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01/16/2016

For the week 1/11-1/15

 [Posted 11:00 PM ET, Friday]

Edition 875

Note: If you haven’t already done so, please click on the gofundme link above, or send a check to PO Box 990, New Providence, NJ 07974.  It’s appreciated. Special thanks to Jerry S.

Washington and Wall Street

President Barack Obama gave his final State of the Union address this week and what had started off as a bounce back performance on Wall Street quickly disintegrated the following morning, Wednesday, into further carnage, with the markets swooning anew, a continuation of what is the worst start to a year in history.

On Friday, as the Dow Jones was in the process of tumbling 390 points, I heard famed investor Leon Cooperman on CNBC say that stocks trade on multiples that are functions of confidence, as well as growth and interest rates, and Mr. Cooperman offered there is zero confidence today when it comes to leadership...the Big Picture, our president and the rapidly disintegrating world scene.  He is so right.

Charles Krauthammer / Washington Post

“President Obama’s Tuesday night address to Congress was less about the state of the union than the state of the presidency.  And the state of this presidency is spent.

“The signs of intellectual exhaustion were everywhere.  Consider just three.  After taking credit for success in Syria, raising American stature abroad and prevailing against the Islamic State – one claim more surreal than the next – Obama was forced to repair to his most well-worn talking point: ‘If you doubt America’s commitment – or mine – to see that justice is done, just ask Osama bin Laden.’

“Really?  Five years later, that’s all you’ve got?

“Indeed, it is.  What else can Obama say?  Talk about Crimea?  Cite Yemen, Libya, Iraq, the South China Sea, the return of the Taliban?

“ ‘Surveys show our standing around the world is higher than when I was elected to this office,’ Obama boasted.  Surveys, mind you.  As if superpower influence is a Miss Universe contest.  As if the world doesn’t see our allies adrift, our enemies on the march and our sailors kneeling, hands behind their heads, in front of armed Iranians, then forced to apologize on camera.  (And our secretary of state expressing appreciation to Iran after their subsequent release.)

“On the domestic side, Obama’s agenda was fairly short, in keeping with his lame-duck status.  It was still startling when he worked up a passion for a great ‘new moonshot’: curing cancer.

“Is there a more hackneyed national-greatness cliché than the idea that if we can walk on the moon...?  Or a more hackneyed facsimile of vision than being ‘the country that cures cancer’?  Do Obama’s speechwriters not know that it was Richard Nixon who first declared a war on cancer – in 1971?....

“There is wisdom to the 22nd Amendment.  After two terms, presidents are spent.  Nothing shows it like a State of the Union valedictory repeating the hollow promises of the yesteryear candidate – as if the intervening presidency had never occurred.”

Regarding Syria, Obama, referring to Senator Ted Cruz’s call to “carpet bomb” ISIS, said: ‘Our answer needs to be more than tough talk or calls to carpet bomb civilians.  That may work as a TV sound bite, but it doesn’t pass muster on the world stage.”

Incredibly, Obama said the U.S. had been “partnering with local forces and leading international efforts to help that broken society pursue a lasting peace.”

Obama really said that. 

August 2012...20,000 dead and Turkey’s President Erdogan crying for our help with a no-fly zone in Syria, only to be ignored.  January 2016...300,000 dead, the country shattered beyond repair...and Obama talks of pursuing a lasting peace.

In conclusion, Obama said: “I believe in you.  That’s why I stand here confident that the state of our union is strong.”

Oh, spare me.

---

The Federal Reserve’s Beige Book of regional economic conditions showed that two of the 12 Fed districts posted “moderate” growth from late November to early January, while seven described the expansion as “modest.”  Boston described its activity as “upbeat,” while New York and Kansas City Fed districts reported “essentially flat” economic activity.

But in the here and now, the market wasn’t helped on Friday when it was reported December retail sales fell 0.1%,  -0.1% ex-autos as well, when a tick up had been expected. December industrial production was -0.4% when a -0.2% decline had been forecast.

Fed officials in the December minutes voiced “significant concern” about low inflation, even as they voted to hike the funds rate a quarter-point, and then this week St. Louis Fed president James Bullard, seen as a hawk, said tumbling inflation expectations were “worrisome,” citing lower energy prices as making it more difficult to meet the Fed’s 2% target.

Bill Dudley, the head of the Federal Reserve Bank of New York, acknowledged on Friday that data was pointing to a “relatively weak fourth quarter” for GDP growth but that this needed to be weighed against continued evidence of a robust labor picture; Dudley still believing inflation will accelerate over time.  But Dudley also said if the economy should weaken unexpectedly, the recent fall in inflation expectations would “become concerning.”

Separately, just a few figures relating to market returns through last Friday, Jan. 8, that came to light after I posted the last review.

The S&P 1500 – a broad basket of large, mid and small company stocks – had an average decline of 26.9% from its 52-week high, according to Bespoke Investment Group (and Adam Shell of USA TODAY).  That’s brutal...and before this week’s further carnage.

In that same S&P 1500, large-company stocks in the S&P 500 were down 22.6% on average from their 52-week peaks, while mid-sized stocks in the S&P 400 were down an average 26.5%, and small stocks in the S&P 600 were 30.7% below the highs of the past year.

That’s called a stealth bear market, friends,

There was a bit of good news this week.  The U.S. budget deficit fell for a sixth straight year in calendar 2015 at $478 billion, or around 2.6% of GDP, down from a year-earlier level of $488 billion, or 2.8%.

The last two years government spending has started to rise again, after Congress had significantly reduced it for about three years, with outlays last year rising 5%, same as the year before, while revenues were up 6% vs. a 10% gain in 2014.

Ergo, unless growth picks up, and there certainly aren’t any signs today of this, beyond the 2% rut we’ve been stuck in, spending will soon cross revenues, especially with the recent bipartisan budget agreement that boosts discretionary spending caps the next two years, and the bottom line is that the deficit could rise to $650 billion in the fiscal year ending Sept. 30, according to Goldman Sachs.

Europe and Asia

After the deluge of economic statistics the prior week, there was virtually nothing this week to report on in Europe.  Eurozone industrial production was down 0.7% in November over October, which is not good, and the year-over-year figure of up 1.1% is just so-so.

But Germany reported its GDP grew 1.7% in 2015, according to the government statistics office, which was a tick better than 2014’s 1.6%.  This year is expected to see GDP growth of 1.8%, essentially the same figure as the eurozone overall. 

On the migrant crisis, Bloomberg reports that the number of refugees entering Europe in the first ten days of 2016 was three times the level of 2015, so the human wave continues as turmoil in Syria and across the Middle East only worsens, while the European continent is roiled with allegations of sweeping sex attacks by mobs of youths from the Middle East and North Africa, not just in Germany, but Austria, Sweden and others.

Police in Stockholm are under fire, for example, for keeping quiet about assaults by immigrants of young women at a recent festival.

German Chancellor Angela Merkel may not survive the year if there are any more incidents like Cologne and/or a devastating terror attack involving fatalities.  Wednesday, in a speech at Frieburg, she fired back at her critics, saying, “If a continent like Europe with 500 million people is not capable of taking in 1 million Syrians, perhaps temporarily, then that is not in line with our values.”

But in Cologne, about 12 hours after I highlighted the New Year’s Eve assaults in this space, there were massive protests last Saturday, with dueling groups, including 1,700 anti-Muslim demonstrators who threw bottles and firecrackers at cops and carried signs reading, “Rapefugees Not Welcome,” and shouting, “Merkel out,” denouncing her open-door policy that has seen 1.1 million refugees and migrants stream into the country.

As more and more details of exactly what happened on New Year’s in Cologne are revealed, it is beyond despicable that the women had to “run a gauntlet” of drunken, abusive “Arab and North African” men in the square bounded by Cologne Cathedral, one of Europe’s best-known Christian symbols.

Questions are still being asked why, just as in Stockholm, police in Germany took more than a week to acknowledge the attacks on women were by asylum seekers.  Bild newspaper published allegations that police forces are under orders not to report crimes involving refugees to the press.  Wouldn’t want to give Merkel a bad name, I guess.

In fact, Cologne police issued a press release on New Year’s Day, which read: “Relaxed atmosphere: celebrations largely peaceful,” when hours before over 375 women had been assaulted!  [The number of criminal complaints was well over 500 in Cologne as of Sunday, but I’m taking the last figure I saw on actual assaults, including rape.]

Finally, Europeans – especially women and cops – are stocking up on guns for personal protection in the wake of the New Year’s Eve sex attacks.  The number of gun permits has quadrupled in Germany and Austria (the latter seeing attacks in Salzburg.) 

Based on 2014 numbers (2015 not being available as yet), in Vienna, every other criminal is a foreigner.  Remember months ago when I said that I’m sure I wouldn’t recognize the Vienna of today vs. that of my travels, one of my favorite places in the world, with the influx of migrants?  Well that crime stat tells you everything, and it had to be worse in 2015.  The city’s top cop warned women not to go out alone at night.  [The chief was ridiculed for this in some circles.]

---

In China, stocks, as measured by the Shanghai Composite index, are in their second bear market in about five months, as the benchmark is down more than 20% from its high in December, after suffering a crash last summer that saw the market decline more than 30%.

You also had data on inflation, with the CPI up just 1.6% in December, according to the National Bureau of Statistics, still far short of the government’s 3% target.  Food prices were up 2.7% from a year earlier, with pork up 9.5%, which is actually a good sign.

The PPI, or factory-gate prices index, fell for a 46th consecutive month, -5.9% year-over-year, and this is not good.

But December exports, up 2.3% in renminbi terms, down 1.4% in dollar terms for a sixth straight decline, were actually better than expected, ditto imports, down 7.6% in dollar terms.

The Chinese Association of Automobile Manufacturers reported vehicle sales rose 4.7% to 24.6m (including commercial vehicles) for 2015, but this was far slower growth than 2014’s up 9.9% and 2013’s up 16%.

GM’s sales in China rose 5.2% in 2015, while Ford’s rose 3% and Toyota’s were up 8.7%, also all down from their 2014 growth pace.  Chinese automakers, on the other hand, saw a 15% increase in 2015 sales.  So here again you see the Chinese beginning to make major inroads with their own product, a la the challenges an Apple or Cisco faces.

Meanwhile, as the Street reacts to China’s equity market and a general slowdown in the economy, the real issue is the currency and the country burning through $120bn in reserves in December defending the yuan, plus you’ve had ongoing massive capital outflows.    That $120bn figure is $500bn over the past 12 months.

Lastly, China will be releasing its GDP for the fourth quarter and 2015 on Monday night, New York time, so with our markets closed Monday (while others will be open), there will be lots to trade on Tuesday morning.

Editorial / The Economist

“China’s economy is not on the verge of collapse.  Next week the government will announce last year’s rate of economic growth. It is likely to be close to 7%. That figure may be an overestimate, but it is not entirely divorced from reality.  Nevertheless, demand is slowing, inflation is uncomfortably low and debts are rising.  The bullish case for China depends partly upon the belief that the government can always lean against the slowdown by stimulating consumption and investment with looser monetary policy – just as in any normal economy.

“Yet China is not normal.  It is caught in a dangerous no-man’s-land between the market and state control.  And the yuan is the prime example of what a perilous place this is.  After a series of mini-steps towards liberalization, China has a semi-fixed currency and semi-porous capital controls.  Partly because a stronger dollar has been dragging up the yuan, the People’s Bank of China has tried to abandon its loose peg against the greenback since August; but it is still targeting a basket of currencies.  A gradual loosening of capital controls means savers have plenty of ways to get their money out.

“A weakening economy, a quasi-fixed exchange rate and more porous capital controls are a volatile combination.  Looser monetary policy would boost demand.  But it would also weaken the currency; and that prospect is already prompting savers to shovel their money offshore.

“In the last six months of 2015 capital left China at an annualized rate of about $1 trillion.”

William Pesek / Barron’s

“China’s 2016 is already off to a bad start, if last week’s nearly 10% plunge in the Shanghai Composite Index is any guide.  We can debate just how far gross domestic product slipped last year – Lombard Street Research says to 3.7% - but the key indicators of the economy will be in the halls of Beijing power and on the streets of the country’s major cities.

“A chill beyond anything China has seen since the 1990s is descending on living standards and corporate profits.  At the same time, its share of the world’s most polluted skies, rivers, and food supplies is rising apace.

“President Xi Jinping’s efforts to replace smokestack industries with a services sector independent from state-owned enterprises have been glacial.  His go-slow approach could backfire and catalyze a bull market in protests – not of the magnitude of Tiananmen Square, perhaps, but enough pressure to spook markets and fuel power struggles between Beijing’s reformers and advocates of the status quo.

“Xi’s most ambitious campaign has been policing chatter in cyberspace – including seven-year prison stints for ‘spreading rumors’ and forcing companies to rat out users engaged in ‘security incidents.’  Clearly, he’s afraid of his 1.4 billion people and running out of options to keep them – and vital allies in Beijing – happy.  That could lead to missteps and misunderstandings that unnerve markets.”

Street Bytes

--For the week, the Dow Jones and S&P 500 lost 2.2% apiece and are now down 8.3% and 8.0%, respectively, for the first two trading weeks of the year.  Nasdaq, which lost 3.3% this week, is already down 10.4% for 2016.

It’s about dwindling prospects for global growth, highlighted by China and its weakening currency, with commodities markets continuing to collapse amidst falling demand.

Europe’s Stoxx 600, like our S&P 500, is now down 20% from its record in April, the definition of a bear market.  [The S&P is off 12% from its record high.]

--U.S. Treasury Yields

6-mo. 0.35%  2-yr. 0.85%  10-yr. 2.03%  30-yr. 2.81%

The yield on the 10-year hit 1.99% Friday morning, hardly what the Fed envisioned when it hiked rates for the first time last month.

The producer price index for December was -0.2%, -0.1% ex-food and energy.  For 12 months, the PPI is -1.0%, +0.3% on core.

