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03/05/2016

For the week 2/29-3/4

[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 Bill S. this week.

Edition 882

Washington and Wall Street

[I cover the election in full in “Random Musings”]

In prepared remarks for a speech he was giving later in China, Bill Dudley, president of the New York Fed, said the hazards facing the U.S. have escalated amid this year’s market turmoil and worries about emerging market growth and should the turmoil continue, it would trigger a “more significant downgrade” to his outlook.  He added a further fall in inflation expectations would be “worrisome,” as such a view could become entrenched in investors and consumers’ outlooks.

“At this moment, I judge that the balance of risks to my growth and inflation outlooks may be starting to tilt slightly to the downside,” his speech read.  [Financial Times]

Dudley’s view is important ahead of the Federal Reserve Open Market Committee’s March 15-16 meeting, but how bad is it out there, especially here?

Stocks registered strong gains for a third consecutive week with the Dow and S&P 500 trading at their best levels since January, the Dow closing above 17000 (17006) and the S&P 2000 (though finishing at 1999.99 at the last moment) on Friday.  Nasdaq is also at its best level since January.

The economic data has been pretty solid.  Friday’s non-farm payrolls report showed employers added 242,000 jobs in February and, coupled with the prior two months’ figures being revised up by 30,000, the three-month average gain is 228,000.  The unemployment rate held steady at 4.9%, while U6, the underemployment (real) rate fell to 9.7%, the best since May 2008.

The fly in the ointment was average hourly wages ticked down 0.1% from the prior month, putting the year over year increase at just 2.2%, and this will clearly lead the Fed to hold the line on any further rate increases on March 16.

At the same time, there should be zero talk of tipping into recession, with the Atlanta Fed’s GDPNow indicator currently pegging first-quarter GDP at 2.2%.

In other economic news, the Chicago PMI for manufacturing in the region was a disappointing 47.6 (50 being the dividing line between growth and contraction), while the February ISM on manufacturing was 49.5, better than expected.  The services figure was a decent 53.4.

Factory orders in January rose 1.6%, while construction spending was up 1.5%, both good.

Add it all up and Wall Street has the best of both worlds, a seemingly stable economy with zero reason for the Fed to hike again.

On the earnings front, with virtually all of the S&P 500 companies reporting, guidance for the first quarter shows earnings declining 5.9% year over year, according to Thomson/Reuters.  At the start of the year, Q1 earnings were expected to rise 2.3%.  [FactSet had estimated Q1 at the start up 0.6%, but now says earnings will fall 7.4%.]

More companies have been warning on Q1 than normal, though much of this is the result of the crash in energy prices, with the projected fall in earnings for the sector tumbling to down 93.3% for the first quarter, vs. a Jan. 1 estimate of down 41.4%.

Europe and Asia

The European Central Bank meets on March 10 and is expected to cut the deposit rate further into negative territory, but the financial markets have been expecting more, like additional quantitative easing, and they might be disappointed.  ECB governing council member Francois Villeroy de Galhau said the other day that despite the inflation rate you see below, the eurozone was not in deflation.

“Once oil prices stabilize, we should see inflation turn slightly positive in the second half of the year.”

There was a slew of economic data from the eurozone.  The final PMI for manufacturing in February was 51.2 vs. 52.3, as reported by Markit.  The service reading was 53.3, down from 53.6.

Germany came in at just 50.5 vs. 52.3 on the manufacturing front in January, a 15-mo. low, while the service reading edged up to 55.3 from 55.0.

France’s manufacturing PMI was 50.2 last month (50.0 Jan.); services 49.2, a 15-mo. low.

Italy’s manufacturing number was 52.2 vs. 53.2, a 12-mo. low; services 53.8.

Spain’s manufacturing reading was 54.1 vs. 55.4 in January; services also 54.1.

Greece had a manufacturing PMI of just 48.4, down from 50.0, while non-euro UK reported 50.8 vs. 52.9.

Eurostat’s flash reading on eurozone inflation for February was -0.2% annualized, down from 0.3% in January but due largely to falling energy prices.

And the volume of retail trade in the euro area was 0.4% in January over December, while the retail PMI for February was 50.1, a 4-mo. high, as there was a rebound in Germany, offsetting declines in Italy and France.

Lastly, Eurostat reported the eurozone unemployment rate for January was 10.3%, the lowest in 53 months, though contrasting with the 4.9% in the U.S.

Germany’s was the lowest at 4.3%, France 10.2%, Italy 10.5%, Spain 20.5% and Greece 24.6% (Nov.).

Youth unemployment is still a big problem, with a youth jobless rate of 48% in Greece (Nov.), 45% in Spain and 39.3% in Italy.

Chris Williamson, Chief Economist at Markit:

“With factory output in the eurozone showing the smallest rise for a year in February, concerns are growing that the region is facing yet another year of sluggish growth in 2016, or even another downturn.

“Lackluster domestic demand is being compounded by a worsening global picture. Exports either fell or rose more slowly in all countries surveyed with the sole exception of Austria.

“For a region in desperate need of lower unemployment, the near-stalling of jobs growth in the manufacturing sector comes as disappointing news.  Firms are cutting back on their hiring due to worries about the outlook.

“Prices are meanwhile being dropped as firms endeavor to boost sales, suggesting deflationary pressures have intensified....

“With all indicators – from output and demand to employment and prices – turning down, the survey will add pressure on the ECB to act quickly and aggressively to avert another economic downturn.”

Separately, Spain continues to be roiled by the inability of anyone to form a government post-election.  Pedro Sanchez, the leader of the center-left Socialist party, was the latest to give it a go but he could only cobble together 130 out of 350 deputies in parliament.  Popular party leader Mariano Rajoy, acting prime minister, refused to join a coalition with Sanchez, though Rajoy has been unable to form a coalition of his own. 

But Sanchez has another shot on Friday.  If the situation then remains the same over the next two months, Spain will have to hold another vote on June 26.

On the migration front...Eurostat released its latest report and for 2015, 1,255,600 first time asylum seekers applied for international protection in the European Union, a number more than double that of the previous year.  The number of Syrians seeking protection doubled to 362,800 over 2014, while the number of Afghans quadruped to 178,200 and that of Iraqis multiplied by 7 to 121,500.

More than a third of the first time applicants were registered in Germany.

So this week....

European Union president Donald Tusk, traveling throughout the continent and meeting leaders in an attempt to find a solution to the refugee crisis, said in Athens after meeting Greek Prime Minister Alexis Tsipras:

“I want to appeal to all potential illegal economic migrants wherever you are from: Do not come to Europe.

“Do not believe the smugglers.  Do not risk your lives and your money.  It is all for nothing.”

120,000 refugees have crossed into Greece in the first two months of the year, according to the UN refugee agency, with the government estimating 25,000 of those being stranded there.

The European Commission announced it was seeking 700m euro in emergency aid for Greece and other countries dealing with the wave.  European leaders hold a critical meeting in Brussels on Monday to try to come up with a solution.

The biggest immediate issue, aside from the growing throngs from Syria, is individual European countries imposing their own border controls.  Refugees are piling up in the Aegean islands and in central Athens, after both Macedonia and Serbia shut their borders.  A similar knock-on effect is happening throughout Eastern Europe.

The Brussels agreement on Monday is supposed to see all non-Syrian migrants reaching Greek islands returned to Turkey.

German Chancellor Angela Merkel said on Wednesday:

“The strength of our single currency relies on the free movement of goods and services as well as people, and therefore the protection of our external border is our joint European project.

“All 28 members of the European Union define this the same way and have said that we need to ensure that this border is protected.”

But Merkel won’t last the year, at least that’s my prediction, and it doesn’t help that recently released German government figures show more than 130,000 asylum seekers may have disappeared in Germany, raising concerns over terrorism and organized crime.

Merkel’s government had to admit it had lost track of the hordes in a question session in parliament.  The missing people never arrived at official government refugee accommodations that had been assigned to them.  Who knows how many are Islamic extremists?

For two months, it has emerged, Germany has been searching frantically for 12 asylum seekers who simply vanished, but what makes this so urgent is the 12 were believed to have crossed the border using forged passports from the same source as those used by some of the Paris attackers.

Wolfgang Munchau / Financial Times

“There is now a real possibility that the EU system for border and immigration controls will break down in about 10 days.  [Ed. Munchau wrote this Feb. 28]  On March 7, EU leaders will hold a summit in Brussels with Ahmet Davutoglu, the Turkish prime minister.

“The idea is to persuade Ankara to do what Greece failed to do: protect the EU’s southeastern border and halt the flow of immigrants.  There is a lot of behind-the-scenes diplomacy going on between Germany and Turkey.  The mood in Berlin, however, is not good.

“The action taken by Austria, Hungary and other countries to protect their national borders has shut the western Balkan route along which migrants had made their way to Germany.

“Refugees now find themselves trapped in Greece....

“A refugee crisis that spins out of control could tilt the vote in the British referendum.  There is no way the EU will be able to deal with two simultaneous shocks of such size.  Coming at a time like this, Brexit has the potential to destroy the EU....

“Member states have lost the will to find joint solutions for problems that they could solve at the level of the EU but not on their own....

“Ms. Merkel must take much of the blame.  Her open-door policy was anti-European in that she unilaterally imposed it on her own country and on the rest of Europe.  She consulted only Austrian Chancellor Werner Feymann.

“The EU is at risk of four fractures.  I do not expect all of them to happen but I would be surprised if none did.  The first is a north-south break-up over refugees.  The so-called Schengen system of passport-free travel, in which 26 European countries take part, could be suspended indefinitely or become a miniature version comprising just Germany, France and the Benelux countries.  Italy would not be part of it.

“A second north-south faultline is the euro.  Nothing has changed here. Echoes of the eurozone crisis linger on and the Greek position is as unsustainable today as it was last summer.

“The third is an east-west divide.  Will the open societies of western Europe want to be tied into an ever-close union with the likes of (Hungary’s Viktor) Orban or the other nationalists in central or eastern Europe?

“Finally, there is Brexit.  There is no way of knowing the outcome of the British referendum.  The opinion polls are as useless as they were during last year’s general election.”

Regarding the looming British referendum, June 23, on staying in or exiting the EU, Emmanuel Macron, the French economy minister, said if the UK leaves, France would relocate its migrant camp from Calais to Britain and roll out “a red carpet” for bankers fleeing London.

Macron said the bilateral relationship could change abruptly in the event of Brexit, including new trade obstacles.

In an interview with the Financial Times, Macron said Brexit would kill a bilateral deal with France that allows Britain to carry out border controls – and keep unwanted migrants – on the French side of the Channel.

And he also expected that bankers would flee London in droves because their institutions would lose “passport” rights that allow them to operate across the EU.

---

Turning to Asia....

As China’s National People’s Congress gathered in Beijing (covered more below), the government reported the manufacturing PMI for February was just 49.0, the worst since January 2009, while the services index was 52.7, down from 53.5.

The private Caixin manufacturing PMI was 48.0 last month vs. 48.4 in January, with the services reading at 51.2 vs. 52.4.

Since the Chinese New Year holiday fell in February that no doubt skewed the manufacturing numbers as most factories closed for a spell, but it should have then been better news for services.

One additional item...the government said on Monday that a total of 1.8 million workers in China’s coal and steel sectors are expected to lose their jobs as part of the effort to reduce industrial overcapacity; 1.3 million from the coal industry, 500,000 from the latter.

But if the workers don’t receive abundant compensation or are provided new opportunities, there is going to be major unrest.

In Japan, the government will release fourth-quarter GDP next Tuesday and it is now expected to have shrunk 1.5% annualized. 

The February PMI for manufacturing was 50.1 vs. 52.3 in January, while the services reading was 51.2 vs. 52.4 (yes, same as China’s).

The government also for the first time sold 10-year bonds with a negative yield, -0.024 percent.

Elsewhere in Asia, you had manufacturing PMIs of 49.4 in Taiwan, 48.7 in South Korea and 51.1 in India; hardly roaring growth.

Street Bytes

--The S&P 500, in rising 2.7% this week, has now gained 7.3% in the last three and it’s the first time since 2009 the benchmark has surged 1.5% three weeks in  row.  The Dow Jones gained 2.2% and Nasdaq 2.8%, with the year to date loss on the Dow and S&P now just 2%, while Nasdaq has cut its loss to 6%.  For all three it’s the best three week stretch since 2014.

With the rally in oil, energy stocks and financials have been leading the way.

--U.S. Treasury Yields

6-mo. 0.45%  2-yr. 0.86%  10-yr. 1.87%  30-yr. 2.69%

The yield on the 10-year rose from 1.76% the week before with the better economic news.

But the euro bond market, particularly Germany’s, could be cruisin’ for a bruisin’.  With oil prices rising off their January lows, eurozone inflation expectations are rising and that could spell trouble for German Bunds, especially if the ECB disappoints at next week’s meeting.  The 10-year Bund hit a 10-month low yield of 0.10% this week, but it closed Friday at 0.24%.  Last April, the 10-year jumped from 0.049% to 1.059% in just two months.

--In his monthly investment newsletter, Janus Capital’s Bill Gross said that negative rates may be the final act of a death spiral.

“Instead of historically generating economic growth via a wealth effect and its trickle-down effect on the real economy, negative investment rates and the expansion of central bank balance sheets via quantitative easing are creating negative effects,” he wrote.

Aside from impacting bank profits, other business models, such as those for insurance companies and pension funds that depend on 7 to 8 percent annual returns on assets are taking a hit.

“And the damage extends to all savers; households world-wide that saved/invested money for college, retirement or for medical bills. They have been damaged, and only now are becoming aware of it.”

--According to a USA TODAY analysis of data from S&P Global Market Intelligence, just 28 firms in the S&P 500 – including the likes of Apple and JPMorgan Chase, accounted for 50% of U.S. profits within the index.  In 2014, 52 S&P 500 companies generated half the overall profits.

So profits have become even more concentrated.  [Matt Krantz / USA TODAY]

--As noted above, oil rose to a two-month high this week as traders believe stories of an output agreement among the large producers could pan out.  Russia’s energy minister said Tuesday that a “critical mass” of oil-producing countries had agreed to freeze production; a group that would include Russia, Saudi Arabia, Venezuela and Qatar.

But the market still has to deal with record inventories and Iran hasn’t said it would participate as it continues to ramp up following the lifting of sanctions.

And sure enough, the day after the talk from Russia, U.S. inventories rose four-times more than forecast, jumping 10.4m barrels to 518m, a “historically high” level for this time of year, according to the Energy Department.  You aren’t going to get West Texas Intermediate (the benchmark I list down below each week) over $40 until you work off the surplus.  That said the rally has been substantial.

My eye in the sky, commercial airline pilot Bobby C., sent me a note this week:  “Oil tanker ships, sitting low in the water (meaning they are full), are lined up in San Francisco Bay and outside Long Beach harbor for as far as the eye can see.”

--But, some traders are betting the bottom is in on commodities in general, thus the sloughing off of further inventory gains for crude.

Industrial metals such as copper are at their highest levels since the fall, which has triggered a big rally in beaten-down mining stocks.

And recent news from China, that the world’s largest consumer of commodities will continue to support economic growth, has also helped sentiment and the belief we’ve bottomed.

--ExxonMobil, the world’s largest listed oil company, expects no increase in production in 2020 over last year, with capital spending having been cut 25 percent, with a further reduction in 2017.

CEO Rex Tillerson said criticism of the company for lack of production growth “doesn’t bother us,” adding Exxon was constantly working to offset the natural decline in output from its oil and gas wells.

“People say, ‘Well, you’re not growing,’ That just tells you how hard it is to hold your own in a depleting business.”

Tillerson added that many smaller U.S. oil companies had been “destroying value” by loading up with debt, which meant that attractive assets were encumbered.

--The number of rigs drilling for oil in the U.S. fell by 8 last week to 392, the first drop below 400 since the financial crisis, as reported by Baker Hughes.

