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11/26/2011

For the week 11/21-11/25

[Posted 6:00 AM ET]

Europe, Washington and Wall Street

It was another dreadful week for world markets as fears of a second global recession carried the day yet again, this time precipitated not just by further European inaction in coming up with a solution to attack both the sovereign debt crisis as well as recapitalize the banks, but an unbelievably bad German bond (bund) auction, whereby the Germans tried to auction off 6 billion euro in 10-year paper and only 3.6 billion was scooped up by private investors. The German 10-year shot up to 2.26%, above Britain’s 2.19% yield for like maturity, a first. [By week’s end Germany was still at 2.26%, but the U.K. was at 2.29%.]

The obvious conclusion being if the one country that is supposed to somehow save the continent and the eurozone, the healthiest economy to boot, can’t find buyers for its quality bonds, who the heck is going to step up and buy all the crappola hitting the market in the next few years? And this while the European economy is tanking and by virtually every expert already in recession.

So the one issue that keeps coming up is this. The European Central Bank has to be the lender of last resort and somehow save the PIIGS [Portugal, Ireland, Italy, Greece and Spain] for starters, as well as the big banks with a huge exposure to all of them, but this is an impossible task. Reminder, the original European Financial Stability Facility (or Fund)…EFSF…was for 440 billion euro but has only about 235bn left. That was nonetheless supposed to be enough to backstop Greece, Ireland and Portugal, the three countries already being bailed out. But then contagion set in, in the case of Italy and Spain. The EFSF, then, per an Oct. 26 agreement, was to be leveraged up to perhaps 1.4 trillion, but Italy’s sovereign debt alone is 1.9 trillion euro. And we aren’t talking about what to do with the banks that need 100s of billions of euro in new capital themselves.

But throughout the latest round of discussions between German Chancellor Angela Merkel and French President Nicolas Sarkozy, Merkel continued to make it exceedingly clear that she would not accept a greatly expanded role for the ECB whereby, perhaps with IMF help (though that outfit has limited resources of its own at this stage), it could just print 4 trillion in euro and paper the world with it…end of crisis! 

There is another EU summit on Dec. 9 and this is a new target date to watch. I mean, folks, this all started in the spring of 2010 and could have been nipped in the bud back then. But for now, Merkel insists there is no bazooka, no “big bang,” as she said.

“We have frittered away political trust in the euro,” the chancellor added. “That is why I deeply believe that you can’t restore this confidence with purely financial means, but that only a coherent political response can create this confidence.”

Well, heck, Angela, let’s start with the fact that if you are looking for political solutions, both Greece and Italy are now being run by unelected technocrats!

At least Spain, in electing Mariano Rajoy last weekend, has a politician to deal with the many issues his nation faces.

“Hard times lie ahead,” Rajoy told supporters. “We are going to govern in the most delicate situation Spain has faced in 30 years.”

As to the ever present idea of eurobonds and greater ECB involvement in bailing out troubled economies, Merkel is concerned that joint bonds would reduce pressure on member states to stick to their austerity programs and reduce their debt loads (let alone that existing EU treaties prevent the ECB from buying bonds as the lender of last resort).

Editorial / Financial Times…on the eurobond concept.

“Peripheral countries would benefit disproportionately, thereby helping to ease overall debt burdens. The weighted average of the eurozone’s borrowing costs is 4.7%. Greece could cut its interest bill by 15% of GDP in this way, according to Capital Economics. Germany’s interest bill would rise proportionately, of course – by some 2.5 percent of GDP. What’s not to like?

“Moral hazard, for starters. By offering the likes of Greece or Italy such rewards, eurozone bonds could remove these countries’ incentive to regain lost competitiveness. Nor would these bonds reduce the stock of existing debt. Unless there was a degree of fiscal union and budgetary enforcement in the eurozone that trampled on national sovereignty, investors would rightly be skeptical about buying such instruments. If the yield on eurozone bonds was to become significantly higher than that on debt of the bloc’s triple A states, the project would crumble.

