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Week in Review

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02/21/2015

For the week 2/16-2/20

[Posted 11:00 PM ET, Friday]

Edition 828

Washington, Wall Street and the War on Terror

Just a few notes on the economy before turning to a far more important topic that at some point will impact investor sentiment...terrorism. [Vladimir Putin and Ukraine could also yet upset the bull run, as noted below.]

January housing starts came in a little less than expected, while industrial production for the month was in line, up 0.2%.

Producer prices last month fell a whopping 0.8% owing to falling energy prices and over the past 12 months are down 0.1%. Ex-food and energy, the core reading, the PPI was down 0.1%, though is up 1.5% over the past year.

Oil prices broke their three-week winning streak as inventories remain at record levels (highest in 80 years for this time of year), though on Friday, Baker Hughes announced the industrywide rig count, while down an 11th consecutive week, hadn’t declined as much as expected.

So lots of supply that isn’t being removed as quickly as some might hope. On the demand side of the equation, there are hopes for Europe as it is beginning to show signs of coming out of its stupor.

But there was another story that will be part of a bigger one this coming week; that being the release of the Federal Reserve’s minutes from its Jan. 27-28 meeting.

Whereas the feeling has been the Fed will change the language at its March confab to prepare the markets for a June rate hike, it turns out “Many participants (at the January FOMC meeting) indicated that their assessment of the balance of risks associated with the timing of the beginning of policy normalization had inclined them toward keeping the federal funds rate at its effective lower bound for a longer time.”

The minutes say the committee was looking at international flash points from Greece to Ukraine, as well as slow wage growth as weakening the case for the first rate rise since 2006.

“Many participants regarded dropping the ‘patient’ language in the statement, whenever that might occur, as risking a shift in market expectations for the beginning of policy firming toward an unduly narrow range of dates,” the minutes said. “Some expressed the concern that financial markets might overreact.”

But if the employment data continues to show strength, and if, as in the last jobs report, wages are increasing at a respectable clip, the Fed has to act.

More important than the minutes, however, will be Chair Janet Yellen’s testimony to Congress this Tuesday and Wednesday, as the markets look for clues on what the Fed will do at its March 17-18 gathering. So we’ll have something more to talk about next WIR for sure.

One final item...the labor dispute between West Coast dock workers and port owners appears to have been resolved as I go to post. The National Retail Federation had projected a total shutdown would cost the U.S. economy $2 billion a day. As it is it will still take months to get back to normal even after this settlement.

The War on Terror

In a speech wrapping up a three-day summit organized by the White House to discuss the roots of terrorism, President Obama said: “The notion that the West is at war with Islam is an ugly lie. And all of us, regardless of our faith, have a responsibility to reject it.”

Obama has refused to use the terms “Islamist” or “Islamic” to describe the likes of ISIS, arguing he doesn’t want to give these groups any theological legitimacy.

“All of us have a responsibility to refute the notion that groups like ISIL somehow represent Islam, because that is a falsehood that embraces the terrorists’ narrative,” said Obama.

Additionally: “Muslim communities, including scholars and clerics, therefore have a responsibility to push back not just on twisted interpretations of Islam, but also on the lie that we are somehow engaged in a clash of civilizations.”

Republican presidential candidate Jeb Bush said: “I think it’s a mistake to think that ISIS is not what it is. It’s violent, extreme Islamic terrorism, and the more we try to ignore that reality, the less likely it is that we’re going to develop the appropriate strategy to garner the support in the Muslim world...to take them out.” [Geoff Dyer / Financial Times]

Editorial / Wall Street Journal...Feb. 17

“The White House hosts its Summit on Countering Violent Extremism this week, and Islamic State seems not to understand it wasn’t invited. The event is supposed to showcase President Obama’s leadership against a threat he refuses to identify by name, but the entire world has been watching Islamist jihadists advertise the specific threat across a brutal weekend.

“In Iraq Islamic State paraded in cages through the city of Kirkuk 17 captured Kurdish fighters whom it presumably plans to burn alive as it recently did a caged Jordanian fighter pilot. Kirkuk is on the crossroads of Kurdish and Sunni Iraq, and ISIS didn’t hold any of the crucial oil hub when Mr. Obama unveiled his anti-ISIS strategy in September. The Kurds are on the front lines against Islamic State, but the Obama Administration has been wary of sending them significant arms lest it offend the government in Baghdad that can’t or won’t protect the Kurds.

“Meanwhile, the rising Libyan branch of Islamic State released a video showing the beheading of 21 Egyptian Coptic Christians. The Copts were kidnapped in Libya and killed as ‘A Message Signed With Blood To the Nation of the Cross,’ according to the video caption.

“ ‘Oh people, recently you have seen us on the hills of Al-Sham and Dabiq’s plain, chopping off the heads that have been carrying the cross for a long time, and today, we are on the south of Rome, on the land of Islam, Libya, sending another message,’ declared a masked ISIS member.

“These videos are intended to show a religious movement that is on the march, the vanguard of history. This helps convert and intimidate Muslims who might otherwise resist. The longer Islamic State appears to be advancing despite Mr. Obama’s promise to ‘degrade and destroy’ it, the wider its appeal becomes.

“Egyptian President Abdel Fattah Al Sisi responded to the murder of the Copts with bombing raids against ISIS bases in Libya, and he urged the U.S. coalition to expand its operations to North Africa. Like the Kurds and King Abdullah in Jordan, Egypt knows the real threat and understands the need to step up the fight against Islamic State.”

Editorial / Wall Street Journal...Feb. 19

“President Obama opened this week’s White House Conference on Violent Extremism with a speech about community-based counter-radicalization efforts, and his Administration is being roundly mocked for its refusal to use terms like ‘Muslim terrorism’ or ‘Islamism.’ The mockery is deserved...

“But there is a deeper problem with the Administration’s semantic dodges. Al-Qaeda, Islamic State, Boko Haram and other jihadist groups are waging more than a military conflict. They are also waging an increasingly successful ideological war for the soul of Islam and its 1.6 billion followers.

“Their version of jihad is gaining adherents precisely because it is motivated by an idea that challenges the values and beliefs of moderate Islam, the West and modernity. The free and non-fanatic world won’t win this deeper struggle if the Obama Administration refuses even to acknowledge its nature.

“The 9/11 Commission Report put this front and center. Its second chapter, ‘The Foundation of the New Terrorism,’ traces what it calls ‘Bin Ladin’s (sic) Appeal in the Islamic World.’ It discusses the late al-Qaeda leader’s faith in ‘a return to observance of the literal teachings of the Qur’an and the hadith.’ It underscores bin Laden’s reliance on Muslim theologians, from Ibn Taimiyyah in the 14th century to Sayyid Qutb in the 20th. And it explains how bin Laden turned Islam into a license for murder.

“ ‘Qutb argued that humans can choose only between Islam and jahilyya,’ referring to a world of licentiousness and unbelief. ‘No middle ground exists... All Muslims – as he defined them – therefore just take up arms in this fight. Any Muslim who rejects his ideas is just one more nonbeliever worthy of destruction.’

“None of this is denied in the Muslim world, which is well aware of the increasingly radical bent of mainstream Islamist theology. Not for nothing did Egyptian President Abdel Fattah Al Sisi recently visit Cairo’s al-Azhar university, Sunni Islam’s premier center of religious learning, to warn leading clerics of where Islam is heading: ‘Let me say it again, we need to revolutionize our religion.’....

“But the President (insists) the West must never grant al-Qaeda and Islamic State ‘the religious legitimacy they seek’ by suggesting they are Muslim religious leaders rather than mere terrorists. That’s a fine sentiment, but it elides the fact that the two categories aren’t mutually exclusive. The Islamic State may speak for only a minority of Muslims, but it is nothing if not Islamic in its beliefs, methods and aims. Ignoring that reality for the sake of avoiding injured feelings helps nobody, least of all Islamic State’s many Muslim victims or Islam’s would-be reformers.”

Republican Sen. Ted Cruz (Texas): “The words ‘radical Islamic terrorism’ do not come out of the president’s mouth. The word ‘jihad’ does not come out of the president’s mouth. And that is dangerous.”

Democratic Rep. Tulsi Gabbard (Hawaii): “You look at the vast majority of terrorist attacks that are being committed around the world, there’s one common element here and it is this radical Islamist ideology. This war cannot be won, this enemy and threat cannot be defeated unless we understand what’s driving them, what is their ideology.”

Daniel Henninger / Wall Street Journal

“It is a mistake to think that Mr. Obama’s passivity or indecision are sufficient explanation. What is on offer here is the American left’s version of realpolitik. The decision by the Obama White House not to deploy American resources is thought-out, brutal and unapologetic.

“President Obama in his Feb. 6 national-security statement explained what he is doing – or not doing. He was precise and clear:

“ ‘We have to make hard choices among many competing priorities and we must always resist the overreach that comes when we make decisions based upon fear.’

“Short version: He’s not spending any real money on any of this. Get over it.”

Timothy Cardinal Dolan / New York Post

“Along with Pope Francis and so many others, I was deeply saddened to learn of the latest violence by fanatics who see anybody who disagrees with them as their enemy.

“These attacks threaten civilization itself.

“Whether it’s a massacre in Paris, Indonesia, Nigeria, Syria, Iraq, Iran, India or now in Libya and Egypt, we keep saying, ‘How much worse can it get?’

“And then we woke up Monday morning to see that it did get worse, with this brutal massacre of these young Egyptian Christians in Libya.

“They were beheaded for nothing less than their religious convictions. It moves me to prayers. It moves me to tears, yes, as a Christian, but also as an American, who recognizes religious freedom as ‘our first and most cherished liberty.’

“No denying it: There is an orchestrated phobia of Christianity throughout the world today, a coordinated effort on behalf of fanatics to see that true religion which stands for friendship, peace, the dignity of the human person and the sacredness of human life, is stamped out.

“These aren’t sporadic attacks. This is part of an orchestrated fanaticism, an ideology that sees Christianity, Judaism and any religion of peace as the enemy.

“Fanatics want to take over, and we can’t let that happen. They threaten civilization, everything that is decent and noble about humanity. It is a worldwide crisis that cannot, must not, be ignored.

“As the Holy Father has stated, we now see an ‘ecumenism of blood’ as men and women of all true creeds – Jewish, Christian and Islamic – unite in abhorrence of these horrors.

“I would like to believe these fanatics are a small group that is well-orchestrated and well-choreographed.

“But what we have to do is echo the appeal of Pope Francis. We believe that Islam is – at its root – a religion of peace.

“Now we encourage the majority of Islam to speak up and condemn these attacks, like Jordan is doing....

“We need Islamic religious leaders to stand up and say, ‘This is not Islam. This is a perversion of our faith.’

“Simply because these Christians make the sign of a cross, there is a price on their head.”

Europe and Asia

Continuing with this running history of our times, as the week drew to a close eurozone finance ministers were trying to reach a compromise between the Greek government’s request for a six-month loan extension with fewer conditions and demands from its creditors that Greece meet the existing terms of its 240 billion euro ($273 billion) bailout.

Outflows from Greek banks picked up and by some reports were about $23 billion since December. The European Central Bank increased the pool of emergency cash the banks can draw on by just 3.3 billion euros, far short of the 10 billion euro increase Greece requested, because the ECB said the deadline was Feb. 28 anyway. If no agreement was reached by then, the ECB wouldn’t be loaning out any further emergency funds.

Greek Prime Minister Alexis Tsipras told lawmakers in his Syriza party that the government – elected to scrap the bailout, repeal hated austerity measures and end cooperation with the ‘troika,’ the EU, ECB and IMF lenders – would not compromise. Any extension was “absurd” and “unacceptable.”

German Finance Minister Wolfgang Schaeuble hammered away at his take-it-or-leave-it message. “The question still remains if Greece wants a program at all or not,” Schaeuble told reporters on Tuesday. “On Feb. 28, at midnight, it’s over.”

Schaeuble said Germany’s parliament must vote on any extension by Feb. 27 for the program to continue. Failure to reach an accord could see Greece run out of cash by end of March.

Tsipras said he would not give in to “blackmail” from technocrats.

Greek Finance Minister Yanis Varoufakis said on Tuesday: “We know in Europe how to deliberate in such a way as to create a very good solution, an honorable solution, out of initial disagreements.”

The European Central Bank warned Greek banks to reduce their holdings of state debt if talks broke down in order to preserve some level of liquidity.

Greeks were not only yanking their cash out, but they were delaying making tax payments, which the government desperately needs. Tax revenue in January was 1 billion euro short of the target.

So ahead of Friday’s climactic meeting, Germany rejected Greece’s request to extend its rescue by six months. Varoufakis reversed his government’s long-held promise to kill the current bailout, but a letter he submitted to the finance ministers contained a series of clauses Berlin said amounted to “a Trojan horse” designed to allow Athens to change the terms of the game.

Martin Jager, spokesman for the German finance ministry, said, “The letter from Athens is not a substantive proposal for a solution. In truth, it aims at bridge financing without fulfilling the demands of the program.”

Germany wanted Athens to request an extension, while promising to complete the program and committing to negotiate any changes with bailout monitors.

So we move to Friday and as is almost always the case with the eurozone and its financial crises, an agreement was reached at the 11th- hour to extend Greece’s rescue program for four months, thus setting up another potential stand-off in June when a 3.5bn euro debt payment is due.

However, several important issues need to be decided in the next few days, including what reform measures Athens needs to adopt in order to get the final installment of 7.2bn euro in aid that comes with completing the current program. The Tsipras government needs to submit a list for approval to eurozone ministers on Monday.

Assuming this then meets approval, a crisis will have been averted for at least a decent spell and its assumed there will be no bank runs in Athens, which would have no doubt otherwise been the case.

Jeroen Dijsselbloem, the chairman of the finance minister’s group who brokered the deal said, “It was intense because it was about building trust between us. Tonight was a first step in this process of rebuilding trust. As you know, trust leaves quicker than it comes.”

But this is not over. For starters, Alexis Tsipras has taken a U-turn for a politician who promised in his election campaign to kill the existing bailout.

Plus the agreement doesn’t reduce Greece’s sovereign debt levels, another campaign promise. Any debt restructuring now has to be part of a new bailout agreement for June.

The eurogroup statement read: “The Greek authorities commit to refrain from any rollback of measures and unilateral changes to the policies and structural reforms that would negatively impact fiscal targets, economic recovery or financial stability, as assessed by [bailouot monitors].” [Financial Times]

What will the people and members of Greece’s parliament say over the weekend? Greece can negotiate its economic reform agenda, but it is committing to the “successful completion” of the current bailout review.

Also, in a move reflecting a lack of trust between Athens and eurozone lenders, the deal unexpectedly takes back 10.9bn euro in funds currently sitting in Greece’s bank rescue facility. These funds can still be used to recapitalize the banks, but instead of the Greek government having a say in the disbursement of said funds, now it’s up to eurozone authorities as to how they are doled out.

So I’m posting this Friday night, but by Monday morning who knows what the situation will be.

---

Meanwhile, turning to the eurozone and EU economy, the week started off with continued good news on the car sales front, or as the Euros call it, registrations. Sales were up 6.2% in January, year on year, according to the European Automobile Manufacturers’ Association, which compares with up 5.4% for all of 2014, the first year of growth after a six-year decline.

Individually, January sales were up a whopping 28% in Spain, 11% in Italy, 6.7% in the U.K., 6.2% in France and 2.6% in Germany.

Then on Friday, Markit released its flash reading for manufacturing and services in the eurozone for the month of February, with a composite figure of 53.5 vs. 52.6 in January (50 being the dividing line between growth and contraction). The flash PMI on manufacturing, specifically, was just 51.1 vs. 51.0, but services rose to 53.9 from last month’s 52.7.

