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Week in Review

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01/30/2016

For the week 1/25-1/29

 [Posted 12:00 AM ET, Saturday]

Warning: If you are used to printing this out, this one is about 37 pages.

Edition 877

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Washington and Wall Street

Well January sucked, I think you’d agree, though Friday’s global rally ameliorated the pain a lot.

Some major benchmarks for the month:

Dow Jones -5.5%
S&P 500 -5.1%
London FTSE -2.5%
Frankfurt DAX -8.8%
Euro Stoxx 600 -6.4%
Tokyo Nikkei -8.0%
Shanghai Comp. -22.7%

The week was highlighted in the U.S. by the first meeting of the U.S. Federal Reserve’s Open Market Committee since it raised interest rates  in December, strongly hinting then that it would raise them another four times in 2016 as part of its effort to normalize policy.

And while no one thought the Fed would hike this week, especially owing to the dreadful start to the year in global markets, Janet Yellen and her band of merry pranksters gave a statement leaving all befuddled in terms of future policy.

The central bank said it was assessing what the gyrations around the world meant for the risks facing the U.S., with the global picture having darkened, while at the same time the European Central Bank, the Bank of Japan and the Bank of England have been sending out dovish signals (especially the BoJ on Friday, see below), which means Yellen and Co. look increasingly out of step for hiking in December.

In its statement, the Fed acknowledged the plunge in oil prices augured low inflation for the near term, but it still expected inflation to head towards its target, 2.0%, over time.

Addressing the turmoil in world markets the FOMC statement read: “The Committee is closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook.”

The Fed downgraded its view of the pace of growth, noting it “slowed late last year,” an acknowledgement its previous view of “moderate growth’ was wrong.

And the Fed then said the labor market, however, has “improved further” with December’s solid jobs report.

But you add all the above up and investors and Fed watchers were reduced to one of those Homer Simpson blank looks, except we know one thing.  The Fed is not hiking when they next meet on March 15-16, especially, again, after the Bank of Japan’s move and, let’s face it, the crappy GDP report, let alone other overseas developments.

Sorry the above is kind of convoluted.  I know what’s going on, but the Fed doesn’t.  We know the Fed can’t hike in March, but they didn’t come out and say so.

I also get a kick out of those saying earnings season has been fine thus far, especially when you take out the energy sector.

No it hasn’t.  Yes, a lot of companies are beating expectations, but in many cases those same companies have reported both profits and revenues that are below a year ago levels.  Yes, some of this is due to currency issues, but you can’t say the environment for U.S. multinationals is going to get any better any time soon, again, especially after the BoJ’s move.   The bottom line is profits, ex-energy, are stagnant at best.

Now if you tell me the dollar is going to continue to stabilize, especially against the euro and the yen, I’ll change my tune but obviously recent moves by both the ECB and BoJ, as well as the Fed, argue otherwise.

Which brings me to the first look at GDP for the fourth quarter, a less than expected 0.7%.  First off, kudos once again to the Atlanta Fed’s GDPNow indicator, which forecast 0.8%.  0.7% is just more of the same, continuing the putrid growth of the past few years.

For 2015....

Q1... 0.6
Q2... 3.9
Q3... 2.0
Q4... 0.7

As former NBA All-Star Derrick Coleman used to say, “Whoopty-damn-do.”

Personal consumption was at least up a respectable 2.2%, though less than the prior period (3.0%), and we already know holiday sales came in at 3.0%, which was not disastrous by any stretch, just in keeping with the rest of the data.

But investment fell 2.5% in the quarter owing to the energy sector pulling projects with the collapse in crude.

In other economic items of note:

December durable goods were miserable, -5.1% when a -0.2% decrease was expected.  Ex-transportation the figure was still down, -1.2%. 

But then we had this weird Chicago PMI for January, 55.6, when it’s recently been mired below 50, contraction territory.  We’ll have to see what the February figure is before drawing too many conclusions, but some of the components in Friday’s report, such as new orders and declining inventories, were indeed positive.

On the housing front, December new home sales came in at an annualized pace of 544,000, well above expectations, with 2015 (501,000 overall) being the best year since 2007 and up 14.7% over 2014.  Remember our warm December?  That helped, big time.

And the S&P Case-Shiller 20-city home index for November showed home prices rose 5.8% in the month, year over year, with Portland, Oregon, leading the way, up 11.1% over the past 12 months.  On the other end, Chicago’s were up just 2%.

Europe and Asia

A flash reading on January euro area inflation came in at an annualized rate of 0.4%, up from 0.2% in December, according to Eurostat, which is encouraging but still far from the European Central Bank’s 2.0% target.

Otherwise, there was a paucity of broad data so just a few tidbits....

--Spain’s GDP came in at 0.8% for the fourth quarter, a very solid 3.2% for the full year.  But its inflation rate for January was -0.4% annualized, so deflation continues to be a story here.

And Spain also continues to be roiled on the political front, as acting Prime Minister Mariano Rajoy has turned down an invitation to form a new government after inconclusive elections in December.  Rajoy’s conservative Popular Party lacks the required support in Parliament.

So that leaves it to the leader of the main opposition Socialist party, Pedro Sanchez, to form a left-wing coalition but many in his party are balking at allowing upstart Podemos to become a partner, plus a combination of these two is still not sufficient to win a parliamentary vote and would require the backing of smaller parties and, bottom line, some are saying the Socialists are better rebuilding themselves as part of the opposition, not from the lead.

And then you have divergences over the fate of Catalonia and its drive for independence.

Actually, I’m having trouble keeping up here.  I need a pitcher of sangria.  [Then I’ll call Uber.]

--France’s GDP in Q4 was 0.2% quarter over quarter, +1.3% for 2015.

--The UK’s Office of National Statistics reported Q4 GDP of 0.4%, up 1.9% year over year, the slowest pace since early 2013 but not all bad given the global issues.  For 2015, GDP was 2.2% vs. 2.9% in 2014.

--Germany’s retail sales rose a less than expected 1.5% in December, year over year.

--Italy’s banking stocks took a huge hit this week and are down about 25% on the year (already) as there are major doubts over the effectiveness of a deal struck between Italy and the EU over non-performing loans.  The deal aims to offload these loans from bank balance sheets into a bad bank, backed by a state guarantee.

This is important because Italian companies rely more on bank loans than bonds for their financing.  But it’s not like the state’s finances are great.  Just last week I told you Italy’s debt to GDP ratio is 130%.  However, it seems the government is only guaranteeing senior tranches of the garbage.  The Italian finance ministry assures us (not that I personally care, mind you), “This intervention will not create any burdens for our public finances.”  I don’t believe that.  This is yet another very confusing situation, which is why Italy’s bank stocks took it on the chin anew following the announcement.  [Think ‘Fifty Shades of Greece, Part II’.]

--Portugal’s public sector workers staged a strike on Friday for a 35-hour work week.  The new ruling socialist-led coalition had promised to roll back the austerity measures of the prior center-right government, including the 40-hour work week, in July, but the workers want the reduction now.  [Tip for the day: Don’t invest in Portugal, mused the editor who conservatively works 80+ hours a week.]

But here, as in Spain, you have an ongoing political crisis in that Socialist leader Antonio Costa is under pressure from his far-left coalition partners to renounce all austerity measures of the previous government, yet Costa has to obey European Union rules on budget control.  Thus far he has been walking the tightrope like a Wallenda, but it won’t last....cue ‘splat!’

On the migrant crisis...attitudes are hardening rapidly, and wait until the spring surge in new numbers.

Finland announced it expected to expel nearly 20,000 migrants out of the 32,000 who sought asylum last year.  In 2014 there were only 3,650 applications and 56% were expelled.

Sweden announced it is preparing to deport 70-80,000 migrants of the 163,000 who sought asylum last year, as this week you had a “terrible crime,” in the words of Sweden’s prime minister, Stefan Lofven, as a female employee at a center for young asylum seekers was stabbed to death by a 15-year-old. 

And Greece is under intense pressure to control its external border from the European Commission as an EC report concludes “Greece seriously neglected its obligations and that there are serious deficiencies occurring out of border controls that must be overcome,” commission vice president Valdis Dombrovskis told reporters.  [Irish Independent]

Among the issues is Greece is not doing a good job at registering and fingerprinting migrants who have entered from Turkey, the main gateway for those fleeing Syria, Iraq and Afghanistan.

This could culminate in Greece facing suspension from the EU’s passport-free travel zone (Schengen) unless the deficiencies are addressed.  Greece has three months to get its act together.

And this from Tom Whitehead of the Daily Telegraph:

“Islamic State in Iraq and Levant (ISIL) is increasingly exploiting the huge migrant flows to slip jihadist cells through undetected to launch attacks in the UK and elsewhere.

“They are mainly traveling on fake Syrian or Iraqi passports which are now so sophisticated it is almost impossible to distinguish between genuine refugees and terror suspects....

“It is feared sleeper cells are being established in the UK and across Europe having been sent back by their ISIL commanders fully trained and with attack orders.

“The strategy is being run out of ISIL’s Syrian stronghold in Raqqa where would-be recruits are briefed and handed new identities....

“Frans Timmermans, the first vice president of the European Commission, said that the majority of those coming to the EU are not fleeing war or persecution and that they should be deported.

“ ‘It’s about 60 percent of all asylum seekers,’ he said, citing internal figures held by Frontex, the EU border agency.  ‘These are people that you can assume have no reason to apply for refugee status.’”

This last bit could have a huge impact on the European Union referendum to be held in the UK, apparently now on June 23.

As Mr. Whitehead writes:  “Eurosceptics have warned that the only way of ensuring that terrorists are not able to travel to the UK would be by withdrawing from the EU and imposing much stricter border regulations.”

Robert Fico, Slovakia’s prime minister, said on Tuesday the EU is committing a “ritual suicide” by letting so many migrants in to the continent.

I said this months ago in supporting Hungary’s actions that represented the first backlash.  I obviously stand by all my statements on this topic since then.  I’m being proven right, daily.

Wolfgang Munchau / Financial Times

“Gerhard Schroder, (German Chancellor Angela Merkel’s) Social Democratic predecessor, last week came out against (Merkel’s open door policy for refugees) with exactly the same arguments as the right-wingers in Ms. Merkel’s own party: Germany cannot absorb such a large number.  More than 1m refugees arrived in the country in 2015.  It could be twice as many this year and the same again next – more if you include family members who will eventually follow.

“It is tempting to think of refugees and migrants as a new source of labor.  But in this case this just is not true, at least not for now. The majority of those who arrive in Germany lack the skills needed in the local labor market. They will enter the low wage sector of the economy, and drive down wages, producing another deflationary shock. This is the last thing Germany and the eurozone need right now.”

If you know of Gerhard Schroder, it is almost staggering to see him come out in this fashion.

Philip Stephens / Financial Times

“Angela Merkel wants to save Europe.  She must first save herself.  The German chancellor’s lodestar is unity within the EU.  This is an admirable ambition, but one that has landed her in serious political trouble at home.  The leaders of Poland, Hungary and Slovakia will never share her generosity towards refugees who also happen to be Muslims.  Ms. Merkel’s search for consensus is a recipe for paralysis.

“Historians will scratch their heads as to how the arrival of 1m people in such a rich, large continent became an existential threat.  The newcomers account for just 0.2 percent of the EU’s population. A sudden influx was always going to be destabilizing, but tear apart half a century of integration among some of the world’s most advanced democracies?

“For some, panic has become a default.  When Mark Rutte, Dutch prime minister, and his French counterpart, Manuel Valls, issue chilling warnings of permanent fracture in the union they invite the obvious question as to what they are doing to forestall it.  Not much.  Matteo Renzi, Italy’s prime minister, is busy settling old scores with Ms. Merkel. Britain’s David Cameron has a referendum to win so wants no truck with what he crassly calls ‘a bunch of migrants.’

“To say there is no easy answer to the refugee question does not mean there are no useful responses.  Above all else, European leaders need to demonstrate that they have regained command of events.  Voters worry about the numbers, certainly, but what hardens concern into anger and intolerance is the role of their leaders as hapless bystanders. Refugees and Islamist terrorism are becoming fused in the public mind....

“If Ms. Merkel is to shake off the challenges to her leadership, generosity towards the migrants must be coupled with the assurance of security. The chaotic response so far has given oxygen to those proclaiming every Muslim a potential criminal or terrorist.  Setting numerical targets solves nothing.  But Berlin must instill confidence that it has a grip on the numbers and can process and separate out genuine refugees.”

Sorry, Mr. Stephens.  It’s too late.  Merkel is toast.

Finally, Europol said ISIS has increased its ability to launch global terror attacks and plans more Paris-style operations in Europe.

Not that this was a surprise, it’s just the forcefulness of Europol and its head, Rob Wainwright, in stressing how ISIS “had developed a new combat style capability to carry out a campaign of large-scale terrorist attacks on a global stage, with a particular focus in Europe.”

---

Turning to Asia, as of Thursday, China’s Shanghai Composite stock index was down a whopping 25% for the year to a level that was the lowest in 13 months, before a rally on Friday regained 3% of the loss.

After a slew of economic data the prior week, including on GDP, just a few notes this past one.  Industrial profits fell 4.7% in December, year over year, according to the National Bureau of Statistics, while the National Development and Reform Commission reported rail freight volume fell 11.9% in 2015 over 2014; both figures hardly positive.

There were more stories echoing what I have written the past few weeks on China’s massive capital outflows and foreign exchange reserves plunging $700 billion in 2015.  Ken Brown of the Wall Street Journal wrote:  “We are witnessing the greatest episode of capital flight in history,” but that the prime risk is more in the emerging markets realm.

“The big worry is that China devalues its currency, which would come at a time that money already is flowing out of emerging markets as investors grow more risk averse and the U.S. Federal Reserve slowly begins to raise interest rates.  If the yuan does fall further, it makes the economies of its Asian neighbors less competitive.  That could lead to more capital flight from emerging markets, which could drain foreign-currency reserves in countries trying to keep their currencies from falling.  Places that do see their currencies tumble also could face inflation, slowing investment and tapering growth.”

Mr. Brown wrote this before the Bank of Japan’s move.  The BoJ shocked global markets on Friday in introducing a negative interest rate; a benchmark of -0.1% which means commercial banks will be charged by the central bank for some deposits.  [The charge does not directly apply to ordinary customers’ accounts.]

Just as in Europe and its negative short-term interest rates, the policy is designed to get the banks to use their reserves for commercial lending to businesses in an attempt to stimulate the Japanese economy and to get out of this recession, slow growth, recession, slow growth, falling prices stagnation of the past 25 years.

For decades Japan has been trying to boost consumer spending, but this is the first time the Bank of Japan has taken such a step and it’s not as if it wasn’t without controversy within the BoJ as the vote was just 5-4.

A statement read in part: “The BoJ will cut interest rates further into negative territory if judged as necessary,” adding it would continue as long as needed to achieve an inflation target of 2%, which the European Central Bank has been trying to do itself with no success.

And while savers aren’t directly impacted, the banks could decide to pass on the cost to their depositors, which would, in theory, give consumers a further incentive to spend.

[Actually, this whole cut into negative territory is very confusing; it’s some kind of three-tier system and the BoJ will only pay negative rates on new bank reserves resulting from its program of asset purchases, which the BoJ said it would keep unchanged at Y80tn a year, even though it is running out of assets to buy!  All existing bank reserves will continue to be paid interest at 0.1 percent.  I’m going to try not thinking about this as I go to sleep.]

BoJ governor Haruhiko Kuroda (Japan’s Janet Yellen) said the weakening growth rate of the global economy was the main factor behind the move: “Japan’s economy continues to recover moderately and the underlying price trend is improving steadily...further falls in oil prices, uncertainty over emerging economics, including China, and global market instability could hurt business confidence and delay the eradication of people’s deflationary mindset.”

No doubt the recent economic news has been poor.  Retail sales month-on-month in December came in -0.2%, with a year over year decline of -1.1%.  The December core inflation rate was shown to be just 0.1% - far below the target.  Industrial production in December over November was -1.4%; -1.6% year over year.

The only good news this week was the unemployment rate was 3.3% in December, but this is very deceiving.  Prime Minister Shinzo Abe promised reforms in Japan’s economy and the nearly historical low jobless figure (3.1% being the low) tells you very little reform is taking place.

Abe has also been pleading for Japan’s corporations to raise wages significantly and invest in capital projects, but they have been largely sitting on their profits, especially the major exporters such as the auto companies who are taking advantage of the weak yen.

And these same cash rich companies hardly need the fresh funds the BoJ is trying to encourage!

So will the BoJ’s action work? Has the ECB’s? [No.]  Has the Fed’s?  [No.]  Did the BoJ’s action of the past 25 years?  [No.]

One last note concerning the region...fourth-quarter GDP in Taiwan was -0.3%, after -0.6% in the third, so that is recession, though these numbers can be revised sharply, either way.  The June quarter, for example, was first reported as negative and then revised into positive territory.

That said, Taiwan’s exports, which account for 70 percent of GDP, fell 13.9 percent on a year-on-year basis in December as growth in China, its biggest market, slowed dramatically.

Street Bytes

--What was once looking like the worst opening month to a year ever turned out to be something far less, the worst month for stocks since last August as Friday’s 2.4% rally for the Dow Jones, S&P 500 and Nasdaq meant all the difference in the world between historically awful and just plain abysmal.

For the week the Dow gained 2.3% to 16466, while the S&P was up 1.8% and Nasdaq 0.5%.  Nasdaq did still lose 7.9% for the month, while the small-cap Russell 2000 was off a whopping 8.9%.  But it was looking far worse until the Bank of Japan said, hey, here’s more free money and, just as in the aftermath of the 2011 earthquake and tidal wave, Japan’s flotsam washed up on our shores, though at a much more rapid pace.  Investors thought it was all good, but having seen the actual garbage up close in Oregon a year later, I can tell you it’s really nothing more than barnacles and invasive species.

--U.S. Treasury Yields

6-mo. 0.42%  2-yr. 0.77%  10-yr. 1.92%  30-yr. 2.74%

The yield on the 10-year is at its lowest level since last spring.

--Oil rallied a bit this week (again, I am not going overboard about any rally in crude until we close over $40 and stay there for at least a few weeks), closing at $33.62, or the level of three weeks ago, partly on word Russia was ready to discuss an output cut with OPEC members.  But Saudi officials said there are zero plans for such discussions, let alone the proposal long out there to cut production 5 percent.  OPEC has yet to announce any kind of special meeting for February as rumored, either, though some members such as Venezuela and Nigeria are pushing for emergency talks.

--Officials from the World Bank and International Monetary Fund traveled to Azerbaijan to discuss a possible $4bn emergency loan package as a result of the collapse in the oil price, in what is seen as the first of what could become a series of bailouts involving emerging market producers from central Asia to Latin America.  [Financial Times]

Azerbaijan depends on oil and gas for 95% of its exports and with the severe weakness in its currency, the government instituted capital controls amid rising unrest among the people.

This week the World Bank predicted crude prices would average just $37 this year, specifically warning commodity markets to beware of sharper than expected slowdowns in emerging markets.