“And then there is the clinching argument – that Germany will not accept them. An ersatz form of eurozone bond issued by the European Financial Stability Facility already exists. Anything more ambitious is a non-starter until the crisis has abated.”

Mohamed El-Erian / Financial Times

“Just when you think the European crisis cannot get much worse, Wednesday’s shunned Bund auction showed that it can. With this, the risks for the global economy as a whole, and for virtually every country, increase materially.

“Given this week’s developments, there should be no doubt in anyone’s mind that what started out as a dislocation in the periphery of the eurozone has now decisively breached the firewalls protecting the outer core and is seriously threatening the inner core. Unless this is countered quickly, European policymakers will find it even harder to catch up with the crisis, let alone get ahead of it.

“Europe must still stabilize its sovereign debt situation. But this is now far from sufficient. Policymakers must also move quickly to contain banking sector frailties, and do so using a more coherent approach to the trio of capital, asset quality and liquidity.

“In the eyes of the markets, the capital cushion of Europe’s banking system as a whole is no longer sufficient to support its balance sheet. This concern is not limited to the markets. Judging from their eagerness to dispose of assets, bank managements also believe that balance sheet delevering is key to the institutions’ survival and wellbeing….

“Problems in the banking sector have a nasty habit of accelerating and amplifying crises. Indeed, they significantly increase the risk of policymakers losing control. It is therefore critical for Europe to add this policy challenge to an already long ‘to do’ list.”

By the way, this week Belgium’s debt rating was cut, and Portugal’s and Hungary’s were cut to junk status.

Other euro bits…in no particular order…

Merkel and Sarkozy at week’s end were talking about EU treaty changes in time for the Dec. 9 summit but this is insane. It’s normally a years-long process. No way they can just ram them through, especially since they involve greater oversight of national budgets and statistics, as well as create debt limits for governments, while trying to reach consensus in the eurozone on pension ages and tax levels.

The U.K. and Germany each reported third quarter GDP rose 0.5% over the second quarter. This is good, right? It’s irrelevant, is what it is. Fourth quarter GDP should be flat at best, most likely negative.

A joint services/manufacturing index for the EU came in at 47.2 for November vs. 46.5 in October, still putrid, while a reading on industrial orders for the eurozone in Sept. over Aug. fell 6.4% (Germany down 4.4%, France down 6.2% and Italy off 9.2%).

Italy’s borrowing costs soared, with the two-year nearing 8% while the three-year bond peaked at 8.13%. The key 10-year hit 7.60% before finishing the week around 7.30%. Six-month bills carried yields of 6.50%!

Belgium, not one of the PIIGS but always on the periphery, saw its 10-year hit a yield of 5.85% on Friday, up from 4.79% on Monday. Belgium deserves it as the country hasn’t had a government since native Eddy Merckx was winning the Tour de France.

Things are not going well for Britain and Prime Minister David Cameron. A poll for the London Times showed that 79% of voters believe the country will fare ‘badly’ over the next year against 18% who think it will do ‘well.’

Chinese vice-premier Wang Wishan, responsible for overseeing the financial sector, said this week:

“Right now the global economic situation is extremely serious and in a time of uncertainty the only thing we can be certain of is that the world economic recession caused by the international crisis will last a long time.”

Which leads me into a discussion of…

Washington…yuck

The supercommittee failed to come up with the $1.2 trillion in deficit reduction it was charged with doing and so now sequestration kicks in, $1.2 trillion in automatic cuts over ten years, half from defense, but not starting until 2013. President Obama faulted congressional Republicans, saying they “refused to listen to the voices of reason and compromise” during the debt talks. Obama also warned that he would veto any attempt to unwind the automatic spending cuts. There will be “no easy off-ramps on this one,” he said.

Republican committee member Pat Toomey, senator from Pennsylvania, countered: “Unfortunately, our Democratic colleagues refused to agree to any meaningful deficit reduction without $1,000bn in job-crushing tax increases.”

