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04/18/2015

For the week 4/13-4/17

[Posted 11:30 PM ET, Friday]

Edition 836

Washington and Wall Street

Lots of economic data and earnings this week, but I’ll start off with the International Monetary Fund’s twice yearly global forecast for growth, released this week.

2014...global GDP was 3.4%
2015...new estimate is 3.5%
2016...est. is 3.8%

The United States, according to the IMF, is expected to grow 3.1% in each of 2015 and 2016. GDP this year was originally forecast to rise 3.6%.

The eurozone is now expected to grow 1.5% this year vs. 0.9% in 2014.

The U.K. should see growth of 2.7% in 2015; 2.3% in 2016.

Japan...1% in 2015; 1.2% in 2016.

China...6.8% in 2015; 6.3% in 2016.

India...7.5% in both 2015/16, so faster growth here than in China for the first time in quite a while.

Brazil will contract 1% in 2015. Russia will contract 3.8% this year and Ukraine’s economic output will tumble 5.5%.

In an interview with the Financial Times, Olivier Blanchard, the IMF’s chief economist, said: “I sense the macro risks are smaller than in October – there is no reason for doom and gloom.”

The IMF predicted that aside from falling oil prices, the rise in the U.S. dollar and Chinese renminbi against the Japanese yen and the euro would help boost growth further. At the same time, the IMF is saying the appreciation of the dollar and Chinese currency should “not damage their growth prospects because these economies can keep interest rates lower for longer to offset any deterioration in their trade performance.” [Chris Giles / Financial Times]

But in its statement, the IMF also said: “Disruptive asset price shifts in financial markets remain a concern. Term and other risk premiums in bond markets are still low in historical terms, and the context underlying this asset price configuration – very accommodative monetary policies in the major advanced economies – is expected to start changing in 2015.

“Triggers for turmoil include changing expectations about these elements as well as unexpected portfolio shifts more broadly. A further sharp dollar appreciation could trigger financial tensions elsewhere, particularly in the emerging markets.”

Olivier Blanchard did warn: “If large exchange-rate movements were to continue, they could both create further financial risks and reignite talk of currency wars.” [Sydney Morning Herald]

So in the U.S., March retail sales came in a little shy of expectations, up 0.9%, up 0.4% ex-autos, while March industrial production fell 0.6%, worse than expected, and March housing starts also came in shy of analysts’ forecasts at 926,000 vs. expectations of 1,040,000.

On the inflation front, March producer prices were up 0.2%, ditto ex-food and energy, and for the past 12 months, the PPI is down 0.8%, but up 0.9% on core.

March consumers prices were also up 0.2%, including on core, with the year over year CPI unchanged, though up 1.8% ex-the stuff we use, or close to the Federal Reserve’s target of 2.0%. [A separate report on average hourly earnings showed wages rising at a 2.2% pace year over year.]

So what does this mean in terms of the Fed finally raising interest rates? The Fed’s beige book, its survey of regional economic conditions, found modest or moderate growth in eight of its 12 districts, while in the other four the pace was steady or slight.

The survey covered the period from mid-February through end of March and was released ahead of the April 28-29 policy meeting where little of note is expected.

The issue remains, will the Fed hike rates in June or wait until September, or later.

Minutes of the March meeting of the Open Market Committee showed “several” officials wanted to hike in June, but the economic numbers since then have not been that great, including the dismal March jobs report.

And this week, a number of Fed governors who were leaning towards a June hike clearly backed off. Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, said in a speech on Thursday, “Data available for the first quarter of this year have been notably weak,” which “is giving rise to heightened uncertainty about the track the economy is on.”

Earlier this month, New York Fed President William Dudley said the weak numbers hardly augured a mid-year rate increase, while this week Fed Vice Chairman Stanley Fischer said a rate increase sometime this year was still in the cards, but he doesn’t know when and any hike would be small.

It’s about “escape velocity” and the economy hasn’t achieved that, especially when first-quarter GDP is likely to come in at around 1.5%.

As for the first big week of Q1 corporate earnings, the picture was mixed, as described more fully below. Some, such as JPMorgan Chase and Goldman Sachs, handily exceeded expectations, while others, like Johnson & Johnson and American Express, were hit hard by the rising dollar and their international exposure when it came to the top line, revenues, even though they were able to ‘beat’ on the bottom line, earnings.

The thing is the market is far from cheap based on historical measurements. The trailing price/earnings multiple on the S&P 500 is 20, after all (as listed in Barron’s...it drives me up the wall that you see so many different P/Es bandied about) and earnings are expected to drop in the first two quarters of the year. But’s it’s the old game, with rates at zero, where else are you going to put your money? Well, sometimes just holding cash isn’t such a bad thing and with all the cross-currents today, especially Greece in the short run, as billionaire Roger McNamee once told me when we met on a trip long ago, “It’s a good time to take a cruise.”

One other item....

Editorial / Wall Street Journal

“The big news Thursday was that Republicans and Democrats on the Senate Finance Committee had reached a deal to produce a compromise bill that would give President Obama the ability to negotiate free-trade agreements with the rest of the world. The deeper news, in our view, is that there are still Members of Congress fighting free trade’s progress, even as the clouds darken over the global economy. Consider:

“U.S. manufacturing slowed for the fifth straight month in March amid sluggish growth in the rest of the world economy....On the heels of the Great Recession, what this malaise translates into is hardship for hundreds of millions the world over, not least in the United States.

“The overdue trade bill gives the president trade promotion authority (TPA) that guarantees an up-or-down vote in Congress without amendments. It emerged from hard negotiations between Finance Chairman Orrin Hatch of Utah and the committee’s ranking Democrat, Senator Ron Wyden of Oregon. The bill is also supported by House Ways and Means Chairman Paul Ryan of Wisconsin....

“Some Congressional conservatives resist giving this president ‘too much authority’ over pretty much anything, including free trade, normally a consensus GOP goal. On the Democratic left the opposition includes an array of unions, environmentalists and anti-business activists. Oh, and the man presumed to be the Democrats’ next Senate leader, Chuck Schumer, is in the opposition.

“Senators Hatch and Wyden bent beyond over backwards to mollify these factions....

“If Congress can get the bill completed before its May recess, there is reason to believe the Trans-Pacific Partnership (TPP) would be agreed upon this spring. The countries who’d be party to that agreement make up 40% of the world’s economy....

“With the world’s economies hitting stiff headwinds, more free trade is the one big lever available to produce a lift for consumers, job-seekers and entrepreneurs. Passing Hatch-Wyden-Ryan as early as next week would also lift Congress’ sunken reputation.”

President Obama said in a statement on Thursday: “My top priority in any trade negotiation is expanding opportunity for hardworking Americans. It’s no secret that past trade deals haven’t always lived up to their promise, and that’s why I will only sign my name to an agreement that helps ordinary Americans get ahead. At the same time, at a moment when 95 percent of our potential customers live outside our borders, we must make sure that we, and not countries like China, are writing the rules for the global economy.”

The AFL-CIO announced its opposition, saying it would fight the bill in a series of ads targeting 16 senators and 36 House members.

Sen. Wyden, who really should switch parties, won a number of provisions aimed at ensuring greater transparency in the trade negotiations, as well as a key provision that would allow the Senate to turn-off President Obama’s authority to negotiate if the administration fails to live up to various requirements.

And the bill includes provisions for workers and the environment, as well as stipulating that human rights be a priority of U.S. negotiators.

I support the president on this one.

Europe and Asia

Before I get to Greece, some brief eurozone items on a broader front. Eurostats reported industrial production for the EA-19 rose a solid 1.1% in February over January, up 1.6% year over year, while the final figure on eurozone inflation for March was as first estimated, -0.1% annualized, which was an improvement from February’s -0.3% and January’s -0.6%.

Inflation in Germany was +0.1%, unchanged in France and Italy, -0.8% in Spain, and -1.9% in Greece.

Also in Germany, wages are expected to rise 3.5% this year, which should spur consumer spending that could benefit the eurozone, as well as the rest of the world.

U.K. retail sales were up 3.2% in March, year over year.

But with regards to Greece, as I’ve pointed out before all you have to know is where euro bond yields are to get the lay of the land, if you had been stranded on a desert island for a spell.

I have been very wrong on eurozone bond yields for the better part of a year. I misread the impact of the run-up to the European Central Bank’s version of quantitative easing, which was really for the period September through March 6, the Friday before QE was launched across the pond.

I recently did a “Wall Street History” piece that for traders/investors should be clipped and saved...the tale of interest rates in the eurozone prior to and then in the immediate aftermath of the formal launch of QE.

For example, the 10-year German bund had a yield of 1.57% on 3/31/14. On the Friday before QE, March 6, the yield was 0.39%. This week the German bund hit a record low of 0.07% before closing, Friday, at 0.08%.

Contrast this action with Greece. On 3/31/14, the Greek 10-year had a yield of 6.25%. 3/6/15 it was 9.09%. This week it closed at 12.52%, after hitting 13.20% intraday, the highest since Dec. 2012. [During the height of the 2012 crisis, the Greek 10-year peaked at 44.21%.]

So the above shows you how money has flowed into Germany, and other bonds in euroland, while fleeing Greece over uncertainty created by the new Greek government’s inability to convince its creditors, like the IMF and European Central Bank, that it had a viable reform plan warranting further bailout aid.

But I’ve also written when pointing out the likes of Italy and Spain, eventually investors in their paper will get burned big time. Last week I wrote: “At some point euro bond buyers will get slaughtered.”

I also noted last time that the Italian and Spanish 10-year bonds closed with yields of 1.26% and 1.22%, respectively, 4/10. 

Where did they close this Friday? Try 1.47% for Italy and 1.44% for Spain.

In fact, prior to QE being launched, 3/6/15, the yield on the Italian 10-year was 1.31% and Spain’s 1.29%.

So what good has QE been for these two? The European Central Bank launched an aggressive program of bond-buying across the eurozone and yet yields are rising in Italy and Spain.

Why pick on them? Because this is where, along with Portugal, any contagion from Greece will spread immediately.

[Portugal’s 10-year was 1.74% on 3/6/15...this week it closed at 1.99%.]

You won’t find this stuff anywhere else, at least not in this detail.

It’s also why those who say ‘Greece doesn’t matter’ are full of it. In the long run, should Greece default and/or exit the euro area, it may not matter much, but in the short run it’s bound to convulse the markets and no one knows how serious it could get.

As for the dysfunctional nation where Jason and the Argonauts once plied their trade, Friday, Pierre Moscovici, the European commissioner for economic and financial affairs, told the Financial Times there was no “plan B” regarding a Greece exit from the eurozone (“Grexit”) and he called on Athens to “speed up” concrete technical discussions on a list of reforms that are needed to unlock the remaining 7.2bn euro in bailout loans Greece needs to survive.

Some are already saying it’s too late. Greece was to have convinced eurozone finance ministers ahead of an April 24 meeting in Riga that they had a plan, but this is clearly not going to happen.

Moscovici, however, says May 11 is the real deadline, with another finance ministers meeting scheduled then, though he adds, May 11 would “certainly (be) decisive.”

Earlier this week, IMF managing director Christine Lagarde said she warned Greece she wouldn’t let it skip a debt payment to the IMF; the IMF being owed about $1 billion next month and another nearly $2 billion in June.

Plus, Greece has to figure out how to pay salaries and pensions in these two months, let alone end of April.

Missing a debt payment to the IMF would put Greece in a class with Zimbabwe, Somalia and Sudan. Lagarde said the IMF hasn’t allowed a country to delay a payment, as Greece has inquired, in 30 years.

German Finance Minister Wolfgang Schaeuble, in an interview with Bloomberg on Wednesday, ruled out further concessions in Greece, saying Prime Minister Alexis Tsipras’ government needed to commit to reforms to release the needed aid rather than give his people false hope.

But to further show you how clueless the Greeks are, they are negotiating with Russia for the purchase of missiles for its S-300 anti-missile systems and for their maintenance, according to Russia’s RIA news agency.

NATO member Greece has been in possession of the Russian-made S-300 system since the late 1990s.

Regardless of whether this is all for new missiles or just maintenance, as the Greek defense ministry scrambled to say at week’s end, you might be thinking, ‘Where the hell are they going to get the money?!’

Finally, The Economist had the following thoughts on the eurozone and signs the economy overall, save for Greece, might be recovering.

“After years of bad news it may seem churlish to belittle signs of brighter prospects. Countries like Italy have made welcome efforts at reform; the QE program is useful in bolstering inflation expectations. But neither France, the second-biggest economy in the currency bloc, nor Italy, the third-biggest, is expected to muster growth above 1% this year. And the longer-term prospects for the euro area remain weighed down by excessive debt and low productivity growth, as well as the threat of deflation and disadvantageous demography (Germany’s working-age population will be shrinking as fast as Japan’s by 2020). According to the IMF, the euro area’s potential rate of growth has deteriorated since before the financial crisis of 2007-08 by more than that of other advanced economies. However welcome, an upturn should not be mistaken for a renaissance.”

As for Asia, this week it’s all about China. Talk about a slew of data, most of it bad. To wit:

Exports in March fell 15% year over year vs. expectations of an increase of 12%! As my grandfather used to say, “Gee willickers!” Weak overseas demand was said to be the culprit, as for the first quarter overall, exports were up just 4.7% year over year vs. Q4’s 8.6% increase. That spells slowdown, sports fans.

Imports were down 12.2% yoy in March, the worst since 2009, while industrial production last month rose just 5.6%, the weakest since November 2008, and retail sales increased 10.2% (worse than expected), while fixed asset investment rose 13.5%, also worse than forecast.

Foreign direct investment in March did increase 2.2% yoy, vs. 1.7% for all of 2014, so a very slight improvement, but growth in this figure of 11.3% for the entire first quarter was due to two big one-off deals with Saudi Arabia and France.

So you mix all the above up in a bowl, add some minced rat meat, and what do you get in terms of GDP growth for the first quarter? Try 7%, just as the government forecast, which once again tells you it’s all a bunch of garbage.

Some figures can be trusted in China. Personally, I think the inflation data is accurate and the housing stats are probably pretty good. The rest is all manipulated so you look for trends and what’s important is not whether the Chinese economy is really growing at 7%, but rather this is the slowest figure on GDP since 2009, and that’s not good. Certainly it hasn’t been good for those exporting commodities to China, such as Australia, whose mining sector has been suffering mightily the past few years.

And remember, U.S. farmers sell a lot of product to China, so they don’t want to see the slump continue, but as I note above, the IMF indeed sees a further slowing in economic output in China well into 2016.

But this week the Shanghai stock market rose a whopping 7% and is now at its best level since March 2008 on the Shanghai Composite, up 32% on the year.

Yes, there is bubble talk and after the market closed on Friday, regulators took steps to attempt to prick it, without causing a crash. The government had been making it easier for individual Chinese investors to put their money in the market and of course they’ll lose their shirts.

Meanwhile, the government is working on further stimulus measures for the economy.

Street Bytes

--The markets tanked on Friday, both here and in Europe, on fears this is finally the end for Greece, as well as some poor corporate earnings from the likes of American Express and Honeywell. The Dow Jones’ 279-point loss today erased all the gains on the week and the Dow finished down 1.3% to 17826, while the S&P 500 lost 1% and Nasdaq 1.3%. The latter two were just shy of their all-time highs before pulling back.

The German DAX was down 5.5% on the week, but is still up 19.2% year to date (local currency).

--U.S. Treasury Yields

6-mo. 0.07% 2-yr. 0.51% 10-yr. 1.87% 30-yr. 2.52%

--I’ve been saying the budget deficit this year (the fiscal year ending Sept. 30) will be higher than expected and for the first six months (going back to Oct. 1), the Treasury Dept. announced it had run a deficit of $439 billion, up from $413 billion through the first half of the 2014 fiscal year. This is far from worrying in the short term, but the fact is Congress and the White House have begun relaxing the agreed upon spending cuts – the sequester – put in place four years ago, which worked beautifully, at least some of us think so (if you lost your job as a result you’d undoubtedly disagree). Federal receipts rose 7% to $1.42 trillion during the first half of the fiscal year from the prior period, but government outlays rose 7% to $1.86 trillion.

--The China-led Asian Infrastructure Investment Bank (AIIB) officially approved 57 nations as prospective founding members, including Sweden, Poland and Israel among the last to be included.

The AIIB is the first Asian bank to have a new international banking system independent from that set up by Bretton Woods.

Others that were included, much to the dismay of the U.S., were France, Germany, Italy, Britain, and Australia.

The U.S. and Japan are the two major nations to hold off for now.

Taiwan was rejected over how it would be identified, but they could be accepted later.

Canada has yet to join but is looking into it.

