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Week in Review

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11/19/2011

For the week 11/14-11/18

[Posted 7:00 AM ET]

Europe, Washington and Wall Street

It’s amazing to think that right before our eyes European democracy has taken a huge hit and may yet suffer further ones before the people truly revolt. Think about it. Two nations, Italy and Greece, are now being run by unelected officials. Imagine an American president being shunted aside for, say, the leadership of Ben Bernanke and Timothy Geithner, who then start telling us not just what we should do, but have to do. Imagine unelected officials having the power to slash your pensions and salaries. Sure, you would think Congress would have to go along first, just like the respective Greek and Italian parliaments do to approve the plans the technocrats come up with, but the fact is the people had no hand in the selection of the people at the top. 

And when you look at Europe, as I’ve written throughout the debt crisis, it’s also about sovereignty, or lack thereof; of Greeks losing a large portion of theirs to bureaucrats outside their country who now oversee every financial decision the Greeks propose. Italy has now lost a part of their sovereignty as well. Ireland and Portugal after having to take bailouts. Spain is on the brink of losing theirs. More opinion on this topic below.

But for now the eurozone crisis worsened this week as technocrats Lucas Papademos of Greece and Mario Monti of Italy took charge, though in both cases their work is just beginning. Papademos, who polls show does have the approval of 3/4s of the people, needs to garner enough support in parliament for implementing further austerity measures that would then allow Greece to receive its next installment of aid from Greek Bailout I.

Italy, now under Monti and his caretaker government of unelected technocrats, needs to enact radical reforms that will not only jumpstart the economy, but convince the European Central Bank, Germany and France that they are worth supporting in one fashion or another. And Italy must act fast, within weeks, ditto Greece. For starters, also like Greece, Italy must tackle its massive problem of tax evasion, an estimated $133 billion each year, with an underground economy amounting to 16% of GDP. Greece is scheduled to hold new elections in February, but Monti wants to wait until 2013; or well over a year with an unelected official at the helm. Italy, as I’ve written ad nauseum recently, also has 300 billion euro of sovereign debt to roll over in 2012 and it cannot avoid default unless its interest rates come way down. Among the austerity measures the new Italian government must implement is a freeze on public sector salaries until 2014. Will the people accept this?

Then there is Spain. It has an election on Sunday and it is widely expected that Mariano Rajoy, a conservative, will win handily. He will have a mandate for change, and further austerity, but Spain’s issue is a total lack of transparency when it comes to its banks and its unique relationship with the ‘regions’ that control 1/3 of the national budget. No one has the slightest idea if the regions’ books are close to being accurate. Actually, they should know. They aren’t.

And the problems of Eastern Europe are waiting in the wings. A credit crunch at the worst possible time for them, and in the case of Hungary, now the contagion factor has hit and its bond auctions are going miserably. Hungary, while dutifully reducing its debt, is also beset by inconsistent policies so investors have little incentive to buy in.

In the U.K., one million young people aged 16-24 are unemployed for the first time ever. The youth here have an unemployment rate of 21.9% (it’s 46.2% in Spain!).  Overall unemployment in Britain is 8.3%, a 17-year high. The Bank of England cut its GDP forecast for 2011 and 2012 to just 1%, though at least inflation here, an EU high of 5%, is expected to fall rapidly.

European Commission President Jose Manuel Barroso said unemployment will remain at 10% in the eurozone the next two years. Growth was 0.2% in the third quarter, as announced this week, with Germany up 0.5% and France up 0.4%, quarter over quarter, but that was for the period ending Sept. 30. Virtually everyone is in agreement the eurozone will experience negative growth in the current quarter and early next year, i.e., the recession has begun on the Continent. All you need to know is that the Organization for Economic Cooperation and Development (OECD) is forecasting that Germany’s economy, supposedly the bulwark, will contract at an annualized rate of 4% for Q4.

Through it all, though, you have the paramount debate in Europe of who is responsible for whom? Who provides the backstop for the likes of Greece and Italy? It’s a broken record, but the details of the European Financial Stability Facility (EFSF) still haven’t been worked out, though the chief debate of the week is should the European Central Bank (ECB) come to the rescue of Italy, for example, and just keep buying Italian sovereign debt to keep their interest rates as low as possible, even though some question whether this goes against the EU treaty.

It’s about the still ongoing clash between France and Germany over just how much the ECB can intervene. German Chancellor Angela Merkel is holding fast that the ECB’s role should be limited, saying EU rules prohibit more forceful action.

French President Nicolas Sarkozy, as you long know by now, feels otherwise. The ECB should indeed be a “lender of last resort.”

Bank of England Governor Sir Mervyn King said, “Official meetings come and go, but the underlying global problems of trade imbalances, unsustainable levels of external and internal indebtedness and loss of competitiveness remain. Sovereign and bank funding concerns are symptoms of these underlying problems. The journey to a more balanced world economy will be long and arduous.”

Chancellor Merkel, in insisting the only way forward is to stick with austerity while revising the EU treaty to allow for greater economic policy coordination, said:

“Europe is in one of its toughest, perhaps the toughest, hour since World War II.”

But new ECB chief Mario Draghi reminds all the players that since the Greek credit crisis was first uncovered in 2009, there have been four plans billed as a comprehensive strategy to end the crisis, yet leaders have failed to implement the policy commitments emerging from each of the four programs. It’s pathetic.

The thought might also have crossed your mind, what about the IMF? Did you know it only has about $400 billion in available funds? Italy’s sovereign debt load is $2.5 trillion. How is the IMF going to get more money? Everyone looks to China, India, Brazil and maybe the Saudis to help refill the IMF’s coffers.

And this just in…British Prime Minister David Cameron met with Angela Merkel on Friday and the two didn’t reach agreement on anything, literally, beginning with Cameron’s repeated calls for “decisive” eurozone action, while Merkel insists on a “step-by-step” approach. The two also remain split on a proposal for a financial transaction tax, as well as the need to amend the EU treaty. At least they smiled at their press conference afterwards, so London doesn’t have to worry about being blitzed again.

So that’s where we stand in Europe this week…nothing has changed, except a few players, at a time when change was required two years ago. Plus now democracy has taken a big hit. Various opinion on this last item follows.

Editorial / Irish Independent

“Last week, it certainly looked as though the lamps were going out again across a continent whose feet are no longer just close to, but actually in, the fire.

“The gathering darkness is not just of the fiscal variety, for the fates of Italy and Greece suggest the lights are dimming on the concept of democracy in Europe. The intervention in the governance of Greece and Italy can, theoretically, be justified on the basis of the terrible mistakes both countries, and their chosen leaders, are guilty of. However, democracy is about far more than merely giving us the right to choose between variations of the same political marionettes.

“Its greatest value, instead, lies in the offering to citizens of the opportunity to develop a sense of self respect. The right to vote is the secular equivalent of a soul, for, in a democratic state, we can convince ourselves we are not merely serf-like economic units. Our masters in the bond markets, in contrast, believe that vassals are precisely the measure of what we are and they are not alone….

“(As Europe begins) to fracture under the weight of its political and fiscal bankruptcy, Churchill’s prescient ‘iron curtain’ speech of 1946 has acquired a new and terrible relevance. The sense that Sarkozy and Merkel are backing away from the mess their own expansionist dreams created was intensified last week by less than subtle hints about the need to ‘prune’ the eurozone. Rather like the old League of Nations, the ECB also appears to be tip-toeing away from a continent that, like Weimar Germany, appears to be incapable of reforming itself to save itself.

“As Europe retreats into the isolationism that characterized the protectionist economies of the Thirties, its leaders would be wise to ‘remember everything’ and keep their heads. Imposing Thirties-style solutions might not merely fail to solve current problems. It could also have Thirties-style consequences.”

Michael Ignatieff / Financial Times

“After economic default comes political default. Politicians in Greece and Italy have failed. Now it’s the technocrats’ turn. Having been pummeled by the bond markets and disgraced by their own intrigues, the Greek political class has turned to Lucas Papademos while the Italians have turned to Mario Monti. Both are skilled and reputable economists, but a skeptic can be forgiven for asking: why should ordinary citizens trust them?

“Both belong to the class of bankers and economists who dropped Europe into this mess in the first place. Both occupied commanding positions in European Union institutions that winked at a decade of Greek and Italian lies about their public finances. So why then are Greece and Italy turning to Eurocrats to pull them out? Because no one else has any authority left.

“Technocrats are supposed to have the mysterious authority of being above politics. But there is no ‘above politics.’ The crisis is political all the way through.

“The problems both countries face are not technocratic. The measures that must be taken are obvious enough: regain control of public finances, restart demand and make the two southern economies competitive again. The problem is political: how to push a reluctant bureaucracy to reform itself, how to corral parliamentarians into voting for tax increases, and how to persuade a hard-pressed people that the proposed sacrifices are fair and that there is light at the end of the tunnel.”

Philip Collins / London Times

“Everyone remembers where they were the day Aldous Huxley died. It didn’t get the publicity it warranted as he had the misfortune to die on November 22, 1963, the same day as John F. Kennedy. The elected politician trumped the prophet of technocracy, but it feels as if Huxley is having the last laugh. In Brave New World he imagined a grotesque society that, through sheer lack of interest, had dispensed with the need for politics. The arbitration of dispute had given way to arithmetical calculation conducted by experts who delivered the medicine to a grateful public.

“The eurozone crisis has not brought the brave new world, but there are now such people in it. Greece and Italy have emergency-service government by technocrat. The Greek Prime Minister, Lucas Papademos, a former vice-president of the European Central Bank, is even a visiting professor at the John F. Kennedy School of Government, the world’s leading institution for trying to distil government into a teachable formula.

“Mr. Papademos leads a three-party coalition with the sole task of keeping Greece in the eurozone until February, when a general election is planned. This will require another round of painful austerity. The brief rule of the economist-king will bring unpopularity without legitimacy. I wish him luck with that.

“In Italy, Mario Monti, a former European Commissioner for the Internal Market and Competition, has gathered a Cabinet of experts united only by the fact that none of them has ever done anything so grubby as treat with the electorate. The European political elites’ allergic reaction to the people has rarely been so transparent.

“But for all the talk about technocrats being ‘above’ politics, as if they occupied some Archimedean point of neutrality in which only correct decisions are made, there is no point in not speaking plainly. Technocracy is a suspension of democracy. Mr. Monti and Mr. Papademos are a capitulation to the fallacy that there is a body of knowledge, somewhere in the ether above democratic politics, that is disclosed only to those in the know.”

Editorial / London Times

“In the year that the Arab Spring toppled undemocratic regimes in one part of the world, the notion of democracy is being severely tested in another. The appointment of a civilian junta in Italy, by the country’s new unelected Prime Minister, is a profoundly worrying development. In Arab countries, democracy has blossomed out of dictators’ failure to pursue sustainable economics. In the eurozone, the failure of so many elected leaders to manage their economies sustainably now poses a challenge to democracy. A European Autumn has dawned, and it is chilling.

“A decade ago, it was fashionable to accept the claim made by Francis Fukuyama in his The End of History and the Last Man, that liberal democracy had triumphed over the state capitalism preached by China. Today, Chinese leaders are scolding the West for its profligate, short-termist approach. They argue that the West’s travails only prove that bureaucrats and engineers are better placed than elected politicians to secure long-term economic growth.

“This unpalatable ideology will only draw strength from the appointment of Lucas Papademos, a former official at the European Central Bank, to run Greece, and the arrival of Mario Monti, the former European Commissioner, as head of Italy. And by Mr. Monti’s decision to appoint an emergency Cabinet made up entirely of technocrats.

“Able as many of these individuals may be, they do not represent the will of the people. The true price of membership of the euro is becoming clear: having your finances, and your future, decided by people you have not chosen. The European Union has always had a democratic deficit, but this is a gulf….

“These are times that call for statesmanship: but precious little has been shown. Individually, most eurozone leaders continue to focus on their own re-election, rather than the long-term interests of their nations. Collectively, their dithering has turned a Greek solvency problem into a financial catastrophe for the entire Continent. They will not heed the increasingly desperate calls from the UK and U.S. to change course. Only Ireland stands out as a resolute government, taking tough decisions, with a brave and phlegmatic people.

“The single currency was always fundamentally incompatible with nation state sovereignty. Politicians’ refusal to admit this has cost Europe dear. It will be a tragedy if the world looks upon Italy and concludes that the Chinese model has triumphed. Democracy must not be a casualty of European political failure.”

Washington

For all the discouraging news in Europe, there have been some bright spots in the U.S. the last few months after the pain in the markets of August and September. The thing is, even then the economy had stabilized some, witness the flash estimate on third quarter GDP of 2.5%. Now economists are ratcheting up fourth quarter projections to generally 3% or higher. This is good. Heck, if Europe was only growing at around 2% and the U.S. at 3%, plus solid growth in Asia, the markets would be rockin’ and rollin’. Slow to moderate growth with little inflation, one would also assume, has long been the perfect environment for equities. 

