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01/01/2016

For the week 12/28-1/1

 [Posted Friday, 2:00 PM ET]

Note: If you haven’t already done so, please click on the gofundme link above (and to the left), or send a check to PO Box 990, New Providence, NJ 07974

*Special thanks this week to Ken and Sue S., and Jeff B.

Edition 873

Washington and Wall Street

Well that was a lousy year.  For the S&P 500 the first negative one since 2011 (which was down by a hair, but up on a total return basis...ditto 2015), with the global picture not much better, especially on a geopolitical basis.

2015 Returns

Dow Jones -2.2%
S&P 500 -0.7%
Nasdaq +5.7

Frankfurt +9.6% (local currency)
London -4.9%
Paris +8.5%

Tokyo +9.1%
Shanghai +9.4%

And 2016 augurs more of the same.  The key to global growth and economic sentiment these days remains China and there is little cause for optimism on that front as its economy will continue to slow, impacting markets around the world, especially when it comes to those heavily reliant on the commodity sector.

International Monetary Fund Managing Director Christine Lagarde said this week that the prospect of rising interest rates in the United States and China’s slowdown will contribute to a higher risk of economic vulnerability worldwide.

Additionally, growth in global trade has slowed considerably and a decline in commodities prices is posing problems, with financial risks rising, especially in emerging markets, she added.

“All of that means global growth will be disappointing and uneven in 2016,” Lagarde said, noting that low productivity, aging populations and the still lingering effects of the financial crisis were putting the brakes on growth.

Here at home there was a little economic news this week.  The latest S&P/Case-Shiller 20-city index of property values climbed 5.5% in October from a year earlier.  All 20 cities in the index showed a year-over-year increase, led by 10.9% gains in San Francisco, Denver and Portland, Oregon.  Chicago had the smallest increase at 1.3%.

David Blitzer, chairman of the S&P index committee, said, “Generally good economic conditions continue to support gains in home prices.  Among the positive factors are consumers’ expectations of low inflation and further economic growth as well as recent increases in residential construction.”

Meanwhile, the December Chicago Purchasing Managers Index came in at a putrid 42.9 (50 being the dividing line between growth and contraction), the 7th negative reading out of 12 in 2015 and the worst since July 2009.  The expectation was for a figure of 50.3.  Not good, sports fans.

The Atlanta Fed’s GDPNow indicator is forecasting fourth quarter growth in the U.S. of just 1.3%, down from an initial 2.5% forecast.

As for the all-important holiday shopping season, early indications are that it may have been as expected, if you use the National Retail Federation’s forecast of 3.7% growth over 2014 as your benchmark.

MasterCard Spending Pulse said between Black Friday and Christmas Eve, spending was up 7.9% vs. last year (2014 was up 5.5% for the same period), with e-commerce up 20% over a year ago (comprising 10% of total sales).  These figures don’t include Dec. 26, which a report from Nomura Securities labeled “one of the busiest shopping days of the year.”

IHS predicts U.S. e-commerce sales will have increased 11.7% in November and December (the official holiday shopping period), but with overall retail sales up 3.4%, or less than the NRF forecast.

Europe and Asia

No big economic reports for the holiday week.

In Spain, post-titanic election, Prime Minister Mariano Rajoy is in no hurry to form a needed coalition if he is to stay in power.  For now he said in a news conference that he will simply wait for Socialist party leader Pedro Sanchez to agree to an alliance, even though Sanchez has been adamant that he will not join Rajoy and his conservative Popular Party.

Rajoy, recall, lost his majority but still finished first, while the Socialists were a distant second, followed by anti-austerity Podemos and the centrist upstart Ciudadanos.  Ciudadanos said it wouldn’t block Rajoy’s re-election, but he needs the Socialists to attain a true majority.

Spain’s business community wants a three-way alliance with the Socialists and Ciudadanos.

As for David Cameron and the referendum on the issue of remaining in the European Union, while he has said he would hold by the end of 2017, if he and other EU leaders reach a deal on the reforms he has requested in February, a vote could come as early as June.

Cameron has to consider the impact of French and German national elections in 2017 that could affect the kinds of concessions their leaders are willing to grant the U.K., so yet another reason to hold the referendum this year.

On the migration front, German Chancellor Angela Merkel continued to tell her people that the country will benefit from the record influx of migrants.

“There is no doubt, the influx of so many people will demand a great deal from us.  It will cost time, strength and money – particularly with regards to the important task of integrating those who will stay here permanently,” she said in a New Year address televised Thursday evening.

Merkel said anyone who wants to live in Germany must respect German values, traditions, law and language as preconditions for good cohabitation.

“I am convinced: If we get it right, the current big tasks arising from the influx and integration of so many people are an opportunity for the future because we have a great civic engagement and a comprehensive concept of political measures,” she said.  “A country has always benefited from a successful immigration – economically as well as socially.”

Merkel also urged Germans not to give in to attempts to divide the society into longtime inhabitants and new arrivals.

“It’s important not to follow those who claim – with coldheartedness or even with hatred in their hearts – that only they know what it is to be German and (not to follow) those who want to exclude others.

“It’s important that we remain in future a country where we are self-confident and free, compassionate and open-minded.” [Andrea Thomas / Wall Street Journal]

Merkel is going to have a bad year in 2016 and may not make it into 2017.

She’s also increasingly a lone voice in the wilderness as Europe turns on its migrants.  Even Sweden, which welcomed more refugees per capita than any other country, now feels overwhelmed and the center-left government is deploying extraordinary border controls and slashing benefits in a signal to those seeking to come there in 2016: Don’t try it.

The thing is, if Sweden won’t take them in, it will set off a domino effect in which those countries down the trail will seal their borders for fear their neighbors will do the same.

In an interview with Barron’s, historian Niall Ferguson had the following take on Europe, writ large:

“Europe faces three extraordinary challenges. It wants to have a foreign policy to be able to influence the fate of Syria, but it can’t act independently of the U.S. because it has slashed its defense capability. Secondly, Europe can’t stop this huge wave of refugees.  The border is enormous, vastly larger than the Mexican border with the U.S., and much of it is a sea border.

“The biggest problem is the fifth column within Europe – people who aren’t loyal to their European states even though they are citizens, second- and third-generation.  Potentially, there are thousands of jihadists or sympathizers.

“Europe’s problems are unsolvable.  Anybody who thinks this great wave of immigration solves Europe’s demographic deficit hasn’t been to the suburbs of Paris.”

Sound familiar?

In Asia, there was a slew of economic data the past week out of Japan, with core inflation, which excludes fresh food, up 0.1% from a year ago in November, the first rise in five months but still far from the government’s 2% target.  Household spending fell 2.9% in November, the third consecutive month of decline.

Industrial production also slumped 1% in November from October; up 1.6% from last year.  Retail sales declined 2.5% from October.

Add it up and Prime Minister Shinzo Abe’s economic reform plan, “Abenomics,” just isn’t working, nor are his calls for industry to use their strong balance sheets and profits to hike wages. 

In China, industrial profits fell a sixth straight month in November, 1.4% from a year earlier, while on Friday, the official reading on the manufacturing sector contracted for a fifth straight month in December, with the PMI coming in at 49.7.  The services sector, the lone bright spot in the economy, did have a reading of 54.4, up from November’s 53.6. 

This last figure is particularly important as the service sector’s share of China’s economic output is now up to 48.2 percent (the latest calculation being for 2014).

China will be releasing fourth quarter and full-year 2015 GDP on Jan. 19.

As for the Big Picture and the global outlook in 2016....

Gideon Rachman / Financial Times

“In 2015, a sense of unease and foreboding seemed to settle on all the world’s major power centers.  From Beijing to Washington, Berlin to Brasilia, Moscow to Tokyo – governments, media and citizens were jumpy and embattled.

“This kind of globalized anxiety is unusual. For the past 30 years and more, there has been at least one world power that was bullishly optimistic. In the late 1980s the Japanese were still enjoying a decades-long boom – and confidently buying up assets all over the world.  In the 1990s America basked in victory in the cold war and a long economic expansion.  In the early 2000s the EU was in a buoyant mood, launching a single currency and nearly doubling its membership.  And for most of the past decade, the growing political and economic power of China has inspired respect all over the world.

“Yet at the moment all the big players seem uncertain – even fearful.  The only partial exception that I came across this year was India, where the business and political elite still seemed buoyed by the reformist zeal of prime minister Narendra Modi.

“By contrast, in Japan, faith is fading that the radical reforms, known as Abenomics, can truly break the country’s cycle of debt and deflation.  Japanese anxiety is fed by continuing tensions with China. However, my main impression from a visit to China, early in the year, is that this too is a country that feels much less stable than it did even a couple of years ago.  The era when the government effortlessly delivered growth of 8 percent or more a year is over.  Concerns about domestic financial stability are mounting, as the upheavals in the Shanghai stock exchange over the summer revealed.

“However, the main source of anxiety is political. President Xi Jinping’s leadership is more dynamic but also less predictable than that of his predecessors. Fear is spreading among officials and business people, who are scared of being caught up in an anti-corruption drive that has led to the arrest of more than 100,000 people.

“The slowing of the Chinese economy has had global ramifications....

“The mood in Europe is also bleak.  The year was framed by two bloody terrorist attacks in Paris.  The economic crisis that has bedeviled the continent for several years threatened to come to a head in July, as Greece teetered on the edge of expulsion from the eurozone.... Meanwhile, Britain is threatening to leave the EU and French voters are turning to the far-right in ever greater numbers.

“If you judge by the economic figures, the U.S. should be an exception to all this gloom.... And yet the public mood is sour.  The prospect that the Republicans, one of America’s two great political parties, might genuinely nominate Donald Trump, a boorish demagogue, as its candidate for the presidency, does not suggest that the U.S. is at ease with itself.... Beyond these local factors, are there common elements behind this global unease?  Clearly, the world economy has not fully recovered from the financial crisis. There is also a widespread fear that, after years of highly unorthodox monetary policy, another financial or economic crisis might be building....

“The global gloom makes the international political system feel like a patient that is still struggling to recover from a severe illness which began with the financial crisis of 2008.... The patient is vulnerable... Another severe shock, such as a major terrorist attack or a serious economic downturn, could spell real trouble.”

As to my own take, the issues for 2016 are numerous, but they start with China and its economy, as well as the increasing risks of a military clash over disputed territory in the South China Sea, President Xi Jinping’s ongoing crackdown on freedoms of all kinds, and China’s response to Taiwan’s upcoming presidential election.

Next would be the Middle East.  Is there any kind of broad ceasefire in Syria? Does it really matter anymore? [No.]  When will Iraq attempt to retake Mosul, and does ISIS make a stand or melt away beforehand?  What of Iran’s ongoing infiltration in the entire region, its increasing provocations towards the U.S., and the status of the Iranian nuclear deal and the ending of sanctions?  How will Congress react?

Does the refugee situation in Jordan explode?  What of the ticking time bomb in Lebanon?

How does Putin play his cards this year, both in Eastern Europe and the Middle East?

Can Israel avoid a third war with Hizbullah for at least another year, and will ISIS launch an attack inside Israel?

How does Europe handle its migrant crisis?  Does the far-right continue to make gains across the continent?  Does David Cameron hold his EU referendum in June?  Should the voters elect to leave the EU (‘Brexit’), it would convulse markets in a huge way.

Does North Korea lash out and surprise the world with an attack on South Korea?  Is Kim removed?

Here at home, does Donald Trump effectively sow-up the Republican nomination after Super Tuesday, or does this go to the end?  Does Hillary have a medical issue that convulses the Democratic Party?

How successful will Paul Ryan be?  Does Congress and the president finally act on corporate tax reform?

Does inflation become an issue thanks to surging wage growth later in the year?  How does the market handle the Fed perhaps being forced to move more aggressively on the rate front?

Does the U.S. get hit with a major cyberattack, from Wall Street to a key utility?

How many major terrorist attacks around the world do we see?  Will they be spaced out as before, or is there a sudden wave that takes down financial markets and economies around the world due to shattered confidence and fear?

And, finally, Nov. 8, 2016.  How surly is the American electorate as it goes to the polls?

It’s going to be a truly tumultuous year.  Fasten your seat belts and keep them on at all times. 

A Brief Look Back at 2015....

So how did I do with my predictions?  For starters, I wrote in last year’s review, “For 2015, I’m going with small gains of 2% on the S&P and Dow, up 5% for Nasdaq.”

I’m declaring victory.  This was a heck of a lot better call than 95%, or more, of the analysts out there.

For 2016, I’m going with minus 5% on the S&P and Dow, minus 2% for Nasdaq.

Among my other predictions for last year, I wrote:

“Vladimir Putin is not in a position to expand operations in Ukraine these days, nor to make a move on Moldova, Georgia, or one of the Baltic republics, but he will place nuclear weapons in Crimea as a way of riling up the West.

“Should oil stay below $70 a barrel (on Brent), Putin will be forced out of office by end of the year by a shadowy group led by Igor Sechin.  [I’ll say this until I’m finally right.]”

Well I’m still wrong on this last bit.

I said a year ago: “Mosul will be retaken from ISIS by a combination of Iraqi Army, Kurds and U.S. Special Ops forces that will target airstrikes with devastating success.  ISIS will regroup in its Syrian strongholds.”

Not quite, yet.

“Kim Jong-un’s agents will carry out a major assassination.”

Not quite.