--The S&P 500 was -0.7% last year, but +1.4% on a total return basis.  So with the 1.4% in mind, I was looking through some yearend mutual fund indices, courtesy of Barron’s and Lipper, and here are a few of the categories that may be of interest.

Large-Cap Core Funds -0.56% for 2015
Large-Cap Growth Funds +5.26%
Large-Cap Value Funds -4.22%

Small-Cap Growth Funds -2.2%
Small-Cap Value Funds -7.01%

World Equity Funds -3.89%
Emerging Markets Funds -14.08%

Short-Intermediate U.S. Government Bond Funds +0.18%
High Yield Bond Funds -4.09%

Not a great year all around, sports fans.

--The weekly inventory report from the Energy Information Administration didn’t help oil any as inventories of gasoline increased by 8.4m barrels in the week to January 8, following a 10.6m barrel build the prior week.  The report also showed that crude stockpiles in Cushing, Oklahoma, a key delivery hub, hit a record high of 64m barrels.

Crude, as measured by West Texas Intermediate, closed below the $30 a barrel mark for the first time in more than 12 years, ditto Brent crude.  [$29.42 on WTI, $28.94 for Brent.]

AAA said this week that the average price for a gallon of gas across the nation was $1.97, the cheapest price at the pump since March 23, 2009.

Morgan Stanley predicted crude prices could slide to $20 a barrel.  Goldman Sachs and others have previously said the oil overhang could send prices to this level.

So with all this talk, the specter of a large number of bankruptcies looms.  According to Wolfe Research (and the Wall Street Journal), “As many as a third of American oil-and-gas producers could tip toward bankruptcy and restructuring by mid-2017.”

--Meanwhile, Brazilian oil major Petrobras slashed its five-year investment plan by 25 percent, or $32bn.  The company’s shares are trading at levels not seen since 2003, amid the ongoing scandal involving figures high in government.

--BP announced it would cut 4,000 jobs across its exploration and production businesses.  600 of the jobs are involved in BP’s North Sea operations.

--BHP Billiton wrote down the value of its U.S. shale assets by $7.2 billion with the collapse in oil prices, with the CEO admitting “Oil and gas markets have been significantly weaker than the industry expected.”

--Energy consultancy Wood Mackenzie said oil companies had delayed making decisions on 68 major projects world-wide in 2015, with total deferred spending now up to $380 billion industry-wide.

--And, staying in the commodities sector, Monday brought Arch Coal Inc.’s bankruptcy as part of an effort to cut $4.5 billion in debt.  As the Wall Street Journal reported, “Over a quarter of U.S. coal production is now in bankruptcy, trying to reorganize to cope with prices that have fallen 50% since 2011, battered by competition from natural gas and new environmental rules.”

Arch is the biggest to fall thus far.  But the U.S. still receives 34% of its electricity from coal, and Arch, along with some of the others, will survive, it is assumed, because their mines are still essential.

The above-cited Energy Information Administration, for example, says coal will still probably account for 30% of U.S. electricity in 2030!

So the story can get a little distorted.  Arch shareholders are, err, you know, screwed.  But most of the jobs, at least the ones that count, the miners’, should largely remain in place, though the problem is individual mines get shut down for periods of time, and then reemerge. 

I read the Wall Street Journal editorial that said, of Arch Coal’s filing for Chapter 11, “The White House must be cheering, because this is one Obama energy policy that seems to be working....

“According to the National Mining Association, 40,000 coal jobs have been lost in the U.S. since 2008.

“The wealth destruction has been equally dramatic.  Peabody Energy is a going concern, but its shares have declined by roughly 95% in the last year.”

I am the last person to defend President Obama’s overall energy policies, and a number of weeks ago I posted George Will’s defense of the coal industry (just plug his name into my search engine to read his thoughts), but I want to see where we are a year from now in terms of employment in the sector.

The Energy Information Administration doesn’t take political stances and if it’s true that coal will still account for 30% of our electricity in 2030, then that’s a lot of jobs.  No doubt, though, over the next 15 years, thousands of jobs will be lost for many reasons, including improved efficiency and automation.  My bottom line is, this isn’t the death of coal...and, oh, I do want clean coal!

----JPMorgan Chase reported earnings and revenues that beat estimates, with profits climbing to $5.4bn, or $1.32 a share for the December quarter, up from $4.9bn and $1.19 a year earlier.  Revenues, though, while exceeding expectations, just inched higher to $22.9bn from $22.8bn in the year ago quarter.

JPM has slashed expenses, down to $14.3bn in the quarter from $15.4bn year-over-year.

--Citigroup reported earnings of $3.3 billion, in line with expectations, with revenues up 3% to $18.5bn.

--Wells Fargo & Co. recorded a slight dip in quarterly profit as the bank said its exposure to energy loans meant provisions for credit losses jumped by about $346 million from a year earlier to $831 million.  Of the increase, $159 million was mainly for oil and gas loans.

But Wells, the biggest U.S. residential mortgage lender, said mortgage banking revenue rose 9.6% to $1.66bn in the quarter compared with a year earlier.

--General Electric announced plans to shed 6,500 jobs in Europe as it integrates the energy units of France’s Alstom that it acquired last year.  1,700 jobs in Germany and 1,200 in Switzerland would be cut, but it is the 765 in France that will be a huge issue, given how the unions were dead set against the deal initially, and now the French government will be under immense pressure to confront GE on their plans.

The company said in a statement: “This is a necessary step to increase the competitiveness of the former Alstom businesses and generate the synergies we have targeted,” and GE said it wasn’t cutting jobs at turbine factories in France, rather the cuts will be mostly headquarters positions in the Paris area. 

But...GE also announced this week it was moving its headquarters to Boston after a dispute with Connecticut and its tax policies, leaving the Nutmeg State after 40 years.

GE first relocated to Fairfield, CT, in 1974, but since last year the company said it was considering a move.

In actuality, only 800 of GE’s 300,000 work in Fairfield and most of those are in a unit, capital lending, which continues to shrink.  The move to South Boston’s Seaport District will be completed by 2018, as the company looks to sell the 68-acre Fairfield campus as well as two floors of offices it had kept for executives at Rockefeller Center in New York City.

--Wal-Mart is closing 269 stores, more than half of them in the U.S. and another chunk in Brazil.  The stores being shuttered are but a fraction of the company’s 11,000 stores worldwide, including 4,500 in the U.S., with 1.4 million employees here, another 800,000 abroad.

Of the closures, 154 will be in the U.S., including 102 of the smallest-format stores called Wal-Mart Express.  60 of 558 stores in Brazil are being closed.  The other 55 are spread across Latin America.

Wal-Mart is still opening 50 to 60 supercenters in the U.S. this year, as well as 200-240 stores outside the U.S.

--Intel reported earnings that beat analyst estimates but the stock fell on concerns about slowing growth in its data center business.  Revenue from its mainstay PC business, which is still 59% of company revenues, fell about 1 percent. 

Overall net revenue for the quarter rose to $14.91bn from $14.72bn.  Net income fell 1 percent in the quarter, down 2 percent for the year.

--Speaking of the PC industry, according to International Data Corp., sales of personal computers fell in the fourth quarter to their lowest level since 2007, the year Apple introduced the iPhone.

IDC said PC makers shipped 276.2 million units in 2015, a decline of 10.4% for the year. It was the first figure under 300 million since 2008.

Rival research group Gartner Inc. said PC makers shipped 288.7 million for 2015, an 8% drop.

HP saw a 10.1% decline in Q4 vs. the prior year, Dell -5.7%, Lenovo -4.5% and Apple’s rose 2.8%, IDC said.  [Robert McMillan / Wall Street Journal]

Speaking of Apple, I think I’ll bop over to The Mall at Short Hills for a quick channel check. [I’m writing this Thursday afternoon.]

...and I’m back...it really is a 2-minute drive from my place....

For the record it was 1:45 p.m. and I’ve never seen the Apple store emptier, with far more employees than customers.

--General Motors raised its earnings projections for 2016 and raised its quarterly dividend.  CEO Mary Barra said the company expected to benefit from modest worldwide auto industry growth.  Ford also announced it expected 2016 to be “equal to or higher” than the record figures it is expected to announce for 2015.

I’ll take the other side of this trade, not expecting there to be any growth worldwide, minimal in the U.S.

--BMW reported a fifth-straight year of record sales in 2015, though the sales increase was 6.1% from a year earlier, vs. growth of 7.9% in 2014.

Regarding China, growth was just 1.7% last year, down sharply from 16.7% in 2014.  That’s not a great trend.

--Alcoa, in announcing its earnings this week, said it expects global demand for aluminum to grow 6 percent this year, only slightly slower than 2015.  I’ll take the other side of this one, too. 

In the final quarter of 2014 Alcoa was selling its aluminum for an average price of $2,578 per ton.  By Q4 last year, that average price had fallen to $1,799 per ton, or down 30%.

Here’s where I would disagree, without knowing all the specifics behind the company’s forecasts.  It is looking for growth of aluminum components of 8-9 percent for aircraft and 1-4 percent for cars.

Then again, I’ll wait to see what Boeing says in its next report.  Every December I fly into Charleston, S.C. for my Kiawah race and this year I was astounded at the ever expanding Boeing operation there.

--Goldman Sachs Group Inc. said it settled a U.S. probe into its handling of mortgage-backed securities for about $5.1 billion, closing out a year of record legal and litigation costs.

--UK pharmaceutical group Shire is acquiring U.S. drug-maker Baxalta in a deal worth $32 billion.  An initial bid was rejected by Baxalta in August.

--Shares in French auto manufacturer Renault fell 20% on Thursday after police raids on several of its factories, with the company saying investigators wanted to check equipment.  Apparently the raids were connected to vehicle emissions and a union suggested the raids “are linked to the consequences of the Volkswagen rigged-engines affairs.”  [BBC News]

--United Continental said the terrorist attacks in Paris have hurt passenger traffic, while it is also seeing a drop-off in corporate traffic due to the slide in the energy industry.

United said it now expects fourth-quarter 2015 passenger revenue to decline between 5.75% and 6.25% year-over-year.

--Yum Brands Inc. reported that sales in China rose an estimated 1% in December, which is actually an improvement over recent disastrous results there.  KFC same-store sales rose 5% in December, helping offset an 11% decline at Pizza Hut.

By the way, to digress, for years I’ve been surprised that Pizza Hut’s product gets lumped together with Domino’s and Papa John’s.  I don’t think there is any question Pizza Hut is superior.  And that’s a memo....

Back to Yum, which is splitting off its China unit, which comprises over 50% of overall company sales, it was the first major Western fast-food company to enter China, opening a KFC in Beijing, but since 2012, it has been beset by allegations a KFC supplier used growth hormones and antibiotics to help its chickens grow faster.  Then you had a bird flu outbreak, the chickens clucking, “Ohhh noooo.”  It’s been a very rough ride for Yum since.

--Shares in Wynn Resorts bucked the trend on Friday, rising about 8 percent as the company expects improvements in its Las Vegas resorts, while it continues to struggle with its Macau properties.

--This is a bit distressing.  “The number of workers injured in New York City construction accidents rose by more than 50 percent last year, stoking fears that builders are cutting corners to cash in on the rally in the metropolitan area’s trillion-dollar-plus property market.”  [Gary Silverman / Financial Times]

For the year ending in September 2015, the figure is 356 workers hurt vs. 237 the previous year.  18 died vs. 12 in the previous 12 months.  [15 were non-union.]

--AdWeek is tracking the companies lining up for Super Bowl spots (at up to $5m, or more, for a 30-second ad) and I was struck by this one.

“SunTrust Banks: This year SunTrust will run its first Super Bowl spot... The brand believes its 30-second ad will fare well during the Big Game this year as Americans become more optimistic about their personal finances.”

Or maybe not after the recent market carnage....

And this one....

“Colgate: The toothpaste brand will make its Super Bowl debut in 2016, with a 30-second spot titled ‘Save Water.’  The ad, which will run at the two-minute warning break during the second half, will encourage people to turn the tap off while brushing their teeth in an effort to save water.”

Two thoughts.  Everyone will be flushing their toilet at this point, since you have to go before the halftime show...and make sure you rinse your mouth out before a job interview.

--Shares in GoPro Inc. continued to crater as the camera maker warned revenue for the fourth quarter will be well below Wall Street expectations and the company said it was laying off 7% of its workforce, or about 105 jobs.

The stock traded as high as $93.85 in October 2014 and closed the week at $11.45.

--Al Jazeera America said it is closing after 2 ½ years.  The network blames the “economic landscape of the media environment.”  I have no comment (but you can imagine what it would be).

-- “Star Wars: The Force Awakens” grossed an estimated $53 million in ticket sales in its first two days in China last Saturday-Sunday, 70% better than the previous record holder on the mainland, “Mission: Impossible – Rogue Nation.”

As of Monday, “Star Wars” was the third biggest movie ever, globally, behind just “Titanic” and “Avatar.”

Some estimates of the eventual take in China are in the $300 million neighborhood.  “Furious 7” did $380 million in China, the record.

--Our own Dr. Bortrum and I are among the millions who enjoy “CBS Sunday Morning” with Charles Osgood (I watch the first hour, then switch to “This Week” for a half hour, before moving on to “Face the Nation”...).  This week the New York Daily News reported this is Osgood’s last year.  He’s 83, after all. 

Jane Pauley, 65, is the early favorite to take over as host, according to the News.  That would be a good choice.

Osgood has been in his role for over 20 years, after taking over from Charles Kuralt.

Last Sunday, the program was seen by 6.6 million viewers, far more than its network rivals in that slot, “Good Morning America” and “Today.”

Foreign Affairs

Iraq/Syria/ISIS/Russia: At least 12 children and three adults were killed in a Russian air strike that hit a school in Syria’s Aleppo province Monday, activists said.  The British-based Syrian Observatory for Human Rights said a few weeks ago that Russian air strikes, in support of Bashar Assad, had killed more than 2,300 people since they began on Sept. 30, among them 790 civilians.

