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02/27/2016

For the week 2/22-2/26

[Posted 11:00 PM ET, Friday]

Note: StocksandNews has substantial costs.  If you haven’t already done so, please click on the gofundme link or send a check to PO Box 990, New Providence, NJ  07974. Special thanks to Mark R. this week.

Edition 881

Washington and Wall Street

Stocks rose a second week as some of the economic news was downright solid, or at least better than expected, and it helped that global markets, save for China, rose as well.  Forget that the geopolitical picture continues to deteriorate, and that the U.S. presidential election campaign is, suffice it to say, unsettling to the establishment of both parties, while across the pond the term “Brexit” is very much in the air, which creates its own issues.  All of this is covered in great detail below.

For now let’s run through the data.  January existing home sales came in at an annualized pace of 5.47 million, the second-strongest since February 2007, up 7.5% year over year.  Since existing home sales equate to 90% of the market, this is good.  But new home sales for the month, at 494,000, were far less than expected, though it was still a decent number.

The median existing home price, by the way, was up 8.2% from January 2015, which is unhealthy but due largely to a lean supply of available homes.

The S&P/Case-Shiller 20-city home price index for December (this one lags) showed prices rising 5.7% year over year (5.4% nationwide), with Portland (11.4%), San Francisco (10.3%) and Denver (10.2%) leading the way.

Separately, January durable goods were up a far better than expected 4.9%, up 1.8% ex-transportation.  For the former it was the best pace since June 2014.

Then on Friday we had solid figures on January personal income, up 0.5%, the best since June, and consumption, also up 0.5% and the best since May.

The Fed’s preferred inflation indicator, personal consumption expenditures, or PCE, rose 0.1% from December and is up 1.3% from a year earlier.  However, ex-food and energy, the PCE is up 1.7%, the strongest pace since July 2014 and near the Fed’s 2.0% target.

Also on Friday we had a revision to fourth-quarter GDP, revised up from 0.7% to 1.0%, though the consumption component (consumer spending) was lowered slightly to 2.0%.  The full-year consumption figure for 2015, however, 3.1%, is the fastest in a decade.

But before we get too carried away, we’re still in a 2% economy and in looking at the current quarter, the Atlanta Fed’s GDPNow indicator has fallen from an estimate of 2.7% two weeks ago to 2.1% as of Friday.  More of the same, sports fans.

Lastly, in terms of fourth-quarter earnings season, as of Wednesday, Thomson Reuters reported that with 454 of 500 S&P 500 companies reporting, the estimated year over year decline in earnings is 3.6%, little changed from the forecast first of the year.  But the estimated decline in revenue is now 4.4%, compared with an initial projection of 3.2%.

Q1 earnings are projected to be down 5.3%, while Q2’s are estimated to be lower by 1.1%.  Caroline Valetkevitch / Thomson Reuters]

And there is this from the Wall Street Journal’s Justin Lahart:

“There’s a big difference between companies’ advertised performance in 2015 and how they actually did.

“How big?  With most calendar-year results now in, FactSet estimates companies in the S&P 500 earned 0.4% more per share in 2015 than the year before.  That marks the weakest growth since 2009.  But this is based on so-called pro forma figures, results provided by companies that exclude certain items such as restructuring charges or stock-based compensation.

“Look to results reported under generally accepted accounting principles (GAAP) and S&P earnings per share fell by 12.7%, according to S&P Dow Jones Indices. That is the sharpest decline since the financial crisis year of 2008.  Plus, the reported earnings were 25% lower than the pro forma figures – the widest difference since 2008 when companies took a record amount of charges.

“The implication: Even after a brutal start to 2016, stocks may still be more expensive than they seem.  Even worse, investors may be paying for earnings and growth that aren’t anywhere near what they think.”

Europe and Asia

Before I get to the critical migration and Brexit issues, some eurozone economic data.

A flash PMI composite reading, which only breaks down Germany and France individually, came in at 52.7 vs. 53.6 in January, according to Markit, a 13-month low.  The manufacturing PMI for the month is 51.0 vs. 52.3, a 12-month low, while the services reading, 53.0, is a 13-month low.

Germany’s manufacturing PMI was just 50.2 vs. 52.3 last month (50 being the dividing line between growth and contraction), while France’s came in at 50.3 vs. 50.0.

A closely watched German survey of business sentiment showed the steepest drop since 2011, while other sentiment readings in the euro area were pretty miserable.

Additionally, a final reading on eurozone inflation for January was 0.3% annualized vs. an initial estimate of 0.4%, with Germany at 0.4%, France 0.3% and Italy 0.4%.

However, when the individual countries look at prices on an ‘EU harmonized’ basis, prices fell in Germany, Italy, Spain and France.  Based on this metric, Spain hasn’t been at zero since May 2014.

One other tidbit; industrial orders in Italy in December were down 2.8% over November, up only 1.5% year over year.

Chris Williamson, Chief Economist, Markit:

“Disappointing PMI survey data for February greatly increase the odds of more aggressive stimulus from the ECB in March.

“Not only did the survey indicate the weakest pace of economic growth for just over a year, but deflationary forces intensified.  Economic growth is likely to slow below 0.3% in the first quarter unless we see a sudden uplift in March, which on the basis of the forward-looking components of the PMI seems unlikely. In fact, growth looks more likely to slow further than accelerate.

“France is flat-lining and German growth is being held back by weak global demand hitting its manufacturers.  Elsewhere across the region, growth slowed to the weakest since the start of last year as companies struggle in the face of waning demand both at home and abroad.

“The need to compete on price has become increasingly widespread amid weak demand, leading to an escalation of deflationary pressures that will worry policymakers.  As such, the data will further fuel expectations that the ECB will unleash further quantitative easing and deeper negative interest rates at its March meeting.”

Brexit: After marathon talks over two days in Brussels, British Prime Minister David Cameron secured a package of reforms that paves the way for a referendum on Britain’s future in the European Union, June 23.  The prime minister gained protections on migration, for the City of London and an exemption for Britain from “ever closer union”.

Critics claimed the reforms were “trivial” and that this was hardly far-reaching change as Cameron wanted the impression to be.

Cameron negotiated a four-year restriction on in-work benefits to individual migrant workers, operable over a seven-year period, but this was not the outright ban promised during the Tories’ (Conservatives’) last campaign. Nonetheless, the ability to restrict benefits allows Cameron to say he has met his pledge to help reduce the number of EU migrants coming to live and work in the UK, though critics say the reforms do ‘not’ allow the UK to reduce migration.*

*Cameron originally wanted a complete ban on migrants sending child benefits abroad but had to compromise after some Eastern European states rejected that and also insisted that existing claimants should continue to receive the full payment. [Think ‘Polish plumbers,’ a popular term across the pond.]

The prime minister also received safeguards for Britain and other non-eurozone countries to protect them against discrimination by eurozone member states in the single market, while Britain “can never be forced into political integration.”

Speaking at a news conference right after the deal was struck, Cameron said: “I do not love Brussels; I love Britain.”  But staying in the bloc gives his country “the best of both worlds,” with the opportunity to keep the benefits of EU membership while “staying out of the parts of Europe that don’t work for us.”  An exit, he said, represents “a leap in the dark.”

European Council president Donald Tusk said it “strengthens Britain’s special status,” while EU Commission president Jean-Claude Juncker described it as “fair.”

The whole package is very complicated, frankly, and, critically, still needs to be approved by the other 27 EU members, though not until after Britain’s referendum.

Six senior members of Cameron’s cabinet announced plans to campaign for an exit (“Brexit”), including close friend Michael Gove, the justice secretary.

But defense secretary Michael Fallon, a euroskeptic, said the return of the Russian threat and the rise of ISIS meant that this was not the time to cut off ties with the rest of Europe and ‘hide under the duvet.’ 

Home Secretary Theresa May also backed the prime minister: “The EU is far from perfect, and no one should be in any doubt that this deal must be part of an ongoing process of change and reform....

“But in my view – for reasons of security, protection against crime and terrorism, trade with Europe, and access to markets around the world – it is in the national interest to remain a member of the European Union.”

Scotland’s First Minister Nicola Sturgeon said it was now “more important than ever” to make the case for continued EU membership.

Nigel Farage, leader of the anti-EU UK Independence Party, tweeted, “Let’s leave the EU, control our borders, run our own country and stop handing ($80 million) every day to Brussels.”

Cameron warned about the length of time it would take to negotiate new trade deals, maybe as much as seven years, which was the case with Canada, and that “financial services could be discriminated against.”

The British pound had its biggest single-session loss Monday since October 2009 after London mayor Boris Johnson threw his weight behind the campaign for Britain to exit the EU.  It was also a seven-year dollar low.  Moody’s warned Brexit could have implications for Britain’s credit rating.

Johnson has long been seen as Cameron’s most dangerous foe in the referendum campaign.  But at this moment it seems less than half of Cameron’s Conservative party members back Brexit.

Cameron is trying to corral the leaders of Britain’s largest corporations for support and the likes of Shell, BAE Systems, BT and Rio Tinto are signing a joint letter arguing Britain is “stronger, safer and better off” in a reformed EU.

The prime minister has said of talk of a second referendum if the UK votes to withdraw from the EU: “A vote to leave is a vote to leave.”  Period.

A summit of EU member-states’ leaders is scheduled for Brussels on June 23-24.

“If the British people vote to leave, the government will clearly respect the outcome of that,” said a Cameron spokeswoman.  “The government will then launch the process to leave.”

Cameron told MPs that when it comes to Boris Johnson wanting to use a Brexit to secure a better EU deal: “I won’t dwell on the irony that some people want to leave in order to remain.”

He added: “Such an approach also ignores more profound points about democracy and diplomacy.”

Then Cameron said of his rival: “I do not know any (couples) who have begun divorce proceedings in order to renew their wedding vows.... I am not standing for re-election.  I have no other agenda other than what’s best for our country.”

Cameron has also warned that trade deals within the EU would take precedent over any involving Britain.

Wolfgang Munchau / Financial Times

“One of the few certain statements one can make about Friday’s agreement between European leaders and David Cameron is that it will have little impact on the June 23 referendum on British membership of the EU. It is far too technical to sway many voters.

“Even those who have made an effort to understand its nuances cannot be sure of exactly how much would unravel in the legislative and judicial processes that will follow.  It is, after all, the first such agreement of its kind....

“From the perspective of the rest of the EU, the deal is awkward.  EU leaders calculated, rightly in my view, that the cost of Brexit would be too high at a time when the future of the EU itself is in doubt.  They were ready to pay ransom money to prevent a calamity. The question is: did they pay too much?

“Their single most important concession is their agreement, for the first time, to a two-tier Europe.  This is not an opt-out, an exemption or a derogation. This is not a Europe of variable speeds or variable geometry – expressions that have been used in the past to denote different degrees of integration.  This is formal exemption from the goal of ever-closer union.  I am not sure whether this has any legal significance but it matters as a political statement.

“How can the EU pursue ever-closer union when one of its most important EU members enjoys a permanent exemption?....

“What about the social benefits, the big political issue in the UK?  The provision that allows the UK government to restrict in-work benefits for non-British EU employees for a period of up to four years will make it marginally harder for some to move across borders.

“This is not going to be the end of free movement of labor.  But one would have thought that if the EU really took the concept of an ever-closer union seriously, policy should encourage cross-border labor movements, not do the opposite.  Other countries will no doubt ask for – and get – similar exemptions.

“There is a risk that following a vote to remain in the EU, the deal may not be implemented in full, prompting conspiracy theories about how the EU deliberately misled the British electorate.

“If the deal is implemented in full, it will end the idea of ever-closer union. And if the British vote to leave, the deal will become null and void. Britain would enter a long process negotiating its exit from the EU. I struggle to see any good outcomes.”

Simon Nixon / Wall Street Journal

“It is just nine months since David Cameron won a remarkable election victory. Yet the UK prime minister will be out of a job in four months if he fails to persuade the British public to back his campaign to keep Britain in the European Union....

“Mr. Cameron insists that he will cling to office even if he loses.  But defeat would split his party, potentially trigger the breakup of the UK and accelerate the disintegration of the European Union.  It is hard to see how any leader could survive such monumental failure....

“Mr. Cameron’s most fateful concession to his euroskeptic colleagues may have been his rash promise to reform the UK’s relationship with the EU before holding the referendum. Whether he ever seriously believed he could secure the wholesale ‘repatriation of powers’ that he claimed in 2013 were urgently needed to make Britain’s EU membership tolerable is unclear.

“But by the time the negotiations began in earnest last year, he had clearly accepted that his chances of unilaterally rewriting the rules of the EU so that the UK could achieve all of the benefits and none of the obligations of membership were precisely zero. He scaled back his demands accordingly. And so the prime minister found himself in the small hours of Friday morning staking 70 years of British foreign policy on securing the right to discriminate against Polish expatriate workers....

“Yet Mr. Cameron may ultimately prevail.  Polls suggest the ‘remain’ camp starts the campaign with either a small or substantial lead, depending on the methodology. If Mr. Cameron can move the debate on from his renegotiation, he has some powerful arguments to deploy based on the risks to economic prosperity and national security and the inability of euroskeptics to agree on an alternative to EU membership.

“The ‘leave’ campaign’s best chance may be to run a populist, antiestablishment campaign, given the strong business backing for EU membership. But many of the most effective antiestablishment campaigners will be lined up in favor of remaining in the EU, including the Labor Party’s new left-wing leadership and the Scottish Nationalist Party.  In contrast, the anti-immigrant nature of euroskeptic populism may repel as many voters as it attracts.

“But even if Mr. Cameron does win, there will be no return to the status quo ante. The referendum will leave scars that may never heal, not just on British politics but on the EU itself.  At the heart of the European project is the notion that relations between sovereign states should be based on the rule of law, that big countries shouldn’t be able to bully small countries, that all EU citizens should be treated equally.

“On Thursday night, as Mr. Cameron threatened to blow up the postwar European order unless the EU changed its rules to help him settle a domestic political dispute, the nature of the European project changed.  Mr. Cameron may not have achieved much in his renegotiation, but what he did achieve may prove to be momentous.”

Editorial / Wall Street Journal

“The problem for Mr. Cameron and other supporters of the ‘Stay’ campaign is that this is no ordinary year. Angela Merkel may not have figured ‘Brexit’ into her calculations when she decided last year to admit an uncapped number of Mideast refugees into Germany. But the Chancellor’s decision and the flood of migrants that followed have reinforced British perceptions of a Continent that has lost control of its borders, lost sight of its European identity, and allowed itself to be overrun by dangerous foreigners.  Add decades of European economic mismanagement and a broad sense that the euro has been  a costly failure, and it makes for a potent political case for the UK to leave.

“That’s probably why Boris Johnson, London’s colorful mayor and a contender to succeed Mr. Cameron, declared Sunday that he would campaign for the ‘Leave’ side.  He will join several members of Mr. Cameron’s own cabinet, including the formidable Justice Secretary Michael Gove.  Joining Mr. Cameron is Chancellor of the Exchequer George Osborne.  Mr. Osborne has long been the Prime Minister’s heir apparent, but that succession will be in doubt if Britain votes to leave.

“Mr. Cameron warned that ‘leaving Europe would threaten our economic and our national security,’ adding that the Leave campaign was offering ‘risk at a time of uncertainty – a leap in the dark.’  That puts matters too starkly.  However Britain votes in June, the UK will still be part of the only security alliance that still counts – namely, NATO – and it will likely be able to renegotiate its economic ties to the Continent.

“But advocates of a British exit should not lightly dismiss the advantages of EU membership.  Much of London’s financial class wants Britain to stay, not least because membership gives them unfettered access to Europe’s markets and residency in Britain’s more free-market economy, while maintaining the City’s position as a global financial capital.  There’s also the risk that leaving might entice the Scottish to secede from the UK in favor of the EU.

“The American interest is whether Britain contributes more to global freedom, and to its own economic strength, from inside or outside the EU. We’ve thought the answer was inside, but that isn’t as clear as it used to be.  That’s the question we’ll be watching as the debate unfolds.”

Editorial / The Economist

“The battle is joined, at last.  David Cameron has called a referendum on Britain’s membership of the European Union for June 23rd, promising to campaign hard to stay in. What began as a gambit to hold together his divided Tory party is turning into an alarmingly close contest.  Betting markets put the odds that Britons opt to leave at two-to-one; some polls suggest the voters are evenly split; several cabinet ministers are campaigning for Brexit. There is a real chance that in four months’ time Britain could be casting off from Europe’s shores.

“That would be grave news – and not just for Britain.  A vote to leave would damage the economy, certainly in the short term and probably in the long run.  (As financial markets woke up to the prospect, the pound this week fell to its lowest level against the dollar since 2009.)  It would imperil Britain’s security, when threats from terrorists and foreign powers are at their most severe in years. And far from reclaiming sovereignty, Britons would be forgoing clout, by giving up membership of a powerful club whose actions they can influence better from within than without. Those outside Britain marveling at this proposed act of self-harm should worry for themselves, too. Brexit would deal a heavy blow to Europe, a continent already on the ropes.  It would uncouple the world’s fifth-largest economy from its biggest market, and unmoor the fifth-largest defense spender from its allies.  Poorer, less secure and disunited, the new EU would be weaker; the West, reliant on the balancing forces of America and Europe, would be enfeebled, too....

“Worse, the EU would have a strong incentive to impose a harsh settlement to discourage other countries from leaving. The Brexit camp’s claim that Europe needs Britain more than the other way round is fanciful: the EU takes almost half Britain’s exports, whereas Britain takes less than 10% of the EU’s; and the British trade deficit is mostly with the Germans and Spanish, not with the other 25 countries that would have to agree on a new trade deal....

“One exception is immigration, the area over which many euroskeptics most long for control.  Half of Britain’s migrants come from the EU, and there is little the government can do to stop them.  If Britain left the union, it could.  But doing so would have a double cost.  Gaining the right to stop immigration from the EU would almost certainly mean losing full access to the single market. And reducing the numbers of immigrants would hurt Britain’s businesses and public services, which rely on French bankers, Bulgarian builders and Italian doctors.

“The longer-term costs would go beyond economics. Brexit might well break up the United Kingdom itself.  Scotland, more Europhile than England, is again agitating for a divorce; if Britain decides to leave Europe, then the Scots may at last have a point.  Brexit could also dangerously unsettle Northern Ireland, where the peace process over two decades has depended on the fact that both Ireland and Britain are members of the EU.  The Irish government is among the most vocal foreign supporters of the campaign for Britain to stay in.

“Ireland is not the only country that would suffer. European leaders know Brexit would weaken a club already in deep trouble over such issues as migration and the euro crisis.  And Europe would be poorer without Britain’s voice: more dominated by Germany; and, surely, less liberal, more protectionist and more inward-looking.  Europe’s links to America would become more tenuous.  Above all, the loss of its biggest military power and most significant foreign-policy actor would seriously weaken the EU in the world.”

Gideon Rachman / Financial Times

“The mayor of London’s decision is certainly a significant moment in the referendum campaign. A Vote Leave group that was in danger of being led by cranks, nobodies and octogenarians will now be headed by one of the country’s most popular politicians.  [Ed. Boris Johnson]

“June could also be a particularly propitious time to be making the case against the EU.  By then, the Greek debt crisis may well have flared up again.  Europe’s migrant crisis is also likely to have intensified, as improved weather increases the numbers of would-be refugees crossing the Mediterranean. That will increase infighting among the members of the EU, making the organization look ever more shambolic.

“The vision of hundreds of thousands more desperate would-be migrants, not too far from the English Channel, will also play directly into the most emotive argument that the Leave campaign will deploy: the fear of mass migration from Europe and the demand that the free movement of people from the EU should be halted.

“Seeing the potentially terminal difficulties that the EU is facing may have led Mr. Johnson to try to ‘put himself on the right side of history,’ by placing a bet against Europe.

“But there is more than one way of being on the right side of history. The first is simply to anticipate the direction of events.  The second, more important, way is to align yourself with the right causes and values – those that the history books will ultimately vindicate....