As it is, retail sales in October were up a better than expected 0.5%, the October readings on industrial production and the leading economic indicators were up solidly, both also better than forecast, and there was even a little cause for optimism in housing (though don’t get carried away) as housing starts for last month were better than projected and a reading on mortgage delinquencies was also better.

And the inflation readings for October were okay. Producer prices fell 0.3%, unchanged ex-food and energy, while consumer prices fell 0.1%, up 0.1% on the core. For the last 12 months, consumer prices have risen 3.5%, but the core reading is just 2.1%.

So save for Europe and its many issues, we should be feeling a little better, right?

Not quite. We still have massive deficits, heading the way of Italy and Greece, and the congressional supercommittee that was tasked with coming up with a minimal deficit reduction plan of $1.2 trillion over the next ten years, with the cuts not actually beginning to take effect until 2013, is going nowhere fast.  The deadline is Nov. 23 and as I write there is zero chance the committee will do something heroic, like a needed $4 trillion package of revenue enhancements and major cuts to entitlements, as well as defense.

Instead, it seems very apparent that whatever the supercommittee comes up with, if anything, will be small. Maybe the markets don’t react much to this, but it’s part of my scenario that we will meet our deficit Waterloo in 2012 and it isn’t going to be pretty.

For now I’ll wait to see what the boys and girls do over the coming days. Perhaps Republican Sen. Lamar Alexander (Tenn.) summed it up best.

“This is about more than money. It’s about whether the president and the Congress can competently govern, about whether we can face up to the biggest problem facing our country and, working together, can we solve that problem?”

George Will / Washington Post

“The supercommittee’s difficulties are not shocking. This is shocking: Amid a darkening fiscal crisis, Energy Secretary Steven Chu, whose department has become a huge and incompetent venture capital fund, has not resigned as penance for complicity in the administration’s ‘green graft’ and crony capitalism.

“Equally incomprehensible: As the supercommittee seems about to leave government’s spending curve unbent, Transportation Secretary Ray LaHood, who should take a high-speed train into retirement, continues his multibillion-dollar mania for California’s San Francisco-to-Anaheim high-speed-rail project. In just three years, the projected price of it has tripled to $98.5 billion, and only ludicrous assumptions about passenger traffic present the project as profitable enough to attract private investors, who are supposed to pay most of the costs.

“ ‘The first lesson of economics is scarcity,’ writes economist Thomas Sowell ‘There is never enough of anything to fully satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.’ Next November we will learn whether the second lesson of politics is that adhering to the first lesson is eventually dangerous to incumbents.”

China

The slide in housing has begun in earnest, with some calling for a correction in home prices of 10% to 30%. For the month of October, prices fell in 33 of 70 cities monitored by the government, the worst performance since it expanded property curbs. But now can the government control the speed of decline?

[Housing construction accounts for 20% of steel and 6% of GDP.]

Meanwhile, some corporations are moving production inland to lower costs, like away from Guangzhou, but at least they aren’t moving production to Vietnam or Indonesia. The average monthly pay for “general workers” in Guangzhou is $281 vs. $114 in Ho Chi Minh City. [It’s $54 in Dhaka, Bangladesh.]

Lastly, appearing at the Asia-Pacific Economic Cooperation forum in Honolulu, Chinese President Hu Jintao vowed that his country would seek to increase imports as a way to help boost growth. Imports have indeed been surging. We want to see that.

Street Bytes

--Despite the respectable economic news, stocks took it on the chin owing to renewed uncertainty in Europe and the potential impact on U.S. banks should the crisis worsen even further as the Dow Jones lost 2.9% to 11796, while the S&P 500 fell 3.8% and Nasdaq dropped 4.0%. The latter two are now down again on the year.

I also can’t help but note an appearance by billionaire Mark Cuban on CNBC, wherein he totally trashed investing in the stock market, saying it was for “hackers,” [hedge fund types looking for nothing more than an edge] and that cash is “king.” Can’t say I disagree with Mr. Cuban.

--U.S. Treasury Yields

6-mo. 0.04% 2-yr. 0.28% 10-yr. 2.01% 30-yr. 2.99%

Foreign central banks purchased $38.8 billion in Treasury notes and bonds in September amidst the flight to safety that month. China’s holdings rose $11.3 billion to $1.148 trillion after falling a bit in August. [This does not include China’s holdings through London.] Japan, the second-largest holder, also increased its share.

Total net buying of U.S. assets, including equities, totaled $68.6 billion, the highest since November 2010. U-S-A! U-S-A! 

--Bankrupt brokerage MF Global’s record-keeping was so sloppy, there is no telling just where the missing $600 million in customer money is. Myriad federal regulators as well as criminal investigators are on the case and one thing is becoming increasingly clear; the final days were beyond chaotic as MF failed to register all the transactions that took place, forcing regulators to reconstruct the ledger. The bankruptcy trustee alone has a team of 200 accountants attempting to unwind the firm, in addition to 200 MF Global employees who were retained for this purpose. Some customers are finally getting access to a portion of their money…the lucky ones as much as 60%.

[Some MF customers are also ticked at JPMorgan Chase as they feel the bank is looking to cut ahead of them in the long line of creditors. JPMorgan argues it’s the lead creditor because it had provided MF with a revolving $1.2 billion line of credit before MF imploded.]

--UBS, Switzerland’s biggest bank, is looking to reduce headcount by a further 1,500-2,000, after announcing it would eliminate 2,000 back in July.

--Citigroup is looking to cut 3,000 positions, equal to about 1% of the staff. In both the case of Citi and UBS, investment banking and trading operations are being targeted.

--And Mizuho Financial Group Inc., Japan’s second-largest bank by assets, said it would cut 3,000 jobs as well by 2015, 10% of total staff.

--From the Financial Times:

“The Federal Housing Administration touts itself as the only U.S. government agency that ‘costs taxpayers nothing.’ That may soon change and was hardly true in the first place. Founded in the Depression, the FHA’s role in fostering home ownership expanded hugely after the crisis hobbled its private but government-sponsored brethren, Fannie Mae and Freddie Mac. Its share of new mortgages insured expanded six-fold to more than 30 percent of the market. But an audit released this week shows that it faces a 50 percent chance of exhausting its current reserves. If home prices fall sharply, auditors reckon it could require as much as $43 billion in support. Some experts say it may be more.”

The FHA has pitifully small reserves on a portfolio that is now $1.1 trillion.

--As for Fannie and Freddie, a congressional committee approved a measure that would slash pay for employees of the two mortgage giants, which is leading to an exodus of executives. Freddie CEO Charles E. Haldeman Jr., announced plans to leave next year. The House committee plan still must be approved by the full House (likely) but then move to the Senate (not as likely).

Rep. Spencer Bachus (R., Ala.) said, “Taxpayers own these companies and staff should be paid accordingly.” The CEOs at Fannie and Freddie have base salaries of $900,000, but stood to make as much as $6 million a year after receiving deferred pay and bonuses.

It’s an easy argument to make that the executives don’t deserve this kind of money, but you still have to be able to attract the right kind of talent or you potentially cost taxpayers further $billions on top of the $150 billion the two have already cost us. However, I’m in no way defending $6 million.

--Enbridge, a Canadian oil pipeline company, is buying a 50% stake in a pipeline that would run south from landlocked Cushing, Oklahoma to the Gulf of Mexico. Thus the oil would then be available for Gulf Coast refineries and change the supply/demand situation in the region and lessen the need for imports from Mexico and Venezuela.

The significance is that heretofore there was excess supply in and around the Cushing delivery point for West Texas Intermediate crude, the price of which I list at the end of the column each week. That has helped keep prices down vs. similar oil types, but now the move by Enbridge is an attempt to drain inventories.

So the price of West Texas immediately soared over $100 a barrel on the news, but then finished the week around $98.

--Meanwhile, regarding the controversial Keystone XL pipeline that the Obama administration is looking to delay until after the 2012 election, if it allowed it at all, TransCanada agreed to change the route of the pipeline to avoid the ecologically sensitive Sandhills region of Nebraska. Canada needs the crucial pipelines to export its growing oil sands production from northern Alberta; the third-largest reserves in the world. Daily production of 1.5 million barrels from the sands is expected to increase to 3.7 million in 2025.

--And one other item on the energy front. In August, the latest month for which Energy Department data is available, U.S. refiners exported a record average of 895,000 barrels a day of refined fuels, most going to Central and South America, though the Netherlands was the biggest single buyer, mostly diesel fuel.

But with incentives to produce diesel, that means less production of gasoline by the refiners and that equates to stubbornly high prices for U.S. consumers at the pump; in fact currently record prices for this time of year.

--The World Gold Council announced that central banks made their largest purchases of gold in the third quarter in decades. It was just last year that the banks became net buyers after two decades of heavy selling. The last time central banks were net buyers before 2010 was in 1988.

--Boeing secured the biggest order in its 100-year history after signing a $26 billion deal with Emirates for as many as 70 aircraft

--California is slated to take in $3.7 billion less in revenues than a budget crafted just a few months ago planned on, necessitating even more cuts to services, including a shorter school year. Tuition at state universities would also rise further. Needless to say, residents of all kinds are outraged.

--The “constitutionality” of the Obama health care law will be decided by the Supreme Court next spring (March…with a likely decision in June) and the nine Justices are going to allow an historic 5 ½ hours to hear oral arguments. [Normally it’s just one hour for each case presented before them.]

Editorial / Wall Street Journal

“The issue at the heart of the ObamaCare challenge brought by 26 states and the National Federation of Independent Business is whether the federal government has the constitutional authority, under the Commerce Clause, to order everyone in the United States to purchase health insurance – the so-called ‘individual mandate.’ If that is so, critics argue, then there is no limit to what commercial activity the government can command. And make no mistake: Future governments would  order specific ‘commercial’ activity under this authority.”

--Japan’s economy grew 1.5% in the third quarter over the second, or 6% annualized, but the trends for the fourth are nowhere near as good as industrial production is sliding anew.

--The Irish government is looking to cut 18,000 public sector workers by 2015. On the housing front, the peak-to-trough decline in residential prices is now expected to be 60%, an unprecedented collapse in wealth levels. [Japan’s property collapse of 90% in 1990 was on the commercial side.]

--China is resuming service with 54 bullet trains recalled over safety concerns following July’s deadly crash. Of course China doesn’t say how the trains have been fixed or modified.

--Shares in Rambus Inc. collapsed after it lost a $3.95 billion jury trial over its allegation that Micron Technology and Hynix Semiconductor colluded to manipulate prices of DRAMs, or memory chips, and thus impede Rambus’ business relationship with Intel. Rambus claims it would have made $3.95 billion in royalties without the alleged conspiracy. On Wednesday, shares in the company opened at $18, then the ruling came out and the stock dropped to $4, before finishing the week at $8.40.   

--Warren Buffett announced he has been buying a $10.7 billion stake in IBM, or 5.4% of the company, Buffett’s largest holding after Coca-Cola.

--Dell missed the Street’s revenue expectations and warned the flooding in Thailand creates uncertainty for the global economy as Thailand has some of the biggest makers of hard drives, a key PC component. Dell’s CFO Brian Gladden said he expected the flooding to be an issue for several quarters.

--Wal-Mart broke its string of same-store sales declines for its fiscal third-quarter, up 1.9% (ex-fuel) but margins declined, as did earnings, and it sees sales flat to up 2% for the fourth quarter.

--Home Depot, the world’s largest home-improvement chain, beat the Street’s earnings expectations on the heels of Hurricane Irene generated business.

--In the latest chapter in the Solyndra debacle, the Obama administration asked the company to delay announcing layoffs until after the November 2010 midterm elections that imperiled Democratic control of Congress, newly released e-mails show. The layoffs were announced Nov. 3, the day after the Nov. 2 vote.

Appearing before a Republican-controlled House committee on Thursday, Energy Secretary Steven Chu refused to apologize for the bad investment that cost the American taxpayer in excess of $500 million.

--The U.S. Postal Service said it lost $5.1 billion for the fiscal year ending Sept. 30, with losses only expected to accelerate in 2012. The Postal Service had a Friday deadline to pay $5.5 billion into the U.S. Treasury for future retiree health benefits but Congress was expected to grant a reprieve that only delays the day of reckoning. The losses are despite the fact the USPS has slashed 130,000 jobs over the last few years.

--Until 2005, portfolio manager Bill Miller was a superstar in the mutual fund business as his Legg Mason Capital Management Value Trust beat the S&P 500 for 15 consecutive years. And then the roof caved in and he was slaughtered. Over the last five years, Value Trust is ranked last of the 818 funds in its Lipper category. He’ll now retire in April, handing over full management to Sam Peters. Assets, once $21.5 billion, have dwindled to $2.8 billion.

--Jon B. Lovelace, who led the American Funds complex to its explosive growth from the 1980s through the mid-2000s, died. He was 84. The parent Capital Group Cos. now manages about $1.2 trillion.