--Aubrey McClendon, one of the leading figures in the U.S. oil and gas industry, including the shale revolution, was indicted on Tuesday for conspiring to rig bids for O&G leases in northwestern Oklahoma.  The indictment alleged McClendon worked with executives at another unnamed company to hold down the price of those leases.

The charges are serious and carry a maximum sentence of 10 years in prison for each violation.

McClendon issued a statement following the indictment:

“The charge that has been filed against me today is wrong and unprecedented.  I have been singled out as the only person in the oil and gas industry in over 110 years since the Sherman Act became law to have been accused of this crime in relation to joint bidding on leaseholds.”

But on Wednesday, McClendon died in a single-car crash in Oklahoma City, his base.  He wasn’t wearing a seat belt and there is no official word (if there ever will be) that there was a medical condition or it was suicide.

McClendon was a larger-than-life figure, who transformed Chesapeake Energy, the company he founded in 1989 with just $50,000, into the second-largest gas producer in the country, behind Exxon-Mobil.  He was also a part-owner of the Oklahoma City Thunder basketball team and a generous donor to causes in the city.

--U.S. auto sales continued to rock and roll in February, with Ford’s up 20.2%, Fiat Chrysler’s 12%, GM’s 6.6% and Toyota’s 5.2%.  Honda’s rose 13%, with its Civic model up 32%, and Nissan Motor Co. saw its sales rise 11%.

Those low prices at the gas pump help big time.  February’s seasonally adjusted annual rate is in the 17.9m vehicles range, up 10.8% from February 2015.

Ford’s SUV sales rose 29% year over year.  Fiat Chrysler’s were up 23% for its Jeep SUV brand.

Meanwhile, having halted sales of diesel cars due to its emissions-cheating scandal, Volkswagen’s sales declined 13% for the month.  But its Tiguan (small SUV) sales soared 78%.

--Monsanto, in issuing a profit warning, nonetheless said there were signs of stabilization in the farm economy.

The world’s biggest seller of corn and soybean seeds, as well as the maker of Roundup weed killer, announced it doesn’t plan any further job cuts after laying off about 3,600 in recent months, or 16% of its global workforce.

“There are no signs of improvement, but not much indication of further deterioration,” said CEO Hugh Grant.

The U.S. farmer has been hit by lower global crop prices and the strong dollar.

--Apple is fighting a court order to help the FBI bypass the passcode-security measures on the phone used by Syed Rizwan Farook, one of the two assailants in the San Bernardino attacks.

County officials had reset the cloud storage account connected to the phone, which impeded the FBI’s ability to access more of the data.

“There was a mistake made in that 24 hours after the attack, where the county at the FBI’s request took steps that made it impossible later to cause the phone to back up to the cloud,” FBI Director James Comey told the House Judiciary Committee.

Apple’s lawyer, Bruce Sewell, said the company must draw a line when the government tries to force its employees to weaken the overall security of its products.

The day before, a federal judge in New York ruled that government can’t compel Apple to help investigators extract data from a locked iPhone in a drug probe, thus giving support to Apple’s position in its fight against a California judge’s order that it create specialized software to help the FBI hack into Farook’s device.

Rep. Trey Gowdy (R., S.C.) said national security concerns should trump privacy worries.  “You can go into people’s bodies and remove bullets, but you can’t look in a dead person’s phone,” he said. “I just find it baffling.”  [Devlin Barrett / Wall Street Journal]

Editorial / Wall Street Journal

“The Apple encryption conflict has turned nasty, as the Obama Administration, most Republicans and public opinion turn against the tech company.  But, lo, Apple won its first court test on Monday, and its legal briefs against the court order to unlock an iPhone used by the San Bernardino jihadists show it has a better argument than the government....

“(A) California magistrate ordered the company to design a custom version of its operating software that will disable certain security features and permit the FBI to break the password.  Apple has cooperated with the probe but argues that forcing it to write new code is illegal.

“One confusion promoted by the FBI is that its order is merely a run-of-the-mill search warrant. This is false. The FBI is invoking the 1789 All Writs Act, an otherwise unremarkable law that grants judges the authority to enforce their orders as ‘necessary or appropriate.’  The problem is that the All Writs Act is not a catch-all license for anything judges want to do.  They can only exercise powers that Congress has granted them.

“Congress knows how to require private companies to serve public needs. The law obligates telecoms, for example, to assist with surveillance collection.  But Congress has never said the courts can commandeer companies to provide digital forensics or devise programs it would be theoretically useful for the FBI to have – even if they are ‘necessary’ for a search.

“Congress could instruct tech makers from now on to build ‘back doors’ into their devices for law-enforcement use, for better or more likely worse.  But this back-door debate has raged for two years.  In the absence of congressional action, the courts can’t now appoint themselves as a super legislature to commandeer innocent third parties ex post facto....

“FBI director James Comey told Congress last week that the Apple case was ‘unlikely to be a trailblazer’ and that it also would be ‘instructive for other courts.’  Well, which is it?  This contradiction isn’t the only reason to wonder if Mr. Comey prefers an encryption legal precedent over Farook’s actual data....

“We bow to no one in defense of antiterror programs whose political popularity waxes and wanes, especially on surveillance. But this case isn’t about ‘privacy.’  This is about engineering security and its implications for the security of all Americans.

“Back doors are engineering vulnerabilities that make devices less secure. But terrorists and criminals will always be able to find some underground encrypted communication channel, so regulating back doors into legal devices achieves little national-security benefit.  To borrow a line from James Burnham, if there’s no alternative, there’s no problem.”

Evgeny Morozov / Financial Times

“Something in the government’s rhetoric does not add up.  The FBI either has solid reasons to break into that phone – in which case it is not obvious why the mighty power of the National Security Agency and other government bodies has not yet been mobilized – or it is simply using the San Bernardino case as an excuse to redefine its relationship with Silicon Valley....

“While the FBI’s defense has been that their request is extremely narrow – once Apple has facilitated access to that single phone, it is free to destroy the code required to do so – the broader political context in which this battle unfolds suggests that Apple’s stance will have far-reaching implications.

“First, the FBI’s request comes at a time when the U.S. government is exerting immense pressure on America’s largest technology companies to join it in the fight against ISIS....

“While many such requests are straightforward – removing jihadist propaganda from YouTube or Twitter, for example – there are concerns that such pressure might extend to modifying their algorithms in order to hide certain types of content from easily susceptible users.

“Google knows what is in your inbox; why should it not modify your search results to make you less of a terrorist?

“Second, it is hard to believe that the San Bernardino case will be an isolated episode....

“Even if Apple chose to destroy the code it writes to help the FBI on this occasion, it would need to rewrite it for a new request.  Should it keep this code forever, it would be holding on to a magic key to its devices – a highly prized asset for any hacker.

“Given the publicity of the case, any terrorist would probably stop using Apple’s products anyway. The only people to suffer would be ordinary users, stuck with their iPhones and iPads.

“Third, the FBI’s rationale in this case would make any other manufacturer of smart devices – including all those smart fridges and smart thermostats in your smart home – subject to similar request.

“If Apple can be forced to modify security protocols on its phone, what stops the FBI from asking the manufacturer of the smart smoke detector to trigger a fake smoke alarm?  Or asking the manufacturer of the smart car to drive suspects directly to the police station?

“All of this would seem neat so long as the government agencies were competent and nobody else could take advantage of such vulnerabilities.

“This is not so....

“And it would be suicidal to force technology companies to weaken security at a time when institutions of all sorts are vulnerable to hackers demanding ransoms – earlier this month, a hospital in California paid the bitcoin equivalent of $17,000 to hackers who had breached its computer network.

“Apple’s proposed solution is the right one: America needs a comprehensive political debate on the issue – one that would bypass inter-agency squabbling.”

--So I’ve been writing for the better part of a year how Apple doesn’t have a clue how it is going to get screwed in China, and in light of the above discussion, note the following from David Pierson of the Los Angeles Times.

“Apple Inc. has come out swinging in its pitched battle with the government on its home turf.

“But when it comes to its second-largest market, China, the Cupertino, Calif., company has been far more accommodating.

“Since the iPhone was officially introduced in China seven years ago, Apple has overcome a national security backlash there and has censored apps that wouldn’t pass muster with Chinese authorities. It has moved local user data onto servers operated by the state-owned China Telecom and submits to security audits by Chinese authorities.

“The approach contrasts with Apple’s defiant stance against the FBI....

“The years-long strategy in China is paying off at a crucial time. While sales of Apple products have flatlined or declined in the U.S., Europe and Japan, business in the company’s greater China region continues to soar – to a record $59 billion last year.  The Asian giant surpassed the U.S. last year as the No. 1 buyer of iPhones and could one day be the largest market for Apple Pay, the mobile payment platform that was rolled out for Chinese consumers last week.

“But there’s no guarantee the good times will continue rolling for Apple.  Beijing is increasingly tightening the screws on foreign technology companies, having introduced strict laws aimed at policing the Internet and digital hardware

“The environment will get even tougher, Apple says, if the FBI prevails in seeking a so-called backdoor to Farook’s phone.  That could set a precedent for China’s authoritarian leaders to demand the same in a country where Apple has never publicly defied orders.”

Apple has sold out, but while the relationship with Beijing appears to be solid today, let’s see how solid it is a year from now.  I virtually guarantee it will have cracked.

--Honeywell scrapped its proposed $90bn offer for rival United Technologies on Tuesday, as the aerospace supplier strongly disagreed with UTC’s characterization of regulatory and customer risks associated with a deal.

Honeywell CEO Dave Cote appealed directly to investors by publishing a Feb. 19 presentation he had made to UTC CEO Greg Hayes about the logic of the merger.

HON has argued the overlaps between the businesses were smaller than they appeared and that regulatory issues were manageable.

--General Electric CEO Jeff Immelt used his annual letter to shareholders to take a few shots at anti-growth policies.

“In the U.S., we want exports but seem to hate trade and exporters; globally, governments love small businesses but then regulate them to death,” Immelt writes.  “And so, we perpetuate a cycle: slow growth, poor job creation, populism, low productivity, higher regulation, poor policy and more slow growth.”

--Macau’s GDP contracted 14.4 percent in the fourth quarter of 2015 compared to the same period in the previous year as it continues to be hit by a decline in the gambling industry.  It is the sixth consecutive quarter of contraction, though Q4 was the best in more than a year.

Owing to Beijing’s crackdown on corruption, gaming revenues have posted year-on-year declines in every month since June 2014.

--The manufacturing PMI for February in Brazil was a putrid 44.5 in February vs. 47.4 in January as reported by Markit.  More on the chaotic political situation there down below.

--The Center for Disease Control has advised women who are pregnant to “consider not going to the Olympics” in Brazil, the epicenter of the Zika virus outbreak.  The CDC also warned male partners attending the Rio Games to “use condoms the right way, every time, or do not have sex during your pregnancy” because of the risk for sexual transmission of Zika.

The International Olympic Committee’s medical director, Richard Budgett, continues to attempt to reassure everyone that “everything that can be done is being done...to protect the health of the athletes.”

--Carl Icahn’s hedge fund lost 18% last year, following a loss of 7.4% in 2014, as his bets on the likes of Chesapeake Energy and commodities dropped steeply.

Since its founding in 2004, Icahn’s fund, part of Icahn Enterprises, has returned 9% annualized.

Donald Trump needs to hope his rivals don’t know much about the recent performance of a man he is continually touting.

--According to Forbes magazine’s annual list of global billionaires, there are 1,810 of them and Facebook founder Mark Zuckerberg made more than any of them last year.

Bill Gates topped the list for the 17th time, with a net worth of $75bn.  Zuckerberg added $11.2bn to move up to sixth on the list with a total of $46.7bn.

Donald Trump’s net wealth was estimated at $4.5bn, though Trump says it’s more than double that.

--Italian lawmakers have been wrestling with legislation that would decriminalize the act of passing off counterfeit olive oil and its origin.  As the New York Times’ Elisabetta Povoledo reported:

“The decree is intended to regulate penalties for counterfeiting olive oil and its origins. One example of counterfeiting would be declaring that an oil was 100 percent Italian extra-virgin olive oil when, in fact, it contained olive oil from other countries.”

Prime Minister Matteo Renzi’s government has made a priority of promoting authentic “made in Italy.”  As one Italian lawmaker wrote in an email: “It is important to punish anyone who damages the image of Italy abroad.”

I note this story because there was a recent “60 Minutes” piece that if you saw it would have you second-guessing purchasing olive oil purported to be made in Italy.  Much of the production is controlled by the Mob.

Consumers, to a large extent, aren’t getting what they think they are.  Extra-virgin olive oil is usually twice the cost of blended oils, but the fraud occurs when companies attempt to pass off foreign olive oil as 100 percent Italian. 

Solution? Buy U.S. (Californian).  It’s just as good and cheaper.

--After a very dry, and warm, February, suddenly California’s snowpack stood at only 83% of average as of Tuesday, after it had been solidly above average in December and January.  Half of the state’s annual rain and snow falls during these three months.  The ‘Godzilla’ El Nino had seemingly ended.

But fret not, for a massive rain/snow maker is hitting the Sierras and other parts of the state this weekend, so there will indeed be some drought relief.

Foreign Affairs

Syria/ISIS/Iraq/Russia/Turkey: Israel said on Tuesday that since the start of the ceasefire last Saturday, Syrian government forces had used chemical weapons against civilians.

Israeli Defense Minister Moshe Ya’alon said in a speech, “The Syrians used military grade chemical weapons and lately have been using materials against civilians...dropping barrels of chlorine on them.”

The global chemical weapons watchdog (OPCW) concluded in 2014 that the use of chlorine gas had been “systematic” in the civil war.

Overall, the ceasefire is said to be holding, but NATO is concerned over Russia’s military build-up in the country.

NATO secretary-general Jens Stoltenberg said:

“We are concerned about the significant Russian military build-up we have seen in Syria with the ground troops, with the naval forces in the eastern Mediterranean and with air forces conducting air strikes.”

The ceasefire is only a partial one, excluding ISIL, Nusra Front and other groups designated as terrorist groups by the U.S.

In a new report from Amnesty International, the rights group has “compelling evidence” of at least six deliberate attacks on medical facilities in the Aleppo governorate over the past twelve weeks.

Meanwhile, there was a report that ISIS is making up to $20m a month through playing foreign currency markets, funneling dollars looted from banks during its takeover of the city of Mosul into legitimate currency in Middle East markets.

It then makes huge returns on currency speculation, which are wired back via financial authorities in Iraq and Jordan.  The details were relayed as part of a British parliamentary inquiry.

During the 2014 takeover of Mosul, ISIS got its hands on an estimated $429m from the city’s central bank.  [Irish Independent]

Speaking of Mosul, Defense Secretary Ash Carter and Joint Chiefs Chairman Gen. Joseph Dunford said multinational forces have begun to cut off the city’s supply and communication lines, and to encircle and isolate ISIS fighters with cyber and air and ground attacks in the first steps to retake the city.  According to Dunford, the final thrust should be expected sooner than later.

Last Sunday, ISIS launched twin suicide bomb attacks in Baghdad’s Sadr City, killing at least 78.  The target was a busy market in the Shia district, IS having said it would continue to target Shia Muslims, whom it considers heretics.

With ISIS having suffered setbacks elsewhere in Iraq, there are fears it will step up attacks in the capital.

Also on Sunday, ISIS claimed responsibility for a suicide attack in the Syrian province of Hama that killed 20, mostly Syrian army forces.

Lastly, NATO’s supreme allied commander, General Philip Breedlove, said Russia was “weaponizing” immigrants, by using types of bombs that are designed to force civilians from their homes in Syria.

Speaking at a Senate hearing, Breedlove said: “I can’t find any other reason for them [air strikes against civilians] other than to cause refugees to be on the move and make them someone else’s problem.  I use the term weaponization of immigration.”

Iran: More than 30 million Iranians voted in last Friday’s polls, the first since the implementation of the nuclear agreement between Iran and the P5+1 (U.S., Britain, France, Russia, China and Germany).