Just three months ago, the WB predicted $52 as an average for 2016.

Oxford Economics warned clients on Wednesday, “These are bad times for oil producers and their creditors.  History provides reason for extreme pessimism on the likely fortunes of commodity producers; suggesting that [emerging markets] are prone to default and that commodity slumps are possibly the biggest cause of defaults.”  [Jack Farchy, Sharm Donnan / FT]

Friday, S&P cut Azerbaijan’s credit rating to junk.

--Baker Hughes, the U.S. oil services group that has agreed to a merger with Halliburton (yet to be approved) reported a $1.97bn loss for 2015, while noting the number of rigs drilling oil and gas wells worldwide has fallen 46% since the fourth quarter of 2014, and could drop a further 30% in 2016 if crude prices stay around current levels.

Baker Hughes’ revenues were down 36% for the year...49% for the fourth quarter vs. a year ago.

--Chevron, the second-largest U.S. oil group, spoke of deeper cuts in capital spending in its earnings release on Friday as it reported its first quarterly loss since 2002, $588 million, compared to a $3.5bn profit for the same period in 2014.  The results included a $1.1bn charge for asset writedowns and other one-offs.  Revenues were down 33 percent at $28bn.

CEO James Watson said the company’s number one financial priority was “to maintain and grow the dividend,” while some analysts said this wasn’t possible.

--BlackRock Inc. chairman Laurence Fink said as many as 400 energy companies may not survive given their debt obligations.

“Carbons are going to be cheaper for longer,” Fink said in a presentation in New Jersey on Wednesday.  [Bloomberg]

[Fink also said China “is frightened of the future,” with the wealthiest trying to move capital out of the country, while he described Japan’s demographics as “terrible.”]

--Facebook Inc. killed it in their earnings report, posting a $1 billion quarterly profit for the first time as advertisers increasingly look to the site and its user base.

Mobile ads accounted for 80% of Facebook’s ad revenue in the fourth quarter.  Just three years ago it was 20%.

Revenues rose 52% to $5.84 billion, up from $3.85 billion, while costs rose ‘just’ 21% (a concern of some analysts).

Advertising revenue overall jumped 57%, and it would have been higher were it not for the impact of the stronger U.S. dollar.  Earnings at 79 cents a share (adjusted) handily beat Street estimates of 68 cents.

Full-year profit was $3.69 billion, up from $2.94 billion in 2014, while revenue for 2015 was $17.93 billion, up 44% year over year.

CEO Mark Zuckerberg announced in a conference call with analysts that Facebook users watch 100 million hours of video on the network every day, as the company looks to sell increasing amounts of ads on its Instagram image-sharing network.  [No wonder global GDP blows.]

COO Sheryl Sandberg said 98 of the top 100 Facebook advertisers also advertised on Instagram in the fourth quarter.

Facebook has 1.59 billion monthly active users, a 14% increase year over year*, with more than 1 billion using the network every day (1.04bn).  An average of 934 million people access Facebook on their mobile devices daily, an increase of 25% year over year.

*Twitter can only dream of such growth as it seems stuck on around 300 million (320m at last count).

Capital expenditures for the fourth quarter were $692 million.

Facebook’s share of the digital advertising market, by the way, rose to 10% from 8% last year, according to research firm eMarketer, while Google’s share declined to 30% from 32%.  Google is slated to report earnings on Monday.

FB’s stock soared 14% on all the positive news.

--That wasn’t the case with Apple, which earlier reported slowing iPhone sales and forecast a drop in its flagship product.  [My sporadic local channel checks were pretty, pretty insightful.]

Total revenue for Apple’s fiscal first quarter ending in December rose just 2 percent to $75.9bn, compared with 30 percent in the same period a year ago.

But Apple will point to net profits of $18.4bn, a new record for the most profitable quarter in U.S. corporate history, with earnings per share at $3.28, basically in line with the Street.

However, iPhone sales for the holiday quarter were up only 1 percent from a year ago at 74.8 million, which was far less than CEO Tim Cook intimated three months earlier.

And sales for its quarter to March would fall to between $50bn-$53bn, due to what Apple finance chief Luca Maestri called growing “volatility” in some economies, including China.

This is the first time iPhone sales will drop since its 2007 debut.

Tim Cook said he saw no sign of an impact to Apple’s business in China, and then Maestri said, “But in spite of the fact we produced our best results in mainland China and Greater China, we can see some signs of economic softness, particularly in Hong Kong right now.”

Cook said of the global scene, “We’re seeing extreme conditions unlike anything we’ve experienced before just about everywhere we look.”

Not a small issue when you generate two-thirds of your revenue outside the U.S.

So Apple might as well focus on something else.  Including all its products, from the iPhone, to the iPad, Apple Watch, Mac and iPod, Apple now has 1bn devices in “active” use, an increase of more than 25 percent year over year.

This was never disclosed before and, coupled with Tim Cook’s mention of Apple “services” and the “mother of all balance sheets,” the company was clearly trying to get investors (and analysts) to focus on the growth elements of the story, and not the slowing iPhone issue.

On the issue of services, such as iCloud and Apple Pay, revenues rose 15% year-on-year in the quarter to $5.5bn.  But this pales in comparison to the $51.6bn in iPhone sales.

The release of the iPhone 7 is expected this autumn.

Editorial / Financial Times

“Apple is trying to fix the reality distortion field. For decades it helped Steve Jobs inspire developers and customers. Now it is backfiring; the shares have fallen a quarter since July and were stagnant after-hours on Tuesday even following record quarterly results.

“The most profitable company in the world is now valued at just 8 times earnings, excluding cash.  That does seem unreal.  Investors, though, have a laser focus on projections for iPhone growth, which Apple’s own revenue guidance now implies will fall into negative territory for the first time in the next quarter.

“Apple’s solution is to provide new numbers on its installed base – 1bn active devices – and to remind people that they are enticing their users to part with billions of dollars for apps and music.  This is not simply a hardware business, Apple is saying. We are selling high-margin digital goods at greater scale than most internet companies.  Services revenue jumped 26 percent year-on-year to $6bn.  At that rate it will soon leapfrog revenues from Macs and iPads.

“Yet Alphabet (Google) – which recently overtook Apple by enterprise value – gets a multiple of 25 times forward earnings; Facebook is at 45 times and Amazon 111 times....

“(But) Tim Cook and his team are not going to talk the stock out of its malaise. Now that the first iPhone revenue decline is all but baked-in, the pressure will be on to staunch the bleeding and produce another product that can raise expectations once more.”

--Shares in Amazon were taken to the woodshed as earnings for the fourth quarter came in well-below expectations, even as sales rose 26% to $35.7bn on a currency-adjusted basis, helping push full-year sales above the $100bn mark for the first time in its history.

Q4 profits were a third lower than the Street forecast at $482 million, or $1 per share, and the share price before the announcement was $635.  The stock then traded below $550, but finished the week at $585.  Pretty easy to do the math, but, longer-term, it has never seemed to matter when it comes to this company.

Amazon Web Services did report its cloud computing business saw full-year sales of $7.9bn, up 70 percent from the previous year.

The overall rise in revenues was offset in part by a 20.5 percent increase in operating expenses, including for fulfilment, content costs and its original video production business.

--Alibaba Group Holding Limited reported revenue was up 32% year over year, better than forecast, with China retail marketplace revenue up 35% and mobile revenue 192%.  [Not a typo.]

Earnings beat the Street by $0.10 ($0.99 vs. $0.89, adjusted).  Annual active buyers increased to 407 million, an increase of 21 million from the prior quarter.

In looking for clues on the current environment in China, EVP Joe Tsai said in a conference call, “The Chinese economy is going through a structural shift to more moderate, but more sustainable, growth...and we have no reason to think anything different in the future.”

Tsai thought Alibaba was insulated from the deceleration in the overall economy, but few believe this.

--Twitter announced a major management shakeup, with four top executives leaving the company and CEO Jack Dorsey saying they chose to do so.  Whatever.

--Microsoft beat the Street on the top and bottom line, even as both declined for the period ended in December, and the shares rallied.  The company wrote down about 80% of its $9.4bn purchase of Nokia Corp.’s handset business as phone revenue declined 49% in the quarter.

But Microsoft had revenue of $1.3bn from its Surface computing products, up 29% from the year-earlier period, and it showed continued growth in its cloud services initiatives, with commercial cloud revenue running at an annual rate of $9.4 billion compared with $5.5bn for the same period in 2014.

Plus CEO Satya Nadella said growth in Windows 10 “is outpacing adoption of any of our previous operating systems” despite a declining hardware market.

--McDonald’s reported better-than-expected quarterly same-restaurant sales, owing to the launch of all-day breakfast and solid demand in China.  Global same-restaurant sales rose a very solid 5%, above the expected 3.2% forecast by analysts, with sales at U.S. restaurants open at least 13 months rising 5.7%.  It wasn’t that long ago that U.S. sales were stagnant or down, quarter to quarter.  Total revenue actually fell 3.5% but this was due to the strong dollar.

It’s great to see this company do well again.

--Boeing shares dropped sharply after the company said it would deliver fewer jets this year than 2015.  Boeing also lowered guidance on earnings per share for this year, far below analysts’ expectations.

Fourth-quarter revenue fell 4 percent to $23.6bn for the commercial aircraft division, while the defense, space and security division saw revenue increase 3 percent.

--Ford posted its best ever earnings on Thursday and the shares went nowhere with the growing feeling the sector has peaked.

Importantly, Ford reported its first full-year profit in Europe since 2010.

Thanks to low gasoline prices, consumers continue to buy high-margin pick-up trucks and SUVs in the U.S.

Ford reported sales of 6.6m cars last year, cementing its position as the world’s number six carmaker with pre-tax profit of $10.8bn, up almost 50% on the year before.  Revenue rose 4% to $150bn – the highest level in 12 years, while net income was $7.4bn.

--I cover the Zika virus in depth down below, but for Street Bytes, the mosquito-borne disease and new travel warnings did a number on the shares of cruise operators, at least temporarily.

--Sprint Corp. beat earnings estimates, but the fourth-largest wireless carrier is eliminating 2,500 jobs, or about 7 percent of total staff.

--EBay Inc. continues to struggle, reporting $2.32 billion in sales for the fourth quarter, virtually flat with a year earlier and the fourth straight quarter without growth.  Profit dropped to $477 million.  The company added the first quarter isn’t looking any better, guiding below the Street’s expectations, and the shares fell sharply in after-hours trading.

The StubHub division is doing well, however, logging $232 million in sales, up 34% from a year earlier.

EBay’s former PayPal Holdings Inc. subsidiary, which was spun off as its own publicly traded company last summer, posted a 17% jump in sales on Wednesday.

--Shares of Under Armour soared after the athletic apparel firm reported higher than expected earnings thanks in part to the impact of NBA superstar Stephen Curry.  Footwear sales rose 95% during the three-month period, primarily from the Curry signature line and other shoe offerings.

I have to admit, I never think of Under Armour when it comes to shoes.  That said, footwear sales totaled $166.88 million, nearly doubling the $85.8 million for the same period last year.  Apparel sales rose 22.2% to $864.8 million.

But for all the success, the shares remain well off their Oct. 12 high of $103.35 at $85.50.

--Weight Watchers stock rose again as shareholder and pitchwoman, Oprah Winfrey, tweeted that she’s lost 26 pounds since she’s been on the diet, even boasting that she’s eaten bread every day.

“That’s the genius of this program,” she said in a video posted on Twitter.

--Insurance giant AIG, under pressure from activist investors such as Carl Icahn, who want the company broken into three parts, instead said it will split off part of its mortgage insurance unit in an initial public offering, sell its financial advisory business and create nine distinct operations in its commercial and consumer divisions that could pave the way for future spinoffs and sales.

--DuPont reported sales fell 9.4% last quarter, which would have slid 1% without the currency impact...still a loss as the company is particularly hard hit in the emerging markets.  Additionally, the company’s near-term outlook for China is “mixed.”

DuPont also strongly hinted there might be more layoffs than the significant ones they recently spoke of, including in Wilmington, DE, their longtime headquarters. 

--Freeport-McMoran Inc. took another big write-down on its oil-and-gas business as revenue continues to crater.  As it attempts to step up its debt reduction, the company reported a loss of $4.09 billion, including charges, with revenue falling 28%.  Last month Freeport suspended its dividend and announced it would reduce capital spending another $1 billion over the next two years.  Carl Icahn has an 8.7% stake in the company currently, according to FactSet.

Freeport did say it believed the copper market was finally “balanced” after its long slide and as one who tweets the price of copper every morning, I’d say at least it appears to be making a stand at $2.00.

--Carl Icahn was in the news a lot this week, including in Iowa as Donald Trump announced the billionaire investor had given $1 million to veterans.

But earlier in the day, owing to pressure from Icahn, Xerox announced it was splitting itself in two, hardware and services businesses.  Icahn will be given three seats on the board of the services unit, which at the end of the third quarter accounted for about 56 percent of Xerox’s revenue.

Icahn reportedly holds 8% of the shares in a company that has been shifting away from its copier business to IT services.

--Johnson & Johnson, the world’s largest healthcare company, reported revenues fell 2.4 percent to $17.8bn in the final quarter of 2015, owing to the strong dollar, but profits did rise to $3.2bn from $2.5bn a year ago and earnings per share beat the Street.

--Proctor & Gamble said if you strip out the impact of the stronger dollar on its operations, revenue rose 2 percent in the fourth quarter.  The prior quarter it reported its first decline in ‘organic’ sales since the 2008-09 recession.

--The Russian economy contracted 3.7% in 2015, the country’s statistics office announced, the worst drop in six years.  Retail sales for the year declined 15.3 percent in December from year ago levels.  Industrial production contracted 4.5% last month, real wages fell 10% year-on-year and producer prices contracted 2.2% from the previous month.

Other than all this, everything in Russia is hunky-dory. 

--China’s Communist Party mouthpiece, the People’s Daily, warned investor George Soros that he needs to think twice launching a “war on the renminbi.”

With China trying to stem capital flight and support its currency, a front page opinion piece read, “Soros’ war on the renminbi and the Hong Kong dollar cannot possibly succeed – about this there can be no doubt.”

The headline in the overseas edition of the People’s Daily read: “Declaring war on China’s currency?  Ha ha.”

The Chinese might kidnap Soros and then two days later say “he is cooperating with authorities on an investigation.”

That’s how these things have been going down, boys and girls.

Soros did not mention the renminbi nor the Hong Kong dollar in his remarks that I noted the prior week, but he did say China was the “root cause” of this year’s global bear market, emphasizing deflation and excessive debt as key risks while adding a hard landing was “practically unavoidable.”

--Speaking of hedge funds and Soros, according to an annual list compiled by LCH Investments, which measures hedge fund traders by the total dollars they have made for investors since launching, Ray Dalio of Bridgewater is number one, having made $45bn in net gains since Bridgewater’s inception in 1975, making a net investment gain of $3.3bn last year.

George Soros’ Quantum Endowment, and his successor Scott Bessent who recent left the Soros group, are ranked second, having made $42.8bn since starting in 1973, while my next door neighbor’s Appaloosa fund (managed by David Tepper) is now third with net gains and prizes of $22.8bn.

John Paulson, the man who made a killing betting against subprime mortgages (see below) slipped from third to seven after posting a net loss of $2.1bn in 2015.

--JPMorgan Chase is paying out almost $2.5bn to settle two of its biggest legal issues remaining from the financial crisis; $1bn to insurer Ambac and $1.42bn to end its remaining disputes with defunct Lehman Brothers.

The Ambac lawsuit centered on an arm of Bear Stearns, which JPM acquired in 2008.  Ambac alleged a Bear Stearns unit misrepresented the securities, with court documents showing a Bear Stearns employee referred to some of them as a “sack of s---.”

As for the Lehman payment, court documents show JPM agreed to settle allegations it unfairly jumped the creditors’ queue as Lehman was collapsing.

--Mexico’s economy grew 0.6% in the last three months of 2015 from the prior quarter, according to the country’s National Statistics Institute.  Overall, Mexico grew 2.5% in 2015, up from 2.1% in 2014.

--The European Union announced the EU hit a new record level of around 2.8 billion tourism nights in 2015, up by 3.2% compared with 2014, with a steady increase since 2009.  Spain was +4.3%, France +2.8%, Italy +1.8% and Germany +3.3%.

Romania was +15.9%, Slovakia +11.5% and Czech Republic +10.3%.

Ireland, in case you’re wondering, as I was, hasn’t reported their data to Eurostat, the statistical arm of the EU.

Interestingly, the figures for Estonia, Latvia and Lithuania were all down and I’m guessing that certainly had to do with Russia and its occasional verbal threats against the Baltics.  [Eurostat doesn’t comment on this.]

--Back to Ireland, its central bank revised its expectations for GDP growth for both 2015 and 2016, raising the past year to 6.6% from a previous estimate of 5.8%, and for 2016 from 4.7% to 4.8%.

--The Los Angeles Times reported that despite a $9 billion investment in new light rail and subway lines, the Los Angeles County Metropolitan Transit Authority (Metro) has seen a drop of more than 10% of its boardings from 2006 to 2015, “a decline that appears to be accelerating.”

Other agencies are doing just as poorly.  In Orange County, bus ridership plummeted 30% in the last seven years.

I find this startling.  Granted the recession forced deep service cuts, but transit agencies can’t figure out where the passengers went.

Yes, falling gas prices wouldn’t help, and Metro has yet to quantify the impact of ride-hailing companies like Uber and Lyft.

But so much for the goal of getting drivers out of their cars and onto public transit to reduce traffic congestion and air pollution.

Foreign Affairs

Iraq/Syria/ISIS/Russia: As the UN-sponsored peace talks were set to commence on Friday, negotiators for the rebels demanded that previous Security Council resolutions on aid distribution be followed before they consider taking part.

Stephen O’Brien, the UN’s head of humanitarian aid, told the Security Council that of 113 requests to be allowed to make aid deliveries to “hard to reach” areas last year, only 10 percent reached the civilians in need.  [See Madaya.]

The Assad regime itself, according to the UN, ignores three quarters of the requests.  As O’Brien said, “Such inaction is simply unacceptable for a member-state of the United Nations and a signatory of the United Nations charter.”

This is beyond despicable, but in keeping with this catastrophic war.  If I’m the opposition (the rebels), no way I take part in any fashion until the aid is allowed to flow, but of course, just as I said all the way back in the summer of 2012, it’s already over. 

Nonetheless, they are attempting to hold talks, with Russia and Iran glad to attend, being backers of Assad.  The opposition groups, a wide-ranging coalition of Islamist and secular fighting groups, exiled politicians and Assad defectors, want an assurance they are the recognized opposition body, but the Russians want a Kurdish group to be part of it.

The Assad regime’s recent military gains have it dealing from a position of strength, even as civilians continue to be targeted.  Unicef reported this week that 47 schools were hit over the last year.

Among the casualties of the past week....

A double suicide bombing in Homs killed at least 22, with another 100 wounded.

