For the week 2/8-2/12

Wall Street

If you are optimistic these days, especially about the direction of the United States, the fate of the European Union currency experiment, or some kind of favorable resolution to the rapidly developing Iranian crisis, and all the offshoots from it, then you’re a better man than me. I see zero reason to be optimistic about much of anything these days. To wit:

In Europe, specifically the 16 nations of the 27-nation European Union that use the euro currency, they are trying to come to grips with a debt crisis in Greece and a government in Athens that flat out lied until recently when confronted about its debt levels. “Debt? What debt problem?” Greek officials would say when asked just where they stood. Then they finally fessed up and offered, “Oh, I guess you’d like to know our debt is 12.7% of GDP.” Seeing as how the Euro nations are supposed to limit their budget deficits to 3%, this created a bit of a dilemma, especially when the likes of Portugal (9.3%) and Spain (11.4%) are in a similar mess. So EU leaders got together this week and on Thursday issued a statement:

“We fully support the efforts of the Greek government and their commitment to do whatever is necessary, including adopting additional measures to ensure that the ambitious targets set in the stability program for 2010 and the following years are met.

“We call on the Greek government to implement all these measures in a rigorous and determined manner to effectively reduce the budgetary deficit by 4% in 2010.”

Nothing on what exactly the EU will do, other than give Greece a hearty pat on the back, because, as I’ve been writing, there is no mechanism in place for dealing with such a crisis and to just bail Greece out injects the ‘moral hazard’ issue whereby if you rescue the Greeks, it only encourages bad behavior on the part of the others.

On the other hand, if the International Monetary Fund got involved, the IMF being the usual rescuer of last resort in these situations, it would imply that the EU can’t handle their problems themselves and thus why would you consider the euro currency any differently than that of Ukraine (an IMF beneficiary)?

The problem is Germany, Europe’s largest economy and the country that was also most resistant to a single euro currency in the first place (save for Britain, which remains outside this part of the EU club). Germany just reported that its economy stagnated in the fourth quarter, unchanged, surprising the experts, and Chancellor Angela Merkel has a ton of political issues to address. She wouldn’t be allowed to throw Greece a life preserver even if she wanted to at this point, so Merkel was forced to say after Thursday’s meeting, “(Greece) will not be left on its own, but there are rules and these rules must be adhered to.” 

So on Monday, when eurozone finance ministers meet, it is hoped more details will emerge on just how the EU will aid Greece, while the Greek government deals with a populous that has been spoiled rotten with outlandish pay raises in just the past few years. Now their leaders are calling for givebacks. Ain’t gonna happen, say the workers. Let’s strike. 

“The financial crisis of 2009 is morphing into the fiscal anxieties of 2010. This is particularly true inside the eurozone….The risk has emerged of a self-fulfilling confidence crisis that would have dire consequences for other vulnerable members. Much attention has focused on what might happen if the crisis were not resolved, with talk of bailouts, defaults or even exits from the euro. But what would need to be done to resolve the crisis, without such a calamity? It is the demand, stupid.

“Conventional wisdom in the eurozone is that the crises are the result of poor policy-making in peripheral countries. In particular, fiscal policy has been too loose and economies too inflexible. The wages of such sins are austerity. Then, after a lengthy penance, the lost sheep returns to the fold of stability….

“The conventional wisdom also declares that once fiscal adjustments have been made and flexibility introduced, the affected economies can return to growth….

“This conventional wisdom is, alas, nonsense. Until policymakers recognize this, they are dooming the eurozone to huge tensions…Theirs is not a problem that can be resolved by fiscal austerity alone. They need a huge improvement in external demand for their output….

“So what is to be done? If the aim is to avoid disaster, the answer is temporary fiscal support for the struggling countries, robust aggregate demand in the eurozone as a whole and a substantial rebalancing of that demand, led by Germany. The fiscal support would be designed to prevent a short-term confidence collapse from triggering a default. In return, weak countries would need to commit themselves to falling nominal wages and a program of fiscal retrenchment….

“Alternatively, the vulnerable countries could be left to dangle in the wind. But a currency union whose core country not only exports deflation, but also stands aside as members collapse is in deep trouble. Germany alone can decide whether it wants this union to prosper, or not.”

“(The worst news of all is that) the extreme deflationary policies now being imposed on the weakest eurozone countries point to frightening implications. The Greek and other Club Med governments [Ed. another name for the PIIGS, ex-Ireland] can slash their deficits only at the cost of huge falls in economic activity. Without the possibility of devaluation they cannot hope for big export gains, nor even for the capital inflows that have helped to end the slump in British property.

“Instead of the broadly Keynesian policies that have helped to revive growth not only in America and Britain but also in Germany and France, these weaker members of the eurozone are pursuing measures that are almost guaranteed to prolong and deepen their recessions.

“And now, to make matters worse, Germany is planning to cut its own budget deficits and to rely for the next phase of its recovery on export-led growth – which can only mean crushing even more Club Med businesses unable to compete against German goods.”

Oh well, as the dollar soars against the euro, at least European exporters benefit from the cheaper currency, which has been their big complaint. But what of the United States? Are we really any better off despite the confidence expressed in the green back? As the GEICO commercial puts it, “Does a 10-pound bag of flour make a really big biscuit?”

“President Barack Obama’s 2011 budget lays out a stunningly expensive big-government spending agenda, mostly to be paid for years down the road….

“On average, in the first three years of the 10-year budget plan, federal spending rises by 4.4% of GDP. That’s more than during President Lyndon Johnson’s Great Society and Vietnam War buildup and President Ronald Reagan’s defense buildup combined. In those same years, spending on average hits the highest level in American history (25.1% of GDP), save the peak of World War II. The average deficit of $1.4 trillion (9.6% of GDP) is over three times the previous 2008 record.

“Remarkably, President Obama will add more red ink in his first two years than President George W. Bush – berated by conservatives for his failure to control domestic spending and by liberals for the explosion of military spending in Iraq and Afghanistan – did in eight. In his first 15 months, Mr. Obama will raise the debt burden – the ratio of the national debt to GDP – by more than Reagan did in eight years….

“The deficits are so large relative to GDP that the debt-GDP ratio keeps growing and then explodes as entitlement costs accelerate in subsequent decades….

“Ken Rogoff of Harvard and Carmen Reinhart of Maryland have studied the impact of high levels of national debt on economic growth in the U.S. and around the world in the last two centuries. In a study presented last month at the annual meeting of the American Economic Association…they conclude that, so long as the gross debt-GDP ratio is relatively modest, 30%-90% of GDP, the negative growth impact of higher debt is likely to be modest as well.