The chief concern of the U.S. is that the bank will earmark funds that benefit Chinese projects, in one form or another, at the expense of projects in some of the other countries. [I admit to not having studied the topic much, but let’s face it, boys and girls...China only does what is good for Mao, err, Xi....who is Mao II.]

--Japan has overtaken China as the largest holder of U.S. Treasurys for the first time since the 2008 financial crisis. According to the latest data released by the Treasury Dept. on Wednesday, private investors and official institutions in Japan owned $1.2244 trillion of U.S. government securities at the end of February, compared with $1.2237 held by China, which was a slight drop from a month earlier.

Over the past year, Japan has boosted its holdings by a net $13.6 billion, while China’s holdings dropped by $49.2 billion.

But as I’ve noted in some of my “Wall Street History” pieces on the topic, China also may be parking some of its holdings in places such as the U.K. and Belgium.

Bottom line, Japan’s purchases are offsetting any concerns over the decline in China’s purchases.

--JPMorgan Chase beat on earnings, with net income up 12% to $5.9 billion year-on-year, while revenue rose 4 percent.

CEO Jamie Dimon said in a statement: “We have an outstanding franchise which is getting safer and stronger, and is gaining market share over time.”

As the Financial Times noted, it was only the second time in seven quarters JPM exceeded estimates, weighed down by ongoing legal and regulatory expenses. [$30 billion over the past several years.]

Trading revenues were up 9 percent year on year, with a 22 percent increase in equities.

--Wells Fargo & Co. also beat expectations on earnings but fell short on revenues. Net income was down from $5.6 billion to $5.5bn.

--Bank of America missed on earnings, even as its legal expenses fell sharply from the prior year. The bank’s profit of $3.36 billion, or 27 cents a share, was less than the 29 cents analysts expected, while revenue fell 6 percent.

BofA did fund $16.9 billion in new mortgages and home-equity loans, a jump of 56 percent from the same period a year ago.

--Then there was Goldman Sachs. Prior to the financial crisis, Goldman always blew away analysts’ earnings estimates, but it’s been a rocky road the past few years. Thursday, though, the investment bank reported earnings of $5.94 per share that blew away estimates of $4.20. Net income was $2.8 billion. 

Revenue handily beat as well, with overall trading revenues up 23 percent, the biggest quarter since the start of 2012 and the first time revenues rose in the first quarter in six years.

Equities trading jumped 46 percent, while revenues in fixed income, currencies and commodities rose 10 percent (vs. 9 percent at JPMorgan Chase, and a 7 percent decline at BofA).

But Goldman shares were flat after a very solid run-up ahead of the news.

--Citigroup posted first-quarter net income of $4.8 billion, handily beating expectations, though revenues were down 2 percent from a year earlier.

--Delta Airlines reported hefty profit gains in the first quarter to $746 million from $213 million a year ago, marking the best first quarter in its history. Revenue rose 9 percent.

But the airline said it would be cutting overseas capacity due to the strong dollar and lower travel demand from the likes of Japan, Brazil, and the Middle East.

--Google is facing antitrust charges from the European Commission over not just its dominance in search, but its use of search to favor one company over another depending on the amount of advertising with Google. That’s just one issue. Google is also accused of highlighting its own shopping services in response to search queries, what is called “search bias,” while Google currently has a 90 percent market share in the European Union in terms of search.

The antitrust chief, Margreth Vestager, added the commission is also looking into accusations Google demands that phone makers using Android place applications like YouTube in prominent positions on mobile devices.

Google faces a huge fine and could be forced to allow smaller players to gain greater prominence. Germany, in particular, is upset its online mapping, travel services and shopping sites don’t have a chance against the giant.

The EU’s competition commissioner has the power to levy a fine of as much as $6.4 billion, or higher, were Google not to rebut any formal charges.

Microsoft was once forced to pay a fine of about $2 billion but over a decade.

--Shares in Netflix Inc. soared nearly 20% on Thursday as the video service added a better-than-expected 4.88 million streaming subscribers in the first quarter, owing to aggressive overseas expansion. Shares are up about 50% over the past three months.

For the current quarter, Netflix expects to add 600,000 customers in the U.S. and 1.9 million abroad, as the company looks to complete its overseas expansion by the end of 2016. This past quarter it added service to Australia, New Zealand and Cuba.

--A research firm, Slice Intelligence, estimates Apple had preorders for the Apple Watch on the first day it was available of nearly 1 million, with most going for the cheapest model; the Apple Watch Sport, which goes for $382.

Shipments start end of next week, but many models won’t be available until the summer. The company has yet to release any sales information of its own.

Meanwhile, Samsung said its new Galaxy S6 and S6 Edge smartphones, which went on sale on April 10, had pre-orders of 20 million, according to a report in the Korea Times, which would easily exceed the pace of any previous Galaxy phone launch.

--Intel reported revenues that were flat in the first quarter, with earnings in line with expectations after the chipmaker had previously warned of a slow start to 2015. Intel, like others, is stressing revenues from the “internet of things,” as opposed to traditional “embedded” systems in retail, transport, industrial and domestic products. The ‘IoT’ is from connected devices, like from a “smart home,” a rapidly growing market and critical for Intel as its desktop PC sales volumes fell by 16 percent in the first quarter vs. a year ago.

--Nokia Oyj agreed to buy Alcatel-Lucent SA in an all-stock deal worth $16.6 billion (I think, it’s rather confusing) to create the world’s largest supplier of equipment that powers mobile-phone networks; thus surpassing Ericsson and Huawei Technologies Co.

The combined company will be called Nokia and if completed would be the biggest in the industry since at least 1999, when Lucent bought Ascend Communications for about $21 billion.

The deal that brought Lucent and Alcatel together in 2006 was worth $13.4 billion, according to Bloomberg.

Nokia and Alcatel combined have more than 110,000 workers and no doubt there will be layoffs. France, in particular, is worried about the 7,000 Alcatel workers in the country and keeping a significant French influence in the new company. The current Alcatel CEO, Michel Combes, did a good job keeping Alcatel-Lucent alive, but Nokia execs would be in charge now.

Ericsson currently has the largest market share among wireless-network gear manufacturers at 25.7 percent, according to IDC, with Huawei at 23.2 percent, Nokia at 15.8 and Alcatel at 11.4 percent.

--OPEC production climbed the most in almost four years in March to 31.02 million barrels a day, according to the International Energy Agency, up 890,000 bd. At the same time, the IEA cut its prediction for U.S. and Canadian supply growth in the second half of the year and crude continued to rally, with West Texas Intermediate finishing the week at $55.74.

Global oil demand will increase by 1.1 mbd in 2015 to an average 93.6 million, or slightly more than projected in the IEA’s report last month.

Saudi production was 10.1 mbd in March, the highest since September 2013 and near record levels, the IEA said, with exports rising 600,000 barrels a day to 7.4 million, most of the increase going to Asia.

Iran’s crude exports rose to 1.27 mbd last month, the highest in a year, with rising purchases from China.

U.S. crude oil production has risen from five million barrels a day to 9.3 million bd, with the U.S. surge accounting for virtually all the growth in global output, but now it has clearly leveled off. Inventories are also down.

So I’ve been writing about all the layoffs in the energy sector, 100,000 and counting, and this passage from an article by Dan Molinski in the Wall Street Journal kind of sums up the impact on the economy, especially in places like North Dakota and Texas.

“According to the Bureau of Labor Statistics, full-time ‘construction laborers’ earned an average of $605 a week in 2014, while ‘derrick, rotary drill, and service operators, oil, gas and mining’ earned almost twice as much, or $1,187 a week. The average pay at a well site is about $20 an hour, industry experts say, but overtime and hazard pay often put take-home salaries close to $100,000 a year.”

If production has peaked, at least in the short term, this augurs further job losses, though an increase in the oil price (beyond the recent rally) could reverse the now dire trend.

The closely watched count of rigs actively drilling new oil wells is at its lowest level since 2010, though advances in technology, including the shale revolution, have meant fewer rigs can produce the same amount of oil.

--So in keeping with all the above, Schlumberger Ltd., the largest oil-field service company in the world, announced it would cut an additional 11,000 workers, bringing the firm’s total layoffs to 20,000. The company, with joint headquarters in Houston and Paris, had previously announced 9,000 cuts in January.

At the same time, Schlumberger said it would cut cap-ex spending from $4 billion in 2014 to $2.5 billion this year. Revenue declined nearly 9 percent in the first quarter.

--Nestle SA reported a lower-than-expected increase in sales of just 0.5% in the first quarter. Efforts to build sales in developing markets such as China and the Philippines have not panned out as expected.

--UnitedHealth Group Inc. reported a very healthy 29% increase in quarterly earnings and raised its full-year guidance. Revenue in Q1 rose 13%.

--American Express beat on the bottom line in the first quarter by a healthy margin, but sales were less than expected and down 2.7% vs. the same period in 2014, though up 1% when excluding the impact of currency conversions. CEO Kenneth Chenault said 2015 earnings will be “flat to modestly down year over year.” The company’s long-term revenue growth target is 8%.  The shares tanked on Friday.

--General Motors Co. is looking to spend as much as $1 billion to renovate its Tech Center campus in Warren, Michigan, north of Detroit, which sounds like a ton but represents the cost to build a factory or new line of autos. GM’s plans would be to build some new facilities in Warren to house 2,500 new hires on the tech side, such as in software development.

--The unemployment rate in Australia fell to 6.1% in March.

--The Southern California housing market perked up in March, with the median price - $425,000 – up 2.4% over February after hovering around $415,000 since May (though year over year unchanged). Home sales surged 11% in the six-county region that is often a bellwether for the country in terms of divining trends. The 11% increase was only the third gain in 18 months, according to real estate firm CoreLogic and the Los Angeles Times.

--I did a piece for my “Wall Street History” link on steel production and in light of some of the Fed talk this week and thoughts of a disappointing start to 2015 in terms of the economy, it’s worth glancing at. The trends in steel aren’t real good.

--Bloomberg’s terminals went down around the world this morning, an “unprecedented” outage that forced the postponement of a U.K. Treasury auction and affected thousands of investors.

The outage corresponded with the closing of trading in China and the opening in Europe, though most terminals were back up a little over two hours later.

Bloomberg said the failure was caused by a combination of hardware and software failures, which is kind of bad because computers are comprised of hardware and software. [Just wanted to show you my tech expertise.]

Actually, as I go to post, there is a story that the outage was caused by an IT worker in London spilling his can of soda on some vital equipment.

--According to the Fiscal Policy Institute, average hourly private-sector wages in the first two months of this year rose by 4.4% in New York – to $34.06 – the strongest increase since the recession and twice the national average. [Aaron Elstein / Crain’s New York Business]

--David Lazarus of the Los Angeles Times had a piece on the Ask.com toolbar. As one West Hollywood resident told him, “It’s like a bad houseguest. It will not leave.” This fellow has paid $450 to tech troubleshooters to help him delete Ask.com’s software from his system and he’s still not rid of it.

One of the issues is that when you update your Java software, you may also be installing the toolbar if you don’t uncheck a box in the update agreement. Just uninstalling the toolbar doesn’t help.

--According to the nonpartisan Tax Policy Center, the top 20% of taxpayers account for 84% of total income tax.

Foreign Affairs

Iran: Iranian President Hassan Rouhani said Iran would only accept a deal on its contested nuclear program if world powers simultaneously lifted all sanctions imposed on it.

“If there is no end to sanctions, there will not be an agreement,” Rouhani said in a televised speech, echoing prior remarks by Supreme Leader Ayatollah Ali Khamenei.

“The end of these negotiations and a signed deal must include a declaration of canceling the oppressive sanctions on the great nation of Iran,” said Rouhani.

The comments came a day after President Obama was forced to compromise with Congress and give them a say in any final accord that is supposed to be reached by June 30, following agreement on a tentative deal April 2 in Switzerland. Discussions are to resume April 21.

Rouhani said that in terms of the congressional agreement:

“What the U.S. Senate, Congress and others say is not our problem. We want mutual respect... We are in talks with the major powers and not with Congress....

“At the end of these negotiations and at the time of signing the deal, there should be the announcement of ending and annulling the unfair sanctions against the great Iranian people.”

Sec. of State John Kerry said, “Looming large is the challenge of finishing the negotiations with Iran over the course of the next two and a half months.”

The compromise worked up in Congress, passed 19-0 by the Senate Foreign Relations Committee (with full Senate and House approval to come) essentially sets up a future vote on lifting congressionally imposed sanctions following a 30-day review period once a final accord is reached. The review period had previously been listed as 60 days. If a final accord is not submitted to Congress by July 9, the review period reverts to 60 days.

But if the Senate were to reject a final agreement, Obama could veto the legislation – and it would only take 34 senators to sustain it.

Meanwhile, the International Atomic Energy Agency held scheduled talks in Tehran to address technical issues and once again failed to resolve long-standing questions over Iran’s alleged past efforts to develop nuclear weapons.

Sen. Bob Corker / Washington Post

“Any deal on Iran’s nuclear program would affect generations to come, which is why it was troubling to watch President Obama and his deputies try to shut out the public and Congress from having a say in this consequential decision.

“Time and again, the administration suggested that a vote in Congress would scuttle any nuclear agreement and leave war with Iran as the only alternative.

“This week, Democrats and Republicans pushed back, forcing the administration to bow to the inevitable role of Congress in this process. With a unanimous vote, the Senate Foreign Relations Committee affirmed that the American people – through their elected representatives – must be given a voice on what is one of the greatest geopolitical issues of our time.

“The Iran Nuclear Agreement Review Act will allow Congress to weigh in after an agreement is reached to ensure that any deal with Iran is truly strong enough to eliminate the threat of the regime’s nuclear program.

“This bipartisan bill accomplishes three things.

“First, it will ensure transparency. The bill requires the president to submit to Congress the details and all related documents regarding any final deal with Iran. The administration has confirmed that it will seek a resolution at the U.N. Security Council endorsing a final agreement. If the Security Council can pass judgment on the validity of an agreement, then surely the U.S. Congress should do so as well.

“Second, it will provide oversight and allow lawmakers time to review all parts of an agreement before the president could suspend the sanctions on Iran that Congress put in place.

“Beginning in 2010, congressional Democrats and Republicans overwhelmingly passed a series of strong sanctions that crushed the Iranian economy and eventually brought Iran to the negotiating table. These are many of the sanctions that Iran desperately wants lifted.

“Our bill will make sure the president could not waive these sanctions before Congress has the chance to first review a deal and, if it chooses, vote on whether to approve or disapprove it. The bill gives Congress up to 52 days to act. If lawmakers vote to disapprove a final deal, the president would be prohibited from suspending the congressionally mandated sanctions.

“Third, our legislation helps hold Iran accountable. The president will be required to certify to Congress every 90 days that Iran is complying with the agreement. Should Iran violate the terms, the bill enables Congress to snap its sanctions back into place....

“Our legislation neither prejudges nor prevents the president from reaching a deal with Iran that is strong, verifiable and enforceable.

“We have worked hard to keep our bill bipartisan and focused on the appropriate role for Congress – passing judgment on suspending the sanctions that Congress created. The president would retain authority over U.S. sanctions implemented through executive order, allowing the administration to implement any final agreement in phases, as it has insisted, while assessing Iranian compliance and giving Congress time to consider the agreement.

“It is clear that Iran and the United States have different views of what the political framework entails, particularly regarding the pace of the lifting of economic sanctions on Iran. As the major world powers work toward a final agreement, we must remain clear-eyed regarding Iran’s continued resistance to concessions, long history of covert nuclear weapons-related activities, support of terrorism and role in destabilizing the region. Now is the time to tie any future relief of statutory sanctions with a formal process for Congress to assess a final accord.”

James A. Baker III / Wall Street Journal

“Iranian leaders quickly disputed key points about the White House’s description of the terms of the agreement. Among them was Iran’s demand that all sanctions be removed once a final deal is signed. That is a far cry from the U.S. understanding that sanctions will only be removed over time, as Iran meets its obligations. This different Iranian position may have been aimed at Iran’s domestic audience. But if Iran holds to it, there should be no final agreement.

“Arms-control negotiations are rarely easy, and there remain serious questions about more than the phasing out of sanctions. These include verification mechanisms (including access to Iran’s military bases for inspections); the ‘snapback’ provisions for reapplying sanctions; and Iran’s refusal so far to provide historical information about its nuclear-enrichment program so that there is a baseline against which to measure any future enrichment. The proposed snapback and verification provisions, while still being negotiated, look like they will be particularly bureaucratic and cumbersome....