The flash readings highlight only Germany and France, individually, and Germany’s manufacturing PMI was unchanged at 50.9, but services were at 55.5 vs. 54.0, and the comp, 54.3 vs. January’s 53.5, is a 7-month high.

In France, the manufacturing PMI fell to 47.7 from 49.2, but services registered their best reading in 42 months, 53.4 vs. 49.4.

Chris Williamson, Chief Economist at Markit:

“February’s PMI surveys paint an upbeat picture of improving eurozone economic health. Undeterred by the ongoing Greek debt crisis, economic growth is gathering momentum and looks set to gain further traction in coming months. The economy is on course to grow by at least 0.3% in the first quarter, assuming March doesn’t disappoint.

“Even more encouraging is the faster rate of job creation reported during the month. Employment is now rising at the steepest rate since 2011 as employers become increasingly confident in the outlook and eager to take on staff to meet rising demand.

“With the ECB’s quantitative easing ‘bazooka’ due to start in March, business optimism has been boosted to its highest for three-and-a-half years.

“Growth is looking lopsided, however, and very much dependent on the services economy where lower prices are fuelling growth.”

A few other tidbits....

Consumer prices in France in January fell 0.4% year on year.

Greece’s CPI was down 2.8% yoy last month.

The CPI in the U.K. increased at an annualized rate of 0.3% in January, the lowest rate of inflation in Britain since the data series started in 1989, and by other measures the weakest since 1960. Most experts believe the Bank of England is not raising rates until 2016, even though unemployment is down to 5.7%, the lowest since August 2008; with wages up 1.7%, ex-bonuses, which means wage growth is far outpacing inflation. This is good.

And a few notes on Asia....home prices in China fell again last month in 64 of 70 major cities, according to the National Bureau of Statistics, the ninth consecutive decline, falling at an annualized pace of 5.1% in January. Chinese business sentiment also fell to a record low in February.

In Japan, the Tokyo Nikkei stock index finished the week at a nearly 15-year high, 18332, the highest level since May 2000. Earlier in the week, the government announced a flash estimate for fourth-quarter GDP, up 2.2%, less than expected, though this was after contracting the prior two quarters. Going forward it’s about companies passing on more of their profits in the form of increased wages. That’s the only way the consumer sector is going to get out of neutral.

---

Finally, back to Europe and the above commentary on the terror threat. After the beheadings by ISIS in Libya, Italy’s foreign minister, Paolo Gentiloni, said there was a grave danger of ISIS fighters in Libya allying with other Islamist extremists groups, establishing a foothold on the shores of the Mediterranean from where they could attack Europe. 

The terror threat from Libya is just over 600km from Italy.

“There is an evident risk of an alliance being forged between local groups and Daesh (ISIL) and it is a situation that has to be monitored with maximum attention,” Gentiloni told parliament.

Evidence from ISIL supporters shows they are planning a takeover of Libya as a “gateway” to wage war across southern Europe.

Italy is fearful the growing crisis in Libya will flood Europe with refugees and asylum seekers. Last year, 170,000 arrived by boat.

The Italian government is putting 4,800 soldiers on the streets throughout the country to help guard against potential terrorist attacks; guarding sensitive sites and targets until at least June. 500 will be deployed in Rome, where there is already a sizable army presence to protect embassies, the capital’s synagogue and Jewish schools. The new troops are to be deployed at tourist venues.

Security for Pope Francis has been stepped up, the Swiss Guard said.

This comes after an Islamist killed two people in Copenhagen last Saturday, let alone the Paris attacks that claimed 17 lives.

Lastly, you have the rush by some European leaders to reassure Jews, such as in France, that they have a home in Europe amid renewed calls by Israeli Prime Minister Benjamin Netanyahu for them to come home to Israel.

French Prime Minister Manuel Valls called for France to unite against “Islamo-fascism” in affirming his call for French Jews to stay.

“France is as injured as you are and France doesn’t want you to leave,” said Valls. “France once again expresses its love for you, its support and solidarity.”

Around 6,900 French Jews moved to Israel in 2014, up from 3,300, with the number expected to grow to 10,000 in 2015.

Netanyahu said: “Jews deserve protection in every country, but we say to Jews, to our brothers and sisters: Israel is your home. We are preparing and calling for the absorption of mass immigration from Europe.” [AFP]

Street Bytes

--Stocks rallied a third straight week with the Dow Jones and S&P 500 hitting new record highs (as well as the Russell 2000), thanks to a solid rally on Friday fueled by hopes the Greece situation has been resolved for at least a spell.

The Dow Jones rose 0.7% to 18140, while the S&P gained 0.6% to 2110. Nasdaq, up 1.3% to 4955, is now less than 100 points shy of its all-time closing high of 5048 set back on March 10, 2000.

I do have to mention that last week I noted a Bloomberg survey that had earnings growth for the S&P 500 in the fourth quarter thus far coming in at 4.1%. But I saw a blurb in Barron’s that Apple accounts for a full half of that earnings gain and that if you strip Apple out, the S&P 499 has a growth rate of less than 2%. [Jim Bianco / FactSet; Randall Forsyth / Barron’s]

--U.S. Treasury Yields

6-mo. 0.06% 2-yr. 0.63% 10-yr. 2.11% 30-yr. 2.71%

Reminder, the yield on the 10-year was 1.64% on Jan. 30. We started the year at 2.17%.

--Less than a week after the close of the open enrollment period for ObamaCare, federal officials announced a special six-week extension for uninsured people who they say may not yet understand they will be fined if they don’t have coverage. The extension runs from March 15 to April 30.

At the same time officials announced that there was an error with some of the figures provided to roughly 800,000 Americans to determine a customer’s tax responsibility, IRS form 1095a, which details how much of a subsidy they received. Corrected IRS forms are to be in the hands of those impacted the first week of March, with the 800,000 being notified Friday, either with personal phone calls or emails. You shouldn’t file your taxes if you are so contacted until you have the corrected information, but it’s estimated of the 800,000, 50,000 already did.

--Walmart reported earnings that were better than expected for the quarter, though revenues fell short. U.S. same-store sales were up 1.5%, which was decent, but then the company guided lower for all of 2015.

The big news, however, was that the company announced it was hiking its minimum wage to $9.00 an hour - $1.75 above the federal minimum wage. By February 2016, all of its existing workers, currently 500,000, will be paid at least $10. [After April’s hike to $9.00, the typical full-time Walmart employee will earn $13 an hour.]

The initiative will cost the company $1 billion and, coupled with the reduced earnings outlook, sent the shares lower as analysts lowered their price outlooks. It’s expected Walmart’s move will reverberate across the retail sector.

--Gavyn Davies / Financial Times...on the topic of oil:

“(The) combination of excess inventories, still-high U.S. production, the refusal of OPEC to cut output and sluggish demand growth may hold oil prices down for quite a while before a sustainable balance is restored to the market, probably in 2016. Prices may remain very volatile before settling in a range of perhaps $60-$70 next year. This is somewhere near the consensus forecast and the forward market prices for next year. For what it is worth, it seems to me that downside risks to that forecast outweigh upside risks, unless the Saudis change their minds.

“What about the even longer term? (Strategist) Jeremy Grantham...states the bullish case for oil prices, five to eight years out. He may be right, but much has changed since the heady days of $140 a barrel in 2008. The ‘peak oil’ theory looks increasingly dubious, GDP growth in the major emerging economies has slowed, electric cars are coming closer, the Saudis are no longer willing to act as the swing producer, and alternative energy sources are coming on stream.

“The trough of this cycle may be close, but the golden era for oil producers is nothing more than a very distant memory.”

--The Russian cybersecurity firm, Kaspersky Lab, said the United States has found a way to embed surveillance and sabotage tools in computers and networks it has targeted in Iran, Russia, Pakistan, China, Afghanistan and others being closely watched by the intelligence community.

Kaspersky, at a conference in Mexico, said the techniques resembled those used in Stuxnet, the computer worm that did a number on Iran’s nuclear enrichment program. Kaspersky says the “firmware” being employed is beyond the reach of existing antivirus products and most security controls.

Security software made by Kaspersky Lab is used by the likes of Iran and Russia, which gives Kaspersky key access to America’s espionage operations, as reported by the New York Times’ Nicole Perlroth and David E. Sanger.

“If the malware gets into the firmware, it is able to resurrect itself forever,” Costin Raiu, a Kaspersky threat researcher, said in a report. “It means that we are practically blind and cannot detect hard drives that have been infected with this malware.”

Well, needless to say, Vladimir Putin and his goons were none too pleased with this report by Kaspersky, which no doubt is accurate (I’ve written of them before), and a former National Security Agency employee told Reuters the same. It’s certainly not good for U.S. computer manufacturers and the likes of Microsoft.

Earlier, Kaspersky said as many as 100 banks and other financial institutions around the world had been hit by hackers to the tune of $1 billion, one of the most sophisticated cyberattacks to hit the industry. Kaspersky said it’s “an attack that’s very much active.”

The attacks were said to have been mounted by an international criminal gang that goes by the name of Carbanak, with representatives in Russia, Ukraine and other parts of Europe, as well as China.

--Lenovo Group, the world’s largest supplier of personal computers, has had to rush to squash a burgeoning controversy over adware pre-installed on its laptops after experts declared the technology to be a serious security threat, as reported by the South China Morning Post.

Lenovo said it stopped shipping any products with the Superfish software last month and had stopped pre-installing the adware.

The Superfish adware pushes third-party advertisements into Google searches and websites without the computer user’s permission. Superfish is a U.S.-based software startup that had formed a partnership with Lenovo.

According to IDC, Lenovo accounted for 59.2 million of 308.6 million PCs shipped globally last year.

The company said Superfish was not installed on its premium, Thinkpad-brand business notebook computers, nor was it preloaded on its desktop computers, smartphones or tablets.

--Apple said it would be in production on an electric car by 2020.

--Snapchat, the app that allows users to send friends photos and videos that disappear in seconds, is receiving another round of venture capital funding that will raise its value to $19 billion (another source says $16bn).

Snapchat was founded in a Stanford University frat house four years ago. More than 700 million disappearing photos and videos are sent every day, according to the company.

At $19 billion, Snapchat would be the third most valuable startup backed by VC funding, next to Chinese smartphone maker Xiaomi, at $45 billion, and Uber, $40 billion.

--According to the Wall Street Journal and a report by a London research firm, Coalition Ltd., Wall Street’s workforce has fallen 20% globally since its recent peak in 2010. 10 of the world’s largest firms trimmed 4%, or 2,100 employees, in 2014 from a year earlier, primarily because of the challenging environment in the fixed-income sector. New rules on capital and risk taking have also crimped profit.

On the other hand, the likes of JPMorgan Chase are beefing up their back-office operations in areas like cybersecurity and compliance.

--Deere & Co. lowered its sales outlook for the year amid a stronger U.S. dollar as well as slumping demand for farm machinery. Deere, which handily beat expectations for its fiscal first-quarter due to aggressive cost cutting, said overall sales for the year ending Oct. 31 would be down 17%, worse than previously forecast.

--Google co-founders Larry Page and Sergey Brin announced they would sell shares currently worth $4.4 billion over the next two years that would reduce their voting control through a special class of shares down to 52 percent, even though their economic interest is about 13 percent. Their remaining combined stake would be worth nearly $45 billion.

--The Frankfurt stock market, as measured by the DAX, crossed 11000 for the first time ever this week, 11050, and is up 12.7% for the year.

--According to the International Coffee Organization, demand is set to grow 25% in the next five years. Increased consumption in India and China is a major reason.

A historic drought in Brazil, however, is leading to reduced production, with the likes of Vietnam, India and Indonesia not likely to be able to make up for the shortfall.

Ergo, sports fans, prices should rise, but then you have currency issues in Brazil that have tended to mitigate the supply problem.

--I forgot to note last time that Kellogg reported sales of its morning meals unit (Special K, Corn Flakes and Kashi brands, among others) were down 7.7 percent in the fourth quarter. General Mills (Wheaties, Cheerios and Lucky Charms) said its cereal unit was down 7 percent in the six months ended Nov. 23.

A lot of cereal fans have moved to yogurt for breakfast.

--According to Nielsen, traditional TV usage among millennials, 18 to 34, which had fallen around 4% a year since 2012, declined a whopping 10.6% between September and January. This is stunning.

Additionally, the median age of the TV audience hit 50 this year, older than the critical 18-to-49 demographic targeted by advertisers. [New York Post]

--Once again this week I had a pleasant experience at my local “Burger King.” This time I was using the double cheeseburger with bacon, plus large fries, coupon for $3.00. [I’m hoping to get a major national television spot for touting the chain ceaselessly.]

More importantly, the new Burger King / Tim Hortons entity (Restaurant Brands International Inc.) had super fourth-quarter sales, up 7.7% in the former, 7.4% in the latter. [If I had a Tim Hortons nearby, sorry, Dunkin’ Donuts, they’d get my business.]

Recall, McDonald’s U.S. same-store sales in January rose just 0.4% (down 1.8%, globally).

--It is estimated Russia’s financial crisis will lead to 30% of Moscow’s restaurants closing by March, as reported by Izvestia. That’s a lot of lost jobs.

--We note the passing of Michele Ferrero, Italy’s richest man, who died at the age of 89.

Ferrero’s privately owned firm is famous for its Nutella spread, Ferrero Rocher chocolates, Kinder eggs and Tic Tac sweets.

Ferrero’s father developed the forerunner to Nutella in 1946, and then Michele turned the paste into what is now known the world over in 1964.

The Ferrero group has annual sales of more than $9 billion and Forbes magazine ranked his family 30th on their list of the world’s wealthiest people at $23.4 billion.

--NBC Nightly News retained its ratings lead in its first full week with Lester Holt subbing for Brian Williams, though its edge over ABC World News Tonight was reduced to 400,000 viewers (9.4 million to 9 million).

--As reported by Yoona Ha of Crain’s New York Business, owing to the box office success of “Fifty Shades of Grey,” New York City sex-shops have seen sales rise around 25%! [It’s “Web Sweeps Week.” I need to juice ratings.]

Foreign Affairs

Russia / Ukraine: So much for the ceasefire, which anyone with half a brain knew was a crock to begin with. Russian troops and armaments continue to pour into the eastern part of the country, the Donbass, as Russian-backed separatists took the strategic rail hub of Debaltseve in a gross violation of the ceasefire agreement. Ukrainian troops were forced into a humiliating, disorganized retreat. 13 Ukrainian soldiers were killed in the withdrawal, with 157 wounded, 90 captured and 82 reported missing in action, according to the military.

As part of the ceasefire, a prisoner exchange was to take place by March 7. Vladimir Putin told Chancellor Merkel he would do his best “to influence the separatists in this regard,” according to a spokesman for Merkel.

Ukrainian President Petro Poroshenko is appealing for the deployment of peacekeepers from either the United Nations or the European Union to police the front line between the two sides.

Moscow and the rebels immediately denounced the idea. Putin said of Debaltseve that it was already surrounded before the Minsk talks. Speaking to journalists in Hungary, Putin proclaimed: “I said that the surrounded troops would try to break through and that the militia, who had got the Ukrainian troops surrounded, would resist these attempts and try to keep the encirclement in place, and this would inevitably lead to further clashes.”

Putin also said, “According to our intelligence, [U.S.] weapons are already being delivered.” Another lie from Vlad the Impaler.

The fall of Debaltseve is yet another defeat for Poroshenko in a series of defeats that threaten his government. Many in parliament are calling for the heads of the generals, and that’s for starters.

