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10/18/2014

For the week 10/13-10/17

[Posted 10:30 PM ET, Friday]

Edition 810

Ebola, Washington and Wall Street

What a week. A week where confidence in our government and institutions seemingly hit an all-time low with the mishandling of the Ebola crisis. A week where it was clear our campaign against ISIS was not exactly going as planned, or rather, we question just what the heck the plan really is. A week where stock markets around the world plunged on fears the global economy was not only slowing, but the word ‘deflation’ was increasingly part of the lexicon. A week where Vladimir Putin once again talked of Russia’s nuclear prowess.

It was a week where in some respects the world seemed in freefall, though finally on Friday, at least for a few hours, the financial markets rallied back. This new cycle of high volatility, however, is probably here to stay for the balance of the year...certainly as long as Ebola is in the news.

And that’s where we start, because Ebola is indeed a big deal. There is no reason to panic in the United States, yet, but when you view Ebola from its source, Western Africa, there is cause for tremendous concern.

I was warning of the economic impact of Ebola long before the Obama administration began to take the crisis seriously and there is now little doubt Ebola will impact a large segment of the African economy potentially for decades to come unless a vaccine for the virus can be found, soon. Certainly sentiment is changing rapidly if you’re a businessman, looking to invest in the region. It’s a time to look elsewhere, and that’s tragic.

But if many of Africa’s immensely corrupt governments had spent just a little of the money that  flows into the coffers on simple healthcare, much of the human carnage could have been avoided.  [It’s also why India’s new prime minister, Narendra Modi, is correct in focusing on sanitation and bringing his people into the 21st century. Imagine Ebola there.]

So forget the United States, here’s where we stand in West Africa as I go to post.

UN Secretary General Ban Ki-moon pleaded for funds to fight the virus in the three countries hardest hit, Liberia, Sierra Leone and Guinea. Pledges of help and deployments to the region have had minimal impact. The death toll is over 4,500, there have been 9,000+ cases, and the World Health Organization is warning of as many as 10,000 new cases a week by Dec. 1 if the epidemic isn’t arrested.

Yet Ban Ki-moon said that while a $1 billion trust fund was launched in September, only $100,000 has been received. Let me repeat. $1 billion needed. $100,000 received. Donors have sent $400m to other UN agencies and aid organizations directly, but it’s this trust fund that is intended to be the vital spending reserve and it has received pledges of only $20 million.

As of Friday, guess which country is responsible for the full $100,000 in actual funds? Colombia.

Former Secretary General Kofi Annan told the BBC, “If the crisis had hit some other region it probably would have been handled very differently. In fact when you look at the evolution of the crisis, the international community really woke up when the disease got to America and Europe.”

Medecins San Frontieres (MSF) currently runs about 70% of the 1,000 beds available in treatment facilities across the three worst affected countries and Christopher Stokes, who heads the charity’s Ebola operation, said it was “ridiculous” his volunteers still bore the brunt of care for sufferers.

Britain and the United States, for example, committed to build new critically needed field hospitals and treatment centers, but this should have happened yesterday. Instead, much of the work won’t be completed for another 4-6 weeks, at best.

As Stokes told the BBC, the slow pace of deployment “puts in danger our chance of really getting on top of this collectively.”

The World Health Organization at week’s end was talking of a “spike” in the Guinean capital, Conakry, with “intense transmission” in Freetown, the capital of Sierra Leone. In the Liberian capital, Monrovia, the WHO spoke of “significant underreporting” and problems with data-gathering.

About 20 countries need to be on alert, including Ivory Coast, Mali and Senegal that border the worst affected area.

The UN’s Ebola mission chief, Anthony Banbury, told the UN Security Council, “It is running faster than us, and it is winning the race.”

So while the death of Thomas Eric Duncan in Dallas and the two nurses who were treating him who then contracted the virus is important, you haven’t seen anything yet unless immediate progress is made in West Africa. There will be no holding it back, even if Europe and North America institute travel bans.

There is also another risk if we can’t stop Ebola in its tracks. The longer the epidemic continues, the greater the chance it will mutate in a way that makes it more transmissible between humans. That is a nightmare none of us want to contemplate but we rely on our governments to ‘game out’ such a scenario. Clearly, when the greatest country on earth, the USA, has all of 13 beds at its four designated infectious disease centers, in some respects we are as woefully unprepared as Sierra Leone.

But fear not, we have a new Ebola czar, President Obama naming political hack Ron Klain, a longtime Democratic aide. He will be charged with coordinating the response, including how best to isolate and treat Ebola patients in the U.S. I feel so much better.

Finally, regarding America’s hospitals, long ago I used to harp on the number who die from infections each year, like staph, once they are admitted as patients. I forget who was mentioning it on one of the talk shows the other day but some 75,000 a year succumb this way. It is inexcusable for one citizen to die of an infection in a hospital.

I bring this up because why are some of us seemingly so surprised at what happened in Dallas? Tens of thousands die each year because far simpler protocols than those for Ebola aren’t followed. It’s been a national disgrace.   

But that’s a story worth returning to at another time. For now, if you see a fruit bat, don’t touch it.

---

So on to Wall Street. At its worst levels on Wednesday, the Dow Jones was down 460 points, Ebola was all over the news, and the bond market was going bananas, with the yield on the 10-year Treasury crashing 34 basis points to a yield of 1.86%, the single-biggest fall since March 2009, but then it finished the week at the same level it started Wednesday morning, 2.20%. Some hedge funds got obliterated, no doubt, though it often takes a few weeks to identify the bodies, as so many on the Street were ‘short’ Treasuries. Heck, I’ve been calling for the 10-year to rise myself.

But as there was a flight to safety component in the trade at times this week, so much of the market activity was clearly computer generated and had nothing to do with fundamentals. Investment legend Leon Cooperman said 75-80% of market action these days is irrespective of the fundamentals and he’s right. It’s a joke.

Nonetheless the week did see a slew of earnings reports (the fundamentals) and the market rallied back some on Friday on the strength of news from industrials like General Electric and Honeywell, who both reassured us that when it comes to the U.S. economy, the recovery continues. When it came to some of the bank earnings reports, though, revenues, except in the case of Goldman Sachs, were light and low interest rates continue to do a number on margins. [More below.]

But one positive of lower rates is the 30-year fixed mortgage is down to 3.97%, so you have another opportunity to refinance.

Two other items: While Friday saw a positive reading on September housing starts, Wednesday’s market action was influenced to the downside by a worse than expected reading on September retail sales, down 0.3%, and down 0.2% ex-autos.

The other big item on the week was the slide in oil prices to $80 at one point (before closing the week at $83), a three-year low and some 27% from the peak in June.

But while this is a big break for consumers heading into the holiday shopping season, some viewed it as yet another sign of deflation. Deflation isn’t a problem here, yet, but as I’ll get into in a bit, it certainly is a threat to Europe. 

More on the topic of crude....

Ed Morse / Financial Times

“Crude oil prices have plunged by $25, or more than 20 percent, since mid-June, raising many questions. How low might prices go? If they rebound, at what level will they stabilize? Will Saudi Arabia and OPEC move to cut output when they meet next month? At what price level might U.S. shale oil production be affected and how severely?

“One thing is certain: even the current lower prices are rapidly creating winners and losers. Losers are producers, countries and governments. If Brent falls to $80, OPEC countries would lose some $200 billion of their recent $1 trillion in earnings, affecting not only their ability to earn enough to cover the post-Arab Spring expanded budgets, but also their capacity to service debt without triggering defaults. And for the U.S., if prices fall much further, capital expenditures to expand production would have to be cut, potentially slowing the U.S. shale revolution.

“On the other hand, the world economy as a whole would enjoy the equivalent of a huge quantitative easing program, helping to spur stalling economic growth. The decline in prices would generate a $1.8bn daily windfall, about $660bn annualized. Tracking this into gasoline prices, in the U.S., where last year some $2,900 per household was spent on gasoline, the windfall would amount to a tax rebate of just under $600 per household. It would affect all consumers globally save for those in OPEC countries, who already pay little for fuel.”

[Every one-cent drop in gas prices equates to a $1 billion decline in energy spending by Americans, i.e., more discretionary income.]

Global demand is rising at a rate less than 1m b/d and surpluses for 2015 could be in the neighborhood of a like amount, which would weigh even more heavily on prices. Last month, output from OPEC rose to a 13-month high of 30.7m b/d. A nuclear deal with Iran would lead to even more oil on the market.

Plus you have Saudi Arabia, which is determined to maintain market share and doesn’t mind prices going down further, also knowing this hurts Iran and Russia, while also attempting to thwart rising U.S. production. Russian President Vladimir Putin is already talking of the severe impact plunging oil has on his nation’s finances. Russia needs $100 oil for a balanced budget, while Saudi Arabia, according to some, needs $90-$95 (the IMF says $89), though it can accept far lower short term and fund its social programs by tapping its huge cash reserves.

But Saudi billionaire investor Prince Alwaleed bin Talal al-Saud expressed his “astonishment” at comments by Saudi oil minister, Ali al-Naimi, who played down the impact of falling prices below $100 a barrel.

Prince Alwaleed, noting the kingdom’s budget was 90% dependent on oil, said the impact of lower prices was a “catastrophe that cannot go unmentioned.”

Then you have Venezuela, which relies on oil for 97% of its export revenues. As noted in a report by Bloomberg, Harvard economists Kenneth Rogoff and Carmen Reinhart are predicting this hell-hole will default on its foreign debt, while borrowing costs are surging as oil prices fall.

“They have extensive domestic defaults and an economy that is really imploding,” Reinhart said. “What they really need to do is get their house in order. If an external default would trigger such a possibility, that’s not a bad thing.” Yes, default could be a sensible strategy. Venezuelan debt is yielding 16 percentage points more than Treasuries, according to JPMorgan Chase.

Europe and Asia

By the close on Thursday, some $5.5 trillion in the value of equities had been wiped out, worldwide, since September with concerns over the global economy, particularly in Europe and Asia. Friday’s market rally both here and across the pond helped a little, with the Stoxx Europe 600 Index jumping 2.8%, its best single performance in almost three years. [European stocks, prior to Friday, had fallen eight straight days, the longest streak since 2003.] But I can virtually guarantee it was a fake-out. Yes, the European Central Bank announced Friday that it would start buying assets next week, but Europe’s essential problems will remain...no inflation (and outright deflation in some countries) and zero growth with still sky-high unemployment rates.

*European stocks, prior to Friday, had fallen eight straight days, the longest streak since 2003.

Eurostats, the statistical arm of the European Union, released its inflation data for September and for the euro-18 nations it was up just 0.3% on an annual basis. By contrast, in Sept. 2013 the inflation rate was 1.3%, which the ECB would kill for today.

But prices are flat out falling in some countries. Prices were down 1.1% in Greece, down 0.3% in Spain, again, annualized (after being down 0.5% in August and 0.4% in July), down 0.4% in Sweden (they are EU, not eurozone) and they were down 0.1% in Italy.

Germany had inflation at a whopping 0.8%, while France was at 0.4%.

Eurozone industrial production was also released for August, down 1.8% over July and down 1.9% year-over-year.

In further country specific news, the German government lowered its official growth forecast to 1.2% this year from a previous estimate of 1.8%, and it reduced the outlook for 2015 to 1.3% from 2.0%.

The U.K. had some positive news, reporting an unemployment rate of 6.0%, a six-year low, for the three months thru August (they have rolling three month periods for this stat), but with inflation falling to 1.2% in September from 1.5% in August, the Bank of England is hinting it may keep interest rates unchanged for longer than expected; the BoE and U.S. Fed being the two central banks that it was thought would first hike yields next year.

But then you had France and Italy, both at loggerheads with Germany in the austerity vs. growth debate. France said it was going to run a deficit of 4.4% of GDP, a further slap in the face to the EU, while Italy’s Prime Minister Matteo Renzi said he needed Germany and the other austerians to cut him some budgetary slack if he’s to boost growth in his country.

But German Chancellor Angela Merkel insisted now wasn’t the time to ease up on the fiscal discipline that the likes of Germany and Finland argue has brought stability to the eurozone.

So Italy, Germany and France went around and around in a discussion that will now move to next week as the EU starts a two-week probe of euro-area governments’ draft budgets.

French Finance Minister Michel Sapin said, “Right now, in this period, with growth that’s half the pace of what was expected, with inflation that’s collapsed, we cannot cut our deficits at the same pace.” France isn’t going to hit the EU’s 3% budget deficit target until 2017, at the earliest, two years later than the extended deadline the European Commission had handed down.

As for the bond-buying that European Central Bank President Mario Draghi may employ within days, the EU’s Court of Justice, the bloc’s highest court, will weigh in on whether Draghi’s pledge to do “whatever it takes” in buying sovereign paper in particular overstepped the ECB’s powers. Germany’s top court expressed doubts as to the legality, and they then referred it to the EU’s 15-judge panel.

The Court of Justice won’t say the ECB’s “Outright Monetary Transactions” (OMT) mechanism is illegal because politically they just couldn’t do that without killing the euro. But their ruling, not expected until next spring, by my calculation, will still have impact in the language that is used.

The thing is, two years after the OMT program was put in place to avert a breakup of the union at the height of the euro crisis, the ECB is finally gearing up to buy asset-backed securities and covered bonds in yet another attempt to jumpstart the economy by funneling money to companies and households, while fueling inflation.

Of course nothing the ECB has done thus far has worked. Chancellor Merkel, in rejecting internal calls to boost spending and delay her government’s goal of a balanced budget next year, said there is no need for the ECB to try out new and uncertain measures.

To those like France and Italy who favor spending over austerity, German Finance Minister Wolfgang Schauble said, “The worst thing we could do would be to repeat yesterday’s mistakes” of relying on public debt to lift growth.

Bottom line, the likes of Germany don’t want the ECB to give countries such as France and Greece an excuse not to get their budgets in order and make their economies more productive, which is also another reason why Germany doesn’t want the ECB buying sovereign debt from the likes of Greece.