“British Prime Minister David Cameron will eke out a win in May’s parliamentary elections.  He will then stick to his promise to hold a vote in 2017 on staying in the EU.”

Pretty good.

“The July deadline for the Iranian nuclear talks will come and go. President Obama desperately wants an agreement, but he knows he won’t be able to get it through Congress.  Ayatollah Khamenei will direct that future talks be scuttled.  Protests over the economic plight of the Iranian people will turn violent, with the Revolutionary Guard crushing them in the end.  Israel will be on edge even more than they normally are, but no military action until early 2016.”

Miss.

“Pope Francis will draw enormous crowds on his trip to the U.S. in September and it will be a nice shot in the arm for far more than just American Catholics.”

Not bad, but not exactly a tough call either, I’ll admit.

Due to time constraints, I’m holding off on broad 2016 predictions until next week, though I certainly told you above what the main issues will be.

Street Bytes

--No Santa Claus rally this year, boys and girls.  The Dow Jones dropped 0.7% on the week, securing a down year, -2.2%, while the S&P 500 and Nasdaq each lost 0.8%.

Netflix was the biggest gainer in the S&P for the year, up 134%, with Amazon next with a gain of 118%.  Walmart fell 29%.

[More next week after I pour through all the reports.]

--U.S. Treasury Yields

12/31/14

6-mo. 0.12%  2-yr. 0.66%  10-yr. 2.17%  30-yr. 2.75%

12/31/15

6-mo. 0.47%  2-yr. 1.05%  10-yr. 2.27%  30-yr. 3.02%

--The national average price of gas in 2015 was $2.40 per gallon, which was the second cheapest annual average of the past ten years.  Only 2009 was lower during that time.  The average price was $3.34 in 2014; $3.49 in 2013; $3.60 in 2012.  $2.35 in 2009.

--Saudi Arabia said it plans to gradually cut subsidies to the people as the slump in oil slams overall government revenue by a forecasted 16%.

The kingdom now expects the 2016 budget deficit to narrow to $87 billion from $98 billion, as it reduces spending by nearly 15% in a massive display of austerity.

It is the first budget under King Salman, who ascended to the throne in January, but even as it reduces spending to pare the deficit, the latter will still be about 16% of GDP.  Oil this year made up 73% of revenue.

Taken together, however, all the above signals that Riyadh does not intend to reduce production, which pressures the oil price further.  It also means the Saudis will continue to put pressure on rivals such as U.S. shale producers.

--The Russian ruble hit a new low this week as Russians faced the prospect of another year of recession in 2016, after the economy contracted an estimated 3.7% this year, amid falling oil prices and western sanctions.  Recently President Vladimir Putin said the “peak of the crisis” had passed.

Certainly Saudi Arabia’s economic program isn’t going to help oil prices as the Saudis continue to pump as much as they can to bring in revenue.  Russia’s economy minister, Alexei Ulyukayev, said Russia should prepare for oil prices to remain low “for years.”

Total retail sales – from sales of food to cars – fell a whopping 13.1 percent year-on-year in November in Russia.  According to a state-owned pollster, VTsIOM (sic), 39 percent of Russian households cannot afford to buy either sufficient food or clothing – up from 22 percent a year ago.

--Meanwhile, the price of U.S. crude oil rallied two weeks ago when the weekly inventory report revealed a large drawdown when an increase was expected.  But this week it was back to adding to inventories, up 2.6 million barrels to 487.4 million and thus no surprise the price of West Texas Intermediate dropped anew.

--FedEx attributed its failure to deliver some Christmas packages to volumes that “far exceeded all previous records” after earlier blaming bad weather for some of the delays.  In a statement Monday the company said “An unprecedented surge of last-minute e-commerce shipments” flooded their system.

But United Parcel Service Inc. reported completing all the deliveries it had promised ahead of Dec. 25.  The past two years it has been UPS that had serious problems of its own; 2013 when it became seriously congested, and 2014 when it way overcompensated and was hit with excess costs.

--Of every $1 Americans spent for items online this year, Amazon captured 51 cents, according to a recent estimate by analysts at Macquarie Research.

Of the expected $94 billion growth in all retail sales this year – both in stores and online – “Amazon took a staggering $22 billion, or almost a quarter, Ben Schachter, a retail analyst at Macquarie, calculated.”  [Hiroko Tabuchi / New York Times]

Additionally, Amazon’s share price more than doubled this year and it now has a market capitalization of about $316 billion vs. Walmart’s $196bn.

Amazon Web Services’ operating income was $521 million, up more than fivefold in a year, but without this growing division, the company probably doesn’t earn a net profit.

The retail business, though, is exhibiting steady growth of its own in its Prime membership program, which now covers an estimated 25 percent of all American households.  The company picked up three million new Prime members during the third week of December alone, Amazon announced the other day.

--Warren Buffett’s Berkshire Hathaway completed its worst year relative to the S&P 500 since 2009, with the shares down about 11%.

Berkshire was hurt big time in its railroad business that transports oil, coal and agricultural products, while its manufacturing arm sells products to the struggling oil industry.

So even though Berkshire doesn’t own any oil and gas companies, it was hit by the crash in commodities prices overall.

This is Buffett’s 50th year at the helm and it is the 11th negative one for Berkshire.

--David Einhorn’s Greenlight Capital hedge fund lost 20% in 2015, according to an email to investors that was obtained by Bloomberg; only the second losing year in Greenlight’s almost 20-year history.  We should see similar stories next week as the reports begin to roll in.

According to preliminary data compiled by Hedge Fund Research Inc., the average fund trailed the S&P 500 Index for a seventh straight year in 2015.  [Bloomberg]

--Hong Kong has been a mecca for Chinese seeking luxury items such as watches and handbags, but as mainland tourists have been staying away, chiefly because of Beijing’s crackdown on corruption and conspicuous consumption, Hong Kong is expecting its biggest decline in retail sales for 2015 since the SARS outbreak in 2003. [Probably about 3% for the year.]

As the Wall Street Journal reported, during the boom times “luxury goods sold in Hong Kong were up to 40% cheaper than in China.”

But now the number of Chinese tourists is down 15% (November compared with a year ago), the steepest decline all year.

So Hong Kong realizes they need to do more to diversity tourism.  But a second Disneyland theme park, as the Journal mentioned?  I’ve been to the one there.  A big ‘eh.’  [Pssst....though the bar at the Disney hotel on the property was quite nice.]

Separately, I’m looking forward to seeing Macau’s yearend numbers.  They won’t be good...at all.

--Hotels and restaurants in Paris are still suffering from the November attacks that killed 130 people, with bookings for New Year celebrations down 30-40 percent, a hotel federation said.

--DuPont shocked Delaware officials as the company announced it would cut 28% of its workforce in its home state early in January, part of its merger with Dow Chemical.  1,700 out of 6,100 employees in Delaware will be impacted.

--Embattled drugmaker Valeant Pharmaceuticals announced its CEO, Michael Pearson, is taking a medical leave of absence due to a severe case of pneumonia.  What was surprising is that Pearson had recently been on CNBC, but about five days later the 56-year-old was hospitalized.  A team of executives will run the show until Pearson returns.

Valeant’s strategy of using mail-order pharmacies, price increases and acquisitions for growth had been under fire and Pearson promised more transparency.

--The average price of a Manhattan co-op or condominium topped $1 million for the first time in the fourth quarter of 2015, further highlighting the unaffordability of homeownership in Gotham.

But the market is changing, with a lot of supply coming online and the number of foreign buyers dropping.

That said, the median price of a Manhattan apartment rose to nearly $1.1 million, an increase of 13.5% from Q4 of 2014, according to an analysis of data by the Wall Street Journal.

--From a piece by Jack Hough in Barron’s about the potential of YouTube: “Television...has been holding steady only with viewers age 50 and up, while the 25-to-34 cohort spent 8.6% less time watching it last quarter than a year earlier, according to Nielsen.  Over four years, that group’s viewing time is down nearly 24%.”

--Shares in Weight Watchers International Inc. surged almost 30% Tuesday and Wednesday after Oprah Winfrey debuted a campaign endorsing the company’s weight-loss program.  Back in October, Oprah announced a partnership whereby she will buy 10% of the stock and join the board.

Since she made her initial move, the stock is up more than threefold and the value of her stake, which would have been around $43 million before she joined, according to Crain’s New York Business, is now valued at almost $150 million.

--While Uber and Lyft are sucking up the venture capital dollars, $11.3bn between the two, Sidecar, one of the ride-sharing pioneers, decided to close its operations on New Year’s Eve.

The San Francisco-based company raised $35 million in its near-four year history, with backers like Richard Branson, but as Sidecar announced this week, they faced “a significant capital disadvantage” when it came to keeping up with its competitors.

It’s funny how all three ride-share companies introduced their services the same year, 2012. Sidecar then shifted its focus to the package delivery game, using the same drivers, but that, too, saw an explosion of well-financed competition, like with Postmates, which raised $155m this year, according to the Journal.  [Actually, the Journal story is riddled with financial errors, but what I stated is close enough.]

--Fox News dominated the competition in 2015, the 14th consecutive year Fox led in total viewers and in the 25-to-54-year-old demographic.  The network averages 1.8 million viewers in prime time, second among all cable channels to ESPN.

CNN has been growing, with a day average of 490,000 viewers, its best in six years.  MSNBC takes in an average of 352,000, but it’s been losing in the 25-to-54 demographic.

“The O’Reilly Factor” remains the No. 1 cable news program for a 14th year, with an average of 2.8 million viewers.  “The Kelly File” is second.  [John Koblin / New York Times]

--Speaking of ESPN, they sure have shaken up New Year’s Eve with the College Football Playoffs.  I’m posting before the official ratings come out and it will be interesting to see what they are, especially as the second game in particular was a bust unless you are an Alabama fan.  The network is out to alter New Year’s Eve traditions and rituals.

As the New York Times’ Richard Sandomir writes, “ESPN wants to dominate New Year’s Eve, much as the NFL takes over Thanksgiving Day and the NBA deploys five games in its bid to wrest control of Christmas from Santa Claus.  But playing games on national holidays is one thing; seeking dominion on New Year’s Eve is another.”

The network has a 12-year contract to telecast the national semifinals and 8 of the next 11 will also be on New Year’s Eve, the exceptions being when New Year’s Eve conflicts with the NFL.

Last season, the semifinal games were played on New Year’s Day and drew an average of just over 28 million viewers.

But last season the Orange Bowl, played on New Year’s Eve drew 8.9 million viewers in prime time for a meaningless matchup except to the teams and their fans.

Fewer people watch television on New Year’s Eve, but viewership spikes from 11:30 p.m. to 12:30 a.m.  No doubt ESPN was hoping the Cotton Bowl ended at around 11:30 (11:40ish as it turned out to be) so it could send a large audience to ABC and Ryan Seacrest to watch the ball drop.

Foreign Affairs

Iraq/Syria/ISIS/Russia/Iran:  Iraqi forces regained control over most of Ramadi this week in what marks their most significant victory against ISIS fighters to date, though it’s pretty clear that much of the city is in ruins so what do civilians have to return to?  Such is the case throughout virtually all of the cities and towns that ISIS first took.

As Anthony Cordesmann, a military expert at the Center for Strategic and International Studies in Washington, put it to the Financial Times:

“Getting a town back that you should not have lost in the first place is not going to matter very much if it has been completely destroyed.”

But the White House preferred to see the news out of Ramadi as a validation of their strategy of using the Iraqi military as the main force to combat ISIS on the ground.

Iraqi Prime Minister Haider al-Abadi said on Monday night that ISIL would be defeated in 2016, with the army planning to move on Mosul; where Abu Bakr al-Baghdadi declared his caliphate.

“We are coming to liberate Mosul and it will be the fatal and final blow to Daesh,” he said, using the Arabic name for ISIL in a speech praising the army’s victory in Ramadi.  Tuesday, he visited Ramadi to congratulate Iraqi forces.

As to the effort to retake Mosul, the biggest city under ISIS control, Iraq’s finance minister, Hoshiyar Zebari, said Iraq’s army will need the help of Kurdish fighters.

“Peshmerga is a major force – you cannot do Mosul without Peshmerga,” Zebari, a Kurd, said.

The battle of Mosul would be “very, very challenging,” he added.  “For some time they have been strengthening themselves, but it’s doable.”

But given the extent of the territory surrounding Mosul that will need to be controlled to prevent a breakout, Iraq will no doubt also need the likes of Shiite Popular Mobilization, known as Hashid Shaabi, a coalition of Iran-backed Shiite militias set up to fight ISIL.  It was barred from the effort to retake Ramadi to avoid tension with the Sunni population.

Separately, the U.S. said coalition airstrikes had killed 10 Islamic State commanders in Iraq and Syria in the past month, including two linked to the Paris attacks, as well as those who were said to be planning further ones on the West.  One, Charaffe al-Mouadan, had a direct link to Paris attack cell leader Abdelhamid Abaaoud.

But last weekend, the leader of a powerful Syrian rebel group that controls key suburbs of Damascus was killed in an air strike.

Zahran Alloush, who headed Jaish al-Islam, was holding meetings with rebel officials when their compound near the Syrian capital came under attack.  Alloush’s death will have significant repercussions and its comes amid intensifying diplomacy over the Syrian crisis.  Activists on the ground believe it was Russian warplanes that carried out the attack on the leader.

Alloush’s death also complicated a plan to evacuate thousands of jihadist fighters and civilians from three besieged districts of Damascus, though it appears at week’s end, the UN-brokered deal was proceeding, slowly.