“But as it gets to 90% of GDP, there is a dramatic slowing of economic growth by at least one percentage point a year. The likely causes are expectations of much higher taxes, uncertainty over resolution of the unsustainable deficits, and higher interest rates curtailing capital investment.

“The Obama budget takes the publicly held debt to 73% and the gross debt [Ed. what you see on the national debt clock…the difference between these two often muddies the discussion…] to 103% of GDP by 2015, over this precipice….

“Such vast debt implies immense future tax increases….It’s hard to imagine a worse detriment to economic growth.”

Back to Rogoff, in a story by Peter Coy of Bloomberg BusinessWeek, Coy writes:

“In an interview, Rogoff says investor confidence is more of a concern now than it was [in another high debt period following World War II]. ‘Wartime expenditures come down easily. Plus, you have a huge labor force you can absorb, which boosts growth.’ This time around the U.S. has neither advantage: There’s no easy way to cut spending, and the economy doesn’t seem capable of absorbing the huge mass of unemployed. So, says Rogoff, ‘It’s much harder to convince markets, as Obama will learn, that you really mean business.’”

Which leads me to spending. Last Saturday, I wrote of the Tea Partiers, “Ask [them] if they’re willing to give up any of their entitlements and then we’ll talk because that’s what needs to be done in this country before we officially break the bank.”

The next day, on “Meet the Press,” former Federal Reserve Chairman Alan Greenspan noted that what is depressing these days is that “spending is untouchable.”

That’s the bottom line, folks. If you aren’t depressed yourself by this then you’re living in a dream world. Our political process is dysfunctional, our leaders refuse to face facts, and we, the people, are just as culpable. Incredibly, some talk of revolution but then follow the likes of Sarah Palin. I noted a few weeks ago that I’m astounded when I hear people say they just want ordinary Joes and Janes in government instead of the garbage we have today. I counter I’ve always believed in American exceptionalism. I want exceptional people, like our Founding Fathers, leading this nation but instead we’ve had a series of disappointing presidents at a time when we can least afford them. There are ways to fix the entitlement mess, such as a one-year freeze on the level of benefits and a hike in the retirement age, but with the exception of our military our nation is largely comprised of a bunch of selfish wimps.

“There is no way to close the massive deficits without big cuts in existing government programs or stupendous tax increases. Suppose we decided to cover all future deficits by raising taxes. Taxes would rise in the 2020s by roughly 50 percent from the average 1970-2009 tax burden.

“That’s the gut of it. At age 65, average Americans live for another 18 years. Government now subsidizes each of them an average of about $25,000 a year (almost $14,000 Social Security, $11,000 Medicare). We cannot sensibly afford all these subsidies without oppressive tax increases, deep cuts in defense and other programs or immense budget deficits that someday might trigger another financial crisis. Bond buyers might balk at swallowing so much government debt. By the administration’s estimates, that publicly held debt (the accumulation of all annual deficits) balloons from $5.8 trillion in 2008 to $18.6 trillion in 2020….

“We can no longer just tinker. We need to ask whether government spending serves genuine public purposes or merely benefits favored constituencies. Delay in acting has already eliminated a long grace period to prepare for reduced retirement benefits or to wind down useless programs….

“The politics of procrastination is bipartisan and rests on shared assumptions: that the public won’t stomach hard choices; that we don’t know whether large budget deficits will produce a crisis or when; and that, therefore, the easiest political course is to dawdle and blame the other party. But this self-serving inattention, coupled with much larger deficits, is tempting fate. If investors lose confidence in Treasury bonds, they would demand much higher interest rates. The ensuing crisis would almost certainly compel abrupt spending cuts and tax increases that would make today’s choices look gentle.”

So between the United States and Europe, there is a critical need for true leaders, and people willing to sacrifice. I see neither. Markets will continue to go up and down, and we may yet have another great year or two (not in 2010, though), but the long-term trend is now down. And I haven’t even mentioned the severe budgetary issues some of our major states face, similar to Greece, or the kind of geopolitical events that could sap confidence far worse than 9/11 did…. Now who wants a beer?!

Welcome back. One government that acts forcefully, though not always in a way us Westerners admire, especially if you’re talking human rights, is China’s and this Friday, with rising concerns of a property bubble here that could derail it’s robust recovery, financial authorities raised the amount banks have to hold in reserve in an attempt to cool things off, and slow significantly the amount of lending that surged yet again in January as banks rushed to hand out loans ahead of the tightening. Friday’s announcement, which roiled global markets a bit, is nothing. The real issue is probably in March when it is expected the government will formalize a policy of rising interest rates. [Thus far the Bank of China is slowly hiking the key lending rate but has not issued a formal statement like our central bank would have been doing all along.] 

China’s exports, and imports, surged in January and power consumption was up 40% for the month over year ago levels, while producer prices rose 4.3%, though consumer prices were up ‘only’ 1.5%. Strategist Marc Faber suggests the potential exists for China to crash because of severe overcapacity in many industries. I disagree. There will be bumps along the way but growth for 2010 will be just fine on the mainland.

Meanwhile, Asia’s other juggernaut, India, reported that industrial production in December was up 16.8%, the highest pace since 1994, while 3,000 miles southeast, Australia’s unemployment rate dropped to 5.3%. Americans and most Europeans would kill for this.

Street Bytes

–Stocks broke their four-week losing streak, though it sure didn’t feel like it, as the Dow Jones added 0.9% to close at 10099, while the S&P 500 gained an equal amount and Nasdaq rose 2.0%. Retail sales for January at the bigger chain stores rose 3%, while overall retail sales rose 0.5%, ex-autos, for the month…a decent number.

Rates rose as Federal Reserve Chairman Ben Bernanke submitted testimony to Congress outlining that the Fed may opt to raise the discount rate, which represents loans to commercial banks, as a way of beginning to remove the stimulus rather than hike the funds rate, because it is intent on keeping overall rates as low as possible for “an extended period” due to the continuing softness in the economy.

–The economic impact of the snowstorms, with as many as 18,000 flights being canceled since the first whopper on Feb. 5, including yesterday, is one of the most significant weather events for the economy in decades. However, the financial impact for the airline industry will be limited due to the fact most of the passengers had already paid for their tickets.

–Foreclosure notices in the U.S. surged 15% in January over the previous year (though down 10% vs. December’s pace). In New York City, the rate of foreclosure notices surged 35% for the month over January ’09. We have a ways to go before a true housing recovery gets underway.

