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04/11/2015

For the week 4/6-4/10

[Posted 12:00 AM ET]

Edition 835

The Iran Framework...round two

The more one looks at it, the more the draft agreement between the P5+1 and Iran looks like an unmitigated disaster. I hate to beat a dead horse, but since 2011, I have noted that all you needed to know about Iran and their intentions was one word...Parchin. In fact if you plug ‘Parchin’ into my search engine you’ll see I’ve mentioned it like 38 times, and once going back to 2006 in my “Hot Spots” column.

Parchin is the disputed military base that Iran has denied International Atomic Energy Agency (IAEA) inspectors access to all these years and for good reason. It is suspected of being the site where Iran tested nuclear trigger devices. The main area (it’s a huge base) where the testing is suspected of having taken place has long been paved over but the Iranians still won’t let the inspectors see it.

Nor are they about to anytime soon and that’s what makes the nuclear framework even more troubling. There are no provisions for inspections of suspected military sites... none. It’s why I’ve been saying for years that the Obama administration has been lying to the American public and it’s been getting away with it with its claims Iran has been abiding by the interim agreement. It’s worse now because of the deal, but it’s appalling that our president and his lackeys treat us like chumps. Of course most Americans haven’t a clue but enough of us do.

There can be no deal without rigorous inspections... period. But this is indeed where we are headed. 

For their part, the Iranians have played this all brilliantly.

Supreme Leader Ayatollah Ali Khamenei said on Thursday he neither supports nor opposes the nuclear framework, but that all economic sanctions need to be lifted immediately upon any final agreement.

“All sanctions should be removed when the deal is signed,” he said, according to Reuters. “If the sanctions removal depends on other processes, then why did we start the negotiations?”

In a televised speech marking Iran’s National Day of Nuclear Technology, Khamenei also ruled out any “extraordinary supervision measures” over Iran’s nuclear activities and said that “Iran’s military sites cannot be inspected under the excuse of nuclear supervision.”

Khamenei warned of Washington’s “devilish” intentions. Reuters reports the ayatollah as saying: “I neither support nor oppose the deal. Everything is in the details. It may be that the deceptive other side wants to restrict us in the details.”

Khamenei needn’t worry about President Obama’s intentions. He’ll give you what you want, Ali.

On Wednesday, Iranian Defense Minister Major General Hossein Dehqan also said there has been “no agreement on inspecting Iran’s military facilities and no visits will be allowed.”

As the Tehran Times reported, “Dehqan underlined that access to the country’s military centers is among the Islamic Republic’s red lines.”

Earlier, Iranian President Hassan Rouhani, in agreeing with his boss, said economic sanctions “must be lifted immediately” once a final nuclear deal is implemented.

“We will not sign any agreement unless all economic sanctions are totally lifted on the first day of the implementation of the deal,” Rouhani said. [Washington Post, Reuters, Financial Times]

The Obama administration insists sanctions must be phased out gradually as Iran takes steps to comply with any accord.

So for the historic record, following is some of what President Obama told the New York Times’ Thomas L. Friedman last Saturday in an important interview.

Obama said America needs to have the self-confidence to take some calculated risks to open important new possibilities – like trying to forge the Iran deal.

“We are powerful enough to be able to test these propositions without putting ourselves at risk. And that’s the thing...people don’t seem to understand,” the president said. ‘You take a country like Cuba. For us to test the possibility that engagement leads to a better outcome for the Cuban people, there aren’t that many risks for us. It’s a tiny little country. It’s not one that threatens our core security interests, and so [there’s no reason not] to test the proposition. And if it turns out that it doesn’t lead to better outcomes, we can adjust our policies. The same is true with respect to Iran, a larger country, a dangerous country, one that has engaged in activities that resulted in the death of U.S. citizens, but the truth of the matter is: Iran’s defense budget is $30 billion. Our defense budget is closer to $600 billion. Iran understands that they cannot fight us. ...You asked about an Obama doctrine. The doctrine is: We will engage, but we preserve all our capabilities.”

The notion that Iran is undeterrable – “it’s simply not the case,” he added. “And so for us to say, ‘Let’s try’ – understanding that we’re preserving all our options, that we’re not naïve – but if in fact we can resolve these issues diplomatically, we are more likely to be safe, more likely to be secure, in a better position to protect our allies, and who knows? Iran may change. If it doesn’t, our deterrence capabilities, our military superiority stays in place. ...We’re not relinquishing our capacity to defend ourselves or our allies. In that situation, why wouldn’t we test it?”

Regarding criticism from Israel and Prime Minister Benjamin Netanyahu: “What I would say to them is that not only am I absolutely committed to making sure that they maintain their qualitative military edge, and that they can deter any potential future attacks, but what I’m willing to do is to make the kinds of commitments that would give everybody in the neighborhood, including Iran, a clarity that if Israel were to be attacked by any state, that we would stand by them. And that, I think, should be...sufficient to take advantage of this once-in-a-lifetime opportunity to see whether or not we can at least take the nuclear issue off the table.”

On Congress’ role, Obama said he insists on preserving the presidential prerogative to enter into binding agreements with foreign powers without congressional approval, though he added: “I do think that [Tennessee Republican] Senator Corker, the head of the Foreign Relations Committee, is somebody who is sincerely concerned about this issue and is a good and decent man, and my hope is that we can find something that allows Congress to express itself but does not encroach on traditional president prerogatives – and ensures that, if in fact we get a good deal, that we can go ahead and implement it.” 

On inspections: “(If) we can have vigorous inspections, unprecedented, and we know at every point along their nuclear chain exactly what they’re doing and that lasts for 20 years, and for the first 10 years their program is not just frozen but effectively rolled back to a larger degree, and we know that even if they wanted to cheat we would have at least a year, which is about three times longer than we’d have right now, and we would have insights into their programs that we’ve never had before, in that circumstance, the notion that we wouldn’t take that deal right now and that would not be in Israel’s interest is simply incorrect.”

Because, Obama argues, “the one thing that changes the equation is when these countries get a nuclear weapon. ...Witness North Korea, which is a problem state that is rendered a lot more dangerous because of their nuclear program. If we can prevent that from happening anyplace else in the world, that’s something where it’s worth taking some risks.”

Friedman asked the president, ‘Do we have the right to insist on a facility being examined by international inspectors if we suspect cheating?’

Obama: “(What) we have agreed to is that we will be able to inspect and verify what’s happening along the entire nuclear chain from the uranium mines all the way through to the final facilities like Natanz. What that means is that we’re not just going to have a bunch of folks posted at two or three or five sites. We are going to be able to see what they’re doing across the board, and in fact, if they now wanted to initiate a covert program that was designed to produce a nuclear weapon, they’d have to create a whole different supply chain. That’s point number one. Point number two, we’re actually going to be setting up a procurement committee that examines what they’re importing, what they’re bringing in that they might claim as dual-use, to determine whether or not what they’re using is something that would be appropriate for a peaceful nuclear program versus a weapons program. And number three, what we’re going to be doing is setting up a mechanism whereby, yes, IAEA inspectors can go anyplace.”

Anywhere in Iran? Friedman asked.

Obama: “That we suspect. Obviously, a request will have to be made. Iran could object, but what we have done is to try to design a mechanism whereby once those objections are heard, that it is not a final veto that Iran has, but in fact some sort of international mechanism will be in place that makes a fair assessment as to whether there should be an inspection, and if they determine it should be, that’s the tiebreaker, not Iran saying, ‘No, you can’t come here.’ So over all, what we’re seeing is not just the additional protocols that IAEA has imposed on countries that are suspected of in the past having had problematic nuclear programs, we’re going even beyond that, and Iran will be subject to the kinds of inspections and verification mechanisms that have never been put in place before.”

Mr. Obama is both hopelessly naïve and deceitful. Again, he’s lying to the American people.

Appearing on one of the Sunday talk shows, Benjamin Netanyahu said of the framework deal, “Not a single centrifuge is destroyed. Not a single nuclear facility is shut down, including the underground facilities that they build illicitly. Thousands of centrifuges will keep spinning, enriching uranium. That’s a very bad deal.”

Republican Senator Lindsey Graham of South Carolina said it was “probably the best deal that Barack Obama could get with the Iranians because the Iranians don’t fear” him.

The Senate is to start voting on the Iran deal April 14, though some Democrats who were once siding with Republicans appear to be backing down in the face of White House pressure. 67 votes are needed to override a presidential veto and I’m guessing the number of supporters has declined from a projected 65 to 60.

Michael Gerson / Washington Post

“For all the praise Obama is claiming, the Iranian regime counts the most remarkable achievement. It has engaged in nuclear negotiations with the United States while actively engaged in a regional conflict against American friends and proxies. Since Obama has prioritized the nuclear negotiations – the only alternative to which, he constantly reminds us, is war – other concessions have seemed small in comparison. Opposition to Bashar al-Assad has become muted, even as he crosses every blood-red line of brutality, to avoid disrupting relations with his Iranian patron. Human rights issues within Iran have become secondary to avoid giving offense. Obama has sometimes seemed more tolerant and empathetic toward Iranian positions than those of allies and partners such as Israel.

“Will Iran continue to hold U.S. policy in the Middle East hostage – causing the United States to hush its reactions to Iranian aggression for fear the regime will walk out of a nuclear deal? This is precisely what American friends in the region fear. The real test – for allies and for members of Congress – will be whether Obama can accompany a final nuclear agreement with a much more aggressive resistance to Iranian ambitions in places such as Syria, Iraq and Yemen. Otherwise, Iran will simply use the wealth that comes from lifted sanctions to cause more havoc.

“If Iran is treated as a normal nation simply because of its nuclear cooperation – if it interprets a deal as a green light for its actions in the region – neither our traditional allies nor members of Congress will sustain Obama’s nuclear agreement in the long term. And the support of Congress could be dramatically helpful in surrounding a deal with snapback sanctions and the pre-authorization of military force in the event of an Iranian breach.

“To secure his nuclear deal with Iran, Obama must show resistance to Iranian aggression across the range of our relationship.”

Reuel Marc Gerecht and Mark Dubowitz / Wall Street Journal

“The inspections regime in Iran envisioned by the Obama administration will not even come close to the intrusiveness of the failed inspections in Iraq. Worse, once sanctions are lifted and billions of dollars of Iranian trade starts to flow again to European and Asian companies, the U.S. likely will be dealing with a U.N. even more politically divided, and more incapable of action, than in the days of Saddam and the run-up to the Iraq war in 2003....

“The nuclear deal with Iran will now obviously go through without the clerical regime having to answer all of the questions that the IAEA still has about the ‘possible military dimensions,’ or PMDs, of Iran’s nuclear program. It is perverse to think that the IAEA, having been successfully thwarted by Iran in the past, can now serve as a safeguard against future Iranian cheating....

“Critics of Mr. Obama’s efforts are going to get lost in the technical details of this ‘framework’ agreement. Yet behind all the one-year breakout calculations, the enormous question marks about verification and PMDs, and sustainable snap-back provisions, the ultimate issue remains: Are you willing to threaten war to get a better deal, and prepared to preventively strike if Tehran moves toward a bomb?”

Henry Kissinger and George P. Shultz / Wall Street Journal

“Progress has been made on shrinking the size of Iran’s enriched stockpile, confining the enrichment of uranium to one facility, and limiting aspects of the enrichment process. Still, the ultimate significance of the framework will depend on its verifiability and enforceability....

“Under the new approach, Iran permanently gives up none of its equipment, facilities or fissile product to achieve the proposed constraints. It only places them under temporary restriction and safeguard – amounting in many cases to a seal at the door of a depot or periodic visits by inspectors to declared sites. The physical magnitude of the effort is daunting. Is the International Atomic Energy Agency technically, and in terms of human resources, up to so complex and vast an assignment?

“In a large country with multiple facilities and ample experience in nuclear concealment, violations will be inherently difficult to detect. Devising theoretical models of inspection is one thing. Enforcing compliance, week after week, despite competing international crises and domestic distractions, is another. Any report of a violation is likely to prompt debate over its significance – or even calls for new talks with Tehran to explore the issue. The experience of Iran’s work on a heavy-water reactor during the ‘interim agreement’ period – when suspect activity was identified but played down in the interest of a positive negotiating atmosphere – is not encouraging.

“Compounding the difficulty is the unlikelihood that breakout will be a clear-cut event. More likely it will occur, if it does, via the gradual accumulation of ambiguous evasions.

“When inevitable disagreements arise over the scope and intrusiveness of inspections, on what criteria are we prepared to insist and up to what point? If evidence is imperfect, who bears the burden of proof? What process will be followed to resolve the matter swiftly?

“The agreement’s primary enforcement mechanism, the threat of renewed sanctions, emphasizes a broad-based asymmetry, which provides Iran permanent relief from sanctions in exchange for temporary restraints on Iranian conduct. Undertaking the ‘snap-back’ of sanctions is unlikely to be as clear or as automatic as the phrase implies. Iran is in a position to violate the agreement by executive decision. Restoring the most effective sanctions will require coordinated international action. In countries that had reluctantly joined in previous rounds, the demands of public and commercial opinion will militate against automatic or even prompt ‘snap-back.’ If the follow-on process does not unambiguously define the term, an attempt to reimpose sanctions risks primarily isolating America, not Iran.

“The gradual expiration of the framework agreement, beginning in a decade, will enable Iran to become a significant nuclear, industrial and military power after that time – in the scope and sophistication of its nuclear program and its latent capacity to weaponize at a time of its choosing. Limits on Iran’s research and development have not been publicly disclosed (or perhaps agreed). Therefore Iran will be in a position to bolster its advanced nuclear technology during the period of the agreement and rapidly deploy more advanced centrifuges – of at least five times the capacity of the current model – after the agreement expires or is broken....

“The final stages of the nuclear talks have coincided with Iran’s intensified efforts to expand and entrench its power in neighboring states. Iranian or Iranian client forces are now the pre-eminent military or political element in multiple Arab countries, operating beyond the control of national authorities. With the recent addition of Yemen as a battlefield, Tehran occupies positions along all of the Middle East’s strategic waterways and encircles archrival Saudi Arabia, an American ally. Unless political restraint is linked to nuclear restraint, an agreement freeing Iran from sanctions risks empowering Iran’s hegemonic efforts....

“If the world is to be spared even worse turmoil, the U.S. must develop a strategic doctrine for the region. Stability requires an active American role. For Iran to be a valuable member of the international community, the prerequisite is that it accepts restraint on its ability to destabilize the Middle East and challenge the broader international order.

“Until clarity on an American strategic political concept is reached, the projected nuclear agreement will reinforce, not resolve, the world’s challenges in the region. Rather than enabling American disengagement from the Middle East, the nuclear framework is more likely to necessitate deepening involvement there – on complex new terms. History will not do our work for us; it helps only those who seek to help themselves.”

Charles Krauthammer / Washington Post

“It was but a year and a half ago that Barack Obama endorsed the objective of abolition when he said that Iran’s heavily fortified Fordow nuclear facility, its plutonium-producing heavy-water reactor and its advanced centrifuges were all unnecessary for a civilian nuclear program. The logic was clear: Since Iran was claiming to be pursuing an exclusively civilian program, these would have to go.

“Yet under the deal Obama is now trying to sell, not one of these is to be dismantled. Indeed, Iran’s entire nuclear infrastructure is kept intact, just frozen or repurchased for the length of the deal (about a decade). Thus Fordow’s centrifuges will keep spinning. They will now be fed xenon, zinc and germanium instead of uranium. But that means they remain ready at any time to revert from the world’s most heavily (indeed comically) fortified medical isotope facility to a bomb-making factory.

“And upon the expiration of the deal, conceded Obama Monday on NPR, Iran’s breakout time to a nuclear bomb will be ‘almost down to zero,’ i.e., it will be able to produce nuclear weapons at will and without delay.

“And then there’s cheating. Not to worry, says Obama. We have guarantees of compliance: ‘unprecedented inspections’ and ‘snapback’ sanctions.

“The inspection promises are a farce. We haven’t even held the Iranians to their current obligation to come clean with the International Atomic Energy Agency on their previous nuclear activities. The IAEA charges Iran with stonewalling on 11 or 12 issues.

“As veteran nuclear expert David Albright points out, that makes future verification impossible – how can you determine what’s been illegally changed or added if you have no baseline? Worse, there’s been no mention of the only verification regime with real teeth – at-will, unannounced visits to any facility, declared or undeclared. The joint European-Iranian statement spoke only of ‘enhanced access through agreed procedures,’ which doesn’t remotely suggest anywhere/anytime inspections. And on Thursday, Iran’s supreme leader ruled out any ‘extraordinary supervision measures.’