Editorial / Wall Street Journal

“In the sorry annals of ‘ceasefires,’ this week’s fiasco in southern Ukraine will have to rank among the most instantly humiliating. For Ukrainian President Petro Poroshenko, who was bludgeoned by his friends into accepting it. And for Angela Merkel, Francois Hollande and President Obama, who did the bludgeoning and have since let Vladimir Putin violate it with impunity.  Ukraine is paying today in more lost territory, but the NATO alliance may also pay soon enough....

“ ‘Obviously it’s bad to lose,’ chirped Mr. Putin about the retreat [from Debaltseve], during a visit to his autocratic ally in Hungary. ‘But life is life and it still goes on.’ Unless you were a Ukrainian killed during the non-ceasefire.

“The result is that Mr. Putin has again expanded the Russian rump state of Novorossiya inside Ukraine. He may now decide to consolidate those gains and sit tight – for a while. But that’s what the West’s Russia-appeasement lobby predicted a year ago after Mr. Putin grabbed Crimea.

“Then he moved on Luhansk and Donetsk. After a previous ceasefire in September, his troops and proxies advanced along the Sea of Azov coast toward Mariupol. Sooner rather than later the shelling of that key port city will begin again. Meanwhile, the Pentagon says Russian trops and weapons continue to flow into Ukraine....

“Here and there...a Western leader is willing to admit to a harsher reality. The latest is British Defense Minister Michael Fallon, who said Thursday that the tactics of deceptive invasion that Russia has used to destabilize Ukraine pose a ‘very real and present danger’ to the Baltic states, which are members of NATO.

“ ‘I’m worried about Putin,’ Mr. Fallon said, according to the London Times. ‘I’m worried about his pressure on the Baltics, the way he is testing NATO.’

“He should be worried, all the more so after the latest Minsk humiliation. The cutthroat in the Kremlin wants a Greater Russia that he can dominate. He wants a cowed West that will leave him to it. And after watching Western leaders beg for his mercy after Minsk, he can see a clearer path to getting both.”

Republican Senators John McCain and Lindsey Graham evoked the appeasement of Hitler before World War II, saying Tuesday that Merkel and Hollande, with Obama’s support, were “legitimizing the dismemberment of a sovereign nation in Europe for the first time in seven decades.”

Philip Stephens / Financial Times

“War or ceasefire, Russian aggression in Ukraine is overturning at last the West’s complacency. Washington has realized that this is more than a discrete regional conflict. Europeans – many of them anyway – now understand that Vladimir Putin is challenging the rules-based order that has kept the continent’s peace. What is needed next is a broadly based strategy to counter the Russian president’s ambitions.

“This demands an assessment of the Kremlin’s thinking, motives and intentions... Where do military opportunism in Ukraine, Russian gas supplies, Moscow-directed subversion and corruption, and nuclear sword-waving fit in Mr. Putin’s worldview? Whatever happens in the Donbass, the West will be grappling with Russian revanchism for some time yet....

“At the heart of (Russia’s) neurosis lies an intuitive insecurity reaching back deep into Russian history. Conveniently, the ever-present danger provides a patriotic buttress for the ruling elite. Faced with an ‘evil, hostile and menacing’ world, the security of the nation and regime become interchangeable.

“There are nuances. Even as he rails against their efforts to humiliate Russia, Mr. Putin regards western societies as decadent, weak and divided. And Russia still has friends in the West. Mr. Putin is lauded by far-right populists. He is assured of a welcome in Vienna. Only this week he was in Budapest to meet Viktor Orban, the acolyte who serves as Hungary’s prime minister. Moscow’s goal is to deepen and exploit conflicts between the western powers.”

Editorial / Washington Post

“President Obama has frequently boasted of leading a collective U.S.-European response. But he stood back last week as Ms. Merkel and French President Hollande negotiated the giveaway of eastern Ukraine to Mr. Putin. When the European Union announced a small round of new sanctions against Russian officials Monday, before Debaltseve fell, the Obama administration did not join in. Rather than lead, the president appears to have ceded the Ukraine crisis to Germany, with predictably poor results.

“European leaders will not stop Russian aggression without a determined U.S. president. Ukrainians must be wondering how much more of their country must fall to Russian troops for Mr. Obama to set aside his ‘strategic patience.’”

Editorial / The Economist

“(Former) Soviet countries that have joined Western institutions must be buttressed and reassured. If the case for sending arms to the Donbas is doubtful, that for basing NATO troops in the Baltics is overwhelming, however loudly Mr. Putin squeals. Western leaders must make it clear, to him and their own people, that they will defend their allies, and the alliance – even if the struggle is covert and murky.

“And it isn’t only its allies who appreciate the West’s virtues. So do many Russians, including shameless Putinists who denounce the West’s decadence but exploit its schools and stock-markets. It is long past time for every Russian parliamentarian and senior official to join the sanctions list. Far from being relaxed as, after Minsk, fellow-travelers may suggest, sanctions must be tightened – and sanctions-busting curtailed. In the end, they will prove a stronger lever than weapons.

“At the same time, the West should use every available means to help ordinary Russians, including Russian-sympathizers in the Baltics and Ukraine, learn the bloody, venal truth about Mr. Putin. It should let them know that Russia, a great nation dragged down a terrible path, will be embraced when it has rulers who treat the world, and their own people, with respect not contempt, however long that takes.”

The death toll in the war is now more than 5,600. 

*Friday afternoon, the deputy commander of NATO, Sir Adrian Bradshaw, openly raised the prospect of a conventional armed conflict with Russia on European soil, warning Russia could lash out at an eastern European member state designed to catch the alliance off guard and snatch territory. 

Speaking at a think-tank in London, Sir Adrian said, “Russia might believe the large-scale conventional forces she has shown she can generate at very short notice...could in future not only be used for intimidation and coercion, but to seize NATO territory,” he said.

Bradshaw pointed to extensive war games conducted by the Russian military in 2013 that worked on lightning moves involving the rapid mobilization of as many as 25,000 troops in Belarus. Another ‘snap’ exercise the same year in Russia’s eastern military district was the largest since the fall of the Iron Curtain and involved 160,000.

Iraq / Syria / ISIS: For the life of me I don’t understand why this has been announced so publicly, but a joint Iraqi-Kurdish military force of up to 25,000 is being assembled to retake Iraq’s second city, Mosul, from ISIS, according to a U.S. official.

Yes, ISIS knows this is a goal, but it’s also the second time the U.S. has spoken up about it, including giving a time table for the offensive; specifically April or May. To do so later runs up against the summer heat. Of course this gives ISIS even more of a heads-up in ‘preparing the ground’ for the attack, such as in planting IEDs.

While the official wouldn’t say if a small group of U.S. advisers would be part of the attack force to guide air support, that seems a certainty if the goal is success.

In the here and now, there was fierce fighting in and around the Syrian city of Aleppo as regime forces battled a range of insurgents, including al-Qaeda’s Nusra Front, with heavy casualties on both sides.

Separately, Turkey and the United States signed an agreement Thursday to train and arm Syrian rebels fighting ISIS after months of talks. This is a step that should have been taken three years ago, realistically.

The Turkish government said the training could begin as early as next month and involve hundreds of Syrian fighters in the first year.

The U.S. and Turkey, though, continue to disagree over just what this force that is to eventually number 5,000 is supposed to do. Washington wants it going after ISIS, while Ankara says the target should be President Bashar Assad.

A new poll from CNN/ORC shows 57 percent of Americans do not approve of the way President Obama is handling the country’s military action against ISIL. 40 percent said they approved of his efforts. Back in September, 49 percent approved.

One more on ISIS...in retaliation for Egypt’s bombing of its positions in Libya, IS militants killed at least 40 people there on Friday in the eastern town of al-Qubbah. Three bombs targeted a petrol station, a police station and the home of parliamentary speaker Agila Salah, who was not there at the time of the attack.

Iran / Israel: On the nuclear talks front, with time running out to reach an agreement, U.S. officials will meet with their Iranian counterparts in Geneva on Sunday, with the P5+1 (Russia, China, Britain, France, the United States and Germany) facing a March 31 deadline.

According to Yuval Steinitz, Israel’s intelligence, international relations and strategic affairs minister, “The gap is narrower than before.”

“I can see progress on two or three central items,” said Steinitz, who is the Israeli point man on the issue, though not directly involved in the talks.

As reported by the Financial Times’ Sam Jones and Geoff Dyer:

“Mr. Steinitz outlined four key areas of concern in the talks: the number of centrifuges Iran is permitted to continue operating; its stockpile of enriched uranium; its research into more advanced centrifuges; and the storage and dismantling of mothballed centrifuge arrays.

“ ‘On the first issue of the number of centrifuges...there is some progress or gaps which have been narrowed. But this is mainly because the P5+1 made too many concessions,’ Mr. Steinitz said. Tehran initially wanted a minimum of 9,000 centrifuges, and the P5+1 is considering 4,500 and possibly 6,000.

“Iran has, however, made substantial concessions on its stockpile of uranium, Mr. Steinitz said. ‘There is some progress here also – the Iranians [are] agreeing to deliver most of the stockpile abroad,’ he said.

“Israel’s chief remaining concern, on which there had been ‘no real progress,’ was centrifuge research. Without a comprehensive ban, Mr. Steinitz said, Iran could – completely and legally – undermine any deal. Israel would push the P5+1 hard on the issue, he said, adding that world powers could afford to be tough with Tehran.

“ ‘There can be no deal immediately, but this doesn’t mean that there will be no deal after a few months or maybe a year or two because if the pressure is sufficient and if the Iranians are forced to choose either to save their economy or to save their uranium enrichment facilities, I’m confident...they will choose to save their economy.’”

David Ignatius / Washington Post

“The public rift between President Obama and Israeli Prime Minister Benjamin Netanyahu over the Iranian nuclear issue is often described as a personality dispute. But a senior Israeli official argued this week that the break has been building for more than two years and reflects a deep disagreement about how best to limit the threat of a rising Iran.

“Yuval Steinitz, Israel’s minister of intelligence, outlined his government’s view in an interview Wednesday. He said that the nuclear agreement contemplated by Obama would ratify Iran as a threshold nuclear-weapons state, and that the one-year breakout time sought by Washington wasn’t adequate. And he stressed that these views aren’t new.

“ ‘From the very beginning, we made it clear we had reservations about the goal of the negotiations,’ he explained. ‘We thought the goal should be to get rid of the Iranian nuclear threat, not verify or inspect it.’

“Steinitz, who helps oversee Iran strategy for Netanyahu, said he understands the United States wants to tie Iran’s hands for a decade until a new generation takes power there. But he warns: ‘You’re saying, okay, in 10 or 12 years Iran might be a different country.’ This is ‘dangerous’ because it ignores that Iran is ‘thinking like an old-fashioned superpower.’....

“ ‘The temptation [for Iran] is not now but in two or three or four years, when the West is preoccupied with other crises,’ he added. Steinitz said that if Iran chose to ‘sneak out’ at such a moment, it would take the United States and its allies months to determine the pact had been violated, and another six months to form a coalition for sanctions or other decisive action. By then, it might be too late....

“Steinitz concluded the conversation with an emphatic warning: ‘Iran is part of the problem and not part of the solution – unless you think Iran dominating the Middle East is the solution.’ People who think that a nuclear deal with Iran is desirable, as I do, need to be able to answer Steinitz’s critique.”

Meanwhile, Ayatollah Ali Khamenei, still the key to any nuclear agreement, said in a speech this week:

“The enemy is going to use the weapons of sanctions to the hilt because their goal is to stop the progress of our people,” as quoted by the official Islamic Republic News Agency. “Even if we were to allow them to dictate to us on the nuclear issue, the sanctions will not be lifted because they are against the foundational principles of the revolution....

“If their intent is to retain sanctions, the Iranian nation can go that route as well. Iran has the world’s most gas and oil, and if need be Iran can hold back gas that Europe and the world is so dependent on.” [Los Angeles Times]

Benjamin Netanyahu...at a speech in Jerusalem on Monday explaining the reason behind his upcoming address before a Joint Session of Congress.

“Why am I going to Washington? Because, as prime minister of Israel, it’s my obligation to do everything in my power to prevent the conclusion of a bad deal that could threaten the survival of the State of Israel.

“The current proposal to Iran would endanger Israel. It would enable Iran to build its first nuclear device within an unacceptably short time. And it would allow Iran to build an industrial capability to enrich uranium that could provide the fuel for many bombs in the coming years.

“A regime that openly calls for Israel’s destruction would thus have finally the means to realize its genocidal aims.

“Now mind you, I’m not opposed to any deal with Iran. I’m opposed to a bad deal with Iran. And I believe this is a very bad deal....

“Why am I going to Congress? Because Israel has been offered the chance to make its case on this crucial issue before the world’s most important parliament; because a speech before Congress allows Israel to present its position to the elected representatives of the American people and to a worldwide audience; because Congress has played a critical role in applying pressure to the Iranian regime – the very pressure that brought the ayatollahs to the negotiating table in the first place, and because Congress may well have a say on any final deal....

“The pursuit of nuclear weapons by Iran is the most urgent security challenge facing the world. The greatest danger facing humanity is the possibility that any movement or any regime of militant Islam will arm itself with weapons of mass destruction.

“Everything that we see in our region now will pale by comparison. Everything that we see in Europe will pale by comparison.

“When a militant Islamic regime that is rampaging through the region right now – that’s what Iran is doing, it’s conducting a rampage through the region – when such a regime has nuclear weapons, the whole world will be in peril.

“Look at what Iran is doing now without nuclear weapons. States are collapsing – and Iran is plunging forward. It already controls four capitals.

“It’s trying to envelope Israel with three terrorist tentacles – Hizbullah in Lebanon, Hamas in Gaza and now it’s trying to build with its Hizbullah proxies a third front in the Golan.

“With nuclear weapons, such a regime would be infinitely more dangerous to everyone, not only to Israel.” [New York Post]

Lebanon: Michael Young / Daily Star

“As prospects for the emergence of new sectarian and ethnic entities rise in the Middle East to replace illegitimate, authoritarian states, it is necessary to ask what will happen to Lebanon, the only Arab state that has sought to build its political system around a formula for sectarian compromise.

“Lebanon’s most pressing danger is the presence of some 1.5 million Syrian refugees in the country, most of them Sunnis from areas the Assad regime considers vital for its political survival. Many have fled Homs and Qalamoun, which sit on vital communication lines between Damascus and the coast. These are both places the regime intends to retain, even as it has given up on far-flung districts that it has no real hope of controlling, such as Syria’s north, northeast and east.

“Bringing back hundreds of thousands of Sunnis to Homs and its environs, the vulnerable neck of Bashar Assad’s ‘useful Syria,’ is not something the regime in Damascus intends to do, amid rumors that the Iranians have resettled friendlier Shiite populations there from outside Syria and even the region. So, what happens to most of the refugees now in Lebanon?

“Developments don’t offer much of an answer, let alone provoke optimism....

“Is the permanent settlement of Syrian refugees in Lebanon a possibility, as some Lebanese have warned? Certainly it is, and what is more worrisome is that there are those Lebanese willing to go along with such a project, seeing that it will boost Sunni demographics at the expense of Shiites. International humanitarian organizations have insisted that Lebanon is obliged to care for the refugees, but have given scant attention to the long-term, political implications of their presence....

“Populations are not sacks of potatoes. As the regime’s intent becomes clearer, the refugees will understandably resist it and many will refuse to leave Lebanon....