And nine children were among at least 63 killed in air strikes believed to be carried out by Russian warplanes on the eastern city of Deir al-Zor.  On the orders of Russian President Putin, Russian warplanes have been bombing around Deir al-Zor in support of pro-government forces who are battling ISIS.  [Syrian Observatory for Human Rights and various wire services.]

Separately, Syrian army troops made major gains in the Alawite stronghold of Latakia, after opposition forces had been making gains.

Traveling in Turkey, Vice President Joe Biden said that if a political settlement is not possible, the United States and Turkey were prepared for a military solution.

You had your chance to work with Turkey in 2012, Mr. Vice President, and the administration blew it.

Iran: The sanctions have been lifted and President Hassan Rouhani ran around Europe this week, hailing a “new relationship” between Iran and France, at one stop, with similar utterances elsewhere.

“Let us forget the resentment,” Rouhani said, calling for both countries to take advantage of the “positive atmosphere” following removal of the sanctions.

In a speech to French business leaders, Rouhani said, “We are ready to turn the page” and establish a “new relationship between our countries.”

French Prime Minister Manuel Valls responded that “Iran can count on France.”

“France is ready to use its companies, its engineers, its technicians and its many resources to help to modernize your country,” Valls said.  [Financial Times]

Earlier, Rouhani had been in Italy, where he sealed a number of industrial deals and even had an audience with the pope.

But as Rouhani is barnstorming for commerce, he was issuing harsh statements against rival Saudi Arabia.  Rouhani told an audience in Paris that “some countries had wanted to use terrorism for their own means... But this is a hand grenade with the pin removed.”

Rouhani, in Italy, said Iran would not apologize to the Saudis for the attack on its embassy by demonstrators furious over Riyadh’s execution of Shiite cleric, Nimr al-Nimr.

“Why should we apologize, because Nimr al-Nimr was executed? We are the ones to apologize because they are killing the people of Yemen?   Apologize to them because they are helping terrorists?” the Iranian president asked.

In Italy, officials felt compelled to cover up nude statues in one of the museums Rouhani was at out of respect for Iran’s strict laws governing propriety.

Rouhani denied he had asked for this.

Oh brother.  And President Obama has the gall to speak of “snapback sanctions” should Iran violate the nuclear deal?  Are you freakin’ kidding me?!  Just re-read what Valls said and ask yourself if France, or any others in the P5+1, will switch gears when Iran begins cheating, as I’m sure they already are.

Of course there are big business deals being cut.  Iran has committed to buying more than 100 passenger planes from Airbus, for one.  French car maker Peugeot said it will return to the Iranian market, producing 200,000 cars a year in a joint venture with a local manufacturer.  Peugeot had been forced to pull out of Iran in 2012 when sanctions took hold.

Daniel Henninger / Wall Street Journal

“Some wonder how history will treat Barack Obama’s presidency.  That depends on who writes the histories.

“Secretary of State John Kerry’s account will fist-pump the Iran nuclear deal as the central foreign-policy event of the Obama presidency, a triumph for Western diplomacy.

“But news photographs in recent weeks are producing a different history. These photos document the abject humiliation of the West by Iran.  Americans who plan to vote in their presidential election should look hard at these photos, because the West’s direction after this will turn on the decisions they make.  [Henninger then talks of the nude statues being covered up.]....

“Then, because Mr. Rouhani will not attend a meal that serves alcohol to anyone, the nominally Italian government of Prime Minister Matteo Renzi declined to serve wine.  [Ed. I guess drinking a bottle of domestic with Rouhani would be out of the question if I requested an interview.]

“They did so for the same reason that beggars grub change in front of Rome’s churches.  Freed by the Obama nuclear deal with Iran, Italy’s tin-cup businesses signed about a dozen deals with Mr. Rouhani this week, totaling $18 billion.

“The bowing and scraping to Mr. Rouhani continues this week as France and Germany sign more deals.  This is not economic re-normalization.  Rather than reform its weak, politically unstable economies, Europe is content to make itself a dependency of the aborning Iranian empire.”

Then you have the photos of Rouhani and the pope.

“The Vatican argues this is realpolitik by a pope trying to protect Christians in the Middle East by inducing Iran to play an ‘important role’ in the peace process.

“Set aside the ‘role’ Iran has played in the death of a quarter-million Syrians and the refugees now destabilizing Europe. One still may ask: Why such public and jolly photo-ops with this person?....

“The persecuted in Iran include Bahais, Sunni Muslims, Christians (notably evangelicals), Jews, Yarsanis and even Shia groups.

“Mr. Rouhani is grinning in this photo because he knows these people can’t move Iran’s culture out of the 16th century.

“The third photograph is of 10 sailors from the U.S. Navy who are kneeling in rows, hands on their heads, on the deck of an Iranian boat.

“The Obama administration hasn’t provided an explanation for how this ‘deviation’ and capture by Iran in the Persian Gulf happened....

“Meeting in a congratulatory ceremony with the Islamic Revolutionary Guard Corps members who took the sailors, Iranian supremo Ayatollah Khamenei said, ‘This event should be considered God’s work.’

“One is tempted to tip one’s hat to the Khamenei-Rouhani strategy team.  Iran took the West’s measure with its nuclear brinkmanship and the West bent.”

When you look at Rouhani’s victory tour, remember something else.  Iran is holding parliamentary elections end of February.

Editorial / Wall Street Journal

“Tehran on Monday barred 635 of the 801 candidates who had intended to run next month for seats in Iran’s Assembly of Experts, the body that will select and nominally oversee the country’s next Supreme Leader. That came on the heels of last week’s disqualification of some 7,000 candidates for next months’ elections to the Iranian Majlis, or Parliament.  So much for the nuclear deal’s promise of empowering Iranian reformers.

“The disqualifications were the work of the Guardian Council, an unelected body that vets candidates for ideological purity. The system allows the mullahs to hold popular ‘elections’ while ensuring no one who might challenge Islamist rule could ever be in a position to win a seat.

“Monday’s purge of candidates betrayed an especially hardline approach.  Among those disqualified is 43-year-old Hassan Khomeini – grandson of Ayatollah Ruhollah Khomeini, the leader of the 1979 revolution that created the Islamic Republic.  Officially, the younger Khomeini is insufficiently versed in Shariah law. The real reason is that he is reform-minded and popular with young Iranians.

“Meantime, the leaders of the pro-democracy Green Movement...are still under house arrest....

“All of this will ensure that whoever replaces Supreme Leader Ali Khamenei will be another ideological purist close to the country’s security establishment.  Iranians hoping for greater freedom under a real democracy will have to wait for a more revolutionary form of change than fake elections and sweetheart nuclear deals.”

Anne Applebaum / Washington Post

“President Hassan Rouhani is not Mikhail Gorbachev, and this is not a perestroika moment.  Iran is not ‘opening up’ or becoming ‘more Western’ or somehow more liberal.  Maybe Iran’s foreign minister will now pick up the phone when John Kerry calls.  But other than that, the nature of the Iranian regime has not altered at all.

“On the contrary, the level of repression inside the country has grown since the ‘moderate’ Rouhani was elected in 2013.  The number of death sentences has risen.  In 2014, Iran carried out the largest number of executions anywhere in the world except for China.  Last year, the number may have exceeded 1,000....

“Political pressure and religious discrimination have increased, too.  Women who don’t wear veils are still vulnerable to arrest and sentencing... Cultural dissidents are under pressure, too, even more so since the sanctions-lifting deal was announced.  On Jan. 7, the poet Hila Sedighi was arrested after landing at Tehran airport and detained for 48 hours, presumably as a warning.  In October, a Kurdish filmmaker received six years and 223 lashes for ‘insulting the sacred.’  When five Americans were released from Iranian prisons this month, the International Campaign for Human Rights in Iran noted that many other political prisoners, including some foreigners, remain in Iranian prisons.”

Libya: The National Oil Corporation has said it fears that up to 3 million barrels of oil could be lost following an ISIS attack on the major oil terminal of Ras Lanuf, with at least five of the 13 tanks being damaged.  The terminal, shut since December 2014, faces a lengthy closure.

Israel: Another female Israeli settler was stabbed to death by two Palestinian terrorists Monday evening as she was walking to a store.

Separately, at least 8 Hamas militants were killed digging underground tunnels after heavy rains northeast of Gaza City caused the tunnel to collapse, Israel Radio reported, citing Palestinian sources.

Hamas has been digging new tunnels and restocking its rocket arsenal since the terrorist infrastructure was hit hard during last summer’s Operation Protective Edge.  [Jerusalem Post]

Egypt: According to the New York Times and human rights organizations, hundreds of Egyptians have been subjected to “enforced disappearance,” as President Abdel Fattah el-Sisi widens his crackdown on opponents, “real or imagined,” as the Times put it.

Enforced disappearance means the people are detained in “a network of secretive detention centers, run by the security forces, where they are held incommunicado, without charge or access to a lawyer, for weeks and sometimes months, according to the rights groups.”

“There, interrogators use the detainee’s isolation and lack of legal protections to interrogate them harshly.  Some have been forced to open their Facebook pages, and other social media sites, to identify friends and relatives.  Many say they have been tortured.”  [Amina Ismail and Declan Walsh / New York Times]

China: Sec. of State John Kerry met with his Chinese counterpart, Foreign Minister Wang Yi, in Beijing and the two reached no agreement when it came to the severity of prospective sanctions for North Korea, three weeks after Kim and his Orcs conducted their fourth nuclear bomb test (which some now say may have indeed had a hydrogen bomb element), nor did they come to any agreement over China’s territorial ambitions in the South China Sea.

Although Wang agreed the UN Security Council should pass a new resolution condemning Pyongyang for conducting the test, he said, “Sanctions are not an end of themselves.  We must point out that the new resolution should not provoke new tension in the situation, much less destabilize the Korean peninsula.”

China’s New China News Agency accused Washington this week of “uncompromising hostility” toward the North, “flaring up the country’s sense of insecurity and thus pushing it towards reckless nuclear brinkmanship.”

As for the South China Sea, which China claims virtually all of, it is uncompromising despite its neighbors’ own claims to parts of the territory.

Wang said at a news conference on Wednesday: “The South China Sea islands were historically China’s territory, and China has a right to protect its maritime sovereign and legal rights and interests.”  Then he denied China was militarizing its artificial islands. At which point Western reporters in attendance all coughed into their hands “Bulls---.”  [Jonathan Kaiman and Julie Makinen / Los Angeles Times...except that last bit.]

Meanwhile, Taiwan’s president, Ma Ying-jeou, visited an island, Taiping, in the South China Sea to emphasize Taiwan’s sovereignty claims.  Taiwan has spent more than $100 million to upgrade the island’s airstrip and even has a 10-bed hospital on it.  Taiwan stations about 200 coast guard personnel there.

The United States and the Philippines were not happy with the visit, which came as a surprise as Ma is due to step down in May, with opposition party president-elect Tsai Ing-wen declining an invitation to go on the trip.

Tsai favors more independence for Taiwan, but she has been careful not to rile up Beijing.  When she officially takes office, we’ll see what direction she really ends up taking.

Separately, China is now in the midst of its Lunar New Year holiday migration, which begins February 8 but normally starts 15 days before and carries on as much as 25 days after.  This year is different, though, because many migrant factory workers were told to go home early with the big slowdown in Chinese manufacturing.  More than a few of them are concerned that they’ll have a job when they return later in February.

Russia: Ralph Peters / New York Post...after the British inquiry into the assassination of Russian defector Alexander Litvinenko and the rantings of Chechen chief Ramzan Kadyrov, both of which I covered extensively last review.

“Putin’s Russia isn’t a nation of laws, but it is a land of rules.  And rule No. 1 is that no one’s allowed to criticize, mock or challenge the reigning czar.

“To borrow the words of one of our own apparatchiki, ‘What does it matter?’  Why should we care about the death of one defector when the world’s ablaze?

“Because the second-most-powerful nuclear-armed state is ruled dictatorially by a remorseless assassin.  It matters because he ignores international law.  It matters because, like Hitler, he has a vision that only war can fulfill.  And it matters because he’s as brilliant as he is ruthless, a leader who knows his own people and sizes up his enemies with genius....

“After toying with a feckless American president, Putin ‘liberated’ Crimea from Ukraine.  When the West failed to respond in a serious way, he invaded eastern Ukraine.  In both operations he used thinly disguised security forces, smirking as he denied Russian involvement.  Again, he faced a limp response, sanctions designed to protect Western business interests.

“Next, he staged a military surprise, deploying forces to Syria under the high-tech noses of Western intelligence agencies.  While the Syrian opposition turned out to be tougher than he expected, Putin nonetheless has managed to stabilize the Assad government’s position, insuring that, whatever Bashar al-Assad’s personal fate, a pro-Russian regime will remain in Damascus....

“Along the way, Putin’s suffered embarrassments, but no compelling defeats.  The West has yet to stand up to him in any significant way.  The result is that he now expects to win – which makes him extremely dangerous.

“That danger may be coming to a head, because market forces are doing what no Western leader dared: applying the brakes.  With oil and gas prices plummeting, Russia’s economy shrinking, inflation’s soaring, the ruble’s collapsing, pensions are losing value, wages can’t keep pace – and the first hairline cracks in Putin’s popularity are showing.  The czar won’t fall tomorrow, but the grumbling has begun....

“Should we rejoice? Does this mean that the assassinations and invasions might end?

“No. In his desperation, Putin could become even more embittered and reckless. Ailing on the home front, he may feel compelled to deliver new triumphs abroad.  His throne isn’t threatened yet, but his pride is wounded.

“And beware a wounded bear.”

South Africa: Not that it will move global markets, but this country bears watching with the collapse in commodities.  As many as 32,000 workers in the mining sector could lose their jobs in the near future.  South Africa’s mining sector employs 400,000 and contributes 7 percent of GDP, but with falling demand from China and elsewhere, the companies have to cut jobs in an aggressive fashion.

However, that is not easy to do here.  The National Union of Mineworkers has urged the government to intervene, the union not understanding simple economics, yet the country is already dealing with an unemployment rate of over 25% and President Jacob Zuma’s government faces key elections later this year.

It could be an explosive situation. 

Malaysia: Prime Minister Najib Razak was cleared of any wrongdoing over $680 million that was channeled into his private accounts, with the country’s attorney general saying the money was from a personal donation from Saudi Arabia’s royal family and not from a state-owned investment fund as had been alleged.  Najib has consistently denied the accusations but faced pressure to resign.

But then the next day, the Malaysian Anti-Corruption Commission said it was seeking to reverse the AG’s conclusion.

And late Friday, Switzerland’s top prosecutor said $4 billion may have been misappropriated from state-owned companies in Malaysia, with some of the funds having been transferred to Swiss accounts held by former Malaysian public officials and current and former officials from the United Arab Emirates.

Random Musings

--I’m ready for the Iowa caucuses and real voting.  That said it appears a snowstorm, originally scheduled there for Tuesday, could start Monday and that could impact the result in a big way.

I’m also the ‘wait 24 hours guy’ and while I’m well aware of the latest on Hillary Clinton’s emails, and the State Department not releasing 22 documents it believes contained top secret information, there’s nothing more for me to say at the moment, though I have related commentary below.

Edward Luce / Financial Times

“Donald Trump may have quit the stage on Thursday night but in so doing only cemented his stranglehold on the Republican race.  With the exception of Jeb Bush, who seemed liberated by Mr. Trump’s absence, the remainder of the field carried on as if Mr. Trump were still on the podium.

“Whether the issue was illegal immigration, ISIS or Barack Obama, candidates vied with each other to out-Trump Trump.  Which candidate would seal the U.S.-Mexico border more tightly?  Who would obliterate ISIS more totally?  And which would display the greatest contempt for the moral failings of Washington?

“If you subtract Mr. Trump’s asides, the transcript would read little different to the first six debates.  By that measure, Mr. Trump’s temporary absence changed nothing.  He has set the tone for 2016....

“Marco Rubio, who is still the likeliest to survive the second-tier circular firing squad, had a difficult night.  A strong third place showing in Iowa next Monday would set Mr. Rubio up for New Hampshire the following week and give him a chance to consolidate the big money – the Koch Brothers, Sheldon Adelson, and others, who are still on the sidelines – for the bigger primaries.

“But he flunked the chance.  He appeared nervous and over-schooled.  Virtually every answer Mr. Rubio gave on foreign policy ended with the phrase: ‘...and if we capture them alive, they’re going to Guantanamo.’....

“There were no memorable lines.  There were only two clear winners on Thursday night.

“The first was Fox News, which posed tough questions and tried to live up to its ‘fair and balanced’ motto.  Partly because of that, Mr. Trump was the other winner. The tougher Fox’s questions, the more his main rivals – particularly Mr. Rubio – appeared to wobble.

“It was almost as if Fox and Trump were on the same team.  Such are the ironies of show business.”

Funny how everyone sees a debate differently.  Virtually all the mainstream commentators thought Cruz looked terrible.

Some final polls ahead of the Iowa caucuses....

In Iowa, a Fox News poll released on Sunday had Donald Trump with an 11-point lead, a 15-point swing in the two weeks between surveys, Trump leading 34-23, with Marco Rubio at 12% and Ben Carson at 7%.

A CBS News “Battleground Tracker” poll released Sunday morning showed Trump leading in Iowa 39-34, with Rubio at 13%.

An NBC News/Wall Street Journal/Marist poll released Thursday showed Trump leading Cruz 32-25, Rubio 18.

A Monmouth University poll of likely Iowa caucusgoers has Trump leading Cruz 30-23, with Rubio at 16% and Carson 10%.

A Quinnipiac University survey has it Trump just 31-29...Rubio at 13%, with no other candidate above 7%.

Marco Rubio received the endorsement of the Des Moines Register.

“Sen. Marco Rubio has the potential to chart a new direction for the party, and perhaps the nation, with his message of restoring the American dream. We endorse him because he represents his party’s best hope.

“That hope rests partly in the electoral calculus of the country.  Republicans should have learned from 2012 that they cannot win with Republicans alone.  Recent polling shows Rubio has higher favorability ratings among independents than all candidates but Ben Carson, as well as positive ratings among Latinos....

“The editorial board also values the executive experience, pragmatism and thoughtful policies of John Kasich, Chris Christie and Jeb Bush.  Yet most Republicans aren’t interested in rewarding a long resume this year.  They want new and different.”

On the Democratic side in Iowa, the CBS/Battleground poll has Bernie Sanders leading Hillary Clinton 47-46.

The NBC News/WSJ/Marist survey has Clinton leading 48-45.

The Quinnipiac poll has Sanders leading 49-45.

In New Hampshire, the aforementioned Fox poll has Trump ahead of Cruz 31-14, with Rubio at 13%, John Kasich 9% and Jeb Bush and Chris Christie 7%.  Whoever finishes fourth, particularly if it’s Kasich or Christie, should move on at least to South Carolina and Nevada, though in the case of those two there is zero reason to believe they would do well in either.  Kasich would appear to have the best chance at pulling off an upset and edging out Rubio (or Cruz) for third.  At least that’s my take.

The CBS/Battleground poll has Trump handily beating Cruz 34-16, Rubio at 14% and Kasich at 10%.