–Toyota Motor Corp.’s massive recalls and related problems with acceleration and brakes could lead to at least 30 class-action lawsuits that will result in additional losses of $billions on top of the estimated $2 billion that Toyota said it would cost the company in repairs and lost sales. Since the fall, Toyota has issued 10 million recall notices, including the most recent ones for the recall of 437,000 Prius and Lexus hybrids this past week. One of the chief issues is how the problems are leading to lost car value. As one law professor involved in the suits said, “It’s easy to prove damages here. If you don’t think you’re damaged, try to sell your Toyota and see if you can get for it today what you could have four weeks ago,” said P. Tim Howard of Northeastern University. Kelley Blue Book and Edmunds.com estimate that trade-in values, for example, are down up to 6% thus far.

As reported by the Los Angeles Times, Prof. Howard noted “that if a typical vehicle was worth just $10,000 before the recalls and drops 3.5% in value, that’s $350 per car. Multiply that by 6 million – the approximate number of Toyota autos recalled in the U.S. – and the potential damages reach $2.1 billion. If a trial attorney can prove allegations that Toyota hid its knowledge of the defects, punitive damages could easily double the tab, other product liability law experts said.” Of course then you still have the personal injury claims. The earlier figures are just the tip of the iceberg.

Toyota also hasn’t been helping itself with conflicting statements on what it knew and when, let alone whether or not it truly has a fix for the sudden acceleration issue in particular. It all goes back to the electronics. Congressman Henry Waxman (D-Ca.) has scheduled a hearing for Feb. 25 that should be explosive, especially if President Akio Toyoda shows up, as insurer State Farm became the latest to say it alerted federal safety regulators on numerous occasions beginning in 2007 about unexpected acceleration in Toyotas. So now the National Highway Traffic Safety Administration is under the gun as well.

[Separately, Honda said it was expanding a recall on airbags in 2001 and 2002 Accord and Civic models.]

–How well is the Australian economy doing? Credit card transactions rose 10% in December to the highest level ever spent by Aussies, though the growth rate in the balances is not necessarily a sign of a bubble here.

Of course the Aussies are doing well thanks in no small part to their mining industry which has been a huge beneficiary of growth in China, the most recent example of which was this week’s announcement that an Aussie company, Resourcehouse, signed a $70 billion, 20-year deal to supply coal to Chinese power stations, which involves building a new mining complex in Queensland and laying 311 miles of railway lines to move the coal to the coast. As the company’s CEO said, this is a “once-in-a-century project.”

–For the record, growth in the 16-nation eurozone was just 0.1% in the fourth quarter after being up 0.4% in the third.

–Global oil demand is expected to rise to an average 86.5 million barrels a day, according to the most recent estimate by the International Energy Agency, or 1.6 mmb more than in 2009, but this is assuming a solid pickup in economic activity, 3.8% worldwide. U.S. and European demand remains flat at best

–McDonald’s is clearly a leading economic indicator and it recorded a 2.6% rise in global January sales, though the strength was due to overseas operations, not the U.S., where sales fell 0.7%. McDonald’s has been hard hit at breakfast, thus the need to introduce a $1 breakfast menu.

–For its latest quarter, thru Jan. 2, Disney’s revenues edged up to $9.7 billion from $9.6 billion a year earlier, which, coupled with the U.S. news from McDonald’s, still isn’t exactly signaling a robust recovery. Revenue at Disney’s theme parks and resorts was flat, with Disney CEO Robert Iger saying, “We don’t believe we’re in an economy that allows us to shut off the discounting immediately.”

–Las Vegas Strip casino revenue in December registered its second consecutive monthly gain in a solid sign the slump here is finally easing. Revenue for the full year, though, declined 9.4%, and revenues for all Nevada casinos still fell in December.

–Atlantic City’s casinos posted another 8.5 decrease in revenues for January vs. year ago levels. Two of the eleven, the Hilton and Trump Taj Mahal, saw declines of 26.4% and 23.7%, respectively.

–Thousands of jobs in Ireland’s banking industry remain at risk. AIB and Bank of Ireland, the nation’s big two, employ 25,000 and escalating losses from property loans will lead to further massive “redundancies,” as they say on the Emerald Isle. College grads are increasingly looking elsewhere for job opportunities in a bad sign for the future (it took decades to reverse the old trend that had them fleeing to America and now this could happen all over again).

–After less than a year at the helm, SAP CEO Leo Apotheker resigned last Sunday from the German software giant and was replaced by dual CEOs. Then the chief operating officer, citing health reasons, and another top executive announced they were leaving. SAP’s fourth quarter revenue fell 9%, though the company is optimistic about the current year, but SAP’s board refused to renew Apotheker’s contract amid employee and customer discontent, let alone the failure to increase revenues. SAP co-founder and supervisory board chairman Hasso Plattner vows to take a more active role in returning the culture back to its roots. After cleaning rival Oracle’s clock for years, Oracle has leaped back to the forefront of this industry, with Larry Ellison’s company now having a market cap more than double that of SAP.   

–President Obama said he doesn’t “begrudge” the $17 million bonus awarded JPMorgan Chase CEO Jamie Dimon, nor the $9 million issued to Lloyd Blankfein of Goldman Sachs, telling Bloomberg that while the compensation is high, “there are some baseball players who are making more than that and don’t get to the World Series either, so I’m shocked by that as well.” Hell, there are some baseball players, Mr. President, earning $12 million and then going 3-4 on the mound, mused the editor, as the contract of Mets pitcher Oliver Perez continues to make some fans’ blood boil.

–Google announced it will be test marketing a new broadband service capable of delivering bits and bytes at speeds 100 times what consumers receive today from their cable and phone companies, in yet another attempt to leapfrog existing technology to position itself for the future. Earlier, Google said it was unveiling Google Buzz, an effort to knit together a variety of social networks into a Soviet-era collective. Only half-kidding. These moves are really just part of the company’s efforts to get you to use the Net more, and thus keep its ad revenues growing.

–There is a growing furor over the pricing of electronic books, with publishers gaining the upper hand on Amazon for the time being as some best sellers and new releases are now going for as much as $14.99, up from what had been the standard $9.99.

But in an article on the topic for the New York Times, I got a kick out of some of the responses from consumers, like this from Harvey Chute, “who runs KindleBoards, a popular discussion forum for readers of electronic books.”

“With the iPad, the whole notion of e-book reading is probably going to become way more mainstream than it ever has. And a majority of people may be coming to it new, and may only see that they are getting $7 off the price they would see at a bookstore.”

Another guy, a consumer that lives in The Villages, Fla., so you can guess his age, said, “Some listings Amazon should refuse when the authors are trying to rip off Amazon’s customers.”

Seeing as I’m a guy who one day will be writing a rather lengthy tome or two that he hopes to sell for a decent price, given the thousands of hours of sweat that will go into it, I despise this attitude. No doubt this same fellow doesn’t want to give up a cent of his entitlements.

Meanwhile, many publishers, and authors, are worried stiff about a culture of piracy taking hold, much as it did in the music and movie business.