Moscow has called these allegations “absurd.”

Monday, a convoy of international aid trucks did reach the Damascus suburb of Madaya, where at least 32 had starved to death amid a siege by the Assad regime.  But the aid was immediately put into a warehouse rather than distributed.  It was finally handed out at week’s end but will last only ten days.

Only 10% of the UN’s requests to send aid convoys into distressed parts of Syria have been approved, either by rebel groups, extremists or the regime.

As for ISIS....

Ralph Peters / New York Post

“Ten tourists dead in Istanbul, with 15 others wounded: another dirt-cheap win for the Islamic State. The body count may be low by the standards of neighboring Syria, but the end result of this suicide bombing in the world’s most intriguing city will be months, if not years, of damage.

“Despite President Obama’s self-congratulatory rhetoric on terror, Islamist fanatics have proven to be inspired, innovative, resilient and committed to their purpose unto death.  And in at least one sphere, we’re losing big.

“Islamist terrorists have made our world smaller and narrower, crippling travel and destroying tourism in countries that depend on it for revenue. Their campaign to break the economies of Muslim states by discouraging ‘infidel’ visitors already has crippled Tunisia and Egypt for resisting the thrall of fanaticism.  Jordan’s hurting, too.

“Tuesday, it was Turkey’s turn.  Why?  Because Turkish President Recep Tayyip Erdogan had, at last, cracked down on foreign recruits for ISIS transiting Turkish territory....

“ ‘Tourist-cleansing’ is becoming one of Islamist terror’s most effective techniques of state subversion....

“President Obama’s latest ploy has been to downplay the danger yet again, to insist that we shouldn’t over-react to terrorism – which his underlings blithely dismiss as ‘not an existential threat.’

“Yet we live in a world in which even boarding an aircraft is humiliating.  A world where entire countries and regions have become no-go zones for the average traveler. A world in which Islamist barbarians have greater freedom of action than ever before, while civilized men and women can no longer visit the Pyramids with confidence....

“They’ve terrorized cities from Brussels to Mumbai.  They’ve destroyed hundreds of thousands, if not millions, of jobs in struggling states and killed even more dreams than they’ve killed men and women.

“And our president claims that we’re winning.”

Iran: Secretary of Defense Ashton Carter said on Thursday that a “navigational error of some kind” had led two Navy patrol boats to end up in Iranian waters.  But the incident was Tuesday and details are still lacking.  There’s a story they attempted to take a shortcut and apparently ran out of gas on their more than 300-mile journey back to base.

When Iranian naval vessels approached, according to the Los Angeles Times, the 10 sailors tried to make a run for it, one boat developed engine trouble, and both craft were quickly seized.

The sailors were released a day after being detained by the Iranian Revolutionary Guard in the Persian Gulf, following frantic calls between Washington and Tehran, with Sec. of State John Kerry speaking with his Iranian counterpart, Mohammad Javad Zarif, five times.

Kerry then thanked the Iranians for their quick actions and said the sailors had been “well taken care of.”

But then after the boats were released, Iranian television broadcast the images of the U.S. sailors being detained with their hands behind their heads, with one then apologizing “for our mistake.”

The whole episode is pathetic on so many different levels.  For starters, we were initially told one of the two Navy boats had mechanical problems and drifted into Iranian waters.  Then we’re told it was a navigational error.  Clearly, both vessels were fine the next day as they headed back to their command ship.

Harold Rhode, distinguished senior fellow at the New York-based Gatestone Institute and a former adviser at the Pentagon, told the Jerusalem Post, the fact that until now the U.S. has not reacted on numerous issues – such as Iran’s testing of a ballistic missile in October in violation of the UN Security Council resolution and the firing of rockets near U.S. naval ships – “demonstrates America’s weakness to Middle Easterners,” Rhode said.

“This is another case of America demonstrating that it is an unreliable ally and a harmless enemy,” he added.

“In the Middle East, when people smell weakness, they pounce.  Most amazingly from the Iranian point of view,” Rhode continued, “is that they captured these sailors right before Obama’s State of the Union speech, and the president didn’t even mention it.

“Did the Iranians do that on purpose to further humiliate Obama and Secretary of State John Kerry? From an Iranian cultural point of view, the answer is yes!” exclaimed Rhode.

Michael Rubin, a scholar at the American Enterprise Institute and a former Pentagon official, told the Post:

“They humiliated the United States. They received a groveling apology. They broadcast photos of the captured Americans....

“To credit diplomacy for their release is like giving a slap on the back to an arsonist who started a fire and then wants credit for putting it out,” said Rubin.  [Ariel Ben Solomon / Jerusalem Post]

Rich Lowry / New York Post

“The Obama administration was right when it insisted that the capture and release of 10 American sailors by Iran showed the benefits of a cooperative relationship with Tehran.

“The crux of the arrangement is simple: the Iranians agree to humiliate us (and pursue their long war against the United States and their hegemonic ambitions in the Middle East) and we agree not to care.  It is, as Secretary of State John Kerry says, diplomacy at its best.

“What Vice President Joe Biden called ‘standard nautical practice’ involved the Iranians making our sailors get on their knees on their captured boats, eliciting an apology from the commander, and photographing and videotaping all of it to broadcast for propaganda purposes – in clear violation of international law.

“This obviously wasn’t another Carter-era Iranian Hostage Crisis (it wasn’t even a hostage crisis), but it was another national humiliation to add to a sour public mood that President Obama doesn’t get, let alone understand his own role in creating....

“The day after the State of the Union, the images from Iran emerged to provide a picture that said far more than Obama’s 6,000 words.

“The president has actively sought America’s diminishment abroad.  For him, this is a shrewd play that avoids costly entanglements and makes us stronger.  But there’s no doubt that we are less respected and feared around the world.

“The public feels it, and doesn’t like it.  President Obama may fancy himself above the old Thucydides trinity of motives – honor, interest and fear – but most people aren’t.  Many of them, as a certain presidential candidate puts it, want to win again.

“They look at the photographs and videos of those American sailors and it feels like a punch in the gut.

“The Obama administration looks at them and says to the Iranians.  Thank you very much.”

Aaron David Miller, a former Middle East negotiator now at the Wilson Center:

“This administration is going to remain hostage from now until they leave office to the games the Iranians play and to Iranian behavior that falls outside the four corners of the agreement.”  [Bloomberg News]

Speaking of which, the nuclear accord could go into effect this weekend, with Iran then eligible to receive at least $100bn in frozen funds (over time).

In his State of the Union, Obama said: “As we speak, Iran has rolled back its nuclear program, shipped out its uranium stockpile, and the world has avoided another war.”

Former U.S. ambassador to Iraq Jim Jeffrey, now at the Washington Institute for Near East Policy:

“The problem is all indications are that the Obama administration is changing its overall approach to Iran, not standing up for its own rights.  A lot of it is, ‘This is our legacy,’ and ‘We can’t let anything get in the way of it.’”  [Bloomberg]

Editorial / Wall Street Journal

“The best you can say about the Iran nuclear deal is that it will take years to play out and it will be vindicated if Iran’s theocratic regime falls before the accord sunsets.  If not, the deal will have enabled, with money and legitimacy, Iran’s ambitions to dominate the Middle East.” 

Turkey: Aside from the above-mentioned ISIS attack in Istanbul’s main tourist district that killed at least 10 Germans, the government’s war against Kurdish rebels deepened.  Turkish security forces killed 32 Kurdish militants in the southeast of the country last weekend, while the Kurds retaliated by attacking a police station in the region, killing five.

Israel: Prime Minister Benjamin Netanyahu did not react well to the following comments from Sweden’s Foreign Minister Margot Wallstrom.  Wallstrom called for an investigation to determine if Israel was guilty of extrajudicial killings of Palestinians during the current wave of terrorism. 

“It is vital that there is a thorough, credible investigation into these deaths in order to clarify and bring about possible accountability,” she said on Tuesday during a parliamentary debate.

The Israeli Foreign Ministry countered that Wallstrom’s comments indicate that “she does not understand what is happening in our region and is apparently not aware of the difficult situation facing Israeli citizens, and the continuous danger of murderous terrorism.”

Wednesday, the Foreign Ministry said Sweden would not have any future role in the Israeli-Palestinian diplomatic process, nor is Wallstrom welcome to visit Israel.  Netanyahu is furious, and with good reason.

China / Taiwan: As you read this, we may already know the result of Taiwan’s presidential election, which I have said is a major event in the region with China’s leadership expressing concern.

It is expected the Democratic Progressive Party’s candidate Tsai Ing-wen will win, and then the issue will be can she smooth the ongoing transition in Taiwan’s relations with the mainland.  Voters will expect Tsai and her administration to trumpet Taiwan’s achievements more openly, especially in securing political and civil rights for its citizens, which will be in great contrast to what is taking place in China these days.

Most importantly, Tsai is a figure who has spoken forcefully of Taiwan’s independence, the last thing Beijing wants to hear.  But, assuming the polls are right, a majority of Taiwan’s 23 million people have tired of the past eight years under President Ma, who many say has been too accommodating of Beijing’s interests at the expense of the economy.

Ms. Tsai has pledged not to provoke China, but her party supports formal independence from the mainland.

As for Washington, officials have quietly been urging all sides on Taiwan to avoid unilateral actions that could provoke China, and with good reason there are concerns this could become a major flashpoint.  Beijing has never dropped threats to retake the island by force and you have those thousands of missiles pointed at Taiwan from across the Strait.

Tsai would not be inaugurated until May, so she would have time to issue some accommodating statements, but if she doesn’t acknowledge Beijing’s line of “One China,” look for Xi Jinping to take action.  At first it would be economic, but depending on the mood of the Chinese people, Xi can move on the island itself. And then all hell breaks loose.  [Do not discount this possibility.]

For now, Tsai has pledged to focus on the economy and address concerns many jobs have moved to the mainland.

Tsai has a master’s degree from Cornell University and a doctorate from the London School of Economics, by the way.  She would be Taiwan’s first female president.

In other China news....

Vietnam accused Beijing of threatening regional air safety by conducting unannounced flights through its airspace to a disputed reef in the South China Sea.  Vietnam’s Civil Aviation Authority issued a protest letter that read in part:

“Chinese aircraft have ignored all the rules and norms of the ICAO (the UN’s International Civil Aviation Organization) by not providing any flight plans or maintaining any radio contact with Vietnam’s air traffic control center.”

In just the past week, as reported by the South China Morning Post, “Vietnam logged 46 incidents of Chinese planes flying without warning through airspace monitored by air traffic control in the southern metropolis of Ho Chi Minh City.”

Chinese state media ten days ago said two civilian planes landed on an island in the contested Spratly Islands.

Separately, the South China Morning Post had an extensive story on China’s nuclear reactors, many of which are being built on Hong Kong’s doorstep, and given China’s lack of transparency about anything, let alone industrial safety, as Stuart Heaver reports:

“Scientists and conservationists fear the ever-increasing commercial and environmental pressure to expand the nuclear power sector means not enough attention is being paid to safety.  Within a couple of decades, Hong Kong could be in close proximity to as many as 39 reactors, spread across Guangdong province.  Two of them are nearing completion just 140km west of Hong Kong, in Taishan, in what has been labeled by green groups as the ‘most dangerous nuclear power plant in the world.’

“ ‘China is developing its nuclear capability too fast; they just don’t have enough trained staff or adequate independent safety infrastructure,’ says civil engineer Albert Lai Kwong-tak, of Hong Kong think tank the Professional Commons and a long-standing opponent of nuclear energy.”

Finally, the other day I wrote of the disappearance of five booksellers in Hong Kong.  Reuters reported this week that Hong Kong publishers and vendors of books on China politics that are banned in China are beginning to pull them from their shelves.  Bookstore owners declined to be publicly interviewed by Reuters, citing the fear of mainland anger.

China has yet to say anything about the fate of the five men and whether they are in custody.

China’s state-run Global Times wrote in a recent editorial that the booksellers were exercising an “evil influence” in China through their political books.  The newspaper then said it was “reasonable” for law enforcement agencies to “circumvent the law when they seek cooperation from an individual for investigation.”

Russia: President Vladimir Putin gave an interview to Germany’s Bild newspaper wherein he said the West and Russia had never re-established a relationship of trust following the breakup of the Soviet Union.

“Twenty-five years ago, the Berlin Wall fell, but invisible walls were moved to eastern Europe. This has led to mutual misunderstandings and assignments of guilt.  They are the cause of all crises ever since...We’ve done everything wrong,” said Putin.

Pointing to NATO’s eastward expansion for the cooling in Russia’s relations with the West, Putin said:

“NATO and the U.S. wanted a complete victory over the Soviet Union.  They wanted to sit on the throne in Europe alone.”

Putin added Western sanctions imposed on Russia over its annexation of Crimea and its role in eastern Ukraine were aimed at “geopolitically pushing Russia back” – not at helping Ukraine.

Putin described the sanctions as “a theater of the absurd.”  [Eva Hartog / Moscow Times]

Indonesia: ISIS claimed responsibility for a Paris-style rampage in the capital of Jakarta on Thursday, but thankfully only two civilians were killed, while all five attackers died.  Authorities believe the attackers, who didn’t possess powerful explosives in blowing themselves up, thus limiting the carnage (two died in an ensuing gun battle), are probably linked to an Indonesian faction of Islamic State that has sent volunteers to fight in Syria.

Somalia: Al-Shabab militants attacked an African Union military base here and the Islamist group said it took complete control of the camp and killed more than 60 Kenyan soldiers.  A Kenyan military spokesman said Kenyan troops nearby counter-attacked, but the number of casualties was not known.  A resident nearby told the BBC by phone the camp was in the hands of al-Shabab.  “We can see military cars burning and dead soldiers all over the place. There are no civilian casualties but most people have fled the town.”