“Mr. Johnson’s decision to campaign for Brexit might put him on the right side of history, but only in the first and narrowest sense of foreseeing the direction of events.  The EU is certainly in a sorry mess at the moment. There is also a strong strand of anti-establishment, anti-immigration populism loose in both the U.S. and Europe, which could easily translate into a British vote to leave the EU.  So betting against the EU could allow the London mayor to pocket some political winnings.

“But Mr. Johnson is on the wrong side of history in the more important sense, because he is aligning himself with some of the most malign forces in Europe and Britain.  Across Europe, it is the far-right and the far-left that are calling for the destruction of the EU – and they will cheer loudest if Britain votes to leave.  On the borders of the EU, Vladimir Putin sees Brussels as a bitter enemy – and hugely resents the sanctions that the EU imposed on Russia after its annexation of Crimea.  The Russian president will be delighted and emboldened at any sign of the disintegration of the EU....

“A modern Churchill, which is what Boris clearly aspires to be, would immediately understand that Britain’s decision about whether to stay in the EU has to be seen as part of a wider global picture. And that big picture is very worrying – with Russia rediscovering its taste for war, the Middle East disintegrating, violent jihadism on the rise, China flexing its muscles in the Pacific and the U.S. flirting with the lunacy of ‘Trumpism.’

“Given all that, it is depressingly small-minded of Mr. Johnson to justify campaigning for Brexit partly on the grounds that Britain might save a bit of money on its contributions to the EU budget. The fact is that Britain will pay a very heavy price – directly and indirectly – if the EU disintegrates. As David Cameron, prime minister, correctly pointed out, this is ultimately a question of national security.”

Finally...on the migration front....

It’s been another week of chaos, largely at Greece’s expense.  Macedonian police shut the refugee border crossing with their neighbor following clashes with rejected Afghan asylum seekers, this after Austria imposed a cap on asylum applications.

Tuesday, police in Greece were forced to remove hundreds of protesters who had halted rail traffic on the line between Greece and the Balkans near the border with Macedonia.

Macedonian authorities were being accused of defying the terms of a deal by EU leaders the prior week to keep open the Balkan migrant route ahead of a March 6 emergency summit on the crisis.

In other cases, Pakistani and Moroccan migrants are being turned away as some countries limit apps to Syria, Iraq and Afghanistan.  But the move by Macedonia was the first direct crackdown against Afghans.

Also on Tuesday, Athens withdrew its ambassador to Austria, with a statement from Greece’s foreign ministry accusing the Austrian government of unilateral action outside of EU rules.

Germany is another that is upset with Austria, saying Austrian Chancellor Werner Faymann is violating previously negotiated principles.  Austria, while capping daily asylum applications at 80, is allowing as many as 3,200 refugees per day to pass through Austria to Germany.

But back to Greece, tens of thousands are now stuck there, unable to proceed further.  And the spring/summer crush hasn’t begun yet.  It is beyond a disaster.  It can yet lead to the breakup of the European Union.  It’s also not in the least a stretch to talk of potential military conflict between states, which makes it all the more urgent for the EU to support Turkey to the hilt, for starters, to try to keep the refugees there. 

Separately, Europol estimates the number of EU citizens who have slipped back after training in the Middle East with ISIS as between 3,000 and 5,000.

“Europe is currently facing the highest terror threat in more than 10 years,” Rob Wainwright, the British head of Europol, said.  “We can expect ISIL or other religious terror groups to stage an attack somewhere in Europe, with the aim of achieving mass casualties among the civilian population.”

It’s comments like this fueling actions such as Austria’s, and before that, Hungary’s, and it’s why many Germans are increasingly turning on Chancellor Angela Merkel.

Editorial / The Economist

“For months experts have warned that if northern Europe restricts refugee flows without an overall plan for handling migration, Greece faces disaster.  The United Nations predicts 1m arrivals this year.  Alexis Tsipras, the prime minister, worries that Greece will become ‘a black box’ for migrants. As razor wire goes up across the Balkans, his fears may be about to come true.

“The crisis could hardly have come at a worse moment for Mr. Tsipras.  His left-wing Syriza government faces a revolt by lawyers, doctors and farmers against reforms demanded by Greece’s international creditors....

“While the farmers’ rebellion may have been crushed, lawyers are on strike over a new pension scheme, which they say would force them to pay more than 30% of their income in employee contributions.... (Greece’s) creditors from the EU and International Monetary Fund say the pension system is on the verge of bankruptcy. They want an across-the-board benefits cut of at least 10% before releasing the next tranche of funding from the $95bn bailout Greece concluded last year.

“That leaves the Greek government on the edge of insolvency as the migrant crisis is about to explode.”

---

Just a few notes on Asia...in China, the Shanghai Composite fell 6.4%, Thursday, though was down ‘just’ 3.2% for the week.  There was talk of policymakers trying to restrain housing-price gains in some of the nation’s largest cities amid signs of tighter liquidity. 

Separately, Minister of Commerce Gao Hucheng said consumption was 66.4% of GDP in 2015 and looked for a similar figure this year.

In Japan, headline inflation for January was zero, annualized (after 0.2% in December).  Core inflation, ex-food and energy, rose 0.7% year over year; still far short of the official target of 2%.

But Japan has a huge long-term issue, which was highlighted in the latest census released by the government at week’s end. 

The official population as of Oct. 1 is 127.1 million, which is down by 947,000 or 0.7% from the previous census in 2010; the first ever decline since the census started in 1920.  Even during World War II the population rose.

A UN report last year projected that Japan’s population would fall to about 83 million by 2100.  The average number of children a woman will bear here in a lifetime – just 1.42 as of 2014 – is far below the replacement rate of 2.1.

It doesn’t help that Japan keeps a tight lid on immigration, which business leaders are calling to be loosened, but Prime Minister Shinzo Abe is showing no signs of changing existing policy.

The census figures are depressing and don’t help when it comes to consumer spending, which furthers Japan’s decades-long stagnation.  From a government standpoint, look for further stimulus packages.

One other.  While Tokyo’s population grew 2.7% from 2010 to 2015, the population in 39 of Japan’s 47 prefectures (regions) declined.

Street Bytes

--Stocks rose a second week with the Dow Jones advancing 1.5% to 16639, the S&P 1.6% and Nasdaq 1.9%.

--U.S. Treasury Yields

6-mo. 0.45%  2-yr. 0.79%  10-yr. 1.76%  30-yr. 2.64%

Treasuries were basically unchanged. 

The yield on the German 10-year Bund fell from 0.20% to 0.15%, while the yield on the French 10-year declined from 0.56% to 0.50%.

--The average price of gas at the pump nationwide this week was $1.71, the lowest for this time of year since 2004. 

[Jimbo notes the price for milk is twice that of gas, with cows increasingly becoming part of the 1% (or 2%, depending on the product).  We both agree...good for them.  They work hard and are udderly deserving.]

The government, by the way, announced Americans drove a record 3.1 trillion miles last year, besting the previous mark of 3.0 trillion set in 2007, before the Great Recession, so this is a pretty darn good economic barometer I think you’d agree.

How far is 3.1 trillion miles?  According to the Associated Press, it “is roughly the same distance as 337 round trips from Earth to Pluto.”  The problem with this example is there are no rest stops...at least that I know of.  “Mom!  I have to go!” 

On a more serious note, more miles means more deaths and the National Safety Council estimates the number of traffic deaths in the U.S. climbed 8% compared with 2014; the largest year-to-year percentage increase in half a century.

--Oil prices pared their losses on Wednesday after the U.S. Energy Department, in its weekly inventory report, said they didn’t rise as much as feared, though the level, up 3.5m barrels to 507.61m last week is a new record.

Previously, the American Petroleum Institute said inventories rose 7.1m barrels during the period.

Prices had fallen back on Tuesday after Saudi Arabia’s oil minister, Ali Al-Naimi, told an audience in Houston Tuesday that “We are not banking on cuts because” there is “less trust” that “countries are going to deliver even if they promise.”  The market will eventually rebalance because high-cost producers will have to “lower costs, borrow or liquidate” to cope with the slump in oil prices.  Al-Naimi added that he doesn’t know when the current price rout will end.

[Ignore the late-week rally back to $33.00.]

Saudi Arabia did say it would commit to freezing production at January levels, per an accord with Russia, Qatar and Venezuela, but of course January saw record amounts of crude and inventories.  Iran balked, with its oil minister saying the call for a freeze puts “unrealistic demands” on his country, which is boosting output by 1 million barrels a day following the lifting of international sanctions.  [Bloomberg]

--Chesapeake Energy, the second-largest gas producer in the U.S., announced it was slashing capital spending by 69 percent this year in an effort to conserve cash.  For 2015, Chesapeake reported a net loss of $14.9bn, including an $18.2bn pre-tax writedown of Chesapeake’s assets to reflect lower prices in both oil and natural gas.

The company has downplayed stories it was exploring bankruptcy.

--Bloomberg reported that “Energy XXI Ltd. and SandRidge Energy Inc., oil and gas drillers with a combined $7.6 billion of debt, didn’t pay interest on their bonds last week.”  Just another example of the severe, still-developing problems in the oil patch, though to be fair, both of the above could yet reach agreements with their creditors to buy enough time for them to turn their businesses around.

--Halliburton announced it was cutting another 5,000 workers, or 8 percent of its remaining global workforce.  Just last month the second-largest oilfield services provider said it had slashed 4,000 jobs the last three months of 2015.

Halliburton has now laid off 29,000 workers since staffing peaked in late 2014.

--Falling oil prices are hitting JPMorgan Chase harder than it said they were just weeks earlier.  On Tuesday, CEO Jamie Dimon said the bank would have to increase its energy loan reserves by 60 percent to $1.3 billion (another $500m).  Should oil stay around its current levels, the reserves will only grow.

But low interest rates are far more damaging to JPM’s bottom line.  The investment bank presented a scenario whereby if the federal-funds rate rose to around 3.25% at the end of 2018 as opposed to today’s 0.375%, JPMorgan would earn an additional $10 billion of net interest income, but it sure doesn’t look like 3.25% is in the cards anytime soon.

--Matt Apuzzo and Katie Benner / New York Times:

Apple engineers have already begun developing new security measures that would make it impossible for the government to break into a locked iPhone using methods similar to those now at the center of a court fight in California, according to people close to the company and security experts.

“If Apple succeeds in upgrading its security – and experts say it almost surely will – the company would create a significant technical challenge for law enforcement agencies, even if the Obama administration wins its fight over access to data stored on an iPhone used by one of the killers in last year’s San Bernardino, Calif., rampage. The FBI would then have to find another way to defeat Apple security, setting up a new cycle of court fights and, yet again, more technical fixes by Apple.

“The only way out of this back-and-forth, experts say, is for Congress to get involved. Federal wiretapping laws require traditional phone carriers to make their data accessible to law enforcement agencies.  But tech companies like Apple and Google are not covered, and they have strongly resisted legislation that would place similar requirements on them.”

For his part, Apple CEO Tim Cook told ABC News his company first learned of the controversial request to unlock the phone when it was reported in the news media.

“I don’t think that’s the way the railroad should be run,” he said.

But a source close to the investigation told the BBC Mr. Cook’s claim was “simply not true” and that Apple’s legal team was “the first to know.”

Cook said the FBI was asking the company to make “the software equivalent of cancer.”

“I think safety of the public is incredibly important,” Cook told ABC.  “The protection of people’s data is incredibly important. And so the trade-off here is we know that doing this could expose people to incredible vulnerabilities.”

Monday, in a memo to employees, Cook said:

“At stake is the data security of hundreds of millions of law-abiding people and setting a dangerous precedent that threatens everyone’s civil liberties.”

The FBI has argued that Apple is overstating the security risk to its devices and that it has the technical know-how to break into the terrorist’s device in a way that did not create a “backdoor” into every Apple device.

As for the attitudes of the American public, a Pew Research Center survey suggested a majority of the people sided with the FBI by a 51-38 margin.  A YouGov survey showed that 63% of Americans say Apple should obey the court order that they cooperate with the FBI, while only 23% said Apple should not.

But a Reuters/Ipsos poll said 55% of respondents were worried that the FBI would seek to use the backdoor to “spy on iPhone users.”

It depends how the question is asked, it turns out.

Separately, Microsoft co-founder Bill Gates didn’t like the way his position was portrayed in an interview with the Financial Times over the Apple/FBI issue.  He said he was “disappointed” in reports claiming he sides with the FBI.  But Gates told the FT:

“This is a specific case where the government is asking for access to information. They are not asking for some general thing, they are asking for a particular case.”

Gates later told Bloomberg, the courts will ultimately make the decision.  “In the meantime, that gives us this opportunity to get the discussion, and these issues will be decided in Congress.”

On Thursday, Apple filed key court papers to fight a judge’s order requiring it to assist the FBI in the San Bernardino investigation, saying the judge in the case had violated the company’s constitutional rights.

“This is not a case about one isolated iPhone,” the company’s motion read.  “Rather, this case is about the Department of Justice and the FBI seeking through the courts a dangerous power that Congress and the American people have withheld: the ability to force companies like Apple to undermine the basic security and privacy interests of hundreds of millions of individuals around the globe.”

Personally, I haven’t taken a stand on this as yet.  I’m torn.  I couldn’t give a damn about Apple, but I have zero confidence in our government.  Frankly, the only people I trust these days are the grunts in the military and our Special Forces.  Among the last people I trust, however, are their generals.  And that’s a memo....

--Foxconn Technology Group appeared ready to sign a takeover agreement with Sharp Corp., but suddenly on Thursday, Foxconn said it was delaying the deal due to last-minute details that Sharp supplied.  Sources told the Wall Street Journal it had to do with contingent liabilities from Sharp that Foxconn hadn’t previously been made aware of.  [This would include costs associated with the outcome of lawsuits, supply contracts or other developments.]

Literally, hours earlier, Sharp announced it had agreed to sell itself to Foxconn for about $6-$6.2bn.

Foxconn wants to hook up with Sharp because of Sharp’s expertise on advanced screens for iPhones, with Apple currently needing to rely on rival Samsung for this technology, while Foxconn, already Apple’s biggest contractor, could move in on the screen side.  For obvious reasons, Apple doesn’t want to be totally reliant on Samsung.

Should the deal still go through, it would be the largest acquisition of a Japanese tech firm by a foreign company.  Sharp, over a century old, was once a highly profitable manufacturer of premium TVs, as well as a screen supplier to Apple.  But the company has struggled mightily amid price competition from Asian rivals and it has undergone two bank bailouts since 2012.

--Home Depot Inc. reported stronger-than-expected earnings growth in its latest quarter, with sales increasing a whopping 10%.  The company also lifted its quarterly dividend 17%.

For the fourth quarter, same-store sales at HD stores rose 7.1%, with comp sales up 5.6% for the year; again, very solid.  The company cited an aging housing stock as being helpful, with two-thirds of American homes being at least 30 years old.

For the current year, HD’s guidance was in line with expectations.

--HD rival Lowe’s also reported strong results.  Same-store sales for the quarter ending Jan. 29 jumped 5.5 percent, while the company forecast 4 percent growth for 2016.  A mild winter helped in the quarter as people were able to spend on their gardens in many parts of the country.

--Shares in Macy’s rose even as fourth quarter sales fell 5.3 percent as the warm winter did a number on retailers, other than home-improvement types, though Macy’s reported it saw an improving trend in January with more normal weather and the company now looks to “stabilize” sales this year; a decline of 2 percent vs. a 3 percent decline for all of 2015.

That said it was still the sharpest sales drop for the department store operator in more than five years.

--Target’s turnaround continues.  Same-store sales for the three months ending January rose 1.9 percent, which beat expectations.  Brian Cornell, who took over as CEO in August 2014, has had a plan and it’s been paying off.  I mean this chain was going nowhere (ditto Kohl’s). Target has been focusing on “signature” categories like baby products, fashion and furniture.

Net earnings came in at $1.4bn, compared with a loss of $2.6bn in the prior year period.

Cornell said: “With traffic growing for five consecutive quarters and our signature categories of Style, Baby, Kids, and Wellness leading our growth, Target’s results demonstrate that we are focused on the right strategic priorities.”

Target saw a big improvement online as well.

--Speaking of Kohl’s, it reported same-store sales up just 0.4% from 3.7% a year before, but at least this was the fifth-consecutive quarter of positive comp store sales growth.  CEO Kevin Mansell also said, “I am particularly encouraged by the 4% increase we saw between Thanksgiving and Christmas.”  But this was offset by softness in early November and in January due to slack demand for cold-weather goods.

For the year, Kohl’s expects sales to be between down 0.5% and up 0.5%.  The company announced it would close 18 underperforming stores in 2016, while testing a smaller-format in some urban areas (which strikes me as a dumb idea).

--Best Buy, the largest U.S. consumer electronics retailer, warned that the absence of a new smartphone this year will depress revenues.  Overall revenues for the holiday quarter dropped to $13.6bn from $14.2bn a year ago, though the company reported a better than expected earnings figure.

Online sales did improve, accounting for 15.6% of domestic revenues, up from 14% a year ago.

--I enjoyed this opinion piece from the Financial Times’ Lex column:

“If there is one area in which Salesforce is the technology industry’s undisputed leader, it is superlatives.  Quarterly results on Wednesday were described within six sentences as ‘spectacular,’ ‘unprecedented,’ ‘tremendous’ and ‘outstanding.’

“You might expect a side dish of profits with that main course of braggadocio, especially since another boast was ‘top and bottom line excellence.’  You would be disappointed.  Salesforce had a net loss of $25m on revenues of $1.81bn in the fourth quarter.  Yet investors were content to embrace the hype: shares in the enterprise software company rose 9 percent in after-hours trading.

“Relief is understandable.  In the first five weeks of the year, Salesforce’s stock fell more than 30 percent amid a sudden crisis of confidence in the prospects of ‘software as a service’ – or SaaS – companies.  The sell-off was premature.

“As founder and chief braggart Marc Benioff is at pains to stress, not many companies of Salesforce’s size are growing at more than 20 percent a year.  Investors will still pay up for growth – Salesforce’s enterprise value is back up at 6 times forward sales – they are just demanding more evidence that it is not going to fall off a cliff.”

--Campbell Soup Co. reported higher profits despite a 1.5% decline in revenue as the company did a good job of controlling expenses.  Earnings exceeded expectations and sales were in line.  U.S. soup sales decreased 4%.  I’m having Campbell’s clam chowder tonight, in case you were wondering what I was eating.

--HP Inc., in its first quarter as an independent company, reported weak conditions in its core printing and personal computer divisions, with printing revenue declining 17% and revenue from PCs down 13%.  But the company said the strong U.S. dollar was a big factor in its results and that total revenue on a constant currency basis was off only 5%.

For the second fiscal quarter ending in April, HP estimated earnings basically in line with current analyst estimates, but the company didn’t project revenue.

--United Technologies CEO Gregory Hayes denied stories that had his company merging with Honeywell, saying regulators would clearly block the transaction for anti-trust reasons so it simply was not worth pursuing.

For its part, Honeywell insisted regulatory obstacles need not prevent it from merging and that it remains committed to pursuing the potential $90bn transaction.

A merged HON-UTC would have annual sales of more than $100bn a year and would be a powerful supplier of components to aerospace companies, particularly builders of commercial passenger and business jets.  UTC says opposition from Boeing and Airbus would doom the deal (think fewer suppliers to choose from, ergo higher costs).

Honeywell counters that it has “engaged in discussions” with UTC over the past year and that there are tremendous synergies.  The company said: “In fact, a combination would benefit our customers and enhance our ability to offer a more comprehensive and compelling suite of technologies to serve their needs.”

My first reaction is that UTC is right.  No way a merger would fly, even in a future Republican administration (should that come to pass, the editor hastily added).

CNBC’s David Faber said the other day he thought one reason why the two companies haven’t agreed to give it a go is that Hayes insists he be the one in charge of a combined entity, while I’m not sure where Honeywell’s David Cote (who lives in my town) stands on the leadership issue.

*Late Friday the story hit that Cote sold $36m in shares in Honeywell three days before it approached UTC with its purchase offer.  This doesn’t look good unless it was part of a so-called 10b5-1 plan, established by the SEC to shield executives and directors from the appearance of insider-trading.  [Bloomberg]

--According to CPB Netherlands Bureau for Economic Policy Analysis, trade volumes around the world rose by just 0.6 percent in December compared to a year earlier, down from November’s 2.1 percent increase, the slowest rate since May 2015.