The NBC/WSJ/Marist survey has Trump at 31%, Cruz 12%, Rubio and Kasich at 11%, Bush 8%, Christie 7%.

On the Democratic side, the CBS/Battleground poll has Sanders leading Clinton in New Hampshire 57-38.

The NBC/WSJ/Marist poll in the Granite State also has Sanders at 57-38.

In South Carolina, the CBS/Battleground survey has Trump whipping Cruz like a rented mule 40-21, Rubio third at 13%.

The NBC/WSJ/Marist poll has Trump with a 36-20 lead over Cruz, with Rubio at 14%.

In the CBS/Battleground survey Clinton leads Sanders in the Palmetto State 60-38.

In the NBC/WSJ/Marist poll Clinton leads Sanders 64-27.

In a Fox News national poll, Trump bests Cruz 34-20, with Rubio third at 11%, followed by Carson at 8%.

A Bloomberg Politics national survey has Trump leading with 34%, followed by Rubio with 14% and Cruz 12%.  No other candidate in double digits.

A Washington Post/ABC News poll found that Trump had a 37-21 lead over Cruz, with Rubio third at 11%.

On the Democratic side, the same WP/ABC national survey has Clinton with a 55-36 lead over Sanders among registered Democrats and Democratic-leaning independents, down from a 59-28 margin in December.

--Meanwhile, Donald Trump abruptly pulled out of Thursday’s Republican debate in Des Moines, saying one of the moderators for Fox News, Megyn Kelly, had treated him unfairly at last August’s debate and since then.  [Ed. I am a viewer but hardly a fan of Ms. Megyn myself.]

But Trump appears to have been more ticked off at a “wise-guy press release” the network released Tuesday belittling him, which the Donald said was inappropriately antagonistic and childish.

Fox’s statement said that network officials “had learned from a secret back channel that the Ayatollah and Putin both intend to treat Donald Trump unfairly when they meet with him if he becomes president.”

The statement added that Trump “has his own secret plan to replace the Cabinet with his Twitter followers to see if he should even go to those meetings.’

After reading it, Trump replied: “I said, ‘Bye-bye.’”

“Fox is playing games,” Trump said.  “They can’t toy with me like they toy with everybody else.  Let them have the debate.  Let’s see how they do with the ratings.”  [Washington Post]

--Iowa’s Republicans haven’t picked the nominee since George W. Bush in 2000.  But New Hampshire has picked the ultimate winner in three of the past five contested primaries in each party.

--Charles Krauthammer / Washington Post

“It’s hard to believe that the United States, having resisted the siren song of socialism during its entire 20th-century heyday (the only major democracy to do so), should suddenly succumb to its charms a generation after its intellectual demise.  Indeed, the prospect of socialist Bernie Sanders, whatever his current momentum, winning the Democratic nomination remains far-fetched.

“The Democrats would be risking a November electoral disaster of historic dimensions.  Yet there is no denying how far Sanders has pulled his party to the left – and how hard the establishment candidate, Hillary Clinton, has been racing to catch up.

“The Republicans, on the other hand, are dealing with a full-scale riot. The temptation they face is trading in a century of conservatism for Trumpism.

“The 2016 presidential race has turned into an epic contest between the ethno-nationalist populism of Donald Trump and traditional conservatism, though in two varieties: the scorched-earth fundamentalist version of Ted Cruz, and a reformist version represented by Marco Rubio (and several so-called establishment candidates) – and articulated most fully by non-candidate Paul Ryan and a cluster of highly productive thinkers and policy wonks dubbed ‘reformicons.’

“Trump insists that he’s a conservative, but in his pronouncements and policies, conservatism seems more of a rental – a three-story penthouse rental with Central Park-view, to be sure – than an ideological home....

“My personal preference is for the third ideological alternative, the reform conservatism that locates the source of our problems not in heartless billionaires or crafty foreigners, but in our superannuated, increasingly sclerotic 20th-century welfare-state structures.  Their desperate need for reform has been overshadowed by the new populism, but Speaker Ryan is determined to introduce a serious reform agenda in this year’s Congress – boring stuff like welfare reform, health-care reform, tax reform and institutional congressional reforms such as the return to ‘regular order.’

“Paired with a president like Rubio...such an agenda would give conservatism its best opportunity since Reagan to become the country’s governing philosophy.

“Unless the GOP takes the populist leap.  In which case, a conservative restoration will be a long time coming.”

--I’m on record as having voted for third-party presidential candidates before, specifically John Anderson in 1980 and Ross Perot in 1992, and former New York City mayor Michael Bloomberg is in the news as he weighs a third-party challenge, even at this late date.

Editorial / Wall Street Journal

“We’ve been skeptical of a third-party Bloomberg candidacy in the past, but this year’s tumult has thrown convention out the window.  Mr. Bloomberg is looking at the primary chaos and figuring he may have a chance if the parties nominate flawed or polarizing candidates who struggle to unite their parties.

“The 73-year-old’s opening would widen on the left if the Democrats nominate avowed socialist Bernie Sanders.  He’d probably not run if Hillary Clinton is nominated – unless she is wounded by an indictment or plea deal for having mishandled classified information. Mr. Bloomberg tilts left enough on guns, climate change and immigration that many Democrats would find him politically congenial.  He’s more centrist on economics, and somewhat hawkish on foreign policy, but many Democrats would not find those views disqualifying amid 2% growth and the rise of Islamic State.

“Mr. Bloomberg’s appeal is harder to discern on the political right, though that also depends on the GOP nominee.  He has a stellar record reducing crime in New York and he fought the teachers union for school choice and accountability. He’s a social liberal loathed by the National Rifle Association and he has a nanny-state tendency (his failed big-soda ban) that irritates free-marketeers.

“But if Republicans nominate Donald Trump, who is also no conservative, Mr. Bloomberg’s pitch would include his governing experience in New York and that he’s not a leap in the policy dark.  He might also find a lane up the political middle if the GOP nominates Ted Cruz, whose belief that he can win merely with conservative voters means he could struggle in swing states like Iowa, Florida, Colorado and New Hampshire, among others.

“As a self-financing billionaire, Mr. Bloomberg could get on the ballot and field a strong campaign in every state. He might do well enough in the polls to get into the autumn debates where he would compete on equal terms.... Mr. Bloomberg could figure that many Republicans might find him more palatable as Commander in Chief than the say-anything style of Mr. Trump.

“The big question is whether Mr. Bloomberg could win enough states to deny 270 electoral votes to the other candidates.  That would throw the election to the House of Representatives... Mr. Bloomberg would then have to make the case that he would be better for the country and the GOP than its nominee....

“(Bloomberg) is a serious man who wouldn’t waste his money or time if he didn’t sense an opportunity.  If we’ve learned anything so far in this tumultuous election season, it’s that the electorate is volatile enough that anything can happen.”

--Maureen Dowd / New York Times

“Before (Sarah) Palin, if a woman flamed out in a spectacular fashion, it was considered an X through the X chromosome.  If Billie Jean King lost to Bobby Riggs, women would be seen as second-class athletes.  If Geraldine Ferraro seemed unfit for the White House, all women might be judged incapable.

“But when Palin turned out to be utterly unqualified and unintelligible, spouting her own special Yoda-like language, it did not reflect poorly on women as a whole – only on her and John McCain.  What the hell were you thinking, Senator?

“Ordinarily, it’s considered sexist to call a woman shrill.   But Palin liberated us on that score. She really is shrill.

“Ordinarily, it’s dicey to focus on what a woman in politics is wearing.  But again, Palin has freed us up.  She sported a cardigan so gaudy and rogue at her Iowa endorsement of Donald Trump (the man who viciously mocked her former running mate’s war record) that we would be remiss not to mention that it was the sartorial reflection of Palin and Trump themselves.

“Ordinarily, you have to tread gingerly in critiquing a working woman on her mothering skills.  But Palin’s brawling brood runs so wild around the state she once governed, in a way that is so contrary to her evangelistic, sanctimonious homilies on family values, that it seems only Christian to advise her to study the Obamas to see what exceptional parenting looks like.

“With Palin and Trump, a failed reality star and a successful one, gall is divided into two parts. There has been a lot of talk this campaign season about how women pols bring superior qualities to the table: collegiality and listening skills.  But Saracuda shows that we are truly the equals of men, capable of narcissistic explosions, brazen hypocrisy and unapologetic greed.”

--Kathleen Parker / Washington Post

“Questions about Hillary Clinton’s honesty did not start with Benghazi or with emails and a private server, but began ages ago with any number of fabricated – or at least exaggerated – stories.  Many may remember what New York Times columnist William Safire wrote about Clinton in 1996:

“ ‘Americans of all political persuasions are coming to the sad realization that our First Lady – a women of undoubted talents who was a role model for many in her generation – is a congenital liar,’ he said.  ‘Drip by drip, like Whitewater torture, the case is being made that she is compelled to mislead, and to ensnare her subordinates and friends in a web of deceit.’

“There ‘they’ go again?

“Safire’s concerns at the time – Whitewater, Travelgate, ‘lost’ records – may seem remote and trivial to some, but the drip-drip he identified didn’t stop with the White House years.  Subsequent to the various ‘-gates’ were, for example, the story of coming under fire on a tarmac in Bosnia or about her having been named for the explorer Edmund Hillary, the first person to reach the summit of Mount Everest, despite her having been born about six years before his history-making climb.

“These are such trivial stories to invent that one wonders why she bothered.  The answer can’t be easily divined except as Safire suggested. Or, is it that she is reflexively prone to dissemble?  Would this be a matter of habit, or something else?  An innate need to inflate one’s status – even when it isn’t needed?....

“(More) recent issues of inaccuracies are both concerning and consequential.  We now know with certainty (thanks to an email from Clinton to daughter Chelsea the night of the Benghazi attacks) that the then-secretary of state knew it was a terrorist attack, contrary to official reports, in the days following, about street riots that escalated.  We also know from the intelligence community inspector general that her private server contained information ranked beyond top secret, contradicting her assertions to the contrary.

“What difference, at this point, does any of it make?  When it comes to public trust in a presidential candidate – everything.”

--Editorial / Wall Street Journal

“Financial analyst and our contributor Donald Luskin has described Donald Trump as a ‘black swan’ over the political economy.  He’s referring to an outlier event that few anticipated and whose impact is impossible to predict.  As the voting season begins in Iowa, this strikes us as a useful way for Republicans to think about the Trump candidacy.

“We’ve been critical of Mr. Trump on many grounds and our views have not changed.  But we also respect the American public, and the brash New Yorker hasn’t stayed atop the GOP polls for six months because of his charm.  Democracies sometimes elect poor leaders – see the last eight years – but their choices can’t be dismissed as mindless unless you want to give up on democracy itself.”

--I warned you of the dangers of the Zika virus three weeks before the mainstream media did and the situation is seemingly worsening at light speed.  Brazil’s health ministry said the number of cases of microcephaly – a rare condition in which infants are born with abnormally small heads – had climbed to 4,180 since October, when Brazil normally has about 150 cases a year.

But as the New York Times reports, officials in Brazil are investigating the cases reported by hospitals and doctors around the country more closely.  “So far, 732 cases have been examined. In 462 of them, either no microcephaly was found, or it was caused by something other than an infection, such as alcohol or drug abuse by the mother during pregnancy, a spokeswoman for the Health Ministry said.

“The spokeswoman added that congenital infections had caused 270 cases of microcephaly.  But in that group, the Zika virus was found in only six infants, the ministry said.”

But a leading infectious disease specialist in Sao Paulo told the Times that Brazil’s ability to test effectively for Zika remained “very inefficient” because the authorities lack the most up-to-date methods.

“Dr. Artur Timerman said this meant that tests used in Brazil could generally detect Zika in pregnant women or their infants only during the acute phase of the virus, which lasts about five or six days.”  [New York Times]

The sharp increase in cases means “This is clearly still a health crisis on a major scope,” according to Timerman.

What this Times story fails to point out, though, is that the government also has a major incentive to begin to downplay the virus with the Olympic Games coming up, and at the same time it has launched a major campaign, including use of the military, to get the word out and to rid the cities of standing pools of water.  From a PR standpoint it must be able to report it has a handle on Zika, quickly, or you’re going to see mass cancelations, even if the biggest danger is only to pregnant women.

Also this week, a Danish man returned from a trip to Mexico and Brazil and tested positive for Zika, but he is expected to recover soon.  He was suffering from fever, headaches and muscle pain.  Three Britons who traveled to South America were also infected, but it is not expected to spread in Europe.

Closer to home, officials in Arkansas and Virginia confirmed residents of those states had tested positive, but since it is not mosquito season in either, the infections pose no further risk.

In Los Angeles, a young girl traveling to El Salvador was infected, but has since recovered.

So with the above in mind, Thursday the World Health Organization said it had set up a Zika “emergency team” after the “explosive” spread of the virus.

WHO director general Dr. Margaret Chan said Zika had gone “from a mild threat to one of alarming proportions” and was having a “heart-breaking” impact.

The team is meeting on Monday to decide whether Zika should be treated as a global emergency.

Zika was first detected in Uganda in 1947, but has never caused an outbreak on this scale.  Now it has been detected in 23 countries across the Americas and the WHO predicted 3m-4m cases in the region over the next year from Argentina to the southern states of the U.S.

As I noted last week, there is also a major concern on the link between Zika and the rare nervous system disorder Guillain-Barre syndrome.  The link has not been totally confirmed, but Dr. Chan said it was “strongly suspected” and “deeply alarming.”

El Nino is also leading to increasing mosquito populations in many parts of South and Central America.

Come spring and summer, the kinds of mosquitoes Americans will need to be on the lookout for are Asian tiger and the yellow fever species that have black-and-white stripes.  But unlike the common mosquitoes that come out at night, these mosquitoes bite during the daytime.  They have been detected in large portions of L.A. County, for one.

Editorial / The Economist

“Zika has no cure and a vaccine will not be available for at least a decade.  But that is no cause for despair – nor for governments to scare women into not having babies.  Two things are known for certain. The first is that the main, possibly only, transmission route is via mosquitoes, which pick up the virus from infected people and pass it on when the pests next take a meal.  The second is how to cut the number of mosquitoes – and preferably eradicate them.

“The idea of fighting mosquitoes has a long history.  Aedes aegypti, the species that carries not only Zika but dengue, chikungunya and yellow fever, was almost eliminated from much of South America by the early 1960s, after a long anti-dengue campaign. The insects were killed with frequent fumigation. Health workers visited households to urge people to mop up standing water, where mosquitoes breed.  But some countries slackened their efforts too soon.  After the number of cases fell, politicians’ attention waned. And the mosquitoes returned in their buzzing billions....

“(The World Health Organization) now needs to rally governments for a new push.  Brazil is mobilizing its armed forces for a nationwide door-to-door information campaign; other affected countries should do likewise....

“All this will be pricey.  But it would bring not one, but several, dread diseases under control.  Aedes aegypti does not carry malaria, but the methods used to kill it will also kill Anopheles, which does.  The moment has come again to take the fight to the mosquitoes – and this time to finish the job.”

--So that was one helluva snowstorm last weekend.  Here in Summit, NJ, we ended up with somewhere near 25 inches (official tallies from neighboring towns ranged from 21” to 33”).  I have never seen it snow with such intensity for ten hours straight as it did.  Normally you get lulls and pockets of dry air in nor’easters, but not this one.

I drove about three blocks on Sunday and right away saw the dangers...the snow banks were massive, and dangerous, in terms of lane reduction and not being able to see when making right-hand turns, that kind of thing, let alone if there was a little kid standing in the street.  So it was totally understandable that much of the Mid-Atlantic was still shut down on Monday.

Some totals...Washington, D.C. (the National Zoo, since Reagan National’s total wasn’t measured properly) 22.4 inches.  Manassas, VA, 30; Baltimore 29.2, an all-time record; Dulles 29.3 (3 inches shy of Snowmaggedon in 2010); Philadelphia International Airport 22.4; King of Prussia, PA, 26.1; Central Park, NYC, 26.8 (0.1 inch shy of the all-time mark); JFK Airport 30.5; Newark International 28.1...yup, Snowzilla.

Actually, according to the National Oceanic and Atmospheric Administration, the snowstorm was the fourth-biggest to strike the Northeast since 1950, dumping more than 30 inches on 1.5 million people and affecting nearly 103 million in all.

The three storms ahead of this one are the “Storm of the Century” of March 1993, the blizzard of January 1996 and a historic nor’easter storm of March 1960.

--Speaking of snow, the Sierra Nevada snowpack is now 115 percent of normal, California officials said on Tuesday, the highest since 2011, though the figure needs to get to 150 percent by April 1 to ease the four-year drought.

Some key reservoirs are beginning to rise, like Lake Oroville in Butte County, the State Water Project’s largest reservoir, is at 60 percent of its historical average for this time of year.

--Meanwhile, an historic polar vortex plunged parts of Asia in record deadly cold.  At least 50 deaths were reported in Taiwan due to hypothermia and cardiac disease, while heavy snow forced the closure of an airport on the South Korean resort island of Jeju, stranding tens of thousands of passengers.

In Taiwan, the capital of Taipei saw Sunday temps of 39F, and you have to understand many homes on the island lack central heating because it just doesn’t get that cold.  As to why so many died of heart attacks, an official said “it’s not the actual temperature but the sudden drop that’s too sudden for people’s circulatory systems.

Hong Kong reported temps of just 37F, the lowest there in nearly 60 years.  Record low temps and rare snowfalls were the order of the day in southern China.  Parts of Japan had record-breaking snowfalls with a number of deaths reported.  “The small subtropical island of Amami observed snow for the first time since 1901, the Japan Meteorological Agency said.”  [South China Morning Post]  Okinawa had snow for the first time in 39 years.

--Regarding the armed protest group responsible for the month-long occupation of the Malheur National Wildlife Refuge in southeastern Oregon, which ended this week with one death in a confrontation with the FBI and Oregon State Police, as well as a number of arrests, all I needed to know was how the locals, from the beginning, wanted these guys out.

Thursday, the leader of the group, Ammon Bundy, said it was time to wrap it up. 

--This is kind of bizarre, or maybe not.  New York City has seen a 15% increase in slashings and stabbings thus far in 2016 vs. last year.  At the same time, homicides were down to 20 from 36 through Tuesday.

Three subway slashings in two days was being taken very seriously, Police Commissioner William Bratton said.

--To end on a lighter note...about 16 days to pitchers and catchers!!!

---

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

God bless America.

---

Gold $1118
Oil $33.62

Returns for the week 1/25-1/29

Dow Jones  +2.3%  [16466]
S&P 500  +1.8%  [1940]
S&P MidCap  +2.3%
Russell 2000  +1.4%
Nasdaq  +0.5%  [4613]

Returns for the period 1/1/16-1/29/16

Dow Jones  -5.5%
S&P 500  -5.1%
S&P MidCap  -5.8%
Russell 2000  -8.9%
Nasdaq  -7.9%

Bulls  26.8
Bears 36.1  [Source: Investors Intelligence]

Have a great week.  I appreciate your support.

Brian Trumbore



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Week in Review

01/30/2016

For the week 1/25-1/29

 [Posted 12:00 AM ET, Saturday]

Warning: If you are used to printing this out, this one is about 37 pages.