–From the Wall Street Journal, “Two defibrillator brands made by Boston Scientific Corp. have a design flaw that can result in the devices delivering potentially life-threatening shocks to the hearts of patients, authors of a medical journal article say.” [Cognis and Teligen brands, specifically.] Well, that would kind of suck. Shares in Boston Scientific took a beating.

–The New York Times reported further depressing news on the print ad front. While the rate of decline is easing, companies continue to reduce the amount spent on print media. In all honesty, I’m sickened by the prospect of no newspapers, seeing as how I don’t envision many revenue models for strictly online access succeeding. It’s not good for our civilization, sports fans. 

–In Henry Paulson Jr.’s new book, “On the Brink: Inside the Race to Stop the Collapse of the Global Financial System,” Paulson writes of an episode involving GE CEO Jeffrey Immelt wherein on Sept. 15, 2008, the day Lehman Brothers declared bankruptcy, Immelt startled Paulson by showing up at the then Treasury Secretary’s office, saying it was “very difficult” for GE to sell its short-term debt “for any term longer than overnight.” But a day earlier, GE sent investors a letter saying its ability to sell commercial paper was “robust.”

As reported by Jeff Gerth of the Washington Post, “If correct, the portrayals in Paulson’s book…could spell trouble for GE in court, where shareholders are accusing Immelt and other executives in civil suits of violating securities laws by misleading investors in fall 2008 about GE’s finances and withholding key information.”

Of course the company, and Immelt, issued misleading statements. Everyone knows that.

But, in the interest of full disclosure, the discussions between Paulson and Immelt “are based on Paulson’s call logs and his recollection of what transpired. There are no transcripts or documents to back up those conversations.” I’ll go with Paulson’s take.

–While authorities in the United States say that swine flu has run its course, experts in Australia say a second wave could hit there over the coming months. It will be interesting if this proves to be the case.

–Speaking of swine, former Merrill Lynch CEO John Thain has popped up again, this time as the new chief executive at CIT Group, the middle-market financing company that is getting its act back together after emerging from bankruptcy.

–The Hooters restaurant chain, 450 strong, is said to be on the block for about $250 million. While sales of wings and breast meat exceeded $1 billion in 2008, the chain is experiencing financial difficulties with steep declines over the course of the recession. We wish this outstanding icon well. [Actually, it’s been at least ten years since I’ve been in a Hooters, now that I think about it.]

–So last month the Burj Khalifa, the world’s tallest skyscraper located in Dubai, opened to much fanfare but now it’s closed, at least as of this writing, supposedly due to electrical problems, which is a rather important issue if you’re on, say, the 150th of 160 floors and the power goes out. Thousands of tourists had been lining up to pay $27 ($100 without an advance ticket) to visit the observation platform on the top floor, which had been the only part of the tower open thus far. Will we be talking of the Burj Khalifa a year from now as one of the biggest fiascos in the history of global commerce? I’d say the odds are pretty good we will. [At least in terms of the observation deck, there was a rumor the owners were rushing to fix their problems by Valentine’s Day, which still doesn’t speak to the economic viability of the complex overall.]

–According to a study by HSBC equity analyst Douglas Rowat, since 1988, of the 12 nations hosting the Olympics, the countries’ stock markets rose an average 14.8% during the year following the Games. Of course you still have to factor in fundamentals, and, for some reason, the market only rose after two of the six Winter Games, but did so after five of the six summer events.

–Fred Morrison, the inventor of the Frisbee, died. I’ll have more in that other column I write.

Foreign Affairs

Iran: Supreme Leader Ayatollah Ali Khamenei thanked the “tens of millions” across the country who celebrated the 31st anniversary of the 1979 Islamic Revolution on Thursday, as security forces did their part in severely clamping down on the Green Movement, the opposition, in a big defeat for them. Khamenei said Thursday’s rally should be a wake-up call for the “domestic enemies and deceived groups who claim to represent the people,” blasting the West further in saying it was time for “foreign enemies to abandon futile efforts to subjugate” Iran. 

“The past 31 years are not enough to awaken a few arrogant and bullying states to their futile efforts to dominate this Islamic nation.”

For his part, President Ahmadinejad told the throng on Thursday:

“When we say we do not manufacture the bomb, we mean it, and we do not believe in manufacturing a bomb….The Iranian nation is brave enough that if one day we wanted to build nuclear bombs we would announce it publicly without being afraid of you.”

A senior Israeli official told the Jerusalem Post that Ahmadinejad’s reference to building a nuclear bomb would likely serve to further convince the world of the true purpose of the country’s nuclear program, according to the source. “There is no logic to the Iranian nuclear program if it is not for a military purpose.”

The security crackdown was successful in preventing opposition leaders such as Mir Hossein Mousavi and his wife from attending an opposition gathering. [It was reported Mousavi’s wife was beaten and kicked by plainclothes police.] Another opposition leader, Mahdi Karroubi, had his car windows smashed by hardliners. Violence overall, though, was muted by comparison to last December’s demonstrations that claimed at least 8 lives.

Israeli Prime Minister Benjamin Netanyahu is traveling to Moscow on Sunday for talks with both President Medvedev and Prime Minister Putin, with Israel hoping to continue to block delivery of the S-300 air defense system to Iran that Russia had promised Tehran going back to 2007. It is Netanyahu’s first trip to Moscow since his “secret” meetings last September.

But what now? While the United States acted unilaterally to levy some sanctions targeting the Revolutionary Guard and the companies it owns, Defense Secretary Robert Gates said, “I think it’s going to take some period of time – I would say weeks, not months – to see if we can’t get another UN Security Council resolution.” Russia said it understood the West’s anxieties, that they were “valid,” but China remains obstinate, and also silent the past few days, amid its growing economic ties with Iran as well as its anger over U.S. arms sales to Taiwan.

It’s the irrational, though crazy like a fox, Iranian leadership, however, that occupies center stage. Just a week ago Iran, as part of its Dean Smith four-corners offense, offered up another ludicrous proposal, saying it would allow some of its uranium to be enriched up to 20% for medical research, as proposed by the West, but would only hand over batches at a time. Plus the enrichment would have to be done on its soil, not Russia’s and/or France’s as originally agreed to, and Iran set no timetable. As the German defense minister said, the offer was a “transparent ploy for time.”

Then Khamenei and Ahmadinejad said Iran would deliver a “punch” to the West that would stun world powers during the anniversary celebrations (though none was forthcoming).  Then Ahmadinejad said his country would immediately begin enriching its uranium to the 20% level without the West’s help.

“Yesterday, the Islamist dictatorship in Tehran celebrated its 31st birthday with nuclear candles, crushing Iranian dreams of freedom and Western hopes of appeasement.

