebola patients are running into reluctance from facilities worried about steep costs, unwanted attention and the possibility of scaring away other patients.

“ ‘They’re saying, ‘Look, we might be willing to do this, but we don’t want to be called an Ebola hospital. We don’t want people to be cancelling appointments left and right,’’ said Michael Bell, director of laboratory safety at the Centers for Disease Control and Prevention.”

Certainly the Dallas hospital treating Thomas Eric Duncan (Texas Health Presbyterian) wishes it hadn’t taken him in. A spokeswoman for the hospital said patient volumes for most services have returned to average levels but that emergency department volume remains below previous levels.

Other hospitals such as Nebraska Medical Center, which handled three cases, would be “overwhelmed by even a modest surge of 10 to 20 patients,” said an official at Emory University Hospital, which treated four patients. Emory’s costs were close to $1 million for direct care for “a single high-intensity patient.”

--Along the lines of the above, the New York Times’ Gardiner Harris reported that India is being hit by a deadly epidemic of its own, 58,000 infant deaths last year due to bacterial infections, “superbugs,” that are resistant to most known antibiotics.

Granted, 800,000 newborns overall die annually in India, but “Indian pediatricians say that the rising toll of resistant infections could soon swamp efforts to improve India’s abysmal infant death rate. Nearly a third of the world’s newborn deaths occur in India.”

The issue is that the resistant infections sweeping the country could of course spread elsewhere.

For starters, the country desperately needs better sanitation and hygiene, which is a major reason why doctors are then overusing antibiotics.

This is interesting. As Gardiner Harris notes: “Global sales of antibiotics for human consumption rose 36% from 2000 to 2010, with Brazil, Russia, India, China and South Africa accounting for 76% of that increase. In India, much of that growth has been driven by private doctors who deliver about 90% of care here and are often poorly trained. Much of these doctors’ income comes from drug sales.”

--Sony Pictures Entertainment was hit by a crippling cyberattack that caused such disruption to one of Hollywood’s biggest studios, employees were forced to use paper and pens instead of their computers. Hackers deleted files from hard drives, uploaded several unreleased films (like Annie and Mr. Turner) to the Internet and leaked sensitive personal information on thousands of Sony employees.

But the high-profile flick The Interview, with Seth Rogen and James Franco, who play a producer and talk-show host who travel to North Korea to interview Kim Jong Un, but are then enlisted by the CIA to assassinate him, was not leaked (despite initial reports to the contrary). North Korean officials have been complaining to both the United States and the U.N. about the ‘comedy,’ with the country’s U.N. ambassador calling it an “undisguised sponsoring of terrorism as well as an act of war.”

The FBI, which is investigating the hack, has yet to comment on the source, but on Monday issued a flash warning to businesses about “destructive malware” that was written in the Korean language and was capable of overriding data on hard drives and erasing data files...though it did not specifically link this to the Sony hack.

Some have said the attack could be an inside job and that they didn’t believe North Korea carried it out.

Then on Friday we learned the hack was even more serious; that among the items exposed were the Social Security numbers of more than 47,000 current and former employees along with Hollywood celebrities like Sylvester Stallone, according to the Wall Street Journal. Among other items now floating around are salaries and home addresses, posted online, for people who stopped working at Sony Pictures as far back as 2000. There are also stories of threatening message against individuals.

According to Identity Finder LLC, much of the data was stored on Microsoft Excel files without password protection.

Investigators say the hackers used methods similar to ones previously attributed to North Korea. A researcher at Russian cybersecurity company Kaspersky Lab said there are similarities between this hack and one on South Korea, which was linked to Pyongyang.

Jules Polonetsky, executive director of the Future of Privacy Forum, told the Washington Post: “If it’s true that North Korea was behind it, it almost seems to be taking a tool from the methods of terrorists who try to hurt innocent civilians to attack a country or a company. They’ve apparently gone to great lengths to personally hurt individuals who are working at the company to assert displeasure at the company.”

--BNP Paribas projects that if oil production remains at its current level and oil prices stayed at about $70 a barrel for the next year, OPEC nations will receive $316 billion less in oil revenues than if oil prices were at their three-year average of $105. That’s money no longer going to juice assets around the world, like glitzy New York real estate projects, not that too many of us care.

--Daniel Yergin / Wall Street Journal

“The decision by members of OPEC Thursday (Nov. 27) not to cut production reflects a profound shift in the world oil market. The demand for oil – by China and other emerging economies – is no longer the dominant factor. Instead, the surge in U.S. oil production, bolstered by additional new supply from Canada, is decisive. This surge is on a scale that most oil exporters had not anticipated. The turmoil in prices, with spasmodic plunges over the past few days, will likely continue.

“Since 2008 – when fear of ‘peak oil,’ after which global output would supposedly decline, was the dominant motif – U.S. oil production has risen 80%, to nine million barrels daily. The U.S. increase alone is greater than the output of every OPEC country except Saudi Arabia....

“The drama is far from over. If prices remain close to their current level, OPEC members will likely come together again to reassess the market, especially as the stronger winter demand fades with the approach of spring. But a pickup in world economic growth, or new disruptions or geopolitical crises in the Middle East or North Africa or elsewhere, could send prices up again.”

--According to researcher Autodata Corp., November U.S. auto sales, at an annualized rate of 17.2 million vehicles, represent the highest rate since 2003. Plunging gasoline prices are a major contributing factor, especially in the mix of cars consumers are buying.

For instance, interest in big, expensive models like the Cadillac Escalade surged, in its case up 91% last month; with the Lincoln Navigator’s up 88%. But sales in some small, economy cars slumped in a big way; the Ford Fiesta was down 26%. Toyota’s Prius hybrid fell 14%.

Overall, industrywide sales rose 4.6% to 1.3 million. Fiat Chrysler’s sales jumped 20% for a 56th straight monthly increase, with big gains for its Jeep (up 27%), Ram pickup and Chrysler 200 sedan lines.

GM sales rose 6.5%, with GMC up 23%, its best November since 2001. Silverado pickup sales rose 24%.

Ford’s light-vehicle sales fell 1.8%, though with strong SUV sales, as sales of Ford’s F-Series pickup line declined 10% as the automaker transitioned to the new aluminum models.

Separately, Toyota sales rose 3%, Nissan’s declined 3.1%, Honda Motor’s increased 4.6%, Volkswagen AG’s VW and Audi brands gained 9%, and the combination of Hyundai and Kia declined 2.8%.

Whether they were up or down, sales beat expectations.

The average pump price has fallen from $3.69 in April to $2.76, according to the latest from AAA; which is the lowest since October 2010. Some expect the national average to drop to $2.00 by Dec. 25. I know my station dropped 13 cents in two days this week to $2.76.

The danger for the auto companies is that they’ve invested $billions in the development of electric vehicles.

--In what could be a worrisome development for Ford, Motor Trend announced it had chosen Chevrolet’s new midsize pickup, the Colorado, for its prestigious Truck of the Year award. It had been expected that Ford’s new F-150 would be tabbed.

The thing is, Ford didn’t even come in second. That went to another Ford: its new Transit full-size commercial van.

--The Takata airbag debacle worsened this week as the Japanese auto supplier resisted demands it expand the recall of its airbags nationwide. So Honda Motor told lawmakers this week it would act independently and use replacements from other suppliers if necessary, which isn’t a comforting thought by my way of thinking. The fact is today, if you took your Honda in for a Takata replacement, it could take months before you got one.

Five deaths have now been linked to the faulty airbags, all in cars made by Honda.

Takata says there are issues only in areas associated with high humidity, which is where they’ve focused their recall – Florida, Hawaii, Puerto Rico and the Virgin Islands. 

--Uber Technologies Inc., the mobile car-booking company, raised $1.2 billion in new financing at a $40 billion valuation, more than double the $17 billion accorded it back in June. Uber thus becomes the most highly valued U.S. technology startup, with a value exceeding that of most airlines.

Uber CEO Travis Kalanick said the company is in a “tremendous growth” period, creating more than 1 million jobs worldwide next year.

--The PIMCO Total Return Fund, formerly managed by Bill Gross, suffered its 19th consecutive month of redemptions in November, though the figure of $9.5 billion is down from $32 billion in October. PIMCO appears to be turning the fund’s performance around after a rough stretch.

--Vanguard, the giant mutual fund manager, took in $21.3 billion in November, the third-best monthly total ever for the leading provider of low-cost index tracker funds. The company is taking advantage of the fact active fund managers have had a particularly tough time of it this year.

Vanguard has inflows of $185 billion for the first eleven months of 2014, including $63 billion into exchange traded funds.

--My favorite economic indicator in China, gambling revenues in Macau, should cause some concern. Revenues fell in November a whopping 20% from year ago levels. Beijing’s ongoing corruption crackdown (more on this below), let alone the economic slowdown, are reasons why 2014 is on target for the first calendar-year drop in gambling revenue since at least 2002, when public data became available.

--Interesting piece in Bloomberg Businessweek on how China is exporting industrial pollution. It’s moving some steel operations, for example, from heavily polluted Heibei province to South Africa. Other production will be moved to Latin America, Eastern Europe and other parts of Asia.

First and foremost, the government is doing this to shift pollution out of China, but with a sluggish economy, local producers on the mainland have been hit hard owing to severe overcapacity. Investment has thus been in unproductive areas and maybe now will shift to what Chinese leaders want, more of a service economy, a la the U.S., where domestic consumption accounts for 70% of GDP vs. just 35% in China.

--Ireland’s National Competitiveness Council is urging the government to take action to prevent the return of another damaging property bubble, as reported by the Irish Independent.  House prices in Dublin, for example, have risen 24% in the past year, while across the country they are up 16%.

Recall, prices fell about 50% in the crash, but they’ve been roaring back the past two years.

--The current record paid for an apartment in New York City is $88 million, but as Crain’s New York Business reports, a number of penthouses are now on the market with price tags in excess of $100 million.

But it seems developers are not having an easy go of it at this range. A developer of a triplex penthouse in the Village that had been on the market for more than a year recently slashed the price $10.2 million to $39.2 million. It doesn’t help the de Blasio administration is calling for a ‘mansion tax’. 

Many developers appear to be pegging their hopes on an overall profitable development on the sale of just a single penthouse, breaking even on the rest, in essence.

--Last weekend, Switzerland voted down a law requiring the country’s central bank to hold at least 20% of its reserves in gold, 77% to 23%. So gold was supposed to tumble, which it did, briefly, but ended up about $15 on the week. 

--According to the Economist Intelligence Unit business-environment rankings, the best place in the world to do business is Singapore, followed by Switzerland and Australia. The United States is 7th. 

China is No. 50 (by contrast, Hong Kong is No. 4) and Russia No. 64 out of 82 countries. Last is Libya. Next to last Venezuela.

--The biggest shopping mall in Europe opened this week in Moscow with an orchestra belting out Ode to Joy as the ceremonial ribbon was cut. Well, like they say, timing is everything and the timing couldn’t be worse on this project. Construction had begun in 2012, when things looked much rosier.

The mall, Aviapark, at full capacity will have 80 restaurants, a 17-screen cinema, and more than 500 shops.

--Interesting note from the Australian art market. A Sydney attorney won a judgment of $118,000 from international auction house Christie’s over the sale of a fake Albert Tucker for $75,000 in 2000. The importance of the ruling is that Christie’s is paying 85% of the damages, the man who consigned the painting to Christies will pay 10%, and the attorney’s art adviser, 5%. So as Anne Davies writes in the Sydney Morning Herald, “The case clarifies the obligation of players in the art world, when they hold themselves out as experts, and the steps they are expected to take to establish the authenticity of the works they sell or recommend to clients.”

--Despite all the rainfall this week across California, “State water experts said it would take 150% of the average rainfall for California to recover from the current drought. That would mean a total of 75 inches of rain from Oct. 1, 2014, through Sept. 30, 2015, recorded at eight stations in the northern Sierra.” [Los Angeles Times]

To give you a better idea, Lake Oroville – the key reservoir of the California State Water Project, which delivers water from the north to the south of the state, took in 5 billion gallons over the last 10 days, through Tuesday, but that is still less than 1% of its capacity. [Overall, it is now at about 44% of its historical average.]

--As you were eating your Thanksgiving turkey, did you know that the bird has been exploding in size? As reported by the U.S. Department of Agriculture and The Economist, the average size of a turkey has swelled from 13.2 lbs. in 1929 to over 30 lbs. today. Good lord! The Economist estimates that if this trend continues, turkeys will be as big as humans in just 150 years! “Before 6,000 years are out, turkeys will dwarf the Earth itself.” Run for your lives! [Or continue to sleep with one eye open.]