--Uber said it does not plan to change its driver screening or safety processes following the mass shooting by an on-duty driver in Kalamazoo, Michigan, that killed six.  The suspect had a “good” driver rating and a clean background check, Uber said.  Police confirmed he had no criminal record.

But, man, was that spooky, having the guy giving rides while the shootings were occurring.  And for the life of me, I can’t believe what an idiot that one guy was who asked “Are you the shooter?”  Why would you ever do that?!

I have to admit.  As I wrote this I was thinking about the hundreds of cabs I have taken, all around the world, and I have never, ever, had a scary experience with a driver.

Except once (though as it turned out, not really)...my first trip to Istanbul. 

I had tried to learn some words and the local beer before I got there and at the airport I hop in a cab for the rather lengthy drive to my hotel.  I had studied the directions beforehand, concerned I’d get a bad cabby and have to pull a Jack Bauer, but a minute after I sat down, for the purpose of small talk I asked, “Efes?  Good beer?”  Through the mirror he looked at me quizzically and nodded, rather sternly.

Next thing I know we are getting off the highway.  Uh oh, I more than mused.  What the heck is he doing?  Two minutes later we are in a kind of crappy neighborhood, he pulls over, and goes into a store.  A minute after he came back and handed me an Efes tall boy!!!

That was my introduction to Turkey.  He also turned down my attempt to pay for it, but needless to say he got a nice tip.

--I was reading a piece in the Sydney Morning Herald on the real estate bubble in Australia, which I knew was the case, especially in Sydney, but I didn’t know how bad it was until the Herald’s John McDuling cited an Australian Financial Review report from a British economist, Jonathan Tepper, who concluded after his extensive research that the country is in the midst of “one of the biggest housing bubbles in history.”

It’s all about easy financing, but this is what stands out.  “Over the past few years,” writes Tepper, “over 40 percent of all new mortgages originated have been interest-only mortgages.

“This is truly Ponzi financing, where home buyers only make money if their houses keep rising in value.”

Of course this is exactly what happened in the U.S. (and Ireland, for another).

--Moody’s dropped Brazil’s debt rating to junk status, Ba2 from Baa3; further bad news for the country.  GDP down 4%, inflation 10.7%, consumption way down, major political crisis with the Olympics coming and Zika.

--Speaking of Zika, there are growing links between the virus and Guillain-Barre syndrome.  One Colombia city of 60,000, Turbo, has seen five severe cases in the past five weeks, with three patients dying.  Zika is widespread here.  But researchers still don’t know the link between the two.

Colombia says more than 30,000 citizens have been diagnosed with Zika thus far, with 97 cases linked to Guillain-Barre.

The U.S. Centers for Disease Control and Prevention has confirmed two cases of Guillain-Barre related to Zika in the U.S., presumably among the more than 80 travelers infected by the virus after returning to the country.  Another G-B case was reported in Puerto Rico. [Washington Post]

Finally, the CDC is investigating 14 new reports of potential sexual transmission of the Zika virus, including several cases involving pregnant women.  Friday, the CDC reported nine American women who traveled to Zika-affected countries while pregnant have tested positive, with one giving birth to an infant with severe microcephaly.

At least one of two women who terminated their pregnancy did so after brain abnormalities were detected, officials added today.  Two other pregnancies ended spontaneously in the first trimester.  The CDC does not know if Zika caused the miscarriages.

--India’s Finance Ministry said on Friday that growth would be between 7% and 7.75% next fiscal year, which compares with the 7.6% forecast in the current year through March.

So this would ensure India remains the world’s fastest growing large economy after it overtook China last year.

--Facebook’s Instagram app opened its advertising to all marketers just five months ago and Wednesday the company revealed it already had more than 200,000 advertisers, quite an accomplishment that compares with ‘just’ 130,000 on Twitter, which has been available to advertisers for far longer.

--The annual Mercer Quality of Living ranking has the following top five:

1. Vienna
2. Zurich
3. Auckland
4. Munich
5. Vancouver

No American city was in the top 25.  San Francisco was highest at 28.  Paris was 37, London 39, New York City 44.

The index focuses on quality of life for expatriates.  “Media availability and censorship, limitations on personal freedom” are among the factors Mercer looks at, as well as personal safety, with Paris now 71st, post-attacks.  [Washington Post]

--For the week ending Feb. 21, CBS aired all of the top 11 broadcast shows in total viewers, marking the second consecutive week that the network claimed the top ten and the first time any network had done this since Nielsen enhanced its ratings back in 2005.

Needless to say, first the Super Bowl, then the Grammys, helped propel it.  [Adweek]

--Nike co-founder Phil Knight is known for his significant financial contributions to the University of Oregon athletic department, but now he has stepped up to donate an astounding $400 million to Stanford, where he received his MBA in 1962.  And it has nothing to do with athletics.

Instead, Knight is helping endow a graduate-level scholarship program for high-achieving undergraduate students. 

[Larger than the Rhodes Scholarship program, supposedly.  I fell just 2.0 short of being eligible for a Rhodes scholarship myself, in case you were wondering.]

Aside from giving an estimated $300m to UO’s athletic program, Knight has also donated more than $200 million for cancer research at the Oregon Health & Science University, as well as money to renovate the school’s library and big donations to the law and business schools.

Forbes estimates Knight’s wealth at $25.7 billion.

Foreign Affairs

Syria/Russia/ISIS/Turkey: A ceasefire is to start Saturday, as Damascus accepted the deal, but the opposition says it’s stacked against them and that they expect the joint Russian-Syrian advance to continue.  Thursday, Russian warplanes bombed Syrian rebel-held areas in northwestern Syria while government forces pounded a suburb of the capital prior to the supposed halt in fighting.

The Syrian Observatory for Human Rights, the British-based group that has supplied most of the news coverage of the entire conflict, said government helicopters dropped at least 30 “barrel bombs” on the Damascus suburb of Daraya. The government says Al Nusra is there, firing mortars into residential areas of Damascus.

And that’s the thing; the ceasefire does not involve ISIS and the al-Qaeda-linked group, the Nusra Front, with the Bashar al-Assad regime saying the agreement falls apart if foreign states continue to supply the rebels or militants.

But the Nusra Front often allies itself with the more moderate opposition, at least in as much as you can identify who is who, which is virtually impossible these days.

Ahra al-Sham is a rebel alliance covered by the ceasefire, but it has said the Syrian government will break the agreement in Daraya.

One of the other issues is Aleppo, where rebels, part of the ceasefire, are surrounded following the government’s recent Russian-backed offensive.  Will the fighting stop here?  Hardly.  Assad said he is allowed to go after terrorists and terrorists are defined as anyone who opposes the regime.

For its part, Turkey wants the main Syrian Kurdish militia, the People’s Protection Units (YPG), to be excluded from the planned truce, a la ISIS and Al-Nusra.  But Washington views the YPG as its most effective fighting force against ISIS in Syria.

U.S. Republican Senator Bob Corker, chairman of the Foreign Relations Committee, said that if the truce fails, “there is no ‘plan B’.”  The Russians were “now dominating,” Corker said this week.  “It’s totally in Russia’s hands now.”

Separately, there was a report that “Dozens of Russian generals at a military base near the eastern Syrian city of Latakia were killed Sunday afternoon in a deadly car bomb attack committed by two opposition factions, Ahra al-Sham and Bayan movement, Syrian opposition groups reported on Wednesday.”  [Jerusalem Post]

According to the story, when the two factions observed a gathering of senior Russian generals at the base, they quickly acted.

But I have seen no other reports on what would be a rather significant development, let alone the fact al-Sham is part of the ceasefire agreement.

Also, ISIS claimed responsibility for suicide bombings last Sunday in Homs and a Damascus suburb that killed a staggering 184 people, at last count.  [The toll keeps rising.]

As for the dangerous situation Turkey finds itself in, French President Francois Hollande warned last weekend that “there is a risk of war between Turkey and Russia.”

Turkey feels trapped, completely isolated, and it has alienated everyone, including its allies.

Just look at its southern border with Syria, where Russia is bombing, the Kurds are advancing and the rebels the Turkish government has supported against Assad are facing defeat.

Lastly, Somini Sengupta / New York Times:

“First, the government soldiers made sure no food could get into rebel-held towns.  Then, government planes bombed what health centers remained in those towns, making sure that those who got sick from hunger had no medical care to save them.

“That is the harrowing picture painted by the latest report of the United Nations Commission of Inquiry on the war in Syria.  The report, released on Monday, chronicles a series of attacks on health care centers by government forces and the Islamic State, and it says the ‘deliberate destruction of health care infrastructure’ was responsible for driving up deaths and permanent disabilities.

“To follow the commission’s work in Syria – it has written 11 reports since August 2011 – is to witness how blatantly the laws of war have been broken, with no prospects of accountability....

“Airstrikes destroyed the vast majority of the 33 hospitals that functioned in the northern city of Aleppo, the report found.  Those have been carried out mainly by Syrian government forces, but lately also by Russian military planes....”

Editorial / Washington Post

“President Obama and some of his senior aides are sounding skeptical about the partial cessation of hostilities due to begin in Syria on Saturday, and for good reason.  Russian President Vladimir Putin has agreed to multiple cease-fires in Syria and Ukraine over the past two years but has observed none of them.  The same is true of Syrian dictator Bashar al-Assad, who hasn’t bothered to hide his intention to continue slaughtering his own people.  If some slackening in the fighting actually takes place, and humanitarian convoys get through, it will be because Mr. Putin found it was in his strategic interest.  That is the real import of the ceasefire: It puts Russia in control of what happens next in Syria.”

Charles Krauthammer / Washington Post

“State of the world, Year Eight of Barack Obama:

“1. In the South China Sea, on a speck of land of disputed sovereignty far from its borders, China has just installed antiaircraft batteries and stationed fighter jets.  This after China landed planes on an artificial island it created on another disputed island chain (the Spratlys, claimed by the Philippines, Malaysia, Taiwan and Vietnam).  These facilities now function as forward bases for Beijing to challenge seven decades of American naval dominance of the Pacific Rim.

“ ‘China is clearly militarizing the South China Sea,’ the commander of the U.S. Pacific Command told Congress on Tuesday.  Its goal?  ‘Hegemony in East Asia.’

“2. Syria. Russian intervention has turned the tide of war. Having rescued the Bashar al-Assad regime from collapse, relentless Russian bombing is destroying the rebel stronghold of Aleppo, Syria’s largest city, creating a massive new wave of refugees and demonstrating to the entire Middle East what a Great Power can achieve when it acts seriously.

“The U.S. response?  Repeated pathetic attempts by Secretary of State John Kerry to propitiate Russia (and its ally, Iran) in one collapsed peace conference after another....

“3. Ukraine.  Having swallowed Crimea so thoroughly that no one even talks about it anymore, Russia continues to trample with impunity on the Minsk ceasefire agreements.  Vladimir Putin is now again stirring the pot, intensifying the fighting, advancing his remorseless campaign to fracture and subordinate the Ukrainian state.  Meanwhile, Obama still refuses to send the Ukrainians even defensive weapons.

“4. Iran. Last Thursday, Iran received its first shipment of S-300 antiaircraft batteries from Russia, a major advance in developing immunity to any attack on its nuclear facilities. And it is negotiating an $8 billion arms deal with Russia that includes sophisticated combat aircraft.  Like its ballistic missile tests, this conventional weapons shopping spree is a blatant violation of UN Security Council prohibitions.  It was also a predictable – and predicted – consequence of the Iran nuclear deal that granted Iran $100 billion and normalized its relations with the world.

“The U.S. response?  Words....

“(Today), three major have-not powers are seeking to overturn the post-Cold War status quo: Russia in Eastern Europe, China in East Asia, Iran in the Middle East. All are on the march.

“To say nothing of the Islamic State, now extending its reach from Afghanistan to West Africa. The international order built over decades by the United States is crumbling.

“In the face of which, what does Obama do? Go to Cuba.”

Cuba, where the repression has gotten worse since Obama’s “historic” normalization.

“(Obama) knows what really matters: climate change, Gitmo and Cuba.

“With time running out, he wants these to be his legacy.  Indeed, they will be.”

Joseph I. Lieberman / Washington Post

“For more than 50 years, national security leaders have gathered at the Munich Security Conference, a conclave established during the depths of the Cold War as a meeting place for the Western allies standing against the communist threat.  I have been privileged to attend almost half of these meetings...but none has been as troubling as the one held this month.

“That is because the world has never seemed as dangerous and leaderless as it does now.  Only the extremists and bullies act boldly, and therefore they have seized the initiative.  It is a moment in history that evokes the haunting words of W.B. Yeats: ‘The best lack all conviction, while the worst are full of passionate intensity.’

“The simple fact is that there is more instability in the world today than at any time since the end of World War II. The threats come from emboldened expansionist powers such as Iran, Russia and China, and also terrorist aggressors such as the Islamic State and al-Qaeda.  In short, the enemies of freedom are on the march.

“At the same time, the United States – which assumed global leadership after World War II to protect our domestic security, prosperity and freedom – has chosen this moment to become more passive in the world.

“The absence of American leadership has certainly not caused all the instability, but it has encouraged and exacerbated it....

“In too many places in recent years, the United States has treated its adversaries as essential partners to be courted, while dismissing or denigrating its historic allies and partners as inconveniences or obstacles to peace.  But as frustrated as they are with the United States, our friends also recognize that they are incapable by themselves of managing the crises that confront them without the United States.

“In Munich this month, the United States ratified its diminished role by reaching an agreement on Syria that elevates the standing of Russia, pressures the Syrian opposition and stands little chance of ending the campaign of indiscriminate violence being waged on behalf of the Assad regime against the long-suffering Syrian people.  Almost no one in Munich thought it would work.

“At the end of the conference, I shared these fears about the state of the world with an Arab diplomat.  ‘I agree,’ he replied, ‘and when we return to Munich next February, it will all be much worse.’”

Iran: The people are voting today (no details as yet) for a new parliament and an Assembly of Experts (which selects the next supreme leader) and aside from a referendum on the nuclear deal it’s also a vote on oil.  Moderates would be expected to increase output, keeping global oil prices low. Hardliners could take the opposite view.

Wednesday, Ayatollah Ali Khamenei proclaimed that he was confident Iranians would vote to maintain the country’s anti-Western stance, which has been in place since the 1979 revolution.  [Andy Critchlow / Reuters]

Jonathan Ruhe and Blake Fleisher / Wall Street Journal

“Iran’s brazen tests of ballistic missiles in recent months highlight a glaring failure of its nuclear agreement with Western powers, agreed to only months ago.  But the focus on Tehran’s ballistic missiles overlooks an important point: Iran already possesses cruise missiles capable of delivering a nuclear warhead.  Neither the nuclear agreement, nor the UN Security Council resolution endorsing it, mention cruise missiles despite the threat they pose.

“Tehran has at least a dozen nuclear-capable Russian-made Kh-55 cruise missiles, procured illegally from Ukraine around 2001.  They have a range of 1,500 miles, allowing Tehran to place a warhead anywhere from Cairo to New Delhi....

“To make matters worse, the nuclear deal will allow Tehran to expand its arsenal of cruise missiles....

“Russia and China, which sold Iran much of its existing military equipment, have taken note.  Their demonstrated eagerness to rebuild ties with Tehran’s defense industry suggests that Iran will have little trouble purchasing turbofan engines and guidance systems to improve its cruise missiles’ range and accuracy.... Chinese-made anti-ship missiles are elemental to Iran’s strategy for contesting U.S. predominance in the Persian Gulf and Gulf of Oman.”

Libya: ISIS briefly took over the security headquarters in the western city of Sabratha, “killing and beheading 12 security officers before being driven out early Wednesday morning, two city security officials said.”  Sabratha “serves as a hub for migrants heading to Europe.”  [Associated Press / Daily Star]

Want more?  “(ISIS) used the headless bodies of the officers they killed to block the roads leading to the security headquarters.”

[This is the very same place the U.S. recently bombed, taking out 30-40 ISIS fighters.  Impact?  None.]

But focus on this chaotic city being a “hub for migrants.”  [See Paris.]

Lebanon: By suspending at least $3 billion in military aid to the Lebanese Army, Saudi Arabia is sending the message that Lebanon has fallen under the control of Iranian-backed Hizbullah, with the Saudis warning their citizens against traveling to the country.

Tony Badran, a Lebanon expert, told the Jerusalem Post: “Saudi Arabia is drawing a line in the sand in the region-wide conflict with Iran,” adding this is not like the old Saudi Arabia that would give aid even if their interests were not being upheld.

I know a little something about this place and this is a huge blow to Saad Hariri, whose family has long benefited from Saudi support, including that bestowed upon his late father, Rafik, who was assassinated in 2005. 

This is the most underreported important story of the month.  And having written extensively of Beirut in my second trip there in 2010 and of the real estate situation, as I noted the last time, it was the Saudis buying up all the luxury apartments overlooking the Mediterranean, let alone the ones frequenting the major shopping centers.  This kills the economy for good.

So this week an Iranian Foreign Ministry spokesman said Iran is prepared to fil the void. The spokesman said Iran views the Lebanese army as a “symbol of national unity” and a front “against terrorism and its spread.”  [Tehran Times]

Lebanon is doomed.

Jordan: King Abdullah paid a visit to the White House on Wednesday and President Obama said the U.S. would continue to give financial aid to help Jordan cope with the more than 1 million refugees from Syria and Iraq that it is hosting.  According to the Jordanian government, the cost of housing Syrian refugees alone could reach $4.2 billion in 2016.

The United States has given more aid to Jordan than any other country, $4.5bn, according to Abdullah.

Afghanistan: Not for nothing, but the Taliban now controls most of Helmand Province after they routed Afghan forces in a strategic district, giving the insurgents control of 10 of 14 districts in this critical region. 

Among other issues, Helmand “is the world’s most important opium-growing region.  Its southern edge flanks the porous border with Pakistan, where the Taliban leadership is based.” [Mujib Mashal / New York Times]

China: Last weekend President Xi Jinping visited the headquarters of the three main Communist Party and state news organizations.  As described by the New York Times’ Edward Wong: “Photographs showed fawning journalists crowding around Mr. Xi, who sat at an anchor’s desk at the state television network.  One media official wrote the president an adoring poem.

“The blanket coverage reflected the brazen and far-reaching media policy announced by Mr. Xi on his choreographed tour: The Chinese news media exists to serve as a propaganda tool for the Communist Party, and it must pledge its fealty to Mr. Xi.”

Needless to say, Xi wants to curb the presence of foreign media companies.

As Edward Wong adds: “Mr. Xi’s appearances were another major effort in his campaign to build a personality cult that equates him with the well-being of the party and the nation. The act of biao tai, or pledging loyalty, by newsroom leaders was one that Mr. Xi has demanded of military leaders and other important figures in the last year....

“(Recent announced new regulations would have) foreign companies – even ones that form joint ventures with Chinese partners – (not being) allowed to publish and distribute online content.”

This puts joint ventures with the likes of Microsoft, Apple and Amazon (think e-books) in jeopardy.

I have written a ton the past few years on how hopelessly naïve some American companies, especially Apple, are in going after the Chinese market. At the first signs of a real crisis, say over the South China Sea, between Washington and Beijing, bye-bye Apple’s market share...and now Xi has cemented the propaganda machine that will hasten its demise.

[I also feel increasingly for Taiwan...it doesn’t stand a chance.]

North Korea: The UN Security Council approved a resolution imposing significant new sanctions on Pyongyang, including mandatory cargo inspections and a cutoff of jet-fuel deliveries to the country, following the North’s recent nuclear and missile tests.  The resolution is expected to be adopted this weekend.

But the Security Council has enacted four previous resolutions targeting North Korea’s nuclear and ballistic missile program since 2006 with little effect.

It does seem to me the new sanctions are an upgrade, including banning the transfer of even small arms, previously allowed under the older resolutions.

For once, China is cooperating.

Nigeria: The New York Times reported Friday that the Pentagon is preparing to send dozens of Special Operations advisers to the front lines of Nigeria’s battle against Boko Haram.  The Americans would supposedly only serve in noncombat advisory roles.