“President Mahmoud Ahmadinejad announced that his scientists have already enriched uranium to the crucial 20% hurdle, threatening to go all the way to nuke capability.

“In the streets, thugs smashed scattered freedom rallies – clubbing, gassing and firing on demonstrators – while hundreds of thousands of organized regime supporters rallied in Tehran’s main square.

“What happens next? Having threatened ‘consequences’ yet again in his State of the Union message, President Obama will play at picayune sanctions, achieving nothing. He won’t even take a convincing rhetorical stand in support of the freedom marchers.

“Europe will do even less.   Russia will flash us some thigh, only to cover up again and return to embracing Iran. But what’s coming up in Iran will really test us….

“Soon, once-peaceful demonstrators will feel they have no choice but to turn to violence. In the coming months, a campaign of terror against the state will begin. It may prove inept, or it may become destabilizing. Either way, the Obama administration will be challenged.”

Here’s my bottom line. Every few months there are a series of reports that Iran is having trouble enriching uranium due to old equipment, incompetence, and/or sabotage. We saw the exact same reports again this week. Some of it is true, no doubt; the rest of it can be taken with a grain of salt. I have virtually zero confidence in U.S. intelligence these days, for instance, which for every success has also proved itself to be inept, and as for the vaunted Israelis, just think back to how badly they underestimated Hizbullah’s strength before the 2006 war. [The Germans appear to have the best intel these days, in the humble estimation of your scribe.]

The reason why the 20% enrichment figure is so important is because going from 3.5% to 20% is the hardest process, which would take about a year if Iran was looking to get their entire batch of enriched uranium to this level (1.8 tons worth), utilizing 2,000 centrifuges. The IAEA says Iran has 8,700 centrifuges but only 1,800 are currently usable (though as in my earlier discussion who the heck knows).

Then, once you’re at 20%, to get the batch to weapons-grade material, or 90% (actually 93%), it requires half the time, and just 500 to 1,000 centrifuges. If Iran just wants enough weapons-grade uranium for a test to scare the hell out of us, they would need far fewer centrifuges and require less time. As for the weaponization process, clearly Iran has made great progress.

This is what we are dealing with, as our president tells Iran the “door is still open,” while some of us can only wonder why Obama wants to continue to deal with an illegitimate government.

Add all the above up and the day when Israel strikes is growing ever closer. I want to emphasize a point I made last fall, though. Assuming Iran is indeed plowing ahead with its enrichment program, there are risks in Israel waiting much longer. Environmental risks. A successful attack on Natanz could possibly result in an environmental disaster. They would be blowing up nuclear material, after all. Depending on the fallout, literally, it has the potential to be a huge PR disaster for Israel and the risk grows daily, one must assume. Just food for thought you won’t find in any other reports.

I also have to reiterate another unique angle I have put on the table from time to time. Should Israel attack, and oil spike, short the heck out of crude! This will take almost perfect timing, I grant you, but I’ll be trying to put on the trade myself.   I am not concerned about Iran’s ability to wreak havoc in the Persian Gulf and Strait of Hormuz, outside of a day or two. The threat will be eliminated in short order.

But it’s the Saudis who will come to the rescue with their huge spare capacity. No one, least of all the kingdom, wants to see oil at $130, or higher, for any extended period of time, causing our fragile global economy to slide into depression, and they will flood the system. That, in combination with the reopening of the Strait, will cause oil to crash from whatever level it peaks at. Big profits will be made at this time. I have personal experience in this from the invasion of Kuwait and the response of oil then. It spiked higher, but then came tumbling down once Margaret Thatcher convinced Bush 41 to buck up and start flooding the Gulf region with troops.

One last point. Of course an Israeli attack could unleash Iran’s proxies, Hamas and Hizbullah. This week Ahmadinejad told Syrian President Assad that Israel “must be resisted with full force to put an end to it once and for all” should this occur, while Israel continues to play with fire when it comes to Lebanon. Stop making air incursions into Lebanese air space, my Israeli friends! Don’t talk to me about Hizbullah violating UN resolutions, which they obviously are, dangerously so, when you yourself are doing it and bringing the entire region on the brink of war. Lebanon’s army, supported by the United States, has every right to shoot down an Israeli fighter plane.

[The latest Pew Research Center Global Attitudes survey finds 97% of Jordanians, 97% of Palestinians, and 98% of Lebanese hold an unfavorable opinion of Jews. In Turkey, amidst recent tensions between Ankara and Jerusalem, the percentage holding a “very unfavorable” attitude towards Jews jumped from 32% in 2004 to 73% late last year.]

Afghanistan: U.S. and coalition forces have just launched the biggest offensive of the war against a Taliban stronghold in Helmand province, the town of Marjah and what has been the Taliban’s center for southern Afghanistan.   The place is entirely encircled, but the Taliban have undoubtedly planted hundreds of explosive devices around it. Far more on this next time.

Separately, there was a terrific tragedy west of Helmand this week as at least 166 died in a series of avalanches that thundered down a pass used by motorists. This is no ordinary pass. It’s 12,700-feet high and hundreds of vehicles were buried as snow engulfed three miles of roadway. Many were also trapped in a tunnel, one that is an engineering marvel, built in the 1960s, but also with a past history of being a deathtrap. If you have an accident in there and attempt to walk out you’d be overwhelmed by the fumes as there is little ventilation.

Pakistan: The Pakistani Taliban confirmed the death of their leader Mehsud from injuries suffered in a U.S. drone attack last month, forcing them to come up with a new leader for the second time in six months, while Pakistan begins talks with India, the first since the 2008 Mumbai terror attacks, in New Delhi on Feb. 25, a good sign. Vice President Biden said this week that Pakistan worried him more than Iraq, Iran and Afghanistan. I’d still put Iran first, but Pakistan a close second.

China: The angry rhetoric subsided some, though a few Chinese military officials proposed selling U.S. bonds to punish Washington for its arms sales to Taiwan. Little should be made of this. It’s the government mouthpieces one needs to concern themselves with, and more importantly, it’s unknown if a China Air purchase of 20 Airbus planes was a direct shot at Boeing or not, seeing as the government didn’t comment on the sale. No doubt, however, the U.S.-China relationship is undergoing some growing pains.

“(There) are two trends that could take a manageable situation and make it something more worrisome. The first is a growing perception in China that it is no longer as reliant on the West, and in particular the United States, as it was. In the 1980s, Deng Xiaoping brought China out of the cold by embracing America and opening up to foreign investment….Ravaged by the Cultural Revolution, Beijing desperately needed Western managerial know-how, technology and capital to develop its economy.