“As things now stand, however, if in the end there is no final agreement – and if the U.S. is seen to be the reason why – we could be in a worse position than we are today, because the United Nations and European Union sanctions would likely be watered down or dropped. The U.S. would then be left with the option of only unilateral sanctions, which are far less effective. So it is critical that the U.S. position on these issues be supported by most, if not all, of the other members of the P5+1 group....

“Our P5+1 partners should understand that if we can’t trust Iran to stick to its promises during negotiations, we cannot trust that it won’t resume its nuclear-weapons program after a final deal is reached.

“Only after we have the necessary support from the P5+1 should we resume our discussions with Iran. And then, only after the Iranians have been told in no uncertain terms that we have reasonable specific demands they must meet. Let Iran and the world know what those demands are. If Iran balks at such an arrangement, then it will be that country’s fault that the talks broke down.

“On the other hand, if the U.S. is viewed as cratering the deal because of insufficient domestic support, it will be much easier for our P5+1 partners to diminish or drop sanctions against Iran. We should recognize that some of those countries are eager to resume their business relations there, just as Russia has actually done in recent days by agreeing to the sale of a sophisticated air-defense system to Iran.”

Editorial / Wall Street Journal

“President Obama says he wants Congress to play a role in approving a nuclear deal with Iran, but his every action suggests the opposite. After months of resistance, the White House said Tuesday the president would finally sign a bill requiring a Senate vote on any deal – and why not since it still gives him nearly a free hand.

“Modern presidents have typically sought a Congressional majority vote, and usually a two-thirds majority, to ratify a major nuclear agreement. Mr. Obama has maneuvered to make Congress irrelevant, though bipartisan majorities passed the economic sanctions that even he now concedes drove Iran to the negotiating table.

“(On) Tuesday afternoon the Senate Foreign Relations Committee unanimously passed a measure that authorizes Congress to vote on an Iran deal within 30 days of Mr. Obama submitting it for review....

“(The) White House conceded when passage with a veto-proof majority seemed inevitable. The bill will now pass easily on the floor, and if Mr. Obama’s follows his form, he will soon talk about the bill as if it was his idea.

“Mr. Obama can still do whatever he wants on Iran as long as he maintains Democratic support. A majority could offer a resolution of disapproval, but that could be filibustered by Democrats and vetoed by the president. As few as 41 Senate Democrats could thus vote to prevent it from ever getting to President Obama’s desk – and 34 could sustain a veto. Mr. Obama could then declare that Congress had its say and ‘approved’ the Iran deal even if a majority in the House and Senate voted to oppose it.

“Foreign Relations Chairman Bob Corker deserves credit for trying, but in the end he had to agree to Democratic changes watering down the measure if he wanted 67 votes to override an Obama veto....

“His latest concessions shorten the review period to 30 days, which Mr. Obama wanted, perhaps to mollify the mullahs in Tehran who want sanctions lifted immediately. After 52 days Mr. Obama could unilaterally ease sanctions without Congressional approval. Mr. Obama has said that under the ‘framework’ accord sanctions relief is intended to be gradual. But don’t be surprised if his final concession to Ayatollah Khamenei is to lift sanctions after 52 days....

“The case for the Corker bill is that at least it guarantees some debate and a vote in Congress on an Iran deal. Mr. Obama can probably do what he wants anyway, but the Iranians are on notice that the United States isn’t run by a single Supreme Leader.”

Benny Avni / New York Post

“In pushing for a deal to stop Iran from getting nukes, Washington hopes to reform Iran so it will ‘take its rightful place in the community of nations.’

“Instead, an emboldened Tehran is fomenting violence – and the Mideast is headed for a major explosion.

“Here’s the state of the region, after 14 months of negotiations:

“In Yemen, all hell is breaking loose. Iran’s allies, the Houthis, have chased away the Western-backed elected government (as well as all Americans stationed in the country). The Saudis are now deep in the battle, at least from the air, and with supporting roles from their own allies. Both Iran and the Saudis, meanwhile, now have warships off Yemen’s coast....

“In Syria, there’s no end in sight to the killing that’s already claimed a quarter million lives. Now, even Palestinians in camps there, particularly in Yarmouk, have been roped into the conflict. As the loyalties of the camp’s own militants split, civilians are killed by the hundreds with ISIS on one side and Assad on the other.

“No one wants ISIS to prevail, of course, but if it fails, Iran will run Syria, with dire consequences for the region.

“In Iraq, anti-ISIS forces are playing whack-a-mole. They recently made great strides toward recapturing Tikrit, but have been losing ground in the Anbar region. Reports this week had the key city of Ramadi, 70 miles from Baghdad, on the brink of falling.

“These relatively confined hot wars are just the start. Iranian arms are flowing to Iraq, Lebanon, the West Bank, Gaza and as far as North Africa. According to the Israelis, Iran this month boosted weapons deliveries to Hizbullah and Hamas, raising new fears of a coming war there....

“In Iran itself, one of our ‘allies’ in the talks meant to curb the mullahs’ nuke lust, China, now plans to build five new reactors in Iran. That’s after Russia announced this week its intention to send the mullahs S-300 surface-to-air missiles, violating its previous vows not to do so.

“And with that, one option for the West to stop Iran’s bomb-acquisition program – hitting its nuclear facilities militarily – will become more risky and costly....

“The see-no-evil deference paid by the Obama folks in the hope of reaching an agreement and maybe converting Iran’s mullahs into peace-lovers has only left the region more volatile.

“Far from helping to pacify the region, the talks in Switzerland have only escalated wars there. Whether we reach a deal on Iran’s nukes or not, they have only helped Iran further its own goals – which fly in the face of our own.”

Iraq / Syria / ISIS: The Chairman of the Joint Chiefs of Staff, Gen. Martin Dempsey, said U.S. and Iraqi forces were working hard to maintain control of Ramadi as ISIS forces sought to take it over, but he added Ramadi wasn’t strategically that important should the Iraqis not be able to hold onto it.

“The city itself is not symbolic in any way,” Dempsey said Thursday at the Pentagon, which was a stupid statement to make as up to 150,000 residents of Ramadi, the provincial capital of Anbar province, became instant refugees in fleeing the city.

Dempsey, though, said the U.S. and Iraqi forces were emphasizing the city of Beiji, north of Baghdad, where ISIS has been attacking a strategic oil refinery. The U.S. is supporting Iraqi troops with airstrikes, intelligence, surveillance and other support, with Dempsey saying, “Once the Iraqis have full control of Beiji, they will have control of their oil infrastructure, both north and south and deny [ISIS] the ability to generate revenue through oil.” [Gordon Lubold / Defense One]

Iraqi Prime Minister Haider al-Abadi, in Washington for talks with President Obama and other U.S. officials, tried to convince the White House he was concerned over Iran’s involvement in Iraq, specifically the elite Quds forces under the control of Iranian Maj. Gen. Soleimani. Abadi also said he had “zero tolerance” for abuses perpetrated by Shia militants in Tikrit once ISIS was forced out.

Abadi then said Saudi Arabia’s airstrike campaign against the Houthis in Yemen could trigger a broader sectarian war, as he played all sides of Iran’s influence in the region overall.

Yemen / Saudi Arabia: U.S. officials have been increasing their support of Saudi Arabia’s air campaign in Yemen, but the widespread bombing of Yemeni villages and towns since March 26 has not only failed to dislodge the Iran-backed Houthi rebels, it has led to significant civilian casualties; the U.N. announcing at least 364 civilians having been killed thus far. The World Food Program said on Thursday it would distribute food to 105,000 displaced people around Aden, but that conditions were so unsafe it was “struggling to reach (them).”

One other result is Al Qaeda in the Arabian Peninsula (AQAP) has been expanding its reach and on Thursday gained control of an airbase and other key facilities, including an oil export terminal, at an Arabian Sea port in southern Yemen. This comes as the Saudis are not targeting al-Qaeda fighters.

One U.S. official, speaking on condition of anonymity, told the Los Angeles Times that the air war was a “disaster,” saying the Saudis don’t have a “realistic endgame” for the bombing campaign.

Gen. Martin Dempsey said the Houthis are looking to restore an ancient empire “that included all of Yemen and parts of southern Saudi Arabia.”

“The Saudis are right to be concerned,” he said.

There was a positive development this week in Yemen as a key leader of AQAP, Ibrahim Suleiman Rubaish, was killed in an airstrike. Rubaish was a former inmate at the U.S. military prison at Guantanamo Bay. Details on how the strike went down were not forthcoming.

Israel: A Bloomberg News poll finds that when it comes to Israel, Americans are increasingly partisan. For example, by a ratio of 2-to-1, Republicans thought the U.S. should stand squarely behind Israel even if its positions diverge considerably from American interests. But the ratio was the reverse for Democrats.

Republicans also said they had more sympathetic feelings towards Benjamin Netanyahu over President Obama by a 67 to 16 margin. Democrats felt more allegiance to Obama, though, by 76 percent to 9 percent.

Democrats were also more optimistic than pessimistic, by a nearly 3-to-1 ratio, when it comes to a tentative deal with Iran, while Republicans were more pessimistic than optimistic by a 2-to-1 margin.

Russia / Ukraine: President Vladimir Putin held his annual marathon call-in show on Thursday and the state of the Russian economy took precedence over the Ukraine crisis.

Among the messages Putin wanted to get across were that Russia has weathered the worst stage of the economic crisis, “Stalinism was ugly but cannot be compared to Nazism, there will be no war over Ukraine and there are no Russian troops there.” [Moscow Times]

Putin repeatedly said the United States plays a negative role in major world conflicts, including in the Middle East. In attempting to explain Russia’s decision to supply S-300 surface-to-air missiles to Iran, Putin said that the U.S. still sends far more weapons to the region.

Putin alleges it was OK to begin shipping the S-300 – which the U.S. and Israel are livid about, but can’t do anything to stop – because a preliminary agreement on a final nuclear deal is on track. The delivery of the anti-missile rocket system to Iran had been banned by Russia itself under pressure from the West; specifically, UN Security Council Resolution 1929, “which banned supply to Iran of conventional weapons including missiles, tanks, attack helicopters, warplanes and ships.” [Los Angeles Times]

Russia also announced it was supplying Iran with grain, equipment and construction materials in exchange for crude oil under a barter deal. Iran is the third-largest buyer of Russian wheat and the barter exchange has been in the works for more than year. The Kremlin is clearly looking to get a jump on others in resuming trade with Tehran once a deal on the nuke program is signed.

Editorial / Wall Street Journal

“Vladimir Putin blew a geopolitical raspberry at the Obama administration on Monday by authorizing the sale of Russia’s S-300 missile system to Iran. The Kremlin is offering the mullahs an air-defense capability so sophisticated that it would render Iran’s nuclear installations far more difficult and costly to attack should Tehran seek to build a bomb.

“Feeling better about that Iranian nuclear deal now?....

“So much for the White House hope that the West could cordon off Russia’s aggression against Ukraine while working with Mr. Putin on other matters. Russia and the West could disagree about Crimea and eastern Ukraine, the thinking went, but Washington could solicit the Kremlin’s cooperation on the Iranian nuclear crisis....

“Now Mr. Obama wants to delegate responsibility for enforcing his nuclear deal with Iran to the United Nations, which means that the Russians will have a say – and a veto – there, too. Think of this missile sale as a taste of what’s to come.”

In Ukraine, at least six Ukrainian government soldiers were killed in one 24-hour period this week and army positions were fired on 26 times near the rebel stronghold of Donetsk.

On Monday, Ukraine, Russia, Germany and France held talks, calling for the withdrawal of more weapons from the frontline.

German Foreign Minister Frank-Walter Steinmeier said the discussions were “in parts very controversial...the differences of opinion between Kiev and Moscow became clear once again.”

China: Satellite images show China has made rapid progress in building an airstrip suitable for military use in contested territory in the South China Sea, specifically the Spratly Islands, with plans in the works for another airstrip on manmade land, as reported by IHS Jane’s Defence Weekly. China appears to be trying to combine two of the land masses in the area that would allow for a very extensive airstrip.

Senator John McCain called on the Obama administration to act on plans to move more military resources into the region.

“When any nation fills in 600 acres of land and builds runways and most likely is putting in other kinds of military capabilities in what is international waters, it is clearly a threat to where the world’s economy is going, has gone, and will remain for the foreseeable future,” McCain told a briefing in Congress. [South China Morning Post]

On the economic front, aside from the data released this week (as covered above), Premier Li Keqiang “lashed out at officials for holding up reforms amid an economic slowdown.

“In an outburst made public late on Wednesday, Li used a State Council meeting earlier in the day to complain that a few ministerial section chiefs were stalling key decisions despite a consensus among ministers.

“The comments underscored his frustration at the slow roll-out of his economic policies...

“ ‘If the central government takes more than a year of deliberation to come up with policies, and they then have to go through another year of red tape – is that some kind of joke?’ Li was quoted as saying ‘sternly’ in a statement posted on a government website.” [South China Morning Post]

A veteran journalist, Gao Yu, known for hard-hitting reports on elite politics, has been sentenced to seven years in prison after she was convicted of leaking state secrets. Gao has been detained since April 24 of last year.

As the South China Morning Post reported, “People familiar with Gao speculate that the authorities have long held a grudge against her for her political writings and wanted to punish her.”

Gao had served seven years in prison previously for her reporting on the Tiananmen Square crackdown in 1989.

Amnesty International condemned the latest sentence: “This deplorable sentence against Gao Yu is nothing more than blatant political persecution by the Chinese authorities.”

Separately, the government’s Cyberspace Administration of China publicly blasted popular online news service Sina for spreading “false information” and “violating morality,” according to a statement from the CAC.

Sina is listed on Nasdaq and has often come under fire from Chinese authorities, with several high-profile bloggers on its Twitter-like Weibo service having had their accounts shut down.

According to a World Press Freedom Index 2015, Reporters Without Borders ranked China 176th out of 180 countries. The only countries worse are Syria, Turkmenistan, North Korea and Eritrea. [Jamil Anderlini / Financial Times]

Lebanon: Former Prime Minister Saad Hariri is visiting Washington this coming week for talks with Sec. of State Kerry, among others, as he seeks Washington’s support of his country.

Hariri has been vehemently backing the Saudi campaign in Yemen, while Hizbullah leader, Sheikh Nasrallah, has denounced Riyadh for spearheading the offensive, which is further fueling tensions in Lebanon.

Nasrallah addressed a Hizbullah rally in Beirut on Friday to show solidarity with the Yemeni people against the military intervention.

Turkey: Last Sunday, Pope Francis made a highly controversial comment at a Mass at St. Peter’s, attended by the Armenian president and the head of the Armenian Apostolic Church. The Pope said that humanity had lived through “three massive and unprecedented tragedies” in the last century.

“The first, which is widely considered the first genocide of the 20th Century, struck your own Armenian people,” he said. Francis also referred to the crimes “perpetrated by Nazism and Stalinism.”

Well, this didn’t go down well with Turkish President Erdogan, who had expressed condolences last year to the victims of the killings, in a step towards reconciliation, but said when it came to using the term ‘genocide,’ political and religious leaders playing the role of historian resulted in “delirium, not fact.”

“Hereby, I want to repeat our call to establish a joint commission of historians and stress we are ready to open our archives. I want to warn the Pope to not repeat this mistake and condemn him.”

The issue is particularly sensitive today because this coming week marks the 100th anniversary of the killings. Turkey claims many of the dead were killed in clashes during World War One.

Armenia says up to 1.5 million people died during the deportation to barren desert regions where they died of starvation.

Britain: National elections are around the corner, May 7, with an ICM poll on Monday having the Tories (Conservatives) on top at 39%, with Labour at 33%; the Tories largest poll lead over Labour in three years. Prime Minister David Cameron’s approval rating, 52%, is at its highest level in five years. Britain’s strong economic performance, especially relative to the eurozone, is finally paying off.

Nigel Farage’s UK Independence Party has fallen all the way back to 7%, same as the Greens.

The Liberal Democrats, Cameron’s coalition partner, are at 8%.

Other polls, though, have Labour and the Conservatives tied.

France: Jean-Marie Le Pen, founder of the National Front party, succumbed to pressure from his daughter, Marine Le Pen, and announced he was pulling out of regional elections. Jean-Marie’s granddaughter, rising star Marion Le Pen, was assured of backing at a meeting on Friday to replace him in the southern region in the December regional elections.

Cuba: President Obama decided to lift the U.S. designation of Cuba as a state sponsor of terrorism; a long-awaited decision that removes an impediment to establishment of full diplomatic relations between the two countries.

Congress has 45 days to consider Cuba’s removal from the list before it becomes effective, but to block it would require separate legislation that is not thought to be in the cards.

Cuba’s removal would leave only three countries on the list – Iran, Sudan and Syria. Cuba was first put on in 1982.