There are currently an estimated 100 Special Ops commandos advising fighters battling ISIS in both Syria and Iraq, with dozens more in Libya and Somalia.

Another 250 American service members have deployed to Cameroon, where U.S. surveillance drones fly over northeastern Nigeria.

Ireland: The nation held elections on Friday and Prime Minister Enda Kenny, who has presided over a coalition government since 2011 as Ireland has roared back from the depths of the global financial crisis, appears to have suffered a big defeat, according to exit polls.  [Were he to survive he’d need a new coalition, but I just haven’t seen the official results.]

Random Musings

--Primary / Caucus Results

Republicans / South Carolina

Donald Trump 32.5 percent
Marco Rubio 22.5
Ted Cruz 22.3
Jeb Bush 7.8
John Kasich 7.6
Ben Carson 7.2

Republicans / Nevada

Trump 46
Rubio 24
Cruz 21
Carson 5
Kasich 4

Democrats / Nevada

Hillary Clinton 52.7
Bernie Sanders 47.2

How did the polls do?  Some of them, like the Wall Street Journal/NBC News poll of South Carolina were awful.  That one had Trump by just five points.  Fox nailed Trump’s percentage at 32%, though had Rubio third at just 15%.

CNN/ORC did a great job in Nevada, with Trump beating Rubio 45-19, Cruz at 17.

On the Democrat side, CNN/ORC had Clinton 48-47, also very good.

--Following Nevada, The Hill commented: “Yes, there is a long way to go.  But if a more conventional candidate than Trump had won three of the first four contests by such emphatic margins, there would be broad consensus that they were on their way to becoming the party’s standard-bearer.”

Regarding Rubio: “There is no polling-based evidence that Rubio will win anywhere on Super Tuesday.... That would leave (him) without a single win in 15 contests.”

Chris Cillizza / Washington Post: [Following S.C.] Winner – Donald Trump. “All he does is win – and win by a lot....If he sweeps – or comes close to sweeping – the March 1 states, it might just all be over.

“Anger: Six in 10 caucusgoers said they were ‘angry’ at the federal government.  That makes them angrier than the Republican electorates in the previous three states....

“Anger is, of course, Trump’s calling card; he won 49 percent of the vote among those who said they were ‘angry’ with the federal government and 43 percent with those who said they were ‘dissatisfied’ with the government.”

Any momentum John Kasich had after his second-place finish in New Hampshire is history.

Ben Carson should have gotten out after South Carolina.

--The Democrats have their South Carolina primary this Saturday.  For the record, Clinton beat Sanders 57% to 41% among women in Nevada, while beating Sanders 3-to-1 among African American voters, though it seems Sanders edged her among Latinos, which the Clinton camp vehemently disputes.

--Susan Page / USA TODAY

“The confident predictions about Donald Trump’s candidacy over the past eight months have been disproven again and again – starting with the judgment that he wouldn’t run, that his outrageous statements would undermine his appeal, that voters would show up for the entertainment value of his rallies but not cast a ballot for him when it mattered.

“Wrong, wrong and wrong....

“Consider this: According to surveys of voters in Nevada on Tuesday, Trump carried evangelical Christians over Cruz, the core of the Texas senator’s base.  He won Hispanics over his two Latino rivals.  He won among every ideological group, every education group, every racial group and both genders.  He won among both Republicans and independents.

“The theme that threads through his supporters is concern and worse about the state of the nation.  Almost every caucusgoer – 94% - expressed a negative view about the government.  Six in 10 described themselves as ‘angry.’  An equal number said they wanted the next president to come from ‘outside politics.’

“Enter Donald Trump.”

Editorial / Washington Post

“The unthinkable is starting to look like the inevitable: Absent an extraordinary effort from people who understand the menace he represents, Donald Trump is likely to be the presidential nominee of the Republicans Party.  At this stage, even an extraordinary effort might fall short. But history will not look kindly on GOP leaders who fail to do everything in their power to prevent a bullying demagogue from becoming their standard-bearer.

“A few days ago we criticized Republican National Committee Chairman Reince Priebus for his assertion that a Trump victory in November would silence the doubters.  ‘Winning is the antidote to a lot of things,’ Mr. Priebus had said.  We argued that winning would not erase the bigotry and ugliness of Mr. Trump’s campaign, nor remove the dangers of a Trump presidency. On Wednesday, the GOP chairman, perhaps wanting to show that he can match Mr. Trump in eloquence, responded: ‘That is the stupidest editorial that I have ever seen.’

“So it falls to other leaders to decide if their party will stand for anything other than winning.  A political party, after all, isn’t meant to be merely a collection of consultants, lobbyists and functionaries angling for jobs.  It is supposed to have principles: in the Republican case, at least as we have always understood it, to include a commitment to efficient government, free markets and open debate.

“Now it is faced with a front-runner who, in the interval between the two Priebus comments cited above, said of a protester, ‘I’d like to punch him in the face.’  This is a front-runner with no credible agenda and no suitable experience....

“There was an assumption that Mr. Trump would fade, and that confronting him would only make him stronger.

“The calculations have proved wrong. If Mr. Trump is to be stopped, now is the time for leaders of conscience to say they will not and cannot support him and to do what they can to stop him.  We understand that Mr. Trump would seek to use this to his benefit, and that he might succeed. But what is the choice?  Is the Republican Party truly not going to resist its own debasement?”

Jonathan Bernstein / Bloomberg

“The question is whether anyone will try to stop (Trump). It takes two things. The first one Republicans finally did, when party actors broke clearly for Marco Rubio this past week.  It seems to be helping a little, since he’s moved up to second place in South Carolina and Nevada.  But that’s not enough.

“The second part is to take Trump down.  A myth has evolved that negative ads don’t work against Trump, but in the two states where they were tried at least to some extent – Iowa and South Carolina – they did seem to have some results.  We’re not talking about someone with 70 percent of the vote and an insurmountable lead.  Trump should be easy to take on, and given how much money should be available, not every hit needs to be effective for an overall campaign to succeed....

“(If Republicans don’t fight hard the next few week), they risk losing their party entirely, and for all we know they may never get it back. Republicans in the Senate are fighting hard against allowing Barack Obama to fill a Supreme Court vacancy; Republicans on the campaign trail are allowing a loose cannon who could easily drag down every Republican on the ballot this November.”

--And then on Friday, Donald Trump received a big endorsement, that of New Jersey Gov. and one-time rival, Chris Christie, a member of the establishment.  Exactly what Trump needed.

“I’ve gotten to know all the people on that stage, and there is no one who is better prepared to provide America with the strong leadership that it needs, both at home and around the world, than Donald Trump,” Christie said during a news conference with Trump in Fort Worth.

The governor is obviously a potential running mate or cabinet member.

--As for Super Tuesday, the states for the Republicans are Alabama, Alaska, Arkansas, Georgia, Massachusetts, Minnesota, Oklahoma, Tennessee, Texas, Vermont and Virginia.

It’s really all about Texas and whether Cruz can hold on in his home state, while Rubio and Kasich are acting like they can hang on until their respective home states, Florida and Ohio, but they aren’t until March 15.

In a Quinnipiac University Poll this week of Ohio prospective voters, Trump leads Kasich 31-26, with Cruz at 21% and Rubio 13%.  Of course these numbers could change drastically after Super Tuesday but it doesn’t look good for Kasich.

Ditto Marco Rubio in Florida, who in polls there trails Trump badly, including a Quinnipiac University survey that has Trump ahead 44-28.

--A Bloomberg Politics poll shows Trump is backed by 37 percent of likely Republican presidential primary voters in seven Super Tuesday Bible Belt states, compared to 20% for both Rubio and Cruz.

--A Washington Post-Univision survey of Hispanic voters has Trump losing the segment to Clinton by 73 to 16 percent, the worst among GOP candidates.  The gap is significantly wider than the 44-point margin by which Mitt Romney lost Hispanics four years ago.

But Clinton leads Rubio by ‘just’ 30 points, Cruz by 38 and Kasich by 43. Trump trails Sanders (in a hypothetical) among Hispanics by 56 percent, while Sanders leads Rubio by 24 points.

--As for Thursday’s Republican debate.

John Podhoretz / New York Post

“If debates can change the course of an election, we’ll learn it soon, because Marco Rubio utterly trounced Donald Trump last night in the most commanding performance we’ve seen in the 10 GOP scuffles thus far.

“I use the word ‘trounced’ advisedly. After an hour in which Rubio turned Trump’s own game on him with quick jabs and mocking counterjabs, and Ted Cruz joined in a tag-team effort with his Florida rival, Trump was actually complaining he was getting too many questions and too much time to speak.

“A frustrated Trump tried to flummox Rubio by calling him a ‘choke artist’ and referencing the senator’s bad New Hampshire confrontation with Chris Christie, but the opposite was the case.  Rubio came loaded for bear.  He knows that his back is against the wall, that Trump leads in almost all of the 12 states that will vote on Tuesday and that he has to alter the trajectory of the race in his favor.

“ ‘If he builds the wall the way he built Trump Tower, he’d be using illegal immigrants to do it,’ Rubio said.

“ ‘Make them in America,’ he said to Trump about the ties and suits that bear his brand name, which are made in China.

“ ‘You have a fake university,’ he said about Trump University.

“ ‘If he hadn’t inherited $200 million, you know where Donald Trump would be right now?’ Rubio said.  ‘Selling watches in Manhattan.’....

“This debate demonstrated just how destructive it was to the Republican Party that there were so many candidates crowding the stages at the earlier debates.  With only five last night, the necessary battle for the nomination between the front-runner who has changed the rules of American politics and the two insurgent Republican politicians who still have a chance to catch him was finally joined.”

Jennifer Rubin / Washington Post

“On arguably the most important night of his political career Sen. Marco Rubio turned in an outstanding performance, thus raising hopes the GOP might be able to save itself from Donald Trump....

“Cruz had a good showing as well, but was sidelined for long stretches of the debate, allowing Rubio to assume the role of Trump’s prime antagonist. When Cruz did weigh in, he seemed to merely echo Rubio’s argument....

“Trump had his own self-inflicted calamities.  He declared we should not ‘defend all these countries.’  He insisted no one is more pro-Israel than he – and to prove it cited awards many celebrities receive.  He proclaimed that the budget could be balanced by eliminating ‘waste, fraud and abuse.’  Whether it will make any difference remains to be seen, but for the first time one could see how he can be mocked and challenged.

“Ohio Gov. John Kasich, apparently angling for the vice presidency, refused to attack Trump.  He spewed many words, but said little that was memorable. Dr. Ben Carson brought down the energy level each time he spoke, reminding us the RNC should be limiting the debates to real contenders.”

Chris Cillizza / Washington Post

“Winner – Marco Rubio: This was not only Rubio’s best debate performance.  It was the best debate performance by any candidate in any debate so far in the 2016 election.  Rubio, grasping the fact that if nothing changes in this race he – and everyone else – will lose to Donald Trump, hit Trump at every turn.  He savaged Trump on using illegal immigrants to help build Trump Tower.  He went after Trump for inheriting money.  He hit Trump for his position on Israel and Palestine.  And, most importantly, he rattled Trump during a back and forth over Obamacare....

“What Rubio’s stellar performance means is that the race between now and Tuesday – and March 15 and beyond – will be cast as a two-man showdown between Trump and Rubio. That’s the only chance Rubio has of winning.  What I don’t know is whether the punches Rubio landed will do any lasting damage to Trump.  Nothing else has – yet.....

“Loser – Ted Cruz: Cruz watched – and I do mean watched – as Rubio turned the race into a two-man contest between he and Trump.  Cruz was strangely absent from the main back-and-forths of the night....

“Loser – Donald Trump: This wasn’t Trump’s worst debate.  In fact, it might not even be in the bottom half of his performances.  He generally counter-punched admirably – particularly against Cruz.  But, Rubio got the better of Trump on several occasions; the Florida senator found ways to embarrass and mock Trump, which is something no one in any previous debate has been able to do.”

--Jeb Bush dropped out after his miserable showing in South Carolina, as well as Iowa and New Hampshire.  His campaign spent a staggering $130 million and, personally, for the life of me I was trying to figure out why Bush was wasting money in the New York City media market where I reside when New York, New Jersey and Connecticut weren’t close to holding primaries.  [Mid-April and beyond.]

At least he gave a classy and dignified speech shortly after the results on Saturday became known, but as Chris Cillizza of the Washington Post put it, in the final days leading up to the primary, Trump’s full frontal assault “on the legacy of George W. Bush is particularly painful for the Bush family and a remarkable testament to the fact that the GOP of the Bushes is no more.”

--Senate Republican leaders, including from the Senate Judiciary Committee, rejected holding any election-year Supreme Court confirmation hearings, saying on Tuesday they would not even meet with President Obama’s nominee to replace Justice Antonin Scalia.

But a day later, there was talk Senate Majority Leader Mitch McConnell and Judiciary Committee chairman Sen. Charles Grassley would meet with the president as some Republican senators, such as Susan Collins of Maine and Mark S. Kirk of Illinois, have already said they would be willing to vote on a candidate.

The Hill notes that there are five endangered Senate Republican incumbents running for reelection in states won in 2008 and 2012 by Obama.

Republicans are also trying to hold onto the seat being vacated by Marco Rubio, and while Republicans in states such as North Carolina, Missouri and Indiana don’t seem endangered now, Donald Trump’s rise coupled with anti-Washington fervor is causing unease in these too.

Separately, Democrats attempted to contain the damage from a June 1992 Senate floor speech by then-Senator Joseph Biden, who urged President George H.W. Bush not to make a nomination to the Supreme Court until after that year’s presidential election.  Biden said his words were taken out of context.

--President Obama submitted a plan to Congress on Tuesday to close Guantanamo Bay, which House Speaker Paul Ryan said was dead on arrival.  For starters, there were zero details on the sites where the detainees would be sent.

Editorial / Wall Street Journal

“The day after he was first sworn in, President Obama issued an executive order declaring that he would shut down the terrorist detention camp at Guantanamo Bay in Cuba ‘no later than one year from the date of this order.’ That was January 2009 in one of his first acts as President.  Congress has since used its power of the purse to frustrate the President’s effort. So on Tuesday he said he’s going to try again in one of his last acts as President.

“It’s not going to happen – at least not if Mr. Obama follows the law.  Polls show the American people oppose closing Gitmo by about two to one, politicians in both parties oppose closing it, and the past seven years have taught that the camp plays an important role in keeping America safe.

“One reason is because Americans have figured out that the alternative is bringing these terrorists to the mainland. It’s easy to call for Gitmo’s closure in the abstract.  It’s harder to explain to voters why Khalid Sheikh Mohammed and other killers may soon move into a prison near you.”

As the Journal notes, back in 2009, after Obama first proposed closing the prison, the vote in the Democratic Senate that May was 90 to 6 against him.

The Journal concludes:

“The great political irony is that Mr. Obama is the main cause of his own Guantanamo failure.  If he hadn’t let Islamic State rise in Syria and Iraq, if he hadn’t let Libya become another terror incubator, and if he hadn’t let al-Qaeda make a comeback via multiple local franchises, the American people might feel more relaxed about closing the terror prison.  As the tide of war keeps rising, Americans know they need it.”

--Virginia Heffernan / Wall Street Journal

“Around 70% of teenagers in the U.S. own an iPhone, Nancy Jo Sales reports in her enlightening account of ‘social media and the secret lives of teenagers.’  ‘It’s like Apple has a monopoly on adolescence,’ Billie, a high-schooler in Boca Raton, Fla., tells Ms. Sales. And what those phones are for seems to be, chiefly, the high-speed form of stagey fraternizing known as social media.  ‘Social media is destroying our lives,’ a 16-year-old girl in an L.A. shopping mall tells Ms. Sales. But then the girl’s friend shoots back: Without social media, ‘we would have no life.’....

“(The takeaway from Ms. Sales’ research): Teen girls think feverishly about sex, popularity, their looks, their moods and social dynamics....

“(It) turns out one of the main uses teens make of their phones is to watch, wield and circulate naked pictures of themselves....

“(But) while a nude photo of a guy is practically worthless, a nude photo of a girl can be used as currency, traded with friends for marijuana or liquor – that’s ‘lq’ in textspeak.

“ ‘If you don’t send them nudes, they say you’re a prude,’ says Cassy, another Floridian teen, of boys.  Sophia, in Montclair, N.J., argues that these exchanges take finesse: ‘If you get mad they’ll think you have no chill,’ she says.  ‘But if you just laugh, then they’ll be aggravated, but they won’t do anything bad to you.’  ‘Anything bad’ is usually circulating rumors or nudes (real or fake), after which the standard dynamics of bullying, shaming and scapegoating take over.....

“Which brings us to the girls’ own selfies – not necessarily nudes but simply carefully posed, coquettish and sultry pictures – posted to Instagram or Snapchat and designed to attract coveted ‘likes.’... ‘Every girl wishes she could get three hundred likes on her pictures,’ says Teresa, a 17-year-old in Livingston, N.J.  ‘Because that means you’re the girl everybody wants’ to have sex with.’”

Oh brother.

I had a great childhood.  I rushed home after school every day, changed into my ‘play clothes,’ gathered up a friend or two (or ten) and played the sport of the season.

But no doubt today I’d be just like all the rest.  And that would suck.

--Way back in 1999, I went to the Treblinka extermination camp in Poland, where an estimated 800,000 perished, and I saw this week that the last survivor of a revolt there, Samuel Willenberg, died at his home in Tel Aviv. He was 93.

In August 1943, Willenberg and 199 others escaped but only 67 survived.  And as if that wasn’t enough, he played a role in the Polish resistance against the Germans, and then after the war served in the Polish Army, before moving to Israel in 1950, where from 1993 onward, he and his wife, a survivor of the Warsaw Ghetto, led youth groups to Poland where he told his story.

--From The Economist:

“Ample evidence shows that exercising regularly reduces the risk of cancer.  Similarly, those who have survived the disease are less likely to see it return if they engage in lots of physical activity after treatment.  All this suggests that such activity triggers a reaction in the body which somehow thwarts cancer calls, but the details of the process have remained murky. Now, a team led by Pernille Hojman at Copenhagen University Hospital, in Denmark, has reported in Cell Metablism that the key to the mystery is adrenalin.”

--Finally, I didn’t comment on Harper Lee’s death last time because I wanted to ‘wait 24 hours,’ not being happy with how her final year played out and whether the author of “To Kill a Mockingbird,” long in an assisted-living facility, really wanted her second book, “Go Set a Watchman,” released.  I’ve seen those representing her publisher (and estate) saying she was totally aware of what was going on and that she wanted it out, but I frankly don’t trust them; even those who are emphatic that Ms. Lee was like, ‘Of course I wanted that book published.’

All these years she knew she had written it but suddenly it was found?  I just don’t believe Lee wanted it released, especially since it was such a different portrayal of Atticus Finch. She knew the importance in American culture of the Finch from her classic.

Then again, what the heck do I know?  I haven’t had time to read a book for years and I sure as hell will never read “Go Set a Watchman.” 

Instead, I agree with James McBride, winner of the National Book Award in 2013 for the novel “Good Lord Bird” and an upcoming nonfiction book, “Kill ‘em and Leave” about James Brown, when he told the Associated Press’ Hillel Italie:

“I prefer to remember ‘To Kill a Mockingbird’ and Atticus Finch and all those characters as Harper Lee wanted us to remember them.  I believe she wasn’t strong enough at the end of her life to make any informed decisions about her work.”

---

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

God bless America.

---

Gold closed at $1223
Oil $32.78...best week since Aug., but whoopty damn do...

Returns for the market 2/22-2/26

Dow Jones  +1.5%  [16639]
S&P 500  +1.6%  [1948]
S&P MidCap  +2.7%
Russell 2000  +2.7%
Nasdaq  +1.9%  [4590]

Returns for the period 1/1/16-2/26/16

Dow Jones  -4.5%
S&P 500  -4.7%
S&P MidCap  -4.2%
Russell 2000  -8.7%
Nasdaq  -8.3%

Bulls 34.7 [up from 26.5...and 24.7 two weeks ago]
Bears 35.7 [Source: Investors Intelligence]

Have a great week.  I appreciate your support.

