For the week 12/28-1/1

Appearing on “Meet the Press” last week, former House Speaker Newt Gingrich called the just completed decade one of “self-deception,” naivety, with bubbles galore such as in technology, housing, Wall Street and government.  I’d say it was a decade characterized by the little guy getting crushed. 

But it was also a time when real heroes emerged, first in the actions of firemen and passengers on 9/11, and then the U.S. military in both Iraq and Afghanistan. Even here, however, it was a decade of unfulfilled objectives, such as in the failure to take out al-Qaeda’s two main symbols, bin Laden and Zawahiri, or the failure to stop North Korea’s and Iran’s nuclear weapons intentions. Forget Wall Street, it was a “lost decade” on the geopolitical front and our leaders are left with staggering challenges and an ever-present threat that one day we will be shaken to the core, even worse than 9/11. Just two weeks ago, 12/19, I wrote: 

“Without giving away all my thoughts on 2010…I’ll just add for now that due to geopolitical reasons there will come a time next year when we’ll feel about as low as you can get.” 

Six days later, Christmas Day, we almost saw a manifestation of this in the failed attack on a Northwest Airlines plane heading for Detroit. Let me just jump to my main thesis on this new year. We will be convulsed by geopolitical events of immense proportions.  

But let’s look in detail at the past decade in financial terms, first. Economist Paul Krugman of the New York Times summed it up…the last ten years were “the Big Zero.” 

“It was a decade with zero economic gains for the typical family…. 

“It was a decade of zero gains for homeowners, even if they bought early: right now housing prices, adjusted for inflation, are roughly back to where they were at the beginning of the decade. [Ed. as I note below, Las Vegas is a prime example of this point.] 

“Last and least for most Americans – but a big deal for retirement accounts, not to mention the talking heads on financial TV – it was a decade of zero gains for stocks, even without taking inflation into account. Remember the excitement when the Dow first topped 10,000 and best-selling books like ‘Dow 36,000’ predicted that the good times would just keep rolling? Well, that was back in 1999. Last week the market closed at 10,520. 

“So there was a whole lot of nothing going on in measures of economic progress or success. Funny how that happened. 

“For as the decade began, there was an overwhelming sense of economic triumphalism in America’s business and political establishments, a belief that we – more than anyone else in the world – knew what we were doing. 

“Let me quote from a speech that Lawrence Summers, then deputy Treasury secretary (and now the Obama administration’s top economist), gave in 1999. ‘If you ask why the American financial system succeeds,’ he said, ‘at least my reading of the history would be that there is no innovation more important than that of generally accepted accounting principles: it means that every investor gets to see information presented on a comparable basis; that there is discipline on company managements in the way they report and monitor their activities.’ And he went on to declare that there is ‘an ongoing process that really is what makes our capital market work and work as stably as it does.’ 

“So here’s what Mr. Summers – and, to be fair, just about everyone in a policy-making position at the time – believed in 1999: America has honest corporate accounting; this lets investors make good decisions, and also forces management to behave responsibly; and the result is a stable, well-functioning financial system. 

“What was truly impressive about the decade past, however, was our unwillingness, as a nation, to learn from our mistakes. 

“Even as the dot-com bubble deflated, credulous bankers and investors began inflating a new bubble in housing. Even after famous, admired companies like Enron and WorldCom were revealed to have been Potemkin corporations with facades built out of creative accounting, analysts and investors believed banks’ claims about their own financial strength and bought into the hype about investments they didn’t understand. Even after triggering a global economic collapse, and having to be rescued at taxpayers’ expense, bankers wasted no time going right back to the culture of giant bonuses and excessive leverage…. 

“So let’s bid a not at all fond farewell to the Big Zero – the decade in which we achieved nothing and learned nothing.” 

It’s been a decade where Wall Street was king, and as I mentioned some of the following comments of former Fed chairman Paul Volcker a few weeks ago they bear repeating, this time as presented by Patrick Hosking of the London Times. 

“As Paul Volcker put it…the greatest piece of financial innovation of the past few decades has not been the credit default swap or any of the other fancy derivatives conjured up by the industry’s energetic rocket scientists, but the humble cash machine. 

“(Volcker) argued that the mushrooming in the relative size of the financial services industry in recent decades was not because it was creating extra value for the world but simply because it was paying itself much, much more. 

“His grumpy denunciation of modern-day wholesale financial services at a Wall Street Journal conference was magisterial. Cue hundreds of bankers shuffling their feet in embarrassed silence. 

“Lord Turner of Ecchinswell, the chairman of the Financial Services Authority, was spot-on when he argued that some of what the City does is socially useless. In some ways, it is worse than useless, depriving other industries of our brightest and most energetic graduates. 

“The banks are perhaps the victims of their particular activity. They deal in that most commoditized of products, money. A loan is a loan is a loan. Beyond a few bells and whistles, there is no honest way to dress it up to make it better. So some banks have strayed into dishonest ways instead.” 

William Rees-Mogg, also of the London Times, added his two cents. 

“Mr. Volcker…opened his speech with the words: ‘Wake up, gentleman…I can only say that your response (to the crisis) is inadequate. I wish that somebody would give me some shred of neutral evidence about the relationship between financial innovation recently and the growth of the global economy – just one shred.’” 

And so it was a decade where we faced terrorism, and then war, on one end, and financial terrorism on the other…the planting of weapons of mass destruction on the books of banks, pension funds, and municipalities, with government left to clean it up, hardly the perfect situation. It was a decade where financial innovation killed us. And yet name one individual who was responsible for the mess that has truly paid the price…not including the latest generation of Ponzi scheme artists. Who on Wall Street, aside from perhaps losing their position and some net worth, really suffered for their manipulation of the markets solely for personal gain? 

Back in January 2000, when Americans were asked for a USA TODAY/Gallup poll whether the country was headed in the right direction, 69% said ‘yes.’ The same poll last month had 25% believing so. But then there is this AP-GfK survey just out that asks if Americans are optimistic about 2010 and 72% said yes to that one. The questions aren’t the same, but they are similar…sense of the direction of the country vs. how you and I will fare. To me it’s the same principle as the one where we want government to do this, that and the other thing, but we don’t want to pay for it…or sacrifice in any fashion. You can’t have it both ways, but we keep trying. It’s not an admirable trait. Much like the housing bubble, it smacks of a delusional mind. Not a band of brothers, but a band of selfish jerks. 

The S&P 500 posted an average decrease of 0.9% a year since 1999 including dividends, the first negative return for a decade since data began in 1927; meaning investors who put $10,000 in stocks on Dec. 31, 1999, have $9,090 now, while the same amount in 10-year Treasury notes would have grown to about $18,000 following a 6.1% annualized return, according to Bloomberg. A $10,000 investment in the Reuters/Jefferies CRB Index of 19 raw materials increased 3.3% a year to $13,803, while gold futures rose 14% a year, turning $10,000 into $37,852. 

Just further examples of the failure of buy and hold that through the 90s held everyone in such good stead. Then again, if you held Apple the entire decade you would have picked up a cool 720%. 

But before we look at 2009, specifically, just a reminder of what I started off last year’s review with.