“Beyond that, the millions of Syrians in Lebanon, Jordan and Turkey are a potential reservoir of difficulties not only for the region but also for the international community. A consequence of Sunni alienation in Iraq was ISIS; the Syrian refugees present risks far more perilous, as millions of people without a future, a territory, an anchor are circulating among fragile countries already at their limits in coping with the present situation.

“That the international community – starting with Europe, the United States, the Arab countries, and Russia – has been less than useless with regard to the Syrian refugees is self-evident. Nor have they taken any measures against those exacerbating the refugees’ terrible predicament, namely the Syrian regime and Iran. But the problem will not go away; it will only get worse for everyone. It’s past time for the world to wake up.”

Afghanistan: The United Nations reported that more than 10,500 civilians were killed or wounded in 2014, the highest toll since the U.N. began counting casualties in 2009. 3,699 were documented as being killed, 6,849 injured; a 22% increase over 2013. 714 of those killed were children.

Separately, a Taliban suicide attack on a police station in Logar province killed at least 22 in the latest targeted assault on security forces.

Russia, cont’d: A new German documentary on Vladimir Putin purports that he was regularly violent to his ex-wife Lyudmila during their marriage, he’s had five attempts on his life, including one in London foiled by Scotland Yard, and he loves to deliberately keep people waiting, such as Angela Merkel, who has had to wait four or five hours before a meeting. ZDF television claimed to have been given access to the unseen files of an unidentified Western intelligence agency, with details going back to his time as a young KGB officer stationed in Dresden.

Separately, opposition leader Alexei Navalny was sentenced to 15 days in prison for handing out leaflets to publicize a planned rally for March 1. The imprisonment bars him from taking part in the demonstration that is to protest Putin’s policies.

Hungary: As alluded to above, Vladimir Putin spent some time in Hungary this week at the invitation of Hungarian Prime Minister Viktor Orban, Putin’s first official visit to a Western country in more than eight months. Thousands of Hungarians took to the streets to protest the warming ties between the two leaders, with demonstrators carrying signs proclaiming “Putin, Nyet! Europe, Yes.”

Orban is receiving $10 billion in aid to expand and update a nuclear power complex with Russian assistance, while the two also cut a new deal on gas imports.

At the same time, Orban has been imposing curbs on a free press and stifling opposition.

Orban has made statements like, “Europe’s unity can and must be created along with Russia.” [Carol Williams / Los Angeles Times]

China: I’ve been writing of Beijing’s construction of artificial islands in the disputed South China Sea for some time now and this week the Wall Street Journal reported “a dramatic expansion...intensifying concerns about Beijing’s territorial ambitions.”

New satellite imagery released by IHS Jane’s, the defense intelligence provider, show significant progress on three islands, all clearly designed to help enforce control of the one of the world’s busiest shipping routes.

The U.S. says it continually tells China to cut the crap, obviously to no avail.

North Korea: Kim Jong-un is sporting a new hairdo and he’s over plucked (or shaved) his eyebrows. The hairstyle appears to be an attempt, according to some experts, to look more like his late grandfather, the revered Kim Il Sung, which he already does, supposedly as a result of some plastic surgery. The real issue, though, is does he accept Putin’s invitation to come to Moscow in a few months, which would be his first trip outside North Korea and a sign he is comfortable he’d be allowed to return to Pyongyang!

Nigeria: It’s impossible to know how accurate some of the reports from here are, but it appears the Chadian army has made gains against Boko Haram inside Nigeria, with Chadian state television saying Wednesday it had inflicted heavy losses on the militants; though on Tuesday a Boko Haram suicide bomber killed at least 36 in the Borno town of Biu. The group’s presumed leader, Abubakar Shekau, pledged in a video to disrupt the presidential elections that were postponed until March 28.

President Goodluck Jonathan is now appealing for U.S. troops, but the chances of this happening are slim and none.

Cuba: So I was watching the golf from Pebble Beach last Saturday and it was the usual AT&T pro-am event where you see a smattering of celebrities. On-course reporter David Feherty at one point corralled actor Andy Garcia and while they talked a little about the state of Garcia’s golf game, Feherty couldn’t help asking the actor, who was born in Havana, what he thought of the new relationship between the U.S. and Cuba. “I don’t like it...it strengthens the Castro regime,” said Garcia.

Go Andy! I mused. Frankly, I’m surprised this didn’t get a little national airplay, including on Fox (if I missed it, I apologize). 

Oh well, it was an important statement. The kind I’ll never forget, frankly.

Random Musings

--David Nakamura and Juliet Eilperin / Washington Post

“President Obama’s new immigration program was supposed to begin accepting applications Wednesday from thousands of illegal immigrants hoping for relief from the threat of sudden deportation. Instead, the administration abruptly postponed the launch after a federal judge in Texas temporarily blocked the White House initiative....

“Though (U.S. District Judge Andrew S.) Hanen did not rule on the constitutionality of Obama’s November immigration order, he said there was sufficient merit to warrant a suspension of the new program while the case goes forward. All told, Obama’s immigration actions are projected to benefit as many as 5 million immigrants, many of whom could receive work permits if they qualified.

“The effects of Hanen’s procedural ruling rippled through Washington and underscored a broader challenge to the president as he seeks to solidify the legacy of his administration.

“Along with the immigration action, the fate of two of Obama’s other signature initiatives – a landmark health-care law and a series of aggressive executive actions on climate change – now rests in the hands of federal judges. It is a daunting prospect for a president in the final two years of his tenure who believes he is on the path to leaving a lasting impact on intractable and politically perilous issues, despite an often bitter relationship with Congress.”

All three issues are now going to be decided either at a U.S. Court of Appeals or the Supreme Court (ObamaCare).

[The White House announced Friday afternoon it was seeking an emergency order to block Judge Hanen’s ruling.]

Editorial / Wall Street Journal

“That marvel of American self-government – the separation of powers – is once again frustrating President Obama’s habit of suspending statutes that conflict with his political goals. This time a federal judge in Texas has rebuked and blocked his attempt to rewrite immigration law – potentially rewiring the debate in Washington.

Judge Andrew Hanen issued a preliminary injunction late Monday against Mr. Obama’s order that awards quasi-legal status and work permits to some five million illegal immigrants. His meticulous 123-page ruling is a vindication of the 26 states that brought the challenge and, more significantly, for the rule of law.

“Last November the Department of Homeland Security published memos instructing immigration enforcers to disregard federal laws that require deportation of the undocumented and place strict limits on who may work in the U.S. The White House and DHS claim this ‘deferred action’ is nothing more than routine prosecutorial discretion, as if the department is merely conceding that its officers cannot hunt down and deport the millions of illegals in the country.

“Judge Hanen dismantles that fiction. As he points out, the DHS memos amount to ‘a massive change in immigration practice’ that reorders ‘the nation’s entire immigration scheme.’ Instead of the historical norm of forbearance in individual cases, the memos devote 150 pages to detailing a blanket policy for whole classes of immigrants – meaning that discretion is ‘virtually extinguished,’ as Judge Hanen writes.

“The memos also actively bestow benefits that Congress never granted, such as the right to work, obtain Social Security numbers, and travel to and from the U.S....

“Meantime, Judge Hanen’s decision is an airlift for Republicans in Congress if they have the wit to accept the relief. Immigration hardliners are attempting to defund Mr. Obama’s order but lack a legislative strategy whose end-game isn’t shutting down all of DHS. If the injunction is sustained on appeal, the President’s unilateralism will be a dead letter until the case is resolved, which should persuade the GOP’s deportation caucus to stand down before another self-defeating flameout.

“We support a generous immigration policy, but the Texas decision shows that Mr. Obama’s political whims are the wrong way to get there.”

--In a speech on Wednesday, former Florida governor Jeb Bush vowed to set his own agenda on foreign policy, not that of presidents 41 and 43, George H.W. Bush and George W. Bush.

Jeb said he has been “fortunate” to have two family members “who both have shaped America’s foreign policy from the Oval Office.”

“I recognize that as a result, my views will often be held up in comparison to theirs,” Jeb said. “But I am my own man.” His views would be shaped by “my own thinking and my own experiences.”

In a Q&A session afterward, Jeb Bush said, “There were mistakes made in Iraq for sure,” pointing to the inaccurate information concerning Saddam and weapons of mass destruction.

Iran, Bush said, is “the defining foreign policy issue of our time,” saying the Obama administration is “unequal to the task.”

“The great irony of the Obama presidency is this: Someone who came to office promising greater engagement with the world has left America less influential in the world,” he said. [Ed O’Keefe and Karen Tumulty / Washington Post]

--Some NBC/Marist polls for Iowa, New Hampshire and South Carolina were released this week. Among potential GOP caucus-goers and primary voters:

Iowa: Mike Huckabee 17%, Jeb Bush 16%, Scott Walker 15%, Chris Christie 9%, Rand Paul 7%.

New Hampshire: Bush 18%, Walker 15%, Paul 14%, Christie 13%, Huckabee 7% Ben Carson 7%.

South Carolina: Lindsey Graham 17%, Bush 15%, Walker 12%, Huckabee 10%, Carson 10%, Paul 7%.

On the Democratic side, Hillary crushes the opposition, which for the purposes of these surveys did not include Elizabeth Warren because she continues to insist she isn’t running.

Iowa: Clinton 68%, Crazy Joe Biden 12%, Bernie Sanders 7%

New Hampshire: Clinton 69%, Sanders 13%, Uncle Joe Biden 8%

South Carolina: Clinton 65%, “Oh that Joe Biden” 20%

--According to a CBS News survey, just 28% of Republicans said they would consider supporting Gov. Chris Christie, compared with 43% who said they would not, the worst ranking among potential GOP candidates.

By comparison, 49% would consider supporting Jeb Bush for the nomination vs. 26% who said they wouldn’t. 46% would consider backing Mike Huckabee with 24% saying no. The split for Sen. Marco Rubio was 37 (yes)/19 (no), and 31/30 for Sen. Rand Paul.

On the Democratic side, 81% would consider voting for Hillary Clinton for the party’s nomination, 12% would not.

--Maggie Haberman and Nicholas Confessore / New York Times...on Gov. Christie:

“He does not return phone calls. He does not ask for support. He arrives late for meetings. And he acts as if he has all the time in the world.

“The complaints have piled up for weeks, dismaying many longtime supporters of Gov. Chris Christie of New Jersey and sending others into the arms of his rivals for the presidential nomination, according to interviews with more than two dozen Republican donors and strategists.

“As a half-dozen other candidates aggressively raise money and chase endorsements in Iowa and New Hampshire, friends and detractors alike say Mr. Christie’s view of his status and pre-eminence within the Republican field is increasingly at odds with the picture outside his inner circle.”

Others say Christie is doing just fine and Kenneth Langone, a co-founder of Home Depot and Christie’s leading supporter among New York donors “said he had been raising money for Mr. Christie’s new leadership PAC at a healthy clip... ‘I’ve never had anyone say no,’ Mr. Langone said.”

--I have no comment on Rudy Giuliani’s remarks on President Obama other than to say I don’t see how this helps Republicans take the White House.

--179 patients at UCLA’s Ronald Reagan Medical Center may have been exposed to a potentially deadly bacteria from contaminated medical scopes, with two deaths already linked to the outbreak. As first reported by the Los Angeles Times’ Chad Terhune, “the two people who died are among seven patients that UCLA found were infected by the drug-resistant superbug known as CRE – a number that may grow as more patients get tested....

“By some estimates, if the infection spread to a person’s bloodstream, the bacteria can kill 40% to 50% of patients.

“At issue is a specialized endoscope inserted down the throats of about 500,000 patients annually to treat cancers, gallstones and other ailments of the digestive system.

“These duodenoscopes are considered minimally invasive, and doctors credit them for saving lives through early detection and treatment. But medical experts say some scopes can be difficult to disinfect through conventional cleaning because of their design, so bacteria are transmitted from patient to patient.

“These instruments are not the same type used in more routine endoscopies and colonoscopies.”

There have been about a half-dozen similar outbreaks around the country since 2012.

--For the Northeast and parts of the Midwest, this has been a second straight brutal winter. December was OK, but January was colder than normal by my records and now it’s official; February will go down as the coldest month in 100 years for many major metropolitan areas such as New York. Not a lot of winter golf being played like two years ago, for one. The Siberian Express we are suffering through as I write is some of the coldest weather since the mid-1990s. Kentucky seems to be ground zero for this particular experience with temps 40 degrees below normal.

But for the rest of the country, thus far the winter has been warmer than average, particularly in the first two weeks of February. Ski areas across the West have struggled to stay open due to lack of snow. The same pattern, ongoing warmth in the West and freezing cold in the East is expected to be the case the next few weeks, according to the Climate Prediction Center.

As for Boston, for the archives I just have to get this down, from fivethirtyeight.com:

“So far in February (Ed. as of midweek), 58.5 inches of snow have fallen... that’s more than the total seasonal snowfall that Boston received in 95 of the previous 124 winters (77 percent). It beats the previous all-time monthly record (January 2005) by 15.2 inches.

“And this data undersells what Boston has gone through in 2015. In January and February so far, a total of 92.8 inches of snow have hit Boston. That’s 22.9 inches more than the previous two-month record (January and February 1994), and it’s greater than the total seasonal snowfall of all but two (98 percent) of the last 124 winters.”

Boston will see more snow Saturday and Sunday.

--According to the Gallup-Healthways Well-Being Index, Alaskans lead in well-being [as measured by physical and emotional health – purpose, social, financial, community and physical.] Hawaii and South Dakota are two and three. Kentucky is No. 49 and West Virginia last. The rankings are based on over 176,000 phone interviews with people in all 50 states.

I was kind of surprised Ohio and Indiana are Nos. 47 and 48, respectively.

--Speaking of well-being, a government advisory committee has issued new dietary recommendations that reverse previous guidance on limiting dietary cholesterol, while the same guidelines say you can drink more than a few cups of coffee.

And the committee is backing off stricter limits on salt, but adding limits on sugar, which promotes obesity. The panel also recommends eating more veggies, fruits, whole grains and nuts, while advocating a diet lower in red and processed meat, though lean meats can still be part of a healthy program.

The recommendations will eventually be written into dietary guidelines by the end of the year.

--Lastly, in reading the Feb. 23, 2015 issue of Army Times (which I subscribe to just to keep up on things), I can’t help but note the awarding of a Distinguished Service Cross (second only to the Medal of Honor) and eight Silver Stars to nine members of the 3rd Special Forces Group for their actions in Afghanistan spanning more than two years.

Capt. William Eberle, earned the DSC, and the following received the Silver Star.

Master Sgt. Jeffrey Batson
Master Sgt. Jeffrey Bochey
Master Sgt. Johnie Brewington
Sgt. 1st Class Clayton Brachtenbach
Sgt. 1st Class Keith Smith
Master Sgt. Carl Schmidt
Staff Sgt. Russell Dallas
Staff Sgt. Thomas Daley

We thank you for your service. 
---

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

God bless America.
---

Gold closed at $1204...so much for $1300
Oil $50.34...first down week in four

Returns for the week 2/16-2/20

Dow Jones +0.7% [18140]
S&P 500 +0.6% [2110]
S&P MidCap +0.9%
Russell 2000 +0.7%
Nasdaq +1.3% [4955]

Returns for the period 1/1/15-2/20/15

Dow Jones +1.8%
S&P 500 +2.5%
S&P MidCap +4.4%
Russell 2000 +2.2%
Nasdaq +4.6%

Bulls 56.6
Bears 14.1 [Source: Investors Intelligence...over 40-pt. spread between the two normally a major warning signal. Last was end of Dec., which did indeed mark a short-term top.]

Have a great week. I appreciate your support.