Peter Peterson, the long-time advocate for balancing the federal budget, called the panel’s failure “deeply disappointing.”

“A divided government cannot succeed until elected officials choose to lead the country toward solutions instead of relentlessly defending their own political ideology.”

Politicians from both sides, as well as many a pundit, said it’s now about the 2012 election, as if this is going to change things. It won’t.

I’ve been telling you for months what will happen, though. Once the two parties couldn’t come up with a substantial, $4 trillion deficit-reduction package this summer, I’ve been calling for a Crash next year, one that will be related to the feeling hitting the markets all at once that we are indeed no different than Europe. Our leaders’ failure, particularly the president’s, to enact a legitimate plan that markets would have rejoiced over seals our fate in 2012. I told you a few weeks ago that next year could look a lot like 1860 (a theme CNBC’s Jim Cramer began to pick up on this past week, not that I ever want to be associated with him). The political debate will be as ugly as any in our lifetime.

The Wall Street Journal’s John Bussey interviewed Erskine Bowles and Alan Simpson of Simpson-Bowles fame and just a reminder as to the extent of the mess.

Erskine Bowles:

“I think we face the most predictable economic crisis in history. It’s as clear as the nose on my face that the fiscal path they are on here in Washington is not sustainable. And worse yet, I know every member of that fiscal commission knows it, too.

“The economics is very clear. The politics, very difficult. I’ll give you one little simple arithmetic example. If you take 100% of the revenue that came into the country last year, every single dime of it was consumed by our mandatory spending and interest on the debt. Mandatory spending in English is basically the entitlement programs. Medicare, Medicaid and Social Security. That means every single dollar we spent last year on these two wars, on national defense, homeland security, education, infrastructure, high value-added research – every single dollar was borrowed, and half of it was borrowed from foreign countries.

“That’s a formula for failure in anybody’s book. And this is not a problem that we can solely grow our way out of.”

John Bussey asked the two about President Obama’s non-reaction to their report when they released it in December, and how the president then didn’t even mention it in the State of the Union, my own big issue at the time.

Bowles:

“I negotiated the budget for President Clinton. And every investment banker will tell you the key to success is knowing your client and defining success up front. So, I knew what success was on his part, and I could go in there and negotiate the deal.

“I did not know President Obama, and neither did Alan. So we spend a tremendous amount of time with him and his economic team up front defining success. And we negotiated a deal that got a majority of Republicans to vote for it, so he had plenty of cover on the other side. It also exceeded every single one of the goals that he had given us.

“I fully expected them to grab hold of this. If it had been President Clinton, he would have said, ‘God, I created this, this is wonderful. It was all my idea.’

“So we were really surprised. My belief is that most of the members of the economic team strongly supported it. Like every White House, there’s a small cabal of people that surround the president that he trusts and works with, and I believe it was those Chicago guys, the political team that convinced him it would be smarter for him to wait and let Paul Ryan go first, and then he would look like the sensible guy in the game.

“We then expected, before the State of the Union, that when he did the stimulus, that that would be a great time to say not only, look, we’re going to do this to get the economy moving forward, but we have to do it within the context of long-term fiscal reform and responsibility. And he didn’t.”

Robert Samuelson / Washington Post

“From 2005 to 2035, (the cost of entitlements) will nearly double as a share of national income, projects the Congressional Budget Office. How big a government do we want? What’s the balance of fairness between young and old? How much should other programs be reduced or taxes raised? Many Democrats duck the fundamental policy questions and reject any benefit cuts.

“Only President Obama can start such a debate. He has the bully pulpit, but he hasn’t used it. Here’s an exchange between ABC White House correspondent Jake Tapper and the president, at a July 15 news conference, that captures Obama’s calculated obscurity.

“Tapper: ‘In the interest of transparency, leadership and also showing the American people that you have been negotiating (with Republicans) in good faith, can you tell us one structural reform that you are willing to make to one of these entitlement programs that would have a major effect on the deficit? Would you be willing to raise the retirement age? Would you be willing to means test Social Security or Medicare?’