Edition 877

Note: If you haven’t already done so, please click on the gofundme link above, or send a check to PO Box 990, New Providence, NJ 07974. In beginning to prepare my taxes the other day, I calculated I spent over $2,700 on subscriptions alone for the site last year.

Washington and Wall Street

Well January sucked, I think you’d agree, though Friday’s global rally ameliorated the pain a lot.

Some major benchmarks for the month:

Dow Jones -5.5%
S&P 500 -5.1%
London FTSE -2.5%
Frankfurt DAX -8.8%
Euro Stoxx 600 -6.4%
Tokyo Nikkei -8.0%
Shanghai Comp. -22.7%

The week was highlighted in the U.S. by the first meeting of the U.S. Federal Reserve’s Open Market Committee since it raised interest rates  in December, strongly hinting then that it would raise them another four times in 2016 as part of its effort to normalize policy.

And while no one thought the Fed would hike this week, especially owing to the dreadful start to the year in global markets, Janet Yellen and her band of merry pranksters gave a statement leaving all befuddled in terms of future policy.

The central bank said it was assessing what the gyrations around the world meant for the risks facing the U.S., with the global picture having darkened, while at the same time the European Central Bank, the Bank of Japan and the Bank of England have been sending out dovish signals (especially the BoJ on Friday, see below), which means Yellen and Co. look increasingly out of step for hiking in December.

In its statement, the Fed acknowledged the plunge in oil prices augured low inflation for the near term, but it still expected inflation to head towards its target, 2.0%, over time.

Addressing the turmoil in world markets the FOMC statement read: “The Committee is closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook.”

The Fed downgraded its view of the pace of growth, noting it “slowed late last year,” an acknowledgement its previous view of “moderate growth’ was wrong.

And the Fed then said the labor market, however, has “improved further” with December’s solid jobs report.

But you add all the above up and investors and Fed watchers were reduced to one of those Homer Simpson blank looks, except we know one thing.  The Fed is not hiking when they next meet on March 15-16, especially, again, after the Bank of Japan’s move and, let’s face it, the crappy GDP report, let alone other overseas developments.

Sorry the above is kind of convoluted.  I know what’s going on, but the Fed doesn’t.  We know the Fed can’t hike in March, but they didn’t come out and say so.

I also get a kick out of those saying earnings season has been fine thus far, especially when you take out the energy sector.

No it hasn’t.  Yes, a lot of companies are beating expectations, but in many cases those same companies have reported both profits and revenues that are below a year ago levels.  Yes, some of this is due to currency issues, but you can’t say the environment for U.S. multinationals is going to get any better any time soon, again, especially after the BoJ’s move.   The bottom line is profits, ex-energy, are stagnant at best.

Now if you tell me the dollar is going to continue to stabilize, especially against the euro and the yen, I’ll change my tune but obviously recent moves by both the ECB and BoJ, as well as the Fed, argue otherwise.

Which brings me to the first look at GDP for the fourth quarter, a less than expected 0.7%.  First off, kudos once again to the Atlanta Fed’s GDPNow indicator, which forecast 0.8%.  0.7% is just more of the same, continuing the putrid growth of the past few years.

For 2015....

Q1... 0.6
Q2... 3.9
Q3... 2.0
Q4... 0.7

As former NBA All-Star Derrick Coleman used to say, “Whoopty-damn-do.”

Personal consumption was at least up a respectable 2.2%, though less than the prior period (3.0%), and we already know holiday sales came in at 3.0%, which was not disastrous by any stretch, just in keeping with the rest of the data.

But investment fell 2.5% in the quarter owing to the energy sector pulling projects with the collapse in crude.

In other economic items of note:

December durable goods were miserable, -5.1% when a -0.2% decrease was expected.  Ex-transportation the figure was still down, -1.2%. 

But then we had this weird Chicago PMI for January, 55.6, when it’s recently been mired below 50, contraction territory.  We’ll have to see what the February figure is before drawing too many conclusions, but some of the components in Friday’s report, such as new orders and declining inventories, were indeed positive.

On the housing front, December new home sales came in at an annualized pace of 544,000, well above expectations, with 2015 (501,000 overall) being the best year since 2007 and up 14.7% over 2014.  Remember our warm December?  That helped, big time.

And the S&P Case-Shiller 20-city home index for November showed home prices rose 5.8% in the month, year over year, with Portland, Oregon, leading the way, up 11.1% over the past 12 months.  On the other end, Chicago’s were up just 2%.

Europe and Asia

A flash reading on January euro area inflation came in at an annualized rate of 0.4%, up from 0.2% in December, according to Eurostat, which is encouraging but still far from the European Central Bank’s 2.0% target.

Otherwise, there was a paucity of broad data so just a few tidbits....

--Spain’s GDP came in at 0.8% for the fourth quarter, a very solid 3.2% for the full year.  But its inflation rate for January was -0.4% annualized, so deflation continues to be a story here.

And Spain also continues to be roiled on the political front, as acting Prime Minister Mariano Rajoy has turned down an invitation to form a new government after inconclusive elections in December.  Rajoy’s conservative Popular Party lacks the required support in Parliament.

So that leaves it to the leader of the main opposition Socialist party, Pedro Sanchez, to form a left-wing coalition but many in his party are balking at allowing upstart Podemos to become a partner, plus a combination of these two is still not sufficient to win a parliamentary vote and would require the backing of smaller parties and, bottom line, some are saying the Socialists are better rebuilding themselves as part of the opposition, not from the lead.

And then you have divergences over the fate of Catalonia and its drive for independence.

Actually, I’m having trouble keeping up here.  I need a pitcher of sangria.  [Then I’ll call Uber.]

--France’s GDP in Q4 was 0.2% quarter over quarter, +1.3% for 2015.

--The UK’s Office of National Statistics reported Q4 GDP of 0.4%, up 1.9% year over year, the slowest pace since early 2013 but not all bad given the global issues.  For 2015, GDP was 2.2% vs. 2.9% in 2014.

--Germany’s retail sales rose a less than expected 1.5% in December, year over year.

--Italy’s banking stocks took a huge hit this week and are down about 25% on the year (already) as there are major doubts over the effectiveness of a deal struck between Italy and the EU over non-performing loans.  The deal aims to offload these loans from bank balance sheets into a bad bank, backed by a state guarantee.

This is important because Italian companies rely more on bank loans than bonds for their financing.  But it’s not like the state’s finances are great.  Just last week I told you Italy’s debt to GDP ratio is 130%.  However, it seems the government is only guaranteeing senior tranches of the garbage.  The Italian finance ministry assures us (not that I personally care, mind you), “This intervention will not create any burdens for our public finances.”  I don’t believe that.  This is yet another very confusing situation, which is why Italy’s bank stocks took it on the chin anew following the announcement.  [Think ‘Fifty Shades of Greece, Part II’.]

--Portugal’s public sector workers staged a strike on Friday for a 35-hour work week.  The new ruling socialist-led coalition had promised to roll back the austerity measures of the prior center-right government, including the 40-hour work week, in July, but the workers want the reduction now.  [Tip for the day: Don’t invest in Portugal, mused the editor who conservatively works 80+ hours a week.]

But here, as in Spain, you have an ongoing political crisis in that Socialist leader Antonio Costa is under pressure from his far-left coalition partners to renounce all austerity measures of the previous government, yet Costa has to obey European Union rules on budget control.  Thus far he has been walking the tightrope like a Wallenda, but it won’t last....cue ‘splat!’

On the migrant crisis...attitudes are hardening rapidly, and wait until the spring surge in new numbers.

Finland announced it expected to expel nearly 20,000 migrants out of the 32,000 who sought asylum last year.  In 2014 there were only 3,650 applications and 56% were expelled.

Sweden announced it is preparing to deport 70-80,000 migrants of the 163,000 who sought asylum last year, as this week you had a “terrible crime,” in the words of Sweden’s prime minister, Stefan Lofven, as a female employee at a center for young asylum seekers was stabbed to death by a 15-year-old. 

And Greece is under intense pressure to control its external border from the European Commission as an EC report concludes “Greece seriously neglected its obligations and that there are serious deficiencies occurring out of border controls that must be overcome,” commission vice president Valdis Dombrovskis told reporters.  [Irish Independent]

Among the issues is Greece is not doing a good job at registering and fingerprinting migrants who have entered from Turkey, the main gateway for those fleeing Syria, Iraq and Afghanistan.

This could culminate in Greece facing suspension from the EU’s passport-free travel zone (Schengen) unless the deficiencies are addressed.  Greece has three months to get its act together.

And this from Tom Whitehead of the Daily Telegraph:

“Islamic State in Iraq and Levant (ISIL) is increasingly exploiting the huge migrant flows to slip jihadist cells through undetected to launch attacks in the UK and elsewhere.

“They are mainly traveling on fake Syrian or Iraqi passports which are now so sophisticated it is almost impossible to distinguish between genuine refugees and terror suspects....

“It is feared sleeper cells are being established in the UK and across Europe having been sent back by their ISIL commanders fully trained and with attack orders.

“The strategy is being run out of ISIL’s Syrian stronghold in Raqqa where would-be recruits are briefed and handed new identities....

“Frans Timmermans, the first vice president of the European Commission, said that the majority of those coming to the EU are not fleeing war or persecution and that they should be deported.

“ ‘It’s about 60 percent of all asylum seekers,’ he said, citing internal figures held by Frontex, the EU border agency.  ‘These are people that you can assume have no reason to apply for refugee status.’”

This last bit could have a huge impact on the European Union referendum to be held in the UK, apparently now on June 23.

As Mr. Whitehead writes:  “Eurosceptics have warned that the only way of ensuring that terrorists are not able to travel to the UK would be by withdrawing from the EU and imposing much stricter border regulations.”

Robert Fico, Slovakia’s prime minister, said on Tuesday the EU is committing a “ritual suicide” by letting so many migrants in to the continent.

I said this months ago in supporting Hungary’s actions that represented the first backlash.  I obviously stand by all my statements on this topic since then.  I’m being proven right, daily.

Wolfgang Munchau / Financial Times

“Gerhard Schroder, (German Chancellor Angela Merkel’s) Social Democratic predecessor, last week came out against (Merkel’s open door policy for refugees) with exactly the same arguments as the right-wingers in Ms. Merkel’s own party: Germany cannot absorb such a large number.  More than 1m refugees arrived in the country in 2015.  It could be twice as many this year and the same again next – more if you include family members who will eventually follow.

“It is tempting to think of refugees and migrants as a new source of labor.  But in this case this just is not true, at least not for now. The majority of those who arrive in Germany lack the skills needed in the local labor market. They will enter the low wage sector of the economy, and drive down wages, producing another deflationary shock. This is the last thing Germany and the eurozone need right now.”

If you know of Gerhard Schroder, it is almost staggering to see him come out in this fashion.

Philip Stephens / Financial Times

“Angela Merkel wants to save Europe.  She must first save herself.  The German chancellor’s lodestar is unity within the EU.  This is an admirable ambition, but one that has landed her in serious political trouble at home.  The leaders of Poland, Hungary and Slovakia will never share her generosity towards refugees who also happen to be Muslims.  Ms. Merkel’s search for consensus is a recipe for paralysis.

“Historians will scratch their heads as to how the arrival of 1m people in such a rich, large continent became an existential threat.  The newcomers account for just 0.2 percent of the EU’s population. A sudden influx was always going to be destabilizing, but tear apart half a century of integration among some of the world’s most advanced democracies?

“For some, panic has become a default.  When Mark Rutte, Dutch prime minister, and his French counterpart, Manuel Valls, issue chilling warnings of permanent fracture in the union they invite the obvious question as to what they are doing to forestall it.  Not much.  Matteo Renzi, Italy’s prime minister, is busy settling old scores with Ms. Merkel. Britain’s David Cameron has a referendum to win so wants no truck with what he crassly calls ‘a bunch of migrants.’

“To say there is no easy answer to the refugee question does not mean there are no useful responses.  Above all else, European leaders need to demonstrate that they have regained command of events.  Voters worry about the numbers, certainly, but what hardens concern into anger and intolerance is the role of their leaders as hapless bystanders. Refugees and Islamist terrorism are becoming fused in the public mind....

“If Ms. Merkel is to shake off the challenges to her leadership, generosity towards the migrants must be coupled with the assurance of security. The chaotic response so far has given oxygen to those proclaiming every Muslim a potential criminal or terrorist.  Setting numerical targets solves nothing.  But Berlin must instill confidence that it has a grip on the numbers and can process and separate out genuine refugees.”

Sorry, Mr. Stephens.  It’s too late.  Merkel is toast.

Finally, Europol said ISIS has increased its ability to launch global terror attacks and plans more Paris-style operations in Europe.

Not that this was a surprise, it’s just the forcefulness of Europol and its head, Rob Wainwright, in stressing how ISIS “had developed a new combat style capability to carry out a campaign of large-scale terrorist attacks on a global stage, with a particular focus in Europe.”

---

Turning to Asia, as of Thursday, China’s Shanghai Composite stock index was down a whopping 25% for the year to a level that was the lowest in 13 months, before a rally on Friday regained 3% of the loss.

After a slew of economic data the prior week, including on GDP, just a few notes this past one.  Industrial profits fell 4.7% in December, year over year, according to the National Bureau of Statistics, while the National Development and Reform Commission reported rail freight volume fell 11.9% in 2015 over 2014; both figures hardly positive.

There were more stories echoing what I have written the past few weeks on China’s massive capital outflows and foreign exchange reserves plunging $700 billion in 2015.  Ken Brown of the Wall Street Journal wrote:  “We are witnessing the greatest episode of capital flight in history,” but that the prime risk is more in the emerging markets realm.

“The big worry is that China devalues its currency, which would come at a time that money already is flowing out of emerging markets as investors grow more risk averse and the U.S. Federal Reserve slowly begins to raise interest rates.  If the yuan does fall further, it makes the economies of its Asian neighbors less competitive.  That could lead to more capital flight from emerging markets, which could drain foreign-currency reserves in countries trying to keep their currencies from falling.  Places that do see their currencies tumble also could face inflation, slowing investment and tapering growth.”

Mr. Brown wrote this before the Bank of Japan’s move.  The BoJ shocked global markets on Friday in introducing a negative interest rate; a benchmark of -0.1% which means commercial banks will be charged by the central bank for some deposits.  [The charge does not directly apply to ordinary customers’ accounts.]

Just as in Europe and its negative short-term interest rates, the policy is designed to get the banks to use their reserves for commercial lending to businesses in an attempt to stimulate the Japanese economy and to get out of this recession, slow growth, recession, slow growth, falling prices stagnation of the past 25 years.

For decades Japan has been trying to boost consumer spending, but this is the first time the Bank of Japan has taken such a step and it’s not as if it wasn’t without controversy within the BoJ as the vote was just 5-4.

A statement read in part: “The BoJ will cut interest rates further into negative territory if judged as necessary,” adding it would continue as long as needed to achieve an inflation target of 2%, which the European Central Bank has been trying to do itself with no success.

And while savers aren’t directly impacted, the banks could decide to pass on the cost to their depositors, which would, in theory, give consumers a further incentive to spend.

[Actually, this whole cut into negative territory is very confusing; it’s some kind of three-tier system and the BoJ will only pay negative rates on new bank reserves resulting from its program of asset purchases, which the BoJ said it would keep unchanged at Y80tn a year, even though it is running out of assets to buy!  All existing bank reserves will continue to be paid interest at 0.1 percent.  I’m going to try not thinking about this as I go to sleep.]

BoJ governor Haruhiko Kuroda (Japan’s Janet Yellen) said the weakening growth rate of the global economy was the main factor behind the move: “Japan’s economy continues to recover moderately and the underlying price trend is improving steadily...further falls in oil prices, uncertainty over emerging economics, including China, and global market instability could hurt business confidence and delay the eradication of people’s deflationary mindset.”

No doubt the recent economic news has been poor.  Retail sales month-on-month in December came in -0.2%, with a year over year decline of -1.1%.  The December core inflation rate was shown to be just 0.1% - far below the target.  Industrial production in December over November was -1.4%; -1.6% year over year.

The only good news this week was the unemployment rate was 3.3% in December, but this is very deceiving.  Prime Minister Shinzo Abe promised reforms in Japan’s economy and the nearly historical low jobless figure (3.1% being the low) tells you very little reform is taking place.

Abe has also been pleading for Japan’s corporations to raise wages significantly and invest in capital projects, but they have been largely sitting on their profits, especially the major exporters such as the auto companies who are taking advantage of the weak yen.

And these same cash rich companies hardly need the fresh funds the BoJ is trying to encourage!

So will the BoJ’s action work? Has the ECB’s? [No.]  Has the Fed’s?  [No.]  Did the BoJ’s action of the past 25 years?  [No.]

One last note concerning the region...fourth-quarter GDP in Taiwan was -0.3%, after -0.6% in the third, so that is recession, though these numbers can be revised sharply, either way.  The June quarter, for example, was first reported as negative and then revised into positive territory.

That said, Taiwan’s exports, which account for 70 percent of GDP, fell 13.9 percent on a year-on-year basis in December as growth in China, its biggest market, slowed dramatically.

Street Bytes

--What was once looking like the worst opening month to a year ever turned out to be something far less, the worst month for stocks since last August as Friday’s 2.4% rally for the Dow Jones, S&P 500 and Nasdaq meant all the difference in the world between historically awful and just plain abysmal.

For the week the Dow gained 2.3% to 16466, while the S&P was up 1.8% and Nasdaq 0.5%.  Nasdaq did still lose 7.9% for the month, while the small-cap Russell 2000 was off a whopping 8.9%.  But it was looking far worse until the Bank of Japan said, hey, here’s more free money and, just as in the aftermath of the 2011 earthquake and tidal wave, Japan’s flotsam washed up on our shores, though at a much more rapid pace.  Investors thought it was all good, but having seen the actual garbage up close in Oregon a year later, I can tell you it’s really nothing more than barnacles and invasive species.

--U.S. Treasury Yields

6-mo. 0.42%  2-yr. 0.77%  10-yr. 1.92%  30-yr. 2.74%

The yield on the 10-year is at its lowest level since last spring.

--Oil rallied a bit this week (again, I am not going overboard about any rally in crude until we close over $40 and stay there for at least a few weeks), closing at $33.62, or the level of three weeks ago, partly on word Russia was ready to discuss an output cut with OPEC members.  But Saudi officials said there are zero plans for such discussions, let alone the proposal long out there to cut production 5 percent.  OPEC has yet to announce any kind of special meeting for February as rumored, either, though some members such as Venezuela and Nigeria are pushing for emergency talks.

--Officials from the World Bank and International Monetary Fund traveled to Azerbaijan to discuss a possible $4bn emergency loan package as a result of the collapse in the oil price, in what is seen as the first of what could become a series of bailouts involving emerging market producers from central Asia to Latin America.  [Financial Times]

Azerbaijan depends on oil and gas for 95% of its exports and with the severe weakness in its currency, the government instituted capital controls amid rising unrest among the people.