Japan (Nikkei) -42.1% [worst ever]
South Korea (Kospi) -40.7%
Hong Kong (Hang Seng) -48.3% [worst since 1974]
China (Shanghai Comp) -65.4% [2007 +97%]
Singapore (Straits Times) -49.2%
Australia (S&P/ASX) -41.3% 

U.K. (FTSE) -31.3%
Germany (DAX) -40.4%
France (CAC 40) -42.7% 

[28 of 69 nations under the MSCI umbrella had declines of greater than 50%, including Russia’s 67% loss and India’s 52%.] 

U.S. stock mutual fund averages for 2008 [Lipper indices] 

Now…2009…comeback after the fall 

But the ’09 return numbers, the best since 2003, tell only half the story. 

From the depths of despair on March 9, stocks staged a stupendous rally without as much as a 10% correction. 

And 2009 was a huge comeback year around the world [local currencies]. 

Tokyo’s Nikkei +19%
Sydney’s All-ordinaires +31%
London’s FTSE +22%
Frankfurt’s DAX +24%
Paris’ CAC-40 +22% 

All the above staged spectacular rallies off the March lows as well, with London’s FTSE, to pick one, up 54%. 

To complete the comparison of \’08 to \’09, the Lipper fund indices for \’09:

Large Cap Growth  +38.5%
Large Cap Value  +25.0%
Small Cap Growth  +38.0%
Small Cap Value  +33.0%
International  +35.3%

But stocks have a ways to go to return to where we were at the highs of October 2007. 

So how did I do in terms of my predictions for 2009? Not bad…not bad at all. In fact, spectacularly well, frankly. In terms of the bottom line I said the Dow Jones and S&P 500 would advance 20% and Nasdaq 30%. It’s this last bit that really distinguished my call over other bulls. And whereas some strategists were scrambling last March at the market lows (remember, the S&P was off 25% year-to-date as of March 9), I stuck to my guns…all year. 

But what really sets me apart is that not only did I call the stock market (I also had the direction right in 2008, incidentally), but at least for now I nailed the bottom in the housing market, April-May, which I came up with in the fall of 2008.  

To give you a flavor, here’s some of what I wrote a year ago, 1/3/09, when looking at the year ahead. 

“Forgetting the usual caveats on geopolitical surprises, a major terror attack in the U.S., or a conflict over Iran, I do not see how you can make a claim, as so many are doing, that the economic recovery will begin in the second half, and, just as importantly, be sustainable, yet. What was once all about housing and the wealth effect has evolved into housing and jobs, the two then feeding into consumer and capital spending. The job picture is not going to be pretty for at least the first half of the year, while housing, which will bottom in April (though give me a month or two on this consistent forecast), then flatlines. There will be no ‘V-shaped’ recovery in housing. Not with inventory levels like we have today. At least lower mortgage rates, for those who qualify, could help keep the economy from tipping into depression through the ability to refinance, let alone buy a new home. 

“This will remain a deep global recession, with pockets of rising unrest overseas helping to feed the doom and gloom as it doesn’t make for inspiring pictures on the nightly newscasts. 

“The inauguration of Barack Obama, though, will supply some good feeling and both Wall and Main Streets will initially like the stimulus program that he signs shortly after taking office. Let’s face it, bulls are counting on stimulus packages around the world to get out of this mess, and they have a point. I maintain China will be a leader in this vein. 

“But, again, to then draw a line and say beginning in the second half it’s ‘Oh happy days!’ doesn’t strike me as being rational given the many facets of the crisis that make this all so historic. [The behavior of the stock market, though, is a far different story. More later.]” 

So that’s part of what I was writing a year ago (emphasis included as originally written). I was noting that as gloomy as some of the news would prove to be, and it certainly was for much of the year, the stock market was a different animal and that’s what bearish strategists such as David Rosenberg totally missed. We learned to accept “less bad” when it came to the economic numbers, and “green shoots,” while hardly Jack’s beanstalk, sufficed until the economy gained a bit more traction; though now we have a market that, after the rally off the March bottom, is looking for more than a sentiment change. It wants to see real revenue growth and an improving employment picture. 

Perhaps we get a fair amount of this but here’s my bottom line. Stocks will finish the year in negative territory…with the S&P 500 and Dow Jones down 12%, Nasdaq off 6%.  

I fall firmly in the camp that the deleveraging process for the consumer is far from over and that spending won’t return until the job picture improves, which I just don’t see happening in any big way. I also don’t see housing coming back significantly in terms of median home prices, owing to the still serious foreclosure issue, as well as a ton of option-ARM mortgages that will be resetting at much higher rates later in the year. 

It’s a year that’s also going to be dominated to a great extent by further issues on the state and local government front, as in revenues won’t nearly meet expenses, which will lead to even further layoffs. The big stories are California, New York and New Jersey. Regarding my home turf, it was revealed this week that state revenues are off 14% and our new governor wants to cut spending 25%. No way the state legislature will allow that, but it also doesn’t mean New Jersey, or any other state for that matter, is going to be doing any hiring. 

It’s about deficits and this is an issue worldwide. 2010 is about still stagnant, if not falling, wages. This year will also see an ever increasing anger with government and the health-care debate, and this will best be manifested in what is going to be an unruly mid-term election. 

2009 was about survival…and as I’ll note further below Ben Bernanke deserves a lot of the credit. 2010 is going to be about shattered expectations and dreadful pictures on television that will depress the hell out of us. It’s going to be about Iran, for sure, but also a heavy dose of Pakistan as it hurtles towards collapse, with unfathomable consequences. It’s going to be about terror attacks around the globe, including a major incident in Latin America.  

Inflation. More time has been wasted on this single topic over the past years than just about anything else. Ditto the plight of the dollar. Yours truly has not fallen into these traps of punditry for two simple reasons. Regarding the former, talk to me when the job picture is greatly improved, period. Not before. Regarding the greenback, yes, I’m well aware of our extreme budget issues and the risk China will stop buying our Treasuries. But I’m also well aware, while others miss, that just about everyone else in the world has the same deficit issues we do and, ergo, the dollar is still as good, if not better, than most alternatives. Let alone the fact that when the geopolitical picture really heats up, money will come flooding into our currency. Those screaming about these two topics will, it’s true, one day be right. But we’re nowhere close to that time. 

Same with commercial real estate. One of my best calls was not to confuse problems in this arena with any reaction in the equity markets. I told you, correctly, ad nauseum, that there is a huge difference when it comes to investor sentiment between the impact of residential and commercial real estate. The first is about the wealth effect and its drag on consumer spending. The second is about bank lending, particularly to small business, which impedes the strength of any recovery but has little to do with movement in the Dow Jones on a day-to-day basis. 

The number of bank failures, as I’ve noted, is also irrelevant. Bottom line, the system works. The only thing you need to be concerned with if you have sizable assets is to make sure they aren’t all going into one or two accounts and exceeding FDIC (and/or SIPC) limits. I’m about to get a little windfall from selling my home and I’ll be very conscious of this myself. 

The Terror Threat…and the President’s handling of it 

It came to light that the CIA learned of Abdulmutallab in November when his father went to the U.S. embassy in Nigeria to seek help in finding him. The father, a well-known and respected figure in his country, spoke of his son’s increasing radicalism. The CIA then entered the name into the government terrorism database, but this did not subject Abdulmutallab to extra airport security, let alone the ‘no-fly list.’ Yet the same terrorist was barred from reentering Britain, after having attended university in London, and his visa request was refused in May. 