So...speaking of Greece. For the better part of this year, during the spectacular bond rally in the eurozone’s periphery, Spain, Italy, Portugal and Greece (and earlier Ireland), I have been warning that some of the yields weren’t in the least bit dealing with reality. All year I have looked very wrong as yields continued to plummet.

But this week, at least for a few days, I can unequivocally declare victory. The yield on Greece’s 10-year bond, for example, hit 9.33% Friday morning, before finishing the week in the 7.80% range, which is up from 5.52% on Sept. 8. Heck, last week I noted in this space that the yield had risen to 6.46% over increased political uncertainty and questions over Prime Minister Samaras’ bailout exit plans. Obviously, this past week those concerns increased.

Greece had the biggest selloff in its bonds since the height of the euro crisis, July 2012. An early election is now possible, perhaps February or March, and with Left opposition party Syriza now leading in the polls by six points over the governing center-right coalition, the markets worried about Samaras’ plans and what could then be Greece’s inability to finance its debt at realistic rates. That’s the message being sent by soaring bond yields. Investors don’t believe the politicians would be able to successfully manage the economy without international supervision.

[Separately, Italy’s 10-year, which closed last week at 2.32%, traded above 2.70% before finishing the week at 2.49%. Portugal’s 10-year went from 2.93% to 3.27%. Conversely, the German bund hit a new all-time low yield of 0.72% before finishing Friday at 0.86%.]

So this new leg of the eurozone story is just beginning. What kind of bond-buying will the ECB do and can it possibly have any real impact on a stagnant continent? Stay tuned.

Finally, a few quick notes on Asia.   China reported September exports rose a better than expected 15.3%, with imports also exceeding expectations, up 7%, but on the former the number was so strong, especially in relation to goods flowing through Hong Kong, that there were renewed concerns over fake invoicing, which the government had seemingly gotten a handle on.

China also reported that consumer prices for the month of September rose only 1.6% year-over-year vs. a 2.0% rate in August, far below the official target of 3.5%, which means the government has lots of room to stimulate the economy, should it so choose. [Various reports have China injecting $32.7 billion into some national and regional lenders to support economic growth.]

And passenger-car sales rose 6.4% in September vs. year ago levels, which was actually the weakest since February 2013.

In Japan, which is struggling mightily to generate growth, Goldman Sachs cut its GDP forecast to just 0.1% in fiscal 2015 (ending 3/15), with GDP up 2.9% in the third quarter, which is far less than an earlier projection of up 3.8%. [Reminder...GDP fell 7% in the second quarter.]

Street Bytes

--Friday’s rally helped pare the losses on the week for the broader averages, though this extends the losing streak for the Dow, S&P 500 and Nasdaq to four. The Dow and S&P lost 1%, while Nasdaq dropped 0.4%. The S&P is 6.2% off its high and we still haven’t officially hit the 10% correction mark on a closing basis.

But when it comes to year-to-date returns, the Dow is down 1.2% and the S&P and Nasdaq are up only 2% each.

--U.S. Treasury Yields

6-mo. 0.04% 2-yr. 0.37% 10-yr. 2.19% 30-yr. 2.97%

Producer prices for the month of September fell 0.1%; unchanged ex-food and energy. For the 12 months, the PPI is up just 1.6%, including on core. The decline for September was the first negative reading since Aug. 2013.

The Fed’s next Open Market Committee meeting is Oct. 28-29, at which point they are expected to announce the end of QE3 (quantitative easing).

--I don’t mean to give this short shrift, but the Treasury Dept. announced its final budget deficit report on fiscal 2014 (ending 9/30), and the annual shortfall fell to $483.35 billion, the lowest since 2008. [The deficit was $680.2 billion a year ago and had peaked in 2009 at $1.4 trillion.]

The figure is also just 2.8% of gross domestic product, which is good, but deficits are slated to increase anew beginning in fiscal 2016, after one more probable drop in the year that started Oct. 1.

Over the last 40 years the deficit as a share of GDP has averaged 3.1%.

Revenues increased 9% in fiscal 2014, with individual tax receipts up 5.9% to a record $1.394 trillion, while payroll taxes rose 8% to pass $1 trillion for the first time, and corporate taxes surged 16% to $321 billion, the third highest total in history and the most since $370.2 billion in 2007.

It also needs to be noted that Congress did a good job...spending rose just 1.4%, though Medicare and Medicaid rose 5.6%, while Social Security outlays increased 4.4%. Defense spending was down 4.9% owing to the sequester, but that’s going to change given today’s new world.

--The International Monetary Fund is concerned about large bond investors such as PIMCO and their dominating positions in high-risk, generally illiquid bonds all over the world.

“Credit-focused mutual funds have seen massive inflows and have become the largest holders of corporate and foreign bonds,” said Jose Vinals, the head of the IMF’s financial-markets division, at a news conference in Washington recently. “These inflows have created a liquidity illusion, which can amplify shocks and lead to sharper falls in the market.”

For example, PIMCO owns close to 50% of a number of foreign bonds.

Laurence D. Fink, CEO of BlackRock, said in a conference call with investors, “We are worried about liquidity. And the question is, do we have enough time before a true liquidity event destabilizes the market?” [Landon Thomas Jr. / New York Times]

--One reason for the market tanking on Wednesday was U.S. pharmaceutical group AbbVie warning it may pull out of its deal to acquire Dublin-based Shire, with shares of Shire falling 22% immediately, while some of the world’s largest hedge funds were left with heavy losses.

AbbVie said it was forced to reconsider the acquisition in response to a White House crackdown on so-called inversions; U.S. companies use of overseas mergers to lower their tax burden.

The hedge funds had no clue what was about to hit them, especially as AbbVie’s CEO had just made positive comments two weeks ago, while hedge funds also felt there was no way Washington could prevent the tax inversion deals until next year.

AbbVie’s probable move thus called into question the entire M&A game, which was destabilizing to the banks.

--Ireland is looking to change its tax code to require that all Irish-registered companies be tax residents in Ireland within the next six years. Finance Minister Michael Noonan told parliament:

“Aggressive tax planning by the multinational companies has been criticized by governments across the globe, and has damaged the reputation of many countries.”

Companies such as Google, Facebook and Microsoft have used what is known as the “Double Irish” to funnel billions in non-U.S. profits to offshore tax havens such as Bermuda.

At the same time, though, Finance Minister Noonan said Ireland is not budging on its low 12.5% corporate tax rate.

U2 frontman Bono weighed in, saying the Irish economy needs companies like Apple, Facebook and Google.

“We are a tiny little country, we don’t have scale, and our version of scale is to be innovative and to be clever, and tax competitiveness has brought our country the only prosperity we’ve known.

“That’s how we got these companies here... We don’t have natural resources, we have to be able to attract people.”

Bono also admitted the biggest transformation he has undergone in the past ten years is to recognize the power of commerce to get people out of poverty.

But such comments make him unpopular among the left, who, as the New York Post opined, favor models that “seem to prefer perpetual dependency rather than the dignity of self-sufficiency.”

--U.S. bank stocks were hit hard this week as plummeting interest rates narrowed the spread further between the rate they pay for deposits and the rate they are paid for loans and investments. It had been hoped in recent months that the Federal Reserve’s monetary policy was going to change early to middle of next year, but as noted above, rising rates and normalization of same is unlikely to occur before the end of next year at the earliest.

Lower Treasury yields are a double-whammy as well these days because of the huge amounts of government securities the banks are forced to hold to meet new liquidity rules and when the  securities roll over, the banks are having to buy new Treasuries at even lower yields.

What is the bottom line impact? Bank of America said a 100 basis point rise in rates would boost revenues by about $3 billion, though net interest margin continues to deteriorate instead.

One positive of falling rates is in customers refinancing their mortgages, allowing the banks to pick up more fees.

--While JPMorgan reported revenues for the quarter that were up 5%, they are still down by 2% through the first nine months of the year, and as Aaron Elstein of Crain’s New York Business points out, revenues at JPM haven’t grown in any year since 2010, further proof of how regulatory changes are having a deleterious effect.

--Bank of America’s revenues were down 2.4% in the third quarter vs. year ago levels, while a $5.3 billion legal charge resulted in profits of just $168 million.

--General Electric Co. CEO Jeff Immelt said, “The U.S. is probably the best we have seen it since the financial crisis” as the company announced a 9% increase in earnings from its industrial operations. Orders from the U.S. grew 25%, led by stronger demand for locomotives, as well as ultrasound machines on the health-care equipment front. GE is also confident the fourth quarter will be “very strong.” 

--Honeywell International’s third-quarter earnings rose 18%, with sales up a solid 4.8%.

--Rolls-Royce Holdings warned it was being hit hard by trade sanctions against Russia as it announced underlying revenue for 2014 would be about 4% lower than expected, while adding the “economic outlook for 2015 has become more challenging,” with many of its customers experiencing “worsening market conditions” affecting their investment decisions. [BBC News]

--Wal-Mart announced it was cutting its sales growth forecast in the current fiscal year to between 2% and 3% from a previous range of 3% to 5%, while also cutting capital spending plans such as in a reduction in the number of supercenters it plans to build in coming years. The company did say it would spend between $1.2 billion and $1.5 billion on e-commerce investments next year, up from $400 million. It is building two new warehouses dedicated to handling Internet orders in Atlanta and Bethlehem, Pa.

--Shares in high-flying Netflix were taken out back and shot after the growth rate for new subscribers disappointed, with the online video giant adding 3 million in the most recent quarter vs. its own forecast of 3.69 million. Year-on-year net additions in the U.S. fell to 980,000 from 1.3 million; management blaming a $1 price hike in May for new subscribers (existing ones keep the old rate for at least two years).

--Meanwhile, rival HBO announced it would begin offering a new online subscription service for U.S. viewers who don’t have pay TV (at least 10m homes in the U.S. have broadband but no cable subscription). While Netflix and HBO are competitors, they do offer different products and have different price points. Netflix is $9 for new subscribers and HBO will likely charge about $15 a month.

--CBS is joining the streaming game, too. It will introduce a subscription service that lets Internet users stream live broadcasts and a library of current hits like “The Good Wife” for $5.99 a month. More than 5,000 episodes of older series, such as “Cheers,” will also be available.

--Google’s share fell after the company reported third-quarter earnings that fell short of the Street’s expectations. Revenue rose a solid 20% but was also a bit light vs. what the Street wanted to see, while costs-per-click, a key for the company’s advertising growth, dropped 2%.

--Intel beat on earnings and revenues, the latter up 8% year over year, as demand for personal computers recovered after years of decline, but investors were unimpressed, even with Intel raising guidance for the current quarter, because of the uncertainty in the market and a feeling the chipmaker wouldn’t meet its forecast.

--Home sales in the bellwether six-county Southern California ‘Southland’ market grew for the first time in a year in September, according to CoreLogic DataQuick. It was only 1.2%, but sales had slid 18% in August.

But the region’s median price fell to $413,000 from its post-crash high of $420,000 in August. Compared with a year ago, the median price is up 8.1%.

So it’s a market that seems to be reaching equilibrium. [Tim Logan / Los Angeles Times]

--California’s jobless rate fell to 7.3% in September, the lowest in more than six years. Separately, the Port of Los Angeles said September was its busiest month in eight years.

--The unemployment rate in New York City fell to 6.8% in September, the lowest level since November 2008. The rate has fallen 1.8 points in the past 12 months.

--EBay said sales for 2014 will fall short of prior estimates, though the PayPal unit that it is spinning off next year continues to far outpace eBay’s sales; PayPal’s revenues growing at 19% a year, twice as fast as the parent’s.

--Amazon.com Inc. said it plans to hire 80,000 seasonal workers for its warehouse network, up 14% over last year.

--Natural gas prices hit their lowest level since last November, $3.715MMBtus thanks to heavy supply and decreased demand. But the decline has been orderly.

--Regarding the purchase of New York’s Waldorf Astoria hotel by a Chinese insurance company for $1.95 billion, U.S. officials are reviewing the sale due to the government’s longstanding relationship with the Waldorf, which houses the American ambassador to the United Nations and hosts the president and scores of U.S. diplomats during the annual U.N. General Assembly.

The State Department, after all, warns U.S. diplomats in China about physical and electronic surveillance, and there is every reason to believe the Chinese would do the same with guests staying at the Waldorf. During the General Assembly, the State Department takes two whole floors of the Waldorf for its diplomats and the president.

Don’t let them buy it.

--Shares in Domino’s Pizza jumped 11% on the heels of stronger-than-expected sales and earnings growth. Promotions and new menu items, such as chicken bites, helped juice revenues. Domino’s added 160 stores in the quarter, bringing its total store count to in excess of 11,100. Same-store U.S. sales grew 7.7%, also very solid. 

--Ah, people? If you are sending nude photos through Snapchat, understand a third-party app is being used by hackers to capture your photos and videos which are then being posted on an online forum I won’t distinguish by naming.

--What the heck was Sears thinking? Listed under its “men’s punk rock style” jewelry collection was a swastika ring for sale on its website. As noted in the Jerusalem Post, the item description read; “This gothic jewelry item in particular features a Swastika ring that’s made of .925 Thai silver. Not for Neo Nazi or any Nazi implication. These jewelry items are going to make you look beautiful at your next dinner date.”

Unbelievable. After consumers brought this item to the attention of Sears, a representative responded via Twitter that it was being removed. It was also for sale on Amazon.com, though apparently is no longer available.

Foreign Affairs

ISIS / Iraq / Syria: It was a tale of two cities this week – the northern Syrian town of Kobane, a Kurdish enclave, and Baghdad. Thanks to a stepped up coalition air campaign, at week’s end ISIS was said to be retreating from most if not all areas of Kobane, though the facts are almost impossible to obtain without reporters on the ground, inside the town, rather than those observing from a hilltop.

What seems clear is the air strikes have helped, but the Kurds still lack heavy weapons and ammunition to take back the town in full....and then keep it. ISIS could easily return.