“Obama: ‘We’ve said that we are willing to look at all these approaches. I’ve laid out some criteria in terms of what would be acceptable. So, for example, I’ve said very clearly that we should make sure that current beneficiaries as much as possible are not affected. But we should look at what can we do in the out-years, so that over time some of these programs are more sustainable. I’ve said that means testing on Medicare, meaning people like myself, if – I’m going to be turning 50 in a week. So I’m starting to think a little bit more about Medicare eligibility.(Laughter). Yes, I’m going to get my AARP card soon – and the discounts. But you can envision a situation where for somebody in my position, me having to pay a little bit more on premiums or co-pays or things like that would be appropriate.’

“Noncommittal gibberish. There is no leadership from the nation’s ‘leader.’ Space precludes running all his rambling response; the excerpt above was about half. Tapper followed up.

“Tapper: ‘And the retirement age?’
“Obama: ‘I’m not going to get into specifics.’

“Well, there you have it. The president won’t talk specifics, but government consists of specifics. The reason we cannot have a large budget deal is that Americans haven’t been prepared for one. The president hasn’t educated them, and so they can’t support what they don’t understand. Left or right, there are no comfortable positions. No one relishes curbing Social Security or Medicare benefits. But without changes, taxes will go way up, the rest of government will shrink dramatically or huge deficits will persist.”

You know who would have been effective these days, in his prime? Ross Perot. Call him what you will (I proudly voted for him in ‘92), but he was ahead of his time when it came to deficits.

Charles Krauthammer / Washington Post…on how some Republicans, such as Sen. Tom Coburn (Ok.) have actually supported increased tax revenue, as did supercommittee member Sen. Pat Toomey, let alone House Speaker John Boehner as part of the grand bargain with President Obama that fell through last summer.

“So why does the myth of the (Grover) Norquist controlled anti-tax monolith persist? You might suggest cynicism and perversity. Let me offer a more benign explanation: thickheadedness – the inability to tell the difference between tax revenue and tax rates.

“In deficit reduction, all that matters is tax revenue. The holders of our national debt care not a whit what tax rates yield the money to pay them back. They care about the sum.

“The Republican proposals raise revenue, despite lowering rates, by opening a gusher of new income for the Treasury in the form of loophole elimination. For example, the Toomey plan eliminates deductions by $300 billion more than the reduction in tax rates ‘cost.’ Result: $300 billion in new revenue.

“The Simpson-Bowles commission – appointed by President Obama and endorsed by Coburn – used the same formula. Its tax reform would lower tax rates at a ‘cost’ of $1 trillion a year while eliminating loopholes that deprive the Treasury of $1.1 trillion a year. This would leave the Treasury with an excess – i.e., new tax revenue – of $100 billion a year or $1 trillion over a decade.

“Raising revenue through tax reform is better than simply raising rates, which Democrats insist upon with near religious fervor. It is more economically efficient because it eliminates credits, carve-outs and deductions that grossly misallocate capital. And it is more fair because it is the rich who can afford not only the sharp lawyers and accountants who exploit loopholes but the lobbyists who create them in the first place.

“Yet the Democrats, who flatter themselves as the party of fairness, are instead obsessed with raising tax rates on the rich as a sign of civic virtue.”

Editorial / Washington Post

“That the lawmakers were…unable to reach agreement does not bode well for future negotiations. The 2012 election may produce a change in the occupant of the White House and control of one or both houses of Congress, but it is not likely to produce a clear mandate for either party’s vision of debt reduction. The compromise that proved elusive for the supercommittee will remain necessary. Perhaps it can be achieved in the action-forcing context of the trigger and expiring tax cuts. Working on deficit reduction, after all, requires a triumph of hope over experience.”

Batten down the hatches, folks. You ain’t seen nuthin’ yet.