The deal was opposed by many hardliners but backed by moderates and reformists, so the election was basically a referendum on it.

And so it was that President Hassan Rouhani and his allies won 15 out of the capital’s 16 seats on the Assembly of Experts, out of 88 overall, this body choosinig the country’s next supreme leader.  Two key leading hardline clerics lost their seats.  The Assembly of Experts is paramount in that Supreme Leader Ayatollah Ali Khamenei is 76 and not in good health.

Moderates and reformists won all 30 of Tehran’s seats in parliament, but hardliners are said to have retained a majority in the 290-seat parliament, though a round of runoffs is necessary in some of the “constituencies.”

Ayatollah Akbar Hashemi Rafsanjani, a leader of the reformists and ally of President Hassan Rouhani, as well as former two-term president, said on Twitter on Sunday:

“No one is able to resist against the will of the majority of the people and whoever the people don’t want has to step aside.”

But frankly the election is confusing.

Editorial / Washington Post

“If you are a Washington foreign policy analyst who supported the nuclear deal with Iran, then the result of the country’s elections last week was a resounding victory for reformists that proves the wisdom of President Obama’s engagement with the Islamic republic.  If you opposed the deal, then the election merely entrenched conservatives and hard-liners.  Such is the opacity of Iranian politics that neither of those dueling narratives could be entirely discounted following the release of the election results this week.

“What seems relatively clear is that the voting for parliament, and for the Assembly of Experts that will choose the next Iranian supreme leader, showed, like most Iranian elections, that a large part of the public supports a liberalization of the regime.  But as in the past, that popular sentiment is unlikely to bring about substantial change in the near future – in part because many of those elected are far less reform-minded than those who voted for them....

“(Any) claims of a reformist triumph...are overblown....Most of those in Mr. Rouhani’s coalition are, like him, moderate conservatives, meaning they favor economic reforms and greater Western investment, but not liberalization of the political system or a moderation of Iran’s aspiration to become the hegemon of the Middle East.  True Iranian religious and political reformers, like those who joined the 2009 Green Movement, are in jail or exile, or were banned from the ballot....

“For now, Iran can be expected to continue the course it has been pursuing in the months since the nuclear deal was struck: waging proxy wars against the United States and its allies around the Middle East, using its unfrozen reserves to buy weapons, and defying non-nuclear limits – such as by testing long-range missiles.  The elections won’t make the regime more pliable, and they won’t change the need for a U.S. counter to its aggressions.  They shouldn’t provide an excuse for the Obama administration to tolerate Tehran’s provocations.”

Lebanon: The six-member Gulf Cooperation Council has designated Hizbullah a terrorist organization, ratcheting up pressure on the Iran-allied group that is a big player in Lebanon and Syria.

The decision followed a speech by Hizbullah leader Sayyed Hassan Nasrallah wherein he said Saudi Arabia had pushed Lebanon into a new phase of political conflict by announcing it was suspending an aid package to the Lebanese army.  Nasrallah also accused Saudi Arabia of directing car bombings in Lebanon.

The Saudis support Sunni politician Saad al-Hariri, the former prime minister and son of the assassinated Rafik Hariri, but while tensions are building once again in Beirut, Nasrallah has said there would be no repeat of the violence that rocked the area in 2008.

But there is no doubt the Saudis appear to be walking away, opening the door for Iran, seemingly punishing Lebanon for allowing Hizbullah to side with Iran in Syria.  In Saudi eyes, it seems Lebanon has now taken a back seat to Yemen, Syria and other conflicts in terms of its priorities.

This spells disaster for Lebanon.

Iraq: The United States has reiterated that the Mosul dam faces “unprecedented” risk of a “catastrophic failure” that would unleash a wall of water which could flatten cities and kill hundreds of thousands within hours.

I first wrote of this weeks ago, but Wednesday, Washington urged its citizens in Iraq to make contingency plans now.  Australia is another that has plans in place for the evacuation of soldiers there should the dam collapse.

The U.S. said Iraq’s power grid could be entirely knocked out and parts of major cities would be underwater for weeks.

Mosul would be under 20 meters (65 feet) of water within hours of a breach, giving residents little time to flee.

Much of the territory projected to be damaged is contested or under ISIL control.

Jordan: Security services here said on Wednesday they had foiled a large-scale ISIS plot to blow up civilian and military targets, with seven militants killed in clashes that took place on Tuesday.  One police officer was killed.  The militants were holed up near a Palestinian refugee camp in the center of Irbid.

Afghanistan: A Taliban suicide bomber blew himself up near the Afghan defense ministry in Kabul on Saturday, killing 23 Afghan soldiers and civilians.  This came just hours after an attack in the eastern province of Kunar killed 13 and put prospects for new peace talks in doubt.

The Wall Street Journal reports that the Afghan police “lost nearly a quarter of its members last year after most foreign troops left the country, according to interior ministry data, as thousands deserted in the face of increasing Taliban attacks and poor leadership.”

China: The two-week National People’s Congress commences this weekend in Beijing, a largely ceremonial affair of speechmaking, but the real discussions take place behind closed doors.

In terms of the markets, the government will announce its official economic policy and growth forecast, while Chinese President Xi Jinping will look to further consolidate power after a three-year anticorruption campaign that has seen some 750,000 party members punished.

Xi’s new demand is to enforce unswerving loyalty to preserve “the party’s centralized unity.”

Separately, China’s militarization of the South China Sea will have consequences, according to U.S. Defense Secretary Carter.

“China must not pursue militarization in the South China Sea,” Carter said in a speech in San Francisco.  “Specific actions will have specific consequences.”  He did not elaborate.

[In the same speech, Carter blasted Russia and China for their actions to limit Internet access, as well as state-sponsored cyber threats, cyber espionage and cybercrime.” (Reuters)]

*And this just in as I go to post Friday evening...the National People’s Congress set the country’s growth target for 2016 at 6.5% to 7%, as expected.  More next week following Premier Li Keqiang’s speech on the details.

North Korea: Kim Jong-un ordered his country to be ready to use its nuclear weapons at any time and to turn its military posture to “pre-emptive attack” mode in the face of growing threats from its enemies, according to official media on Friday.

This is a further escalation of tensions on the Korean peninsula after the UN Security Council imposed harsh new sanctions against Pyongyang for its nuclear program.

Kim, shown supervising the exercise of newly developed multiple rocket launchers on state TV, said the new weapons had South Korea within range.

Kim said North Korea should “bolster up (its) nuclear force both in quality and quantity” and stressed “the need to get the nuclear warheads deployed for national defense always on standby so as to be fired any moment,” KCNA quoted him as saying.  “Now is the time for us to convert our mode of military counteraction toward the enemies into a preemptive attack in every aspect.” [Reuters]

A day earlier, the North launched several projectiles off its coast into the sea, in an apparent response to the new sanctions being imposed.

Russia: There was a gruesome incident in Moscow this week as a woman – identified as a 38-year-old Uzbek national – was detained on a street holding the severed head of a child, shouting “Allahu Akbar” and calling herself a “terrorist.”

The woman worked as the child’s nanny and was accused of killing the girl.

The thing is the national media, including the television networks, didn’t cover the story even though it went viral.  Russia’s Communist Party immediately called for a curtailment of “illegal migration” to the country and illustrated its appeal by a drawing of a woman wearing a Muslim head covering the veil and holding a severed human head.

And there was a bizarre story in a Lebanese newspaper, picked up by the Jerusalem Post, that the head of Russia’s military intelligence service, Colonel-General Igor Sergun, was killed in January during a secret mission in Beirut.

The Kremlin had announced the death of Sergun on January 4, saying that he died in Moscow after a heart attack.  Sergun had played a key role in the Russian seizure of Crimea in March 2014, and reportedly died three weeks after he was sent to Syria by Vladimir Putin to demand Syrian President Assad step aside.

But according to the newspaper al-Akhbar, Sergun was killed by a team of Arab and Middle Eastern intelligence agencies.  A diplomatic source told al-Akhbar that Turkey was involved, which then resulted in increased tensions between Moscow and Ankara.

Lastly, 39-year-old Chechen leader Ramzan Kadyrov said it was time for him to step aside and that he wanted the Kremlin to find his replacement.

This week marked the one-year anniversary of the assassination of opposition leader Boris Nemtsov in Moscow, with Nemtsov allegedly gunned down by a group of Chechens.  Thousands marched to honor him on Saturday; the largest opposition rally since his death.

There have been calls for Kadyrov to be interrogated over the murder, but he has denied involvement.

Brazil: Former President Luiz Lula da Silva was detained by police on Friday as part of the massive fraud inquiry into the state oil company Petrobras.  Lula’s house was raided and he was brought in for questioning, sparking unrest across the country between police and his old supporters.

Lula left office in 2011 and has denied allegations of corruption.

The Petrobras scandal, known as Operation Car Wash, is probing accusations of corruption and money laundering, with officials carrying out some 33 search warrants and 11 detention warrants in the past few days throughout the country.

Dozens of executives and politicians have been arrested or are under investigation on suspicion of overcharging contracts with Petrobras and using part of the money to pay for bribes.

Lula served two terms as president before being succeeded in office by his political protégé, Dilma Rousseff.

As for Rousseff, she may yet be impeached.  A massive national protest against her rule is slated for March 13.

Cuba: Secretary of State John Kerry canceled a trip to Havana two weeks before President Obama heads to the island as diplomats haggle over which Cuban dissidents the president will be allowed to meet.

Obama’s visit on March 21 is the first by a sitting president in nearly 90 years, but haggling over human rights will present a problem for him.  As Obama has pushed for normalization of relations, the Cuban government has done nothing to ease its limits on free expression or to improve treatment of human rights activists and political dissidents.

In January, 1,414 dissidents were detained, the second highest number in years, according to the head of the opposition Cuban Commission for Human Rights and National Reconciliation.  Elizardo Sanchez said 56 of the detainees were beaten.

Ireland: Voters ousted Prime Minister Enda Kenny’s Fine Gael and its junior collation partner, the Labour Party, in last weekend’s elections.  But the vote was splintered into many pieces and forming a new coalition government will be difficult.  Left-of-center Sinn Fein received the third most votes at about 14%.

For now there is a hung parliament (Dail).  Luckily, Ireland is in good shape economically these days.

Random Musings

--Results from Super Tuesday...Republicans:

Donald Trump won in Alabama (43%), Arkansas (33%), Georgia (39%), Massachusetts (49%), Tennessee (39%), Virginia (35%), Vermont (33%).

Ted Cruz won in Alaska (36%), Oklahoma (34%), Texas (44%).

Marco Rubio won in Minnesota (37%).

Trump finished second in Alaska, Oklahoma and Texas.

Rubio was second in Georgia and Virginia.

John Kasich was second in Massachusetts and Vermont.

Cruz was second in Alabama, Arkansas, Minnesota and Tennessee.

--Delegate count (est.)....Republicans

Trump 316
Cruz 226
Rubio 106
Kasich 25

[1,237 needed to win]

March 5 the Republicans have primaries or caucuses in Kansas, Kentucky, Louisiana and Maine.

March 6 there is a primary in Puerto Rico.

March 8 there are caucuses or primaries in Hawaii, Idaho, Michigan and Mississippi.

March 15 you have large states such as Ohio, Florida...in the first winner-take-all contests of the race.

--Trump redoubled his attacks on the establishment.

Tim Pawlenty, the former Minnesota Republican governor who ran for president in 2012, spoke for many in the club when he described the Super Tuesday results as an “inflection point” for the GOP.

“If the Republican Party were an airplane and you’re looking out the window, you’d see some pieces of the surface flying off. And you’d be wondering whether the engine or a wing is next.”

Former Republican senator Trent Lott said, “We’ve now backed ourselves into a corner...and it’s not very pretty.”

Gerald F. Seib / Wall Street Journal

“Donald Trump cruised out of Super Tuesday in fine shape. By contrast, Republican leaders who had been hoping he would stumble emerged still in a fix, facing tough choices, uncertain options and perhaps a moment of truth in the next two weeks....

“Sen. Ted Cruz showed he can win, but he is hardly beloved within the party. Sen. Marco Rubio won the caucuses in Minnesota, giving him the fuel needed to carry on, but didn’t win any of the bigger primaries elsewhere, and lots of the party’s donors have bet on him.  If those two continue to divide the anti-Trump vote, they may pave the road to the nomination for Mr. Trump.

“In short, those atop the Republican Party who hoped Tuesday would throw a stop sign in front of a man who dislikes the party’s establishment, insults its donor base, disagrees with its traditional positions on trade and mocks its neoconservative foreign-policy thinkers – well, the day provided more of a speed bump.

“Now the anti-Trump forces have basically four choices:

“The first is to simply fight on over the next two weeks, hoping that the vote in the next big states on March 15 provide something different. The problem in this scenario is simple – though Mr. Cruz won his big home state of Texas, he was clobbered by Mr. Trump in the states of the deep South that were supposed to form his base.  There remain deep questions about how broad his appeal can be.

“Meanwhile, the candidate with the best chance of stopping Mr. Trump in the pivotal state of Florida on March 15 – and the one who seems to have the best general-election profile – is Mr. Rubio.  But he still needs a big-state primary victory....

“The second option is for party leaders to somehow persuade everybody except Mr. Cruz to get out of the race so he can consolidate the anti-Trump vote.  The problem there is that party leaders despise Mr. Cruz, almost as much as they dislike Mr. Trump....

“The third option is for leading party figures to take a stand on conscience and declare that they won’t back Mr. Trump as the nominee, hoping that will reverse the tide.  Some have done so in recent days....

“Which leaves the fourth option: acquiesce to the Trump movement.  That is a particularly tough choice for the party’s conservative activists, who don’t consider Mr. Trump one of their own....

“Hovering over it all is a large cloud of uncertainty about how a nominee as unconventional as Mr. Trump would fare in a general election.  One GOP strategist argued Tuesday night that he would produce a ‘shattered, decimated party’ in the fall.

“Mr. Trump, meantime, argued that ‘I have millions and millions and millions of people.’

“We will have to wait to see who is right.”

Speaker Paul Ryan issued a scathing rebuke of Trump, warning that Trump cannot engage in “evasion” or “games” when it comes to rejecting white supremacy groups.

Jonah Goldberg / Los Angeles Times

“Many decent and sincere Republicans, in and out of the Republican leadership, have been operating on the assumption that Trump will fade and that the gravest threat is a third party run by the dean of Trump University. There was a time when that concern was defensible.  But once it became clear that he was favored to win the nomination outright, Republicans should have realized that a third-party run was more like a best-case scenario.

“Better the GOP do battle with a know-nothing bigot (and lose the presidency) than become the party of know-nothing bigots (and still lose the presidency).

“That’s why I embrace the Twitter hashtag #NeverTrump, initiated by conservative talk show host Erick Erickson.  For too long, Trump has benefited from the assumption that the non-Trump faction of the party will be ‘reasonable’ and support the nominee.  Such thinking paves the road to power for demagogues.

“Trump says he gets along with everybody and will unify the country, even as he suggests an inconvenient judge is biased because he’s Latino, vows to ban 1.6 billion Muslims, insists his Central Intelligence Agency will torture people and boasts he will declare war on disloyal journalists.

“When your opponent is that unreasonable, the reasonable response is not surrender.

“I don’t know whether Trump will win the nomination or the presidency.  But I am fairly certain that if he does a great many people will one day say, ‘My God, what have I done?’”

--Meanwhile, New York Attorney General Eric Schneiderman described now-shuttered Trump University as a bait-and-switch scheme when he filed a suit back in 2013, alleging the school duped thousands of enrollees out of millions of dollars.  On Tuesday, a state appellate court ruled unanimously that the case can proceed.  Friday, Schneiderman went on CNN to say the evidence of fraud is “overwhelming.”  Look for a “60 Minutes” piece on this in the coming weeks.