Activists say more than 600 have been killed in the month-long battle.

Separately, the new UN human rights commissioner, Zeid Ra’ad al Hussein, described the Islamic State as the antithesis of human rights and ‘a diabolical, potentially genocidal movement.”

“The way it has spread its tentacles into other countries, employing social media and the Internet to brainwash and recruit people from across the globe, reveals it to be the product of a perverse and lethal marriage of a new form of nihilism with the digital age.” [BBC News]

But while ISIS was suffering losses in Syria, the Islamic State continued to make gains in Iraq’s Anbar province, while stepping up its terror campaign inside Baghdad in an attempt to sow fear.

Wave after wave of car bombs have hit the capital in the past week, killing over 100, with Sunni ISIS targeting Shiite civilians and police checkpoints.

U.S. and Iraqi officials continue to maintain Baghdad is secure in terms of being able to beat back any large-scale advance by IS fighters, but confidence in the new government of Prime Minister Haider Abadi has to be shaken.

Last Sunday, appearing on ABC’s “This Week,” Joint Chiefs of Staff chairman, Gen. Martin Dempsey, said “there will be circumstances” in which ground troops will be needed to guide U.S. airstrikes, adding, “Mosul will likely be the decisive battle in the ground campaign.” He also revealed for the first time that U.S. Apache helicopters have been deployed near Baghdad to prevent ISIS from overrunning Iraqi forces as the militants neared Baghdad airport.

And back to Syria...while the United States insists Kobane isn’t a strategic imperative and that airstrikes on ISIS are more about degrading the force to keep it from reinforcing Iraq, Syrian President Bashar Assad has been taking advantage of the battle to continue his own war against the very forces we are supposed to be supporting, the Free Syrian Army, or moderate rebels.

“We have no problem with striking the Islamic State, but people think it is Syrians who are being targeted, which makes it difficult for the Free Syrian Army to support America,” said Salim al-Birin, a commander with the Fifth Legion, another group that has received U.S. support. “That is why we want strikes against the regime as well.” [Liz Sly / Washington Post]

And for his part, Turkish President Erdogan attacked Kurdistan Workers Party (PKK) targets in southeast Turkey in the first air operation against the militants since peace talks were launched two years ago. Turkey says it was in retaliation for three days of attacks by the PKK on a government military outpost near the Iraqi border. This comes amidst Kurdish protests in Turkey over Erdogan’s failure to intervene along its border with Syria and the battle for Kobane.

Editorial / Washington Post

“The (Obama) administration strategy of targeting the Islamic State while giving Mr. Assad a pass has actually worsened the conditions for his victims in towns held by moderate rebels who, in theory, enjoy U.S. backing. As the New York Times reported Wednesday (Oct. 8), the Assad regime, freed of the need to go after the Islamic State, has returned ‘with new intensity to its longstanding and systematic attacks on rebellious towns and neighborhoods.’

“And the strategy is incoherent as well as morally questionable. The United States expects these same moderate rebels to become its foot soldiers in the war against the more extreme Islamic State. Yet it refuses to target the Assad regime, which the moderates see as their chief enemy – and which is doing everything it can to wipe them out while the United States calls for patience and restraint.

“This lies at the heart of President Obama’s disagreement with Turkish President Erdogan, who is urging the United States to create a no-fly zone over northern Syria. Such a move would not interfere with the campaign against the Islamic State, but it would give moderate rebels some respite from attacks and some territory in which to regroup. In other words, it would serve the interests of what Mr. Obama in the past has claimed as U.S. objectives: helping the moderates and unseating Mr. Assad.”

One other item. The BBC reported that Iraqi pilots who have joined Islamic State are training its members in Syria to fly three captured fighter jets, according to a UK-based activist group. Witnesses have apparently seen the planes being flown around a military airport in Aleppo. Should this be the case, you’d think the U.S. would take them out...today.

Iran: The deadline for reaching a comprehensive agreement on Iran’s nuclear program is Nov. 24, with a State Department official saying this week “substantial work” remains to be done. Secretary of State John Kerry, European Union foreign policy chief Catherine Ashton, and Iranian foreign minister Mohammad Javad Zarif, met in Vienna for six hours of talks on Wednesday. The prime sticking point remains just how much of Iran’s existing enrichment program would it be allowed to retain in any final accord, as well as how long the agreement would last. It is very possible another extension will be granted so talks can continue. Initially, both sides were against such a move, but this seems to be where we’re headed.

[The White House insists there will be no extension. I don’t believe this.]

Editorial / Wall Street Journal

“Lost in the chaos of the Middle East is that the United States and Iran are fast approaching next month’s deadline to strike a deal on Tehran’s nuclear program....

“President Obama’s insistence on consulting largely with himself on the world’s most complex issues is well known. Most troublesome for the outcome with Iran is his rejection of needed support from Congress. 

“The Administration is currently leaning on Democrats in the Senate to block an attempt by Republicans to give Congress a say on any Iran accord. In late July, Bob Corker, Lindsey Graham, Marco Rubio and John McCain – the GOP’s strongest voices on foreign policy – introduced the ‘Iran Nuclear Negotiations Act of 2014.' The bill compels the Administration to submit any agreement for Senate review within three days of completion.

“If Iran walks away from the table without a deal, the sanctions waived last November would be immediately reimposed. The bill also puts in place a quick mechanism to reimpose sanctions in case Iran cheats on a deal. Both provisions are sensible safeguards....

“The real contribution of the Corker-Graham bill is that it gives the U.S. stronger leverage with Tehran. The message it sends to Iran is that Congress won’t sign off on a bad agreement that puts America’s interests at risk and is ready to double down on sanctions, the only pressure Iran understands....

“Leaks out of the talks suggest the Iranians are playing the U.S. and the other negotiating countries for more concessions.... Another delay would give Iran more time to perfect the technology behind a bomb and to create further political pressure from Western business lobbies to ease sanctions. The Corker-Graham legislation prohibits an extension.

“The signal the U.S. is sending is that ‘we need them more than they need us,’ a senior European policy maker told us. The Senate bill is the one stick available to change this exceedingly dangerous impression. A smart White House would grab it.”

Russia / Ukraine: Lost in all the other news events of the week were some rather hardline comments by Russian President Vladimir Putin. He warned Western states that attempts to “blackmail” Russia using sanctions could strike “discord between large nuclear powers,” while also telling a Serbian newspaper that the “economic health of Europe and the world” could be “seriously undermined” because of sanctions against Russia over the Ukraine crisis.

“Our partners should be well aware that attempts to put pressure on Russia with unilateral and illegitimate restrictive measures will not bring about a settlement, but rather impede the dialogue,” Putin said.

“How can we talk about de-escalating in Ukraine while the decisions on new sanctions are introduced almost simultaneously with the agreements on the peace process? If the main goal is to isolate our country, it’s an absurd and illusory goal.”

Putin added: “We are hoping that our partners will understand the imprudence of attempts to blackmail Russia, [and] remember what discord between large nuclear powers can do to strategic stability.”

This was the second time Putin brought up Russia’s nuclear weapons stash in recent months, telling a group of Russians kids in August that it was “best not to mess with us...I want to remind you that Russia is one of the leading nuclear powers.”

Putin is attending a Europe-Asia summit in Milan, where he held talks with Ukrainian President Petro Poroshenko and German Chancellor Merkel. Putin also said in a speech this week:

“Regrettably, in some European countries the Nazi virus ‘vaccine’ created at the Nuremberg Tribunal is losing its effect,” he said. “This is clearly demonstrated by open manifestations of neo-Nazism that have already become commonplace in Latvia and other Baltic states.” [Daily Telegraph / Irish Independent]

For her part, Merkel has been urging Russia to support the ceasefire between Ukrainian forces and rebels as agreed to on Sept. 5, but Putin denies any involvement in the conflict. Plus Putin rattled the cage on the topic of natural gas and Ukraine, threatening once again to shut off supplies. About 15% of the natural gas for electricity and heating that Europe receives goes through pipelines crossing Ukraine.

When it comes to the sanctions, Merkel said the European Union must hold firm. As for the ceasefire, it’s a joke. Seven civilians in a funeral procession were killed near Mariupol on Tuesday, the result of rebel shelling of the strategic city. Wednesday, separatist forces killed 12 Ukrainian soldiers in an attack near Luhansk.

And this just in...there were no breakthroughs in talks between Poroshenko and Putin, Friday, though parameters on a new contract for natural gas shipments have been agreed to. However, it is still just “progress” in Putin’s words. It is estimated Kiev owes Moscow $4.5 billion.

On a totally different topic, Russian opposition leader Alexei Navalny, currently under house arrest, gave an interview to a Moscow radio station, saying he would not return the Crimean Peninsula to Ukraine if he had the power to do so, and that the issue of illegal immigration “is 100 times more important than any Ukraine.” Navalny has always had nationalist tendencies and he has long called for visa requirements for migrant workers.

As for the views of the Russian people, a new survey from the independent Levada Center has President Putin with an 86% approval rating and, staggeringly, 62% of Russians believe everything is headed in the right direction, which is up from 40% one year ago, despite all the economic difficulties that are beginning to cascade down on the people. The government has been able to keep up the levels of social spending.

Finally, Russia’s national defense budget for next year will reach a record $81 billion, according to the head of the State Duma’s defense committee, or $20 billion more than this year, even with a crumbling economy. [Moscow Times]

Ukraine: As you know, the Kiev government is broke and we had a big example of this with the announcement that construction on a new cover for the Chernobyl nuclear plant has been pushed back to 2017 from the original 2015 date. Construction of the steel-and-concrete sarcophagus is crucial as the protective cover currently in place to contain the reactor could collapse at any moment, thus creating an environmental catastrophe. But Ukraine needs another $780 million for the project that it doesn’t have and a fundraising effort has been launched by the G7.

China / Hong Kong: As I go to post, clashes between police and protesters erupted Friday night into Saturday morning in multiple locations in Hong Kong. There are reports of hundreds injured (this is literally breaking and I can’t confirm this figure). Occupy Central issued a statement condemning Chief Executive CY Leung’s administration for launching clearance operations before dialogue with students resumed. Earlier, seven police officers were suspended after a video emerged showing the beating of a protester on Wednesday.

Negotiations between the two sides were to begin next week, but I can’t see any progress being made, seeing as the pro-democracy camp’s main demand is for the public nomination of Hong Kong’s chief executive. China is not going to reverse its position that candidates be first approved by a committee that has been loyal to Beijing. CEO Leung has said the students’ wish is impossible. 

“If the pre-condition is to put aside the Basic Law and the [Standing Committee] decisions, I believe all of us know that the chance is almost zero.” [South China Morning Post]

One thing to watch is next week’s Fourth Plenum – which President Xi Jinping will use to highlight his ongoing anticorruption campaign, including the case against former security chief Zhou Yongkang, the first time corruption charges were filed against a retired or ranking member of the Politburo Standing Committee. Some say Xi may also use the plenum to rule on Hong Kong.

One expert familiar with the talks between Beijing and Hong Kong told the Wall Street Journal that there is a potential area of compromise...the election of 2022, not 2017.

Claudia Rosett / The Weekly Standard

“China will draw fresh lessons from how this shakes out. So will China’s fellow tyrannies around the globe. Hong Kong is protected – at least in theory – under the 1984 Sino-British Joint Declaration, which laid out the terms on which Britain handed this former Crown Colony back to China in 1997. Under the agreement, Hong Kong was promised 50 years of ‘a high degree of autonomy,’ an arrangement summed up by former Chinese ruler Deng Xiaoping with the formulation ‘one country, two systems.’ The result is that Hong Kong, perhaps more than any other place on the planet, occupies an extraordinary position between the tectonic plates of dictatorship and democracy.”

I also have to note that Taiwan President Ma Ying-jeou said China should move toward constitutional democracy and that process could start in Hong Kong, a rather sharp jab at Beijing. In a speech marking Taiwan’s National Day celebration in Taipei, Ma said:

“Now that the 1.3 billion people on the mainland have become moderately wealthy, they will of course wish to enjoy greater democracy and rule of law. Such a desire has never been a monopoly of the West, but is the right of all humankind.”

On a different issue, China’s foreign ministry expressed serious concern on Friday after Japanese Prime Minister Shinzo Abe sent a ritual offering to Tokyo’s controversial Yasukuni Shrine.

I don’t understand why Abe did this. It certainly won’t help in his efforts to get a meeting with President Xi at next month’s Asia-Pacific summit in Beijing.

Signs of a thaw had been growing, as both sides recognized their economies were taking a hit as tensions rose, but China has demanded Abe not make another pilgrimage to the war shrine as he did last December. Friday’s offering by Abe was in the form of a small tree, but he will not make a public promise never to personally visit Yasukuni again.

Abe has said he visited the shrine to pay his respects to those who fought and died for their country, not to glorify war.

North Korea: Kim Jong-un reemerged after being out of sight since September 3, missing a key political anniversary just last Friday. The daily newspaper carried several photographs of Kim using a walking stick as he inspected a newly built residential district. It still isn’t known if he underwent surgery, but the newly-released pictures indicate Kim remains in charge.

Separately, in a rare meeting, military generals from North and South Korea met on the border in Panmunjom, days after the two sides’ navy boats exchanged fire on their disputed western sea border, as well as exchanging fire across the border as the North tried to shoot down large balloons carrying anti-North Korea propaganda leaflets.

Nigeria: The military says it has agreed to a truce with Islamist group Boko Haram and that the abducted schoolgirls it still has will be released. An aide to Nigeria’s president told the BBC that the agreement followed one month of negotiations, mediated by Chad. Boko Haram apparently announced a unilateral ceasefire on Thursday. Talk about my dictum ‘wait 24 hours.’

Venezuela: Editorial / Wall Street Journal

“Venezuela’s economy may be imploding, with a debt default looming, but the enemy of the United States on Thursday managed the diplomatic coup of being elected to the United Nations Security Council. So much for the Obama Administration’s political and moral influence with the ‘international community.’