China

I guess I should change my heading above from “Europe, Washington and Wall Street” to include China, because it obviously impacts market sentiment almost as much as Europe some days, such as when HSBC released their preliminary purchasing managers’ index (PMI) on manufacturing for China in November, 48, or off the 50 dividing line between growth and contraction, this after a 51 reading in October was bullish for being better than expected.

China is slowing. The central government knows this. One leading banking official, chairman Jiang Jianqing of the Industrial & Commercial Bank of China, said China would nonetheless maintain its tight monetary policy over inflation fears.

But that doesn’t mean Beijing can’t play with bank reserve requirements, which is what they are already doing with some rural banks to help small businesses. I also think China will lower interest rates because inflation is going to come down sharply from here.

The problem is exports are slowing precipitously, with 1/5th going to Europe. In Guangdong, for example, 450 small factories have closed (those making toys and clothing, primarily), as the World Bank warned China’s growth will decline to 8.4% next year. Hong Kong warned that a full third of its 50,000 factories in China could shut down over the coming months.

[Another economic report I read from a Chinese government mouthpiece said growth in 2012 will still be 9.2%.]

Meanwhile, you have the property bubble and how quickly does that deflate? What’s the impact on the smaller banks in particular? This is where I’m convinced the government will not let the situation get out of hand. I have written in this space in the past few months that Beijing will have no problem letting small banks fail that have been irresponsible. But it will protect the larger institutions and thus prevent a systemic crisis, assuming Europe’s recession doesn’t evolve into a depression.

Street Bytes

--Stocks had another miserable week with the Dow Jones losing 4.8% to close at 11231, down exactly 1,000 points in four weeks and now down 3.0% for the year. The S&P 500 lost 4.7%, while Nasdaq declined 5.1%, its fourth-straight weekly loss. Both the S&P and Nasdaq are now down 8% in 2011. For very selfish reasons I wish the year ended now. I’d be spot on with my yearend forecast of the major averages finishing down 5% to 7%. Plus the CRB Index of 19 commodities is at 305.45, down from the 12/31/10 level of 332.80, so my prediction there is good.

But five weeks is an eternity these days and I wouldn’t be the least bit surprised to see a big rally before yearend. No one said it has to be a rational one.

--U.S. Treasury Yields

6-mo. 0.06% 2-yr. 0.27% 10-yr. 1.96% 30-yr. 2.92%

The debate over deficit reduction didn’t shake the Treasury market as Europe’s turmoil led to a further flight to quality, at least the U.S. being perceived as the best kid on a sleazy planet. Back on Aug. 5, when S&P downgraded the U.S. credit rating, the benchmark 10-year Treasury was at 2.56%. Today it sits at 1.96%, after hitting 1.67% on Sept. 23, and 1.87% on Nov. 23.

--The Federal Reserve is putting the 31 largest banks (with assets over $50 billion) through another stress test, this one where GDP would decline 6.9% based on a euro recession, with 13% unemployment and locusts; the point being to measure capital levels in times of crisis.

I don’t know if a stress test is necessary, I would just raise bank capital requirements above where they are now, almost to draconian levels, to kill any thought of excessive risk-taking and return them to what they were supposed to be doing in the first place. Lend to businesses and homeowners (with a mandatory 20% down). Boring stuff. I love to be bored.

--Speaking of housing, October existing home sales were a little better than expected, but the median home price was down to $162,500. The July 2006 peak was $230,300. The Feb. 2011 low was $156,000.

--Tokyo’s Nikkei index is at its worst level since the March 2009 lows.

--It’s staggering to think that AT&T will have to take $4 billion in charges in the year’s final quarter as a result of its seemingly failed $39 billion acquisition of T-Mobile USA, as the Federal Communications Commission announced it would seek a trial-like hearing on the merger, one that would cause countless delays, which then led AT&T and T-Mobile parent Deutsche Telekom AG to pull their application for FCC approval in order to focus on the Justice Department, which is also seeking to block the acquisition.