Brian Trumbore



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Week in Review

02/21/2015

For the week 2/16-2/20

[Posted 11:00 PM ET, Friday]

Edition 828

Washington, Wall Street and the War on Terror

Just a few notes on the economy before turning to a far more important topic that at some point will impact investor sentiment...terrorism. [Vladimir Putin and Ukraine could also yet upset the bull run, as noted below.]

January housing starts came in a little less than expected, while industrial production for the month was in line, up 0.2%.

Producer prices last month fell a whopping 0.8% owing to falling energy prices and over the past 12 months are down 0.1%. Ex-food and energy, the core reading, the PPI was down 0.1%, though is up 1.5% over the past year.

Oil prices broke their three-week winning streak as inventories remain at record levels (highest in 80 years for this time of year), though on Friday, Baker Hughes announced the industrywide rig count, while down an 11th consecutive week, hadn’t declined as much as expected.

So lots of supply that isn’t being removed as quickly as some might hope. On the demand side of the equation, there are hopes for Europe as it is beginning to show signs of coming out of its stupor.

But there was another story that will be part of a bigger one this coming week; that being the release of the Federal Reserve’s minutes from its Jan. 27-28 meeting.

Whereas the feeling has been the Fed will change the language at its March confab to prepare the markets for a June rate hike, it turns out “Many participants (at the January FOMC meeting) indicated that their assessment of the balance of risks associated with the timing of the beginning of policy normalization had inclined them toward keeping the federal funds rate at its effective lower bound for a longer time.”

The minutes say the committee was looking at international flash points from Greece to Ukraine, as well as slow wage growth as weakening the case for the first rate rise since 2006.

“Many participants regarded dropping the ‘patient’ language in the statement, whenever that might occur, as risking a shift in market expectations for the beginning of policy firming toward an unduly narrow range of dates,” the minutes said. “Some expressed the concern that financial markets might overreact.”

But if the employment data continues to show strength, and if, as in the last jobs report, wages are increasing at a respectable clip, the Fed has to act.

More important than the minutes, however, will be Chair Janet Yellen’s testimony to Congress this Tuesday and Wednesday, as the markets look for clues on what the Fed will do at its March 17-18 gathering. So we’ll have something more to talk about next WIR for sure.

One final item...the labor dispute between West Coast dock workers and port owners appears to have been resolved as I go to post. The National Retail Federation had projected a total shutdown would cost the U.S. economy $2 billion a day. As it is it will still take months to get back to normal even after this settlement.

The War on Terror

In a speech wrapping up a three-day summit organized by the White House to discuss the roots of terrorism, President Obama said: “The notion that the West is at war with Islam is an ugly lie. And all of us, regardless of our faith, have a responsibility to reject it.”

Obama has refused to use the terms “Islamist” or “Islamic” to describe the likes of ISIS, arguing he doesn’t want to give these groups any theological legitimacy.

“All of us have a responsibility to refute the notion that groups like ISIL somehow represent Islam, because that is a falsehood that embraces the terrorists’ narrative,” said Obama.

Additionally: “Muslim communities, including scholars and clerics, therefore have a responsibility to push back not just on twisted interpretations of Islam, but also on the lie that we are somehow engaged in a clash of civilizations.”

Republican presidential candidate Jeb Bush said: “I think it’s a mistake to think that ISIS is not what it is. It’s violent, extreme Islamic terrorism, and the more we try to ignore that reality, the less likely it is that we’re going to develop the appropriate strategy to garner the support in the Muslim world...to take them out.” [Geoff Dyer / Financial Times]

Editorial / Wall Street Journal...Feb. 17

“The White House hosts its Summit on Countering Violent Extremism this week, and Islamic State seems not to understand it wasn’t invited. The event is supposed to showcase President Obama’s leadership against a threat he refuses to identify by name, but the entire world has been watching Islamist jihadists advertise the specific threat across a brutal weekend.

“In Iraq Islamic State paraded in cages through the city of Kirkuk 17 captured Kurdish fighters whom it presumably plans to burn alive as it recently did a caged Jordanian fighter pilot. Kirkuk is on the crossroads of Kurdish and Sunni Iraq, and ISIS didn’t hold any of the crucial oil hub when Mr. Obama unveiled his anti-ISIS strategy in September. The Kurds are on the front lines against Islamic State, but the Obama Administration has been wary of sending them significant arms lest it offend the government in Baghdad that can’t or won’t protect the Kurds.

“Meanwhile, the rising Libyan branch of Islamic State released a video showing the beheading of 21 Egyptian Coptic Christians. The Copts were kidnapped in Libya and killed as ‘A Message Signed With Blood To the Nation of the Cross,’ according to the video caption.

“ ‘Oh people, recently you have seen us on the hills of Al-Sham and Dabiq’s plain, chopping off the heads that have been carrying the cross for a long time, and today, we are on the south of Rome, on the land of Islam, Libya, sending another message,’ declared a masked ISIS member.

“These videos are intended to show a religious movement that is on the march, the vanguard of history. This helps convert and intimidate Muslims who might otherwise resist. The longer Islamic State appears to be advancing despite Mr. Obama’s promise to ‘degrade and destroy’ it, the wider its appeal becomes.

“Egyptian President Abdel Fattah Al Sisi responded to the murder of the Copts with bombing raids against ISIS bases in Libya, and he urged the U.S. coalition to expand its operations to North Africa. Like the Kurds and King Abdullah in Jordan, Egypt knows the real threat and understands the need to step up the fight against Islamic State.”

Editorial / Wall Street Journal...Feb. 19

“President Obama opened this week’s White House Conference on Violent Extremism with a speech about community-based counter-radicalization efforts, and his Administration is being roundly mocked for its refusal to use terms like ‘Muslim terrorism’ or ‘Islamism.’ The mockery is deserved...

“But there is a deeper problem with the Administration’s semantic dodges. Al-Qaeda, Islamic State, Boko Haram and other jihadist groups are waging more than a military conflict. They are also waging an increasingly successful ideological war for the soul of Islam and its 1.6 billion followers.

“Their version of jihad is gaining adherents precisely because it is motivated by an idea that challenges the values and beliefs of moderate Islam, the West and modernity. The free and non-fanatic world won’t win this deeper struggle if the Obama Administration refuses even to acknowledge its nature.

“The 9/11 Commission Report put this front and center. Its second chapter, ‘The Foundation of the New Terrorism,’ traces what it calls ‘Bin Ladin’s (sic) Appeal in the Islamic World.’ It discusses the late al-Qaeda leader’s faith in ‘a return to observance of the literal teachings of the Qur’an and the hadith.’ It underscores bin Laden’s reliance on Muslim theologians, from Ibn Taimiyyah in the 14th century to Sayyid Qutb in the 20th. And it explains how bin Laden turned Islam into a license for murder.

“ ‘Qutb argued that humans can choose only between Islam and jahilyya,’ referring to a world of licentiousness and unbelief. ‘No middle ground exists... All Muslims – as he defined them – therefore just take up arms in this fight. Any Muslim who rejects his ideas is just one more nonbeliever worthy of destruction.’

“None of this is denied in the Muslim world, which is well aware of the increasingly radical bent of mainstream Islamist theology. Not for nothing did Egyptian President Abdel Fattah Al Sisi recently visit Cairo’s al-Azhar university, Sunni Islam’s premier center of religious learning, to warn leading clerics of where Islam is heading: ‘Let me say it again, we need to revolutionize our religion.’....

“But the President (insists) the West must never grant al-Qaeda and Islamic State ‘the religious legitimacy they seek’ by suggesting they are Muslim religious leaders rather than mere terrorists. That’s a fine sentiment, but it elides the fact that the two categories aren’t mutually exclusive. The Islamic State may speak for only a minority of Muslims, but it is nothing if not Islamic in its beliefs, methods and aims. Ignoring that reality for the sake of avoiding injured feelings helps nobody, least of all Islamic State’s many Muslim victims or Islam’s would-be reformers.”

Republican Sen. Ted Cruz (Texas): “The words ‘radical Islamic terrorism’ do not come out of the president’s mouth. The word ‘jihad’ does not come out of the president’s mouth. And that is dangerous.”

Democratic Rep. Tulsi Gabbard (Hawaii): “You look at the vast majority of terrorist attacks that are being committed around the world, there’s one common element here and it is this radical Islamist ideology. This war cannot be won, this enemy and threat cannot be defeated unless we understand what’s driving them, what is their ideology.”

Daniel Henninger / Wall Street Journal

“It is a mistake to think that Mr. Obama’s passivity or indecision are sufficient explanation. What is on offer here is the American left’s version of realpolitik. The decision by the Obama White House not to deploy American resources is thought-out, brutal and unapologetic.

“President Obama in his Feb. 6 national-security statement explained what he is doing – or not doing. He was precise and clear:

“ ‘We have to make hard choices among many competing priorities and we must always resist the overreach that comes when we make decisions based upon fear.’

“Short version: He’s not spending any real money on any of this. Get over it.”

Timothy Cardinal Dolan / New York Post

“Along with Pope Francis and so many others, I was deeply saddened to learn of the latest violence by fanatics who see anybody who disagrees with them as their enemy.

“These attacks threaten civilization itself.

“Whether it’s a massacre in Paris, Indonesia, Nigeria, Syria, Iraq, Iran, India or now in Libya and Egypt, we keep saying, ‘How much worse can it get?’

“And then we woke up Monday morning to see that it did get worse, with this brutal massacre of these young Egyptian Christians in Libya.

“They were beheaded for nothing less than their religious convictions. It moves me to prayers. It moves me to tears, yes, as a Christian, but also as an American, who recognizes religious freedom as ‘our first and most cherished liberty.’

“No denying it: There is an orchestrated phobia of Christianity throughout the world today, a coordinated effort on behalf of fanatics to see that true religion which stands for friendship, peace, the dignity of the human person and the sacredness of human life, is stamped out.

“These aren’t sporadic attacks. This is part of an orchestrated fanaticism, an ideology that sees Christianity, Judaism and any religion of peace as the enemy.

“Fanatics want to take over, and we can’t let that happen. They threaten civilization, everything that is decent and noble about humanity. It is a worldwide crisis that cannot, must not, be ignored.

“As the Holy Father has stated, we now see an ‘ecumenism of blood’ as men and women of all true creeds – Jewish, Christian and Islamic – unite in abhorrence of these horrors.

“I would like to believe these fanatics are a small group that is well-orchestrated and well-choreographed.

“But what we have to do is echo the appeal of Pope Francis. We believe that Islam is – at its root – a religion of peace.

“Now we encourage the majority of Islam to speak up and condemn these attacks, like Jordan is doing....

“We need Islamic religious leaders to stand up and say, ‘This is not Islam. This is a perversion of our faith.’

“Simply because these Christians make the sign of a cross, there is a price on their head.”

Europe and Asia

Continuing with this running history of our times, as the week drew to a close eurozone finance ministers were trying to reach a compromise between the Greek government’s request for a six-month loan extension with fewer conditions and demands from its creditors that Greece meet the existing terms of its 240 billion euro ($273 billion) bailout.

Outflows from Greek banks picked up and by some reports were about $23 billion since December. The European Central Bank increased the pool of emergency cash the banks can draw on by just 3.3 billion euros, far short of the 10 billion euro increase Greece requested, because the ECB said the deadline was Feb. 28 anyway. If no agreement was reached by then, the ECB wouldn’t be loaning out any further emergency funds.

Greek Prime Minister Alexis Tsipras told lawmakers in his Syriza party that the government – elected to scrap the bailout, repeal hated austerity measures and end cooperation with the ‘troika,’ the EU, ECB and IMF lenders – would not compromise. Any extension was “absurd” and “unacceptable.”

German Finance Minister Wolfgang Schaeuble hammered away at his take-it-or-leave-it message. “The question still remains if Greece wants a program at all or not,” Schaeuble told reporters on Tuesday. “On Feb. 28, at midnight, it’s over.”

Schaeuble said Germany’s parliament must vote on any extension by Feb. 27 for the program to continue. Failure to reach an accord could see Greece run out of cash by end of March.

Tsipras said he would not give in to “blackmail” from technocrats.

Greek Finance Minister Yanis Varoufakis said on Tuesday: “We know in Europe how to deliberate in such a way as to create a very good solution, an honorable solution, out of initial disagreements.”

The European Central Bank warned Greek banks to reduce their holdings of state debt if talks broke down in order to preserve some level of liquidity.

Greeks were not only yanking their cash out, but they were delaying making tax payments, which the government desperately needs. Tax revenue in January was 1 billion euro short of the target.

So ahead of Friday’s climactic meeting, Germany rejected Greece’s request to extend its rescue by six months. Varoufakis reversed his government’s long-held promise to kill the current bailout, but a letter he submitted to the finance ministers contained a series of clauses Berlin said amounted to “a Trojan horse” designed to allow Athens to change the terms of the game.

Martin Jager, spokesman for the German finance ministry, said, “The letter from Athens is not a substantive proposal for a solution. In truth, it aims at bridge financing without fulfilling the demands of the program.”

Germany wanted Athens to request an extension, while promising to complete the program and committing to negotiate any changes with bailout monitors.

So we move to Friday and as is almost always the case with the eurozone and its financial crises, an agreement was reached at the 11th- hour to extend Greece’s rescue program for four months, thus setting up another potential stand-off in June when a 3.5bn euro debt payment is due.

However, several important issues need to be decided in the next few days, including what reform measures Athens needs to adopt in order to get the final installment of 7.2bn euro in aid that comes with completing the current program. The Tsipras government needs to submit a list for approval to eurozone ministers on Monday.

Assuming this then meets approval, a crisis will have been averted for at least a decent spell and its assumed there will be no bank runs in Athens, which would have no doubt otherwise been the case.

Jeroen Dijsselbloem, the chairman of the finance minister’s group who brokered the deal said, “It was intense because it was about building trust between us. Tonight was a first step in this process of rebuilding trust. As you know, trust leaves quicker than it comes.”

But this is not over. For starters, Alexis Tsipras has taken a U-turn for a politician who promised in his election campaign to kill the existing bailout.

Plus the agreement doesn’t reduce Greece’s sovereign debt levels, another campaign promise. Any debt restructuring now has to be part of a new bailout agreement for June.

The eurogroup statement read: “The Greek authorities commit to refrain from any rollback of measures and unilateral changes to the policies and structural reforms that would negatively impact fiscal targets, economic recovery or financial stability, as assessed by [bailouot monitors].” [Financial Times]

What will the people and members of Greece’s parliament say over the weekend? Greece can negotiate its economic reform agenda, but it is committing to the “successful completion” of the current bailout review.

Also, in a move reflecting a lack of trust between Athens and eurozone lenders, the deal unexpectedly takes back 10.9bn euro in funds currently sitting in Greece’s bank rescue facility. These funds can still be used to recapitalize the banks, but instead of the Greek government having a say in the disbursement of said funds, now it’s up to eurozone authorities as to how they are doled out.

So I’m posting this Friday night, but by Monday morning who knows what the situation will be.

---

Meanwhile, turning to the eurozone and EU economy, the week started off with continued good news on the car sales front, or as the Euros call it, registrations. Sales were up 6.2% in January, year on year, according to the European Automobile Manufacturers’ Association, which compares with up 5.4% for all of 2014, the first year of growth after a six-year decline.

Individually, January sales were up a whopping 28% in Spain, 11% in Italy, 6.7% in the U.K., 6.2% in France and 2.6% in Germany.

Then on Friday, Markit released its flash reading for manufacturing and services in the eurozone for the month of February, with a composite figure of 53.5 vs. 52.6 in January (50 being the dividing line between growth and contraction). The flash PMI on manufacturing, specifically, was just 51.1 vs. 51.0, but services rose to 53.9 from last month’s 52.7.