“ ‘This is a moment of great pride for all of Venezuela,’ said President Nicolas Maduro from Caracas. ‘The world has given us support. We should feel happiness in our hearts that we are a country that is admired and loved.’

“The vote, after a long campaign by Caracas and its friends in Havana and Moscow, ought to be an embarrassment to the Obama Administration, which barely lifted a hand to stop Venezuela’s accession for a two-year term through 2016. Secretary of State John Kerry apparently felt it wasn’t worth the effort, or perhaps that the effort wouldn’t succeed....

“Venezuela will be one of the 10 rotating members of the Security Council, and with any luck it won’t matter. The Security Council has become increasingly irrelevant as Russia and China exercise their vetoes against concerted action in Syria or the world’s other despotisms.

“Still, President Obama usually insists on the world’s blessing before the U.S. acts even in its own defense, so it will be a particular irony if Cuba’s best friend in the Americas now bedevils the U.S. security agenda through the end of the Obama presidency.”

Britain: London Mayor Boris Johnson said in an interview with the Daily Telegraph that Britain’s security services are monitoring thousands of terrorism suspects in London alone and are involved in operations on a daily basis.

“In London we’re very, very vigilant and very, very concerned.”

About 500 Britons are believed to have joined the fighting in Syria and Iraq, but Johnson emphasized “there are probably in the low thousands of people that we are monitoring in London.”

France: Marine Le Pen is picking a new fight with her father, Jean-Marie. Marine is considering changing the National Front (Front National) party’s name in a move designed to cleanse it of its xenophobic roots. The matter may be included in a yearend questionnaire that will be sent to the party’s 75,000 members.

Jean-Marie has previously described a potential name change as “completely moronic, scandalous, indecent.” Recall, Marine took over the party from her father in 2011 and, as of today, is a major factor in France’s next scheduled presidential election in 2017.

But get this. Recently, Ms. Le Pen’s cat was reportedly mauled by her father’s Doberman.

Random Musings

--Daniel Henninger / Wall Street Journal

“History will mark down 2014 as the year predicted 49 years ago by Martha and the Vandellas. In 1965 the group recorded a Motown classic, ‘Nowhere to Run, Nowhere to Hide.’ We’re there, at the brink.

“Liberia, ISIS, Ukraine, Hong Kong, a hospital fighting Ebola infections in Dallas, the year’s stock-market gains obliterated, and I almost forgot – just last week Secretary of State John Kerry warned that climate change could end life as we know it.”

--David Ignatius / Washington Post

“President Obama tried to speak calmly to a rattled nation on Wednesday, describing how he had kissed and embraced nurses at Emory University Hospital who had treated Ebola patients safely. Don’t panic, was the unspoken message. It’s safe. Listening to the president, you couldn’t help but wonder if he was straining to keep a polarized, fearful country from losing its cool.

“Panic is a natural human response to danger, but it’s one that severely compounds the risk. Frightened people want to protect themselves, sometimes without thinking about others. Often, they get angry and want to find someone to blame for catastrophe. Inevitably, they spread information without checking whether it’s true.

“Fear brings out the best in some people and the worst in others. It’s a test of character, for individuals and nations. That’s why the stories of the New York City firefighters rushing upstairs to their deaths in the twin towers on the morning of Sept. 11, 2001, became a kind of national legend. It showed the human spirit in its most selfless form.

“We can’t all be heroic firefighters, and this week we began to see a display of less noble emotions. Inevitably, the blame game began....

“My own business, the news media, has a peculiar responsibility in times like these. We have to deliver information quickly and reliably, and also hold officials accountable for their performance – all without unnecessarily frightening people or contributing to the kind of hysteria that makes public-health measures more difficult....

“One of the best comments I saw came from Shepard Smith, an anchor for Fox News....On Wednesday afternoon, Smith admonished viewers not to panic about Ebola. He was passionate, and maybe you can argue that journalists shouldn’t give medical advice, but here’s part of what he said:

“ ‘Today, given what we know, you should have no concerns about Ebola at all. None. I promise. Unless a medical professional has contacted you personally and told you of some sort of possible exposure, fear not. Do not listen to the hysterical voices on the radio and the television or read the fear-provoking words online....

“ ‘There is no evidence of any kind of which we at Fox News are aware that leaders have lied about anything regarding Ebola... There is no Ebola spreading in America. Should that change, our reporting will change.’”

--NBC’s chief medical reporter, Dr. Nancy Snyderman, caught heat for being spotted outside in violation of a voluntary Ebola quarantine and when the New Jersey Health Department caught wind of it, Snyderman and her crew that had been working in Liberia with an NBC cameraman who caught Ebola, were told the quarantine was now mandatory.

Dr. Snyderman deserved the heat she received, especially after her apology was less than contrite. She acted like an entitled jerk.

[But residents of her home town of Princeton, New Jersey, have taken things perhaps a bit too far. NJ.com reported that signs urging residents to be on the lookout for Snyderman are being posted all over Princeton, listing her exact address.]

--Aaron David Miller / Washington Post

“All presidents disappoint. It comes with the job, the unreasonable expectations Americans have for their presidents, and the inherent conflict and disconnect between campaigning (promising people all they can have) and governing (explaining to people why they won’t get it).

“So Barack Obama isn’t the first president to fail to meet expectations – and he won’t be the last. But he has come to embody something else, too: the risks and travails of reaching for greatness in the presidency without the crisis, character and capacity necessary to achieve it.

“ ‘Now, there are some who question the scale of our ambitions, who suggest that our system cannot tolerate too many big plans,’ the new president declared in his 2009 inaugural address to a 1.8 million-strong crowd on the Mall. ‘...What the cynics fail to understand is that the ground has shifted beneath them, that the stale political arguments that have consumed us for so long no longer apply.’

“From pledging an Earth-moving transformation, Obama has been reduced to hitting singles.... After drawing early comparisons to Abraham Lincoln, Franklin Roosevelt and John F. Kennedy all rolled into one, Obama has fallen so low that journalists wonder whether Jimmy Carter is not a more appropriate parallel....

“But however historians and the public ultimately rate Obama, the greatness that he sought – and that was expected of him – will probably not be his. As early as 2011, in an extraordinary comment to ’60 Minutes,’ Obama believed otherwise: ‘I would put our legislative and foreign policy accomplishments in our first two years against any president – with the possible exceptions of Johnson, FDR and Lincoln – just in terms of what we’ve gotten done in modern history.’

“He has certainly not been a failed president. But neither is Obama likely to be judged a great or iconic one. Unlike FDR, JFK or even LBJ, there will not be a BHO.”

I would submit there is still time to conclude Obama was a failed president. Events overseas will have a lot to do with history’s final judgment. [Think Iran, Russia and China, for starters.]

--The mid-term elections are just 17 days away and there is tremendous uncertainty when it comes to predicting the outcome in the Senate, where Republicans need to pick up six seats to regain the majority, the margin currently being 55-45 Democrats. So many of the races are not only too close to call, the fact is that late-breaking news events, such as Ebola, could determine the final result in many of them. 

For example, a Wall Street Journal/NBC News poll found that 98% of voters have heard about Ebola, a record level of awareness of major news events tracked by WSJ/NBC polling, so developments on that front could swing some voters.

As for President Obama’s poll numbers, he has a record-low 31% approval rating for his handling of foreign policy among registered voters, with 61% disapproving. His overall job approval is at 42%, while Congress’ approval matched its record low of 12%.

--Jennifer Rubin / Washington Post

“We have cautioned against using early 2016 polling as evidence of who is ‘winning’ a race in which the first primary votes will not be cast for well over a year. However, as snapshots they do provide insight into how the potential candidates are viewed now, and significant movement shows potential voters at least for now are reevaluating candidates.

“The latest WMUR/UNH poll from New Hampshire suggests that aside from flashy confrontations and media hype since June, Sen. Ted Cruz has not moved out of single digits in the last month, Sen. Marco Rubio has skidded from 8 points to 3 points, other candidates including governors Scott Walker, Rick Perry, Bobby Jindal, Rep. Paul Ryan and Rick Santorum have not yet broken out of single digits, and Sen. Rand Paul, who has suffered months of pummeling on foreign policy, has lost half his support in what is the most libertarian-friendly early primary state....Since June, former governor Jeb Bush has gained ground and now leads with 15%, Gov. Chris Christie has lost ground but is second at 12%, and former governor Mike Huckabee has essentially held steady at 9%....

“It is not surprising that international chaos, executive malfeasance, an Ebola virus and widespread disdain for Washington give hawkish governors who exude gravitas a leg up. As USA TODAY’s Susan Page put it, Obama’s incompetency is already having an impact on the midterms: ‘Both of these stories, the Ebola virus and the threat from ISIS are feeding into a sense that Americans have that the world is not only a dangerous place but the government is not competent to handle them.’ Unless presidential candidates project their leadership and toughness on national security, however, they won’t be seen as the one to take on Hillary Clinton and clean up Obama’s messes. For those without executive experience, especially if they have been inconsistent on defense and are defined by fiery rhetoric rather than calm leadership, it will be a steep climb.”

--Jeb Bush said his wife, Columba, who previously didn’t want him running for president, is now “supportive,” while his mother, former first lady Barbara, was now “neutral, trending in a different direction.” Bush told the Associated Press, “This is ultimately my decision with as much consideration as I can to take into account the people that I really love.”

--New Jersey Gov. Chris Christie’s poll numbers are falling in my home state, with just 42% having a favorable impression of him, a new low for a Rutgers-Eagleton Poll, with 45% rating him unfavorably. It’s a seven-point decline in the last two months.

As for his overall job approval, this has fallen three points to 49%. Voters are most concerned with taxes and the job picture, where Christie scores poorly, but 60% believe he has handled the aftermath of superstorm Sandy well.

--Edward Luce / Financial Times

“A paradox haunts America’s first black president. African-American wealth has fallen further under Barack Obama than under any president since the Depression. Yet they are the only group that still gives him high ratings. So meager is Mr. Obama’s national approval rating that embattled Democrats have made him unwelcome in states that twice swept him to power. Those who have fared worst under Mr. Obama are the ones who love him the most. You would be hard-pressed to find a better example of perception-driven politics. As the Reverend Kevin Johnson asked in 2013: ‘Why are we so loyal to a president who isn’t loyal to us?’...

“(But)...without Mr. Obama’s efforts, African-American suffering would have been even greater. He has fought Congress to preserve food stamps and long-term unemployment insurance – both of which help blacks disproportionately. The number of Americans without health insurance has fallen by 8m since the Affordable Care Act came into effect. Likewise, no president has done as much as Mr. Obama – to depressingly little effect – to try to correct the racial bias in U.S. federal sentencing. Bill Clinton was once termed ‘America’s first black president.’ But it was under Mr. Clinton that incarceration rates rose to their towering levels.

“By no honest reckoning can Mr. Obama be blamed for the decline in black America’s fortunes.  Yet the facts are deeply unflattering. Since 2009, median non-white household income has dropped by almost a 10th to $33,000 a year, according to the U.S. Federal Reserve’s survey of consumer finances. As a whole, median incomes fell by 5%. But by the more telling measure of net wealth – assets minus liabilities – the numbers offer a more troubling story.

“The median non-white family today has a net worth of just $18,100 – almost a fifth lower than it was when Mr. Obama took office. White median wealth, on the other hand, has inched up by 1 percent to $142,000. In 2009, white households were seven times richer than their black counterparts. That gap is now eightfold. Both in relative and absolute terms, blacks are doing worse under Mr. Obama....

“(But) black Americans seem to grasp something many of Mr. Obama’s white supporters often forget. If the opposing party controls Congress and wants to make trouble, it can stop almost any White House initiative in its tracks. Most voters hold the president accountable for the big trends affecting their lives, particularly economic. But there are times when this is not fully deserved. Under this president at least, black America’s insights may be a step ahead of the rest.”

--Vice President Joe Biden’s son Hunter was discharged from the Navy Reserve earlier this year after testing positive for cocaine, though it isn’t clear what kind of ‘discharge’ he received.

--From Accuweather’s winter weather outlook for the Mid-Atlantic: “Cold air will surge into the Northeast in late November, but the brunt of the season will hold off until Januray and February. The polar vortex, the culprit responsible for several days of below-zero temperatures last year, will slip down into the region from time to time, delivering blasts of arctic air.”

Oh joy. At least Accuweather doesn’t see any prolonged cold snaps and March won’t be brutal like this past one.

Regarding snowfall, Accuweather forecasts that snow to the west of the I-95 corridor could be much higher than normal. One reason is the lingering warm water in the Gulf of Mexico that could fuel stronger coastal storms.

In the Midwest, temps are expected to be 7 to 9 degrees warmer than last year, with below-normal snowfall.

Out West, Accuweather looks for snowfall in amounts that will be enough to keep the drought from getting worse. [Angela Fritz / Washington Post]

--A separate report from Atmospheric and Environmental Research shows that September and October have seen record levels of snowfall in Siberia, which is often a harbinger of a rough winter for the U.S. and Europe. By some measures it’s the snowiest fall there since at least 1962.

You’ve been warned.
---

Pray for the men and women of our armed forces.
God bless America.

---

Gold closed at $1238...up from $1192 bottom two weeks ago
Oil $82.96

Returns for the week 10/13-10/17

Dow Jones -1.0% [16380]
S&P 500 -1.0% [1886]
S&P MidCap +1.3%
Russell 2000 +2.8%
Nasdaq -0.4% [4258]

Returns for the period 1/1/14-10/17/14

Dow Jones -1.2%
S&P 500 +2.1%
S&P MidCap -1.5%
Russell 2000 -7.0%
Nasdaq +2.0%

Bulls 37.8...lowest since summer 2013
Bears 17.3 [Source: Investors Intelligence]

Have a great week...at least try to. I appreciate your support.

New readers: I do have an iPad app.

