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Week in Review

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03/12/2016

For the week 3/7-3/11

[Posted 11:30 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.

Edition 883

Washington and Wall Street

Ah, the best laid plans.  I told a friend I wanted to open this week defending Bernie Sanders, of all people, on a topic I am still upset about, weeks later; the Clinton camp’s treatment of him in South Carolina and the vicious lies of the likes of none other than civil rights icon Rep. John Lewis, and how Hillary blatantly lies about Sanders’ vote on the auto bailout (which I do cover below). 

But I spent two hours today watching Nancy Reagan’s funeral service, and now as I’m supposed to be proofing and filling in Street returns for this column, I’ve been glued to the events in Chicago and the amazing amalgam of a-holes we have in this country, and I just need to largely  invoke my “24 hours rule.” 

I promise to let loose, finally, on all sides next week, including on Ted Cruz’ incredibly idiotic lie about the Iran nuclear deal; that you can just rip it up.  Hint:  It’s too freakin’ late, people.  I told you that for the better part of the past year as the Obama administration, especially Sec. of State John Kerry, negotiated this fiasco.  For now, let me repeat to all those commenting on this historically bad agreement....it is not between just us and Iran. It is between Germany, Britain, France, Russia, China and the United States!

It’s over.  As I note below on one of the consequences, Iran’s ballistic missile testing this week, the hardliners in Tehran are mocking us.

It’s depressing. 

As for what I saw out of some of the youth in Chicago tonight, I’ll be long dead and gone when these losers are turning 40 and 50.  My only message for them is good luck.

---

There was literally zero economic news of consequence this week here in the U.S., but this coming one promises to be active, as the Federal Reserve gathers for its latest Open Market Committee meeting.

Stanley Fischer, the Fed’s vice chair, said this week the U.S. may be seeing the “first stirrings” of a long-awaited increase in inflation.

But Fed Gov. Lael Brainard said the Fed needed to be mindful of “weak and decelerating foreign demand.” Policymakers should not take “the strength in the U.S. labor market and consumption for granted.”  Brainard argues against further tightening.

The market is betting the Fed will issue some hawkish language on Wednesday to set up a potential tightening in June; this while the rest of the world is going low.

The following few pages are wonky but important.

Lawrence Summers / Washington Post

“Here is a thought experiment that illuminates the challenges facing macroeconomic policymakers in the United States and the rest of the industrial world.

“Imagine that in a brief period, inflation expectations around the industrial world, as inferred from the indexed bond market or the inflation swaps market, rose by nearly 50 basis points to a level well above the 2 percent target, with larger increases foreseen at longer horizons.  Imagine that at the same time, survey measures of inflation expectations such as those calculated by the University of Michigan and New York Fed in the United States were rising sharply.  Imagine also that commodity prices were soaring and that the dollar experienced a once-every-15-years decline.  Imagine that the market anticipated future monetary policy in the United States that was far tighter than the Fed’s own policy projections.  Imagine that measures of gross domestic product growth were accelerating, with increasing signs of a worldwide boom.  Imagine also that no serious efforts were underway to reduce budget deficits.  Finally, suppose that policymakers were comfortable with current policy settings based on the argument that Phillips curve models predicted that inflation would revert over time to target due to the supposed relationship between unemployment and price increases....

“We are living in a world that is the mirror image of the hypothetical one I just described.  Market measures of inflation expectations have been collapsing and, on the Fed’s preferred inflation measure, are now in the range of 1 to 1.25 percent over the next decade.  Inflation expectations are even lower in Europe and Japan. Survey measures have shown sharp declines in recent months.  Commodity prices are at multi-decade lows, and the dollar has only risen as rapidly as it has in the past 18 months twice during the past 40 years when the value of the dollar has fluctuated freely.  The Fed’s most recent forecasts call for short-term interest rates to rise almost 2 percent in the next two years, while the market foresees an increase of only about 0.5 percent.  Consensus forecasts are for U.S. GDP growth of only about 1.5 percent for the six months from October to this month.  And the Fed is forecasting a return to its 2 percent inflation target on the basis of models that are not convincing to most outside observers....

“While there is certainly substantial anxiety about the macro environment, as judged from the meeting of the Group of 20 major economies in Shanghai last month, there is no evidence that policymakers globally are acting strongly to restore their credibility as inflation expectations fall below target.  In a world that is one major adverse shock away from a global recession, little if anything was agreed upon to spur demand.  Central bankers communicated a sense that there was relatively little left that they could do to strengthen growth or even to raise inflation.  This message was reinforced by the highly negative market reaction to Japan’s move to negative interest rates.  No significant announcements regarding non-monetary measures to stimulate growth or a return to target inflation were forthcoming....

“Today’s risks of embedded ‘lowflation’ tilting toward deflation and of secular stagnation in output growth are at least as serious as the inflation problem of the 1970s.  They, too, will require shifts in policy paradigms if they are to be resolved.  In all likelihood, the important elements will be a combination of fiscal expansion drawing on the opportunity created by super low rates and unconventional monetary policies and, in extremis, further experimentation with unconventional monetary policies.”

Europe and Asia

All eyes in the eurozone were on the European Central Bank and its long anticipated statement on policy, Thursday, as it seeks to combat tepid growth and near deflation.  The following was a good summary of its moves.

Editorial / Wall Street Journal

“Christmas came late for markets on Thursday, as European Central Bank President Mario Draghi delivered the monetary jolt investors had wanted in December. Already those investors are refusing to take yes for an answer.  Mr. Draghi threw the kitchen sink at Europe’s deflation and slow growth, plus the stove and toaster.  Monthly asset purchases under the ECB’s bond-buying, or quantitative easing, program will expand to 80bn euro ($87.9 billion) from 60bn, and the bigger surprise is that the ECB will start buying corporate bonds in addition to sovereign debt.  The latter step and some technical tweaks to the program are meant as reassurance that the ECB won’t run out of eligible bonds to buy.  This will bring the total value of QE to 1.7 trillion or more.

“Mr. Draghi also cut the rate the ECB pays banks for their deposits to negative -0.4% from negative -0.3%.  This is supposed to encourage banks to lend excess reserves instead of stockpiling cash. And since negative rates strain bank profits, the ECB also expanded lending subsidies, known as TLTROs, that will partly offset what banks pay the ECB to hold deposits.  On Planet Negative Rates, central bankers are using taxes and bribes to spur lending.

“Mr. Draghi has given markets everything they wanted and more.  So the sour reaction to Thursday’s news – European shares closed down on the day, and the euro fell against the dollar – must have come as a shock at ECB headquarters in Frankfurt.  It shouldn’t have.

“Mr. Draghi is right that the monetary problem Europe ought to worry about is why banks aren’t lending.  Some of this is because demand for new loans is slack as businesses worry about slower export growth to China and emerging markets.  But the ECB and its enablers also are stuck on the view that banks are carelessly hoarding too much cash in reserves at the central bank. There’s no evidence for that.”

The problem is that as the banks have been slow to reorganize since the 2008-09 financial crisis, the ECB has been aggravating the problem by enforcing stricter capital requirements that are creating uncertainty among both the banks and investors.

WSJ:

“Instead of finding ways to help this beleaguered financial system allocate capital more efficiently, Mr. Draghi is further politicizing credit.  Most damaging is the expansion of QE to include purchases of “investment grade euro-denominated bonds issued by non-bank corporations in the euro area.”

I’ve written since the ECB first initiated QE that it was going to run out of things to buy, because the eurozone’s bond market is nowhere near the size of ours and there are only so many good credits.

But as the Journal points out, the other side is, “does this mean the ECB will favor, say, a bond issue to fund an expansion at Siemens but not a GE plant in the eurozone?  And why favor lending to large companies over medium-size firms?”

So Draghi’s credibility is at stake, while at the same time Europe’s politicians have refused to reform, witness the French masses going on strike this week over a modest proposal to change the 35-hour work week.  [And I have a comical story concerning Italy down below.]

Look at Spain.  Its economy is doing well after going through wrenching pain amidst the euro crisis in 2012, yet it has no government today, the reformers having been tossed out.

But back to the buying of corporate bonds, yes, it does force the ECB to pick winners and losers, in both companies and sectors.  And companies can default more easily than governments.

Thursday’s initial rally on the ECB’s announcement was stopped cold and put into reverse when Draghi in a press conference said there were no plans to lower interest rates further.

“It’s a fairly long list of measures, and each one of them is very significant and devised to have the maximum impact in boosting the economy and the return to price stability – we have shown we are not short of ammunition,” Draghi told reporters.  “From today’s perspective, we don’t anticipate it will be necessary to reduce rates further.”

This last statement caused a massive reversal in the euro, from $1.0822 to $1.1218*, an historic move, intraday, that was the last thing Draghi wanted (the ECB desiring a weaker euro to spur exports, not a stronger one, so Draghi clearly blew it in his communication, though he was probably telling the truth).

*The euro finished the week at $1.115.

Separately, the ECB in its quarterly forecast said it expects eurozone GDP to rise 1.4% this year and 1.7% in 2017, unchanged from its December forecast.  The inflation outlook was downgraded sharply to 0.1% from 1% for 2016; 1.3% in 2017.

But European stocks reversed Friday and traders decided the ECB’s moves were positive after all. 

As for current data, Eurostats released its final look at fourth-quarter GDP for the euro area, 0.3% over the prior quarter, which was also at a 0.3% rate, or 1.6% year over year.

Germany’s yoy figure was 1.3%, France 1.4%, Italy 1.0%, Spain 3.5% and Greece’s minus -0.8%.

Industrial production in January in Germany was encouraging, up the most in six years (Sept. ’09), and up 3.3% over December, with construction spending up 7% for the month owing to mild weather.

But German Chancellor Angela Merkel faces a big political test over the weekend.  More in a bit.

Spain has had a heckuva time in forming a new government, post-December election.  While Spain’s economy has been performing very well, the uncertainty is definitely impacting the expansion and the political parties have until May 2 to come up with a solution or there will be new elections on June 26.  It doesn’t help you still have the issue of Catalonia’s separatist movement.

Meanwhile, Ireland’s parliament failed on Thursday to nominate a new prime minister so Enda Kenny will continue to act as caretaker leader over the coming weeks while all the parties try to come up with a solution on who should lead a new administration. 

But this is nowhere as impactful as Spain’s situation. Plus Ireland reported GDP growth of 7.8% for 2015 this week.

Greece was told by the troika (the European Commission, ECB and IMF) to step up its reform efforts as the creditors are reviewing progress under the country’s third, $95bn bailout.

The review is supposed to pave the way for debt relief, which Dutch Finance Minister Jeroen Dijsselbloem said could ensure the economic efforts in the country are “sustainable.”

But as is always the case, it comes down to hated pension reforms.  It won’t be easy.

So turning to the migration front...after marathon talks in Brussels on Monday, Angela Merkel announced the European Union was on the verge of a breakthrough with Turkey to stop the flow of migrants to Europe.  Now the key is going to be another EU summit next week, March 17-18.

Under a tentative agreement, Turkey would receive as much as $6.6bn in aid, up from about $3.3bn, to help the country cope with millions of refugees.

In return, Turkey would take back migrants who arrive in Greece from Turkish shores, including Syrian refugees.  The EU will then take Syrian refugees from UN-run camps on a one-for-one principle to ensure there is only a legal, organized channel for migration to the bloc.

“The days of irregular migration to the European Union are over,” said European Council President Donald Tusk.

There is no commitment to back Turkey’s long-standing push for a safe zone to be established in Syria.

But back to Merkel, she is on the defensive ahead of three key state elections on Sunday, which is a mini-referendum on her migration policy.  Her coalition partner in one state is expected to suffer humiliating losses to the anti-immigrant Alternative for Germany party, which some say is poised for big gains in all three.

Separately, Slovenia announced it would limit the number of migrants to the country, as Greece deals with a continued buildup, 30,000+, who have been pushed back as the borders north, such as in Macedonia, close.

---

China’s National People’s Congress convened last weekend and the government revealed its long-anticipated economic policy for 2016.  Premier Li Keqiang announced the target for growth would be no less than 6.5 percent for the next five years, along with the highest budget deficit since 1976 in a “challenging” year ahead.

According to the government work report delivered to the NPC, the deficit (3 percent of GDP) would be used primarily for tax and fee cuts for companies.

Li said: “Our country’s development faces more and greater difficulties and severer challenges this year, so we must be prepared for a tough battle.”

Many see the growth target as too aggressive.

Officials hope to create 10 million new urban jobs this year, with many of them generated by new technology and internet-related industries.

Li emphasized that innovation was the primary driving force for development, so no doubt China will send out agents and spies far and wide, especially in the U.S. and Europe, to steal our corporate secrets (or you could just save on travel expenses and hack for it).

In its blueprint for development between 2016 and 2020, the government is pegging “industries such as semiconductors and in the next generation of chip materials, robotics, aviation equipment and satellites.”

Separately, Li promised to deal with “zombie enterprises,” a campaign that would result in millions of layoffs if executed properly.  As I wrote last week, China already announced it would shed 1.8 million coal and steel jobs in the next five years to address overcapacity.  Li emphasized this would be done “prudently” to avoid social instability.

Beijing also pledged to stick to the principle of “one country, two systems,” when it comes to Hong Kong and “a high degree of autonomy” for the city, while promoting “harmony.”

Xu Shaoshi, chairman of the National Development and Reform Commission, said China will not have a hard landing.  “Please relax,” he said in his press conference.  “Such a possibility doesn’t exist.” 

Xu also said blaming China for global investment jitters was “unreasonable and unfounded.”  [South China Morning Post]

But this week ratings agency Fitch, in downgrading its growth forecast for the global economy, blamed China’s slowdown as well as the spending crunch in commodity-producing countries.

Fitch now sees growth in global GDP of 2.5 percent in 2016, with China at 6.2 percent.  The growth rate in advanced economies has been slashed to 1.7 percent from 2.1 percent, and emerging economies to 4.0 percent from 4.4 percent.

“The investment slowdown in China and sharp expenditure compression in major commodity-producing countries continue to reverberate around the world economy.  As the volume of housebuilding in China has levelled off, the impact on resource exporters across the globe has been felt profoundly....

“The collapse in commodity prices has presented commodity exporters in the emerging world with a huge income shock.”  [Financial Times]

There was some important economic data in China this week.   Exports suffered their biggest drop in more than five years, down 25.4% in dollar terms for February, year over year, though the Lunar New Year holiday had something to do with this (Jan. being down 11.2%).  Imports fell 13.8% (vs. a decline of 18.8% in January), though this particular number is squirrelier (made up word of the week) than most, having to do with fake invoices to hide capital flight.

Meanwhile, with the government having a 3% inflation target, and needing inflation to more easily service its growing debt, consumer prices came in at 2.3%, with food prices up 7.3% on higher demand during the holiday period, but the core rate, ex-food and energy, was only 1.3% for February.

Producer, or factory gate, prices fell for a 48th straight month, down 4.9%.

While I’m on the topic of exports, they were down last month for a 13th straight time in Taiwan, and for a 14th straight month in South Korea.

In Japan, fourth-quarter GDP came in a little better than expected, though still down 1.1% on an annualized basis.  Capital expenditures rose 1.5%, but private consumption was down 0.9%.  The estimate for first quarter GDP is up 0.9%.

Editorial / Washington Post

“So far, not so good for Abenomics, the ambitious program for reviving Japan’s stagnant economy introduced by Shinzo Abe upon his election as prime minister three years ago.  Mr. Abe promised to fire ‘three arrows’: fiscal stimulus, monetary easing and structural reforms.  He has delivered most dramatically in the monetary area, where the Bank of Japan has tried radical anti-deflation measures, including, most recently, negative interest rates on commercial bank deposits at the central bank. Yet in view of the underwhelming results – including another three months of negative growth at the end of 2015 – Japanese are worried and the prime minister’s approval ratings are falling.  Meanwhile, China and North Korea agitate militarily nearby.”

The Post goes on to criticize Abe for stifling the media over their criticism of his policies.  Three top broadcasters, often critical of the prime minister, suddenly resigned under pressure from their networks (at least it seems that way).

Street Bytes

--Wednesday, March 9, represented the 7th anniversary of the market low of March 9, 2009, but this bull market is distinctly showing signs of age despite the rally of the past four weeks.  The all-time high of 2130 on the S&P 500 was achieved last May 21, and at Friday’s closing price of 2022, we are still 5% below it.

That said, you can’t officially call it the end of the bull market until the index declines 20% from the high, though back in February it had fallen 15%, intraday, and I’ve detailed before how many stocks in the S&P have had their own bear markets with declines well in excess of 20%.

As for the past five days, the Dow Jones added 1.2% to 17213, with the S&P tacking on 1.1% and Nasdaq 0.7%.

--U.S. Treasury Yields

6-mo. 0.50%   2-yr. 0.96%  10-yr. 1.98%  30-yr. 2.75%

The yield on the 10-year rose a third straight week.

--The average price at the gas pump across the country has risen to $1.82 per gallon, but this is still down 65 cents vs. year ago levels.  For a change, at least as of Thursday, my local station was at $1.75 when it’s normally a few cents over the average, so I keep topping off.

Actually, for research purposes, I keep my gas receipts and two years ago the price in my area was $3.40, quite a difference.

--The International Energy Agency said Friday that oil prices may have “bottomed out” and cuts to higher cost output this year will be greater than initially anticipated.