But in the southern province of Daraa this week, a heavy Russian aerial bombing campaign helped Syrian troops fight their way into the rebel-held town of Sheikh Maskin, which lies on a major supply route to Damascus.  Rebels had counted at least 100 raids in just two days by Russian aircraft.  This is exactly what the U.S. has said Russia is doing...aiding President Assad and his fight against rebel forces, many of which are Western backed, vs. going after ISIS.

But this week, a senior Russian officer said in an interview with Rossiya 24 television that Russian air forces have not hit civilian targets, as Amnesty International alleged last week.

Talk about a crock.  Here is what Viktor Bondarev, commander-in-chief of Russia’s Aerospace Forces, said: “The Military Space Forces have never hit civilian targets in Syria.”  Pilots are well-trained and “have never missed their targets, have never hit...so-called sensitive places: schools, hospitals, mosques,” he said.

Also in Syria, as the death toll in the civil war continues to soar, at least 32 were killed in two suicide bombings in the city of Homs on Monday, where a ceasefire was to have taken effect earlier in December.

Opinion....

Editorial / Washington Post

“The raising of the Iraqi government’s flag in the center of Ramadi on Monday marked an encouraging advance in the war against the Islamic State – and not just in the territorial sense.  The recapture of the Sunni city seven months after it was overrun by jihadists was accomplished by Iraqi army forces reconstituted and retrained with U.S. assistance, and backed by American and coalition air power. That the offensive succeeded without the involvement of Iraq’s Iranian-backed Shiite militias was significant, as was the participation of Sunni tribal forces that, along with local police, are eventually expected to take control of the city.

“The Islamic State has now suffered three defeats at the hands of three different forces since the middle of October. Shiite militias led the recapture of the Baiji oil refinery north of Baghdad, while Kurdish fighters freed the town of Sinjar, cutting a supply line between the Islamic State capital of Raqqa, in Syria, and the Iraqi city of Mosul, which is the biggest population center it controls.  The Iraqi government of Haider al-Abadi is now saying that Mosul will be the army’s next major target, while U.S.-supported Kurdish and Arab forces are inching toward Raqqa.

“The flip side of this positive news is that the United States and its allies may be nearing the limit of what they can do to destroy the Islamic State without cracking the big problem at the center of the war.  That is the absence of a moderate Sunni political alternative or cohesive fighting force in either Iraq or Syria.  In Iraq, Mr. Abadi, under pressure from Washington, has repeatedly promised to create more political space for Sunni leaders, but has failed to do so – in large part because of countervailing pressures from Iranian-backed Shiite parties.”

Editorial / Wall Street Journal

“The retaking of central Ramadi on Monday by Iraqi security forces is good news by itself but  even better if it signals an overdue revival of the moderate Sunni forces in Iraq and the region.

“The Ramadi victory was accomplished largely by the Iraqi military, mainly by its Sunni forces with the help of local Sunni tribes, who were aided by U.S. training and weapons. That formula could be a model for success in clearing Islamic State from the rest of Western Iraq and Syria.

“The U.S. has helped by picking up the pace of its assistance in recent weeks, inserting more special forces into the theater and supplying more arms. Tactical bombing by the U.S. has limited Islamic State movement, and shoulder-fired antitank weapons have been able to stop ISIS truck bombs from a distance.  Recapturing Ramadi, which Islamic State captured last May as the Iraqi army fled, also removes an immediate ISIS threat to Baghdad....

“Also worth noting is that ISIS’s leader, Abu Bakr al-Baghdadi, issued a rare public message late last week trying to buck up Islamic State forces after Iraqi forces had besieged the city.  This may have been in anticipation of the Ramadi defeat. He also issued a broadside against pretty much everyone – the Saudi coalition, the West, the Russians, ‘the Jews’ and the ‘apostates.’

“Al-Baghdadi knows that Islamic State’s success depends on projecting an aura of inevitable victory to keep recruiting jihadist cannon fodder. Retaking Ramadi is the first step toward shattering that Islamist illusion.”

Ariel Ben / Jerusalem Post

“The Western-backed war against the Sunni Islamic State is setting the stage for the rise of an Iran-led Shiite crescent across the region.

“From contiguous territory stretching from Afghanistan to Iran and through Iraq, Syria, and Lebanon, Shiite influence would increase.

“Just as the U.S.-led coalition war against Iraq in 2003 toppled the Sunni power and removed an obstacle for Iran to spread its influence in the overwhelmingly Shiite country, the removal of Islamic State would give Iran the upper hand against its Sunni enemies.

“In fact, many Sunnis support Islamic State not necessarily because they are true believers, but in a show of solidarity against an Iranian-led Shiite onslaught.

“With the aid of attacks on Islamic State by Western forces and Russia, Iran and its militia allies can prepare for an onslaught on the remaining Sunni rebel forces in Syria.  And from there, the Iran axis would look to penetrate neighboring Jordan as well as expand its support of the Houthis in Yemen.”

Iran: The U.S. accused Iran of launching a “highly provocative” rocket test last week near its warships in the Strait of Hormuz, the strategic waterway through which a third of all oil traded by sea passes.

On Saturday, the USS Harry S. Truman aircraft carrier, the USS Bulkeley destroyer and a French frigate, were passing through the strait, according to a U.S. spokesman.

As they passed, Iranian Revolutionary Guard vessels hailed other ships in the strait over maritime radio and announced they were about to conduct a live-fire exercise. 

23 minutes later, as reported by the Irish Independent and Reuters, “the Iranian boats fired ‘several unguided rockets’ about 1,370 meters from the warships and commercial traffic, the U.S. said.”

A spokesman for U.S. Central Command said that while the rockets weren’t fired in the direction of any ships, Iran’s actions were “unsafe, unprofessional and inconsistent with international maritime law.”

Iran’s actions come as the Obama administration is preparing to impose financial sanctions on Iran, the first since the nuclear agreement was signed in July.

The sanctions are reportedly directed at nearly a dozen companies and individuals in Iran, Hong Kong and the United Arab Emirates “for their alleged role in developing Iran’s ballistic-missile program.”  [Jay Solomon / Wall Street Journal]

But Iran has warned the U.S. that any such moves would be viewed by Supreme Leader Ayatollah Ali Khamenei as a violation of the nuclear accord.

Treasury Department officials, though, view any efforts to blacklist Iranian companies or individuals involved in missile development, or those that support terrorism, as separate from the nuke deal.

Last week I told you of how Iran is ticked at the legislation Congress passed on the visa front that requires any foreign national who visits Iran or Syria to obtain a visa before entering the U.S., which Iran claims is a sanction on international businessmen seeking to invest in the Iranian market.

As to its missile program, Iran says it doesn’t violate UN law and is strictly for defensive purposes. Then Thursday, President Hossan Rohani said that in response to threatened U.S. sanctions, Iran would “accelerate” its ballistic-missile program, casting fresh doubts on the nuclear accord.

Rohani tweeted: “If [the] U.S. continues its illegitimate interference [with] Iran’s right to defend itself a new program will be devised to enhance missile capabilities.

“We have never negotiated regarding our defense capabilities, including our missile program & will not accept any restrictions in this regard,” he said.  [Wall Street Journal]

Again, the whole point of the UN resolutions that Iran is clearly violating, recently per the UN itself with its test program, is to prevent Iran from developing nuclear-warhead-capable missiles.

But in a late development, U.S. officials have decided to delay the imposition of new financial sanctions on Iran!  Republican leaders on Thursday accused the White House of losing its will to challenge Iran after Rohani’s call to accelerate the missile effort.

“If the president’s announced sanctions ultimately aren’t executed, it would demonstrate a level of fecklessness that even the president hasn’t shown before,” said Rep. Mike Pompeo (R., Kan.), a leading critic of the nuclear deal, in an interview.  [Jay Solomon / Wall Street Journal]

Lastly, Iran did hand over its stockpile of enriched uranium to Russia on Monday, fulfilling a major pledge in the nuclear deal that apparently leaves Iran with too little fuel for a nuclear weapon.  The move brings Iran another step closer to “implementation day,” when roughly $100 billion in Iranian assets will be unfrozen, while Tehran would be free to sell oil on global markets.

Afghanistan: In a just-released transcript of a late-October meeting of the Afghan National Security Council, the country’s chief executive, Abdullah Abdullah, told the high-level gathering: “We have not met the people’s expectations.  We haven’t delivered.  Our forces lack discipline. They lack rotation opportunities.  We haven’t taken care of our own policemen and soldiers. They continue to absorb enormous casualties.”

As of the end of November, about 7,000 members of the Afghan security forces had been killed this year, with 12,000 injured, a 26% increase over the total number of dead and wounded in all of 2014, a Western official with access to the most recent NATO statistics told the Washington Post.  “Attrition rates are soaring.  Deserters and injured Afghan soldiers say they are fighting a more sophisticated and well-armed insurgency than they have seen in years.”  [Sudarsan Raghavan / Washington Post]

Yes, the Taliban is back in a big way and it is grabbing territory seemingly at lightspeed all over the country.

Pakistan: A suspected suicide attack at a government office in northwest Pakistan killed at least 22, with a faction of the Pakistani Taliban claiming responsibility.  The bomber reportedly arrived on a motorbike and blew himself up.

But there was a positive development last weekend when Indian Prime Minister Modi made a surprise visit to Pakistan, weeks before the reopening of high-level talks between the nuclear-armed rivals.  Modi spent time at the residence of Pakistani Prime Minister Nawaz Sharif, a nice touch.

Israel: The U.S. National Security Agency’s foreign eavesdropping included phone conversations between top Israeli officials and U.S. lawmakers and American-Jewish groups, the Wall Street Journal first reported on Tuesday, citing current and former U.S. officials.

The Journal said the intercepts were designed to pick up information that could counter Prime Minister Benjamin Netanyahu’s campaign against the Iran nuclear deal.

The NSA reports allowed administration officials to see inside Israeli efforts to turn Congress against the accord.

After Edward Snowden’s disclosures of the NSA’s spying operations, President Obama announced in January 2014 that the U.S. would curb its eavesdropping operations against friendly nations and their leaders, including the likes of French President Hollande and German Chancellor Angela Merkel.  But the Journal reported that Obama maintained the monitoring of Netanyahu on the grounds it served a “compelling national security purpose.”

On a totally different matter, former Prime Minister Ehud Olmert will become the first Israeli leader to serve jail time after the country’s highest court partially upheld his conviction on corruption charges.  Olmert’s prison time was reduced to 18 months from six years after the high court struck down the major charge on which a lower court convicted him last year.  He is due to enter prison on Feb. 15.

China: The Defense Ministry confirmed it is building a second aircraft carrier, which certainly won’t help sentiment in the region as Beijing continues to assert its claims in the South China Sea.

This week the Japanese government formally protested the entry of an armed Chinese government ship and two other vessels into waters that Japan claims as its own; apparently the first time an armed Chinese vessel intruded into areas that Japan calls its own.  The islands the ships approached were in the East China Sea and are part of the chain known as Senkaku in Japanese and Diaoyu in Chinese.

Separately, as China continues to crack down on Internet freedom, ditto Russia....

Editorial / Washington Post

“Last week brought a positively Orwellian moment to the debate about Internet freedom.  Chinese President Xi Jinping spoke at a state-organized Internet conference in Wuzhen, in Zhejiang province, where he was once party secretary.  Mr. Xi declared, ‘As in the real world, freedom and order are both necessary in cyberspace.’  He added, ‘Freedom is what order is meant for, and order is the guarantee of freedom.’  These slogans are more than just propaganda from the leader of a country with the world’s largest Internet censorship operation. Behind them lurks a dangerous ambition.

“In China today, there is no Internet ‘freedom,’ if the word means freedom to visit Facebook, Google or other vast stores of online information that are blocked off by the authorities and their Great Firewall. On vibrant social media, China’s 670 million online users can often find a way to be heard, if fleetingly, but a sustained challenge to the ruling power of the Communist Party is invariably squelched.  Mr. Xi talking about ‘freedom’ is like saying black is white.  His words were live-tweeted by Xinhua, China’s official news agency, and posted on YouTube, even though Twitter and YouTube are blocked for most people in China.

“The real danger in Mr. Xi’s remarks is the word ‘order,’ because he envisions not only politeness but also obedience.  In China, the party-state sets the rules that determine what Internet users can see and say, and they have been tightened recently.  Having established ‘order’ within the walls of China, Mr. Xi has increasingly promoted it as a model of ‘Internet sovereignty’ for the rest of the world, saying that each nation should set its own rules for the Internet within its boundaries.

“Russia has been heading in the same direction for several years as President Vladimir Putin attempts to extinguish any serious opposition.  The security services in Russia have direct access to the Internet through a physical monitoring system....

“The digital revolution has delivered a truly global information superhighway. This powerful and remarkable invention must not be squandered or put in the hands of those who would use it to stifle free speech, freedom of association and human rights.”

On a related issue, China’s parliament passed a controversial counter terrorism law, with some provisions that could force foreign information technology groups to provide the Chinese government with “back door” access to these products, encryption codes and other sensitive information.

As Tom Mitchell of the Financial Times reports:

“Chinese officials have consistently rebuffed (criticism of the law), arguing that the country faces a clear and present terrorist threat, especially in the northwestern region of Xinjiang.  They allege that some members of the region’s large community of Muslim Uighurs, inspired by groups such as the Taliban and ISIS, have waged a violent ‘separatist’ campaign in pursuit of an independent homeland.”