Sierra Leone: Just hours after the World Health Organization declared West Africa free of Ebola, a corpse tested positive for it in Sierra Leone.  Too much.

Ebola killed more than 11,300, mostly in West Africa, since it emerged at the end of 2013.

Random Musings

--There were a few polls this week:

Nationally: A New York Times/CBS News Poll has Hillary Clinton leading Bernie Sanders 48-41.  Just a month ago, Clinton led by 20 percentage points nationally in this one.

A Fox News national poll has Clinton leading Sanders 54-39.

On the Republican side, the aforementioned NYT/CBS poll has Donald Trump receiving 36% nationally, with Sen. Ted Cruz next at 19% and Sen. Marco Rubio third with 12%.  [Ben Carson, who back in late October received 26%, is now down to 6%.]

The Fox News poll has Trump at 35%, followed by Cruz with 20%, Rubio 13% and Carson 10%.  Jeb Bush is fifth at just 4%.  The prior month, Trump led Cruz 39-18.

And in a new Wall Street Journal/NBC News national poll released Thursday, Trump leads Cruz 33-20, with Rubio at 13% and Carson at 12%.  In December, Trump led Cruz by five points.

Iowa: A Quinnipiac University Poll found Bernie Sanders besting Hillary Clinton in Iowa 49-44, which compares to a Dec. 15 survey that had Clinton leading Sanders 51-40.  Men back Sanders 61-30, while women back Clinton 55-39.  [Martin O’Malley picks up the crumbs.]

But a Des Moines Register/Bloomberg Politics poll has Clinton leading Sanders 42-40.  Her lead had been 9 points a month ago. 

An NBC News/Wall Street Journal/Marist poll has Clinton leading Sanders 48-45.

On the Republican side, the Des Moines Register/Bloomberg poll has Ted Cruz leading Trump by a 25-22 margin, with Rubio at 12%, Carson 11% and Rand Paul fifth at 5%.  Bush polls 4%.

According to the NBC/WSJ/Marist poll, Cruz leads Trump in Iowa by four points, 28-24, followed by Rubio at 13% and Carson 11% among “likely” caucus-goers.  [Among “potential” caucus-goers, Trump leads Cruz 26-24, suggesting a larger turnout could benefit Trump.]

The Quinnipiac survey has Trump with a 31-29 lead, Rubio 15%, Carson 7%.  [Jeb Bush 3%.]

New Hampshire: A Monmouth University poll of Granite State voters likely to participate in the primary has Sanders holding a 53-39 lead over Clinton.  Clinton led here 48-45 in November.  But among women in this survey, Sanders has overtaken Clinton, 50-44, when it had been 37-56, Clinton, two months ago.

The NBC/WSJ/Marist poll has Sanders ahead of Clinton just 50-46.

On the Republican side...

The NBC/WSJ/Marist poll of Republican primary voters in New Hampshire has Trump leading Rubio 30-14, with Chris Christie at 12%, Cruz 10%, and John Kasich and Jeb Bush at 9% each.

The Monmouth poll has Trump at 32%, Cruz and Kasich at 14%, Rubio 12% and Christie 8%.

--So in Thursday’s Republican debate in Charleston, S.C., Donald Trump and Ted Cruz took off the gloves and engaged in heated exchanges, as Trump does not want to lose Iowa, which as you can see from the above is a toss-up.

I thought Trump did well, especially with his retort when Cruz said The Donald isn’t a conservative because he embodies “New York values.”

“When the World Trade Centers’ came down, I saw something that no place on Earth could have handled more beautifully, more humanely, than New York....We rebuilt downtown Manhattan, and everybody in the world watched.  And everybody in the world loved New York and loved New Yorkers. I have to tell you, that was a very insulting statement that Ted made.”

It was Trump’s best moment of the debates, plus I also think he nailed the question on trade deals, even if moderator Neil Cavuto pretended not to understand.

Hugh Hewitt, conservative radio host, said: “Winners tonight: Donald Trump and Marco Rubio, but Ted Cruz and Chris Christie with enough to smile about.  Jeb Bush hangs on.”

Mark Halperin, managing editor of Bloomberg Politics: “My debate report card grades: Trump: A-, Cruz: B+, Christie: B, Rubio: B, Bush: B-, Kasich: B-, Carson: C.”  [Bloomberg News]

I agree with Mr. Halperin’s grades, except I’d give Rubio a B+ and Cruz a B.

--Hillary Clinton proposed a 4 percent additional tax on individuals earning more than $5 million a year.  According to her campaign, the tax would raise an estimated $150bn over the next decade, but some of her policy proposals dwarf this; such as $350bn to make college more affordable and relieve student debt, and a $250bn infrastructure program.

--Chris Cillizza of the Washington Post interviewed Pat Buchanan and posed the question, “Can Donald Trump win the presidency as the Republican nominee?  If so, how?  Be specific.”

Buchanan: “Demographically and electorally, the Democratic Party has the stronger hand. For Trump to win, I would hammer the illegal immigration issue, securing the border, renegotiating trade deals that have cost us factories, jobs and rising wages, and after securing the party base, go for victory in Pennsylvania, Ohio, Michigan and Wisconsin, by campaigning against the Clinton trade policies that de-industrialized Middle America and on a new Trump trade agenda to re-industrialize America.

“Bring the jobs back!

“With Obama not running, there is no reason Trump, a builder and job creator, could not win more of the African American vote than McCain who lost it 24-1.  There is no reason Trump cannot win more Hispanics, who respond to strong leaders and job creators.  Romney lost over 70 percent of the Hispanic vote.

“Given the situation in the country and the world, the issues for Trump are backing up the men in blue, building a wall to secure the border against illegal immigrants, cracking down on corporations that hire illegals rather than Americans, making America the strongest nation on Earth, but staying out of wars that are none of our business.  And paying back 10 times over those who attack us – the Jacksonian stance.

“Lastly, as Democrats and a hostile media will seek to make Trump the issue, the Republicans should, if she is nominated, make Hillary the issue. Do we really want to go back through all that again, or roll the dice on a better, brighter and surely more exciting future.”

--South Carolina Gov. Nikki Haley gave what turned out to be a controversial Republican response to Obama’s State of the Union address, and it was a wing of her own party that was unhappy.

Editorial / Wall Street Journal

“It’s a sign of the GOP’s distemper that some conservatives denounced her because she didn’t denounce legal immigration.

“Gov. Haley’s parents came to America from India.  He father taught botany at Voorhees College.  Her mother started what would become a multimillion-dollar clothing company out of the living room of the family home.  As she put it Tuesday, ‘I am the proud daughter of Indian immigrants who reminded my brothers, my sister and me every day how blessed we were to live in this country.’

“Her conservative critics unloaded.  ‘Trump should deport Nikki Haley’ went one tweet....

“The distinction Gov. Haley is trying to make is between a functioning, legal immigration system that works in America’s interest – which Republicans say they want – and the unlawful, broken and arbitrary system that encourages illegality – which is what we now have and which President Obama exploits to the Democrats’ political advantage.

“The attacks on Ms. Haley show that many on the right these days oppose any immigrants, even those who arrive legally. They also want to make opposition to immigration a GOP litmus test.  A party that rejects Nikki Haley as a spokeswoman is one that doesn’t really want to build a governing majority.”

--Ted Cruz failed to report a large loan from Goldman Sachs, where his wife works, when he was running for the U.S. senate four years ago.  Coupled with a loan from Citibank, they totaled “$750,000 and eventually increased to a maximum of $1 million before being paid down later that year.  There is no explanation of their purpose.”

As first reported by Mike McIntire of the New York Times, “Neither loan appears in reports the Ted Cruz for Senate Committee filed with the Federal Election Commission, in which candidates are required to disclose the source of money they borrow to finance their campaigns.... There is no evidence that the Cruzes got a break on their loans.”

A spokeswoman for the Cruz presidential campaign acknowledged the loan from Goldman was a source of money for the Senate race.

Then on Thursday in the debate, when questioned on the issue, Cruz responded: “Yes, I made a paperwork error disclosing it on one piece of paper instead of the other.  But if that’s the best the New York Times has got, they better go back to the well.”

That’s a really lousy answer, Senator.  And it’s not nearly good enough. I’m with the Times on this one.

--Peggy Noonan / Wall Street Journal:

“The real problem for Mrs. Clinton is that so many people do not find her to be a person of reliable integrity.  It’s not more complicated than that, really – her character is not admired.  It’s all in the polls.  In August, a Quinnipiac poll had 61% of respondents saying they do not consider her honest and trustworthy.  In October they reported that in swing-states she was regarded as the least trustworthy of all the candidates, both parties.

“After 23 years at the highest levels of public life, Mrs. Clinton has become encrusted by scandal, from her part in her husband’s dramas straight through to Benghazi, the Clinton Foundation and the emails, in connection with which she may be indicted. She brings scandal with her, always has.  I would be surprised if many people were not thinking: ‘Do we really want to go back to all that again, knowing it never ends, knowing there will be another scandal, that all we have to do is wait?’

“Maybe she’ll gut it out.  But maybe it’s like 2008 again, a reverse Sally Field: They don’t like me, they really don’t like me.

--A Gallup poll released Monday found that the share of Americans identifying themselves as Democrats last year dropped to an all-time low of 29%.  But just 26% describe themselves as Republicans, a tick up from the party’s all-time low of 25%, recorded in 2014.

42% of Americans consider themselves independents.

--According to a Kuwaiti newspaper Al-Jarida, President Obama has already discussed the issue of running for secretary-general of the United Nations, succeeding Ban Ki-moon when the South Korean’s term ends on December 31 of this year.

Oh brother.  The Jerusalem Post reported that Prime Minister Netanyahu is already leading an effort to thwart Obama’s plan, seeking to unite moderate Arab governments against him.

“Wasn’t eight years of having Obama in office enough?” Netanyahu is quoted in the Kuwaiti daily as telling associates.  “Eight years during which he ignored Israel?  And now he wants to be in a position that is liable to cause us hardships in the international arena.”  [Jerusalem Post]

--The following editorial from the New York Post pretty well sums up the Sean Penn situation.

“El Chapo, meet El Jerko.

“Hollywood blowhard Sean Penn secretly met, interviewed, and posed for grip-and-smirk selfies with murderous drug lord Joaquin Guzman Loera – even as the world’s most-wanted fugitive continued to elude authorities in the months after tunneling out of a Mexican prison.

“Penn (agreed) not to alert authorities to the killer’s whereabouts.  Still, Guzman’s capture in a dramatic police shootout Friday came as a direct result of Mexican officials tracking their contacts, authorities there said.

“And Mexican officials now are investigating Penn and actress Kate del Castillo, who traveled with the actor to visit the vile drug lord, ABC News reported.”

Penn concedes in the piece (for Rolling Stone) that he ‘may be perceived as protecting criminals.’

In an interview with CBS News’ Charlie Rose for “60 Minutes,” Penn says: “I have a regret that the entire discussion about this article ignores its purpose, which was to try to contribute to this discussion about the policy in the war on drugs.”

What is good about the whole takedown of El Chapo is the U.S. and Mexico cooperated extensively and in this regard it could be a very positive development.  Guzman will be extradited to the U.S. where, among other things, he faces 12 murder charges.

--On 12/26/15 in this space, I wrote of a terrifying mosquito-borne virus, Zika, that has been sweeping Brazil, a real health crisis there.  I not only noted how this couldn’t occur at a worse time for their upcoming Olympic Games in Rio, but also how we need very cold weather in the U.S. to kill mosquito larvae, essential to holding down viruses this coming summer like West Nile.

So what do we hear this week?  “A Houston-area woman who traveled to El Salvador has been diagnosed with the Zika virus, public health officials said, raising concern that the mosquito-borne illness linked to a health crisis in Brazil could spread through the Americas.” [Wall Street Journal]

NBC News then featured it Thursday and Friday.

Zika is seldom fatal, but in Brazil, there are thousands of cases of microcephaly – a condition in which infants are born with undersized brains and skulls.

Puerto Rico reported its first case of Zika in a resident who hadn’t traveled to a country where the virus is present, so it’s circulating in mosquitoes there.

“U.S. officials say they are preparing for a possible influx of Zika this spring and summer,” notes the Journal’s Betsy McKay and Reed Johnson.

Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, co-wrote a new report in The New England Journal of Medicine and said the U.S. needs to prepare for a scenario of multiple mosquito-borne diseases (including dengue and chikungunya) breaking out simultaneously.

Diseases spread by insects “are the next big threat to the Western Hemisphere, including the U.S.,” said Peter Hotez, dean of the National School of Tropical Medicine at Baylor College of Medicine in Houston.  [Liz Szabo / USA TODAY]

This is scary stuff.  I showed you in my 12/26 spot, through my own research, the impact cold weather can have...so as much as I hate it with a passion, every super cold morning I’ll think, ‘at least we’re killing some mosquitoes.’

--I liked what Iman, David Bowie’s supermodel wife, tweeted on Friday, two days before the rock star’s death.

“Life isn’t about avoiding the bruises. It’s about collecting the scars to prove we showed up for it.”

May all of us show up.

---

Pray for the men and women of our armed forces...and all the fallen, including those Marines involved in the helicopter collision off Oahu.

God bless America.

---

Gold $1088
Oil $29.42 [Brent 28.94...both lowest in 12 years]

Returns for the week 1/11-1/15

Dow Jones  -2.2%  [15988]
S&P 500  -2.2%  [1880]
S&P MidCap  -3.0%
Russell 2000  -3.7%
Nasdaq  -3.3%  [4488]

Returns for the period 1/1/16-1/15/16

Dow Jones -8.3%
S&P 500  -8.0%
S&P MidCap  -9.2%
Russell 2000  -11.3%
Nasdaq  -10.4%

Bulls 28.6
Bears 35.7  [Source: Investors Intelligence]

Have a great week. I appreciate your support.