“The IAEA hasn’t been allowed to see the Parchin weaponization facility in 10 years. And the massive Fordow complex was disclosed not by the IAEA but by Iranian dissidents.”

So I have to repeat a bit from an opinion piece of a few weeks ago. What if violations are found? What then?

Michael Hayden, Olli Heinonen and Ray Takeyh / Washington Post

“As negotiations between Iran and the great powers press forward, Sec. of State John Kerry seems to have settled on this defense of any agreement: The terms will leave Iran at least a year away from obtaining a nuclear bomb, thus giving the world plenty of time to react to infractions. The argument is meant to reassure, particularly when a sizable enrichment capacity and a sunset clause appear to have already been conceded. A careful assessment, however, reveals that a one-year breakout time may not be sufficient to detect and reverse Iranian violations.

“Once the United States had an indication that Iran was violating an agreement, a bureaucratic process would be necessary to validate the information. It could be months before the director of national intelligence would be confident enough to present a case for action to the president. Several U.S. intelligence agencies, the Energy Department and national nuclear laboratories would need a chance to sniff the data to be convinced that a technical breach had occurred. Only after this methodical review was finished could the director go to the White House with conclusions and recommendations....

“History suggests the Iranians would engage in protracted negotiations and much arcane questioning of the evidence. Iran could eventually offer some access while holding back key data and personnel. It would be only after tortured discussions that the IAEA could proclaim itself dissatisfied with Iran’s reaction. This process also could take months.”

It’s a nightmare.

Israeli Defense Minister Moshe Ya’alon / Washington Post

“The framework concluded last week on Iran’s nuclear program was doomed to disagreement. Even the ‘fact sheets’ issued by the United States, France and Iran – all parties to the talks – didn’t agree on the facts....

“To justify the risks inherent to the framework, its supporters have posited three main arguments: that the only alternative is war; that Iranian violations will be deterred or detected because of ‘unprecedented verification’; and that, in the event of violations, sanctions will be snapped back into place. These arguments have one important feature in common: They’re all wrong.

“The claim that the only alternative to the framework is war is false. It both obscures the failure to attain better terms from Iran and stifles honest and open debate by suggesting that if you don’t agree, you must be a warmonger. It also feeds and reflects the calumny that Israel in particular is agitating for war....

“The choice is not between this bad deal and war. The alternative is a better deal that significantly rolls back Iran’s nuclear infrastructure and links the lifting of restrictions on its nuclear program to an end of Iran’s aggression in the region, its terrorism across the globe and its threats to annihilate Israel. This alternative requires neither war nor putting our faith in tools that have already failed us.”

Fat chance of any alternative being accepted at this point. 

Washington and Wall Street

Little to report on the economic front this week, though things are about to heat up in terms of data and corporate earnings. A survey of 62 economists by the Wall Street Journal has the group now forecasting GDP growth in the first quarter of just 1.4%, a big comedown from January’s 3% forecast. The Commerce Dept. releases its first look on April 29.

The economists are still looking at 2.7% growth for all of 2015 vs. their prediction of 3% in January.

The Federal Reserve released the minutes from its March Open Market Committee meeting and they showed the board was split on whether or not to raise rates in June or later. But...this was before release of the putrid March employment data, April 3, and there is virtually no shot the Fed will hike in June now, though perhaps July or September, as some Fed governors have been stating the past week or so.

Federal Reserve Bank of New York President William Dudley, however, reiterated that the path of any rate increases is likely to be “shallow” once the Fed does decide to tighten.

[One economic data point for the week of note. The ISM services PMI for March came in at 56.5, right in line with expectations and down slightly from February’s 56.9.]

On the earnings front, FactSet is looking for first-quarter S&P 500 earnings to fall 4.8%, with a further decline of 2.1% in Q2 and an increase of just 1.6% in Q3. Thomson Reuters I/B/E/S is looking at a 2.8% drop in Q1, which would be the first year over year decline since the third quarter of 2009.

It’s still all about the stronger dollar hitting exporters, weak oil hammering the energy sector, and just dismal economic data overall. But are earnings bottoming? The next few weeks will tell us.

Christine Lagarde, managing director of the IMF, said the world should prepare itself for slow growth and high debt and unemployment without aggressive action on the part of policy makers.

“Today, we must prevent that new mediocre from becoming the ‘new reality,” she said. As I note further below, deflation in the eurozone and Asia, as well as a decline in commodity prices, including oil, has hit the export revenues of key emerging market (EM) economies such as Brazil and Russia, while a strong dollar has exacerbated capital outflows in Asia, which are only expected to increase.

Chris Williamson, chief economist at Markit Economics, said: “EM GDP growth will slip below 5 percent in the first quarter, which would be the weakest pace of expansion since the third quarter of 2009.” [Financial Times]

In the IMF’s World Economic Outlook released this week, economists for the organization noted: “A large share of the output loss since the crisis can now be seen as permanent, and policies are thus unlikely to return investment fully to its pre-crisis trend. This does not imply, however, that there is no scope for using fiscal and monetary policies to help sustain the recovery and thus to encourage firms to invest.”

For all the monetary easing across the globe, however, we have yet to see robust growth. The IMF added that compounding the problem is aging labor forces.

Europe and Asia

Across the pond it’s still all about Greece in terms of its ability to muck things up, even as major European equity markets virtually across the board are at 15-year (or all-time) highs, including the benchmark Stoxx Euro 600 (like our S&P 500) which closed at an all-time high both Thursday and Friday.

The Greek government did make a critical 450 million euro payment to the IMF on Thursday as scheduled, but it had to raid the cash reserves of public agencies and utilities to do so. Everyone is in agreement that unless Greece receives further bailout aid, to the tune of a scheduled $7.2bn, it will exhaust all cash reserves by the end of May, if not sooner, and aside from having to roll over a large amount of debt next week ($2.4bn), it has payments totaling nearly 3.4bn euro to both the IMF and for pensions and salaries in May.

So how does it get more aid? It must satisfy euro finance ministers by middle of next week that the latest version of its reform agenda is legit so that the same folks can dot the i’s and cross the t’s by April 24 at a finance ministers’ meeting in Riga.

While Greece did report decent industrial production growth of 1.9% in February, year over year, it has been slipping back into recession, which is disastrous and a real downer for the people. The government does insist, however, that the shortfall in tax receipts in January and February has been covered by increased tax payments in March, though who the hell knows with these folks.

Meanwhile, the final composite reading for the eurozone in March, as reported by Eurostats, was 54.0 vs. 53.3 in February, an 11-mo. high, with a final services reading of 54.2 vs. 53.7.

Germany’s comp was 55.4, an 8-mo. high; France’s was 51.5, a 2-mo. low; and Italy 52.4, an 8-mo. high.

The U.K.’s services reading for March was a whopping 58.9 vs. 56.7 the prior month.

Industrial production figures for the U.K. and France in February were up just 0.1% and unchanged, respectively, month over month; but Spain was up 0.6%.

Importantly, for the eurozone as a whole, industrial producer prices rose 0.5% February over January. This is good...a sign of needed inflation.

Euro-19 retail sales for February, however, were down 0.2% over January, but up 3% year over year.

The European Central Bank revealed that in the first month of quantitative easing, the ECB purchased 52.5bn euro of government bonds, including 11.1bn of German paper, 8.75bn of French papier, and 7.6bn of Italian crapola.

Government bond yields continued to tumble owing to QE, which of course is aiding Euro stocks as well. Following are some respective 10-year yields as of the close on Friday, all at or near all-time lows. 

Germany 0.15%
France 0.43%
Italy 1.26%
Spain 1.22%
Portugal 1.60%
Netherlands 0.30%
(non-euro) U.K. 1.58%

Switzerland auctioned 10-year bonds this week with a negative yield. Nuts. Again, it’s why the move up in February industrial producer prices could be significant. At some point euro bond buyers will get slaughtered, though, admittedly, with the ECB’s announced QE program running through at least Sept. 2016, it would argue it can maintain rates at existing levels. Then again, everyone also knows the ECB is going to have trouble finding enough bonds to buy well before Sept. ’16. 

Chris Williamson / Markit:

“Whether the eurozone economy has achieved escape velocity to enjoy a return to a strong and sustainable recovery remains uncertain, but the region is certainly seeing its best growth momentum since 2011.

“The PMIs are indicating somewhat sluggish GDP growth of 0.3% for the first quarter. However, the important message from the survey data is that the pace of expansion looks set to gather pace in coming months....

“With the ECB’s policy of quantitative easing also set to provide a boost to the nascent recovery in coming months, the economic outlook is therefore brightening as we expect to see more upward revisions to growth forecasts for the year.

“An ongoing recovery is no one-way bet, however, with the Greek crisis remaining a critical threat to stability in the region.”

I do have to mention Greek Prime Minister Alexis Tsipras’ trip to Moscow where he met with Russian President Vladimir Putin. Tsipras claims he wasn’t asking for financial aid, and none was granted, but Putin offered moral support.

At a joint news conference after Kremlin talks, Putin said: “The Greek side has not addressed us with any requests for aid. We discussed cooperation in various sectors of the economy, including the possibility of developing major energy projects.”

Tsipras said: “Greece is not a beggar going around to countries asking them to solve its economic problems, an economic crisis that doesn’t only concern Greece but is a European crisis.”

Tsipras was careful to add, “We respect our obligations in all international organizations,” alluding to the fact Greece is part of the European Union and its sanctions against Moscow over Ukraine.

Putin did hint Russia could lift its embargo on food imports from Greece, part of Russia’s retaliation against the EU.

Editorial / Wall Street Journal

“Greece’s main contagion threat now would be if it is bailed out again without reform. Athens wants creditors to reward Greek voters for electing a government committed to dismantling the reforms Greece needs. If creditors allow Athens to increase government spending while reversing labor-market liberalization and privatizations, they’ll encourage anti-reform movements elsewhere.

“Spain’s left-wing Podemos party has polled well since Syriza’s Greek victory in January as Spaniards consider whether it might offer an alternative to painful reforms, and the party won 15 seats in the regional parliament in Andalusia last month.

“Ireland’s Sinn Fein is gaining support for its anti-reform platform... Italy has its own anti-reformers in the Northern League and the Five Star Movement....

“Accommodating Syriza’s agenda now would be a severe blow to a eurozone that urgently needs faster growth. Consider how hard it has been for France’s Socialist government to pass even a modest reform package that increases the number of Sundays that businesses can open to 12 from five a year.*

“The Alternative for Germany (AfD) party, founded in 2013, has also seen its support grow during this year’s Greek crisis as German taxpayers rebel against continuing to subsidize a recalcitrant Athens....

“The strongest argument against allowing Greece to leave the euro is that it would dent the bloc’s appearance of permanence, making the euro more like a currency peg that members could leave at will. But we doubt other countries will want to follow Greece’s example once they see the damage to Greeks....

“What’s not sustainable is allowing euro members to bully their way into deals in which they reap the rewards of a currency union without living by its rules.”

*Thursday saw a general strike across France as workers protested state funding cuts, planned increases in the retirement age, and business-friendly reforms that could make firing workers easier. Striking air-traffic controllers canceled some 2,000 flights in and out of the country.

Turning to Asia, the March data has started to come through in China and consumer prices for the month were up 1.4%, same as February’s annualized pace and well off the government’s 3% target. [Food inflation was up a tame 2.3%.]

Producer prices, or as they call them here ‘factory gate’ prices, however, fell a 37th consecutive month, down 4.6% in March vs. February’s decline of 4.8%.

China’s official report on first-quarter GDP comes out next Wednesday and this could be critical. Beijing has pegged growth at 7% for 2015 and while the figures are manipulated, if the government reports something like 6.8%, that’s going to shake some people up, especially those exporting to China.

The government has been relaxing banks’ reserve requirements and making it easier to buy a second home as it seeks to fight deflationary pressures and slack foreign and domestic demand.

Separately, Premier Li Keqiang announced China will cut red tape and reduce costs for Chinese firms looking to spread their operations overseas to help boost growth.

In Japan, the Bank of Japan’s quarterly survey of businesses showed small companies plan to decrease capital spending a whopping 14% this year after a 6% increase in 2014, exactly what the Abe government doesn’t want to see.

But the Tokyo Nikkei stock index touched the 20000 level for the first time since April 2000, before finishing the week at 19907.

One last item on the deflation front...producer prices in South Korea fell a 39th consecutive month in March. That’s what has the likes of Christine Lagarde so worried.

Street Bytes

--The Dow Jones and S&P 500 both rose 1.7% on the week, with the two nearing all-time highs again, the Dow at 18057 (shy of its 18288 record close) and the S&P at 2102 (2117 being its high-water mark). Nasdaq gained 2.2% to 4995, 53 points from its March 10, 2000 peak of 5048. 

Last time I forgot to mention the first-quarter returns for the major indices.

The Dow Jones was -0.3%, the S&P 500 +0.4% and Nasdaq +3.5%.

According to Lipper, the 8,212 diversified equity funds it tracks returned 2.48% for the January-March period, compared with just 0.8% for S&P 500 index funds. The performance for active managers comes after four straight quarters of underperformance in 2014.

Large-company growth funds outperformed, +3.59%, while large-cap value funds finished -0.01%. Small-company growth funds returned 5.9%, while small-cap value funds were up 2.1%. [Michael Vallo / Barron’s]

--U.S. Treasury Yields

6-mo. 0.09% 2-yr. 0.56% 10-yr. 1.95% 30-yr. 2.58%

--As part of its ongoing attempt to return the company to its manufacturing roots, General Electric CEO Jeff Immelt laid out an ambitious plan to shrink its finance arm, sending shares soaring 11% on Friday for their biggest daily gain since the financial crisis.

$26.5 billion of property assets, the bulk of GE Capital, the company’s finance arm, are being sold to Blackstone and Wells Fargo, with virtually the whole of GE Capital being shed over the next two years.

By 2018, GE expects manufacturing businesses to account for 90% of the company’s profits.

GE also announced that as a result of the disposals, the company would return $90 billion to shareholders over the next three years through a combination of share buybacks and dividends.

--California Gov. Jerry Brown recently ordered a 25% cut in water use in cities and towns statewide, but this week California regulators proposed that the biggest urban water users cut consumption by as much as 35% over the next year, including the likes of Newport Beach and Beverly Hills.

But also this week, state officials announced Californians cut their water usage by only 2.8% in February, the second consecutive month that conservation was in decline. After Californians cut their usage by 22% in December, the figure slid to just 8% in January and then this.

Max Gomberg, the state water board’s senior scientist, said, “The gentle nudge is no longer sufficient.” [Los Angeles Times]

For consumers the drought has already impacted prices of some items, with the cost of fruits and vegetables generally up 10% to 25% last year, though they fell in February and are expected to rise more in line with historical averages this year, 2% to 3.5%, according to the U.S. Department of Agriculture.

But the drought has been great for California wines, seeing as wine grapes use relatively little  water and 2014 marked the third straight great vintage of the decade, according to the Wine Institute.

--One more item on the California drought. Bloomberg had a piece on Friday that noted, “The last 12 months (in California) were a full 4.5 degrees Fahrenheit above the 20th century average. Doesn’t sound like much? When measuring average temperatures, day and night, over extended periods of time, it’s extraordinary. On a planetary scale, just 2.2 degrees Fahrenheit is what separates the hottest year ever recorded (2014) from the coldest (1911).”

--California utility regulators levied a record $1.6 billion fine against the state’s largest utility, Pacific Gas & Electric Co., which is related to the 2010 explosion of a natural gas transmission line in the San Francisco suburb of San Bruno that killed eight residents and destroyed 38 homes. The penalty is more than 10 times greater than the previous highest fine of $146 million against Southern California Edison Co. 

PG&E, as part of the fine, is required to pay $850 million for improvements to its natural gas pipeline system.

--Royal Dutch Shell Plc agreed to buy BG Group Plc (formerly part of one-time gas monopoly, British Gas) for $70 billion in the oil and gas industry’s biggest deal in at least a decade.

The merged company will be twice the size in market value of BP and surpass Chevron Corp. Shell, after its worst production performance in 17 years, will increase its oil and natural gas reserves by 28% with the combination.

BG is a huge player in natural gas (and liquefied nat gas, or LNG), which Shell is betting will be big for the emerging markets that are looking for alternatives to dirty coal.

--Oil (as represented by West Texas Intermediate) rallied to $53.90 on Tuesday, but then on Wednesday, the U.S. Energy Information Administration said U.S. crude stocks recorded their biggest gain in 14 years, which followed a report from the American Petroleum Institute on Tuesday that showed inventories surged in the week to April 3 almost four times more than expected.