Chinese legislators are also considering a new law regulating the activities of foreign non-governmental organizations, which is just another aspect of a larger crackdown.

North Korea: A top aide to Kim Jong-un died in a car crash (cough cough) according to state news agency KCNA.  Kim Yang-gon, 73, was a secretary of the ruling Workers’ Party and in charge of ties with South Korea.  Last August, he led a delegation from North Korea that helped ease a stand-off with the South in August, after an exchange of artillery fire.

KCNA called him Kim Jong-un’s “closest comrade and a solid revolutionary partner.”

A state funeral was to be held for him on Thursday.  But this isn’t the first time a top leader has suddenly met his end as Kim continues to surround himself with his own people, while eliminating those who came to power under his father and whose loyalties may be suspect.

Japan / South Korea: In a landmark agreement reached on Monday, these two resolved the issue of “comfort women,” as those who were forced to work in Japan’s wartime brothels were called, an issue that has plagued relations between the two ever since. South Korean President Park Geun-hye and Japanese Prime Minister Shinzo Abe pledged to take the opportunity to boost bilateral ties following the agreement, which will see Japan make an apology and promise one billion yen ($8.3 million) for a fund to help former “comfort women.”

South Korea’s Park now hopes the two countries can work through other issues, such as the sharing of military information, now that Japan has apologized and expressed its remorse.  Abe said, “From now on, Japan and South Korea will enter a new era.”

It is also hoped this will solidify a security agreement between South Korea, Japan and the U.S.

Russia / Ukraine: Crimea lost at least one quarter of its power after Ukraine halted supplies on Thursday, a situation Ukrainian police blamed on unidentified saboteurs who blew up an electricity pylon.  Crimea has suffered repeated power cuts since Russia seized it from Ukraine in March 2014, underlining its reliance on Ukraine for electricity and fueling a downward spiral in relations between the two.

It was in November that Crimea suffered crippling blackouts as a result of saboteurs blowing up a number of pylons supplying the peninsula.  Ukraine provides at least 70% of Crimea’s electricity overall.

Nigeria: Last week I noted that Nigerian President Buhari said his country has “technically won the war” against Boko Haram, saying the group was reduced to using IEDs and suicide bombers, rather than taking and holding territory.

But this week in the capital of Borno state, Maiduguri, and a nearby town, Boko Haram struck with rocket-propelled grenades and multiple suicide bombers, killing at least 80, according to witnesses.

Random Musings

--A reminder...Iowa caucuses February 1st...New Hampshire primaries Feb. 9th.  [Then for Republicans, South Carolina Feb. 20.]  It’s almost show time.

--It was a week off for the presidential pollsters, but Reuters’ five-day rolling national poll among Republican voters had Donald Trump at 39.1% as of 12/29, followed by Ted Cruz 13.7%, Marco Rubio 11.9%, Ben Carson 11.7% and Jeb Bush 6.4%.

--Ben Carson’s campaign, however, is in turmoil as on Thursday, his campaign manager and another top aide resigned (Barry Bennett and Doug Watts) amid plunging poll numbers  One Iowa expert told Reuters that Carson just disappeared from the state, which is proving to be a fatal mistake.

--The Washington Post ran a rather damning story concerning Marco Rubio and his time as majority whip of the Florida House of Representatives, where in July 2002, “he used his official position to urge state regulators to grant a real estate license to his brother-in-law, a convicted cocaine trafficker who had been released from prison 20 months earlier, according to records obtained by the Washington Post.”

Rubio recommended Orlando Cicilia for the license, but in a letter to the Florida Division of Real Estate, he “did not disclose that Cicilia was married to his sister, Barbara, or that the former cocaine dealer was living at the time in the same West Miami home as Rubio’s parents.  He wrote that he had known Cicilia ‘for over 25 years,’ without elaborating.”

Rubio has declined to answer the Post’s questions on the matter.  Back in 1989 in a high-profile trial, Cicilia was convicted of distributing $15 million worth of cocaine.  He did then serve 11 ½ years in federal prison.

I basically like Rubio, but this is another example of a side that’s distasteful.  I was ticked off when he failed to vote on the new budget legislation the other week as well, after complaining about it.  It follows a pattern of behavior and his critics are right to point out all his missed votes.

He is super intelligent, a la Ted Cruz, but they are both slippery.

Plus Rubio doesn’t have a path to victory, which is becoming increasingly clear as we approach Iowa and New Hampshire.

I’m back to John Kasich, knowing he doesn’t have a chance.  Just wish he hadn’t screwed up so badly in that one debate.

--George Pataki ended his presidential campaign on Tuesday, yet another who failed to gain traction of any kind. 

--Conservatives in Congress (read the Freedom Caucus), as well as conservatives on the airwaves such as Mark Levin, Laura Ingraham, and Rush Limbaugh, were disgusted by the nearly $2 trillion government funding and tax-cuts package recently passed by Congress and signed by President Obama, and new speaker Paul Ryan has felt the heat, such as from Limbaugh for selling the country “down the river.”

But these same conservatives know that Ryan’s hands were tied by the top-line funding levels that had been set by Obama  and John Boehner before Ryan came on board.

That said, first thing Ryan needs to do in January is shore up his conservative flank and as one such lawmaker told The Hill’s Scott Wong, “Mr. Ryan will need to put real pressure on the Senate in the first quarter or any goodwill he had will be gone.”

So look for Ryan to immediately hold a vote on repealing ObamaCare with legislation that would include a provision that halts federal funding of Planned Parenthood.

Ryan claims Senate Minority Leader Harry Reid has agreed to take up spending bills and that the Senate won’t be able to filibuster legislation the House sends over, but if that proves not to be the case, all are in agreement Ryan’s honeymoon is over.

--New CNN/ORC polls revealed some of the following:

On the issue of the war on terror and terrorism in general, 40% of Americans believe the terrorists are winning, which is 17 points above the previous high of 23% reached in August 2005.  Another 40% say neither side has an advantage, and just 18% say today that the U.S. and its allies have the upper hand – 10 points off the previous low for that measure, reached in January 2007.

At the same time, 53% say the U.S. can absolutely repel attacks, but 45% say they are very or somewhat worried that they or someone in their family will become a victim of terrorism.

75% of Americans say they are dissatisfied with the way the nation is being governed, 90% of Republicans.  Among Trump backers, 97% are dissatisfied with government.

Overall, 37% say Obama has brought positive change to the country (who are these people?!), but an equal share say he’s changed things for the worse.  Another 21% say he hasn’t changed anything.  Among Democrats, 67% say Obama has brought positive change, while 63% of Republicans say he’s changed the country for the worse.

48% of Americans have a favorable opinion of Obama, 50% an unfavorable one.  His overall approval rating has 47% approving, 52% disapproving, with the other 1% waiting in line for “Star Wars.”

But 52% approve of Obama’s handling of the economy, which is an improvement, while, overall, 49% say the economy is in good shape, 51% doing poorly.  Falling gas prices have no doubt helped confidence, unless you work in the oil and gas industry and just lost your job.

As for Congress, it has just a 14% approval rating, 85% disapprove of its performance.

But new speaker Paul Ryan is viewed favorably by 45%, unfavorably by 34%.  His favorables among Democrats rose from 15% to 34%, which is pretty good.

--There has been a surge of Central American families and children crossing the U.S./Mexican border in recent months, prompting fears of another migration crisis, such as in 2014, so the Obama administration is planning to deport these same families, which is drawing criticism from Democratic presidential candidates, and derision from immigration opponents as it not being enough and too late.

Reading between the lines, the White House appears to be worried there could be a new crisis in time for the party conventions and the election, but the initiative, which would include going into homes as opposed to raiding plants, doesn’t seem at all workable.

Central Americans have largely been settling in metropolises such as Houston, Los Angeles and the Washington, D.C., area.

More than 12,000 individuals in so-called family units were apprehended at the border in October and November, compared with 4,500 in the same months last year.

--Connecticut Gov. Dannel Malloy (Dem.) wants to raise the minimum age to be tried as an adult from 18 to 21.

From Joseph De Avila / Wall Street Journal

“People who agree with Mr. Malloy’s proposal say putting young people in adult prisons exposes them to violence and increases the likelihood they will commit new crimes when they are released.  They also point to medical research showing that the brains of young people don’t fully develop until well into their 20s.

“But some are concerned about the implications of moving to juvenile court those who can legally marry, enter into contracts or volunteer for the armed services without parental consent.

“How does the state treat them one way ‘if they have those rights and abilities, and then treat them like a child if they commit crimes?’ said Kevin Kane, Connecticut’s chief state’s attorney and the state’s top prosecutor.  ‘The concept certainly has some merit, but the details are complicated and really need to be explored in depth.’

“Others say Connecticut’s recent success in shifting 16- and 17-year-olds from the adult to the juvenile system shows the state can push the minimum age even higher.”

Now when I first saw the headline, I was thinking of someone accused of murder or other serious crimes and in those circumstances, raising the age is nuts.  In those instances, the argument the brains of young people aren’t fully developed is bogus.  Kids are far more sophisticated in the ways of violent crime these days than they were decades ago.

So I’m assuming that juveniles accused of Class A and B felonies, the serious crimes, would still be automatically transferred to the adult system.

But if you are talking less serious crimes and keeping such individuals, under the age of 21, in the juvenile system, I’d have an open mind on the change.  [Supposedly the proposal will be part of the February legislative session in the Nutmeg State.]

--Speaking of juvenile delinquents, did you see that mall disturbance in Louisville last Saturday night?  2,000 juveniles between middle school and high school age disrupted post-holiday shopping at the Mall St. Matthews by causing fights and exhibiting atrocious behavior.  Then I read that the same night, a mall in Deptford, N.J. suffered a similar fate.

The Louisville police, facing abuse from all angles once they arrived, appear to have handled it well.  Officer Dennis McDonald, a spokesman with the St. Matthews Police Department, told USA TODAY that there has been an increase in teens loitering in area businesses.

“Once they get there, they’re being disrespectful, harassing paying customers, using profanity,” he said.  “It just goes on and on. Then, when (law enforcement) encounters some of these juveniles, they’re very antagonistic.  It’s almost like they want the confrontation.”

Stories like these depress the hell out of me.

--Comedian Bill Cosby was charged Wednesday with sexually assaulting a woman after allegedly drugging her at his Pennsylvania home 12 years ago; the statute of limitations in this one about to expire. 

CNN aired a 1991 interview Cosby did with Larry King and to show you how much times have changed on certain topics, the two openly joke about “Spanish fly,” which was used to seduce women, to put it mildly.  No doubt prosecutors will use the tape.

--According to the National Law Enforcement Officers Memorial Fund, as of Wednesday, there were 42 fatal shootings of U.S. police officers in 2015, down 14 percent from 2014.

Overall, 124 officers were killed in the line of duty, with more than one third of those deaths due to traffic accidents, the largest single cause of officer fatalities.  [Christopher Ingraham / Washington Post]

--For 2015....

“Dirtball(s) of the Year”...ISIS and Abu Bakr al-Baghdadi, again.

There is no “Person of the Year”...though Pope Francis was close to repeating.

--Fascinating story from Angela Fritz in the Washington Post on the weather.

“A powerful winter cyclone – the same storm that led to two tornado outbreaks in the United States and disastrous river flooding – has driven the North Pole to the freezing point this week, 50 degrees above average for this time of year.

“From Tuesday evening to Wednesday morning, a mind-boggling pressure drop was recorded in Iceland: 54 millibars in just 18 hours.  This triples the criteria for ‘bomb’ cyclogenesis, which meteorologists use to describe a rapidly intensifying mid-latitude storm.  A ‘bomb’ cyclone is defined as dropping one millibar per hour for 24 hours.”

It turns out the storm was one of the top five strongest storms on record in this region. [It then hit Ireland and England, with devastating results.]

But as the storm churned, it pumped warm air to the north, so that on Wednesday morning, temperatures over a vast area around the North Pole “were somewhere between 30 and 35 degrees Fahrenheit.”

The average winter temperature there this time of year is 20 degrees below zero.

--Finally, the news keeps getting better on the snowpack in the Sierra Nevada, 30% of California’s water supply.  It rose from about 110% of average to 136% in just a week, a very good start to the season.

---

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

God bless America.

---

Gold $1061...$1184 12/31/14
Oil $37.04...$53.27 12/31/14

Returns for the week 12/28-1/1

Dow Jones  -0.7%  [17425]
S&P 500  -0.8%  [2043]
S&P MidCap  -1.2%
Russell 2000  -1.6%
Nasdaq  -0.8%  [5007]

Returns for 2015

Dow Jones  -2.2%
S&P 500  -0.7%
S&P MidCap  -3.7%
Russell 2000  -5.7%
Nasdaq  +5.7%

Bulls 36.7
Bears
29.6 [Source: Investors Intelligence...I have been keeping track of these figures since March of 1990! and this is the first time they have taken a week off from reporting the data.  What’s scary is I have all this handwritten on spreadsheets.]

*Dr. Bortrum posted a new column.

I’ve been listening to old Bob and Ray skits from their CBS Radio days, 1959-60, and if you are a fan it’s very easy to find.  Just Google them.  But a warning...it’s addictive.

“Write if you get work.”

Thank you for your support throughout 2015 and Happy New Year!