Brian Trumbore

 

 



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Week in Review

01/16/2016

For the week 1/11-1/15

 [Posted 11:00 PM ET, Friday]

Edition 875

Note: If you haven’t already done so, please click on the gofundme link above, or send a check to PO Box 990, New Providence, NJ 07974.  It’s appreciated. Special thanks to Jerry S.

Washington and Wall Street

President Barack Obama gave his final State of the Union address this week and what had started off as a bounce back performance on Wall Street quickly disintegrated the following morning, Wednesday, into further carnage, with the markets swooning anew, a continuation of what is the worst start to a year in history.

On Friday, as the Dow Jones was in the process of tumbling 390 points, I heard famed investor Leon Cooperman on CNBC say that stocks trade on multiples that are functions of confidence, as well as growth and interest rates, and Mr. Cooperman offered there is zero confidence today when it comes to leadership...the Big Picture, our president and the rapidly disintegrating world scene.  He is so right.

Charles Krauthammer / Washington Post

“President Obama’s Tuesday night address to Congress was less about the state of the union than the state of the presidency.  And the state of this presidency is spent.

“The signs of intellectual exhaustion were everywhere.  Consider just three.  After taking credit for success in Syria, raising American stature abroad and prevailing against the Islamic State – one claim more surreal than the next – Obama was forced to repair to his most well-worn talking point: ‘If you doubt America’s commitment – or mine – to see that justice is done, just ask Osama bin Laden.’

“Really?  Five years later, that’s all you’ve got?

“Indeed, it is.  What else can Obama say?  Talk about Crimea?  Cite Yemen, Libya, Iraq, the South China Sea, the return of the Taliban?

“ ‘Surveys show our standing around the world is higher than when I was elected to this office,’ Obama boasted.  Surveys, mind you.  As if superpower influence is a Miss Universe contest.  As if the world doesn’t see our allies adrift, our enemies on the march and our sailors kneeling, hands behind their heads, in front of armed Iranians, then forced to apologize on camera.  (And our secretary of state expressing appreciation to Iran after their subsequent release.)

“On the domestic side, Obama’s agenda was fairly short, in keeping with his lame-duck status.  It was still startling when he worked up a passion for a great ‘new moonshot’: curing cancer.

“Is there a more hackneyed national-greatness cliché than the idea that if we can walk on the moon...?  Or a more hackneyed facsimile of vision than being ‘the country that cures cancer’?  Do Obama’s speechwriters not know that it was Richard Nixon who first declared a war on cancer – in 1971?....

“There is wisdom to the 22nd Amendment.  After two terms, presidents are spent.  Nothing shows it like a State of the Union valedictory repeating the hollow promises of the yesteryear candidate – as if the intervening presidency had never occurred.”

Regarding Syria, Obama, referring to Senator Ted Cruz’s call to “carpet bomb” ISIS, said: ‘Our answer needs to be more than tough talk or calls to carpet bomb civilians.  That may work as a TV sound bite, but it doesn’t pass muster on the world stage.”

Incredibly, Obama said the U.S. had been “partnering with local forces and leading international efforts to help that broken society pursue a lasting peace.”

Obama really said that. 

August 2012...20,000 dead and Turkey’s President Erdogan crying for our help with a no-fly zone in Syria, only to be ignored.  January 2016...300,000 dead, the country shattered beyond repair...and Obama talks of pursuing a lasting peace.

In conclusion, Obama said: “I believe in you.  That’s why I stand here confident that the state of our union is strong.”

Oh, spare me.

---

The Federal Reserve’s Beige Book of regional economic conditions showed that two of the 12 Fed districts posted “moderate” growth from late November to early January, while seven described the expansion as “modest.”  Boston described its activity as “upbeat,” while New York and Kansas City Fed districts reported “essentially flat” economic activity.

But in the here and now, the market wasn’t helped on Friday when it was reported December retail sales fell 0.1%,  -0.1% ex-autos as well, when a tick up had been expected. December industrial production was -0.4% when a -0.2% decline had been forecast.

Fed officials in the December minutes voiced “significant concern” about low inflation, even as they voted to hike the funds rate a quarter-point, and then this week St. Louis Fed president James Bullard, seen as a hawk, said tumbling inflation expectations were “worrisome,” citing lower energy prices as making it more difficult to meet the Fed’s 2% target.

Bill Dudley, the head of the Federal Reserve Bank of New York, acknowledged on Friday that data was pointing to a “relatively weak fourth quarter” for GDP growth but that this needed to be weighed against continued evidence of a robust labor picture; Dudley still believing inflation will accelerate over time.  But Dudley also said if the economy should weaken unexpectedly, the recent fall in inflation expectations would “become concerning.”

Separately, just a few figures relating to market returns through last Friday, Jan. 8, that came to light after I posted the last review.

The S&P 1500 – a broad basket of large, mid and small company stocks – had an average decline of 26.9% from its 52-week high, according to Bespoke Investment Group (and Adam Shell of USA TODAY).  That’s brutal...and before this week’s further carnage.

In that same S&P 1500, large-company stocks in the S&P 500 were down 22.6% on average from their 52-week peaks, while mid-sized stocks in the S&P 400 were down an average 26.5%, and small stocks in the S&P 600 were 30.7% below the highs of the past year.

That’s called a stealth bear market, friends,

There was a bit of good news this week.  The U.S. budget deficit fell for a sixth straight year in calendar 2015 at $478 billion, or around 2.6% of GDP, down from a year-earlier level of $488 billion, or 2.8%.

The last two years government spending has started to rise again, after Congress had significantly reduced it for about three years, with outlays last year rising 5%, same as the year before, while revenues were up 6% vs. a 10% gain in 2014.

Ergo, unless growth picks up, and there certainly aren’t any signs today of this, beyond the 2% rut we’ve been stuck in, spending will soon cross revenues, especially with the recent bipartisan budget agreement that boosts discretionary spending caps the next two years, and the bottom line is that the deficit could rise to $650 billion in the fiscal year ending Sept. 30, according to Goldman Sachs.

Europe and Asia

After the deluge of economic statistics the prior week, there was virtually nothing this week to report on in Europe.  Eurozone industrial production was down 0.7% in November over October, which is not good, and the year-over-year figure of up 1.1% is just so-so.

But Germany reported its GDP grew 1.7% in 2015, according to the government statistics office, which was a tick better than 2014’s 1.6%.  This year is expected to see GDP growth of 1.8%, essentially the same figure as the eurozone overall. 

On the migrant crisis, Bloomberg reports that the number of refugees entering Europe in the first ten days of 2016 was three times the level of 2015, so the human wave continues as turmoil in Syria and across the Middle East only worsens, while the European continent is roiled with allegations of sweeping sex attacks by mobs of youths from the Middle East and North Africa, not just in Germany, but Austria, Sweden and others.

Police in Stockholm are under fire, for example, for keeping quiet about assaults by immigrants of young women at a recent festival.

German Chancellor Angela Merkel may not survive the year if there are any more incidents like Cologne and/or a devastating terror attack involving fatalities.  Wednesday, in a speech at Frieburg, she fired back at her critics, saying, “If a continent like Europe with 500 million people is not capable of taking in 1 million Syrians, perhaps temporarily, then that is not in line with our values.”

But in Cologne, about 12 hours after I highlighted the New Year’s Eve assaults in this space, there were massive protests last Saturday, with dueling groups, including 1,700 anti-Muslim demonstrators who threw bottles and firecrackers at cops and carried signs reading, “Rapefugees Not Welcome,” and shouting, “Merkel out,” denouncing her open-door policy that has seen 1.1 million refugees and migrants stream into the country.

As more and more details of exactly what happened on New Year’s in Cologne are revealed, it is beyond despicable that the women had to “run a gauntlet” of drunken, abusive “Arab and North African” men in the square bounded by Cologne Cathedral, one of Europe’s best-known Christian symbols.

Questions are still being asked why, just as in Stockholm, police in Germany took more than a week to acknowledge the attacks on women were by asylum seekers.  Bild newspaper published allegations that police forces are under orders not to report crimes involving refugees to the press.  Wouldn’t want to give Merkel a bad name, I guess.

In fact, Cologne police issued a press release on New Year’s Day, which read: “Relaxed atmosphere: celebrations largely peaceful,” when hours before over 375 women had been assaulted!  [The number of criminal complaints was well over 500 in Cologne as of Sunday, but I’m taking the last figure I saw on actual assaults, including rape.]

Finally, Europeans – especially women and cops – are stocking up on guns for personal protection in the wake of the New Year’s Eve sex attacks.  The number of gun permits has quadrupled in Germany and Austria (the latter seeing attacks in Salzburg.) 

Based on 2014 numbers (2015 not being available as yet), in Vienna, every other criminal is a foreigner.  Remember months ago when I said that I’m sure I wouldn’t recognize the Vienna of today vs. that of my travels, one of my favorite places in the world, with the influx of migrants?  Well that crime stat tells you everything, and it had to be worse in 2015.  The city’s top cop warned women not to go out alone at night.  [The chief was ridiculed for this in some circles.]

---

In China, stocks, as measured by the Shanghai Composite index, are in their second bear market in about five months, as the benchmark is down more than 20% from its high in December, after suffering a crash last summer that saw the market decline more than 30%.

You also had data on inflation, with the CPI up just 1.6% in December, according to the National Bureau of Statistics, still far short of the government’s 3% target.  Food prices were up 2.7% from a year earlier, with pork up 9.5%, which is actually a good sign.

The PPI, or factory-gate prices index, fell for a 46th consecutive month, -5.9% year-over-year, and this is not good.

But December exports, up 2.3% in renminbi terms, down 1.4% in dollar terms for a sixth straight decline, were actually better than expected, ditto imports, down 7.6% in dollar terms.

The Chinese Association of Automobile Manufacturers reported vehicle sales rose 4.7% to 24.6m (including commercial vehicles) for 2015, but this was far slower growth than 2014’s up 9.9% and 2013’s up 16%.

GM’s sales in China rose 5.2% in 2015, while Ford’s rose 3% and Toyota’s were up 8.7%, also all down from their 2014 growth pace.  Chinese automakers, on the other hand, saw a 15% increase in 2015 sales.  So here again you see the Chinese beginning to make major inroads with their own product, a la the challenges an Apple or Cisco faces.

Meanwhile, as the Street reacts to China’s equity market and a general slowdown in the economy, the real issue is the currency and the country burning through $120bn in reserves in December defending the yuan, plus you’ve had ongoing massive capital outflows.    That $120bn figure is $500bn over the past 12 months.

Lastly, China will be releasing its GDP for the fourth quarter and 2015 on Monday night, New York time, so with our markets closed Monday (while others will be open), there will be lots to trade on Tuesday morning.

Editorial / The Economist

“China’s economy is not on the verge of collapse.  Next week the government will announce last year’s rate of economic growth. It is likely to be close to 7%. That figure may be an overestimate, but it is not entirely divorced from reality.  Nevertheless, demand is slowing, inflation is uncomfortably low and debts are rising.  The bullish case for China depends partly upon the belief that the government can always lean against the slowdown by stimulating consumption and investment with looser monetary policy – just as in any normal economy.

“Yet China is not normal.  It is caught in a dangerous no-man’s-land between the market and state control.  And the yuan is the prime example of what a perilous place this is.  After a series of mini-steps towards liberalization, China has a semi-fixed currency and semi-porous capital controls.  Partly because a stronger dollar has been dragging up the yuan, the People’s Bank of China has tried to abandon its loose peg against the greenback since August; but it is still targeting a basket of currencies.  A gradual loosening of capital controls means savers have plenty of ways to get their money out.

“A weakening economy, a quasi-fixed exchange rate and more porous capital controls are a volatile combination.  Looser monetary policy would boost demand.  But it would also weaken the currency; and that prospect is already prompting savers to shovel their money offshore.

“In the last six months of 2015 capital left China at an annualized rate of about $1 trillion.”

William Pesek / Barron’s

“China’s 2016 is already off to a bad start, if last week’s nearly 10% plunge in the Shanghai Composite Index is any guide.  We can debate just how far gross domestic product slipped last year – Lombard Street Research says to 3.7% - but the key indicators of the economy will be in the halls of Beijing power and on the streets of the country’s major cities.

“A chill beyond anything China has seen since the 1990s is descending on living standards and corporate profits.  At the same time, its share of the world’s most polluted skies, rivers, and food supplies is rising apace.

“President Xi Jinping’s efforts to replace smokestack industries with a services sector independent from state-owned enterprises have been glacial.  His go-slow approach could backfire and catalyze a bull market in protests – not of the magnitude of Tiananmen Square, perhaps, but enough pressure to spook markets and fuel power struggles between Beijing’s reformers and advocates of the status quo.

“Xi’s most ambitious campaign has been policing chatter in cyberspace – including seven-year prison stints for ‘spreading rumors’ and forcing companies to rat out users engaged in ‘security incidents.’  Clearly, he’s afraid of his 1.4 billion people and running out of options to keep them – and vital allies in Beijing – happy.  That could lead to missteps and misunderstandings that unnerve markets.”

Street Bytes

--For the week, the Dow Jones and S&P 500 lost 2.2% apiece and are now down 8.3% and 8.0%, respectively, for the first two trading weeks of the year.  Nasdaq, which lost 3.3% this week, is already down 10.4% for 2016.

It’s about dwindling prospects for global growth, highlighted by China and its weakening currency, with commodities markets continuing to collapse amidst falling demand.

Europe’s Stoxx 600, like our S&P 500, is now down 20% from its record in April, the definition of a bear market.  [The S&P is off 12% from its record high.]

--U.S. Treasury Yields

6-mo. 0.35%  2-yr. 0.85%  10-yr. 2.03%  30-yr. 2.81%

The yield on the 10-year hit 1.99% Friday morning, hardly what the Fed envisioned when it hiked rates for the first time last month.

The producer price index for December was -0.2%, -0.1% ex-food and energy.  For 12 months, the PPI is -1.0%, +0.3% on core.