--A Manhattan-based executive recruitment firm has been conducting a survey of holiday parties for the last 23 years and an all-time high 97% of companies threw them in 1996 and 1997. Only 74% will do so this year. Said the survey coordinator, Dale Winston, “once a company does away with them, parties rarely get back in the budget.” [Crain’s New York Business]

--I never liked clothing retailer Benetton and now I vow never to walk into one after their despicable ad campaign showing world leaders kissing (using Photo Shop).

--My Fujian, China holding reported earnings this week that were a little disappointing, but at the same time the company finally made the feedstock acquisition it’s been talking about all year. Some think they overpaid; I haven’t had the time to study it myself yet, but I’m having dinner with the CFO in New York on Monday. For those doubting if the company and its healthy cash position were real, however, the acquisition should have at least allayed any of those fears. The CFO is seeking my advice on a different aspect of the company, which is also encouraging.

That said I’m impatient like every other shareholder at this point. Conservatively, even given the dreadful sentiment towards Chinese small caps these days, the stock should be at least 2 ½ times what it is today.

Some of these small cap stories are amazing. I also have a much smaller position in China I’ve touched on before, a food company that is like a mini-ADM. For the past three months I’ve wondered if it was still alive because literally it didn’t trade, day after day…so I’d buy 100 shares just to make sure I could still do so. Until Friday, when someone else suddenly bought 200, I was the only buyer in the whole freakin’ world for like 10 weeks! And this is a company whose reported third quarter revenues went from $20 million to $86 million, while its annualized earnings give it a P/E of well under two (just like my Fujian play). I just keep believing that in the next up cycle these stocks will once again be recognized…the survivors of the Great Purge.

Foreign Affairs

Iran: In a meeting on Friday with Israeli Defense Minister Ehud Barak, U.S. Defense Secretary Leon Panetta said he would raise American concerns over the unintended consequences of a strike on Iran’s nuclear facilities. Panetta reiterated the most effective way to confront Iran is through increased sanctions and diplomatic pressure.

A foreign affairs adviser to Iranian Supreme Leader Ali Khamenei said that he did not think a military attack on Iran was imminent.

Meanwhile, Washington and the West wanted the International Atomic Energy Agency’s 35-member board to approve a clear resolution condemning Iran, including referral to the U.N. Security Council, but only received the first part. The new IAEA resolution calls on Iran to clear up outstanding questions about its nuclear capabilities, with Russia and China sharing in the concern, but it’s toothless.  The two had criticized the IAEA for releasing its latest report that Russia says is just a “compilation of well-known facts.” Moscow’s foreign ministry office even compared the IAEA’s report to the false intelligence on Saddam Hussein’s nuclear activities used to justify the invasion of Iraq.

But while the negotiating takes place, behind the scenes the covert war continues, with Iran conceding that one of the 17 men killed in a huge explosion last weekend at a Revolutionary Guard munitions depot was a key commander who headed Iran’s missile program, Gen. Hasan Moghaddam, while the state news agency reported that scientists had discovered a new computer virus in their systems, a more sophisticated version of the Stuxnet worm that was designed to infect Iran’s centrifuges.

Iran claimed the massive explosion, that could be felt over 25 miles away in Tehran, was an accident, but most believe it is part of an ongoing CIA / Mossad operation to eliminate Iran’s nuclear weapons threat.

Syria: The Arab League issued a three-day ultimatum insisting that Syria halt the violence against protesters or face further economic sanctions, though an earlier ultimatum had zero impact on President Bashar al-Assad’s crackdown.

What has had an impact is the rebel Free Syrian Army, created back in July by defectors from the regular army. It has formed a temporary military council to oust Assad and protect civilians. A statement from the council said it aims to “bring down the current regime, protect Syrian civilians from its oppression, protect private and public property, and prevent chaos and acts of revenge when it falls.”

Free Syrian Army fighters attacked a military intelligence base in a Damascus suburb, killing six soldiers in their boldest move yet.

Separately, Turkey is considering the establishment of a no-fly zone inside Syria, as Turkish Prime Minister Erdogan called on the world to “hear the screams” from Syria and act urgently to end the violence.

“The lack of reaction to massacres in Syria is causing irreparable wounds in the conscience of humanity,” he said.

A key leader of the Syrian opposition weighed in. “The Syrian people would accept intervention coming from Turkey, rather than from the West, if its goal was to protect the people. We may ask more from Turkey as a neighbor.” [London Times]

Russia’s Foreign Minister Sergei Lavrov concluded, “This is all looking very much like a civil war,” while Jordan’s King Abdullah II became the first Arab leader to publicly call for Assad to quit, after which Assad supporters stormed the Jordanian embassy. Earlier, thugs attacked the embassies of Qatar, Saudi Arabia and Turkey.

Michael Young / Daily Star

“The mendacity, the arrogance, the condescension, the surreal levels of criminality, have all been in full view these past months, as the Assads have slaughtered their people without flinching. The Arab states gave the Syrian regime ample time to stifle the dissension, until they saw that Bashar Assad was going to lose anyway. Panic has set in as the intifada veers toward a Sunni-Alawite war [Ed. Syria is majority Sunni, but the Assads head the minority Alawite sect], which would have dire repercussions for Syria’s neighbors, and the Arab world in general.

“One should have faith. A people that has mostly avoided resorting to arms through eight months of carnage, is one wise to the ways of its tormentors. Syrians have the Assads to thank for that. Having endured for four decades the whims of two sordid families, they know what to expect. See through the bully, and you’re on your way to deflating him. Assad dreams of containing the Syrian intifada and imposing a bogus reform project that consolidates his authority; but to many Syrians he is simply irrelevant. Recognition of that fact was implied in the advice of King Abdullah of Jordan that Bashar Assad step down.

“It is difficult to predict what will happen next in Syria. But the Assad order has been stripped down to its carcass, left only with the brutality of Alawite solidarity, fortified by mounting Arab isolation. The ogre is stammering, meaning the end cannot be too far off.”

Pakistan: U.S. missiles reportedly took out 18 Taliban militants at a base on the Afghan border as five drones fired up to 10 rockets. That would have been rather impressive to watch from the security of a hill overlooking the base. Good job, controllers.

Afghanistan: President Hamid Karzai is insisting the U.S. and NATO stop carrying out night raids on Afghan homes before he will sign a strategic partnership agreement, Karzai long arguing night raids pose a disproportionate risk to civilians.

Egypt: The ruling military council now says a presidential election will not occur before 2013. Sec. of State Hillary Clinton responded to this in a speech:

“If, over time, the most powerful political force in Egypt remains a roomful of unelected officials, they will have planted the seeds for future unrest, and Egyptians will have missed a historic opportunity.”

But a month earlier, Clinton approved of an extended timetable for electing a president. What’s up with that, Hillary?

Friday, tens of thousands of Islamists protested in Tahrir Square against the military council’s attempts to carve out special powers (covered here a few weeks ago), even after a new constitution is put in place.

Christians in the Middle East: “A Gathering of Catholic patriarchs in the Middle East urged Christians Thursday to hold onto their lands and holy places despite the ongoing popular uprisings in the Arab world, which have raised fears about the presence of Christians in the region. They also called for a unified Easter holiday to boost Christian unity [Ed: Eastern Orthodox and Western Christian churches using different calendars]….

“Thousands of Christians fled Iraq following the U.S.-led invasion of 2003 fueling worries over the fate of Christians in the region [Ed. a common theme of mine over the years], while recent attacks on Christian Coptic churches in Egypt have only enhanced these fears….

“The patriarchs stressed the need for national dialogue, respect of human rights and national reconciliation.” [Daily Star]

Amen.

China: On Thursday, President Obama vowed to expand U.S. influence in the Asia-Pacific region and “project power and deter threats to peace” in that part of the world.

“The United States is a Pacific power, and we are here to stay,” he declared in a speech to the Australian Parliament.

“Let there be no doubt: in the Asia-Pacific in the 21st century, the United States of America is all in,” Obama added. “With most of the world’s nuclear powers and some half of humanity, Asia will largely define whether the century ahead will be marked by conflict or cooperation, needless suffering or human progress.”

As I noted last week, Obama also announced up to 2,500 Marines will eventually be rotating out of northern Australia. It’s a great move. Australia is as good an ally as we have these days and will be increasingly important over the coming decades.

Benny Avni / New York Post

“President Obama is pushing all the right buttons on his Pacific trip – letting friend and foe alike know that ‘the United States is a Pacific power, and we are here to stay.’

“Much follow-through will be needed to fully calm nerves in a region where fears of China are soaring, but this was certainly a good week for America and for everyone in the Asian Pacific realm.

“By announcing that he’ll deploy 2,500 Marines in friendly Australia, the president showed that America intends to ‘project power and deter threats to peace’ in the region.

“Sure, budget-conscious types will kick and scream. But deploying troops in troubled regions is more cost-effective than sending them in after problems arise….

“No one can mistake Obama for a warmonger or for adopting a sledge-hammer mentality in world affairs. Speaking of the planned trade pacts with our allies, he assured everyone that ‘the notion that we exclude China is mistaken’ (although aides insist that, to be included, Beijing must raise the value of its currency and adopt other fair-trade practices – which it won’t).

“China was also careful to avoid inflammatory rhetoric; its foreign ministry cautiously responded that Obama’s promises to deploy American troops in the region ‘may’ not be ‘appropriate.’….

“Yet China and America are shadow-boxing – dancing around the ring while avoiding any trade of serious punches.

“And as long as Obama is going to stay in the ring, as he promised his regional listeners he would, this was a good round. Above all else, he identified the Pacific (and, implicitly, the competition with China) as a national-security imperative.

“But tougher rounds are coming.”

And to that end, Premier Wen Jiabao said on Friday that “outside forces” had no excuse to get involved in a complex dispute over the South China Sea, a veiled warning to Washington.

But, earlier, at the Asean (Association of Southeast Asian Nations) summit on Bali, he offered $10 billion in loans and lines of credit, saying China only wanted to be friends with whom it shares interests in the critical body of water that is potentially rich in energy resources.

[More on this topic in an upcoming “Hot Spots” column.]

On a totally different matter, 18 kindergarten students were killed on their way to class in China’s Gansu province on Wednesday. I saw a picture of the crash, which also killed two adults and ignited public anger across the country, and understand this was a minibus with nine seats, but it was jammed with 62 children when it crashed head-on with a truck on a rural road.

And, lastly, dissident Ai Weiwei paid the government $1.33 million towards his tax bill that Beijing authorities say Ai owes them. Ai said he felt like he had paid a ransom. By paying what he did, though, he gets to challenge the tax bill in court. Gee, I wonder who will win that one?

Burma: President Obama announced on Friday that Sec. of State Clinton would be the first secretary of state in more than 50 years to visit when she travels to Myanmar in December.

“For decades Americans have been deeply concerned about the denial of basic human rights for the Burmese people,” Obama said. “The persecution of democratic reformers, the brutality shown toward ethnic minorities and the concentration of power in the hands of a few military leaders has challenged our conscience and isolated Burma from the United States and much of the world.”

But now there were “flickers of progress” as the president and Parliament in Myanmar have taken steps toward reform; enough so that dissident Aung San Suu Kyi declared that she and her party would rejoin the political system.

Russia: In an annual meeting with reporters, Prime Minister Vladimir Putin showed signs he will be his usual prickly self when he is re-elected president, reiterating his warnings of four years ago that Russia would target U.S. missile defense installations if they were close to its borders. “We have repeatedly said that the establishment of the missile defense shield is a threat to our nuclear potential, and we will be compelled to respond, but no one is listening to us.” Putin added that he didn’t believe U.S. assertions the shield was aimed at ‘rogue’ states such as Iran. Russia’s parliamentary elections are just three weeks away.

On the demographic front the disaster continues, only in this case it’s about the 1.25 million Russians who have left the country in the last 10 years, comparable to the outrush in the wake of the Bolshevik Revolution, a Russian statistician told a Moscow radio station. These days most leave because they are feeling pinched economically; like the Russian nuclear physicist who told the Los Angeles Times’ Sergei L. Loiko that “he couldn’t survive on the $450 monthly salary of a senior researcher at the Institute of Physical Chemistry of the Russian Academy of Sciences.”

Random Musings

--This week’s polls:

In a Fox News national survey, Newt Gingrich surged from 12% to 23% since the last Fox poll in late October and is now ahead of Mitt Romney, who is at 22%. Herman Cain received 15% and Ron Paul was fourth with 8%. In a hypothetical matchup, Romney leads Obama 44%-42%, while Obama leads Cain 47%-38%, and Gingrich 46%-41%.

Romney leads a New Hampshire poll of probable primary voters with 40%, according to a Bloomberg News survey, with Ron Paul second at 17%, while Gingrich is third at 11%. But, 66% of Romney backers said they could be persuaded to support another candidate.