“For prices there may be light at the end of what has been a long, dark tunnel,” said the IEA, even though it said it would take until 2017 for supply to align with demand.

But OPEC is unlikely to cut production to support oil prices until it sees output declines in the United States, Russia and Iraq, according to energy consultant Fereidun Fesharaki, as reported by Reuters.

“What they want to achieve is to see production declines in several areas,” he said.

The problem is that while production is expected to decline in the first two, Iraq has little incentive to cut while the Iranians are ramping up.  Fesharaki, though, says Iran will do it more slowly than expected, “because anybody who is accused of being responsible for lower oil prices is despised and hated, not only outside of their own country, but inside their country.”

Prices rose a fourth consecutive week, climbing over $40 on Brent and $39 on West Texas Intermediate, a rally of 50% off the recent bottom.  [They closed at $40.38 and $38.50, respectively.]

Much of the rally has been short covering as traders close out bets on falling prices, and now the same folks and hedge funds are jumping on the bandwagon going the other way, as they are wont to do.

--Iron ore prices soared nearly 20% on Monday, the biggest gain on record, as Chinese mills scrambled to replenish supplies ahead of the summer construction season.  The price is up 70% off the December low.

China has boosted credit to the construction and infrastructure sectors.

But when looking at the commodities rally overall, Goldman Sachs said it expected it to be short-lived “in the absence of a material increase in Chinese steel demand.”  It expects copper prices to slide as much as 20 percent over the next year.

“We are yet to find evidence of higher-than-expected steel demand – whether in the order books of individual steel producers or in the official data for new orders,” the bank said.  “Based on the information currently available, the seasonal increase in demand appears only marginally stronger than last year.”

Mining giant BHP Billiton said recently that prices would probably remain low, in particular for iron ore, “constrained by weak demand and abundant seaborne supply.”  [Financial Times]

--Citigroup announced its trading revenue in equities and fixed-income will drop 15 percent in the first quarter from a year earlier.  Low interest rates, plunging commodity prices and volatile stock markets have slowed trading to a crawl, though we’ll see if the recent pickup in commodities leads to a meaningful bounce in activity.

Separately, the New York State Comptroller tracks bonuses on Wall Street and the average one dropped 9 percent last year to $146,200; the second straight decline.  The bonus pool peaked in 2006 at an average of $191,360.

--China’s new car sales fell in February compared with a year earlier, the first such decline in six months.  It’s a little confusing given the Lunar New Year holiday, but the fact is sales are slowing in keeping with the rest of the economy.

“Between 2005 and 2014 the Chinese car market grew at an average compound rate of 20% a year.” [Rose Yu and Lilian Lin / Wall Street Journal]

General Motors and Ford each reported 9% declines in vehicle sales in China for the month, though Toyota Motor Corp.’s sales rose 6%.

SUV sales have been the bright spot in the Chinese market, up 44% year over year.

To be fair, Ford’s and GM’s sales rose 18% and 11%, respectively, through the first two months of 2016, as many Chinese buy cars ahead of the holiday.

--Apple Inc. must pay $450 million to end an antitrust suit after the U.S. Supreme Court refused to question a finding that the company orchestrated a price-fixing scheme for electronic books.

A federal appeals court had ruled in favor of the U.S. Justice Department and more than 30 states that sued as part of a settlement reached in 2014.  Consumers who overpaid will get credits they can apply to future e-book purchases. 

Apple knowingly conspired with book publishers to raise the prices of e-books, according to the Justice Department, at a time Apple was trying to gain a foothold in  a market dominated by Amazon.

--On another Apple issue...Adam Segal / Defense One

“Shadowing the standoff between the FBI and Apple over access to an encrypted iPhone used by one of the San Bernardino attackers is the question: What will China do?  If Apple creates unique software that allows Washington access to the phone, does that open the door for Beijing to make similar demands on the company and all other foreign technology firms operating in China?  As Sen. Ron Wyden of Oregon argues, ‘This move by the FBI could snowball around the world.  Why in the world would our government want to give repressive regimes in Russia and China a blueprint for forcing American companies to create a backdoor?’...

“An early draft of China’s counterterrorism law included provisions requiring the installation of backdoors and the reporting of encryption keys.  In the face of criticism from the U.S. government and foreign technology and companies, Fu Ying, spokeswoman for the National People’s Congress, defended the provisions as in accordance with ‘international common practices,’ adding that it was common for the Western countries, such as the United States and Britain, to request tech firms to disclose encryption methods.  The final law, passed in December 2015, was much more ambiguous about what type of demands the government would make on technology companies, but it is clear that Chinese leaders are more than happy to exploit what is happening in the United States as rhetorical cover....

“Beijing, like governments everywhere, wants to collect and analyze data for law enforcement and national intelligence reasons.  The desire for data may only intensify under Xi Jinping’s leadership; the Chinese Communist Party appears increasingly worried about domestic stability and the spread of information within the country’s borders.  For foreign companies, refusal to cooperate with the Chinese authorities will increasingly lead to a loss of market opportunities....

“Apple is likely to be pushed, unwillingly, into forking its products, creating separate, less secure products for Chinese users. While this will be a bitter pill for Tim Cook and Apple to swallow, given their promises to defend privacy of all users, it is likely to be the price of continuing to do business in China.”

Craig Federighi, SVP, Apple / Op-ed Washington Post

“(The) threat to our personal information is just the tip of the iceberg.  Your phone is more than a personal device.  In today’s mobile, networked world, it’s part of the security perimeter that protects your family and co-workers.  Our nation’s vital infrastructure – such as power grids and transportation hubs – becomes more vulnerable when individual devices get hacked.  Criminals and terrorists who want to infiltrate systems and disrupt sensitive networks may start their attacks through access to just one person’s smartphone....

“The encryption technology built into today’s iPhone represents the best data security available to consumers.  And cryptographic protections on the device don’t just help prevent unauthorized access to your personal data – they’re also a critical line of defense against criminals who seek to implant malware or spyware and to use the device of an unsuspecting person to gain access to a business, public utility or government agency....

“That’s why it’s so disappointing that the FBI, Justice Department and others in law enforcement are pressing us to turn back the clock to a less-secure time and less-secure technologies....

‘To get around Apple’s safeguards, the FBI wants us to create a backdoor in the form of special software that bypasses passcode protections, intentionally creating a vulnerability that would let the government force its way into an iPhone.  Once created, this software – which law enforcement has conceded it wants to apply to many iPhones – would become a weakness that hackers and criminals could use to wreak havoc on the privacy and personal safety of us all....

“Security is an endless race – one that you can lead but never decisively win. Yesterday’s best defenses cannot fend off the attacks of today or tomorrow. Software innovations of the future will depend on the foundation of strong device security.  We cannot afford to fall behind those who would exploit technology in order to cause chaos. To slow our pace, or reverse our progress puts everyone at risk.”

Yeah, but you are giving in to China.

--Related to the above...Adam Turner / Sydney Morning Herald:

“Millions of customers of Australia’s largest banks are the target of a sophisticated Android attack which steals banking details and thwarts two-factor authentication security.

“(The banks) are all at risk from the malware which hides on infected devices waiting until users open legitimate banking apps.  The malware then superimposes a fake login screen over the top in order to capture usernames and passwords....

“Along with stealing login details, the malware can also intercept two-factor authentication codes sent to the phone via SMS – forwarding the code to hackers while hiding it from the owner of the phone.  With access to this information, thieves can bypass a bank’s security measures to log into the victims’ online banking account from anywhere in the world and transfer funds.”

--The U.S. is looking to sanction Chinese telecom giant ZTE for trade violations with Iran.

Editorial / Wall Street Journal

“This provides reason to hope that at last the Obama Administration may also crack down on Chinese firms benefiting from other illicit conduct such as cybertheft....

“An internal ZTE document seen by Reuters describes how ZTE schemed to buy export-controlled U.S. technologies via shell companies and re-export them to Iran in ways that make it ‘harder for the U.S. government to trace it or investigate the real flow of the controlled commodities.’  Another internal memo, addressed to ‘company leaders’ and marked ‘no spreading abroad without permission of ZTE,’ describes ‘projects in all five major embargoed countries – Iran, Sudan, North Korea, Syria and Cuba.’  It notes that ‘all of these projects depend on U.S.-procured items to some extent, so export control obstacles have arisen.’....

“One issue is whether ZTE’s behavior reflects Chinese state policy.  The company doesn’t have the typical profile of a state-owned enterprise, but a 2012 investigation by the U.S. House Intelligence Committee was unable to ‘allay concerns that ZTE is aligned with Chinese military and intelligence activities or research institutes.’  Its Iranian-export shell game fits China’s extensive record of undermining sanctions on rogue regimes with sales of everything from mobile missile launchers to uranium-enrichment tools.”

ZTE is a maker of smartphones that has been successful in the U.S., but now with the Commerce Department’s restrictions on sales, U.S. vendors such as Qualcomm and Intel, which supply components to ZTE, will suffer big time.

A spokesman for China’s Foreign Ministry, Hong Lei, said, “We hope the U.S. stops this erroneous action and avoids damaging Sino-U.S. trade cooperation and bilateral relations.”

--Canada’s unemployment rate unexpectedly ticked up in February to 7.3 percent from 7.2 percent, its highest level since March 2013, the government announced on Friday.  Sharp cutbacks to capital investment in the oil sands industry has been a big factor.  In January the Bank of Canada reduced its growth forecast for 2016 to just 1.4 percent.

--A Federal Reserve report this week showed that housing wealth is poised to reach a new record as early as the second quarter.  The 2006-09 crash in housing reduced wealth by $7 trillion, but since then the value of homeowners’ equity in real estate has more than doubled from the first quarter 2009 low.

The gains are inconsistent across the country.  According to the S&P/Case-Shiller index, in Las Vegas, housing prices are still 38 percent below the level reached in April 2006, while in the likes of Miami and Phoenix they are generally 25 percent less than at their peaks.  But property prices have recovered 61 percent from their low in Vegas.

--So in keeping with the above, the net worth of U.S. households and nonprofits, defined as the total of all assets minus all liabilities, reached a record $86.8 trillion in the fourth quarter, according to the Federal Reserve, up $1.6 trillion from the third quarter.

--Lena H. Sun / Washington Post

“The top U.S. health officials leading the response to the mosquito-borne Zika virus sweeping through the hemisphere said its growing links to a broad array of birth defects and neurological disorders are worse than they originally suspected, increasing the risk for devastating harm during pregnancy.

“Until Zika, ‘there has never been a mosquito-borne virus that could cause serious defects on a such a large scale,’ Thomas Frieden, director of the Centers for Disease Control and Prevention, said Thursday during a conference call with reporters.”

--As reported in the Wall Street Journal: “Bacteria can gobble up oil spills, radioactive waste and, now, plastic.  Researchers in Japan said they have discovered a species of microbe that eats PET, the polymer widely used in food containers, bottles and synthetic fibers.

“Some scientists have said the bacteria could help break down otherwise non-biodegradable debris in landfills or recycling plants.”

There is a long way to go in terms of the research, but this is hopeful.

--Chipotle Mexican Grill had another setback as a Boston-area store was closed a few days after an employee tested positive for norovirus.  Two other employees were suspected of it.

--Tailored Brands, the parent company of chains Jos. A Bank, Men’s Wearhouse and suit brand Joseph Abboud, announced it was shutting about 250 stores, 80 to 90 of which would be Jos. A Bank locations; this last one having killed its absurd “buy one, get three free” promotion last fall.

Sales plunged 31.7 percent last year at Jos. A Bank alone.  But Wall Street liked the move and the shares of Tailored Brands rose sharply on the news.

--New York City saw a record number of tourists last year, 58.3 million, and Gotham is forecasting 59.7 million this year, up 2.4%.  The longer term goal is 67 million annual visitors by 2021, according to the city’s tourism agency.

Despite its economic issues, a projected 920,000 visitors from China are expected this year.

--For all of 2015, the nation’s air carriers broke records for the number of passengers carried (798.4 million), the percentage of filled seats (83.8%) and the total miles traveled with paying customers (902.4 billion), according to data released Thursday by the U.S. Department of Transportation.  [Hugo Martin / Los Angeles Times]

--California’s reservoirs have had a great 7-10 days after a dry February cast doubt on real drought relief.  But with recent massive storms, and more on the way, the next report on March 17 should show major relief.

--We note the passing of John H. Gutfreund at the age of 86.

Gutfreund was chairman and CEO of Salomon Brothers in the 1980s and was labeled “the king of Wall Street” for having transformed the company into one of the world’s largest securities traders.

But he was forced to resign in 1991 amidst a major scandal involving illegal bids by the firm for Treasury bonds.

Gutfreund was a gruff, obnoxious guy whose advice to novice traders – to wake up each morning “ready to bite the ass off a bear” – became a Street catchphrase.

Michael Lewis’ “Liar’s Poker,” a 1989 best seller about the author’s experience as a young bond trader at Salomon, highlighted Gutfreund’s manner. “(He) seemed able to smell money being lost.  He was the last person a nerve-racked trader wanted to see.”

--From Reuters: “Italian unions have lambasted the new museum chief of the world-famous Royal Palace of Caserta for working too hard, prompting Prime Minister Matteo Renzi to ride to his defense.

“Renzi’s government appointed Mauro Felicori five months ago to revive the fortunes of the spectacular, 1,200-room Baroque palace of the Bourbon kings, which like many of the country’s artistic and cultural treasures was suffering from decades of neglect and mismanagement.

“Local unions however sent a letter to the culture minister, Felicori’s boss, complaining that he works late into the evening without the rest of the personnel being informed.

“ ‘Such behavior puts the whole structure at risk,’ read the letter.

Renzi called the accusation leveled at Felicori ridiculous.  “The fun’s over,” Renzi said.

--Raymond Tomlinson, the inventor of modern email, died last weekend.  He was 74.

Tomlinson worked at Raytheon Co., and way back in 1971, he was the first to figure out how to send messages person-to-person by email at a specific address.  He chose the “@” symbol to connect the username with the destination address.

His coworkers said he was not a frequent checker of email.

--The value of Maine fishermen’s catch topped $631 million at the dock last year, surpassing the previous year’s record total by more than $33 million.  Lobsters constituted more than three-quarters of the value at more than $495 million, also a record.”  [Associated Press]

Union spokesman Larry Lobster, on his way to a Trump rally, was later found boiled.  Perhaps a taste of things to come.

--Dos Equis is sending actor Jonathan Goldsmith, aka The Most Interesting Man In The World, on a one-way trip to Mars, thus ending his reign as pitchman since 2006.  The beer company (owned by Heineken USA), said the campaign will continue with a new, as yet unnamed, star.

On the final commercial, as he enters the rocket ship in a tuxedo, the voiceover says, “His only regret is not knowing what regret feels like.”

Stay thirsty my friends.

Foreign Affairs

Iraq/Syria/ISIS: Despite the supposed truce, there is heavy fighting in various parts of the country and the Syrian opposition has complained to the UN that Russian air strikes continue to be carried out.  Syrian government forces, backed by Russia’s air force, Iranian troops and Iraqi militias, have continually breached the temporary ceasefire and used barrel bombs and toxic gas, according to one opposition figure.  Massacres have been reported.

And late Friday, the State Department for the first time accused Syria of violating the truce and urged Russia to use its influence to stop the attacks, warning they could ‘tear asunder’ the fragile peace process.

State Department spokesman John Kirby said the United States “strongly condemned” the government of Syrian President Assad for air strikes that have struck civilian protesters in the cities of Aleppo and Deraa, including targeting a mosque as the congregation was leaving. Kirby said at a briefing that the United States also “strongly condemned the Assad regime’s practice of removing badly needed medical supplies from the emergency humanitarian aid deliveries.”

Next door, the level of violence in Iraq has soared in recent weeks.  A suicide attack at a checkpoint south of Baghdad last Sunday killed at least 61 in the city of Hillah, the deadliest such attack in Iraq this year.  23 of those killed were members of the security forces.  ISIS claimed responsibility.

--An ISIS detainee currently in American custody in Iraq, has been questioned about the Sunni group’s plans to use mustard gas in Iraq and Syria, Defense officials said this week.

The figure, described as a “significant” IS operative captured a month ago by American Special Forces, has provided his captors with details about how the group has weaponized mustard gas into powdered form and loaded it into artillery shells.  [Not to lethal levels as yet, according to officials.]

--Islamic State’s ‘Caucasus Province’ has called on Russian Muslims to “kill apostates in Russia,” vowing to attack President Putin and implement Sharia in the country, as reported by the Jerusalem Post.

--German authorities said they had captured a cache of 22,000 documents that provided an unparalleled snapshot into the recruitment of foreign fighters by ISIS.

Iran: It was ballistic missile test week in Iran, as the regime sought to demonstrate “deterrence power,” with long-range tests conducted both Tuesday and Wednesday, a move that is in defiance of U.S. sanctions imposed on its missile program in January.

The official IRNA news agency said the tests showed the country’s “all-out readiness to confront threats” against its territorial integrity.

The missile tests come less than two weeks after Iran’s elections delivered gains to politicians aligned with Hassan Rouhani, the country’s “moderate” president.

But the Revolutionary Guards report to Supreme Leader Ayatollah Ali Khamenei, not Rouhani, and their influence is far greater.

A UN panel said in December that missile tests that first took place in October breached previous UN resolutions aimed at stopping Tehran from developing weapons capable of carrying a nuclear warhead.

Iran denies its missiles would ever be designed to, nor ever carry, the bomb.