Foreign Affairs

Iraq / Syria / Iran / ISIS: Why look who I’ve added to the pool this week...Iran. Over a month ago I noted how Iran’s Revolutionary Guard leader was leading the Iraqi Army in some of its battles around Baghdad and Anbar province. This week we learned Iran has been launching airstrikes against ISIS in Iraq, which U.S. Secretary of State John Kerry described as “positive.”

Well in terms of the fight against ISIS I’m sure it is positive. But this is highly complicated. For starters, Iran supports Bashar al-Assad in Syria and the United States isn’t supposed to be doing so, though our actions say otherwise.

But the bigger issue is how this impacts talks on Iran’s nuclear program. Remember those? You know, the talks that were extended yet again, this time until end of June?

I mean why not just hand Iraq to Iran, at least from Baghdad south, and then sign an agreement with Iran that allows it to keep its uranium enrichment capability and says nothing about its ballistic missile program? That’s where we’re headed. The United States could not have screwed this region up worse.

To praise Iran for anything is absurd. Better to keep your mouth shut, Mr. Secretary. Plus it was reported this week that Iranian hackers have penetrated dozens of international organizations, including six major oil companies and a U.S. defense contractor. As the Financial Times’ Sam Jones notes, the attacks “are primarily aimed at giving their perpetrators the ability to cause physical destruction.”

Oh yeah, Secretary Kerry. Iran is very helpful.

[Besides the U.S., hackers have hit firms and agencies in Canada, China, England, France, Germany, India, Israel and a slew of others, according to an 87-page report by Cylance, a California-based security services firm.]

Editorial / Washington Post

“Under pressure from allies, the Obama administration appears to be creeping toward a correction of its strategy in Syria. If so – and officials stress that President Obama has made no decisions and none is imminent – the change would be welcome. The president has been counting on moderate Syrian forces to fight the Islamic State while refusing to address the threat those forces face from the regime of Bashar al-Assad. That policy has prompted Turkey to withhold vital cooperation and, more seriously, has risked the destruction of U.S. allies, who have been losing territory to both the Assad regime and Islamic extremist groups....

“The Post’s Karen DeYoung reported that U.S. officials are discussing the creation of a de facto safe zone along the Turkish border, perhaps 20 miles deep and 100 miles long, that the rebels could hold with the help of U.S. and allied airstrikes and Turkish special forces. The border strip, which extends toward the besieged, Kurdish-held town of Kobane, is currently controlled by forces from the Islamic State. But the strategy would include deterring Syrian government aircraft from entering the area, shielding it from bombing raids.”

All together now...I wrote of this what is now well over two years ago.

The Post, continuing...

“Turkey, with whom senior U.S. officials have been negotiating the plan, could substantially step up its contribution to the war.”

Week in Review, 9/8/12:

“The killing continues, now estimated at anywhere from 23,000 to 26,000 in the civil war [Ed. now over 200,000]...while there is a true humanitarian catastrophe developing in Syria itself...I’ll just say this in terms of the political debate taking place in the U.S. One of the Democrats’ campaign slogans is ‘Bin Laden is dead and GM is alive.’ It needs to be pointed out that at least 20,000 of the Syrian deaths could have been prevented if the White House had taken coordinated humanitarian action with Turkey early on. Not a military invasion but just the establishment of safe havens and the Obama administration could have significantly reduced the human toll.

“But it’s too late now. We missed our opportunity. The situation is indeed far more dangerous....

“In Ankara, Turkish Prime Minister Erdogan accused the outside world of indifference on Syria, adding ‘The regime in Syria has now become a terrorist state.’”

It’s pathetic. It’s also why I’m right to be a cynic regarding anything going forward in this theater. We blew it. But it was about November 2012. I’ve said this countless times before, and I’ll be saying it many more in the future. It’s yet another example of how history will blister the Obama presidency.

Meanwhile, back to the here and now...ISIS is setting up training camps in eastern Libya, according to the head of U.S. Africa command, Gen. David Rodriguez. ISIS also appears to have gained further control of eastern Syria, bordering Iraq, as part of its self-declared state.

The Lebanese Army detained a former wife and son of IS leader Abu Bakr Al-Baghdadi as they crossed from Syria in recent days, though it’s unlikely she has any intelligence of value.

In Iraq, the Washington Post reported: “The Iraqi army has been paying salaries to at least 50,000 soldiers who don’t exist, Iraqi Prime Minister Haider al-Abadi said on Sunday, an indication of the level of corruption that permeates an institution that the United States has spent billions on equipping and arming.”

50,000 “ghost soldiers” would equate to about $380 million of our tax dollars, “though officials say that’s probably only a fraction of the true expense.” One member of parliament said it was probably triple that amount.

Finally, last Sunday, “60 Minutes” had a glowing report on the United Nations’ food aid program that was helping to feed 1.7 million Syrian refugees. What drove me up the wall is that there was nothing in the report about how the United States, with early action, could have prevented there ever being close to 1.7 million refugees.

So what happened? On Monday the U.N. suspended the program due to a severe cash shortfall. 

I have said for years the United States is lying when it comes to the amount of aid it is giving in places like Syria. If this was such a great program, as “60 Minutes” wanted you to believe, why isn’t the Obama administration and Congress funding it?

The New York Times reported in writing of the suspension that the U.S. gave the agency $125 million last week, but the agency said it needed a further $64 million to support its efforts in December. Suffice it to say the same Times report failed to mention the “60 Minutes” story.

Russia: Russian President Vladimir Putin gave his annual state of the union speech on Thursday and accused Russia’s enemies of attempting to carve it up and destroy its economy by punishing it for its growing strength.

In the process, Putin praised the Russian people for their resilience and accused the West of “pure cynicism” in Ukraine, while trumpeting the annexation of Crimea. He added that economic sanctions are forcing Russians to do more to develop their own unique economy.

In a nutshell, Putin showed no signs of turning back from the policies of 2014, saying Russia’s “enemies of yesterday” wished on it the same fate as Yugoslavia in the 1990s.

“There is no doubt they would have loved to see the Yugoslavia scenario of collapse and dismemberment for us – with all the tragic consequences it would have for the peoples of Russia. This has not happened. We did not allow it,” he said.

Putin said sanctions would have been imposed on Russia even without Ukraine.

“I am certain that if all this did not take place...they would come up with another reason to contain Russia’s growing capabilities,” he said. “Whenever anyone thinks Russia has become strong, they resort to this instrument.”

Back to Crimea, Putin said it held sacred meaning for Russians, forever, while Russia was justified in intervening in Ukraine due to the “coup” in Kiev.

“For our country, for our people, this event has a special meaning because our people live in Crimea and the territory itself is strategically important. It was here in Crimea in ancient Khersones or Kosun as the chroniclers called it, that Count Vladimir was baptized [in the 10th century] to then baptize the rest of Rus.’

Putin added the historic landmarks of Crimea have a sacred meaning for Russians as important “as the Temple Mount in Jerusalem for those who profess Islam and Judaism.”

Regarding Ukraine in general, Putin said: “We see today that the tragedy in its southeast completely proves the righteousness of our position.”

On the issue of the economy and the collapsing ruble, Putin promised amnesty for repatriated capital to the country, saying Russians who brought money back would face no questions on how they earned it. [Timothy Heritage and Alexei Anishchuk / Reuters; Sergei L. Loiko / Los Angeles Times]

In other matters....

The Chechen capital of Grozny experienced the worst violence in months as a battle between Islamist militants and government security forces left at least 20 dead, embarrassing Putin hours before his speech. Some speculated the attack was carried out by fighters linked to Islamic State. Chechen fighters have long said they would respond to Putin’s support of Syrian President Assad.

Chechen leader Ramzan Kadyrov, the Kremlin’s lackey there, actually still attended Putin’s address in Moscow, hours after the fighting started. “I flew home, organized a special operation, killed the devils, held a meeting, gathered the staff needed to restore the damaged building, and made it back in time to listen to the address of our national leader.” [Andrew E. Kramer and Neil MacFarquhar / New York Times]

That’s classic Kadyrov, a devil in his own right. 

Regarding Russia’s economic plight not just from sanctions but from falling oil prices, the IMF’s Christine Lagarde said the drop is a “significant threat” that “is adding to their fragility and their vulnerability and they know it. It remains to be seen what the reaction will be.”

Oil and gas account for 50% of government revenues.

Russia, and Putin, suffered a big defeat this week when they were forced to scrap the South Stream gas pipeline that would have established the country’s energy dominance over southeastern Europe. But with Russia facing increased pressure from the European Union and the United States, Putin was forced to redirect the pipeline to Turkey.

This shocked and angered the likes of Serbia, Hungary and Bulgaria, who were given no warning and you can imagine how shares in companies set to benefit plummeted on the news.

Brussels has long feared the pipeline would cement Gazprom’s domination of the European gas market. The European Commission demanded other suppliers be given access to South Stream, arguing Gazprom violated EU competition rules.

But the above-noted countries saw South Stream as helping them gain energy independence, along with transit fees.

Finally, last Sunday, Moldovans voted to retain their pro-Western government despite attempts by Russia to install candidates seeking to move the tiny nation back into Russia’s orbit. So barring a move by Putin, Moldovans will continue on a path that will one day see it integrated into the European Union. The vote was close, 44% for the Western coalition, 39% for the Kremlin’s favorites. Will Putin respect it?

Israel: Prime Minister Benjamin Netanyahu called for a new election, March 17, after his ruling coalition collapsed and two centrist cabinet ministers were fired.

Netanyahu said he was frustrated at nearly two years of coalition politics. “Against the serious challenges facing the state of Israel – security, economic and regional – there is a need for a large and experienced ruling party. The bill I discussed last week that would enshrine Israel’s status as the Jewish state in law, is at the heart of the crisis.

Analysts say should Netanyahu consolidate the right, it would reduce the chances of resuming the Middle East peace process, not that this is ever going anywhere in our lifetime.

But there are early signs the prime minister may have miscalculated, with a poll for The Jerusalem Post showing 60% do not want Netanyahu to remain in power, just 34% saying yes.

When matched up against various individuals such as Moshe Kahlon and Gideon Sa’ar, both defeat the prime minister.

Sa’ar, a former interior minister, is thinking of running against Netanyahu in the January 6 Likud leadership race.

Netanyahu did defeat other party leaders such as Naftali Bennett by 12 points, as well as Avigdor Lieberman by 28.

64% of the Panels poll said the country’s socioeconomic situation had gotten worse under the outgoing government. The two key issues for voters are the economy and security.

[A poll for Haaretz has Netanyahu’s approval rating at 38%, down from 77% amid hostilities in Gaza in early August.]

Separately, Israel suffered an oil spill near Eilat that flooded 200 acres of a desert nature preserve in southern Israel. The accident happened during maintenance on a pipeline. If there is any good news in this it is that the oil has pooled in ravines and not impacted the preserve’s rare deer. That said it is one of Israel’s worst environmental disasters in its history.

Egypt: Former President Hosni Mubarak was cleared of charges in the deaths of civilians during the 2011 uprising that toppled him. A number of demonstrators were killed in Tahrir Square after the ruling was made public.

China: Beijing said it needed more time to dissect President Obama’s statement this week that he was concerned about the speed and “dangers” of President Xi Jinping’s rapid consolidation of personal power. Obama told the Business Roundtable, a group of U.S. CEOs, that Xi had won respect in the short time since he had taken over.

“He has consolidated power faster and more comprehensively than probably anybody since Deng Xiaoping,” said Obama, referring to the man who led China from 1978 to 1992.

“And everybody’s been impressed by his...clout inside of China after only a year and a half or two years.”

But then Obama said there were negatives to this.

“There are dangers...On issues of human rights, on issues of clamping down on dissent. He taps into a nationalism that worries his neighbors.

“On the other hand, I think they have a very strong interest in maintaining good relations with the United States. And my visit was a demonstration of their interest in managing this relationship effectively.”

The United States should be “cautious and clear-eyed” about its relationship with China.

Some Chinese academics told the South China Morning Post that Obama’s comments were “careless.”

Separately, Beijing arrested ex-security chief Zhou Yongkang, the most senior Chinese official to be investigated for corruption, and expelled him from the Communist Party. Before retiring two years ago, Mr. Zhou had been the head of China’s vast internal security apparatus. Many of his former associates and relatives also face corruption probes.

In Hong Kong, student protest leaders are deciding in the next few days whether to abandon their street camps (likely) to pursue a different strategy. Said Yvonne Leung, a leader of the Federation of Students, “We’ve tried both the soft and hard way, we’ve negotiated with them, and we’ve tried to blockade the government headquarters. But the government has been unwavering, so we have to make a decision.”