Some in Congress, such as senators Marco Rubio and Robert Menendez, argue Cuba’s refusal to extradite fugitives who reside there should constitute an act of international terrorism.

One of those in question, Joanne Chesimard, a black militant who killed a New Jersey State trooper in 1973, could be sent back.

Editorial / Wall Street Journal

“Mr. Obama’s Cuban diplomacy has been one unreciprocated offering after another, from December’s pledge to normalize relations to the global legitimacy he bestowed by meeting Cuba’s dictator to this free terror pass. So far Raul (Castro) has returned the favors by praising Mr. Obama personally while condemning U.S. foreign policy.”

Obama and Raul Castro met in the first face-to-face discussion between the leaders of the two countries in a half-century last weekend in Panama at the Summit of the Americas. Obama called it a “historic meeting.” Your editor thought, ‘whatever.’

Random Musings

--Hillary Clinton formally launched her campaign for president on Sunday in a video, then hopped in a van and headed to Iowa, via Chipotle.

“I’m running for president. Everyday Americans need a champion, and I want to be that champion,” she said in a Twitter message.

In her video, Clinton says, “Americans have fought way back from tough economic times. But the deck is still stacked in favor of those at the top. I’m hitting the road to earn your vote, because it’s your time. And I hope you’ll join me on this journey.”

Personally, I don’t have any time for a journey with Hillary.

She also said nothing of note in her swing through Iowa, which some say was by design, because she was there ‘to listen to everyday people.’ But then her imperial self was revealed yet again in dissing reporters who dared to ask simple questions.

Editorial / Washington Post

“Hillary Rodham Clinton announced her candidacy for president Sunday, entering the race with universal name recognition, undisputed smarts and a record of hard work and competence. Nonetheless, she knows as well as anyone that her road to the White House will not be easy.

“In 2016, Democrats will have controlled the presidency for eight years, and many voters will think it’s time for a change. Should Ms. Clinton win her party’s nomination, as now seems likely, she will have to promise such change, differentiating herself from President Obama even though she served in his administration – and doing so without alienating his admirers. Al Gore provided a vivid demonstration of how to fail at this balancing act in 2000, even when the departing president was relatively popular.

“To pull it off, Ms. Clinton will have to articulate a program that shows she is not just a capable and dedicated administrator but also a leader with a clear governing philosophy that fits the times. In a video released Sunday, Ms. Clinton promised a forward-looking agenda, saying that she would be a champion for families struggling to get by. But she gave no indication of how she would change an economy that she said, echoing Sen. Elizabeth Warren, is stacked against ordinary Americans.

“Adding substance to the slogans will prove challenging for several reasons. Democrats have implemented much of their agenda during the Obama years, most notably on health-care coverage, financial regulation, gay rights and climate change, leaving the party’s policy shelf a little bare. Entrenching and defending the gains against attempted Republican rollback will be an important mission of Ms. Clinton’s presidency, if she is elected, but no one gets elected by promising to play defense.”

Maureen Dowd / New York Times

“Hillary Clinton has always tried to be more like the Democratic president she lived with in the White House, to figure out how he spins the magic. ‘I never realized how good Bill was at this until I tried to do it,’ she once told her adviser, Harold Ickes. But she ends up being compared with the Republican president she investigated as a young lawyer for the House Judiciary’s Watergate investigation.

“Her paranoia, secrecy, scandals and disappearing act with emails from her time as secretary of state have inspired a cascade of comparisons with Nixon.

“Pat Buchanan, a former Nixon adviser, bluntly told Jason Zengerle recently in New York magazine: ‘She reminds me of Nixon’....

“Democratic strategists and advisers told the Washington Post’s Anne Gearan and Dan Balz that ‘the go-slow, go-small strategy’ plays to her strengths, ‘allowing her to meet voters in intimate settings where her humor, humility and policy expertise can show through.’

“As the old maxim goes, if you can fake humility, you’ve got it made. But seeing Rahm and Hillary do it in the same season might be too much to take.

“President Obama has said: ‘If she’s her wonderful self, I’m sure she’s going to do great.’ But which self is that?

“Instead of a chilly, scripted, entitled policy wonk, as in 2008, Hillary plans to be a warm, spontaneous, scrappy fighter for average Americans. Instead of a woman campaigning like a man, as in 2008, she will try to stir crowds with the idea of being the first woman president. Instead of haughtily blowing off the press, as in 2008, she will make an effort to play nice.

“It’s a do-or-die remodeling, like when you put a new stainless steel kitchen in a house that doesn’t sell.”

At least in week one, Hillary was hardly warm and fuzzy with the press. Instead she was once again the Ice Queen.

--A USA TODAY/Suffolk University Poll finds that 55% of Democrats say it’s “very important” to them to see strong challenges to Hillary Clinton for the presidential nomination. Another 25% call it “somewhat important.” 43% said they preferred Clinton as the nominee, with 5% naming Massachusetts Sen. Elizabeth Warren, even though she’s not running. 48% said they were undecided.

On the Republican side, not one GOP candidate scored as high as double digits. Wisconsin Gov. Scott Walker had 9%, Jeb Bush 8%, Sen. Ted Cruz 7% and Sen. Rand Paul 5%. [Marco Rubio was at just 2%.] Mitt Romney had led the January USA TODAY/Suffolk Poll with 16%, but then he said he wasn’t running in 2016.

The survey also found that 48% of all those surveyed disapproved of the job President Obama is doing; 42% approve. Congress has only an 11% approval rating; 77% disapprove of its performance.

Only 25% say the country is headed in the right direction, a rather startling drop from the 36% who felt that way in January. [Source: USA TODAY]

--New York City Mayor Bill de Blasio has been taking heat from some fellow Democrats for refusing to endorse Hillary Clinton for president. He first declined to support her on “Meet the Press” Sunday, and then on Tuesday, when confronted on his position, the mayor said, “Not a lot has changed since Sunday morning. It’s Tuesday.”

For the first time, I have to say that something the mayor said was pretty funny.

The mayor’s contention is that Clinton has been “out of the public eye” for almost eight years, and she needs to reintroduce herself to the public before he would consider backing her candidacy.

De Blasio argues Clinton, when serving as secretary of state, for example, wasn’t addressing domestic issues and now he wants to hear what she has to say.

But this is all about de Blasio wanting to elevate himself among fellow Democrats as a standard-bearer. He has been traveling in the likes of Iowa and Nebraska this week to speak about his signature issue, income inequality.

The stories you hear about the mayor’s soaring ambition are true. He really believes that he’ll be running for president down the road, the leader of a new progressive Democratic Party, one touting more active government.

But many Democrats, especially in New York, were incredulous de Blasio refused to immediately endorse his former boss. A Democratic insider told the New York Post: “The Clinton people are really angry. They’re furious.”

--The aforementioned Marco Rubio declared his candidacy for the Republican nomination on Monday in Miami, speaking of “the new American century.” He mocked Hillary Clinton as “a leader from yesterday.”

“Yesterday is over. We are never going back,” Rubio told the crowd. The 43-year-old senator drew the contrast with the 67-year-old Clinton, as well as fellow Floridian, Jeb Bush, who is 62.

Jennifer Rubin / Washington Post

“Sen. Marco Rubio (R-Fla.) caught a break and he should make the most of it. On Sunday, the grand dame of the Democratic Party, will, from the comfortable distance afforded by social media, signal she is claiming her crown as the prohibitive Democratic favorite for 2016. Hillary Clinton won’t put it quite that way, but everything from her enormous organization to the refusal to give media access to her lack of ideas to the disdain for rules that apply to others reeks of entitlement. She needs an entourage but can forgo the indignity of nettlesome press questions, the trouble of coming up with policy proposals and the ‘inconvenience’ of following the rules. She is running because she is Hilary, and that’s enough, at least for now.

“The very next day, the young Hispanic, with a moving immigrant story and great charisma meets the voters – in public? – and plans to deliver his announcement speech at Miami’s historic Freedom Tower. For a time the tower was the processing center for Cuban refugees fleeing Fidel Castro – a regime with which the president has started normalized relations with no concern for and no protections for the Cubans who remain. It is in some respects the Ellis Island for Cubans, and so the announcement most resembles that of a president who stood in front of another symbol of freedom, the Statue of Liberty....

“Clinton talks in platitudes, for a reason. There is nothing new or exciting or specific to say if the underlying message is really ‘It’s my turn.’ For Rubio, who told CPAC earlier this year, ‘This country doesn’t owe me anything,’ it is a chance to be forward-looking and creative, interactive and down-to-earth, charismatic and inspiring – everything Clinton is not. For his party, it is a chance to turn away from the gloom-and-doom purveyors, from those who miss the true spirit of Reagan and obsessively try, as Clinton does, to recreate a bygone era. Rubio can embrace a domestic agenda based on reform and an international outlook determined to project American strength and values....

“The Clinton-Rubio comparison is a helpful one for the GOP, a moment to cherish when the country can see new vs. old, immigrant success story vs. wealthy matron and charm vs. regal distance. What a boost for Rubio this is.”

--In New Hampshire on Tuesday, New Jersey Gov. Chris Christie unveiled an ambitious plan for Social Security and Medicare reform for future retirees, as part of an overall blueprint to cut deficits by $1 trillion over a decade. Christie sought to portray himself as a leader unafraid to discuss “hard truths” with American voters.

“It is time to tell the truth about what we need to do in order to solve our problems and put our country back on the path to greater prosperity. Washington is afraid to have an honest conversation about Social Security, Medicare and Medicaid with the people of our country. I am not.”

Christie proposed means testing and a cap for Social Security benefits, reducing payments for those making more than $80,000 in additional income and eliminating the benefits altogether for those making more than $200,000 a year.

“Unless we deal with this crisis, the young people of this country will get poorer, the disparity between young and old, the working middle class and the retired will grow even larger,” he said. “Our economy will grow even weaker. Our debt will skyrocket.”

The proposal would gradually raise the retirement age to 29, beginning in 2022, while raising the early retirement age to 64.

Christie said, “I have come to New Hampshire today to talk about the challenges we’re facing as a country.”

But while it’s nice the governor is at least thinking of real reform, the fact is his popularity around the country continues to slide and Bridgegate has a lot to do with this. Probable indictments are in the cards (though not of Christie directly) that will only damage the governor’s reputation further.

I noted years ago that a Rutgers poli-sci professor who was an expert on Jersey politics said that Christie was always thinking about three steps ahead of his competition. [This was in relation to the criticism Christie faced in embracing President Obama in the aftermath of Superstorm Sandy.] That may have once been true, but the governor certainly didn’t think through the consequences of Bridgegate, which is a classic example of abuse of power.

Plus, as I’ve been also pointing out for years, there is little he can point to as real accomplishments in my home state.

Nonetheless, he’s running.

But wait...there’s more! Moody’s Investors Service has downgraded New Jersey’s credit rating, a record ninth ratings cut since Christie took office. Moody’s cited “continued pension contribution shortfalls.”

--Meanwhile, New Jersey Sen. Robert Menendez’s buddy, Florida eye doctor Salomon Melgen, was indicted on 46 counts for health-care fraud, with federal prosecutors alleging he cheated Medicare out of $105 million over six years.

Melgen previously pleaded not guilty along with Sen. Menendez in their corruption case and Melgen was released on $1.5 million bail in that matter. But now he faces these new charges.

It was the Wall Street Journal that spearheaded an effort to have Medicare release the names of individual doctors and a year ago, Melgen was on the list as Medicare’s top biller. He received $21 million from the taxpayer-funded program in 2012 alone.

But as the Journal noted, Medicare continued to pay Melgen even after the FBI raided his office in January and October 2013, with auditors identifying millions of dollars in excess payments.

Needless to say, none of this is helpful to Sen. Menendez, who it is alleged went a bit too far in offering help to Melgen with his “Medicare problem,” as the indictment against Menendez alleged.

If convicted, Dr. Melgen faces up to 10 years in prison on each of the 46 health-care fraud counts. 

Separately, a new Quinnipiac University poll of New Jersey voters found that 52% – 61% of Republicans, 51% of independents and 46% of Democrats – say Menendez should resign.

54% say he’s not “honest and trustworthy,” while 23% think he is. The senator’s job approval rating is down to 35%.

--From Gregg Zoroya / USA TODAY: “More than half of some 770,000 soldiers are pessimistic about their future in the military and nearly as many are unhappy in their jobs, despite a six-year, $287 million campaign to make troops more optimistic and resilient, findings obtained by USA TODAY show.”

52% agreed with statements such as “I rarely count on good things happening to me.” 48% have little satisfaction in or commitment to their jobs.

--One former Blackwater security contractor received a life in prison sentence for killing 17 unarmed Iraqi civilians in Baghdad back in 2007, with three others receiving 30-year sentences. 

The incident marked the end for Blackwater Worldwide after it had become one of the wealthiest and politically powerful security firms in the U.S.

The U.S. government had asked their Iraqi counterparts to be patient and allow the U.S. criminal justice system to handle the case in the face of intense Iraqi government criticism.

--The following really ticks me off...a world of dirtballs.

Stephen L. Carter / Bloomberg

“The big news about ‘Game of Thrones’ this past weekend wasn’t the comparative blood-and-gore quotient for Sunday night’s season five premiere, but that the first four episodes were leaked online, and have already been downloaded perhaps a million times. Although HBO has hinted that the episodes were uploaded by a reviewer, the leak could hardly have come as a surprise, given that ‘Game of Thrones’ at times last year ‘accounted for more than half of all TV shows pirated on file-sharing networks, and more than all music downloads combined.’ In short, what happened over the weekend was just more of the same....

“(Most) users take the view that the online world should accommodate rather than frustrate their desires. They should get what they want when they want it.”

Stephen Carter quotes Corry Doctorow and his recent book “Information Doesn’t Want to be Free.”

Carter: “Online, in Doctorow’s telling, users gravitate toward a simple libertarian principle under which they should enjoy maximum freedom of action.” 

In Doctorow’s words, “You can’t and won’t solve copying.”

--CBS and Bob Schieffer made a good choice in selecting John Dickerson, CBS News’ political director, to replace Schieffer as host of “Face the Nation.” Mr. Dickerson is a likable sort with the “right bloodlines,” as Schieffer said on Sunday. His mother, Nancy Dickerson, was the first female correspondent in the CBS News Washington bureau.

--A quarter of all high school students and 8% of middle school students used tobacco in some form last year, according to federal data released this week. 

Smoking traditional cigarettes, from 2011 to 2014, is actually down sharply, from 16% of high school students to 9%. But e-cigarette use is soaring, which creates a new problem. They deliver just as much nicotine, but not the dangerous tar and other chemicals.

Kids say they use them either to be trendy or to quit smoking cigarettes, but nicotine is addictive, and as Dr. Thomas Frieden, director of the C.D.C., said, “This is another generation being hooked by the tobacco industry. It makes me angry.”

--NBC has a new problem in terms of credibility. The facts behind reporter Richard Engel’s kidnapping in Syria back in December 2012. The New York Times questioned the details as presented by Engel upon his release and Engel corrected the storyline this week.

The issue isn’t whether Engel told the truth, because it doesn’t seem he intentionally distorted the facts, but NBC executives were informed of them and kept them quiet. More on this later as warranted.

For now, in light of the Brian Williams fiasco, this situation couldn’t come at a worse time.

--After the gyrocopter incident at the U.S. Capitol this week, all the experts are talking about the same type of scenario. Why not send 10 gyrocopters into the Capitol or White House from ten different directions? 

--Finally, Sunday is the 20th anniversary of the Oklahoma City bombing that killed 168 and injured 500. That was one of the most sickening days in the history of our country, but also a day of tremendous heroism. I’ve been to the memorial and museum there twice and I strongly urge all of you to take your kids at some point. Remember to bring a box of Kleenex. If you don’t exit the museum crying, you aren’t human.

---

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

Remember those who died in the Alfred P. Murrah Federal Building. Pray for the survivors who have to live with the memories every day. And remember the rescue dogs.

God bless America.
---

Gold closed at $1203
Oil $55.74...up a fifth week in a row and highest since Dec.

Returns for the period 1/1/15-4/17/15

Dow Jones -1.3% [17826]
S&P 500 -1.0% [2081]
S&P MidCap -1.2%
Russell 2000 -1.0%
Nasdaq -1.3% [4931]

Returns for the period 1/1/15-4/17/15

Dow Jones +0.02%
S&P 500 +1.1%
S&P MidCap +4.4%
Russell 2000 +3.9%
Nasdaq +4.1%

Bulls 50.5
Bears 13.9

There are major costs associated with S&N and for the first time in 16 years I’m asking for donations.  

So if you would like to make one, checks should be made payable to StocksandNews.com. *Please include your email address so I can acknowledge receipt. 