Yet state television showed long-range tests on Wednesday that hit targets 870 miles away.

“The reason we designed our missiles with a range of 2,000 km (1,240 miles) is to be able to hit our enemy the Zionist regime from a safe distance,” Brigadier General Amir Ali Hajizadeh was quoted as saying by the IRNA agency. The nearest point in Iran is around 1,000 km from Tel Aviv and Jerusalem.

The missiles were stamped with the words “Israel should be wiped from the pages of history” in Hebrew, according to Iranian agencies reporting on the tests.

Israeli Defense Minister Moshe Yaalon told Israel Radio the tests showed Iran’s hostility had not changed since implementing a nuclear deal with world powers in January, despite President Hassan Rouhani’s overtures to the West.

“To my regret there are some in the West who are misled by the honeyed words of part of the Iranian leadership while the other part continues to produce equipment and weaponry, to arm terrorist groups,” Yaalon said.

For its part, the Obama administration labeled the missile launches provocative, but said they did not violate the terms of the nuclear agreement.

Editorial / Wall Street Journal

“Tehran’s show of force...is not the work of the usual ‘hardline’ suspects.  Iran tested ballistic missiles last fall in violation of a UN Security Council resolution, and in January Mr. Rouhani publicly ordered his defense minister to speed up missile testing and production.  The Obama Administration later sanctioned a handful of Iranian individuals and companies for the violations, but to little effect.  The tests appear to be timed to coincide with Vice President Joe Biden’s visit to Israel.

“ ‘Our main enemies, the Americans, who mutter about plans, have activated new missile sanctions against the Islamic Republic of Iran and are seeking to weaken the country’s missile capability,’ said one Iranian general.  ‘The Guards and other armed forces are defenders of the revolution and the country will not pay a toll to anyone.’

“So much for the nuclear deal producing a new era of Iranian accommodation to the world.  Part of the problem is that Secretary of State John Kerry bowed to Iranian demands during the nuclear negotiations not to include ballistic missiles as part of the final deal, though missiles are an essential component of any nuclear program....

“The lesson – as always in arms control, from Brezhnev’s Soviet Union to North Korea – is that a regime that can’t be trusted with nuclear weapons also can’t be trusted to honor the agreements it signs promising to eliminate them.  Iran’s missile program is the clearest example to date of how the nuclear deal has enhanced the country’s military leverage. There will be others.”

Richard Weitz / Defense One

“As potential missile threats surge, why is our nation’s missile defense budget not growing accordingly?

“In recent days, Iran has test-fired several missiles of ranges up to 1,250 miles, some inscribed with the words ‘Israel should be wiped off the Earth.’  Meanwhile, North Korean leaders have bragged that they had developed a key component of a nuclear warhead – a claim that Western experts say just might be true this time.

“That’s only the recent news; earlier this year saw North Korea test another nuclear weapon plus a long-range rocket that could one day lead to an ICBM capable of reaching the United States.  Furthermore, Iran’s plans to continue developing missiles that can reach Israel, Europe, and perhaps eventually the United States scuttle hopes that the recent nuclear deal might have reduced this threat.  And evidence persists that Iran and North Korea are sharing missile-technology insights with each other and, perhaps, spreading them to other states and non-state actors....

“(But) last month, the Obama administration unveiled its 2017 request for the Missile Defense Agency: about $7.5 billion, down from $8.1 billion the previous year. This is too little, and it risks being too little, too late....

“Whatever the dubious merits of the sequestration mechanism in the Budget Control Act of 2011, the world has changed tremendously during the last few years, and not for the better.  Boosting BMD (ballistic missile defense) is a prudent, cost-effective response.”

Finally, Matthew Bodner / Moscow Times:

“After decades of isolation from the international arms market, Iran is gearing up for a military shopping spree.  Lagging behind U.S.-equipped regional rivals, it has turned to Russia for assistance.

“On Feb. 15, Iranian Defense Minister Hossein Dehghan landed in Moscow for a two-day visit. According to media reports, Tehran came with an $8 billion shopping list that included the high-end Su-30 warplane, Yak-30 training aircraft, military helicopters...new surface ships, and even new diesel-electric submarines....

“Taken as a whole, a multibillion-dollar Russian-Iranian arms deal would decisively change the balance of power in the Middle East.  But the deal still requires agreement by the UN Security Council, where the United States has the right to torpedo the deal with its veto power.”

Israel: An American tourist was stabbed to death by a Palestinian in Jaffa, near Tel Aviv, about a mile from where Vice President Biden was as he paid a visit.  It was one of three attacks carried out by Palestinians on Tuesday.  A survey released earlier showed almost half of all Jewish Israelis support expelling Arab citizens of Israel.

Meanwhile, Prime Minister Benjamin Netanyahu faces a political crisis that could bring down his government as his ultra-Orthodox coalition partners informed him that they will quit the government if it goes ahead and enacts measures that would be interpreted as official state recognition of Reform and Conservative Judaism.  It’s complicated.

Tunisia: At least 51 were killed in heavy clashes between Tunisian security forces and Libya-based, ISIS-affiliated jihadists on Monday near the border between the two countries; a worrisome development as it shows the continuing spread of ISIS across North Africa.

Tunisia has been a fertile ground for recruitment as it struggles with its economy, post-Arab Spring.

Speaking of Libya, Defense Secretary Ashton Carter outlined a plan to combat ISIS in Libya with an air campaign, which would then allow Western-backed Libyan militias to battle IS fighters on the ground.  But this seems a ways off, as noted by the New York Times.

That said, reportedly British, American, French and perhaps Italian Special Ops forces have been in Libya for months conducting reconnaissance and gathering intelligence.

Turkey: In a dangerous sign, Turkish police raided the offices of Zaman, the country’s biggest newspaper, hours after a court ruling placed it under state control.

Zaman is closely linked to the Hizmet movement of influential U.S.-based cleric Fethullah Gulen, a one-time ally of President Erdogan.

Turkey says Hizmet is a “terrorist” group aiming to overthrow Erdogan’s government.

But this is the latest government move against journalists.

After the raid, hundreds of supporters gathered outside the offices to protest the takeover.

In a defiant last edition last Saturday, the paper said Turkey’s press had experienced “one of the darkest days in its history.”

In its first edition after the takeover, the paper adopted a more pro-government line.

Somalia: American warplanes struck a training camp belonging to Islamist group al-Shabab in Somalia, supposedly killing 150 fighters according to U.S. officials, though some connected to the Pentagon say the attack may not have been this spectacular.  Somalia isn’t the easiest place from which to get the truth.

What does seem clear is that there was a concentration of fighters for a ceremony and a Pentagon official said, “They were standing outdoors in formation.”  [Helene Cooper / New York Times]

North Korea: North Korea threatened “special” military steps against South Korea hours after firing short-range missiles into the sea on Thursday.  Pyongyang viewed all economic cooperation deals with the South null and said it would take “political, military and economic” steps to hurt President Park Geun Hye.  The Korean Central News Agency said in a statement that the country’s troops were ready for a “preemptive strike,” and then on Friday, Kim Jong-un said he had ordered further nuclear tests; Kim on Wednesday having threatened retaliation with nuclear missiles if his country was attacked during U.S. / South Korean war games.

Both Washington and Seoul maintain North Korea has not miniaturized nuclear bombs to fit on a ballistic missile warhead as yet.

Separately, Hong Kong turned away a North Korean freighter seeking to dock in the city, following the newly-imposed UN sanctions.  South Korea-based Yonhap News agency said the cargo vessel was arriving “to get fuel and supplies for its crew” when it was turned away.

China: A top mainland Taiwan affairs adviser warned on Wednesday that official exchanges between Beijing and Taipei may be halted if the administration of president-elect Tsai Ing-wen hesitates to recognize the 1992 consensus.

Li Yihu, head of Peking University’s Taiwan Studies Institute, said if Tsai failed to recognize ‘one China’ in his inauguration speech, all official and semi-official contact could be suspended.

Warning against Taiwan independence, last weekend, Chinese President Xi Jinping said Beijing’s policy on Taiwan would remain clear and consistent irrespective of the “change in Taiwan’s political situation.”

The 1992 consensus reached between the two in 1992 notes there is only “one China” but each side has its own interpretation of what that China stands for.

Li said Beijing will allow Tsai to use her own wording to define the “consensus”: but she must stick to the one-China principle.  [South China Morning Post]

Meanwhile, China’s military budget will grow between 7 and 8 percent this year, the slowest increase in six years, as announced by the National People’s Congress.  But this apparently doesn’t cover outlays for long-term military modernization and research.

In his annual press conference as part of the NPC, Foreign Minister Wang Yi said, “China will not allow anyone to cause chaos in the South China Sea.”

He shrugged off claims Beijing was militarizing the region.

“China cannot be accused of militarization.  This label suits other countries better,” he said.  [SCMP]

Russia: A former aide and minister under Russian President Vladimir Putin who was found dead in his hotel room in Washington last year, was killed by blunt force injuries to the head, according to the chief medical examiner’s office in the U.S. capital said Thursday.

Mikhail Lesin, who advised Putin on media policies, ran one of Russia’s biggest media operations, Gazprom Media, until December 2014.  He was also a founder of the Russia Today news channel, now known as RT.

At the time of his death in November 2015, Russian state news service RIA Novosti reported that Lesin died of a heart attack.

But the Washington medical examiner said that in addition to the blows to the head, Lesin suffered blunt-force injuries to his neck, torso, arms and legs.

A spokesman for the police said, “There is an active, ongoing investigation.”

Slovakia: While the leftist ruling party won a parliamentary election last weekend, after campaigning on an anti-migrant ticket, it will need coalition partners.

And in a surprise, a neo-Nazi party, Our Slovakia, gained seats for the first time in winning 8 percent of the vote.

Prime Minister Robert Fico has been critical of Western sanctions against Russia and is known for his strong anti-Muslim rhetoric.

Brazil: Former President Luiz Lula da Silva was formally charged in a money-laundering investigation led by Sao Paulo state prosecutors.  While no specifics were given, investigators have suspected Lula’s family owned undeclared real estate as part of hiding assets.

Current President Dilma Rousseff said she is not resigning.

Random Musings

Republican primary/caucus results 3/5, 3/8

Kansas: Ted Cruz 48%, Donald Trump 23%, Marco Rubio 17%
Kentucky: Trump 36, Cruz 32, Rubio 16
Louisiana: Trump 41, Cruz 38, Rubio 11
Maine: Cruz 46, Trump 33, John Kasich 12

Hawaii: Trump 42, Cruz 33
Idaho: Cruz 45, Trump 28
Michigan: Trump 37, Cruz 25
Mississippi: Trump 47, Cruz 36

Delegate count [AP]

Trump 458
Cruz 359
Rubio 151
Kasich 54

1,237 needed for nomination.

Tuesday night, Trump said in his rally and news conference, “There’s only one person who did well tonight.  Donald Trump.”

Trump touted himself as  a party leader and team player, one who would unite Republicans in their attempt to retain the House and Senate.

Cruz’s win in Idaho, though, allows him to say he remains the party’s alternative.

So it’s now all about the next Super Tuesday, March 15, and specifically Florida and Ohio; the last stands of Marco Rubio and John Kasich.

Susan Page / USA TODAY

“He is braced for battle: Donald Trump’s delegate lead was widened by easy victories in the Michigan and Mississippi primaries Tuesday – stoking a furious campaign by the GOP establishment to prevent him from arriving at the Republican National Convention with the nomination clinched.  His opponents hope a rare floor fight could award the nomination to, well, just about anybody else.

“She had been poised for the prize: Hillary Clinton hoped wins in Michigan and Mississippi would make her all but certain to claim the Democratic presidential nomination she lost to Barack Obama eight years ago.  But Vermont Sen. Bernie Sanders narrowly won Michigan in an upset that ensures a longer campaign....

“As the primary season heads toward its final phase, the two front-runners seem to be living in alternate political realities.

“The Democratic Party is close to coming to terms, although Sanders’ first-place finish in Michigan could signal unexpected strength in the Ohio and Wisconsin primaries just ahead.

“The Republican Party is on the verge of going to war even as Trump is tightening his hold on the nomination.”

In a Monmouth University Poll of Florida primary voters, Trump leads Rubio 38-30.  Earlier polling had Trump up 20%. A new Quinnipiac survey, however, has Trump leading Rubio 45-22.  A CNN/ORC poll has Trump leading Rubio 40-24.  A Washington Post-Univision poll has it 38-31.

In Ohio it’s Trump over Kasich 41-35 in the CNN/ORC poll, while Quinnipiac has it 38-32 Trump.

Gideon Rachman / Financial Times

“He has been called a phony, a fraud and a threat to democracy – and that is just by members of his own party.  Other critics have compared Donald Trump to Hitler and Mussolini.  I have shared in the widespread horror at Mr. Trump’s rise but at the same time, a small voice in the back of my head has sometimes asked: ‘Is he really that bad?  Might all this hysteria be a bit overdone?’

“The death of Nancy Reagan over the weekend served as a reminder of the horror and condemnation that once greeted the rise of her husband, Ronald Reagan.  Like Mr. Trump, Reagan was labelled a fascist, accused of race baiting and derided as a moron. As a student when Reagan took office, I remember the widespread predictions that he would provoke a world war. And yet Reagan is now securely in the pantheon of ‘great presidents.’  Might Mr. Trump make the same journey from odium to acceptance?

“It is certainly possible to construct a case in Mr. Trump’s defense.  If you move beyond the vulgarity of his style and examine his proposed policies, it is clear that on many domestic and foreign policy issues, he is more moderate than several of his ‘establishment’ rivals for the Republican nomination.  Mr. Trump has argued for closing tax loopholes for high finance and has said the state should guarantee healthcare coverage for all Americans.  He has also defended Planned Parenthood, a family planning group regularly savaged by the evangelical right.

“When it comes to foreign policy, Mr. Trump’s rhetoric is aggressive and nationalistic but his positions on specific issues suggest an Obama-like caution about U.S. military intervention and democracy promotion overseas.  Mr. Trump’s rivals are running attack ads against him for having the temerity to suggest, correctly, that it might not be a good idea to scrap the Iran nuclear deal.  Also, in the last television debate, it was not Mr. Trump, but the ‘mainstream’ Republicans, John Kasich and Marco Rubio, who advocated the reckless option of sending U.S. troops into Libya....

“A large part of the horror at the Trump phenomenon is that he is appealing to ‘nasty’ instincts among the American electorate.  It is, however, the job of politicians to identify the concerns of voters, and to frame a response.  There is a finer line than is commonly acknowledged between populism (which all ‘right-thinking’ people abhor) and democracy (which we all approve of).  Mr. Trump has certainly revealed an acute and unorthodox political intelligence that has repeatedly left his rivals and the media flat-footed....

“Finally, Mr. Trump’s approach to the world goes well beyond an appropriate caution about American intervention overseas.  He has also embraced trade protectionism and is highly skeptical about America’s alliance commitments overseas.  Those policies, if energetically pursued, would represent a full-scale retreat from U.S. global leadership – which would probably make the world a much more dangerous place.

“Of course, one of the fascinations of the Trump phenomenon is that it is very hard to know how much of what he says is for real and how much is posturing for the voters and the cameras.  Mr. Trump’s record as a businessman and some of his writings suggests that he is, above all, a pragmatic dealmaker who likes to make radical demands as an opening position, before finding a compromise.

“It is certainly possible that a President Trump would surprise his critics and govern responsibly. I sincerely hope that I never get to find out.”

Maureen Dowd / New York Times

“Watching (Donald Trump) morph into a pol in real time and wriggle away from the junior-varsity GOP chuckleheads trying to tackle him is hypnotic. He’s like the blond alien in the 1995 movie ‘Species,’ who mutates from ova to adult in months, regenerating and reconfiguring at warp speed to escape the establishment, kill everyone in sight and eliminate the human race.

“The other thing I know is that Trump really wants to be president.  It isn’t a joke any more....

“The most enjoyable thing about the Trump phenomenon has been watching him make monkeys out of a lot of people who had it coming.

“Marco Rubio, a frothy focus-grouped concoction whose main qualifications to be president consist of a nice smile and an easy wit, has been mocking Trump as a con man.

“Real estate developers are con men by nature, trying to get what they want at the lowest price and sell it at the highest price, overpromising how great it’s going to be....

“It’s delicious watching the neocon men who tricked the country and gulled the naïve W. into the Iraq invasion go ballistic trying to stop the Gotham con man.

“Bill Kristol of The Weekly Standard wrote an outraged column about why there wasn’t more outrage at Trump, who correctly pointed out that Americans were deceived into a catastrophic war.

“Kristol, the midwife to three debacles – Dan Quayle, Iraq and Sarah Palin – solicited suggestions for the name of the new party that Republicans will have to start if Trump secures the nomination.  How about ‘Losers’?

“Eliot Cohen, a former W. State Department official who pushed to ‘liberate’ Iraq, said Trump would be ‘an unmitigated disaster for American foreign policy.’ And Robert Kagan, who backed the Iraq war, said ‘the only choice will be to vote for Hillary Clinton.’  Max Boot concurred.

“It’s amazing, having been tainted by the worst foreign policy disaster in American history, that the Republican national security intelligentsia would unite against a Trump presidency in an open letter, charging that he would ‘make America less safe’ and ‘diminish our standing in the world.’  Sort of like the Iraq invasion?....