There was some violence when police cleared one protest camp and afterwards three of the protest leaders surrendered to police.

And a note on Taiwan. The ruling Kuomintang (KMT) party, which advocates stronger ties with China, is struggling after a poor showing in local elections last weekend. President Ma formally resigned as chairman of the KMT to take responsibility for the election results.

The main opposition Democratic Progressive Party, the big winner, is viewed with distrust by Beijing. The DPP feels the KMT has been signing too many agreements with the mainland and seeks to “win Taiwan back step by step,” as stated by party chair Tsai Ing-wen, who lost the 2012 presidential election to Mr. Ma.

This all bears watching. The DPP is in essence aligned with the Hong Kong protesters. Beijing cannot be happy and no doubt it is dusting off its invasion/takeover plans for Taipei.

Kenya: Al-Shabab struck again. A week ago the Islamist terrorist group killed 28 in Kenya who were riding a bus and then when stopped, couldn’t recite passages from the Koran. This week, 36 quarry workers near the Somali border were killed while sleeping in tents, with non-Muslim workers first separated from the Muslims, the former then being shot dead.

Kenyan President Uhuru Kenyatta said, “This is a war against Kenya and Kenyans....The time has come for each and every one of us to decide and choose – are you on the side of an open, free, democratic Kenya...or do you stand with repressive, intolerant extremists?”

Yemen: The U.S. revealed it tried to rescue U.K.-born American hostage Luke Somers, who is being held in Yemen by al-Qaeda, but the National Security Council said this week, “Regrettably, Luke was not present,” though hostages of other nationalities were rescued. Somers appeared in a video the other day, saying his life is in danger.

Nigeria: More than one million Nigerians have fled Boko Haram’s reign of terror. An attack on a mosque in north Nigeria’s biggest city of Kano killed more than 100 last weekend. These numbers just become numbing after a while.

France: Former president Nicolas Sarkozy won the leadership of his center-right UMP party, part of his plan to return to the presidency in 2017. But Sarkozy will still have to win his party’s nomination in 2016. Meanwhile a recent poll has National Front leader Marine Le Pen out in front with 30%.

Venezuela: Opposition leader Maria Corina Machado, a former congresswoman, was charged with leading a plot to assassinate President Nicolas Maduro. Machado said the accusations were intended to silence her and without merit. She wasn’t taken into custody but is barred from leaving the country.

Another opposition leader, Leopoldo Lopez, has been jailed since February as part of the government’s attempt to stifle the opposition.

I have been shocked Maduro has survived this long and wasn’t taken out in a coup this year.

Mexico: President Enrique Pena Nieto’s job approval has hit an all-time low of 39%, vs. the 70% he garnered when he was inaugurated. This is the lowest approval rating of any Mexican leader in nearly two decades. [Los Angeles Times]

Random Musings

--Pope Francis traveled to Turkey, a risky trip to a nation about 98% Muslim. Among the things he said, including to reporters on his flight home:

“I told (Turkish President Erdogan) that it would be beautiful if all Islamic leaders, whether they are political, religious or academic leaders, would speak out clearly and condemn (terrorism) because this would help the majority of Muslim people.”

Francis more than once in his trip condemned Islamic State: “They are driving us (Christians) out of the Middle East,” and that ISIS is committing a “profoundly grave sin against God.”

“Fanaticism and fundamentalism, as well as irrational fears, which foster misunderstanding and discrimination, need to be countered by the solidarity of all believers,” the Pope said in televised remarks at President Erdogan’s way over the top new palace in Ankara.

Francis called for the people and governments of the Middle East to “reverse the trend” of violent conflict.

“In Syria and Iraq, particularly, terrorist violence shows no signs of abating,” the Pope said, adding: “In reaffirming that it is licit, while always respecting the international law, to stop an unjust aggressor, I wish to reiterate, moreover, that the problem cannot be resolved solely through a military response.”

--Ashton Carter is President Obama’s choice to take over from Chuck Hagel atop the Pentagon. He is well-respected on both sides of the aisle and should sail through his confirmation hearings, however, this will also give the Senate a chance to pick apart President Obama’s foreign policy, and on much of this, Carter may be left going “Ah...ah...ah...”

Carter is known as a ‘hawk’ but he’ll be hamstrung.
Benny Avni / New York Post:

“When (Carter) takes over as defense secretary, should we expect a sharp policy turn? A more muscular U.S. response to North Korea? Greater toughness on Iran, Syria, Afghanistan, Iraq?

“Well, Carter is said to have more hawkish views on all of these hot spots than Obama – but peace mongers can relax.

“Even with Attila the Hun running the Pentagon, today’s Washington would find some pretext to appease dangerous enemies rather than send them exploding messages....

“What if Carter, as secretary, actually comes up with ballsier ideas than Obama’s see-no-evil ones – like, say, an actual ‘all options’ plan for hitting Iran’s nuclear-weapons program?

“Well, the president won’t listen.

“Bob Gates, Leon Panetta and Hagel all found that their advice on questions of war and peace went unheeded by a White House bent on diplomacy at all costs, with no military muscle to back it up.

“Obama wants a defense secretary who’ll bend the Pentagon to his will, not a contrarian who brings up inconvenient truths. Speak those truths too publicly, and like Hagel you’ll be shown the door.

“So our foes needn’t worry: We’re still at least two years away from any improvement in America’s deteriorating stance around the world.”

--In a CNN/ORC poll released Tuesday asking Republicans about their preferred presidential nominee in 2016, Ben Carson finished second behind Mitt Romney. Granted, Carson was at just 10%, but that was more than Jeb Bush, Chris Christie and Mike Huckabee. Pretty remarkable. [Romney polled 20%.]

But, if Romney is removed, Bush gets the first spot, though only 3 points ahead of Carson, four ahead of Huckabee.

Carson, an African-American in case you’ve been living under a rock the last two years, criticized President Obama for contributing to poor race relations.

“I actually believe that things were better before this president was elected. And I think that things have gotten worse because of his unusual emphasis on race.”

On the Democratic side of the CNN/ORC poll, Hillary Clinton takes 65%, Vice President Biden 10% and Sen. Elizabeth Warren 9%.

--As for Jeb Bush, addressing a Wall Street Journal CEO Council annual meeting the other day, he said his priorities included an “all-in” energy policy; a reduction in business regulations; a simpler tax code; an “economically driven” overhaul of the immigration system; and a “radical transformation” of the education system. [Beth Reinhard / Wall Street Journal]

Bush said he will make up his mind shortly on whether or not to run in 2016 and that his decision will rest on whether he has “the skills to do it in a way that tries to lift people’s spirits and not get sucked into the vortex.”

--Meanwhile, in yet another example of just how pathetic some of our politicians are, New Jersey Gov. Chris Christie vetoed a bill that would have banned the practice of confining pregnant pigs in crates, so as not to upset interests in Iowa, the nation’s leading state for pork production that, err, you know, happens to be the site of the first presidential caucus.

Of course there aren’t a lot of pig farmers in my home state, but there are in Iowa.

But then word came that an interim report by the joint legislative panel investigating Bridgegate has not as yet been able to determine if Gov. Christie had any direct involvement, while suggesting his former aide, Bridget Anne Kelly, may have violated state law.

The report states: “At present, there is no conclusive evidence as to whether Governor Chris Christie was or was not aware of the lane closures either in advance of their implementation or contemporaneously as they were occurring.”

The report adds that because “several critical witnesses” have not testified, the record of the incident “remains incomplete and leaves several important questions unanswered.”

Republicans on the committee have been highly critical of the process and wonder why there was “a rush” to issue something, as one Republican member put it.

For her part, the report says Kelly may have been guilty of witness tampering in encouraging another aide to delete emails.

A separate criminal investigation continues. [Steve Strunsky / NJ Advance Media]

--I agree with many fellow conservatives that based on the evidence we all saw, the extensive video, the New York City policeman should have been indicted in the death of Eric Garner.    I support the NYPD and have expressed my admiration for union president Patrick Lynch, but I can’t agree with him in this instance, except I do agree with his statement that Mayor de Blasio “threw (police) under the bus” with his remarks during the week.

So like the rest of you, I’ll just wait to see what the Department of Justice does with its investigation, though I expect beforehand that NYPD Commissioner William Bratton will take action against the police officer, like booting him off the force, which he would be in his rights to do.

The timing of this grand jury decision on the heels of the Ferguson case obviously could not have been worse and it’s a shame, and tragedy, the two, totally disparate, cases are being conflated.

For the record, I do have to note that President Obama, while not directly commenting on the Garner case, did say the grand jury decision spoke to “the concern on the part of too many minority communities that law enforcement is not working with them and dealing with them in a fair way.”

As for Mayor de Blasio and Reverend Al...Geoff Earle / New York Post:

“Bill de Blasio and ‘Co-Mayor’ Al Sharpton are joined at the hip in New York, so why not in Washington?

“De Blasio and the race-baiting Rev met with President Obama and other clergy, cops and pols Monday about ‘simmering’ tensions between the police and minorities across the United States.

“Sharpton, a White House regular under Obama, got a prime seat at the table – directly facing the president – during the two-hour session at the Eisenhower Office Building.

“Hizzoner, meanwhile, got a seat further away from Obama....

“Many critics...have ridiculed de Blasio for giving the architect of the infamous Tawana Brawley hoax undue sway over the NYPD.

“Sharpton’s police power play began over the summer at an event at City Hall dealing with the chokehold death of Eric Garner, where he humiliated de Blasio and NYPD Commissioner Bill Bratton by lecturing them on the department’s supposed ills.

“ ‘If Dante wasn’t your son, he’d be a candidate for a chokehold. And we’ve got to deal with that reality,’ Sharpton said at the time, referring to Hizzoner’s biracial son.

“At the Monday meeting, Dante’s name came up again – this time from Obama.

“ ‘The president referred to when he met my son, Dante. Well, I can tell you I think every night about my son, making sure he comes home safely...We have to make sure all our children are safe, living in justice,’ de Blasio said....

“Participants said Obama didn’t state an opinion on the grand jury’s failure to indict Wilson.

“Obama said the situation was emblematic of a larger issue.

“ ‘Ferguson laid bare a problem that is not unique to St. Louis, and that is a simmering distrust that exists between too many police departments and too many communities of color,’ he said.”

But as the New York Post editorial board noted:

“(President Obama should) never again have the Rev. Al Sharpton at the White House. In American life today, it’s hard to think of any figure more opposed to the idea of respecting a grand jury’s considered decision than our Rev. Al.

“Certainly he showed that in Ferguson, immediately dismissing the grand jury’s decision because it wasn’t the indictment he’d demanded.”

Meanwhile, according to an ABC News/Washington Post poll, 48% of Americans approve of the Ferguson grand jury’s action, 45% disapprove.

58% of whites approve of the grand jury action, compared with 9% of blacks and 32% of Hispanics.

--Separately, the Justice Department accused the Cleveland police department of using excessive and deadly force against citizens in violation of their constitutional rights. Justice and the city agreed to establish an independent monitor to oversee changes in the department.

--NBA legend Charles Barkley, who likes to sound off on topics far from the basketball court, lashed out on the Ferguson verdict and aftermath on a Philadelphia sports radio station, 97.5. In part: ”We have to be really careful with the cops, because if it wasn’t for the cops we would be living in the Wild, Wild West in our neighborhoods. We can’t pick out certain incidents that don’t go our way and act like the cops are all bad.... Do you know how bad some of these neighborhoods would be if it wasn’t for the cops?”

--In the interest of being ‘fair and balanced’ I offer this from Michael Eric Dyson in his New York Times op-ed.

“Mr. Obama spoke twice in the aftermath of the Ferguson grand jury’s decision. He spoke Monday night about America as a nation of laws and said that we must respect the jury’s conclusion, even if we don’t agree with it, and make progress by working together – not by throwing bottles, smashing car windows or using anger as an excuse to vandalize property or hurt anyone.

“On Tuesday, the president doubled down on his indictment of ‘criminal acts’ and declared,’ I do not have any sympathy’ for those who destroy ‘your own communities. While he avoided saying so, it was clear that his remarks were directed at the black people who looted and rioted in Ferguson. But their criminal activity is the effect of going unrecognized by the state for decades, a crime in itself. As for the plague of white cops who kill unarmed black youth, the facts of which are tediously and sickeningly repetitive and impose a psychological tariff on black minds, the president was vague, halting and sincerely noncommittal....

“Mr. Obama’s treacherous balancing act between white and black, left and right, obscures who has held the power for the longest amount of time to make things the way they are.”