“Today, China is awash in capital; it has many top-notch local companies; and this year for the first time, the primary engine of Chinese growth has been its domestic market, not exports. As China expands, that internal market will probably become its dominant concern.

“A similar reality applies in foreign policy. Mao restored relations with the United States in some measure to buy himself an ally against the Soviet Union. China has needed the United States as a political ally ever since; Jiang Zemin’s fuzzy embrace of the United States was part of a strategy whose goal was concrete: membership in the World Trade Organization. Today, China commands respect across the globe. It is confident, even cocky, in bilateral and multilateral fora.

“None of this is nefarious. But Beijing’s newfound arrogance is not joined with a broader vision. The country does not appear ready to play a global role….Beijing has been largely focused on pursuing its interests in a fairly narrow sense….

“The second factor that could exacerbate Sino-U.S. tensions is America’s economic fate. There’s great fear that the U.S. economy is in deep structural decline. If American politicians cannot muster the courage to make the U.S. economy competitive again and Beijing perceives that it is dealing with a superpower in inexorable decline, relations between China and America will change fundamentally. Of course, if that happens, America will have plenty else to worry about as well.”

The government shut down what is believed to be the biggest training website for hackers, a decent sign given the recent Google allegations.

Shanghai is raising the city’s retirement age, currently 60 for men and 50 or 55 for women, depending on the occupation, to deal with pension fund shortfalls, though the government didn’t say to what ages they are being raised. It’s about the demographic shortfall between an aging population and falling birth rates.

And the government conceded it has a far greater environmental problem than first thought, particularly when it comes to water pollution, now seen as twice the levels of a 2007 report because it appears agricultural waste was ignored before.

Ukraine: Viktor Yanukovich, who was humiliated in the 2004 Orange Revolution when he tried to steal the presidential election and was forced to give up the office to Viktor Yushchenko, completed his comeback by defeating Prime Minister Tymoshenko in the run-off on Sunday for the presidency, Yanukovich winning by a reported 3 points. As of this writing, though, Tymoshenko was undecided whether or not to contest the vote. For Russia, once officially Yanukovich’s patron, this represents the completion of the Kremlin’s silent coup I’ve long written of, though both Yanukovich and Moscow are taking a quiet approach to the seeming victory. President Medvedev was the first foreign leader to offer his congratulations but the phone call was brief. European officials monitoring the election said it was free and fair, a huge accomplishment for Ukraine regardless of the winner. And consider this. President Yushchenko will be handing power over peacefully. As many an observer also offered, no former Soviet state has a freer press than Ukraine.

But now Yanukovich must turn his eyes onto Ukraine’s staggering economy and enlist the aid of all manner of folks, from the International Monetary Fund, to the Kremlin, as well as to the West.

Britain: Prime Minister Gordon Brown evidently bares his soul on a number of personal issues, including the death of his child nine years ago, as well as his relationship with former Prime Minister Tony Blair (not good) in a television interview airing tomorrow, Sunday, that will have the nation riveted, Brown heretofore known for being a very private man. But there is an election coming up and it’s time for Brown, once far behind in the polls but now making headway, to pull out all the stops. In a poll for the London Times, almost 60% of the people say they hardly recognize the country they are living in, while a startling 42% say they would emigrate if they could. 64% believe Britain is headed in the wrong direction. Meanwhile, conservative leader David Cameron is running a miserable campaign of his own.

Haiti: The death toll here is a reported 230,000, according to the government, or what’s left of it.

Nigeria: After being incapacitated in a Saudi hospital for 11 weeks, President Umaru Yar-Adua was finally forced to give up power to a new figure who has the interesting name of Goodluck Jonathan, Yar-Adua’s vice president. Mr. Jonathan has no shortage of challenges in this key energy producing nation.

South Africa: President Jacob Zuma apologized over his fathering of an illegitimate child, number 20 for this joke of a leader. I didn’t realize he is also in the midst of an $8 million expansion of his home, which doesn’t exactly send the right message during these tough economic times.  Then again the complex is home to all his wives, four (another divorced him and a sixth committed suicide, if I recall correctly, plus he has a fiancé he’s marrying later this year…it’s so hard to keep up with Zuma Nation!)

Random Musings

–According to a Marist Poll, 57% of independent voters have a negative view of President Obama’s job performance, up from 44% in a Dec. 8 survey. 29% of independents approve, down from 41%.

–In a new Washington Post-ABC News poll, more than seven in 10 Americans disapprove of the job Congress is doing, but when asked how they would vote in the November House elections, we are split evenly – 46% siding with the Democrats, 46% with the Republicans. Four months ago, Democrats held a 51-39 advantage. President Obama’s job approval rating in this particular survey was 51%.

–Related to the above, the latest CBS News/New York Times poll reveals “Fewer than 1 in 10 Americans say members of Congress deserve reelection.” 51% view the Democratic Party unfavorably, and 57% have an unfavorable view of Republicans. 3/4s of the public disapproves of Congress, “matching the highest level measured by the New York Times/CBS News poll since it began asking the question in 1977.” 62% said the country was heading in the wrong direction. 56% say they want a smaller government. Obama’s job approval rating in the CBS poll is just 46%, as low as it has been since he took office.

–In the Washington Post/ABC News poll, 75% say they support openly gay people serving in the military, the same level as a July 2008 survey. Back in May 1993, the percentage supporting gays serving was just 44%.

But, I subscribe to Army Times and this week they released the findings of an extensive survey of the troops themselves. Among active duty members, only 30% favor gays serving openly, while 51% oppose (the rest either refusing to answer the question or expressing no opinion). The split between males and females, though, is telling. Among males it’s 27-54 (favor/oppose), while among women it’s 55-26. I suspect that as much as the president wants this issue to be resolved quickly, it won’t be.

–Leading Republicans Tim Pawlenty (Gov.-Minn.) and former House Speaker Newt Gingrich offered up their health care reform prescriptions in op-eds for the Washington Post and Wall Street Journal and, while they have sensible proposals, such as making insurance portable as well as liability reform, neither, incredibly, addresses what should be the number one issue. 100,000 Americans dying each year as a result of infections picked up in the hospital!  Remember, friends, until we solve this issue, talk of tort reform, and severely limiting judgments (as I like virtually everyone else want to see, save for Democratic politicians who live off the trial lawyers’ money) is not possible until we tackle the infections issue. If a loved one dies because of pure carelessness, I’m suing the heck out of the offending parties.

–President Obama met with both Republicans and Democrats in a new ploy to spur cooperation on topics such as jobs, deficit reduction and health care. But Obama said, “We can’t afford grandstanding at the expense of actually getting something done. What I won’t consider is doing nothing….I won’t hesitate to embrace a good idea from my friends in the minority party, but I also won’t hesitate to condemn…what I consider to be obstinacy.” The president is to hold a summit on health care Feb. 25, televised on C-SPAN, and we’ll see how this turns out. Leading Republican Congressman Paul Ryan (Wis.) and others are suspicious of the outreach.