Brian Trumbore

 



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Week in Review

02/27/2016

For the week 2/22-2/26

[Posted 11:00 PM ET, Friday]

Note: StocksandNews has substantial costs.  If you haven’t already done so, please click on the gofundme link or send a check to PO Box 990, New Providence, NJ  07974. Special thanks to Mark R. this week.

Edition 881

Washington and Wall Street

Stocks rose a second week as some of the economic news was downright solid, or at least better than expected, and it helped that global markets, save for China, rose as well.  Forget that the geopolitical picture continues to deteriorate, and that the U.S. presidential election campaign is, suffice it to say, unsettling to the establishment of both parties, while across the pond the term “Brexit” is very much in the air, which creates its own issues.  All of this is covered in great detail below.

For now let’s run through the data.  January existing home sales came in at an annualized pace of 5.47 million, the second-strongest since February 2007, up 7.5% year over year.  Since existing home sales equate to 90% of the market, this is good.  But new home sales for the month, at 494,000, were far less than expected, though it was still a decent number.

The median existing home price, by the way, was up 8.2% from January 2015, which is unhealthy but due largely to a lean supply of available homes.

The S&P/Case-Shiller 20-city home price index for December (this one lags) showed prices rising 5.7% year over year (5.4% nationwide), with Portland (11.4%), San Francisco (10.3%) and Denver (10.2%) leading the way.

Separately, January durable goods were up a far better than expected 4.9%, up 1.8% ex-transportation.  For the former it was the best pace since June 2014.

Then on Friday we had solid figures on January personal income, up 0.5%, the best since June, and consumption, also up 0.5% and the best since May.

The Fed’s preferred inflation indicator, personal consumption expenditures, or PCE, rose 0.1% from December and is up 1.3% from a year earlier.  However, ex-food and energy, the PCE is up 1.7%, the strongest pace since July 2014 and near the Fed’s 2.0% target.

Also on Friday we had a revision to fourth-quarter GDP, revised up from 0.7% to 1.0%, though the consumption component (consumer spending) was lowered slightly to 2.0%.  The full-year consumption figure for 2015, however, 3.1%, is the fastest in a decade.

But before we get too carried away, we’re still in a 2% economy and in looking at the current quarter, the Atlanta Fed’s GDPNow indicator has fallen from an estimate of 2.7% two weeks ago to 2.1% as of Friday.  More of the same, sports fans.

Lastly, in terms of fourth-quarter earnings season, as of Wednesday, Thomson Reuters reported that with 454 of 500 S&P 500 companies reporting, the estimated year over year decline in earnings is 3.6%, little changed from the forecast first of the year.  But the estimated decline in revenue is now 4.4%, compared with an initial projection of 3.2%.

Q1 earnings are projected to be down 5.3%, while Q2’s are estimated to be lower by 1.1%.  Caroline Valetkevitch / Thomson Reuters]

And there is this from the Wall Street Journal’s Justin Lahart:

“There’s a big difference between companies’ advertised performance in 2015 and how they actually did.

“How big?  With most calendar-year results now in, FactSet estimates companies in the S&P 500 earned 0.4% more per share in 2015 than the year before.  That marks the weakest growth since 2009.  But this is based on so-called pro forma figures, results provided by companies that exclude certain items such as restructuring charges or stock-based compensation.

“Look to results reported under generally accepted accounting principles (GAAP) and S&P earnings per share fell by 12.7%, according to S&P Dow Jones Indices. That is the sharpest decline since the financial crisis year of 2008.  Plus, the reported earnings were 25% lower than the pro forma figures – the widest difference since 2008 when companies took a record amount of charges.

“The implication: Even after a brutal start to 2016, stocks may still be more expensive than they seem.  Even worse, investors may be paying for earnings and growth that aren’t anywhere near what they think.”

Europe and Asia

Before I get to the critical migration and Brexit issues, some eurozone economic data.

A flash PMI composite reading, which only breaks down Germany and France individually, came in at 52.7 vs. 53.6 in January, according to Markit, a 13-month low.  The manufacturing PMI for the month is 51.0 vs. 52.3, a 12-month low, while the services reading, 53.0, is a 13-month low.

Germany’s manufacturing PMI was just 50.2 vs. 52.3 last month (50 being the dividing line between growth and contraction), while France’s came in at 50.3 vs. 50.0.

A closely watched German survey of business sentiment showed the steepest drop since 2011, while other sentiment readings in the euro area were pretty miserable.

Additionally, a final reading on eurozone inflation for January was 0.3% annualized vs. an initial estimate of 0.4%, with Germany at 0.4%, France 0.3% and Italy 0.4%.

However, when the individual countries look at prices on an ‘EU harmonized’ basis, prices fell in Germany, Italy, Spain and France.  Based on this metric, Spain hasn’t been at zero since May 2014.

One other tidbit; industrial orders in Italy in December were down 2.8% over November, up only 1.5% year over year.

Chris Williamson, Chief Economist, Markit:

“Disappointing PMI survey data for February greatly increase the odds of more aggressive stimulus from the ECB in March.

“Not only did the survey indicate the weakest pace of economic growth for just over a year, but deflationary forces intensified.  Economic growth is likely to slow below 0.3% in the first quarter unless we see a sudden uplift in March, which on the basis of the forward-looking components of the PMI seems unlikely. In fact, growth looks more likely to slow further than accelerate.

“France is flat-lining and German growth is being held back by weak global demand hitting its manufacturers.  Elsewhere across the region, growth slowed to the weakest since the start of last year as companies struggle in the face of waning demand both at home and abroad.

“The need to compete on price has become increasingly widespread amid weak demand, leading to an escalation of deflationary pressures that will worry policymakers.  As such, the data will further fuel expectations that the ECB will unleash further quantitative easing and deeper negative interest rates at its March meeting.”

Brexit: After marathon talks over two days in Brussels, British Prime Minister David Cameron secured a package of reforms that paves the way for a referendum on Britain’s future in the European Union, June 23.  The prime minister gained protections on migration, for the City of London and an exemption for Britain from “ever closer union”.

Critics claimed the reforms were “trivial” and that this was hardly far-reaching change as Cameron wanted the impression to be.

Cameron negotiated a four-year restriction on in-work benefits to individual migrant workers, operable over a seven-year period, but this was not the outright ban promised during the Tories’ (Conservatives’) last campaign. Nonetheless, the ability to restrict benefits allows Cameron to say he has met his pledge to help reduce the number of EU migrants coming to live and work in the UK, though critics say the reforms do ‘not’ allow the UK to reduce migration.*

*Cameron originally wanted a complete ban on migrants sending child benefits abroad but had to compromise after some Eastern European states rejected that and also insisted that existing claimants should continue to receive the full payment. [Think ‘Polish plumbers,’ a popular term across the pond.]

The prime minister also received safeguards for Britain and other non-eurozone countries to protect them against discrimination by eurozone member states in the single market, while Britain “can never be forced into political integration.”

Speaking at a news conference right after the deal was struck, Cameron said: “I do not love Brussels; I love Britain.”  But staying in the bloc gives his country “the best of both worlds,” with the opportunity to keep the benefits of EU membership while “staying out of the parts of Europe that don’t work for us.”  An exit, he said, represents “a leap in the dark.”

European Council president Donald Tusk said it “strengthens Britain’s special status,” while EU Commission president Jean-Claude Juncker described it as “fair.”

The whole package is very complicated, frankly, and, critically, still needs to be approved by the other 27 EU members, though not until after Britain’s referendum.

Six senior members of Cameron’s cabinet announced plans to campaign for an exit (“Brexit”), including close friend Michael Gove, the justice secretary.

But defense secretary Michael Fallon, a euroskeptic, said the return of the Russian threat and the rise of ISIS meant that this was not the time to cut off ties with the rest of Europe and ‘hide under the duvet.’ 

Home Secretary Theresa May also backed the prime minister: “The EU is far from perfect, and no one should be in any doubt that this deal must be part of an ongoing process of change and reform....

“But in my view – for reasons of security, protection against crime and terrorism, trade with Europe, and access to markets around the world – it is in the national interest to remain a member of the European Union.”

Scotland’s First Minister Nicola Sturgeon said it was now “more important than ever” to make the case for continued EU membership.

Nigel Farage, leader of the anti-EU UK Independence Party, tweeted, “Let’s leave the EU, control our borders, run our own country and stop handing ($80 million) every day to Brussels.”

Cameron warned about the length of time it would take to negotiate new trade deals, maybe as much as seven years, which was the case with Canada, and that “financial services could be discriminated against.”

The British pound had its biggest single-session loss Monday since October 2009 after London mayor Boris Johnson threw his weight behind the campaign for Britain to exit the EU.  It was also a seven-year dollar low.  Moody’s warned Brexit could have implications for Britain’s credit rating.

Johnson has long been seen as Cameron’s most dangerous foe in the referendum campaign.  But at this moment it seems less than half of Cameron’s Conservative party members back Brexit.

Cameron is trying to corral the leaders of Britain’s largest corporations for support and the likes of Shell, BAE Systems, BT and Rio Tinto are signing a joint letter arguing Britain is “stronger, safer and better off” in a reformed EU.

The prime minister has said of talk of a second referendum if the UK votes to withdraw from the EU: “A vote to leave is a vote to leave.”  Period.

A summit of EU member-states’ leaders is scheduled for Brussels on June 23-24.

“If the British people vote to leave, the government will clearly respect the outcome of that,” said a Cameron spokeswoman.  “The government will then launch the process to leave.”

Cameron told MPs that when it comes to Boris Johnson wanting to use a Brexit to secure a better EU deal: “I won’t dwell on the irony that some people want to leave in order to remain.”

He added: “Such an approach also ignores more profound points about democracy and diplomacy.”

Then Cameron said of his rival: “I do not know any (couples) who have begun divorce proceedings in order to renew their wedding vows.... I am not standing for re-election.  I have no other agenda other than what’s best for our country.”

Cameron has also warned that trade deals within the EU would take precedent over any involving Britain.

Wolfgang Munchau / Financial Times

“One of the few certain statements one can make about Friday’s agreement between European leaders and David Cameron is that it will have little impact on the June 23 referendum on British membership of the EU. It is far too technical to sway many voters.

“Even those who have made an effort to understand its nuances cannot be sure of exactly how much would unravel in the legislative and judicial processes that will follow.  It is, after all, the first such agreement of its kind....

“From the perspective of the rest of the EU, the deal is awkward.  EU leaders calculated, rightly in my view, that the cost of Brexit would be too high at a time when the future of the EU itself is in doubt.  They were ready to pay ransom money to prevent a calamity. The question is: did they pay too much?

“Their single most important concession is their agreement, for the first time, to a two-tier Europe.  This is not an opt-out, an exemption or a derogation. This is not a Europe of variable speeds or variable geometry – expressions that have been used in the past to denote different degrees of integration.  This is formal exemption from the goal of ever-closer union.  I am not sure whether this has any legal significance but it matters as a political statement.

“How can the EU pursue ever-closer union when one of its most important EU members enjoys a permanent exemption?....

“What about the social benefits, the big political issue in the UK?  The provision that allows the UK government to restrict in-work benefits for non-British EU employees for a period of up to four years will make it marginally harder for some to move across borders.

“This is not going to be the end of free movement of labor.  But one would have thought that if the EU really took the concept of an ever-closer union seriously, policy should encourage cross-border labor movements, not do the opposite.  Other countries will no doubt ask for – and get – similar exemptions.

“There is a risk that following a vote to remain in the EU, the deal may not be implemented in full, prompting conspiracy theories about how the EU deliberately misled the British electorate.

“If the deal is implemented in full, it will end the idea of ever-closer union. And if the British vote to leave, the deal will become null and void. Britain would enter a long process negotiating its exit from the EU. I struggle to see any good outcomes.”

Simon Nixon / Wall Street Journal

“It is just nine months since David Cameron won a remarkable election victory. Yet the UK prime minister will be out of a job in four months if he fails to persuade the British public to back his campaign to keep Britain in the European Union....

“Mr. Cameron insists that he will cling to office even if he loses.  But defeat would split his party, potentially trigger the breakup of the UK and accelerate the disintegration of the European Union.  It is hard to see how any leader could survive such monumental failure....

“Mr. Cameron’s most fateful concession to his euroskeptic colleagues may have been his rash promise to reform the UK’s relationship with the EU before holding the referendum. Whether he ever seriously believed he could secure the wholesale ‘repatriation of powers’ that he claimed in 2013 were urgently needed to make Britain’s EU membership tolerable is unclear.

“But by the time the negotiations began in earnest last year, he had clearly accepted that his chances of unilaterally rewriting the rules of the EU so that the UK could achieve all of the benefits and none of the obligations of membership were precisely zero. He scaled back his demands accordingly. And so the prime minister found himself in the small hours of Friday morning staking 70 years of British foreign policy on securing the right to discriminate against Polish expatriate workers....

“Yet Mr. Cameron may ultimately prevail.  Polls suggest the ‘remain’ camp starts the campaign with either a small or substantial lead, depending on the methodology. If Mr. Cameron can move the debate on from his renegotiation, he has some powerful arguments to deploy based on the risks to economic prosperity and national security and the inability of euroskeptics to agree on an alternative to EU membership.

“The ‘leave’ campaign’s best chance may be to run a populist, antiestablishment campaign, given the strong business backing for EU membership. But many of the most effective antiestablishment campaigners will be lined up in favor of remaining in the EU, including the Labor Party’s new left-wing leadership and the Scottish Nationalist Party.  In contrast, the anti-immigrant nature of euroskeptic populism may repel as many voters as it attracts.

“But even if Mr. Cameron does win, there will be no return to the status quo ante. The referendum will leave scars that may never heal, not just on British politics but on the EU itself.  At the heart of the European project is the notion that relations between sovereign states should be based on the rule of law, that big countries shouldn’t be able to bully small countries, that all EU citizens should be treated equally.

“On Thursday night, as Mr. Cameron threatened to blow up the postwar European order unless the EU changed its rules to help him settle a domestic political dispute, the nature of the European project changed.  Mr. Cameron may not have achieved much in his renegotiation, but what he did achieve may prove to be momentous.”

Editorial / Wall Street Journal

“The problem for Mr. Cameron and other supporters of the ‘Stay’ campaign is that this is no ordinary year. Angela Merkel may not have figured ‘Brexit’ into her calculations when she decided last year to admit an uncapped number of Mideast refugees into Germany. But the Chancellor’s decision and the flood of migrants that followed have reinforced British perceptions of a Continent that has lost control of its borders, lost sight of its European identity, and allowed itself to be overrun by dangerous foreigners.  Add decades of European economic mismanagement and a broad sense that the euro has been  a costly failure, and it makes for a potent political case for the UK to leave.

“That’s probably why Boris Johnson, London’s colorful mayor and a contender to succeed Mr. Cameron, declared Sunday that he would campaign for the ‘Leave’ side.  He will join several members of Mr. Cameron’s own cabinet, including the formidable Justice Secretary Michael Gove.  Joining Mr. Cameron is Chancellor of the Exchequer George Osborne.  Mr. Osborne has long been the Prime Minister’s heir apparent, but that succession will be in doubt if Britain votes to leave.

“Mr. Cameron warned that ‘leaving Europe would threaten our economic and our national security,’ adding that the Leave campaign was offering ‘risk at a time of uncertainty – a leap in the dark.’  That puts matters too starkly.  However Britain votes in June, the UK will still be part of the only security alliance that still counts – namely, NATO – and it will likely be able to renegotiate its economic ties to the Continent.

“But advocates of a British exit should not lightly dismiss the advantages of EU membership.  Much of London’s financial class wants Britain to stay, not least because membership gives them unfettered access to Europe’s markets and residency in Britain’s more free-market economy, while maintaining the City’s position as a global financial capital.  There’s also the risk that leaving might entice the Scottish to secede from the UK in favor of the EU.

“The American interest is whether Britain contributes more to global freedom, and to its own economic strength, from inside or outside the EU. We’ve thought the answer was inside, but that isn’t as clear as it used to be.  That’s the question we’ll be watching as the debate unfolds.”

Editorial / The Economist

“The battle is joined, at last.  David Cameron has called a referendum on Britain’s membership of the European Union for June 23rd, promising to campaign hard to stay in. What began as a gambit to hold together his divided Tory party is turning into an alarmingly close contest.  Betting markets put the odds that Britons opt to leave at two-to-one; some polls suggest the voters are evenly split; several cabinet ministers are campaigning for Brexit. There is a real chance that in four months’ time Britain could be casting off from Europe’s shores.

“That would be grave news – and not just for Britain.  A vote to leave would damage the economy, certainly in the short term and probably in the long run.  (As financial markets woke up to the prospect, the pound this week fell to its lowest level against the dollar since 2009.)  It would imperil Britain’s security, when threats from terrorists and foreign powers are at their most severe in years. And far from reclaiming sovereignty, Britons would be forgoing clout, by giving up membership of a powerful club whose actions they can influence better from within than without. Those outside Britain marveling at this proposed act of self-harm should worry for themselves, too. Brexit would deal a heavy blow to Europe, a continent already on the ropes.  It would uncouple the world’s fifth-largest economy from its biggest market, and unmoor the fifth-largest defense spender from its allies.  Poorer, less secure and disunited, the new EU would be weaker; the West, reliant on the balancing forces of America and Europe, would be enfeebled, too....

“Worse, the EU would have a strong incentive to impose a harsh settlement to discourage other countries from leaving. The Brexit camp’s claim that Europe needs Britain more than the other way round is fanciful: the EU takes almost half Britain’s exports, whereas Britain takes less than 10% of the EU’s; and the British trade deficit is mostly with the Germans and Spanish, not with the other 25 countries that would have to agree on a new trade deal....

“One exception is immigration, the area over which many euroskeptics most long for control.  Half of Britain’s migrants come from the EU, and there is little the government can do to stop them.  If Britain left the union, it could.  But doing so would have a double cost.  Gaining the right to stop immigration from the EU would almost certainly mean losing full access to the single market. And reducing the numbers of immigrants would hurt Britain’s businesses and public services, which rely on French bankers, Bulgarian builders and Italian doctors.

“The longer-term costs would go beyond economics. Brexit might well break up the United Kingdom itself.  Scotland, more Europhile than England, is again agitating for a divorce; if Britain decides to leave Europe, then the Scots may at last have a point.  Brexit could also dangerously unsettle Northern Ireland, where the peace process over two decades has depended on the fact that both Ireland and Britain are members of the EU.  The Irish government is among the most vocal foreign supporters of the campaign for Britain to stay in.

“Ireland is not the only country that would suffer. European leaders know Brexit would weaken a club already in deep trouble over such issues as migration and the euro crisis.  And Europe would be poorer without Britain’s voice: more dominated by Germany; and, surely, less liberal, more protectionist and more inward-looking.  Europe’s links to America would become more tenuous.  Above all, the loss of its biggest military power and most significant foreign-policy actor would seriously weaken the EU in the world.”

Gideon Rachman / Financial Times

“The mayor of London’s decision is certainly a significant moment in the referendum campaign. A Vote Leave group that was in danger of being led by cranks, nobodies and octogenarians will now be headed by one of the country’s most popular politicians.  [Ed. Boris Johnson]

“June could also be a particularly propitious time to be making the case against the EU.  By then, the Greek debt crisis may well have flared up again.  Europe’s migrant crisis is also likely to have intensified, as improved weather increases the numbers of would-be refugees crossing the Mediterranean. That will increase infighting among the members of the EU, making the organization look ever more shambolic.

“The vision of hundreds of thousands more desperate would-be migrants, not too far from the English Channel, will also play directly into the most emotive argument that the Leave campaign will deploy: the fear of mass migration from Europe and the demand that the free movement of people from the EU should be halted.

“Seeing the potentially terminal difficulties that the EU is facing may have led Mr. Johnson to try to ‘put himself on the right side of history,’ by placing a bet against Europe.

“But there is more than one way of being on the right side of history. The first is simply to anticipate the direction of events.  The second, more important, way is to align yourself with the right causes and values – those that the history books will ultimately vindicate....