President Obama stepped forward the other day to admit U.S. intelligence agencies had missed “red flags” warning of the coming incident. It was another case of our bureaucratic mess on this front and a failure to, (a) communicate with each other, and/or (b) not take some seemingly obvious threats seriously. “We need to learn from this episode and act quickly to fix flaws in the system,” said the president. No kidding. Were it not for the actions of one individual in particular, Jasper Schuringa, a Dutch filmmaker, this New Year’s Eve our television screens would still be filled with a sickening act of terror that had killed nearly 300. 

We also have a new nation in the spotlight today, Yemen, which has been working closely with the United States in terms of receiving extensive technical support as well as intelligence in its battle against al-Qaeda, which has sought to make Yemen another base of operations along with neighboring Somalia. Yemen is the poorest Arab country but it’s showing more backbone than Afghanistan recently. It needs help…and it’s getting it, but the relationship between our two countries is limited to the extent that U.S. soldiers can not yet go into Yemen to capture al-Qaeda suspects. This will change. Guaranteed. 

On President Obama’s leadership in this whole matter, some opinion. 

Editorial / New York Post 

“That was quite a revealing – and understandable – public tantrum President Obama threw Tuesday. 

“Understandable, because the president has every right to be livid over the ‘potentially catastrophic breach of security’ that nearly saw a terrorist bring down an airliner with 289 people aboard. 

“And revealing, because perhaps Obama has come to understand that he does not enjoy as much control over intelligence matters as he might have imagined. 

“Also, that the Islamist threat to America won’t be countered with mere words. 

“We suspect that Obama’s predecessor, George W. Bush – who also was frustrated by intel shortcomings – feels sympathy with Obama’s frustration…. 

“Obama was correct when he decried the ‘mix of human and systemic failure’ that ignored a host of red flags and warning signs to let a self-proclaimed jihadist from Nigeria board a flight…. 

“Coming just a few months after 9/11, with security and intelligence officials still revamping their systems – as it did in the case of shoe-bomber Richard Reid – such a lapse might be understandable. 

“Coming more than eight years after the attacks on the World Trade Center and the Pentagon, it’s unforgivable.” 

“President Obama has belatedly declared that the near miss above Detroit constituted ‘a catastrophic breach of security’ and ordered a review of America’s intelligence efforts. We’re glad to hear it, but let’s hope the Commander in Chief also rethinks his own approach to counterterrorism. 

“Recent events have exposed the shortcomings of treating terror as a law enforcement problem and rushing to close Guantanamo Bay. A new wave of jihadists is coming of age, inspiring last month’s deadly attack at Ft. Hood and nearly bringing down Northwest Flight 253, and next time we may not be so lucky…. 

“A Pentagon analysis, released in May, showed that one in seven freed Gitmo detainees – 61 in all – returned to terrorism….The Pentagon has since updated its findings, and we’re told the numbers are even worse. 

“Yet the White House has resisted calls by Members of the House and Senate intelligence committees to declassify this revised report – no doubt because that would make closing Gitmo harder. Congress should insist on its release…. 

“Sending Gitmo’s jihadists back to this maelstrom makes no security sense. Yemen has a weak government with mixed loyalties and its prisons are porous…. 

“More broadly, the Administration’s law enforcement mentality is also part of the problem. Its instinct is to attribute every terror incident to a misguided individual – ‘an isolated extremist,’ as the President initially said of Abdulmutallab – as if al Qaeda sympathies require a membership card and monthly meetings…. 

“Whatever their mistakes, the Bush-Cheney policies properly identified the enemy and kept the U.S. homeland safe after 9/11. The Obama Administration needs to shed some of its campaign illusions to meet this evolving threat, and not returning Gitmo’s detainees to Yemen is an essential first step.” 

Editorial / New York Daily News 

“The attempt to blow Northwest Flight 253 out of the air was planned as an attack on the United States and very nearly succeeded in accomplishing that horrific goal. The moment demanded inspiring, decisive presidential leadership. 

“America waited four days for a glimmer. 

“President Obama’s initial response Monday was too long in coming, too cool in delivery and too removed from the extreme gravity of the plot. 

“Tuesday, he spoke more assertively, acknowledging what everyone else had long ago concluded: that unacceptable security failures had enabled [Abdulmutallab] to smuggle high explosives onto a Detroit-bound jet. 

“Before his first remarks on Monday, Obama had left a vacuum, and into that 76-hour empty space rushed Homeland Security Secretary Janet Napolitano, whose ineptitude made a mockery of her position and threw millions of fliers into continuing states of confusion. 

“What the public was left with was a never-to-be-repeated case study in crisis mismanagement. It’s time to get a grip, Mr. President…. 

“When finally Obama spoke after the weekend, he vowed to hunt down ‘all who were involved’ and promised, as has become standard, to ‘use every element of our national power to disrupt, dismantle and defeat the violent extremists who threaten us.’…. 

“Obama’s description of Abdulmutallab as an ‘isolated extremist’ was remarkable and disturbing. This radicalized young Nigerian is nothing of the sort…. 

“It is all but certain that Obama’s reviews will reveal screwups that overwhelmingly are not of his administration’s making. The record shows that he inherited the Transportation Security Administration’s long and wasteful botch of airport screening, as well as intelligence databases of unwieldy proportions. 

“Obama is, however, accountable for his own anti-terror appointees and policies…. 

“Ultimately, Obama will be measured by a single, unforgiving standard of accountability. It will not be that he affords constitutional rights to terrorists. It will not be that he distinguishes himself by 180 degrees from his predecessor. It will not be that he extends a hand to the Muslim world and refrains from speaking of Islamist terror. It will be whether, on his watch, America suffers a terror attack from abroad, as almost happened on Christmas.” 

“If we can’t catch a Nigerian with a powerful explosive powder in his oddly feminine-looking underpants and a syringe full of acid, a man whose own father had alerted the U.S. Embassy in Nigeria, a traveler whose ticket was paid for in cash and who didn’t check bags, whose visa renewal had been denied by the British, who had studied Arabic in Al Qaeda sanctuary Yemen, whose name was on a counterterrorism watch list, who can we catch? 

“We are headed toward the moment when screeners will watch watch-listers sashay through while we have to come to the airport in hospital gowns, flapping open in the back…. 

“Citing the attempt of the Nigerian’s father to warn U.S. authorities six months ago, the president intoned: ‘It now appears that weeks ago this information was passed to a component of our intelligence community but was not effectively distributed so as to get the suspect’s name on a no-fly list.’ 

“In his detached way, Spock was letting us know that our besieged starship was not speeding into a safer new future, and that we still have to be scared. 

Charles Krauthammer / Washington Post 

“The reason the country is uneasy about the Obama administration’s response to this attack is a distinct sense of not just incompetence but incomprehension. From the very beginning, President Obama has relentlessly tried to play down and deny the nature of the terrorist threat we continue to face. Napolitano renames terrorism ‘man-caused disasters.’ Obama goes abroad and pledges to cleanse America of its post-9/11 counterterrorist sins. Hence, Guantanamo will close, CIA interrogators will face a special prosecutor, and Khalid Sheik Mohammed will bask in a civilian trial in New York – a trifecta of political correctness and image management. 

“And just to make sure the dimmest understand, Obama banishes the term ‘war on terror.’ It’s over – that is, if it ever existed. 

“Obama may have declared the war over. Unfortunately, al-Qaeda has not. Which gives new meaning to the term ‘asymmetric warfare.’” 