--The S&P 500 was -0.7% last year, but +1.4% on a total return basis.  So with the 1.4% in mind, I was looking through some yearend mutual fund indices, courtesy of Barron’s and Lipper, and here are a few of the categories that may be of interest.

Large-Cap Core Funds -0.56% for 2015
Large-Cap Growth Funds +5.26%
Large-Cap Value Funds -4.22%

Small-Cap Growth Funds -2.2%
Small-Cap Value Funds -7.01%

World Equity Funds -3.89%
Emerging Markets Funds -14.08%

Short-Intermediate U.S. Government Bond Funds +0.18%
High Yield Bond Funds -4.09%

Not a great year all around, sports fans.

--The weekly inventory report from the Energy Information Administration didn’t help oil any as inventories of gasoline increased by 8.4m barrels in the week to January 8, following a 10.6m barrel build the prior week.  The report also showed that crude stockpiles in Cushing, Oklahoma, a key delivery hub, hit a record high of 64m barrels.

Crude, as measured by West Texas Intermediate, closed below the $30 a barrel mark for the first time in more than 12 years, ditto Brent crude.  [$29.42 on WTI, $28.94 for Brent.]

AAA said this week that the average price for a gallon of gas across the nation was $1.97, the cheapest price at the pump since March 23, 2009.

Morgan Stanley predicted crude prices could slide to $20 a barrel.  Goldman Sachs and others have previously said the oil overhang could send prices to this level.

So with all this talk, the specter of a large number of bankruptcies looms.  According to Wolfe Research (and the Wall Street Journal), “As many as a third of American oil-and-gas producers could tip toward bankruptcy and restructuring by mid-2017.”

--Meanwhile, Brazilian oil major Petrobras slashed its five-year investment plan by 25 percent, or $32bn.  The company’s shares are trading at levels not seen since 2003, amid the ongoing scandal involving figures high in government.

--BP announced it would cut 4,000 jobs across its exploration and production businesses.  600 of the jobs are involved in BP’s North Sea operations.

--BHP Billiton wrote down the value of its U.S. shale assets by $7.2 billion with the collapse in oil prices, with the CEO admitting “Oil and gas markets have been significantly weaker than the industry expected.”

--Energy consultancy Wood Mackenzie said oil companies had delayed making decisions on 68 major projects world-wide in 2015, with total deferred spending now up to $380 billion industry-wide.

--And, staying in the commodities sector, Monday brought Arch Coal Inc.’s bankruptcy as part of an effort to cut $4.5 billion in debt.  As the Wall Street Journal reported, “Over a quarter of U.S. coal production is now in bankruptcy, trying to reorganize to cope with prices that have fallen 50% since 2011, battered by competition from natural gas and new environmental rules.”

Arch is the biggest to fall thus far.  But the U.S. still receives 34% of its electricity from coal, and Arch, along with some of the others, will survive, it is assumed, because their mines are still essential.

The above-cited Energy Information Administration, for example, says coal will still probably account for 30% of U.S. electricity in 2030!

So the story can get a little distorted.  Arch shareholders are, err, you know, screwed.  But most of the jobs, at least the ones that count, the miners’, should largely remain in place, though the problem is individual mines get shut down for periods of time, and then reemerge. 

I read the Wall Street Journal editorial that said, of Arch Coal’s filing for Chapter 11, “The White House must be cheering, because this is one Obama energy policy that seems to be working....

“According to the National Mining Association, 40,000 coal jobs have been lost in the U.S. since 2008.

“The wealth destruction has been equally dramatic.  Peabody Energy is a going concern, but its shares have declined by roughly 95% in the last year.”

I am the last person to defend President Obama’s overall energy policies, and a number of weeks ago I posted George Will’s defense of the coal industry (just plug his name into my search engine to read his thoughts), but I want to see where we are a year from now in terms of employment in the sector.

The Energy Information Administration doesn’t take political stances and if it’s true that coal will still account for 30% of our electricity in 2030, then that’s a lot of jobs.  No doubt, though, over the next 15 years, thousands of jobs will be lost for many reasons, including improved efficiency and automation.  My bottom line is, this isn’t the death of coal...and, oh, I do want clean coal!

----JPMorgan Chase reported earnings and revenues that beat estimates, with profits climbing to $5.4bn, or $1.32 a share for the December quarter, up from $4.9bn and $1.19 a year earlier.  Revenues, though, while exceeding expectations, just inched higher to $22.9bn from $22.8bn in the year ago quarter.

JPM has slashed expenses, down to $14.3bn in the quarter from $15.4bn year-over-year.

--Citigroup reported earnings of $3.3 billion, in line with expectations, with revenues up 3% to $18.5bn.

--Wells Fargo & Co. recorded a slight dip in quarterly profit as the bank said its exposure to energy loans meant provisions for credit losses jumped by about $346 million from a year earlier to $831 million.  Of the increase, $159 million was mainly for oil and gas loans.

But Wells, the biggest U.S. residential mortgage lender, said mortgage banking revenue rose 9.6% to $1.66bn in the quarter compared with a year earlier.

--General Electric announced plans to shed 6,500 jobs in Europe as it integrates the energy units of France’s Alstom that it acquired last year.  1,700 jobs in Germany and 1,200 in Switzerland would be cut, but it is the 765 in France that will be a huge issue, given how the unions were dead set against the deal initially, and now the French government will be under immense pressure to confront GE on their plans.

The company said in a statement: “This is a necessary step to increase the competitiveness of the former Alstom businesses and generate the synergies we have targeted,” and GE said it wasn’t cutting jobs at turbine factories in France, rather the cuts will be mostly headquarters positions in the Paris area. 

But...GE also announced this week it was moving its headquarters to Boston after a dispute with Connecticut and its tax policies, leaving the Nutmeg State after 40 years.

GE first relocated to Fairfield, CT, in 1974, but since last year the company said it was considering a move.

In actuality, only 800 of GE’s 300,000 work in Fairfield and most of those are in a unit, capital lending, which continues to shrink.  The move to South Boston’s Seaport District will be completed by 2018, as the company looks to sell the 68-acre Fairfield campus as well as two floors of offices it had kept for executives at Rockefeller Center in New York City.

--Wal-Mart is closing 269 stores, more than half of them in the U.S. and another chunk in Brazil.  The stores being shuttered are but a fraction of the company’s 11,000 stores worldwide, including 4,500 in the U.S., with 1.4 million employees here, another 800,000 abroad.

Of the closures, 154 will be in the U.S., including 102 of the smallest-format stores called Wal-Mart Express.  60 of 558 stores in Brazil are being closed.  The other 55 are spread across Latin America.

Wal-Mart is still opening 50 to 60 supercenters in the U.S. this year, as well as 200-240 stores outside the U.S.

--Intel reported earnings that beat analyst estimates but the stock fell on concerns about slowing growth in its data center business.  Revenue from its mainstay PC business, which is still 59% of company revenues, fell about 1 percent. 

Overall net revenue for the quarter rose to $14.91bn from $14.72bn.  Net income fell 1 percent in the quarter, down 2 percent for the year.

--Speaking of the PC industry, according to International Data Corp., sales of personal computers fell in the fourth quarter to their lowest level since 2007, the year Apple introduced the iPhone.

IDC said PC makers shipped 276.2 million units in 2015, a decline of 10.4% for the year. It was the first figure under 300 million since 2008.

Rival research group Gartner Inc. said PC makers shipped 288.7 million for 2015, an 8% drop.

HP saw a 10.1% decline in Q4 vs. the prior year, Dell -5.7%, Lenovo -4.5% and Apple’s rose 2.8%, IDC said.  [Robert McMillan / Wall Street Journal]

Speaking of Apple, I think I’ll bop over to The Mall at Short Hills for a quick channel check. [I’m writing this Thursday afternoon.]

...and I’m back...it really is a 2-minute drive from my place....

For the record it was 1:45 p.m. and I’ve never seen the Apple store emptier, with far more employees than customers.

--General Motors raised its earnings projections for 2016 and raised its quarterly dividend.  CEO Mary Barra said the company expected to benefit from modest worldwide auto industry growth.  Ford also announced it expected 2016 to be “equal to or higher” than the record figures it is expected to announce for 2015.

I’ll take the other side of this trade, not expecting there to be any growth worldwide, minimal in the U.S.

--BMW reported a fifth-straight year of record sales in 2015, though the sales increase was 6.1% from a year earlier, vs. growth of 7.9% in 2014.

Regarding China, growth was just 1.7% last year, down sharply from 16.7% in 2014.  That’s not a great trend.

--Alcoa, in announcing its earnings this week, said it expects global demand for aluminum to grow 6 percent this year, only slightly slower than 2015.  I’ll take the other side of this one, too. 

In the final quarter of 2014 Alcoa was selling its aluminum for an average price of $2,578 per ton.  By Q4 last year, that average price had fallen to $1,799 per ton, or down 30%.

Here’s where I would disagree, without knowing all the specifics behind the company’s forecasts.  It is looking for growth of aluminum components of 8-9 percent for aircraft and 1-4 percent for cars.

Then again, I’ll wait to see what Boeing says in its next report.  Every December I fly into Charleston, S.C. for my Kiawah race and this year I was astounded at the ever expanding Boeing operation there.

--Goldman Sachs Group Inc. said it settled a U.S. probe into its handling of mortgage-backed securities for about $5.1 billion, closing out a year of record legal and litigation costs.

--UK pharmaceutical group Shire is acquiring U.S. drug-maker Baxalta in a deal worth $32 billion.  An initial bid was rejected by Baxalta in August.

--Shares in French auto manufacturer Renault fell 20% on Thursday after police raids on several of its factories, with the company saying investigators wanted to check equipment.  Apparently the raids were connected to vehicle emissions and a union suggested the raids “are linked to the consequences of the Volkswagen rigged-engines affairs.”  [BBC News]

--United Continental said the terrorist attacks in Paris have hurt passenger traffic, while it is also seeing a drop-off in corporate traffic due to the slide in the energy industry.

United said it now expects fourth-quarter 2015 passenger revenue to decline between 5.75% and 6.25% year-over-year.

--Yum Brands Inc. reported that sales in China rose an estimated 1% in December, which is actually an improvement over recent disastrous results there.  KFC same-store sales rose 5% in December, helping offset an 11% decline at Pizza Hut.

By the way, to digress, for years I’ve been surprised that Pizza Hut’s product gets lumped together with Domino’s and Papa John’s.  I don’t think there is any question Pizza Hut is superior.  And that’s a memo....

Back to Yum, which is splitting off its China unit, which comprises over 50% of overall company sales, it was the first major Western fast-food company to enter China, opening a KFC in Beijing, but since 2012, it has been beset by allegations a KFC supplier used growth hormones and antibiotics to help its chickens grow faster.  Then you had a bird flu outbreak, the chickens clucking, “Ohhh noooo.”  It’s been a very rough ride for Yum since.

--Shares in Wynn Resorts bucked the trend on Friday, rising about 8 percent as the company expects improvements in its Las Vegas resorts, while it continues to struggle with its Macau properties.

--This is a bit distressing.  “The number of workers injured in New York City construction accidents rose by more than 50 percent last year, stoking fears that builders are cutting corners to cash in on the rally in the metropolitan area’s trillion-dollar-plus property market.”  [Gary Silverman / Financial Times]

For the year ending in September 2015, the figure is 356 workers hurt vs. 237 the previous year.  18 died vs. 12 in the previous 12 months.  [15 were non-union.]

--AdWeek is tracking the companies lining up for Super Bowl spots (at up to $5m, or more, for a 30-second ad) and I was struck by this one.

“SunTrust Banks: This year SunTrust will run its first Super Bowl spot... The brand believes its 30-second ad will fare well during the Big Game this year as Americans become more optimistic about their personal finances.”

Or maybe not after the recent market carnage....

And this one....

“Colgate: The toothpaste brand will make its Super Bowl debut in 2016, with a 30-second spot titled ‘Save Water.’  The ad, which will run at the two-minute warning break during the second half, will encourage people to turn the tap off while brushing their teeth in an effort to save water.”

Two thoughts.  Everyone will be flushing their toilet at this point, since you have to go before the halftime show...and make sure you rinse your mouth out before a job interview.

--Shares in GoPro Inc. continued to crater as the camera maker warned revenue for the fourth quarter will be well below Wall Street expectations and the company said it was laying off 7% of its workforce, or about 105 jobs.

The stock traded as high as $93.85 in October 2014 and closed the week at $11.45.

--Al Jazeera America said it is closing after 2 ½ years.  The network blames the “economic landscape of the media environment.”  I have no comment (but you can imagine what it would be).

-- “Star Wars: The Force Awakens” grossed an estimated $53 million in ticket sales in its first two days in China last Saturday-Sunday, 70% better than the previous record holder on the mainland, “Mission: Impossible – Rogue Nation.”

As of Monday, “Star Wars” was the third biggest movie ever, globally, behind just “Titanic” and “Avatar.”

Some estimates of the eventual take in China are in the $300 million neighborhood.  “Furious 7” did $380 million in China, the record.

--Our own Dr. Bortrum and I are among the millions who enjoy “CBS Sunday Morning” with Charles Osgood (I watch the first hour, then switch to “This Week” for a half hour, before moving on to “Face the Nation”...).  This week the New York Daily News reported this is Osgood’s last year.  He’s 83, after all. 

Jane Pauley, 65, is the early favorite to take over as host, according to the News.  That would be a good choice.

Osgood has been in his role for over 20 years, after taking over from Charles Kuralt.

Last Sunday, the program was seen by 6.6 million viewers, far more than its network rivals in that slot, “Good Morning America” and “Today.”

Foreign Affairs

Iraq/Syria/ISIS/Russia: At least 12 children and three adults were killed in a Russian air strike that hit a school in Syria’s Aleppo province Monday, activists said.  The British-based Syrian Observatory for Human Rights said a few weeks ago that Russian air strikes, in support of Bashar Assad, had killed more than 2,300 people since they began on Sept. 30, among them 790 civilians.