--One endorsement that may had a positive impact for Trump was that of Alabama Rep. Sen. Jeff Sessions, with Trump then receiving 43% of the vote in that state, 22 points more than Ted Cruz.

--Ben Carson pulled out of the race after Super Tuesday, saying he did not see a “path forward.”

--So then the four remaining Republican candidates gathered for another debate in Detroit and what a debacle, as Marco Rubio and Ted Cruz ganged up on Trump, with Rubio calling the frontrunner a “con artist” again, while dismissing Trump’s policies as unserious.  Cruz slammed Trump for the checks he’s written to Hillary Clinton.

For his part, Trump fought back as only he can, addressing “Little Marco” and “Lyin’ Ted,” as well as defending the size of his penis.  Yes, it was appalling.  But in the end, Rubio, Cruz and John Kasich pledged to support Trump should he gain the nomination, as they all push for a contested convention as being the only way, it would seem, to take The Donald down.

When it came to their prospective opponents in November, Sen. Rubio said during the debate:

“The Democrats have two people left in the race.  One of them is a socialist. The other one is under FBI investigation.  And not only is she under FBI investigation, she lied to the families of the victims of Benghazi. And anyone who lies to the families of victims who have lost their lives in the service of our country can never be a commander in chief of the United States.”

Hours earlier, 2012 Republican nominee Mitt Romney gave an extraordinary speech blasting Trump as a “phony” and a “fraud” who must be defeated.  “He’s playing members of the American public for suckers.”

Romney continued: “His bankruptcies have crushed small businesses and the men and women who work for them.  Whatever happened to Trump Airlines?  How about Trump University?  And then there’s Trump Magazine and Trump Vodka and Trump Steaks and Trump Mortgage.  A business genius he is not.”

Prior to the debate, Trump, speaking at a rally in Maine, bemoaned Romney’s “nasty” critique and dismissed him as a “choke artist” who botched an easy chance to prevent a second Obama term.

Trump recalled his endorsement of Romney in February 2012.

“He was begging for my endorsement,” Trump said.  “I could’ve said, ‘Mitt, drop to your knees,’ and he would’ve dropped to his knees.”

John Podhoretz / New York Post

“Well, it was nice being the greatest country in the history of the world.

“We pulled it off for 240 years. Then came the Republican debate Thursday night in Michigan, in which the rattled frontrunner of the party of Abraham Lincoln defended the size of his male member before 10 to 20 million of his fellow Americans.

“By the way, Lincoln was sworn in as president 155 years ago yesterday.  And so, on behalf of a horrified people, let me just say: I’m sorry, Abe, for what’s become of the union you sacrificed your life to save.

“Since Donald Trump’s reference to the substantiality of his private part came at the beginning of an almost insanely raucous two hours, and cast a shadow over everything that followed, it’s hard to know whether one can properly judge the night’s proceedings as a debate and not a living civic nightmare.

“The entire evening was what Trump would call a ‘disastuh.’  Now, I know it makes no sense to bet against him, and that anyone who has written his political obituary thus far (me included, after the ‘ban all Muslims’ moment in November) has had to eat crow.

“But the events in Detroit last night will have long-lasting effects even if they don’t affect his path to the nomination in the short term....

“It was not just Trump who was damaged Thursday night. That a major debate of a major political party could devolve in this way did damage to the United States.”

Peggy Noonan / Wall Street Journal

“The (Republican Party) establishment was slow to see what was happening, slow to see Mr. Trump coming, in full denial as he continued to win. Their denial is self-indicting. They couldn’t see his appeal because they had no idea how their own people were experiencing America.  I have been thinking a lot about establishments and elites.  A central purpose of both, a prime responsibility, is to understand those who are not establishment and elite and look out for them, take care of them.  Not in a government-from-on-high way, not with an air of noblesse oblige, but in a way that is respectfully attentive to the facts of their lives.  You have a responsibility when you lead not to offend needlessly, not to impose realities you yourself can buy your way out of.  You don’t privately make fun of people as knuckle-draggers, victims of teachers-union educations, low-information voters.

“We had a low-information elite.

“This column has been pretty devoted the past nine months to everything that gave rise to this moment, to Mr. Trump.  His supporters disrespect the system – fair enough, its earned disrespect.  They see Washington dysfunction and want to break through it – fair enough.  In a world of thugs, they say, he will be our thug.  Politics is a freak show? He’s our freak.  They know they’re lowering standards by giving the top political job in America to a man who never held office. But they feel Washington lowered all standards first. They hate political correctness – there is no one in the country the past quarter-century who has not been embarrassed or humiliated for using the wrong word or concept or having the wrong thought – and see his rudeness as proof he hates PC too....

“(Trump) is a one-man wrecking crew of all political comportment, and a carrier of that virus. Yet his appeal is not only his outrageousness.

“He is a divider of the Republican Party and yet an enlarger of the tent.  His candidacy is contributing to record turnouts in primary after primary, and surely bringing in Democrats and independents.  But it should concern his supporters that his brain appears to be a grab bag of impulses, and although he has many views and opinions he doesn’t seem to know anything about public policy or the way the White House or the government actually works.

“He is unpredictable, which his supporters see as an advantage.  But in a harrowing, hair-trigger world it matters that the leaders of other nations be able to calculate with some reasonable certainty what another leader would do under a given set of circumstances.

“ ‘He goes with his gut.’  Yes.  But George W. Bush was a gut player, too, and it wasn’t pretty when his gut began to fail.

“The GOP elite is about to spend a lot of money and hire a lot of talent, quickly, to try to kill Trump off the next two weeks. There will be speeches, ads – an onslaught. It will no doubt do Mr. Trump some damage, but not much.

“It will prove to Trump supporters that what they think is true – their guy is the only one who will stand up to the establishment, so naturally the establishment is trying to kill him.  And Trump supporters don’t seem to have that many illusions about various aspects of his essential character.  One of them told me he’s ‘a junkyard dog.’

“They think his character is equal to the moment.”

--On the Democratic side...Super Tuesday results:

Hillary Clinton won in Alabama (78%), Arkansas (66%), Georgia (71%), Massachusetts (50%), Tennessee (66%), Texas (65%), Virginia (64%).

Bernie Sanders won in Colorado (59%), Minnesota (62%), Oklahoma (52%), Vermont (86%).

Previously, last Saturday, Clinton shellacked Sanders in South Carolina, 74% to 26%.  According to a CNN exit poll, 61% of the voters who turned out in the primary were African-American and Clinton won 87% of them.

--Delegate count (est.)...Democrats

Clinton 1,034
Sanders 408

[2,383 needed to win]

March 5 the Democrats hold caucuses or primaries in Kansas, Louisiana and Nebraska.

March 6 they hold a caucus in Maine.

March 8 it’s primaries in Michigan and Mississippi.

--Separately, Hillary could be in deeper trouble than first thought over the email issue.  Former State Department staffer Bryan Pagliano was granted immunity, as first reported by the Washington Post.  Pagliano worked on Clinton’s 2008 campaign and set up her unsecured server in 2009, according to the paper.

My opinion has been that there is no way Clinton is indicted prior to November and thus I have written relatively little on the case, separating this aspect from how the Republican nominee will attack her regardless.

But this move by Justice is indeed significant.  It’s also a classic ‘wait 24 hours’ situation.  #HumaAbedin

--A CNN/ORC national poll has Clinton leading Bernie Sanders 55-38, while on the Republican side Trump is at a whopping 49% to Rubio’s 16%, with Cruz at 15%.  But this was before Thursday’s debate, not that it mattered to Trump’s supporters.

--The most telling stat on Super Tuesday involved voter turnout.  As NBC News reported, in 2008, Democrats shattered voter turnout records in their primary clash between Barack Obama and Hillary Clinton.  8.2 million votes were cast in nine selected states for the Dems, while Republicans in their primaries in the same nine of 11 on Super Tuesday 2008 drew just about 5 million.

But in 2016, the totals flipped.

About 8.3 million votes were cast on the GOP side in the nine, with just 5.6 million for the Democrats.

Earlier, Republican turnout was far greater than that for the Democrats in Iowa, New Hampshire, South Carolina and Nevada.

--I like Democratic Congresswoman Tulsi Gabbard (Hawaii), and I detest Democratic National Committee chairwoman, Rep. Debbie Wasserman Schultz (Fla.).  I saw Wasserman Schultz in Iowa at the State Fair last August and she makes my skin crawl.  So I was watching CNN the other day when Gabbard endorsed Bernie Sanders.

Editorial / New York Post

“Even those of us who’ll never ‘feel the Bern’ can admire Hawaii Rep. Tulsi Gabbard’s risky and defiant stand against her party’s machine.

“A rising Democratic star – first Samoan-American member of Congress, one of the first female combat veterans to win a House seat – Gabbard just quit as vice chair (of the DNC) so she should endorse Bernie Sanders.

“Thereby earning herself a spot high on Hillary Clinton’s enemies list.

“Gabbard had been unhappy for months: She was one of the few voices decrying the machinations that limited the party to just six presidential-primary debates – mostly at times designed for low viewership.

“Everyone knew party head Debbie Wasserman Schultz was doing Clinton’s work on that front – debates were too likely to boost Hillary’s opponents.  Only when Sanders became a threat, prompting Clinton to want more face-offs, did the party suddenly add four debates – leaving it still one behind the GOP total.

“Of course, Clinton now seems back on track to crush the Sanders revolution – with significant help from the party’s vast number of un-democratic ‘superdelegates.’

“So Gabbard has taken a real risk – the more so, as the Army veteran made it plain she backs Sanders in good measure because he’d be a wiser commander-in-chief ‘so that we don’t continue to find ourselves in these failures that have resulted in chaos in the Middle East and so much loss of life.’

“With the likes of Tulsi Gabbard on his side, maybe Bernie’s cause isn’t lost after all.”

--My governor, Chris Christie, as of this week became a total, rather than partial, embarrassment with the way he handled his endorsement of Donald Trump.  Not because he backed him, but because Christie, for a second time, abandoned the state of New Jersey in once again hitting the road, seemingly full time, in support of The Donald.

Christie’s approval rating as of Wednesday in my state was just 30 percent (27% in the immediate days following the endorsement), 61% disapproving, according to a Fairleigh Dickinson University PublicMind Poll.

New Jersey has a ton of serious issues, including a potentially crippling transit strike in a week’s time.

So it should be no surprise, seeing as how he has been absent for two years (72 percent of the days in 2015, in fact), and now may be for long stretches for months to come, that the leading newspaper in the state, The Star-Ledger, along with at least six others, have asked Christie to resign.  I agree.

Rich Lowry / New York Post

“Endorsements usually don’t matter much, but Chris Christie giving his nod to Donald Trump shocked the political world and will bolster a Trump campaign that has grown from a madcap insurgency to a serious threat for the Republican nomination.

“Most immediately, the New Jersey governor’s endorsement instantly changed the subject from Trump’s debate performance Thursday night (2/25), when Marco Rubio got the best of him.

“Christie accentuates the Trump brand of bully-boy toughness.  He further validates The Donald and paves the way for future endorsements.

“Finally, he will be an eager and willing surrogate – who will relish nothing more than filleting Rubio, for whom he has a burning contempt....

“(Christie) had two choices: sitting in Trenton and going gentle into that electoral good night, or joining up with Trump and riding on the mogul’s private jet every other day, enjoying a luxury seat at the center of the political world.  (Plus, though Christie denies he wants it, a potential veep slot or Cabinet post.)

“The Christie-Trump pairing shows how, counter to the mogul’s reputation, he isn’t an outrageous right-winger.  Absent his serial violations of political decorum and his advocacy of mass deportation, it would be clearer that Trump is a Northeastern moderate who will likely run as a tell-it-like-it-is pragmatist should he win the nomination.”

However, Gov. Christie returned to New Jersey Thursday and said he is not a “full-time surrogate” for Trump and is focused on his duties in the state.  “I am here,” he said.  “I am back to work.”

I doubt it.

--My friend Jeff B. and his wife are on their annual vacation to a nice resort in the Caribbean, the same place each time, and he shot me a note the other day.

“I cannot begin to tell you how many locals and Brits have come up to us this week asking what the (heck) is going on with Trump.  It makes the U.S. look like complete idiots.”  [And this was before Thursday night!]

The barrage got so bad the two began having breakfast in their room.

I’ve been in Ireland where I’ve had some huge arguments in the pubs over American policy and some of our politicians over the years, so I told Jeff to counter that we saved his inquisitors during World War II. 

--Chicago had 95 homicides in January and February combined, the same as in 1999.  Over the past decade there haven’t been more than 66 homicides during the first two months of each year.

But this is staggering.  At least 467 people were shot in the first two months compared with 217 in the same period last year, according to Chicago Tribune statistics.

--Welcome home to astronaut Scott Kelly of nearby West Orange, N.J., who spent 340 days on the International Space Station (ISS), twice the length of a normal stay.  [Russian cosmonaut Mikhail Kornienko did the same.]

The two were part of an ongoing effort to study the effects of long-duration spaceflight on the body, in hoped for preparation for a trip to Mars.

While Scott Kelly has been away, tests have been conducted on his twin brother, Mark, so that scientists can compare the two to deepen their understanding of the physical and psychological shifts that occur during long stays in orbit.

--Finally, Navy Senior Chief Edward Byers Jr. was awarded the Medal of Honor by President Obama on Monday.

Editorial / Wall Street Journal

“ ‘Today’s ceremony,’ the President said, ‘is truly unique, a rare opportunity for the American people to get a glimpse of a special breed of warrior who so often serves in the shadows.’

“It has become a commonplace in some corners of our relentlessly politicized culture to characterize those ‘shadows’ as a gray zone of questionable moral behavior inhabited by highly trained American fighters such as Edward Byers.

“We doubt that the SEALs themselves, or their counterparts in the other services’ special forces, see their work as an exercise in moral ambiguity. The event that brought the Medal of Honor to Senior Chief Special Warfare Operator Byers is closer to the truth.

“The mission that took SEAL Team 6 through the mountains of Afghanistan in 2012 was to rescue an American doctor, the father of four, who had been kidnapped by the Taliban.

“The first U.S. team member through the kidnappers’ door was shot. Senior Chief Byers, the next in, shot a Taliban in the corner, subdued a second on the ground, shouted for the doctor on a nearby bed, shot the armed terrorist beneath him and then covered the doctor with his body amid the exchange of bullets.  Noticing another armed Taliban in the corner, he pinned him to the wall until the team members arrived and completed the rescue mission.

“One more thing: A trained paramedic, Senior Chief Byers then tried to save the life of his wounded team member, Nicolas Checque, but could not.  This is the definition of selflessness, and in the American armed services today you will find a lot of selflessness on behalf of others – fellow soldiers, other Americans and other nations’ citizens.  Senior Chief Byers has served in nine combat tours and 11 overseas deployments.

“Ed Byers, like virtually every other Medal of Honor recipient, will be the first to say what he did was nothing special, that every Navy SEAL would to what he did that day.  With Monday’s White House ceremony, President Obama set the shadows aside to shine the light of public gratitude where it belongs, every day.”

---

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

God bless America.

---

Gold closed at $1258
Oil $35.92

Returns for the 2/29-3/4

Dow Jones  +2.2%  [17006]
S&P 500  +2.7%  [1999]
S&P MidCap  +4.4%
Russell 2000  +4.3%
Nasdaq  +2.8%  [4717]

Returns for the period 1/1/16-3/4/16

Dow Jones  -2.4%
S&P 500  -2.2%
S&P MidCap  +0.04%
Russell 2000  -4.8%
Nasdaq  -5.8%

Bulls  36.4
Bears  34.3  [Source: Investors Intelligence...can’t help but reiterate again.  I pointed out the bear reading of 2/12, 24.7, was the lowest since the low of March 2009.  That’s how this contrarian indicator is supposed to work.]

*Dr. Bortrum posted a new column.

Have a great week.  I appreciate your support.