The two agencies say that a merger of the No. 2 and No. 4 wireless carriers would damage competition. AT&T needs approval from both to proceed.

The thing is, AT&T agreed to a breakup fee of $3 billion with Deutsche Telekom for the latter to go along with the deal and to turn over valuable spectrum if the deal wasn’t approved (estimated cost another $1 billion). Obviously, AT&T didn’t anticipate such fierce opposition from the feds.

--An estimated 200,000 jobs have been lost this year in the financial services sector, worse than the 174,000 in 2009, as compiled by Bloomberg. This is more than just Wall Street’s traditional cyclical moves; over-hiring at the top, slashing too much at the bottom. It is indeed a permanent shrinking of the industry. An economist at Moody’s predicted the Street wouldn’t regain these jobs until 2023.

So tell your kids that are in high school and about to go off to college to focus on engineering. 

--The U.K.’s High Pay Commission has recommended that top executives be restricted to a basic salary plus a single performance element instead of three or four that are commonplace in order to halt the spiraling bonuses that are “corrosive” to the economy “and threaten to create the type of inequalities last seen in the Victorian era,” as the Financial Times put it.

For example, John Varley, Barclay’s top executive in 2010, earned 169 times the earnings of an average British worker, whereas in 1980 Barclays’ top pay was just 13 times the average.

At BP, “the boss earned 63 times the company’s average, while the 1980 multiple was 16.5.” [Brian Groom/FT]

--According to ComScore, online holiday shopping was up by 14% over last year in the first 20 days of November. The growth is owed to record numbers prowling the Internet on enhanced smartphones and tablet computers, even when they are in bricks-and-mortar stores. ComScore is expecting online sales to rise 15% for both November and December. In 2010, ecommerce grew by 12% over the previous year.

--What a mess. Kaja Whitehouse / New York Post:

“Folks who got stuck with bum checks from Jon Corzine’s defunct brokerage firm MF Global are getting bounced a second time.

“This time, it’s by the MF Global trustee’s claims process….

“The (process) allows those with accounts to recover 60 percent of the $5.5 billion in MF’s accounts frozen after it emerged that $1.2 billion* was missing from accounts that should have been segregated, and therefore safe.

“But folks who cashed out of their MF brokerage accounts leading up to the Wall Street firm’s Halloween collapse – and received checks from MF for their account balance, only to see them bounce – are not addressed by the claims process, The Post has learned.

“Potentially hundreds of people with an estimated $50 million in claims are in this limbo.”

*It was discovered this week that the shortfall in customer funds had doubled from previous estimates. Jon Corzine is slated to testify on Dec. 15 before the House Financial Services Subcommittee on Oversight and Investigations, which might be the first time we finally see the guy, he having disappeared from sight. Maybe he’s in Bimini?

--Further evidence of contagion from Europe as Australian banking officials say the sovereign debt crisis in the former is threatening to become a full-fledged credit crisis impacting the Aussie housing market as banks stop lending to each other. Roughly a third of the funding for Australian mortgages comes from overseas bond markets; so that’s a third of the big banks’ sources of capital potentially drying up, which will lead to price drops, as reported by the Sydney Morning Herald.

--And further evidence of Ireland’s housing crash. The Irish Independent used the example of a property in Dublin, where a father bought his ideal family home for 65,000 euro. The same three-bedroom house was going for 380,000 when he first looked at it. The previous owner couldn’t sell it during this time and finally went to auction.

The number of mortgages in arrears more than three months in Ireland has grown to 63,000 as of Sept. 2011 from 26,200 at the end of Sept. 2009. An Irish Central Bank study also found that four out of 10 households in mortgage arrears are actually behind by a year or more. As I told you from my last trip to Ireland in October, the anecdotal evidence I picked up is beyond scary. In all honesty, it’s a topic I think of every day, knowing some of the folks in deep trouble.