Meanwhile, Saudi Arabia said its output had climbed to a record 10.3m barrels a day in March, besting a record set in August 2013.

So Wednesday, oil fell back below $51.00, before closing the week at $51.64.

--As for the price of gas at the pump, according to a forecast by the U.S. Energy Department, gasoline this summer will average $2.45 a gallon for regular, the lowest since 2009, and well off the $3.59 average during the same period last year.

--FedEx agreed to take over Dutch delivery company TNT Express for $4.8 billion, an acquisition that rival UPS had attempted two years ago and failed. The price represented a premium of 33% over TNT’s prior closing price.

--Mylan, one of the world’s biggest generic drug groups, has made a $28.9 billion offer for Perrigo, a maker of cough medicines and allergy remedies. Perrigo’s board said it would consider the “unsolicited, indicative proposal.” The offer was at a 25% premium to Perrigo’s closing share price last week.

--Whether or not the Mylan-Perrigo deal goes through, as witnessed by the Shell-BG and FedEx-TNT deals, takeovers are booming and at the current pace, mergers-and-acquisitions volume for the full year would make it the second-biggest year in history after 2007. 15 deals of at least $10 billion have been proposed or announced thus far in 2015, the highest number on record, according to Dealogic.

--Adam Jonas, the lead auto analyst at Morgan Stanley, issued a report that concludes the auto industry is entering a period of deep disruption. To wit:

“The auto industry is a century-old ecosystem being ogled by outside players hungry for a slice of a $10-trillion mobility market. Many want in. It’s just beginning. And it won’t stop.”

Robot cars; Tesla and electric cars, a market Apple is eyeing....

As reported by the Los Angeles Times’ Jerry Hirsch: “Jonas wrote that the two most important technological trends in automotive transportation are the sharing economy and autonomous driving. He said those trends will fuse into what he calls ‘shared autonomy’ or what is essentially a world of competing robotic taxi services.”

Eventually we will transition from human to robotic driving. Consider that “cars are used only about one hour a day and sit idle in a parking space or garage most of the time,” writes Hirsch.

“The car, in our estimates, is the world’s most underutilized asset,” Jonas writes. “We believe it’s the most disruptable business on earth”

Eventually (I’m skipping a few steps), you’ll have “roving fleets of completely autonomous vehicles in operation 24 hours a day, available on your smartphone.”

--Apple has begun taking orders for Apple Watch, with it being slated for release April 24. However, actual delivery is already estimated for most at mid-May or later.

--The Canadian economy unexpectedly added nearly 29,000 jobs in March after a slight loss in February, with the jobless rate remaining at 6.8 percent. Some are suggesting the report is proof that while falling oil prices are hurting an economy heavily dependent on the energy sector, the impact may not be as dire as first thought.

Time to buy a six-pack of Canadian, friends. That’s Canada, “where all domestic is premium.”

[Josh P. sent me a very generous donation that included specific instructions to buy a six-pack of premium, so Canadian it will be while watching The Masters. Pete M., on the other hand, sent instructions to buy a six-pack of domestic, which is more appropriate for consumption while viewing a Mets or Jets game.]

--JPMorgan Chase CEO Jamie Dimon warned in his annual letter to shareholders that the next financial crisis should see “more volatile” markets and a “rapid decline in valuations” because regulators have hamstrung the banks. Dimon said recent schisms in Treasury and currency markets were a “warning shot across the bow.”

Dimon warns that the big banks can no longer act as the shock absorbers in a crisis, saying that unlike in 2008 when JPM attracted $100 billion of deposits from weaker institutions, it was “unlikely that we would want to accept new deposits the next time around.”

As reported by the Financial Times’ Tom Braithwaite: “(Dimon) wrote that while investors would traditionally flock to safe-haven securities in a storm, there would be ‘a greatly reduced supply of Treasuries to go around – in effect, there may be a shortage of all forms of good collateral’ because of new liquidity requirements tying up safe assets at banks.

“Noting that banks underwrote stock offerings to help shore up other banks during the last crisis, he said they ‘might be reluctant to do this again.’”

--Alcoa’s first-quarter revenues fell short of expectations, so the shares fell a bit, but revenues were up 7% year-over-year, which isn’t bad.

--The Wall Street Journal reports the FAA has stepped up oversight of United Continental Holdings Inc., “citing risks from repeated violations of mandatory pilot qualification and scheduling requirements.”

The Journal reviewed a letter first sent out by the FAA on Feb. 6, “which called for a thorough overhaul of parts of United’s process for qualifying crew members, (and) represents the most detailed indication yet of FAA worries about United’s internal safety oversight....

“The move by the FAA came amid broader pilot problems at United, including discontent among some of its unionized aviators. In the company’s internal safety warning in January, it said that personnel shifts affecting pilots – including retirements, new hires, and transfers to different aircraft types – ‘introduces significant risk to the operation.’ That letter highlighted incidents including one in which pilots had to execute an emergency pull-up maneuver to avoid crashing into the ground and another in which a plane landed with less than the mandatory minimum fuel reserves.”

--Congratulations to 60-year-old Lynda Weinman, who just sold her e-learning site, Lynda.com, to LinkedIn for $1.5 billion. Lynda.com offers courses in design, technology and business and it’s been 20 years in the making as Weinman co-founded it with her husband, Bruce Heavin, in 1995.

--Inflation in Russia rose to 16.9% in March, its highest level since 2002, though the rate of price growth is slowing. Inflation surged after Moscow imposed bans on food imports in response to sanctions levied on it over Ukraine. A fall in the ruble against the dollar also raised the cost of imports.

--2015 has been a bad one for the New York City construction industry, with at least seven deaths as a result of accidents, after eight in all of 2014, which was double 2013’s rate. 19 fatal accidents in 2008 is the recent high.

--The median sale price of a Brooklyn home has skyrocketed to a record $610,894 during the first quarter of 2015 – a 17.5% increase year over year, according to Douglas Elliman Real Estate. [Crain’s New York Business]

As noted by a recent S&P/Case-Shiller report, New York area prices are up only about 2% (Jan. 2015 over Jan. 2014), and they’ve plateaued in Manhattan the last three quarters, but not in Brooklyn.

--Monday night’s NCAA basketball championship won by Duke over Wisconsin saw ratings up 33% from last year – to 28.3 million viewers. The price of a 30-second TV spot on CBS was $1.5 million, so that is going to rise next year. Outside of the Olympics and the NFL, March Madness has the highest ad rates in the sports world. [This year’s Super Bowl had 30-second spots going for $4.5 million, while the NFL’s AFC and NFC championship games ran about $1.7 million.]

--Drew Harwell / Washington Post

“RadioShack, long derided as the ‘cockroach of retail’....has emerged from its steady walk toward the light with a big new rebirthing plan: Act more like a convenience store.”

Standard General, the hedge fund, won approval to keep open 1,740 of RadioShack’s 4,000 stores, and now the plan is to rebrand the chain as “the premier community destination for consumer electronics,” or, as Drew Harwell puts it, “a national bodega of batteries and earbuds.”

So gone will be unprofitable cameras, laptops and tablets, the stuff now sold online, and instead, the Shack will have cellphone chargers, headphones and other doo-dads that keep our Web-connected lives running. [Hearing-aid batteries are a big seller, too.]

Only 7,500 of RadioShack’s 27,000 employees will survive the restructuring.

--After being No. 1 in the ratings game for 288 consecutive weeks, “NBC Nightly News” fell to No. 2 behind “ABC World News Tonight with David Muir.”

Yes, the first time since Brian Williams’ departure. NBC News expressed support for Lester Holt.

Foreign Affairs, cont’d...

Yemen: In Iranian President Rouhani’s above-noted remarks, he also called for an end to Saudi-led airstrikes in Yemen, adding the U.S.-supported bombing campaign could not succeed and that the countries in the region should work for a political solution, which would of course mean granting power to the Iranian-backed Houthi rebels.

The Houthis, who control the Yemeni capital of Sanaa, are now on the verge of taking the southern city of Aden from local militias in intense fighting that has killed well over 200.

Ayatollah Khamenei said in his above-noted televised speech that Saudi Arabia’s actions in Yemen were “a crime and genocide that can be prosecuted in international courts...Riyadh will not emerge victorious in its aggression.”

Iran sent two warships to the waters near Yemen, which Iran claims will help protect its shipping lanes and protect Iran’s “interests in the high seas,” according to state television.

U.S. Secretary of State John Kerry said the U.S. was “very concerned” over Iran’s support for the Shiite rebels.

“We’re well aware of the support that Iran has been giving to Yemen,” he said on ‘PBS NewsHour’. “And Iran needs to recognize that the United States is not going to stand by while the region is destabilized or while people engage in overt warfare across lines, international boundaries and other countries.” [William Branigin and Daniela Deane / Washington Post]

The U.S. has been helping the Saudi coalition in conducting aerial refueling of fighter jets from both the UAE and Saudi Arabia.

The World Health Organization said on Wednesday that 640 had died in the fighting in Yemen since Saudi Arabia entered the battle. More than 100,000 have been displaced, creating a new humanitarian crisis in the region. Hospitals are overwhelmed and running out of supplies. Markets are closed, shortages of everything are developing.

A Saudi air and naval blockade is preventing supplies from reaching the insurgents, but it has also impeded aid relief. Intense fighting in the southern port city of Aden means any relief coming through there won’t get through to where it’s needed.

In the capital, Sanaa, any neighborhood near a military base has been evacuated due to airstrikes on the bases.

The Los Angeles Times reports drivers are waiting more than 12 hours for fuel.

As for the terror element in Yemen, al-Qaeda and al-Qaeda in the Arabian Peninsula, AQAP, the collapse of the government has created a huge opportunity for them, as well as ISIS, which has been making inroads.

Defense Secretary Ashton Carter said on Wednesday that AQAP had “ambition to strike Western targets including the United States” and that American counterterrorism efforts had been stymied by the fall of the Yemeni government.

One other item...Pakistan’s parliament voted to remain neutral in the conflict rather than support their ally Saudi Arabia.

Iraq / Syria / ISIS: With the Bashar Assad regime weakened, ISIS moved into Yarmouk, a densely populated suburb of Damascus that is home to 18,000 civilians, mostly Palestinian refugees. The U.N. has called the development “catastrophic.” The people there have been slowly starving to death as U.N. aid has not been able to get through. [A few hundred people were said to have escaped the camp last weekend.]

It seems that ISIS is exploiting divisions in the opposition ranks as the Damascus suburbs have been starved and bombarded for the almost two years of Assad regime siege. Many are now pledging allegiance to ISIS, an enemy of both the regime and the rebels.

Some believe Assad almost welcomes ISIS’ presence in the south, hoping this will draw coalition airstrikes down on them. Such a move on the part of the coalition, would split the opposition as most rebels oppose the U.S.

So this too makes it easier for ISIS to draw supporters. Any territorial gains on its part in the Damascus region have been small, but will it now pick up speed? Does it have the firepower to begin to move into central Damascus?

Meanwhile, in Iraq, officials announced the discovery of at least 10 mass graves near the city of Tikrit after Iraqi troops and militias routed ISIS from the area. An estimated 1,700 Iraqi military cadets stationed in Tikrit when ISIS rolled in in June are estimated to have been executed; most Shiite Muslims. This was where the cadets were featured in those grizzly videos at the time, so it has long been known the graves were somewhere.

Lebanon: Once again the country is on a knife’s edge as a war of words between Hizbullah leader Hasan Nasrallah and Future leader and former Prime Minister Saad Hariri heated up.

Nasrallah is of course supporting Iran’s intentions in Yemen, while Hariri is defending Saudi actions there.

Hariri assailed Nasrallah for “luring” Lebanon’s official television channel into airing “offensive” remarks against Saudi Arabia in an interview with Syrian TV. Nasrallah railed against Riyadh in the interview for its military intervention in Yemen.

“All Lebanon needed after all the problems Hizbullah has accumulated on Lebanon was to plunge Tele Liban into the media and political boxing ring, and lure it into the trap of participation in a show of insults against Saudi Arabia and its leadership broadcast by Syria’s official Al-Ekhbariya TV two days ago, through the infamous interview with Hizbullah’s secretary-general,” Hariri said in a statement.

Hariri said his main concern was the use of government-run media outlets as platforms “to offend an Arab country and insult Saudi Arabia, its officials and its role...for the sake of Iran and its regional policies.”

Separately, Hariri said: “Iran wants to clone the Lebanese model Yemen, and has been working for years to make the Houthi Ansarullah a copy of the Lebanese Hizbullah, in order to become a tool in its hand to knock the doors of Mecca and the Arabian Gulf.” [Daily Star]

Russia / Ukraine: Amnesty International said it had evidence four Ukrainian soldiers were executed by Russian rebels. The other day a separatist commander told Ukraine’s Kyiv Post he personally killed 15 soldiers captured from the Ukrainian armed forces. [BBC News]

Editorial / Washington Post

“While Western attention is fixed on the Middle East, Russia’s aggression in eastern Ukraine grinds on. In blatant violation of a Feb. 15 cease-fire agreement, artillery, tanks and heavy mortars fire on Ukrainian army positions on a daily basis. Since last Saturday, nine government soldiers have been killed. The latest report of an international monitoring mission, released Wednesday, described ‘a general increase in the number of ceasefire violations.’ The West’s non-response only makes it more likely that the offensive will escalate.

“The cease-fire deal required Russian-backed forces to withdraw artillery, tanks and other heavy weapons from the front lines and place them under monitoring by inspectors of the Organization for Security and Cooperation in Europe (OSCE). Instead, many of those weapons are used in the daily shellings, while Russia sends still more across the border. ‘We continue to see disturbing elements of air defense, command and control, resupply equipment coming across a completely porous border,’ NATO supreme commander Gen. Philip Breedlove said late last month....

“Some experts believe a Russian push against Mariupol is imminent. [Ed. As I noted last week this is Ret. Gen. Wesley Clark’s theory.]....

“Ukrainian forces, Mr. Clark observed, performed well against local militants but were no match for Russian units and their advanced weapons.... Mr. Clark, a retired four-star U.S. Army general, said a U.S. decision to provide Ukraine with defensive arms might deter a Russian attack....

“Yet President Obama continues to overrule senior officials who support arms deliveries; like European Union leaders, he is ignoring the brazen cease-fire violations. U.S. and European officials say they will act if Russia actually attacks Mariupol. By remaining passive now, they make that offensive more likely.”

China: On the issue of China creating artificial islands in the South China Sea....

Editorial / Washington Post

“(China) is digging in – literally.

“Admiral Harry B. Harris Jr., the commander of the U.S. Pacific Fleet, delivered a speech in Canberra, Australia, on March 31 that offered a revealing and unusual description of how China is dredging its atolls, turning coral reefs into more permanent and larger islands. He said China is engaged in ‘unprecedented land reclamation,’ an effort to build artificial lands by ‘pumping sand on to live coral reefs – some of them submerged - and paving them over with concrete.’

“China has now created over four square kilometers of artificial landmass,’ he said. ‘China is creating a Great Wall of sand, with dredges and bulldozers, over the course of months.’ In effect, China seems to be fortifying these specks of land for something in the future.

“Chinese Foreign Minister Wang Yi said March 8 that China was just ‘carrying out necessary construction on its own islands and reefs,’ and insisted that it ‘does not target or affect anyone.’ China, he added, seeks ‘to bring harmony, stability and prosperity to the neighborhood.’ Nice words, but pay attention to deeds. What is the purpose of the digging? Are these reinforced outposts going to be used someday for military forces that would attempt to enforce China’s vaguely drawn ‘nine-dash line’ territorial claim that encompasses most of the South China Sea? As Admiral Harris put it, ‘the scope and pace of building man-made islands raise serious questions about China’s intentions.’...

“The United States does not have a direct dispute with China over any of the maritime territories, but it does have an enormous stake in the stability of the region and in the defense of Japan. China has wisely turned away from aggressive confrontation in recent months, but that may not be the whole story. Admiral Harris has sounded a valuable warning. Vigilance is required to make sure that China has not simply found another way to exert its will, with a Great Wall of sand.”

In a related piece, Charles Clover of the Financial Times began an essay on China’s “Projections of Power” thusly:

“China’s military made history practically every day last week. On Thursday [Ed. April 2] it was the Lin Yi, a guided missile frigate, which spent 75 minutes moored in war-torn Yemen’s port of Aden before setting off to Djibouti with 225 evacuees.

“Billed by Beijing as the navy’s first international maritime rescue evacuation, the mission helps show the rising ambitions of the People’s Liberation Army.