Brian Trumbore



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Week in Review

03/05/2016

For the week 2/29-3/4

[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 Bill S. this week.

Edition 882

Washington and Wall Street

[I cover the election in full in “Random Musings”]

In prepared remarks for a speech he was giving later in China, Bill Dudley, president of the New York Fed, said the hazards facing the U.S. have escalated amid this year’s market turmoil and worries about emerging market growth and should the turmoil continue, it would trigger a “more significant downgrade” to his outlook.  He added a further fall in inflation expectations would be “worrisome,” as such a view could become entrenched in investors and consumers’ outlooks.

“At this moment, I judge that the balance of risks to my growth and inflation outlooks may be starting to tilt slightly to the downside,” his speech read.  [Financial Times]

Dudley’s view is important ahead of the Federal Reserve Open Market Committee’s March 15-16 meeting, but how bad is it out there, especially here?

Stocks registered strong gains for a third consecutive week with the Dow and S&P 500 trading at their best levels since January, the Dow closing above 17000 (17006) and the S&P 2000 (though finishing at 1999.99 at the last moment) on Friday.  Nasdaq is also at its best level since January.

The economic data has been pretty solid.  Friday’s non-farm payrolls report showed employers added 242,000 jobs in February and, coupled with the prior two months’ figures being revised up by 30,000, the three-month average gain is 228,000.  The unemployment rate held steady at 4.9%, while U6, the underemployment (real) rate fell to 9.7%, the best since May 2008.

The fly in the ointment was average hourly wages ticked down 0.1% from the prior month, putting the year over year increase at just 2.2%, and this will clearly lead the Fed to hold the line on any further rate increases on March 16.

At the same time, there should be zero talk of tipping into recession, with the Atlanta Fed’s GDPNow indicator currently pegging first-quarter GDP at 2.2%.

In other economic news, the Chicago PMI for manufacturing in the region was a disappointing 47.6 (50 being the dividing line between growth and contraction), while the February ISM on manufacturing was 49.5, better than expected.  The services figure was a decent 53.4.

Factory orders in January rose 1.6%, while construction spending was up 1.5%, both good.

Add it all up and Wall Street has the best of both worlds, a seemingly stable economy with zero reason for the Fed to hike again.

On the earnings front, with virtually all of the S&P 500 companies reporting, guidance for the first quarter shows earnings declining 5.9% year over year, according to Thomson/Reuters.  At the start of the year, Q1 earnings were expected to rise 2.3%.  [FactSet had estimated Q1 at the start up 0.6%, but now says earnings will fall 7.4%.]

More companies have been warning on Q1 than normal, though much of this is the result of the crash in energy prices, with the projected fall in earnings for the sector tumbling to down 93.3% for the first quarter, vs. a Jan. 1 estimate of down 41.4%.

Europe and Asia

The European Central Bank meets on March 10 and is expected to cut the deposit rate further into negative territory, but the financial markets have been expecting more, like additional quantitative easing, and they might be disappointed.  ECB governing council member Francois Villeroy de Galhau said the other day that despite the inflation rate you see below, the eurozone was not in deflation.

“Once oil prices stabilize, we should see inflation turn slightly positive in the second half of the year.”

There was a slew of economic data from the eurozone.  The final PMI for manufacturing in February was 51.2 vs. 52.3, as reported by Markit.  The service reading was 53.3, down from 53.6.

Germany came in at just 50.5 vs. 52.3 on the manufacturing front in January, a 15-mo. low, while the service reading edged up to 55.3 from 55.0.

France’s manufacturing PMI was 50.2 last month (50.0 Jan.); services 49.2, a 15-mo. low.

Italy’s manufacturing number was 52.2 vs. 53.2, a 12-mo. low; services 53.8.

Spain’s manufacturing reading was 54.1 vs. 55.4 in January; services also 54.1.

Greece had a manufacturing PMI of just 48.4, down from 50.0, while non-euro UK reported 50.8 vs. 52.9.

Eurostat’s flash reading on eurozone inflation for February was -0.2% annualized, down from 0.3% in January but due largely to falling energy prices.

And the volume of retail trade in the euro area was 0.4% in January over December, while the retail PMI for February was 50.1, a 4-mo. high, as there was a rebound in Germany, offsetting declines in Italy and France.

Lastly, Eurostat reported the eurozone unemployment rate for January was 10.3%, the lowest in 53 months, though contrasting with the 4.9% in the U.S.

Germany’s was the lowest at 4.3%, France 10.2%, Italy 10.5%, Spain 20.5% and Greece 24.6% (Nov.).

Youth unemployment is still a big problem, with a youth jobless rate of 48% in Greece (Nov.), 45% in Spain and 39.3% in Italy.

Chris Williamson, Chief Economist at Markit:

“With factory output in the eurozone showing the smallest rise for a year in February, concerns are growing that the region is facing yet another year of sluggish growth in 2016, or even another downturn.

“Lackluster domestic demand is being compounded by a worsening global picture. Exports either fell or rose more slowly in all countries surveyed with the sole exception of Austria.

“For a region in desperate need of lower unemployment, the near-stalling of jobs growth in the manufacturing sector comes as disappointing news.  Firms are cutting back on their hiring due to worries about the outlook.

“Prices are meanwhile being dropped as firms endeavor to boost sales, suggesting deflationary pressures have intensified....

“With all indicators – from output and demand to employment and prices – turning down, the survey will add pressure on the ECB to act quickly and aggressively to avert another economic downturn.”

Separately, Spain continues to be roiled by the inability of anyone to form a government post-election.  Pedro Sanchez, the leader of the center-left Socialist party, was the latest to give it a go but he could only cobble together 130 out of 350 deputies in parliament.  Popular party leader Mariano Rajoy, acting prime minister, refused to join a coalition with Sanchez, though Rajoy has been unable to form a coalition of his own. 

But Sanchez has another shot on Friday.  If the situation then remains the same over the next two months, Spain will have to hold another vote on June 26.

On the migration front...Eurostat released its latest report and for 2015, 1,255,600 first time asylum seekers applied for international protection in the European Union, a number more than double that of the previous year.  The number of Syrians seeking protection doubled to 362,800 over 2014, while the number of Afghans quadruped to 178,200 and that of Iraqis multiplied by 7 to 121,500.

More than a third of the first time applicants were registered in Germany.

So this week....

European Union president Donald Tusk, traveling throughout the continent and meeting leaders in an attempt to find a solution to the refugee crisis, said in Athens after meeting Greek Prime Minister Alexis Tsipras:

“I want to appeal to all potential illegal economic migrants wherever you are from: Do not come to Europe.

“Do not believe the smugglers.  Do not risk your lives and your money.  It is all for nothing.”

120,000 refugees have crossed into Greece in the first two months of the year, according to the UN refugee agency, with the government estimating 25,000 of those being stranded there.

The European Commission announced it was seeking 700m euro in emergency aid for Greece and other countries dealing with the wave.  European leaders hold a critical meeting in Brussels on Monday to try to come up with a solution.

The biggest immediate issue, aside from the growing throngs from Syria, is individual European countries imposing their own border controls.  Refugees are piling up in the Aegean islands and in central Athens, after both Macedonia and Serbia shut their borders.  A similar knock-on effect is happening throughout Eastern Europe.

The Brussels agreement on Monday is supposed to see all non-Syrian migrants reaching Greek islands returned to Turkey.

German Chancellor Angela Merkel said on Wednesday:

“The strength of our single currency relies on the free movement of goods and services as well as people, and therefore the protection of our external border is our joint European project.

“All 28 members of the European Union define this the same way and have said that we need to ensure that this border is protected.”

But Merkel won’t last the year, at least that’s my prediction, and it doesn’t help that recently released German government figures show more than 130,000 asylum seekers may have disappeared in Germany, raising concerns over terrorism and organized crime.

Merkel’s government had to admit it had lost track of the hordes in a question session in parliament.  The missing people never arrived at official government refugee accommodations that had been assigned to them.  Who knows how many are Islamic extremists?

For two months, it has emerged, Germany has been searching frantically for 12 asylum seekers who simply vanished, but what makes this so urgent is the 12 were believed to have crossed the border using forged passports from the same source as those used by some of the Paris attackers.

Wolfgang Munchau / Financial Times

“There is now a real possibility that the EU system for border and immigration controls will break down in about 10 days.  [Ed. Munchau wrote this Feb. 28]  On March 7, EU leaders will hold a summit in Brussels with Ahmet Davutoglu, the Turkish prime minister.

“The idea is to persuade Ankara to do what Greece failed to do: protect the EU’s southeastern border and halt the flow of immigrants.  There is a lot of behind-the-scenes diplomacy going on between Germany and Turkey.  The mood in Berlin, however, is not good.

“The action taken by Austria, Hungary and other countries to protect their national borders has shut the western Balkan route along which migrants had made their way to Germany.

“Refugees now find themselves trapped in Greece....

“A refugee crisis that spins out of control could tilt the vote in the British referendum.  There is no way the EU will be able to deal with two simultaneous shocks of such size.  Coming at a time like this, Brexit has the potential to destroy the EU....

“Member states have lost the will to find joint solutions for problems that they could solve at the level of the EU but not on their own....

“Ms. Merkel must take much of the blame.  Her open-door policy was anti-European in that she unilaterally imposed it on her own country and on the rest of Europe.  She consulted only Austrian Chancellor Werner Feymann.

“The EU is at risk of four fractures.  I do not expect all of them to happen but I would be surprised if none did.  The first is a north-south break-up over refugees.  The so-called Schengen system of passport-free travel, in which 26 European countries take part, could be suspended indefinitely or become a miniature version comprising just Germany, France and the Benelux countries.  Italy would not be part of it.

“A second north-south faultline is the euro.  Nothing has changed here. Echoes of the eurozone crisis linger on and the Greek position is as unsustainable today as it was last summer.

“The third is an east-west divide.  Will the open societies of western Europe want to be tied into an ever-close union with the likes of (Hungary’s Viktor) Orban or the other nationalists in central or eastern Europe?

“Finally, there is Brexit.  There is no way of knowing the outcome of the British referendum.  The opinion polls are as useless as they were during last year’s general election.”

Regarding the looming British referendum, June 23, on staying in or exiting the EU, Emmanuel Macron, the French economy minister, said if the UK leaves, France would relocate its migrant camp from Calais to Britain and roll out “a red carpet” for bankers fleeing London.

Macron said the bilateral relationship could change abruptly in the event of Brexit, including new trade obstacles.

In an interview with the Financial Times, Macron said Brexit would kill a bilateral deal with France that allows Britain to carry out border controls – and keep unwanted migrants – on the French side of the Channel.

And he also expected that bankers would flee London in droves because their institutions would lose “passport” rights that allow them to operate across the EU.

---

Turning to Asia....

As China’s National People’s Congress gathered in Beijing (covered more below), the government reported the manufacturing PMI for February was just 49.0, the worst since January 2009, while the services index was 52.7, down from 53.5.

The private Caixin manufacturing PMI was 48.0 last month vs. 48.4 in January, with the services reading at 51.2 vs. 52.4.

Since the Chinese New Year holiday fell in February that no doubt skewed the manufacturing numbers as most factories closed for a spell, but it should have then been better news for services.

One additional item...the government said on Monday that a total of 1.8 million workers in China’s coal and steel sectors are expected to lose their jobs as part of the effort to reduce industrial overcapacity; 1.3 million from the coal industry, 500,000 from the latter.

But if the workers don’t receive abundant compensation or are provided new opportunities, there is going to be major unrest.

In Japan, the government will release fourth-quarter GDP next Tuesday and it is now expected to have shrunk 1.5% annualized. 

The February PMI for manufacturing was 50.1 vs. 52.3 in January, while the services reading was 51.2 vs. 52.4 (yes, same as China’s).

The government also for the first time sold 10-year bonds with a negative yield, -0.024 percent.

Elsewhere in Asia, you had manufacturing PMIs of 49.4 in Taiwan, 48.7 in South Korea and 51.1 in India; hardly roaring growth.

Street Bytes

--The S&P 500, in rising 2.7% this week, has now gained 7.3% in the last three and it’s the first time since 2009 the benchmark has surged 1.5% three weeks in  row.  The Dow Jones gained 2.2% and Nasdaq 2.8%, with the year to date loss on the Dow and S&P now just 2%, while Nasdaq has cut its loss to 6%.  For all three it’s the best three week stretch since 2014.

With the rally in oil, energy stocks and financials have been leading the way.

--U.S. Treasury Yields

6-mo. 0.45%  2-yr. 0.86%  10-yr. 1.87%  30-yr. 2.69%

The yield on the 10-year rose from 1.76% the week before with the better economic news.

But the euro bond market, particularly Germany’s, could be cruisin’ for a bruisin’.  With oil prices rising off their January lows, eurozone inflation expectations are rising and that could spell trouble for German Bunds, especially if the ECB disappoints at next week’s meeting.  The 10-year Bund hit a 10-month low yield of 0.10% this week, but it closed Friday at 0.24%.  Last April, the 10-year jumped from 0.049% to 1.059% in just two months.

--In his monthly investment newsletter, Janus Capital’s Bill Gross said that negative rates may be the final act of a death spiral.

“Instead of historically generating economic growth via a wealth effect and its trickle-down effect on the real economy, negative investment rates and the expansion of central bank balance sheets via quantitative easing are creating negative effects,” he wrote.

Aside from impacting bank profits, other business models, such as those for insurance companies and pension funds that depend on 7 to 8 percent annual returns on assets are taking a hit.

“And the damage extends to all savers; households world-wide that saved/invested money for college, retirement or for medical bills. They have been damaged, and only now are becoming aware of it.”

--According to a USA TODAY analysis of data from S&P Global Market Intelligence, just 28 firms in the S&P 500 – including the likes of Apple and JPMorgan Chase, accounted for 50% of U.S. profits within the index.  In 2014, 52 S&P 500 companies generated half the overall profits.

So profits have become even more concentrated.  [Matt Krantz / USA TODAY]

--As noted above, oil rose to a two-month high this week as traders believe stories of an output agreement among the large producers could pan out.  Russia’s energy minister said Tuesday that a “critical mass” of oil-producing countries had agreed to freeze production; a group that would include Russia, Saudi Arabia, Venezuela and Qatar.

But the market still has to deal with record inventories and Iran hasn’t said it would participate as it continues to ramp up following the lifting of sanctions.

And sure enough, the day after the talk from Russia, U.S. inventories rose four-times more than forecast, jumping 10.4m barrels to 518m, a “historically high” level for this time of year, according to the Energy Department.  You aren’t going to get West Texas Intermediate (the benchmark I list down below each week) over $40 until you work off the surplus.  That said the rally has been substantial.

My eye in the sky, commercial airline pilot Bobby C., sent me a note this week:  “Oil tanker ships, sitting low in the water (meaning they are full), are lined up in San Francisco Bay and outside Long Beach harbor for as far as the eye can see.”

--But, some traders are betting the bottom is in on commodities in general, thus the sloughing off of further inventory gains for crude.

Industrial metals such as copper are at their highest levels since the fall, which has triggered a big rally in beaten-down mining stocks.

And recent news from China, that the world’s largest consumer of commodities will continue to support economic growth, has also helped sentiment and the belief we’ve bottomed.

--ExxonMobil, the world’s largest listed oil company, expects no increase in production in 2020 over last year, with capital spending having been cut 25 percent, with a further reduction in 2017.

CEO Rex Tillerson said criticism of the company for lack of production growth “doesn’t bother us,” adding Exxon was constantly working to offset the natural decline in output from its oil and gas wells.

“People say, ‘Well, you’re not growing,’ That just tells you how hard it is to hold your own in a depleting business.”

Tillerson added that many smaller U.S. oil companies had been “destroying value” by loading up with debt, which meant that attractive assets were encumbered.

--The number of rigs drilling for oil in the U.S. fell by 8 last week to 392, the first drop below 400 since the financial crisis, as reported by Baker Hughes.