[By the way, Canada is clamoring for Irish workers to fill needs in industries such as fisheries, mining, and oil and gas. Some 10,000 Irish have relocated to Canada in just the past two years. In turn, the Canadian government is increasing the quotas on work visas for the Irish.]

--Sticking to the real estate theme, the Wall Street Journal reported that in my native New Jersey, “100,000 homeowners are dealing with foreclosures that are stalled in court and another 48,000 are way behind on mortgage payments.” This is going to be a drag on home prices for years to come, but, at the same time, these are people actually ‘saving’ a ton of money and the impact on consumer spending cannot be discounted. Heck, I know a guy who hasn’t made a mortgage payment in at least 18 months and he’s spending at least as much as he always did. Part of the issue in his case is his mortgage kept being bounced around with all the bank mergers that took place during the peak of the crisis and with each merger, let alone the robo-signing scandal, the clock on the foreclosure process and/or workout would start anew.

--Automakers GM, Honda and Volkswagen expect China passenger-car sales to rise as much as 10% next year, faster than China’s current 6% pace for the first ten months of 2011. Well this kind of flies in the face of every other prediction on a slowing China due to the Euro crisis. The car folks, though, tout still extremely low ownership levels and rising incomes for their bullishness.

--According to the Labor Department, the jobless rate dropped in 36 states in October, while payrolls increased in 39, led by Illinois which added 30,000 jobs, and California with 25,700. [Wisconsin lost 9,700, and New York, 8,300.]   North Dakota continues to have the lowest unemployment rate, 3.5%, while Nevada still has the highest, 13.4%.

--Nokia Siemens Networks is cutting a whopping 17,000 employees worldwide as part of a massive restructuring to focus the telecom equipment maker on more profitable broadband operations. The 17,000 figure is almost a quarter of its 74,000 workforce.

--With the European Union in full crisis mode, I got a kick out of the European Parliament and Commission’s request for a 5% hike in its budget next year. It had to settle for a 2% increase. They just don’t get it.

The real problem, however, is that the EC has made financial commitments to its newer and poorer members that it may not be able to honor, such as farm subsidies and regional development funding.

--Ohhh Ca-na-daaa! I’m packin’ my bags for theeee…

You see, kids, Canada’s debt to GDP ratio is but 35% vs. a Group of Seven average of 80%. And the beer is all premium. Plus, in my case, I’d become a hockey fan again after shunning the sport for about 15 years. And Tim Hortons is even better than Dunkin’ Donuts. Only thing is you have to wear long underwear in Canada for up to 350 days a year.

--Oh to have been a shareholder of Pharmasset Inc., which was acquired by Gilead Sciences for $11 billion, or $137 in cash; this being a company with no products on the market and a stock that traded as low as $20 in the past year. But they have a pill in late-stage testing that could be a treatment for hepatitis C, which analysts expect to become a bigger health problem due to the aging baby boomer population, seeing as it is spread by intravenous drug users, among other ways, and can take years to emerge once you have picked up the virus.

--Meg Whitman, Hewlett-Packard’s new CEO, had her first earnings report card and in the process lowered fiscal 2012 guidance to $4 per share vs. $4.88 in the year just finished. Wall Street expectations were for $4.60. Whitman promised “No more surprises,” but then said the company would no longer provide revenue guidance, just earnings, which was a surprise.

--People still send holiday cards. According to Hallmark, 1.5 billion are mailed for Christmas, followed by Valentine’s Day (144 million), Mother’s Day (133 million) and Father’s Day (94 million). It seems the greeting card industry has weathered the Internet storm and is making a comeback. Hallmark and American Greetings control 82% of the market. No word on Festivus sales.

--Shares in Groupon, the largest Internet daily-deal site, closed the week at $16.75, or already below the IPO price of $20 on Nov. 4. Of course anyone buying that first day paid substantially more than $20, like between $26 and $31, and is thus at a rather sizable loss already. Your editor said he wouldn’t touch this one.