“A few days earlier, state television showed a satellite photo of three submarines anchored at a top-secret base on China’s southern island of Hainan. The report identified them as the navy’s most advanced Type-093G nuclear powered attack submarines, which experts say will start China’s first patrol by nuclear powered subs later this year.

“And to top off a busy week, Pakistan agreed ‘in principle’ to buy eight Chinese submarines in a deal that could be worth up to $5bn – the most lucrative Chinese arms contract ever.

“China also announced last month that it is building a second aircraft carrier and that defense spending would rise by 10.1%, marking 27 years of double-digit or near double-digit increases.”

Meanwhile, if you are a Chinese government official, don’t even think about golfing. As part of its anti-corruption campaign, golf is a big target, being seen as an elitist, corrupt pastime.

As Calum MacLeod of USA TODAY reported: “The government has closed almost 70 courses, frozen development nationwide for the past year and started corruption probes into officials who play golf.” 

One senior official is under investigation after breaking Communist Party rules against extravagance by attending a golf event organized by a company.

Ergo, don’t look for President Xi Jinping to go golfing with President Obama during Xi’s state visit in September.

France: Last May, having been to Paris to observe the National Front party at its annual May Day gathering, I later wrote that leader Marine Le Pen wishes her father, FN founder Jean-Marie Le Pen, were, err, “not living” in order to shed the party’s anti-Semitic image as she prepares for a run for the presidency in 2017. Well that proved to be one of my more prescient comments as this past week, Marine took steps to oust her father from the party, saying she would oppose his candidacy at regional elections this year.

Once again Jean-Marine made an embarrassment of himself and the National Front when he defended a past comment that Nazi gas chambers were “a detail” of history and was quoted on Tuesday as calling France’s Spanish-born prime minister Manuel Valls “the immigrant.”

Speaking to a far-right publication, Jean-Marie also defended Philipe Petain, leader of the wartime government that collaborated with the Nazis.

The day after these comments were published, Marine issued a statement: “Jean-Marie Le Pen seems to have descended into a strategy somewhere between scorched earth and political suicide.

“His status as honorary president does not give him the right to hijack the National Front with vulgar provocations seemingly designed to damage me but which unfortunately hit the whole movement.”

Florian Philippot, the National Front’s vice-president, said in a tweet: “The political split with Jean-Marie Le Pen is now complete and definite. Under Marine Le Pen’s guidance, decisions will be taken swiftly.” [Financial Times]

But then Jean-Marie issued his own statement: “Marine Le Pen may want my death but she cannot count on any help from me.”

Yup, Marine wishes her father were, err, dead.

Random Musings

--Hillary Clinton is going to announce her candidacy on Sunday via video and social media, after which she will stage some events in Iowa and New Hampshire. A Quinnipiac University Swing State Poll shows Sen. Rand Paul leading her in Colorado, 44% to 41%, and 43-42 in Iowa. In Virginia, Clinton leads 47-43. [Clinton leads Jeb Bush in Virginia, 47-40, compared to a 42-42 tie in February.]

--Kentucky Republican Senator Paul joined Texas Sen. Ted Cruz as the first two to formally announce their candidacies for the Republican nomination for president; Florida Sen. Marco Rubio to follow next week.

Paul is attempting to appeal to conservatives angry with both parties, “a fresh-faced disrupter of the entrenched political order,” as Katie Zezima and Robert Costa of the Washington Post put it.

Paul said in the speech unveiling his campaign, “We have come to take our country back from the special interests that use Washington as their personal piggy bank....

‘Many Americans are being left behind. The reward of work seems beyond their grasp. Under the watch of both parties, the poor seem to get poorer and the rich get richer.”

While Paul appeals to populists, his views on national security scare the heck out of many in the Republican Party. Paul is tailoring his message these days to stress he is not an isolationist but a non-interventionist – “supportive of U.S. military forces but cautious about deploying them beyond a response to direct threats...while also declaring that ‘the enemy is radical Islam’ in current global conflicts.” [Washington Post]

“I envision a national defense that promotes, as Reagan put it, peace through strength,” said Paul.

His base loves that he “will immediately end...unconstitutional surveillance,” as he put it.

But while there is no reason why Paul shouldn’t be able to stay in the race for a long time, given his hard-core following, even if it is just 10% or so of the early primaries (assuming a crowded field), he is a prickly sort.

Rem Rieder / USA TODAY:

“I know he’s busy, what with this running for president thing and all. But it might be good for Republican presidential hopeful Rand Paul to enroll in journalism school, or at least audit a few classes.

“Because his behavior strongly suggests he has no clue how the give and take between candidates and the news media works.

“We got a taste of this awhile back, in February, when the Kentucky Republican behaved badly in an interview with CNBC’s Kelly Evans. Rather than answer her questions, Paul cut her off and lectured her about how to do her job. The impression he gave was of someone who was both boorish and defensive, not particularly attractive traits in a would-be president.

“Paul formally kicked off his campaign Tuesday. And his relations with the Fourth Estate hardly seem on the upswing.

“Wednesday morning brought us Paul’s disastrous appearance on NBC’s Today show. Once again, Paul took umbrage at perfectly legitimate questions about his evolving positions. Again we had the refusal to answer, the interrupting, the condescending instructions to co-anchor Savannah Guthrie about how she should do her job.

“ ‘Before we go through a litany of things you say I changed on, why don’t you ask me a question: Have I changed my opinion?’ professor Paul intoned. ‘That would be sort of a better way to approach an interview.’

“As Guthrie persisted, Paul continued with his lecture. ‘No, no, no, no, no, no. Listen, you’ve editorialized. Let me answer...you ask a question, and you say, ‘Have your views changed?’ instead of editorializing and saying my views have changed.’

“Not surprisingly, Paul’s pompous prattling didn’t play so well on social media. The good doctor was pummeled mercilessly on Twitter, where the hashtag #randsplaining – a play on the term ‘mansplaining,’ when a man explains something in a patronizing way to a woman – has come to the fore.”

I saw the Guthrie and Evans interviews, and a bunch of others, and, yes, Paul did not handle them well.

But it also needs to be said that the worsening trend of interviewers feeling the compulsion to talk over their guests ticks me off to no end. For starters, it’s bad television! Everyone does it. Guthrie, Evans (incessantly), O’Reilly, Hannity...let the guest talk! If they then insist on filibustering and not answering the question, then it’s time to get tough on the likes of Paul, but let them expose themselves first. And that’s a memo....

--Rahm Emanuel won a second-term as mayor of Chicago after he had been forced into a surprise run-off with Jesus “Chuy” Garcia, a Cook County commissioner backed by the teachers’ union. The margin was 56%-44%.

So Emanuel gets another four years to deal with Chicago’s fiscal crisis, including a $20 billion unfunded pension liability and a $300 million operating budget deficit.

Emanuel has taken steps to alleviate some of the pressures in cutting deals with unions and closing schools, but the latter were mostly in black neighborhoods so that alienated a constituency that comprises a third of the city’s population.

Chicago recorded the fewest murders in five decades in 2014, after a surge in Emanuel’s initial year, but in the first three months of 2015, murders were back up 29% and shootings by 40%.

As President Obama’s former chief of staff, he has another job these days...to try to secure Obama’s presidential library over New York and Hawaii.

--In a Rutgers-Eagleton poll of New Jersey residents, 58% said Democratic Sen. Robert Menendez should be allowed to stay in office unless he’s proven guilty of federal corruption charges, while 34% say he should resign.

I say he should stay in office, but the reality is, the indictment is so sweeping, there seems little doubt he will seek a plea deal and depart. The key will be the timing and the calling of a special election that would be held in November, and/or does Gov. Chris Christie get to appoint a Republican to replace Menendez with enough time to build support for the vote, rather than, say, two months.

[Like if Menendez resigned in the next month or two, which is unlikely, the appointee would have five months rather than two if Menendez held on awhile.]

--I have to admit, until I read a Los Angeles Times piece by Michael Finnegan and Maloy Moore, I had no idea that Charles Munger Jr., the son of Berkshire Hathaway vice chairman and $billionaire Charles T. Munger, is California’s top donor to the Republican Party.

Munger, 58, is a Palo Alto physicist, who “spent more than $11 million last year to help put Republicans in Congress and the Legislature, making him by far the state party’s biggest benefactor. His funding of Latino, female and moderate candidates has been crucial to the party’s effort to shed its image as a league of conservative white men.”

Munger’s funding of moderates, however, scares away some conservatives from running, while he is known for spending huge sums on ballot initiatives.

--Boston Marathon bomber Dzhokhar Tsarnaev was convicted on 30 counts, including conspiracy to use weapons of mass destruction. Next week, the seven-woman, five-man federal jury decides on how to punish him; death or life in prison.

While I recognize Tsarnaev wants to be viewed as a martyr, and life in prison would deny him that, I would still put him to death as long as it’s quick. If we were to be talking about him 10 years from now, with a “60 Minutes” piece on his captivity while endless appeals move through the courts, that would be the worst possible scenario.

--It is more than a bit discomforting that the Secret Service is a freakin’ mess. This week we learned a manager in the security clearance division was placed on indefinite administrative leave, his gun and badge taken away, and added to an internal “do not admit” list prohibiting entry to the office, after a female employee accused him of assaulting her after-hours at agency headquarters.

The manager had been among the first group of officials Director Joseph P. Clancy promoted when he took over as acting director in October after a string of missteps.

--USA TODAY’s Brad Heath reported, “For more than two decades, the Justice Department and the Drug Enforcement Administration amassed logs of virtually all telephone calls from the USA to as many as 116 countries linked to drug trafficking, current and former officials involved with the operation said.”

This work went on a decade before 9/11 in a program that provided a blueprint for the National Security Agency’s later surveillance. The DEA discontinued the operation, which was collecting numbers dialed and when, but not the content.

The data collection began in 1992 during the George H.W. Bush administration. The reason why this is a story, today, is because agents were gathering the records without court approval, but the result was “a treasure trove of very important information on trafficking,” former DEA administrator Thomas Constantine said in an interview.

President George H.W. Bush first proposed such a measure in his first prime-time address in 1989, and you have to remember this was a time when violent crime rates were at record highs and the DEA launched a “kingpin strategy” to attack the drug cartels.

The DEA stopped its program in the fall of 2013, but immediately asked the Justice Department to restart it because the shutdown “had a major impact on investigations,” one former DEA official told USA TODAY.

Today, the DEA files electronic subpoenas to telephone companies seeking logs of international telephone calls linked to targeted numbers. “Agents said it takes a day or more to pull together communication profiles that used to take minutes.” [Brad Heath]

--The University of Virginia chapter of Phi Kappa Psi announced it plans to pursue “all available legal action” against Rolling Stone magazine, following the release of a Columbia University School of Journalism report, headed by Dean Steve Coll, on its investigation into the now-discredited account of a UVA student, ‘Jackie,’ who said she was the victim of a gang rape at the fraternity. The Columbia report called magazine writer Sabrina Erdely’s story “a failure of journalism,” concluding Rolling Stone didn’t follow basic standards in reporting, fact-checking, and editing. Rolling Stone retracted the story, but incredibly did not fire Ms. Erdely.

In a statement the fraternity said: “The intense and comprehensive media coverage conveyed these falsehoods to hundreds of millions of people worldwide. Clearly our fraternity and its members have been defamed, but more importantly we fear this entire episode may prompt some victims to remain in the shadows, fearful to confront their attackers.”

UVA President Teresa Sullivan added: “Rolling Stone’s story, ‘A Rape on Campus,’ did nothing to combat sexual violence, and it damaged serious efforts to address the issue. Irresponsible journalism unjustly damaged the reputations of many innocent individuals and the University of Virginia. Rolling Stone falsely accused some University of Virginia students of heinous, criminal acts, and falsely depicted others as indifferent to the suffering of their classmate....Such false depictions reinforce the reluctance sexual assault victims already feel about reporting their experience, lest they be doubted or ignored.”

Edward Kosner / Washington Post

“For all the hand-wringing, there are no deep journalistic issues involved in the article. Any decent text editor or a magazine or desk editor on a newspaper would have taken one look at the manuscript, asked a few questions of the writer, and bounced it back with a growly ‘check it out!’

“Ms. Erdely never could find ‘Drew,’ the alleged mastermind of the rapes, or Jackie’s friends, also given pseudonyms, nor did she ask detailed questions of the fraternity or UVA officials that might have raised red flags about the authenticity of Jackie’s account. On any professionally run publication, editors would have directed the writer to do these elementary tasks long before the article was submitted for editing, fact-checking and legal review....

“Rather, ‘A Rape on Campus’ was nothing more than elementary journalistic malpractice committed by the writer, her text editor, the managing editor and proprietor (Jann) Wenner, who, according to the Columbia report, read an early version of the piece and raised no objections. The fact-checker, who identified some problems but was waved off by her superiors, is probably the only one in the chain-of-command who did her job....

“In the aftermath, incredibly enough, no Rolling Stone editor or the offending writer was fired, and the magazine proclaimed that none of its procedures needed rethinking. That is a bigger indictment of big-time journalism today than anything in Mr. Coll’s investigation.”

Finally, special kudos to the Washington Post and reporters Paul Farhi and T. Rees Shapiro for immediately doing yeoman’s work on this story, calling it out for what it was...a piece of fiction.

--Editorial / New York Post

“It’s pretty pathetic when the only campus figure who’ll stand up to the thought police is the football coach – but such is the University of Michigan.

“The school had nixed an April 10 screening of ‘American Sniper’ after a few students launched a petition whining that the film promoted ‘negative and misleading stereotypes’ and ‘sympathizes with a mass killer.’

“The censorship sent coach Jim Harbaugh to Twitter. ‘Michigan football will watch ‘American Sniper’! Proud of Chris Kyle and proud to be an America,’ he tweeted. ‘And if that offends anybody, then so be it.’

“That may not be why the school reversed course late Wednesday. That it had become a national laughingstock likely did the trick.

“Every Michigan official involved should still be fired.

“They banned the top-grossing movie of 2014, an Oscar-nominated flick full of nuance – just to spare a few students the horrors of having it shown on campus.

“That reveals utter cluelessness that the point of college is the free and fair exchange of ideas, no matter how it might hurt.”

--78-year-old Bob Schieffer, who has been anchor of CBS’ “Face the Nation” since 1982, announced he is retiring this summer. I’ve been watching “Face the Nation” over “Meet the Press” the past few years (after watching the first ½ hour of “This Week”) and I’ll miss Schieffer. Just slightly surprised he didn’t want to hang on through the election cycle, but then there are more important things in life, right, sports fans?

--The U.S. Postal Service issued a new limited edition “Forever” stamp Tuesday, honoring former Wake Forest professor (had to work in my alma mater) Maya Angelou, and the stamp carries the quotation: “A bird doesn’t sing because it has an answer, it sings because it has a song.”

It turns out the quotation isn’t Angelou’s. A children’s book author Joan Walsh Anglund told the Washington Post the quotation is in her book of poems “A Cup of Sun,” published in 1967. Anglund, 89, isn’t upset, being a big Angelou fan. She said she was just surprised to see it.

--Among his statements during four days of special Easter services, Pope Francis called on the world to give “tangible help” to persecuted Christians.

“We still see today our persecuted brothers, decapitated and crucified for their faith in you [Jesus], before our eyes and often with our complicit silence.”

“We ask for peace, above all, for Syria and Iraq, that the roar of arms may cease and that peaceful relations may be restored among the various groups which make up those beloved countries.

“May the international community not stand by before the immense humanitarian tragedy unfolding in these countries and the drama of the numerous refugees.”

“These are our martyrs of today, and they are many. We can say that there are more of them now than there were in the early centuries. I hope the international community does not look on, mute and inert, at such an unacceptable crime.”

---

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

God bless America.
---

Gold closed at $1204
Oil $51.64...first weekly close above $50 in seven weeks

Returns for the week 4/6-4/10

Dow Jones +1.7% [18057]
S&P 500 +1.7% [2102]
S&P MidCap +0.7%
Russell 2000 +0.7%
Nasdaq +2.2% [4995]

Returns for the period 1/1/15-4/10/15

Dow Jones +1.3%
S&P 500 +2.1%
S&P MidCap +5.7%
Russell 2000 +5.0%
Nasdaq +5.5%

Bulls 50.4
Bears 14.2 [Source: Investors Intelligence]

I greatly appreciate those of you who have donated to StocksandNews the past few weeks. My pledge drive continues here, as well as in another of my columns.

There are major costs associated with S&N so for the first time in 16 years I’m asking for donations. This is no different than a PBS pledge drive, or Wikipedia’s donation requests. 