Actually, Dyson’s diatribe gets worse. But he did once write a good book on Marvin Gaye.

--Interesting crime stats. “In 1991 Newark and New York City had roughly the same murder rate: 32 and 29 per 100,000 respectively. But by last year New York’s rate had fallen to four and Newark’s had jumped to 40, according to the latest data published on Nov. 14 by the FBI.”

New York City was under Mayors Rudy Giuliani and Michael Bloomberg during the time of the huge decline. Newark had charlatans or lightweights.

--Prior to the Eric Garner grand jury verdict, Mayor de Blasio touted the fact that major crime in Gotham continued to fall in the first 11 months of 2014, with homicides down 6.8%.

During the four-month period between August and November, the city recorded the lowest number of homicides in that period since 1993. But, overall, shooting incidents were up 4.5%

--George Will / Washington Post

“In 2010, Plymouth, Conn., was awarded $430,000 for widening sidewalks and related matters near two schools. This money was a portion of the $612 million that Congress had authorized for five years of the Federal Safe Routes to School program, which is intended to fight childhood obesity by encouraging children to burn calories by walking or biking to school. Really.

“Fortunately, Plymouth is near Sharon, Conn., home of the Buckley family, whose members, when their gimlet eyes notice nonsense, become elegantly polemical. So Congress’ Safe Routes silliness inadvertently did something excellent. It helped to provoke James Buckley to write a slender book that, if heeded, would substantially improve American governance.”

I bring this particular piece by Mr. Will up because James Buckley was a fave of mine growing up. I always thought he was underrated. He’s now 91, of course the brother of the late Bill Buckley. Just sounds like a good stocking stuff: “Saving Congress from Itself: Emancipating the States and Empowering Their People.”

So as Will writes: “Buckley proposes ending federal grants to state and local governments, a category of spending that has ballooned from $24.1 billion in 1970 to an estimated $640.8 billion in fiscal 2015. Devising such spending, Buckley says, absorbs much of Congress’ time, diverting it from ‘core national responsibilities’ and toward concerns that are properly – he says constitutionally – the concerns of the states.”

But the courts have ruled, through the “general welfare” clause, that Congress can essentially spend on anything.

So when Congress sends money to the states, it’s seen as ‘free money,’ but as Will notes: “Free” money can be expensive. Washington used $455 million to induce Connecticut to provide the remaining $112 million needed for an unneeded 9.4-mile busway linking New Britain and Hartford, which were already linked by bus service – and $112 million was diverted from more crucial state needs. Buckley explains:

“Anyone who has ever eaten lunch on an expense account will understand the perverse incentives generated when a person is given access to funds that may only be used for a particular purpose... Organizations, government included, will act in the same way. When someone else picks up the check, they consume goods and services inefficiently.”

--Some good news. I have long written of the incidences of deadly infections and ailments that kill hundreds of thousands a year in our nation’s hospitals and according to the Department of Health and Human Services, the number of those dying from such ailments fell 17% between 2010 and 2013; as many as 50,000 fewer people dying while hospitalized over this period. [Wall Street Journal]

--Lia Eustachewich / New York Post:

“Kennedy Airport just keeps on earning its reputation as one of the worst airports in the world.

“Seven luggage handlers at JFK Airport allegedly snatched up more than $20,000 in iPads, MacBooks, laptops and even a pair of two-carat diamond gold earrings from travelers’ checked bags, authorities said.” The items were sold to a pawn shop.

The employees worked at two terminals which have many overseas flights so it’s possible unknowing foreigners were packing these items in their checked luggage and not keeping them in their hand luggage, but while the article goes on to say the baggage handlers themselves were true idiots, which is why they were caught, the passengers were hardly better.

People, they open your luggage! That’s why you can’t lock it anymore.

--The Los Angeles Times’ Hugo Martin reported on an issue at Los Angeles International Airport, which is similar to other airports around the country.

LAX added a bunch of classy restaurants at the Tom Bradley International Terminal, including a huge steak house, III Forks. One problem. The restaurant hands out “serrated steel knives to passengers who had already passed screening checkpoints before boarding a plane.”

New York newspapers have raised the same issue as a result of the opening of some new restaurants at JFK, where officials have now banned such knives.

So at LAX, numbers are now etched on the knives and guests are asked to show identification and boarding passes.

But now patrons have stopped asking for steak knives because it’s such a hassle. Instead they have to eat their steak with a butter knife.

--I am proud I wrote nothing on the University of Virginia alleged gang rape case, as reported in Rolling Stone. Nor did I tweet anything on this one. It was all about my dictum ‘wait 24 hours.’ 

We learned on Friday that Rolling Stone now admits it has doubts about the veracity of the source of the story, the supposed victim. And it turns out the writer of the story, “A Rape on Campus,” never contacted the alleged rapists for their side of what happened.

The Washington Post also ran a story on Friday, poking holes in the woman’s tale.

But just as in the Duke lacrosse team tragedy, many of the innocent have already been destroyed, especially through social media. And some of the statements coming out of Virginia infuriate me. “Well, this doesn’t mean it’s not a big issue on this campus or around the country.”

But you jumped to conclusions on this one, Ms. Jones!

Our society sucks. And it grows worse literally by the hour.

--It has been nine years since Florida was last hit by a hurricane, a modern-day record and great for the Florida Hurricane Catastrophe Fund, which is so well-funded, businesses and residents won’t have to add to it after the end of next year.

But as Spencer Jakab wrote this week in the Wall Street Journal, the fund would be totally depleted by a 100-year storm, and, you know, it’s been nine years...oh well, 91 to go, right? Is that how these things work?

--Professor Stephen Hawking has warned of doom and gloom on many an occasion and now he is warning artificial intelligence “could outsmart us all” and that there is a need to establish colonies on other planets to avoid ultimately a “near-certainty” of technological catastrophe.

So Hawking joins the likes of Elon Musk who have echoed similar warnings in recent months. Hawking says AI could become “a real danger in the not-too-distant future” if it became capable of designing improvements to itself.

--Finally, on a particularly happy note, and related to the above, I have to admit I was super pumped, and nervous, watching the Orion spacecraft’s successful launch this morning and then seeing the spectacular return of the capsule 4 ½ hours later. Americans needed a shot in the arm and NASA provided it.

I have but one real wish in my life (of the big picture variety, not the selfish kind) and that is to be alive long enough to see us land a man on Mars.

But that’s probably about 22 years off. It’s going to be close, sports fans. 
---

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

God bless America.
---

Gold closed at $1190
Oil $65.84

Returns for the period 12/1/14-12/5/14

Dow Jones +0.7% [17958...new record]
S&P 500 +0.4 [2075...new record]
S&P MidCap +0.1%
Russell 2000 +0.8%
Nasdaq -0.2%

Returns for the period 1/1/14-12/5/14

Dow Jones +8.3%
S&P 500 +12.3%
S&P MidCap +7.6%
Russell 2000 +1.6%
Nasdaq +14.5%

Bulls 53.4
Bears 13.9 [Source: Investors Intelligence]

Dr. Bortrum has a new column posted.

My next review will be from Kiawah, S.C. and may be slightly delayed.

Happy Birthday, Mom!

Brian Trumbore



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Week in Review

12/06/2014

For the week 12/1-12/5

[Posted 12:00 AM ET]

Edition 817

Washington and Wall Street

Stocks around the world continued to soar, based on existing easy money policies, perceived easy money policies to come, sheer greed, or actual fundamentals.

The Dow Jones and S&P 500 continued to hit one new high after another and while the Federal Reserve’s zero interest rate policy has a lot to do with this, there was some good economic news to trumpet. The Labor Department released its nonfarm payroll figure for November and it showed a seasonally adjusted gain of 321,000, the strongest month since January 2012, and the 10th consecutive monthly gain of 200,000+. October’s figure was revised up to 243,000 and September’s to 271,000. Economists had been expecting November’s figure to be in the 225,000 range.

The unemployment rate was 5.8%, unchanged, though still at the lowest level since mid-2008.

For 2014, the economy is on track to produce the strongest annual payroll growth since 1999. Couple this with the GDP reports of the last two quarters, up 4.6% and 3.9%, and Democrats (as New York Democratic Sen. Charles Schumer said the other day) have to be kicking themselves for having the wrong message for the mid-term election, though it’s unclear just how many races a change in strategy would have been truly impacted.

One other positive from the jobs report was average hourly earnings rose 0.4%, a solid gain, and are now up 2.1% year over year. I’ve been saying wages would pick up, thus forcing the Federal Reserve’s hand earlier than expected, and we’ll see if there is any follow through in the December and January data.

But despite all the good news, the employment report still shows that labor force participation remains at levels last seen in the 1970s, 62.8%, unchanged from October, while U-6, the measurement of those who seek full-time employment but are only working part-time, if at all, was 11.4%, though this is down from 13.1% in November 2013.

In other economic news, the November ISM reading on manufacturing came in at a solid 58.7, while the services figure was 56.2. October construction spending was up a solid 1.1%, better than expected. [October factory orders were down 0.7% but there were some anomalies in the data related to lower oil prices.]

As for the holiday sales season, I said I would go with the National Retail Federation’s outlook for a 4.1% increase in sales for November and December and I’ll stick with this. As some of you know I live a minute drive from The Mall at Short Hills and went on Tuesday to do my own channel check survey and the place was packed. But it’s also a location with over the top, high end stores so it’s hard to judge overall trends using this one as a barometer.

As for the Thanksgiving weekend, a few numbers. The NRF said it estimated spending was down 11% over the four days, while ShopperTrak, a research group, had sales down 0.5% for Thursday and Friday. Clearly some stores have been holding sales since mid-November so if we’ve learned anything from this year, it’s that “Black Friday” no longer means that much, since more and more choose to do their shopping on Thanksgiving or earlier.

As for online sales, IBM tracks 800 retail stores and reported sales on Black Friday were up 9.5%. Amazon said its sales were up 24% that day, and ComScore said online sales were up 15% for Thursday and Friday. For Cyber Monday, IBM had sales rising 8.5%. Adobe tracks the top 25 retailers and it reported a Cyber Monday gain of 25%.

One other item; auto sales were up big for November as I detail below.

On the energy front, you all have continued to see plummeting prices at the pump. With energy doing its part to keep inflation down, it’s yet another reason why central banks can keep interest rates low.

I will just say that my own take on plunging oil prices of last week, that should the trend continue there will be pain in the sector, remains the same; though, again, if we stabilize in the $80 range in a few months, everything is fine. I also continue to maintain many are in a state of denial should oil, say, tumble to $60 or below, which is where the Saudis said it could land in comments by their oil minister this week.

Separately, Bill Gross, in his latest investment outlook from his new perch at Janus, wrote:

“Markets are reaching the point of low return and diminishing liquidity. Investors may want to begin to take some chips off the table: raise asset quality, reduce duration and prepare for at least a halt of asset appreciation engineered upon a false central bank premise of artificial yields, QE and the trickling down of faux wealth to the working class.”

Of central bankers Gross wrote:

“How could policymakers have allowed so much debt to be created in the first place, and then failed to regulate their own system accordingly? How could they have thought that money printing and debt creation could create wealth instead of just more and more debt?”

Lastly, it is expected that Congress will meet the scheduled Dec. 11 deadline on funding the government, and potentially other matters. House Speaker John Boehner wants funding through the end of the fiscal year, Sept. 30, but with caveats that remain to be worked out at the last hour.

Europe and Asia

European share prices rose to their highest level in almost seven years as, once again, the European Central Bank said it will consider quantitative easing and the buying of sovereign debt, though it pushed off any real move until January at the earliest. ECB President Mario Draghi has been stringing the eurozone along since mid-2012, and it’s worked.

Aside from the broad-based Stoxx Europe 600 Index climbing to a new record on Friday, Germany’s DAX Index hit a record of its own. German factory orders climbed 2.5% in October after a revised increase of 1.1% in September, far better than expected, and that helped the tone on Friday, but what of the other data?

The final manufacturing PMI for the eurozone in November came in at just 50.1 vs. October’s 50.6, so barely above the 50 dividing line between growth and contraction.

Ireland’s was 56.2 and the Netherlands’ at 54.6 was a 9-month high, but Germany was 49.5, a 17-month low, Italy clocked in at 49.0, Greece 49.1, and France 48.4.

A November composite reading that includes new orders and the service sector was 51.1 vs. 52.1 in October, the lowest for the eurozone in 16 months.