“We hear the soothing rhetoric, but what we see is the same scary substance. If they really want bipartisanship, then they have to collaborate.”

“When (Obama) came to office in 2009…(he) was faced with a fundamental choice. He could either chart a bipartisan course in response to the economic emergency, or he could try to expand government in Western Europe magnitude as Democratic congressional leaders, elected for years in monopartisan districts, had long wished to do.

“The former community organizer and Chicago pol chose the latter course.

“To the surprise of many who watched previous presidents present specific administration policies to Congress, he allowed Democratic leaders to design the stimulus package they rushed into law in six weeks.

“One-third of the money went to state and local governments – an obvious payoff to the public-employee unions that contributed so much money to Democrats – and much of it went to permanently raise the baseline spending of discretionary programs, a longtime goal of Democratic congressional leaders.

“Federal spending was raised from about 20% to about 24% of gross domestic product, putting America on a trajectory to double the national debt as a percentage of GDP in less than 10 years.

“Team Obama overestimated the stimulative effect of the stimulus package and underestimated the strength of the spontaneous tea-party movement that flared up in protest of this expansion of government.

“They underestimated, as well, the opposition to expanding government control over health care and, through the cap-and-trade bill, to the energy sector. And the disgust over conspicuous vote-buying on health care – the Louisiana Purchase, the Cornhusker Kickback, the Labor Loophole.

“Team Obama failed to realize it was no longer running in Chicago or in the Democratic primaries or facing an electorate fed up with Republicans. More important, it failed to realize that vastly expanding government goes deeply against the American grain – and against the basic appeal of Obama’s successful campaign.”

–Two recent quotes from George Will stick in my head…the health care legislative process was nothing but “serial corruption” and when it comes to Americans’ attitudes about their political leaders, there is a “deficit of trust.”

–Jackson Diehl / Washington Post…on Obama’s handling of foreign policy.

“Is a wounded Barack Obama withdrawing from the world?

“Europeans could be excused for speculating as much. The White House announced last week that the president would not attend a U.S.-European Union summit planned for Madrid in May, forcing its cancellation. The spurned host, Spanish Prime Minister Jose Luis Rodriguez Zapatero, also failed to get a meeting with either Obama or Vice President Biden during a two-day visit to Washington.

“Zapatero claimed he had ‘no problem’ with the rebuff. But that was not the reaction back home. ‘Obama Turns His Back on Europe,’ said Spain’s El Pais. ‘Obama’a No-Show Disappoints Europe’ said Germany’s Der Spiegel.

“Israelis and Palestinians also have reason to wonder. Obama’s 70-minute State of the Union made no mention of Israel or a Middle East peace process. Shortly before the speech, Obama told an interviewer he had overestimated his administration’s ability to renew negotiations between recalcitrant Israelis and Palestinians….

“(It’s) not wrong to detect a presidential step back. Partly it is sensible – as he did domestically, Obama piled too much on his foreign policy agenda his first year. The prospects are not good for an early Israeli-Palestinian peace, so the president is right to let an envoy manage it. Obama visited Europe six times in 2009, often for meetings that produced few results. His advisers are rightly trying to use his travel time more wisely this year.

“Yet there’s also a disquieting aspect to Obama’s retreat. It’s not just Zapatero who has trouble gaining traction in this White House: Unlike most of his predecessors, Obama has not forged close ties with any European leader. Britain’s Brown, France’s Sarkozy and Germany’s Merkel have each, in turn, felt snubbed by him. Relations between Obama and Israeli Prime Minister Benyamin Netanyahu are tense at best. George W. Bush used to hold regular videoconferences with Iraqi Prime Minister Nouri al-Maliki and Afghan President Hamid Karzai. Obama has spoken to them on only a handful of occasions.

“Obama’s personal popularity in many parts of the world remains strong. Zapatero told The Post’s editorial board that ‘in Spain, [Obama’s] election was experienced as if it was an election in our own country.’ But in his first year the new president did not make the same connection with the leaders of America’s principal allies. Now he is sending the message that he is cutting back his time for them. Maybe, as Zapatero diplomatically put it, this will be ‘no problem.’ But I doubt that’s what the Spaniard was really thinking.”

–Former Texas Congressman Charlie Wilson, of “Charlie Wilson’s War” fame, died. He was 76. Wilson was known in 24 years in Washington as “Good time Charlie” for his reputation as a hard-drinking womanizer, but it was his efforts to fund the Afghan resistance to the Soviet Union that played a key role in the former’s victory.

–Pennsylvania Democratic Congressman John Murtha died of complications following gallbladder surgery. Murtha was 77. Over 19 terms, Murtha earned the moniker the “King of Pork” for the volume of taxpayer money he brought back to his district around his home town of Johnstown. In recent years he has been under steady investigation for possible ethics violations.

But a word on what transpired at the end. His gallbladder surgery was botched, pure and simple, as the surgeon, during what was to be a routine laparoscopic procedure, nicked his large intestine and an infection took hold from which Murtha never recovered. It’s rare this happens, but I’m guessing this is also the kind of story that is ripe for “60 Minutes.” [It could renew the debate between laparoscopic vs. traditional invasive surgery.]

–Scientists have found that significant quantities of cancer-causing chemicals are produced on indoor surfaces contaminated by tobacco smoke, even when a smoker has been away from the room for hours or even days. For example, nicotine can stick to surfaces where it interacts with nitrous acid formed from the gas nitrous oxide, released by car exhausts and gas appliances. The biggest risk is to young children. 

–Speaking of kids, kudos to First Lady Michelle Obama for her campaign to fight childhood obesity. Get them out playing and away from the freakin’ computer. 

–A former husband and wife team for Blackwater Worldwide accused the private security contractor, in newly unsealed court records, of “falsifying invoices, double-billing federal agencies and charging the government for personal and inappropriate items whose real purpose was hidden.   They said they witnessed ‘systematic’ fraud on the company’s security contracts with the Department of State in Iraq and Afghanistan, and with the Department of Homeland Security and Federal Emergency Management Agency in Louisiana after Hurricane Katrina.”

Brad and Melan Davis also assert that “Blackwater officials kept a Filipino prostitute on the company payroll for a State Department contract in Afghanistan, and billed the government for her time working for Blackwater male employees in Kabul. The alleged prostitute’s salary was categorized as part of the company’s ‘Morale Welfare Recreation’ expenses, they said.” [Carol D. Leonnig / Washington Post]

–Some of Sarah Palin’s lines at last weekend’s Tea Party convention in Nashville.