This week the World Bank predicted crude prices would average just $37 this year, specifically warning commodity markets to beware of sharper than expected slowdowns in emerging markets.

Just three months ago, the WB predicted $52 as an average for 2016.

Oxford Economics warned clients on Wednesday, “These are bad times for oil producers and their creditors.  History provides reason for extreme pessimism on the likely fortunes of commodity producers; suggesting that [emerging markets] are prone to default and that commodity slumps are possibly the biggest cause of defaults.”  [Jack Farchy, Sharm Donnan / FT]

Friday, S&P cut Azerbaijan’s credit rating to junk.

--Baker Hughes, the U.S. oil services group that has agreed to a merger with Halliburton (yet to be approved) reported a $1.97bn loss for 2015, while noting the number of rigs drilling oil and gas wells worldwide has fallen 46% since the fourth quarter of 2014, and could drop a further 30% in 2016 if crude prices stay around current levels.

Baker Hughes’ revenues were down 36% for the year...49% for the fourth quarter vs. a year ago.

--Chevron, the second-largest U.S. oil group, spoke of deeper cuts in capital spending in its earnings release on Friday as it reported its first quarterly loss since 2002, $588 million, compared to a $3.5bn profit for the same period in 2014.  The results included a $1.1bn charge for asset writedowns and other one-offs.  Revenues were down 33 percent at $28bn.

CEO James Watson said the company’s number one financial priority was “to maintain and grow the dividend,” while some analysts said this wasn’t possible.

--BlackRock Inc. chairman Laurence Fink said as many as 400 energy companies may not survive given their debt obligations.

“Carbons are going to be cheaper for longer,” Fink said in a presentation in New Jersey on Wednesday.  [Bloomberg]

[Fink also said China “is frightened of the future,” with the wealthiest trying to move capital out of the country, while he described Japan’s demographics as “terrible.”]

--Facebook Inc. killed it in their earnings report, posting a $1 billion quarterly profit for the first time as advertisers increasingly look to the site and its user base.

Mobile ads accounted for 80% of Facebook’s ad revenue in the fourth quarter.  Just three years ago it was 20%.

Revenues rose 52% to $5.84 billion, up from $3.85 billion, while costs rose ‘just’ 21% (a concern of some analysts).

Advertising revenue overall jumped 57%, and it would have been higher were it not for the impact of the stronger U.S. dollar.  Earnings at 79 cents a share (adjusted) handily beat Street estimates of 68 cents.

Full-year profit was $3.69 billion, up from $2.94 billion in 2014, while revenue for 2015 was $17.93 billion, up 44% year over year.

CEO Mark Zuckerberg announced in a conference call with analysts that Facebook users watch 100 million hours of video on the network every day, as the company looks to sell increasing amounts of ads on its Instagram image-sharing network.  [No wonder global GDP blows.]

COO Sheryl Sandberg said 98 of the top 100 Facebook advertisers also advertised on Instagram in the fourth quarter.

Facebook has 1.59 billion monthly active users, a 14% increase year over year*, with more than 1 billion using the network every day (1.04bn).  An average of 934 million people access Facebook on their mobile devices daily, an increase of 25% year over year.

*Twitter can only dream of such growth as it seems stuck on around 300 million (320m at last count).

Capital expenditures for the fourth quarter were $692 million.

Facebook’s share of the digital advertising market, by the way, rose to 10% from 8% last year, according to research firm eMarketer, while Google’s share declined to 30% from 32%.  Google is slated to report earnings on Monday.

FB’s stock soared 14% on all the positive news.

--That wasn’t the case with Apple, which earlier reported slowing iPhone sales and forecast a drop in its flagship product.  [My sporadic local channel checks were pretty, pretty insightful.]

Total revenue for Apple’s fiscal first quarter ending in December rose just 2 percent to $75.9bn, compared with 30 percent in the same period a year ago.

But Apple will point to net profits of $18.4bn, a new record for the most profitable quarter in U.S. corporate history, with earnings per share at $3.28, basically in line with the Street.

However, iPhone sales for the holiday quarter were up only 1 percent from a year ago at 74.8 million, which was far less than CEO Tim Cook intimated three months earlier.

And sales for its quarter to March would fall to between $50bn-$53bn, due to what Apple finance chief Luca Maestri called growing “volatility” in some economies, including China.

This is the first time iPhone sales will drop since its 2007 debut.

Tim Cook said he saw no sign of an impact to Apple’s business in China, and then Maestri said, “But in spite of the fact we produced our best results in mainland China and Greater China, we can see some signs of economic softness, particularly in Hong Kong right now.”

Cook said of the global scene, “We’re seeing extreme conditions unlike anything we’ve experienced before just about everywhere we look.”

Not a small issue when you generate two-thirds of your revenue outside the U.S.

So Apple might as well focus on something else.  Including all its products, from the iPhone, to the iPad, Apple Watch, Mac and iPod, Apple now has 1bn devices in “active” use, an increase of more than 25 percent year over year.

This was never disclosed before and, coupled with Tim Cook’s mention of Apple “services” and the “mother of all balance sheets,” the company was clearly trying to get investors (and analysts) to focus on the growth elements of the story, and not the slowing iPhone issue.

On the issue of services, such as iCloud and Apple Pay, revenues rose 15% year-on-year in the quarter to $5.5bn.  But this pales in comparison to the $51.6bn in iPhone sales.

The release of the iPhone 7 is expected this autumn.

Editorial / Financial Times

“Apple is trying to fix the reality distortion field. For decades it helped Steve Jobs inspire developers and customers. Now it is backfiring; the shares have fallen a quarter since July and were stagnant after-hours on Tuesday even following record quarterly results.

“The most profitable company in the world is now valued at just 8 times earnings, excluding cash.  That does seem unreal.  Investors, though, have a laser focus on projections for iPhone growth, which Apple’s own revenue guidance now implies will fall into negative territory for the first time in the next quarter.

“Apple’s solution is to provide new numbers on its installed base – 1bn active devices – and to remind people that they are enticing their users to part with billions of dollars for apps and music.  This is not simply a hardware business, Apple is saying. We are selling high-margin digital goods at greater scale than most internet companies.  Services revenue jumped 26 percent year-on-year to $6bn.  At that rate it will soon leapfrog revenues from Macs and iPads.

“Yet Alphabet (Google) – which recently overtook Apple by enterprise value – gets a multiple of 25 times forward earnings; Facebook is at 45 times and Amazon 111 times....

“(But) Tim Cook and his team are not going to talk the stock out of its malaise. Now that the first iPhone revenue decline is all but baked-in, the pressure will be on to staunch the bleeding and produce another product that can raise expectations once more.”

--Shares in Amazon were taken to the woodshed as earnings for the fourth quarter came in well-below expectations, even as sales rose 26% to $35.7bn on a currency-adjusted basis, helping push full-year sales above the $100bn mark for the first time in its history.

Q4 profits were a third lower than the Street forecast at $482 million, or $1 per share, and the share price before the announcement was $635.  The stock then traded below $550, but finished the week at $585.  Pretty easy to do the math, but, longer-term, it has never seemed to matter when it comes to this company.

Amazon Web Services did report its cloud computing business saw full-year sales of $7.9bn, up 70 percent from the previous year.

The overall rise in revenues was offset in part by a 20.5 percent increase in operating expenses, including for fulfilment, content costs and its original video production business.

--Alibaba Group Holding Limited reported revenue was up 32% year over year, better than forecast, with China retail marketplace revenue up 35% and mobile revenue 192%.  [Not a typo.]

Earnings beat the Street by $0.10 ($0.99 vs. $0.89, adjusted).  Annual active buyers increased to 407 million, an increase of 21 million from the prior quarter.

In looking for clues on the current environment in China, EVP Joe Tsai said in a conference call, “The Chinese economy is going through a structural shift to more moderate, but more sustainable, growth...and we have no reason to think anything different in the future.”

Tsai thought Alibaba was insulated from the deceleration in the overall economy, but few believe this.

--Twitter announced a major management shakeup, with four top executives leaving the company and CEO Jack Dorsey saying they chose to do so.  Whatever.

--Microsoft beat the Street on the top and bottom line, even as both declined for the period ended in December, and the shares rallied.  The company wrote down about 80% of its $9.4bn purchase of Nokia Corp.’s handset business as phone revenue declined 49% in the quarter.

But Microsoft had revenue of $1.3bn from its Surface computing products, up 29% from the year-earlier period, and it showed continued growth in its cloud services initiatives, with commercial cloud revenue running at an annual rate of $9.4 billion compared with $5.5bn for the same period in 2014.

Plus CEO Satya Nadella said growth in Windows 10 “is outpacing adoption of any of our previous operating systems” despite a declining hardware market.

--McDonald’s reported better-than-expected quarterly same-restaurant sales, owing to the launch of all-day breakfast and solid demand in China.  Global same-restaurant sales rose a very solid 5%, above the expected 3.2% forecast by analysts, with sales at U.S. restaurants open at least 13 months rising 5.7%.  It wasn’t that long ago that U.S. sales were stagnant or down, quarter to quarter.  Total revenue actually fell 3.5% but this was due to the strong dollar.

It’s great to see this company do well again.

--Boeing shares dropped sharply after the company said it would deliver fewer jets this year than 2015.  Boeing also lowered guidance on earnings per share for this year, far below analysts’ expectations.

Fourth-quarter revenue fell 4 percent to $23.6bn for the commercial aircraft division, while the defense, space and security division saw revenue increase 3 percent.

--Ford posted its best ever earnings on Thursday and the shares went nowhere with the growing feeling the sector has peaked.

Importantly, Ford reported its first full-year profit in Europe since 2010.

Thanks to low gasoline prices, consumers continue to buy high-margin pick-up trucks and SUVs in the U.S.

Ford reported sales of 6.6m cars last year, cementing its position as the world’s number six carmaker with pre-tax profit of $10.8bn, up almost 50% on the year before.  Revenue rose 4% to $150bn – the highest level in 12 years, while net income was $7.4bn.

--I cover the Zika virus in depth down below, but for Street Bytes, the mosquito-borne disease and new travel warnings did a number on the shares of cruise operators, at least temporarily.

--Sprint Corp. beat earnings estimates, but the fourth-largest wireless carrier is eliminating 2,500 jobs, or about 7 percent of total staff.

--EBay Inc. continues to struggle, reporting $2.32 billion in sales for the fourth quarter, virtually flat with a year earlier and the fourth straight quarter without growth.  Profit dropped to $477 million.  The company added the first quarter isn’t looking any better, guiding below the Street’s expectations, and the shares fell sharply in after-hours trading.

The StubHub division is doing well, however, logging $232 million in sales, up 34% from a year earlier.

EBay’s former PayPal Holdings Inc. subsidiary, which was spun off as its own publicly traded company last summer, posted a 17% jump in sales on Wednesday.

--Shares of Under Armour soared after the athletic apparel firm reported higher than expected earnings thanks in part to the impact of NBA superstar Stephen Curry.  Footwear sales rose 95% during the three-month period, primarily from the Curry signature line and other shoe offerings.

I have to admit, I never think of Under Armour when it comes to shoes.  That said, footwear sales totaled $166.88 million, nearly doubling the $85.8 million for the same period last year.  Apparel sales rose 22.2% to $864.8 million.

But for all the success, the shares remain well off their Oct. 12 high of $103.35 at $85.50.

--Weight Watchers stock rose again as shareholder and pitchwoman, Oprah Winfrey, tweeted that she’s lost 26 pounds since she’s been on the diet, even boasting that she’s eaten bread every day.

“That’s the genius of this program,” she said in a video posted on Twitter.

--Insurance giant AIG, under pressure from activist investors such as Carl Icahn, who want the company broken into three parts, instead said it will split off part of its mortgage insurance unit in an initial public offering, sell its financial advisory business and create nine distinct operations in its commercial and consumer divisions that could pave the way for future spinoffs and sales.

--DuPont reported sales fell 9.4% last quarter, which would have slid 1% without the currency impact...still a loss as the company is particularly hard hit in the emerging markets.  Additionally, the company’s near-term outlook for China is “mixed.”

DuPont also strongly hinted there might be more layoffs than the significant ones they recently spoke of, including in Wilmington, DE, their longtime headquarters. 

--Freeport-McMoran Inc. took another big write-down on its oil-and-gas business as revenue continues to crater.  As it attempts to step up its debt reduction, the company reported a loss of $4.09 billion, including charges, with revenue falling 28%.  Last month Freeport suspended its dividend and announced it would reduce capital spending another $1 billion over the next two years.  Carl Icahn has an 8.7% stake in the company currently, according to FactSet.

Freeport did say it believed the copper market was finally “balanced” after its long slide and as one who tweets the price of copper every morning, I’d say at least it appears to be making a stand at $2.00.

--Carl Icahn was in the news a lot this week, including in Iowa as Donald Trump announced the billionaire investor had given $1 million to veterans.

But earlier in the day, owing to pressure from Icahn, Xerox announced it was splitting itself in two, hardware and services businesses.  Icahn will be given three seats on the board of the services unit, which at the end of the third quarter accounted for about 56 percent of Xerox’s revenue.

Icahn reportedly holds 8% of the shares in a company that has been shifting away from its copier business to IT services.

--Johnson & Johnson, the world’s largest healthcare company, reported revenues fell 2.4 percent to $17.8bn in the final quarter of 2015, owing to the strong dollar, but profits did rise to $3.2bn from $2.5bn a year ago and earnings per share beat the Street.

--Proctor & Gamble said if you strip out the impact of the stronger dollar on its operations, revenue rose 2 percent in the fourth quarter.  The prior quarter it reported its first decline in ‘organic’ sales since the 2008-09 recession.

--The Russian economy contracted 3.7% in 2015, the country’s statistics office announced, the worst drop in six years.  Retail sales for the year declined 15.3 percent in December from year ago levels.  Industrial production contracted 4.5% last month, real wages fell 10% year-on-year and producer prices contracted 2.2% from the previous month.

Other than all this, everything in Russia is hunky-dory. 

--China’s Communist Party mouthpiece, the People’s Daily, warned investor George Soros that he needs to think twice launching a “war on the renminbi.”

With China trying to stem capital flight and support its currency, a front page opinion piece read, “Soros’ war on the renminbi and the Hong Kong dollar cannot possibly succeed – about this there can be no doubt.”

The headline in the overseas edition of the People’s Daily read: “Declaring war on China’s currency?  Ha ha.”

The Chinese might kidnap Soros and then two days later say “he is cooperating with authorities on an investigation.”

That’s how these things have been going down, boys and girls.

Soros did not mention the renminbi nor the Hong Kong dollar in his remarks that I noted the prior week, but he did say China was the “root cause” of this year’s global bear market, emphasizing deflation and excessive debt as key risks while adding a hard landing was “practically unavoidable.”

--Speaking of hedge funds and Soros, according to an annual list compiled by LCH Investments, which measures hedge fund traders by the total dollars they have made for investors since launching, Ray Dalio of Bridgewater is number one, having made $45bn in net gains since Bridgewater’s inception in 1975, making a net investment gain of $3.3bn last year.

George Soros’ Quantum Endowment, and his successor Scott Bessent who recent left the Soros group, are ranked second, having made $42.8bn since starting in 1973, while my next door neighbor’s Appaloosa fund (managed by David Tepper) is now third with net gains and prizes of $22.8bn.

John Paulson, the man who made a killing betting against subprime mortgages (see below) slipped from third to seven after posting a net loss of $2.1bn in 2015.

--JPMorgan Chase is paying out almost $2.5bn to settle two of its biggest legal issues remaining from the financial crisis; $1bn to insurer Ambac and $1.42bn to end its remaining disputes with defunct Lehman Brothers.

The Ambac lawsuit centered on an arm of Bear Stearns, which JPM acquired in 2008.  Ambac alleged a Bear Stearns unit misrepresented the securities, with court documents showing a Bear Stearns employee referred to some of them as a “sack of s---.”

As for the Lehman payment, court documents show JPM agreed to settle allegations it unfairly jumped the creditors’ queue as Lehman was collapsing.

--Mexico’s economy grew 0.6% in the last three months of 2015 from the prior quarter, according to the country’s National Statistics Institute.  Overall, Mexico grew 2.5% in 2015, up from 2.1% in 2014.

--The European Union announced the EU hit a new record level of around 2.8 billion tourism nights in 2015, up by 3.2% compared with 2014, with a steady increase since 2009.  Spain was +4.3%, France +2.8%, Italy +1.8% and Germany +3.3%.

Romania was +15.9%, Slovakia +11.5% and Czech Republic +10.3%.

Ireland, in case you’re wondering, as I was, hasn’t reported their data to Eurostat, the statistical arm of the EU.

Interestingly, the figures for Estonia, Latvia and Lithuania were all down and I’m guessing that certainly had to do with Russia and its occasional verbal threats against the Baltics.  [Eurostat doesn’t comment on this.]

--Back to Ireland, its central bank revised its expectations for GDP growth for both 2015 and 2016, raising the past year to 6.6% from a previous estimate of 5.8%, and for 2016 from 4.7% to 4.8%.

--The Los Angeles Times reported that despite a $9 billion investment in new light rail and subway lines, the Los Angeles County Metropolitan Transit Authority (Metro) has seen a drop of more than 10% of its boardings from 2006 to 2015, “a decline that appears to be accelerating.”

Other agencies are doing just as poorly.  In Orange County, bus ridership plummeted 30% in the last seven years.

I find this startling.  Granted the recession forced deep service cuts, but transit agencies can’t figure out where the passengers went.

Yes, falling gas prices wouldn’t help, and Metro has yet to quantify the impact of ride-hailing companies like Uber and Lyft.

But so much for the goal of getting drivers out of their cars and onto public transit to reduce traffic congestion and air pollution.

Foreign Affairs

Iraq/Syria/ISIS/Russia: As the UN-sponsored peace talks were set to commence on Friday, negotiators for the rebels demanded that previous Security Council resolutions on aid distribution be followed before they consider taking part.

Stephen O’Brien, the UN’s head of humanitarian aid, told the Security Council that of 113 requests to be allowed to make aid deliveries to “hard to reach” areas last year, only 10 percent reached the civilians in need.  [See Madaya.]

The Assad regime itself, according to the UN, ignores three quarters of the requests.  As O’Brien said, “Such inaction is simply unacceptable for a member-state of the United Nations and a signatory of the United Nations charter.”

This is beyond despicable, but in keeping with this catastrophic war.  If I’m the opposition (the rebels), no way I take part in any fashion until the aid is allowed to flow, but of course, just as I said all the way back in the summer of 2012, it’s already over. 

Nonetheless, they are attempting to hold talks, with Russia and Iran glad to attend, being backers of Assad.  The opposition groups, a wide-ranging coalition of Islamist and secular fighting groups, exiled politicians and Assad defectors, want an assurance they are the recognized opposition body, but the Russians want a Kurdish group to be part of it.

The Assad regime’s recent military gains have it dealing from a position of strength, even as civilians continue to be targeted.  Unicef reported this week that 47 schools were hit over the last year.

Among the casualties of the past week....

A double suicide bombing in Homs killed at least 22, with another 100 wounded.