[In October 1983, then Vice President Walter Mondale had 44% of the vote in New Hampshire, with Colorado Sen. Gary Hart at 6%. On Feb. 28, 1984, Hart defeated Mondale in the state by 10 points. In September 1999, George W. Bush had a 33-point lead over John McCain, but McCain would then beat Bush in New Hampshire, 49-30. Some see a parallel to Jon Huntsman, who is at 7% in the Bloomberg News poll today.]

A Bloomberg poll of Iowa primary voters has Herman Cain ahead with 20%, followed by Paul at 19%, Romney 18%, and Gingrich 17%.

In a USC Dornsife/Los Angeles Times poll of California Republicans, Romney had 27%, followed by Cain at 20%, Gingrich at 14% and Paul at 6%. Rick Perry polled just 3% in this one. But in an Obama-Romney matchup in the state, Obama cleans up, 52% to 35%.

I just have to give major kudos to a friend of mine down in Austin, Texas, Liz S., who first told me when Perry was thinking of running that he was a ‘nitwit.’ Boy, I thought Perry was going to be pretty strong. I should have listened to Liz early on. It also seems I saw him at the Iowa State Fair when he was at his very peak, having just officially announced.

--Meanwhile, with rising poll numbers comes greater scrutiny, as you’ve only heard 100 times already this campaign season, and it’s Newt Gingrich’s turn. Aside from all his personal baggage, professionally, he had to defend himself over at least $1.6 million in payments for consulting contracts with Freddie Mac, though to semi-defend him the payments were over a decade, 1999-2008. Gingrich explained it by saying he provided “strategic advice for a long period of time” after he resigned as Speaker of the House following the 1998 elections. Gingrich also added that his experience with Freddie Mac should be viewed as being valuable.

“It reminds people that I know a great deal about Washington. We just tried four years of amateur ignorance, and it didn’t work very well. So having someone who actually knows Washington might be a really good thing.”

Republican rival Michele Bachmann responded: “It doesn’t matter if its $300,000 or $2 million, the point is the money that was taken by Newt Gingrich was taken to influence Republicans in Congress to be in support of Fannie and Freddie. While Newt was taking money from Fannie and Freddie I was fighting against them.”

Former Fannie and Freddie executives dispute Gingrich’s description of his work at the mortgage giant, saying he was hired to strategize over identifying political friends on Capitol Hill who could help the company through a difficult legislative environment.

--Michael Gerson / Washington Post

“In the GOP’s whack-a-mole primary process, Newt Gingrich is about to get thumped by conservatives.

“The cause is likely to be climate policy. It is not only that Gingrich appeared next to Nancy Pelosi in a 2008 commercial calling for ‘action to address climate change.’ A year earlier, Gingrich argued, ‘The evidence is sufficient that we should move toward the most effective possible steps to reduce carbon-loading in the atmosphere.’ To that end, he supported ‘mandatory carbon caps combined with a trading system, much like we did with sulfur.’

“At the time, Gingrich’s position was not unique. John McCain had been the Senate sponsor of cap-and-trade legislation. His primary GOP opponents in the 2008 presidential campaign, Mike Huckabee and Mitt Romney, had endorsed greenhouse gas limits in various forms. When Tim Pawlenty was criticized for similar views this year, he noted, ‘Everybody in the race – at least the big names in the race – embraced climate change or cap-and-trade at one point or another. Every one of us.’

“There is a reason for such mass heresy: because the case once made by Gingrich and the others is perfectly reasonable….

“But Gingrich, in the manner of Cultural Revolution self-criticism, has now called his appearance with Pelosi the ‘dumbest single thing I’ve done in recent years.’ Some conservatives may dispute this claim, arguing that Gingrich’s previous support for the individual health insurance mandate and the Medicare prescription drug benefit are rivals….

“It is now a familiar pattern – the scandal of sanity….

“Some of this is just the nature of primaries, in which audiences applaud for purity. But there are other factors. Over the past few decades, the GOP has become a more conservative party. The development of self-consciously conservative media – on radio, cable and the Internet – has provided a welcome alternative to the bias of the mainstream media. It has also simplified many public debates into a contest of ideological teams…But ideological conformity easily becomes cultural isolation – the development of assumptions, language and views disconnected from the broad middle of American life….

“A political party that is serious about winning does not punish candidates for their virtues.”

--Another candidate facing intense scrutiny is Herman Cain. Good lord…he’s turned into a walking gaffe track. After screwing up royally in an interview with editors at the Milwaukee Journal-Sentinel over Libya, he went to Florida and said Republicans won back the House from the Democrats in 2008. It was 2010. “When the American people begin to ignite that American spirit, they make things happen, just like they made things happen in 2008 when the Republicans took back control of the House,” he declared.

Then Cain, in a stop in Miami’s Little Havana, sipped Cuban coffee and tasted Cuban cuisine. But in trying to say the coffee was delicious, he had no idea what the word is in Spanish. Then he asked, “How do you say delicious in Cuban?”

Oh brother. Earlier in the week, the Journal-Sentinel editors asked him a simple question. Did he support President Obama’s backing of the revolution that toppled Muammar Gaddafi?

“Okay...Libya,” Cain responded haltingly…nineteen seconds later he asked.

“President Obama supported the uprising, correct?” Cain said. “President Obama called for the removal of Gaddafi – just wanted to make sure we are talking about the same thing.” Then more staring at the ceiling. “Nope, that’s a different one,” he blurted out. “I gotta go back and see…I got all this stuff twirling around in my head.” Later, Cain said, “I would have done a better job of determining who the opposition is.”

Yikes. So after seeing the full video, I sent an e-mail to the Cain campaign, urging someone on the staff to show him my column and get him to glance at it every Saturday morning. I also pointed out to them that I had supported John McCain in no small way with my dollars in 2008, a fact you can easily find on the Web.

The purpose of me doing this was really an experiment just to see if I’d get a form e-mail in return, thanking me for my interest and here is how I can contribute to the Cain Train, etc., but I didn’t even receive an acknowledgement of the note. I mean if this campaign isn’t set up to do minimal robo responses, then it truly is as pathetic as the past few weeks have demonstrated.

The campaign of Herman Cain has also proved once again that those who think our political process for selecting a president should be shortened are sadly mistaken. A month ago I thought Cain might be for real, and I was not alone. Today, I think he’s a joke.

Not surprisingly, Cain’s negatives in a Washington Post-ABC News poll rose to 44% from just 27% in October among all adults…up from 17 to 36 percent among Republicans; 25 to 45 percent among all women.

--The U.S. is reportedly furious over security plans for the London Olympic Games next year, with Washington wanting to send 1,000 people of its own, including 500 FBI agents, but Britain’s Home Office said it is confident it can keep everyone safe. British Defense Secretary Philip Hammond is assuring everyone there would be a “full range of multilayered defense and deterrents” in place, including surface-to-air missiles.

--Oscar Ramiro Ortega-Hernandez, the Idaho man suspected of shooting at the White House last Friday, while President and Mrs. Obama were away, was nonetheless charged with attempted assassination. Good.

--Arizona Congresswoman Gabrielle Giffords gave her first extended interview since the January shooting that almost took her life and she was clearly struggling to form words. Giffords admitted she would not return to Congress until she is “better.” Her husband, astronaut Mark Kelly, was at her side and had to complete some of her thoughts.

It’s a touchy subject, but at what point does she step down until she is fully recovered? The constituents aren’t being served by her. 

--Editorial / New York Post…on Occupy Wall Street

“Mayor Bloomberg last night ordered a long-overdue fumigation of the festering mess at Zuccotti Park – and while the zealots likely will be winging about the decision for months, it remains that the two-month-long demonstration had long since devolved from a principled sit-down into a carnival of contempt both for the law and for common decency.

“The action followed crackdowns on Occupy sites around the country – and may well have been prompted by promises of a substantial escalation of the demonstration this Thursday.

“Threats to disrupt rush-hour subway service appeared on fliers around Lower Manhattan at the weekend.

“Just who was responsible for them wasn’t clear – but even the possibility of such a challenge to public safety had to be taken seriously, given the irresponsible acting out that has accompanied the Zuccotti Park demonstration from the outset.

“And, a possible subway shutdown notwithstanding, the demonstrators’ overweening disregard for their neighbors – residential and commercial alike – simply could no longer be tolerated.

“Public urination and defecation was a public-health problem from the beginning.

“All-night drumming, disruption of local business and sporadic forays out of the park to shut down traffic and such were a 24/7 presence.

“Then came the crime. Reports of rape, sexual abuse and garden-variety assault were fixtures….

“So, enough….

“To argue, as some have, that there can be no time limits on freedom of speech is specious nonsense. Others have rights, too, and it is not unreasonable that they be respected. 

“Mayor Bloomberg did that last night. Good for him.”

Public support for OWS has plummeted. A poll by Public Policy Polling found that 45% of respondents disagreed with the movement’s goals and only 33% supported them. A Siena Research Institute Poll found that, by a 2-1 margin, New Yorkers said that OWS did not represent the 99% of Americans that are not among the super-rich.

--I was in New Orleans twice last year as part of my Gulf oil spill thing and thoroughly enjoyed the place. I also know from other trips there it can be dangerous and you always have to keep your guard up. But I was surprised to see a Wall Street Journal report on just how high the murder rate is now. As of about ten days ago, there had been 164 homicides in New Orleans this year, compared to last year’s total of 172. Understand that New York City has 20 times the population and had 536 murders in 2010. “If New York had New Orleans’ homicide rate, more than 4,000 people would have been murdered there last year, about 11 every day.” 

--A major drug tunnel linking San Diego and Tijuana warehouses was discovered, leading to the seizure of 17 tons of marijuana. It ran the length of four football fields and was equipped with aisle path lighting and a ventilation system. [I’m assuming it was aisle path lighting…this being a fancy tunnel, you see.]

--NBC News hired Chelsea Clinton to become a full-time special correspondent. This is absurd. It’s one thing to hire the late-Tim Russert’s son, Luke. Tim Russert was never the news himself, after all. But, gee, err, Bill Clinton loves to be in the news, and, err, Hillary Clinton is in the news all the time, as she should be in her current position, so do you really think NBC will be objective in the least concerning Bill and Hillary, with daughter Chelsea in the employ? Then again, NBC hired Jenna Bush and MSNBC, Meghan McCain.

--Scientists have found the best evidence yet that Jupiter’s icy moon, Europa, has water just beneath the surface, as published in the journal Nature. Scientists have long suspected there could be a giant lake 100 miles deep about 10km below the ice crust. No doubt the Europa monster holds sway there.

--Last week I commented on the Russian launch of a craft headed to explore a Martian moon that got stalled in low-Earth orbit after its engines failed to fire. The probe will now crash back to Earth within weeks.

But on Monday in Kazakhstan, a Russian Soyuz rocket successfully blasted off for the International Space Station, a good thing since it was ferrying an American along with two Russians. This particular launch was originally scheduled for September but was delayed after the failure in August of a Russian unmanned cargo rocket similar to the one used for manned flights.

--As a story in Time magazine puts it, the real “1%” is the U.S. military. Back in 1945 as World War II was ending, 8.7% of the U.S. population was in the armed forces. Today it’s 0.5%, while the rest of us haven’t been asked by either of our wartime presidents to sacrifice in the least. Retired Army colonel and Medal of Honor recipient Jack Jacobs observed, “We love the troops, and you know why we love the troops? Because we don’t have to be the troops.”

--And next year, the Supreme Court is going to rule on an issue that will interest me more than the Court’s healthcare ruling, frankly; that being a case that claims the Stolen Valor Act, which makes it a crime to lie about receiving military medals, violates free speech. A majority of respondents to an Oct. 24-Nov. 2 online survey for Army Times and similar publications reveals that 84% say lying about military medals “should be a crime,” while 16% say we must preserve freedom of speech, even for liars. Through my subscriptions to Defense News and Army Times, I’ve read of too many cases of individuals faking being a hero but it’s going to be fascinating to see how the Court handles the issue.

---

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

God bless America.
---

Gold closed at $1726
Oil, $97.79…after hitting $102

Returns for the week 11/14-11/18

Dow Jones -2.9% [11796]
S&P 500 -3.8% [1215]
S&P MidCap -3.5%
Russell 2000 -3.4%
Nasdaq -4.0% [2572]

Returns for the period 1/1/11-11/18/11

Dow Jones +1.9%
S&P 500 -3.3%
S&P MidCap -5.1%
Russell 2000 -8.2%
Nasdaq -3.0%

Bulls 47.2
Bears 32.6   [Source: Chartcraft / Investors Intelligence]

Have a great Thanksgiving holiday.

And, hey, kids…yes, my iPad app is now available! I haven’t checked out the finished product myself as I still haven’t purchased an iPad, but some of you have told me you like it. Hopefully, in 2012, I’ll add some juice to it.

Also, I forgot to mention last time that Dr. Bortrum has a new column up, the one delayed by our snowstorm.

And college football fans, quite an upset Friday night that shakes up the rankings in a huge way…Iowa State 37…Oklahoma State 31…in OT.