Brian Trumbore
StocksandNews.com
PO Box 990
New Providence, NJ  07974

A special thank you to those who have contributed thus far.

 
 



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Week in Review

04/18/2015

For the week 4/13-4/17

[Posted 11:30 PM ET, Friday]

Edition 836

Washington and Wall Street

Lots of economic data and earnings this week, but I’ll start off with the International Monetary Fund’s twice yearly global forecast for growth, released this week.

2014...global GDP was 3.4%
2015...new estimate is 3.5%
2016...est. is 3.8%

The United States, according to the IMF, is expected to grow 3.1% in each of 2015 and 2016. GDP this year was originally forecast to rise 3.6%.

The eurozone is now expected to grow 1.5% this year vs. 0.9% in 2014.

The U.K. should see growth of 2.7% in 2015; 2.3% in 2016.

Japan...1% in 2015; 1.2% in 2016.

China...6.8% in 2015; 6.3% in 2016.

India...7.5% in both 2015/16, so faster growth here than in China for the first time in quite a while.

Brazil will contract 1% in 2015. Russia will contract 3.8% this year and Ukraine’s economic output will tumble 5.5%.

In an interview with the Financial Times, Olivier Blanchard, the IMF’s chief economist, said: “I sense the macro risks are smaller than in October – there is no reason for doom and gloom.”

The IMF predicted that aside from falling oil prices, the rise in the U.S. dollar and Chinese renminbi against the Japanese yen and the euro would help boost growth further. At the same time, the IMF is saying the appreciation of the dollar and Chinese currency should “not damage their growth prospects because these economies can keep interest rates lower for longer to offset any deterioration in their trade performance.” [Chris Giles / Financial Times]

But in its statement, the IMF also said: “Disruptive asset price shifts in financial markets remain a concern. Term and other risk premiums in bond markets are still low in historical terms, and the context underlying this asset price configuration – very accommodative monetary policies in the major advanced economies – is expected to start changing in 2015.

“Triggers for turmoil include changing expectations about these elements as well as unexpected portfolio shifts more broadly. A further sharp dollar appreciation could trigger financial tensions elsewhere, particularly in the emerging markets.”

Olivier Blanchard did warn: “If large exchange-rate movements were to continue, they could both create further financial risks and reignite talk of currency wars.” [Sydney Morning Herald]

So in the U.S., March retail sales came in a little shy of expectations, up 0.9%, up 0.4% ex-autos, while March industrial production fell 0.6%, worse than expected, and March housing starts also came in shy of analysts’ forecasts at 926,000 vs. expectations of 1,040,000.

On the inflation front, March producer prices were up 0.2%, ditto ex-food and energy, and for the past 12 months, the PPI is down 0.8%, but up 0.9% on core.

March consumers prices were also up 0.2%, including on core, with the year over year CPI unchanged, though up 1.8% ex-the stuff we use, or close to the Federal Reserve’s target of 2.0%. [A separate report on average hourly earnings showed wages rising at a 2.2% pace year over year.]

So what does this mean in terms of the Fed finally raising interest rates? The Fed’s beige book, its survey of regional economic conditions, found modest or moderate growth in eight of its 12 districts, while in the other four the pace was steady or slight.

The survey covered the period from mid-February through end of March and was released ahead of the April 28-29 policy meeting where little of note is expected.

The issue remains, will the Fed hike rates in June or wait until September, or later.

Minutes of the March meeting of the Open Market Committee showed “several” officials wanted to hike in June, but the economic numbers since then have not been that great, including the dismal March jobs report.

And this week, a number of Fed governors who were leaning towards a June hike clearly backed off. Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, said in a speech on Thursday, “Data available for the first quarter of this year have been notably weak,” which “is giving rise to heightened uncertainty about the track the economy is on.”

Earlier this month, New York Fed President William Dudley said the weak numbers hardly augured a mid-year rate increase, while this week Fed Vice Chairman Stanley Fischer said a rate increase sometime this year was still in the cards, but he doesn’t know when and any hike would be small.

It’s about “escape velocity” and the economy hasn’t achieved that, especially when first-quarter GDP is likely to come in at around 1.5%.

As for the first big week of Q1 corporate earnings, the picture was mixed, as described more fully below. Some, such as JPMorgan Chase and Goldman Sachs, handily exceeded expectations, while others, like Johnson & Johnson and American Express, were hit hard by the rising dollar and their international exposure when it came to the top line, revenues, even though they were able to ‘beat’ on the bottom line, earnings.

The thing is the market is far from cheap based on historical measurements. The trailing price/earnings multiple on the S&P 500 is 20, after all (as listed in Barron’s...it drives me up the wall that you see so many different P/Es bandied about) and earnings are expected to drop in the first two quarters of the year. But’s it’s the old game, with rates at zero, where else are you going to put your money? Well, sometimes just holding cash isn’t such a bad thing and with all the cross-currents today, especially Greece in the short run, as billionaire Roger McNamee once told me when we met on a trip long ago, “It’s a good time to take a cruise.”

One other item....

Editorial / Wall Street Journal

“The big news Thursday was that Republicans and Democrats on the Senate Finance Committee had reached a deal to produce a compromise bill that would give President Obama the ability to negotiate free-trade agreements with the rest of the world. The deeper news, in our view, is that there are still Members of Congress fighting free trade’s progress, even as the clouds darken over the global economy. Consider:

“U.S. manufacturing slowed for the fifth straight month in March amid sluggish growth in the rest of the world economy....On the heels of the Great Recession, what this malaise translates into is hardship for hundreds of millions the world over, not least in the United States.

“The overdue trade bill gives the president trade promotion authority (TPA) that guarantees an up-or-down vote in Congress without amendments. It emerged from hard negotiations between Finance Chairman Orrin Hatch of Utah and the committee’s ranking Democrat, Senator Ron Wyden of Oregon. The bill is also supported by House Ways and Means Chairman Paul Ryan of Wisconsin....

“Some Congressional conservatives resist giving this president ‘too much authority’ over pretty much anything, including free trade, normally a consensus GOP goal. On the Democratic left the opposition includes an array of unions, environmentalists and anti-business activists. Oh, and the man presumed to be the Democrats’ next Senate leader, Chuck Schumer, is in the opposition.

“Senators Hatch and Wyden bent beyond over backwards to mollify these factions....

“If Congress can get the bill completed before its May recess, there is reason to believe the Trans-Pacific Partnership (TPP) would be agreed upon this spring. The countries who’d be party to that agreement make up 40% of the world’s economy....

“With the world’s economies hitting stiff headwinds, more free trade is the one big lever available to produce a lift for consumers, job-seekers and entrepreneurs. Passing Hatch-Wyden-Ryan as early as next week would also lift Congress’ sunken reputation.”

President Obama said in a statement on Thursday: “My top priority in any trade negotiation is expanding opportunity for hardworking Americans. It’s no secret that past trade deals haven’t always lived up to their promise, and that’s why I will only sign my name to an agreement that helps ordinary Americans get ahead. At the same time, at a moment when 95 percent of our potential customers live outside our borders, we must make sure that we, and not countries like China, are writing the rules for the global economy.”

The AFL-CIO announced its opposition, saying it would fight the bill in a series of ads targeting 16 senators and 36 House members.

Sen. Wyden, who really should switch parties, won a number of provisions aimed at ensuring greater transparency in the trade negotiations, as well as a key provision that would allow the Senate to turn-off President Obama’s authority to negotiate if the administration fails to live up to various requirements.

And the bill includes provisions for workers and the environment, as well as stipulating that human rights be a priority of U.S. negotiators.

I support the president on this one.

Europe and Asia

Before I get to Greece, some brief eurozone items on a broader front. Eurostats reported industrial production for the EA-19 rose a solid 1.1% in February over January, up 1.6% year over year, while the final figure on eurozone inflation for March was as first estimated, -0.1% annualized, which was an improvement from February’s -0.3% and January’s -0.6%.

Inflation in Germany was +0.1%, unchanged in France and Italy, -0.8% in Spain, and -1.9% in Greece.

Also in Germany, wages are expected to rise 3.5% this year, which should spur consumer spending that could benefit the eurozone, as well as the rest of the world.

U.K. retail sales were up 3.2% in March, year over year.

But with regards to Greece, as I’ve pointed out before all you have to know is where euro bond yields are to get the lay of the land, if you had been stranded on a desert island for a spell.

I have been very wrong on eurozone bond yields for the better part of a year. I misread the impact of the run-up to the European Central Bank’s version of quantitative easing, which was really for the period September through March 6, the Friday before QE was launched across the pond.

I recently did a “Wall Street History” piece that for traders/investors should be clipped and saved...the tale of interest rates in the eurozone prior to and then in the immediate aftermath of the formal launch of QE.

For example, the 10-year German bund had a yield of 1.57% on 3/31/14. On the Friday before QE, March 6, the yield was 0.39%. This week the German bund hit a record low of 0.07% before closing, Friday, at 0.08%.

Contrast this action with Greece. On 3/31/14, the Greek 10-year had a yield of 6.25%. 3/6/15 it was 9.09%. This week it closed at 12.52%, after hitting 13.20% intraday, the highest since Dec. 2012. [During the height of the 2012 crisis, the Greek 10-year peaked at 44.21%.]

So the above shows you how money has flowed into Germany, and other bonds in euroland, while fleeing Greece over uncertainty created by the new Greek government’s inability to convince its creditors, like the IMF and European Central Bank, that it had a viable reform plan warranting further bailout aid.

But I’ve also written when pointing out the likes of Italy and Spain, eventually investors in their paper will get burned big time. Last week I wrote: “At some point euro bond buyers will get slaughtered.”

I also noted last time that the Italian and Spanish 10-year bonds closed with yields of 1.26% and 1.22%, respectively, 4/10. 

Where did they close this Friday? Try 1.47% for Italy and 1.44% for Spain.

In fact, prior to QE being launched, 3/6/15, the yield on the Italian 10-year was 1.31% and Spain’s 1.29%.

So what good has QE been for these two? The European Central Bank launched an aggressive program of bond-buying across the eurozone and yet yields are rising in Italy and Spain.

Why pick on them? Because this is where, along with Portugal, any contagion from Greece will spread immediately.

[Portugal’s 10-year was 1.74% on 3/6/15...this week it closed at 1.99%.]

You won’t find this stuff anywhere else, at least not in this detail.

It’s also why those who say ‘Greece doesn’t matter’ are full of it. In the long run, should Greece default and/or exit the euro area, it may not matter much, but in the short run it’s bound to convulse the markets and no one knows how serious it could get.

As for the dysfunctional nation where Jason and the Argonauts once plied their trade, Friday, Pierre Moscovici, the European commissioner for economic and financial affairs, told the Financial Times there was no “plan B” regarding a Greece exit from the eurozone (“Grexit”) and he called on Athens to “speed up” concrete technical discussions on a list of reforms that are needed to unlock the remaining 7.2bn euro in bailout loans Greece needs to survive.

Some are already saying it’s too late. Greece was to have convinced eurozone finance ministers ahead of an April 24 meeting in Riga that they had a plan, but this is clearly not going to happen.

Moscovici, however, says May 11 is the real deadline, with another finance ministers meeting scheduled then, though he adds, May 11 would “certainly (be) decisive.”

Earlier this week, IMF managing director Christine Lagarde said she warned Greece she wouldn’t let it skip a debt payment to the IMF; the IMF being owed about $1 billion next month and another nearly $2 billion in June.

Plus, Greece has to figure out how to pay salaries and pensions in these two months, let alone end of April.

Missing a debt payment to the IMF would put Greece in a class with Zimbabwe, Somalia and Sudan. Lagarde said the IMF hasn’t allowed a country to delay a payment, as Greece has inquired, in 30 years.

German Finance Minister Wolfgang Schaeuble, in an interview with Bloomberg on Wednesday, ruled out further concessions in Greece, saying Prime Minister Alexis Tsipras’ government needed to commit to reforms to release the needed aid rather than give his people false hope.

But to further show you how clueless the Greeks are, they are negotiating with Russia for the purchase of missiles for its S-300 anti-missile systems and for their maintenance, according to Russia’s RIA news agency.

NATO member Greece has been in possession of the Russian-made S-300 system since the late 1990s.

Regardless of whether this is all for new missiles or just maintenance, as the Greek defense ministry scrambled to say at week’s end, you might be thinking, ‘Where the hell are they going to get the money?!’

Finally, The Economist had the following thoughts on the eurozone and signs the economy overall, save for Greece, might be recovering.

“After years of bad news it may seem churlish to belittle signs of brighter prospects. Countries like Italy have made welcome efforts at reform; the QE program is useful in bolstering inflation expectations. But neither France, the second-biggest economy in the currency bloc, nor Italy, the third-biggest, is expected to muster growth above 1% this year. And the longer-term prospects for the euro area remain weighed down by excessive debt and low productivity growth, as well as the threat of deflation and disadvantageous demography (Germany’s working-age population will be shrinking as fast as Japan’s by 2020). According to the IMF, the euro area’s potential rate of growth has deteriorated since before the financial crisis of 2007-08 by more than that of other advanced economies. However welcome, an upturn should not be mistaken for a renaissance.”

As for Asia, this week it’s all about China. Talk about a slew of data, most of it bad. To wit:

Exports in March fell 15% year over year vs. expectations of an increase of 12%! As my grandfather used to say, “Gee willickers!” Weak overseas demand was said to be the culprit, as for the first quarter overall, exports were up just 4.7% year over year vs. Q4’s 8.6% increase. That spells slowdown, sports fans.

Imports were down 12.2% yoy in March, the worst since 2009, while industrial production last month rose just 5.6%, the weakest since November 2008, and retail sales increased 10.2% (worse than expected), while fixed asset investment rose 13.5%, also worse than forecast.

Foreign direct investment in March did increase 2.2% yoy, vs. 1.7% for all of 2014, so a very slight improvement, but growth in this figure of 11.3% for the entire first quarter was due to two big one-off deals with Saudi Arabia and France.

So you mix all the above up in a bowl, add some minced rat meat, and what do you get in terms of GDP growth for the first quarter? Try 7%, just as the government forecast, which once again tells you it’s all a bunch of garbage.

Some figures can be trusted in China. Personally, I think the inflation data is accurate and the housing stats are probably pretty good. The rest is all manipulated so you look for trends and what’s important is not whether the Chinese economy is really growing at 7%, but rather this is the slowest figure on GDP since 2009, and that’s not good. Certainly it hasn’t been good for those exporting commodities to China, such as Australia, whose mining sector has been suffering mightily the past few years.

And remember, U.S. farmers sell a lot of product to China, so they don’t want to see the slump continue, but as I note above, the IMF indeed sees a further slowing in economic output in China well into 2016.

But this week the Shanghai stock market rose a whopping 7% and is now at its best level since March 2008 on the Shanghai Composite, up 32% on the year.

Yes, there is bubble talk and after the market closed on Friday, regulators took steps to attempt to prick it, without causing a crash. The government had been making it easier for individual Chinese investors to put their money in the market and of course they’ll lose their shirts.

Meanwhile, the government is working on further stimulus measures for the economy.

Street Bytes

--The markets tanked on Friday, both here and in Europe, on fears this is finally the end for Greece, as well as some poor corporate earnings from the likes of American Express and Honeywell. The Dow Jones’ 279-point loss today erased all the gains on the week and the Dow finished down 1.3% to 17826, while the S&P 500 lost 1% and Nasdaq 1.3%. The latter two were just shy of their all-time highs before pulling back.

The German DAX was down 5.5% on the week, but is still up 19.2% year to date (local currency).

--U.S. Treasury Yields

6-mo. 0.07% 2-yr. 0.51% 10-yr. 1.87% 30-yr. 2.52%

--I’ve been saying the budget deficit this year (the fiscal year ending Sept. 30) will be higher than expected and for the first six months (going back to Oct. 1), the Treasury Dept. announced it had run a deficit of $439 billion, up from $413 billion through the first half of the 2014 fiscal year. This is far from worrying in the short term, but the fact is Congress and the White House have begun relaxing the agreed upon spending cuts – the sequester – put in place four years ago, which worked beautifully, at least some of us think so (if you lost your job as a result you’d undoubtedly disagree). Federal receipts rose 7% to $1.42 trillion during the first half of the fiscal year from the prior period, but government outlays rose 7% to $1.86 trillion.

--The China-led Asian Infrastructure Investment Bank (AIIB) officially approved 57 nations as prospective founding members, including Sweden, Poland and Israel among the last to be included.

The AIIB is the first Asian bank to have a new international banking system independent from that set up by Bretton Woods.

Others that were included, much to the dismay of the U.S., were France, Germany, Italy, Britain, and Australia.