Chris Williamson, chief economist at Markit:

“With the final PMI coming in below the flash reading, the situation in euro area manufacturing is worse than previously thought. Not only is the performance of the sector the worst seen since mid-2013, there is a risk that renewed rot is spreading across the region from the core. The sector has more or less stagnated since August, but we are now seeing, for the first time in nearly 1 ½ years, the three largest economies all suffering manufacturing downturns.

“Germany’s export engine has stalled, causing the steepest deterioration of new orders in the country since December 2012, and new business is also falling in both France and Italy, boding ill for production in coming months.

“Spain, Ireland and the Netherlands remain bright spots, but the worry is that these countries will, like Greece and Austria, struggle to continue to expand unless demand picks up in the region’s largest member states.”

Separately, October retail sales rose 0.4% in the region, but were down in France and Spain.

Eurozone industrial producer prices declined 0.4% in October compared with September.

And then on Friday we learned GDP for the eurozone in the third quarter was 0.2% over the second quarter, matching an initial estimate published last month per Eurostat, the EU’s statistics arm. Mario Draghi had said earlier the outlook has worsened.

So in the third quarter, for the 12 months the economy grew 0.8%.

The central bank, as part of its yearend meeting, cut its 2015 GDP forecast from 1.6% to 1.0%; 2016 to 1.5% growth from 1.9%. It also sees inflation of 0.5% this year and only 0.7% next year, well below the 2% target.

As for the euro bond markets, they all continued to rally on speculation the ECB is readying QE, even if the moves are totally unwarranted. Italy’s 10-year yield, for example, dropped to another record at week’s end, 1.97%, even as Standard & Poor’s lowered the nation’s long-term credit rating, citing zero growth (it’s in recession) and government debt that is nearing 135% of GDP, or $2.8 trillion worth by the end of 2017.

Separately, the yield on Spain’s 10-year fell to 1.82%, while Greece’s hit 7.00%, despite the fact there continues to be major political turmoil in the country with an election coming up in a matter of four months that could rock the eurozone.

And back to Germany, despite the stronger October factory output, the Bundesbank cut its growth forecast for next year to 1% from June’s 2% outlook.

On the labor front, German airline Lufthansa cancelled half of its long-haul flights as pilots went on strike for the second time in a week over retirement benefits. It is the 10th strike for the airline since April. Currently, pilots are able to retire at the age of 55 and receive up to 60% of their pay until the standard retirement age of 65, which management wants to phase out. The airline is struggling to remain competitive against budget carriers such as Ryanair and Easyjet.

Turning to Asia...in China, HSBC’s final reading on the November manufacturing PMI was 50.0, a 6-mo. low and down from 50.4 in October. The services reading was 53.0 vs. 52.9. The government’s official manufacturing PMI was 50.3, an 8-mo. low, vs. 50.8. Services were 53.9 vs. 53.8.

Japan’s manufacturing PMI for November was 52.0 vs. 52.4 the prior month, while wages in October were down 2.8% year over year (adjusted for inflation), a 16th straight drop.

[While I’m on the topic, Taiwan’s November PMI was 51.4 vs. 52.0, a 15-mo. low; South Korea’s was 49.0 in November vs. 48.7.]

As for Japanese Prime Minister Shinzo Abe and his reelection bid, Dec. 14, in the snap vote he called for, polls say he will receive the mandate he is looking for to pursue his economic agenda.

Street Bytes

--The Dow and S&P 500 rose a seventh straight week, with the Dow gaining 0.7% to 17958 after flirting with 18000 all day Friday. The S&P tacked on 0.4% to 2075. Both are up 11% off the mid-October lows (back when your editor’s yearend predictions were looking great...cough cough). Nasdaq, however, had its six-week winning streak snapped, losing 0.2% to 4780.

--U.S. Treasury Yields

6-mo. 0.08% 2-yr. 0.64% 10-yr. 2.31% 30-yr. 2.97%

On the heels of the strong jobs report, yields snapped back with the 10-year rising 14 basis points on the week to get back into its 2.30% to 2.38% range of recent weeks. The two-year rose from 0.48% to 0.64%.

So with the Federal Reserve holding its yearend meeting on Dec. 16-17, what kinds of changes in the accompanying statement might we see, knowing it’s still not until 2015 that they will consider raising rates?   Fed vice-chairman Stanley Fischer said in an interview with the Wall Street Journal that the Fed might drop the assurance that it would not raise them for a “considerable time,” replacing it with alternative language that is more flexible.

Separately, in a speech this week, Federal Reserve Bank of New York President William C. Dudley said investors’ expectations for a Fed rate increase in mid-2015 are reasonable, and that the pace at which the Fed tightens is dependent on financial market conditions and the economy. Dudley added lower energy costs “should be a strong spur to consumer spending.”

--Ebola remains both a human tragedy as well as an economic story which is why I’ll continue to slot it here. The World Health Organization said 6,055 people have died as of earlier this past week in Liberia, Sierra Leone and Guinea, while Medecins Sans Frontieres (Doctors Without Borders) has described the international response as patchy and slow. The U.K. in Sierra Leone and China in Liberia have been building treatment centers, but as MSF notes these were sometimes in the wrong places and using under-qualified local staff.

The U.N., meanwhile, has been giving more upbeat public reports, even as privately it is saying Sierra Leone is not coping at all, but this is all “off the record.”

President Obama said this week, in asking for $6 billion in emergency funding, “Every hotspot is an ember that if not contained can become a new fire, so we cannot let down our guard even for a minute. And we can’t just fight this epidemic, we have to extinguish it.” [BBC News]

One interesting sidebar on the Ebola story. The Washington Post’s Lena H. Sun and Brady Dennis had a piece that starts out: “U.S. officials trying to set up a network of hospitals in this country to care for Ebola patients are running into reluctance from facilities worried about steep costs, unwanted attention and the possibility of scaring away other patients.

“ ‘They’re saying, ‘Look, we might be willing to do this, but we don’t want to be called an Ebola hospital. We don’t want people to be cancelling appointments left and right,’’ said Michael Bell, director of laboratory safety at the Centers for Disease Control and Prevention.”

Certainly the Dallas hospital treating Thomas Eric Duncan (Texas Health Presbyterian) wishes it hadn’t taken him in. A spokeswoman for the hospital said patient volumes for most services have returned to average levels but that emergency department volume remains below previous levels.

Other hospitals such as Nebraska Medical Center, which handled three cases, would be “overwhelmed by even a modest surge of 10 to 20 patients,” said an official at Emory University Hospital, which treated four patients. Emory’s costs were close to $1 million for direct care for “a single high-intensity patient.”

--Along the lines of the above, the New York Times’ Gardiner Harris reported that India is being hit by a deadly epidemic of its own, 58,000 infant deaths last year due to bacterial infections, “superbugs,” that are resistant to most known antibiotics.

Granted, 800,000 newborns overall die annually in India, but “Indian pediatricians say that the rising toll of resistant infections could soon swamp efforts to improve India’s abysmal infant death rate. Nearly a third of the world’s newborn deaths occur in India.”

The issue is that the resistant infections sweeping the country could of course spread elsewhere.

For starters, the country desperately needs better sanitation and hygiene, which is a major reason why doctors are then overusing antibiotics.

This is interesting. As Gardiner Harris notes: “Global sales of antibiotics for human consumption rose 36% from 2000 to 2010, with Brazil, Russia, India, China and South Africa accounting for 76% of that increase. In India, much of that growth has been driven by private doctors who deliver about 90% of care here and are often poorly trained. Much of these doctors’ income comes from drug sales.”

--Sony Pictures Entertainment was hit by a crippling cyberattack that caused such disruption to one of Hollywood’s biggest studios, employees were forced to use paper and pens instead of their computers. Hackers deleted files from hard drives, uploaded several unreleased films (like Annie and Mr. Turner) to the Internet and leaked sensitive personal information on thousands of Sony employees.

But the high-profile flick The Interview, with Seth Rogen and James Franco, who play a producer and talk-show host who travel to North Korea to interview Kim Jong Un, but are then enlisted by the CIA to assassinate him, was not leaked (despite initial reports to the contrary). North Korean officials have been complaining to both the United States and the U.N. about the ‘comedy,’ with the country’s U.N. ambassador calling it an “undisguised sponsoring of terrorism as well as an act of war.”

The FBI, which is investigating the hack, has yet to comment on the source, but on Monday issued a flash warning to businesses about “destructive malware” that was written in the Korean language and was capable of overriding data on hard drives and erasing data files...though it did not specifically link this to the Sony hack.

Some have said the attack could be an inside job and that they didn’t believe North Korea carried it out.

Then on Friday we learned the hack was even more serious; that among the items exposed were the Social Security numbers of more than 47,000 current and former employees along with Hollywood celebrities like Sylvester Stallone, according to the Wall Street Journal. Among other items now floating around are salaries and home addresses, posted online, for people who stopped working at Sony Pictures as far back as 2000. There are also stories of threatening message against individuals.

According to Identity Finder LLC, much of the data was stored on Microsoft Excel files without password protection.

Investigators say the hackers used methods similar to ones previously attributed to North Korea. A researcher at Russian cybersecurity company Kaspersky Lab said there are similarities between this hack and one on South Korea, which was linked to Pyongyang.

Jules Polonetsky, executive director of the Future of Privacy Forum, told the Washington Post: “If it’s true that North Korea was behind it, it almost seems to be taking a tool from the methods of terrorists who try to hurt innocent civilians to attack a country or a company. They’ve apparently gone to great lengths to personally hurt individuals who are working at the company to assert displeasure at the company.”

--BNP Paribas projects that if oil production remains at its current level and oil prices stayed at about $70 a barrel for the next year, OPEC nations will receive $316 billion less in oil revenues than if oil prices were at their three-year average of $105. That’s money no longer going to juice assets around the world, like glitzy New York real estate projects, not that too many of us care.

--Daniel Yergin / Wall Street Journal

“The decision by members of OPEC Thursday (Nov. 27) not to cut production reflects a profound shift in the world oil market. The demand for oil – by China and other emerging economies – is no longer the dominant factor. Instead, the surge in U.S. oil production, bolstered by additional new supply from Canada, is decisive. This surge is on a scale that most oil exporters had not anticipated. The turmoil in prices, with spasmodic plunges over the past few days, will likely continue.

“Since 2008 – when fear of ‘peak oil,’ after which global output would supposedly decline, was the dominant motif – U.S. oil production has risen 80%, to nine million barrels daily. The U.S. increase alone is greater than the output of every OPEC country except Saudi Arabia....

“The drama is far from over. If prices remain close to their current level, OPEC members will likely come together again to reassess the market, especially as the stronger winter demand fades with the approach of spring. But a pickup in world economic growth, or new disruptions or geopolitical crises in the Middle East or North Africa or elsewhere, could send prices up again.”

--According to researcher Autodata Corp., November U.S. auto sales, at an annualized rate of 17.2 million vehicles, represent the highest rate since 2003. Plunging gasoline prices are a major contributing factor, especially in the mix of cars consumers are buying.

For instance, interest in big, expensive models like the Cadillac Escalade surged, in its case up 91% last month; with the Lincoln Navigator’s up 88%. But sales in some small, economy cars slumped in a big way; the Ford Fiesta was down 26%. Toyota’s Prius hybrid fell 14%.

Overall, industrywide sales rose 4.6% to 1.3 million. Fiat Chrysler’s sales jumped 20% for a 56th straight monthly increase, with big gains for its Jeep (up 27%), Ram pickup and Chrysler 200 sedan lines.

GM sales rose 6.5%, with GMC up 23%, its best November since 2001. Silverado pickup sales rose 24%.

Ford’s light-vehicle sales fell 1.8%, though with strong SUV sales, as sales of Ford’s F-Series pickup line declined 10% as the automaker transitioned to the new aluminum models.

Separately, Toyota sales rose 3%, Nissan’s declined 3.1%, Honda Motor’s increased 4.6%, Volkswagen AG’s VW and Audi brands gained 9%, and the combination of Hyundai and Kia declined 2.8%.

Whether they were up or down, sales beat expectations.

The average pump price has fallen from $3.69 in April to $2.76, according to the latest from AAA; which is the lowest since October 2010. Some expect the national average to drop to $2.00 by Dec. 25. I know my station dropped 13 cents in two days this week to $2.76.

The danger for the auto companies is that they’ve invested $billions in the development of electric vehicles.

--In what could be a worrisome development for Ford, Motor Trend announced it had chosen Chevrolet’s new midsize pickup, the Colorado, for its prestigious Truck of the Year award. It had been expected that Ford’s new F-150 would be tabbed.

The thing is, Ford didn’t even come in second. That went to another Ford: its new Transit full-size commercial van.