The flash readings highlight only Germany and France, individually, and Germany’s manufacturing PMI was unchanged at 50.9, but services were at 55.5 vs. 54.0, and the comp, 54.3 vs. January’s 53.5, is a 7-month high.

In France, the manufacturing PMI fell to 47.7 from 49.2, but services registered their best reading in 42 months, 53.4 vs. 49.4.

Chris Williamson, Chief Economist at Markit:

“February’s PMI surveys paint an upbeat picture of improving eurozone economic health. Undeterred by the ongoing Greek debt crisis, economic growth is gathering momentum and looks set to gain further traction in coming months. The economy is on course to grow by at least 0.3% in the first quarter, assuming March doesn’t disappoint.

“Even more encouraging is the faster rate of job creation reported during the month. Employment is now rising at the steepest rate since 2011 as employers become increasingly confident in the outlook and eager to take on staff to meet rising demand.

“With the ECB’s quantitative easing ‘bazooka’ due to start in March, business optimism has been boosted to its highest for three-and-a-half years.

“Growth is looking lopsided, however, and very much dependent on the services economy where lower prices are fuelling growth.”

A few other tidbits....

Consumer prices in France in January fell 0.4% year on year.

Greece’s CPI was down 2.8% yoy last month.

The CPI in the U.K. increased at an annualized rate of 0.3% in January, the lowest rate of inflation in Britain since the data series started in 1989, and by other measures the weakest since 1960. Most experts believe the Bank of England is not raising rates until 2016, even though unemployment is down to 5.7%, the lowest since August 2008; with wages up 1.7%, ex-bonuses, which means wage growth is far outpacing inflation. This is good.

And a few notes on Asia....home prices in China fell again last month in 64 of 70 major cities, according to the National Bureau of Statistics, the ninth consecutive decline, falling at an annualized pace of 5.1% in January. Chinese business sentiment also fell to a record low in February.

In Japan, the Tokyo Nikkei stock index finished the week at a nearly 15-year high, 18332, the highest level since May 2000. Earlier in the week, the government announced a flash estimate for fourth-quarter GDP, up 2.2%, less than expected, though this was after contracting the prior two quarters. Going forward it’s about companies passing on more of their profits in the form of increased wages. That’s the only way the consumer sector is going to get out of neutral.

---

Finally, back to Europe and the above commentary on the terror threat. After the beheadings by ISIS in Libya, Italy’s foreign minister, Paolo Gentiloni, said there was a grave danger of ISIS fighters in Libya allying with other Islamist extremists groups, establishing a foothold on the shores of the Mediterranean from where they could attack Europe. 

The terror threat from Libya is just over 600km from Italy.

“There is an evident risk of an alliance being forged between local groups and Daesh (ISIL) and it is a situation that has to be monitored with maximum attention,” Gentiloni told parliament.

Evidence from ISIL supporters shows they are planning a takeover of Libya as a “gateway” to wage war across southern Europe.

Italy is fearful the growing crisis in Libya will flood Europe with refugees and asylum seekers. Last year, 170,000 arrived by boat.

The Italian government is putting 4,800 soldiers on the streets throughout the country to help guard against potential terrorist attacks; guarding sensitive sites and targets until at least June. 500 will be deployed in Rome, where there is already a sizable army presence to protect embassies, the capital’s synagogue and Jewish schools. The new troops are to be deployed at tourist venues.

Security for Pope Francis has been stepped up, the Swiss Guard said.

This comes after an Islamist killed two people in Copenhagen last Saturday, let alone the Paris attacks that claimed 17 lives.

Lastly, you have the rush by some European leaders to reassure Jews, such as in France, that they have a home in Europe amid renewed calls by Israeli Prime Minister Benjamin Netanyahu for them to come home to Israel.

French Prime Minister Manuel Valls called for France to unite against “Islamo-fascism” in affirming his call for French Jews to stay.

“France is as injured as you are and France doesn’t want you to leave,” said Valls. “France once again expresses its love for you, its support and solidarity.”

Around 6,900 French Jews moved to Israel in 2014, up from 3,300, with the number expected to grow to 10,000 in 2015.

Netanyahu said: “Jews deserve protection in every country, but we say to Jews, to our brothers and sisters: Israel is your home. We are preparing and calling for the absorption of mass immigration from Europe.” [AFP]

Street Bytes

--Stocks rallied a third straight week with the Dow Jones and S&P 500 hitting new record highs (as well as the Russell 2000), thanks to a solid rally on Friday fueled by hopes the Greece situation has been resolved for at least a spell.

The Dow Jones rose 0.7% to 18140, while the S&P gained 0.6% to 2110. Nasdaq, up 1.3% to 4955, is now less than 100 points shy of its all-time closing high of 5048 set back on March 10, 2000.

I do have to mention that last week I noted a Bloomberg survey that had earnings growth for the S&P 500 in the fourth quarter thus far coming in at 4.1%. But I saw a blurb in Barron’s that Apple accounts for a full half of that earnings gain and that if you strip Apple out, the S&P 499 has a growth rate of less than 2%. [Jim Bianco / FactSet; Randall Forsyth / Barron’s]

--U.S. Treasury Yields

6-mo. 0.06% 2-yr. 0.63% 10-yr. 2.11% 30-yr. 2.71%

Reminder, the yield on the 10-year was 1.64% on Jan. 30. We started the year at 2.17%.

--Less than a week after the close of the open enrollment period for ObamaCare, federal officials announced a special six-week extension for uninsured people who they say may not yet understand they will be fined if they don’t have coverage. The extension runs from March 15 to April 30.

At the same time officials announced that there was an error with some of the figures provided to roughly 800,000 Americans to determine a customer’s tax responsibility, IRS form 1095a, which details how much of a subsidy they received. Corrected IRS forms are to be in the hands of those impacted the first week of March, with the 800,000 being notified Friday, either with personal phone calls or emails. You shouldn’t file your taxes if you are so contacted until you have the corrected information, but it’s estimated of the 800,000, 50,000 already did.

--Walmart reported earnings that were better than expected for the quarter, though revenues fell short. U.S. same-store sales were up 1.5%, which was decent, but then the company guided lower for all of 2015.

The big news, however, was that the company announced it was hiking its minimum wage to $9.00 an hour - $1.75 above the federal minimum wage. By February 2016, all of its existing workers, currently 500,000, will be paid at least $10. [After April’s hike to $9.00, the typical full-time Walmart employee will earn $13 an hour.]

The initiative will cost the company $1 billion and, coupled with the reduced earnings outlook, sent the shares lower as analysts lowered their price outlooks. It’s expected Walmart’s move will reverberate across the retail sector.

--Gavyn Davies / Financial Times...on the topic of oil:

“(The) combination of excess inventories, still-high U.S. production, the refusal of OPEC to cut output and sluggish demand growth may hold oil prices down for quite a while before a sustainable balance is restored to the market, probably in 2016. Prices may remain very volatile before settling in a range of perhaps $60-$70 next year. This is somewhere near the consensus forecast and the forward market prices for next year. For what it is worth, it seems to me that downside risks to that forecast outweigh upside risks, unless the Saudis change their minds.

“What about the even longer term? (Strategist) Jeremy Grantham...states the bullish case for oil prices, five to eight years out. He may be right, but much has changed since the heady days of $140 a barrel in 2008. The ‘peak oil’ theory looks increasingly dubious, GDP growth in the major emerging economies has slowed, electric cars are coming closer, the Saudis are no longer willing to act as the swing producer, and alternative energy sources are coming on stream.

“The trough of this cycle may be close, but the golden era for oil producers is nothing more than a very distant memory.”

--The Russian cybersecurity firm, Kaspersky Lab, said the United States has found a way to embed surveillance and sabotage tools in computers and networks it has targeted in Iran, Russia, Pakistan, China, Afghanistan and others being closely watched by the intelligence community.

Kaspersky, at a conference in Mexico, said the techniques resembled those used in Stuxnet, the computer worm that did a number on Iran’s nuclear enrichment program. Kaspersky says the “firmware” being employed is beyond the reach of existing antivirus products and most security controls.

Security software made by Kaspersky Lab is used by the likes of Iran and Russia, which gives Kaspersky key access to America’s espionage operations, as reported by the New York Times’ Nicole Perlroth and David E. Sanger.

“If the malware gets into the firmware, it is able to resurrect itself forever,” Costin Raiu, a Kaspersky threat researcher, said in a report. “It means that we are practically blind and cannot detect hard drives that have been infected with this malware.”

Well, needless to say, Vladimir Putin and his goons were none too pleased with this report by Kaspersky, which no doubt is accurate (I’ve written of them before), and a former National Security Agency employee told Reuters the same. It’s certainly not good for U.S. computer manufacturers and the likes of Microsoft.

Earlier, Kaspersky said as many as 100 banks and other financial institutions around the world had been hit by hackers to the tune of $1 billion, one of the most sophisticated cyberattacks to hit the industry. Kaspersky said it’s “an attack that’s very much active.”

The attacks were said to have been mounted by an international criminal gang that goes by the name of Carbanak, with representatives in Russia, Ukraine and other parts of Europe, as well as China.

--Lenovo Group, the world’s largest supplier of personal computers, has had to rush to squash a burgeoning controversy over adware pre-installed on its laptops after experts declared the technology to be a serious security threat, as reported by the South China Morning Post.

Lenovo said it stopped shipping any products with the Superfish software last month and had stopped pre-installing the adware.

The Superfish adware pushes third-party advertisements into Google searches and websites without the computer user’s permission. Superfish is a U.S.-based software startup that had formed a partnership with Lenovo.

According to IDC, Lenovo accounted for 59.2 million of 308.6 million PCs shipped globally last year.

The company said Superfish was not installed on its premium, Thinkpad-brand business notebook computers, nor was it preloaded on its desktop computers, smartphones or tablets.

--Apple said it would be in production on an electric car by 2020.

--Snapchat, the app that allows users to send friends photos and videos that disappear in seconds, is receiving another round of venture capital funding that will raise its value to $19 billion (another source says $16bn).

Snapchat was founded in a Stanford University frat house four years ago. More than 700 million disappearing photos and videos are sent every day, according to the company.

At $19 billion, Snapchat would be the third most valuable startup backed by VC funding, next to Chinese smartphone maker Xiaomi, at $45 billion, and Uber, $40 billion.

--According to the Wall Street Journal and a report by a London research firm, Coalition Ltd., Wall Street’s workforce has fallen 20% globally since its recent peak in 2010. 10 of the world’s largest firms trimmed 4%, or 2,100 employees, in 2014 from a year earlier, primarily because of the challenging environment in the fixed-income sector. New rules on capital and risk taking have also crimped profit.

On the other hand, the likes of JPMorgan Chase are beefing up their back-office operations in areas like cybersecurity and compliance.

--Deere & Co. lowered its sales outlook for the year amid a stronger U.S. dollar as well as slumping demand for farm machinery. Deere, which handily beat expectations for its fiscal first-quarter due to aggressive cost cutting, said overall sales for the year ending Oct. 31 would be down 17%, worse than previously forecast.

--Google co-founders Larry Page and Sergey Brin announced they would sell shares currently worth $4.4 billion over the next two years that would reduce their voting control through a special class of shares down to 52 percent, even though their economic interest is about 13 percent. Their remaining combined stake would be worth nearly $45 billion.

--The Frankfurt stock market, as measured by the DAX, crossed 11000 for the first time ever this week, 11050, and is up 12.7% for the year.

--According to the International Coffee Organization, demand is set to grow 25% in the next five years. Increased consumption in India and China is a major reason.

A historic drought in Brazil, however, is leading to reduced production, with the likes of Vietnam, India and Indonesia not likely to be able to make up for the shortfall.

Ergo, sports fans, prices should rise, but then you have currency issues in Brazil that have tended to mitigate the supply problem.

--I forgot to note last time that Kellogg reported sales of its morning meals unit (Special K, Corn Flakes and Kashi brands, among others) were down 7.7 percent in the fourth quarter. General Mills (Wheaties, Cheerios and Lucky Charms) said its cereal unit was down 7 percent in the six months ended Nov. 23.

A lot of cereal fans have moved to yogurt for breakfast.

--According to Nielsen, traditional TV usage among millennials, 18 to 34, which had fallen around 4% a year since 2012, declined a whopping 10.6% between September and January. This is stunning.

Additionally, the median age of the TV audience hit 50 this year, older than the critical 18-to-49 demographic targeted by advertisers. [New York Post]

--Once again this week I had a pleasant experience at my local “Burger King.” This time I was using the double cheeseburger with bacon, plus large fries, coupon for $3.00. [I’m hoping to get a major national television spot for touting the chain ceaselessly.]

More importantly, the new Burger King / Tim Hortons entity (Restaurant Brands International Inc.) had super fourth-quarter sales, up 7.7% in the former, 7.4% in the latter. [If I had a Tim Hortons nearby, sorry, Dunkin’ Donuts, they’d get my business.]

Recall, McDonald’s U.S. same-store sales in January rose just 0.4% (down 1.8%, globally).

--It is estimated Russia’s financial crisis will lead to 30% of Moscow’s restaurants closing by March, as reported by Izvestia. That’s a lot of lost jobs.

--We note the passing of Michele Ferrero, Italy’s richest man, who died at the age of 89.

Ferrero’s privately owned firm is famous for its Nutella spread, Ferrero Rocher chocolates, Kinder eggs and Tic Tac sweets.

Ferrero’s father developed the forerunner to Nutella in 1946, and then Michele turned the paste into what is now known the world over in 1964.

The Ferrero group has annual sales of more than $9 billion and Forbes magazine ranked his family 30th on their list of the world’s wealthiest people at $23.4 billion.

--NBC Nightly News retained its ratings lead in its first full week with Lester Holt subbing for Brian Williams, though its edge over ABC World News Tonight was reduced to 400,000 viewers (9.4 million to 9 million).

--As reported by Yoona Ha of Crain’s New York Business, owing to the box office success of “Fifty Shades of Grey,” New York City sex-shops have seen sales rise around 25%! [It’s “Web Sweeps Week.” I need to juice ratings.]

Foreign Affairs

Russia / Ukraine: So much for the ceasefire, which anyone with half a brain knew was a crock to begin with. Russian troops and armaments continue to pour into the eastern part of the country, the Donbass, as Russian-backed separatists took the strategic rail hub of Debaltseve in a gross violation of the ceasefire agreement. Ukrainian troops were forced into a humiliating, disorganized retreat. 13 Ukrainian soldiers were killed in the withdrawal, with 157 wounded, 90 captured and 82 reported missing in action, according to the military.

As part of the ceasefire, a prisoner exchange was to take place by March 7. Vladimir Putin told Chancellor Merkel he would do his best “to influence the separatists in this regard,” according to a spokesman for Merkel.

Ukrainian President Petro Poroshenko is appealing for the deployment of peacekeepers from either the United Nations or the European Union to police the front line between the two sides.

Moscow and the rebels immediately denounced the idea. Putin said of Debaltseve that it was already surrounded before the Minsk talks. Speaking to journalists in Hungary, Putin proclaimed: “I said that the surrounded troops would try to break through and that the militia, who had got the Ukrainian troops surrounded, would resist these attempts and try to keep the encirclement in place, and this would inevitably lead to further clashes.”

Putin also said, “According to our intelligence, [U.S.] weapons are already being delivered.” Another lie from Vlad the Impaler.

The fall of Debaltseve is yet another defeat for Poroshenko in a series of defeats that threaten his government. Many in parliament are calling for the heads of the generals, and that’s for starters.