“Mr. Johnson’s decision to campaign for Brexit might put him on the right side of history, but only in the first and narrowest sense of foreseeing the direction of events.  The EU is certainly in a sorry mess at the moment. There is also a strong strand of anti-establishment, anti-immigration populism loose in both the U.S. and Europe, which could easily translate into a British vote to leave the EU.  So betting against the EU could allow the London mayor to pocket some political winnings.

“But Mr. Johnson is on the wrong side of history in the more important sense, because he is aligning himself with some of the most malign forces in Europe and Britain.  Across Europe, it is the far-right and the far-left that are calling for the destruction of the EU – and they will cheer loudest if Britain votes to leave.  On the borders of the EU, Vladimir Putin sees Brussels as a bitter enemy – and hugely resents the sanctions that the EU imposed on Russia after its annexation of Crimea.  The Russian president will be delighted and emboldened at any sign of the disintegration of the EU....

“A modern Churchill, which is what Boris clearly aspires to be, would immediately understand that Britain’s decision about whether to stay in the EU has to be seen as part of a wider global picture. And that big picture is very worrying – with Russia rediscovering its taste for war, the Middle East disintegrating, violent jihadism on the rise, China flexing its muscles in the Pacific and the U.S. flirting with the lunacy of ‘Trumpism.’

“Given all that, it is depressingly small-minded of Mr. Johnson to justify campaigning for Brexit partly on the grounds that Britain might save a bit of money on its contributions to the EU budget. The fact is that Britain will pay a very heavy price – directly and indirectly – if the EU disintegrates. As David Cameron, prime minister, correctly pointed out, this is ultimately a question of national security.”

Finally...on the migration front....

It’s been another week of chaos, largely at Greece’s expense.  Macedonian police shut the refugee border crossing with their neighbor following clashes with rejected Afghan asylum seekers, this after Austria imposed a cap on asylum applications.

Tuesday, police in Greece were forced to remove hundreds of protesters who had halted rail traffic on the line between Greece and the Balkans near the border with Macedonia.

Macedonian authorities were being accused of defying the terms of a deal by EU leaders the prior week to keep open the Balkan migrant route ahead of a March 6 emergency summit on the crisis.

In other cases, Pakistani and Moroccan migrants are being turned away as some countries limit apps to Syria, Iraq and Afghanistan.  But the move by Macedonia was the first direct crackdown against Afghans.

Also on Tuesday, Athens withdrew its ambassador to Austria, with a statement from Greece’s foreign ministry accusing the Austrian government of unilateral action outside of EU rules.

Germany is another that is upset with Austria, saying Austrian Chancellor Werner Faymann is violating previously negotiated principles.  Austria, while capping daily asylum applications at 80, is allowing as many as 3,200 refugees per day to pass through Austria to Germany.

But back to Greece, tens of thousands are now stuck there, unable to proceed further.  And the spring/summer crush hasn’t begun yet.  It is beyond a disaster.  It can yet lead to the breakup of the European Union.  It’s also not in the least a stretch to talk of potential military conflict between states, which makes it all the more urgent for the EU to support Turkey to the hilt, for starters, to try to keep the refugees there. 

Separately, Europol estimates the number of EU citizens who have slipped back after training in the Middle East with ISIS as between 3,000 and 5,000.

“Europe is currently facing the highest terror threat in more than 10 years,” Rob Wainwright, the British head of Europol, said.  “We can expect ISIL or other religious terror groups to stage an attack somewhere in Europe, with the aim of achieving mass casualties among the civilian population.”

It’s comments like this fueling actions such as Austria’s, and before that, Hungary’s, and it’s why many Germans are increasingly turning on Chancellor Angela Merkel.

Editorial / The Economist

“For months experts have warned that if northern Europe restricts refugee flows without an overall plan for handling migration, Greece faces disaster.  The United Nations predicts 1m arrivals this year.  Alexis Tsipras, the prime minister, worries that Greece will become ‘a black box’ for migrants. As razor wire goes up across the Balkans, his fears may be about to come true.

“The crisis could hardly have come at a worse moment for Mr. Tsipras.  His left-wing Syriza government faces a revolt by lawyers, doctors and farmers against reforms demanded by Greece’s international creditors....

“While the farmers’ rebellion may have been crushed, lawyers are on strike over a new pension scheme, which they say would force them to pay more than 30% of their income in employee contributions.... (Greece’s) creditors from the EU and International Monetary Fund say the pension system is on the verge of bankruptcy. They want an across-the-board benefits cut of at least 10% before releasing the next tranche of funding from the $95bn bailout Greece concluded last year.

“That leaves the Greek government on the edge of insolvency as the migrant crisis is about to explode.”

---

Just a few notes on Asia...in China, the Shanghai Composite fell 6.4%, Thursday, though was down ‘just’ 3.2% for the week.  There was talk of policymakers trying to restrain housing-price gains in some of the nation’s largest cities amid signs of tighter liquidity. 

Separately, Minister of Commerce Gao Hucheng said consumption was 66.4% of GDP in 2015 and looked for a similar figure this year.

In Japan, headline inflation for January was zero, annualized (after 0.2% in December).  Core inflation, ex-food and energy, rose 0.7% year over year; still far short of the official target of 2%.

But Japan has a huge long-term issue, which was highlighted in the latest census released by the government at week’s end. 

The official population as of Oct. 1 is 127.1 million, which is down by 947,000 or 0.7% from the previous census in 2010; the first ever decline since the census started in 1920.  Even during World War II the population rose.

A UN report last year projected that Japan’s population would fall to about 83 million by 2100.  The average number of children a woman will bear here in a lifetime – just 1.42 as of 2014 – is far below the replacement rate of 2.1.

It doesn’t help that Japan keeps a tight lid on immigration, which business leaders are calling to be loosened, but Prime Minister Shinzo Abe is showing no signs of changing existing policy.

The census figures are depressing and don’t help when it comes to consumer spending, which furthers Japan’s decades-long stagnation.  From a government standpoint, look for further stimulus packages.

One other.  While Tokyo’s population grew 2.7% from 2010 to 2015, the population in 39 of Japan’s 47 prefectures (regions) declined.

Street Bytes

--Stocks rose a second week with the Dow Jones advancing 1.5% to 16639, the S&P 1.6% and Nasdaq 1.9%.

--U.S. Treasury Yields

6-mo. 0.45%  2-yr. 0.79%  10-yr. 1.76%  30-yr. 2.64%

Treasuries were basically unchanged. 

The yield on the German 10-year Bund fell from 0.20% to 0.15%, while the yield on the French 10-year declined from 0.56% to 0.50%.

--The average price of gas at the pump nationwide this week was $1.71, the lowest for this time of year since 2004. 

[Jimbo notes the price for milk is twice that of gas, with cows increasingly becoming part of the 1% (or 2%, depending on the product).  We both agree...good for them.  They work hard and are udderly deserving.]

The government, by the way, announced Americans drove a record 3.1 trillion miles last year, besting the previous mark of 3.0 trillion set in 2007, before the Great Recession, so this is a pretty darn good economic barometer I think you’d agree.

How far is 3.1 trillion miles?  According to the Associated Press, it “is roughly the same distance as 337 round trips from Earth to Pluto.”  The problem with this example is there are no rest stops...at least that I know of.  “Mom!  I have to go!” 

On a more serious note, more miles means more deaths and the National Safety Council estimates the number of traffic deaths in the U.S. climbed 8% compared with 2014; the largest year-to-year percentage increase in half a century.

--Oil prices pared their losses on Wednesday after the U.S. Energy Department, in its weekly inventory report, said they didn’t rise as much as feared, though the level, up 3.5m barrels to 507.61m last week is a new record.

Previously, the American Petroleum Institute said inventories rose 7.1m barrels during the period.

Prices had fallen back on Tuesday after Saudi Arabia’s oil minister, Ali Al-Naimi, told an audience in Houston Tuesday that “We are not banking on cuts because” there is “less trust” that “countries are going to deliver even if they promise.”  The market will eventually rebalance because high-cost producers will have to “lower costs, borrow or liquidate” to cope with the slump in oil prices.  Al-Naimi added that he doesn’t know when the current price rout will end.

[Ignore the late-week rally back to $33.00.]

Saudi Arabia did say it would commit to freezing production at January levels, per an accord with Russia, Qatar and Venezuela, but of course January saw record amounts of crude and inventories.  Iran balked, with its oil minister saying the call for a freeze puts “unrealistic demands” on his country, which is boosting output by 1 million barrels a day following the lifting of international sanctions.  [Bloomberg]

--Chesapeake Energy, the second-largest gas producer in the U.S., announced it was slashing capital spending by 69 percent this year in an effort to conserve cash.  For 2015, Chesapeake reported a net loss of $14.9bn, including an $18.2bn pre-tax writedown of Chesapeake’s assets to reflect lower prices in both oil and natural gas.

The company has downplayed stories it was exploring bankruptcy.

--Bloomberg reported that “Energy XXI Ltd. and SandRidge Energy Inc., oil and gas drillers with a combined $7.6 billion of debt, didn’t pay interest on their bonds last week.”  Just another example of the severe, still-developing problems in the oil patch, though to be fair, both of the above could yet reach agreements with their creditors to buy enough time for them to turn their businesses around.

--Halliburton announced it was cutting another 5,000 workers, or 8 percent of its remaining global workforce.  Just last month the second-largest oilfield services provider said it had slashed 4,000 jobs the last three months of 2015.

Halliburton has now laid off 29,000 workers since staffing peaked in late 2014.

--Falling oil prices are hitting JPMorgan Chase harder than it said they were just weeks earlier.  On Tuesday, CEO Jamie Dimon said the bank would have to increase its energy loan reserves by 60 percent to $1.3 billion (another $500m).  Should oil stay around its current levels, the reserves will only grow.

But low interest rates are far more damaging to JPM’s bottom line.  The investment bank presented a scenario whereby if the federal-funds rate rose to around 3.25% at the end of 2018 as opposed to today’s 0.375%, JPMorgan would earn an additional $10 billion of net interest income, but it sure doesn’t look like 3.25% is in the cards anytime soon.

--Matt Apuzzo and Katie Benner / New York Times:

Apple engineers have already begun developing new security measures that would make it impossible for the government to break into a locked iPhone using methods similar to those now at the center of a court fight in California, according to people close to the company and security experts.

“If Apple succeeds in upgrading its security – and experts say it almost surely will – the company would create a significant technical challenge for law enforcement agencies, even if the Obama administration wins its fight over access to data stored on an iPhone used by one of the killers in last year’s San Bernardino, Calif., rampage. The FBI would then have to find another way to defeat Apple security, setting up a new cycle of court fights and, yet again, more technical fixes by Apple.

“The only way out of this back-and-forth, experts say, is for Congress to get involved. Federal wiretapping laws require traditional phone carriers to make their data accessible to law enforcement agencies.  But tech companies like Apple and Google are not covered, and they have strongly resisted legislation that would place similar requirements on them.”

For his part, Apple CEO Tim Cook told ABC News his company first learned of the controversial request to unlock the phone when it was reported in the news media.

“I don’t think that’s the way the railroad should be run,” he said.

But a source close to the investigation told the BBC Mr. Cook’s claim was “simply not true” and that Apple’s legal team was “the first to know.”

Cook said the FBI was asking the company to make “the software equivalent of cancer.”

“I think safety of the public is incredibly important,” Cook told ABC.  “The protection of people’s data is incredibly important. And so the trade-off here is we know that doing this could expose people to incredible vulnerabilities.”

Monday, in a memo to employees, Cook said:

“At stake is the data security of hundreds of millions of law-abiding people and setting a dangerous precedent that threatens everyone’s civil liberties.”

The FBI has argued that Apple is overstating the security risk to its devices and that it has the technical know-how to break into the terrorist’s device in a way that did not create a “backdoor” into every Apple device.

As for the attitudes of the American public, a Pew Research Center survey suggested a majority of the people sided with the FBI by a 51-38 margin.  A YouGov survey showed that 63% of Americans say Apple should obey the court order that they cooperate with the FBI, while only 23% said Apple should not.

But a Reuters/Ipsos poll said 55% of respondents were worried that the FBI would seek to use the backdoor to “spy on iPhone users.”

It depends how the question is asked, it turns out.

Separately, Microsoft co-founder Bill Gates didn’t like the way his position was portrayed in an interview with the Financial Times over the Apple/FBI issue.  He said he was “disappointed” in reports claiming he sides with the FBI.  But Gates told the FT:

“This is a specific case where the government is asking for access to information. They are not asking for some general thing, they are asking for a particular case.”

Gates later told Bloomberg, the courts will ultimately make the decision.  “In the meantime, that gives us this opportunity to get the discussion, and these issues will be decided in Congress.”

On Thursday, Apple filed key court papers to fight a judge’s order requiring it to assist the FBI in the San Bernardino investigation, saying the judge in the case had violated the company’s constitutional rights.

“This is not a case about one isolated iPhone,” the company’s motion read.  “Rather, this case is about the Department of Justice and the FBI seeking through the courts a dangerous power that Congress and the American people have withheld: the ability to force companies like Apple to undermine the basic security and privacy interests of hundreds of millions of individuals around the globe.”

Personally, I haven’t taken a stand on this as yet.  I’m torn.  I couldn’t give a damn about Apple, but I have zero confidence in our government.  Frankly, the only people I trust these days are the grunts in the military and our Special Forces.  Among the last people I trust, however, are their generals.  And that’s a memo....

--Foxconn Technology Group appeared ready to sign a takeover agreement with Sharp Corp., but suddenly on Thursday, Foxconn said it was delaying the deal due to last-minute details that Sharp supplied.  Sources told the Wall Street Journal it had to do with contingent liabilities from Sharp that Foxconn hadn’t previously been made aware of.  [This would include costs associated with the outcome of lawsuits, supply contracts or other developments.]

Literally, hours earlier, Sharp announced it had agreed to sell itself to Foxconn for about $6-$6.2bn.

Foxconn wants to hook up with Sharp because of Sharp’s expertise on advanced screens for iPhones, with Apple currently needing to rely on rival Samsung for this technology, while Foxconn, already Apple’s biggest contractor, could move in on the screen side.  For obvious reasons, Apple doesn’t want to be totally reliant on Samsung.

Should the deal still go through, it would be the largest acquisition of a Japanese tech firm by a foreign company.  Sharp, over a century old, was once a highly profitable manufacturer of premium TVs, as well as a screen supplier to Apple.  But the company has struggled mightily amid price competition from Asian rivals and it has undergone two bank bailouts since 2012.

--Home Depot Inc. reported stronger-than-expected earnings growth in its latest quarter, with sales increasing a whopping 10%.  The company also lifted its quarterly dividend 17%.

For the fourth quarter, same-store sales at HD stores rose 7.1%, with comp sales up 5.6% for the year; again, very solid.  The company cited an aging housing stock as being helpful, with two-thirds of American homes being at least 30 years old.

For the current year, HD’s guidance was in line with expectations.

--HD rival Lowe’s also reported strong results.  Same-store sales for the quarter ending Jan. 29 jumped 5.5 percent, while the company forecast 4 percent growth for 2016.  A mild winter helped in the quarter as people were able to spend on their gardens in many parts of the country.

--Shares in Macy’s rose even as fourth quarter sales fell 5.3 percent as the warm winter did a number on retailers, other than home-improvement types, though Macy’s reported it saw an improving trend in January with more normal weather and the company now looks to “stabilize” sales this year; a decline of 2 percent vs. a 3 percent decline for all of 2015.

That said it was still the sharpest sales drop for the department store operator in more than five years.

--Target’s turnaround continues.  Same-store sales for the three months ending January rose 1.9 percent, which beat expectations.  Brian Cornell, who took over as CEO in August 2014, has had a plan and it’s been paying off.  I mean this chain was going nowhere (ditto Kohl’s). Target has been focusing on “signature” categories like baby products, fashion and furniture.

Net earnings came in at $1.4bn, compared with a loss of $2.6bn in the prior year period.

Cornell said: “With traffic growing for five consecutive quarters and our signature categories of Style, Baby, Kids, and Wellness leading our growth, Target’s results demonstrate that we are focused on the right strategic priorities.”

Target saw a big improvement online as well.

--Speaking of Kohl’s, it reported same-store sales up just 0.4% from 3.7% a year before, but at least this was the fifth-consecutive quarter of positive comp store sales growth.  CEO Kevin Mansell also said, “I am particularly encouraged by the 4% increase we saw between Thanksgiving and Christmas.”  But this was offset by softness in early November and in January due to slack demand for cold-weather goods.

For the year, Kohl’s expects sales to be between down 0.5% and up 0.5%.  The company announced it would close 18 underperforming stores in 2016, while testing a smaller-format in some urban areas (which strikes me as a dumb idea).

--Best Buy, the largest U.S. consumer electronics retailer, warned that the absence of a new smartphone this year will depress revenues.  Overall revenues for the holiday quarter dropped to $13.6bn from $14.2bn a year ago, though the company reported a better than expected earnings figure.

Online sales did improve, accounting for 15.6% of domestic revenues, up from 14% a year ago.

--I enjoyed this opinion piece from the Financial Times’ Lex column:

“If there is one area in which Salesforce is the technology industry’s undisputed leader, it is superlatives.  Quarterly results on Wednesday were described within six sentences as ‘spectacular,’ ‘unprecedented,’ ‘tremendous’ and ‘outstanding.’

“You might expect a side dish of profits with that main course of braggadocio, especially since another boast was ‘top and bottom line excellence.’  You would be disappointed.  Salesforce had a net loss of $25m on revenues of $1.81bn in the fourth quarter.  Yet investors were content to embrace the hype: shares in the enterprise software company rose 9 percent in after-hours trading.

“Relief is understandable.  In the first five weeks of the year, Salesforce’s stock fell more than 30 percent amid a sudden crisis of confidence in the prospects of ‘software as a service’ – or SaaS – companies.  The sell-off was premature.

“As founder and chief braggart Marc Benioff is at pains to stress, not many companies of Salesforce’s size are growing at more than 20 percent a year.  Investors will still pay up for growth – Salesforce’s enterprise value is back up at 6 times forward sales – they are just demanding more evidence that it is not going to fall off a cliff.”

--Campbell Soup Co. reported higher profits despite a 1.5% decline in revenue as the company did a good job of controlling expenses.  Earnings exceeded expectations and sales were in line.  U.S. soup sales decreased 4%.  I’m having Campbell’s clam chowder tonight, in case you were wondering what I was eating.

--HP Inc., in its first quarter as an independent company, reported weak conditions in its core printing and personal computer divisions, with printing revenue declining 17% and revenue from PCs down 13%.  But the company said the strong U.S. dollar was a big factor in its results and that total revenue on a constant currency basis was off only 5%.

For the second fiscal quarter ending in April, HP estimated earnings basically in line with current analyst estimates, but the company didn’t project revenue.

--United Technologies CEO Gregory Hayes denied stories that had his company merging with Honeywell, saying regulators would clearly block the transaction for anti-trust reasons so it simply was not worth pursuing.

For its part, Honeywell insisted regulatory obstacles need not prevent it from merging and that it remains committed to pursuing the potential $90bn transaction.

A merged HON-UTC would have annual sales of more than $100bn a year and would be a powerful supplier of components to aerospace companies, particularly builders of commercial passenger and business jets.  UTC says opposition from Boeing and Airbus would doom the deal (think fewer suppliers to choose from, ergo higher costs).

Honeywell counters that it has “engaged in discussions” with UTC over the past year and that there are tremendous synergies.  The company said: “In fact, a combination would benefit our customers and enhance our ability to offer a more comprehensive and compelling suite of technologies to serve their needs.”

My first reaction is that UTC is right.  No way a merger would fly, even in a future Republican administration (should that come to pass, the editor hastily added).

CNBC’s David Faber said the other day he thought one reason why the two companies haven’t agreed to give it a go is that Hayes insists he be the one in charge of a combined entity, while I’m not sure where Honeywell’s David Cote (who lives in my town) stands on the leadership issue.

*Late Friday the story hit that Cote sold $36m in shares in Honeywell three days before it approached UTC with its purchase offer.  This doesn’t look good unless it was part of a so-called 10b5-1 plan, established by the SEC to shield executives and directors from the appearance of insider-trading.  [Bloomberg]

--According to CPB Netherlands Bureau for Economic Policy Analysis, trade volumes around the world rose by just 0.6 percent in December compared to a year earlier, down from November’s 2.1 percent increase, the slowest rate since May 2015.