Brian Trumbore



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Week in Review

10/18/2014

For the week 10/13-10/17

[Posted 10:30 PM ET, Friday]

Edition 810

Ebola, Washington and Wall Street

What a week. A week where confidence in our government and institutions seemingly hit an all-time low with the mishandling of the Ebola crisis. A week where it was clear our campaign against ISIS was not exactly going as planned, or rather, we question just what the heck the plan really is. A week where stock markets around the world plunged on fears the global economy was not only slowing, but the word ‘deflation’ was increasingly part of the lexicon. A week where Vladimir Putin once again talked of Russia’s nuclear prowess.

It was a week where in some respects the world seemed in freefall, though finally on Friday, at least for a few hours, the financial markets rallied back. This new cycle of high volatility, however, is probably here to stay for the balance of the year...certainly as long as Ebola is in the news.

And that’s where we start, because Ebola is indeed a big deal. There is no reason to panic in the United States, yet, but when you view Ebola from its source, Western Africa, there is cause for tremendous concern.

I was warning of the economic impact of Ebola long before the Obama administration began to take the crisis seriously and there is now little doubt Ebola will impact a large segment of the African economy potentially for decades to come unless a vaccine for the virus can be found, soon. Certainly sentiment is changing rapidly if you’re a businessman, looking to invest in the region. It’s a time to look elsewhere, and that’s tragic.

But if many of Africa’s immensely corrupt governments had spent just a little of the money that  flows into the coffers on simple healthcare, much of the human carnage could have been avoided.  [It’s also why India’s new prime minister, Narendra Modi, is correct in focusing on sanitation and bringing his people into the 21st century. Imagine Ebola there.]

So forget the United States, here’s where we stand in West Africa as I go to post.

UN Secretary General Ban Ki-moon pleaded for funds to fight the virus in the three countries hardest hit, Liberia, Sierra Leone and Guinea. Pledges of help and deployments to the region have had minimal impact. The death toll is over 4,500, there have been 9,000+ cases, and the World Health Organization is warning of as many as 10,000 new cases a week by Dec. 1 if the epidemic isn’t arrested.

Yet Ban Ki-moon said that while a $1 billion trust fund was launched in September, only $100,000 has been received. Let me repeat. $1 billion needed. $100,000 received. Donors have sent $400m to other UN agencies and aid organizations directly, but it’s this trust fund that is intended to be the vital spending reserve and it has received pledges of only $20 million.

As of Friday, guess which country is responsible for the full $100,000 in actual funds? Colombia.

Former Secretary General Kofi Annan told the BBC, “If the crisis had hit some other region it probably would have been handled very differently. In fact when you look at the evolution of the crisis, the international community really woke up when the disease got to America and Europe.”

Medecins San Frontieres (MSF) currently runs about 70% of the 1,000 beds available in treatment facilities across the three worst affected countries and Christopher Stokes, who heads the charity’s Ebola operation, said it was “ridiculous” his volunteers still bore the brunt of care for sufferers.

Britain and the United States, for example, committed to build new critically needed field hospitals and treatment centers, but this should have happened yesterday. Instead, much of the work won’t be completed for another 4-6 weeks, at best.

As Stokes told the BBC, the slow pace of deployment “puts in danger our chance of really getting on top of this collectively.”

The World Health Organization at week’s end was talking of a “spike” in the Guinean capital, Conakry, with “intense transmission” in Freetown, the capital of Sierra Leone. In the Liberian capital, Monrovia, the WHO spoke of “significant underreporting” and problems with data-gathering.

About 20 countries need to be on alert, including Ivory Coast, Mali and Senegal that border the worst affected area.

The UN’s Ebola mission chief, Anthony Banbury, told the UN Security Council, “It is running faster than us, and it is winning the race.”

So while the death of Thomas Eric Duncan in Dallas and the two nurses who were treating him who then contracted the virus is important, you haven’t seen anything yet unless immediate progress is made in West Africa. There will be no holding it back, even if Europe and North America institute travel bans.

There is also another risk if we can’t stop Ebola in its tracks. The longer the epidemic continues, the greater the chance it will mutate in a way that makes it more transmissible between humans. That is a nightmare none of us want to contemplate but we rely on our governments to ‘game out’ such a scenario. Clearly, when the greatest country on earth, the USA, has all of 13 beds at its four designated infectious disease centers, in some respects we are as woefully unprepared as Sierra Leone.

But fear not, we have a new Ebola czar, President Obama naming political hack Ron Klain, a longtime Democratic aide. He will be charged with coordinating the response, including how best to isolate and treat Ebola patients in the U.S. I feel so much better.

Finally, regarding America’s hospitals, long ago I used to harp on the number who die from infections each year, like staph, once they are admitted as patients. I forget who was mentioning it on one of the talk shows the other day but some 75,000 a year succumb this way. It is inexcusable for one citizen to die of an infection in a hospital.

I bring this up because why are some of us seemingly so surprised at what happened in Dallas? Tens of thousands die each year because far simpler protocols than those for Ebola aren’t followed. It’s been a national disgrace.   

But that’s a story worth returning to at another time. For now, if you see a fruit bat, don’t touch it.

---

So on to Wall Street. At its worst levels on Wednesday, the Dow Jones was down 460 points, Ebola was all over the news, and the bond market was going bananas, with the yield on the 10-year Treasury crashing 34 basis points to a yield of 1.86%, the single-biggest fall since March 2009, but then it finished the week at the same level it started Wednesday morning, 2.20%. Some hedge funds got obliterated, no doubt, though it often takes a few weeks to identify the bodies, as so many on the Street were ‘short’ Treasuries. Heck, I’ve been calling for the 10-year to rise myself.

But as there was a flight to safety component in the trade at times this week, so much of the market activity was clearly computer generated and had nothing to do with fundamentals. Investment legend Leon Cooperman said 75-80% of market action these days is irrespective of the fundamentals and he’s right. It’s a joke.

Nonetheless the week did see a slew of earnings reports (the fundamentals) and the market rallied back some on Friday on the strength of news from industrials like General Electric and Honeywell, who both reassured us that when it comes to the U.S. economy, the recovery continues. When it came to some of the bank earnings reports, though, revenues, except in the case of Goldman Sachs, were light and low interest rates continue to do a number on margins. [More below.]

But one positive of lower rates is the 30-year fixed mortgage is down to 3.97%, so you have another opportunity to refinance.

Two other items: While Friday saw a positive reading on September housing starts, Wednesday’s market action was influenced to the downside by a worse than expected reading on September retail sales, down 0.3%, and down 0.2% ex-autos.

The other big item on the week was the slide in oil prices to $80 at one point (before closing the week at $83), a three-year low and some 27% from the peak in June.

But while this is a big break for consumers heading into the holiday shopping season, some viewed it as yet another sign of deflation. Deflation isn’t a problem here, yet, but as I’ll get into in a bit, it certainly is a threat to Europe. 

More on the topic of crude....

Ed Morse / Financial Times

“Crude oil prices have plunged by $25, or more than 20 percent, since mid-June, raising many questions. How low might prices go? If they rebound, at what level will they stabilize? Will Saudi Arabia and OPEC move to cut output when they meet next month? At what price level might U.S. shale oil production be affected and how severely?

“One thing is certain: even the current lower prices are rapidly creating winners and losers. Losers are producers, countries and governments. If Brent falls to $80, OPEC countries would lose some $200 billion of their recent $1 trillion in earnings, affecting not only their ability to earn enough to cover the post-Arab Spring expanded budgets, but also their capacity to service debt without triggering defaults. And for the U.S., if prices fall much further, capital expenditures to expand production would have to be cut, potentially slowing the U.S. shale revolution.

“On the other hand, the world economy as a whole would enjoy the equivalent of a huge quantitative easing program, helping to spur stalling economic growth. The decline in prices would generate a $1.8bn daily windfall, about $660bn annualized. Tracking this into gasoline prices, in the U.S., where last year some $2,900 per household was spent on gasoline, the windfall would amount to a tax rebate of just under $600 per household. It would affect all consumers globally save for those in OPEC countries, who already pay little for fuel.”

[Every one-cent drop in gas prices equates to a $1 billion decline in energy spending by Americans, i.e., more discretionary income.]

Global demand is rising at a rate less than 1m b/d and surpluses for 2015 could be in the neighborhood of a like amount, which would weigh even more heavily on prices. Last month, output from OPEC rose to a 13-month high of 30.7m b/d. A nuclear deal with Iran would lead to even more oil on the market.

Plus you have Saudi Arabia, which is determined to maintain market share and doesn’t mind prices going down further, also knowing this hurts Iran and Russia, while also attempting to thwart rising U.S. production. Russian President Vladimir Putin is already talking of the severe impact plunging oil has on his nation’s finances. Russia needs $100 oil for a balanced budget, while Saudi Arabia, according to some, needs $90-$95 (the IMF says $89), though it can accept far lower short term and fund its social programs by tapping its huge cash reserves.

But Saudi billionaire investor Prince Alwaleed bin Talal al-Saud expressed his “astonishment” at comments by Saudi oil minister, Ali al-Naimi, who played down the impact of falling prices below $100 a barrel.

Prince Alwaleed, noting the kingdom’s budget was 90% dependent on oil, said the impact of lower prices was a “catastrophe that cannot go unmentioned.”

Then you have Venezuela, which relies on oil for 97% of its export revenues. As noted in a report by Bloomberg, Harvard economists Kenneth Rogoff and Carmen Reinhart are predicting this hell-hole will default on its foreign debt, while borrowing costs are surging as oil prices fall.

“They have extensive domestic defaults and an economy that is really imploding,” Reinhart said. “What they really need to do is get their house in order. If an external default would trigger such a possibility, that’s not a bad thing.” Yes, default could be a sensible strategy. Venezuelan debt is yielding 16 percentage points more than Treasuries, according to JPMorgan Chase.

Europe and Asia

By the close on Thursday, some $5.5 trillion in the value of equities had been wiped out, worldwide, since September with concerns over the global economy, particularly in Europe and Asia. Friday’s market rally both here and across the pond helped a little, with the Stoxx Europe 600 Index jumping 2.8%, its best single performance in almost three years. [European stocks, prior to Friday, had fallen eight straight days, the longest streak since 2003.] But I can virtually guarantee it was a fake-out. Yes, the European Central Bank announced Friday that it would start buying assets next week, but Europe’s essential problems will remain...no inflation (and outright deflation in some countries) and zero growth with still sky-high unemployment rates.

*European stocks, prior to Friday, had fallen eight straight days, the longest streak since 2003.

Eurostats, the statistical arm of the European Union, released its inflation data for September and for the euro-18 nations it was up just 0.3% on an annual basis. By contrast, in Sept. 2013 the inflation rate was 1.3%, which the ECB would kill for today.

But prices are flat out falling in some countries. Prices were down 1.1% in Greece, down 0.3% in Spain, again, annualized (after being down 0.5% in August and 0.4% in July), down 0.4% in Sweden (they are EU, not eurozone) and they were down 0.1% in Italy.

Germany had inflation at a whopping 0.8%, while France was at 0.4%.

Eurozone industrial production was also released for August, down 1.8% over July and down 1.9% year-over-year.

In further country specific news, the German government lowered its official growth forecast to 1.2% this year from a previous estimate of 1.8%, and it reduced the outlook for 2015 to 1.3% from 2.0%.

The U.K. had some positive news, reporting an unemployment rate of 6.0%, a six-year low, for the three months thru August (they have rolling three month periods for this stat), but with inflation falling to 1.2% in September from 1.5% in August, the Bank of England is hinting it may keep interest rates unchanged for longer than expected; the BoE and U.S. Fed being the two central banks that it was thought would first hike yields next year.

But then you had France and Italy, both at loggerheads with Germany in the austerity vs. growth debate. France said it was going to run a deficit of 4.4% of GDP, a further slap in the face to the EU, while Italy’s Prime Minister Matteo Renzi said he needed Germany and the other austerians to cut him some budgetary slack if he’s to boost growth in his country.

But German Chancellor Angela Merkel insisted now wasn’t the time to ease up on the fiscal discipline that the likes of Germany and Finland argue has brought stability to the eurozone.

So Italy, Germany and France went around and around in a discussion that will now move to next week as the EU starts a two-week probe of euro-area governments’ draft budgets.

French Finance Minister Michel Sapin said, “Right now, in this period, with growth that’s half the pace of what was expected, with inflation that’s collapsed, we cannot cut our deficits at the same pace.” France isn’t going to hit the EU’s 3% budget deficit target until 2017, at the earliest, two years later than the extended deadline the European Commission had handed down.

As for the bond-buying that European Central Bank President Mario Draghi may employ within days, the EU’s Court of Justice, the bloc’s highest court, will weigh in on whether Draghi’s pledge to do “whatever it takes” in buying sovereign paper in particular overstepped the ECB’s powers. Germany’s top court expressed doubts as to the legality, and they then referred it to the EU’s 15-judge panel.

The Court of Justice won’t say the ECB’s “Outright Monetary Transactions” (OMT) mechanism is illegal because politically they just couldn’t do that without killing the euro. But their ruling, not expected until next spring, by my calculation, will still have impact in the language that is used.

The thing is, two years after the OMT program was put in place to avert a breakup of the union at the height of the euro crisis, the ECB is finally gearing up to buy asset-backed securities and covered bonds in yet another attempt to jumpstart the economy by funneling money to companies and households, while fueling inflation.

Of course nothing the ECB has done thus far has worked. Chancellor Merkel, in rejecting internal calls to boost spending and delay her government’s goal of a balanced budget next year, said there is no need for the ECB to try out new and uncertain measures.

To those like France and Italy who favor spending over austerity, German Finance Minister Wolfgang Schauble said, “The worst thing we could do would be to repeat yesterday’s mistakes” of relying on public debt to lift growth.

Bottom line, the likes of Germany don’t want the ECB to give countries such as France and Greece an excuse not to get their budgets in order and make their economies more productive, which is also another reason why Germany doesn’t want the ECB buying sovereign debt from the likes of Greece.