“We need a commander-in-chief, not a professor of law.”

Later, she told Fox News Sunday’s Chris Wallace that she would run for the 2012 GOP nomination “if I believed that that is the right thing to do for our country and for the Palin family. I think that it would be absurd to not consider what it is that I can potentially do to help our country.” She also told Wallace that Obama would be a one-term president unless he changed strategy. If he should play “the war card” and “declare war on Iran,” that might change public opinion in Obama’s favor, she said.

Asked by Wallace if she meant Obama might “cynically play the war card,” Palin said, “Things would dramatically change if he decided to toughen up and do all that he can do to secure our nation and our allies.”

But at one point in Nashville, there was Sarah glancing down at the palm of her left hand – on which the words “energy,” “budget cuts,” “tax” and “lift American spirits” had been written in ink – during a question and answer session. Detractors called it the “Hillbilly Palm Pilot,” seeing as she should by now be able to memorize her talking points. Just minutes before she was criticizing President Obama for being a “charismatic guy with a teleprompter.”

The organizer of the convention, Judson Phillips, who is seeking to get rich off the Tea Partiers, noted that it would have been Ronald Reagan’s 99th birthday. “I never met Ronald Reagan,” he said. “But I’ve met Sarah Palin.”

“(The Tea Partiers) are principled people who are quick to point out that even worse than being a liberal of the enemy Democratic camp is being a Republican unfaithful to conservation.

“But they have a big problem. Outside this protected political snow globe, all their idealism crashes and falls apart against the rocky shoals of reality.

“The political world they want to influence is a world of compromise and accommodation. It is no place for ‘purity’ and that is precisely how the American Founding Fathers designed it.

“At best, these Tea Party folks have just one actual success at the ballot box that they can point to.

“Scott Brown’s astonishing come-from-nowhere victory to take the Massachusetts Senate seat once held by Ted Kennedy was a caustic rebuke of Democrats, but it is also a race that the Tea Party claims to have put on the map and brought home to an unlikely victory. Helping Brown to victory, Tea Partiers worked with the GOP.

“In every one of their attempts to punish unfaithful Republicans, they have either failed to win or simply handed the seat over to Democrats.

“Even Brown’s victory is a strange one for them to rally around, since it is hardly a testament to the success of political purity. As Brown himself points out at every opportunity, he has spent his political career compromising with Democrats.”

–So I didn’t understand why the Northern Hemisphere suffered such a cold spell early in the winter, which is now being felt again in Europe. As told by Paul Simons of the London Times:

“The story begins with El Nino, the big warming of tropical seas under way in the Pacific. So much hot air soared up from the Pacific it punched through into the stratosphere and dislocated winds 20-50km high.

“On January 20 this colossal jolt sent unusually warm air flooding into the stratosphere over the Arctic, where temperatures in the stratosphere soared by 40C in just a few days. The intensely cold stratosphere air normally over the Arctic was shunted over Europe instead. Eventually that cold stratosphere rippled down into the lower atmosphere, flipping our winds from west to east – and easterly winds in winter usually give us our coldest weather.”

And that’s how some of us have received the cold weather, Charlie Brown. It’s been the coldest winter in Britain since 1981-82.

Of course this week’s review also wouldn’t be complete without mention of the all-time snow records that were set in places like Washington, D.C., Baltimore, Atlantic City and Philadelphia. In Washington, the pitiful handling of the snow should cost Mayor Adrian Fenty his job when he goes for another term this November. While outside Philadelphia, my friend Mark R., fresh off 45 inches of snow in two storms, is convinced the next Ice Age started in his backyard and we’ll be tracking its progress over the coming years. Admittedly, when it hits 95 in his neighborhood this summer, global warming enthusiasts may have a field day should Mark’s glacier disappear.

–Two weeks ago PBS’ “Frontline” had a program titled “Digital Nation” that was frankly as depressing as my opening for this week’s column. Our children are spending 50 hours a week with the digital medium and it’s not good. The program showed a scene from an MIT classroom and no one was listening to the professor…everyone was looking at Facebook, listening to iTunes, or catching up on email on their laptops. So many of us think we’re smart and we aren’t. I mentioned this to David P., who passed on a note to a professor friend of his at Wellesley College and the gentleman replied:

“I wish I could say I was surprised. The Wellesley students are in some ways worse (than the MIT ones), because our classes are smaller, and they STILL try to get away with it! They are addicted to this crap.”

I encourage you to peruse my current “Wall Street History” column where the next two weeks I’m running some comments from interviews conducted with Frontline participants. Here is a sample:

ST: I teach at MIT. I teach the most brilliant students in the world. But they have done themselves a disservice by drinking the Kool-Aid and believing that a multitasking learning environment will serve their best purposes, because they need to be taught how to make a sustained, complicated argument on a hard, cultural, historical, psychological point.

Many of them were trained that a good presentation is a PowerPoint presentation – you know, bam-bam-bam – it’s very hard for them to have a kind of quietness, a stillness in their thinking where only one thing can actually lead to another and build and build and build and build….

I think it’s for a generation of professors to not be intimidated and say, “Oh, this must be the way of the future,” but to say: “Look, there really are important things you cannot think about unless you’re only thinking about one thing at a time. There are just some things that are not amenable to being thought about in conjunction with 15 other things. And there’s some kind of arguments you cannot make unless you’re willing to take something from beginning to end.”

We are so doomed. More next week on this topic.

–Happy Valentine’s Day. New research [appearing in the journal Neurology] suggests eating chocolate may have a positive impact on preventing stroke, at least one chocolate bar a week. Eating a little more reduces the risk even further. But eating 40 candy bars a week could make you eligible for federal assistance of one kind or another.

–Finally, you have to feel for Canada and the people of Vancouver to have their Olympic Games open on such a down note with the death of Georgian luger Nodar Kumaritashvili in a horrific crash during a practice run.

But I was watching the opening ceremonies, really just to see who lit the torch (what a fiasco that was), when the head of the Vancouver committee gave his speech, which was quite good, and there was a line worth remembering for those who have an influence on young people in particular.

“Lives of great significance begin with a nudge, a spark.”

Returns for the week 2/8-2/12

Dow Jones +0.9% [10099]
S&P 500 +0.9% [1075]
S&P MidCap +2.7%
Russell 2000 +3.0%
Nasdaq +2.0% [2183]

Returns for the period 1/1/10-2/12/10

Dow Jones -3.2%
S&P 500 -3.6%
S&P MidCap -1.5%
Russell 2000 -2.3%
Nasdaq -3.8%

Bulls 34.1
Bears  26.1 [Source: Chartcraft / Investors Intelligence…huge drop in bulls since early January]