“Like Bill Clinton, Trump talks and talks to crowds. They feed his narcissism, and in turn, he creates an intimacy even in an arena that leaves both sides awash in pleasure. It’s easy to believe him when he says that, unlike President Obama, he would enjoy endlessly negotiating with obstructionists and those on the other side of the aisle.

“That’s the wicked fun part. But then there’s the simply wicked part.

“Trump wants to be seen as Ronald Reagan but often he’s more like Pat Buchanan, playing to the crowd’s prejudices just to hear the bloodthirsty roar, evoking memories of Molly Ivins’ observation about Buchanan’s 1992 culture wars speech, that it was translated from the original German.

“Trump, who was slow to disavow David Duke and the Klan, stokes the gladiatorial fever, leading to minorities being roughed up and the press being bullied. His mocking of a Times reporter with a disability was grotesque.

“He has a tenuous relationship with the truth and an inch-deep understanding of policy....

“He has a nasty gift for dragging everyone down to his own vulgar level.  Presidential campaigns should not be about belittling people’s appearances or bragging about your own appendages. Whatever his flaws, President Obama has reinforced our desire for class in presidents....

“Trump sees his egregious positions on immigration, torture and terrorism revenge as opening bids.  After Super Tuesday, he told reporters that while they might be surprised, he would be a ‘unifier, once we get all of this finished.’

“But he should take a lesson from Condi Rice. She went along with the Iraq invasion, thinking she could reposition W. on the side of diplomacy afterward.  But some positions are so extreme, there’s no coming back.  Your deal with the devil is sealed.”

As for Thursday’s debate, hey, it was civil.  The only real news was that Trump continued his attack on Islam when he had an opportunity to climb down.

“I’m not interested in being politically correct, I’m interested in being correct.”

For the record, CNN’s Anderson Cooper asked Trump in a one-on-one interview before the debate:

“Do you think that Islam is at war with the West?”

“I think Islam hates us,” Trump responded.  “There’s something there that’s a tremendous hatred, we have to get to the bottom of it,” he added.

“It’s very hard to define.  It’s very hard to separate. Because you don’t know who’s who,” referring to in his opinion the failure to create space between the religion of Islam and Islamic fundamentalists.

Not everyone was happy with the tone of Thursday’s debate.  As the New York Post’s John Podhoretz wrote:

“It’s fair to assume that the GOP candidates challenging Donald Trump Thursday night in Miami saw reams of polling and focus-group data suggesting that the direct confrontations Marco Rubio and Ted Cruz had staged against him in the last two debates would be disastrous for them.

“And so Thursday night they didn’t go in for the kill; indeed, they didn’t go in for so much as a tickle.

“It was, perhaps, an unfortunate moment for peace to break out for those of us who view a Trump nomination with dread.”

Republican National Committee chairman Reince Priebus told the audience prior to the debate, “This party is going to support the nominee, whoever that is, 100 percent.”

Friday morning, Dr. Ben Carson endorsed Trump.  I was struck by how much Trump seemingly plans to involve Carson in the campaign.

One more, the New York Times on Friday released a report on Trump University, showing how students were pressured to give positive reviews.

Trump has fended off criticism and claims of fraud by saying the overwhelming number of reviews from participants was positive – a 98 percent level of satisfaction.

But students and their lawyers claim they were instructed on how to fill out the forms to obtain their graduation certificates, with one student saying, “It’s absolutely a con.  The role of the evaluations were a defense against any legal actions.”

I said a few weeks ago this issue was made for “60 Minutes” and now with the Times story I’m sure it’s in production.

But if it doesn’t come out Sunday, after Super Tuesday the point is moot.  It’s a primary issue, not a general election one, in my estimation.

Democrat primary/caucus results 3/5, 3/8

Kansas: Bernie Sanders 68%, Hillary Clinton 32%
Louisiana: Clinton 71, Sanders 23
Nebraska: Sanders 56, Clinton 44

Michigan: Sanders 50, Clinton 48
Mississippi: Clinton 83, Sanders 16

Delegate count [AP]

Clinton 1,223 [including superdelegates]
Sanders 574

2,383 needed for nomination.

The polling in Michigan was godawful, showing Sanders down 20 points just days before [For example, a WSJ/NBC News poll had it 57-40 Clinton.].  The key, it seems, was Sanders’ tough position on trade and Clinton’s support of deals that have led to job losses in the U.S., according to exit polling.  Sanders kicked butt among those who listed this as their chief concern.

Upcoming....

A Quinnipiac survey has Clinton leading Sanders in Ohio 52-43, while a CNN/ORC survey has it 63-33 Clinton.

In Florida, CNN/ORC has Clinton leading Sanders 61-34, while the Quinnipiac poll has it Clinton 63-32.

As for Wednesday’s debate....

Margaret Talev / Bloomberg News

“Hillary Clinton had a shot in Wednesday’s Democratic debate at retooling her message to white working-class voters a day after they largely rejected her in Michigan, and just in time for a fresh set of primaries March 15.

“But she found little traction to steer the conversation back to jobs and the economy under aggressive questioning from debate moderators.  And in that way, the event was a lost opportunity ahead of contests in states very much like Michigan, including Ohio and Missouri.

“Clinton spent much of the night on the defensive about her trustworthiness and use of private emails while serving as secretary of state.  At one point, she was pressed to say whether she would drop out if she was indicted over sending and receiving classified information in some emails. Exasperated, she said she wouldn’t even answer the question.”

Dan Balz / Washington Post

“Democrats got a taste Wednesday night of where their nominating contest between Hillary Clinton and Bernie Sanders could be heading – toward a grueling and increasingly contentious battle that could continue until the primaries end in June.”

Earlier, Balz wrote:

“After a year of campaigning, Clinton still seems not to have found a comfortable voice or a message that comes from her heart, unlike eight years ago as she battled to overtake Obama. This came to the fore in Michigan, a trade-sensitive state, where she struggled to demonstrate that she is as resistant to trade agreements as her opponent.

“Her attack on Sanders in last Sunday’s debate as an opponent of the auto bailout was a stretch at best, a deliberate distortion at worst.  On Tuesday she doubled down on the issue, seeking to show that Sanders had opposed a bill early in 2009 that included funds to save the industry.

“But almost immediately after she did, David Axelrod, who was senior adviser to Obama in the White House, tweeted this: ‘She did it again and I’ll say it again.  It’s misleading to imply that TARP II was an auto bailout bill.’

The Post’s Glenn Kessler and Michelle Ye Hee Lee, fact-checking the Democratic debate on Wednesday.

“It was not prohibited. It was not in any way disallowed. And as I have said and as now has come out, my predecessors did the same thing and many other people in the government.”

--Hillary Clinton

“This is language that had previously earned Clinton Three Pinocchios. Clinton is relying on the fact that the legal requirement to immediately preserve emails from nongovernment email accounts was not made mandatory until nearly two years after she stepped down as secretary of state.

“But that does not mean that when Clinton was secretary of state, there were not already in place State Department rules on how to handle emails and whether to use a personal email account.  While Clinton says that ‘my predecessors did the same thing,’ none had set up an exclusive and private email server for all of their departmental communications.  (In fact, only Colin L. Powell has ever said he sent emails from a personal account, so Clinton’s use of plural is misleading.)....

“In 2009, just eight months after Clinton became secretary of state, the U.S. Code of federal regulations on handling electronic records was updated: ‘Agencies that allow employees to send and receive official electronic mail messages using a system not operated by the agency must ensure that Federal records sent or received on such systems are preserved in the appropriate agency record-keeping system.’  The responsibility for making and preserving the records is assigned to ‘the head of each federal agency.’

“On top of that, when Clinton was secretary, a cable went out under her signature warning employees to ‘avoid conducting official Department business from your personal email accounts.’

“The issue thus becomes whether Clinton cooperated in the spirit of the laws and rules in place at the time.  In reality, Clinton’s decision to use a private email system for official business was highly unusual and flouted State Department procedures, even if not expressly prohibited by law at the time.  Moreover, Clinton appears to have not complied with the requirement to turn over her business-related emails before she left government service.”

--Corey Bennett and Julian Hattem / The Hill

“The aggressive posture of the FBI under Director James Comey is becoming a political problem for the White House.

“The FBI’s demand that Apple help unlock an iPhone used by one of the San Bernardino killers has outraged Silicon Valley, a significant source of political support for President Obama and Democrats.

“Comey, meanwhile, has stirred tensions by linking rising violent crime rates to the Black Lives Matter movement’s focus on police violence and by warning about ‘gaps’ in the screening process for Syrian refugees.

“Then there’s the biggest issue of all: the FBI’s investigation into the private email server used by Hillary Clinton, Obama’s former secretary of State and the leading contender to win the Democratic presidential nomination.

“A decision by the FBI to charge Clinton or her top aides for mishandling classified information would be a shock to the political system....

“ ‘Part of his role is to not necessarily be in lock step with the White House,’ said Mitch Silber, a former intelligence official with the New York City Police Department and current senior managing director at FTI Consulting.

“ ‘He takes very seriously the fact that he works for the executive branch,’ added Leo Taddeo, a former agent in the FBI’s cyber division.  ‘But he also understands the importance of maintaining his independence as a law enforcement agency that needs to give not just the appearance of independence but the reality of it.’

“The split over Clinton’s email server is the most politically charged issue facing the FBI, with nothing less than the race for the White House potentially at stake.

“Obama has publicly defended Clinton, saying that while she ‘made a mistake’ with her email setup, it was ‘not a situation in which America’s national security was endangered.’

“But the FBI director has bristled at that statement, saying the president would not have any knowledge of the investigation.  Comey, meanwhile, told lawmakers last week that he is ‘very close, personally,’ to the probe.

“Obama’s comments reflected a pattern, several former agents said, of the president making improper comments about FBI investigations.”

Stay tuned.

--Nationally....

An NBC News/Wall Street Journal poll revealed that two-thirds of registered voters say they couldn’t see themselves supporting Trump, while 56% say they couldn’t cast a ballot for Clinton.

Majorities say they couldn’t support five of the six remaining contenders – John Kasich being the exception.

This survey has Trump with just a 30-27 lead over Cruz, Kasich at 22% and Rubio 20% among voters who said they’d vote in the primaries.  [The NBC/WSJ polls have been abysmal, I hasten to add.]

The survey has Clinton leading Sanders 53-44, among voters who said they’d participate in the Democratic primary.

In a new Washington Post-ABC News survey of registered Republicans and Republican-leaning independents, Trump garners 34% to 25% for Cruz, 18% for Rubio and 13% for Kasich.

Among Democrats and Democratic-leaning independents in this one, Clinton leads Sanders 49-42.

--Michael R. Bloomberg

“The Risk I Will Not Take”

“Americans today face a profound challenge to preserve our common values and national promise.

“Wage stagnation at home and our declining influence abroad have left Americans angry and frustrated. And yet Washington, D.C., offers nothing but gridlock and partisan finger-pointing.

“Worse, the current presidential candidates are offering scapegoats instead of solutions, and they are promising results that they can’t possibly deliver. Rather than explaining how they will break the fever of partisanship that is crippling Washington, they are doubling down on dysfunction.

“Over the course of American history, both parties have tended to nominate presidential candidates who stay close to and build from the center.  But that tradition may be breaking down.  Extremism is on the march, and unless we stop it, our problems at home and abroad will grow worse....

“But when I look at the data, it’s clear to me that if I entered the race, I could not win.  I believe I would win a number of diverse states – but not enough to win the 270 Electoral College votes necessary to win the presidency.

“In a three-way race, it’s unlikely any candidate would win a majority of electoral votes, and then the power to choose the president would be taken out of the hands of the American people and thrown to Congress....

“As the race stands now, with Republicans in charge of both Houses, there is a good chance that my candidacy could lead to the election of Donald Trump or Senator Ted Cruz. That is not a risk I can take in good conscience.

“I have known Mr. Trump casually for many years, and we have always been on friendly terms.... but he has run the most divisive and demagogic presidential campaign I can remember, preying on people’s prejudices and fears.  Abraham Lincoln, the father of the Republican Party, appealed to our ‘better angels.’  Trump appeals to our worst impulses....

“Senator Cruz’s pandering on immigration may lack Trump’s rhetorical excess, but it is no less extreme.  His refusal to oppose banning foreigners based on their religion may be less bombastic than Trump’s position, but it is no less divisive.

“We cannot ‘make America great again’ by turning our backs on the values that made us the world’s greatest nation in the first place.  I love our country too much to play role in electing a candidate who would weaken our unity and darken our future – and so I will not enter the race for president of the United States....

“I am not ready to endorse any candidate, but I will continue urging all voters to reject divisive appeals and demanding that candidates offer intelligent, specific and realistic ideas for bridging divides, solving problems, and giving us the honest and capable government we deserve.”

Bottom line, Bloomberg probably would have run if he thought it was Trump and Sanders, but Trump and Clinton was a no go.

It also needs to be said Michael Bloomberg just isn’t that popular, even though he did a very solid job in his years in New York, and that’s around here.  Nationally, people just don’t know him.

--George F. Will / Washington Post

“They were just four words, but they denoted something that led to a wonderful swerve in world history.  They were words Ronald Reagan repeatedly used when referring to something that happened long before he spoke his most famous four words: ‘Tear down this wall.’  The other four words described the most important event in his eventful life, an event without which Reagan probably would never have been in a position to bring down the Berlin Wall:

“ ‘Then along came Nancy.’ If she had not come along, he would not have come to the place he now occupies in history and in the hearts of his countrymen.

“When filling out forms that ask if one is married, many people perfunctorily check that box.  The Reagans should have put not a check mark but an exclamation point: They were the most married couple imaginable. Ronald was a reproach to every husband who does not write love notes to his wife as they sit together in evening repose.  It was a remarkable woman who could elicit such private devotion from a public man with presidential preoccupations.

“Reagan’s strength was reflected in his preternatural cheerfulness, which flowed from his marriage.  Politics requires the patience, endurance and serenity that a happy marriage can confer.  In a democracy, politics is a team sport.  Parties are teams; congressional caucuses are teams; campaigns are teams.  But often the most important team is the smallest, a harmonious marriage. The presidency has had three especially history-shaping partnerships: Abigail and John Adams, Dolley and James Madison, Nancy and Ronald Reagan....

“Ronald Reagan was a friendly who used friendliness as a buffer, keeping the world at a distance from his sphere of privacy. He had one true friend, and he married her.  She understood his amiable propensity for thinking the best of everybody, a mistake she did not make.

“Her cool public persona and occasionally icy decisiveness sometimes obscured her warmth, her capacity for fun and her sly wit. She revealed the latter, for example, when describing a problem of Hollywood manners.

“What should you do, she asked, when you are invited to the home of an actor or director for a private screening of his newest movie – and the movie is dreadful? What do you say to your anxious host when he asks your opinion of his handiwork? Nancy impishly explained: You fix your host with an earnest gaze and exclaim, ‘You’ve done it again!’  Her husband was not the only master politician living on the second floor of the White House....

“(Reagan) spoke often of America as a shining city on a hill, words first used long ago to describe the American aspiration at a time when the nascent nation was a few hardy people on the continent’s rocky Atlantic shore.  The hill to which Nancy now goes overlooks the sun-dappled Pacific shore of a nation grown great not just in size but also in moral stature because of its fidelity to principles that the Reagans defended together.

“For generations to come, Americans will continue to climb that hill in Simi Valley to renew their devotion to the nation.  And to one another, moved by the luminous example of two people who changed the world as, and because, they moved through it as one.”

[As an aside, I made my pilgrimage to the Reagan Library in 2011.  I wrote at the time it was a must trip for every family in America.  Please take your kids.]

--When I go over to Dr. Bortrum’s place for happy hour, invariably the weather comes up for discussion and the two of us agree that the intensity of the rain and snowstorms that hit our area has certainly increased from the levels we remember from, say, 20-30 years ago.

So the good Doctor will be pleased to learn that our thoughts have been confirmed by a study published in the journal Nature Climate Change.  As reported by Bloomberg News, while the overall rain and snowfall average is increasing only moderately, “the wettest days every year have increased their intensity by 1 percent to 2 percent per decade.”

“The basics of the earth’s water cycle are pretty straightforward.  When it’s warmer, water not only evaporates faster, but the air can hold more moisture. So when storms come, there’s more water vapor to tap, and down it comes.”

Ask Louisianans today if they agree with the findings.  Thoughts and prayers to them.

--NOAA announced the Lower 48 states had its warmest winter in 121 years of record-keeping. Average temperatures between December and February were nearly five degrees above the 20th-century average.  Every state but two were warmer than normal and all six New England states set winter records.  Not what the ski industry wanted to see.

Hack, we had two 80 degree days here on Wednesday and Thursday, shattering records by 8-12 degrees across the region, which is totally unheard of.

Of course last winter was one of the coldest on record for us.

---

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

God bless America.

---

Gold $1249
Oil $38.50

Returns for the week 3/7-3/11

Dow Jones  +1.2%  [17213]
S&P 500  +1.1%  [2022]
S&P MidCap  +0.6%
Russell 2000  +0.5%
Nasdaq  +0.7%  [4748]

Returns for the period 1/1/16-3/11/16

Dow Jones  -1.2%
S&P 500  -1.1%
S&P MidCap +0.6%
Russell 2000  -4.3%
Nasdaq  -5.2%

Bulls  39.4
Bears  35.4  [Source: Investors Intelligence]

Have a good week.  I appreciate your support.