The U.S. and Japan are the two major nations to hold off for now.

Taiwan was rejected over how it would be identified, but they could be accepted later.

Canada has yet to join but is looking into it.

The chief concern of the U.S. is that the bank will earmark funds that benefit Chinese projects, in one form or another, at the expense of projects in some of the other countries. [I admit to not having studied the topic much, but let’s face it, boys and girls...China only does what is good for Mao, err, Xi....who is Mao II.]

--Japan has overtaken China as the largest holder of U.S. Treasurys for the first time since the 2008 financial crisis. According to the latest data released by the Treasury Dept. on Wednesday, private investors and official institutions in Japan owned $1.2244 trillion of U.S. government securities at the end of February, compared with $1.2237 held by China, which was a slight drop from a month earlier.

Over the past year, Japan has boosted its holdings by a net $13.6 billion, while China’s holdings dropped by $49.2 billion.

But as I’ve noted in some of my “Wall Street History” pieces on the topic, China also may be parking some of its holdings in places such as the U.K. and Belgium.

Bottom line, Japan’s purchases are offsetting any concerns over the decline in China’s purchases.

--JPMorgan Chase beat on earnings, with net income up 12% to $5.9 billion year-on-year, while revenue rose 4 percent.

CEO Jamie Dimon said in a statement: “We have an outstanding franchise which is getting safer and stronger, and is gaining market share over time.”

As the Financial Times noted, it was only the second time in seven quarters JPM exceeded estimates, weighed down by ongoing legal and regulatory expenses. [$30 billion over the past several years.]

Trading revenues were up 9 percent year on year, with a 22 percent increase in equities.

--Wells Fargo & Co. also beat expectations on earnings but fell short on revenues. Net income was down from $5.6 billion to $5.5bn.

--Bank of America missed on earnings, even as its legal expenses fell sharply from the prior year. The bank’s profit of $3.36 billion, or 27 cents a share, was less than the 29 cents analysts expected, while revenue fell 6 percent.

BofA did fund $16.9 billion in new mortgages and home-equity loans, a jump of 56 percent from the same period a year ago.

--Then there was Goldman Sachs. Prior to the financial crisis, Goldman always blew away analysts’ earnings estimates, but it’s been a rocky road the past few years. Thursday, though, the investment bank reported earnings of $5.94 per share that blew away estimates of $4.20. Net income was $2.8 billion. 

Revenue handily beat as well, with overall trading revenues up 23 percent, the biggest quarter since the start of 2012 and the first time revenues rose in the first quarter in six years.

Equities trading jumped 46 percent, while revenues in fixed income, currencies and commodities rose 10 percent (vs. 9 percent at JPMorgan Chase, and a 7 percent decline at BofA).

But Goldman shares were flat after a very solid run-up ahead of the news.

--Citigroup posted first-quarter net income of $4.8 billion, handily beating expectations, though revenues were down 2 percent from a year earlier.

--Delta Airlines reported hefty profit gains in the first quarter to $746 million from $213 million a year ago, marking the best first quarter in its history. Revenue rose 9 percent.

But the airline said it would be cutting overseas capacity due to the strong dollar and lower travel demand from the likes of Japan, Brazil, and the Middle East.

--Google is facing antitrust charges from the European Commission over not just its dominance in search, but its use of search to favor one company over another depending on the amount of advertising with Google. That’s just one issue. Google is also accused of highlighting its own shopping services in response to search queries, what is called “search bias,” while Google currently has a 90 percent market share in the European Union in terms of search.

The antitrust chief, Margreth Vestager, added the commission is also looking into accusations Google demands that phone makers using Android place applications like YouTube in prominent positions on mobile devices.

Google faces a huge fine and could be forced to allow smaller players to gain greater prominence. Germany, in particular, is upset its online mapping, travel services and shopping sites don’t have a chance against the giant.

The EU’s competition commissioner has the power to levy a fine of as much as $6.4 billion, or higher, were Google not to rebut any formal charges.

Microsoft was once forced to pay a fine of about $2 billion but over a decade.

--Shares in Netflix Inc. soared nearly 20% on Thursday as the video service added a better-than-expected 4.88 million streaming subscribers in the first quarter, owing to aggressive overseas expansion. Shares are up about 50% over the past three months.

For the current quarter, Netflix expects to add 600,000 customers in the U.S. and 1.9 million abroad, as the company looks to complete its overseas expansion by the end of 2016. This past quarter it added service to Australia, New Zealand and Cuba.

--A research firm, Slice Intelligence, estimates Apple had preorders for the Apple Watch on the first day it was available of nearly 1 million, with most going for the cheapest model; the Apple Watch Sport, which goes for $382.

Shipments start end of next week, but many models won’t be available until the summer. The company has yet to release any sales information of its own.

Meanwhile, Samsung said its new Galaxy S6 and S6 Edge smartphones, which went on sale on April 10, had pre-orders of 20 million, according to a report in the Korea Times, which would easily exceed the pace of any previous Galaxy phone launch.

--Intel reported revenues that were flat in the first quarter, with earnings in line with expectations after the chipmaker had previously warned of a slow start to 2015. Intel, like others, is stressing revenues from the “internet of things,” as opposed to traditional “embedded” systems in retail, transport, industrial and domestic products. The ‘IoT’ is from connected devices, like from a “smart home,” a rapidly growing market and critical for Intel as its desktop PC sales volumes fell by 16 percent in the first quarter vs. a year ago.

--Nokia Oyj agreed to buy Alcatel-Lucent SA in an all-stock deal worth $16.6 billion (I think, it’s rather confusing) to create the world’s largest supplier of equipment that powers mobile-phone networks; thus surpassing Ericsson and Huawei Technologies Co.

The combined company will be called Nokia and if completed would be the biggest in the industry since at least 1999, when Lucent bought Ascend Communications for about $21 billion.

The deal that brought Lucent and Alcatel together in 2006 was worth $13.4 billion, according to Bloomberg.

Nokia and Alcatel combined have more than 110,000 workers and no doubt there will be layoffs. France, in particular, is worried about the 7,000 Alcatel workers in the country and keeping a significant French influence in the new company. The current Alcatel CEO, Michel Combes, did a good job keeping Alcatel-Lucent alive, but Nokia execs would be in charge now.

Ericsson currently has the largest market share among wireless-network gear manufacturers at 25.7 percent, according to IDC, with Huawei at 23.2 percent, Nokia at 15.8 and Alcatel at 11.4 percent.

--OPEC production climbed the most in almost four years in March to 31.02 million barrels a day, according to the International Energy Agency, up 890,000 bd. At the same time, the IEA cut its prediction for U.S. and Canadian supply growth in the second half of the year and crude continued to rally, with West Texas Intermediate finishing the week at $55.74.

Global oil demand will increase by 1.1 mbd in 2015 to an average 93.6 million, or slightly more than projected in the IEA’s report last month.

Saudi production was 10.1 mbd in March, the highest since September 2013 and near record levels, the IEA said, with exports rising 600,000 barrels a day to 7.4 million, most of the increase going to Asia.

Iran’s crude exports rose to 1.27 mbd last month, the highest in a year, with rising purchases from China.

U.S. crude oil production has risen from five million barrels a day to 9.3 million bd, with the U.S. surge accounting for virtually all the growth in global output, but now it has clearly leveled off. Inventories are also down.

So I’ve been writing about all the layoffs in the energy sector, 100,000 and counting, and this passage from an article by Dan Molinski in the Wall Street Journal kind of sums up the impact on the economy, especially in places like North Dakota and Texas.

“According to the Bureau of Labor Statistics, full-time ‘construction laborers’ earned an average of $605 a week in 2014, while ‘derrick, rotary drill, and service operators, oil, gas and mining’ earned almost twice as much, or $1,187 a week. The average pay at a well site is about $20 an hour, industry experts say, but overtime and hazard pay often put take-home salaries close to $100,000 a year.”

If production has peaked, at least in the short term, this augurs further job losses, though an increase in the oil price (beyond the recent rally) could reverse the now dire trend.

The closely watched count of rigs actively drilling new oil wells is at its lowest level since 2010, though advances in technology, including the shale revolution, have meant fewer rigs can produce the same amount of oil.

--So in keeping with all the above, Schlumberger Ltd., the largest oil-field service company in the world, announced it would cut an additional 11,000 workers, bringing the firm’s total layoffs to 20,000. The company, with joint headquarters in Houston and Paris, had previously announced 9,000 cuts in January.

At the same time, Schlumberger said it would cut cap-ex spending from $4 billion in 2014 to $2.5 billion this year. Revenue declined nearly 9 percent in the first quarter.

--Nestle SA reported a lower-than-expected increase in sales of just 0.5% in the first quarter. Efforts to build sales in developing markets such as China and the Philippines have not panned out as expected.

--UnitedHealth Group Inc. reported a very healthy 29% increase in quarterly earnings and raised its full-year guidance. Revenue in Q1 rose 13%.

--American Express beat on the bottom line in the first quarter by a healthy margin, but sales were less than expected and down 2.7% vs. the same period in 2014, though up 1% when excluding the impact of currency conversions. CEO Kenneth Chenault said 2015 earnings will be “flat to modestly down year over year.” The company’s long-term revenue growth target is 8%.  The shares tanked on Friday.

--General Motors Co. is looking to spend as much as $1 billion to renovate its Tech Center campus in Warren, Michigan, north of Detroit, which sounds like a ton but represents the cost to build a factory or new line of autos. GM’s plans would be to build some new facilities in Warren to house 2,500 new hires on the tech side, such as in software development.

--The unemployment rate in Australia fell to 6.1% in March.

--The Southern California housing market perked up in March, with the median price - $425,000 – up 2.4% over February after hovering around $415,000 since May (though year over year unchanged). Home sales surged 11% in the six-county region that is often a bellwether for the country in terms of divining trends. The 11% increase was only the third gain in 18 months, according to real estate firm CoreLogic and the Los Angeles Times.

--I did a piece for my “Wall Street History” link on steel production and in light of some of the Fed talk this week and thoughts of a disappointing start to 2015 in terms of the economy, it’s worth glancing at. The trends in steel aren’t real good.

--Bloomberg’s terminals went down around the world this morning, an “unprecedented” outage that forced the postponement of a U.K. Treasury auction and affected thousands of investors.

The outage corresponded with the closing of trading in China and the opening in Europe, though most terminals were back up a little over two hours later.

Bloomberg said the failure was caused by a combination of hardware and software failures, which is kind of bad because computers are comprised of hardware and software. [Just wanted to show you my tech expertise.]

Actually, as I go to post, there is a story that the outage was caused by an IT worker in London spilling his can of soda on some vital equipment.

--According to the Fiscal Policy Institute, average hourly private-sector wages in the first two months of this year rose by 4.4% in New York – to $34.06 – the strongest increase since the recession and twice the national average. [Aaron Elstein / Crain’s New York Business]

--David Lazarus of the Los Angeles Times had a piece on the Ask.com toolbar. As one West Hollywood resident told him, “It’s like a bad houseguest. It will not leave.” This fellow has paid $450 to tech troubleshooters to help him delete Ask.com’s software from his system and he’s still not rid of it.

One of the issues is that when you update your Java software, you may also be installing the toolbar if you don’t uncheck a box in the update agreement. Just uninstalling the toolbar doesn’t help.

--According to the nonpartisan Tax Policy Center, the top 20% of taxpayers account for 84% of total income tax.

Foreign Affairs

Iran: Iranian President Hassan Rouhani said Iran would only accept a deal on its contested nuclear program if world powers simultaneously lifted all sanctions imposed on it.

“If there is no end to sanctions, there will not be an agreement,” Rouhani said in a televised speech, echoing prior remarks by Supreme Leader Ayatollah Ali Khamenei.

“The end of these negotiations and a signed deal must include a declaration of canceling the oppressive sanctions on the great nation of Iran,” said Rouhani.

The comments came a day after President Obama was forced to compromise with Congress and give them a say in any final accord that is supposed to be reached by June 30, following agreement on a tentative deal April 2 in Switzerland. Discussions are to resume April 21.

Rouhani said that in terms of the congressional agreement:

“What the U.S. Senate, Congress and others say is not our problem. We want mutual respect... We are in talks with the major powers and not with Congress....

“At the end of these negotiations and at the time of signing the deal, there should be the announcement of ending and annulling the unfair sanctions against the great Iranian people.”

Sec. of State John Kerry said, “Looming large is the challenge of finishing the negotiations with Iran over the course of the next two and a half months.”

The compromise worked up in Congress, passed 19-0 by the Senate Foreign Relations Committee (with full Senate and House approval to come) essentially sets up a future vote on lifting congressionally imposed sanctions following a 30-day review period once a final accord is reached. The review period had previously been listed as 60 days. If a final accord is not submitted to Congress by July 9, the review period reverts to 60 days.

But if the Senate were to reject a final agreement, Obama could veto the legislation – and it would only take 34 senators to sustain it.

Meanwhile, the International Atomic Energy Agency held scheduled talks in Tehran to address technical issues and once again failed to resolve long-standing questions over Iran’s alleged past efforts to develop nuclear weapons.

Sen. Bob Corker / Washington Post

“Any deal on Iran’s nuclear program would affect generations to come, which is why it was troubling to watch President Obama and his deputies try to shut out the public and Congress from having a say in this consequential decision.

“Time and again, the administration suggested that a vote in Congress would scuttle any nuclear agreement and leave war with Iran as the only alternative.

“This week, Democrats and Republicans pushed back, forcing the administration to bow to the inevitable role of Congress in this process. With a unanimous vote, the Senate Foreign Relations Committee affirmed that the American people – through their elected representatives – must be given a voice on what is one of the greatest geopolitical issues of our time.

“The Iran Nuclear Agreement Review Act will allow Congress to weigh in after an agreement is reached to ensure that any deal with Iran is truly strong enough to eliminate the threat of the regime’s nuclear program.

“This bipartisan bill accomplishes three things.

“First, it will ensure transparency. The bill requires the president to submit to Congress the details and all related documents regarding any final deal with Iran. The administration has confirmed that it will seek a resolution at the U.N. Security Council endorsing a final agreement. If the Security Council can pass judgment on the validity of an agreement, then surely the U.S. Congress should do so as well.

“Second, it will provide oversight and allow lawmakers time to review all parts of an agreement before the president could suspend the sanctions on Iran that Congress put in place.

“Beginning in 2010, congressional Democrats and Republicans overwhelmingly passed a series of strong sanctions that crushed the Iranian economy and eventually brought Iran to the negotiating table. These are many of the sanctions that Iran desperately wants lifted.

“Our bill will make sure the president could not waive these sanctions before Congress has the chance to first review a deal and, if it chooses, vote on whether to approve or disapprove it. The bill gives Congress up to 52 days to act. If lawmakers vote to disapprove a final deal, the president would be prohibited from suspending the congressionally mandated sanctions.

“Third, our legislation helps hold Iran accountable. The president will be required to certify to Congress every 90 days that Iran is complying with the agreement. Should Iran violate the terms, the bill enables Congress to snap its sanctions back into place....

“Our legislation neither prejudges nor prevents the president from reaching a deal with Iran that is strong, verifiable and enforceable.

“We have worked hard to keep our bill bipartisan and focused on the appropriate role for Congress – passing judgment on suspending the sanctions that Congress created. The president would retain authority over U.S. sanctions implemented through executive order, allowing the administration to implement any final agreement in phases, as it has insisted, while assessing Iranian compliance and giving Congress time to consider the agreement.

“It is clear that Iran and the United States have different views of what the political framework entails, particularly regarding the pace of the lifting of economic sanctions on Iran. As the major world powers work toward a final agreement, we must remain clear-eyed regarding Iran’s continued resistance to concessions, long history of covert nuclear weapons-related activities, support of terrorism and role in destabilizing the region. Now is the time to tie any future relief of statutory sanctions with a formal process for Congress to assess a final accord.”

James A. Baker III / Wall Street Journal

“Iranian leaders quickly disputed key points about the White House’s description of the terms of the agreement. Among them was Iran’s demand that all sanctions be removed once a final deal is signed. That is a far cry from the U.S. understanding that sanctions will only be removed over time, as Iran meets its obligations. This different Iranian position may have been aimed at Iran’s domestic audience. But if Iran holds to it, there should be no final agreement.

“Arms-control negotiations are rarely easy, and there remain serious questions about more than the phasing out of sanctions. These include verification mechanisms (including access to Iran’s military bases for inspections); the ‘snapback’ provisions for reapplying sanctions; and Iran’s refusal so far to provide historical information about its nuclear-enrichment program so that there is a baseline against which to measure any future enrichment. The proposed snapback and verification provisions, while still being negotiated, look like they will be particularly bureaucratic and cumbersome....