Regarding Janet Napolitano, who on Sunday’s talk shows stressed that everything worked ‘like clockwork’ after passengers foiled the Nigerian’s plot, she then said. 

Editorial / New York Post 

“If by working, Napolitano means she has extended the government’s policy of porous borders to the skies, she is certainly correct. 

“If by working, she means that someone named Umar Farouk Abdulmutallab was spared the indignity of a body search, then she has hit a home run. 

“If by working, she means that quick-thinking passengers once again sprang into action and bravely carried out the duties that she utterly failed to do, then, yeah, everything is working.” 

–For the holiday-shortened week all the major averages finished in the red but there was little to cite of real import. This coming Friday’s employment data for December, though, will be enlightening. Does the labor picture continue to improve? 

And just a note on the holiday shopping season as the first surveys come out. One said sales were up 3.6%, but if you take out an extra day they were really just up 1%. Online sales evidently rose in the neighborhood of 5-10%. But I’m awaiting the definitive National Retail Federation release which comes out around Jan. 14, as well as the figures from the International Council of Shopping Centers. 

As for some benchmarks for 2010, the consensus of a Barron’s poll of strategists and investment managers has the S&P 500 rising 12% this year. 

The consensus on earnings for the S&P in 2010 is about $76, so use that to play around with a market multiple and probable S&P 500 index figure.  

–U.S. Treasury Yields 

Despite the recent rise in rates on the feeling the economy will continue to strengthen (and that the Federal Reserve may be behind the curve), Corporate America is saving $billions in interest costs. For example, according to Bloomberg and Moody’s Investors Service: 

“Borrowing costs have fallen to almost a five-year low, meaning (with) $429 billion of debt maturing (corporations) are poised to shave $17.4 billion off annual interest expense in 2010.” 

As Mark Kiesel of PIMCO said, “Corporate profit growth is improving, the credit fundamentals have turned positive.” 

S&P, for example, upgraded more corporations than it downgraded in the fourth quarter for the first time since the second quarter 2007, in yet another sign of improvement. 

But Corporate America may want to act fast. There’s no guarantee rates will stay so low, as you can see from the movement in just the past year. 

Among the better known strategists and their 2010 forecasts for the key 10-year Treasury, David Rosenberg is calling for a 2.75% yield come year end [he not only was stupidly bearish on equities in ’09, he called for a 1.50% 10-year by 12/31; which was, err, a slight miss.] For 2010, ISI’s Ed Hyman (who saw 2.00% himself for 12/31/09) is calling for a 10-year of 4.50% next December. Goldman Sachs’ Jan Hatzius sees a 3.25% bond and 2.3% GDP growth for the year, while Morgan Stanley is out on a limb with a forecast that the 10-year will hit 5.50%. Were this to be the case we’re talking 7.00% plus mortgage rates for a 30-year fixed (and that only for the most credit worthy) which wouldn’t exactly be conducive to a strong recovery in housing. 

[Note: The consensus forecast on the 10-year is 4.125%.] 

–For the record, the Chicago Purchasing Managers Index for December came in at a strong 60.0, the best reading since 2006, while the S&P/Case-Shiller figures on housing for 20 major metropolitan areas showed just a 0.4% increase in October, with 11 of the 20 markets up, 8 down, and 1 unchanged. Overall, the median price is down 7.3% from Oct. 2008 and 29% off the peak for this barometer, set in July 2006. [April ’09 was the low for Case-Shiller, down 33%.] 

–Back in 2006 at the height of the housing bubble, we were using our abodes as ATMs and took out a whopping $430 billion in home-equity loans and lines of credit. For the first nine months of ’09 the figure was down to $40 billion! There are 20 million loans of both kinds still outstanding as the banks apply the brakes (and fewer and fewer qualify anyway thanks to negative equity). 

–I’m giving health-care a rest until Congress returns but one of the big issues for the November mid-term election is that assuming a bill gets out of conference between the House and Senate, the bulk of the benefits don’t come into play until 2013-2014, but the costs hit immediately. However, Democrats will try their hardest to ensure that some consumer- and small business-friendly features do indeed begin with Obama\’s signature or they’ll get slaughtered at the polls. 

–Japan’s measurement for ‘cash earnings for wage earners’ declined 2.8% in November as the nation continues to suffer from deflation. 

But talk about a ‘lost decade,’ try two lost decades. It was year end, 1989, when the Nikkei average peaked at 38957.  In 2009 it closed at 10546, or 73% lower…over 20 years. No wonder they have a high suicide rate. 

–While many investors are concerned over the extent of government regulation of the financial markets, this is one guy who wants to see derivatives regulated to the hilt. 

–The federal government has taken majority control of GMAC and provided further aid of $3.8 billion (for a total of $16.3 billion), which wasn’t unexpected since the Treasury had been saying that GMAC would require further assistance because it couldn’t raise money privately, but as Citigroup and Bank of America pay off their own government obligations, the government is handing more to Fannie Mae, Freddie Mac, and GMAC, plus it also owns majority stakes in GM and AIG, as well as a leftover stake in Citigroup and a large one in Chrysler. 

GMAC remains the largest lender to GM and Chrysler dealerships as well as their customers and its essential to keep GMAC going in order to have any shot at resurrecting the other two…so says the government. 

–French President Sarkozy made climate change a centerpiece of his time in office but France’s constitutional court struck down his new tax on carbon emissions, saying the tax, which was to take effect Jan. 1, didn’t apply to 93% of industrial emissions. 

–I thought I handled reporting of the H1N1 story quite well, frankly. [Giving myself a gold star and a can of domestic.] When I saw it wasn’t going to become an issue for the economy, I shut it down. Personally, I also didn’t get a flu shot…haven’t had one in decades and haven’t had the flu since 1981. But as I’ve always said, I’ll get hit crossing the street by an SUV whose driver is on a cellphone or texting. H1N1 as an issue for 2010 and 2011, however, is still alive, as outbreaks in India and Egypt are actually intensifying. 

–Canada approved a $1.7 billion acquisition by PetroChina of two major oil sands projects in Alberta. PetroChina now has control of 60% of the critical Athabasca’s oil sands deposits. That’s PetroChina, folks…in Canada…60%… 

–China unveiled what it claims is the world’s fastest train, 217 mph, which on its first link will cut a trip from Guangzhou to Wuhan by 7 ½ hours. But there are some who say China’s plans for high-speed rail, some 42 separate lines by 2012, will prove to be a massive boondoggle in terms of actual demand for the service. 

–Meanwhile, Premier Wen Jiabao warned the nation’s real estate bubble could be getting a bit unwieldy, but the government has yet to demand the banks tighten credit. Wen did admit that the response to the financial crisis, which helped to maintain stability, may have been too strong in some areas. 

“We will have to pay some price and face some unexpected difficulty in tackling such a big crisis. It would be good if our bank lending was more balanced, better structured and not on such a large scale,” though Wen added the situation “has been improving in the second half of this year.” [Wall Street Journal] 

–China released its purchasing managers index for December on Friday and it came in at a strong 56.6, though a reading on exports contained within showed a slight drop. The PMI was 38.8 in November 2008. 

–According to a Wall Street Journal poll, more Americans believe China will be the leading nation in 20 years, not the U.S. The fact our economy grew less than 2% a year over the past decade may have something to do with this sentiment, don’t you think? 