Brian Trumbore



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Week in Review

03/12/2016

For the week 3/7-3/11

[Posted 11:30 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.

Edition 883

Washington and Wall Street

Ah, the best laid plans.  I told a friend I wanted to open this week defending Bernie Sanders, of all people, on a topic I am still upset about, weeks later; the Clinton camp’s treatment of him in South Carolina and the vicious lies of the likes of none other than civil rights icon Rep. John Lewis, and how Hillary blatantly lies about Sanders’ vote on the auto bailout (which I do cover below). 

But I spent two hours today watching Nancy Reagan’s funeral service, and now as I’m supposed to be proofing and filling in Street returns for this column, I’ve been glued to the events in Chicago and the amazing amalgam of a-holes we have in this country, and I just need to largely  invoke my “24 hours rule.” 

I promise to let loose, finally, on all sides next week, including on Ted Cruz’ incredibly idiotic lie about the Iran nuclear deal; that you can just rip it up.  Hint:  It’s too freakin’ late, people.  I told you that for the better part of the past year as the Obama administration, especially Sec. of State John Kerry, negotiated this fiasco.  For now, let me repeat to all those commenting on this historically bad agreement....it is not between just us and Iran. It is between Germany, Britain, France, Russia, China and the United States!

It’s over.  As I note below on one of the consequences, Iran’s ballistic missile testing this week, the hardliners in Tehran are mocking us.

It’s depressing. 

As for what I saw out of some of the youth in Chicago tonight, I’ll be long dead and gone when these losers are turning 40 and 50.  My only message for them is good luck.

---

There was literally zero economic news of consequence this week here in the U.S., but this coming one promises to be active, as the Federal Reserve gathers for its latest Open Market Committee meeting.

Stanley Fischer, the Fed’s vice chair, said this week the U.S. may be seeing the “first stirrings” of a long-awaited increase in inflation.

But Fed Gov. Lael Brainard said the Fed needed to be mindful of “weak and decelerating foreign demand.” Policymakers should not take “the strength in the U.S. labor market and consumption for granted.”  Brainard argues against further tightening.

The market is betting the Fed will issue some hawkish language on Wednesday to set up a potential tightening in June; this while the rest of the world is going low.

The following few pages are wonky but important.

Lawrence Summers / Washington Post

“Here is a thought experiment that illuminates the challenges facing macroeconomic policymakers in the United States and the rest of the industrial world.

“Imagine that in a brief period, inflation expectations around the industrial world, as inferred from the indexed bond market or the inflation swaps market, rose by nearly 50 basis points to a level well above the 2 percent target, with larger increases foreseen at longer horizons.  Imagine that at the same time, survey measures of inflation expectations such as those calculated by the University of Michigan and New York Fed in the United States were rising sharply.  Imagine also that commodity prices were soaring and that the dollar experienced a once-every-15-years decline.  Imagine that the market anticipated future monetary policy in the United States that was far tighter than the Fed’s own policy projections.  Imagine that measures of gross domestic product growth were accelerating, with increasing signs of a worldwide boom.  Imagine also that no serious efforts were underway to reduce budget deficits.  Finally, suppose that policymakers were comfortable with current policy settings based on the argument that Phillips curve models predicted that inflation would revert over time to target due to the supposed relationship between unemployment and price increases....

“We are living in a world that is the mirror image of the hypothetical one I just described.  Market measures of inflation expectations have been collapsing and, on the Fed’s preferred inflation measure, are now in the range of 1 to 1.25 percent over the next decade.  Inflation expectations are even lower in Europe and Japan. Survey measures have shown sharp declines in recent months.  Commodity prices are at multi-decade lows, and the dollar has only risen as rapidly as it has in the past 18 months twice during the past 40 years when the value of the dollar has fluctuated freely.  The Fed’s most recent forecasts call for short-term interest rates to rise almost 2 percent in the next two years, while the market foresees an increase of only about 0.5 percent.  Consensus forecasts are for U.S. GDP growth of only about 1.5 percent for the six months from October to this month.  And the Fed is forecasting a return to its 2 percent inflation target on the basis of models that are not convincing to most outside observers....

“While there is certainly substantial anxiety about the macro environment, as judged from the meeting of the Group of 20 major economies in Shanghai last month, there is no evidence that policymakers globally are acting strongly to restore their credibility as inflation expectations fall below target.  In a world that is one major adverse shock away from a global recession, little if anything was agreed upon to spur demand.  Central bankers communicated a sense that there was relatively little left that they could do to strengthen growth or even to raise inflation.  This message was reinforced by the highly negative market reaction to Japan’s move to negative interest rates.  No significant announcements regarding non-monetary measures to stimulate growth or a return to target inflation were forthcoming....

“Today’s risks of embedded ‘lowflation’ tilting toward deflation and of secular stagnation in output growth are at least as serious as the inflation problem of the 1970s.  They, too, will require shifts in policy paradigms if they are to be resolved.  In all likelihood, the important elements will be a combination of fiscal expansion drawing on the opportunity created by super low rates and unconventional monetary policies and, in extremis, further experimentation with unconventional monetary policies.”

Europe and Asia

All eyes in the eurozone were on the European Central Bank and its long anticipated statement on policy, Thursday, as it seeks to combat tepid growth and near deflation.  The following was a good summary of its moves.

Editorial / Wall Street Journal

“Christmas came late for markets on Thursday, as European Central Bank President Mario Draghi delivered the monetary jolt investors had wanted in December. Already those investors are refusing to take yes for an answer.  Mr. Draghi threw the kitchen sink at Europe’s deflation and slow growth, plus the stove and toaster.  Monthly asset purchases under the ECB’s bond-buying, or quantitative easing, program will expand to 80bn euro ($87.9 billion) from 60bn, and the bigger surprise is that the ECB will start buying corporate bonds in addition to sovereign debt.  The latter step and some technical tweaks to the program are meant as reassurance that the ECB won’t run out of eligible bonds to buy.  This will bring the total value of QE to 1.7 trillion or more.

“Mr. Draghi also cut the rate the ECB pays banks for their deposits to negative -0.4% from negative -0.3%.  This is supposed to encourage banks to lend excess reserves instead of stockpiling cash. And since negative rates strain bank profits, the ECB also expanded lending subsidies, known as TLTROs, that will partly offset what banks pay the ECB to hold deposits.  On Planet Negative Rates, central bankers are using taxes and bribes to spur lending.

“Mr. Draghi has given markets everything they wanted and more.  So the sour reaction to Thursday’s news – European shares closed down on the day, and the euro fell against the dollar – must have come as a shock at ECB headquarters in Frankfurt.  It shouldn’t have.

“Mr. Draghi is right that the monetary problem Europe ought to worry about is why banks aren’t lending.  Some of this is because demand for new loans is slack as businesses worry about slower export growth to China and emerging markets.  But the ECB and its enablers also are stuck on the view that banks are carelessly hoarding too much cash in reserves at the central bank. There’s no evidence for that.”

The problem is that as the banks have been slow to reorganize since the 2008-09 financial crisis, the ECB has been aggravating the problem by enforcing stricter capital requirements that are creating uncertainty among both the banks and investors.

WSJ:

“Instead of finding ways to help this beleaguered financial system allocate capital more efficiently, Mr. Draghi is further politicizing credit.  Most damaging is the expansion of QE to include purchases of “investment grade euro-denominated bonds issued by non-bank corporations in the euro area.”

I’ve written since the ECB first initiated QE that it was going to run out of things to buy, because the eurozone’s bond market is nowhere near the size of ours and there are only so many good credits.

But as the Journal points out, the other side is, “does this mean the ECB will favor, say, a bond issue to fund an expansion at Siemens but not a GE plant in the eurozone?  And why favor lending to large companies over medium-size firms?”

So Draghi’s credibility is at stake, while at the same time Europe’s politicians have refused to reform, witness the French masses going on strike this week over a modest proposal to change the 35-hour work week.  [And I have a comical story concerning Italy down below.]

Look at Spain.  Its economy is doing well after going through wrenching pain amidst the euro crisis in 2012, yet it has no government today, the reformers having been tossed out.

But back to the buying of corporate bonds, yes, it does force the ECB to pick winners and losers, in both companies and sectors.  And companies can default more easily than governments.

Thursday’s initial rally on the ECB’s announcement was stopped cold and put into reverse when Draghi in a press conference said there were no plans to lower interest rates further.

“It’s a fairly long list of measures, and each one of them is very significant and devised to have the maximum impact in boosting the economy and the return to price stability – we have shown we are not short of ammunition,” Draghi told reporters.  “From today’s perspective, we don’t anticipate it will be necessary to reduce rates further.”

This last statement caused a massive reversal in the euro, from $1.0822 to $1.1218*, an historic move, intraday, that was the last thing Draghi wanted (the ECB desiring a weaker euro to spur exports, not a stronger one, so Draghi clearly blew it in his communication, though he was probably telling the truth).

*The euro finished the week at $1.115.

Separately, the ECB in its quarterly forecast said it expects eurozone GDP to rise 1.4% this year and 1.7% in 2017, unchanged from its December forecast.  The inflation outlook was downgraded sharply to 0.1% from 1% for 2016; 1.3% in 2017.

But European stocks reversed Friday and traders decided the ECB’s moves were positive after all. 

As for current data, Eurostats released its final look at fourth-quarter GDP for the euro area, 0.3% over the prior quarter, which was also at a 0.3% rate, or 1.6% year over year.

Germany’s yoy figure was 1.3%, France 1.4%, Italy 1.0%, Spain 3.5% and Greece’s minus -0.8%.

Industrial production in January in Germany was encouraging, up the most in six years (Sept. ’09), and up 3.3% over December, with construction spending up 7% for the month owing to mild weather.

But German Chancellor Angela Merkel faces a big political test over the weekend.  More in a bit.

Spain has had a heckuva time in forming a new government, post-December election.  While Spain’s economy has been performing very well, the uncertainty is definitely impacting the expansion and the political parties have until May 2 to come up with a solution or there will be new elections on June 26.  It doesn’t help you still have the issue of Catalonia’s separatist movement.

Meanwhile, Ireland’s parliament failed on Thursday to nominate a new prime minister so Enda Kenny will continue to act as caretaker leader over the coming weeks while all the parties try to come up with a solution on who should lead a new administration. 

But this is nowhere as impactful as Spain’s situation. Plus Ireland reported GDP growth of 7.8% for 2015 this week.

Greece was told by the troika (the European Commission, ECB and IMF) to step up its reform efforts as the creditors are reviewing progress under the country’s third, $95bn bailout.

The review is supposed to pave the way for debt relief, which Dutch Finance Minister Jeroen Dijsselbloem said could ensure the economic efforts in the country are “sustainable.”

But as is always the case, it comes down to hated pension reforms.  It won’t be easy.

So turning to the migration front...after marathon talks in Brussels on Monday, Angela Merkel announced the European Union was on the verge of a breakthrough with Turkey to stop the flow of migrants to Europe.  Now the key is going to be another EU summit next week, March 17-18.

Under a tentative agreement, Turkey would receive as much as $6.6bn in aid, up from about $3.3bn, to help the country cope with millions of refugees.

In return, Turkey would take back migrants who arrive in Greece from Turkish shores, including Syrian refugees.  The EU will then take Syrian refugees from UN-run camps on a one-for-one principle to ensure there is only a legal, organized channel for migration to the bloc.

“The days of irregular migration to the European Union are over,” said European Council President Donald Tusk.

There is no commitment to back Turkey’s long-standing push for a safe zone to be established in Syria.

But back to Merkel, she is on the defensive ahead of three key state elections on Sunday, which is a mini-referendum on her migration policy.  Her coalition partner in one state is expected to suffer humiliating losses to the anti-immigrant Alternative for Germany party, which some say is poised for big gains in all three.

Separately, Slovenia announced it would limit the number of migrants to the country, as Greece deals with a continued buildup, 30,000+, who have been pushed back as the borders north, such as in Macedonia, close.

---

China’s National People’s Congress convened last weekend and the government revealed its long-anticipated economic policy for 2016.  Premier Li Keqiang announced the target for growth would be no less than 6.5 percent for the next five years, along with the highest budget deficit since 1976 in a “challenging” year ahead.

According to the government work report delivered to the NPC, the deficit (3 percent of GDP) would be used primarily for tax and fee cuts for companies.

Li said: “Our country’s development faces more and greater difficulties and severer challenges this year, so we must be prepared for a tough battle.”

Many see the growth target as too aggressive.

Officials hope to create 10 million new urban jobs this year, with many of them generated by new technology and internet-related industries.

Li emphasized that innovation was the primary driving force for development, so no doubt China will send out agents and spies far and wide, especially in the U.S. and Europe, to steal our corporate secrets (or you could just save on travel expenses and hack for it).

In its blueprint for development between 2016 and 2020, the government is pegging “industries such as semiconductors and in the next generation of chip materials, robotics, aviation equipment and satellites.”

Separately, Li promised to deal with “zombie enterprises,” a campaign that would result in millions of layoffs if executed properly.  As I wrote last week, China already announced it would shed 1.8 million coal and steel jobs in the next five years to address overcapacity.  Li emphasized this would be done “prudently” to avoid social instability.

Beijing also pledged to stick to the principle of “one country, two systems,” when it comes to Hong Kong and “a high degree of autonomy” for the city, while promoting “harmony.”

Xu Shaoshi, chairman of the National Development and Reform Commission, said China will not have a hard landing.  “Please relax,” he said in his press conference.  “Such a possibility doesn’t exist.” 

Xu also said blaming China for global investment jitters was “unreasonable and unfounded.”  [South China Morning Post]

But this week ratings agency Fitch, in downgrading its growth forecast for the global economy, blamed China’s slowdown as well as the spending crunch in commodity-producing countries.

Fitch now sees growth in global GDP of 2.5 percent in 2016, with China at 6.2 percent.  The growth rate in advanced economies has been slashed to 1.7 percent from 2.1 percent, and emerging economies to 4.0 percent from 4.4 percent.

“The investment slowdown in China and sharp expenditure compression in major commodity-producing countries continue to reverberate around the world economy.  As the volume of housebuilding in China has levelled off, the impact on resource exporters across the globe has been felt profoundly....

“The collapse in commodity prices has presented commodity exporters in the emerging world with a huge income shock.”  [Financial Times]

There was some important economic data in China this week.   Exports suffered their biggest drop in more than five years, down 25.4% in dollar terms for February, year over year, though the Lunar New Year holiday had something to do with this (Jan. being down 11.2%).  Imports fell 13.8% (vs. a decline of 18.8% in January), though this particular number is squirrelier (made up word of the week) than most, having to do with fake invoices to hide capital flight.

Meanwhile, with the government having a 3% inflation target, and needing inflation to more easily service its growing debt, consumer prices came in at 2.3%, with food prices up 7.3% on higher demand during the holiday period, but the core rate, ex-food and energy, was only 1.3% for February.

Producer, or factory gate, prices fell for a 48th straight month, down 4.9%.

While I’m on the topic of exports, they were down last month for a 13th straight time in Taiwan, and for a 14th straight month in South Korea.

In Japan, fourth-quarter GDP came in a little better than expected, though still down 1.1% on an annualized basis.  Capital expenditures rose 1.5%, but private consumption was down 0.9%.  The estimate for first quarter GDP is up 0.9%.

Editorial / Washington Post

“So far, not so good for Abenomics, the ambitious program for reviving Japan’s stagnant economy introduced by Shinzo Abe upon his election as prime minister three years ago.  Mr. Abe promised to fire ‘three arrows’: fiscal stimulus, monetary easing and structural reforms.  He has delivered most dramatically in the monetary area, where the Bank of Japan has tried radical anti-deflation measures, including, most recently, negative interest rates on commercial bank deposits at the central bank. Yet in view of the underwhelming results – including another three months of negative growth at the end of 2015 – Japanese are worried and the prime minister’s approval ratings are falling.  Meanwhile, China and North Korea agitate militarily nearby.”

The Post goes on to criticize Abe for stifling the media over their criticism of his policies.  Three top broadcasters, often critical of the prime minister, suddenly resigned under pressure from their networks (at least it seems that way).

Street Bytes

--Wednesday, March 9, represented the 7th anniversary of the market low of March 9, 2009, but this bull market is distinctly showing signs of age despite the rally of the past four weeks.  The all-time high of 2130 on the S&P 500 was achieved last May 21, and at Friday’s closing price of 2022, we are still 5% below it.

That said, you can’t officially call it the end of the bull market until the index declines 20% from the high, though back in February it had fallen 15%, intraday, and I’ve detailed before how many stocks in the S&P have had their own bear markets with declines well in excess of 20%.

As for the past five days, the Dow Jones added 1.2% to 17213, with the S&P tacking on 1.1% and Nasdaq 0.7%.

--U.S. Treasury Yields

6-mo. 0.50%   2-yr. 0.96%  10-yr. 1.98%  30-yr. 2.75%

The yield on the 10-year rose a third straight week.

--The average price at the gas pump across the country has risen to $1.82 per gallon, but this is still down 65 cents vs. year ago levels.  For a change, at least as of Thursday, my local station was at $1.75 when it’s normally a few cents over the average, so I keep topping off.

Actually, for research purposes, I keep my gas receipts and two years ago the price in my area was $3.40, quite a difference.

--The International Energy Agency said Friday that oil prices may have “bottomed out” and cuts to higher cost output this year will be greater than initially anticipated.