So...speaking of Greece. For the better part of this year, during the spectacular bond rally in the eurozone’s periphery, Spain, Italy, Portugal and Greece (and earlier Ireland), I have been warning that some of the yields weren’t in the least bit dealing with reality. All year I have looked very wrong as yields continued to plummet.

But this week, at least for a few days, I can unequivocally declare victory. The yield on Greece’s 10-year bond, for example, hit 9.33% Friday morning, before finishing the week in the 7.80% range, which is up from 5.52% on Sept. 8. Heck, last week I noted in this space that the yield had risen to 6.46% over increased political uncertainty and questions over Prime Minister Samaras’ bailout exit plans. Obviously, this past week those concerns increased.

Greece had the biggest selloff in its bonds since the height of the euro crisis, July 2012. An early election is now possible, perhaps February or March, and with Left opposition party Syriza now leading in the polls by six points over the governing center-right coalition, the markets worried about Samaras’ plans and what could then be Greece’s inability to finance its debt at realistic rates. That’s the message being sent by soaring bond yields. Investors don’t believe the politicians would be able to successfully manage the economy without international supervision.

[Separately, Italy’s 10-year, which closed last week at 2.32%, traded above 2.70% before finishing the week at 2.49%. Portugal’s 10-year went from 2.93% to 3.27%. Conversely, the German bund hit a new all-time low yield of 0.72% before finishing Friday at 0.86%.]

So this new leg of the eurozone story is just beginning. What kind of bond-buying will the ECB do and can it possibly have any real impact on a stagnant continent? Stay tuned.

Finally, a few quick notes on Asia.   China reported September exports rose a better than expected 15.3%, with imports also exceeding expectations, up 7%, but on the former the number was so strong, especially in relation to goods flowing through Hong Kong, that there were renewed concerns over fake invoicing, which the government had seemingly gotten a handle on.

China also reported that consumer prices for the month of September rose only 1.6% year-over-year vs. a 2.0% rate in August, far below the official target of 3.5%, which means the government has lots of room to stimulate the economy, should it so choose. [Various reports have China injecting $32.7 billion into some national and regional lenders to support economic growth.]

And passenger-car sales rose 6.4% in September vs. year ago levels, which was actually the weakest since February 2013.

In Japan, which is struggling mightily to generate growth, Goldman Sachs cut its GDP forecast to just 0.1% in fiscal 2015 (ending 3/15), with GDP up 2.9% in the third quarter, which is far less than an earlier projection of up 3.8%. [Reminder...GDP fell 7% in the second quarter.]

Street Bytes

--Friday’s rally helped pare the losses on the week for the broader averages, though this extends the losing streak for the Dow, S&P 500 and Nasdaq to four. The Dow and S&P lost 1%, while Nasdaq dropped 0.4%. The S&P is 6.2% off its high and we still haven’t officially hit the 10% correction mark on a closing basis.

But when it comes to year-to-date returns, the Dow is down 1.2% and the S&P and Nasdaq are up only 2% each.

--U.S. Treasury Yields

6-mo. 0.04% 2-yr. 0.37% 10-yr. 2.19% 30-yr. 2.97%

Producer prices for the month of September fell 0.1%; unchanged ex-food and energy. For the 12 months, the PPI is up just 1.6%, including on core. The decline for September was the first negative reading since Aug. 2013.

The Fed’s next Open Market Committee meeting is Oct. 28-29, at which point they are expected to announce the end of QE3 (quantitative easing).

--I don’t mean to give this short shrift, but the Treasury Dept. announced its final budget deficit report on fiscal 2014 (ending 9/30), and the annual shortfall fell to $483.35 billion, the lowest since 2008. [The deficit was $680.2 billion a year ago and had peaked in 2009 at $1.4 trillion.]

The figure is also just 2.8% of gross domestic product, which is good, but deficits are slated to increase anew beginning in fiscal 2016, after one more probable drop in the year that started Oct. 1.

Over the last 40 years the deficit as a share of GDP has averaged 3.1%.

Revenues increased 9% in fiscal 2014, with individual tax receipts up 5.9% to a record $1.394 trillion, while payroll taxes rose 8% to pass $1 trillion for the first time, and corporate taxes surged 16% to $321 billion, the third highest total in history and the most since $370.2 billion in 2007.

It also needs to be noted that Congress did a good job...spending rose just 1.4%, though Medicare and Medicaid rose 5.6%, while Social Security outlays increased 4.4%. Defense spending was down 4.9% owing to the sequester, but that’s going to change given today’s new world.

--The International Monetary Fund is concerned about large bond investors such as PIMCO and their dominating positions in high-risk, generally illiquid bonds all over the world.

“Credit-focused mutual funds have seen massive inflows and have become the largest holders of corporate and foreign bonds,” said Jose Vinals, the head of the IMF’s financial-markets division, at a news conference in Washington recently. “These inflows have created a liquidity illusion, which can amplify shocks and lead to sharper falls in the market.”

For example, PIMCO owns close to 50% of a number of foreign bonds.

Laurence D. Fink, CEO of BlackRock, said in a conference call with investors, “We are worried about liquidity. And the question is, do we have enough time before a true liquidity event destabilizes the market?” [Landon Thomas Jr. / New York Times]

--One reason for the market tanking on Wednesday was U.S. pharmaceutical group AbbVie warning it may pull out of its deal to acquire Dublin-based Shire, with shares of Shire falling 22% immediately, while some of the world’s largest hedge funds were left with heavy losses.

AbbVie said it was forced to reconsider the acquisition in response to a White House crackdown on so-called inversions; U.S. companies use of overseas mergers to lower their tax burden.

The hedge funds had no clue what was about to hit them, especially as AbbVie’s CEO had just made positive comments two weeks ago, while hedge funds also felt there was no way Washington could prevent the tax inversion deals until next year.

AbbVie’s probable move thus called into question the entire M&A game, which was destabilizing to the banks.

--Ireland is looking to change its tax code to require that all Irish-registered companies be tax residents in Ireland within the next six years. Finance Minister Michael Noonan told parliament:

“Aggressive tax planning by the multinational companies has been criticized by governments across the globe, and has damaged the reputation of many countries.”

Companies such as Google, Facebook and Microsoft have used what is known as the “Double Irish” to funnel billions in non-U.S. profits to offshore tax havens such as Bermuda.

At the same time, though, Finance Minister Noonan said Ireland is not budging on its low 12.5% corporate tax rate.

U2 frontman Bono weighed in, saying the Irish economy needs companies like Apple, Facebook and Google.

“We are a tiny little country, we don’t have scale, and our version of scale is to be innovative and to be clever, and tax competitiveness has brought our country the only prosperity we’ve known.

“That’s how we got these companies here... We don’t have natural resources, we have to be able to attract people.”

Bono also admitted the biggest transformation he has undergone in the past ten years is to recognize the power of commerce to get people out of poverty.

But such comments make him unpopular among the left, who, as the New York Post opined, favor models that “seem to prefer perpetual dependency rather than the dignity of self-sufficiency.”

--U.S. bank stocks were hit hard this week as plummeting interest rates narrowed the spread further between the rate they pay for deposits and the rate they are paid for loans and investments. It had been hoped in recent months that the Federal Reserve’s monetary policy was going to change early to middle of next year, but as noted above, rising rates and normalization of same is unlikely to occur before the end of next year at the earliest.

Lower Treasury yields are a double-whammy as well these days because of the huge amounts of government securities the banks are forced to hold to meet new liquidity rules and when the  securities roll over, the banks are having to buy new Treasuries at even lower yields.

What is the bottom line impact? Bank of America said a 100 basis point rise in rates would boost revenues by about $3 billion, though net interest margin continues to deteriorate instead.

One positive of falling rates is in customers refinancing their mortgages, allowing the banks to pick up more fees.

--While JPMorgan reported revenues for the quarter that were up 5%, they are still down by 2% through the first nine months of the year, and as Aaron Elstein of Crain’s New York Business points out, revenues at JPM haven’t grown in any year since 2010, further proof of how regulatory changes are having a deleterious effect.

--Bank of America’s revenues were down 2.4% in the third quarter vs. year ago levels, while a $5.3 billion legal charge resulted in profits of just $168 million.

--General Electric Co. CEO Jeff Immelt said, “The U.S. is probably the best we have seen it since the financial crisis” as the company announced a 9% increase in earnings from its industrial operations. Orders from the U.S. grew 25%, led by stronger demand for locomotives, as well as ultrasound machines on the health-care equipment front. GE is also confident the fourth quarter will be “very strong.” 

--Honeywell International’s third-quarter earnings rose 18%, with sales up a solid 4.8%.

--Rolls-Royce Holdings warned it was being hit hard by trade sanctions against Russia as it announced underlying revenue for 2014 would be about 4% lower than expected, while adding the “economic outlook for 2015 has become more challenging,” with many of its customers experiencing “worsening market conditions” affecting their investment decisions. [BBC News]

--Wal-Mart announced it was cutting its sales growth forecast in the current fiscal year to between 2% and 3% from a previous range of 3% to 5%, while also cutting capital spending plans such as in a reduction in the number of supercenters it plans to build in coming years. The company did say it would spend between $1.2 billion and $1.5 billion on e-commerce investments next year, up from $400 million. It is building two new warehouses dedicated to handling Internet orders in Atlanta and Bethlehem, Pa.

--Shares in high-flying Netflix were taken out back and shot after the growth rate for new subscribers disappointed, with the online video giant adding 3 million in the most recent quarter vs. its own forecast of 3.69 million. Year-on-year net additions in the U.S. fell to 980,000 from 1.3 million; management blaming a $1 price hike in May for new subscribers (existing ones keep the old rate for at least two years).

--Meanwhile, rival HBO announced it would begin offering a new online subscription service for U.S. viewers who don’t have pay TV (at least 10m homes in the U.S. have broadband but no cable subscription). While Netflix and HBO are competitors, they do offer different products and have different price points. Netflix is $9 for new subscribers and HBO will likely charge about $15 a month.

--CBS is joining the streaming game, too. It will introduce a subscription service that lets Internet users stream live broadcasts and a library of current hits like “The Good Wife” for $5.99 a month. More than 5,000 episodes of older series, such as “Cheers,” will also be available.

--Google’s share fell after the company reported third-quarter earnings that fell short of the Street’s expectations. Revenue rose a solid 20% but was also a bit light vs. what the Street wanted to see, while costs-per-click, a key for the company’s advertising growth, dropped 2%.

--Intel beat on earnings and revenues, the latter up 8% year over year, as demand for personal computers recovered after years of decline, but investors were unimpressed, even with Intel raising guidance for the current quarter, because of the uncertainty in the market and a feeling the chipmaker wouldn’t meet its forecast.

--Home sales in the bellwether six-county Southern California ‘Southland’ market grew for the first time in a year in September, according to CoreLogic DataQuick. It was only 1.2%, but sales had slid 18% in August.

But the region’s median price fell to $413,000 from its post-crash high of $420,000 in August. Compared with a year ago, the median price is up 8.1%.

So it’s a market that seems to be reaching equilibrium. [Tim Logan / Los Angeles Times]

--California’s jobless rate fell to 7.3% in September, the lowest in more than six years. Separately, the Port of Los Angeles said September was its busiest month in eight years.

--The unemployment rate in New York City fell to 6.8% in September, the lowest level since November 2008. The rate has fallen 1.8 points in the past 12 months.

--EBay said sales for 2014 will fall short of prior estimates, though the PayPal unit that it is spinning off next year continues to far outpace eBay’s sales; PayPal’s revenues growing at 19% a year, twice as fast as the parent’s.

--Amazon.com Inc. said it plans to hire 80,000 seasonal workers for its warehouse network, up 14% over last year.

--Natural gas prices hit their lowest level since last November, $3.715MMBtus thanks to heavy supply and decreased demand. But the decline has been orderly.

--Regarding the purchase of New York’s Waldorf Astoria hotel by a Chinese insurance company for $1.95 billion, U.S. officials are reviewing the sale due to the government’s longstanding relationship with the Waldorf, which houses the American ambassador to the United Nations and hosts the president and scores of U.S. diplomats during the annual U.N. General Assembly.

The State Department, after all, warns U.S. diplomats in China about physical and electronic surveillance, and there is every reason to believe the Chinese would do the same with guests staying at the Waldorf. During the General Assembly, the State Department takes two whole floors of the Waldorf for its diplomats and the president.

Don’t let them buy it.

--Shares in Domino’s Pizza jumped 11% on the heels of stronger-than-expected sales and earnings growth. Promotions and new menu items, such as chicken bites, helped juice revenues. Domino’s added 160 stores in the quarter, bringing its total store count to in excess of 11,100. Same-store U.S. sales grew 7.7%, also very solid. 

--Ah, people? If you are sending nude photos through Snapchat, understand a third-party app is being used by hackers to capture your photos and videos which are then being posted on an online forum I won’t distinguish by naming.

--What the heck was Sears thinking? Listed under its “men’s punk rock style” jewelry collection was a swastika ring for sale on its website. As noted in the Jerusalem Post, the item description read; “This gothic jewelry item in particular features a Swastika ring that’s made of .925 Thai silver. Not for Neo Nazi or any Nazi implication. These jewelry items are going to make you look beautiful at your next dinner date.”

Unbelievable. After consumers brought this item to the attention of Sears, a representative responded via Twitter that it was being removed. It was also for sale on Amazon.com, though apparently is no longer available.

Foreign Affairs

ISIS / Iraq / Syria: It was a tale of two cities this week – the northern Syrian town of Kobane, a Kurdish enclave, and Baghdad. Thanks to a stepped up coalition air campaign, at week’s end ISIS was said to be retreating from most if not all areas of Kobane, though the facts are almost impossible to obtain without reporters on the ground, inside the town, rather than those observing from a hilltop.

What seems clear is the air strikes have helped, but the Kurds still lack heavy weapons and ammunition to take back the town in full....and then keep it. ISIS could easily return.