–For all the talk about gold, and boy there was a ton of it last year, the precious metal rose 24%, or less than the Russell 2000, let alone 20% behind Nasdaq. Heck, the average junk bond fund rose 46%. 

–New York City shelled out $563 million in 2009 to settle thousands of lawsuits ranging from car crashes to employee discrimination. This involved nearly 7,000 cases, all but 31 of which were settled rather than jury verdicts. [Brad Hamilton / New York Post] 

–Funds focused on emerging markets equities took in a record $75.4 billion this year, besting 2007’s record $54 billion according to EPFR Global. Schroders estimates that emerging economies will account for 70 to 75 percent of the growth in global output “for the foreseeable future.” [New York Times] 

–The price of copper reached a 16-month high this week owing to strike action looming at two copper mines in Chile. For the year the rise is about 140%, the biggest move in 30 years. 

–The average hedge fund around the world gained 19% this year. As former NBA star Derrick Coleman said, “Whoopty-damn-do. Nasdaq was up 44%.” Actually, I’m not sure this was a direct quote from Mr. Coleman. For the decade, the annualized return for hedge funds was about 6.3%, according to Hedge Fund Research. 

–The average annualized return for U.S. equity mutual funds was 1.7% during the decade, according to Morningstar. 

–Contained in the S&P/Case-Shiller housing figures for October was the news that the Las Vegas market fell for a 38th straight month and is now off 55% from its peak. But talk about a lost decade, the average home here is now just 5% above Jan. 2000 levels. 

–But the average home price in Sydney, Australia rose 12% in 2009, the Aussies having avoided the worst of the global housing bubble, as well as recession. 

–Iceland’s parliament approved by a narrow 33-30 margin the payment of some $6.4 billion to 320,000 savers in Britain and the Netherlands who lost everything in a failed Icelandic bank. The measure, which represents $20,000 for every citizen in Iceland, was seen as the only way Iceland could become part of the European Union. Half the nation is furious over the move. [And now I\’ve learned the president is attempting to hold up the deal.]

–Avis Budget Group shares were trading at 36 cents in early March and finished the year around $13.10. Headed for bankruptcy, CEO Ronald Nelson has thus far aggressively shrunk the size of the fleet and slashed 1,200 positions, but kept the company alive. Avis earned $2 million over the first nine months after a $1 billion loss the year before, plus it paid down $1.5 billion in debt. It’s estimated to earn $0.80 in 2010, according to Thomson Reuters. Now that’s what I call a CEO. 

–Here’s some good news. The number of miners killed on the job in the U.S. in 2009 was just 34, the fewest since records were first kept a century ago, with most of the deaths occurring in above ground truck accidents on mine property. 18 were at coal mines, 16 at gold, copper and other types. Contrast this with the record toll in 1907…3,242. To those who decry government at all levels, there are some areas where it has made a positive difference through appropriate regulation. 

–The record snowfalls in the Midwest and East Coast thus far have done a number on snow-removal budgets. As noted in the Wall Street Journal, Maryland’s State Highway Administration budgets $26 million annually and spent $27 million alone on the recent blizzard. 

–The carnage in the newspaper business continued as the Washington Times slashed its staff by more than 40%, including the elimination of the sports department, in shifting its focus to politics, business and investigative reporting. 

–Google lost a court case filed against a Canadian business, 207 Media, which has had a search engine called Groovle.com for 2 ½ years. Google said it was too similar to its own. Too bad. 

–New York’s legendary Tavern on the Green served up its last meals on New Year’s Eve. Three years ago it was serving 700,000 annually and taking in $38 million, but it still ended up in bankruptcy court. It’s not known if someone else can step in and use the name, the city owning the space. There’s a court ruling coming up in January. 

–“Avatar” is off to a great start, $212 million in its first two weeks in the U.S. and Canada. Total Hollywood receipts for Christmas weekend totaled a record $278 million.  

–If you want a good meal, it’s pretty well known you don’t fly Ryanair. The other day, due to weather a flight from Stansted was on the tarmac five hours and all the cabin crew served was “ice cubes.” Said CEO Michael O’Leary, “What on earth was the crew thinking? They should have charged for them!” Yup…like I said… 

–My New Year’s Resolution? Watch less CNBC. Some of their anchors are incredibly irritating. 

Iran: As analyst Ray Takeyh noted in the Washington Post on Thursday, the Iranian regime’s “most momentous, and disastrous, decision was its refusal to offer any compromises to an angered nation after the fraudulent presidential election in June. The modest demands of establishment figures such as Ali Akbar Hashemi Rafsanjani, including for the release of political prisoners and restoring popular trust (via measures such as respecting the rule of law and opening up the media), was dismissed by an arrogant regime confident of its power.” 

So what now? Last week I finished my bit on the country by noting that Sunday could be a key day, and it was, as up to 15 protesters (or more) were reportedly killed amid massive demonstrations that swept through many of the major cities. One of the victims was a nephew of leading opposition figure Mousavi, the main challenger in the June vote. Among the 1,000+ that were rounded up was the sister of Nobel peace laureate Shirin Ebadi, who was seized from her home by four intelligence officers, as well as Mousavi’s brother-in-law. You see the tactics now being employed. It smacks of Nazi Germany. 

In addition the bodies of the protesters have been hidden to prevent any funerals from being used for further demonstrations. 

The opposition Green Movement’s latest attempts to bring down the thugocracy started with the death of Grand Ayatollah Montazeri, a figure who had the guts to openly question the government. On Friday, Mousavi stepped up his own denunciations of the regime, saying “I’m not afraid of being one of the post-election martyrs who lose their struggle for their rightful demands.” But hard-line clerics have labeled the opposition “enemies of God,” an Islamic offense punishable by death. 

For his part, President Obama’s leadership, and support for the opposition, has been tepid at best. 

“We will continue to bear witness to the extraordinary events that are taking place there.” 

Bear witness? When it’s snowing outside I bear witness. But how about real support? How about standing alongside Shirin Ebadi at a news conference, Nobel Peace Prize-winner Ebadi being in exile. We aren’t talking about just toppling a dictatorship, but rather Iran’s leadership openly stole an election. You can’t begin to deal with a president, Ahmadinejad, for example, on the nuclear issue when he isn’t the legitimate leader of his country! It’s that simple. No one is asking Obama to go before a microphone and say, ‘We won’t stand for this. Bombing commences at noon.’ Just state the facts on the election and how there can not be any negotiations with a rogue regime…period. Then offer clandestine financial support to the opposition, though in a way that is, shall we say, very obvious to prying journalists. 

“The Obama administration should take a cue from Ronald Reagan and persistently challenge the legitimacy of the theocratic state and highlight its human rights abuses. The notion that harsh language militates against a nuclear accord is false. At this juncture, the only reason Tehran may be receptive to an agreement on the nuclear issue is to mitigate international pressures while it deals with its internal insurrection….the United States must stand firm in its support for human rights…Reagan had no compunction about denouncing the Soviet Union as an ‘evil empire’ while concluding arms control treaties with the Kremlin. The Islamic Republic, like the Soviet Union, is a transient phenomenon. America’s embrace of individual sovereignty will place it on the right side of history as the fortunes of history inevitably change.” 