--Uber said it does not plan to change its driver screening or safety processes following the mass shooting by an on-duty driver in Kalamazoo, Michigan, that killed six.  The suspect had a “good” driver rating and a clean background check, Uber said.  Police confirmed he had no criminal record.

But, man, was that spooky, having the guy giving rides while the shootings were occurring.  And for the life of me, I can’t believe what an idiot that one guy was who asked “Are you the shooter?”  Why would you ever do that?!

I have to admit.  As I wrote this I was thinking about the hundreds of cabs I have taken, all around the world, and I have never, ever, had a scary experience with a driver.

Except once (though as it turned out, not really)...my first trip to Istanbul. 

I had tried to learn some words and the local beer before I got there and at the airport I hop in a cab for the rather lengthy drive to my hotel.  I had studied the directions beforehand, concerned I’d get a bad cabby and have to pull a Jack Bauer, but a minute after I sat down, for the purpose of small talk I asked, “Efes?  Good beer?”  Through the mirror he looked at me quizzically and nodded, rather sternly.

Next thing I know we are getting off the highway.  Uh oh, I more than mused.  What the heck is he doing?  Two minutes later we are in a kind of crappy neighborhood, he pulls over, and goes into a store.  A minute after he came back and handed me an Efes tall boy!!!

That was my introduction to Turkey.  He also turned down my attempt to pay for it, but needless to say he got a nice tip.

--I was reading a piece in the Sydney Morning Herald on the real estate bubble in Australia, which I knew was the case, especially in Sydney, but I didn’t know how bad it was until the Herald’s John McDuling cited an Australian Financial Review report from a British economist, Jonathan Tepper, who concluded after his extensive research that the country is in the midst of “one of the biggest housing bubbles in history.”

It’s all about easy financing, but this is what stands out.  “Over the past few years,” writes Tepper, “over 40 percent of all new mortgages originated have been interest-only mortgages.

“This is truly Ponzi financing, where home buyers only make money if their houses keep rising in value.”

Of course this is exactly what happened in the U.S. (and Ireland, for another).

--Moody’s dropped Brazil’s debt rating to junk status, Ba2 from Baa3; further bad news for the country.  GDP down 4%, inflation 10.7%, consumption way down, major political crisis with the Olympics coming and Zika.

--Speaking of Zika, there are growing links between the virus and Guillain-Barre syndrome.  One Colombia city of 60,000, Turbo, has seen five severe cases in the past five weeks, with three patients dying.  Zika is widespread here.  But researchers still don’t know the link between the two.

Colombia says more than 30,000 citizens have been diagnosed with Zika thus far, with 97 cases linked to Guillain-Barre.

The U.S. Centers for Disease Control and Prevention has confirmed two cases of Guillain-Barre related to Zika in the U.S., presumably among the more than 80 travelers infected by the virus after returning to the country.  Another G-B case was reported in Puerto Rico. [Washington Post]

Finally, the CDC is investigating 14 new reports of potential sexual transmission of the Zika virus, including several cases involving pregnant women.  Friday, the CDC reported nine American women who traveled to Zika-affected countries while pregnant have tested positive, with one giving birth to an infant with severe microcephaly.

At least one of two women who terminated their pregnancy did so after brain abnormalities were detected, officials added today.  Two other pregnancies ended spontaneously in the first trimester.  The CDC does not know if Zika caused the miscarriages.

--India’s Finance Ministry said on Friday that growth would be between 7% and 7.75% next fiscal year, which compares with the 7.6% forecast in the current year through March.

So this would ensure India remains the world’s fastest growing large economy after it overtook China last year.

--Facebook’s Instagram app opened its advertising to all marketers just five months ago and Wednesday the company revealed it already had more than 200,000 advertisers, quite an accomplishment that compares with ‘just’ 130,000 on Twitter, which has been available to advertisers for far longer.

--The annual Mercer Quality of Living ranking has the following top five:

1. Vienna
2. Zurich
3. Auckland
4. Munich
5. Vancouver

No American city was in the top 25.  San Francisco was highest at 28.  Paris was 37, London 39, New York City 44.

The index focuses on quality of life for expatriates.  “Media availability and censorship, limitations on personal freedom” are among the factors Mercer looks at, as well as personal safety, with Paris now 71st, post-attacks.  [Washington Post]

--For the week ending Feb. 21, CBS aired all of the top 11 broadcast shows in total viewers, marking the second consecutive week that the network claimed the top ten and the first time any network had done this since Nielsen enhanced its ratings back in 2005.

Needless to say, first the Super Bowl, then the Grammys, helped propel it.  [Adweek]

--Nike co-founder Phil Knight is known for his significant financial contributions to the University of Oregon athletic department, but now he has stepped up to donate an astounding $400 million to Stanford, where he received his MBA in 1962.  And it has nothing to do with athletics.

Instead, Knight is helping endow a graduate-level scholarship program for high-achieving undergraduate students. 

[Larger than the Rhodes Scholarship program, supposedly.  I fell just 2.0 short of being eligible for a Rhodes scholarship myself, in case you were wondering.]

Aside from giving an estimated $300m to UO’s athletic program, Knight has also donated more than $200 million for cancer research at the Oregon Health & Science University, as well as money to renovate the school’s library and big donations to the law and business schools.

Forbes estimates Knight’s wealth at $25.7 billion.

Foreign Affairs

Syria/Russia/ISIS/Turkey: A ceasefire is to start Saturday, as Damascus accepted the deal, but the opposition says it’s stacked against them and that they expect the joint Russian-Syrian advance to continue.  Thursday, Russian warplanes bombed Syrian rebel-held areas in northwestern Syria while government forces pounded a suburb of the capital prior to the supposed halt in fighting.

The Syrian Observatory for Human Rights, the British-based group that has supplied most of the news coverage of the entire conflict, said government helicopters dropped at least 30 “barrel bombs” on the Damascus suburb of Daraya. The government says Al Nusra is there, firing mortars into residential areas of Damascus.

And that’s the thing; the ceasefire does not involve ISIS and the al-Qaeda-linked group, the Nusra Front, with the Bashar al-Assad regime saying the agreement falls apart if foreign states continue to supply the rebels or militants.

But the Nusra Front often allies itself with the more moderate opposition, at least in as much as you can identify who is who, which is virtually impossible these days.

Ahra al-Sham is a rebel alliance covered by the ceasefire, but it has said the Syrian government will break the agreement in Daraya.

One of the other issues is Aleppo, where rebels, part of the ceasefire, are surrounded following the government’s recent Russian-backed offensive.  Will the fighting stop here?  Hardly.  Assad said he is allowed to go after terrorists and terrorists are defined as anyone who opposes the regime.

For its part, Turkey wants the main Syrian Kurdish militia, the People’s Protection Units (YPG), to be excluded from the planned truce, a la ISIS and Al-Nusra.  But Washington views the YPG as its most effective fighting force against ISIS in Syria.

U.S. Republican Senator Bob Corker, chairman of the Foreign Relations Committee, said that if the truce fails, “there is no ‘plan B’.”  The Russians were “now dominating,” Corker said this week.  “It’s totally in Russia’s hands now.”

Separately, there was a report that “Dozens of Russian generals at a military base near the eastern Syrian city of Latakia were killed Sunday afternoon in a deadly car bomb attack committed by two opposition factions, Ahra al-Sham and Bayan movement, Syrian opposition groups reported on Wednesday.”  [Jerusalem Post]

According to the story, when the two factions observed a gathering of senior Russian generals at the base, they quickly acted.

But I have seen no other reports on what would be a rather significant development, let alone the fact al-Sham is part of the ceasefire agreement.

Also, ISIS claimed responsibility for suicide bombings last Sunday in Homs and a Damascus suburb that killed a staggering 184 people, at last count.  [The toll keeps rising.]

As for the dangerous situation Turkey finds itself in, French President Francois Hollande warned last weekend that “there is a risk of war between Turkey and Russia.”

Turkey feels trapped, completely isolated, and it has alienated everyone, including its allies.

Just look at its southern border with Syria, where Russia is bombing, the Kurds are advancing and the rebels the Turkish government has supported against Assad are facing defeat.

Lastly, Somini Sengupta / New York Times:

“First, the government soldiers made sure no food could get into rebel-held towns.  Then, government planes bombed what health centers remained in those towns, making sure that those who got sick from hunger had no medical care to save them.

“That is the harrowing picture painted by the latest report of the United Nations Commission of Inquiry on the war in Syria.  The report, released on Monday, chronicles a series of attacks on health care centers by government forces and the Islamic State, and it says the ‘deliberate destruction of health care infrastructure’ was responsible for driving up deaths and permanent disabilities.

“To follow the commission’s work in Syria – it has written 11 reports since August 2011 – is to witness how blatantly the laws of war have been broken, with no prospects of accountability....

“Airstrikes destroyed the vast majority of the 33 hospitals that functioned in the northern city of Aleppo, the report found.  Those have been carried out mainly by Syrian government forces, but lately also by Russian military planes....”

Editorial / Washington Post

“President Obama and some of his senior aides are sounding skeptical about the partial cessation of hostilities due to begin in Syria on Saturday, and for good reason.  Russian President Vladimir Putin has agreed to multiple cease-fires in Syria and Ukraine over the past two years but has observed none of them.  The same is true of Syrian dictator Bashar al-Assad, who hasn’t bothered to hide his intention to continue slaughtering his own people.  If some slackening in the fighting actually takes place, and humanitarian convoys get through, it will be because Mr. Putin found it was in his strategic interest.  That is the real import of the ceasefire: It puts Russia in control of what happens next in Syria.”

Charles Krauthammer / Washington Post

“State of the world, Year Eight of Barack Obama:

“1. In the South China Sea, on a speck of land of disputed sovereignty far from its borders, China has just installed antiaircraft batteries and stationed fighter jets.  This after China landed planes on an artificial island it created on another disputed island chain (the Spratlys, claimed by the Philippines, Malaysia, Taiwan and Vietnam).  These facilities now function as forward bases for Beijing to challenge seven decades of American naval dominance of the Pacific Rim.

“ ‘China is clearly militarizing the South China Sea,’ the commander of the U.S. Pacific Command told Congress on Tuesday.  Its goal?  ‘Hegemony in East Asia.’

“2. Syria. Russian intervention has turned the tide of war. Having rescued the Bashar al-Assad regime from collapse, relentless Russian bombing is destroying the rebel stronghold of Aleppo, Syria’s largest city, creating a massive new wave of refugees and demonstrating to the entire Middle East what a Great Power can achieve when it acts seriously.

“The U.S. response?  Repeated pathetic attempts by Secretary of State John Kerry to propitiate Russia (and its ally, Iran) in one collapsed peace conference after another....

“3. Ukraine.  Having swallowed Crimea so thoroughly that no one even talks about it anymore, Russia continues to trample with impunity on the Minsk ceasefire agreements.  Vladimir Putin is now again stirring the pot, intensifying the fighting, advancing his remorseless campaign to fracture and subordinate the Ukrainian state.  Meanwhile, Obama still refuses to send the Ukrainians even defensive weapons.

“4. Iran. Last Thursday, Iran received its first shipment of S-300 antiaircraft batteries from Russia, a major advance in developing immunity to any attack on its nuclear facilities. And it is negotiating an $8 billion arms deal with Russia that includes sophisticated combat aircraft.  Like its ballistic missile tests, this conventional weapons shopping spree is a blatant violation of UN Security Council prohibitions.  It was also a predictable – and predicted – consequence of the Iran nuclear deal that granted Iran $100 billion and normalized its relations with the world.

“The U.S. response?  Words....

“(Today), three major have-not powers are seeking to overturn the post-Cold War status quo: Russia in Eastern Europe, China in East Asia, Iran in the Middle East. All are on the march.

“To say nothing of the Islamic State, now extending its reach from Afghanistan to West Africa. The international order built over decades by the United States is crumbling.

“In the face of which, what does Obama do? Go to Cuba.”

Cuba, where the repression has gotten worse since Obama’s “historic” normalization.

“(Obama) knows what really matters: climate change, Gitmo and Cuba.

“With time running out, he wants these to be his legacy.  Indeed, they will be.”

Joseph I. Lieberman / Washington Post

“For more than 50 years, national security leaders have gathered at the Munich Security Conference, a conclave established during the depths of the Cold War as a meeting place for the Western allies standing against the communist threat.  I have been privileged to attend almost half of these meetings...but none has been as troubling as the one held this month.

“That is because the world has never seemed as dangerous and leaderless as it does now.  Only the extremists and bullies act boldly, and therefore they have seized the initiative.  It is a moment in history that evokes the haunting words of W.B. Yeats: ‘The best lack all conviction, while the worst are full of passionate intensity.’

“The simple fact is that there is more instability in the world today than at any time since the end of World War II. The threats come from emboldened expansionist powers such as Iran, Russia and China, and also terrorist aggressors such as the Islamic State and al-Qaeda.  In short, the enemies of freedom are on the march.

“At the same time, the United States – which assumed global leadership after World War II to protect our domestic security, prosperity and freedom – has chosen this moment to become more passive in the world.

“The absence of American leadership has certainly not caused all the instability, but it has encouraged and exacerbated it....

“In too many places in recent years, the United States has treated its adversaries as essential partners to be courted, while dismissing or denigrating its historic allies and partners as inconveniences or obstacles to peace.  But as frustrated as they are with the United States, our friends also recognize that they are incapable by themselves of managing the crises that confront them without the United States.

“In Munich this month, the United States ratified its diminished role by reaching an agreement on Syria that elevates the standing of Russia, pressures the Syrian opposition and stands little chance of ending the campaign of indiscriminate violence being waged on behalf of the Assad regime against the long-suffering Syrian people.  Almost no one in Munich thought it would work.

“At the end of the conference, I shared these fears about the state of the world with an Arab diplomat.  ‘I agree,’ he replied, ‘and when we return to Munich next February, it will all be much worse.’”

Iran: The people are voting today (no details as yet) for a new parliament and an Assembly of Experts (which selects the next supreme leader) and aside from a referendum on the nuclear deal it’s also a vote on oil.  Moderates would be expected to increase output, keeping global oil prices low. Hardliners could take the opposite view.

Wednesday, Ayatollah Ali Khamenei proclaimed that he was confident Iranians would vote to maintain the country’s anti-Western stance, which has been in place since the 1979 revolution.  [Andy Critchlow / Reuters]

Jonathan Ruhe and Blake Fleisher / Wall Street Journal

“Iran’s brazen tests of ballistic missiles in recent months highlight a glaring failure of its nuclear agreement with Western powers, agreed to only months ago.  But the focus on Tehran’s ballistic missiles overlooks an important point: Iran already possesses cruise missiles capable of delivering a nuclear warhead.  Neither the nuclear agreement, nor the UN Security Council resolution endorsing it, mention cruise missiles despite the threat they pose.

“Tehran has at least a dozen nuclear-capable Russian-made Kh-55 cruise missiles, procured illegally from Ukraine around 2001.  They have a range of 1,500 miles, allowing Tehran to place a warhead anywhere from Cairo to New Delhi....

“To make matters worse, the nuclear deal will allow Tehran to expand its arsenal of cruise missiles....

“Russia and China, which sold Iran much of its existing military equipment, have taken note.  Their demonstrated eagerness to rebuild ties with Tehran’s defense industry suggests that Iran will have little trouble purchasing turbofan engines and guidance systems to improve its cruise missiles’ range and accuracy.... Chinese-made anti-ship missiles are elemental to Iran’s strategy for contesting U.S. predominance in the Persian Gulf and Gulf of Oman.”

Libya: ISIS briefly took over the security headquarters in the western city of Sabratha, “killing and beheading 12 security officers before being driven out early Wednesday morning, two city security officials said.”  Sabratha “serves as a hub for migrants heading to Europe.”  [Associated Press / Daily Star]

Want more?  “(ISIS) used the headless bodies of the officers they killed to block the roads leading to the security headquarters.”

[This is the very same place the U.S. recently bombed, taking out 30-40 ISIS fighters.  Impact?  None.]

But focus on this chaotic city being a “hub for migrants.”  [See Paris.]

Lebanon: By suspending at least $3 billion in military aid to the Lebanese Army, Saudi Arabia is sending the message that Lebanon has fallen under the control of Iranian-backed Hizbullah, with the Saudis warning their citizens against traveling to the country.

Tony Badran, a Lebanon expert, told the Jerusalem Post: “Saudi Arabia is drawing a line in the sand in the region-wide conflict with Iran,” adding this is not like the old Saudi Arabia that would give aid even if their interests were not being upheld.

I know a little something about this place and this is a huge blow to Saad Hariri, whose family has long benefited from Saudi support, including that bestowed upon his late father, Rafik, who was assassinated in 2005. 

This is the most underreported important story of the month.  And having written extensively of Beirut in my second trip there in 2010 and of the real estate situation, as I noted the last time, it was the Saudis buying up all the luxury apartments overlooking the Mediterranean, let alone the ones frequenting the major shopping centers.  This kills the economy for good.

So this week an Iranian Foreign Ministry spokesman said Iran is prepared to fil the void. The spokesman said Iran views the Lebanese army as a “symbol of national unity” and a front “against terrorism and its spread.”  [Tehran Times]

Lebanon is doomed.

Jordan: King Abdullah paid a visit to the White House on Wednesday and President Obama said the U.S. would continue to give financial aid to help Jordan cope with the more than 1 million refugees from Syria and Iraq that it is hosting.  According to the Jordanian government, the cost of housing Syrian refugees alone could reach $4.2 billion in 2016.

The United States has given more aid to Jordan than any other country, $4.5bn, according to Abdullah.

Afghanistan: Not for nothing, but the Taliban now controls most of Helmand Province after they routed Afghan forces in a strategic district, giving the insurgents control of 10 of 14 districts in this critical region. 

Among other issues, Helmand “is the world’s most important opium-growing region.  Its southern edge flanks the porous border with Pakistan, where the Taliban leadership is based.” [Mujib Mashal / New York Times]

China: Last weekend President Xi Jinping visited the headquarters of the three main Communist Party and state news organizations.  As described by the New York Times’ Edward Wong: “Photographs showed fawning journalists crowding around Mr. Xi, who sat at an anchor’s desk at the state television network.  One media official wrote the president an adoring poem.

“The blanket coverage reflected the brazen and far-reaching media policy announced by Mr. Xi on his choreographed tour: The Chinese news media exists to serve as a propaganda tool for the Communist Party, and it must pledge its fealty to Mr. Xi.”

Needless to say, Xi wants to curb the presence of foreign media companies.

As Edward Wong adds: “Mr. Xi’s appearances were another major effort in his campaign to build a personality cult that equates him with the well-being of the party and the nation. The act of biao tai, or pledging loyalty, by newsroom leaders was one that Mr. Xi has demanded of military leaders and other important figures in the last year....

“(Recent announced new regulations would have) foreign companies – even ones that form joint ventures with Chinese partners – (not being) allowed to publish and distribute online content.”

This puts joint ventures with the likes of Microsoft, Apple and Amazon (think e-books) in jeopardy.

I have written a ton the past few years on how hopelessly naïve some American companies, especially Apple, are in going after the Chinese market. At the first signs of a real crisis, say over the South China Sea, between Washington and Beijing, bye-bye Apple’s market share...and now Xi has cemented the propaganda machine that will hasten its demise.

[I also feel increasingly for Taiwan...it doesn’t stand a chance.]

North Korea: The UN Security Council approved a resolution imposing significant new sanctions on Pyongyang, including mandatory cargo inspections and a cutoff of jet-fuel deliveries to the country, following the North’s recent nuclear and missile tests.  The resolution is expected to be adopted this weekend.

But the Security Council has enacted four previous resolutions targeting North Korea’s nuclear and ballistic missile program since 2006 with little effect.

It does seem to me the new sanctions are an upgrade, including banning the transfer of even small arms, previously allowed under the older resolutions.

For once, China is cooperating.

Nigeria: The New York Times reported Friday that the Pentagon is preparing to send dozens of Special Operations advisers to the front lines of Nigeria’s battle against Boko Haram.  The Americans would supposedly only serve in noncombat advisory roles.