Activists say more than 600 have been killed in the month-long battle.

Separately, the new UN human rights commissioner, Zeid Ra’ad al Hussein, described the Islamic State as the antithesis of human rights and ‘a diabolical, potentially genocidal movement.”

“The way it has spread its tentacles into other countries, employing social media and the Internet to brainwash and recruit people from across the globe, reveals it to be the product of a perverse and lethal marriage of a new form of nihilism with the digital age.” [BBC News]

But while ISIS was suffering losses in Syria, the Islamic State continued to make gains in Iraq’s Anbar province, while stepping up its terror campaign inside Baghdad in an attempt to sow fear.

Wave after wave of car bombs have hit the capital in the past week, killing over 100, with Sunni ISIS targeting Shiite civilians and police checkpoints.

U.S. and Iraqi officials continue to maintain Baghdad is secure in terms of being able to beat back any large-scale advance by IS fighters, but confidence in the new government of Prime Minister Haider Abadi has to be shaken.

Last Sunday, appearing on ABC’s “This Week,” Joint Chiefs of Staff chairman, Gen. Martin Dempsey, said “there will be circumstances” in which ground troops will be needed to guide U.S. airstrikes, adding, “Mosul will likely be the decisive battle in the ground campaign.” He also revealed for the first time that U.S. Apache helicopters have been deployed near Baghdad to prevent ISIS from overrunning Iraqi forces as the militants neared Baghdad airport.

And back to Syria...while the United States insists Kobane isn’t a strategic imperative and that airstrikes on ISIS are more about degrading the force to keep it from reinforcing Iraq, Syrian President Bashar Assad has been taking advantage of the battle to continue his own war against the very forces we are supposed to be supporting, the Free Syrian Army, or moderate rebels.

“We have no problem with striking the Islamic State, but people think it is Syrians who are being targeted, which makes it difficult for the Free Syrian Army to support America,” said Salim al-Birin, a commander with the Fifth Legion, another group that has received U.S. support. “That is why we want strikes against the regime as well.” [Liz Sly / Washington Post]

And for his part, Turkish President Erdogan attacked Kurdistan Workers Party (PKK) targets in southeast Turkey in the first air operation against the militants since peace talks were launched two years ago. Turkey says it was in retaliation for three days of attacks by the PKK on a government military outpost near the Iraqi border. This comes amidst Kurdish protests in Turkey over Erdogan’s failure to intervene along its border with Syria and the battle for Kobane.

Editorial / Washington Post

“The (Obama) administration strategy of targeting the Islamic State while giving Mr. Assad a pass has actually worsened the conditions for his victims in towns held by moderate rebels who, in theory, enjoy U.S. backing. As the New York Times reported Wednesday (Oct. 8), the Assad regime, freed of the need to go after the Islamic State, has returned ‘with new intensity to its longstanding and systematic attacks on rebellious towns and neighborhoods.’

“And the strategy is incoherent as well as morally questionable. The United States expects these same moderate rebels to become its foot soldiers in the war against the more extreme Islamic State. Yet it refuses to target the Assad regime, which the moderates see as their chief enemy – and which is doing everything it can to wipe them out while the United States calls for patience and restraint.

“This lies at the heart of President Obama’s disagreement with Turkish President Erdogan, who is urging the United States to create a no-fly zone over northern Syria. Such a move would not interfere with the campaign against the Islamic State, but it would give moderate rebels some respite from attacks and some territory in which to regroup. In other words, it would serve the interests of what Mr. Obama in the past has claimed as U.S. objectives: helping the moderates and unseating Mr. Assad.”

One other item. The BBC reported that Iraqi pilots who have joined Islamic State are training its members in Syria to fly three captured fighter jets, according to a UK-based activist group. Witnesses have apparently seen the planes being flown around a military airport in Aleppo. Should this be the case, you’d think the U.S. would take them out...today.

Iran: The deadline for reaching a comprehensive agreement on Iran’s nuclear program is Nov. 24, with a State Department official saying this week “substantial work” remains to be done. Secretary of State John Kerry, European Union foreign policy chief Catherine Ashton, and Iranian foreign minister Mohammad Javad Zarif, met in Vienna for six hours of talks on Wednesday. The prime sticking point remains just how much of Iran’s existing enrichment program would it be allowed to retain in any final accord, as well as how long the agreement would last. It is very possible another extension will be granted so talks can continue. Initially, both sides were against such a move, but this seems to be where we’re headed.

[The White House insists there will be no extension. I don’t believe this.]

Editorial / Wall Street Journal

“Lost in the chaos of the Middle East is that the United States and Iran are fast approaching next month’s deadline to strike a deal on Tehran’s nuclear program....

“President Obama’s insistence on consulting largely with himself on the world’s most complex issues is well known. Most troublesome for the outcome with Iran is his rejection of needed support from Congress. 

“The Administration is currently leaning on Democrats in the Senate to block an attempt by Republicans to give Congress a say on any Iran accord. In late July, Bob Corker, Lindsey Graham, Marco Rubio and John McCain – the GOP’s strongest voices on foreign policy – introduced the ‘Iran Nuclear Negotiations Act of 2014.' The bill compels the Administration to submit any agreement for Senate review within three days of completion.

“If Iran walks away from the table without a deal, the sanctions waived last November would be immediately reimposed. The bill also puts in place a quick mechanism to reimpose sanctions in case Iran cheats on a deal. Both provisions are sensible safeguards....

“The real contribution of the Corker-Graham bill is that it gives the U.S. stronger leverage with Tehran. The message it sends to Iran is that Congress won’t sign off on a bad agreement that puts America’s interests at risk and is ready to double down on sanctions, the only pressure Iran understands....

“Leaks out of the talks suggest the Iranians are playing the U.S. and the other negotiating countries for more concessions.... Another delay would give Iran more time to perfect the technology behind a bomb and to create further political pressure from Western business lobbies to ease sanctions. The Corker-Graham legislation prohibits an extension.

“The signal the U.S. is sending is that ‘we need them more than they need us,’ a senior European policy maker told us. The Senate bill is the one stick available to change this exceedingly dangerous impression. A smart White House would grab it.”

Russia / Ukraine: Lost in all the other news events of the week were some rather hardline comments by Russian President Vladimir Putin. He warned Western states that attempts to “blackmail” Russia using sanctions could strike “discord between large nuclear powers,” while also telling a Serbian newspaper that the “economic health of Europe and the world” could be “seriously undermined” because of sanctions against Russia over the Ukraine crisis.

“Our partners should be well aware that attempts to put pressure on Russia with unilateral and illegitimate restrictive measures will not bring about a settlement, but rather impede the dialogue,” Putin said.

“How can we talk about de-escalating in Ukraine while the decisions on new sanctions are introduced almost simultaneously with the agreements on the peace process? If the main goal is to isolate our country, it’s an absurd and illusory goal.”

Putin added: “We are hoping that our partners will understand the imprudence of attempts to blackmail Russia, [and] remember what discord between large nuclear powers can do to strategic stability.”

This was the second time Putin brought up Russia’s nuclear weapons stash in recent months, telling a group of Russians kids in August that it was “best not to mess with us...I want to remind you that Russia is one of the leading nuclear powers.”

Putin is attending a Europe-Asia summit in Milan, where he held talks with Ukrainian President Petro Poroshenko and German Chancellor Merkel. Putin also said in a speech this week:

“Regrettably, in some European countries the Nazi virus ‘vaccine’ created at the Nuremberg Tribunal is losing its effect,” he said. “This is clearly demonstrated by open manifestations of neo-Nazism that have already become commonplace in Latvia and other Baltic states.” [Daily Telegraph / Irish Independent]

For her part, Merkel has been urging Russia to support the ceasefire between Ukrainian forces and rebels as agreed to on Sept. 5, but Putin denies any involvement in the conflict. Plus Putin rattled the cage on the topic of natural gas and Ukraine, threatening once again to shut off supplies. About 15% of the natural gas for electricity and heating that Europe receives goes through pipelines crossing Ukraine.

When it comes to the sanctions, Merkel said the European Union must hold firm. As for the ceasefire, it’s a joke. Seven civilians in a funeral procession were killed near Mariupol on Tuesday, the result of rebel shelling of the strategic city. Wednesday, separatist forces killed 12 Ukrainian soldiers in an attack near Luhansk.

And this just in...there were no breakthroughs in talks between Poroshenko and Putin, Friday, though parameters on a new contract for natural gas shipments have been agreed to. However, it is still just “progress” in Putin’s words. It is estimated Kiev owes Moscow $4.5 billion.

On a totally different topic, Russian opposition leader Alexei Navalny, currently under house arrest, gave an interview to a Moscow radio station, saying he would not return the Crimean Peninsula to Ukraine if he had the power to do so, and that the issue of illegal immigration “is 100 times more important than any Ukraine.” Navalny has always had nationalist tendencies and he has long called for visa requirements for migrant workers.

As for the views of the Russian people, a new survey from the independent Levada Center has President Putin with an 86% approval rating and, staggeringly, 62% of Russians believe everything is headed in the right direction, which is up from 40% one year ago, despite all the economic difficulties that are beginning to cascade down on the people. The government has been able to keep up the levels of social spending.

Finally, Russia’s national defense budget for next year will reach a record $81 billion, according to the head of the State Duma’s defense committee, or $20 billion more than this year, even with a crumbling economy. [Moscow Times]

Ukraine: As you know, the Kiev government is broke and we had a big example of this with the announcement that construction on a new cover for the Chernobyl nuclear plant has been pushed back to 2017 from the original 2015 date. Construction of the steel-and-concrete sarcophagus is crucial as the protective cover currently in place to contain the reactor could collapse at any moment, thus creating an environmental catastrophe. But Ukraine needs another $780 million for the project that it doesn’t have and a fundraising effort has been launched by the G7.

China / Hong Kong: As I go to post, clashes between police and protesters erupted Friday night into Saturday morning in multiple locations in Hong Kong. There are reports of hundreds injured (this is literally breaking and I can’t confirm this figure). Occupy Central issued a statement condemning Chief Executive CY Leung’s administration for launching clearance operations before dialogue with students resumed. Earlier, seven police officers were suspended after a video emerged showing the beating of a protester on Wednesday.

Negotiations between the two sides were to begin next week, but I can’t see any progress being made, seeing as the pro-democracy camp’s main demand is for the public nomination of Hong Kong’s chief executive. China is not going to reverse its position that candidates be first approved by a committee that has been loyal to Beijing. CEO Leung has said the students’ wish is impossible. 

“If the pre-condition is to put aside the Basic Law and the [Standing Committee] decisions, I believe all of us know that the chance is almost zero.” [South China Morning Post]

One thing to watch is next week’s Fourth Plenum – which President Xi Jinping will use to highlight his ongoing anticorruption campaign, including the case against former security chief Zhou Yongkang, the first time corruption charges were filed against a retired or ranking member of the Politburo Standing Committee. Some say Xi may also use the plenum to rule on Hong Kong.

One expert familiar with the talks between Beijing and Hong Kong told the Wall Street Journal that there is a potential area of compromise...the election of 2022, not 2017.

Claudia Rosett / The Weekly Standard

“China will draw fresh lessons from how this shakes out. So will China’s fellow tyrannies around the globe. Hong Kong is protected – at least in theory – under the 1984 Sino-British Joint Declaration, which laid out the terms on which Britain handed this former Crown Colony back to China in 1997. Under the agreement, Hong Kong was promised 50 years of ‘a high degree of autonomy,’ an arrangement summed up by former Chinese ruler Deng Xiaoping with the formulation ‘one country, two systems.’ The result is that Hong Kong, perhaps more than any other place on the planet, occupies an extraordinary position between the tectonic plates of dictatorship and democracy.”

I also have to note that Taiwan President Ma Ying-jeou said China should move toward constitutional democracy and that process could start in Hong Kong, a rather sharp jab at Beijing. In a speech marking Taiwan’s National Day celebration in Taipei, Ma said:

“Now that the 1.3 billion people on the mainland have become moderately wealthy, they will of course wish to enjoy greater democracy and rule of law. Such a desire has never been a monopoly of the West, but is the right of all humankind.”

On a different issue, China’s foreign ministry expressed serious concern on Friday after Japanese Prime Minister Shinzo Abe sent a ritual offering to Tokyo’s controversial Yasukuni Shrine.

I don’t understand why Abe did this. It certainly won’t help in his efforts to get a meeting with President Xi at next month’s Asia-Pacific summit in Beijing.

Signs of a thaw had been growing, as both sides recognized their economies were taking a hit as tensions rose, but China has demanded Abe not make another pilgrimage to the war shrine as he did last December. Friday’s offering by Abe was in the form of a small tree, but he will not make a public promise never to personally visit Yasukuni again.

Abe has said he visited the shrine to pay his respects to those who fought and died for their country, not to glorify war.

North Korea: Kim Jong-un reemerged after being out of sight since September 3, missing a key political anniversary just last Friday. The daily newspaper carried several photographs of Kim using a walking stick as he inspected a newly built residential district. It still isn’t known if he underwent surgery, but the newly-released pictures indicate Kim remains in charge.

Separately, in a rare meeting, military generals from North and South Korea met on the border in Panmunjom, days after the two sides’ navy boats exchanged fire on their disputed western sea border, as well as exchanging fire across the border as the North tried to shoot down large balloons carrying anti-North Korea propaganda leaflets.

Nigeria: The military says it has agreed to a truce with Islamist group Boko Haram and that the abducted schoolgirls it still has will be released. An aide to Nigeria’s president told the BBC that the agreement followed one month of negotiations, mediated by Chad. Boko Haram apparently announced a unilateral ceasefire on Thursday. Talk about my dictum ‘wait 24 hours.’

Venezuela: Editorial / Wall Street Journal

“Venezuela’s economy may be imploding, with a debt default looming, but the enemy of the United States on Thursday managed the diplomatic coup of being elected to the United Nations Security Council. So much for the Obama Administration’s political and moral influence with the ‘international community.’