So if you would like to make one, checks should be made payable to StocksandNews.com. *Please include your email address so I can acknowledge receipt. 

Brian Trumbore
StocksandNews.com
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Week in Review

04/11/2015

For the week 4/6-4/10

[Posted 12:00 AM ET]

Edition 835

The Iran Framework...round two

The more one looks at it, the more the draft agreement between the P5+1 and Iran looks like an unmitigated disaster. I hate to beat a dead horse, but since 2011, I have noted that all you needed to know about Iran and their intentions was one word...Parchin. In fact if you plug ‘Parchin’ into my search engine you’ll see I’ve mentioned it like 38 times, and once going back to 2006 in my “Hot Spots” column.

Parchin is the disputed military base that Iran has denied International Atomic Energy Agency (IAEA) inspectors access to all these years and for good reason. It is suspected of being the site where Iran tested nuclear trigger devices. The main area (it’s a huge base) where the testing is suspected of having taken place has long been paved over but the Iranians still won’t let the inspectors see it.

Nor are they about to anytime soon and that’s what makes the nuclear framework even more troubling. There are no provisions for inspections of suspected military sites... none. It’s why I’ve been saying for years that the Obama administration has been lying to the American public and it’s been getting away with it with its claims Iran has been abiding by the interim agreement. It’s worse now because of the deal, but it’s appalling that our president and his lackeys treat us like chumps. Of course most Americans haven’t a clue but enough of us do.

There can be no deal without rigorous inspections... period. But this is indeed where we are headed. 

For their part, the Iranians have played this all brilliantly.

Supreme Leader Ayatollah Ali Khamenei said on Thursday he neither supports nor opposes the nuclear framework, but that all economic sanctions need to be lifted immediately upon any final agreement.

“All sanctions should be removed when the deal is signed,” he said, according to Reuters. “If the sanctions removal depends on other processes, then why did we start the negotiations?”

In a televised speech marking Iran’s National Day of Nuclear Technology, Khamenei also ruled out any “extraordinary supervision measures” over Iran’s nuclear activities and said that “Iran’s military sites cannot be inspected under the excuse of nuclear supervision.”

Khamenei warned of Washington’s “devilish” intentions. Reuters reports the ayatollah as saying: “I neither support nor oppose the deal. Everything is in the details. It may be that the deceptive other side wants to restrict us in the details.”

Khamenei needn’t worry about President Obama’s intentions. He’ll give you what you want, Ali.

On Wednesday, Iranian Defense Minister Major General Hossein Dehqan also said there has been “no agreement on inspecting Iran’s military facilities and no visits will be allowed.”

As the Tehran Times reported, “Dehqan underlined that access to the country’s military centers is among the Islamic Republic’s red lines.”

Earlier, Iranian President Hassan Rouhani, in agreeing with his boss, said economic sanctions “must be lifted immediately” once a final nuclear deal is implemented.

“We will not sign any agreement unless all economic sanctions are totally lifted on the first day of the implementation of the deal,” Rouhani said. [Washington Post, Reuters, Financial Times]

The Obama administration insists sanctions must be phased out gradually as Iran takes steps to comply with any accord.

So for the historic record, following is some of what President Obama told the New York Times’ Thomas L. Friedman last Saturday in an important interview.

Obama said America needs to have the self-confidence to take some calculated risks to open important new possibilities – like trying to forge the Iran deal.

“We are powerful enough to be able to test these propositions without putting ourselves at risk. And that’s the thing...people don’t seem to understand,” the president said. ‘You take a country like Cuba. For us to test the possibility that engagement leads to a better outcome for the Cuban people, there aren’t that many risks for us. It’s a tiny little country. It’s not one that threatens our core security interests, and so [there’s no reason not] to test the proposition. And if it turns out that it doesn’t lead to better outcomes, we can adjust our policies. The same is true with respect to Iran, a larger country, a dangerous country, one that has engaged in activities that resulted in the death of U.S. citizens, but the truth of the matter is: Iran’s defense budget is $30 billion. Our defense budget is closer to $600 billion. Iran understands that they cannot fight us. ...You asked about an Obama doctrine. The doctrine is: We will engage, but we preserve all our capabilities.”

The notion that Iran is undeterrable – “it’s simply not the case,” he added. “And so for us to say, ‘Let’s try’ – understanding that we’re preserving all our options, that we’re not naïve – but if in fact we can resolve these issues diplomatically, we are more likely to be safe, more likely to be secure, in a better position to protect our allies, and who knows? Iran may change. If it doesn’t, our deterrence capabilities, our military superiority stays in place. ...We’re not relinquishing our capacity to defend ourselves or our allies. In that situation, why wouldn’t we test it?”

Regarding criticism from Israel and Prime Minister Benjamin Netanyahu: “What I would say to them is that not only am I absolutely committed to making sure that they maintain their qualitative military edge, and that they can deter any potential future attacks, but what I’m willing to do is to make the kinds of commitments that would give everybody in the neighborhood, including Iran, a clarity that if Israel were to be attacked by any state, that we would stand by them. And that, I think, should be...sufficient to take advantage of this once-in-a-lifetime opportunity to see whether or not we can at least take the nuclear issue off the table.”

On Congress’ role, Obama said he insists on preserving the presidential prerogative to enter into binding agreements with foreign powers without congressional approval, though he added: “I do think that [Tennessee Republican] Senator Corker, the head of the Foreign Relations Committee, is somebody who is sincerely concerned about this issue and is a good and decent man, and my hope is that we can find something that allows Congress to express itself but does not encroach on traditional president prerogatives – and ensures that, if in fact we get a good deal, that we can go ahead and implement it.” 

On inspections: “(If) we can have vigorous inspections, unprecedented, and we know at every point along their nuclear chain exactly what they’re doing and that lasts for 20 years, and for the first 10 years their program is not just frozen but effectively rolled back to a larger degree, and we know that even if they wanted to cheat we would have at least a year, which is about three times longer than we’d have right now, and we would have insights into their programs that we’ve never had before, in that circumstance, the notion that we wouldn’t take that deal right now and that would not be in Israel’s interest is simply incorrect.”

Because, Obama argues, “the one thing that changes the equation is when these countries get a nuclear weapon. ...Witness North Korea, which is a problem state that is rendered a lot more dangerous because of their nuclear program. If we can prevent that from happening anyplace else in the world, that’s something where it’s worth taking some risks.”

Friedman asked the president, ‘Do we have the right to insist on a facility being examined by international inspectors if we suspect cheating?’

Obama: “(What) we have agreed to is that we will be able to inspect and verify what’s happening along the entire nuclear chain from the uranium mines all the way through to the final facilities like Natanz. What that means is that we’re not just going to have a bunch of folks posted at two or three or five sites. We are going to be able to see what they’re doing across the board, and in fact, if they now wanted to initiate a covert program that was designed to produce a nuclear weapon, they’d have to create a whole different supply chain. That’s point number one. Point number two, we’re actually going to be setting up a procurement committee that examines what they’re importing, what they’re bringing in that they might claim as dual-use, to determine whether or not what they’re using is something that would be appropriate for a peaceful nuclear program versus a weapons program. And number three, what we’re going to be doing is setting up a mechanism whereby, yes, IAEA inspectors can go anyplace.”

Anywhere in Iran? Friedman asked.

Obama: “That we suspect. Obviously, a request will have to be made. Iran could object, but what we have done is to try to design a mechanism whereby once those objections are heard, that it is not a final veto that Iran has, but in fact some sort of international mechanism will be in place that makes a fair assessment as to whether there should be an inspection, and if they determine it should be, that’s the tiebreaker, not Iran saying, ‘No, you can’t come here.’ So over all, what we’re seeing is not just the additional protocols that IAEA has imposed on countries that are suspected of in the past having had problematic nuclear programs, we’re going even beyond that, and Iran will be subject to the kinds of inspections and verification mechanisms that have never been put in place before.”

Mr. Obama is both hopelessly naïve and deceitful. Again, he’s lying to the American people.

Appearing on one of the Sunday talk shows, Benjamin Netanyahu said of the framework deal, “Not a single centrifuge is destroyed. Not a single nuclear facility is shut down, including the underground facilities that they build illicitly. Thousands of centrifuges will keep spinning, enriching uranium. That’s a very bad deal.”

Republican Senator Lindsey Graham of South Carolina said it was “probably the best deal that Barack Obama could get with the Iranians because the Iranians don’t fear” him.

The Senate is to start voting on the Iran deal April 14, though some Democrats who were once siding with Republicans appear to be backing down in the face of White House pressure. 67 votes are needed to override a presidential veto and I’m guessing the number of supporters has declined from a projected 65 to 60.

Michael Gerson / Washington Post

“For all the praise Obama is claiming, the Iranian regime counts the most remarkable achievement. It has engaged in nuclear negotiations with the United States while actively engaged in a regional conflict against American friends and proxies. Since Obama has prioritized the nuclear negotiations – the only alternative to which, he constantly reminds us, is war – other concessions have seemed small in comparison. Opposition to Bashar al-Assad has become muted, even as he crosses every blood-red line of brutality, to avoid disrupting relations with his Iranian patron. Human rights issues within Iran have become secondary to avoid giving offense. Obama has sometimes seemed more tolerant and empathetic toward Iranian positions than those of allies and partners such as Israel.

“Will Iran continue to hold U.S. policy in the Middle East hostage – causing the United States to hush its reactions to Iranian aggression for fear the regime will walk out of a nuclear deal? This is precisely what American friends in the region fear. The real test – for allies and for members of Congress – will be whether Obama can accompany a final nuclear agreement with a much more aggressive resistance to Iranian ambitions in places such as Syria, Iraq and Yemen. Otherwise, Iran will simply use the wealth that comes from lifted sanctions to cause more havoc.

“If Iran is treated as a normal nation simply because of its nuclear cooperation – if it interprets a deal as a green light for its actions in the region – neither our traditional allies nor members of Congress will sustain Obama’s nuclear agreement in the long term. And the support of Congress could be dramatically helpful in surrounding a deal with snapback sanctions and the pre-authorization of military force in the event of an Iranian breach.

“To secure his nuclear deal with Iran, Obama must show resistance to Iranian aggression across the range of our relationship.”

Reuel Marc Gerecht and Mark Dubowitz / Wall Street Journal

“The inspections regime in Iran envisioned by the Obama administration will not even come close to the intrusiveness of the failed inspections in Iraq. Worse, once sanctions are lifted and billions of dollars of Iranian trade starts to flow again to European and Asian companies, the U.S. likely will be dealing with a U.N. even more politically divided, and more incapable of action, than in the days of Saddam and the run-up to the Iraq war in 2003....

“The nuclear deal with Iran will now obviously go through without the clerical regime having to answer all of the questions that the IAEA still has about the ‘possible military dimensions,’ or PMDs, of Iran’s nuclear program. It is perverse to think that the IAEA, having been successfully thwarted by Iran in the past, can now serve as a safeguard against future Iranian cheating....

“Critics of Mr. Obama’s efforts are going to get lost in the technical details of this ‘framework’ agreement. Yet behind all the one-year breakout calculations, the enormous question marks about verification and PMDs, and sustainable snap-back provisions, the ultimate issue remains: Are you willing to threaten war to get a better deal, and prepared to preventively strike if Tehran moves toward a bomb?”

Henry Kissinger and George P. Shultz / Wall Street Journal

“Progress has been made on shrinking the size of Iran’s enriched stockpile, confining the enrichment of uranium to one facility, and limiting aspects of the enrichment process. Still, the ultimate significance of the framework will depend on its verifiability and enforceability....

“Under the new approach, Iran permanently gives up none of its equipment, facilities or fissile product to achieve the proposed constraints. It only places them under temporary restriction and safeguard – amounting in many cases to a seal at the door of a depot or periodic visits by inspectors to declared sites. The physical magnitude of the effort is daunting. Is the International Atomic Energy Agency technically, and in terms of human resources, up to so complex and vast an assignment?

“In a large country with multiple facilities and ample experience in nuclear concealment, violations will be inherently difficult to detect. Devising theoretical models of inspection is one thing. Enforcing compliance, week after week, despite competing international crises and domestic distractions, is another. Any report of a violation is likely to prompt debate over its significance – or even calls for new talks with Tehran to explore the issue. The experience of Iran’s work on a heavy-water reactor during the ‘interim agreement’ period – when suspect activity was identified but played down in the interest of a positive negotiating atmosphere – is not encouraging.

“Compounding the difficulty is the unlikelihood that breakout will be a clear-cut event. More likely it will occur, if it does, via the gradual accumulation of ambiguous evasions.

“When inevitable disagreements arise over the scope and intrusiveness of inspections, on what criteria are we prepared to insist and up to what point? If evidence is imperfect, who bears the burden of proof? What process will be followed to resolve the matter swiftly?

“The agreement’s primary enforcement mechanism, the threat of renewed sanctions, emphasizes a broad-based asymmetry, which provides Iran permanent relief from sanctions in exchange for temporary restraints on Iranian conduct. Undertaking the ‘snap-back’ of sanctions is unlikely to be as clear or as automatic as the phrase implies. Iran is in a position to violate the agreement by executive decision. Restoring the most effective sanctions will require coordinated international action. In countries that had reluctantly joined in previous rounds, the demands of public and commercial opinion will militate against automatic or even prompt ‘snap-back.’ If the follow-on process does not unambiguously define the term, an attempt to reimpose sanctions risks primarily isolating America, not Iran.

“The gradual expiration of the framework agreement, beginning in a decade, will enable Iran to become a significant nuclear, industrial and military power after that time – in the scope and sophistication of its nuclear program and its latent capacity to weaponize at a time of its choosing. Limits on Iran’s research and development have not been publicly disclosed (or perhaps agreed). Therefore Iran will be in a position to bolster its advanced nuclear technology during the period of the agreement and rapidly deploy more advanced centrifuges – of at least five times the capacity of the current model – after the agreement expires or is broken....

“The final stages of the nuclear talks have coincided with Iran’s intensified efforts to expand and entrench its power in neighboring states. Iranian or Iranian client forces are now the pre-eminent military or political element in multiple Arab countries, operating beyond the control of national authorities. With the recent addition of Yemen as a battlefield, Tehran occupies positions along all of the Middle East’s strategic waterways and encircles archrival Saudi Arabia, an American ally. Unless political restraint is linked to nuclear restraint, an agreement freeing Iran from sanctions risks empowering Iran’s hegemonic efforts....

“If the world is to be spared even worse turmoil, the U.S. must develop a strategic doctrine for the region. Stability requires an active American role. For Iran to be a valuable member of the international community, the prerequisite is that it accepts restraint on its ability to destabilize the Middle East and challenge the broader international order.

“Until clarity on an American strategic political concept is reached, the projected nuclear agreement will reinforce, not resolve, the world’s challenges in the region. Rather than enabling American disengagement from the Middle East, the nuclear framework is more likely to necessitate deepening involvement there – on complex new terms. History will not do our work for us; it helps only those who seek to help themselves.”

Charles Krauthammer / Washington Post

“It was but a year and a half ago that Barack Obama endorsed the objective of abolition when he said that Iran’s heavily fortified Fordow nuclear facility, its plutonium-producing heavy-water reactor and its advanced centrifuges were all unnecessary for a civilian nuclear program. The logic was clear: Since Iran was claiming to be pursuing an exclusively civilian program, these would have to go.

“Yet under the deal Obama is now trying to sell, not one of these is to be dismantled. Indeed, Iran’s entire nuclear infrastructure is kept intact, just frozen or repurchased for the length of the deal (about a decade). Thus Fordow’s centrifuges will keep spinning. They will now be fed xenon, zinc and germanium instead of uranium. But that means they remain ready at any time to revert from the world’s most heavily (indeed comically) fortified medical isotope facility to a bomb-making factory.

“And upon the expiration of the deal, conceded Obama Monday on NPR, Iran’s breakout time to a nuclear bomb will be ‘almost down to zero,’ i.e., it will be able to produce nuclear weapons at will and without delay.

“And then there’s cheating. Not to worry, says Obama. We have guarantees of compliance: ‘unprecedented inspections’ and ‘snapback’ sanctions.

“The inspection promises are a farce. We haven’t even held the Iranians to their current obligation to come clean with the International Atomic Energy Agency on their previous nuclear activities. The IAEA charges Iran with stonewalling on 11 or 12 issues.