Ralph Peters / New York Post 

“It’s show time, folks! Today’s [12/31] the deadline President Obama imposed on Iran’s leaders to give up their nuclear ambitions and be nice. 

“Not sure if the deadline expires at midnight in Tehran or on Washington time, but the mullahs and President Mahmoud ‘Mighty Mouse’ Ahmadinejad aren’t scrambling to give Obama a New Year’s Eve smooch. 

“Rather than cave in to our president’s mighty rhetoric, the Tehran tyrants took a break from killing protesters in the streets to attempt to import more than 1,300 tons of make-a-nuke uranium ore from Kazakhstan. 

“They’ve also increased their nuke-cooker centrifuge count, tested new long-range missiles and lied like Persian rugs about hidden nuke sites. In response, our president threatened to huff and puff and blow their house down…. 

“While Obama dithers, Israel may have to act. The Gulf will explode. Oil will be a bargain at $400 a barrel. The global economy will freeze. And we’ll be in the fight anyway. 

“And then? Obama will interrupt another vacation to explain that those wicked Israelis didn’t give his sanctions time to work. And it’ll be Bush’s fault, too. And America’s. And Islam will have nothing to do with religious madmen murdering their own people in the streets and begging Allah to help them nuke their neighbors.” 

“With year one drawing to a close, the truth of the Obama presidency is laid bare: retrenchment abroad, and redistribution and the intrusive regulatory state at home. This is the genuine calling of Barack Obama, and of the ‘progressives’ holding him to account. The false dichotomy has taken hold – either we care for our own, or we go abroad in search of monsters to destroy or of broken nations to build. The decision to withdraw missile defense for Poland and the Czech Republic was of a piece with that retreat in American power. 

“In the absence of an overriding commitment to the defense of American primacy in the world, the Obama administration ‘cheats.’ It will not quit the war in Afghanistan but doesn’t fully embrace it as its cause. It prosecutes the war but with Republican support…. 

“As revolution simmers on the streets of Iran, the will was summoned in the White House to offer condolences over the passing of Grand Ayatollah Montazeri, an iconic figure to the Iranian opposition. But the word was also put out that the administration was keen on the prospect of John Kerry making his way to Tehran. No one is fooled. In the time of Barack Obama, ‘engagement’ with Iran’s theocrats and thugs trumps the cause of Iranian democracy…. 

“What a difference three or four years make. The despots have waited out (a) burst of American power and optimism. No despot fears Mr. Obama, and no blogger in Cairo or Damascus or Tehran, no demonstrator in those cruel Iranian streets, expects Mr. Obama to ride to the rescue…. 

“We hadn’t ridden to the rescue of Rwanda and Burundi in the 1990s, but we had saved the Bosnians and the Kosovars. We didn’t have the power to undo the colossus of Chinese tyranny when the tanks rolled into Tiananmen Square, but the brave dissidents knew that we were on their side, that we were appalled by the cruelty of official power. 

“It is different today, there is a cold-bloodedness to American foreign policy…. 

“Under Mr. Obama, we have pulled back from the foreign world. We’re smaller for accepting that false choice between burdens at home and burdens abroad, and the world beyond our shores is more hazardous and cynical for our retrenchment and our self-flagellation.” 

Karim Sadjadpour of the Carnegie Endowment told the Financial Times: 

“A regime that feels confident about themselves does not resort to imprisoning and assassinating relatives of their political opponents. 

“The Islamic Republic’s future looks bleak, but they have plenty of brutality left in them and they are capable of doing even more horrendous things in the coming months.” 

Oh, but our president will be “bearing witness”! I’ve told you before of my trip in 1999 to Treblinka, one of the six Nazi “extermination” camps in Poland. I hired out a driver to take me on the long drive from Warsaw and as we approached the memorial that today marks the site, we passed farm houses where old women were standing in the doorways, staring down strangers. You actually drive over the railroad track that took the Jews into the woods for their last breaths. I could only think these same folks in the doorways, giving me a mean look, bore witness 55 years earlier. Our president seems to want us to just do the same today. 

Afghanistan: Details are still emerging but the suicide bombing in eastern Afghanistan, on the border with Pakistan’s North Waziristan, that took the lives of 7 CIA personnel is both immensely disturbing and devastating. The victims were heavily involved in plotting strikes against the Taliban and al-Qaeda, but it would appear that the Taliban had insiders in the Afghan Army that has a presence on the base because the bomber, who the CIA thought would make for an informer, was invited onto the base without being searched. Since the war began in 2001, the CIA had acknowledged the deaths of four other officers in fighting here. 

Overall, twice as many U.S. soldiers died in Afghanistan (318) in 2009 than in Iraq, the first year since the war in Iraq commenced in 2003 that more troops died in Afghanistan. 

And Canada took a big hit this week as a car bombing claimed four Canadian soldiers’ lives, plus that of a journalist, with a fifth Canadian service member dying in a separate attack the day before. Canada lost 32 soldiers last year in Afghanistan (138 over the course of the war). Britain’s toll is 244, 107 of which were killed in ‘09. 

[As an aside, NBC News got hold of a U.S. military report on the status of the Afghan Army. It shouldn’t come as a surprise that the assessment is a poor one; a bunch of 9-5 corrupt, uncaring, illiterate soldiers and officers.] 

Pakistan: It was another awful week here as 43 died in a suicide attack in the heart of the biggest city, Karachi, that targeted a Shiite procession, triggering a riot as the bombing was designed to spread panic and potentially ignite sectarian bloodshed, this as embattled President Zardari tries to hold onto power amid renewed corruption charges. The Interior Minister said, “Anybody trying to destabilize Karachi is actually destabilizing Pakistan.” 

In another attack, a bomb ripped through a government official’s home in northwestern Pakistan, killing him and his five family members in retaliation for military operations targeting Taliban in the area. What is so disturbing about this one is that, similar to the Afghan attack on the U.S. base, someone gained access to plant the bomb. Who the hell can you trust in this entire region? No one. 

And then on New Year’s Day, at least 100 were killed by a suicide bomber at a volleyball match, also in the northwest. Almost 600 have died in the past 3 months here at the hands of the Taliban. 

Israel: The Housing Ministry announced it would build 700 new apartments in east Jerusalem, drawing criticism from both Palestinians and the United States. Palestinians claim the area is the capital of a future state and consider Jewish neighborhoods there to be settlements. Israel claims all of the city as its eternal capital. Previously, Prime Minister Netanyahu ordered a suspension in settlement construction in the West Bank in hopes of restarting peace talks but the order did not include construction in Jerusalem. The White House said, “The United States opposes new Israeli construction in east Jerusalem.” But nothing ever changes. 

Meanwhile in Lebanon, there was a strange bombing in the Hizbullah controlled suburbs of Beirut that claimed two members of Hamas, which has a presence here because of the hundreds of thousands of Palestinian refugees that live in camps throughout Lebanon. Hizbullah and Hamas represent different strands of Islam – the former is Shia, the latter is Sunni – but they are united in their fight against Israel and are both financed by Iran and Syria. No group claimed responsibility. 

And in yet another troubling incident between Israel and Lebanon, the Lebanese military fired on Israeli warplanes flying low over southern Lebanon. Four warplanes violated the airspace on Tuesday, drawing anti-aircraft fire that missed. The flights violate Security Council Resolution 1701, which ended Israel’s 34-day war with Hizbullah in 2006. Israel can not keep doing this and then claim Lebanon is not fulfilling its responsibilities under the Resolution to disarm Hizbullah. Israel has zero credibility, let alone the fact that one of these days Lebanon will successfully shoot down a fighter and then all hell will break loose. 