“ ‘This is a moment of great pride for all of Venezuela,’ said President Nicolas Maduro from Caracas. ‘The world has given us support. We should feel happiness in our hearts that we are a country that is admired and loved.’

“The vote, after a long campaign by Caracas and its friends in Havana and Moscow, ought to be an embarrassment to the Obama Administration, which barely lifted a hand to stop Venezuela’s accession for a two-year term through 2016. Secretary of State John Kerry apparently felt it wasn’t worth the effort, or perhaps that the effort wouldn’t succeed....

“Venezuela will be one of the 10 rotating members of the Security Council, and with any luck it won’t matter. The Security Council has become increasingly irrelevant as Russia and China exercise their vetoes against concerted action in Syria or the world’s other despotisms.

“Still, President Obama usually insists on the world’s blessing before the U.S. acts even in its own defense, so it will be a particular irony if Cuba’s best friend in the Americas now bedevils the U.S. security agenda through the end of the Obama presidency.”

Britain: London Mayor Boris Johnson said in an interview with the Daily Telegraph that Britain’s security services are monitoring thousands of terrorism suspects in London alone and are involved in operations on a daily basis.

“In London we’re very, very vigilant and very, very concerned.”

About 500 Britons are believed to have joined the fighting in Syria and Iraq, but Johnson emphasized “there are probably in the low thousands of people that we are monitoring in London.”

France: Marine Le Pen is picking a new fight with her father, Jean-Marie. Marine is considering changing the National Front (Front National) party’s name in a move designed to cleanse it of its xenophobic roots. The matter may be included in a yearend questionnaire that will be sent to the party’s 75,000 members.

Jean-Marie has previously described a potential name change as “completely moronic, scandalous, indecent.” Recall, Marine took over the party from her father in 2011 and, as of today, is a major factor in France’s next scheduled presidential election in 2017.

But get this. Recently, Ms. Le Pen’s cat was reportedly mauled by her father’s Doberman.

Random Musings

--Daniel Henninger / Wall Street Journal

“History will mark down 2014 as the year predicted 49 years ago by Martha and the Vandellas. In 1965 the group recorded a Motown classic, ‘Nowhere to Run, Nowhere to Hide.’ We’re there, at the brink.

“Liberia, ISIS, Ukraine, Hong Kong, a hospital fighting Ebola infections in Dallas, the year’s stock-market gains obliterated, and I almost forgot – just last week Secretary of State John Kerry warned that climate change could end life as we know it.”

--David Ignatius / Washington Post

“President Obama tried to speak calmly to a rattled nation on Wednesday, describing how he had kissed and embraced nurses at Emory University Hospital who had treated Ebola patients safely. Don’t panic, was the unspoken message. It’s safe. Listening to the president, you couldn’t help but wonder if he was straining to keep a polarized, fearful country from losing its cool.

“Panic is a natural human response to danger, but it’s one that severely compounds the risk. Frightened people want to protect themselves, sometimes without thinking about others. Often, they get angry and want to find someone to blame for catastrophe. Inevitably, they spread information without checking whether it’s true.

“Fear brings out the best in some people and the worst in others. It’s a test of character, for individuals and nations. That’s why the stories of the New York City firefighters rushing upstairs to their deaths in the twin towers on the morning of Sept. 11, 2001, became a kind of national legend. It showed the human spirit in its most selfless form.

“We can’t all be heroic firefighters, and this week we began to see a display of less noble emotions. Inevitably, the blame game began....

“My own business, the news media, has a peculiar responsibility in times like these. We have to deliver information quickly and reliably, and also hold officials accountable for their performance – all without unnecessarily frightening people or contributing to the kind of hysteria that makes public-health measures more difficult....

“One of the best comments I saw came from Shepard Smith, an anchor for Fox News....On Wednesday afternoon, Smith admonished viewers not to panic about Ebola. He was passionate, and maybe you can argue that journalists shouldn’t give medical advice, but here’s part of what he said:

“ ‘Today, given what we know, you should have no concerns about Ebola at all. None. I promise. Unless a medical professional has contacted you personally and told you of some sort of possible exposure, fear not. Do not listen to the hysterical voices on the radio and the television or read the fear-provoking words online....

“ ‘There is no evidence of any kind of which we at Fox News are aware that leaders have lied about anything regarding Ebola... There is no Ebola spreading in America. Should that change, our reporting will change.’”

--NBC’s chief medical reporter, Dr. Nancy Snyderman, caught heat for being spotted outside in violation of a voluntary Ebola quarantine and when the New Jersey Health Department caught wind of it, Snyderman and her crew that had been working in Liberia with an NBC cameraman who caught Ebola, were told the quarantine was now mandatory.

Dr. Snyderman deserved the heat she received, especially after her apology was less than contrite. She acted like an entitled jerk.

[But residents of her home town of Princeton, New Jersey, have taken things perhaps a bit too far. NJ.com reported that signs urging residents to be on the lookout for Snyderman are being posted all over Princeton, listing her exact address.]

--Aaron David Miller / Washington Post

“All presidents disappoint. It comes with the job, the unreasonable expectations Americans have for their presidents, and the inherent conflict and disconnect between campaigning (promising people all they can have) and governing (explaining to people why they won’t get it).

“So Barack Obama isn’t the first president to fail to meet expectations – and he won’t be the last. But he has come to embody something else, too: the risks and travails of reaching for greatness in the presidency without the crisis, character and capacity necessary to achieve it.

“ ‘Now, there are some who question the scale of our ambitions, who suggest that our system cannot tolerate too many big plans,’ the new president declared in his 2009 inaugural address to a 1.8 million-strong crowd on the Mall. ‘...What the cynics fail to understand is that the ground has shifted beneath them, that the stale political arguments that have consumed us for so long no longer apply.’

“From pledging an Earth-moving transformation, Obama has been reduced to hitting singles.... After drawing early comparisons to Abraham Lincoln, Franklin Roosevelt and John F. Kennedy all rolled into one, Obama has fallen so low that journalists wonder whether Jimmy Carter is not a more appropriate parallel....

“But however historians and the public ultimately rate Obama, the greatness that he sought – and that was expected of him – will probably not be his. As early as 2011, in an extraordinary comment to ’60 Minutes,’ Obama believed otherwise: ‘I would put our legislative and foreign policy accomplishments in our first two years against any president – with the possible exceptions of Johnson, FDR and Lincoln – just in terms of what we’ve gotten done in modern history.’

“He has certainly not been a failed president. But neither is Obama likely to be judged a great or iconic one. Unlike FDR, JFK or even LBJ, there will not be a BHO.”

I would submit there is still time to conclude Obama was a failed president. Events overseas will have a lot to do with history’s final judgment. [Think Iran, Russia and China, for starters.]

--The mid-term elections are just 17 days away and there is tremendous uncertainty when it comes to predicting the outcome in the Senate, where Republicans need to pick up six seats to regain the majority, the margin currently being 55-45 Democrats. So many of the races are not only too close to call, the fact is that late-breaking news events, such as Ebola, could determine the final result in many of them. 

For example, a Wall Street Journal/NBC News poll found that 98% of voters have heard about Ebola, a record level of awareness of major news events tracked by WSJ/NBC polling, so developments on that front could swing some voters.

As for President Obama’s poll numbers, he has a record-low 31% approval rating for his handling of foreign policy among registered voters, with 61% disapproving. His overall job approval is at 42%, while Congress’ approval matched its record low of 12%.

--Jennifer Rubin / Washington Post

“We have cautioned against using early 2016 polling as evidence of who is ‘winning’ a race in which the first primary votes will not be cast for well over a year. However, as snapshots they do provide insight into how the potential candidates are viewed now, and significant movement shows potential voters at least for now are reevaluating candidates.

“The latest WMUR/UNH poll from New Hampshire suggests that aside from flashy confrontations and media hype since June, Sen. Ted Cruz has not moved out of single digits in the last month, Sen. Marco Rubio has skidded from 8 points to 3 points, other candidates including governors Scott Walker, Rick Perry, Bobby Jindal, Rep. Paul Ryan and Rick Santorum have not yet broken out of single digits, and Sen. Rand Paul, who has suffered months of pummeling on foreign policy, has lost half his support in what is the most libertarian-friendly early primary state....Since June, former governor Jeb Bush has gained ground and now leads with 15%, Gov. Chris Christie has lost ground but is second at 12%, and former governor Mike Huckabee has essentially held steady at 9%....

“It is not surprising that international chaos, executive malfeasance, an Ebola virus and widespread disdain for Washington give hawkish governors who exude gravitas a leg up. As USA TODAY’s Susan Page put it, Obama’s incompetency is already having an impact on the midterms: ‘Both of these stories, the Ebola virus and the threat from ISIS are feeding into a sense that Americans have that the world is not only a dangerous place but the government is not competent to handle them.’ Unless presidential candidates project their leadership and toughness on national security, however, they won’t be seen as the one to take on Hillary Clinton and clean up Obama’s messes. For those without executive experience, especially if they have been inconsistent on defense and are defined by fiery rhetoric rather than calm leadership, it will be a steep climb.”

--Jeb Bush said his wife, Columba, who previously didn’t want him running for president, is now “supportive,” while his mother, former first lady Barbara, was now “neutral, trending in a different direction.” Bush told the Associated Press, “This is ultimately my decision with as much consideration as I can to take into account the people that I really love.”

--New Jersey Gov. Chris Christie’s poll numbers are falling in my home state, with just 42% having a favorable impression of him, a new low for a Rutgers-Eagleton Poll, with 45% rating him unfavorably. It’s a seven-point decline in the last two months.

As for his overall job approval, this has fallen three points to 49%. Voters are most concerned with taxes and the job picture, where Christie scores poorly, but 60% believe he has handled the aftermath of superstorm Sandy well.

--Edward Luce / Financial Times

“A paradox haunts America’s first black president. African-American wealth has fallen further under Barack Obama than under any president since the Depression. Yet they are the only group that still gives him high ratings. So meager is Mr. Obama’s national approval rating that embattled Democrats have made him unwelcome in states that twice swept him to power. Those who have fared worst under Mr. Obama are the ones who love him the most. You would be hard-pressed to find a better example of perception-driven politics. As the Reverend Kevin Johnson asked in 2013: ‘Why are we so loyal to a president who isn’t loyal to us?’...

“(But)...without Mr. Obama’s efforts, African-American suffering would have been even greater. He has fought Congress to preserve food stamps and long-term unemployment insurance – both of which help blacks disproportionately. The number of Americans without health insurance has fallen by 8m since the Affordable Care Act came into effect. Likewise, no president has done as much as Mr. Obama – to depressingly little effect – to try to correct the racial bias in U.S. federal sentencing. Bill Clinton was once termed ‘America’s first black president.’ But it was under Mr. Clinton that incarceration rates rose to their towering levels.

“By no honest reckoning can Mr. Obama be blamed for the decline in black America’s fortunes.  Yet the facts are deeply unflattering. Since 2009, median non-white household income has dropped by almost a 10th to $33,000 a year, according to the U.S. Federal Reserve’s survey of consumer finances. As a whole, median incomes fell by 5%. But by the more telling measure of net wealth – assets minus liabilities – the numbers offer a more troubling story.

“The median non-white family today has a net worth of just $18,100 – almost a fifth lower than it was when Mr. Obama took office. White median wealth, on the other hand, has inched up by 1 percent to $142,000. In 2009, white households were seven times richer than their black counterparts. That gap is now eightfold. Both in relative and absolute terms, blacks are doing worse under Mr. Obama....

“(But) black Americans seem to grasp something many of Mr. Obama’s white supporters often forget. If the opposing party controls Congress and wants to make trouble, it can stop almost any White House initiative in its tracks. Most voters hold the president accountable for the big trends affecting their lives, particularly economic. But there are times when this is not fully deserved. Under this president at least, black America’s insights may be a step ahead of the rest.”

--Vice President Joe Biden’s son Hunter was discharged from the Navy Reserve earlier this year after testing positive for cocaine, though it isn’t clear what kind of ‘discharge’ he received.

--From Accuweather’s winter weather outlook for the Mid-Atlantic: “Cold air will surge into the Northeast in late November, but the brunt of the season will hold off until Januray and February. The polar vortex, the culprit responsible for several days of below-zero temperatures last year, will slip down into the region from time to time, delivering blasts of arctic air.”

Oh joy. At least Accuweather doesn’t see any prolonged cold snaps and March won’t be brutal like this past one.

Regarding snowfall, Accuweather forecasts that snow to the west of the I-95 corridor could be much higher than normal. One reason is the lingering warm water in the Gulf of Mexico that could fuel stronger coastal storms.

In the Midwest, temps are expected to be 7 to 9 degrees warmer than last year, with below-normal snowfall.

Out West, Accuweather looks for snowfall in amounts that will be enough to keep the drought from getting worse. [Angela Fritz / Washington Post]

--A separate report from Atmospheric and Environmental Research shows that September and October have seen record levels of snowfall in Siberia, which is often a harbinger of a rough winter for the U.S. and Europe. By some measures it’s the snowiest fall there since at least 1962.

You’ve been warned.
---

Pray for the men and women of our armed forces.
God bless America.

---

Gold closed at $1238...up from $1192 bottom two weeks ago
Oil $82.96

Returns for the week 10/13-10/17

Dow Jones -1.0% [16380]
S&P 500 -1.0% [1886]
S&P MidCap +1.3%
Russell 2000 +2.8%
Nasdaq -0.4% [4258]

Returns for the period 1/1/14-10/17/14

Dow Jones -1.2%
S&P 500 +2.1%
S&P MidCap -1.5%
Russell 2000 -7.0%
Nasdaq +2.0%

Bulls 37.8...lowest since summer 2013
Bears 17.3 [Source: Investors Intelligence]

Have a great week...at least try to. I appreciate your support.

New readers: I do have an iPad app.

Brian Trumbore