“As veteran nuclear expert David Albright points out, that makes future verification impossible – how can you determine what’s been illegally changed or added if you have no baseline? Worse, there’s been no mention of the only verification regime with real teeth – at-will, unannounced visits to any facility, declared or undeclared. The joint European-Iranian statement spoke only of ‘enhanced access through agreed procedures,’ which doesn’t remotely suggest anywhere/anytime inspections. And on Thursday, Iran’s supreme leader ruled out any ‘extraordinary supervision measures.’

“The IAEA hasn’t been allowed to see the Parchin weaponization facility in 10 years. And the massive Fordow complex was disclosed not by the IAEA but by Iranian dissidents.”

So I have to repeat a bit from an opinion piece of a few weeks ago. What if violations are found? What then?

Michael Hayden, Olli Heinonen and Ray Takeyh / Washington Post

“As negotiations between Iran and the great powers press forward, Sec. of State John Kerry seems to have settled on this defense of any agreement: The terms will leave Iran at least a year away from obtaining a nuclear bomb, thus giving the world plenty of time to react to infractions. The argument is meant to reassure, particularly when a sizable enrichment capacity and a sunset clause appear to have already been conceded. A careful assessment, however, reveals that a one-year breakout time may not be sufficient to detect and reverse Iranian violations.

“Once the United States had an indication that Iran was violating an agreement, a bureaucratic process would be necessary to validate the information. It could be months before the director of national intelligence would be confident enough to present a case for action to the president. Several U.S. intelligence agencies, the Energy Department and national nuclear laboratories would need a chance to sniff the data to be convinced that a technical breach had occurred. Only after this methodical review was finished could the director go to the White House with conclusions and recommendations....

“History suggests the Iranians would engage in protracted negotiations and much arcane questioning of the evidence. Iran could eventually offer some access while holding back key data and personnel. It would be only after tortured discussions that the IAEA could proclaim itself dissatisfied with Iran’s reaction. This process also could take months.”

It’s a nightmare.

Israeli Defense Minister Moshe Ya’alon / Washington Post

“The framework concluded last week on Iran’s nuclear program was doomed to disagreement. Even the ‘fact sheets’ issued by the United States, France and Iran – all parties to the talks – didn’t agree on the facts....

“To justify the risks inherent to the framework, its supporters have posited three main arguments: that the only alternative is war; that Iranian violations will be deterred or detected because of ‘unprecedented verification’; and that, in the event of violations, sanctions will be snapped back into place. These arguments have one important feature in common: They’re all wrong.

“The claim that the only alternative to the framework is war is false. It both obscures the failure to attain better terms from Iran and stifles honest and open debate by suggesting that if you don’t agree, you must be a warmonger. It also feeds and reflects the calumny that Israel in particular is agitating for war....

“The choice is not between this bad deal and war. The alternative is a better deal that significantly rolls back Iran’s nuclear infrastructure and links the lifting of restrictions on its nuclear program to an end of Iran’s aggression in the region, its terrorism across the globe and its threats to annihilate Israel. This alternative requires neither war nor putting our faith in tools that have already failed us.”

Fat chance of any alternative being accepted at this point. 

Washington and Wall Street

Little to report on the economic front this week, though things are about to heat up in terms of data and corporate earnings. A survey of 62 economists by the Wall Street Journal has the group now forecasting GDP growth in the first quarter of just 1.4%, a big comedown from January’s 3% forecast. The Commerce Dept. releases its first look on April 29.

The economists are still looking at 2.7% growth for all of 2015 vs. their prediction of 3% in January.

The Federal Reserve released the minutes from its March Open Market Committee meeting and they showed the board was split on whether or not to raise rates in June or later. But...this was before release of the putrid March employment data, April 3, and there is virtually no shot the Fed will hike in June now, though perhaps July or September, as some Fed governors have been stating the past week or so.

Federal Reserve Bank of New York President William Dudley, however, reiterated that the path of any rate increases is likely to be “shallow” once the Fed does decide to tighten.

[One economic data point for the week of note. The ISM services PMI for March came in at 56.5, right in line with expectations and down slightly from February’s 56.9.]

On the earnings front, FactSet is looking for first-quarter S&P 500 earnings to fall 4.8%, with a further decline of 2.1% in Q2 and an increase of just 1.6% in Q3. Thomson Reuters I/B/E/S is looking at a 2.8% drop in Q1, which would be the first year over year decline since the third quarter of 2009.

It’s still all about the stronger dollar hitting exporters, weak oil hammering the energy sector, and just dismal economic data overall. But are earnings bottoming? The next few weeks will tell us.

Christine Lagarde, managing director of the IMF, said the world should prepare itself for slow growth and high debt and unemployment without aggressive action on the part of policy makers.

“Today, we must prevent that new mediocre from becoming the ‘new reality,” she said. As I note further below, deflation in the eurozone and Asia, as well as a decline in commodity prices, including oil, has hit the export revenues of key emerging market (EM) economies such as Brazil and Russia, while a strong dollar has exacerbated capital outflows in Asia, which are only expected to increase.

Chris Williamson, chief economist at Markit Economics, said: “EM GDP growth will slip below 5 percent in the first quarter, which would be the weakest pace of expansion since the third quarter of 2009.” [Financial Times]

In the IMF’s World Economic Outlook released this week, economists for the organization noted: “A large share of the output loss since the crisis can now be seen as permanent, and policies are thus unlikely to return investment fully to its pre-crisis trend. This does not imply, however, that there is no scope for using fiscal and monetary policies to help sustain the recovery and thus to encourage firms to invest.”

For all the monetary easing across the globe, however, we have yet to see robust growth. The IMF added that compounding the problem is aging labor forces.

Europe and Asia

Across the pond it’s still all about Greece in terms of its ability to muck things up, even as major European equity markets virtually across the board are at 15-year (or all-time) highs, including the benchmark Stoxx Euro 600 (like our S&P 500) which closed at an all-time high both Thursday and Friday.

The Greek government did make a critical 450 million euro payment to the IMF on Thursday as scheduled, but it had to raid the cash reserves of public agencies and utilities to do so. Everyone is in agreement that unless Greece receives further bailout aid, to the tune of a scheduled $7.2bn, it will exhaust all cash reserves by the end of May, if not sooner, and aside from having to roll over a large amount of debt next week ($2.4bn), it has payments totaling nearly 3.4bn euro to both the IMF and for pensions and salaries in May.

So how does it get more aid? It must satisfy euro finance ministers by middle of next week that the latest version of its reform agenda is legit so that the same folks can dot the i’s and cross the t’s by April 24 at a finance ministers’ meeting in Riga.

While Greece did report decent industrial production growth of 1.9% in February, year over year, it has been slipping back into recession, which is disastrous and a real downer for the people. The government does insist, however, that the shortfall in tax receipts in January and February has been covered by increased tax payments in March, though who the hell knows with these folks.

Meanwhile, the final composite reading for the eurozone in March, as reported by Eurostats, was 54.0 vs. 53.3 in February, an 11-mo. high, with a final services reading of 54.2 vs. 53.7.

Germany’s comp was 55.4, an 8-mo. high; France’s was 51.5, a 2-mo. low; and Italy 52.4, an 8-mo. high.

The U.K.’s services reading for March was a whopping 58.9 vs. 56.7 the prior month.

Industrial production figures for the U.K. and France in February were up just 0.1% and unchanged, respectively, month over month; but Spain was up 0.6%.

Importantly, for the eurozone as a whole, industrial producer prices rose 0.5% February over January. This is good...a sign of needed inflation.

Euro-19 retail sales for February, however, were down 0.2% over January, but up 3% year over year.

The European Central Bank revealed that in the first month of quantitative easing, the ECB purchased 52.5bn euro of government bonds, including 11.1bn of German paper, 8.75bn of French papier, and 7.6bn of Italian crapola.

Government bond yields continued to tumble owing to QE, which of course is aiding Euro stocks as well. Following are some respective 10-year yields as of the close on Friday, all at or near all-time lows. 

Germany 0.15%
France 0.43%
Italy 1.26%
Spain 1.22%
Portugal 1.60%
Netherlands 0.30%
(non-euro) U.K. 1.58%

Switzerland auctioned 10-year bonds this week with a negative yield. Nuts. Again, it’s why the move up in February industrial producer prices could be significant. At some point euro bond buyers will get slaughtered, though, admittedly, with the ECB’s announced QE program running through at least Sept. 2016, it would argue it can maintain rates at existing levels. Then again, everyone also knows the ECB is going to have trouble finding enough bonds to buy well before Sept. ’16. 

Chris Williamson / Markit:

“Whether the eurozone economy has achieved escape velocity to enjoy a return to a strong and sustainable recovery remains uncertain, but the region is certainly seeing its best growth momentum since 2011.

“The PMIs are indicating somewhat sluggish GDP growth of 0.3% for the first quarter. However, the important message from the survey data is that the pace of expansion looks set to gather pace in coming months....

“With the ECB’s policy of quantitative easing also set to provide a boost to the nascent recovery in coming months, the economic outlook is therefore brightening as we expect to see more upward revisions to growth forecasts for the year.

“An ongoing recovery is no one-way bet, however, with the Greek crisis remaining a critical threat to stability in the region.”

I do have to mention Greek Prime Minister Alexis Tsipras’ trip to Moscow where he met with Russian President Vladimir Putin. Tsipras claims he wasn’t asking for financial aid, and none was granted, but Putin offered moral support.

At a joint news conference after Kremlin talks, Putin said: “The Greek side has not addressed us with any requests for aid. We discussed cooperation in various sectors of the economy, including the possibility of developing major energy projects.”

Tsipras said: “Greece is not a beggar going around to countries asking them to solve its economic problems, an economic crisis that doesn’t only concern Greece but is a European crisis.”

Tsipras was careful to add, “We respect our obligations in all international organizations,” alluding to the fact Greece is part of the European Union and its sanctions against Moscow over Ukraine.

Putin did hint Russia could lift its embargo on food imports from Greece, part of Russia’s retaliation against the EU.

Editorial / Wall Street Journal

“Greece’s main contagion threat now would be if it is bailed out again without reform. Athens wants creditors to reward Greek voters for electing a government committed to dismantling the reforms Greece needs. If creditors allow Athens to increase government spending while reversing labor-market liberalization and privatizations, they’ll encourage anti-reform movements elsewhere.

“Spain’s left-wing Podemos party has polled well since Syriza’s Greek victory in January as Spaniards consider whether it might offer an alternative to painful reforms, and the party won 15 seats in the regional parliament in Andalusia last month.

“Ireland’s Sinn Fein is gaining support for its anti-reform platform... Italy has its own anti-reformers in the Northern League and the Five Star Movement....

“Accommodating Syriza’s agenda now would be a severe blow to a eurozone that urgently needs faster growth. Consider how hard it has been for France’s Socialist government to pass even a modest reform package that increases the number of Sundays that businesses can open to 12 from five a year.*

“The Alternative for Germany (AfD) party, founded in 2013, has also seen its support grow during this year’s Greek crisis as German taxpayers rebel against continuing to subsidize a recalcitrant Athens....

“The strongest argument against allowing Greece to leave the euro is that it would dent the bloc’s appearance of permanence, making the euro more like a currency peg that members could leave at will. But we doubt other countries will want to follow Greece’s example once they see the damage to Greeks....

“What’s not sustainable is allowing euro members to bully their way into deals in which they reap the rewards of a currency union without living by its rules.”

*Thursday saw a general strike across France as workers protested state funding cuts, planned increases in the retirement age, and business-friendly reforms that could make firing workers easier. Striking air-traffic controllers canceled some 2,000 flights in and out of the country.

Turning to Asia, the March data has started to come through in China and consumer prices for the month were up 1.4%, same as February’s annualized pace and well off the government’s 3% target. [Food inflation was up a tame 2.3%.]

Producer prices, or as they call them here ‘factory gate’ prices, however, fell a 37th consecutive month, down 4.6% in March vs. February’s decline of 4.8%.

China’s official report on first-quarter GDP comes out next Wednesday and this could be critical. Beijing has pegged growth at 7% for 2015 and while the figures are manipulated, if the government reports something like 6.8%, that’s going to shake some people up, especially those exporting to China.

The government has been relaxing banks’ reserve requirements and making it easier to buy a second home as it seeks to fight deflationary pressures and slack foreign and domestic demand.

Separately, Premier Li Keqiang announced China will cut red tape and reduce costs for Chinese firms looking to spread their operations overseas to help boost growth.

In Japan, the Bank of Japan’s quarterly survey of businesses showed small companies plan to decrease capital spending a whopping 14% this year after a 6% increase in 2014, exactly what the Abe government doesn’t want to see.

But the Tokyo Nikkei stock index touched the 20000 level for the first time since April 2000, before finishing the week at 19907.

One last item on the deflation front...producer prices in South Korea fell a 39th consecutive month in March. That’s what has the likes of Christine Lagarde so worried.

Street Bytes

--The Dow Jones and S&P 500 both rose 1.7% on the week, with the two nearing all-time highs again, the Dow at 18057 (shy of its 18288 record close) and the S&P at 2102 (2117 being its high-water mark). Nasdaq gained 2.2% to 4995, 53 points from its March 10, 2000 peak of 5048. 

Last time I forgot to mention the first-quarter returns for the major indices.

The Dow Jones was -0.3%, the S&P 500 +0.4% and Nasdaq +3.5%.

According to Lipper, the 8,212 diversified equity funds it tracks returned 2.48% for the January-March period, compared with just 0.8% for S&P 500 index funds. The performance for active managers comes after four straight quarters of underperformance in 2014.

Large-company growth funds outperformed, +3.59%, while large-cap value funds finished -0.01%. Small-company growth funds returned 5.9%, while small-cap value funds were up 2.1%. [Michael Vallo / Barron’s]

--U.S. Treasury Yields

6-mo. 0.09% 2-yr. 0.56% 10-yr. 1.95% 30-yr. 2.58%

--As part of its ongoing attempt to return the company to its manufacturing roots, General Electric CEO Jeff Immelt laid out an ambitious plan to shrink its finance arm, sending shares soaring 11% on Friday for their biggest daily gain since the financial crisis.

$26.5 billion of property assets, the bulk of GE Capital, the company’s finance arm, are being sold to Blackstone and Wells Fargo, with virtually the whole of GE Capital being shed over the next two years.

By 2018, GE expects manufacturing businesses to account for 90% of the company’s profits.

GE also announced that as a result of the disposals, the company would return $90 billion to shareholders over the next three years through a combination of share buybacks and dividends.

--California Gov. Jerry Brown recently ordered a 25% cut in water use in cities and towns statewide, but this week California regulators proposed that the biggest urban water users cut consumption by as much as 35% over the next year, including the likes of Newport Beach and Beverly Hills.

But also this week, state officials announced Californians cut their water usage by only 2.8% in February, the second consecutive month that conservation was in decline. After Californians cut their usage by 22% in December, the figure slid to just 8% in January and then this.

Max Gomberg, the state water board’s senior scientist, said, “The gentle nudge is no longer sufficient.” [Los Angeles Times]

For consumers the drought has already impacted prices of some items, with the cost of fruits and vegetables generally up 10% to 25% last year, though they fell in February and are expected to rise more in line with historical averages this year, 2% to 3.5%, according to the U.S. Department of Agriculture.

But the drought has been great for California wines, seeing as wine grapes use relatively little  water and 2014 marked the third straight great vintage of the decade, according to the Wine Institute.

--One more item on the California drought. Bloomberg had a piece on Friday that noted, “The last 12 months (in California) were a full 4.5 degrees Fahrenheit above the 20th century average. Doesn’t sound like much? When measuring average temperatures, day and night, over extended periods of time, it’s extraordinary. On a planetary scale, just 2.2 degrees Fahrenheit is what separates the hottest year ever recorded (2014) from the coldest (1911).”

--California utility regulators levied a record $1.6 billion fine against the state’s largest utility, Pacific Gas & Electric Co., which is related to the 2010 explosion of a natural gas transmission line in the San Francisco suburb of San Bruno that killed eight residents and destroyed 38 homes. The penalty is more than 10 times greater than the previous highest fine of $146 million against Southern California Edison Co. 

PG&E, as part of the fine, is required to pay $850 million for improvements to its natural gas pipeline system.

--Royal Dutch Shell Plc agreed to buy BG Group Plc (formerly part of one-time gas monopoly, British Gas) for $70 billion in the oil and gas industry’s biggest deal in at least a decade.

The merged company will be twice the size in market value of BP and surpass Chevron Corp. Shell, after its worst production performance in 17 years, will increase its oil and natural gas reserves by 28% with the combination.

BG is a huge player in natural gas (and liquefied nat gas, or LNG), which Shell is betting will be big for the emerging markets that are looking for alternatives to dirty coal.