Brian Trumbore

 



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Week in Review

01/01/2016

For the week 12/28-1/1

 [Posted Friday, 2:00 PM ET]

Note: If you haven’t already done so, please click on the gofundme link above (and to the left), or send a check to PO Box 990, New Providence, NJ 07974

*Special thanks this week to Ken and Sue S., and Jeff B.

Edition 873

Washington and Wall Street

Well that was a lousy year.  For the S&P 500 the first negative one since 2011 (which was down by a hair, but up on a total return basis...ditto 2015), with the global picture not much better, especially on a geopolitical basis.

2015 Returns

Dow Jones -2.2%
S&P 500 -0.7%
Nasdaq +5.7

Frankfurt +9.6% (local currency)
London -4.9%
Paris +8.5%

Tokyo +9.1%
Shanghai +9.4%

And 2016 augurs more of the same.  The key to global growth and economic sentiment these days remains China and there is little cause for optimism on that front as its economy will continue to slow, impacting markets around the world, especially when it comes to those heavily reliant on the commodity sector.

International Monetary Fund Managing Director Christine Lagarde said this week that the prospect of rising interest rates in the United States and China’s slowdown will contribute to a higher risk of economic vulnerability worldwide.

Additionally, growth in global trade has slowed considerably and a decline in commodities prices is posing problems, with financial risks rising, especially in emerging markets, she added.

“All of that means global growth will be disappointing and uneven in 2016,” Lagarde said, noting that low productivity, aging populations and the still lingering effects of the financial crisis were putting the brakes on growth.

Here at home there was a little economic news this week.  The latest S&P/Case-Shiller 20-city index of property values climbed 5.5% in October from a year earlier.  All 20 cities in the index showed a year-over-year increase, led by 10.9% gains in San Francisco, Denver and Portland, Oregon.  Chicago had the smallest increase at 1.3%.

David Blitzer, chairman of the S&P index committee, said, “Generally good economic conditions continue to support gains in home prices.  Among the positive factors are consumers’ expectations of low inflation and further economic growth as well as recent increases in residential construction.”

Meanwhile, the December Chicago Purchasing Managers Index came in at a putrid 42.9 (50 being the dividing line between growth and contraction), the 7th negative reading out of 12 in 2015 and the worst since July 2009.  The expectation was for a figure of 50.3.  Not good, sports fans.

The Atlanta Fed’s GDPNow indicator is forecasting fourth quarter growth in the U.S. of just 1.3%, down from an initial 2.5% forecast.

As for the all-important holiday shopping season, early indications are that it may have been as expected, if you use the National Retail Federation’s forecast of 3.7% growth over 2014 as your benchmark.

MasterCard Spending Pulse said between Black Friday and Christmas Eve, spending was up 7.9% vs. last year (2014 was up 5.5% for the same period), with e-commerce up 20% over a year ago (comprising 10% of total sales).  These figures don’t include Dec. 26, which a report from Nomura Securities labeled “one of the busiest shopping days of the year.”

IHS predicts U.S. e-commerce sales will have increased 11.7% in November and December (the official holiday shopping period), but with overall retail sales up 3.4%, or less than the NRF forecast.

Europe and Asia

No big economic reports for the holiday week.

In Spain, post-titanic election, Prime Minister Mariano Rajoy is in no hurry to form a needed coalition if he is to stay in power.  For now he said in a news conference that he will simply wait for Socialist party leader Pedro Sanchez to agree to an alliance, even though Sanchez has been adamant that he will not join Rajoy and his conservative Popular Party.

Rajoy, recall, lost his majority but still finished first, while the Socialists were a distant second, followed by anti-austerity Podemos and the centrist upstart Ciudadanos.  Ciudadanos said it wouldn’t block Rajoy’s re-election, but he needs the Socialists to attain a true majority.

Spain’s business community wants a three-way alliance with the Socialists and Ciudadanos.

As for David Cameron and the referendum on the issue of remaining in the European Union, while he has said he would hold by the end of 2017, if he and other EU leaders reach a deal on the reforms he has requested in February, a vote could come as early as June.

Cameron has to consider the impact of French and German national elections in 2017 that could affect the kinds of concessions their leaders are willing to grant the U.K., so yet another reason to hold the referendum this year.

On the migration front, German Chancellor Angela Merkel continued to tell her people that the country will benefit from the record influx of migrants.

“There is no doubt, the influx of so many people will demand a great deal from us.  It will cost time, strength and money – particularly with regards to the important task of integrating those who will stay here permanently,” she said in a New Year address televised Thursday evening.

Merkel said anyone who wants to live in Germany must respect German values, traditions, law and language as preconditions for good cohabitation.

“I am convinced: If we get it right, the current big tasks arising from the influx and integration of so many people are an opportunity for the future because we have a great civic engagement and a comprehensive concept of political measures,” she said.  “A country has always benefited from a successful immigration – economically as well as socially.”

Merkel also urged Germans not to give in to attempts to divide the society into longtime inhabitants and new arrivals.

“It’s important not to follow those who claim – with coldheartedness or even with hatred in their hearts – that only they know what it is to be German and (not to follow) those who want to exclude others.

“It’s important that we remain in future a country where we are self-confident and free, compassionate and open-minded.” [Andrea Thomas / Wall Street Journal]

Merkel is going to have a bad year in 2016 and may not make it into 2017.

She’s also increasingly a lone voice in the wilderness as Europe turns on its migrants.  Even Sweden, which welcomed more refugees per capita than any other country, now feels overwhelmed and the center-left government is deploying extraordinary border controls and slashing benefits in a signal to those seeking to come there in 2016: Don’t try it.

The thing is, if Sweden won’t take them in, it will set off a domino effect in which those countries down the trail will seal their borders for fear their neighbors will do the same.

In an interview with Barron’s, historian Niall Ferguson had the following take on Europe, writ large:

“Europe faces three extraordinary challenges. It wants to have a foreign policy to be able to influence the fate of Syria, but it can’t act independently of the U.S. because it has slashed its defense capability. Secondly, Europe can’t stop this huge wave of refugees.  The border is enormous, vastly larger than the Mexican border with the U.S., and much of it is a sea border.

“The biggest problem is the fifth column within Europe – people who aren’t loyal to their European states even though they are citizens, second- and third-generation.  Potentially, there are thousands of jihadists or sympathizers.

“Europe’s problems are unsolvable.  Anybody who thinks this great wave of immigration solves Europe’s demographic deficit hasn’t been to the suburbs of Paris.”

Sound familiar?

In Asia, there was a slew of economic data the past week out of Japan, with core inflation, which excludes fresh food, up 0.1% from a year ago in November, the first rise in five months but still far from the government’s 2% target.  Household spending fell 2.9% in November, the third consecutive month of decline.

Industrial production also slumped 1% in November from October; up 1.6% from last year.  Retail sales declined 2.5% from October.

Add it up and Prime Minister Shinzo Abe’s economic reform plan, “Abenomics,” just isn’t working, nor are his calls for industry to use their strong balance sheets and profits to hike wages. 

In China, industrial profits fell a sixth straight month in November, 1.4% from a year earlier, while on Friday, the official reading on the manufacturing sector contracted for a fifth straight month in December, with the PMI coming in at 49.7.  The services sector, the lone bright spot in the economy, did have a reading of 54.4, up from November’s 53.6. 

This last figure is particularly important as the service sector’s share of China’s economic output is now up to 48.2 percent (the latest calculation being for 2014).

China will be releasing fourth quarter and full-year 2015 GDP on Jan. 19.

As for the Big Picture and the global outlook in 2016....

Gideon Rachman / Financial Times

“In 2015, a sense of unease and foreboding seemed to settle on all the world’s major power centers.  From Beijing to Washington, Berlin to Brasilia, Moscow to Tokyo – governments, media and citizens were jumpy and embattled.

“This kind of globalized anxiety is unusual. For the past 30 years and more, there has been at least one world power that was bullishly optimistic. In the late 1980s the Japanese were still enjoying a decades-long boom – and confidently buying up assets all over the world.  In the 1990s America basked in victory in the cold war and a long economic expansion.  In the early 2000s the EU was in a buoyant mood, launching a single currency and nearly doubling its membership.  And for most of the past decade, the growing political and economic power of China has inspired respect all over the world.

“Yet at the moment all the big players seem uncertain – even fearful.  The only partial exception that I came across this year was India, where the business and political elite still seemed buoyed by the reformist zeal of prime minister Narendra Modi.

“By contrast, in Japan, faith is fading that the radical reforms, known as Abenomics, can truly break the country’s cycle of debt and deflation.  Japanese anxiety is fed by continuing tensions with China. However, my main impression from a visit to China, early in the year, is that this too is a country that feels much less stable than it did even a couple of years ago.  The era when the government effortlessly delivered growth of 8 percent or more a year is over.  Concerns about domestic financial stability are mounting, as the upheavals in the Shanghai stock exchange over the summer revealed.

“However, the main source of anxiety is political. President Xi Jinping’s leadership is more dynamic but also less predictable than that of his predecessors. Fear is spreading among officials and business people, who are scared of being caught up in an anti-corruption drive that has led to the arrest of more than 100,000 people.

“The slowing of the Chinese economy has had global ramifications....

“The mood in Europe is also bleak.  The year was framed by two bloody terrorist attacks in Paris.  The economic crisis that has bedeviled the continent for several years threatened to come to a head in July, as Greece teetered on the edge of expulsion from the eurozone.... Meanwhile, Britain is threatening to leave the EU and French voters are turning to the far-right in ever greater numbers.

“If you judge by the economic figures, the U.S. should be an exception to all this gloom.... And yet the public mood is sour.  The prospect that the Republicans, one of America’s two great political parties, might genuinely nominate Donald Trump, a boorish demagogue, as its candidate for the presidency, does not suggest that the U.S. is at ease with itself.... Beyond these local factors, are there common elements behind this global unease?  Clearly, the world economy has not fully recovered from the financial crisis. There is also a widespread fear that, after years of highly unorthodox monetary policy, another financial or economic crisis might be building....

“The global gloom makes the international political system feel like a patient that is still struggling to recover from a severe illness which began with the financial crisis of 2008.... The patient is vulnerable... Another severe shock, such as a major terrorist attack or a serious economic downturn, could spell real trouble.”

As to my own take, the issues for 2016 are numerous, but they start with China and its economy, as well as the increasing risks of a military clash over disputed territory in the South China Sea, President Xi Jinping’s ongoing crackdown on freedoms of all kinds, and China’s response to Taiwan’s upcoming presidential election.

Next would be the Middle East.  Is there any kind of broad ceasefire in Syria? Does it really matter anymore? [No.]  When will Iraq attempt to retake Mosul, and does ISIS make a stand or melt away beforehand?  What of Iran’s ongoing infiltration in the entire region, its increasing provocations towards the U.S., and the status of the Iranian nuclear deal and the ending of sanctions?  How will Congress react?

Does the refugee situation in Jordan explode?  What of the ticking time bomb in Lebanon?

How does Putin play his cards this year, both in Eastern Europe and the Middle East?

Can Israel avoid a third war with Hizbullah for at least another year, and will ISIS launch an attack inside Israel?

How does Europe handle its migrant crisis?  Does the far-right continue to make gains across the continent?  Does David Cameron hold his EU referendum in June?  Should the voters elect to leave the EU (‘Brexit’), it would convulse markets in a huge way.

Does North Korea lash out and surprise the world with an attack on South Korea?  Is Kim removed?

Here at home, does Donald Trump effectively sow-up the Republican nomination after Super Tuesday, or does this go to the end?  Does Hillary have a medical issue that convulses the Democratic Party?

How successful will Paul Ryan be?  Does Congress and the president finally act on corporate tax reform?

Does inflation become an issue thanks to surging wage growth later in the year?  How does the market handle the Fed perhaps being forced to move more aggressively on the rate front?

Does the U.S. get hit with a major cyberattack, from Wall Street to a key utility?

How many major terrorist attacks around the world do we see?  Will they be spaced out as before, or is there a sudden wave that takes down financial markets and economies around the world due to shattered confidence and fear?

And, finally, Nov. 8, 2016.  How surly is the American electorate as it goes to the polls?

It’s going to be a truly tumultuous year.  Fasten your seat belts and keep them on at all times. 

A Brief Look Back at 2015....

So how did I do with my predictions?  For starters, I wrote in last year’s review, “For 2015, I’m going with small gains of 2% on the S&P and Dow, up 5% for Nasdaq.”

I’m declaring victory.  This was a heck of a lot better call than 95%, or more, of the analysts out there.

For 2016, I’m going with minus 5% on the S&P and Dow, minus 2% for Nasdaq.

Among my other predictions for last year, I wrote:

“Vladimir Putin is not in a position to expand operations in Ukraine these days, nor to make a move on Moldova, Georgia, or one of the Baltic republics, but he will place nuclear weapons in Crimea as a way of riling up the West.

“Should oil stay below $70 a barrel (on Brent), Putin will be forced out of office by end of the year by a shadowy group led by Igor Sechin.  [I’ll say this until I’m finally right.]”

Well I’m still wrong on this last bit.

I said a year ago: “Mosul will be retaken from ISIS by a combination of Iraqi Army, Kurds and U.S. Special Ops forces that will target airstrikes with devastating success.  ISIS will regroup in its Syrian strongholds.”

Not quite, yet.

“Kim Jong-un’s agents will carry out a major assassination.”

Not quite.