--The Takata airbag debacle worsened this week as the Japanese auto supplier resisted demands it expand the recall of its airbags nationwide. So Honda Motor told lawmakers this week it would act independently and use replacements from other suppliers if necessary, which isn’t a comforting thought by my way of thinking. The fact is today, if you took your Honda in for a Takata replacement, it could take months before you got one.

Five deaths have now been linked to the faulty airbags, all in cars made by Honda.

Takata says there are issues only in areas associated with high humidity, which is where they’ve focused their recall – Florida, Hawaii, Puerto Rico and the Virgin Islands. 

--Uber Technologies Inc., the mobile car-booking company, raised $1.2 billion in new financing at a $40 billion valuation, more than double the $17 billion accorded it back in June. Uber thus becomes the most highly valued U.S. technology startup, with a value exceeding that of most airlines.

Uber CEO Travis Kalanick said the company is in a “tremendous growth” period, creating more than 1 million jobs worldwide next year.

--The PIMCO Total Return Fund, formerly managed by Bill Gross, suffered its 19th consecutive month of redemptions in November, though the figure of $9.5 billion is down from $32 billion in October. PIMCO appears to be turning the fund’s performance around after a rough stretch.

--Vanguard, the giant mutual fund manager, took in $21.3 billion in November, the third-best monthly total ever for the leading provider of low-cost index tracker funds. The company is taking advantage of the fact active fund managers have had a particularly tough time of it this year.

Vanguard has inflows of $185 billion for the first eleven months of 2014, including $63 billion into exchange traded funds.

--My favorite economic indicator in China, gambling revenues in Macau, should cause some concern. Revenues fell in November a whopping 20% from year ago levels. Beijing’s ongoing corruption crackdown (more on this below), let alone the economic slowdown, are reasons why 2014 is on target for the first calendar-year drop in gambling revenue since at least 2002, when public data became available.

--Interesting piece in Bloomberg Businessweek on how China is exporting industrial pollution. It’s moving some steel operations, for example, from heavily polluted Heibei province to South Africa. Other production will be moved to Latin America, Eastern Europe and other parts of Asia.

First and foremost, the government is doing this to shift pollution out of China, but with a sluggish economy, local producers on the mainland have been hit hard owing to severe overcapacity. Investment has thus been in unproductive areas and maybe now will shift to what Chinese leaders want, more of a service economy, a la the U.S., where domestic consumption accounts for 70% of GDP vs. just 35% in China.

--Ireland’s National Competitiveness Council is urging the government to take action to prevent the return of another damaging property bubble, as reported by the Irish Independent.  House prices in Dublin, for example, have risen 24% in the past year, while across the country they are up 16%.

Recall, prices fell about 50% in the crash, but they’ve been roaring back the past two years.

--The current record paid for an apartment in New York City is $88 million, but as Crain’s New York Business reports, a number of penthouses are now on the market with price tags in excess of $100 million.

But it seems developers are not having an easy go of it at this range. A developer of a triplex penthouse in the Village that had been on the market for more than a year recently slashed the price $10.2 million to $39.2 million. It doesn’t help the de Blasio administration is calling for a ‘mansion tax’. 

Many developers appear to be pegging their hopes on an overall profitable development on the sale of just a single penthouse, breaking even on the rest, in essence.

--Last weekend, Switzerland voted down a law requiring the country’s central bank to hold at least 20% of its reserves in gold, 77% to 23%. So gold was supposed to tumble, which it did, briefly, but ended up about $15 on the week. 

--According to the Economist Intelligence Unit business-environment rankings, the best place in the world to do business is Singapore, followed by Switzerland and Australia. The United States is 7th. 

China is No. 50 (by contrast, Hong Kong is No. 4) and Russia No. 64 out of 82 countries. Last is Libya. Next to last Venezuela.

--The biggest shopping mall in Europe opened this week in Moscow with an orchestra belting out Ode to Joy as the ceremonial ribbon was cut. Well, like they say, timing is everything and the timing couldn’t be worse on this project. Construction had begun in 2012, when things looked much rosier.

The mall, Aviapark, at full capacity will have 80 restaurants, a 17-screen cinema, and more than 500 shops.

--Interesting note from the Australian art market. A Sydney attorney won a judgment of $118,000 from international auction house Christie’s over the sale of a fake Albert Tucker for $75,000 in 2000. The importance of the ruling is that Christie’s is paying 85% of the damages, the man who consigned the painting to Christies will pay 10%, and the attorney’s art adviser, 5%. So as Anne Davies writes in the Sydney Morning Herald, “The case clarifies the obligation of players in the art world, when they hold themselves out as experts, and the steps they are expected to take to establish the authenticity of the works they sell or recommend to clients.”

--Despite all the rainfall this week across California, “State water experts said it would take 150% of the average rainfall for California to recover from the current drought. That would mean a total of 75 inches of rain from Oct. 1, 2014, through Sept. 30, 2015, recorded at eight stations in the northern Sierra.” [Los Angeles Times]

To give you a better idea, Lake Oroville – the key reservoir of the California State Water Project, which delivers water from the north to the south of the state, took in 5 billion gallons over the last 10 days, through Tuesday, but that is still less than 1% of its capacity. [Overall, it is now at about 44% of its historical average.]

--As you were eating your Thanksgiving turkey, did you know that the bird has been exploding in size? As reported by the U.S. Department of Agriculture and The Economist, the average size of a turkey has swelled from 13.2 lbs. in 1929 to over 30 lbs. today. Good lord! The Economist estimates that if this trend continues, turkeys will be as big as humans in just 150 years! “Before 6,000 years are out, turkeys will dwarf the Earth itself.” Run for your lives! [Or continue to sleep with one eye open.]

Foreign Affairs

Iraq / Syria / Iran / ISIS: Why look who I’ve added to the pool this week...Iran. Over a month ago I noted how Iran’s Revolutionary Guard leader was leading the Iraqi Army in some of its battles around Baghdad and Anbar province. This week we learned Iran has been launching airstrikes against ISIS in Iraq, which U.S. Secretary of State John Kerry described as “positive.”

Well in terms of the fight against ISIS I’m sure it is positive. But this is highly complicated. For starters, Iran supports Bashar al-Assad in Syria and the United States isn’t supposed to be doing so, though our actions say otherwise.

But the bigger issue is how this impacts talks on Iran’s nuclear program. Remember those? You know, the talks that were extended yet again, this time until end of June?

I mean why not just hand Iraq to Iran, at least from Baghdad south, and then sign an agreement with Iran that allows it to keep its uranium enrichment capability and says nothing about its ballistic missile program? That’s where we’re headed. The United States could not have screwed this region up worse.

To praise Iran for anything is absurd. Better to keep your mouth shut, Mr. Secretary. Plus it was reported this week that Iranian hackers have penetrated dozens of international organizations, including six major oil companies and a U.S. defense contractor. As the Financial Times’ Sam Jones notes, the attacks “are primarily aimed at giving their perpetrators the ability to cause physical destruction.”

Oh yeah, Secretary Kerry. Iran is very helpful.

[Besides the U.S., hackers have hit firms and agencies in Canada, China, England, France, Germany, India, Israel and a slew of others, according to an 87-page report by Cylance, a California-based security services firm.]

Editorial / Washington Post

“Under pressure from allies, the Obama administration appears to be creeping toward a correction of its strategy in Syria. If so – and officials stress that President Obama has made no decisions and none is imminent – the change would be welcome. The president has been counting on moderate Syrian forces to fight the Islamic State while refusing to address the threat those forces face from the regime of Bashar al-Assad. That policy has prompted Turkey to withhold vital cooperation and, more seriously, has risked the destruction of U.S. allies, who have been losing territory to both the Assad regime and Islamic extremist groups....

“The Post’s Karen DeYoung reported that U.S. officials are discussing the creation of a de facto safe zone along the Turkish border, perhaps 20 miles deep and 100 miles long, that the rebels could hold with the help of U.S. and allied airstrikes and Turkish special forces. The border strip, which extends toward the besieged, Kurdish-held town of Kobane, is currently controlled by forces from the Islamic State. But the strategy would include deterring Syrian government aircraft from entering the area, shielding it from bombing raids.”

All together now...I wrote of this what is now well over two years ago.

The Post, continuing...

“Turkey, with whom senior U.S. officials have been negotiating the plan, could substantially step up its contribution to the war.”

Week in Review, 9/8/12:

“The killing continues, now estimated at anywhere from 23,000 to 26,000 in the civil war [Ed. now over 200,000]...while there is a true humanitarian catastrophe developing in Syria itself...I’ll just say this in terms of the political debate taking place in the U.S. One of the Democrats’ campaign slogans is ‘Bin Laden is dead and GM is alive.’ It needs to be pointed out that at least 20,000 of the Syrian deaths could have been prevented if the White House had taken coordinated humanitarian action with Turkey early on. Not a military invasion but just the establishment of safe havens and the Obama administration could have significantly reduced the human toll.

“But it’s too late now. We missed our opportunity. The situation is indeed far more dangerous....

“In Ankara, Turkish Prime Minister Erdogan accused the outside world of indifference on Syria, adding ‘The regime in Syria has now become a terrorist state.’”

It’s pathetic. It’s also why I’m right to be a cynic regarding anything going forward in this theater. We blew it. But it was about November 2012. I’ve said this countless times before, and I’ll be saying it many more in the future. It’s yet another example of how history will blister the Obama presidency.

Meanwhile, back to the here and now...ISIS is setting up training camps in eastern Libya, according to the head of U.S. Africa command, Gen. David Rodriguez. ISIS also appears to have gained further control of eastern Syria, bordering Iraq, as part of its self-declared state.

The Lebanese Army detained a former wife and son of IS leader Abu Bakr Al-Baghdadi as they crossed from Syria in recent days, though it’s unlikely she has any intelligence of value.

In Iraq, the Washington Post reported: “The Iraqi army has been paying salaries to at least 50,000 soldiers who don’t exist, Iraqi Prime Minister Haider al-Abadi said on Sunday, an indication of the level of corruption that permeates an institution that the United States has spent billions on equipping and arming.”

50,000 “ghost soldiers” would equate to about $380 million of our tax dollars, “though officials say that’s probably only a fraction of the true expense.” One member of parliament said it was probably triple that amount.

Finally, last Sunday, “60 Minutes” had a glowing report on the United Nations’ food aid program that was helping to feed 1.7 million Syrian refugees. What drove me up the wall is that there was nothing in the report about how the United States, with early action, could have prevented there ever being close to 1.7 million refugees.

So what happened? On Monday the U.N. suspended the program due to a severe cash shortfall. 

I have said for years the United States is lying when it comes to the amount of aid it is giving in places like Syria. If this was such a great program, as “60 Minutes” wanted you to believe, why isn’t the Obama administration and Congress funding it?

The New York Times reported in writing of the suspension that the U.S. gave the agency $125 million last week, but the agency said it needed a further $64 million to support its efforts in December. Suffice it to say the same Times report failed to mention the “60 Minutes” story.

Russia: Russian President Vladimir Putin gave his annual state of the union speech on Thursday and accused Russia’s enemies of attempting to carve it up and destroy its economy by punishing it for its growing strength.

In the process, Putin praised the Russian people for their resilience and accused the West of “pure cynicism” in Ukraine, while trumpeting the annexation of Crimea. He added that economic sanctions are forcing Russians to do more to develop their own unique economy.

In a nutshell, Putin showed no signs of turning back from the policies of 2014, saying Russia’s “enemies of yesterday” wished on it the same fate as Yugoslavia in the 1990s.

“There is no doubt they would have loved to see the Yugoslavia scenario of collapse and dismemberment for us – with all the tragic consequences it would have for the peoples of Russia. This has not happened. We did not allow it,” he said.

Putin said sanctions would have been imposed on Russia even without Ukraine.

“I am certain that if all this did not take place...they would come up with another reason to contain Russia’s growing capabilities,” he said. “Whenever anyone thinks Russia has become strong, they resort to this instrument.”

Back to Crimea, Putin said it held sacred meaning for Russians, forever, while Russia was justified in intervening in Ukraine due to the “coup” in Kiev.

“For our country, for our people, this event has a special meaning because our people live in Crimea and the territory itself is strategically important. It was here in Crimea in ancient Khersones or Kosun as the chroniclers called it, that Count Vladimir was baptized [in the 10th century] to then baptize the rest of Rus.’

Putin added the historic landmarks of Crimea have a sacred meaning for Russians as important “as the Temple Mount in Jerusalem for those who profess Islam and Judaism.”

Regarding Ukraine in general, Putin said: “We see today that the tragedy in its southeast completely proves the righteousness of our position.”