--Aubrey McClendon, one of the leading figures in the U.S. oil and gas industry, including the shale revolution, was indicted on Tuesday for conspiring to rig bids for O&G leases in northwestern Oklahoma.  The indictment alleged McClendon worked with executives at another unnamed company to hold down the price of those leases.

The charges are serious and carry a maximum sentence of 10 years in prison for each violation.

McClendon issued a statement following the indictment:

“The charge that has been filed against me today is wrong and unprecedented.  I have been singled out as the only person in the oil and gas industry in over 110 years since the Sherman Act became law to have been accused of this crime in relation to joint bidding on leaseholds.”

But on Wednesday, McClendon died in a single-car crash in Oklahoma City, his base.  He wasn’t wearing a seat belt and there is no official word (if there ever will be) that there was a medical condition or it was suicide.

McClendon was a larger-than-life figure, who transformed Chesapeake Energy, the company he founded in 1989 with just $50,000, into the second-largest gas producer in the country, behind Exxon-Mobil.  He was also a part-owner of the Oklahoma City Thunder basketball team and a generous donor to causes in the city.

--U.S. auto sales continued to rock and roll in February, with Ford’s up 20.2%, Fiat Chrysler’s 12%, GM’s 6.6% and Toyota’s 5.2%.  Honda’s rose 13%, with its Civic model up 32%, and Nissan Motor Co. saw its sales rise 11%.

Those low prices at the gas pump help big time.  February’s seasonally adjusted annual rate is in the 17.9m vehicles range, up 10.8% from February 2015.

Ford’s SUV sales rose 29% year over year.  Fiat Chrysler’s were up 23% for its Jeep SUV brand.

Meanwhile, having halted sales of diesel cars due to its emissions-cheating scandal, Volkswagen’s sales declined 13% for the month.  But its Tiguan (small SUV) sales soared 78%.

--Monsanto, in issuing a profit warning, nonetheless said there were signs of stabilization in the farm economy.

The world’s biggest seller of corn and soybean seeds, as well as the maker of Roundup weed killer, announced it doesn’t plan any further job cuts after laying off about 3,600 in recent months, or 16% of its global workforce.

“There are no signs of improvement, but not much indication of further deterioration,” said CEO Hugh Grant.

The U.S. farmer has been hit by lower global crop prices and the strong dollar.

--Apple is fighting a court order to help the FBI bypass the passcode-security measures on the phone used by Syed Rizwan Farook, one of the two assailants in the San Bernardino attacks.

County officials had reset the cloud storage account connected to the phone, which impeded the FBI’s ability to access more of the data.

“There was a mistake made in that 24 hours after the attack, where the county at the FBI’s request took steps that made it impossible later to cause the phone to back up to the cloud,” FBI Director James Comey told the House Judiciary Committee.

Apple’s lawyer, Bruce Sewell, said the company must draw a line when the government tries to force its employees to weaken the overall security of its products.

The day before, a federal judge in New York ruled that government can’t compel Apple to help investigators extract data from a locked iPhone in a drug probe, thus giving support to Apple’s position in its fight against a California judge’s order that it create specialized software to help the FBI hack into Farook’s device.

Rep. Trey Gowdy (R., S.C.) said national security concerns should trump privacy worries.  “You can go into people’s bodies and remove bullets, but you can’t look in a dead person’s phone,” he said. “I just find it baffling.”  [Devlin Barrett / Wall Street Journal]

Editorial / Wall Street Journal

“The Apple encryption conflict has turned nasty, as the Obama Administration, most Republicans and public opinion turn against the tech company.  But, lo, Apple won its first court test on Monday, and its legal briefs against the court order to unlock an iPhone used by the San Bernardino jihadists show it has a better argument than the government....

“(A) California magistrate ordered the company to design a custom version of its operating software that will disable certain security features and permit the FBI to break the password.  Apple has cooperated with the probe but argues that forcing it to write new code is illegal.

“One confusion promoted by the FBI is that its order is merely a run-of-the-mill search warrant. This is false. The FBI is invoking the 1789 All Writs Act, an otherwise unremarkable law that grants judges the authority to enforce their orders as ‘necessary or appropriate.’  The problem is that the All Writs Act is not a catch-all license for anything judges want to do.  They can only exercise powers that Congress has granted them.

“Congress knows how to require private companies to serve public needs. The law obligates telecoms, for example, to assist with surveillance collection.  But Congress has never said the courts can commandeer companies to provide digital forensics or devise programs it would be theoretically useful for the FBI to have – even if they are ‘necessary’ for a search.

“Congress could instruct tech makers from now on to build ‘back doors’ into their devices for law-enforcement use, for better or more likely worse.  But this back-door debate has raged for two years.  In the absence of congressional action, the courts can’t now appoint themselves as a super legislature to commandeer innocent third parties ex post facto....

“FBI director James Comey told Congress last week that the Apple case was ‘unlikely to be a trailblazer’ and that it also would be ‘instructive for other courts.’  Well, which is it?  This contradiction isn’t the only reason to wonder if Mr. Comey prefers an encryption legal precedent over Farook’s actual data....

“We bow to no one in defense of antiterror programs whose political popularity waxes and wanes, especially on surveillance. But this case isn’t about ‘privacy.’  This is about engineering security and its implications for the security of all Americans.

“Back doors are engineering vulnerabilities that make devices less secure. But terrorists and criminals will always be able to find some underground encrypted communication channel, so regulating back doors into legal devices achieves little national-security benefit.  To borrow a line from James Burnham, if there’s no alternative, there’s no problem.”

Evgeny Morozov / Financial Times

“Something in the government’s rhetoric does not add up.  The FBI either has solid reasons to break into that phone – in which case it is not obvious why the mighty power of the National Security Agency and other government bodies has not yet been mobilized – or it is simply using the San Bernardino case as an excuse to redefine its relationship with Silicon Valley....

“While the FBI’s defense has been that their request is extremely narrow – once Apple has facilitated access to that single phone, it is free to destroy the code required to do so – the broader political context in which this battle unfolds suggests that Apple’s stance will have far-reaching implications.

“First, the FBI’s request comes at a time when the U.S. government is exerting immense pressure on America’s largest technology companies to join it in the fight against ISIS....

“While many such requests are straightforward – removing jihadist propaganda from YouTube or Twitter, for example – there are concerns that such pressure might extend to modifying their algorithms in order to hide certain types of content from easily susceptible users.

“Google knows what is in your inbox; why should it not modify your search results to make you less of a terrorist?

“Second, it is hard to believe that the San Bernardino case will be an isolated episode....

“Even if Apple chose to destroy the code it writes to help the FBI on this occasion, it would need to rewrite it for a new request.  Should it keep this code forever, it would be holding on to a magic key to its devices – a highly prized asset for any hacker.

“Given the publicity of the case, any terrorist would probably stop using Apple’s products anyway. The only people to suffer would be ordinary users, stuck with their iPhones and iPads.

“Third, the FBI’s rationale in this case would make any other manufacturer of smart devices – including all those smart fridges and smart thermostats in your smart home – subject to similar request.

“If Apple can be forced to modify security protocols on its phone, what stops the FBI from asking the manufacturer of the smart smoke detector to trigger a fake smoke alarm?  Or asking the manufacturer of the smart car to drive suspects directly to the police station?

“All of this would seem neat so long as the government agencies were competent and nobody else could take advantage of such vulnerabilities.

“This is not so....

“And it would be suicidal to force technology companies to weaken security at a time when institutions of all sorts are vulnerable to hackers demanding ransoms – earlier this month, a hospital in California paid the bitcoin equivalent of $17,000 to hackers who had breached its computer network.

“Apple’s proposed solution is the right one: America needs a comprehensive political debate on the issue – one that would bypass inter-agency squabbling.”

--So I’ve been writing for the better part of a year how Apple doesn’t have a clue how it is going to get screwed in China, and in light of the above discussion, note the following from David Pierson of the Los Angeles Times.

“Apple Inc. has come out swinging in its pitched battle with the government on its home turf.

“But when it comes to its second-largest market, China, the Cupertino, Calif., company has been far more accommodating.

“Since the iPhone was officially introduced in China seven years ago, Apple has overcome a national security backlash there and has censored apps that wouldn’t pass muster with Chinese authorities. It has moved local user data onto servers operated by the state-owned China Telecom and submits to security audits by Chinese authorities.

“The approach contrasts with Apple’s defiant stance against the FBI....

“The years-long strategy in China is paying off at a crucial time. While sales of Apple products have flatlined or declined in the U.S., Europe and Japan, business in the company’s greater China region continues to soar – to a record $59 billion last year.  The Asian giant surpassed the U.S. last year as the No. 1 buyer of iPhones and could one day be the largest market for Apple Pay, the mobile payment platform that was rolled out for Chinese consumers last week.

“But there’s no guarantee the good times will continue rolling for Apple.  Beijing is increasingly tightening the screws on foreign technology companies, having introduced strict laws aimed at policing the Internet and digital hardware

“The environment will get even tougher, Apple says, if the FBI prevails in seeking a so-called backdoor to Farook’s phone.  That could set a precedent for China’s authoritarian leaders to demand the same in a country where Apple has never publicly defied orders.”

Apple has sold out, but while the relationship with Beijing appears to be solid today, let’s see how solid it is a year from now.  I virtually guarantee it will have cracked.

--Honeywell scrapped its proposed $90bn offer for rival United Technologies on Tuesday, as the aerospace supplier strongly disagreed with UTC’s characterization of regulatory and customer risks associated with a deal.

Honeywell CEO Dave Cote appealed directly to investors by publishing a Feb. 19 presentation he had made to UTC CEO Greg Hayes about the logic of the merger.

HON has argued the overlaps between the businesses were smaller than they appeared and that regulatory issues were manageable.

--General Electric CEO Jeff Immelt used his annual letter to shareholders to take a few shots at anti-growth policies.

“In the U.S., we want exports but seem to hate trade and exporters; globally, governments love small businesses but then regulate them to death,” Immelt writes.  “And so, we perpetuate a cycle: slow growth, poor job creation, populism, low productivity, higher regulation, poor policy and more slow growth.”

--Macau’s GDP contracted 14.4 percent in the fourth quarter of 2015 compared to the same period in the previous year as it continues to be hit by a decline in the gambling industry.  It is the sixth consecutive quarter of contraction, though Q4 was the best in more than a year.

Owing to Beijing’s crackdown on corruption, gaming revenues have posted year-on-year declines in every month since June 2014.

--The manufacturing PMI for February in Brazil was a putrid 44.5 in February vs. 47.4 in January as reported by Markit.  More on the chaotic political situation there down below.

--The Center for Disease Control has advised women who are pregnant to “consider not going to the Olympics” in Brazil, the epicenter of the Zika virus outbreak.  The CDC also warned male partners attending the Rio Games to “use condoms the right way, every time, or do not have sex during your pregnancy” because of the risk for sexual transmission of Zika.

The International Olympic Committee’s medical director, Richard Budgett, continues to attempt to reassure everyone that “everything that can be done is being done...to protect the health of the athletes.”

--Carl Icahn’s hedge fund lost 18% last year, following a loss of 7.4% in 2014, as his bets on the likes of Chesapeake Energy and commodities dropped steeply.

Since its founding in 2004, Icahn’s fund, part of Icahn Enterprises, has returned 9% annualized.

Donald Trump needs to hope his rivals don’t know much about the recent performance of a man he is continually touting.

--According to Forbes magazine’s annual list of global billionaires, there are 1,810 of them and Facebook founder Mark Zuckerberg made more than any of them last year.

Bill Gates topped the list for the 17th time, with a net worth of $75bn.  Zuckerberg added $11.2bn to move up to sixth on the list with a total of $46.7bn.

Donald Trump’s net wealth was estimated at $4.5bn, though Trump says it’s more than double that.

--Italian lawmakers have been wrestling with legislation that would decriminalize the act of passing off counterfeit olive oil and its origin.  As the New York Times’ Elisabetta Povoledo reported:

“The decree is intended to regulate penalties for counterfeiting olive oil and its origins. One example of counterfeiting would be declaring that an oil was 100 percent Italian extra-virgin olive oil when, in fact, it contained olive oil from other countries.”

Prime Minister Matteo Renzi’s government has made a priority of promoting authentic “made in Italy.”  As one Italian lawmaker wrote in an email: “It is important to punish anyone who damages the image of Italy abroad.”

I note this story because there was a recent “60 Minutes” piece that if you saw it would have you second-guessing purchasing olive oil purported to be made in Italy.  Much of the production is controlled by the Mob.

Consumers, to a large extent, aren’t getting what they think they are.  Extra-virgin olive oil is usually twice the cost of blended oils, but the fraud occurs when companies attempt to pass off foreign olive oil as 100 percent Italian. 

Solution? Buy U.S. (Californian).  It’s just as good and cheaper.

--After a very dry, and warm, February, suddenly California’s snowpack stood at only 83% of average as of Tuesday, after it had been solidly above average in December and January.  Half of the state’s annual rain and snow falls during these three months.  The ‘Godzilla’ El Nino had seemingly ended.

But fret not, for a massive rain/snow maker is hitting the Sierras and other parts of the state this weekend, so there will indeed be some drought relief.

Foreign Affairs

Syria/ISIS/Iraq/Russia/Turkey: Israel said on Tuesday that since the start of the ceasefire last Saturday, Syrian government forces had used chemical weapons against civilians.

Israeli Defense Minister Moshe Ya’alon said in a speech, “The Syrians used military grade chemical weapons and lately have been using materials against civilians...dropping barrels of chlorine on them.”

The global chemical weapons watchdog (OPCW) concluded in 2014 that the use of chlorine gas had been “systematic” in the civil war.

Overall, the ceasefire is said to be holding, but NATO is concerned over Russia’s military build-up in the country.

NATO secretary-general Jens Stoltenberg said:

“We are concerned about the significant Russian military build-up we have seen in Syria with the ground troops, with the naval forces in the eastern Mediterranean and with air forces conducting air strikes.”

The ceasefire is only a partial one, excluding ISIL, Nusra Front and other groups designated as terrorist groups by the U.S.

In a new report from Amnesty International, the rights group has “compelling evidence” of at least six deliberate attacks on medical facilities in the Aleppo governorate over the past twelve weeks.

Meanwhile, there was a report that ISIS is making up to $20m a month through playing foreign currency markets, funneling dollars looted from banks during its takeover of the city of Mosul into legitimate currency in Middle East markets.

It then makes huge returns on currency speculation, which are wired back via financial authorities in Iraq and Jordan.  The details were relayed as part of a British parliamentary inquiry.

During the 2014 takeover of Mosul, ISIS got its hands on an estimated $429m from the city’s central bank.  [Irish Independent]

Speaking of Mosul, Defense Secretary Ash Carter and Joint Chiefs Chairman Gen. Joseph Dunford said multinational forces have begun to cut off the city’s supply and communication lines, and to encircle and isolate ISIS fighters with cyber and air and ground attacks in the first steps to retake the city.  According to Dunford, the final thrust should be expected sooner than later.

Last Sunday, ISIS launched twin suicide bomb attacks in Baghdad’s Sadr City, killing at least 78.  The target was a busy market in the Shia district, IS having said it would continue to target Shia Muslims, whom it considers heretics.

With ISIS having suffered setbacks elsewhere in Iraq, there are fears it will step up attacks in the capital.

Also on Sunday, ISIS claimed responsibility for a suicide attack in the Syrian province of Hama that killed 20, mostly Syrian army forces.

Lastly, NATO’s supreme allied commander, General Philip Breedlove, said Russia was “weaponizing” immigrants, by using types of bombs that are designed to force civilians from their homes in Syria.

Speaking at a Senate hearing, Breedlove said: “I can’t find any other reason for them [air strikes against civilians] other than to cause refugees to be on the move and make them someone else’s problem.  I use the term weaponization of immigration.”

Iran: More than 30 million Iranians voted in last Friday’s polls, the first since the implementation of the nuclear agreement between Iran and the P5+1 (U.S., Britain, France, Russia, China and Germany).