“As things now stand, however, if in the end there is no final agreement – and if the U.S. is seen to be the reason why – we could be in a worse position than we are today, because the United Nations and European Union sanctions would likely be watered down or dropped. The U.S. would then be left with the option of only unilateral sanctions, which are far less effective. So it is critical that the U.S. position on these issues be supported by most, if not all, of the other members of the P5+1 group....

“Our P5+1 partners should understand that if we can’t trust Iran to stick to its promises during negotiations, we cannot trust that it won’t resume its nuclear-weapons program after a final deal is reached.

“Only after we have the necessary support from the P5+1 should we resume our discussions with Iran. And then, only after the Iranians have been told in no uncertain terms that we have reasonable specific demands they must meet. Let Iran and the world know what those demands are. If Iran balks at such an arrangement, then it will be that country’s fault that the talks broke down.

“On the other hand, if the U.S. is viewed as cratering the deal because of insufficient domestic support, it will be much easier for our P5+1 partners to diminish or drop sanctions against Iran. We should recognize that some of those countries are eager to resume their business relations there, just as Russia has actually done in recent days by agreeing to the sale of a sophisticated air-defense system to Iran.”

Editorial / Wall Street Journal

“President Obama says he wants Congress to play a role in approving a nuclear deal with Iran, but his every action suggests the opposite. After months of resistance, the White House said Tuesday the president would finally sign a bill requiring a Senate vote on any deal – and why not since it still gives him nearly a free hand.

“Modern presidents have typically sought a Congressional majority vote, and usually a two-thirds majority, to ratify a major nuclear agreement. Mr. Obama has maneuvered to make Congress irrelevant, though bipartisan majorities passed the economic sanctions that even he now concedes drove Iran to the negotiating table.

“(On) Tuesday afternoon the Senate Foreign Relations Committee unanimously passed a measure that authorizes Congress to vote on an Iran deal within 30 days of Mr. Obama submitting it for review....

“(The) White House conceded when passage with a veto-proof majority seemed inevitable. The bill will now pass easily on the floor, and if Mr. Obama’s follows his form, he will soon talk about the bill as if it was his idea.

“Mr. Obama can still do whatever he wants on Iran as long as he maintains Democratic support. A majority could offer a resolution of disapproval, but that could be filibustered by Democrats and vetoed by the president. As few as 41 Senate Democrats could thus vote to prevent it from ever getting to President Obama’s desk – and 34 could sustain a veto. Mr. Obama could then declare that Congress had its say and ‘approved’ the Iran deal even if a majority in the House and Senate voted to oppose it.

“Foreign Relations Chairman Bob Corker deserves credit for trying, but in the end he had to agree to Democratic changes watering down the measure if he wanted 67 votes to override an Obama veto....

“His latest concessions shorten the review period to 30 days, which Mr. Obama wanted, perhaps to mollify the mullahs in Tehran who want sanctions lifted immediately. After 52 days Mr. Obama could unilaterally ease sanctions without Congressional approval. Mr. Obama has said that under the ‘framework’ accord sanctions relief is intended to be gradual. But don’t be surprised if his final concession to Ayatollah Khamenei is to lift sanctions after 52 days....

“The case for the Corker bill is that at least it guarantees some debate and a vote in Congress on an Iran deal. Mr. Obama can probably do what he wants anyway, but the Iranians are on notice that the United States isn’t run by a single Supreme Leader.”

Benny Avni / New York Post

“In pushing for a deal to stop Iran from getting nukes, Washington hopes to reform Iran so it will ‘take its rightful place in the community of nations.’

“Instead, an emboldened Tehran is fomenting violence – and the Mideast is headed for a major explosion.

“Here’s the state of the region, after 14 months of negotiations:

“In Yemen, all hell is breaking loose. Iran’s allies, the Houthis, have chased away the Western-backed elected government (as well as all Americans stationed in the country). The Saudis are now deep in the battle, at least from the air, and with supporting roles from their own allies. Both Iran and the Saudis, meanwhile, now have warships off Yemen’s coast....

“In Syria, there’s no end in sight to the killing that’s already claimed a quarter million lives. Now, even Palestinians in camps there, particularly in Yarmouk, have been roped into the conflict. As the loyalties of the camp’s own militants split, civilians are killed by the hundreds with ISIS on one side and Assad on the other.

“No one wants ISIS to prevail, of course, but if it fails, Iran will run Syria, with dire consequences for the region.

“In Iraq, anti-ISIS forces are playing whack-a-mole. They recently made great strides toward recapturing Tikrit, but have been losing ground in the Anbar region. Reports this week had the key city of Ramadi, 70 miles from Baghdad, on the brink of falling.

“These relatively confined hot wars are just the start. Iranian arms are flowing to Iraq, Lebanon, the West Bank, Gaza and as far as North Africa. According to the Israelis, Iran this month boosted weapons deliveries to Hizbullah and Hamas, raising new fears of a coming war there....

“In Iran itself, one of our ‘allies’ in the talks meant to curb the mullahs’ nuke lust, China, now plans to build five new reactors in Iran. That’s after Russia announced this week its intention to send the mullahs S-300 surface-to-air missiles, violating its previous vows not to do so.

“And with that, one option for the West to stop Iran’s bomb-acquisition program – hitting its nuclear facilities militarily – will become more risky and costly....

“The see-no-evil deference paid by the Obama folks in the hope of reaching an agreement and maybe converting Iran’s mullahs into peace-lovers has only left the region more volatile.

“Far from helping to pacify the region, the talks in Switzerland have only escalated wars there. Whether we reach a deal on Iran’s nukes or not, they have only helped Iran further its own goals – which fly in the face of our own.”

Iraq / Syria / ISIS: The Chairman of the Joint Chiefs of Staff, Gen. Martin Dempsey, said U.S. and Iraqi forces were working hard to maintain control of Ramadi as ISIS forces sought to take it over, but he added Ramadi wasn’t strategically that important should the Iraqis not be able to hold onto it.

“The city itself is not symbolic in any way,” Dempsey said Thursday at the Pentagon, which was a stupid statement to make as up to 150,000 residents of Ramadi, the provincial capital of Anbar province, became instant refugees in fleeing the city.

Dempsey, though, said the U.S. and Iraqi forces were emphasizing the city of Beiji, north of Baghdad, where ISIS has been attacking a strategic oil refinery. The U.S. is supporting Iraqi troops with airstrikes, intelligence, surveillance and other support, with Dempsey saying, “Once the Iraqis have full control of Beiji, they will have control of their oil infrastructure, both north and south and deny [ISIS] the ability to generate revenue through oil.” [Gordon Lubold / Defense One]

Iraqi Prime Minister Haider al-Abadi, in Washington for talks with President Obama and other U.S. officials, tried to convince the White House he was concerned over Iran’s involvement in Iraq, specifically the elite Quds forces under the control of Iranian Maj. Gen. Soleimani. Abadi also said he had “zero tolerance” for abuses perpetrated by Shia militants in Tikrit once ISIS was forced out.

Abadi then said Saudi Arabia’s airstrike campaign against the Houthis in Yemen could trigger a broader sectarian war, as he played all sides of Iran’s influence in the region overall.

Yemen / Saudi Arabia: U.S. officials have been increasing their support of Saudi Arabia’s air campaign in Yemen, but the widespread bombing of Yemeni villages and towns since March 26 has not only failed to dislodge the Iran-backed Houthi rebels, it has led to significant civilian casualties; the U.N. announcing at least 364 civilians having been killed thus far. The World Food Program said on Thursday it would distribute food to 105,000 displaced people around Aden, but that conditions were so unsafe it was “struggling to reach (them).”

One other result is Al Qaeda in the Arabian Peninsula (AQAP) has been expanding its reach and on Thursday gained control of an airbase and other key facilities, including an oil export terminal, at an Arabian Sea port in southern Yemen. This comes as the Saudis are not targeting al-Qaeda fighters.

One U.S. official, speaking on condition of anonymity, told the Los Angeles Times that the air war was a “disaster,” saying the Saudis don’t have a “realistic endgame” for the bombing campaign.

Gen. Martin Dempsey said the Houthis are looking to restore an ancient empire “that included all of Yemen and parts of southern Saudi Arabia.”

“The Saudis are right to be concerned,” he said.

There was a positive development this week in Yemen as a key leader of AQAP, Ibrahim Suleiman Rubaish, was killed in an airstrike. Rubaish was a former inmate at the U.S. military prison at Guantanamo Bay. Details on how the strike went down were not forthcoming.

Israel: A Bloomberg News poll finds that when it comes to Israel, Americans are increasingly partisan. For example, by a ratio of 2-to-1, Republicans thought the U.S. should stand squarely behind Israel even if its positions diverge considerably from American interests. But the ratio was the reverse for Democrats.

Republicans also said they had more sympathetic feelings towards Benjamin Netanyahu over President Obama by a 67 to 16 margin. Democrats felt more allegiance to Obama, though, by 76 percent to 9 percent.

Democrats were also more optimistic than pessimistic, by a nearly 3-to-1 ratio, when it comes to a tentative deal with Iran, while Republicans were more pessimistic than optimistic by a 2-to-1 margin.

Russia / Ukraine: President Vladimir Putin held his annual marathon call-in show on Thursday and the state of the Russian economy took precedence over the Ukraine crisis.

Among the messages Putin wanted to get across were that Russia has weathered the worst stage of the economic crisis, “Stalinism was ugly but cannot be compared to Nazism, there will be no war over Ukraine and there are no Russian troops there.” [Moscow Times]

Putin repeatedly said the United States plays a negative role in major world conflicts, including in the Middle East. In attempting to explain Russia’s decision to supply S-300 surface-to-air missiles to Iran, Putin said that the U.S. still sends far more weapons to the region.

Putin alleges it was OK to begin shipping the S-300 – which the U.S. and Israel are livid about, but can’t do anything to stop – because a preliminary agreement on a final nuclear deal is on track. The delivery of the anti-missile rocket system to Iran had been banned by Russia itself under pressure from the West; specifically, UN Security Council Resolution 1929, “which banned supply to Iran of conventional weapons including missiles, tanks, attack helicopters, warplanes and ships.” [Los Angeles Times]

Russia also announced it was supplying Iran with grain, equipment and construction materials in exchange for crude oil under a barter deal. Iran is the third-largest buyer of Russian wheat and the barter exchange has been in the works for more than year. The Kremlin is clearly looking to get a jump on others in resuming trade with Tehran once a deal on the nuke program is signed.

Editorial / Wall Street Journal

“Vladimir Putin blew a geopolitical raspberry at the Obama administration on Monday by authorizing the sale of Russia’s S-300 missile system to Iran. The Kremlin is offering the mullahs an air-defense capability so sophisticated that it would render Iran’s nuclear installations far more difficult and costly to attack should Tehran seek to build a bomb.

“Feeling better about that Iranian nuclear deal now?....

“So much for the White House hope that the West could cordon off Russia’s aggression against Ukraine while working with Mr. Putin on other matters. Russia and the West could disagree about Crimea and eastern Ukraine, the thinking went, but Washington could solicit the Kremlin’s cooperation on the Iranian nuclear crisis....

“Now Mr. Obama wants to delegate responsibility for enforcing his nuclear deal with Iran to the United Nations, which means that the Russians will have a say – and a veto – there, too. Think of this missile sale as a taste of what’s to come.”

In Ukraine, at least six Ukrainian government soldiers were killed in one 24-hour period this week and army positions were fired on 26 times near the rebel stronghold of Donetsk.

On Monday, Ukraine, Russia, Germany and France held talks, calling for the withdrawal of more weapons from the frontline.

German Foreign Minister Frank-Walter Steinmeier said the discussions were “in parts very controversial...the differences of opinion between Kiev and Moscow became clear once again.”

China: Satellite images show China has made rapid progress in building an airstrip suitable for military use in contested territory in the South China Sea, specifically the Spratly Islands, with plans in the works for another airstrip on manmade land, as reported by IHS Jane’s Defence Weekly. China appears to be trying to combine two of the land masses in the area that would allow for a very extensive airstrip.

Senator John McCain called on the Obama administration to act on plans to move more military resources into the region.

“When any nation fills in 600 acres of land and builds runways and most likely is putting in other kinds of military capabilities in what is international waters, it is clearly a threat to where the world’s economy is going, has gone, and will remain for the foreseeable future,” McCain told a briefing in Congress. [South China Morning Post]

On the economic front, aside from the data released this week (as covered above), Premier Li Keqiang “lashed out at officials for holding up reforms amid an economic slowdown.

“In an outburst made public late on Wednesday, Li used a State Council meeting earlier in the day to complain that a few ministerial section chiefs were stalling key decisions despite a consensus among ministers.

“The comments underscored his frustration at the slow roll-out of his economic policies...

“ ‘If the central government takes more than a year of deliberation to come up with policies, and they then have to go through another year of red tape – is that some kind of joke?’ Li was quoted as saying ‘sternly’ in a statement posted on a government website.” [South China Morning Post]

A veteran journalist, Gao Yu, known for hard-hitting reports on elite politics, has been sentenced to seven years in prison after she was convicted of leaking state secrets. Gao has been detained since April 24 of last year.

As the South China Morning Post reported, “People familiar with Gao speculate that the authorities have long held a grudge against her for her political writings and wanted to punish her.”

Gao had served seven years in prison previously for her reporting on the Tiananmen Square crackdown in 1989.

Amnesty International condemned the latest sentence: “This deplorable sentence against Gao Yu is nothing more than blatant political persecution by the Chinese authorities.”

Separately, the government’s Cyberspace Administration of China publicly blasted popular online news service Sina for spreading “false information” and “violating morality,” according to a statement from the CAC.

Sina is listed on Nasdaq and has often come under fire from Chinese authorities, with several high-profile bloggers on its Twitter-like Weibo service having had their accounts shut down.

According to a World Press Freedom Index 2015, Reporters Without Borders ranked China 176th out of 180 countries. The only countries worse are Syria, Turkmenistan, North Korea and Eritrea. [Jamil Anderlini / Financial Times]

Lebanon: Former Prime Minister Saad Hariri is visiting Washington this coming week for talks with Sec. of State Kerry, among others, as he seeks Washington’s support of his country.

Hariri has been vehemently backing the Saudi campaign in Yemen, while Hizbullah leader, Sheikh Nasrallah, has denounced Riyadh for spearheading the offensive, which is further fueling tensions in Lebanon.

Nasrallah addressed a Hizbullah rally in Beirut on Friday to show solidarity with the Yemeni people against the military intervention.

Turkey: Last Sunday, Pope Francis made a highly controversial comment at a Mass at St. Peter’s, attended by the Armenian president and the head of the Armenian Apostolic Church. The Pope said that humanity had lived through “three massive and unprecedented tragedies” in the last century.

“The first, which is widely considered the first genocide of the 20th Century, struck your own Armenian people,” he said. Francis also referred to the crimes “perpetrated by Nazism and Stalinism.”

Well, this didn’t go down well with Turkish President Erdogan, who had expressed condolences last year to the victims of the killings, in a step towards reconciliation, but said when it came to using the term ‘genocide,’ political and religious leaders playing the role of historian resulted in “delirium, not fact.”

“Hereby, I want to repeat our call to establish a joint commission of historians and stress we are ready to open our archives. I want to warn the Pope to not repeat this mistake and condemn him.”

The issue is particularly sensitive today because this coming week marks the 100th anniversary of the killings. Turkey claims many of the dead were killed in clashes during World War One.

Armenia says up to 1.5 million people died during the deportation to barren desert regions where they died of starvation.

Britain: National elections are around the corner, May 7, with an ICM poll on Monday having the Tories (Conservatives) on top at 39%, with Labour at 33%; the Tories largest poll lead over Labour in three years. Prime Minister David Cameron’s approval rating, 52%, is at its highest level in five years. Britain’s strong economic performance, especially relative to the eurozone, is finally paying off.

Nigel Farage’s UK Independence Party has fallen all the way back to 7%, same as the Greens.

The Liberal Democrats, Cameron’s coalition partner, are at 8%.

Other polls, though, have Labour and the Conservatives tied.

France: Jean-Marie Le Pen, founder of the National Front party, succumbed to pressure from his daughter, Marine Le Pen, and announced he was pulling out of regional elections. Jean-Marie’s granddaughter, rising star Marion Le Pen, was assured of backing at a meeting on Friday to replace him in the southern region in the December regional elections.

Cuba: President Obama decided to lift the U.S. designation of Cuba as a state sponsor of terrorism; a long-awaited decision that removes an impediment to establishment of full diplomatic relations between the two countries.

Congress has 45 days to consider Cuba’s removal from the list before it becomes effective, but to block it would require separate legislation that is not thought to be in the cards.