And nine children were among at least 63 killed in air strikes believed to be carried out by Russian warplanes on the eastern city of Deir al-Zor.  On the orders of Russian President Putin, Russian warplanes have been bombing around Deir al-Zor in support of pro-government forces who are battling ISIS.  [Syrian Observatory for Human Rights and various wire services.]

Separately, Syrian army troops made major gains in the Alawite stronghold of Latakia, after opposition forces had been making gains.

Traveling in Turkey, Vice President Joe Biden said that if a political settlement is not possible, the United States and Turkey were prepared for a military solution.

You had your chance to work with Turkey in 2012, Mr. Vice President, and the administration blew it.

Iran: The sanctions have been lifted and President Hassan Rouhani ran around Europe this week, hailing a “new relationship” between Iran and France, at one stop, with similar utterances elsewhere.

“Let us forget the resentment,” Rouhani said, calling for both countries to take advantage of the “positive atmosphere” following removal of the sanctions.

In a speech to French business leaders, Rouhani said, “We are ready to turn the page” and establish a “new relationship between our countries.”

French Prime Minister Manuel Valls responded that “Iran can count on France.”

“France is ready to use its companies, its engineers, its technicians and its many resources to help to modernize your country,” Valls said.  [Financial Times]

Earlier, Rouhani had been in Italy, where he sealed a number of industrial deals and even had an audience with the pope.

But as Rouhani is barnstorming for commerce, he was issuing harsh statements against rival Saudi Arabia.  Rouhani told an audience in Paris that “some countries had wanted to use terrorism for their own means... But this is a hand grenade with the pin removed.”

Rouhani, in Italy, said Iran would not apologize to the Saudis for the attack on its embassy by demonstrators furious over Riyadh’s execution of Shiite cleric, Nimr al-Nimr.

“Why should we apologize, because Nimr al-Nimr was executed? We are the ones to apologize because they are killing the people of Yemen?   Apologize to them because they are helping terrorists?” the Iranian president asked.

In Italy, officials felt compelled to cover up nude statues in one of the museums Rouhani was at out of respect for Iran’s strict laws governing propriety.

Rouhani denied he had asked for this.

Oh brother.  And President Obama has the gall to speak of “snapback sanctions” should Iran violate the nuclear deal?  Are you freakin’ kidding me?!  Just re-read what Valls said and ask yourself if France, or any others in the P5+1, will switch gears when Iran begins cheating, as I’m sure they already are.

Of course there are big business deals being cut.  Iran has committed to buying more than 100 passenger planes from Airbus, for one.  French car maker Peugeot said it will return to the Iranian market, producing 200,000 cars a year in a joint venture with a local manufacturer.  Peugeot had been forced to pull out of Iran in 2012 when sanctions took hold.

Daniel Henninger / Wall Street Journal

“Some wonder how history will treat Barack Obama’s presidency.  That depends on who writes the histories.

“Secretary of State John Kerry’s account will fist-pump the Iran nuclear deal as the central foreign-policy event of the Obama presidency, a triumph for Western diplomacy.

“But news photographs in recent weeks are producing a different history. These photos document the abject humiliation of the West by Iran.  Americans who plan to vote in their presidential election should look hard at these photos, because the West’s direction after this will turn on the decisions they make.  [Henninger then talks of the nude statues being covered up.]....

“Then, because Mr. Rouhani will not attend a meal that serves alcohol to anyone, the nominally Italian government of Prime Minister Matteo Renzi declined to serve wine.  [Ed. I guess drinking a bottle of domestic with Rouhani would be out of the question if I requested an interview.]

“They did so for the same reason that beggars grub change in front of Rome’s churches.  Freed by the Obama nuclear deal with Iran, Italy’s tin-cup businesses signed about a dozen deals with Mr. Rouhani this week, totaling $18 billion.

“The bowing and scraping to Mr. Rouhani continues this week as France and Germany sign more deals.  This is not economic re-normalization.  Rather than reform its weak, politically unstable economies, Europe is content to make itself a dependency of the aborning Iranian empire.”

Then you have the photos of Rouhani and the pope.

“The Vatican argues this is realpolitik by a pope trying to protect Christians in the Middle East by inducing Iran to play an ‘important role’ in the peace process.

“Set aside the ‘role’ Iran has played in the death of a quarter-million Syrians and the refugees now destabilizing Europe. One still may ask: Why such public and jolly photo-ops with this person?....

“The persecuted in Iran include Bahais, Sunni Muslims, Christians (notably evangelicals), Jews, Yarsanis and even Shia groups.

“Mr. Rouhani is grinning in this photo because he knows these people can’t move Iran’s culture out of the 16th century.

“The third photograph is of 10 sailors from the U.S. Navy who are kneeling in rows, hands on their heads, on the deck of an Iranian boat.

“The Obama administration hasn’t provided an explanation for how this ‘deviation’ and capture by Iran in the Persian Gulf happened....

“Meeting in a congratulatory ceremony with the Islamic Revolutionary Guard Corps members who took the sailors, Iranian supremo Ayatollah Khamenei said, ‘This event should be considered God’s work.’

“One is tempted to tip one’s hat to the Khamenei-Rouhani strategy team.  Iran took the West’s measure with its nuclear brinkmanship and the West bent.”

When you look at Rouhani’s victory tour, remember something else.  Iran is holding parliamentary elections end of February.

Editorial / Wall Street Journal

“Tehran on Monday barred 635 of the 801 candidates who had intended to run next month for seats in Iran’s Assembly of Experts, the body that will select and nominally oversee the country’s next Supreme Leader. That came on the heels of last week’s disqualification of some 7,000 candidates for next months’ elections to the Iranian Majlis, or Parliament.  So much for the nuclear deal’s promise of empowering Iranian reformers.

“The disqualifications were the work of the Guardian Council, an unelected body that vets candidates for ideological purity. The system allows the mullahs to hold popular ‘elections’ while ensuring no one who might challenge Islamist rule could ever be in a position to win a seat.

“Monday’s purge of candidates betrayed an especially hardline approach.  Among those disqualified is 43-year-old Hassan Khomeini – grandson of Ayatollah Ruhollah Khomeini, the leader of the 1979 revolution that created the Islamic Republic.  Officially, the younger Khomeini is insufficiently versed in Shariah law. The real reason is that he is reform-minded and popular with young Iranians.

“Meantime, the leaders of the pro-democracy Green Movement...are still under house arrest....

“All of this will ensure that whoever replaces Supreme Leader Ali Khamenei will be another ideological purist close to the country’s security establishment.  Iranians hoping for greater freedom under a real democracy will have to wait for a more revolutionary form of change than fake elections and sweetheart nuclear deals.”

Anne Applebaum / Washington Post

“President Hassan Rouhani is not Mikhail Gorbachev, and this is not a perestroika moment.  Iran is not ‘opening up’ or becoming ‘more Western’ or somehow more liberal.  Maybe Iran’s foreign minister will now pick up the phone when John Kerry calls.  But other than that, the nature of the Iranian regime has not altered at all.

“On the contrary, the level of repression inside the country has grown since the ‘moderate’ Rouhani was elected in 2013.  The number of death sentences has risen.  In 2014, Iran carried out the largest number of executions anywhere in the world except for China.  Last year, the number may have exceeded 1,000....

“Political pressure and religious discrimination have increased, too.  Women who don’t wear veils are still vulnerable to arrest and sentencing... Cultural dissidents are under pressure, too, even more so since the sanctions-lifting deal was announced.  On Jan. 7, the poet Hila Sedighi was arrested after landing at Tehran airport and detained for 48 hours, presumably as a warning.  In October, a Kurdish filmmaker received six years and 223 lashes for ‘insulting the sacred.’  When five Americans were released from Iranian prisons this month, the International Campaign for Human Rights in Iran noted that many other political prisoners, including some foreigners, remain in Iranian prisons.”

Libya: The National Oil Corporation has said it fears that up to 3 million barrels of oil could be lost following an ISIS attack on the major oil terminal of Ras Lanuf, with at least five of the 13 tanks being damaged.  The terminal, shut since December 2014, faces a lengthy closure.

Israel: Another female Israeli settler was stabbed to death by two Palestinian terrorists Monday evening as she was walking to a store.

Separately, at least 8 Hamas militants were killed digging underground tunnels after heavy rains northeast of Gaza City caused the tunnel to collapse, Israel Radio reported, citing Palestinian sources.

Hamas has been digging new tunnels and restocking its rocket arsenal since the terrorist infrastructure was hit hard during last summer’s Operation Protective Edge.  [Jerusalem Post]

Egypt: According to the New York Times and human rights organizations, hundreds of Egyptians have been subjected to “enforced disappearance,” as President Abdel Fattah el-Sisi widens his crackdown on opponents, “real or imagined,” as the Times put it.

Enforced disappearance means the people are detained in “a network of secretive detention centers, run by the security forces, where they are held incommunicado, without charge or access to a lawyer, for weeks and sometimes months, according to the rights groups.”

“There, interrogators use the detainee’s isolation and lack of legal protections to interrogate them harshly.  Some have been forced to open their Facebook pages, and other social media sites, to identify friends and relatives.  Many say they have been tortured.”  [Amina Ismail and Declan Walsh / New York Times]

China: Sec. of State John Kerry met with his Chinese counterpart, Foreign Minister Wang Yi, in Beijing and the two reached no agreement when it came to the severity of prospective sanctions for North Korea, three weeks after Kim and his Orcs conducted their fourth nuclear bomb test (which some now say may have indeed had a hydrogen bomb element), nor did they come to any agreement over China’s territorial ambitions in the South China Sea.

Although Wang agreed the UN Security Council should pass a new resolution condemning Pyongyang for conducting the test, he said, “Sanctions are not an end of themselves.  We must point out that the new resolution should not provoke new tension in the situation, much less destabilize the Korean peninsula.”

China’s New China News Agency accused Washington this week of “uncompromising hostility” toward the North, “flaring up the country’s sense of insecurity and thus pushing it towards reckless nuclear brinkmanship.”

As for the South China Sea, which China claims virtually all of, it is uncompromising despite its neighbors’ own claims to parts of the territory.

Wang said at a news conference on Wednesday: “The South China Sea islands were historically China’s territory, and China has a right to protect its maritime sovereign and legal rights and interests.”  Then he denied China was militarizing its artificial islands. At which point Western reporters in attendance all coughed into their hands “Bulls---.”  [Jonathan Kaiman and Julie Makinen / Los Angeles Times...except that last bit.]

Meanwhile, Taiwan’s president, Ma Ying-jeou, visited an island, Taiping, in the South China Sea to emphasize Taiwan’s sovereignty claims.  Taiwan has spent more than $100 million to upgrade the island’s airstrip and even has a 10-bed hospital on it.  Taiwan stations about 200 coast guard personnel there.

The United States and the Philippines were not happy with the visit, which came as a surprise as Ma is due to step down in May, with opposition party president-elect Tsai Ing-wen declining an invitation to go on the trip.

Tsai favors more independence for Taiwan, but she has been careful not to rile up Beijing.  When she officially takes office, we’ll see what direction she really ends up taking.

Separately, China is now in the midst of its Lunar New Year holiday migration, which begins February 8 but normally starts 15 days before and carries on as much as 25 days after.  This year is different, though, because many migrant factory workers were told to go home early with the big slowdown in Chinese manufacturing.  More than a few of them are concerned that they’ll have a job when they return later in February.

Russia: Ralph Peters / New York Post...after the British inquiry into the assassination of Russian defector Alexander Litvinenko and the rantings of Chechen chief Ramzan Kadyrov, both of which I covered extensively last review.

“Putin’s Russia isn’t a nation of laws, but it is a land of rules.  And rule No. 1 is that no one’s allowed to criticize, mock or challenge the reigning czar.

“To borrow the words of one of our own apparatchiki, ‘What does it matter?’  Why should we care about the death of one defector when the world’s ablaze?

“Because the second-most-powerful nuclear-armed state is ruled dictatorially by a remorseless assassin.  It matters because he ignores international law.  It matters because, like Hitler, he has a vision that only war can fulfill.  And it matters because he’s as brilliant as he is ruthless, a leader who knows his own people and sizes up his enemies with genius....

“After toying with a feckless American president, Putin ‘liberated’ Crimea from Ukraine.  When the West failed to respond in a serious way, he invaded eastern Ukraine.  In both operations he used thinly disguised security forces, smirking as he denied Russian involvement.  Again, he faced a limp response, sanctions designed to protect Western business interests.

“Next, he staged a military surprise, deploying forces to Syria under the high-tech noses of Western intelligence agencies.  While the Syrian opposition turned out to be tougher than he expected, Putin nonetheless has managed to stabilize the Assad government’s position, insuring that, whatever Bashar al-Assad’s personal fate, a pro-Russian regime will remain in Damascus....

“Along the way, Putin’s suffered embarrassments, but no compelling defeats.  The West has yet to stand up to him in any significant way.  The result is that he now expects to win – which makes him extremely dangerous.

“That danger may be coming to a head, because market forces are doing what no Western leader dared: applying the brakes.  With oil and gas prices plummeting, Russia’s economy shrinking, inflation’s soaring, the ruble’s collapsing, pensions are losing value, wages can’t keep pace – and the first hairline cracks in Putin’s popularity are showing.  The czar won’t fall tomorrow, but the grumbling has begun....

“Should we rejoice? Does this mean that the assassinations and invasions might end?

“No. In his desperation, Putin could become even more embittered and reckless. Ailing on the home front, he may feel compelled to deliver new triumphs abroad.  His throne isn’t threatened yet, but his pride is wounded.

“And beware a wounded bear.”

South Africa: Not that it will move global markets, but this country bears watching with the collapse in commodities.  As many as 32,000 workers in the mining sector could lose their jobs in the near future.  South Africa’s mining sector employs 400,000 and contributes 7 percent of GDP, but with falling demand from China and elsewhere, the companies have to cut jobs in an aggressive fashion.

However, that is not easy to do here.  The National Union of Mineworkers has urged the government to intervene, the union not understanding simple economics, yet the country is already dealing with an unemployment rate of over 25% and President Jacob Zuma’s government faces key elections later this year.

It could be an explosive situation. 

Malaysia: Prime Minister Najib Razak was cleared of any wrongdoing over $680 million that was channeled into his private accounts, with the country’s attorney general saying the money was from a personal donation from Saudi Arabia’s royal family and not from a state-owned investment fund as had been alleged.  Najib has consistently denied the accusations but faced pressure to resign.

But then the next day, the Malaysian Anti-Corruption Commission said it was seeking to reverse the AG’s conclusion.

And late Friday, Switzerland’s top prosecutor said $4 billion may have been misappropriated from state-owned companies in Malaysia, with some of the funds having been transferred to Swiss accounts held by former Malaysian public officials and current and former officials from the United Arab Emirates.

Random Musings

--I’m ready for the Iowa caucuses and real voting.  That said it appears a snowstorm, originally scheduled there for Tuesday, could start Monday and that could impact the result in a big way.

I’m also the ‘wait 24 hours guy’ and while I’m well aware of the latest on Hillary Clinton’s emails, and the State Department not releasing 22 documents it believes contained top secret information, there’s nothing more for me to say at the moment, though I have related commentary below.

Edward Luce / Financial Times

“Donald Trump may have quit the stage on Thursday night but in so doing only cemented his stranglehold on the Republican race.  With the exception of Jeb Bush, who seemed liberated by Mr. Trump’s absence, the remainder of the field carried on as if Mr. Trump were still on the podium.

“Whether the issue was illegal immigration, ISIS or Barack Obama, candidates vied with each other to out-Trump Trump.  Which candidate would seal the U.S.-Mexico border more tightly?  Who would obliterate ISIS more totally?  And which would display the greatest contempt for the moral failings of Washington?

“If you subtract Mr. Trump’s asides, the transcript would read little different to the first six debates.  By that measure, Mr. Trump’s temporary absence changed nothing.  He has set the tone for 2016....

“Marco Rubio, who is still the likeliest to survive the second-tier circular firing squad, had a difficult night.  A strong third place showing in Iowa next Monday would set Mr. Rubio up for New Hampshire the following week and give him a chance to consolidate the big money – the Koch Brothers, Sheldon Adelson, and others, who are still on the sidelines – for the bigger primaries.

“But he flunked the chance.  He appeared nervous and over-schooled.  Virtually every answer Mr. Rubio gave on foreign policy ended with the phrase: ‘...and if we capture them alive, they’re going to Guantanamo.’....

“There were no memorable lines.  There were only two clear winners on Thursday night.

“The first was Fox News, which posed tough questions and tried to live up to its ‘fair and balanced’ motto.  Partly because of that, Mr. Trump was the other winner. The tougher Fox’s questions, the more his main rivals – particularly Mr. Rubio – appeared to wobble.

“It was almost as if Fox and Trump were on the same team.  Such are the ironies of show business.”

Funny how everyone sees a debate differently.  Virtually all the mainstream commentators thought Cruz looked terrible.

Some final polls ahead of the Iowa caucuses....

In Iowa, a Fox News poll released on Sunday had Donald Trump with an 11-point lead, a 15-point swing in the two weeks between surveys, Trump leading 34-23, with Marco Rubio at 12% and Ben Carson at 7%.

A CBS News “Battleground Tracker” poll released Sunday morning showed Trump leading in Iowa 39-34, with Rubio at 13%.

An NBC News/Wall Street Journal/Marist poll released Thursday showed Trump leading Cruz 32-25, Rubio 18.

A Monmouth University poll of likely Iowa caucusgoers has Trump leading Cruz 30-23, with Rubio at 16% and Carson 10%.

A Quinnipiac University survey has it Trump just 31-29...Rubio at 13%, with no other candidate above 7%.

Marco Rubio received the endorsement of the Des Moines Register.

“Sen. Marco Rubio has the potential to chart a new direction for the party, and perhaps the nation, with his message of restoring the American dream. We endorse him because he represents his party’s best hope.

“That hope rests partly in the electoral calculus of the country.  Republicans should have learned from 2012 that they cannot win with Republicans alone.  Recent polling shows Rubio has higher favorability ratings among independents than all candidates but Ben Carson, as well as positive ratings among Latinos....

“The editorial board also values the executive experience, pragmatism and thoughtful policies of John Kasich, Chris Christie and Jeb Bush.  Yet most Republicans aren’t interested in rewarding a long resume this year.  They want new and different.”

On the Democratic side in Iowa, the CBS/Battleground poll has Bernie Sanders leading Hillary Clinton 47-46.

The NBC News/WSJ/Marist survey has Clinton leading 48-45.

The Quinnipiac poll has Sanders leading 49-45.

In New Hampshire, the aforementioned Fox poll has Trump ahead of Cruz 31-14, with Rubio at 13%, John Kasich 9% and Jeb Bush and Chris Christie 7%.  Whoever finishes fourth, particularly if it’s Kasich or Christie, should move on at least to South Carolina and Nevada, though in the case of those two there is zero reason to believe they would do well in either.  Kasich would appear to have the best chance at pulling off an upset and edging out Rubio (or Cruz) for third.  At least that’s my take.

The CBS/Battleground poll has Trump handily beating Cruz 34-16, Rubio at 14% and Kasich at 10%.