“For prices there may be light at the end of what has been a long, dark tunnel,” said the IEA, even though it said it would take until 2017 for supply to align with demand.

But OPEC is unlikely to cut production to support oil prices until it sees output declines in the United States, Russia and Iraq, according to energy consultant Fereidun Fesharaki, as reported by Reuters.

“What they want to achieve is to see production declines in several areas,” he said.

The problem is that while production is expected to decline in the first two, Iraq has little incentive to cut while the Iranians are ramping up.  Fesharaki, though, says Iran will do it more slowly than expected, “because anybody who is accused of being responsible for lower oil prices is despised and hated, not only outside of their own country, but inside their country.”

Prices rose a fourth consecutive week, climbing over $40 on Brent and $39 on West Texas Intermediate, a rally of 50% off the recent bottom.  [They closed at $40.38 and $38.50, respectively.]

Much of the rally has been short covering as traders close out bets on falling prices, and now the same folks and hedge funds are jumping on the bandwagon going the other way, as they are wont to do.

--Iron ore prices soared nearly 20% on Monday, the biggest gain on record, as Chinese mills scrambled to replenish supplies ahead of the summer construction season.  The price is up 70% off the December low.

China has boosted credit to the construction and infrastructure sectors.

But when looking at the commodities rally overall, Goldman Sachs said it expected it to be short-lived “in the absence of a material increase in Chinese steel demand.”  It expects copper prices to slide as much as 20 percent over the next year.

“We are yet to find evidence of higher-than-expected steel demand – whether in the order books of individual steel producers or in the official data for new orders,” the bank said.  “Based on the information currently available, the seasonal increase in demand appears only marginally stronger than last year.”

Mining giant BHP Billiton said recently that prices would probably remain low, in particular for iron ore, “constrained by weak demand and abundant seaborne supply.”  [Financial Times]

--Citigroup announced its trading revenue in equities and fixed-income will drop 15 percent in the first quarter from a year earlier.  Low interest rates, plunging commodity prices and volatile stock markets have slowed trading to a crawl, though we’ll see if the recent pickup in commodities leads to a meaningful bounce in activity.

Separately, the New York State Comptroller tracks bonuses on Wall Street and the average one dropped 9 percent last year to $146,200; the second straight decline.  The bonus pool peaked in 2006 at an average of $191,360.

--China’s new car sales fell in February compared with a year earlier, the first such decline in six months.  It’s a little confusing given the Lunar New Year holiday, but the fact is sales are slowing in keeping with the rest of the economy.

“Between 2005 and 2014 the Chinese car market grew at an average compound rate of 20% a year.” [Rose Yu and Lilian Lin / Wall Street Journal]

General Motors and Ford each reported 9% declines in vehicle sales in China for the month, though Toyota Motor Corp.’s sales rose 6%.

SUV sales have been the bright spot in the Chinese market, up 44% year over year.

To be fair, Ford’s and GM’s sales rose 18% and 11%, respectively, through the first two months of 2016, as many Chinese buy cars ahead of the holiday.

--Apple Inc. must pay $450 million to end an antitrust suit after the U.S. Supreme Court refused to question a finding that the company orchestrated a price-fixing scheme for electronic books.

A federal appeals court had ruled in favor of the U.S. Justice Department and more than 30 states that sued as part of a settlement reached in 2014.  Consumers who overpaid will get credits they can apply to future e-book purchases. 

Apple knowingly conspired with book publishers to raise the prices of e-books, according to the Justice Department, at a time Apple was trying to gain a foothold in  a market dominated by Amazon.

--On another Apple issue...Adam Segal / Defense One

“Shadowing the standoff between the FBI and Apple over access to an encrypted iPhone used by one of the San Bernardino attackers is the question: What will China do?  If Apple creates unique software that allows Washington access to the phone, does that open the door for Beijing to make similar demands on the company and all other foreign technology firms operating in China?  As Sen. Ron Wyden of Oregon argues, ‘This move by the FBI could snowball around the world.  Why in the world would our government want to give repressive regimes in Russia and China a blueprint for forcing American companies to create a backdoor?’...

“An early draft of China’s counterterrorism law included provisions requiring the installation of backdoors and the reporting of encryption keys.  In the face of criticism from the U.S. government and foreign technology and companies, Fu Ying, spokeswoman for the National People’s Congress, defended the provisions as in accordance with ‘international common practices,’ adding that it was common for the Western countries, such as the United States and Britain, to request tech firms to disclose encryption methods.  The final law, passed in December 2015, was much more ambiguous about what type of demands the government would make on technology companies, but it is clear that Chinese leaders are more than happy to exploit what is happening in the United States as rhetorical cover....

“Beijing, like governments everywhere, wants to collect and analyze data for law enforcement and national intelligence reasons.  The desire for data may only intensify under Xi Jinping’s leadership; the Chinese Communist Party appears increasingly worried about domestic stability and the spread of information within the country’s borders.  For foreign companies, refusal to cooperate with the Chinese authorities will increasingly lead to a loss of market opportunities....

“Apple is likely to be pushed, unwillingly, into forking its products, creating separate, less secure products for Chinese users. While this will be a bitter pill for Tim Cook and Apple to swallow, given their promises to defend privacy of all users, it is likely to be the price of continuing to do business in China.”

Craig Federighi, SVP, Apple / Op-ed Washington Post

“(The) threat to our personal information is just the tip of the iceberg.  Your phone is more than a personal device.  In today’s mobile, networked world, it’s part of the security perimeter that protects your family and co-workers.  Our nation’s vital infrastructure – such as power grids and transportation hubs – becomes more vulnerable when individual devices get hacked.  Criminals and terrorists who want to infiltrate systems and disrupt sensitive networks may start their attacks through access to just one person’s smartphone....

“The encryption technology built into today’s iPhone represents the best data security available to consumers.  And cryptographic protections on the device don’t just help prevent unauthorized access to your personal data – they’re also a critical line of defense against criminals who seek to implant malware or spyware and to use the device of an unsuspecting person to gain access to a business, public utility or government agency....

“That’s why it’s so disappointing that the FBI, Justice Department and others in law enforcement are pressing us to turn back the clock to a less-secure time and less-secure technologies....

‘To get around Apple’s safeguards, the FBI wants us to create a backdoor in the form of special software that bypasses passcode protections, intentionally creating a vulnerability that would let the government force its way into an iPhone.  Once created, this software – which law enforcement has conceded it wants to apply to many iPhones – would become a weakness that hackers and criminals could use to wreak havoc on the privacy and personal safety of us all....

“Security is an endless race – one that you can lead but never decisively win. Yesterday’s best defenses cannot fend off the attacks of today or tomorrow. Software innovations of the future will depend on the foundation of strong device security.  We cannot afford to fall behind those who would exploit technology in order to cause chaos. To slow our pace, or reverse our progress puts everyone at risk.”

Yeah, but you are giving in to China.

--Related to the above...Adam Turner / Sydney Morning Herald:

“Millions of customers of Australia’s largest banks are the target of a sophisticated Android attack which steals banking details and thwarts two-factor authentication security.

“(The banks) are all at risk from the malware which hides on infected devices waiting until users open legitimate banking apps.  The malware then superimposes a fake login screen over the top in order to capture usernames and passwords....

“Along with stealing login details, the malware can also intercept two-factor authentication codes sent to the phone via SMS – forwarding the code to hackers while hiding it from the owner of the phone.  With access to this information, thieves can bypass a bank’s security measures to log into the victims’ online banking account from anywhere in the world and transfer funds.”

--The U.S. is looking to sanction Chinese telecom giant ZTE for trade violations with Iran.

Editorial / Wall Street Journal

“This provides reason to hope that at last the Obama Administration may also crack down on Chinese firms benefiting from other illicit conduct such as cybertheft....

“An internal ZTE document seen by Reuters describes how ZTE schemed to buy export-controlled U.S. technologies via shell companies and re-export them to Iran in ways that make it ‘harder for the U.S. government to trace it or investigate the real flow of the controlled commodities.’  Another internal memo, addressed to ‘company leaders’ and marked ‘no spreading abroad without permission of ZTE,’ describes ‘projects in all five major embargoed countries – Iran, Sudan, North Korea, Syria and Cuba.’  It notes that ‘all of these projects depend on U.S.-procured items to some extent, so export control obstacles have arisen.’....

“One issue is whether ZTE’s behavior reflects Chinese state policy.  The company doesn’t have the typical profile of a state-owned enterprise, but a 2012 investigation by the U.S. House Intelligence Committee was unable to ‘allay concerns that ZTE is aligned with Chinese military and intelligence activities or research institutes.’  Its Iranian-export shell game fits China’s extensive record of undermining sanctions on rogue regimes with sales of everything from mobile missile launchers to uranium-enrichment tools.”

ZTE is a maker of smartphones that has been successful in the U.S., but now with the Commerce Department’s restrictions on sales, U.S. vendors such as Qualcomm and Intel, which supply components to ZTE, will suffer big time.

A spokesman for China’s Foreign Ministry, Hong Lei, said, “We hope the U.S. stops this erroneous action and avoids damaging Sino-U.S. trade cooperation and bilateral relations.”

--Canada’s unemployment rate unexpectedly ticked up in February to 7.3 percent from 7.2 percent, its highest level since March 2013, the government announced on Friday.  Sharp cutbacks to capital investment in the oil sands industry has been a big factor.  In January the Bank of Canada reduced its growth forecast for 2016 to just 1.4 percent.

--A Federal Reserve report this week showed that housing wealth is poised to reach a new record as early as the second quarter.  The 2006-09 crash in housing reduced wealth by $7 trillion, but since then the value of homeowners’ equity in real estate has more than doubled from the first quarter 2009 low.

The gains are inconsistent across the country.  According to the S&P/Case-Shiller index, in Las Vegas, housing prices are still 38 percent below the level reached in April 2006, while in the likes of Miami and Phoenix they are generally 25 percent less than at their peaks.  But property prices have recovered 61 percent from their low in Vegas.

--So in keeping with the above, the net worth of U.S. households and nonprofits, defined as the total of all assets minus all liabilities, reached a record $86.8 trillion in the fourth quarter, according to the Federal Reserve, up $1.6 trillion from the third quarter.

--Lena H. Sun / Washington Post

“The top U.S. health officials leading the response to the mosquito-borne Zika virus sweeping through the hemisphere said its growing links to a broad array of birth defects and neurological disorders are worse than they originally suspected, increasing the risk for devastating harm during pregnancy.

“Until Zika, ‘there has never been a mosquito-borne virus that could cause serious defects on a such a large scale,’ Thomas Frieden, director of the Centers for Disease Control and Prevention, said Thursday during a conference call with reporters.”

--As reported in the Wall Street Journal: “Bacteria can gobble up oil spills, radioactive waste and, now, plastic.  Researchers in Japan said they have discovered a species of microbe that eats PET, the polymer widely used in food containers, bottles and synthetic fibers.

“Some scientists have said the bacteria could help break down otherwise non-biodegradable debris in landfills or recycling plants.”

There is a long way to go in terms of the research, but this is hopeful.

--Chipotle Mexican Grill had another setback as a Boston-area store was closed a few days after an employee tested positive for norovirus.  Two other employees were suspected of it.

--Tailored Brands, the parent company of chains Jos. A Bank, Men’s Wearhouse and suit brand Joseph Abboud, announced it was shutting about 250 stores, 80 to 90 of which would be Jos. A Bank locations; this last one having killed its absurd “buy one, get three free” promotion last fall.

Sales plunged 31.7 percent last year at Jos. A Bank alone.  But Wall Street liked the move and the shares of Tailored Brands rose sharply on the news.

--New York City saw a record number of tourists last year, 58.3 million, and Gotham is forecasting 59.7 million this year, up 2.4%.  The longer term goal is 67 million annual visitors by 2021, according to the city’s tourism agency.

Despite its economic issues, a projected 920,000 visitors from China are expected this year.

--For all of 2015, the nation’s air carriers broke records for the number of passengers carried (798.4 million), the percentage of filled seats (83.8%) and the total miles traveled with paying customers (902.4 billion), according to data released Thursday by the U.S. Department of Transportation.  [Hugo Martin / Los Angeles Times]

--California’s reservoirs have had a great 7-10 days after a dry February cast doubt on real drought relief.  But with recent massive storms, and more on the way, the next report on March 17 should show major relief.

--We note the passing of John H. Gutfreund at the age of 86.

Gutfreund was chairman and CEO of Salomon Brothers in the 1980s and was labeled “the king of Wall Street” for having transformed the company into one of the world’s largest securities traders.

But he was forced to resign in 1991 amidst a major scandal involving illegal bids by the firm for Treasury bonds.

Gutfreund was a gruff, obnoxious guy whose advice to novice traders – to wake up each morning “ready to bite the ass off a bear” – became a Street catchphrase.

Michael Lewis’ “Liar’s Poker,” a 1989 best seller about the author’s experience as a young bond trader at Salomon, highlighted Gutfreund’s manner. “(He) seemed able to smell money being lost.  He was the last person a nerve-racked trader wanted to see.”

--From Reuters: “Italian unions have lambasted the new museum chief of the world-famous Royal Palace of Caserta for working too hard, prompting Prime Minister Matteo Renzi to ride to his defense.

“Renzi’s government appointed Mauro Felicori five months ago to revive the fortunes of the spectacular, 1,200-room Baroque palace of the Bourbon kings, which like many of the country’s artistic and cultural treasures was suffering from decades of neglect and mismanagement.

“Local unions however sent a letter to the culture minister, Felicori’s boss, complaining that he works late into the evening without the rest of the personnel being informed.

“ ‘Such behavior puts the whole structure at risk,’ read the letter.

Renzi called the accusation leveled at Felicori ridiculous.  “The fun’s over,” Renzi said.

--Raymond Tomlinson, the inventor of modern email, died last weekend.  He was 74.

Tomlinson worked at Raytheon Co., and way back in 1971, he was the first to figure out how to send messages person-to-person by email at a specific address.  He chose the “@” symbol to connect the username with the destination address.

His coworkers said he was not a frequent checker of email.

--The value of Maine fishermen’s catch topped $631 million at the dock last year, surpassing the previous year’s record total by more than $33 million.  Lobsters constituted more than three-quarters of the value at more than $495 million, also a record.”  [Associated Press]

Union spokesman Larry Lobster, on his way to a Trump rally, was later found boiled.  Perhaps a taste of things to come.

--Dos Equis is sending actor Jonathan Goldsmith, aka The Most Interesting Man In The World, on a one-way trip to Mars, thus ending his reign as pitchman since 2006.  The beer company (owned by Heineken USA), said the campaign will continue with a new, as yet unnamed, star.

On the final commercial, as he enters the rocket ship in a tuxedo, the voiceover says, “His only regret is not knowing what regret feels like.”

Stay thirsty my friends.

Foreign Affairs

Iraq/Syria/ISIS: Despite the supposed truce, there is heavy fighting in various parts of the country and the Syrian opposition has complained to the UN that Russian air strikes continue to be carried out.  Syrian government forces, backed by Russia’s air force, Iranian troops and Iraqi militias, have continually breached the temporary ceasefire and used barrel bombs and toxic gas, according to one opposition figure.  Massacres have been reported.

And late Friday, the State Department for the first time accused Syria of violating the truce and urged Russia to use its influence to stop the attacks, warning they could ‘tear asunder’ the fragile peace process.

State Department spokesman John Kirby said the United States “strongly condemned” the government of Syrian President Assad for air strikes that have struck civilian protesters in the cities of Aleppo and Deraa, including targeting a mosque as the congregation was leaving. Kirby said at a briefing that the United States also “strongly condemned the Assad regime’s practice of removing badly needed medical supplies from the emergency humanitarian aid deliveries.”

Next door, the level of violence in Iraq has soared in recent weeks.  A suicide attack at a checkpoint south of Baghdad last Sunday killed at least 61 in the city of Hillah, the deadliest such attack in Iraq this year.  23 of those killed were members of the security forces.  ISIS claimed responsibility.

--An ISIS detainee currently in American custody in Iraq, has been questioned about the Sunni group’s plans to use mustard gas in Iraq and Syria, Defense officials said this week.

The figure, described as a “significant” IS operative captured a month ago by American Special Forces, has provided his captors with details about how the group has weaponized mustard gas into powdered form and loaded it into artillery shells.  [Not to lethal levels as yet, according to officials.]

--Islamic State’s ‘Caucasus Province’ has called on Russian Muslims to “kill apostates in Russia,” vowing to attack President Putin and implement Sharia in the country, as reported by the Jerusalem Post.

--German authorities said they had captured a cache of 22,000 documents that provided an unparalleled snapshot into the recruitment of foreign fighters by ISIS.

Iran: It was ballistic missile test week in Iran, as the regime sought to demonstrate “deterrence power,” with long-range tests conducted both Tuesday and Wednesday, a move that is in defiance of U.S. sanctions imposed on its missile program in January.

The official IRNA news agency said the tests showed the country’s “all-out readiness to confront threats” against its territorial integrity.

The missile tests come less than two weeks after Iran’s elections delivered gains to politicians aligned with Hassan Rouhani, the country’s “moderate” president.

But the Revolutionary Guards report to Supreme Leader Ayatollah Ali Khamenei, not Rouhani, and their influence is far greater.

A UN panel said in December that missile tests that first took place in October breached previous UN resolutions aimed at stopping Tehran from developing weapons capable of carrying a nuclear warhead.

Iran denies its missiles would ever be designed to, nor ever carry, the bomb.