--Oil (as represented by West Texas Intermediate) rallied to $53.90 on Tuesday, but then on Wednesday, the U.S. Energy Information Administration said U.S. crude stocks recorded their biggest gain in 14 years, which followed a report from the American Petroleum Institute on Tuesday that showed inventories surged in the week to April 3 almost four times more than expected.

Meanwhile, Saudi Arabia said its output had climbed to a record 10.3m barrels a day in March, besting a record set in August 2013.

So Wednesday, oil fell back below $51.00, before closing the week at $51.64.

--As for the price of gas at the pump, according to a forecast by the U.S. Energy Department, gasoline this summer will average $2.45 a gallon for regular, the lowest since 2009, and well off the $3.59 average during the same period last year.

--FedEx agreed to take over Dutch delivery company TNT Express for $4.8 billion, an acquisition that rival UPS had attempted two years ago and failed. The price represented a premium of 33% over TNT’s prior closing price.

--Mylan, one of the world’s biggest generic drug groups, has made a $28.9 billion offer for Perrigo, a maker of cough medicines and allergy remedies. Perrigo’s board said it would consider the “unsolicited, indicative proposal.” The offer was at a 25% premium to Perrigo’s closing share price last week.

--Whether or not the Mylan-Perrigo deal goes through, as witnessed by the Shell-BG and FedEx-TNT deals, takeovers are booming and at the current pace, mergers-and-acquisitions volume for the full year would make it the second-biggest year in history after 2007. 15 deals of at least $10 billion have been proposed or announced thus far in 2015, the highest number on record, according to Dealogic.

--Adam Jonas, the lead auto analyst at Morgan Stanley, issued a report that concludes the auto industry is entering a period of deep disruption. To wit:

“The auto industry is a century-old ecosystem being ogled by outside players hungry for a slice of a $10-trillion mobility market. Many want in. It’s just beginning. And it won’t stop.”

Robot cars; Tesla and electric cars, a market Apple is eyeing....

As reported by the Los Angeles Times’ Jerry Hirsch: “Jonas wrote that the two most important technological trends in automotive transportation are the sharing economy and autonomous driving. He said those trends will fuse into what he calls ‘shared autonomy’ or what is essentially a world of competing robotic taxi services.”

Eventually we will transition from human to robotic driving. Consider that “cars are used only about one hour a day and sit idle in a parking space or garage most of the time,” writes Hirsch.

“The car, in our estimates, is the world’s most underutilized asset,” Jonas writes. “We believe it’s the most disruptable business on earth”

Eventually (I’m skipping a few steps), you’ll have “roving fleets of completely autonomous vehicles in operation 24 hours a day, available on your smartphone.”

--Apple has begun taking orders for Apple Watch, with it being slated for release April 24. However, actual delivery is already estimated for most at mid-May or later.

--The Canadian economy unexpectedly added nearly 29,000 jobs in March after a slight loss in February, with the jobless rate remaining at 6.8 percent. Some are suggesting the report is proof that while falling oil prices are hurting an economy heavily dependent on the energy sector, the impact may not be as dire as first thought.

Time to buy a six-pack of Canadian, friends. That’s Canada, “where all domestic is premium.”

[Josh P. sent me a very generous donation that included specific instructions to buy a six-pack of premium, so Canadian it will be while watching The Masters. Pete M., on the other hand, sent instructions to buy a six-pack of domestic, which is more appropriate for consumption while viewing a Mets or Jets game.]

--JPMorgan Chase CEO Jamie Dimon warned in his annual letter to shareholders that the next financial crisis should see “more volatile” markets and a “rapid decline in valuations” because regulators have hamstrung the banks. Dimon said recent schisms in Treasury and currency markets were a “warning shot across the bow.”

Dimon warns that the big banks can no longer act as the shock absorbers in a crisis, saying that unlike in 2008 when JPM attracted $100 billion of deposits from weaker institutions, it was “unlikely that we would want to accept new deposits the next time around.”

As reported by the Financial Times’ Tom Braithwaite: “(Dimon) wrote that while investors would traditionally flock to safe-haven securities in a storm, there would be ‘a greatly reduced supply of Treasuries to go around – in effect, there may be a shortage of all forms of good collateral’ because of new liquidity requirements tying up safe assets at banks.

“Noting that banks underwrote stock offerings to help shore up other banks during the last crisis, he said they ‘might be reluctant to do this again.’”

--Alcoa’s first-quarter revenues fell short of expectations, so the shares fell a bit, but revenues were up 7% year-over-year, which isn’t bad.

--The Wall Street Journal reports the FAA has stepped up oversight of United Continental Holdings Inc., “citing risks from repeated violations of mandatory pilot qualification and scheduling requirements.”

The Journal reviewed a letter first sent out by the FAA on Feb. 6, “which called for a thorough overhaul of parts of United’s process for qualifying crew members, (and) represents the most detailed indication yet of FAA worries about United’s internal safety oversight....

“The move by the FAA came amid broader pilot problems at United, including discontent among some of its unionized aviators. In the company’s internal safety warning in January, it said that personnel shifts affecting pilots – including retirements, new hires, and transfers to different aircraft types – ‘introduces significant risk to the operation.’ That letter highlighted incidents including one in which pilots had to execute an emergency pull-up maneuver to avoid crashing into the ground and another in which a plane landed with less than the mandatory minimum fuel reserves.”

--Congratulations to 60-year-old Lynda Weinman, who just sold her e-learning site, Lynda.com, to LinkedIn for $1.5 billion. Lynda.com offers courses in design, technology and business and it’s been 20 years in the making as Weinman co-founded it with her husband, Bruce Heavin, in 1995.

--Inflation in Russia rose to 16.9% in March, its highest level since 2002, though the rate of price growth is slowing. Inflation surged after Moscow imposed bans on food imports in response to sanctions levied on it over Ukraine. A fall in the ruble against the dollar also raised the cost of imports.

--2015 has been a bad one for the New York City construction industry, with at least seven deaths as a result of accidents, after eight in all of 2014, which was double 2013’s rate. 19 fatal accidents in 2008 is the recent high.

--The median sale price of a Brooklyn home has skyrocketed to a record $610,894 during the first quarter of 2015 – a 17.5% increase year over year, according to Douglas Elliman Real Estate. [Crain’s New York Business]

As noted by a recent S&P/Case-Shiller report, New York area prices are up only about 2% (Jan. 2015 over Jan. 2014), and they’ve plateaued in Manhattan the last three quarters, but not in Brooklyn.

--Monday night’s NCAA basketball championship won by Duke over Wisconsin saw ratings up 33% from last year – to 28.3 million viewers. The price of a 30-second TV spot on CBS was $1.5 million, so that is going to rise next year. Outside of the Olympics and the NFL, March Madness has the highest ad rates in the sports world. [This year’s Super Bowl had 30-second spots going for $4.5 million, while the NFL’s AFC and NFC championship games ran about $1.7 million.]

--Drew Harwell / Washington Post

“RadioShack, long derided as the ‘cockroach of retail’....has emerged from its steady walk toward the light with a big new rebirthing plan: Act more like a convenience store.”

Standard General, the hedge fund, won approval to keep open 1,740 of RadioShack’s 4,000 stores, and now the plan is to rebrand the chain as “the premier community destination for consumer electronics,” or, as Drew Harwell puts it, “a national bodega of batteries and earbuds.”

So gone will be unprofitable cameras, laptops and tablets, the stuff now sold online, and instead, the Shack will have cellphone chargers, headphones and other doo-dads that keep our Web-connected lives running. [Hearing-aid batteries are a big seller, too.]

Only 7,500 of RadioShack’s 27,000 employees will survive the restructuring.

--After being No. 1 in the ratings game for 288 consecutive weeks, “NBC Nightly News” fell to No. 2 behind “ABC World News Tonight with David Muir.”

Yes, the first time since Brian Williams’ departure. NBC News expressed support for Lester Holt.

Foreign Affairs, cont’d...

Yemen: In Iranian President Rouhani’s above-noted remarks, he also called for an end to Saudi-led airstrikes in Yemen, adding the U.S.-supported bombing campaign could not succeed and that the countries in the region should work for a political solution, which would of course mean granting power to the Iranian-backed Houthi rebels.

The Houthis, who control the Yemeni capital of Sanaa, are now on the verge of taking the southern city of Aden from local militias in intense fighting that has killed well over 200.

Ayatollah Khamenei said in his above-noted televised speech that Saudi Arabia’s actions in Yemen were “a crime and genocide that can be prosecuted in international courts...Riyadh will not emerge victorious in its aggression.”

Iran sent two warships to the waters near Yemen, which Iran claims will help protect its shipping lanes and protect Iran’s “interests in the high seas,” according to state television.

U.S. Secretary of State John Kerry said the U.S. was “very concerned” over Iran’s support for the Shiite rebels.

“We’re well aware of the support that Iran has been giving to Yemen,” he said on ‘PBS NewsHour’. “And Iran needs to recognize that the United States is not going to stand by while the region is destabilized or while people engage in overt warfare across lines, international boundaries and other countries.” [William Branigin and Daniela Deane / Washington Post]

The U.S. has been helping the Saudi coalition in conducting aerial refueling of fighter jets from both the UAE and Saudi Arabia.

The World Health Organization said on Wednesday that 640 had died in the fighting in Yemen since Saudi Arabia entered the battle. More than 100,000 have been displaced, creating a new humanitarian crisis in the region. Hospitals are overwhelmed and running out of supplies. Markets are closed, shortages of everything are developing.

A Saudi air and naval blockade is preventing supplies from reaching the insurgents, but it has also impeded aid relief. Intense fighting in the southern port city of Aden means any relief coming through there won’t get through to where it’s needed.

In the capital, Sanaa, any neighborhood near a military base has been evacuated due to airstrikes on the bases.

The Los Angeles Times reports drivers are waiting more than 12 hours for fuel.

As for the terror element in Yemen, al-Qaeda and al-Qaeda in the Arabian Peninsula, AQAP, the collapse of the government has created a huge opportunity for them, as well as ISIS, which has been making inroads.

Defense Secretary Ashton Carter said on Wednesday that AQAP had “ambition to strike Western targets including the United States” and that American counterterrorism efforts had been stymied by the fall of the Yemeni government.

One other item...Pakistan’s parliament voted to remain neutral in the conflict rather than support their ally Saudi Arabia.

Iraq / Syria / ISIS: With the Bashar Assad regime weakened, ISIS moved into Yarmouk, a densely populated suburb of Damascus that is home to 18,000 civilians, mostly Palestinian refugees. The U.N. has called the development “catastrophic.” The people there have been slowly starving to death as U.N. aid has not been able to get through. [A few hundred people were said to have escaped the camp last weekend.]

It seems that ISIS is exploiting divisions in the opposition ranks as the Damascus suburbs have been starved and bombarded for the almost two years of Assad regime siege. Many are now pledging allegiance to ISIS, an enemy of both the regime and the rebels.

Some believe Assad almost welcomes ISIS’ presence in the south, hoping this will draw coalition airstrikes down on them. Such a move on the part of the coalition, would split the opposition as most rebels oppose the U.S.

So this too makes it easier for ISIS to draw supporters. Any territorial gains on its part in the Damascus region have been small, but will it now pick up speed? Does it have the firepower to begin to move into central Damascus?

Meanwhile, in Iraq, officials announced the discovery of at least 10 mass graves near the city of Tikrit after Iraqi troops and militias routed ISIS from the area. An estimated 1,700 Iraqi military cadets stationed in Tikrit when ISIS rolled in in June are estimated to have been executed; most Shiite Muslims. This was where the cadets were featured in those grizzly videos at the time, so it has long been known the graves were somewhere.

Lebanon: Once again the country is on a knife’s edge as a war of words between Hizbullah leader Hasan Nasrallah and Future leader and former Prime Minister Saad Hariri heated up.

Nasrallah is of course supporting Iran’s intentions in Yemen, while Hariri is defending Saudi actions there.

Hariri assailed Nasrallah for “luring” Lebanon’s official television channel into airing “offensive” remarks against Saudi Arabia in an interview with Syrian TV. Nasrallah railed against Riyadh in the interview for its military intervention in Yemen.

“All Lebanon needed after all the problems Hizbullah has accumulated on Lebanon was to plunge Tele Liban into the media and political boxing ring, and lure it into the trap of participation in a show of insults against Saudi Arabia and its leadership broadcast by Syria’s official Al-Ekhbariya TV two days ago, through the infamous interview with Hizbullah’s secretary-general,” Hariri said in a statement.

Hariri said his main concern was the use of government-run media outlets as platforms “to offend an Arab country and insult Saudi Arabia, its officials and its role...for the sake of Iran and its regional policies.”

Separately, Hariri said: “Iran wants to clone the Lebanese model Yemen, and has been working for years to make the Houthi Ansarullah a copy of the Lebanese Hizbullah, in order to become a tool in its hand to knock the doors of Mecca and the Arabian Gulf.” [Daily Star]

Russia / Ukraine: Amnesty International said it had evidence four Ukrainian soldiers were executed by Russian rebels. The other day a separatist commander told Ukraine’s Kyiv Post he personally killed 15 soldiers captured from the Ukrainian armed forces. [BBC News]

Editorial / Washington Post

“While Western attention is fixed on the Middle East, Russia’s aggression in eastern Ukraine grinds on. In blatant violation of a Feb. 15 cease-fire agreement, artillery, tanks and heavy mortars fire on Ukrainian army positions on a daily basis. Since last Saturday, nine government soldiers have been killed. The latest report of an international monitoring mission, released Wednesday, described ‘a general increase in the number of ceasefire violations.’ The West’s non-response only makes it more likely that the offensive will escalate.

“The cease-fire deal required Russian-backed forces to withdraw artillery, tanks and other heavy weapons from the front lines and place them under monitoring by inspectors of the Organization for Security and Cooperation in Europe (OSCE). Instead, many of those weapons are used in the daily shellings, while Russia sends still more across the border. ‘We continue to see disturbing elements of air defense, command and control, resupply equipment coming across a completely porous border,’ NATO supreme commander Gen. Philip Breedlove said late last month....

“Some experts believe a Russian push against Mariupol is imminent. [Ed. As I noted last week this is Ret. Gen. Wesley Clark’s theory.]....

“Ukrainian forces, Mr. Clark observed, performed well against local militants but were no match for Russian units and their advanced weapons.... Mr. Clark, a retired four-star U.S. Army general, said a U.S. decision to provide Ukraine with defensive arms might deter a Russian attack....

“Yet President Obama continues to overrule senior officials who support arms deliveries; like European Union leaders, he is ignoring the brazen cease-fire violations. U.S. and European officials say they will act if Russia actually attacks Mariupol. By remaining passive now, they make that offensive more likely.”

China: On the issue of China creating artificial islands in the South China Sea....

Editorial / Washington Post

“(China) is digging in – literally.

“Admiral Harry B. Harris Jr., the commander of the U.S. Pacific Fleet, delivered a speech in Canberra, Australia, on March 31 that offered a revealing and unusual description of how China is dredging its atolls, turning coral reefs into more permanent and larger islands. He said China is engaged in ‘unprecedented land reclamation,’ an effort to build artificial lands by ‘pumping sand on to live coral reefs – some of them submerged - and paving them over with concrete.’

“China has now created over four square kilometers of artificial landmass,’ he said. ‘China is creating a Great Wall of sand, with dredges and bulldozers, over the course of months.’ In effect, China seems to be fortifying these specks of land for something in the future.

“Chinese Foreign Minister Wang Yi said March 8 that China was just ‘carrying out necessary construction on its own islands and reefs,’ and insisted that it ‘does not target or affect anyone.’ China, he added, seeks ‘to bring harmony, stability and prosperity to the neighborhood.’ Nice words, but pay attention to deeds. What is the purpose of the digging? Are these reinforced outposts going to be used someday for military forces that would attempt to enforce China’s vaguely drawn ‘nine-dash line’ territorial claim that encompasses most of the South China Sea? As Admiral Harris put it, ‘the scope and pace of building man-made islands raise serious questions about China’s intentions.’...

“The United States does not have a direct dispute with China over any of the maritime territories, but it does have an enormous stake in the stability of the region and in the defense of Japan. China has wisely turned away from aggressive confrontation in recent months, but that may not be the whole story. Admiral Harris has sounded a valuable warning. Vigilance is required to make sure that China has not simply found another way to exert its will, with a Great Wall of sand.”

In a related piece, Charles Clover of the Financial Times began an essay on China’s “Projections of Power” thusly:

“China’s military made history practically every day last week. On Thursday [Ed. April 2] it was the Lin Yi, a guided missile frigate, which spent 75 minutes moored in war-torn Yemen’s port of Aden before setting off to Djibouti with 225 evacuees.