Editorial / Wall Street Journal

“In the sorry annals of ‘ceasefires,’ this week’s fiasco in southern Ukraine will have to rank among the most instantly humiliating. For Ukrainian President Petro Poroshenko, who was bludgeoned by his friends into accepting it. And for Angela Merkel, Francois Hollande and President Obama, who did the bludgeoning and have since let Vladimir Putin violate it with impunity.  Ukraine is paying today in more lost territory, but the NATO alliance may also pay soon enough....

“ ‘Obviously it’s bad to lose,’ chirped Mr. Putin about the retreat [from Debaltseve], during a visit to his autocratic ally in Hungary. ‘But life is life and it still goes on.’ Unless you were a Ukrainian killed during the non-ceasefire.

“The result is that Mr. Putin has again expanded the Russian rump state of Novorossiya inside Ukraine. He may now decide to consolidate those gains and sit tight – for a while. But that’s what the West’s Russia-appeasement lobby predicted a year ago after Mr. Putin grabbed Crimea.

“Then he moved on Luhansk and Donetsk. After a previous ceasefire in September, his troops and proxies advanced along the Sea of Azov coast toward Mariupol. Sooner rather than later the shelling of that key port city will begin again. Meanwhile, the Pentagon says Russian trops and weapons continue to flow into Ukraine....

“Here and there...a Western leader is willing to admit to a harsher reality. The latest is British Defense Minister Michael Fallon, who said Thursday that the tactics of deceptive invasion that Russia has used to destabilize Ukraine pose a ‘very real and present danger’ to the Baltic states, which are members of NATO.

“ ‘I’m worried about Putin,’ Mr. Fallon said, according to the London Times. ‘I’m worried about his pressure on the Baltics, the way he is testing NATO.’

“He should be worried, all the more so after the latest Minsk humiliation. The cutthroat in the Kremlin wants a Greater Russia that he can dominate. He wants a cowed West that will leave him to it. And after watching Western leaders beg for his mercy after Minsk, he can see a clearer path to getting both.”

Republican Senators John McCain and Lindsey Graham evoked the appeasement of Hitler before World War II, saying Tuesday that Merkel and Hollande, with Obama’s support, were “legitimizing the dismemberment of a sovereign nation in Europe for the first time in seven decades.”

Philip Stephens / Financial Times

“War or ceasefire, Russian aggression in Ukraine is overturning at last the West’s complacency. Washington has realized that this is more than a discrete regional conflict. Europeans – many of them anyway – now understand that Vladimir Putin is challenging the rules-based order that has kept the continent’s peace. What is needed next is a broadly based strategy to counter the Russian president’s ambitions.

“This demands an assessment of the Kremlin’s thinking, motives and intentions... Where do military opportunism in Ukraine, Russian gas supplies, Moscow-directed subversion and corruption, and nuclear sword-waving fit in Mr. Putin’s worldview? Whatever happens in the Donbass, the West will be grappling with Russian revanchism for some time yet....

“At the heart of (Russia’s) neurosis lies an intuitive insecurity reaching back deep into Russian history. Conveniently, the ever-present danger provides a patriotic buttress for the ruling elite. Faced with an ‘evil, hostile and menacing’ world, the security of the nation and regime become interchangeable.

“There are nuances. Even as he rails against their efforts to humiliate Russia, Mr. Putin regards western societies as decadent, weak and divided. And Russia still has friends in the West. Mr. Putin is lauded by far-right populists. He is assured of a welcome in Vienna. Only this week he was in Budapest to meet Viktor Orban, the acolyte who serves as Hungary’s prime minister. Moscow’s goal is to deepen and exploit conflicts between the western powers.”

Editorial / Washington Post

“President Obama has frequently boasted of leading a collective U.S.-European response. But he stood back last week as Ms. Merkel and French President Hollande negotiated the giveaway of eastern Ukraine to Mr. Putin. When the European Union announced a small round of new sanctions against Russian officials Monday, before Debaltseve fell, the Obama administration did not join in. Rather than lead, the president appears to have ceded the Ukraine crisis to Germany, with predictably poor results.

“European leaders will not stop Russian aggression without a determined U.S. president. Ukrainians must be wondering how much more of their country must fall to Russian troops for Mr. Obama to set aside his ‘strategic patience.’”

Editorial / The Economist

“(Former) Soviet countries that have joined Western institutions must be buttressed and reassured. If the case for sending arms to the Donbas is doubtful, that for basing NATO troops in the Baltics is overwhelming, however loudly Mr. Putin squeals. Western leaders must make it clear, to him and their own people, that they will defend their allies, and the alliance – even if the struggle is covert and murky.

“And it isn’t only its allies who appreciate the West’s virtues. So do many Russians, including shameless Putinists who denounce the West’s decadence but exploit its schools and stock-markets. It is long past time for every Russian parliamentarian and senior official to join the sanctions list. Far from being relaxed as, after Minsk, fellow-travelers may suggest, sanctions must be tightened – and sanctions-busting curtailed. In the end, they will prove a stronger lever than weapons.

“At the same time, the West should use every available means to help ordinary Russians, including Russian-sympathizers in the Baltics and Ukraine, learn the bloody, venal truth about Mr. Putin. It should let them know that Russia, a great nation dragged down a terrible path, will be embraced when it has rulers who treat the world, and their own people, with respect not contempt, however long that takes.”

The death toll in the war is now more than 5,600. 

*Friday afternoon, the deputy commander of NATO, Sir Adrian Bradshaw, openly raised the prospect of a conventional armed conflict with Russia on European soil, warning Russia could lash out at an eastern European member state designed to catch the alliance off guard and snatch territory. 

Speaking at a think-tank in London, Sir Adrian said, “Russia might believe the large-scale conventional forces she has shown she can generate at very short notice...could in future not only be used for intimidation and coercion, but to seize NATO territory,” he said.

Bradshaw pointed to extensive war games conducted by the Russian military in 2013 that worked on lightning moves involving the rapid mobilization of as many as 25,000 troops in Belarus. Another ‘snap’ exercise the same year in Russia’s eastern military district was the largest since the fall of the Iron Curtain and involved 160,000.

Iraq / Syria / ISIS: For the life of me I don’t understand why this has been announced so publicly, but a joint Iraqi-Kurdish military force of up to 25,000 is being assembled to retake Iraq’s second city, Mosul, from ISIS, according to a U.S. official.

Yes, ISIS knows this is a goal, but it’s also the second time the U.S. has spoken up about it, including giving a time table for the offensive; specifically April or May. To do so later runs up against the summer heat. Of course this gives ISIS even more of a heads-up in ‘preparing the ground’ for the attack, such as in planting IEDs.

While the official wouldn’t say if a small group of U.S. advisers would be part of the attack force to guide air support, that seems a certainty if the goal is success.

In the here and now, there was fierce fighting in and around the Syrian city of Aleppo as regime forces battled a range of insurgents, including al-Qaeda’s Nusra Front, with heavy casualties on both sides.

Separately, Turkey and the United States signed an agreement Thursday to train and arm Syrian rebels fighting ISIS after months of talks. This is a step that should have been taken three years ago, realistically.

The Turkish government said the training could begin as early as next month and involve hundreds of Syrian fighters in the first year.

The U.S. and Turkey, though, continue to disagree over just what this force that is to eventually number 5,000 is supposed to do. Washington wants it going after ISIS, while Ankara says the target should be President Bashar Assad.

A new poll from CNN/ORC shows 57 percent of Americans do not approve of the way President Obama is handling the country’s military action against ISIL. 40 percent said they approved of his efforts. Back in September, 49 percent approved.

One more on ISIS...in retaliation for Egypt’s bombing of its positions in Libya, IS militants killed at least 40 people there on Friday in the eastern town of al-Qubbah. Three bombs targeted a petrol station, a police station and the home of parliamentary speaker Agila Salah, who was not there at the time of the attack.

Iran / Israel: On the nuclear talks front, with time running out to reach an agreement, U.S. officials will meet with their Iranian counterparts in Geneva on Sunday, with the P5+1 (Russia, China, Britain, France, the United States and Germany) facing a March 31 deadline.

According to Yuval Steinitz, Israel’s intelligence, international relations and strategic affairs minister, “The gap is narrower than before.”

“I can see progress on two or three central items,” said Steinitz, who is the Israeli point man on the issue, though not directly involved in the talks.

As reported by the Financial Times’ Sam Jones and Geoff Dyer:

“Mr. Steinitz outlined four key areas of concern in the talks: the number of centrifuges Iran is permitted to continue operating; its stockpile of enriched uranium; its research into more advanced centrifuges; and the storage and dismantling of mothballed centrifuge arrays.

“ ‘On the first issue of the number of centrifuges...there is some progress or gaps which have been narrowed. But this is mainly because the P5+1 made too many concessions,’ Mr. Steinitz said. Tehran initially wanted a minimum of 9,000 centrifuges, and the P5+1 is considering 4,500 and possibly 6,000.

“Iran has, however, made substantial concessions on its stockpile of uranium, Mr. Steinitz said. ‘There is some progress here also – the Iranians [are] agreeing to deliver most of the stockpile abroad,’ he said.

“Israel’s chief remaining concern, on which there had been ‘no real progress,’ was centrifuge research. Without a comprehensive ban, Mr. Steinitz said, Iran could – completely and legally – undermine any deal. Israel would push the P5+1 hard on the issue, he said, adding that world powers could afford to be tough with Tehran.

“ ‘There can be no deal immediately, but this doesn’t mean that there will be no deal after a few months or maybe a year or two because if the pressure is sufficient and if the Iranians are forced to choose either to save their economy or to save their uranium enrichment facilities, I’m confident...they will choose to save their economy.’”

David Ignatius / Washington Post

“The public rift between President Obama and Israeli Prime Minister Benjamin Netanyahu over the Iranian nuclear issue is often described as a personality dispute. But a senior Israeli official argued this week that the break has been building for more than two years and reflects a deep disagreement about how best to limit the threat of a rising Iran.

“Yuval Steinitz, Israel’s minister of intelligence, outlined his government’s view in an interview Wednesday. He said that the nuclear agreement contemplated by Obama would ratify Iran as a threshold nuclear-weapons state, and that the one-year breakout time sought by Washington wasn’t adequate. And he stressed that these views aren’t new.

“ ‘From the very beginning, we made it clear we had reservations about the goal of the negotiations,’ he explained. ‘We thought the goal should be to get rid of the Iranian nuclear threat, not verify or inspect it.’

“Steinitz, who helps oversee Iran strategy for Netanyahu, said he understands the United States wants to tie Iran’s hands for a decade until a new generation takes power there. But he warns: ‘You’re saying, okay, in 10 or 12 years Iran might be a different country.’ This is ‘dangerous’ because it ignores that Iran is ‘thinking like an old-fashioned superpower.’....

“ ‘The temptation [for Iran] is not now but in two or three or four years, when the West is preoccupied with other crises,’ he added. Steinitz said that if Iran chose to ‘sneak out’ at such a moment, it would take the United States and its allies months to determine the pact had been violated, and another six months to form a coalition for sanctions or other decisive action. By then, it might be too late....

“Steinitz concluded the conversation with an emphatic warning: ‘Iran is part of the problem and not part of the solution – unless you think Iran dominating the Middle East is the solution.’ People who think that a nuclear deal with Iran is desirable, as I do, need to be able to answer Steinitz’s critique.”

Meanwhile, Ayatollah Ali Khamenei, still the key to any nuclear agreement, said in a speech this week:

“The enemy is going to use the weapons of sanctions to the hilt because their goal is to stop the progress of our people,” as quoted by the official Islamic Republic News Agency. “Even if we were to allow them to dictate to us on the nuclear issue, the sanctions will not be lifted because they are against the foundational principles of the revolution....

“If their intent is to retain sanctions, the Iranian nation can go that route as well. Iran has the world’s most gas and oil, and if need be Iran can hold back gas that Europe and the world is so dependent on.” [Los Angeles Times]

Benjamin Netanyahu...at a speech in Jerusalem on Monday explaining the reason behind his upcoming address before a Joint Session of Congress.

“Why am I going to Washington? Because, as prime minister of Israel, it’s my obligation to do everything in my power to prevent the conclusion of a bad deal that could threaten the survival of the State of Israel.

“The current proposal to Iran would endanger Israel. It would enable Iran to build its first nuclear device within an unacceptably short time. And it would allow Iran to build an industrial capability to enrich uranium that could provide the fuel for many bombs in the coming years.

“A regime that openly calls for Israel’s destruction would thus have finally the means to realize its genocidal aims.

“Now mind you, I’m not opposed to any deal with Iran. I’m opposed to a bad deal with Iran. And I believe this is a very bad deal....

“Why am I going to Congress? Because Israel has been offered the chance to make its case on this crucial issue before the world’s most important parliament; because a speech before Congress allows Israel to present its position to the elected representatives of the American people and to a worldwide audience; because Congress has played a critical role in applying pressure to the Iranian regime – the very pressure that brought the ayatollahs to the negotiating table in the first place, and because Congress may well have a say on any final deal....

“The pursuit of nuclear weapons by Iran is the most urgent security challenge facing the world. The greatest danger facing humanity is the possibility that any movement or any regime of militant Islam will arm itself with weapons of mass destruction.

“Everything that we see in our region now will pale by comparison. Everything that we see in Europe will pale by comparison.

“When a militant Islamic regime that is rampaging through the region right now – that’s what Iran is doing, it’s conducting a rampage through the region – when such a regime has nuclear weapons, the whole world will be in peril.

“Look at what Iran is doing now without nuclear weapons. States are collapsing – and Iran is plunging forward. It already controls four capitals.

“It’s trying to envelope Israel with three terrorist tentacles – Hizbullah in Lebanon, Hamas in Gaza and now it’s trying to build with its Hizbullah proxies a third front in the Golan.

“With nuclear weapons, such a regime would be infinitely more dangerous to everyone, not only to Israel.” [New York Post]

Lebanon: Michael Young / Daily Star

“As prospects for the emergence of new sectarian and ethnic entities rise in the Middle East to replace illegitimate, authoritarian states, it is necessary to ask what will happen to Lebanon, the only Arab state that has sought to build its political system around a formula for sectarian compromise.

“Lebanon’s most pressing danger is the presence of some 1.5 million Syrian refugees in the country, most of them Sunnis from areas the Assad regime considers vital for its political survival. Many have fled Homs and Qalamoun, which sit on vital communication lines between Damascus and the coast. These are both places the regime intends to retain, even as it has given up on far-flung districts that it has no real hope of controlling, such as Syria’s north, northeast and east.

“Bringing back hundreds of thousands of Sunnis to Homs and its environs, the vulnerable neck of Bashar Assad’s ‘useful Syria,’ is not something the regime in Damascus intends to do, amid rumors that the Iranians have resettled friendlier Shiite populations there from outside Syria and even the region. So, what happens to most of the refugees now in Lebanon?

“Developments don’t offer much of an answer, let alone provoke optimism....

“Is the permanent settlement of Syrian refugees in Lebanon a possibility, as some Lebanese have warned? Certainly it is, and what is more worrisome is that there are those Lebanese willing to go along with such a project, seeing that it will boost Sunni demographics at the expense of Shiites. International humanitarian organizations have insisted that Lebanon is obliged to care for the refugees, but have given scant attention to the long-term, political implications of their presence....

“Populations are not sacks of potatoes. As the regime’s intent becomes clearer, the refugees will understandably resist it and many will refuse to leave Lebanon....