Brian Trumbore



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-11/19/2011-      
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Week in Review

11/19/2011

For the week 11/14-11/18

[Posted 7:00 AM ET]

Europe, Washington and Wall Street

It’s amazing to think that right before our eyes European democracy has taken a huge hit and may yet suffer further ones before the people truly revolt. Think about it. Two nations, Italy and Greece, are now being run by unelected officials. Imagine an American president being shunted aside for, say, the leadership of Ben Bernanke and Timothy Geithner, who then start telling us not just what we should do, but have to do. Imagine unelected officials having the power to slash your pensions and salaries. Sure, you would think Congress would have to go along first, just like the respective Greek and Italian parliaments do to approve the plans the technocrats come up with, but the fact is the people had no hand in the selection of the people at the top. 

And when you look at Europe, as I’ve written throughout the debt crisis, it’s also about sovereignty, or lack thereof; of Greeks losing a large portion of theirs to bureaucrats outside their country who now oversee every financial decision the Greeks propose. Italy has now lost a part of their sovereignty as well. Ireland and Portugal after having to take bailouts. Spain is on the brink of losing theirs. More opinion on this topic below.

But for now the eurozone crisis worsened this week as technocrats Lucas Papademos of Greece and Mario Monti of Italy took charge, though in both cases their work is just beginning. Papademos, who polls show does have the approval of 3/4s of the people, needs to garner enough support in parliament for implementing further austerity measures that would then allow Greece to receive its next installment of aid from Greek Bailout I.

Italy, now under Monti and his caretaker government of unelected technocrats, needs to enact radical reforms that will not only jumpstart the economy, but convince the European Central Bank, Germany and France that they are worth supporting in one fashion or another. And Italy must act fast, within weeks, ditto Greece. For starters, also like Greece, Italy must tackle its massive problem of tax evasion, an estimated $133 billion each year, with an underground economy amounting to 16% of GDP. Greece is scheduled to hold new elections in February, but Monti wants to wait until 2013; or well over a year with an unelected official at the helm. Italy, as I’ve written ad nauseum recently, also has 300 billion euro of sovereign debt to roll over in 2012 and it cannot avoid default unless its interest rates come way down. Among the austerity measures the new Italian government must implement is a freeze on public sector salaries until 2014. Will the people accept this?

Then there is Spain. It has an election on Sunday and it is widely expected that Mariano Rajoy, a conservative, will win handily. He will have a mandate for change, and further austerity, but Spain’s issue is a total lack of transparency when it comes to its banks and its unique relationship with the ‘regions’ that control 1/3 of the national budget. No one has the slightest idea if the regions’ books are close to being accurate. Actually, they should know. They aren’t.

And the problems of Eastern Europe are waiting in the wings. A credit crunch at the worst possible time for them, and in the case of Hungary, now the contagion factor has hit and its bond auctions are going miserably. Hungary, while dutifully reducing its debt, is also beset by inconsistent policies so investors have little incentive to buy in.

In the U.K., one million young people aged 16-24 are unemployed for the first time ever. The youth here have an unemployment rate of 21.9% (it’s 46.2% in Spain!).  Overall unemployment in Britain is 8.3%, a 17-year high. The Bank of England cut its GDP forecast for 2011 and 2012 to just 1%, though at least inflation here, an EU high of 5%, is expected to fall rapidly.

European Commission President Jose Manuel Barroso said unemployment will remain at 10% in the eurozone the next two years. Growth was 0.2% in the third quarter, as announced this week, with Germany up 0.5% and France up 0.4%, quarter over quarter, but that was for the period ending Sept. 30. Virtually everyone is in agreement the eurozone will experience negative growth in the current quarter and early next year, i.e., the recession has begun on the Continent. All you need to know is that the Organization for Economic Cooperation and Development (OECD) is forecasting that Germany’s economy, supposedly the bulwark, will contract at an annualized rate of 4% for Q4.

Through it all, though, you have the paramount debate in Europe of who is responsible for whom? Who provides the backstop for the likes of Greece and Italy? It’s a broken record, but the details of the European Financial Stability Facility (EFSF) still haven’t been worked out, though the chief debate of the week is should the European Central Bank (ECB) come to the rescue of Italy, for example, and just keep buying Italian sovereign debt to keep their interest rates as low as possible, even though some question whether this goes against the EU treaty.

It’s about the still ongoing clash between France and Germany over just how much the ECB can intervene. German Chancellor Angela Merkel is holding fast that the ECB’s role should be limited, saying EU rules prohibit more forceful action.

French President Nicolas Sarkozy, as you long know by now, feels otherwise. The ECB should indeed be a “lender of last resort.”

Bank of England Governor Sir Mervyn King said, “Official meetings come and go, but the underlying global problems of trade imbalances, unsustainable levels of external and internal indebtedness and loss of competitiveness remain. Sovereign and bank funding concerns are symptoms of these underlying problems. The journey to a more balanced world economy will be long and arduous.”

Chancellor Merkel, in insisting the only way forward is to stick with austerity while revising the EU treaty to allow for greater economic policy coordination, said:

“Europe is in one of its toughest, perhaps the toughest, hour since World War II.”

But new ECB chief Mario Draghi reminds all the players that since the Greek credit crisis was first uncovered in 2009, there have been four plans billed as a comprehensive strategy to end the crisis, yet leaders have failed to implement the policy commitments emerging from each of the four programs. It’s pathetic.

The thought might also have crossed your mind, what about the IMF? Did you know it only has about $400 billion in available funds? Italy’s sovereign debt load is $2.5 trillion. How is the IMF going to get more money? Everyone looks to China, India, Brazil and maybe the Saudis to help refill the IMF’s coffers.

And this just in…British Prime Minister David Cameron met with Angela Merkel on Friday and the two didn’t reach agreement on anything, literally, beginning with Cameron’s repeated calls for “decisive” eurozone action, while Merkel insists on a “step-by-step” approach. The two also remain split on a proposal for a financial transaction tax, as well as the need to amend the EU treaty. At least they smiled at their press conference afterwards, so London doesn’t have to worry about being blitzed again.

So that’s where we stand in Europe this week…nothing has changed, except a few players, at a time when change was required two years ago. Plus now democracy has taken a big hit. Various opinion on this last item follows.

Editorial / Irish Independent

“Last week, it certainly looked as though the lamps were going out again across a continent whose feet are no longer just close to, but actually in, the fire.

“The gathering darkness is not just of the fiscal variety, for the fates of Italy and Greece suggest the lights are dimming on the concept of democracy in Europe. The intervention in the governance of Greece and Italy can, theoretically, be justified on the basis of the terrible mistakes both countries, and their chosen leaders, are guilty of. However, democracy is about far more than merely giving us the right to choose between variations of the same political marionettes.

“Its greatest value, instead, lies in the offering to citizens of the opportunity to develop a sense of self respect. The right to vote is the secular equivalent of a soul, for, in a democratic state, we can convince ourselves we are not merely serf-like economic units. Our masters in the bond markets, in contrast, believe that vassals are precisely the measure of what we are and they are not alone….

“(As Europe begins) to fracture under the weight of its political and fiscal bankruptcy, Churchill’s prescient ‘iron curtain’ speech of 1946 has acquired a new and terrible relevance. The sense that Sarkozy and Merkel are backing away from the mess their own expansionist dreams created was intensified last week by less than subtle hints about the need to ‘prune’ the eurozone. Rather like the old League of Nations, the ECB also appears to be tip-toeing away from a continent that, like Weimar Germany, appears to be incapable of reforming itself to save itself.

“As Europe retreats into the isolationism that characterized the protectionist economies of the Thirties, its leaders would be wise to ‘remember everything’ and keep their heads. Imposing Thirties-style solutions might not merely fail to solve current problems. It could also have Thirties-style consequences.”

Michael Ignatieff / Financial Times

“After economic default comes political default. Politicians in Greece and Italy have failed. Now it’s the technocrats’ turn. Having been pummeled by the bond markets and disgraced by their own intrigues, the Greek political class has turned to Lucas Papademos while the Italians have turned to Mario Monti. Both are skilled and reputable economists, but a skeptic can be forgiven for asking: why should ordinary citizens trust them?

“Both belong to the class of bankers and economists who dropped Europe into this mess in the first place. Both occupied commanding positions in European Union institutions that winked at a decade of Greek and Italian lies about their public finances. So why then are Greece and Italy turning to Eurocrats to pull them out? Because no one else has any authority left.

“Technocrats are supposed to have the mysterious authority of being above politics. But there is no ‘above politics.’ The crisis is political all the way through.

“The problems both countries face are not technocratic. The measures that must be taken are obvious enough: regain control of public finances, restart demand and make the two southern economies competitive again. The problem is political: how to push a reluctant bureaucracy to reform itself, how to corral parliamentarians into voting for tax increases, and how to persuade a hard-pressed people that the proposed sacrifices are fair and that there is light at the end of the tunnel.”

Philip Collins / London Times

“Everyone remembers where they were the day Aldous Huxley died. It didn’t get the publicity it warranted as he had the misfortune to die on November 22, 1963, the same day as John F. Kennedy. The elected politician trumped the prophet of technocracy, but it feels as if Huxley is having the last laugh. In Brave New World he imagined a grotesque society that, through sheer lack of interest, had dispensed with the need for politics. The arbitration of dispute had given way to arithmetical calculation conducted by experts who delivered the medicine to a grateful public.

“The eurozone crisis has not brought the brave new world, but there are now such people in it. Greece and Italy have emergency-service government by technocrat. The Greek Prime Minister, Lucas Papademos, a former vice-president of the European Central Bank, is even a visiting professor at the John F. Kennedy School of Government, the world’s leading institution for trying to distil government into a teachable formula.

“Mr. Papademos leads a three-party coalition with the sole task of keeping Greece in the eurozone until February, when a general election is planned. This will require another round of painful austerity. The brief rule of the economist-king will bring unpopularity without legitimacy. I wish him luck with that.

“In Italy, Mario Monti, a former European Commissioner for the Internal Market and Competition, has gathered a Cabinet of experts united only by the fact that none of them has ever done anything so grubby as treat with the electorate. The European political elites’ allergic reaction to the people has rarely been so transparent.

“But for all the talk about technocrats being ‘above’ politics, as if they occupied some Archimedean point of neutrality in which only correct decisions are made, there is no point in not speaking plainly. Technocracy is a suspension of democracy. Mr. Monti and Mr. Papademos are a capitulation to the fallacy that there is a body of knowledge, somewhere in the ether above democratic politics, that is disclosed only to those in the know.”

Editorial / London Times

“In the year that the Arab Spring toppled undemocratic regimes in one part of the world, the notion of democracy is being severely tested in another. The appointment of a civilian junta in Italy, by the country’s new unelected Prime Minister, is a profoundly worrying development. In Arab countries, democracy has blossomed out of dictators’ failure to pursue sustainable economics. In the eurozone, the failure of so many elected leaders to manage their economies sustainably now poses a challenge to democracy. A European Autumn has dawned, and it is chilling.

“A decade ago, it was fashionable to accept the claim made by Francis Fukuyama in his The End of History and the Last Man, that liberal democracy had triumphed over the state capitalism preached by China. Today, Chinese leaders are scolding the West for its profligate, short-termist approach. They argue that the West’s travails only prove that bureaucrats and engineers are better placed than elected politicians to secure long-term economic growth.

“This unpalatable ideology will only draw strength from the appointment of Lucas Papademos, a former official at the European Central Bank, to run Greece, and the arrival of Mario Monti, the former European Commissioner, as head of Italy. And by Mr. Monti’s decision to appoint an emergency Cabinet made up entirely of technocrats.

“Able as many of these individuals may be, they do not represent the will of the people. The true price of membership of the euro is becoming clear: having your finances, and your future, decided by people you have not chosen. The European Union has always had a democratic deficit, but this is a gulf….

“These are times that call for statesmanship: but precious little has been shown. Individually, most eurozone leaders continue to focus on their own re-election, rather than the long-term interests of their nations. Collectively, their dithering has turned a Greek solvency problem into a financial catastrophe for the entire Continent. They will not heed the increasingly desperate calls from the UK and U.S. to change course. Only Ireland stands out as a resolute government, taking tough decisions, with a brave and phlegmatic people.

“The single currency was always fundamentally incompatible with nation state sovereignty. Politicians’ refusal to admit this has cost Europe dear. It will be a tragedy if the world looks upon Italy and concludes that the Chinese model has triumphed. Democracy must not be a casualty of European political failure.”

Washington

For all the discouraging news in Europe, there have been some bright spots in the U.S. the last few months after the pain in the markets of August and September. The thing is, even then the economy had stabilized some, witness the flash estimate on third quarter GDP of 2.5%. Now economists are ratcheting up fourth quarter projections to generally 3% or higher. This is good. Heck, if Europe was only growing at around 2% and the U.S. at 3%, plus solid growth in Asia, the markets would be rockin’ and rollin’. Slow to moderate growth with little inflation, one would also assume, has long been the perfect environment for equities. 