“British Prime Minister David Cameron will eke out a win in May’s parliamentary elections.  He will then stick to his promise to hold a vote in 2017 on staying in the EU.”

Pretty good.

“The July deadline for the Iranian nuclear talks will come and go. President Obama desperately wants an agreement, but he knows he won’t be able to get it through Congress.  Ayatollah Khamenei will direct that future talks be scuttled.  Protests over the economic plight of the Iranian people will turn violent, with the Revolutionary Guard crushing them in the end.  Israel will be on edge even more than they normally are, but no military action until early 2016.”

Miss.

“Pope Francis will draw enormous crowds on his trip to the U.S. in September and it will be a nice shot in the arm for far more than just American Catholics.”

Not bad, but not exactly a tough call either, I’ll admit.

Due to time constraints, I’m holding off on broad 2016 predictions until next week, though I certainly told you above what the main issues will be.

Street Bytes

--No Santa Claus rally this year, boys and girls.  The Dow Jones dropped 0.7% on the week, securing a down year, -2.2%, while the S&P 500 and Nasdaq each lost 0.8%.

Netflix was the biggest gainer in the S&P for the year, up 134%, with Amazon next with a gain of 118%.  Walmart fell 29%.

[More next week after I pour through all the reports.]

--U.S. Treasury Yields

12/31/14

6-mo. 0.12%  2-yr. 0.66%  10-yr. 2.17%  30-yr. 2.75%

12/31/15

6-mo. 0.47%  2-yr. 1.05%  10-yr. 2.27%  30-yr. 3.02%

--The national average price of gas in 2015 was $2.40 per gallon, which was the second cheapest annual average of the past ten years.  Only 2009 was lower during that time.  The average price was $3.34 in 2014; $3.49 in 2013; $3.60 in 2012.  $2.35 in 2009.

--Saudi Arabia said it plans to gradually cut subsidies to the people as the slump in oil slams overall government revenue by a forecasted 16%.

The kingdom now expects the 2016 budget deficit to narrow to $87 billion from $98 billion, as it reduces spending by nearly 15% in a massive display of austerity.

It is the first budget under King Salman, who ascended to the throne in January, but even as it reduces spending to pare the deficit, the latter will still be about 16% of GDP.  Oil this year made up 73% of revenue.

Taken together, however, all the above signals that Riyadh does not intend to reduce production, which pressures the oil price further.  It also means the Saudis will continue to put pressure on rivals such as U.S. shale producers.

--The Russian ruble hit a new low this week as Russians faced the prospect of another year of recession in 2016, after the economy contracted an estimated 3.7% this year, amid falling oil prices and western sanctions.  Recently President Vladimir Putin said the “peak of the crisis” had passed.

Certainly Saudi Arabia’s economic program isn’t going to help oil prices as the Saudis continue to pump as much as they can to bring in revenue.  Russia’s economy minister, Alexei Ulyukayev, said Russia should prepare for oil prices to remain low “for years.”

Total retail sales – from sales of food to cars – fell a whopping 13.1 percent year-on-year in November in Russia.  According to a state-owned pollster, VTsIOM (sic), 39 percent of Russian households cannot afford to buy either sufficient food or clothing – up from 22 percent a year ago.

--Meanwhile, the price of U.S. crude oil rallied two weeks ago when the weekly inventory report revealed a large drawdown when an increase was expected.  But this week it was back to adding to inventories, up 2.6 million barrels to 487.4 million and thus no surprise the price of West Texas Intermediate dropped anew.

--FedEx attributed its failure to deliver some Christmas packages to volumes that “far exceeded all previous records” after earlier blaming bad weather for some of the delays.  In a statement Monday the company said “An unprecedented surge of last-minute e-commerce shipments” flooded their system.

But United Parcel Service Inc. reported completing all the deliveries it had promised ahead of Dec. 25.  The past two years it has been UPS that had serious problems of its own; 2013 when it became seriously congested, and 2014 when it way overcompensated and was hit with excess costs.

--Of every $1 Americans spent for items online this year, Amazon captured 51 cents, according to a recent estimate by analysts at Macquarie Research.

Of the expected $94 billion growth in all retail sales this year – both in stores and online – “Amazon took a staggering $22 billion, or almost a quarter, Ben Schachter, a retail analyst at Macquarie, calculated.”  [Hiroko Tabuchi / New York Times]

Additionally, Amazon’s share price more than doubled this year and it now has a market capitalization of about $316 billion vs. Walmart’s $196bn.

Amazon Web Services’ operating income was $521 million, up more than fivefold in a year, but without this growing division, the company probably doesn’t earn a net profit.

The retail business, though, is exhibiting steady growth of its own in its Prime membership program, which now covers an estimated 25 percent of all American households.  The company picked up three million new Prime members during the third week of December alone, Amazon announced the other day.

--Warren Buffett’s Berkshire Hathaway completed its worst year relative to the S&P 500 since 2009, with the shares down about 11%.

Berkshire was hurt big time in its railroad business that transports oil, coal and agricultural products, while its manufacturing arm sells products to the struggling oil industry.

So even though Berkshire doesn’t own any oil and gas companies, it was hit by the crash in commodities prices overall.

This is Buffett’s 50th year at the helm and it is the 11th negative one for Berkshire.

--David Einhorn’s Greenlight Capital hedge fund lost 20% in 2015, according to an email to investors that was obtained by Bloomberg; only the second losing year in Greenlight’s almost 20-year history.  We should see similar stories next week as the reports begin to roll in.

According to preliminary data compiled by Hedge Fund Research Inc., the average fund trailed the S&P 500 Index for a seventh straight year in 2015.  [Bloomberg]

--Hong Kong has been a mecca for Chinese seeking luxury items such as watches and handbags, but as mainland tourists have been staying away, chiefly because of Beijing’s crackdown on corruption and conspicuous consumption, Hong Kong is expecting its biggest decline in retail sales for 2015 since the SARS outbreak in 2003. [Probably about 3% for the year.]

As the Wall Street Journal reported, during the boom times “luxury goods sold in Hong Kong were up to 40% cheaper than in China.”

But now the number of Chinese tourists is down 15% (November compared with a year ago), the steepest decline all year.

So Hong Kong realizes they need to do more to diversity tourism.  But a second Disneyland theme park, as the Journal mentioned?  I’ve been to the one there.  A big ‘eh.’  [Pssst....though the bar at the Disney hotel on the property was quite nice.]

Separately, I’m looking forward to seeing Macau’s yearend numbers.  They won’t be good...at all.

--Hotels and restaurants in Paris are still suffering from the November attacks that killed 130 people, with bookings for New Year celebrations down 30-40 percent, a hotel federation said.

--DuPont shocked Delaware officials as the company announced it would cut 28% of its workforce in its home state early in January, part of its merger with Dow Chemical.  1,700 out of 6,100 employees in Delaware will be impacted.

--Embattled drugmaker Valeant Pharmaceuticals announced its CEO, Michael Pearson, is taking a medical leave of absence due to a severe case of pneumonia.  What was surprising is that Pearson had recently been on CNBC, but about five days later the 56-year-old was hospitalized.  A team of executives will run the show until Pearson returns.

Valeant’s strategy of using mail-order pharmacies, price increases and acquisitions for growth had been under fire and Pearson promised more transparency.

--The average price of a Manhattan co-op or condominium topped $1 million for the first time in the fourth quarter of 2015, further highlighting the unaffordability of homeownership in Gotham.

But the market is changing, with a lot of supply coming online and the number of foreign buyers dropping.

That said, the median price of a Manhattan apartment rose to nearly $1.1 million, an increase of 13.5% from Q4 of 2014, according to an analysis of data by the Wall Street Journal.

--From a piece by Jack Hough in Barron’s about the potential of YouTube: “Television...has been holding steady only with viewers age 50 and up, while the 25-to-34 cohort spent 8.6% less time watching it last quarter than a year earlier, according to Nielsen.  Over four years, that group’s viewing time is down nearly 24%.”

--Shares in Weight Watchers International Inc. surged almost 30% Tuesday and Wednesday after Oprah Winfrey debuted a campaign endorsing the company’s weight-loss program.  Back in October, Oprah announced a partnership whereby she will buy 10% of the stock and join the board.

Since she made her initial move, the stock is up more than threefold and the value of her stake, which would have been around $43 million before she joined, according to Crain’s New York Business, is now valued at almost $150 million.

--While Uber and Lyft are sucking up the venture capital dollars, $11.3bn between the two, Sidecar, one of the ride-sharing pioneers, decided to close its operations on New Year’s Eve.

The San Francisco-based company raised $35 million in its near-four year history, with backers like Richard Branson, but as Sidecar announced this week, they faced “a significant capital disadvantage” when it came to keeping up with its competitors.

It’s funny how all three ride-share companies introduced their services the same year, 2012. Sidecar then shifted its focus to the package delivery game, using the same drivers, but that, too, saw an explosion of well-financed competition, like with Postmates, which raised $155m this year, according to the Journal.  [Actually, the Journal story is riddled with financial errors, but what I stated is close enough.]

--Fox News dominated the competition in 2015, the 14th consecutive year Fox led in total viewers and in the 25-to-54-year-old demographic.  The network averages 1.8 million viewers in prime time, second among all cable channels to ESPN.

CNN has been growing, with a day average of 490,000 viewers, its best in six years.  MSNBC takes in an average of 352,000, but it’s been losing in the 25-to-54 demographic.

“The O’Reilly Factor” remains the No. 1 cable news program for a 14th year, with an average of 2.8 million viewers.  “The Kelly File” is second.  [John Koblin / New York Times]

--Speaking of ESPN, they sure have shaken up New Year’s Eve with the College Football Playoffs.  I’m posting before the official ratings come out and it will be interesting to see what they are, especially as the second game in particular was a bust unless you are an Alabama fan.  The network is out to alter New Year’s Eve traditions and rituals.

As the New York Times’ Richard Sandomir writes, “ESPN wants to dominate New Year’s Eve, much as the NFL takes over Thanksgiving Day and the NBA deploys five games in its bid to wrest control of Christmas from Santa Claus.  But playing games on national holidays is one thing; seeking dominion on New Year’s Eve is another.”

The network has a 12-year contract to telecast the national semifinals and 8 of the next 11 will also be on New Year’s Eve, the exceptions being when New Year’s Eve conflicts with the NFL.

Last season, the semifinal games were played on New Year’s Day and drew an average of just over 28 million viewers.

But last season the Orange Bowl, played on New Year’s Eve drew 8.9 million viewers in prime time for a meaningless matchup except to the teams and their fans.

Fewer people watch television on New Year’s Eve, but viewership spikes from 11:30 p.m. to 12:30 a.m.  No doubt ESPN was hoping the Cotton Bowl ended at around 11:30 (11:40ish as it turned out to be) so it could send a large audience to ABC and Ryan Seacrest to watch the ball drop.

Foreign Affairs

Iraq/Syria/ISIS/Russia/Iran:  Iraqi forces regained control over most of Ramadi this week in what marks their most significant victory against ISIS fighters to date, though it’s pretty clear that much of the city is in ruins so what do civilians have to return to?  Such is the case throughout virtually all of the cities and towns that ISIS first took.

As Anthony Cordesmann, a military expert at the Center for Strategic and International Studies in Washington, put it to the Financial Times:

“Getting a town back that you should not have lost in the first place is not going to matter very much if it has been completely destroyed.”

But the White House preferred to see the news out of Ramadi as a validation of their strategy of using the Iraqi military as the main force to combat ISIS on the ground.

Iraqi Prime Minister Haider al-Abadi said on Monday night that ISIL would be defeated in 2016, with the army planning to move on Mosul; where Abu Bakr al-Baghdadi declared his caliphate.

“We are coming to liberate Mosul and it will be the fatal and final blow to Daesh,” he said, using the Arabic name for ISIL in a speech praising the army’s victory in Ramadi.  Tuesday, he visited Ramadi to congratulate Iraqi forces.

As to the effort to retake Mosul, the biggest city under ISIS control, Iraq’s finance minister, Hoshiyar Zebari, said Iraq’s army will need the help of Kurdish fighters.

“Peshmerga is a major force – you cannot do Mosul without Peshmerga,” Zebari, a Kurd, said.

The battle of Mosul would be “very, very challenging,” he added.  “For some time they have been strengthening themselves, but it’s doable.”

But given the extent of the territory surrounding Mosul that will need to be controlled to prevent a breakout, Iraq will no doubt also need the likes of Shiite Popular Mobilization, known as Hashid Shaabi, a coalition of Iran-backed Shiite militias set up to fight ISIL.  It was barred from the effort to retake Ramadi to avoid tension with the Sunni population.

Separately, the U.S. said coalition airstrikes had killed 10 Islamic State commanders in Iraq and Syria in the past month, including two linked to the Paris attacks, as well as those who were said to be planning further ones on the West.  One, Charaffe al-Mouadan, had a direct link to Paris attack cell leader Abdelhamid Abaaoud.

But last weekend, the leader of a powerful Syrian rebel group that controls key suburbs of Damascus was killed in an air strike.

Zahran Alloush, who headed Jaish al-Islam, was holding meetings with rebel officials when their compound near the Syrian capital came under attack.  Alloush’s death will have significant repercussions and its comes amid intensifying diplomacy over the Syrian crisis.  Activists on the ground believe it was Russian warplanes that carried out the attack on the leader.