The deal was opposed by many hardliners but backed by moderates and reformists, so the election was basically a referendum on it.

And so it was that President Hassan Rouhani and his allies won 15 out of the capital’s 16 seats on the Assembly of Experts, out of 88 overall, this body choosinig the country’s next supreme leader.  Two key leading hardline clerics lost their seats.  The Assembly of Experts is paramount in that Supreme Leader Ayatollah Ali Khamenei is 76 and not in good health.

Moderates and reformists won all 30 of Tehran’s seats in parliament, but hardliners are said to have retained a majority in the 290-seat parliament, though a round of runoffs is necessary in some of the “constituencies.”

Ayatollah Akbar Hashemi Rafsanjani, a leader of the reformists and ally of President Hassan Rouhani, as well as former two-term president, said on Twitter on Sunday:

“No one is able to resist against the will of the majority of the people and whoever the people don’t want has to step aside.”

But frankly the election is confusing.

Editorial / Washington Post

“If you are a Washington foreign policy analyst who supported the nuclear deal with Iran, then the result of the country’s elections last week was a resounding victory for reformists that proves the wisdom of President Obama’s engagement with the Islamic republic.  If you opposed the deal, then the election merely entrenched conservatives and hard-liners.  Such is the opacity of Iranian politics that neither of those dueling narratives could be entirely discounted following the release of the election results this week.

“What seems relatively clear is that the voting for parliament, and for the Assembly of Experts that will choose the next Iranian supreme leader, showed, like most Iranian elections, that a large part of the public supports a liberalization of the regime.  But as in the past, that popular sentiment is unlikely to bring about substantial change in the near future – in part because many of those elected are far less reform-minded than those who voted for them....

“(Any) claims of a reformist triumph...are overblown....Most of those in Mr. Rouhani’s coalition are, like him, moderate conservatives, meaning they favor economic reforms and greater Western investment, but not liberalization of the political system or a moderation of Iran’s aspiration to become the hegemon of the Middle East.  True Iranian religious and political reformers, like those who joined the 2009 Green Movement, are in jail or exile, or were banned from the ballot....

“For now, Iran can be expected to continue the course it has been pursuing in the months since the nuclear deal was struck: waging proxy wars against the United States and its allies around the Middle East, using its unfrozen reserves to buy weapons, and defying non-nuclear limits – such as by testing long-range missiles.  The elections won’t make the regime more pliable, and they won’t change the need for a U.S. counter to its aggressions.  They shouldn’t provide an excuse for the Obama administration to tolerate Tehran’s provocations.”

Lebanon: The six-member Gulf Cooperation Council has designated Hizbullah a terrorist organization, ratcheting up pressure on the Iran-allied group that is a big player in Lebanon and Syria.

The decision followed a speech by Hizbullah leader Sayyed Hassan Nasrallah wherein he said Saudi Arabia had pushed Lebanon into a new phase of political conflict by announcing it was suspending an aid package to the Lebanese army.  Nasrallah also accused Saudi Arabia of directing car bombings in Lebanon.

The Saudis support Sunni politician Saad al-Hariri, the former prime minister and son of the assassinated Rafik Hariri, but while tensions are building once again in Beirut, Nasrallah has said there would be no repeat of the violence that rocked the area in 2008.

But there is no doubt the Saudis appear to be walking away, opening the door for Iran, seemingly punishing Lebanon for allowing Hizbullah to side with Iran in Syria.  In Saudi eyes, it seems Lebanon has now taken a back seat to Yemen, Syria and other conflicts in terms of its priorities.

This spells disaster for Lebanon.

Iraq: The United States has reiterated that the Mosul dam faces “unprecedented” risk of a “catastrophic failure” that would unleash a wall of water which could flatten cities and kill hundreds of thousands within hours.

I first wrote of this weeks ago, but Wednesday, Washington urged its citizens in Iraq to make contingency plans now.  Australia is another that has plans in place for the evacuation of soldiers there should the dam collapse.

The U.S. said Iraq’s power grid could be entirely knocked out and parts of major cities would be underwater for weeks.

Mosul would be under 20 meters (65 feet) of water within hours of a breach, giving residents little time to flee.

Much of the territory projected to be damaged is contested or under ISIL control.

Jordan: Security services here said on Wednesday they had foiled a large-scale ISIS plot to blow up civilian and military targets, with seven militants killed in clashes that took place on Tuesday.  One police officer was killed.  The militants were holed up near a Palestinian refugee camp in the center of Irbid.

Afghanistan: A Taliban suicide bomber blew himself up near the Afghan defense ministry in Kabul on Saturday, killing 23 Afghan soldiers and civilians.  This came just hours after an attack in the eastern province of Kunar killed 13 and put prospects for new peace talks in doubt.

The Wall Street Journal reports that the Afghan police “lost nearly a quarter of its members last year after most foreign troops left the country, according to interior ministry data, as thousands deserted in the face of increasing Taliban attacks and poor leadership.”

China: The two-week National People’s Congress commences this weekend in Beijing, a largely ceremonial affair of speechmaking, but the real discussions take place behind closed doors.

In terms of the markets, the government will announce its official economic policy and growth forecast, while Chinese President Xi Jinping will look to further consolidate power after a three-year anticorruption campaign that has seen some 750,000 party members punished.

Xi’s new demand is to enforce unswerving loyalty to preserve “the party’s centralized unity.”

Separately, China’s militarization of the South China Sea will have consequences, according to U.S. Defense Secretary Carter.

“China must not pursue militarization in the South China Sea,” Carter said in a speech in San Francisco.  “Specific actions will have specific consequences.”  He did not elaborate.

[In the same speech, Carter blasted Russia and China for their actions to limit Internet access, as well as state-sponsored cyber threats, cyber espionage and cybercrime.” (Reuters)]

*And this just in as I go to post Friday evening...the National People’s Congress set the country’s growth target for 2016 at 6.5% to 7%, as expected.  More next week following Premier Li Keqiang’s speech on the details.

North Korea: Kim Jong-un ordered his country to be ready to use its nuclear weapons at any time and to turn its military posture to “pre-emptive attack” mode in the face of growing threats from its enemies, according to official media on Friday.

This is a further escalation of tensions on the Korean peninsula after the UN Security Council imposed harsh new sanctions against Pyongyang for its nuclear program.

Kim, shown supervising the exercise of newly developed multiple rocket launchers on state TV, said the new weapons had South Korea within range.

Kim said North Korea should “bolster up (its) nuclear force both in quality and quantity” and stressed “the need to get the nuclear warheads deployed for national defense always on standby so as to be fired any moment,” KCNA quoted him as saying.  “Now is the time for us to convert our mode of military counteraction toward the enemies into a preemptive attack in every aspect.” [Reuters]

A day earlier, the North launched several projectiles off its coast into the sea, in an apparent response to the new sanctions being imposed.

Russia: There was a gruesome incident in Moscow this week as a woman – identified as a 38-year-old Uzbek national – was detained on a street holding the severed head of a child, shouting “Allahu Akbar” and calling herself a “terrorist.”

The woman worked as the child’s nanny and was accused of killing the girl.

The thing is the national media, including the television networks, didn’t cover the story even though it went viral.  Russia’s Communist Party immediately called for a curtailment of “illegal migration” to the country and illustrated its appeal by a drawing of a woman wearing a Muslim head covering the veil and holding a severed human head.

And there was a bizarre story in a Lebanese newspaper, picked up by the Jerusalem Post, that the head of Russia’s military intelligence service, Colonel-General Igor Sergun, was killed in January during a secret mission in Beirut.

The Kremlin had announced the death of Sergun on January 4, saying that he died in Moscow after a heart attack.  Sergun had played a key role in the Russian seizure of Crimea in March 2014, and reportedly died three weeks after he was sent to Syria by Vladimir Putin to demand Syrian President Assad step aside.

But according to the newspaper al-Akhbar, Sergun was killed by a team of Arab and Middle Eastern intelligence agencies.  A diplomatic source told al-Akhbar that Turkey was involved, which then resulted in increased tensions between Moscow and Ankara.

Lastly, 39-year-old Chechen leader Ramzan Kadyrov said it was time for him to step aside and that he wanted the Kremlin to find his replacement.

This week marked the one-year anniversary of the assassination of opposition leader Boris Nemtsov in Moscow, with Nemtsov allegedly gunned down by a group of Chechens.  Thousands marched to honor him on Saturday; the largest opposition rally since his death.

There have been calls for Kadyrov to be interrogated over the murder, but he has denied involvement.

Brazil: Former President Luiz Lula da Silva was detained by police on Friday as part of the massive fraud inquiry into the state oil company Petrobras.  Lula’s house was raided and he was brought in for questioning, sparking unrest across the country between police and his old supporters.

Lula left office in 2011 and has denied allegations of corruption.

The Petrobras scandal, known as Operation Car Wash, is probing accusations of corruption and money laundering, with officials carrying out some 33 search warrants and 11 detention warrants in the past few days throughout the country.

Dozens of executives and politicians have been arrested or are under investigation on suspicion of overcharging contracts with Petrobras and using part of the money to pay for bribes.

Lula served two terms as president before being succeeded in office by his political protégé, Dilma Rousseff.

As for Rousseff, she may yet be impeached.  A massive national protest against her rule is slated for March 13.

Cuba: Secretary of State John Kerry canceled a trip to Havana two weeks before President Obama heads to the island as diplomats haggle over which Cuban dissidents the president will be allowed to meet.

Obama’s visit on March 21 is the first by a sitting president in nearly 90 years, but haggling over human rights will present a problem for him.  As Obama has pushed for normalization of relations, the Cuban government has done nothing to ease its limits on free expression or to improve treatment of human rights activists and political dissidents.

In January, 1,414 dissidents were detained, the second highest number in years, according to the head of the opposition Cuban Commission for Human Rights and National Reconciliation.  Elizardo Sanchez said 56 of the detainees were beaten.

Ireland: Voters ousted Prime Minister Enda Kenny’s Fine Gael and its junior collation partner, the Labour Party, in last weekend’s elections.  But the vote was splintered into many pieces and forming a new coalition government will be difficult.  Left-of-center Sinn Fein received the third most votes at about 14%.

For now there is a hung parliament (Dail).  Luckily, Ireland is in good shape economically these days.

Random Musings

--Results from Super Tuesday...Republicans:

Donald Trump won in Alabama (43%), Arkansas (33%), Georgia (39%), Massachusetts (49%), Tennessee (39%), Virginia (35%), Vermont (33%).

Ted Cruz won in Alaska (36%), Oklahoma (34%), Texas (44%).

Marco Rubio won in Minnesota (37%).

Trump finished second in Alaska, Oklahoma and Texas.

Rubio was second in Georgia and Virginia.

John Kasich was second in Massachusetts and Vermont.

Cruz was second in Alabama, Arkansas, Minnesota and Tennessee.

--Delegate count (est.)....Republicans

Trump 316
Cruz 226
Rubio 106
Kasich 25

[1,237 needed to win]

March 5 the Republicans have primaries or caucuses in Kansas, Kentucky, Louisiana and Maine.

March 6 there is a primary in Puerto Rico.

March 8 there are caucuses or primaries in Hawaii, Idaho, Michigan and Mississippi.

March 15 you have large states such as Ohio, Florida...in the first winner-take-all contests of the race.

--Trump redoubled his attacks on the establishment.

Tim Pawlenty, the former Minnesota Republican governor who ran for president in 2012, spoke for many in the club when he described the Super Tuesday results as an “inflection point” for the GOP.

“If the Republican Party were an airplane and you’re looking out the window, you’d see some pieces of the surface flying off. And you’d be wondering whether the engine or a wing is next.”

Former Republican senator Trent Lott said, “We’ve now backed ourselves into a corner...and it’s not very pretty.”

Gerald F. Seib / Wall Street Journal

“Donald Trump cruised out of Super Tuesday in fine shape. By contrast, Republican leaders who had been hoping he would stumble emerged still in a fix, facing tough choices, uncertain options and perhaps a moment of truth in the next two weeks....

“Sen. Ted Cruz showed he can win, but he is hardly beloved within the party. Sen. Marco Rubio won the caucuses in Minnesota, giving him the fuel needed to carry on, but didn’t win any of the bigger primaries elsewhere, and lots of the party’s donors have bet on him.  If those two continue to divide the anti-Trump vote, they may pave the road to the nomination for Mr. Trump.

“In short, those atop the Republican Party who hoped Tuesday would throw a stop sign in front of a man who dislikes the party’s establishment, insults its donor base, disagrees with its traditional positions on trade and mocks its neoconservative foreign-policy thinkers – well, the day provided more of a speed bump.

“Now the anti-Trump forces have basically four choices:

“The first is to simply fight on over the next two weeks, hoping that the vote in the next big states on March 15 provide something different. The problem in this scenario is simple – though Mr. Cruz won his big home state of Texas, he was clobbered by Mr. Trump in the states of the deep South that were supposed to form his base.  There remain deep questions about how broad his appeal can be.

“Meanwhile, the candidate with the best chance of stopping Mr. Trump in the pivotal state of Florida on March 15 – and the one who seems to have the best general-election profile – is Mr. Rubio.  But he still needs a big-state primary victory....

“The second option is for party leaders to somehow persuade everybody except Mr. Cruz to get out of the race so he can consolidate the anti-Trump vote.  The problem there is that party leaders despise Mr. Cruz, almost as much as they dislike Mr. Trump....

“The third option is for leading party figures to take a stand on conscience and declare that they won’t back Mr. Trump as the nominee, hoping that will reverse the tide.  Some have done so in recent days....

“Which leaves the fourth option: acquiesce to the Trump movement.  That is a particularly tough choice for the party’s conservative activists, who don’t consider Mr. Trump one of their own....

“Hovering over it all is a large cloud of uncertainty about how a nominee as unconventional as Mr. Trump would fare in a general election.  One GOP strategist argued Tuesday night that he would produce a ‘shattered, decimated party’ in the fall.

“Mr. Trump, meantime, argued that ‘I have millions and millions and millions of people.’

“We will have to wait to see who is right.”

Speaker Paul Ryan issued a scathing rebuke of Trump, warning that Trump cannot engage in “evasion” or “games” when it comes to rejecting white supremacy groups.

Jonah Goldberg / Los Angeles Times

“Many decent and sincere Republicans, in and out of the Republican leadership, have been operating on the assumption that Trump will fade and that the gravest threat is a third party run by the dean of Trump University. There was a time when that concern was defensible.  But once it became clear that he was favored to win the nomination outright, Republicans should have realized that a third-party run was more like a best-case scenario.

“Better the GOP do battle with a know-nothing bigot (and lose the presidency) than become the party of know-nothing bigots (and still lose the presidency).

“That’s why I embrace the Twitter hashtag #NeverTrump, initiated by conservative talk show host Erick Erickson.  For too long, Trump has benefited from the assumption that the non-Trump faction of the party will be ‘reasonable’ and support the nominee.  Such thinking paves the road to power for demagogues.

“Trump says he gets along with everybody and will unify the country, even as he suggests an inconvenient judge is biased because he’s Latino, vows to ban 1.6 billion Muslims, insists his Central Intelligence Agency will torture people and boasts he will declare war on disloyal journalists.

“When your opponent is that unreasonable, the reasonable response is not surrender.

“I don’t know whether Trump will win the nomination or the presidency.  But I am fairly certain that if he does a great many people will one day say, ‘My God, what have I done?’”

--Meanwhile, New York Attorney General Eric Schneiderman described now-shuttered Trump University as a bait-and-switch scheme when he filed a suit back in 2013, alleging the school duped thousands of enrollees out of millions of dollars.  On Tuesday, a state appellate court ruled unanimously that the case can proceed.  Friday, Schneiderman went on CNN to say the evidence of fraud is “overwhelming.”  Look for a “60 Minutes” piece on this in the coming weeks.