As it is, retail sales in October were up a better than expected 0.5%, the October readings on industrial production and the leading economic indicators were up solidly, both also better than forecast, and there was even a little cause for optimism in housing (though don’t get carried away) as housing starts for last month were better than projected and a reading on mortgage delinquencies was also better.

And the inflation readings for October were okay. Producer prices fell 0.3%, unchanged ex-food and energy, while consumer prices fell 0.1%, up 0.1% on the core. For the last 12 months, consumer prices have risen 3.5%, but the core reading is just 2.1%.

So save for Europe and its many issues, we should be feeling a little better, right?

Not quite. We still have massive deficits, heading the way of Italy and Greece, and the congressional supercommittee that was tasked with coming up with a minimal deficit reduction plan of $1.2 trillion over the next ten years, with the cuts not actually beginning to take effect until 2013, is going nowhere fast.  The deadline is Nov. 23 and as I write there is zero chance the committee will do something heroic, like a needed $4 trillion package of revenue enhancements and major cuts to entitlements, as well as defense.

Instead, it seems very apparent that whatever the supercommittee comes up with, if anything, will be small. Maybe the markets don’t react much to this, but it’s part of my scenario that we will meet our deficit Waterloo in 2012 and it isn’t going to be pretty.

For now I’ll wait to see what the boys and girls do over the coming days. Perhaps Republican Sen. Lamar Alexander (Tenn.) summed it up best.

“This is about more than money. It’s about whether the president and the Congress can competently govern, about whether we can face up to the biggest problem facing our country and, working together, can we solve that problem?”

George Will / Washington Post

“The supercommittee’s difficulties are not shocking. This is shocking: Amid a darkening fiscal crisis, Energy Secretary Steven Chu, whose department has become a huge and incompetent venture capital fund, has not resigned as penance for complicity in the administration’s ‘green graft’ and crony capitalism.

“Equally incomprehensible: As the supercommittee seems about to leave government’s spending curve unbent, Transportation Secretary Ray LaHood, who should take a high-speed train into retirement, continues his multibillion-dollar mania for California’s San Francisco-to-Anaheim high-speed-rail project. In just three years, the projected price of it has tripled to $98.5 billion, and only ludicrous assumptions about passenger traffic present the project as profitable enough to attract private investors, who are supposed to pay most of the costs.

“ ‘The first lesson of economics is scarcity,’ writes economist Thomas Sowell ‘There is never enough of anything to fully satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.’ Next November we will learn whether the second lesson of politics is that adhering to the first lesson is eventually dangerous to incumbents.”

China

The slide in housing has begun in earnest, with some calling for a correction in home prices of 10% to 30%. For the month of October, prices fell in 33 of 70 cities monitored by the government, the worst performance since it expanded property curbs. But now can the government control the speed of decline?

[Housing construction accounts for 20% of steel and 6% of GDP.]

Meanwhile, some corporations are moving production inland to lower costs, like away from Guangzhou, but at least they aren’t moving production to Vietnam or Indonesia. The average monthly pay for “general workers” in Guangzhou is $281 vs. $114 in Ho Chi Minh City. [It’s $54 in Dhaka, Bangladesh.]

Lastly, appearing at the Asia-Pacific Economic Cooperation forum in Honolulu, Chinese President Hu Jintao vowed that his country would seek to increase imports as a way to help boost growth. Imports have indeed been surging. We want to see that.

Street Bytes

--Despite the respectable economic news, stocks took it on the chin owing to renewed uncertainty in Europe and the potential impact on U.S. banks should the crisis worsen even further as the Dow Jones lost 2.9% to 11796, while the S&P 500 fell 3.8% and Nasdaq dropped 4.0%. The latter two are now down again on the year.

I also can’t help but note an appearance by billionaire Mark Cuban on CNBC, wherein he totally trashed investing in the stock market, saying it was for “hackers,” [hedge fund types looking for nothing more than an edge] and that cash is “king.” Can’t say I disagree with Mr. Cuban.

--U.S. Treasury Yields

6-mo. 0.04% 2-yr. 0.28% 10-yr. 2.01% 30-yr. 2.99%

Foreign central banks purchased $38.8 billion in Treasury notes and bonds in September amidst the flight to safety that month. China’s holdings rose $11.3 billion to $1.148 trillion after falling a bit in August. [This does not include China’s holdings through London.] Japan, the second-largest holder, also increased its share.

Total net buying of U.S. assets, including equities, totaled $68.6 billion, the highest since November 2010. U-S-A! U-S-A! 

--Bankrupt brokerage MF Global’s record-keeping was so sloppy, there is no telling just where the missing $600 million in customer money is. Myriad federal regulators as well as criminal investigators are on the case and one thing is becoming increasingly clear; the final days were beyond chaotic as MF failed to register all the transactions that took place, forcing regulators to reconstruct the ledger. The bankruptcy trustee alone has a team of 200 accountants attempting to unwind the firm, in addition to 200 MF Global employees who were retained for this purpose. Some customers are finally getting access to a portion of their money…the lucky ones as much as 60%.

[Some MF customers are also ticked at JPMorgan Chase as they feel the bank is looking to cut ahead of them in the long line of creditors. JPMorgan argues it’s the lead creditor because it had provided MF with a revolving $1.2 billion line of credit before MF imploded.]

--UBS, Switzerland’s biggest bank, is looking to reduce headcount by a further 1,500-2,000, after announcing it would eliminate 2,000 back in July.

--Citigroup is looking to cut 3,000 positions, equal to about 1% of the staff. In both the case of Citi and UBS, investment banking and trading operations are being targeted.

--And Mizuho Financial Group Inc., Japan’s second-largest bank by assets, said it would cut 3,000 jobs as well by 2015, 10% of total staff.

--From the Financial Times:

“The Federal Housing Administration touts itself as the only U.S. government agency that ‘costs taxpayers nothing.’ That may soon change and was hardly true in the first place. Founded in the Depression, the FHA’s role in fostering home ownership expanded hugely after the crisis hobbled its private but government-sponsored brethren, Fannie Mae and Freddie Mac. Its share of new mortgages insured expanded six-fold to more than 30 percent of the market. But an audit released this week shows that it faces a 50 percent chance of exhausting its current reserves. If home prices fall sharply, auditors reckon it could require as much as $43 billion in support. Some experts say it may be more.”

The FHA has pitifully small reserves on a portfolio that is now $1.1 trillion.

--As for Fannie and Freddie, a congressional committee approved a measure that would slash pay for employees of the two mortgage giants, which is leading to an exodus of executives. Freddie CEO Charles E. Haldeman Jr., announced plans to leave next year. The House committee plan still must be approved by the full House (likely) but then move to the Senate (not as likely).

Rep. Spencer Bachus (R., Ala.) said, “Taxpayers own these companies and staff should be paid accordingly.” The CEOs at Fannie and Freddie have base salaries of $900,000, but stood to make as much as $6 million a year after receiving deferred pay and bonuses.

It’s an easy argument to make that the executives don’t deserve this kind of money, but you still have to be able to attract the right kind of talent or you potentially cost taxpayers further $billions on top of the $150 billion the two have already cost us. However, I’m in no way defending $6 million.

--Enbridge, a Canadian oil pipeline company, is buying a 50% stake in a pipeline that would run south from landlocked Cushing, Oklahoma to the Gulf of Mexico. Thus the oil would then be available for Gulf Coast refineries and change the supply/demand situation in the region and lessen the need for imports from Mexico and Venezuela.

The significance is that heretofore there was excess supply in and around the Cushing delivery point for West Texas Intermediate crude, the price of which I list at the end of the column each week. That has helped keep prices down vs. similar oil types, but now the move by Enbridge is an attempt to drain inventories.

So the price of West Texas immediately soared over $100 a barrel on the news, but then finished the week around $98.

--Meanwhile, regarding the controversial Keystone XL pipeline that the Obama administration is looking to delay until after the 2012 election, if it allowed it at all, TransCanada agreed to change the route of the pipeline to avoid the ecologically sensitive Sandhills region of Nebraska. Canada needs the crucial pipelines to export its growing oil sands production from northern Alberta; the third-largest reserves in the world. Daily production of 1.5 million barrels from the sands is expected to increase to 3.7 million in 2025.

--And one other item on the energy front. In August, the latest month for which Energy Department data is available, U.S. refiners exported a record average of 895,000 barrels a day of refined fuels, most going to Central and South America, though the Netherlands was the biggest single buyer, mostly diesel fuel.

But with incentives to produce diesel, that means less production of gasoline by the refiners and that equates to stubbornly high prices for U.S. consumers at the pump; in fact currently record prices for this time of year.

--The World Gold Council announced that central banks made their largest purchases of gold in the third quarter in decades. It was just last year that the banks became net buyers after two decades of heavy selling. The last time central banks were net buyers before 2010 was in 1988.

--Boeing secured the biggest order in its 100-year history after signing a $26 billion deal with Emirates for as many as 70 aircraft

--California is slated to take in $3.7 billion less in revenues than a budget crafted just a few months ago planned on, necessitating even more cuts to services, including a shorter school year. Tuition at state universities would also rise further. Needless to say, residents of all kinds are outraged.

--The “constitutionality” of the Obama health care law will be decided by the Supreme Court next spring (March…with a likely decision in June) and the nine Justices are going to allow an historic 5 ½ hours to hear oral arguments. [Normally it’s just one hour for each case presented before them.]

Editorial / Wall Street Journal

“The issue at the heart of the ObamaCare challenge brought by 26 states and the National Federation of Independent Business is whether the federal government has the constitutional authority, under the Commerce Clause, to order everyone in the United States to purchase health insurance – the so-called ‘individual mandate.’ If that is so, critics argue, then there is no limit to what commercial activity the government can command. And make no mistake: Future governments would  order specific ‘commercial’ activity under this authority.”

--Japan’s economy grew 1.5% in the third quarter over the second, or 6% annualized, but the trends for the fourth are nowhere near as good as industrial production is sliding anew.

--The Irish government is looking to cut 18,000 public sector workers by 2015. On the housing front, the peak-to-trough decline in residential prices is now expected to be 60%, an unprecedented collapse in wealth levels. [Japan’s property collapse of 90% in 1990 was on the commercial side.]

--China is resuming service with 54 bullet trains recalled over safety concerns following July’s deadly crash. Of course China doesn’t say how the trains have been fixed or modified.

--Shares in Rambus Inc. collapsed after it lost a $3.95 billion jury trial over its allegation that Micron Technology and Hynix Semiconductor colluded to manipulate prices of DRAMs, or memory chips, and thus impede Rambus’ business relationship with Intel. Rambus claims it would have made $3.95 billion in royalties without the alleged conspiracy. On Wednesday, shares in the company opened at $18, then the ruling came out and the stock dropped to $4, before finishing the week at $8.40.   

--Warren Buffett announced he has been buying a $10.7 billion stake in IBM, or 5.4% of the company, Buffett’s largest holding after Coca-Cola.

--Dell missed the Street’s revenue expectations and warned the flooding in Thailand creates uncertainty for the global economy as Thailand has some of the biggest makers of hard drives, a key PC component. Dell’s CFO Brian Gladden said he expected the flooding to be an issue for several quarters.

--Wal-Mart broke its string of same-store sales declines for its fiscal third-quarter, up 1.9% (ex-fuel) but margins declined, as did earnings, and it sees sales flat to up 2% for the fourth quarter.

--Home Depot, the world’s largest home-improvement chain, beat the Street’s earnings expectations on the heels of Hurricane Irene generated business.

--In the latest chapter in the Solyndra debacle, the Obama administration asked the company to delay announcing layoffs until after the November 2010 midterm elections that imperiled Democratic control of Congress, newly released e-mails show. The layoffs were announced Nov. 3, the day after the Nov. 2 vote.

Appearing before a Republican-controlled House committee on Thursday, Energy Secretary Steven Chu refused to apologize for the bad investment that cost the American taxpayer in excess of $500 million.

--The U.S. Postal Service said it lost $5.1 billion for the fiscal year ending Sept. 30, with losses only expected to accelerate in 2012. The Postal Service had a Friday deadline to pay $5.5 billion into the U.S. Treasury for future retiree health benefits but Congress was expected to grant a reprieve that only delays the day of reckoning. The losses are despite the fact the USPS has slashed 130,000 jobs over the last few years.

--Until 2005, portfolio manager Bill Miller was a superstar in the mutual fund business as his Legg Mason Capital Management Value Trust beat the S&P 500 for 15 consecutive years. And then the roof caved in and he was slaughtered. Over the last five years, Value Trust is ranked last of the 818 funds in its Lipper category. He’ll now retire in April, handing over full management to Sam Peters. Assets, once $21.5 billion, have dwindled to $2.8 billion.

--Jon B. Lovelace, who led the American Funds complex to its explosive growth from the 1980s through the mid-2000s, died. He was 84. The parent Capital Group Cos. now manages about $1.2 trillion.