Alloush’s death also complicated a plan to evacuate thousands of jihadist fighters and civilians from three besieged districts of Damascus, though it appears at week’s end, the UN-brokered deal was proceeding, slowly.

But in the southern province of Daraa this week, a heavy Russian aerial bombing campaign helped Syrian troops fight their way into the rebel-held town of Sheikh Maskin, which lies on a major supply route to Damascus.  Rebels had counted at least 100 raids in just two days by Russian aircraft.  This is exactly what the U.S. has said Russia is doing...aiding President Assad and his fight against rebel forces, many of which are Western backed, vs. going after ISIS.

But this week, a senior Russian officer said in an interview with Rossiya 24 television that Russian air forces have not hit civilian targets, as Amnesty International alleged last week.

Talk about a crock.  Here is what Viktor Bondarev, commander-in-chief of Russia’s Aerospace Forces, said: “The Military Space Forces have never hit civilian targets in Syria.”  Pilots are well-trained and “have never missed their targets, have never hit...so-called sensitive places: schools, hospitals, mosques,” he said.

Also in Syria, as the death toll in the civil war continues to soar, at least 32 were killed in two suicide bombings in the city of Homs on Monday, where a ceasefire was to have taken effect earlier in December.

Opinion....

Editorial / Washington Post

“The raising of the Iraqi government’s flag in the center of Ramadi on Monday marked an encouraging advance in the war against the Islamic State – and not just in the territorial sense.  The recapture of the Sunni city seven months after it was overrun by jihadists was accomplished by Iraqi army forces reconstituted and retrained with U.S. assistance, and backed by American and coalition air power. That the offensive succeeded without the involvement of Iraq’s Iranian-backed Shiite militias was significant, as was the participation of Sunni tribal forces that, along with local police, are eventually expected to take control of the city.

“The Islamic State has now suffered three defeats at the hands of three different forces since the middle of October. Shiite militias led the recapture of the Baiji oil refinery north of Baghdad, while Kurdish fighters freed the town of Sinjar, cutting a supply line between the Islamic State capital of Raqqa, in Syria, and the Iraqi city of Mosul, which is the biggest population center it controls.  The Iraqi government of Haider al-Abadi is now saying that Mosul will be the army’s next major target, while U.S.-supported Kurdish and Arab forces are inching toward Raqqa.

“The flip side of this positive news is that the United States and its allies may be nearing the limit of what they can do to destroy the Islamic State without cracking the big problem at the center of the war.  That is the absence of a moderate Sunni political alternative or cohesive fighting force in either Iraq or Syria.  In Iraq, Mr. Abadi, under pressure from Washington, has repeatedly promised to create more political space for Sunni leaders, but has failed to do so – in large part because of countervailing pressures from Iranian-backed Shiite parties.”

Editorial / Wall Street Journal

“The retaking of central Ramadi on Monday by Iraqi security forces is good news by itself but  even better if it signals an overdue revival of the moderate Sunni forces in Iraq and the region.

“The Ramadi victory was accomplished largely by the Iraqi military, mainly by its Sunni forces with the help of local Sunni tribes, who were aided by U.S. training and weapons. That formula could be a model for success in clearing Islamic State from the rest of Western Iraq and Syria.

“The U.S. has helped by picking up the pace of its assistance in recent weeks, inserting more special forces into the theater and supplying more arms. Tactical bombing by the U.S. has limited Islamic State movement, and shoulder-fired antitank weapons have been able to stop ISIS truck bombs from a distance.  Recapturing Ramadi, which Islamic State captured last May as the Iraqi army fled, also removes an immediate ISIS threat to Baghdad....

“Also worth noting is that ISIS’s leader, Abu Bakr al-Baghdadi, issued a rare public message late last week trying to buck up Islamic State forces after Iraqi forces had besieged the city.  This may have been in anticipation of the Ramadi defeat. He also issued a broadside against pretty much everyone – the Saudi coalition, the West, the Russians, ‘the Jews’ and the ‘apostates.’

“Al-Baghdadi knows that Islamic State’s success depends on projecting an aura of inevitable victory to keep recruiting jihadist cannon fodder. Retaking Ramadi is the first step toward shattering that Islamist illusion.”

Ariel Ben / Jerusalem Post

“The Western-backed war against the Sunni Islamic State is setting the stage for the rise of an Iran-led Shiite crescent across the region.

“From contiguous territory stretching from Afghanistan to Iran and through Iraq, Syria, and Lebanon, Shiite influence would increase.

“Just as the U.S.-led coalition war against Iraq in 2003 toppled the Sunni power and removed an obstacle for Iran to spread its influence in the overwhelmingly Shiite country, the removal of Islamic State would give Iran the upper hand against its Sunni enemies.

“In fact, many Sunnis support Islamic State not necessarily because they are true believers, but in a show of solidarity against an Iranian-led Shiite onslaught.

“With the aid of attacks on Islamic State by Western forces and Russia, Iran and its militia allies can prepare for an onslaught on the remaining Sunni rebel forces in Syria.  And from there, the Iran axis would look to penetrate neighboring Jordan as well as expand its support of the Houthis in Yemen.”

Iran: The U.S. accused Iran of launching a “highly provocative” rocket test last week near its warships in the Strait of Hormuz, the strategic waterway through which a third of all oil traded by sea passes.

On Saturday, the USS Harry S. Truman aircraft carrier, the USS Bulkeley destroyer and a French frigate, were passing through the strait, according to a U.S. spokesman.

As they passed, Iranian Revolutionary Guard vessels hailed other ships in the strait over maritime radio and announced they were about to conduct a live-fire exercise. 

23 minutes later, as reported by the Irish Independent and Reuters, “the Iranian boats fired ‘several unguided rockets’ about 1,370 meters from the warships and commercial traffic, the U.S. said.”

A spokesman for U.S. Central Command said that while the rockets weren’t fired in the direction of any ships, Iran’s actions were “unsafe, unprofessional and inconsistent with international maritime law.”

Iran’s actions come as the Obama administration is preparing to impose financial sanctions on Iran, the first since the nuclear agreement was signed in July.

The sanctions are reportedly directed at nearly a dozen companies and individuals in Iran, Hong Kong and the United Arab Emirates “for their alleged role in developing Iran’s ballistic-missile program.”  [Jay Solomon / Wall Street Journal]

But Iran has warned the U.S. that any such moves would be viewed by Supreme Leader Ayatollah Ali Khamenei as a violation of the nuclear accord.

Treasury Department officials, though, view any efforts to blacklist Iranian companies or individuals involved in missile development, or those that support terrorism, as separate from the nuke deal.

Last week I told you of how Iran is ticked at the legislation Congress passed on the visa front that requires any foreign national who visits Iran or Syria to obtain a visa before entering the U.S., which Iran claims is a sanction on international businessmen seeking to invest in the Iranian market.

As to its missile program, Iran says it doesn’t violate UN law and is strictly for defensive purposes. Then Thursday, President Hossan Rohani said that in response to threatened U.S. sanctions, Iran would “accelerate” its ballistic-missile program, casting fresh doubts on the nuclear accord.

Rohani tweeted: “If [the] U.S. continues its illegitimate interference [with] Iran’s right to defend itself a new program will be devised to enhance missile capabilities.

“We have never negotiated regarding our defense capabilities, including our missile program & will not accept any restrictions in this regard,” he said.  [Wall Street Journal]

Again, the whole point of the UN resolutions that Iran is clearly violating, recently per the UN itself with its test program, is to prevent Iran from developing nuclear-warhead-capable missiles.

But in a late development, U.S. officials have decided to delay the imposition of new financial sanctions on Iran!  Republican leaders on Thursday accused the White House of losing its will to challenge Iran after Rohani’s call to accelerate the missile effort.

“If the president’s announced sanctions ultimately aren’t executed, it would demonstrate a level of fecklessness that even the president hasn’t shown before,” said Rep. Mike Pompeo (R., Kan.), a leading critic of the nuclear deal, in an interview.  [Jay Solomon / Wall Street Journal]

Lastly, Iran did hand over its stockpile of enriched uranium to Russia on Monday, fulfilling a major pledge in the nuclear deal that apparently leaves Iran with too little fuel for a nuclear weapon.  The move brings Iran another step closer to “implementation day,” when roughly $100 billion in Iranian assets will be unfrozen, while Tehran would be free to sell oil on global markets.

Afghanistan: In a just-released transcript of a late-October meeting of the Afghan National Security Council, the country’s chief executive, Abdullah Abdullah, told the high-level gathering: “We have not met the people’s expectations.  We haven’t delivered.  Our forces lack discipline. They lack rotation opportunities.  We haven’t taken care of our own policemen and soldiers. They continue to absorb enormous casualties.”

As of the end of November, about 7,000 members of the Afghan security forces had been killed this year, with 12,000 injured, a 26% increase over the total number of dead and wounded in all of 2014, a Western official with access to the most recent NATO statistics told the Washington Post.  “Attrition rates are soaring.  Deserters and injured Afghan soldiers say they are fighting a more sophisticated and well-armed insurgency than they have seen in years.”  [Sudarsan Raghavan / Washington Post]

Yes, the Taliban is back in a big way and it is grabbing territory seemingly at lightspeed all over the country.

Pakistan: A suspected suicide attack at a government office in northwest Pakistan killed at least 22, with a faction of the Pakistani Taliban claiming responsibility.  The bomber reportedly arrived on a motorbike and blew himself up.

But there was a positive development last weekend when Indian Prime Minister Modi made a surprise visit to Pakistan, weeks before the reopening of high-level talks between the nuclear-armed rivals.  Modi spent time at the residence of Pakistani Prime Minister Nawaz Sharif, a nice touch.

Israel: The U.S. National Security Agency’s foreign eavesdropping included phone conversations between top Israeli officials and U.S. lawmakers and American-Jewish groups, the Wall Street Journal first reported on Tuesday, citing current and former U.S. officials.

The Journal said the intercepts were designed to pick up information that could counter Prime Minister Benjamin Netanyahu’s campaign against the Iran nuclear deal.

The NSA reports allowed administration officials to see inside Israeli efforts to turn Congress against the accord.

After Edward Snowden’s disclosures of the NSA’s spying operations, President Obama announced in January 2014 that the U.S. would curb its eavesdropping operations against friendly nations and their leaders, including the likes of French President Hollande and German Chancellor Angela Merkel.  But the Journal reported that Obama maintained the monitoring of Netanyahu on the grounds it served a “compelling national security purpose.”

On a totally different matter, former Prime Minister Ehud Olmert will become the first Israeli leader to serve jail time after the country’s highest court partially upheld his conviction on corruption charges.  Olmert’s prison time was reduced to 18 months from six years after the high court struck down the major charge on which a lower court convicted him last year.  He is due to enter prison on Feb. 15.

China: The Defense Ministry confirmed it is building a second aircraft carrier, which certainly won’t help sentiment in the region as Beijing continues to assert its claims in the South China Sea.

This week the Japanese government formally protested the entry of an armed Chinese government ship and two other vessels into waters that Japan claims as its own; apparently the first time an armed Chinese vessel intruded into areas that Japan calls its own.  The islands the ships approached were in the East China Sea and are part of the chain known as Senkaku in Japanese and Diaoyu in Chinese.

Separately, as China continues to crack down on Internet freedom, ditto Russia....

Editorial / Washington Post

“Last week brought a positively Orwellian moment to the debate about Internet freedom.  Chinese President Xi Jinping spoke at a state-organized Internet conference in Wuzhen, in Zhejiang province, where he was once party secretary.  Mr. Xi declared, ‘As in the real world, freedom and order are both necessary in cyberspace.’  He added, ‘Freedom is what order is meant for, and order is the guarantee of freedom.’  These slogans are more than just propaganda from the leader of a country with the world’s largest Internet censorship operation. Behind them lurks a dangerous ambition.

“In China today, there is no Internet ‘freedom,’ if the word means freedom to visit Facebook, Google or other vast stores of online information that are blocked off by the authorities and their Great Firewall. On vibrant social media, China’s 670 million online users can often find a way to be heard, if fleetingly, but a sustained challenge to the ruling power of the Communist Party is invariably squelched.  Mr. Xi talking about ‘freedom’ is like saying black is white.  His words were live-tweeted by Xinhua, China’s official news agency, and posted on YouTube, even though Twitter and YouTube are blocked for most people in China.

“The real danger in Mr. Xi’s remarks is the word ‘order,’ because he envisions not only politeness but also obedience.  In China, the party-state sets the rules that determine what Internet users can see and say, and they have been tightened recently.  Having established ‘order’ within the walls of China, Mr. Xi has increasingly promoted it as a model of ‘Internet sovereignty’ for the rest of the world, saying that each nation should set its own rules for the Internet within its boundaries.

“Russia has been heading in the same direction for several years as President Vladimir Putin attempts to extinguish any serious opposition.  The security services in Russia have direct access to the Internet through a physical monitoring system....

“The digital revolution has delivered a truly global information superhighway. This powerful and remarkable invention must not be squandered or put in the hands of those who would use it to stifle free speech, freedom of association and human rights.”

On a related issue, China’s parliament passed a controversial counter terrorism law, with some provisions that could force foreign information technology groups to provide the Chinese government with “back door” access to these products, encryption codes and other sensitive information.

As Tom Mitchell of the Financial Times reports:

“Chinese officials have consistently rebuffed (criticism of the law), arguing that the country faces a clear and present terrorist threat, especially in the northwestern region of Xinjiang.  They allege that some members of the region’s large community of Muslim Uighurs, inspired by groups such as the Taliban and ISIS, have waged a violent ‘separatist’ campaign in pursuit of an independent homeland.”