There are currently an estimated 100 Special Ops commandos advising fighters battling ISIS in both Syria and Iraq, with dozens more in Libya and Somalia.

Another 250 American service members have deployed to Cameroon, where U.S. surveillance drones fly over northeastern Nigeria.

Ireland: The nation held elections on Friday and Prime Minister Enda Kenny, who has presided over a coalition government since 2011 as Ireland has roared back from the depths of the global financial crisis, appears to have suffered a big defeat, according to exit polls.  [Were he to survive he’d need a new coalition, but I just haven’t seen the official results.]

Random Musings

--Primary / Caucus Results

Republicans / South Carolina

Donald Trump 32.5 percent
Marco Rubio 22.5
Ted Cruz 22.3
Jeb Bush 7.8
John Kasich 7.6
Ben Carson 7.2

Republicans / Nevada

Trump 46
Rubio 24
Cruz 21
Carson 5
Kasich 4

Democrats / Nevada

Hillary Clinton 52.7
Bernie Sanders 47.2

How did the polls do?  Some of them, like the Wall Street Journal/NBC News poll of South Carolina were awful.  That one had Trump by just five points.  Fox nailed Trump’s percentage at 32%, though had Rubio third at just 15%.

CNN/ORC did a great job in Nevada, with Trump beating Rubio 45-19, Cruz at 17.

On the Democrat side, CNN/ORC had Clinton 48-47, also very good.

--Following Nevada, The Hill commented: “Yes, there is a long way to go.  But if a more conventional candidate than Trump had won three of the first four contests by such emphatic margins, there would be broad consensus that they were on their way to becoming the party’s standard-bearer.”

Regarding Rubio: “There is no polling-based evidence that Rubio will win anywhere on Super Tuesday.... That would leave (him) without a single win in 15 contests.”

Chris Cillizza / Washington Post: [Following S.C.] Winner – Donald Trump. “All he does is win – and win by a lot....If he sweeps – or comes close to sweeping – the March 1 states, it might just all be over.

“Anger: Six in 10 caucusgoers said they were ‘angry’ at the federal government.  That makes them angrier than the Republican electorates in the previous three states....

“Anger is, of course, Trump’s calling card; he won 49 percent of the vote among those who said they were ‘angry’ with the federal government and 43 percent with those who said they were ‘dissatisfied’ with the government.”

Any momentum John Kasich had after his second-place finish in New Hampshire is history.

Ben Carson should have gotten out after South Carolina.

--The Democrats have their South Carolina primary this Saturday.  For the record, Clinton beat Sanders 57% to 41% among women in Nevada, while beating Sanders 3-to-1 among African American voters, though it seems Sanders edged her among Latinos, which the Clinton camp vehemently disputes.

--Susan Page / USA TODAY

“The confident predictions about Donald Trump’s candidacy over the past eight months have been disproven again and again – starting with the judgment that he wouldn’t run, that his outrageous statements would undermine his appeal, that voters would show up for the entertainment value of his rallies but not cast a ballot for him when it mattered.

“Wrong, wrong and wrong....

“Consider this: According to surveys of voters in Nevada on Tuesday, Trump carried evangelical Christians over Cruz, the core of the Texas senator’s base.  He won Hispanics over his two Latino rivals.  He won among every ideological group, every education group, every racial group and both genders.  He won among both Republicans and independents.

“The theme that threads through his supporters is concern and worse about the state of the nation.  Almost every caucusgoer – 94% - expressed a negative view about the government.  Six in 10 described themselves as ‘angry.’  An equal number said they wanted the next president to come from ‘outside politics.’

“Enter Donald Trump.”

Editorial / Washington Post

“The unthinkable is starting to look like the inevitable: Absent an extraordinary effort from people who understand the menace he represents, Donald Trump is likely to be the presidential nominee of the Republicans Party.  At this stage, even an extraordinary effort might fall short. But history will not look kindly on GOP leaders who fail to do everything in their power to prevent a bullying demagogue from becoming their standard-bearer.

“A few days ago we criticized Republican National Committee Chairman Reince Priebus for his assertion that a Trump victory in November would silence the doubters.  ‘Winning is the antidote to a lot of things,’ Mr. Priebus had said.  We argued that winning would not erase the bigotry and ugliness of Mr. Trump’s campaign, nor remove the dangers of a Trump presidency. On Wednesday, the GOP chairman, perhaps wanting to show that he can match Mr. Trump in eloquence, responded: ‘That is the stupidest editorial that I have ever seen.’

“So it falls to other leaders to decide if their party will stand for anything other than winning.  A political party, after all, isn’t meant to be merely a collection of consultants, lobbyists and functionaries angling for jobs.  It is supposed to have principles: in the Republican case, at least as we have always understood it, to include a commitment to efficient government, free markets and open debate.

“Now it is faced with a front-runner who, in the interval between the two Priebus comments cited above, said of a protester, ‘I’d like to punch him in the face.’  This is a front-runner with no credible agenda and no suitable experience....

“There was an assumption that Mr. Trump would fade, and that confronting him would only make him stronger.

“The calculations have proved wrong. If Mr. Trump is to be stopped, now is the time for leaders of conscience to say they will not and cannot support him and to do what they can to stop him.  We understand that Mr. Trump would seek to use this to his benefit, and that he might succeed. But what is the choice?  Is the Republican Party truly not going to resist its own debasement?”

Jonathan Bernstein / Bloomberg

“The question is whether anyone will try to stop (Trump). It takes two things. The first one Republicans finally did, when party actors broke clearly for Marco Rubio this past week.  It seems to be helping a little, since he’s moved up to second place in South Carolina and Nevada.  But that’s not enough.

“The second part is to take Trump down.  A myth has evolved that negative ads don’t work against Trump, but in the two states where they were tried at least to some extent – Iowa and South Carolina – they did seem to have some results.  We’re not talking about someone with 70 percent of the vote and an insurmountable lead.  Trump should be easy to take on, and given how much money should be available, not every hit needs to be effective for an overall campaign to succeed....

“(If Republicans don’t fight hard the next few week), they risk losing their party entirely, and for all we know they may never get it back. Republicans in the Senate are fighting hard against allowing Barack Obama to fill a Supreme Court vacancy; Republicans on the campaign trail are allowing a loose cannon who could easily drag down every Republican on the ballot this November.”

--And then on Friday, Donald Trump received a big endorsement, that of New Jersey Gov. and one-time rival, Chris Christie, a member of the establishment.  Exactly what Trump needed.

“I’ve gotten to know all the people on that stage, and there is no one who is better prepared to provide America with the strong leadership that it needs, both at home and around the world, than Donald Trump,” Christie said during a news conference with Trump in Fort Worth.

The governor is obviously a potential running mate or cabinet member.

--As for Super Tuesday, the states for the Republicans are Alabama, Alaska, Arkansas, Georgia, Massachusetts, Minnesota, Oklahoma, Tennessee, Texas, Vermont and Virginia.

It’s really all about Texas and whether Cruz can hold on in his home state, while Rubio and Kasich are acting like they can hang on until their respective home states, Florida and Ohio, but they aren’t until March 15.

In a Quinnipiac University Poll this week of Ohio prospective voters, Trump leads Kasich 31-26, with Cruz at 21% and Rubio 13%.  Of course these numbers could change drastically after Super Tuesday but it doesn’t look good for Kasich.

Ditto Marco Rubio in Florida, who in polls there trails Trump badly, including a Quinnipiac University survey that has Trump ahead 44-28.

--A Bloomberg Politics poll shows Trump is backed by 37 percent of likely Republican presidential primary voters in seven Super Tuesday Bible Belt states, compared to 20% for both Rubio and Cruz.

--A Washington Post-Univision survey of Hispanic voters has Trump losing the segment to Clinton by 73 to 16 percent, the worst among GOP candidates.  The gap is significantly wider than the 44-point margin by which Mitt Romney lost Hispanics four years ago.

But Clinton leads Rubio by ‘just’ 30 points, Cruz by 38 and Kasich by 43. Trump trails Sanders (in a hypothetical) among Hispanics by 56 percent, while Sanders leads Rubio by 24 points.

--As for Thursday’s Republican debate.

John Podhoretz / New York Post

“If debates can change the course of an election, we’ll learn it soon, because Marco Rubio utterly trounced Donald Trump last night in the most commanding performance we’ve seen in the 10 GOP scuffles thus far.

“I use the word ‘trounced’ advisedly. After an hour in which Rubio turned Trump’s own game on him with quick jabs and mocking counterjabs, and Ted Cruz joined in a tag-team effort with his Florida rival, Trump was actually complaining he was getting too many questions and too much time to speak.

“A frustrated Trump tried to flummox Rubio by calling him a ‘choke artist’ and referencing the senator’s bad New Hampshire confrontation with Chris Christie, but the opposite was the case.  Rubio came loaded for bear.  He knows that his back is against the wall, that Trump leads in almost all of the 12 states that will vote on Tuesday and that he has to alter the trajectory of the race in his favor.

“ ‘If he builds the wall the way he built Trump Tower, he’d be using illegal immigrants to do it,’ Rubio said.

“ ‘Make them in America,’ he said to Trump about the ties and suits that bear his brand name, which are made in China.

“ ‘You have a fake university,’ he said about Trump University.

“ ‘If he hadn’t inherited $200 million, you know where Donald Trump would be right now?’ Rubio said.  ‘Selling watches in Manhattan.’....

“This debate demonstrated just how destructive it was to the Republican Party that there were so many candidates crowding the stages at the earlier debates.  With only five last night, the necessary battle for the nomination between the front-runner who has changed the rules of American politics and the two insurgent Republican politicians who still have a chance to catch him was finally joined.”

Jennifer Rubin / Washington Post

“On arguably the most important night of his political career Sen. Marco Rubio turned in an outstanding performance, thus raising hopes the GOP might be able to save itself from Donald Trump....

“Cruz had a good showing as well, but was sidelined for long stretches of the debate, allowing Rubio to assume the role of Trump’s prime antagonist. When Cruz did weigh in, he seemed to merely echo Rubio’s argument....

“Trump had his own self-inflicted calamities.  He declared we should not ‘defend all these countries.’  He insisted no one is more pro-Israel than he – and to prove it cited awards many celebrities receive.  He proclaimed that the budget could be balanced by eliminating ‘waste, fraud and abuse.’  Whether it will make any difference remains to be seen, but for the first time one could see how he can be mocked and challenged.

“Ohio Gov. John Kasich, apparently angling for the vice presidency, refused to attack Trump.  He spewed many words, but said little that was memorable. Dr. Ben Carson brought down the energy level each time he spoke, reminding us the RNC should be limiting the debates to real contenders.”

Chris Cillizza / Washington Post

“Winner – Marco Rubio: This was not only Rubio’s best debate performance.  It was the best debate performance by any candidate in any debate so far in the 2016 election.  Rubio, grasping the fact that if nothing changes in this race he – and everyone else – will lose to Donald Trump, hit Trump at every turn.  He savaged Trump on using illegal immigrants to help build Trump Tower.  He went after Trump for inheriting money.  He hit Trump for his position on Israel and Palestine.  And, most importantly, he rattled Trump during a back and forth over Obamacare....

“What Rubio’s stellar performance means is that the race between now and Tuesday – and March 15 and beyond – will be cast as a two-man showdown between Trump and Rubio. That’s the only chance Rubio has of winning.  What I don’t know is whether the punches Rubio landed will do any lasting damage to Trump.  Nothing else has – yet.....

“Loser – Ted Cruz: Cruz watched – and I do mean watched – as Rubio turned the race into a two-man contest between he and Trump.  Cruz was strangely absent from the main back-and-forths of the night....

“Loser – Donald Trump: This wasn’t Trump’s worst debate.  In fact, it might not even be in the bottom half of his performances.  He generally counter-punched admirably – particularly against Cruz.  But, Rubio got the better of Trump on several occasions; the Florida senator found ways to embarrass and mock Trump, which is something no one in any previous debate has been able to do.”

--Jeb Bush dropped out after his miserable showing in South Carolina, as well as Iowa and New Hampshire.  His campaign spent a staggering $130 million and, personally, for the life of me I was trying to figure out why Bush was wasting money in the New York City media market where I reside when New York, New Jersey and Connecticut weren’t close to holding primaries.  [Mid-April and beyond.]

At least he gave a classy and dignified speech shortly after the results on Saturday became known, but as Chris Cillizza of the Washington Post put it, in the final days leading up to the primary, Trump’s full frontal assault “on the legacy of George W. Bush is particularly painful for the Bush family and a remarkable testament to the fact that the GOP of the Bushes is no more.”

--Senate Republican leaders, including from the Senate Judiciary Committee, rejected holding any election-year Supreme Court confirmation hearings, saying on Tuesday they would not even meet with President Obama’s nominee to replace Justice Antonin Scalia.

But a day later, there was talk Senate Majority Leader Mitch McConnell and Judiciary Committee chairman Sen. Charles Grassley would meet with the president as some Republican senators, such as Susan Collins of Maine and Mark S. Kirk of Illinois, have already said they would be willing to vote on a candidate.

The Hill notes that there are five endangered Senate Republican incumbents running for reelection in states won in 2008 and 2012 by Obama.

Republicans are also trying to hold onto the seat being vacated by Marco Rubio, and while Republicans in states such as North Carolina, Missouri and Indiana don’t seem endangered now, Donald Trump’s rise coupled with anti-Washington fervor is causing unease in these too.

Separately, Democrats attempted to contain the damage from a June 1992 Senate floor speech by then-Senator Joseph Biden, who urged President George H.W. Bush not to make a nomination to the Supreme Court until after that year’s presidential election.  Biden said his words were taken out of context.

--President Obama submitted a plan to Congress on Tuesday to close Guantanamo Bay, which House Speaker Paul Ryan said was dead on arrival.  For starters, there were zero details on the sites where the detainees would be sent.

Editorial / Wall Street Journal

“The day after he was first sworn in, President Obama issued an executive order declaring that he would shut down the terrorist detention camp at Guantanamo Bay in Cuba ‘no later than one year from the date of this order.’ That was January 2009 in one of his first acts as President.  Congress has since used its power of the purse to frustrate the President’s effort. So on Tuesday he said he’s going to try again in one of his last acts as President.

“It’s not going to happen – at least not if Mr. Obama follows the law.  Polls show the American people oppose closing Gitmo by about two to one, politicians in both parties oppose closing it, and the past seven years have taught that the camp plays an important role in keeping America safe.

“One reason is because Americans have figured out that the alternative is bringing these terrorists to the mainland. It’s easy to call for Gitmo’s closure in the abstract.  It’s harder to explain to voters why Khalid Sheikh Mohammed and other killers may soon move into a prison near you.”

As the Journal notes, back in 2009, after Obama first proposed closing the prison, the vote in the Democratic Senate that May was 90 to 6 against him.

The Journal concludes:

“The great political irony is that Mr. Obama is the main cause of his own Guantanamo failure.  If he hadn’t let Islamic State rise in Syria and Iraq, if he hadn’t let Libya become another terror incubator, and if he hadn’t let al-Qaeda make a comeback via multiple local franchises, the American people might feel more relaxed about closing the terror prison.  As the tide of war keeps rising, Americans know they need it.”

--Virginia Heffernan / Wall Street Journal

“Around 70% of teenagers in the U.S. own an iPhone, Nancy Jo Sales reports in her enlightening account of ‘social media and the secret lives of teenagers.’  ‘It’s like Apple has a monopoly on adolescence,’ Billie, a high-schooler in Boca Raton, Fla., tells Ms. Sales. And what those phones are for seems to be, chiefly, the high-speed form of stagey fraternizing known as social media.  ‘Social media is destroying our lives,’ a 16-year-old girl in an L.A. shopping mall tells Ms. Sales. But then the girl’s friend shoots back: Without social media, ‘we would have no life.’....

“(The takeaway from Ms. Sales’ research): Teen girls think feverishly about sex, popularity, their looks, their moods and social dynamics....

“(It) turns out one of the main uses teens make of their phones is to watch, wield and circulate naked pictures of themselves....

“(But) while a nude photo of a guy is practically worthless, a nude photo of a girl can be used as currency, traded with friends for marijuana or liquor – that’s ‘lq’ in textspeak.

“ ‘If you don’t send them nudes, they say you’re a prude,’ says Cassy, another Floridian teen, of boys.  Sophia, in Montclair, N.J., argues that these exchanges take finesse: ‘If you get mad they’ll think you have no chill,’ she says.  ‘But if you just laugh, then they’ll be aggravated, but they won’t do anything bad to you.’  ‘Anything bad’ is usually circulating rumors or nudes (real or fake), after which the standard dynamics of bullying, shaming and scapegoating take over.....

“Which brings us to the girls’ own selfies – not necessarily nudes but simply carefully posed, coquettish and sultry pictures – posted to Instagram or Snapchat and designed to attract coveted ‘likes.’... ‘Every girl wishes she could get three hundred likes on her pictures,’ says Teresa, a 17-year-old in Livingston, N.J.  ‘Because that means you’re the girl everybody wants’ to have sex with.’”

Oh brother.

I had a great childhood.  I rushed home after school every day, changed into my ‘play clothes,’ gathered up a friend or two (or ten) and played the sport of the season.

But no doubt today I’d be just like all the rest.  And that would suck.

--Way back in 1999, I went to the Treblinka extermination camp in Poland, where an estimated 800,000 perished, and I saw this week that the last survivor of a revolt there, Samuel Willenberg, died at his home in Tel Aviv. He was 93.

In August 1943, Willenberg and 199 others escaped but only 67 survived.  And as if that wasn’t enough, he played a role in the Polish resistance against the Germans, and then after the war served in the Polish Army, before moving to Israel in 1950, where from 1993 onward, he and his wife, a survivor of the Warsaw Ghetto, led youth groups to Poland where he told his story.

--From The Economist:

“Ample evidence shows that exercising regularly reduces the risk of cancer.  Similarly, those who have survived the disease are less likely to see it return if they engage in lots of physical activity after treatment.  All this suggests that such activity triggers a reaction in the body which somehow thwarts cancer calls, but the details of the process have remained murky. Now, a team led by Pernille Hojman at Copenhagen University Hospital, in Denmark, has reported in Cell Metablism that the key to the mystery is adrenalin.”

--Finally, I didn’t comment on Harper Lee’s death last time because I wanted to ‘wait 24 hours,’ not being happy with how her final year played out and whether the author of “To Kill a Mockingbird,” long in an assisted-living facility, really wanted her second book, “Go Set a Watchman,” released.  I’ve seen those representing her publisher (and estate) saying she was totally aware of what was going on and that she wanted it out, but I frankly don’t trust them; even those who are emphatic that Ms. Lee was like, ‘Of course I wanted that book published.’

All these years she knew she had written it but suddenly it was found?  I just don’t believe Lee wanted it released, especially since it was such a different portrayal of Atticus Finch. She knew the importance in American culture of the Finch from her classic.

Then again, what the heck do I know?  I haven’t had time to read a book for years and I sure as hell will never read “Go Set a Watchman.” 

Instead, I agree with James McBride, winner of the National Book Award in 2013 for the novel “Good Lord Bird” and an upcoming nonfiction book, “Kill ‘em and Leave” about James Brown, when he told the Associated Press’ Hillel Italie:

“I prefer to remember ‘To Kill a Mockingbird’ and Atticus Finch and all those characters as Harper Lee wanted us to remember them.  I believe she wasn’t strong enough at the end of her life to make any informed decisions about her work.”

---

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

God bless America.

---

Gold closed at $1223
Oil $32.78...best week since Aug., but whoopty damn do...

Returns for the market 2/22-2/26

Dow Jones  +1.5%  [16639]
S&P 500  +1.6%  [1948]
S&P MidCap  +2.7%
Russell 2000  +2.7%
Nasdaq  +1.9%  [4590]

Returns for the period 1/1/16-2/26/16

Dow Jones  -4.5%
S&P 500  -4.7%
S&P MidCap  -4.2%
Russell 2000  -8.7%
Nasdaq  -8.3%

Bulls 34.7 [up from 26.5...and 24.7 two weeks ago]
Bears 35.7 [Source: Investors Intelligence]

Have a great week.  I appreciate your support.

Brian Trumbore