Cuba’s removal would leave only three countries on the list – Iran, Sudan and Syria. Cuba was first put on in 1982.

Some in Congress, such as senators Marco Rubio and Robert Menendez, argue Cuba’s refusal to extradite fugitives who reside there should constitute an act of international terrorism.

One of those in question, Joanne Chesimard, a black militant who killed a New Jersey State trooper in 1973, could be sent back.

Editorial / Wall Street Journal

“Mr. Obama’s Cuban diplomacy has been one unreciprocated offering after another, from December’s pledge to normalize relations to the global legitimacy he bestowed by meeting Cuba’s dictator to this free terror pass. So far Raul (Castro) has returned the favors by praising Mr. Obama personally while condemning U.S. foreign policy.”

Obama and Raul Castro met in the first face-to-face discussion between the leaders of the two countries in a half-century last weekend in Panama at the Summit of the Americas. Obama called it a “historic meeting.” Your editor thought, ‘whatever.’

Random Musings

--Hillary Clinton formally launched her campaign for president on Sunday in a video, then hopped in a van and headed to Iowa, via Chipotle.

“I’m running for president. Everyday Americans need a champion, and I want to be that champion,” she said in a Twitter message.

In her video, Clinton says, “Americans have fought way back from tough economic times. But the deck is still stacked in favor of those at the top. I’m hitting the road to earn your vote, because it’s your time. And I hope you’ll join me on this journey.”

Personally, I don’t have any time for a journey with Hillary.

She also said nothing of note in her swing through Iowa, which some say was by design, because she was there ‘to listen to everyday people.’ But then her imperial self was revealed yet again in dissing reporters who dared to ask simple questions.

Editorial / Washington Post

“Hillary Rodham Clinton announced her candidacy for president Sunday, entering the race with universal name recognition, undisputed smarts and a record of hard work and competence. Nonetheless, she knows as well as anyone that her road to the White House will not be easy.

“In 2016, Democrats will have controlled the presidency for eight years, and many voters will think it’s time for a change. Should Ms. Clinton win her party’s nomination, as now seems likely, she will have to promise such change, differentiating herself from President Obama even though she served in his administration – and doing so without alienating his admirers. Al Gore provided a vivid demonstration of how to fail at this balancing act in 2000, even when the departing president was relatively popular.

“To pull it off, Ms. Clinton will have to articulate a program that shows she is not just a capable and dedicated administrator but also a leader with a clear governing philosophy that fits the times. In a video released Sunday, Ms. Clinton promised a forward-looking agenda, saying that she would be a champion for families struggling to get by. But she gave no indication of how she would change an economy that she said, echoing Sen. Elizabeth Warren, is stacked against ordinary Americans.

“Adding substance to the slogans will prove challenging for several reasons. Democrats have implemented much of their agenda during the Obama years, most notably on health-care coverage, financial regulation, gay rights and climate change, leaving the party’s policy shelf a little bare. Entrenching and defending the gains against attempted Republican rollback will be an important mission of Ms. Clinton’s presidency, if she is elected, but no one gets elected by promising to play defense.”

Maureen Dowd / New York Times

“Hillary Clinton has always tried to be more like the Democratic president she lived with in the White House, to figure out how he spins the magic. ‘I never realized how good Bill was at this until I tried to do it,’ she once told her adviser, Harold Ickes. But she ends up being compared with the Republican president she investigated as a young lawyer for the House Judiciary’s Watergate investigation.

“Her paranoia, secrecy, scandals and disappearing act with emails from her time as secretary of state have inspired a cascade of comparisons with Nixon.

“Pat Buchanan, a former Nixon adviser, bluntly told Jason Zengerle recently in New York magazine: ‘She reminds me of Nixon’....

“Democratic strategists and advisers told the Washington Post’s Anne Gearan and Dan Balz that ‘the go-slow, go-small strategy’ plays to her strengths, ‘allowing her to meet voters in intimate settings where her humor, humility and policy expertise can show through.’

“As the old maxim goes, if you can fake humility, you’ve got it made. But seeing Rahm and Hillary do it in the same season might be too much to take.

“President Obama has said: ‘If she’s her wonderful self, I’m sure she’s going to do great.’ But which self is that?

“Instead of a chilly, scripted, entitled policy wonk, as in 2008, Hillary plans to be a warm, spontaneous, scrappy fighter for average Americans. Instead of a woman campaigning like a man, as in 2008, she will try to stir crowds with the idea of being the first woman president. Instead of haughtily blowing off the press, as in 2008, she will make an effort to play nice.

“It’s a do-or-die remodeling, like when you put a new stainless steel kitchen in a house that doesn’t sell.”

At least in week one, Hillary was hardly warm and fuzzy with the press. Instead she was once again the Ice Queen.

--A USA TODAY/Suffolk University Poll finds that 55% of Democrats say it’s “very important” to them to see strong challenges to Hillary Clinton for the presidential nomination. Another 25% call it “somewhat important.” 43% said they preferred Clinton as the nominee, with 5% naming Massachusetts Sen. Elizabeth Warren, even though she’s not running. 48% said they were undecided.

On the Republican side, not one GOP candidate scored as high as double digits. Wisconsin Gov. Scott Walker had 9%, Jeb Bush 8%, Sen. Ted Cruz 7% and Sen. Rand Paul 5%. [Marco Rubio was at just 2%.] Mitt Romney had led the January USA TODAY/Suffolk Poll with 16%, but then he said he wasn’t running in 2016.

The survey also found that 48% of all those surveyed disapproved of the job President Obama is doing; 42% approve. Congress has only an 11% approval rating; 77% disapprove of its performance.

Only 25% say the country is headed in the right direction, a rather startling drop from the 36% who felt that way in January. [Source: USA TODAY]

--New York City Mayor Bill de Blasio has been taking heat from some fellow Democrats for refusing to endorse Hillary Clinton for president. He first declined to support her on “Meet the Press” Sunday, and then on Tuesday, when confronted on his position, the mayor said, “Not a lot has changed since Sunday morning. It’s Tuesday.”

For the first time, I have to say that something the mayor said was pretty funny.

The mayor’s contention is that Clinton has been “out of the public eye” for almost eight years, and she needs to reintroduce herself to the public before he would consider backing her candidacy.

De Blasio argues Clinton, when serving as secretary of state, for example, wasn’t addressing domestic issues and now he wants to hear what she has to say.

But this is all about de Blasio wanting to elevate himself among fellow Democrats as a standard-bearer. He has been traveling in the likes of Iowa and Nebraska this week to speak about his signature issue, income inequality.

The stories you hear about the mayor’s soaring ambition are true. He really believes that he’ll be running for president down the road, the leader of a new progressive Democratic Party, one touting more active government.

But many Democrats, especially in New York, were incredulous de Blasio refused to immediately endorse his former boss. A Democratic insider told the New York Post: “The Clinton people are really angry. They’re furious.”

--The aforementioned Marco Rubio declared his candidacy for the Republican nomination on Monday in Miami, speaking of “the new American century.” He mocked Hillary Clinton as “a leader from yesterday.”

“Yesterday is over. We are never going back,” Rubio told the crowd. The 43-year-old senator drew the contrast with the 67-year-old Clinton, as well as fellow Floridian, Jeb Bush, who is 62.

Jennifer Rubin / Washington Post

“Sen. Marco Rubio (R-Fla.) caught a break and he should make the most of it. On Sunday, the grand dame of the Democratic Party, will, from the comfortable distance afforded by social media, signal she is claiming her crown as the prohibitive Democratic favorite for 2016. Hillary Clinton won’t put it quite that way, but everything from her enormous organization to the refusal to give media access to her lack of ideas to the disdain for rules that apply to others reeks of entitlement. She needs an entourage but can forgo the indignity of nettlesome press questions, the trouble of coming up with policy proposals and the ‘inconvenience’ of following the rules. She is running because she is Hilary, and that’s enough, at least for now.

“The very next day, the young Hispanic, with a moving immigrant story and great charisma meets the voters – in public? – and plans to deliver his announcement speech at Miami’s historic Freedom Tower. For a time the tower was the processing center for Cuban refugees fleeing Fidel Castro – a regime with which the president has started normalized relations with no concern for and no protections for the Cubans who remain. It is in some respects the Ellis Island for Cubans, and so the announcement most resembles that of a president who stood in front of another symbol of freedom, the Statue of Liberty....

“Clinton talks in platitudes, for a reason. There is nothing new or exciting or specific to say if the underlying message is really ‘It’s my turn.’ For Rubio, who told CPAC earlier this year, ‘This country doesn’t owe me anything,’ it is a chance to be forward-looking and creative, interactive and down-to-earth, charismatic and inspiring – everything Clinton is not. For his party, it is a chance to turn away from the gloom-and-doom purveyors, from those who miss the true spirit of Reagan and obsessively try, as Clinton does, to recreate a bygone era. Rubio can embrace a domestic agenda based on reform and an international outlook determined to project American strength and values....

“The Clinton-Rubio comparison is a helpful one for the GOP, a moment to cherish when the country can see new vs. old, immigrant success story vs. wealthy matron and charm vs. regal distance. What a boost for Rubio this is.”

--In New Hampshire on Tuesday, New Jersey Gov. Chris Christie unveiled an ambitious plan for Social Security and Medicare reform for future retirees, as part of an overall blueprint to cut deficits by $1 trillion over a decade. Christie sought to portray himself as a leader unafraid to discuss “hard truths” with American voters.

“It is time to tell the truth about what we need to do in order to solve our problems and put our country back on the path to greater prosperity. Washington is afraid to have an honest conversation about Social Security, Medicare and Medicaid with the people of our country. I am not.”

Christie proposed means testing and a cap for Social Security benefits, reducing payments for those making more than $80,000 in additional income and eliminating the benefits altogether for those making more than $200,000 a year.

“Unless we deal with this crisis, the young people of this country will get poorer, the disparity between young and old, the working middle class and the retired will grow even larger,” he said. “Our economy will grow even weaker. Our debt will skyrocket.”

The proposal would gradually raise the retirement age to 29, beginning in 2022, while raising the early retirement age to 64.

Christie said, “I have come to New Hampshire today to talk about the challenges we’re facing as a country.”

But while it’s nice the governor is at least thinking of real reform, the fact is his popularity around the country continues to slide and Bridgegate has a lot to do with this. Probable indictments are in the cards (though not of Christie directly) that will only damage the governor’s reputation further.

I noted years ago that a Rutgers poli-sci professor who was an expert on Jersey politics said that Christie was always thinking about three steps ahead of his competition. [This was in relation to the criticism Christie faced in embracing President Obama in the aftermath of Superstorm Sandy.] That may have once been true, but the governor certainly didn’t think through the consequences of Bridgegate, which is a classic example of abuse of power.

Plus, as I’ve been also pointing out for years, there is little he can point to as real accomplishments in my home state.

Nonetheless, he’s running.

But wait...there’s more! Moody’s Investors Service has downgraded New Jersey’s credit rating, a record ninth ratings cut since Christie took office. Moody’s cited “continued pension contribution shortfalls.”

--Meanwhile, New Jersey Sen. Robert Menendez’s buddy, Florida eye doctor Salomon Melgen, was indicted on 46 counts for health-care fraud, with federal prosecutors alleging he cheated Medicare out of $105 million over six years.

Melgen previously pleaded not guilty along with Sen. Menendez in their corruption case and Melgen was released on $1.5 million bail in that matter. But now he faces these new charges.

It was the Wall Street Journal that spearheaded an effort to have Medicare release the names of individual doctors and a year ago, Melgen was on the list as Medicare’s top biller. He received $21 million from the taxpayer-funded program in 2012 alone.

But as the Journal noted, Medicare continued to pay Melgen even after the FBI raided his office in January and October 2013, with auditors identifying millions of dollars in excess payments.

Needless to say, none of this is helpful to Sen. Menendez, who it is alleged went a bit too far in offering help to Melgen with his “Medicare problem,” as the indictment against Menendez alleged.

If convicted, Dr. Melgen faces up to 10 years in prison on each of the 46 health-care fraud counts. 

Separately, a new Quinnipiac University poll of New Jersey voters found that 52% – 61% of Republicans, 51% of independents and 46% of Democrats – say Menendez should resign.

54% say he’s not “honest and trustworthy,” while 23% think he is. The senator’s job approval rating is down to 35%.

--From Gregg Zoroya / USA TODAY: “More than half of some 770,000 soldiers are pessimistic about their future in the military and nearly as many are unhappy in their jobs, despite a six-year, $287 million campaign to make troops more optimistic and resilient, findings obtained by USA TODAY show.”

52% agreed with statements such as “I rarely count on good things happening to me.” 48% have little satisfaction in or commitment to their jobs.

--One former Blackwater security contractor received a life in prison sentence for killing 17 unarmed Iraqi civilians in Baghdad back in 2007, with three others receiving 30-year sentences. 

The incident marked the end for Blackwater Worldwide after it had become one of the wealthiest and politically powerful security firms in the U.S.

The U.S. government had asked their Iraqi counterparts to be patient and allow the U.S. criminal justice system to handle the case in the face of intense Iraqi government criticism.

--The following really ticks me off...a world of dirtballs.

Stephen L. Carter / Bloomberg

“The big news about ‘Game of Thrones’ this past weekend wasn’t the comparative blood-and-gore quotient for Sunday night’s season five premiere, but that the first four episodes were leaked online, and have already been downloaded perhaps a million times. Although HBO has hinted that the episodes were uploaded by a reviewer, the leak could hardly have come as a surprise, given that ‘Game of Thrones’ at times last year ‘accounted for more than half of all TV shows pirated on file-sharing networks, and more than all music downloads combined.’ In short, what happened over the weekend was just more of the same....

“(Most) users take the view that the online world should accommodate rather than frustrate their desires. They should get what they want when they want it.”

Stephen Carter quotes Corry Doctorow and his recent book “Information Doesn’t Want to be Free.”

Carter: “Online, in Doctorow’s telling, users gravitate toward a simple libertarian principle under which they should enjoy maximum freedom of action.” 

In Doctorow’s words, “You can’t and won’t solve copying.”

--CBS and Bob Schieffer made a good choice in selecting John Dickerson, CBS News’ political director, to replace Schieffer as host of “Face the Nation.” Mr. Dickerson is a likable sort with the “right bloodlines,” as Schieffer said on Sunday. His mother, Nancy Dickerson, was the first female correspondent in the CBS News Washington bureau.

--A quarter of all high school students and 8% of middle school students used tobacco in some form last year, according to federal data released this week. 

Smoking traditional cigarettes, from 2011 to 2014, is actually down sharply, from 16% of high school students to 9%. But e-cigarette use is soaring, which creates a new problem. They deliver just as much nicotine, but not the dangerous tar and other chemicals.

Kids say they use them either to be trendy or to quit smoking cigarettes, but nicotine is addictive, and as Dr. Thomas Frieden, director of the C.D.C., said, “This is another generation being hooked by the tobacco industry. It makes me angry.”

--NBC has a new problem in terms of credibility. The facts behind reporter Richard Engel’s kidnapping in Syria back in December 2012. The New York Times questioned the details as presented by Engel upon his release and Engel corrected the storyline this week.

The issue isn’t whether Engel told the truth, because it doesn’t seem he intentionally distorted the facts, but NBC executives were informed of them and kept them quiet. More on this later as warranted.

For now, in light of the Brian Williams fiasco, this situation couldn’t come at a worse time.

--After the gyrocopter incident at the U.S. Capitol this week, all the experts are talking about the same type of scenario. Why not send 10 gyrocopters into the Capitol or White House from ten different directions? 

--Finally, Sunday is the 20th anniversary of the Oklahoma City bombing that killed 168 and injured 500. That was one of the most sickening days in the history of our country, but also a day of tremendous heroism. I’ve been to the memorial and museum there twice and I strongly urge all of you to take your kids at some point. Remember to bring a box of Kleenex. If you don’t exit the museum crying, you aren’t human.

---

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

Remember those who died in the Alfred P. Murrah Federal Building. Pray for the survivors who have to live with the memories every day. And remember the rescue dogs.

God bless America.
---

Gold closed at $1203
Oil $55.74...up a fifth week in a row and highest since Dec.

Returns for the period 1/1/15-4/17/15

Dow Jones -1.3% [17826]
S&P 500 -1.0% [2081]
S&P MidCap -1.2%
Russell 2000 -1.0%
Nasdaq -1.3% [4931]

Returns for the period 1/1/15-4/17/15

Dow Jones +0.02%
S&P 500 +1.1%
S&P MidCap +4.4%
Russell 2000 +3.9%
Nasdaq +4.1%

Bulls 50.5
Bears 13.9

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