--One endorsement that may had a positive impact for Trump was that of Alabama Rep. Sen. Jeff Sessions, with Trump then receiving 43% of the vote in that state, 22 points more than Ted Cruz.

--Ben Carson pulled out of the race after Super Tuesday, saying he did not see a “path forward.”

--So then the four remaining Republican candidates gathered for another debate in Detroit and what a debacle, as Marco Rubio and Ted Cruz ganged up on Trump, with Rubio calling the frontrunner a “con artist” again, while dismissing Trump’s policies as unserious.  Cruz slammed Trump for the checks he’s written to Hillary Clinton.

For his part, Trump fought back as only he can, addressing “Little Marco” and “Lyin’ Ted,” as well as defending the size of his penis.  Yes, it was appalling.  But in the end, Rubio, Cruz and John Kasich pledged to support Trump should he gain the nomination, as they all push for a contested convention as being the only way, it would seem, to take The Donald down.

When it came to their prospective opponents in November, Sen. Rubio said during the debate:

“The Democrats have two people left in the race.  One of them is a socialist. The other one is under FBI investigation.  And not only is she under FBI investigation, she lied to the families of the victims of Benghazi. And anyone who lies to the families of victims who have lost their lives in the service of our country can never be a commander in chief of the United States.”

Hours earlier, 2012 Republican nominee Mitt Romney gave an extraordinary speech blasting Trump as a “phony” and a “fraud” who must be defeated.  “He’s playing members of the American public for suckers.”

Romney continued: “His bankruptcies have crushed small businesses and the men and women who work for them.  Whatever happened to Trump Airlines?  How about Trump University?  And then there’s Trump Magazine and Trump Vodka and Trump Steaks and Trump Mortgage.  A business genius he is not.”

Prior to the debate, Trump, speaking at a rally in Maine, bemoaned Romney’s “nasty” critique and dismissed him as a “choke artist” who botched an easy chance to prevent a second Obama term.

Trump recalled his endorsement of Romney in February 2012.

“He was begging for my endorsement,” Trump said.  “I could’ve said, ‘Mitt, drop to your knees,’ and he would’ve dropped to his knees.”

John Podhoretz / New York Post

“Well, it was nice being the greatest country in the history of the world.

“We pulled it off for 240 years. Then came the Republican debate Thursday night in Michigan, in which the rattled frontrunner of the party of Abraham Lincoln defended the size of his male member before 10 to 20 million of his fellow Americans.

“By the way, Lincoln was sworn in as president 155 years ago yesterday.  And so, on behalf of a horrified people, let me just say: I’m sorry, Abe, for what’s become of the union you sacrificed your life to save.

“Since Donald Trump’s reference to the substantiality of his private part came at the beginning of an almost insanely raucous two hours, and cast a shadow over everything that followed, it’s hard to know whether one can properly judge the night’s proceedings as a debate and not a living civic nightmare.

“The entire evening was what Trump would call a ‘disastuh.’  Now, I know it makes no sense to bet against him, and that anyone who has written his political obituary thus far (me included, after the ‘ban all Muslims’ moment in November) has had to eat crow.

“But the events in Detroit last night will have long-lasting effects even if they don’t affect his path to the nomination in the short term....

“It was not just Trump who was damaged Thursday night. That a major debate of a major political party could devolve in this way did damage to the United States.”

Peggy Noonan / Wall Street Journal

“The (Republican Party) establishment was slow to see what was happening, slow to see Mr. Trump coming, in full denial as he continued to win. Their denial is self-indicting. They couldn’t see his appeal because they had no idea how their own people were experiencing America.  I have been thinking a lot about establishments and elites.  A central purpose of both, a prime responsibility, is to understand those who are not establishment and elite and look out for them, take care of them.  Not in a government-from-on-high way, not with an air of noblesse oblige, but in a way that is respectfully attentive to the facts of their lives.  You have a responsibility when you lead not to offend needlessly, not to impose realities you yourself can buy your way out of.  You don’t privately make fun of people as knuckle-draggers, victims of teachers-union educations, low-information voters.

“We had a low-information elite.

“This column has been pretty devoted the past nine months to everything that gave rise to this moment, to Mr. Trump.  His supporters disrespect the system – fair enough, its earned disrespect.  They see Washington dysfunction and want to break through it – fair enough.  In a world of thugs, they say, he will be our thug.  Politics is a freak show? He’s our freak.  They know they’re lowering standards by giving the top political job in America to a man who never held office. But they feel Washington lowered all standards first. They hate political correctness – there is no one in the country the past quarter-century who has not been embarrassed or humiliated for using the wrong word or concept or having the wrong thought – and see his rudeness as proof he hates PC too....

“(Trump) is a one-man wrecking crew of all political comportment, and a carrier of that virus. Yet his appeal is not only his outrageousness.

“He is a divider of the Republican Party and yet an enlarger of the tent.  His candidacy is contributing to record turnouts in primary after primary, and surely bringing in Democrats and independents.  But it should concern his supporters that his brain appears to be a grab bag of impulses, and although he has many views and opinions he doesn’t seem to know anything about public policy or the way the White House or the government actually works.

“He is unpredictable, which his supporters see as an advantage.  But in a harrowing, hair-trigger world it matters that the leaders of other nations be able to calculate with some reasonable certainty what another leader would do under a given set of circumstances.

“ ‘He goes with his gut.’  Yes.  But George W. Bush was a gut player, too, and it wasn’t pretty when his gut began to fail.

“The GOP elite is about to spend a lot of money and hire a lot of talent, quickly, to try to kill Trump off the next two weeks. There will be speeches, ads – an onslaught. It will no doubt do Mr. Trump some damage, but not much.

“It will prove to Trump supporters that what they think is true – their guy is the only one who will stand up to the establishment, so naturally the establishment is trying to kill him.  And Trump supporters don’t seem to have that many illusions about various aspects of his essential character.  One of them told me he’s ‘a junkyard dog.’

“They think his character is equal to the moment.”

--On the Democratic side...Super Tuesday results:

Hillary Clinton won in Alabama (78%), Arkansas (66%), Georgia (71%), Massachusetts (50%), Tennessee (66%), Texas (65%), Virginia (64%).

Bernie Sanders won in Colorado (59%), Minnesota (62%), Oklahoma (52%), Vermont (86%).

Previously, last Saturday, Clinton shellacked Sanders in South Carolina, 74% to 26%.  According to a CNN exit poll, 61% of the voters who turned out in the primary were African-American and Clinton won 87% of them.

--Delegate count (est.)...Democrats

Clinton 1,034
Sanders 408

[2,383 needed to win]

March 5 the Democrats hold caucuses or primaries in Kansas, Louisiana and Nebraska.

March 6 they hold a caucus in Maine.

March 8 it’s primaries in Michigan and Mississippi.

--Separately, Hillary could be in deeper trouble than first thought over the email issue.  Former State Department staffer Bryan Pagliano was granted immunity, as first reported by the Washington Post.  Pagliano worked on Clinton’s 2008 campaign and set up her unsecured server in 2009, according to the paper.

My opinion has been that there is no way Clinton is indicted prior to November and thus I have written relatively little on the case, separating this aspect from how the Republican nominee will attack her regardless.

But this move by Justice is indeed significant.  It’s also a classic ‘wait 24 hours’ situation.  #HumaAbedin

--A CNN/ORC national poll has Clinton leading Bernie Sanders 55-38, while on the Republican side Trump is at a whopping 49% to Rubio’s 16%, with Cruz at 15%.  But this was before Thursday’s debate, not that it mattered to Trump’s supporters.

--The most telling stat on Super Tuesday involved voter turnout.  As NBC News reported, in 2008, Democrats shattered voter turnout records in their primary clash between Barack Obama and Hillary Clinton.  8.2 million votes were cast in nine selected states for the Dems, while Republicans in their primaries in the same nine of 11 on Super Tuesday 2008 drew just about 5 million.

But in 2016, the totals flipped.

About 8.3 million votes were cast on the GOP side in the nine, with just 5.6 million for the Democrats.

Earlier, Republican turnout was far greater than that for the Democrats in Iowa, New Hampshire, South Carolina and Nevada.

--I like Democratic Congresswoman Tulsi Gabbard (Hawaii), and I detest Democratic National Committee chairwoman, Rep. Debbie Wasserman Schultz (Fla.).  I saw Wasserman Schultz in Iowa at the State Fair last August and she makes my skin crawl.  So I was watching CNN the other day when Gabbard endorsed Bernie Sanders.

Editorial / New York Post

“Even those of us who’ll never ‘feel the Bern’ can admire Hawaii Rep. Tulsi Gabbard’s risky and defiant stand against her party’s machine.

“A rising Democratic star – first Samoan-American member of Congress, one of the first female combat veterans to win a House seat – Gabbard just quit as vice chair (of the DNC) so she should endorse Bernie Sanders.

“Thereby earning herself a spot high on Hillary Clinton’s enemies list.

“Gabbard had been unhappy for months: She was one of the few voices decrying the machinations that limited the party to just six presidential-primary debates – mostly at times designed for low viewership.

“Everyone knew party head Debbie Wasserman Schultz was doing Clinton’s work on that front – debates were too likely to boost Hillary’s opponents.  Only when Sanders became a threat, prompting Clinton to want more face-offs, did the party suddenly add four debates – leaving it still one behind the GOP total.

“Of course, Clinton now seems back on track to crush the Sanders revolution – with significant help from the party’s vast number of un-democratic ‘superdelegates.’

“So Gabbard has taken a real risk – the more so, as the Army veteran made it plain she backs Sanders in good measure because he’d be a wiser commander-in-chief ‘so that we don’t continue to find ourselves in these failures that have resulted in chaos in the Middle East and so much loss of life.’

“With the likes of Tulsi Gabbard on his side, maybe Bernie’s cause isn’t lost after all.”

--My governor, Chris Christie, as of this week became a total, rather than partial, embarrassment with the way he handled his endorsement of Donald Trump.  Not because he backed him, but because Christie, for a second time, abandoned the state of New Jersey in once again hitting the road, seemingly full time, in support of The Donald.

Christie’s approval rating as of Wednesday in my state was just 30 percent (27% in the immediate days following the endorsement), 61% disapproving, according to a Fairleigh Dickinson University PublicMind Poll.

New Jersey has a ton of serious issues, including a potentially crippling transit strike in a week’s time.

So it should be no surprise, seeing as how he has been absent for two years (72 percent of the days in 2015, in fact), and now may be for long stretches for months to come, that the leading newspaper in the state, The Star-Ledger, along with at least six others, have asked Christie to resign.  I agree.

Rich Lowry / New York Post

“Endorsements usually don’t matter much, but Chris Christie giving his nod to Donald Trump shocked the political world and will bolster a Trump campaign that has grown from a madcap insurgency to a serious threat for the Republican nomination.

“Most immediately, the New Jersey governor’s endorsement instantly changed the subject from Trump’s debate performance Thursday night (2/25), when Marco Rubio got the best of him.

“Christie accentuates the Trump brand of bully-boy toughness.  He further validates The Donald and paves the way for future endorsements.

“Finally, he will be an eager and willing surrogate – who will relish nothing more than filleting Rubio, for whom he has a burning contempt....

“(Christie) had two choices: sitting in Trenton and going gentle into that electoral good night, or joining up with Trump and riding on the mogul’s private jet every other day, enjoying a luxury seat at the center of the political world.  (Plus, though Christie denies he wants it, a potential veep slot or Cabinet post.)

“The Christie-Trump pairing shows how, counter to the mogul’s reputation, he isn’t an outrageous right-winger.  Absent his serial violations of political decorum and his advocacy of mass deportation, it would be clearer that Trump is a Northeastern moderate who will likely run as a tell-it-like-it-is pragmatist should he win the nomination.”

However, Gov. Christie returned to New Jersey Thursday and said he is not a “full-time surrogate” for Trump and is focused on his duties in the state.  “I am here,” he said.  “I am back to work.”

I doubt it.

--My friend Jeff B. and his wife are on their annual vacation to a nice resort in the Caribbean, the same place each time, and he shot me a note the other day.

“I cannot begin to tell you how many locals and Brits have come up to us this week asking what the (heck) is going on with Trump.  It makes the U.S. look like complete idiots.”  [And this was before Thursday night!]

The barrage got so bad the two began having breakfast in their room.

I’ve been in Ireland where I’ve had some huge arguments in the pubs over American policy and some of our politicians over the years, so I told Jeff to counter that we saved his inquisitors during World War II. 

--Chicago had 95 homicides in January and February combined, the same as in 1999.  Over the past decade there haven’t been more than 66 homicides during the first two months of each year.

But this is staggering.  At least 467 people were shot in the first two months compared with 217 in the same period last year, according to Chicago Tribune statistics.

--Welcome home to astronaut Scott Kelly of nearby West Orange, N.J., who spent 340 days on the International Space Station (ISS), twice the length of a normal stay.  [Russian cosmonaut Mikhail Kornienko did the same.]

The two were part of an ongoing effort to study the effects of long-duration spaceflight on the body, in hoped for preparation for a trip to Mars.

While Scott Kelly has been away, tests have been conducted on his twin brother, Mark, so that scientists can compare the two to deepen their understanding of the physical and psychological shifts that occur during long stays in orbit.

--Finally, Navy Senior Chief Edward Byers Jr. was awarded the Medal of Honor by President Obama on Monday.

Editorial / Wall Street Journal

“ ‘Today’s ceremony,’ the President said, ‘is truly unique, a rare opportunity for the American people to get a glimpse of a special breed of warrior who so often serves in the shadows.’

“It has become a commonplace in some corners of our relentlessly politicized culture to characterize those ‘shadows’ as a gray zone of questionable moral behavior inhabited by highly trained American fighters such as Edward Byers.

“We doubt that the SEALs themselves, or their counterparts in the other services’ special forces, see their work as an exercise in moral ambiguity. The event that brought the Medal of Honor to Senior Chief Special Warfare Operator Byers is closer to the truth.

“The mission that took SEAL Team 6 through the mountains of Afghanistan in 2012 was to rescue an American doctor, the father of four, who had been kidnapped by the Taliban.

“The first U.S. team member through the kidnappers’ door was shot. Senior Chief Byers, the next in, shot a Taliban in the corner, subdued a second on the ground, shouted for the doctor on a nearby bed, shot the armed terrorist beneath him and then covered the doctor with his body amid the exchange of bullets.  Noticing another armed Taliban in the corner, he pinned him to the wall until the team members arrived and completed the rescue mission.

“One more thing: A trained paramedic, Senior Chief Byers then tried to save the life of his wounded team member, Nicolas Checque, but could not.  This is the definition of selflessness, and in the American armed services today you will find a lot of selflessness on behalf of others – fellow soldiers, other Americans and other nations’ citizens.  Senior Chief Byers has served in nine combat tours and 11 overseas deployments.

“Ed Byers, like virtually every other Medal of Honor recipient, will be the first to say what he did was nothing special, that every Navy SEAL would to what he did that day.  With Monday’s White House ceremony, President Obama set the shadows aside to shine the light of public gratitude where it belongs, every day.”

---

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

God bless America.

---

Gold closed at $1258
Oil $35.92

Returns for the 2/29-3/4

Dow Jones  +2.2%  [17006]
S&P 500  +2.7%  [1999]
S&P MidCap  +4.4%
Russell 2000  +4.3%
Nasdaq  +2.8%  [4717]

Returns for the period 1/1/16-3/4/16

Dow Jones  -2.4%
S&P 500  -2.2%
S&P MidCap  +0.04%
Russell 2000  -4.8%
Nasdaq  -5.8%

Bulls  36.4
Bears  34.3  [Source: Investors Intelligence...can’t help but reiterate again.  I pointed out the bear reading of 2/12, 24.7, was the lowest since the low of March 2009.  That’s how this contrarian indicator is supposed to work.]

*Dr. Bortrum posted a new column.

Have a great week.  I appreciate your support.

Brian Trumbore