The NBC/WSJ/Marist survey has Trump at 31%, Cruz 12%, Rubio and Kasich at 11%, Bush 8%, Christie 7%.

On the Democratic side, the CBS/Battleground poll has Sanders leading Clinton in New Hampshire 57-38.

The NBC/WSJ/Marist poll in the Granite State also has Sanders at 57-38.

In South Carolina, the CBS/Battleground survey has Trump whipping Cruz like a rented mule 40-21, Rubio third at 13%.

The NBC/WSJ/Marist poll has Trump with a 36-20 lead over Cruz, with Rubio at 14%.

In the CBS/Battleground survey Clinton leads Sanders in the Palmetto State 60-38.

In the NBC/WSJ/Marist poll Clinton leads Sanders 64-27.

In a Fox News national poll, Trump bests Cruz 34-20, with Rubio third at 11%, followed by Carson at 8%.

A Bloomberg Politics national survey has Trump leading with 34%, followed by Rubio with 14% and Cruz 12%.  No other candidate in double digits.

A Washington Post/ABC News poll found that Trump had a 37-21 lead over Cruz, with Rubio third at 11%.

On the Democratic side, the same WP/ABC national survey has Clinton with a 55-36 lead over Sanders among registered Democrats and Democratic-leaning independents, down from a 59-28 margin in December.

--Meanwhile, Donald Trump abruptly pulled out of Thursday’s Republican debate in Des Moines, saying one of the moderators for Fox News, Megyn Kelly, had treated him unfairly at last August’s debate and since then.  [Ed. I am a viewer but hardly a fan of Ms. Megyn myself.]

But Trump appears to have been more ticked off at a “wise-guy press release” the network released Tuesday belittling him, which the Donald said was inappropriately antagonistic and childish.

Fox’s statement said that network officials “had learned from a secret back channel that the Ayatollah and Putin both intend to treat Donald Trump unfairly when they meet with him if he becomes president.”

The statement added that Trump “has his own secret plan to replace the Cabinet with his Twitter followers to see if he should even go to those meetings.’

After reading it, Trump replied: “I said, ‘Bye-bye.’”

“Fox is playing games,” Trump said.  “They can’t toy with me like they toy with everybody else.  Let them have the debate.  Let’s see how they do with the ratings.”  [Washington Post]

--Iowa’s Republicans haven’t picked the nominee since George W. Bush in 2000.  But New Hampshire has picked the ultimate winner in three of the past five contested primaries in each party.

--Charles Krauthammer / Washington Post

“It’s hard to believe that the United States, having resisted the siren song of socialism during its entire 20th-century heyday (the only major democracy to do so), should suddenly succumb to its charms a generation after its intellectual demise.  Indeed, the prospect of socialist Bernie Sanders, whatever his current momentum, winning the Democratic nomination remains far-fetched.

“The Democrats would be risking a November electoral disaster of historic dimensions.  Yet there is no denying how far Sanders has pulled his party to the left – and how hard the establishment candidate, Hillary Clinton, has been racing to catch up.

“The Republicans, on the other hand, are dealing with a full-scale riot. The temptation they face is trading in a century of conservatism for Trumpism.

“The 2016 presidential race has turned into an epic contest between the ethno-nationalist populism of Donald Trump and traditional conservatism, though in two varieties: the scorched-earth fundamentalist version of Ted Cruz, and a reformist version represented by Marco Rubio (and several so-called establishment candidates) – and articulated most fully by non-candidate Paul Ryan and a cluster of highly productive thinkers and policy wonks dubbed ‘reformicons.’

“Trump insists that he’s a conservative, but in his pronouncements and policies, conservatism seems more of a rental – a three-story penthouse rental with Central Park-view, to be sure – than an ideological home....

“My personal preference is for the third ideological alternative, the reform conservatism that locates the source of our problems not in heartless billionaires or crafty foreigners, but in our superannuated, increasingly sclerotic 20th-century welfare-state structures.  Their desperate need for reform has been overshadowed by the new populism, but Speaker Ryan is determined to introduce a serious reform agenda in this year’s Congress – boring stuff like welfare reform, health-care reform, tax reform and institutional congressional reforms such as the return to ‘regular order.’

“Paired with a president like Rubio...such an agenda would give conservatism its best opportunity since Reagan to become the country’s governing philosophy.

“Unless the GOP takes the populist leap.  In which case, a conservative restoration will be a long time coming.”

--I’m on record as having voted for third-party presidential candidates before, specifically John Anderson in 1980 and Ross Perot in 1992, and former New York City mayor Michael Bloomberg is in the news as he weighs a third-party challenge, even at this late date.

Editorial / Wall Street Journal

“We’ve been skeptical of a third-party Bloomberg candidacy in the past, but this year’s tumult has thrown convention out the window.  Mr. Bloomberg is looking at the primary chaos and figuring he may have a chance if the parties nominate flawed or polarizing candidates who struggle to unite their parties.

“The 73-year-old’s opening would widen on the left if the Democrats nominate avowed socialist Bernie Sanders.  He’d probably not run if Hillary Clinton is nominated – unless she is wounded by an indictment or plea deal for having mishandled classified information. Mr. Bloomberg tilts left enough on guns, climate change and immigration that many Democrats would find him politically congenial.  He’s more centrist on economics, and somewhat hawkish on foreign policy, but many Democrats would not find those views disqualifying amid 2% growth and the rise of Islamic State.

“Mr. Bloomberg’s appeal is harder to discern on the political right, though that also depends on the GOP nominee.  He has a stellar record reducing crime in New York and he fought the teachers union for school choice and accountability. He’s a social liberal loathed by the National Rifle Association and he has a nanny-state tendency (his failed big-soda ban) that irritates free-marketeers.

“But if Republicans nominate Donald Trump, who is also no conservative, Mr. Bloomberg’s pitch would include his governing experience in New York and that he’s not a leap in the policy dark.  He might also find a lane up the political middle if the GOP nominates Ted Cruz, whose belief that he can win merely with conservative voters means he could struggle in swing states like Iowa, Florida, Colorado and New Hampshire, among others.

“As a self-financing billionaire, Mr. Bloomberg could get on the ballot and field a strong campaign in every state. He might do well enough in the polls to get into the autumn debates where he would compete on equal terms.... Mr. Bloomberg could figure that many Republicans might find him more palatable as Commander in Chief than the say-anything style of Mr. Trump.

“The big question is whether Mr. Bloomberg could win enough states to deny 270 electoral votes to the other candidates.  That would throw the election to the House of Representatives... Mr. Bloomberg would then have to make the case that he would be better for the country and the GOP than its nominee....

“(Bloomberg) is a serious man who wouldn’t waste his money or time if he didn’t sense an opportunity.  If we’ve learned anything so far in this tumultuous election season, it’s that the electorate is volatile enough that anything can happen.”

--Maureen Dowd / New York Times

“Before (Sarah) Palin, if a woman flamed out in a spectacular fashion, it was considered an X through the X chromosome.  If Billie Jean King lost to Bobby Riggs, women would be seen as second-class athletes.  If Geraldine Ferraro seemed unfit for the White House, all women might be judged incapable.

“But when Palin turned out to be utterly unqualified and unintelligible, spouting her own special Yoda-like language, it did not reflect poorly on women as a whole – only on her and John McCain.  What the hell were you thinking, Senator?

“Ordinarily, it’s considered sexist to call a woman shrill.   But Palin liberated us on that score. She really is shrill.

“Ordinarily, it’s dicey to focus on what a woman in politics is wearing.  But again, Palin has freed us up.  She sported a cardigan so gaudy and rogue at her Iowa endorsement of Donald Trump (the man who viciously mocked her former running mate’s war record) that we would be remiss not to mention that it was the sartorial reflection of Palin and Trump themselves.

“Ordinarily, you have to tread gingerly in critiquing a working woman on her mothering skills.  But Palin’s brawling brood runs so wild around the state she once governed, in a way that is so contrary to her evangelistic, sanctimonious homilies on family values, that it seems only Christian to advise her to study the Obamas to see what exceptional parenting looks like.

“With Palin and Trump, a failed reality star and a successful one, gall is divided into two parts. There has been a lot of talk this campaign season about how women pols bring superior qualities to the table: collegiality and listening skills.  But Saracuda shows that we are truly the equals of men, capable of narcissistic explosions, brazen hypocrisy and unapologetic greed.”

--Kathleen Parker / Washington Post

“Questions about Hillary Clinton’s honesty did not start with Benghazi or with emails and a private server, but began ages ago with any number of fabricated – or at least exaggerated – stories.  Many may remember what New York Times columnist William Safire wrote about Clinton in 1996:

“ ‘Americans of all political persuasions are coming to the sad realization that our First Lady – a women of undoubted talents who was a role model for many in her generation – is a congenital liar,’ he said.  ‘Drip by drip, like Whitewater torture, the case is being made that she is compelled to mislead, and to ensnare her subordinates and friends in a web of deceit.’

“There ‘they’ go again?

“Safire’s concerns at the time – Whitewater, Travelgate, ‘lost’ records – may seem remote and trivial to some, but the drip-drip he identified didn’t stop with the White House years.  Subsequent to the various ‘-gates’ were, for example, the story of coming under fire on a tarmac in Bosnia or about her having been named for the explorer Edmund Hillary, the first person to reach the summit of Mount Everest, despite her having been born about six years before his history-making climb.

“These are such trivial stories to invent that one wonders why she bothered.  The answer can’t be easily divined except as Safire suggested. Or, is it that she is reflexively prone to dissemble?  Would this be a matter of habit, or something else?  An innate need to inflate one’s status – even when it isn’t needed?....

“(More) recent issues of inaccuracies are both concerning and consequential.  We now know with certainty (thanks to an email from Clinton to daughter Chelsea the night of the Benghazi attacks) that the then-secretary of state knew it was a terrorist attack, contrary to official reports, in the days following, about street riots that escalated.  We also know from the intelligence community inspector general that her private server contained information ranked beyond top secret, contradicting her assertions to the contrary.

“What difference, at this point, does any of it make?  When it comes to public trust in a presidential candidate – everything.”

--Editorial / Wall Street Journal

“Financial analyst and our contributor Donald Luskin has described Donald Trump as a ‘black swan’ over the political economy.  He’s referring to an outlier event that few anticipated and whose impact is impossible to predict.  As the voting season begins in Iowa, this strikes us as a useful way for Republicans to think about the Trump candidacy.

“We’ve been critical of Mr. Trump on many grounds and our views have not changed.  But we also respect the American public, and the brash New Yorker hasn’t stayed atop the GOP polls for six months because of his charm.  Democracies sometimes elect poor leaders – see the last eight years – but their choices can’t be dismissed as mindless unless you want to give up on democracy itself.”

--I warned you of the dangers of the Zika virus three weeks before the mainstream media did and the situation is seemingly worsening at light speed.  Brazil’s health ministry said the number of cases of microcephaly – a rare condition in which infants are born with abnormally small heads – had climbed to 4,180 since October, when Brazil normally has about 150 cases a year.

But as the New York Times reports, officials in Brazil are investigating the cases reported by hospitals and doctors around the country more closely.  “So far, 732 cases have been examined. In 462 of them, either no microcephaly was found, or it was caused by something other than an infection, such as alcohol or drug abuse by the mother during pregnancy, a spokeswoman for the Health Ministry said.

“The spokeswoman added that congenital infections had caused 270 cases of microcephaly.  But in that group, the Zika virus was found in only six infants, the ministry said.”

But a leading infectious disease specialist in Sao Paulo told the Times that Brazil’s ability to test effectively for Zika remained “very inefficient” because the authorities lack the most up-to-date methods.

“Dr. Artur Timerman said this meant that tests used in Brazil could generally detect Zika in pregnant women or their infants only during the acute phase of the virus, which lasts about five or six days.”  [New York Times]

The sharp increase in cases means “This is clearly still a health crisis on a major scope,” according to Timerman.

What this Times story fails to point out, though, is that the government also has a major incentive to begin to downplay the virus with the Olympic Games coming up, and at the same time it has launched a major campaign, including use of the military, to get the word out and to rid the cities of standing pools of water.  From a PR standpoint it must be able to report it has a handle on Zika, quickly, or you’re going to see mass cancelations, even if the biggest danger is only to pregnant women.

Also this week, a Danish man returned from a trip to Mexico and Brazil and tested positive for Zika, but he is expected to recover soon.  He was suffering from fever, headaches and muscle pain.  Three Britons who traveled to South America were also infected, but it is not expected to spread in Europe.

Closer to home, officials in Arkansas and Virginia confirmed residents of those states had tested positive, but since it is not mosquito season in either, the infections pose no further risk.

In Los Angeles, a young girl traveling to El Salvador was infected, but has since recovered.

So with the above in mind, Thursday the World Health Organization said it had set up a Zika “emergency team” after the “explosive” spread of the virus.

WHO director general Dr. Margaret Chan said Zika had gone “from a mild threat to one of alarming proportions” and was having a “heart-breaking” impact.

The team is meeting on Monday to decide whether Zika should be treated as a global emergency.

Zika was first detected in Uganda in 1947, but has never caused an outbreak on this scale.  Now it has been detected in 23 countries across the Americas and the WHO predicted 3m-4m cases in the region over the next year from Argentina to the southern states of the U.S.

As I noted last week, there is also a major concern on the link between Zika and the rare nervous system disorder Guillain-Barre syndrome.  The link has not been totally confirmed, but Dr. Chan said it was “strongly suspected” and “deeply alarming.”

El Nino is also leading to increasing mosquito populations in many parts of South and Central America.

Come spring and summer, the kinds of mosquitoes Americans will need to be on the lookout for are Asian tiger and the yellow fever species that have black-and-white stripes.  But unlike the common mosquitoes that come out at night, these mosquitoes bite during the daytime.  They have been detected in large portions of L.A. County, for one.

Editorial / The Economist

“Zika has no cure and a vaccine will not be available for at least a decade.  But that is no cause for despair – nor for governments to scare women into not having babies.  Two things are known for certain. The first is that the main, possibly only, transmission route is via mosquitoes, which pick up the virus from infected people and pass it on when the pests next take a meal.  The second is how to cut the number of mosquitoes – and preferably eradicate them.

“The idea of fighting mosquitoes has a long history.  Aedes aegypti, the species that carries not only Zika but dengue, chikungunya and yellow fever, was almost eliminated from much of South America by the early 1960s, after a long anti-dengue campaign. The insects were killed with frequent fumigation. Health workers visited households to urge people to mop up standing water, where mosquitoes breed.  But some countries slackened their efforts too soon.  After the number of cases fell, politicians’ attention waned. And the mosquitoes returned in their buzzing billions....

“(The World Health Organization) now needs to rally governments for a new push.  Brazil is mobilizing its armed forces for a nationwide door-to-door information campaign; other affected countries should do likewise....

“All this will be pricey.  But it would bring not one, but several, dread diseases under control.  Aedes aegypti does not carry malaria, but the methods used to kill it will also kill Anopheles, which does.  The moment has come again to take the fight to the mosquitoes – and this time to finish the job.”

--So that was one helluva snowstorm last weekend.  Here in Summit, NJ, we ended up with somewhere near 25 inches (official tallies from neighboring towns ranged from 21” to 33”).  I have never seen it snow with such intensity for ten hours straight as it did.  Normally you get lulls and pockets of dry air in nor’easters, but not this one.

I drove about three blocks on Sunday and right away saw the dangers...the snow banks were massive, and dangerous, in terms of lane reduction and not being able to see when making right-hand turns, that kind of thing, let alone if there was a little kid standing in the street.  So it was totally understandable that much of the Mid-Atlantic was still shut down on Monday.

Some totals...Washington, D.C. (the National Zoo, since Reagan National’s total wasn’t measured properly) 22.4 inches.  Manassas, VA, 30; Baltimore 29.2, an all-time record; Dulles 29.3 (3 inches shy of Snowmaggedon in 2010); Philadelphia International Airport 22.4; King of Prussia, PA, 26.1; Central Park, NYC, 26.8 (0.1 inch shy of the all-time mark); JFK Airport 30.5; Newark International 28.1...yup, Snowzilla.

Actually, according to the National Oceanic and Atmospheric Administration, the snowstorm was the fourth-biggest to strike the Northeast since 1950, dumping more than 30 inches on 1.5 million people and affecting nearly 103 million in all.

The three storms ahead of this one are the “Storm of the Century” of March 1993, the blizzard of January 1996 and a historic nor’easter storm of March 1960.

--Speaking of snow, the Sierra Nevada snowpack is now 115 percent of normal, California officials said on Tuesday, the highest since 2011, though the figure needs to get to 150 percent by April 1 to ease the four-year drought.

Some key reservoirs are beginning to rise, like Lake Oroville in Butte County, the State Water Project’s largest reservoir, is at 60 percent of its historical average for this time of year.

--Meanwhile, an historic polar vortex plunged parts of Asia in record deadly cold.  At least 50 deaths were reported in Taiwan due to hypothermia and cardiac disease, while heavy snow forced the closure of an airport on the South Korean resort island of Jeju, stranding tens of thousands of passengers.

In Taiwan, the capital of Taipei saw Sunday temps of 39F, and you have to understand many homes on the island lack central heating because it just doesn’t get that cold.  As to why so many died of heart attacks, an official said “it’s not the actual temperature but the sudden drop that’s too sudden for people’s circulatory systems.

Hong Kong reported temps of just 37F, the lowest there in nearly 60 years.  Record low temps and rare snowfalls were the order of the day in southern China.  Parts of Japan had record-breaking snowfalls with a number of deaths reported.  “The small subtropical island of Amami observed snow for the first time since 1901, the Japan Meteorological Agency said.”  [South China Morning Post]  Okinawa had snow for the first time in 39 years.

--Regarding the armed protest group responsible for the month-long occupation of the Malheur National Wildlife Refuge in southeastern Oregon, which ended this week with one death in a confrontation with the FBI and Oregon State Police, as well as a number of arrests, all I needed to know was how the locals, from the beginning, wanted these guys out.

Thursday, the leader of the group, Ammon Bundy, said it was time to wrap it up. 

--This is kind of bizarre, or maybe not.  New York City has seen a 15% increase in slashings and stabbings thus far in 2016 vs. last year.  At the same time, homicides were down to 20 from 36 through Tuesday.

Three subway slashings in two days was being taken very seriously, Police Commissioner William Bratton said.

--To end on a lighter note...about 16 days to pitchers and catchers!!!

---

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

God bless America.

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Gold $1118
Oil $33.62

Returns for the week 1/25-1/29

Dow Jones  +2.3%  [16466]
S&P 500  +1.8%  [1940]
S&P MidCap  +2.3%
Russell 2000  +1.4%
Nasdaq  +0.5%  [4613]

Returns for the period 1/1/16-1/29/16

Dow Jones  -5.5%
S&P 500  -5.1%
S&P MidCap  -5.8%
Russell 2000  -8.9%
Nasdaq  -7.9%

Bulls  26.8
Bears 36.1  [Source: Investors Intelligence]

Have a great week.  I appreciate your support.

Brian Trumbore