Lastly, you have a non-military/political item that could have been a disaster. As reported by the Jerusalem Post: 

“An El Al passenger jet bound for New York nearly collided with an Air France airliner over the skies of Belgrade on Monday.” 

It seems a Serbian air traffic controller inadvertently instructed the Air France plane to fly on a route already used by the El Al aircraft so that the two were on a direct collision course. They were about to crash in midair, but emergency alarms alerted pilots on both and El Al changed course at the last minute, “when the distance between the aircraft was only 300 meters.” 

Turkey: Eight soldiers were detained over an alleged plot to assassinate Deputy Prime Minister Arinc. The military denied being part of any such plan and said the officers allegedly involved were investigating another officer near Arinc’s home and not him; this after Arinc said he had seen a car with two officers near his place several times. 

I just had to give some details on this one because tensions between the Islamist government and the Army, the past guardian of the country’s secularism, have never been worse. Earlier this year, dozens, including two retired generals, were accused of plotting to overthrow the government. 

China: Fallout over the sentencing of dissident Liu Xiaobo to 11 years in jail for “inciting subversion of state power” continues. The government is sending the message to people at home and abroad, “Killing the chicken to frighten the monkeys’ is a warning to activists to back off,” said strategist Joshua Rosenzweig. 

And there was the case of British citizen Akmal Shaikh, 53, who was executed on Tuesday for smuggling heroin. I wrote just last week that a British-China spat in Copenhagen could have long-term ramifications and sure enough, China ignored the pleadings of British Prime Minister Gordon Brown to spare Shaikh, Brown saying after he was “appalled and disappointed that our persistent requests for clemency have not been granted.” A Chinese Foreign Ministry spokesman said, “Nobody has the right to speak ill of China’s judicial sovereignty.” 

So in this case, and that of Liu, you see China hardening its position over what it sees as “interference” in its internal affairs, and seeing as it still has an inferiority complex in terms of its past, including the impact of the Opium Wars, which was part of a process that not only looted the country but was seen as an attempt to weaken China, the government will only become more resolute. 

North Korea: In a New Year’s statement broadcast by the official Korean Central News Agency, the leadership said, “The fundamental task for ensuring peace and stability on the Korean peninsula and in the rest of Asia is to put an end to the hostile relationship” between North Korea and the U.S., adding it was committed to establishing “a lasting peace system on the Korean peninsula and make it nuclear-free through dialogue and negotiations.” 

Well isn’t that special. The starving North wants to talk in exchange for some oatmeal. Just don’t expect them to give up their weapons anytime soon. 

Meanwhile, the government is banning all foreign currency as it attempts to control any last vestiges of an open market. 

Vietnam: The communist government here has, like China, been rounding up, and sentencing, dissidents who are doing nothing more than peacefully calling for freedom of speech and free elections. 

Russia: President Putin called for new offensive weapons systems to “preserve a strategic balance” with the U.S., this as Russia demands more details on the missile defense shield. Putin wants a return to “Cold War conditions…a balance of forces.” 

Separately, flights are resuming between the Georgian capital of Tbilisi and Moscow and St. Petersburg for the first time since the war between the two August 2008, a mild positive. A key road crossing was also reopened. 

France: Reports say President Nicolas Sarkozy is not sending more troops to Afghanistan, per President Obama’s request, because of his growing disenchantment with the American leader, including over the issue of Iran and Obama’s calls for a nuclear-free world; Sarkozy believing, as he said last fall in a speech at the UN, that “We are living in a real world, not a virtual world.” 

Ireland: The country’s leading TV3 was excoriated for its treatment of Finance Minister Brian Lenihan’s illness. Lenihan is a critical figure, to say the least, as Ireland struggles through its financial debacle and he is viewed favorably by the public. So TV3 learned of a particular diagnosis, pancreatic cancer, following an exam, and went public with it just two days after Lenihan knew of the condition. The guy could be dying and the station didn’t allow him time to discuss the situation with family before it burst forth with news of “national importance,” stunning everyone. Lenihan should have been allowed to make his own announcement. But this is typical of the tabloid era we live in. 

On a more positive note, Ireland appears to have had its safest year on the roads since records began 50 years ago with about 250 traffic fatalities. The record was 640 in 1972. What’s significant is the government’s anti-drunk driving campaign is working. 

Predictions: With some of the above in mind, I still maintain, more than ever, that Israel will be forced to strike at Natanz. I really thought the window was in November, but now the Obama administration is jerking Israel around by holding off on pressing for harsher sanctions against the regime in Tehran until as late as March. China is now on record as saying it will not support further sanctions. For Israel, though, it’s a matter of accepting short-term pain, in terms of blowback, for long-term gains. And there is another factor at play here. The longer Israel waits to attack Natanz, the bigger the risk of an environmental disaster in any radiation dispersal. 

Should Israel attack, Hizbullah will launch an attack of its own on Israel with devastating results. 

Meanwhile, Turkey’s military will make another, more serious attempt at a coup to bring down the Islamist government. It won’t succeed but will lead to a very tense period there as Prime Minister Erdogan reestablishes control. This will not be good for the West. 

But what I really see in 2010 is a global wave of assassinations, across virtually all continents, and this plays heavily into my negative market forecast. I also see a major terror incident during the World Cup in South Africa. Talk about a no-brainer if you’re one of the evil doers.  Security? What security? 

Ukraine has a critical presidential election on Jan. 17, with the IMF allowing Ukraine to use $2 billion of its reserves to pay off Russia’s gas bill beforehand. Regardless of who emerges victorious, Prime Minister Tymoshenko or former prime minister Yanukovich, Russia will gain increasing control…a silent coup. Current President Yushchenko has an approval rating of about 2. 

“The good news is that the world has not made mistakes as big as those that followed the noughties of a century ago: thanks, partly, to nuclear weapons, direct conflicts among great powers have been avoided; a liberal world economy has survived, so far; the lessons of the 1930s were applied to the financial crisis of the 2000s, with at least short-run success; climate change negotiations remain open; and many developing countries – though far from all – have made economic progress. While the movement towards democracy of the early 1990s has slowed, the number of grossly malign totalitarian regimes is now small, at least by the worst standards of the 20th century. 

“So where should we go in the next decade? For all its difficulties, the U.S. is not the UK of 1910. Its economy remains the world’s most productive and innovative and its military capacity remains unmatched. The western world, as a whole, remains potent, with about 40 percent of global output, at purchasing power parity. But other countries and forces are now on the rise, while the challenges ahead are also more complex and global than ever before. 

“ ‘We must all hang together or assuredly we shall hang separately.’ All countries – above all, incumbent and rising great powers – must recognize this truth, enunciated by Benjamin Franklin at the signing of the U.S. Declaration of Independence. History has hardly been dominated by the benign spirits of cooperation, foresight and self-restraint. I would at least give Barack Obama credit for trying to provide the right sort of leadership. But will the world produce sufficient followers, at home or abroad? Alas, I rather doubt it.” 

–In the history of the Gallup poll going back to the late 1930s, no newly elected president ever suffered such a steep drop in popularity as Barack Obama did, from 68% approval in January to 47% in early December. No other president’s ratings declined more than 10% in their first year. 