Chinese legislators are also considering a new law regulating the activities of foreign non-governmental organizations, which is just another aspect of a larger crackdown.

North Korea: A top aide to Kim Jong-un died in a car crash (cough cough) according to state news agency KCNA.  Kim Yang-gon, 73, was a secretary of the ruling Workers’ Party and in charge of ties with South Korea.  Last August, he led a delegation from North Korea that helped ease a stand-off with the South in August, after an exchange of artillery fire.

KCNA called him Kim Jong-un’s “closest comrade and a solid revolutionary partner.”

A state funeral was to be held for him on Thursday.  But this isn’t the first time a top leader has suddenly met his end as Kim continues to surround himself with his own people, while eliminating those who came to power under his father and whose loyalties may be suspect.

Japan / South Korea: In a landmark agreement reached on Monday, these two resolved the issue of “comfort women,” as those who were forced to work in Japan’s wartime brothels were called, an issue that has plagued relations between the two ever since. South Korean President Park Geun-hye and Japanese Prime Minister Shinzo Abe pledged to take the opportunity to boost bilateral ties following the agreement, which will see Japan make an apology and promise one billion yen ($8.3 million) for a fund to help former “comfort women.”

South Korea’s Park now hopes the two countries can work through other issues, such as the sharing of military information, now that Japan has apologized and expressed its remorse.  Abe said, “From now on, Japan and South Korea will enter a new era.”

It is also hoped this will solidify a security agreement between South Korea, Japan and the U.S.

Russia / Ukraine: Crimea lost at least one quarter of its power after Ukraine halted supplies on Thursday, a situation Ukrainian police blamed on unidentified saboteurs who blew up an electricity pylon.  Crimea has suffered repeated power cuts since Russia seized it from Ukraine in March 2014, underlining its reliance on Ukraine for electricity and fueling a downward spiral in relations between the two.

It was in November that Crimea suffered crippling blackouts as a result of saboteurs blowing up a number of pylons supplying the peninsula.  Ukraine provides at least 70% of Crimea’s electricity overall.

Nigeria: Last week I noted that Nigerian President Buhari said his country has “technically won the war” against Boko Haram, saying the group was reduced to using IEDs and suicide bombers, rather than taking and holding territory.

But this week in the capital of Borno state, Maiduguri, and a nearby town, Boko Haram struck with rocket-propelled grenades and multiple suicide bombers, killing at least 80, according to witnesses.

Random Musings

--A reminder...Iowa caucuses February 1st...New Hampshire primaries Feb. 9th.  [Then for Republicans, South Carolina Feb. 20.]  It’s almost show time.

--It was a week off for the presidential pollsters, but Reuters’ five-day rolling national poll among Republican voters had Donald Trump at 39.1% as of 12/29, followed by Ted Cruz 13.7%, Marco Rubio 11.9%, Ben Carson 11.7% and Jeb Bush 6.4%.

--Ben Carson’s campaign, however, is in turmoil as on Thursday, his campaign manager and another top aide resigned (Barry Bennett and Doug Watts) amid plunging poll numbers  One Iowa expert told Reuters that Carson just disappeared from the state, which is proving to be a fatal mistake.

--The Washington Post ran a rather damning story concerning Marco Rubio and his time as majority whip of the Florida House of Representatives, where in July 2002, “he used his official position to urge state regulators to grant a real estate license to his brother-in-law, a convicted cocaine trafficker who had been released from prison 20 months earlier, according to records obtained by the Washington Post.”

Rubio recommended Orlando Cicilia for the license, but in a letter to the Florida Division of Real Estate, he “did not disclose that Cicilia was married to his sister, Barbara, or that the former cocaine dealer was living at the time in the same West Miami home as Rubio’s parents.  He wrote that he had known Cicilia ‘for over 25 years,’ without elaborating.”

Rubio has declined to answer the Post’s questions on the matter.  Back in 1989 in a high-profile trial, Cicilia was convicted of distributing $15 million worth of cocaine.  He did then serve 11 ½ years in federal prison.

I basically like Rubio, but this is another example of a side that’s distasteful.  I was ticked off when he failed to vote on the new budget legislation the other week as well, after complaining about it.  It follows a pattern of behavior and his critics are right to point out all his missed votes.

He is super intelligent, a la Ted Cruz, but they are both slippery.

Plus Rubio doesn’t have a path to victory, which is becoming increasingly clear as we approach Iowa and New Hampshire.

I’m back to John Kasich, knowing he doesn’t have a chance.  Just wish he hadn’t screwed up so badly in that one debate.

--George Pataki ended his presidential campaign on Tuesday, yet another who failed to gain traction of any kind. 

--Conservatives in Congress (read the Freedom Caucus), as well as conservatives on the airwaves such as Mark Levin, Laura Ingraham, and Rush Limbaugh, were disgusted by the nearly $2 trillion government funding and tax-cuts package recently passed by Congress and signed by President Obama, and new speaker Paul Ryan has felt the heat, such as from Limbaugh for selling the country “down the river.”

But these same conservatives know that Ryan’s hands were tied by the top-line funding levels that had been set by Obama  and John Boehner before Ryan came on board.

That said, first thing Ryan needs to do in January is shore up his conservative flank and as one such lawmaker told The Hill’s Scott Wong, “Mr. Ryan will need to put real pressure on the Senate in the first quarter or any goodwill he had will be gone.”

So look for Ryan to immediately hold a vote on repealing ObamaCare with legislation that would include a provision that halts federal funding of Planned Parenthood.

Ryan claims Senate Minority Leader Harry Reid has agreed to take up spending bills and that the Senate won’t be able to filibuster legislation the House sends over, but if that proves not to be the case, all are in agreement Ryan’s honeymoon is over.

--New CNN/ORC polls revealed some of the following:

On the issue of the war on terror and terrorism in general, 40% of Americans believe the terrorists are winning, which is 17 points above the previous high of 23% reached in August 2005.  Another 40% say neither side has an advantage, and just 18% say today that the U.S. and its allies have the upper hand – 10 points off the previous low for that measure, reached in January 2007.

At the same time, 53% say the U.S. can absolutely repel attacks, but 45% say they are very or somewhat worried that they or someone in their family will become a victim of terrorism.

75% of Americans say they are dissatisfied with the way the nation is being governed, 90% of Republicans.  Among Trump backers, 97% are dissatisfied with government.

Overall, 37% say Obama has brought positive change to the country (who are these people?!), but an equal share say he’s changed things for the worse.  Another 21% say he hasn’t changed anything.  Among Democrats, 67% say Obama has brought positive change, while 63% of Republicans say he’s changed the country for the worse.

48% of Americans have a favorable opinion of Obama, 50% an unfavorable one.  His overall approval rating has 47% approving, 52% disapproving, with the other 1% waiting in line for “Star Wars.”

But 52% approve of Obama’s handling of the economy, which is an improvement, while, overall, 49% say the economy is in good shape, 51% doing poorly.  Falling gas prices have no doubt helped confidence, unless you work in the oil and gas industry and just lost your job.

As for Congress, it has just a 14% approval rating, 85% disapprove of its performance.

But new speaker Paul Ryan is viewed favorably by 45%, unfavorably by 34%.  His favorables among Democrats rose from 15% to 34%, which is pretty good.

--There has been a surge of Central American families and children crossing the U.S./Mexican border in recent months, prompting fears of another migration crisis, such as in 2014, so the Obama administration is planning to deport these same families, which is drawing criticism from Democratic presidential candidates, and derision from immigration opponents as it not being enough and too late.

Reading between the lines, the White House appears to be worried there could be a new crisis in time for the party conventions and the election, but the initiative, which would include going into homes as opposed to raiding plants, doesn’t seem at all workable.

Central Americans have largely been settling in metropolises such as Houston, Los Angeles and the Washington, D.C., area.

More than 12,000 individuals in so-called family units were apprehended at the border in October and November, compared with 4,500 in the same months last year.

--Connecticut Gov. Dannel Malloy (Dem.) wants to raise the minimum age to be tried as an adult from 18 to 21.

From Joseph De Avila / Wall Street Journal

“People who agree with Mr. Malloy’s proposal say putting young people in adult prisons exposes them to violence and increases the likelihood they will commit new crimes when they are released.  They also point to medical research showing that the brains of young people don’t fully develop until well into their 20s.

“But some are concerned about the implications of moving to juvenile court those who can legally marry, enter into contracts or volunteer for the armed services without parental consent.

“How does the state treat them one way ‘if they have those rights and abilities, and then treat them like a child if they commit crimes?’ said Kevin Kane, Connecticut’s chief state’s attorney and the state’s top prosecutor.  ‘The concept certainly has some merit, but the details are complicated and really need to be explored in depth.’

“Others say Connecticut’s recent success in shifting 16- and 17-year-olds from the adult to the juvenile system shows the state can push the minimum age even higher.”

Now when I first saw the headline, I was thinking of someone accused of murder or other serious crimes and in those circumstances, raising the age is nuts.  In those instances, the argument the brains of young people aren’t fully developed is bogus.  Kids are far more sophisticated in the ways of violent crime these days than they were decades ago.

So I’m assuming that juveniles accused of Class A and B felonies, the serious crimes, would still be automatically transferred to the adult system.

But if you are talking less serious crimes and keeping such individuals, under the age of 21, in the juvenile system, I’d have an open mind on the change.  [Supposedly the proposal will be part of the February legislative session in the Nutmeg State.]

--Speaking of juvenile delinquents, did you see that mall disturbance in Louisville last Saturday night?  2,000 juveniles between middle school and high school age disrupted post-holiday shopping at the Mall St. Matthews by causing fights and exhibiting atrocious behavior.  Then I read that the same night, a mall in Deptford, N.J. suffered a similar fate.

The Louisville police, facing abuse from all angles once they arrived, appear to have handled it well.  Officer Dennis McDonald, a spokesman with the St. Matthews Police Department, told USA TODAY that there has been an increase in teens loitering in area businesses.

“Once they get there, they’re being disrespectful, harassing paying customers, using profanity,” he said.  “It just goes on and on. Then, when (law enforcement) encounters some of these juveniles, they’re very antagonistic.  It’s almost like they want the confrontation.”

Stories like these depress the hell out of me.

--Comedian Bill Cosby was charged Wednesday with sexually assaulting a woman after allegedly drugging her at his Pennsylvania home 12 years ago; the statute of limitations in this one about to expire. 

CNN aired a 1991 interview Cosby did with Larry King and to show you how much times have changed on certain topics, the two openly joke about “Spanish fly,” which was used to seduce women, to put it mildly.  No doubt prosecutors will use the tape.

--According to the National Law Enforcement Officers Memorial Fund, as of Wednesday, there were 42 fatal shootings of U.S. police officers in 2015, down 14 percent from 2014.

Overall, 124 officers were killed in the line of duty, with more than one third of those deaths due to traffic accidents, the largest single cause of officer fatalities.  [Christopher Ingraham / Washington Post]

--For 2015....

“Dirtball(s) of the Year”...ISIS and Abu Bakr al-Baghdadi, again.

There is no “Person of the Year”...though Pope Francis was close to repeating.

--Fascinating story from Angela Fritz in the Washington Post on the weather.

“A powerful winter cyclone – the same storm that led to two tornado outbreaks in the United States and disastrous river flooding – has driven the North Pole to the freezing point this week, 50 degrees above average for this time of year.

“From Tuesday evening to Wednesday morning, a mind-boggling pressure drop was recorded in Iceland: 54 millibars in just 18 hours.  This triples the criteria for ‘bomb’ cyclogenesis, which meteorologists use to describe a rapidly intensifying mid-latitude storm.  A ‘bomb’ cyclone is defined as dropping one millibar per hour for 24 hours.”

It turns out the storm was one of the top five strongest storms on record in this region. [It then hit Ireland and England, with devastating results.]

But as the storm churned, it pumped warm air to the north, so that on Wednesday morning, temperatures over a vast area around the North Pole “were somewhere between 30 and 35 degrees Fahrenheit.”

The average winter temperature there this time of year is 20 degrees below zero.

--Finally, the news keeps getting better on the snowpack in the Sierra Nevada, 30% of California’s water supply.  It rose from about 110% of average to 136% in just a week, a very good start to the season.

---

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

God bless America.

---

Gold $1061...$1184 12/31/14
Oil $37.04...$53.27 12/31/14

Returns for the week 12/28-1/1

Dow Jones  -0.7%  [17425]
S&P 500  -0.8%  [2043]
S&P MidCap  -1.2%
Russell 2000  -1.6%
Nasdaq  -0.8%  [5007]

Returns for 2015

Dow Jones  -2.2%
S&P 500  -0.7%
S&P MidCap  -3.7%
Russell 2000  -5.7%
Nasdaq  +5.7%

Bulls 36.7
Bears
29.6 [Source: Investors Intelligence...I have been keeping track of these figures since March of 1990! and this is the first time they have taken a week off from reporting the data.  What’s scary is I have all this handwritten on spreadsheets.]

*Dr. Bortrum posted a new column.

I’ve been listening to old Bob and Ray skits from their CBS Radio days, 1959-60, and if you are a fan it’s very easy to find.  Just Google them.  But a warning...it’s addictive.

“Write if you get work.”

Thank you for your support throughout 2015 and Happy New Year!

Brian Trumbore