Yet state television showed long-range tests on Wednesday that hit targets 870 miles away.

“The reason we designed our missiles with a range of 2,000 km (1,240 miles) is to be able to hit our enemy the Zionist regime from a safe distance,” Brigadier General Amir Ali Hajizadeh was quoted as saying by the IRNA agency. The nearest point in Iran is around 1,000 km from Tel Aviv and Jerusalem.

The missiles were stamped with the words “Israel should be wiped from the pages of history” in Hebrew, according to Iranian agencies reporting on the tests.

Israeli Defense Minister Moshe Yaalon told Israel Radio the tests showed Iran’s hostility had not changed since implementing a nuclear deal with world powers in January, despite President Hassan Rouhani’s overtures to the West.

“To my regret there are some in the West who are misled by the honeyed words of part of the Iranian leadership while the other part continues to produce equipment and weaponry, to arm terrorist groups,” Yaalon said.

For its part, the Obama administration labeled the missile launches provocative, but said they did not violate the terms of the nuclear agreement.

Editorial / Wall Street Journal

“Tehran’s show of force...is not the work of the usual ‘hardline’ suspects.  Iran tested ballistic missiles last fall in violation of a UN Security Council resolution, and in January Mr. Rouhani publicly ordered his defense minister to speed up missile testing and production.  The Obama Administration later sanctioned a handful of Iranian individuals and companies for the violations, but to little effect.  The tests appear to be timed to coincide with Vice President Joe Biden’s visit to Israel.

“ ‘Our main enemies, the Americans, who mutter about plans, have activated new missile sanctions against the Islamic Republic of Iran and are seeking to weaken the country’s missile capability,’ said one Iranian general.  ‘The Guards and other armed forces are defenders of the revolution and the country will not pay a toll to anyone.’

“So much for the nuclear deal producing a new era of Iranian accommodation to the world.  Part of the problem is that Secretary of State John Kerry bowed to Iranian demands during the nuclear negotiations not to include ballistic missiles as part of the final deal, though missiles are an essential component of any nuclear program....

“The lesson – as always in arms control, from Brezhnev’s Soviet Union to North Korea – is that a regime that can’t be trusted with nuclear weapons also can’t be trusted to honor the agreements it signs promising to eliminate them.  Iran’s missile program is the clearest example to date of how the nuclear deal has enhanced the country’s military leverage. There will be others.”

Richard Weitz / Defense One

“As potential missile threats surge, why is our nation’s missile defense budget not growing accordingly?

“In recent days, Iran has test-fired several missiles of ranges up to 1,250 miles, some inscribed with the words ‘Israel should be wiped off the Earth.’  Meanwhile, North Korean leaders have bragged that they had developed a key component of a nuclear warhead – a claim that Western experts say just might be true this time.

“That’s only the recent news; earlier this year saw North Korea test another nuclear weapon plus a long-range rocket that could one day lead to an ICBM capable of reaching the United States.  Furthermore, Iran’s plans to continue developing missiles that can reach Israel, Europe, and perhaps eventually the United States scuttle hopes that the recent nuclear deal might have reduced this threat.  And evidence persists that Iran and North Korea are sharing missile-technology insights with each other and, perhaps, spreading them to other states and non-state actors....

“(But) last month, the Obama administration unveiled its 2017 request for the Missile Defense Agency: about $7.5 billion, down from $8.1 billion the previous year. This is too little, and it risks being too little, too late....

“Whatever the dubious merits of the sequestration mechanism in the Budget Control Act of 2011, the world has changed tremendously during the last few years, and not for the better.  Boosting BMD (ballistic missile defense) is a prudent, cost-effective response.”

Finally, Matthew Bodner / Moscow Times:

“After decades of isolation from the international arms market, Iran is gearing up for a military shopping spree.  Lagging behind U.S.-equipped regional rivals, it has turned to Russia for assistance.

“On Feb. 15, Iranian Defense Minister Hossein Dehghan landed in Moscow for a two-day visit. According to media reports, Tehran came with an $8 billion shopping list that included the high-end Su-30 warplane, Yak-30 training aircraft, military helicopters...new surface ships, and even new diesel-electric submarines....

“Taken as a whole, a multibillion-dollar Russian-Iranian arms deal would decisively change the balance of power in the Middle East.  But the deal still requires agreement by the UN Security Council, where the United States has the right to torpedo the deal with its veto power.”

Israel: An American tourist was stabbed to death by a Palestinian in Jaffa, near Tel Aviv, about a mile from where Vice President Biden was as he paid a visit.  It was one of three attacks carried out by Palestinians on Tuesday.  A survey released earlier showed almost half of all Jewish Israelis support expelling Arab citizens of Israel.

Meanwhile, Prime Minister Benjamin Netanyahu faces a political crisis that could bring down his government as his ultra-Orthodox coalition partners informed him that they will quit the government if it goes ahead and enacts measures that would be interpreted as official state recognition of Reform and Conservative Judaism.  It’s complicated.

Tunisia: At least 51 were killed in heavy clashes between Tunisian security forces and Libya-based, ISIS-affiliated jihadists on Monday near the border between the two countries; a worrisome development as it shows the continuing spread of ISIS across North Africa.

Tunisia has been a fertile ground for recruitment as it struggles with its economy, post-Arab Spring.

Speaking of Libya, Defense Secretary Ashton Carter outlined a plan to combat ISIS in Libya with an air campaign, which would then allow Western-backed Libyan militias to battle IS fighters on the ground.  But this seems a ways off, as noted by the New York Times.

That said, reportedly British, American, French and perhaps Italian Special Ops forces have been in Libya for months conducting reconnaissance and gathering intelligence.

Turkey: In a dangerous sign, Turkish police raided the offices of Zaman, the country’s biggest newspaper, hours after a court ruling placed it under state control.

Zaman is closely linked to the Hizmet movement of influential U.S.-based cleric Fethullah Gulen, a one-time ally of President Erdogan.

Turkey says Hizmet is a “terrorist” group aiming to overthrow Erdogan’s government.

But this is the latest government move against journalists.

After the raid, hundreds of supporters gathered outside the offices to protest the takeover.

In a defiant last edition last Saturday, the paper said Turkey’s press had experienced “one of the darkest days in its history.”

In its first edition after the takeover, the paper adopted a more pro-government line.

Somalia: American warplanes struck a training camp belonging to Islamist group al-Shabab in Somalia, supposedly killing 150 fighters according to U.S. officials, though some connected to the Pentagon say the attack may not have been this spectacular.  Somalia isn’t the easiest place from which to get the truth.

What does seem clear is that there was a concentration of fighters for a ceremony and a Pentagon official said, “They were standing outdoors in formation.”  [Helene Cooper / New York Times]

North Korea: North Korea threatened “special” military steps against South Korea hours after firing short-range missiles into the sea on Thursday.  Pyongyang viewed all economic cooperation deals with the South null and said it would take “political, military and economic” steps to hurt President Park Geun Hye.  The Korean Central News Agency said in a statement that the country’s troops were ready for a “preemptive strike,” and then on Friday, Kim Jong-un said he had ordered further nuclear tests; Kim on Wednesday having threatened retaliation with nuclear missiles if his country was attacked during U.S. / South Korean war games.

Both Washington and Seoul maintain North Korea has not miniaturized nuclear bombs to fit on a ballistic missile warhead as yet.

Separately, Hong Kong turned away a North Korean freighter seeking to dock in the city, following the newly-imposed UN sanctions.  South Korea-based Yonhap News agency said the cargo vessel was arriving “to get fuel and supplies for its crew” when it was turned away.

China: A top mainland Taiwan affairs adviser warned on Wednesday that official exchanges between Beijing and Taipei may be halted if the administration of president-elect Tsai Ing-wen hesitates to recognize the 1992 consensus.

Li Yihu, head of Peking University’s Taiwan Studies Institute, said if Tsai failed to recognize ‘one China’ in his inauguration speech, all official and semi-official contact could be suspended.

Warning against Taiwan independence, last weekend, Chinese President Xi Jinping said Beijing’s policy on Taiwan would remain clear and consistent irrespective of the “change in Taiwan’s political situation.”

The 1992 consensus reached between the two in 1992 notes there is only “one China” but each side has its own interpretation of what that China stands for.

Li said Beijing will allow Tsai to use her own wording to define the “consensus”: but she must stick to the one-China principle.  [South China Morning Post]

Meanwhile, China’s military budget will grow between 7 and 8 percent this year, the slowest increase in six years, as announced by the National People’s Congress.  But this apparently doesn’t cover outlays for long-term military modernization and research.

In his annual press conference as part of the NPC, Foreign Minister Wang Yi said, “China will not allow anyone to cause chaos in the South China Sea.”

He shrugged off claims Beijing was militarizing the region.

“China cannot be accused of militarization.  This label suits other countries better,” he said.  [SCMP]

Russia: A former aide and minister under Russian President Vladimir Putin who was found dead in his hotel room in Washington last year, was killed by blunt force injuries to the head, according to the chief medical examiner’s office in the U.S. capital said Thursday.

Mikhail Lesin, who advised Putin on media policies, ran one of Russia’s biggest media operations, Gazprom Media, until December 2014.  He was also a founder of the Russia Today news channel, now known as RT.

At the time of his death in November 2015, Russian state news service RIA Novosti reported that Lesin died of a heart attack.

But the Washington medical examiner said that in addition to the blows to the head, Lesin suffered blunt-force injuries to his neck, torso, arms and legs.

A spokesman for the police said, “There is an active, ongoing investigation.”

Slovakia: While the leftist ruling party won a parliamentary election last weekend, after campaigning on an anti-migrant ticket, it will need coalition partners.

And in a surprise, a neo-Nazi party, Our Slovakia, gained seats for the first time in winning 8 percent of the vote.

Prime Minister Robert Fico has been critical of Western sanctions against Russia and is known for his strong anti-Muslim rhetoric.

Brazil: Former President Luiz Lula da Silva was formally charged in a money-laundering investigation led by Sao Paulo state prosecutors.  While no specifics were given, investigators have suspected Lula’s family owned undeclared real estate as part of hiding assets.

Current President Dilma Rousseff said she is not resigning.

Random Musings

Republican primary/caucus results 3/5, 3/8

Kansas: Ted Cruz 48%, Donald Trump 23%, Marco Rubio 17%
Kentucky: Trump 36, Cruz 32, Rubio 16
Louisiana: Trump 41, Cruz 38, Rubio 11
Maine: Cruz 46, Trump 33, John Kasich 12

Hawaii: Trump 42, Cruz 33
Idaho: Cruz 45, Trump 28
Michigan: Trump 37, Cruz 25
Mississippi: Trump 47, Cruz 36

Delegate count [AP]

Trump 458
Cruz 359
Rubio 151
Kasich 54

1,237 needed for nomination.

Tuesday night, Trump said in his rally and news conference, “There’s only one person who did well tonight.  Donald Trump.”

Trump touted himself as  a party leader and team player, one who would unite Republicans in their attempt to retain the House and Senate.

Cruz’s win in Idaho, though, allows him to say he remains the party’s alternative.

So it’s now all about the next Super Tuesday, March 15, and specifically Florida and Ohio; the last stands of Marco Rubio and John Kasich.

Susan Page / USA TODAY

“He is braced for battle: Donald Trump’s delegate lead was widened by easy victories in the Michigan and Mississippi primaries Tuesday – stoking a furious campaign by the GOP establishment to prevent him from arriving at the Republican National Convention with the nomination clinched.  His opponents hope a rare floor fight could award the nomination to, well, just about anybody else.

“She had been poised for the prize: Hillary Clinton hoped wins in Michigan and Mississippi would make her all but certain to claim the Democratic presidential nomination she lost to Barack Obama eight years ago.  But Vermont Sen. Bernie Sanders narrowly won Michigan in an upset that ensures a longer campaign....

“As the primary season heads toward its final phase, the two front-runners seem to be living in alternate political realities.

“The Democratic Party is close to coming to terms, although Sanders’ first-place finish in Michigan could signal unexpected strength in the Ohio and Wisconsin primaries just ahead.

“The Republican Party is on the verge of going to war even as Trump is tightening his hold on the nomination.”

In a Monmouth University Poll of Florida primary voters, Trump leads Rubio 38-30.  Earlier polling had Trump up 20%. A new Quinnipiac survey, however, has Trump leading Rubio 45-22.  A CNN/ORC poll has Trump leading Rubio 40-24.  A Washington Post-Univision poll has it 38-31.

In Ohio it’s Trump over Kasich 41-35 in the CNN/ORC poll, while Quinnipiac has it 38-32 Trump.

Gideon Rachman / Financial Times

“He has been called a phony, a fraud and a threat to democracy – and that is just by members of his own party.  Other critics have compared Donald Trump to Hitler and Mussolini.  I have shared in the widespread horror at Mr. Trump’s rise but at the same time, a small voice in the back of my head has sometimes asked: ‘Is he really that bad?  Might all this hysteria be a bit overdone?’

“The death of Nancy Reagan over the weekend served as a reminder of the horror and condemnation that once greeted the rise of her husband, Ronald Reagan.  Like Mr. Trump, Reagan was labelled a fascist, accused of race baiting and derided as a moron. As a student when Reagan took office, I remember the widespread predictions that he would provoke a world war. And yet Reagan is now securely in the pantheon of ‘great presidents.’  Might Mr. Trump make the same journey from odium to acceptance?

“It is certainly possible to construct a case in Mr. Trump’s defense.  If you move beyond the vulgarity of his style and examine his proposed policies, it is clear that on many domestic and foreign policy issues, he is more moderate than several of his ‘establishment’ rivals for the Republican nomination.  Mr. Trump has argued for closing tax loopholes for high finance and has said the state should guarantee healthcare coverage for all Americans.  He has also defended Planned Parenthood, a family planning group regularly savaged by the evangelical right.

“When it comes to foreign policy, Mr. Trump’s rhetoric is aggressive and nationalistic but his positions on specific issues suggest an Obama-like caution about U.S. military intervention and democracy promotion overseas.  Mr. Trump’s rivals are running attack ads against him for having the temerity to suggest, correctly, that it might not be a good idea to scrap the Iran nuclear deal.  Also, in the last television debate, it was not Mr. Trump, but the ‘mainstream’ Republicans, John Kasich and Marco Rubio, who advocated the reckless option of sending U.S. troops into Libya....

“A large part of the horror at the Trump phenomenon is that he is appealing to ‘nasty’ instincts among the American electorate.  It is, however, the job of politicians to identify the concerns of voters, and to frame a response.  There is a finer line than is commonly acknowledged between populism (which all ‘right-thinking’ people abhor) and democracy (which we all approve of).  Mr. Trump has certainly revealed an acute and unorthodox political intelligence that has repeatedly left his rivals and the media flat-footed....

“Finally, Mr. Trump’s approach to the world goes well beyond an appropriate caution about American intervention overseas.  He has also embraced trade protectionism and is highly skeptical about America’s alliance commitments overseas.  Those policies, if energetically pursued, would represent a full-scale retreat from U.S. global leadership – which would probably make the world a much more dangerous place.

“Of course, one of the fascinations of the Trump phenomenon is that it is very hard to know how much of what he says is for real and how much is posturing for the voters and the cameras.  Mr. Trump’s record as a businessman and some of his writings suggests that he is, above all, a pragmatic dealmaker who likes to make radical demands as an opening position, before finding a compromise.

“It is certainly possible that a President Trump would surprise his critics and govern responsibly. I sincerely hope that I never get to find out.”

Maureen Dowd / New York Times

“Watching (Donald Trump) morph into a pol in real time and wriggle away from the junior-varsity GOP chuckleheads trying to tackle him is hypnotic. He’s like the blond alien in the 1995 movie ‘Species,’ who mutates from ova to adult in months, regenerating and reconfiguring at warp speed to escape the establishment, kill everyone in sight and eliminate the human race.

“The other thing I know is that Trump really wants to be president.  It isn’t a joke any more....

“The most enjoyable thing about the Trump phenomenon has been watching him make monkeys out of a lot of people who had it coming.

“Marco Rubio, a frothy focus-grouped concoction whose main qualifications to be president consist of a nice smile and an easy wit, has been mocking Trump as a con man.

“Real estate developers are con men by nature, trying to get what they want at the lowest price and sell it at the highest price, overpromising how great it’s going to be....

“It’s delicious watching the neocon men who tricked the country and gulled the naïve W. into the Iraq invasion go ballistic trying to stop the Gotham con man.

“Bill Kristol of The Weekly Standard wrote an outraged column about why there wasn’t more outrage at Trump, who correctly pointed out that Americans were deceived into a catastrophic war.

“Kristol, the midwife to three debacles – Dan Quayle, Iraq and Sarah Palin – solicited suggestions for the name of the new party that Republicans will have to start if Trump secures the nomination.  How about ‘Losers’?

“Eliot Cohen, a former W. State Department official who pushed to ‘liberate’ Iraq, said Trump would be ‘an unmitigated disaster for American foreign policy.’ And Robert Kagan, who backed the Iraq war, said ‘the only choice will be to vote for Hillary Clinton.’  Max Boot concurred.

“It’s amazing, having been tainted by the worst foreign policy disaster in American history, that the Republican national security intelligentsia would unite against a Trump presidency in an open letter, charging that he would ‘make America less safe’ and ‘diminish our standing in the world.’  Sort of like the Iraq invasion?....