--A Manhattan-based executive recruitment firm has been conducting a survey of holiday parties for the last 23 years and an all-time high 97% of companies threw them in 1996 and 1997. Only 74% will do so this year. Said the survey coordinator, Dale Winston, “once a company does away with them, parties rarely get back in the budget.” [Crain’s New York Business]

--I never liked clothing retailer Benetton and now I vow never to walk into one after their despicable ad campaign showing world leaders kissing (using Photo Shop).

--My Fujian, China holding reported earnings this week that were a little disappointing, but at the same time the company finally made the feedstock acquisition it’s been talking about all year. Some think they overpaid; I haven’t had the time to study it myself yet, but I’m having dinner with the CFO in New York on Monday. For those doubting if the company and its healthy cash position were real, however, the acquisition should have at least allayed any of those fears. The CFO is seeking my advice on a different aspect of the company, which is also encouraging.

That said I’m impatient like every other shareholder at this point. Conservatively, even given the dreadful sentiment towards Chinese small caps these days, the stock should be at least 2 ½ times what it is today.

Some of these small cap stories are amazing. I also have a much smaller position in China I’ve touched on before, a food company that is like a mini-ADM. For the past three months I’ve wondered if it was still alive because literally it didn’t trade, day after day…so I’d buy 100 shares just to make sure I could still do so. Until Friday, when someone else suddenly bought 200, I was the only buyer in the whole freakin’ world for like 10 weeks! And this is a company whose reported third quarter revenues went from $20 million to $86 million, while its annualized earnings give it a P/E of well under two (just like my Fujian play). I just keep believing that in the next up cycle these stocks will once again be recognized…the survivors of the Great Purge.

Foreign Affairs

Iran: In a meeting on Friday with Israeli Defense Minister Ehud Barak, U.S. Defense Secretary Leon Panetta said he would raise American concerns over the unintended consequences of a strike on Iran’s nuclear facilities. Panetta reiterated the most effective way to confront Iran is through increased sanctions and diplomatic pressure.

A foreign affairs adviser to Iranian Supreme Leader Ali Khamenei said that he did not think a military attack on Iran was imminent.

Meanwhile, Washington and the West wanted the International Atomic Energy Agency’s 35-member board to approve a clear resolution condemning Iran, including referral to the U.N. Security Council, but only received the first part. The new IAEA resolution calls on Iran to clear up outstanding questions about its nuclear capabilities, with Russia and China sharing in the concern, but it’s toothless.  The two had criticized the IAEA for releasing its latest report that Russia says is just a “compilation of well-known facts.” Moscow’s foreign ministry office even compared the IAEA’s report to the false intelligence on Saddam Hussein’s nuclear activities used to justify the invasion of Iraq.

But while the negotiating takes place, behind the scenes the covert war continues, with Iran conceding that one of the 17 men killed in a huge explosion last weekend at a Revolutionary Guard munitions depot was a key commander who headed Iran’s missile program, Gen. Hasan Moghaddam, while the state news agency reported that scientists had discovered a new computer virus in their systems, a more sophisticated version of the Stuxnet worm that was designed to infect Iran’s centrifuges.

Iran claimed the massive explosion, that could be felt over 25 miles away in Tehran, was an accident, but most believe it is part of an ongoing CIA / Mossad operation to eliminate Iran’s nuclear weapons threat.

Syria: The Arab League issued a three-day ultimatum insisting that Syria halt the violence against protesters or face further economic sanctions, though an earlier ultimatum had zero impact on President Bashar al-Assad’s crackdown.

What has had an impact is the rebel Free Syrian Army, created back in July by defectors from the regular army. It has formed a temporary military council to oust Assad and protect civilians. A statement from the council said it aims to “bring down the current regime, protect Syrian civilians from its oppression, protect private and public property, and prevent chaos and acts of revenge when it falls.”

Free Syrian Army fighters attacked a military intelligence base in a Damascus suburb, killing six soldiers in their boldest move yet.

Separately, Turkey is considering the establishment of a no-fly zone inside Syria, as Turkish Prime Minister Erdogan called on the world to “hear the screams” from Syria and act urgently to end the violence.

“The lack of reaction to massacres in Syria is causing irreparable wounds in the conscience of humanity,” he said.

A key leader of the Syrian opposition weighed in. “The Syrian people would accept intervention coming from Turkey, rather than from the West, if its goal was to protect the people. We may ask more from Turkey as a neighbor.” [London Times]

Russia’s Foreign Minister Sergei Lavrov concluded, “This is all looking very much like a civil war,” while Jordan’s King Abdullah II became the first Arab leader to publicly call for Assad to quit, after which Assad supporters stormed the Jordanian embassy. Earlier, thugs attacked the embassies of Qatar, Saudi Arabia and Turkey.

Michael Young / Daily Star

“The mendacity, the arrogance, the condescension, the surreal levels of criminality, have all been in full view these past months, as the Assads have slaughtered their people without flinching. The Arab states gave the Syrian regime ample time to stifle the dissension, until they saw that Bashar Assad was going to lose anyway. Panic has set in as the intifada veers toward a Sunni-Alawite war [Ed. Syria is majority Sunni, but the Assads head the minority Alawite sect], which would have dire repercussions for Syria’s neighbors, and the Arab world in general.

“One should have faith. A people that has mostly avoided resorting to arms through eight months of carnage, is one wise to the ways of its tormentors. Syrians have the Assads to thank for that. Having endured for four decades the whims of two sordid families, they know what to expect. See through the bully, and you’re on your way to deflating him. Assad dreams of containing the Syrian intifada and imposing a bogus reform project that consolidates his authority; but to many Syrians he is simply irrelevant. Recognition of that fact was implied in the advice of King Abdullah of Jordan that Bashar Assad step down.

“It is difficult to predict what will happen next in Syria. But the Assad order has been stripped down to its carcass, left only with the brutality of Alawite solidarity, fortified by mounting Arab isolation. The ogre is stammering, meaning the end cannot be too far off.”

Pakistan: U.S. missiles reportedly took out 18 Taliban militants at a base on the Afghan border as five drones fired up to 10 rockets. That would have been rather impressive to watch from the security of a hill overlooking the base. Good job, controllers.

Afghanistan: President Hamid Karzai is insisting the U.S. and NATO stop carrying out night raids on Afghan homes before he will sign a strategic partnership agreement, Karzai long arguing night raids pose a disproportionate risk to civilians.

Egypt: The ruling military council now says a presidential election will not occur before 2013. Sec. of State Hillary Clinton responded to this in a speech:

“If, over time, the most powerful political force in Egypt remains a roomful of unelected officials, they will have planted the seeds for future unrest, and Egyptians will have missed a historic opportunity.”

But a month earlier, Clinton approved of an extended timetable for electing a president. What’s up with that, Hillary?

Friday, tens of thousands of Islamists protested in Tahrir Square against the military council’s attempts to carve out special powers (covered here a few weeks ago), even after a new constitution is put in place.

Christians in the Middle East: “A Gathering of Catholic patriarchs in the Middle East urged Christians Thursday to hold onto their lands and holy places despite the ongoing popular uprisings in the Arab world, which have raised fears about the presence of Christians in the region. They also called for a unified Easter holiday to boost Christian unity [Ed: Eastern Orthodox and Western Christian churches using different calendars]….

“Thousands of Christians fled Iraq following the U.S.-led invasion of 2003 fueling worries over the fate of Christians in the region [Ed. a common theme of mine over the years], while recent attacks on Christian Coptic churches in Egypt have only enhanced these fears….

“The patriarchs stressed the need for national dialogue, respect of human rights and national reconciliation.” [Daily Star]

Amen.

China: On Thursday, President Obama vowed to expand U.S. influence in the Asia-Pacific region and “project power and deter threats to peace” in that part of the world.

“The United States is a Pacific power, and we are here to stay,” he declared in a speech to the Australian Parliament.

“Let there be no doubt: in the Asia-Pacific in the 21st century, the United States of America is all in,” Obama added. “With most of the world’s nuclear powers and some half of humanity, Asia will largely define whether the century ahead will be marked by conflict or cooperation, needless suffering or human progress.”

As I noted last week, Obama also announced up to 2,500 Marines will eventually be rotating out of northern Australia. It’s a great move. Australia is as good an ally as we have these days and will be increasingly important over the coming decades.

Benny Avni / New York Post

“President Obama is pushing all the right buttons on his Pacific trip – letting friend and foe alike know that ‘the United States is a Pacific power, and we are here to stay.’

“Much follow-through will be needed to fully calm nerves in a region where fears of China are soaring, but this was certainly a good week for America and for everyone in the Asian Pacific realm.

“By announcing that he’ll deploy 2,500 Marines in friendly Australia, the president showed that America intends to ‘project power and deter threats to peace’ in the region.

“Sure, budget-conscious types will kick and scream. But deploying troops in troubled regions is more cost-effective than sending them in after problems arise….

“No one can mistake Obama for a warmonger or for adopting a sledge-hammer mentality in world affairs. Speaking of the planned trade pacts with our allies, he assured everyone that ‘the notion that we exclude China is mistaken’ (although aides insist that, to be included, Beijing must raise the value of its currency and adopt other fair-trade practices – which it won’t).

“China was also careful to avoid inflammatory rhetoric; its foreign ministry cautiously responded that Obama’s promises to deploy American troops in the region ‘may’ not be ‘appropriate.’….

“Yet China and America are shadow-boxing – dancing around the ring while avoiding any trade of serious punches.

“And as long as Obama is going to stay in the ring, as he promised his regional listeners he would, this was a good round. Above all else, he identified the Pacific (and, implicitly, the competition with China) as a national-security imperative.

“But tougher rounds are coming.”

And to that end, Premier Wen Jiabao said on Friday that “outside forces” had no excuse to get involved in a complex dispute over the South China Sea, a veiled warning to Washington.

But, earlier, at the Asean (Association of Southeast Asian Nations) summit on Bali, he offered $10 billion in loans and lines of credit, saying China only wanted to be friends with whom it shares interests in the critical body of water that is potentially rich in energy resources.

[More on this topic in an upcoming “Hot Spots” column.]

On a totally different matter, 18 kindergarten students were killed on their way to class in China’s Gansu province on Wednesday. I saw a picture of the crash, which also killed two adults and ignited public anger across the country, and understand this was a minibus with nine seats, but it was jammed with 62 children when it crashed head-on with a truck on a rural road.

And, lastly, dissident Ai Weiwei paid the government $1.33 million towards his tax bill that Beijing authorities say Ai owes them. Ai said he felt like he had paid a ransom. By paying what he did, though, he gets to challenge the tax bill in court. Gee, I wonder who will win that one?

Burma: President Obama announced on Friday that Sec. of State Clinton would be the first secretary of state in more than 50 years to visit when she travels to Myanmar in December.

“For decades Americans have been deeply concerned about the denial of basic human rights for the Burmese people,” Obama said. “The persecution of democratic reformers, the brutality shown toward ethnic minorities and the concentration of power in the hands of a few military leaders has challenged our conscience and isolated Burma from the United States and much of the world.”

But now there were “flickers of progress” as the president and Parliament in Myanmar have taken steps toward reform; enough so that dissident Aung San Suu Kyi declared that she and her party would rejoin the political system.

Russia: In an annual meeting with reporters, Prime Minister Vladimir Putin showed signs he will be his usual prickly self when he is re-elected president, reiterating his warnings of four years ago that Russia would target U.S. missile defense installations if they were close to its borders. “We have repeatedly said that the establishment of the missile defense shield is a threat to our nuclear potential, and we will be compelled to respond, but no one is listening to us.” Putin added that he didn’t believe U.S. assertions the shield was aimed at ‘rogue’ states such as Iran. Russia’s parliamentary elections are just three weeks away.

On the demographic front the disaster continues, only in this case it’s about the 1.25 million Russians who have left the country in the last 10 years, comparable to the outrush in the wake of the Bolshevik Revolution, a Russian statistician told a Moscow radio station. These days most leave because they are feeling pinched economically; like the Russian nuclear physicist who told the Los Angeles Times’ Sergei L. Loiko that “he couldn’t survive on the $450 monthly salary of a senior researcher at the Institute of Physical Chemistry of the Russian Academy of Sciences.”

Random Musings

--This week’s polls:

In a Fox News national survey, Newt Gingrich surged from 12% to 23% since the last Fox poll in late October and is now ahead of Mitt Romney, who is at 22%. Herman Cain received 15% and Ron Paul was fourth with 8%. In a hypothetical matchup, Romney leads Obama 44%-42%, while Obama leads Cain 47%-38%, and Gingrich 46%-41%.

Romney leads a New Hampshire poll of probable primary voters with 40%, according to a Bloomberg News survey, with Ron Paul second at 17%, while Gingrich is third at 11%. But, 66% of Romney backers said they could be persuaded to support another candidate.