–A federal judge threw out the indictment of five former Blackwater security guards over a 2007 shooting in Baghdad that killed 17 Iraqis, citing misuse of statements made by the guards and the government’s mishandling of the case that “requires dismissal of the indictment against all the defendants.” The judge also cited a “reckless violation of the defendants’ constitutional rights.” Iraqis are outraged. This could have legs. 

–AOL co-founder Steve Case, in an op-ed for the Washington Post, expressed my chief frustration in the health-care debate.  

“A core issue is that our nation has too many people with too many diseases that are debilitating and costly. We have focused our attention on triage – solving the immediate problems when people get sick – rather than on getting people healthy, to reduce future problems. 

“The truth is, our country doesn’t really have a health-care system. We have a sick-care system. Our system isn’t primarily designed to keep us healthy; it’s organized to get us well after we have become sick.” 

Take obesity, with annual related medical costs already at $147 billion and skyrocketing. 

“By some estimates, chronic diseases account for more than 70 percent of the $2 trillion spent on medical care in the United States each year. 

“Chronic diseases result from a number of factors, including heredity. But for most people they are largely caused by unhealthy behaviors such as poor nutrition, lack of exercise, smoking and other largely preventable lifestyle choices. Amid the debate about health-care reform, why is there so little discussion of the role each of us can play to improve our health and reduce our nation’s financial burden?” 

–One of the more remarkable people in the New York area is retiring Manhattan District Attorney Robert Morgenthau, 90. He was in office 35 years and vows to keep working in one form or another. The guy is still sharp and all Americans owe him a debt of gratitude for his prosecution of terror suspects and their enablers. For one, Morgenthau has been blasting President Obama for thinking he could negotiate with the Iranian regime. 

“The president is smoking pot or something if he thinks that being nice to these guys is going to get him anywhere.” 

Morgenthau and Mayor Bloomberg also never got along, particularly over money the DA’s office kept that was recovered from criminals to fund their operations. 

–The BBC had a story on how “Disinfectants could effectively train bacteria to become resistant to antibiotics, research suggests.” 

But here’s what’s scary when looking at the number one healthcare issue in America, infections in hospitals. One study found that “disinfecting wipes used to protect against MRSA could in fact spread the bug, as the solution contained was often not sufficient to kill all the bacteria picked up, and hospital staff often used the same wipe to clean more than one surface.” 

Goodness gracious. That’s disgusting, and I know one doctor friend of mine who told me a few months ago that as much as we all love the work nurses do, in certain parts of the country you just can’t find good ones and they end up being the cause of many of the problems.  

–I write about this every year at this time, as part of my unpaid duty to be a mini-ambassador of tourism for New York. Violent crime this year in Gotham was down 11% from last year and the number of murders will be the lowest since accurate records were first kept in 1962. The peak was 2,245 in 1990, during the crack epidemic (and the Dinkins administration) but this year the total should end up at 470 or less. [2007 had the previous record low at 496.] 

New York’s crime-fighting success all started with Rudy Giuliani (and William Bratton), and Mayor Bloomberg deserves credit for keeping it going, as does police commissioner Raymond Kelly, who should be replacing Janet Napolitano about now. Just as in Los Angeles (another Bratton success story), everyone said that with the poor economy crime would skyrocket, but it hasn’t. 

And this just in from our nation’s capital. The District logged its lowest homicide total in 45 years, just 140, down 25 percent from 2008. 

–An article by the New York Post’s outdoors reporter, Ken Moran, caught my eye because it was titled “Why hunting numbers are up”.  

“If there is a bright side to the economic downturn over the past year, it is the fact that participation in hunting and fishing actually has increased.” 

Fishing licenses nationwide, for example, are up 8% over 2008.  

–I didn’t write about it at the time because it wasn’t that newsworthy, but when the three mountain climbers on Mount Hood died a few weeks ago, rescuers were extra careful about not launching an extensive search because of the avalanche threat. From what I gathered, the relatives of the climbers were certainly understanding. 

So last weekend two tourists went missing in the Italian Alps and four rescuers who were sent to look for them died in an avalanche, along with the other two. 

–Everyone’s asking…what happened to San Francisco’s 1,700 sea lions that suddenly up and left? Who were they doing recon for? One person not to look to for answers, Janet Napolitano. 

–What a decade. People who became famous for being famous, perhaps best personified by the Kardashians. 

–If you can get your kids to listen to you for one moment this year, stress to them that when they go into a club they should first check for the exits in case there is a fire. The Russian nightclub disaster that claimed over 150 lives is yet another excuse to impress upon them just to take this simple precaution. 

–In a year filled with scandal, capped off by Tiger, at least we can go back to Jan. 15 and Capt. Chesley Sullenberger III for inspiration. That was at a key time for the country, as well. We didn’t know if we were going into Depression and while stocks wouldn’t bottom for another two months, don’t totally discount the impact of Sully on our national psyche. 

–Golfer Tom Watson’s performance at the British Open last summer, on the other hand, epitomized the “lost decade.” He just needed a par on the 72nd hole to secure what would have been the greatest moment in modern sports history, winning a major at age 59, but instead he bogeyed when he choked on his approach shot and lost in the playoff. 

–“Person of the Year” time.  I do believe Time magazine nailed it with its choice of Ben Bernanke…so Bernanke it is. I have well documented in this space how he screwed up in the past, but the bottom line is we’re still standing today and in no small part because of the Fed chairman. 

As for the “Robert Mugabe Dirtball of the Year Award,” Mugabe being a four-time winner, it goes for a second time to Mahmoud Ahmadinejad. I really hope it’s the last one he receives, as that would be a good sign for all manner of reasons. A cruise missile during Friday prayers would do the trick. He’d never know what hit him. 

–On “Meet the Press” New York City Mayor Bloomberg talked about dealing with the news cycle of today and how no one is given time to think issues through in this era of sensationalist, instant analysis. That’s one thing I’ve been attempting to combat in my own small way here at StocksandNews. I had some family members over at Christmas and my very smart niece said I have to change…get with the program. I know she’s right, but I’m not quite at the point where I need to compromise my values and my dictum of ‘wait 24 hours.’ 

–Finally, by early February it is expected that President Obama will release his fiscal 2011 budget and contained therein will be the amount of money allocated to NASA. We will then learn the future direction of the space program, and there is little cause for optimism given the current budget crisis. Congressman Bart Gordon, D-Tenn., chairman of the House Science and Technology Committee, which oversees space policy, said, “The next authorization will really set the path of NASA for the next 10 to 20 years.” 

Will there be funding for manned missions to Mars, for example? Unlikely, and that’s immensely depressing. Rep. Gordon estimates we’re only talking another $3 billion a year to undertake ambitious missions. I hope I’m surprised. We must keep exploring, looking for new worlds…to state the obvious…because future generations may find Planet Earth a living hell. 

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

Gold closed at $1096
Oil, $79.36…up 78% in ’09…not too shabby 

Returns for the week 12/28-12/31 

Dow Jones -0.9% [10428]
S&P 500 -1.0% [1115]
S&P MidCap -1.8%
Russell 2000 -1.4%
Nasdaq -0.7% [2269] 

And a Happy Birthday to our own Dr. Bortrum. He’ll continue to write for me, but at 80+ years of age he’s earned the right to set his own pace.