“Billed by Beijing as the navy’s first international maritime rescue evacuation, the mission helps show the rising ambitions of the People’s Liberation Army.

“A few days earlier, state television showed a satellite photo of three submarines anchored at a top-secret base on China’s southern island of Hainan. The report identified them as the navy’s most advanced Type-093G nuclear powered attack submarines, which experts say will start China’s first patrol by nuclear powered subs later this year.

“And to top off a busy week, Pakistan agreed ‘in principle’ to buy eight Chinese submarines in a deal that could be worth up to $5bn – the most lucrative Chinese arms contract ever.

“China also announced last month that it is building a second aircraft carrier and that defense spending would rise by 10.1%, marking 27 years of double-digit or near double-digit increases.”

Meanwhile, if you are a Chinese government official, don’t even think about golfing. As part of its anti-corruption campaign, golf is a big target, being seen as an elitist, corrupt pastime.

As Calum MacLeod of USA TODAY reported: “The government has closed almost 70 courses, frozen development nationwide for the past year and started corruption probes into officials who play golf.” 

One senior official is under investigation after breaking Communist Party rules against extravagance by attending a golf event organized by a company.

Ergo, don’t look for President Xi Jinping to go golfing with President Obama during Xi’s state visit in September.

France: Last May, having been to Paris to observe the National Front party at its annual May Day gathering, I later wrote that leader Marine Le Pen wishes her father, FN founder Jean-Marie Le Pen, were, err, “not living” in order to shed the party’s anti-Semitic image as she prepares for a run for the presidency in 2017. Well that proved to be one of my more prescient comments as this past week, Marine took steps to oust her father from the party, saying she would oppose his candidacy at regional elections this year.

Once again Jean-Marine made an embarrassment of himself and the National Front when he defended a past comment that Nazi gas chambers were “a detail” of history and was quoted on Tuesday as calling France’s Spanish-born prime minister Manuel Valls “the immigrant.”

Speaking to a far-right publication, Jean-Marie also defended Philipe Petain, leader of the wartime government that collaborated with the Nazis.

The day after these comments were published, Marine issued a statement: “Jean-Marie Le Pen seems to have descended into a strategy somewhere between scorched earth and political suicide.

“His status as honorary president does not give him the right to hijack the National Front with vulgar provocations seemingly designed to damage me but which unfortunately hit the whole movement.”

Florian Philippot, the National Front’s vice-president, said in a tweet: “The political split with Jean-Marie Le Pen is now complete and definite. Under Marine Le Pen’s guidance, decisions will be taken swiftly.” [Financial Times]

But then Jean-Marie issued his own statement: “Marine Le Pen may want my death but she cannot count on any help from me.”

Yup, Marine wishes her father were, err, dead.

Random Musings

--Hillary Clinton is going to announce her candidacy on Sunday via video and social media, after which she will stage some events in Iowa and New Hampshire. A Quinnipiac University Swing State Poll shows Sen. Rand Paul leading her in Colorado, 44% to 41%, and 43-42 in Iowa. In Virginia, Clinton leads 47-43. [Clinton leads Jeb Bush in Virginia, 47-40, compared to a 42-42 tie in February.]

--Kentucky Republican Senator Paul joined Texas Sen. Ted Cruz as the first two to formally announce their candidacies for the Republican nomination for president; Florida Sen. Marco Rubio to follow next week.

Paul is attempting to appeal to conservatives angry with both parties, “a fresh-faced disrupter of the entrenched political order,” as Katie Zezima and Robert Costa of the Washington Post put it.

Paul said in the speech unveiling his campaign, “We have come to take our country back from the special interests that use Washington as their personal piggy bank....

‘Many Americans are being left behind. The reward of work seems beyond their grasp. Under the watch of both parties, the poor seem to get poorer and the rich get richer.”

While Paul appeals to populists, his views on national security scare the heck out of many in the Republican Party. Paul is tailoring his message these days to stress he is not an isolationist but a non-interventionist – “supportive of U.S. military forces but cautious about deploying them beyond a response to direct threats...while also declaring that ‘the enemy is radical Islam’ in current global conflicts.” [Washington Post]

“I envision a national defense that promotes, as Reagan put it, peace through strength,” said Paul.

His base loves that he “will immediately end...unconstitutional surveillance,” as he put it.

But while there is no reason why Paul shouldn’t be able to stay in the race for a long time, given his hard-core following, even if it is just 10% or so of the early primaries (assuming a crowded field), he is a prickly sort.

Rem Rieder / USA TODAY:

“I know he’s busy, what with this running for president thing and all. But it might be good for Republican presidential hopeful Rand Paul to enroll in journalism school, or at least audit a few classes.

“Because his behavior strongly suggests he has no clue how the give and take between candidates and the news media works.

“We got a taste of this awhile back, in February, when the Kentucky Republican behaved badly in an interview with CNBC’s Kelly Evans. Rather than answer her questions, Paul cut her off and lectured her about how to do her job. The impression he gave was of someone who was both boorish and defensive, not particularly attractive traits in a would-be president.

“Paul formally kicked off his campaign Tuesday. And his relations with the Fourth Estate hardly seem on the upswing.

“Wednesday morning brought us Paul’s disastrous appearance on NBC’s Today show. Once again, Paul took umbrage at perfectly legitimate questions about his evolving positions. Again we had the refusal to answer, the interrupting, the condescending instructions to co-anchor Savannah Guthrie about how she should do her job.

“ ‘Before we go through a litany of things you say I changed on, why don’t you ask me a question: Have I changed my opinion?’ professor Paul intoned. ‘That would be sort of a better way to approach an interview.’

“As Guthrie persisted, Paul continued with his lecture. ‘No, no, no, no, no, no. Listen, you’ve editorialized. Let me answer...you ask a question, and you say, ‘Have your views changed?’ instead of editorializing and saying my views have changed.’

“Not surprisingly, Paul’s pompous prattling didn’t play so well on social media. The good doctor was pummeled mercilessly on Twitter, where the hashtag #randsplaining – a play on the term ‘mansplaining,’ when a man explains something in a patronizing way to a woman – has come to the fore.”

I saw the Guthrie and Evans interviews, and a bunch of others, and, yes, Paul did not handle them well.

But it also needs to be said that the worsening trend of interviewers feeling the compulsion to talk over their guests ticks me off to no end. For starters, it’s bad television! Everyone does it. Guthrie, Evans (incessantly), O’Reilly, Hannity...let the guest talk! If they then insist on filibustering and not answering the question, then it’s time to get tough on the likes of Paul, but let them expose themselves first. And that’s a memo....

--Rahm Emanuel won a second-term as mayor of Chicago after he had been forced into a surprise run-off with Jesus “Chuy” Garcia, a Cook County commissioner backed by the teachers’ union. The margin was 56%-44%.

So Emanuel gets another four years to deal with Chicago’s fiscal crisis, including a $20 billion unfunded pension liability and a $300 million operating budget deficit.

Emanuel has taken steps to alleviate some of the pressures in cutting deals with unions and closing schools, but the latter were mostly in black neighborhoods so that alienated a constituency that comprises a third of the city’s population.

Chicago recorded the fewest murders in five decades in 2014, after a surge in Emanuel’s initial year, but in the first three months of 2015, murders were back up 29% and shootings by 40%.

As President Obama’s former chief of staff, he has another job these days...to try to secure Obama’s presidential library over New York and Hawaii.

--In a Rutgers-Eagleton poll of New Jersey residents, 58% said Democratic Sen. Robert Menendez should be allowed to stay in office unless he’s proven guilty of federal corruption charges, while 34% say he should resign.

I say he should stay in office, but the reality is, the indictment is so sweeping, there seems little doubt he will seek a plea deal and depart. The key will be the timing and the calling of a special election that would be held in November, and/or does Gov. Chris Christie get to appoint a Republican to replace Menendez with enough time to build support for the vote, rather than, say, two months.

[Like if Menendez resigned in the next month or two, which is unlikely, the appointee would have five months rather than two if Menendez held on awhile.]

--I have to admit, until I read a Los Angeles Times piece by Michael Finnegan and Maloy Moore, I had no idea that Charles Munger Jr., the son of Berkshire Hathaway vice chairman and $billionaire Charles T. Munger, is California’s top donor to the Republican Party.

Munger, 58, is a Palo Alto physicist, who “spent more than $11 million last year to help put Republicans in Congress and the Legislature, making him by far the state party’s biggest benefactor. His funding of Latino, female and moderate candidates has been crucial to the party’s effort to shed its image as a league of conservative white men.”

Munger’s funding of moderates, however, scares away some conservatives from running, while he is known for spending huge sums on ballot initiatives.

--Boston Marathon bomber Dzhokhar Tsarnaev was convicted on 30 counts, including conspiracy to use weapons of mass destruction. Next week, the seven-woman, five-man federal jury decides on how to punish him; death or life in prison.

While I recognize Tsarnaev wants to be viewed as a martyr, and life in prison would deny him that, I would still put him to death as long as it’s quick. If we were to be talking about him 10 years from now, with a “60 Minutes” piece on his captivity while endless appeals move through the courts, that would be the worst possible scenario.

--It is more than a bit discomforting that the Secret Service is a freakin’ mess. This week we learned a manager in the security clearance division was placed on indefinite administrative leave, his gun and badge taken away, and added to an internal “do not admit” list prohibiting entry to the office, after a female employee accused him of assaulting her after-hours at agency headquarters.

The manager had been among the first group of officials Director Joseph P. Clancy promoted when he took over as acting director in October after a string of missteps.

--USA TODAY’s Brad Heath reported, “For more than two decades, the Justice Department and the Drug Enforcement Administration amassed logs of virtually all telephone calls from the USA to as many as 116 countries linked to drug trafficking, current and former officials involved with the operation said.”

This work went on a decade before 9/11 in a program that provided a blueprint for the National Security Agency’s later surveillance. The DEA discontinued the operation, which was collecting numbers dialed and when, but not the content.

The data collection began in 1992 during the George H.W. Bush administration. The reason why this is a story, today, is because agents were gathering the records without court approval, but the result was “a treasure trove of very important information on trafficking,” former DEA administrator Thomas Constantine said in an interview.

President George H.W. Bush first proposed such a measure in his first prime-time address in 1989, and you have to remember this was a time when violent crime rates were at record highs and the DEA launched a “kingpin strategy” to attack the drug cartels.

The DEA stopped its program in the fall of 2013, but immediately asked the Justice Department to restart it because the shutdown “had a major impact on investigations,” one former DEA official told USA TODAY.

Today, the DEA files electronic subpoenas to telephone companies seeking logs of international telephone calls linked to targeted numbers. “Agents said it takes a day or more to pull together communication profiles that used to take minutes.” [Brad Heath]

--The University of Virginia chapter of Phi Kappa Psi announced it plans to pursue “all available legal action” against Rolling Stone magazine, following the release of a Columbia University School of Journalism report, headed by Dean Steve Coll, on its investigation into the now-discredited account of a UVA student, ‘Jackie,’ who said she was the victim of a gang rape at the fraternity. The Columbia report called magazine writer Sabrina Erdely’s story “a failure of journalism,” concluding Rolling Stone didn’t follow basic standards in reporting, fact-checking, and editing. Rolling Stone retracted the story, but incredibly did not fire Ms. Erdely.

In a statement the fraternity said: “The intense and comprehensive media coverage conveyed these falsehoods to hundreds of millions of people worldwide. Clearly our fraternity and its members have been defamed, but more importantly we fear this entire episode may prompt some victims to remain in the shadows, fearful to confront their attackers.”

UVA President Teresa Sullivan added: “Rolling Stone’s story, ‘A Rape on Campus,’ did nothing to combat sexual violence, and it damaged serious efforts to address the issue. Irresponsible journalism unjustly damaged the reputations of many innocent individuals and the University of Virginia. Rolling Stone falsely accused some University of Virginia students of heinous, criminal acts, and falsely depicted others as indifferent to the suffering of their classmate....Such false depictions reinforce the reluctance sexual assault victims already feel about reporting their experience, lest they be doubted or ignored.”

Edward Kosner / Washington Post

“For all the hand-wringing, there are no deep journalistic issues involved in the article. Any decent text editor or a magazine or desk editor on a newspaper would have taken one look at the manuscript, asked a few questions of the writer, and bounced it back with a growly ‘check it out!’

“Ms. Erdely never could find ‘Drew,’ the alleged mastermind of the rapes, or Jackie’s friends, also given pseudonyms, nor did she ask detailed questions of the fraternity or UVA officials that might have raised red flags about the authenticity of Jackie’s account. On any professionally run publication, editors would have directed the writer to do these elementary tasks long before the article was submitted for editing, fact-checking and legal review....

“Rather, ‘A Rape on Campus’ was nothing more than elementary journalistic malpractice committed by the writer, her text editor, the managing editor and proprietor (Jann) Wenner, who, according to the Columbia report, read an early version of the piece and raised no objections. The fact-checker, who identified some problems but was waved off by her superiors, is probably the only one in the chain-of-command who did her job....

“In the aftermath, incredibly enough, no Rolling Stone editor or the offending writer was fired, and the magazine proclaimed that none of its procedures needed rethinking. That is a bigger indictment of big-time journalism today than anything in Mr. Coll’s investigation.”

Finally, special kudos to the Washington Post and reporters Paul Farhi and T. Rees Shapiro for immediately doing yeoman’s work on this story, calling it out for what it was...a piece of fiction.

--Editorial / New York Post

“It’s pretty pathetic when the only campus figure who’ll stand up to the thought police is the football coach – but such is the University of Michigan.

“The school had nixed an April 10 screening of ‘American Sniper’ after a few students launched a petition whining that the film promoted ‘negative and misleading stereotypes’ and ‘sympathizes with a mass killer.’

“The censorship sent coach Jim Harbaugh to Twitter. ‘Michigan football will watch ‘American Sniper’! Proud of Chris Kyle and proud to be an America,’ he tweeted. ‘And if that offends anybody, then so be it.’

“That may not be why the school reversed course late Wednesday. That it had become a national laughingstock likely did the trick.

“Every Michigan official involved should still be fired.

“They banned the top-grossing movie of 2014, an Oscar-nominated flick full of nuance – just to spare a few students the horrors of having it shown on campus.

“That reveals utter cluelessness that the point of college is the free and fair exchange of ideas, no matter how it might hurt.”

--78-year-old Bob Schieffer, who has been anchor of CBS’ “Face the Nation” since 1982, announced he is retiring this summer. I’ve been watching “Face the Nation” over “Meet the Press” the past few years (after watching the first ½ hour of “This Week”) and I’ll miss Schieffer. Just slightly surprised he didn’t want to hang on through the election cycle, but then there are more important things in life, right, sports fans?

--The U.S. Postal Service issued a new limited edition “Forever” stamp Tuesday, honoring former Wake Forest professor (had to work in my alma mater) Maya Angelou, and the stamp carries the quotation: “A bird doesn’t sing because it has an answer, it sings because it has a song.”

It turns out the quotation isn’t Angelou’s. A children’s book author Joan Walsh Anglund told the Washington Post the quotation is in her book of poems “A Cup of Sun,” published in 1967. Anglund, 89, isn’t upset, being a big Angelou fan. She said she was just surprised to see it.

--Among his statements during four days of special Easter services, Pope Francis called on the world to give “tangible help” to persecuted Christians.

“We still see today our persecuted brothers, decapitated and crucified for their faith in you [Jesus], before our eyes and often with our complicit silence.”

“We ask for peace, above all, for Syria and Iraq, that the roar of arms may cease and that peaceful relations may be restored among the various groups which make up those beloved countries.

“May the international community not stand by before the immense humanitarian tragedy unfolding in these countries and the drama of the numerous refugees.”

“These are our martyrs of today, and they are many. We can say that there are more of them now than there were in the early centuries. I hope the international community does not look on, mute and inert, at such an unacceptable crime.”

---

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

God bless America.
---

Gold closed at $1204
Oil $51.64...first weekly close above $50 in seven weeks

Returns for the week 4/6-4/10

Dow Jones +1.7% [18057]
S&P 500 +1.7% [2102]
S&P MidCap +0.7%
Russell 2000 +0.7%
Nasdaq +2.2% [4995]

Returns for the period 1/1/15-4/10/15

Dow Jones +1.3%
S&P 500 +2.1%
S&P MidCap +5.7%
Russell 2000 +5.0%
Nasdaq +5.5%

Bulls 50.4
Bears 14.2 [Source: Investors Intelligence]

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