Moscow has called these allegations “absurd.”

Monday, a convoy of international aid trucks did reach the Damascus suburb of Madaya, where at least 32 had starved to death amid a siege by the Assad regime.  But the aid was immediately put into a warehouse rather than distributed.  It was finally handed out at week’s end but will last only ten days.

Only 10% of the UN’s requests to send aid convoys into distressed parts of Syria have been approved, either by rebel groups, extremists or the regime.

As for ISIS....

Ralph Peters / New York Post

“Ten tourists dead in Istanbul, with 15 others wounded: another dirt-cheap win for the Islamic State. The body count may be low by the standards of neighboring Syria, but the end result of this suicide bombing in the world’s most intriguing city will be months, if not years, of damage.

“Despite President Obama’s self-congratulatory rhetoric on terror, Islamist fanatics have proven to be inspired, innovative, resilient and committed to their purpose unto death.  And in at least one sphere, we’re losing big.

“Islamist terrorists have made our world smaller and narrower, crippling travel and destroying tourism in countries that depend on it for revenue. Their campaign to break the economies of Muslim states by discouraging ‘infidel’ visitors already has crippled Tunisia and Egypt for resisting the thrall of fanaticism.  Jordan’s hurting, too.

“Tuesday, it was Turkey’s turn.  Why?  Because Turkish President Recep Tayyip Erdogan had, at last, cracked down on foreign recruits for ISIS transiting Turkish territory....

“ ‘Tourist-cleansing’ is becoming one of Islamist terror’s most effective techniques of state subversion....

“President Obama’s latest ploy has been to downplay the danger yet again, to insist that we shouldn’t over-react to terrorism – which his underlings blithely dismiss as ‘not an existential threat.’

“Yet we live in a world in which even boarding an aircraft is humiliating.  A world where entire countries and regions have become no-go zones for the average traveler. A world in which Islamist barbarians have greater freedom of action than ever before, while civilized men and women can no longer visit the Pyramids with confidence....

“They’ve terrorized cities from Brussels to Mumbai.  They’ve destroyed hundreds of thousands, if not millions, of jobs in struggling states and killed even more dreams than they’ve killed men and women.

“And our president claims that we’re winning.”

Iran: Secretary of Defense Ashton Carter said on Thursday that a “navigational error of some kind” had led two Navy patrol boats to end up in Iranian waters.  But the incident was Tuesday and details are still lacking.  There’s a story they attempted to take a shortcut and apparently ran out of gas on their more than 300-mile journey back to base.

When Iranian naval vessels approached, according to the Los Angeles Times, the 10 sailors tried to make a run for it, one boat developed engine trouble, and both craft were quickly seized.

The sailors were released a day after being detained by the Iranian Revolutionary Guard in the Persian Gulf, following frantic calls between Washington and Tehran, with Sec. of State John Kerry speaking with his Iranian counterpart, Mohammad Javad Zarif, five times.

Kerry then thanked the Iranians for their quick actions and said the sailors had been “well taken care of.”

But then after the boats were released, Iranian television broadcast the images of the U.S. sailors being detained with their hands behind their heads, with one then apologizing “for our mistake.”

The whole episode is pathetic on so many different levels.  For starters, we were initially told one of the two Navy boats had mechanical problems and drifted into Iranian waters.  Then we’re told it was a navigational error.  Clearly, both vessels were fine the next day as they headed back to their command ship.

Harold Rhode, distinguished senior fellow at the New York-based Gatestone Institute and a former adviser at the Pentagon, told the Jerusalem Post, the fact that until now the U.S. has not reacted on numerous issues – such as Iran’s testing of a ballistic missile in October in violation of the UN Security Council resolution and the firing of rockets near U.S. naval ships – “demonstrates America’s weakness to Middle Easterners,” Rhode said.

“This is another case of America demonstrating that it is an unreliable ally and a harmless enemy,” he added.

“In the Middle East, when people smell weakness, they pounce.  Most amazingly from the Iranian point of view,” Rhode continued, “is that they captured these sailors right before Obama’s State of the Union speech, and the president didn’t even mention it.

“Did the Iranians do that on purpose to further humiliate Obama and Secretary of State John Kerry? From an Iranian cultural point of view, the answer is yes!” exclaimed Rhode.

Michael Rubin, a scholar at the American Enterprise Institute and a former Pentagon official, told the Post:

“They humiliated the United States. They received a groveling apology. They broadcast photos of the captured Americans....

“To credit diplomacy for their release is like giving a slap on the back to an arsonist who started a fire and then wants credit for putting it out,” said Rubin.  [Ariel Ben Solomon / Jerusalem Post]

Rich Lowry / New York Post

“The Obama administration was right when it insisted that the capture and release of 10 American sailors by Iran showed the benefits of a cooperative relationship with Tehran.

“The crux of the arrangement is simple: the Iranians agree to humiliate us (and pursue their long war against the United States and their hegemonic ambitions in the Middle East) and we agree not to care.  It is, as Secretary of State John Kerry says, diplomacy at its best.

“What Vice President Joe Biden called ‘standard nautical practice’ involved the Iranians making our sailors get on their knees on their captured boats, eliciting an apology from the commander, and photographing and videotaping all of it to broadcast for propaganda purposes – in clear violation of international law.

“This obviously wasn’t another Carter-era Iranian Hostage Crisis (it wasn’t even a hostage crisis), but it was another national humiliation to add to a sour public mood that President Obama doesn’t get, let alone understand his own role in creating....

“The day after the State of the Union, the images from Iran emerged to provide a picture that said far more than Obama’s 6,000 words.

“The president has actively sought America’s diminishment abroad.  For him, this is a shrewd play that avoids costly entanglements and makes us stronger.  But there’s no doubt that we are less respected and feared around the world.

“The public feels it, and doesn’t like it.  President Obama may fancy himself above the old Thucydides trinity of motives – honor, interest and fear – but most people aren’t.  Many of them, as a certain presidential candidate puts it, want to win again.

“They look at the photographs and videos of those American sailors and it feels like a punch in the gut.

“The Obama administration looks at them and says to the Iranians.  Thank you very much.”

Aaron David Miller, a former Middle East negotiator now at the Wilson Center:

“This administration is going to remain hostage from now until they leave office to the games the Iranians play and to Iranian behavior that falls outside the four corners of the agreement.”  [Bloomberg News]

Speaking of which, the nuclear accord could go into effect this weekend, with Iran then eligible to receive at least $100bn in frozen funds (over time).

In his State of the Union, Obama said: “As we speak, Iran has rolled back its nuclear program, shipped out its uranium stockpile, and the world has avoided another war.”

Former U.S. ambassador to Iraq Jim Jeffrey, now at the Washington Institute for Near East Policy:

“The problem is all indications are that the Obama administration is changing its overall approach to Iran, not standing up for its own rights.  A lot of it is, ‘This is our legacy,’ and ‘We can’t let anything get in the way of it.’”  [Bloomberg]

Editorial / Wall Street Journal

“The best you can say about the Iran nuclear deal is that it will take years to play out and it will be vindicated if Iran’s theocratic regime falls before the accord sunsets.  If not, the deal will have enabled, with money and legitimacy, Iran’s ambitions to dominate the Middle East.” 

Turkey: Aside from the above-mentioned ISIS attack in Istanbul’s main tourist district that killed at least 10 Germans, the government’s war against Kurdish rebels deepened.  Turkish security forces killed 32 Kurdish militants in the southeast of the country last weekend, while the Kurds retaliated by attacking a police station in the region, killing five.

Israel: Prime Minister Benjamin Netanyahu did not react well to the following comments from Sweden’s Foreign Minister Margot Wallstrom.  Wallstrom called for an investigation to determine if Israel was guilty of extrajudicial killings of Palestinians during the current wave of terrorism. 

“It is vital that there is a thorough, credible investigation into these deaths in order to clarify and bring about possible accountability,” she said on Tuesday during a parliamentary debate.

The Israeli Foreign Ministry countered that Wallstrom’s comments indicate that “she does not understand what is happening in our region and is apparently not aware of the difficult situation facing Israeli citizens, and the continuous danger of murderous terrorism.”

Wednesday, the Foreign Ministry said Sweden would not have any future role in the Israeli-Palestinian diplomatic process, nor is Wallstrom welcome to visit Israel.  Netanyahu is furious, and with good reason.

China / Taiwan: As you read this, we may already know the result of Taiwan’s presidential election, which I have said is a major event in the region with China’s leadership expressing concern.

It is expected the Democratic Progressive Party’s candidate Tsai Ing-wen will win, and then the issue will be can she smooth the ongoing transition in Taiwan’s relations with the mainland.  Voters will expect Tsai and her administration to trumpet Taiwan’s achievements more openly, especially in securing political and civil rights for its citizens, which will be in great contrast to what is taking place in China these days.

Most importantly, Tsai is a figure who has spoken forcefully of Taiwan’s independence, the last thing Beijing wants to hear.  But, assuming the polls are right, a majority of Taiwan’s 23 million people have tired of the past eight years under President Ma, who many say has been too accommodating of Beijing’s interests at the expense of the economy.

Ms. Tsai has pledged not to provoke China, but her party supports formal independence from the mainland.

As for Washington, officials have quietly been urging all sides on Taiwan to avoid unilateral actions that could provoke China, and with good reason there are concerns this could become a major flashpoint.  Beijing has never dropped threats to retake the island by force and you have those thousands of missiles pointed at Taiwan from across the Strait.

Tsai would not be inaugurated until May, so she would have time to issue some accommodating statements, but if she doesn’t acknowledge Beijing’s line of “One China,” look for Xi Jinping to take action.  At first it would be economic, but depending on the mood of the Chinese people, Xi can move on the island itself. And then all hell breaks loose.  [Do not discount this possibility.]

For now, Tsai has pledged to focus on the economy and address concerns many jobs have moved to the mainland.

Tsai has a master’s degree from Cornell University and a doctorate from the London School of Economics, by the way.  She would be Taiwan’s first female president.

In other China news....

Vietnam accused Beijing of threatening regional air safety by conducting unannounced flights through its airspace to a disputed reef in the South China Sea.  Vietnam’s Civil Aviation Authority issued a protest letter that read in part:

“Chinese aircraft have ignored all the rules and norms of the ICAO (the UN’s International Civil Aviation Organization) by not providing any flight plans or maintaining any radio contact with Vietnam’s air traffic control center.”

In just the past week, as reported by the South China Morning Post, “Vietnam logged 46 incidents of Chinese planes flying without warning through airspace monitored by air traffic control in the southern metropolis of Ho Chi Minh City.”

Chinese state media ten days ago said two civilian planes landed on an island in the contested Spratly Islands.

Separately, the South China Morning Post had an extensive story on China’s nuclear reactors, many of which are being built on Hong Kong’s doorstep, and given China’s lack of transparency about anything, let alone industrial safety, as Stuart Heaver reports:

“Scientists and conservationists fear the ever-increasing commercial and environmental pressure to expand the nuclear power sector means not enough attention is being paid to safety.  Within a couple of decades, Hong Kong could be in close proximity to as many as 39 reactors, spread across Guangdong province.  Two of them are nearing completion just 140km west of Hong Kong, in Taishan, in what has been labeled by green groups as the ‘most dangerous nuclear power plant in the world.’

“ ‘China is developing its nuclear capability too fast; they just don’t have enough trained staff or adequate independent safety infrastructure,’ says civil engineer Albert Lai Kwong-tak, of Hong Kong think tank the Professional Commons and a long-standing opponent of nuclear energy.”

Finally, the other day I wrote of the disappearance of five booksellers in Hong Kong.  Reuters reported this week that Hong Kong publishers and vendors of books on China politics that are banned in China are beginning to pull them from their shelves.  Bookstore owners declined to be publicly interviewed by Reuters, citing the fear of mainland anger.

China has yet to say anything about the fate of the five men and whether they are in custody.

China’s state-run Global Times wrote in a recent editorial that the booksellers were exercising an “evil influence” in China through their political books.  The newspaper then said it was “reasonable” for law enforcement agencies to “circumvent the law when they seek cooperation from an individual for investigation.”

Russia: President Vladimir Putin gave an interview to Germany’s Bild newspaper wherein he said the West and Russia had never re-established a relationship of trust following the breakup of the Soviet Union.

“Twenty-five years ago, the Berlin Wall fell, but invisible walls were moved to eastern Europe. This has led to mutual misunderstandings and assignments of guilt.  They are the cause of all crises ever since...We’ve done everything wrong,” said Putin.

Pointing to NATO’s eastward expansion for the cooling in Russia’s relations with the West, Putin said:

“NATO and the U.S. wanted a complete victory over the Soviet Union.  They wanted to sit on the throne in Europe alone.”

Putin added Western sanctions imposed on Russia over its annexation of Crimea and its role in eastern Ukraine were aimed at “geopolitically pushing Russia back” – not at helping Ukraine.

Putin described the sanctions as “a theater of the absurd.”  [Eva Hartog / Moscow Times]

Indonesia: ISIS claimed responsibility for a Paris-style rampage in the capital of Jakarta on Thursday, but thankfully only two civilians were killed, while all five attackers died.  Authorities believe the attackers, who didn’t possess powerful explosives in blowing themselves up, thus limiting the carnage (two died in an ensuing gun battle), are probably linked to an Indonesian faction of Islamic State that has sent volunteers to fight in Syria.

Somalia: Al-Shabab militants attacked an African Union military base here and the Islamist group said it took complete control of the camp and killed more than 60 Kenyan soldiers.  A Kenyan military spokesman said Kenyan troops nearby counter-attacked, but the number of casualties was not known.  A resident nearby told the BBC by phone the camp was in the hands of al-Shabab.  “We can see military cars burning and dead soldiers all over the place. There are no civilian casualties but most people have fled the town.”