On the issue of the economy and the collapsing ruble, Putin promised amnesty for repatriated capital to the country, saying Russians who brought money back would face no questions on how they earned it. [Timothy Heritage and Alexei Anishchuk / Reuters; Sergei L. Loiko / Los Angeles Times]

In other matters....

The Chechen capital of Grozny experienced the worst violence in months as a battle between Islamist militants and government security forces left at least 20 dead, embarrassing Putin hours before his speech. Some speculated the attack was carried out by fighters linked to Islamic State. Chechen fighters have long said they would respond to Putin’s support of Syrian President Assad.

Chechen leader Ramzan Kadyrov, the Kremlin’s lackey there, actually still attended Putin’s address in Moscow, hours after the fighting started. “I flew home, organized a special operation, killed the devils, held a meeting, gathered the staff needed to restore the damaged building, and made it back in time to listen to the address of our national leader.” [Andrew E. Kramer and Neil MacFarquhar / New York Times]

That’s classic Kadyrov, a devil in his own right. 

Regarding Russia’s economic plight not just from sanctions but from falling oil prices, the IMF’s Christine Lagarde said the drop is a “significant threat” that “is adding to their fragility and their vulnerability and they know it. It remains to be seen what the reaction will be.”

Oil and gas account for 50% of government revenues.

Russia, and Putin, suffered a big defeat this week when they were forced to scrap the South Stream gas pipeline that would have established the country’s energy dominance over southeastern Europe. But with Russia facing increased pressure from the European Union and the United States, Putin was forced to redirect the pipeline to Turkey.

This shocked and angered the likes of Serbia, Hungary and Bulgaria, who were given no warning and you can imagine how shares in companies set to benefit plummeted on the news.

Brussels has long feared the pipeline would cement Gazprom’s domination of the European gas market. The European Commission demanded other suppliers be given access to South Stream, arguing Gazprom violated EU competition rules.

But the above-noted countries saw South Stream as helping them gain energy independence, along with transit fees.

Finally, last Sunday, Moldovans voted to retain their pro-Western government despite attempts by Russia to install candidates seeking to move the tiny nation back into Russia’s orbit. So barring a move by Putin, Moldovans will continue on a path that will one day see it integrated into the European Union. The vote was close, 44% for the Western coalition, 39% for the Kremlin’s favorites. Will Putin respect it?

Israel: Prime Minister Benjamin Netanyahu called for a new election, March 17, after his ruling coalition collapsed and two centrist cabinet ministers were fired.

Netanyahu said he was frustrated at nearly two years of coalition politics. “Against the serious challenges facing the state of Israel – security, economic and regional – there is a need for a large and experienced ruling party. The bill I discussed last week that would enshrine Israel’s status as the Jewish state in law, is at the heart of the crisis.

Analysts say should Netanyahu consolidate the right, it would reduce the chances of resuming the Middle East peace process, not that this is ever going anywhere in our lifetime.

But there are early signs the prime minister may have miscalculated, with a poll for The Jerusalem Post showing 60% do not want Netanyahu to remain in power, just 34% saying yes.

When matched up against various individuals such as Moshe Kahlon and Gideon Sa’ar, both defeat the prime minister.

Sa’ar, a former interior minister, is thinking of running against Netanyahu in the January 6 Likud leadership race.

Netanyahu did defeat other party leaders such as Naftali Bennett by 12 points, as well as Avigdor Lieberman by 28.

64% of the Panels poll said the country’s socioeconomic situation had gotten worse under the outgoing government. The two key issues for voters are the economy and security.

[A poll for Haaretz has Netanyahu’s approval rating at 38%, down from 77% amid hostilities in Gaza in early August.]

Separately, Israel suffered an oil spill near Eilat that flooded 200 acres of a desert nature preserve in southern Israel. The accident happened during maintenance on a pipeline. If there is any good news in this it is that the oil has pooled in ravines and not impacted the preserve’s rare deer. That said it is one of Israel’s worst environmental disasters in its history.

Egypt: Former President Hosni Mubarak was cleared of charges in the deaths of civilians during the 2011 uprising that toppled him. A number of demonstrators were killed in Tahrir Square after the ruling was made public.

China: Beijing said it needed more time to dissect President Obama’s statement this week that he was concerned about the speed and “dangers” of President Xi Jinping’s rapid consolidation of personal power. Obama told the Business Roundtable, a group of U.S. CEOs, that Xi had won respect in the short time since he had taken over.

“He has consolidated power faster and more comprehensively than probably anybody since Deng Xiaoping,” said Obama, referring to the man who led China from 1978 to 1992.

“And everybody’s been impressed by his...clout inside of China after only a year and a half or two years.”

But then Obama said there were negatives to this.

“There are dangers...On issues of human rights, on issues of clamping down on dissent. He taps into a nationalism that worries his neighbors.

“On the other hand, I think they have a very strong interest in maintaining good relations with the United States. And my visit was a demonstration of their interest in managing this relationship effectively.”

The United States should be “cautious and clear-eyed” about its relationship with China.

Some Chinese academics told the South China Morning Post that Obama’s comments were “careless.”

Separately, Beijing arrested ex-security chief Zhou Yongkang, the most senior Chinese official to be investigated for corruption, and expelled him from the Communist Party. Before retiring two years ago, Mr. Zhou had been the head of China’s vast internal security apparatus. Many of his former associates and relatives also face corruption probes.

In Hong Kong, student protest leaders are deciding in the next few days whether to abandon their street camps (likely) to pursue a different strategy. Said Yvonne Leung, a leader of the Federation of Students, “We’ve tried both the soft and hard way, we’ve negotiated with them, and we’ve tried to blockade the government headquarters. But the government has been unwavering, so we have to make a decision.”

There was some violence when police cleared one protest camp and afterwards three of the protest leaders surrendered to police.

And a note on Taiwan. The ruling Kuomintang (KMT) party, which advocates stronger ties with China, is struggling after a poor showing in local elections last weekend. President Ma formally resigned as chairman of the KMT to take responsibility for the election results.

The main opposition Democratic Progressive Party, the big winner, is viewed with distrust by Beijing. The DPP feels the KMT has been signing too many agreements with the mainland and seeks to “win Taiwan back step by step,” as stated by party chair Tsai Ing-wen, who lost the 2012 presidential election to Mr. Ma.

This all bears watching. The DPP is in essence aligned with the Hong Kong protesters. Beijing cannot be happy and no doubt it is dusting off its invasion/takeover plans for Taipei.

Kenya: Al-Shabab struck again. A week ago the Islamist terrorist group killed 28 in Kenya who were riding a bus and then when stopped, couldn’t recite passages from the Koran. This week, 36 quarry workers near the Somali border were killed while sleeping in tents, with non-Muslim workers first separated from the Muslims, the former then being shot dead.

Kenyan President Uhuru Kenyatta said, “This is a war against Kenya and Kenyans....The time has come for each and every one of us to decide and choose – are you on the side of an open, free, democratic Kenya...or do you stand with repressive, intolerant extremists?”

Yemen: The U.S. revealed it tried to rescue U.K.-born American hostage Luke Somers, who is being held in Yemen by al-Qaeda, but the National Security Council said this week, “Regrettably, Luke was not present,” though hostages of other nationalities were rescued. Somers appeared in a video the other day, saying his life is in danger.

Nigeria: More than one million Nigerians have fled Boko Haram’s reign of terror. An attack on a mosque in north Nigeria’s biggest city of Kano killed more than 100 last weekend. These numbers just become numbing after a while.

France: Former president Nicolas Sarkozy won the leadership of his center-right UMP party, part of his plan to return to the presidency in 2017. But Sarkozy will still have to win his party’s nomination in 2016. Meanwhile a recent poll has National Front leader Marine Le Pen out in front with 30%.

Venezuela: Opposition leader Maria Corina Machado, a former congresswoman, was charged with leading a plot to assassinate President Nicolas Maduro. Machado said the accusations were intended to silence her and without merit. She wasn’t taken into custody but is barred from leaving the country.

Another opposition leader, Leopoldo Lopez, has been jailed since February as part of the government’s attempt to stifle the opposition.

I have been shocked Maduro has survived this long and wasn’t taken out in a coup this year.

Mexico: President Enrique Pena Nieto’s job approval has hit an all-time low of 39%, vs. the 70% he garnered when he was inaugurated. This is the lowest approval rating of any Mexican leader in nearly two decades. [Los Angeles Times]

Random Musings

--Pope Francis traveled to Turkey, a risky trip to a nation about 98% Muslim. Among the things he said, including to reporters on his flight home:

“I told (Turkish President Erdogan) that it would be beautiful if all Islamic leaders, whether they are political, religious or academic leaders, would speak out clearly and condemn (terrorism) because this would help the majority of Muslim people.”

Francis more than once in his trip condemned Islamic State: “They are driving us (Christians) out of the Middle East,” and that ISIS is committing a “profoundly grave sin against God.”

“Fanaticism and fundamentalism, as well as irrational fears, which foster misunderstanding and discrimination, need to be countered by the solidarity of all believers,” the Pope said in televised remarks at President Erdogan’s way over the top new palace in Ankara.

Francis called for the people and governments of the Middle East to “reverse the trend” of violent conflict.

“In Syria and Iraq, particularly, terrorist violence shows no signs of abating,” the Pope said, adding: “In reaffirming that it is licit, while always respecting the international law, to stop an unjust aggressor, I wish to reiterate, moreover, that the problem cannot be resolved solely through a military response.”

--Ashton Carter is President Obama’s choice to take over from Chuck Hagel atop the Pentagon. He is well-respected on both sides of the aisle and should sail through his confirmation hearings, however, this will also give the Senate a chance to pick apart President Obama’s foreign policy, and on much of this, Carter may be left going “Ah...ah...ah...”

Carter is known as a ‘hawk’ but he’ll be hamstrung.
Benny Avni / New York Post:

“When (Carter) takes over as defense secretary, should we expect a sharp policy turn? A more muscular U.S. response to North Korea? Greater toughness on Iran, Syria, Afghanistan, Iraq?

“Well, Carter is said to have more hawkish views on all of these hot spots than Obama – but peace mongers can relax.

“Even with Attila the Hun running the Pentagon, today’s Washington would find some pretext to appease dangerous enemies rather than send them exploding messages....

“What if Carter, as secretary, actually comes up with ballsier ideas than Obama’s see-no-evil ones – like, say, an actual ‘all options’ plan for hitting Iran’s nuclear-weapons program?

“Well, the president won’t listen.

“Bob Gates, Leon Panetta and Hagel all found that their advice on questions of war and peace went unheeded by a White House bent on diplomacy at all costs, with no military muscle to back it up.

“Obama wants a defense secretary who’ll bend the Pentagon to his will, not a contrarian who brings up inconvenient truths. Speak those truths too publicly, and like Hagel you’ll be shown the door.

“So our foes needn’t worry: We’re still at least two years away from any improvement in America’s deteriorating stance around the world.”

--In a CNN/ORC poll released Tuesday asking Republicans about their preferred presidential nominee in 2016, Ben Carson finished second behind Mitt Romney. Granted, Carson was at just 10%, but that was more than Jeb Bush, Chris Christie and Mike Huckabee. Pretty remarkable. [Romney polled 20%.]

But, if Romney is removed, Bush gets the first spot, though only 3 points ahead of Carson, four ahead of Huckabee.

Carson, an African-American in case you’ve been living under a rock the last two years, criticized President Obama for contributing to poor race relations.

“I actually believe that things were better before this president was elected. And I think that things have gotten worse because of his unusual emphasis on race.”

On the Democratic side of the CNN/ORC poll, Hillary Clinton takes 65%, Vice President Biden 10% and Sen. Elizabeth Warren 9%.

--As for Jeb Bush, addressing a Wall Street Journal CEO Council annual meeting the other day, he said his priorities included an “all-in” energy policy; a reduction in business regulations; a simpler tax code; an “economically driven” overhaul of the immigration system; and a “radical transformation” of the education system. [Beth Reinhard / Wall Street Journal]

Bush said he will make up his mind shortly on whether or not to run in 2016 and that his decision will rest on whether he has “the skills to do it in a way that tries to lift people’s spirits and not get sucked into the vortex.”

--Meanwhile, in yet another example of just how pathetic some of our politicians are, New Jersey Gov. Chris Christie vetoed a bill that would have banned the practice of confining pregnant pigs in crates, so as not to upset interests in Iowa, the nation’s leading state for pork production that, err, you know, happens to be the site of the first presidential caucus.

Of course there aren’t a lot of pig farmers in my home state, but there are in Iowa.