“Beyond that, the millions of Syrians in Lebanon, Jordan and Turkey are a potential reservoir of difficulties not only for the region but also for the international community. A consequence of Sunni alienation in Iraq was ISIS; the Syrian refugees present risks far more perilous, as millions of people without a future, a territory, an anchor are circulating among fragile countries already at their limits in coping with the present situation.

“That the international community – starting with Europe, the United States, the Arab countries, and Russia – has been less than useless with regard to the Syrian refugees is self-evident. Nor have they taken any measures against those exacerbating the refugees’ terrible predicament, namely the Syrian regime and Iran. But the problem will not go away; it will only get worse for everyone. It’s past time for the world to wake up.”

Afghanistan: The United Nations reported that more than 10,500 civilians were killed or wounded in 2014, the highest toll since the U.N. began counting casualties in 2009. 3,699 were documented as being killed, 6,849 injured; a 22% increase over 2013. 714 of those killed were children.

Separately, a Taliban suicide attack on a police station in Logar province killed at least 22 in the latest targeted assault on security forces.

Russia, cont’d: A new German documentary on Vladimir Putin purports that he was regularly violent to his ex-wife Lyudmila during their marriage, he’s had five attempts on his life, including one in London foiled by Scotland Yard, and he loves to deliberately keep people waiting, such as Angela Merkel, who has had to wait four or five hours before a meeting. ZDF television claimed to have been given access to the unseen files of an unidentified Western intelligence agency, with details going back to his time as a young KGB officer stationed in Dresden.

Separately, opposition leader Alexei Navalny was sentenced to 15 days in prison for handing out leaflets to publicize a planned rally for March 1. The imprisonment bars him from taking part in the demonstration that is to protest Putin’s policies.

Hungary: As alluded to above, Vladimir Putin spent some time in Hungary this week at the invitation of Hungarian Prime Minister Viktor Orban, Putin’s first official visit to a Western country in more than eight months. Thousands of Hungarians took to the streets to protest the warming ties between the two leaders, with demonstrators carrying signs proclaiming “Putin, Nyet! Europe, Yes.”

Orban is receiving $10 billion in aid to expand and update a nuclear power complex with Russian assistance, while the two also cut a new deal on gas imports.

At the same time, Orban has been imposing curbs on a free press and stifling opposition.

Orban has made statements like, “Europe’s unity can and must be created along with Russia.” [Carol Williams / Los Angeles Times]

China: I’ve been writing of Beijing’s construction of artificial islands in the disputed South China Sea for some time now and this week the Wall Street Journal reported “a dramatic expansion...intensifying concerns about Beijing’s territorial ambitions.”

New satellite imagery released by IHS Jane’s, the defense intelligence provider, show significant progress on three islands, all clearly designed to help enforce control of the one of the world’s busiest shipping routes.

The U.S. says it continually tells China to cut the crap, obviously to no avail.

North Korea: Kim Jong-un is sporting a new hairdo and he’s over plucked (or shaved) his eyebrows. The hairstyle appears to be an attempt, according to some experts, to look more like his late grandfather, the revered Kim Il Sung, which he already does, supposedly as a result of some plastic surgery. The real issue, though, is does he accept Putin’s invitation to come to Moscow in a few months, which would be his first trip outside North Korea and a sign he is comfortable he’d be allowed to return to Pyongyang!

Nigeria: It’s impossible to know how accurate some of the reports from here are, but it appears the Chadian army has made gains against Boko Haram inside Nigeria, with Chadian state television saying Wednesday it had inflicted heavy losses on the militants; though on Tuesday a Boko Haram suicide bomber killed at least 36 in the Borno town of Biu. The group’s presumed leader, Abubakar Shekau, pledged in a video to disrupt the presidential elections that were postponed until March 28.

President Goodluck Jonathan is now appealing for U.S. troops, but the chances of this happening are slim and none.

Cuba: So I was watching the golf from Pebble Beach last Saturday and it was the usual AT&T pro-am event where you see a smattering of celebrities. On-course reporter David Feherty at one point corralled actor Andy Garcia and while they talked a little about the state of Garcia’s golf game, Feherty couldn’t help asking the actor, who was born in Havana, what he thought of the new relationship between the U.S. and Cuba. “I don’t like it...it strengthens the Castro regime,” said Garcia.

Go Andy! I mused. Frankly, I’m surprised this didn’t get a little national airplay, including on Fox (if I missed it, I apologize). 

Oh well, it was an important statement. The kind I’ll never forget, frankly.

Random Musings

--David Nakamura and Juliet Eilperin / Washington Post

“President Obama’s new immigration program was supposed to begin accepting applications Wednesday from thousands of illegal immigrants hoping for relief from the threat of sudden deportation. Instead, the administration abruptly postponed the launch after a federal judge in Texas temporarily blocked the White House initiative....

“Though (U.S. District Judge Andrew S.) Hanen did not rule on the constitutionality of Obama’s November immigration order, he said there was sufficient merit to warrant a suspension of the new program while the case goes forward. All told, Obama’s immigration actions are projected to benefit as many as 5 million immigrants, many of whom could receive work permits if they qualified.

“The effects of Hanen’s procedural ruling rippled through Washington and underscored a broader challenge to the president as he seeks to solidify the legacy of his administration.

“Along with the immigration action, the fate of two of Obama’s other signature initiatives – a landmark health-care law and a series of aggressive executive actions on climate change – now rests in the hands of federal judges. It is a daunting prospect for a president in the final two years of his tenure who believes he is on the path to leaving a lasting impact on intractable and politically perilous issues, despite an often bitter relationship with Congress.”

All three issues are now going to be decided either at a U.S. Court of Appeals or the Supreme Court (ObamaCare).

[The White House announced Friday afternoon it was seeking an emergency order to block Judge Hanen’s ruling.]

Editorial / Wall Street Journal

“That marvel of American self-government – the separation of powers – is once again frustrating President Obama’s habit of suspending statutes that conflict with his political goals. This time a federal judge in Texas has rebuked and blocked his attempt to rewrite immigration law – potentially rewiring the debate in Washington.

Judge Andrew Hanen issued a preliminary injunction late Monday against Mr. Obama’s order that awards quasi-legal status and work permits to some five million illegal immigrants. His meticulous 123-page ruling is a vindication of the 26 states that brought the challenge and, more significantly, for the rule of law.

“Last November the Department of Homeland Security published memos instructing immigration enforcers to disregard federal laws that require deportation of the undocumented and place strict limits on who may work in the U.S. The White House and DHS claim this ‘deferred action’ is nothing more than routine prosecutorial discretion, as if the department is merely conceding that its officers cannot hunt down and deport the millions of illegals in the country.

“Judge Hanen dismantles that fiction. As he points out, the DHS memos amount to ‘a massive change in immigration practice’ that reorders ‘the nation’s entire immigration scheme.’ Instead of the historical norm of forbearance in individual cases, the memos devote 150 pages to detailing a blanket policy for whole classes of immigrants – meaning that discretion is ‘virtually extinguished,’ as Judge Hanen writes.

“The memos also actively bestow benefits that Congress never granted, such as the right to work, obtain Social Security numbers, and travel to and from the U.S....

“Meantime, Judge Hanen’s decision is an airlift for Republicans in Congress if they have the wit to accept the relief. Immigration hardliners are attempting to defund Mr. Obama’s order but lack a legislative strategy whose end-game isn’t shutting down all of DHS. If the injunction is sustained on appeal, the President’s unilateralism will be a dead letter until the case is resolved, which should persuade the GOP’s deportation caucus to stand down before another self-defeating flameout.

“We support a generous immigration policy, but the Texas decision shows that Mr. Obama’s political whims are the wrong way to get there.”

--In a speech on Wednesday, former Florida governor Jeb Bush vowed to set his own agenda on foreign policy, not that of presidents 41 and 43, George H.W. Bush and George W. Bush.

Jeb said he has been “fortunate” to have two family members “who both have shaped America’s foreign policy from the Oval Office.”

“I recognize that as a result, my views will often be held up in comparison to theirs,” Jeb said. “But I am my own man.” His views would be shaped by “my own thinking and my own experiences.”

In a Q&A session afterward, Jeb Bush said, “There were mistakes made in Iraq for sure,” pointing to the inaccurate information concerning Saddam and weapons of mass destruction.

Iran, Bush said, is “the defining foreign policy issue of our time,” saying the Obama administration is “unequal to the task.”

“The great irony of the Obama presidency is this: Someone who came to office promising greater engagement with the world has left America less influential in the world,” he said. [Ed O’Keefe and Karen Tumulty / Washington Post]

--Some NBC/Marist polls for Iowa, New Hampshire and South Carolina were released this week. Among potential GOP caucus-goers and primary voters:

Iowa: Mike Huckabee 17%, Jeb Bush 16%, Scott Walker 15%, Chris Christie 9%, Rand Paul 7%.

New Hampshire: Bush 18%, Walker 15%, Paul 14%, Christie 13%, Huckabee 7% Ben Carson 7%.

South Carolina: Lindsey Graham 17%, Bush 15%, Walker 12%, Huckabee 10%, Carson 10%, Paul 7%.

On the Democratic side, Hillary crushes the opposition, which for the purposes of these surveys did not include Elizabeth Warren because she continues to insist she isn’t running.

Iowa: Clinton 68%, Crazy Joe Biden 12%, Bernie Sanders 7%

New Hampshire: Clinton 69%, Sanders 13%, Uncle Joe Biden 8%

South Carolina: Clinton 65%, “Oh that Joe Biden” 20%

--According to a CBS News survey, just 28% of Republicans said they would consider supporting Gov. Chris Christie, compared with 43% who said they would not, the worst ranking among potential GOP candidates.

By comparison, 49% would consider supporting Jeb Bush for the nomination vs. 26% who said they wouldn’t. 46% would consider backing Mike Huckabee with 24% saying no. The split for Sen. Marco Rubio was 37 (yes)/19 (no), and 31/30 for Sen. Rand Paul.

On the Democratic side, 81% would consider voting for Hillary Clinton for the party’s nomination, 12% would not.

--Maggie Haberman and Nicholas Confessore / New York Times...on Gov. Christie:

“He does not return phone calls. He does not ask for support. He arrives late for meetings. And he acts as if he has all the time in the world.

“The complaints have piled up for weeks, dismaying many longtime supporters of Gov. Chris Christie of New Jersey and sending others into the arms of his rivals for the presidential nomination, according to interviews with more than two dozen Republican donors and strategists.

“As a half-dozen other candidates aggressively raise money and chase endorsements in Iowa and New Hampshire, friends and detractors alike say Mr. Christie’s view of his status and pre-eminence within the Republican field is increasingly at odds with the picture outside his inner circle.”

Others say Christie is doing just fine and Kenneth Langone, a co-founder of Home Depot and Christie’s leading supporter among New York donors “said he had been raising money for Mr. Christie’s new leadership PAC at a healthy clip... ‘I’ve never had anyone say no,’ Mr. Langone said.”

--I have no comment on Rudy Giuliani’s remarks on President Obama other than to say I don’t see how this helps Republicans take the White House.

--179 patients at UCLA’s Ronald Reagan Medical Center may have been exposed to a potentially deadly bacteria from contaminated medical scopes, with two deaths already linked to the outbreak. As first reported by the Los Angeles Times’ Chad Terhune, “the two people who died are among seven patients that UCLA found were infected by the drug-resistant superbug known as CRE – a number that may grow as more patients get tested....

“By some estimates, if the infection spread to a person’s bloodstream, the bacteria can kill 40% to 50% of patients.

“At issue is a specialized endoscope inserted down the throats of about 500,000 patients annually to treat cancers, gallstones and other ailments of the digestive system.

“These duodenoscopes are considered minimally invasive, and doctors credit them for saving lives through early detection and treatment. But medical experts say some scopes can be difficult to disinfect through conventional cleaning because of their design, so bacteria are transmitted from patient to patient.

“These instruments are not the same type used in more routine endoscopies and colonoscopies.”

There have been about a half-dozen similar outbreaks around the country since 2012.

--For the Northeast and parts of the Midwest, this has been a second straight brutal winter. December was OK, but January was colder than normal by my records and now it’s official; February will go down as the coldest month in 100 years for many major metropolitan areas such as New York. Not a lot of winter golf being played like two years ago, for one. The Siberian Express we are suffering through as I write is some of the coldest weather since the mid-1990s. Kentucky seems to be ground zero for this particular experience with temps 40 degrees below normal.

But for the rest of the country, thus far the winter has been warmer than average, particularly in the first two weeks of February. Ski areas across the West have struggled to stay open due to lack of snow. The same pattern, ongoing warmth in the West and freezing cold in the East is expected to be the case the next few weeks, according to the Climate Prediction Center.

As for Boston, for the archives I just have to get this down, from fivethirtyeight.com:

“So far in February (Ed. as of midweek), 58.5 inches of snow have fallen... that’s more than the total seasonal snowfall that Boston received in 95 of the previous 124 winters (77 percent). It beats the previous all-time monthly record (January 2005) by 15.2 inches.

“And this data undersells what Boston has gone through in 2015. In January and February so far, a total of 92.8 inches of snow have hit Boston. That’s 22.9 inches more than the previous two-month record (January and February 1994), and it’s greater than the total seasonal snowfall of all but two (98 percent) of the last 124 winters.”

Boston will see more snow Saturday and Sunday.

--According to the Gallup-Healthways Well-Being Index, Alaskans lead in well-being [as measured by physical and emotional health – purpose, social, financial, community and physical.] Hawaii and South Dakota are two and three. Kentucky is No. 49 and West Virginia last. The rankings are based on over 176,000 phone interviews with people in all 50 states.

I was kind of surprised Ohio and Indiana are Nos. 47 and 48, respectively.

--Speaking of well-being, a government advisory committee has issued new dietary recommendations that reverse previous guidance on limiting dietary cholesterol, while the same guidelines say you can drink more than a few cups of coffee.

And the committee is backing off stricter limits on salt, but adding limits on sugar, which promotes obesity. The panel also recommends eating more veggies, fruits, whole grains and nuts, while advocating a diet lower in red and processed meat, though lean meats can still be part of a healthy program.

The recommendations will eventually be written into dietary guidelines by the end of the year.

--Lastly, in reading the Feb. 23, 2015 issue of Army Times (which I subscribe to just to keep up on things), I can’t help but note the awarding of a Distinguished Service Cross (second only to the Medal of Honor) and eight Silver Stars to nine members of the 3rd Special Forces Group for their actions in Afghanistan spanning more than two years.

Capt. William Eberle, earned the DSC, and the following received the Silver Star.

Master Sgt. Jeffrey Batson
Master Sgt. Jeffrey Bochey
Master Sgt. Johnie Brewington
Sgt. 1st Class Clayton Brachtenbach
Sgt. 1st Class Keith Smith
Master Sgt. Carl Schmidt
Staff Sgt. Russell Dallas
Staff Sgt. Thomas Daley

We thank you for your service. 
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Pray for the men and women of our armed forces...and all the fallen.

God bless America.
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Gold closed at $1204...so much for $1300
Oil $50.34...first down week in four

Returns for the week 2/16-2/20

Dow Jones +0.7% [18140]
S&P 500 +0.6% [2110]
S&P MidCap +0.9%
Russell 2000 +0.7%
Nasdaq +1.3% [4955]

Returns for the period 1/1/15-2/20/15

Dow Jones +1.8%
S&P 500 +2.5%
S&P MidCap +4.4%
Russell 2000 +2.2%
Nasdaq +4.6%

Bulls 56.6
Bears 14.1 [Source: Investors Intelligence...over 40-pt. spread between the two normally a major warning signal. Last was end of Dec., which did indeed mark a short-term top.]

Have a great week. I appreciate your support.

Brian Trumbore