Sierra Leone: Just hours after the World Health Organization declared West Africa free of Ebola, a corpse tested positive for it in Sierra Leone.  Too much.

Ebola killed more than 11,300, mostly in West Africa, since it emerged at the end of 2013.

Random Musings

--There were a few polls this week:

Nationally: A New York Times/CBS News Poll has Hillary Clinton leading Bernie Sanders 48-41.  Just a month ago, Clinton led by 20 percentage points nationally in this one.

A Fox News national poll has Clinton leading Sanders 54-39.

On the Republican side, the aforementioned NYT/CBS poll has Donald Trump receiving 36% nationally, with Sen. Ted Cruz next at 19% and Sen. Marco Rubio third with 12%.  [Ben Carson, who back in late October received 26%, is now down to 6%.]

The Fox News poll has Trump at 35%, followed by Cruz with 20%, Rubio 13% and Carson 10%.  Jeb Bush is fifth at just 4%.  The prior month, Trump led Cruz 39-18.

And in a new Wall Street Journal/NBC News national poll released Thursday, Trump leads Cruz 33-20, with Rubio at 13% and Carson at 12%.  In December, Trump led Cruz by five points.

Iowa: A Quinnipiac University Poll found Bernie Sanders besting Hillary Clinton in Iowa 49-44, which compares to a Dec. 15 survey that had Clinton leading Sanders 51-40.  Men back Sanders 61-30, while women back Clinton 55-39.  [Martin O’Malley picks up the crumbs.]

But a Des Moines Register/Bloomberg Politics poll has Clinton leading Sanders 42-40.  Her lead had been 9 points a month ago. 

An NBC News/Wall Street Journal/Marist poll has Clinton leading Sanders 48-45.

On the Republican side, the Des Moines Register/Bloomberg poll has Ted Cruz leading Trump by a 25-22 margin, with Rubio at 12%, Carson 11% and Rand Paul fifth at 5%.  Bush polls 4%.

According to the NBC/WSJ/Marist poll, Cruz leads Trump in Iowa by four points, 28-24, followed by Rubio at 13% and Carson 11% among “likely” caucus-goers.  [Among “potential” caucus-goers, Trump leads Cruz 26-24, suggesting a larger turnout could benefit Trump.]

The Quinnipiac survey has Trump with a 31-29 lead, Rubio 15%, Carson 7%.  [Jeb Bush 3%.]

New Hampshire: A Monmouth University poll of Granite State voters likely to participate in the primary has Sanders holding a 53-39 lead over Clinton.  Clinton led here 48-45 in November.  But among women in this survey, Sanders has overtaken Clinton, 50-44, when it had been 37-56, Clinton, two months ago.

The NBC/WSJ/Marist poll has Sanders ahead of Clinton just 50-46.

On the Republican side...

The NBC/WSJ/Marist poll of Republican primary voters in New Hampshire has Trump leading Rubio 30-14, with Chris Christie at 12%, Cruz 10%, and John Kasich and Jeb Bush at 9% each.

The Monmouth poll has Trump at 32%, Cruz and Kasich at 14%, Rubio 12% and Christie 8%.

--So in Thursday’s Republican debate in Charleston, S.C., Donald Trump and Ted Cruz took off the gloves and engaged in heated exchanges, as Trump does not want to lose Iowa, which as you can see from the above is a toss-up.

I thought Trump did well, especially with his retort when Cruz said The Donald isn’t a conservative because he embodies “New York values.”

“When the World Trade Centers’ came down, I saw something that no place on Earth could have handled more beautifully, more humanely, than New York....We rebuilt downtown Manhattan, and everybody in the world watched.  And everybody in the world loved New York and loved New Yorkers. I have to tell you, that was a very insulting statement that Ted made.”

It was Trump’s best moment of the debates, plus I also think he nailed the question on trade deals, even if moderator Neil Cavuto pretended not to understand.

Hugh Hewitt, conservative radio host, said: “Winners tonight: Donald Trump and Marco Rubio, but Ted Cruz and Chris Christie with enough to smile about.  Jeb Bush hangs on.”

Mark Halperin, managing editor of Bloomberg Politics: “My debate report card grades: Trump: A-, Cruz: B+, Christie: B, Rubio: B, Bush: B-, Kasich: B-, Carson: C.”  [Bloomberg News]

I agree with Mr. Halperin’s grades, except I’d give Rubio a B+ and Cruz a B.

--Hillary Clinton proposed a 4 percent additional tax on individuals earning more than $5 million a year.  According to her campaign, the tax would raise an estimated $150bn over the next decade, but some of her policy proposals dwarf this; such as $350bn to make college more affordable and relieve student debt, and a $250bn infrastructure program.

--Chris Cillizza of the Washington Post interviewed Pat Buchanan and posed the question, “Can Donald Trump win the presidency as the Republican nominee?  If so, how?  Be specific.”

Buchanan: “Demographically and electorally, the Democratic Party has the stronger hand. For Trump to win, I would hammer the illegal immigration issue, securing the border, renegotiating trade deals that have cost us factories, jobs and rising wages, and after securing the party base, go for victory in Pennsylvania, Ohio, Michigan and Wisconsin, by campaigning against the Clinton trade policies that de-industrialized Middle America and on a new Trump trade agenda to re-industrialize America.

“Bring the jobs back!

“With Obama not running, there is no reason Trump, a builder and job creator, could not win more of the African American vote than McCain who lost it 24-1.  There is no reason Trump cannot win more Hispanics, who respond to strong leaders and job creators.  Romney lost over 70 percent of the Hispanic vote.

“Given the situation in the country and the world, the issues for Trump are backing up the men in blue, building a wall to secure the border against illegal immigrants, cracking down on corporations that hire illegals rather than Americans, making America the strongest nation on Earth, but staying out of wars that are none of our business.  And paying back 10 times over those who attack us – the Jacksonian stance.

“Lastly, as Democrats and a hostile media will seek to make Trump the issue, the Republicans should, if she is nominated, make Hillary the issue. Do we really want to go back through all that again, or roll the dice on a better, brighter and surely more exciting future.”

--South Carolina Gov. Nikki Haley gave what turned out to be a controversial Republican response to Obama’s State of the Union address, and it was a wing of her own party that was unhappy.

Editorial / Wall Street Journal

“It’s a sign of the GOP’s distemper that some conservatives denounced her because she didn’t denounce legal immigration.

“Gov. Haley’s parents came to America from India.  He father taught botany at Voorhees College.  Her mother started what would become a multimillion-dollar clothing company out of the living room of the family home.  As she put it Tuesday, ‘I am the proud daughter of Indian immigrants who reminded my brothers, my sister and me every day how blessed we were to live in this country.’

“Her conservative critics unloaded.  ‘Trump should deport Nikki Haley’ went one tweet....

“The distinction Gov. Haley is trying to make is between a functioning, legal immigration system that works in America’s interest – which Republicans say they want – and the unlawful, broken and arbitrary system that encourages illegality – which is what we now have and which President Obama exploits to the Democrats’ political advantage.

“The attacks on Ms. Haley show that many on the right these days oppose any immigrants, even those who arrive legally. They also want to make opposition to immigration a GOP litmus test.  A party that rejects Nikki Haley as a spokeswoman is one that doesn’t really want to build a governing majority.”

--Ted Cruz failed to report a large loan from Goldman Sachs, where his wife works, when he was running for the U.S. senate four years ago.  Coupled with a loan from Citibank, they totaled “$750,000 and eventually increased to a maximum of $1 million before being paid down later that year.  There is no explanation of their purpose.”

As first reported by Mike McIntire of the New York Times, “Neither loan appears in reports the Ted Cruz for Senate Committee filed with the Federal Election Commission, in which candidates are required to disclose the source of money they borrow to finance their campaigns.... There is no evidence that the Cruzes got a break on their loans.”

A spokeswoman for the Cruz presidential campaign acknowledged the loan from Goldman was a source of money for the Senate race.

Then on Thursday in the debate, when questioned on the issue, Cruz responded: “Yes, I made a paperwork error disclosing it on one piece of paper instead of the other.  But if that’s the best the New York Times has got, they better go back to the well.”

That’s a really lousy answer, Senator.  And it’s not nearly good enough. I’m with the Times on this one.

--Peggy Noonan / Wall Street Journal:

“The real problem for Mrs. Clinton is that so many people do not find her to be a person of reliable integrity.  It’s not more complicated than that, really – her character is not admired.  It’s all in the polls.  In August, a Quinnipiac poll had 61% of respondents saying they do not consider her honest and trustworthy.  In October they reported that in swing-states she was regarded as the least trustworthy of all the candidates, both parties.

“After 23 years at the highest levels of public life, Mrs. Clinton has become encrusted by scandal, from her part in her husband’s dramas straight through to Benghazi, the Clinton Foundation and the emails, in connection with which she may be indicted. She brings scandal with her, always has.  I would be surprised if many people were not thinking: ‘Do we really want to go back to all that again, knowing it never ends, knowing there will be another scandal, that all we have to do is wait?’

“Maybe she’ll gut it out.  But maybe it’s like 2008 again, a reverse Sally Field: They don’t like me, they really don’t like me.

--A Gallup poll released Monday found that the share of Americans identifying themselves as Democrats last year dropped to an all-time low of 29%.  But just 26% describe themselves as Republicans, a tick up from the party’s all-time low of 25%, recorded in 2014.

42% of Americans consider themselves independents.

--According to a Kuwaiti newspaper Al-Jarida, President Obama has already discussed the issue of running for secretary-general of the United Nations, succeeding Ban Ki-moon when the South Korean’s term ends on December 31 of this year.

Oh brother.  The Jerusalem Post reported that Prime Minister Netanyahu is already leading an effort to thwart Obama’s plan, seeking to unite moderate Arab governments against him.

“Wasn’t eight years of having Obama in office enough?” Netanyahu is quoted in the Kuwaiti daily as telling associates.  “Eight years during which he ignored Israel?  And now he wants to be in a position that is liable to cause us hardships in the international arena.”  [Jerusalem Post]

--The following editorial from the New York Post pretty well sums up the Sean Penn situation.

“El Chapo, meet El Jerko.

“Hollywood blowhard Sean Penn secretly met, interviewed, and posed for grip-and-smirk selfies with murderous drug lord Joaquin Guzman Loera – even as the world’s most-wanted fugitive continued to elude authorities in the months after tunneling out of a Mexican prison.

“Penn (agreed) not to alert authorities to the killer’s whereabouts.  Still, Guzman’s capture in a dramatic police shootout Friday came as a direct result of Mexican officials tracking their contacts, authorities there said.

“And Mexican officials now are investigating Penn and actress Kate del Castillo, who traveled with the actor to visit the vile drug lord, ABC News reported.”

Penn concedes in the piece (for Rolling Stone) that he ‘may be perceived as protecting criminals.’

In an interview with CBS News’ Charlie Rose for “60 Minutes,” Penn says: “I have a regret that the entire discussion about this article ignores its purpose, which was to try to contribute to this discussion about the policy in the war on drugs.”

What is good about the whole takedown of El Chapo is the U.S. and Mexico cooperated extensively and in this regard it could be a very positive development.  Guzman will be extradited to the U.S. where, among other things, he faces 12 murder charges.

--On 12/26/15 in this space, I wrote of a terrifying mosquito-borne virus, Zika, that has been sweeping Brazil, a real health crisis there.  I not only noted how this couldn’t occur at a worse time for their upcoming Olympic Games in Rio, but also how we need very cold weather in the U.S. to kill mosquito larvae, essential to holding down viruses this coming summer like West Nile.

So what do we hear this week?  “A Houston-area woman who traveled to El Salvador has been diagnosed with the Zika virus, public health officials said, raising concern that the mosquito-borne illness linked to a health crisis in Brazil could spread through the Americas.” [Wall Street Journal]

NBC News then featured it Thursday and Friday.

Zika is seldom fatal, but in Brazil, there are thousands of cases of microcephaly – a condition in which infants are born with undersized brains and skulls.

Puerto Rico reported its first case of Zika in a resident who hadn’t traveled to a country where the virus is present, so it’s circulating in mosquitoes there.

“U.S. officials say they are preparing for a possible influx of Zika this spring and summer,” notes the Journal’s Betsy McKay and Reed Johnson.

Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, co-wrote a new report in The New England Journal of Medicine and said the U.S. needs to prepare for a scenario of multiple mosquito-borne diseases (including dengue and chikungunya) breaking out simultaneously.

Diseases spread by insects “are the next big threat to the Western Hemisphere, including the U.S.,” said Peter Hotez, dean of the National School of Tropical Medicine at Baylor College of Medicine in Houston.  [Liz Szabo / USA TODAY]

This is scary stuff.  I showed you in my 12/26 spot, through my own research, the impact cold weather can have...so as much as I hate it with a passion, every super cold morning I’ll think, ‘at least we’re killing some mosquitoes.’

--I liked what Iman, David Bowie’s supermodel wife, tweeted on Friday, two days before the rock star’s death.

“Life isn’t about avoiding the bruises. It’s about collecting the scars to prove we showed up for it.”

May all of us show up.

---

Pray for the men and women of our armed forces...and all the fallen, including those Marines involved in the helicopter collision off Oahu.

God bless America.

---

Gold $1088
Oil $29.42 [Brent 28.94...both lowest in 12 years]

Returns for the week 1/11-1/15

Dow Jones  -2.2%  [15988]
S&P 500  -2.2%  [1880]
S&P MidCap  -3.0%
Russell 2000  -3.7%
Nasdaq  -3.3%  [4488]

Returns for the period 1/1/16-1/15/16

Dow Jones -8.3%
S&P 500  -8.0%
S&P MidCap  -9.2%
Russell 2000  -11.3%
Nasdaq  -10.4%

Bulls 28.6
Bears 35.7  [Source: Investors Intelligence]

Have a great week. I appreciate your support.

Brian Trumbore