[In October 1983, then Vice President Walter Mondale had 44% of the vote in New Hampshire, with Colorado Sen. Gary Hart at 6%. On Feb. 28, 1984, Hart defeated Mondale in the state by 10 points. In September 1999, George W. Bush had a 33-point lead over John McCain, but McCain would then beat Bush in New Hampshire, 49-30. Some see a parallel to Jon Huntsman, who is at 7% in the Bloomberg News poll today.]

A Bloomberg poll of Iowa primary voters has Herman Cain ahead with 20%, followed by Paul at 19%, Romney 18%, and Gingrich 17%.

In a USC Dornsife/Los Angeles Times poll of California Republicans, Romney had 27%, followed by Cain at 20%, Gingrich at 14% and Paul at 6%. Rick Perry polled just 3% in this one. But in an Obama-Romney matchup in the state, Obama cleans up, 52% to 35%.

I just have to give major kudos to a friend of mine down in Austin, Texas, Liz S., who first told me when Perry was thinking of running that he was a ‘nitwit.’ Boy, I thought Perry was going to be pretty strong. I should have listened to Liz early on. It also seems I saw him at the Iowa State Fair when he was at his very peak, having just officially announced.

--Meanwhile, with rising poll numbers comes greater scrutiny, as you’ve only heard 100 times already this campaign season, and it’s Newt Gingrich’s turn. Aside from all his personal baggage, professionally, he had to defend himself over at least $1.6 million in payments for consulting contracts with Freddie Mac, though to semi-defend him the payments were over a decade, 1999-2008. Gingrich explained it by saying he provided “strategic advice for a long period of time” after he resigned as Speaker of the House following the 1998 elections. Gingrich also added that his experience with Freddie Mac should be viewed as being valuable.

“It reminds people that I know a great deal about Washington. We just tried four years of amateur ignorance, and it didn’t work very well. So having someone who actually knows Washington might be a really good thing.”

Republican rival Michele Bachmann responded: “It doesn’t matter if its $300,000 or $2 million, the point is the money that was taken by Newt Gingrich was taken to influence Republicans in Congress to be in support of Fannie and Freddie. While Newt was taking money from Fannie and Freddie I was fighting against them.”

Former Fannie and Freddie executives dispute Gingrich’s description of his work at the mortgage giant, saying he was hired to strategize over identifying political friends on Capitol Hill who could help the company through a difficult legislative environment.

--Michael Gerson / Washington Post

“In the GOP’s whack-a-mole primary process, Newt Gingrich is about to get thumped by conservatives.

“The cause is likely to be climate policy. It is not only that Gingrich appeared next to Nancy Pelosi in a 2008 commercial calling for ‘action to address climate change.’ A year earlier, Gingrich argued, ‘The evidence is sufficient that we should move toward the most effective possible steps to reduce carbon-loading in the atmosphere.’ To that end, he supported ‘mandatory carbon caps combined with a trading system, much like we did with sulfur.’

“At the time, Gingrich’s position was not unique. John McCain had been the Senate sponsor of cap-and-trade legislation. His primary GOP opponents in the 2008 presidential campaign, Mike Huckabee and Mitt Romney, had endorsed greenhouse gas limits in various forms. When Tim Pawlenty was criticized for similar views this year, he noted, ‘Everybody in the race – at least the big names in the race – embraced climate change or cap-and-trade at one point or another. Every one of us.’

“There is a reason for such mass heresy: because the case once made by Gingrich and the others is perfectly reasonable….

“But Gingrich, in the manner of Cultural Revolution self-criticism, has now called his appearance with Pelosi the ‘dumbest single thing I’ve done in recent years.’ Some conservatives may dispute this claim, arguing that Gingrich’s previous support for the individual health insurance mandate and the Medicare prescription drug benefit are rivals….

“It is now a familiar pattern – the scandal of sanity….

“Some of this is just the nature of primaries, in which audiences applaud for purity. But there are other factors. Over the past few decades, the GOP has become a more conservative party. The development of self-consciously conservative media – on radio, cable and the Internet – has provided a welcome alternative to the bias of the mainstream media. It has also simplified many public debates into a contest of ideological teams…But ideological conformity easily becomes cultural isolation – the development of assumptions, language and views disconnected from the broad middle of American life….

“A political party that is serious about winning does not punish candidates for their virtues.”

--Another candidate facing intense scrutiny is Herman Cain. Good lord…he’s turned into a walking gaffe track. After screwing up royally in an interview with editors at the Milwaukee Journal-Sentinel over Libya, he went to Florida and said Republicans won back the House from the Democrats in 2008. It was 2010. “When the American people begin to ignite that American spirit, they make things happen, just like they made things happen in 2008 when the Republicans took back control of the House,” he declared.

Then Cain, in a stop in Miami’s Little Havana, sipped Cuban coffee and tasted Cuban cuisine. But in trying to say the coffee was delicious, he had no idea what the word is in Spanish. Then he asked, “How do you say delicious in Cuban?”

Oh brother. Earlier in the week, the Journal-Sentinel editors asked him a simple question. Did he support President Obama’s backing of the revolution that toppled Muammar Gaddafi?

“Okay...Libya,” Cain responded haltingly…nineteen seconds later he asked.

“President Obama supported the uprising, correct?” Cain said. “President Obama called for the removal of Gaddafi – just wanted to make sure we are talking about the same thing.” Then more staring at the ceiling. “Nope, that’s a different one,” he blurted out. “I gotta go back and see…I got all this stuff twirling around in my head.” Later, Cain said, “I would have done a better job of determining who the opposition is.”

Yikes. So after seeing the full video, I sent an e-mail to the Cain campaign, urging someone on the staff to show him my column and get him to glance at it every Saturday morning. I also pointed out to them that I had supported John McCain in no small way with my dollars in 2008, a fact you can easily find on the Web.

The purpose of me doing this was really an experiment just to see if I’d get a form e-mail in return, thanking me for my interest and here is how I can contribute to the Cain Train, etc., but I didn’t even receive an acknowledgement of the note. I mean if this campaign isn’t set up to do minimal robo responses, then it truly is as pathetic as the past few weeks have demonstrated.

The campaign of Herman Cain has also proved once again that those who think our political process for selecting a president should be shortened are sadly mistaken. A month ago I thought Cain might be for real, and I was not alone. Today, I think he’s a joke.

Not surprisingly, Cain’s negatives in a Washington Post-ABC News poll rose to 44% from just 27% in October among all adults…up from 17 to 36 percent among Republicans; 25 to 45 percent among all women.

--The U.S. is reportedly furious over security plans for the London Olympic Games next year, with Washington wanting to send 1,000 people of its own, including 500 FBI agents, but Britain’s Home Office said it is confident it can keep everyone safe. British Defense Secretary Philip Hammond is assuring everyone there would be a “full range of multilayered defense and deterrents” in place, including surface-to-air missiles.

--Oscar Ramiro Ortega-Hernandez, the Idaho man suspected of shooting at the White House last Friday, while President and Mrs. Obama were away, was nonetheless charged with attempted assassination. Good.

--Arizona Congresswoman Gabrielle Giffords gave her first extended interview since the January shooting that almost took her life and she was clearly struggling to form words. Giffords admitted she would not return to Congress until she is “better.” Her husband, astronaut Mark Kelly, was at her side and had to complete some of her thoughts.

It’s a touchy subject, but at what point does she step down until she is fully recovered? The constituents aren’t being served by her. 

--Editorial / New York Post…on Occupy Wall Street

“Mayor Bloomberg last night ordered a long-overdue fumigation of the festering mess at Zuccotti Park – and while the zealots likely will be winging about the decision for months, it remains that the two-month-long demonstration had long since devolved from a principled sit-down into a carnival of contempt both for the law and for common decency.

“The action followed crackdowns on Occupy sites around the country – and may well have been prompted by promises of a substantial escalation of the demonstration this Thursday.

“Threats to disrupt rush-hour subway service appeared on fliers around Lower Manhattan at the weekend.

“Just who was responsible for them wasn’t clear – but even the possibility of such a challenge to public safety had to be taken seriously, given the irresponsible acting out that has accompanied the Zuccotti Park demonstration from the outset.

“And, a possible subway shutdown notwithstanding, the demonstrators’ overweening disregard for their neighbors – residential and commercial alike – simply could no longer be tolerated.

“Public urination and defecation was a public-health problem from the beginning.

“All-night drumming, disruption of local business and sporadic forays out of the park to shut down traffic and such were a 24/7 presence.

“Then came the crime. Reports of rape, sexual abuse and garden-variety assault were fixtures….

“So, enough….

“To argue, as some have, that there can be no time limits on freedom of speech is specious nonsense. Others have rights, too, and it is not unreasonable that they be respected. 

“Mayor Bloomberg did that last night. Good for him.”

Public support for OWS has plummeted. A poll by Public Policy Polling found that 45% of respondents disagreed with the movement’s goals and only 33% supported them. A Siena Research Institute Poll found that, by a 2-1 margin, New Yorkers said that OWS did not represent the 99% of Americans that are not among the super-rich.

--I was in New Orleans twice last year as part of my Gulf oil spill thing and thoroughly enjoyed the place. I also know from other trips there it can be dangerous and you always have to keep your guard up. But I was surprised to see a Wall Street Journal report on just how high the murder rate is now. As of about ten days ago, there had been 164 homicides in New Orleans this year, compared to last year’s total of 172. Understand that New York City has 20 times the population and had 536 murders in 2010. “If New York had New Orleans’ homicide rate, more than 4,000 people would have been murdered there last year, about 11 every day.” 

--A major drug tunnel linking San Diego and Tijuana warehouses was discovered, leading to the seizure of 17 tons of marijuana. It ran the length of four football fields and was equipped with aisle path lighting and a ventilation system. [I’m assuming it was aisle path lighting…this being a fancy tunnel, you see.]

--NBC News hired Chelsea Clinton to become a full-time special correspondent. This is absurd. It’s one thing to hire the late-Tim Russert’s son, Luke. Tim Russert was never the news himself, after all. But, gee, err, Bill Clinton loves to be in the news, and, err, Hillary Clinton is in the news all the time, as she should be in her current position, so do you really think NBC will be objective in the least concerning Bill and Hillary, with daughter Chelsea in the employ? Then again, NBC hired Jenna Bush and MSNBC, Meghan McCain.

--Scientists have found the best evidence yet that Jupiter’s icy moon, Europa, has water just beneath the surface, as published in the journal Nature. Scientists have long suspected there could be a giant lake 100 miles deep about 10km below the ice crust. No doubt the Europa monster holds sway there.

--Last week I commented on the Russian launch of a craft headed to explore a Martian moon that got stalled in low-Earth orbit after its engines failed to fire. The probe will now crash back to Earth within weeks.

But on Monday in Kazakhstan, a Russian Soyuz rocket successfully blasted off for the International Space Station, a good thing since it was ferrying an American along with two Russians. This particular launch was originally scheduled for September but was delayed after the failure in August of a Russian unmanned cargo rocket similar to the one used for manned flights.

--As a story in Time magazine puts it, the real “1%” is the U.S. military. Back in 1945 as World War II was ending, 8.7% of the U.S. population was in the armed forces. Today it’s 0.5%, while the rest of us haven’t been asked by either of our wartime presidents to sacrifice in the least. Retired Army colonel and Medal of Honor recipient Jack Jacobs observed, “We love the troops, and you know why we love the troops? Because we don’t have to be the troops.”

--And next year, the Supreme Court is going to rule on an issue that will interest me more than the Court’s healthcare ruling, frankly; that being a case that claims the Stolen Valor Act, which makes it a crime to lie about receiving military medals, violates free speech. A majority of respondents to an Oct. 24-Nov. 2 online survey for Army Times and similar publications reveals that 84% say lying about military medals “should be a crime,” while 16% say we must preserve freedom of speech, even for liars. Through my subscriptions to Defense News and Army Times, I’ve read of too many cases of individuals faking being a hero but it’s going to be fascinating to see how the Court handles the issue.

---

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

God bless America.
---

Gold closed at $1726
Oil, $97.79…after hitting $102

Returns for the week 11/14-11/18

Dow Jones -2.9% [11796]
S&P 500 -3.8% [1215]
S&P MidCap -3.5%
Russell 2000 -3.4%
Nasdaq -4.0% [2572]

Returns for the period 1/1/11-11/18/11

Dow Jones +1.9%
S&P 500 -3.3%
S&P MidCap -5.1%
Russell 2000 -8.2%
Nasdaq -3.0%

Bulls 47.2
Bears 32.6   [Source: Chartcraft / Investors Intelligence]

Have a great Thanksgiving holiday.

And, hey, kids…yes, my iPad app is now available! I haven’t checked out the finished product myself as I still haven’t purchased an iPad, but some of you have told me you like it. Hopefully, in 2012, I’ll add some juice to it.

Also, I forgot to mention last time that Dr. Bortrum has a new column up, the one delayed by our snowstorm.

And college football fans, quite an upset Friday night that shakes up the rankings in a huge way…Iowa State 37…Oklahoma State 31…in OT.

Brian Trumbore