But then word came that an interim report by the joint legislative panel investigating Bridgegate has not as yet been able to determine if Gov. Christie had any direct involvement, while suggesting his former aide, Bridget Anne Kelly, may have violated state law.

The report states: “At present, there is no conclusive evidence as to whether Governor Chris Christie was or was not aware of the lane closures either in advance of their implementation or contemporaneously as they were occurring.”

The report adds that because “several critical witnesses” have not testified, the record of the incident “remains incomplete and leaves several important questions unanswered.”

Republicans on the committee have been highly critical of the process and wonder why there was “a rush” to issue something, as one Republican member put it.

For her part, the report says Kelly may have been guilty of witness tampering in encouraging another aide to delete emails.

A separate criminal investigation continues. [Steve Strunsky / NJ Advance Media]

--I agree with many fellow conservatives that based on the evidence we all saw, the extensive video, the New York City policeman should have been indicted in the death of Eric Garner.    I support the NYPD and have expressed my admiration for union president Patrick Lynch, but I can’t agree with him in this instance, except I do agree with his statement that Mayor de Blasio “threw (police) under the bus” with his remarks during the week.

So like the rest of you, I’ll just wait to see what the Department of Justice does with its investigation, though I expect beforehand that NYPD Commissioner William Bratton will take action against the police officer, like booting him off the force, which he would be in his rights to do.

The timing of this grand jury decision on the heels of the Ferguson case obviously could not have been worse and it’s a shame, and tragedy, the two, totally disparate, cases are being conflated.

For the record, I do have to note that President Obama, while not directly commenting on the Garner case, did say the grand jury decision spoke to “the concern on the part of too many minority communities that law enforcement is not working with them and dealing with them in a fair way.”

As for Mayor de Blasio and Reverend Al...Geoff Earle / New York Post:

“Bill de Blasio and ‘Co-Mayor’ Al Sharpton are joined at the hip in New York, so why not in Washington?

“De Blasio and the race-baiting Rev met with President Obama and other clergy, cops and pols Monday about ‘simmering’ tensions between the police and minorities across the United States.

“Sharpton, a White House regular under Obama, got a prime seat at the table – directly facing the president – during the two-hour session at the Eisenhower Office Building.

“Hizzoner, meanwhile, got a seat further away from Obama....

“Many critics...have ridiculed de Blasio for giving the architect of the infamous Tawana Brawley hoax undue sway over the NYPD.

“Sharpton’s police power play began over the summer at an event at City Hall dealing with the chokehold death of Eric Garner, where he humiliated de Blasio and NYPD Commissioner Bill Bratton by lecturing them on the department’s supposed ills.

“ ‘If Dante wasn’t your son, he’d be a candidate for a chokehold. And we’ve got to deal with that reality,’ Sharpton said at the time, referring to Hizzoner’s biracial son.

“At the Monday meeting, Dante’s name came up again – this time from Obama.

“ ‘The president referred to when he met my son, Dante. Well, I can tell you I think every night about my son, making sure he comes home safely...We have to make sure all our children are safe, living in justice,’ de Blasio said....

“Participants said Obama didn’t state an opinion on the grand jury’s failure to indict Wilson.

“Obama said the situation was emblematic of a larger issue.

“ ‘Ferguson laid bare a problem that is not unique to St. Louis, and that is a simmering distrust that exists between too many police departments and too many communities of color,’ he said.”

But as the New York Post editorial board noted:

“(President Obama should) never again have the Rev. Al Sharpton at the White House. In American life today, it’s hard to think of any figure more opposed to the idea of respecting a grand jury’s considered decision than our Rev. Al.

“Certainly he showed that in Ferguson, immediately dismissing the grand jury’s decision because it wasn’t the indictment he’d demanded.”

Meanwhile, according to an ABC News/Washington Post poll, 48% of Americans approve of the Ferguson grand jury’s action, 45% disapprove.

58% of whites approve of the grand jury action, compared with 9% of blacks and 32% of Hispanics.

--Separately, the Justice Department accused the Cleveland police department of using excessive and deadly force against citizens in violation of their constitutional rights. Justice and the city agreed to establish an independent monitor to oversee changes in the department.

--NBA legend Charles Barkley, who likes to sound off on topics far from the basketball court, lashed out on the Ferguson verdict and aftermath on a Philadelphia sports radio station, 97.5. In part: ”We have to be really careful with the cops, because if it wasn’t for the cops we would be living in the Wild, Wild West in our neighborhoods. We can’t pick out certain incidents that don’t go our way and act like the cops are all bad.... Do you know how bad some of these neighborhoods would be if it wasn’t for the cops?”

--In the interest of being ‘fair and balanced’ I offer this from Michael Eric Dyson in his New York Times op-ed.

“Mr. Obama spoke twice in the aftermath of the Ferguson grand jury’s decision. He spoke Monday night about America as a nation of laws and said that we must respect the jury’s conclusion, even if we don’t agree with it, and make progress by working together – not by throwing bottles, smashing car windows or using anger as an excuse to vandalize property or hurt anyone.

“On Tuesday, the president doubled down on his indictment of ‘criminal acts’ and declared,’ I do not have any sympathy’ for those who destroy ‘your own communities. While he avoided saying so, it was clear that his remarks were directed at the black people who looted and rioted in Ferguson. But their criminal activity is the effect of going unrecognized by the state for decades, a crime in itself. As for the plague of white cops who kill unarmed black youth, the facts of which are tediously and sickeningly repetitive and impose a psychological tariff on black minds, the president was vague, halting and sincerely noncommittal....

“Mr. Obama’s treacherous balancing act between white and black, left and right, obscures who has held the power for the longest amount of time to make things the way they are.”

Actually, Dyson’s diatribe gets worse. But he did once write a good book on Marvin Gaye.

--Interesting crime stats. “In 1991 Newark and New York City had roughly the same murder rate: 32 and 29 per 100,000 respectively. But by last year New York’s rate had fallen to four and Newark’s had jumped to 40, according to the latest data published on Nov. 14 by the FBI.”

New York City was under Mayors Rudy Giuliani and Michael Bloomberg during the time of the huge decline. Newark had charlatans or lightweights.

--Prior to the Eric Garner grand jury verdict, Mayor de Blasio touted the fact that major crime in Gotham continued to fall in the first 11 months of 2014, with homicides down 6.8%.

During the four-month period between August and November, the city recorded the lowest number of homicides in that period since 1993. But, overall, shooting incidents were up 4.5%

--George Will / Washington Post

“In 2010, Plymouth, Conn., was awarded $430,000 for widening sidewalks and related matters near two schools. This money was a portion of the $612 million that Congress had authorized for five years of the Federal Safe Routes to School program, which is intended to fight childhood obesity by encouraging children to burn calories by walking or biking to school. Really.

“Fortunately, Plymouth is near Sharon, Conn., home of the Buckley family, whose members, when their gimlet eyes notice nonsense, become elegantly polemical. So Congress’ Safe Routes silliness inadvertently did something excellent. It helped to provoke James Buckley to write a slender book that, if heeded, would substantially improve American governance.”

I bring this particular piece by Mr. Will up because James Buckley was a fave of mine growing up. I always thought he was underrated. He’s now 91, of course the brother of the late Bill Buckley. Just sounds like a good stocking stuff: “Saving Congress from Itself: Emancipating the States and Empowering Their People.”

So as Will writes: “Buckley proposes ending federal grants to state and local governments, a category of spending that has ballooned from $24.1 billion in 1970 to an estimated $640.8 billion in fiscal 2015. Devising such spending, Buckley says, absorbs much of Congress’ time, diverting it from ‘core national responsibilities’ and toward concerns that are properly – he says constitutionally – the concerns of the states.”

But the courts have ruled, through the “general welfare” clause, that Congress can essentially spend on anything.

So when Congress sends money to the states, it’s seen as ‘free money,’ but as Will notes: “Free” money can be expensive. Washington used $455 million to induce Connecticut to provide the remaining $112 million needed for an unneeded 9.4-mile busway linking New Britain and Hartford, which were already linked by bus service – and $112 million was diverted from more crucial state needs. Buckley explains:

“Anyone who has ever eaten lunch on an expense account will understand the perverse incentives generated when a person is given access to funds that may only be used for a particular purpose... Organizations, government included, will act in the same way. When someone else picks up the check, they consume goods and services inefficiently.”

--Some good news. I have long written of the incidences of deadly infections and ailments that kill hundreds of thousands a year in our nation’s hospitals and according to the Department of Health and Human Services, the number of those dying from such ailments fell 17% between 2010 and 2013; as many as 50,000 fewer people dying while hospitalized over this period. [Wall Street Journal]

--Lia Eustachewich / New York Post:

“Kennedy Airport just keeps on earning its reputation as one of the worst airports in the world.

“Seven luggage handlers at JFK Airport allegedly snatched up more than $20,000 in iPads, MacBooks, laptops and even a pair of two-carat diamond gold earrings from travelers’ checked bags, authorities said.” The items were sold to a pawn shop.

The employees worked at two terminals which have many overseas flights so it’s possible unknowing foreigners were packing these items in their checked luggage and not keeping them in their hand luggage, but while the article goes on to say the baggage handlers themselves were true idiots, which is why they were caught, the passengers were hardly better.

People, they open your luggage! That’s why you can’t lock it anymore.

--The Los Angeles Times’ Hugo Martin reported on an issue at Los Angeles International Airport, which is similar to other airports around the country.

LAX added a bunch of classy restaurants at the Tom Bradley International Terminal, including a huge steak house, III Forks. One problem. The restaurant hands out “serrated steel knives to passengers who had already passed screening checkpoints before boarding a plane.”

New York newspapers have raised the same issue as a result of the opening of some new restaurants at JFK, where officials have now banned such knives.

So at LAX, numbers are now etched on the knives and guests are asked to show identification and boarding passes.

But now patrons have stopped asking for steak knives because it’s such a hassle. Instead they have to eat their steak with a butter knife.

--I am proud I wrote nothing on the University of Virginia alleged gang rape case, as reported in Rolling Stone. Nor did I tweet anything on this one. It was all about my dictum ‘wait 24 hours.’ 

We learned on Friday that Rolling Stone now admits it has doubts about the veracity of the source of the story, the supposed victim. And it turns out the writer of the story, “A Rape on Campus,” never contacted the alleged rapists for their side of what happened.

The Washington Post also ran a story on Friday, poking holes in the woman’s tale.

But just as in the Duke lacrosse team tragedy, many of the innocent have already been destroyed, especially through social media. And some of the statements coming out of Virginia infuriate me. “Well, this doesn’t mean it’s not a big issue on this campus or around the country.”

But you jumped to conclusions on this one, Ms. Jones!

Our society sucks. And it grows worse literally by the hour.

--It has been nine years since Florida was last hit by a hurricane, a modern-day record and great for the Florida Hurricane Catastrophe Fund, which is so well-funded, businesses and residents won’t have to add to it after the end of next year.

But as Spencer Jakab wrote this week in the Wall Street Journal, the fund would be totally depleted by a 100-year storm, and, you know, it’s been nine years...oh well, 91 to go, right? Is that how these things work?

--Professor Stephen Hawking has warned of doom and gloom on many an occasion and now he is warning artificial intelligence “could outsmart us all” and that there is a need to establish colonies on other planets to avoid ultimately a “near-certainty” of technological catastrophe.

So Hawking joins the likes of Elon Musk who have echoed similar warnings in recent months. Hawking says AI could become “a real danger in the not-too-distant future” if it became capable of designing improvements to itself.

--Finally, on a particularly happy note, and related to the above, I have to admit I was super pumped, and nervous, watching the Orion spacecraft’s successful launch this morning and then seeing the spectacular return of the capsule 4 ½ hours later. Americans needed a shot in the arm and NASA provided it.

I have but one real wish in my life (of the big picture variety, not the selfish kind) and that is to be alive long enough to see us land a man on Mars.

But that’s probably about 22 years off. It’s going to be close, sports fans. 
---

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

God bless America.
---

Gold closed at $1190
Oil $65.84

Returns for the period 12/1/14-12/5/14

Dow Jones +0.7% [17958...new record]
S&P 500 +0.4 [2075...new record]
S&P MidCap +0.1%
Russell 2000 +0.8%
Nasdaq -0.2%

Returns for the period 1/1/14-12/5/14

Dow Jones +8.3%
S&P 500 +12.3%
S&P MidCap +7.6%
Russell 2000 +1.6%
Nasdaq +14.5%

Bulls 53.4
Bears 13.9 [Source: Investors Intelligence]

Dr. Bortrum has a new column posted.

My next review will be from Kiawah, S.C. and may be slightly delayed.

Happy Birthday, Mom!

Brian Trumbore