“Like Bill Clinton, Trump talks and talks to crowds. They feed his narcissism, and in turn, he creates an intimacy even in an arena that leaves both sides awash in pleasure. It’s easy to believe him when he says that, unlike President Obama, he would enjoy endlessly negotiating with obstructionists and those on the other side of the aisle.

“That’s the wicked fun part. But then there’s the simply wicked part.

“Trump wants to be seen as Ronald Reagan but often he’s more like Pat Buchanan, playing to the crowd’s prejudices just to hear the bloodthirsty roar, evoking memories of Molly Ivins’ observation about Buchanan’s 1992 culture wars speech, that it was translated from the original German.

“Trump, who was slow to disavow David Duke and the Klan, stokes the gladiatorial fever, leading to minorities being roughed up and the press being bullied. His mocking of a Times reporter with a disability was grotesque.

“He has a tenuous relationship with the truth and an inch-deep understanding of policy....

“He has a nasty gift for dragging everyone down to his own vulgar level.  Presidential campaigns should not be about belittling people’s appearances or bragging about your own appendages. Whatever his flaws, President Obama has reinforced our desire for class in presidents....

“Trump sees his egregious positions on immigration, torture and terrorism revenge as opening bids.  After Super Tuesday, he told reporters that while they might be surprised, he would be a ‘unifier, once we get all of this finished.’

“But he should take a lesson from Condi Rice. She went along with the Iraq invasion, thinking she could reposition W. on the side of diplomacy afterward.  But some positions are so extreme, there’s no coming back.  Your deal with the devil is sealed.”

As for Thursday’s debate, hey, it was civil.  The only real news was that Trump continued his attack on Islam when he had an opportunity to climb down.

“I’m not interested in being politically correct, I’m interested in being correct.”

For the record, CNN’s Anderson Cooper asked Trump in a one-on-one interview before the debate:

“Do you think that Islam is at war with the West?”

“I think Islam hates us,” Trump responded.  “There’s something there that’s a tremendous hatred, we have to get to the bottom of it,” he added.

“It’s very hard to define.  It’s very hard to separate. Because you don’t know who’s who,” referring to in his opinion the failure to create space between the religion of Islam and Islamic fundamentalists.

Not everyone was happy with the tone of Thursday’s debate.  As the New York Post’s John Podhoretz wrote:

“It’s fair to assume that the GOP candidates challenging Donald Trump Thursday night in Miami saw reams of polling and focus-group data suggesting that the direct confrontations Marco Rubio and Ted Cruz had staged against him in the last two debates would be disastrous for them.

“And so Thursday night they didn’t go in for the kill; indeed, they didn’t go in for so much as a tickle.

“It was, perhaps, an unfortunate moment for peace to break out for those of us who view a Trump nomination with dread.”

Republican National Committee chairman Reince Priebus told the audience prior to the debate, “This party is going to support the nominee, whoever that is, 100 percent.”

Friday morning, Dr. Ben Carson endorsed Trump.  I was struck by how much Trump seemingly plans to involve Carson in the campaign.

One more, the New York Times on Friday released a report on Trump University, showing how students were pressured to give positive reviews.

Trump has fended off criticism and claims of fraud by saying the overwhelming number of reviews from participants was positive – a 98 percent level of satisfaction.

But students and their lawyers claim they were instructed on how to fill out the forms to obtain their graduation certificates, with one student saying, “It’s absolutely a con.  The role of the evaluations were a defense against any legal actions.”

I said a few weeks ago this issue was made for “60 Minutes” and now with the Times story I’m sure it’s in production.

But if it doesn’t come out Sunday, after Super Tuesday the point is moot.  It’s a primary issue, not a general election one, in my estimation.

Democrat primary/caucus results 3/5, 3/8

Kansas: Bernie Sanders 68%, Hillary Clinton 32%
Louisiana: Clinton 71, Sanders 23
Nebraska: Sanders 56, Clinton 44

Michigan: Sanders 50, Clinton 48
Mississippi: Clinton 83, Sanders 16

Delegate count [AP]

Clinton 1,223 [including superdelegates]
Sanders 574

2,383 needed for nomination.

The polling in Michigan was godawful, showing Sanders down 20 points just days before [For example, a WSJ/NBC News poll had it 57-40 Clinton.].  The key, it seems, was Sanders’ tough position on trade and Clinton’s support of deals that have led to job losses in the U.S., according to exit polling.  Sanders kicked butt among those who listed this as their chief concern.

Upcoming....

A Quinnipiac survey has Clinton leading Sanders in Ohio 52-43, while a CNN/ORC survey has it 63-33 Clinton.

In Florida, CNN/ORC has Clinton leading Sanders 61-34, while the Quinnipiac poll has it Clinton 63-32.

As for Wednesday’s debate....

Margaret Talev / Bloomberg News

“Hillary Clinton had a shot in Wednesday’s Democratic debate at retooling her message to white working-class voters a day after they largely rejected her in Michigan, and just in time for a fresh set of primaries March 15.

“But she found little traction to steer the conversation back to jobs and the economy under aggressive questioning from debate moderators.  And in that way, the event was a lost opportunity ahead of contests in states very much like Michigan, including Ohio and Missouri.

“Clinton spent much of the night on the defensive about her trustworthiness and use of private emails while serving as secretary of state.  At one point, she was pressed to say whether she would drop out if she was indicted over sending and receiving classified information in some emails. Exasperated, she said she wouldn’t even answer the question.”

Dan Balz / Washington Post

“Democrats got a taste Wednesday night of where their nominating contest between Hillary Clinton and Bernie Sanders could be heading – toward a grueling and increasingly contentious battle that could continue until the primaries end in June.”

Earlier, Balz wrote:

“After a year of campaigning, Clinton still seems not to have found a comfortable voice or a message that comes from her heart, unlike eight years ago as she battled to overtake Obama. This came to the fore in Michigan, a trade-sensitive state, where she struggled to demonstrate that she is as resistant to trade agreements as her opponent.

“Her attack on Sanders in last Sunday’s debate as an opponent of the auto bailout was a stretch at best, a deliberate distortion at worst.  On Tuesday she doubled down on the issue, seeking to show that Sanders had opposed a bill early in 2009 that included funds to save the industry.

“But almost immediately after she did, David Axelrod, who was senior adviser to Obama in the White House, tweeted this: ‘She did it again and I’ll say it again.  It’s misleading to imply that TARP II was an auto bailout bill.’

The Post’s Glenn Kessler and Michelle Ye Hee Lee, fact-checking the Democratic debate on Wednesday.

“It was not prohibited. It was not in any way disallowed. And as I have said and as now has come out, my predecessors did the same thing and many other people in the government.”

--Hillary Clinton

“This is language that had previously earned Clinton Three Pinocchios. Clinton is relying on the fact that the legal requirement to immediately preserve emails from nongovernment email accounts was not made mandatory until nearly two years after she stepped down as secretary of state.

“But that does not mean that when Clinton was secretary of state, there were not already in place State Department rules on how to handle emails and whether to use a personal email account.  While Clinton says that ‘my predecessors did the same thing,’ none had set up an exclusive and private email server for all of their departmental communications.  (In fact, only Colin L. Powell has ever said he sent emails from a personal account, so Clinton’s use of plural is misleading.)....

“In 2009, just eight months after Clinton became secretary of state, the U.S. Code of federal regulations on handling electronic records was updated: ‘Agencies that allow employees to send and receive official electronic mail messages using a system not operated by the agency must ensure that Federal records sent or received on such systems are preserved in the appropriate agency record-keeping system.’  The responsibility for making and preserving the records is assigned to ‘the head of each federal agency.’

“On top of that, when Clinton was secretary, a cable went out under her signature warning employees to ‘avoid conducting official Department business from your personal email accounts.’

“The issue thus becomes whether Clinton cooperated in the spirit of the laws and rules in place at the time.  In reality, Clinton’s decision to use a private email system for official business was highly unusual and flouted State Department procedures, even if not expressly prohibited by law at the time.  Moreover, Clinton appears to have not complied with the requirement to turn over her business-related emails before she left government service.”

--Corey Bennett and Julian Hattem / The Hill

“The aggressive posture of the FBI under Director James Comey is becoming a political problem for the White House.

“The FBI’s demand that Apple help unlock an iPhone used by one of the San Bernardino killers has outraged Silicon Valley, a significant source of political support for President Obama and Democrats.

“Comey, meanwhile, has stirred tensions by linking rising violent crime rates to the Black Lives Matter movement’s focus on police violence and by warning about ‘gaps’ in the screening process for Syrian refugees.

“Then there’s the biggest issue of all: the FBI’s investigation into the private email server used by Hillary Clinton, Obama’s former secretary of State and the leading contender to win the Democratic presidential nomination.

“A decision by the FBI to charge Clinton or her top aides for mishandling classified information would be a shock to the political system....

“ ‘Part of his role is to not necessarily be in lock step with the White House,’ said Mitch Silber, a former intelligence official with the New York City Police Department and current senior managing director at FTI Consulting.

“ ‘He takes very seriously the fact that he works for the executive branch,’ added Leo Taddeo, a former agent in the FBI’s cyber division.  ‘But he also understands the importance of maintaining his independence as a law enforcement agency that needs to give not just the appearance of independence but the reality of it.’

“The split over Clinton’s email server is the most politically charged issue facing the FBI, with nothing less than the race for the White House potentially at stake.

“Obama has publicly defended Clinton, saying that while she ‘made a mistake’ with her email setup, it was ‘not a situation in which America’s national security was endangered.’

“But the FBI director has bristled at that statement, saying the president would not have any knowledge of the investigation.  Comey, meanwhile, told lawmakers last week that he is ‘very close, personally,’ to the probe.

“Obama’s comments reflected a pattern, several former agents said, of the president making improper comments about FBI investigations.”

Stay tuned.

--Nationally....

An NBC News/Wall Street Journal poll revealed that two-thirds of registered voters say they couldn’t see themselves supporting Trump, while 56% say they couldn’t cast a ballot for Clinton.

Majorities say they couldn’t support five of the six remaining contenders – John Kasich being the exception.

This survey has Trump with just a 30-27 lead over Cruz, Kasich at 22% and Rubio 20% among voters who said they’d vote in the primaries.  [The NBC/WSJ polls have been abysmal, I hasten to add.]

The survey has Clinton leading Sanders 53-44, among voters who said they’d participate in the Democratic primary.

In a new Washington Post-ABC News survey of registered Republicans and Republican-leaning independents, Trump garners 34% to 25% for Cruz, 18% for Rubio and 13% for Kasich.

Among Democrats and Democratic-leaning independents in this one, Clinton leads Sanders 49-42.

--Michael R. Bloomberg

“The Risk I Will Not Take”

“Americans today face a profound challenge to preserve our common values and national promise.

“Wage stagnation at home and our declining influence abroad have left Americans angry and frustrated. And yet Washington, D.C., offers nothing but gridlock and partisan finger-pointing.

“Worse, the current presidential candidates are offering scapegoats instead of solutions, and they are promising results that they can’t possibly deliver. Rather than explaining how they will break the fever of partisanship that is crippling Washington, they are doubling down on dysfunction.

“Over the course of American history, both parties have tended to nominate presidential candidates who stay close to and build from the center.  But that tradition may be breaking down.  Extremism is on the march, and unless we stop it, our problems at home and abroad will grow worse....

“But when I look at the data, it’s clear to me that if I entered the race, I could not win.  I believe I would win a number of diverse states – but not enough to win the 270 Electoral College votes necessary to win the presidency.

“In a three-way race, it’s unlikely any candidate would win a majority of electoral votes, and then the power to choose the president would be taken out of the hands of the American people and thrown to Congress....

“As the race stands now, with Republicans in charge of both Houses, there is a good chance that my candidacy could lead to the election of Donald Trump or Senator Ted Cruz. That is not a risk I can take in good conscience.

“I have known Mr. Trump casually for many years, and we have always been on friendly terms.... but he has run the most divisive and demagogic presidential campaign I can remember, preying on people’s prejudices and fears.  Abraham Lincoln, the father of the Republican Party, appealed to our ‘better angels.’  Trump appeals to our worst impulses....

“Senator Cruz’s pandering on immigration may lack Trump’s rhetorical excess, but it is no less extreme.  His refusal to oppose banning foreigners based on their religion may be less bombastic than Trump’s position, but it is no less divisive.

“We cannot ‘make America great again’ by turning our backs on the values that made us the world’s greatest nation in the first place.  I love our country too much to play role in electing a candidate who would weaken our unity and darken our future – and so I will not enter the race for president of the United States....

“I am not ready to endorse any candidate, but I will continue urging all voters to reject divisive appeals and demanding that candidates offer intelligent, specific and realistic ideas for bridging divides, solving problems, and giving us the honest and capable government we deserve.”

Bottom line, Bloomberg probably would have run if he thought it was Trump and Sanders, but Trump and Clinton was a no go.

It also needs to be said Michael Bloomberg just isn’t that popular, even though he did a very solid job in his years in New York, and that’s around here.  Nationally, people just don’t know him.

--George F. Will / Washington Post

“They were just four words, but they denoted something that led to a wonderful swerve in world history.  They were words Ronald Reagan repeatedly used when referring to something that happened long before he spoke his most famous four words: ‘Tear down this wall.’  The other four words described the most important event in his eventful life, an event without which Reagan probably would never have been in a position to bring down the Berlin Wall:

“ ‘Then along came Nancy.’ If she had not come along, he would not have come to the place he now occupies in history and in the hearts of his countrymen.

“When filling out forms that ask if one is married, many people perfunctorily check that box.  The Reagans should have put not a check mark but an exclamation point: They were the most married couple imaginable. Ronald was a reproach to every husband who does not write love notes to his wife as they sit together in evening repose.  It was a remarkable woman who could elicit such private devotion from a public man with presidential preoccupations.

“Reagan’s strength was reflected in his preternatural cheerfulness, which flowed from his marriage.  Politics requires the patience, endurance and serenity that a happy marriage can confer.  In a democracy, politics is a team sport.  Parties are teams; congressional caucuses are teams; campaigns are teams.  But often the most important team is the smallest, a harmonious marriage. The presidency has had three especially history-shaping partnerships: Abigail and John Adams, Dolley and James Madison, Nancy and Ronald Reagan....

“Ronald Reagan was a friendly who used friendliness as a buffer, keeping the world at a distance from his sphere of privacy. He had one true friend, and he married her.  She understood his amiable propensity for thinking the best of everybody, a mistake she did not make.

“Her cool public persona and occasionally icy decisiveness sometimes obscured her warmth, her capacity for fun and her sly wit. She revealed the latter, for example, when describing a problem of Hollywood manners.

“What should you do, she asked, when you are invited to the home of an actor or director for a private screening of his newest movie – and the movie is dreadful? What do you say to your anxious host when he asks your opinion of his handiwork? Nancy impishly explained: You fix your host with an earnest gaze and exclaim, ‘You’ve done it again!’  Her husband was not the only master politician living on the second floor of the White House....

“(Reagan) spoke often of America as a shining city on a hill, words first used long ago to describe the American aspiration at a time when the nascent nation was a few hardy people on the continent’s rocky Atlantic shore.  The hill to which Nancy now goes overlooks the sun-dappled Pacific shore of a nation grown great not just in size but also in moral stature because of its fidelity to principles that the Reagans defended together.

“For generations to come, Americans will continue to climb that hill in Simi Valley to renew their devotion to the nation.  And to one another, moved by the luminous example of two people who changed the world as, and because, they moved through it as one.”

[As an aside, I made my pilgrimage to the Reagan Library in 2011.  I wrote at the time it was a must trip for every family in America.  Please take your kids.]

--When I go over to Dr. Bortrum’s place for happy hour, invariably the weather comes up for discussion and the two of us agree that the intensity of the rain and snowstorms that hit our area has certainly increased from the levels we remember from, say, 20-30 years ago.

So the good Doctor will be pleased to learn that our thoughts have been confirmed by a study published in the journal Nature Climate Change.  As reported by Bloomberg News, while the overall rain and snowfall average is increasing only moderately, “the wettest days every year have increased their intensity by 1 percent to 2 percent per decade.”

“The basics of the earth’s water cycle are pretty straightforward.  When it’s warmer, water not only evaporates faster, but the air can hold more moisture. So when storms come, there’s more water vapor to tap, and down it comes.”

Ask Louisianans today if they agree with the findings.  Thoughts and prayers to them.

--NOAA announced the Lower 48 states had its warmest winter in 121 years of record-keeping. Average temperatures between December and February were nearly five degrees above the 20th-century average.  Every state but two were warmer than normal and all six New England states set winter records.  Not what the ski industry wanted to see.

Hack, we had two 80 degree days here on Wednesday and Thursday, shattering records by 8-12 degrees across the region, which is totally unheard of.

Of course last winter was one of the coldest on record for us.

---

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

God bless America.

---

Gold $1249
Oil $38.50

Returns for the week 3/7-3/11

Dow Jones  +1.2%  [17213]
S&P 500  +1.1%  [2022]
S&P MidCap  +0.6%
Russell 2000  +0.5%
Nasdaq  +0.7%  [4748]

Returns for the period 1/1/16-3/11/16

Dow Jones  -1.2%
S&P 500  -1.1%
S&P MidCap +0.6%
Russell 2000  -4.3%
Nasdaq  -5.2%

Bulls  39.4
Bears  35.4  [Source: Investors Intelligence]

Have a good week.  I appreciate your support.

Brian Trumbore