--We note the passing of legendary financier Ted Forstmann. He was 71. Forstmann was chairman of IMG Worldwide, the largest sports and entertainment management firm of its kind, but earned his fame and fortune as the founder of the modern leveraged buyout, or LBO, though what distinguished Forstmann was that he did his deals with as little debt as possible, blasting what would become a bubble in junk bond financed deals in the 1980s. Forstmann expressed his open contempt for Wall Street’s hustlers at congressional hearings, telling the SEC that the investment banking heads of the day were like street walkers. “They are the hookers who make $1 million a night, but pretty soon, what have you got? Eleven hookers.”

In Forstmann’s fight with rival Henry Kravis over RJR Nabisco, Forstmann accurately predicted the junk bond debt would kill the company, coining the phrase “barbarians at the gate.”

Eventually, after making $15 billion in profits for his investors, he turned away from Wall Street and acquired IMG, which was struggling at the time, turning it back into a true powerhouse.

Forstmann was a big philanthropist, giving an estimated $440 million to help poor kids, and led the charge for school voucher programs in the 1990s.

--This story hit a week ago and I wasn’t able to get it into the review, but 28 waiters at Smith & Wollensky, the Capital Grille and other New York area restaurants were charged with copying customers’ credit cards and then passing them on to a crime ring. The crimes allegedly took place between April 2010 and this month and involved at least 50 American Express account holders. The crime ring bought luxury goods, including from Chanel, Bloomingdale’s and Bergdorf Goodman, showing they had good tastes.

--So I get this envelope in the mail and it says ‘payment enclosed’ and I’m thinking, what’s this? Found money? A relative I didn’t know I had leaving me some funds for premium beer?

Nope, I received $53.86 for damages in a class action suit involving American Express and foreign transaction fees! So my extensive travel really paid off.

--My portfolio: I had dinner with my CFO friend of the China company in Fujian province. I’m not expecting any miracles, though confident in what they are doing. [I have no idea if their acquisition of the feedstock company for $13 million was a fair price or not. That would be a little arrogant of me to think I did.]   It’s just all about the global, and China, economies, as well as the still dreadful sentiment towards China small caps. After the holidays I might hit the road with them for a day or two in the U.S., depending on our schedules. I really can’t say more at this time.

--Finally, a real Street Byte, the passing of Gregory Papalexis, the owner of the Sabrett hot dog trademark. He was 86.

Ah yes, the Sabrett tube steak. Many was the day when I was starting out in the business world, working for an insurance brokerage firm in Manhattan, that I could only afford two Sabrett dogs for $2 at a local pushcart. They were/are pretty nasty, but gotta hand it to Mr. Papalexis, who formed Marathon Enterprises in 1964 and acquired a number of competitors, including Sabrett Food Products later on, selling hot dogs and other items from a pushcart brand called House O’ Weenies.

His daughter, a company executive, “said her father gave great detail to the buns his company sold, insisting they be ‘light, airy and fluffy.’ His reasoning was simple: If customers filled up on the bun, they won’t have room for a second hot dog.” [Crain’s New York Business]

Foreign Affairs

Egypt: Following a week of demonstrations, a second revolution by all appearances, this time against the ruling Military Council, the generals agreed to form a new “national salvation” government, with former prime minister Kamal Ganzouri at the head, but protesters vowed to continue with their demands that the army quit power. At least 40 have been killed in Cairo and elsewhere.

The thing is, multi-stage parliamentary elections (lasting weeks) are slated to begin on Monday and the military has said they will proceed as scheduled. How can they? The generals did make a major concession in saying they would now hold presidential elections by next June, rather than 2013, as their latest shifting calendar had called for, but the opposition says that’s not good enough.

If I were them, I’d accept the new timetable, which it appears the Muslim Brotherhood is ready to do…not that I’m giving them my campaign dollars.

Iran: The government said it had arrested 12 spies with ties to the CIA, though wouldn’t say anything as to their nationalities. An official said, “The U.S. and Zionist regime’s espionage apparatuses were trying to use regional intelligence services, both inside and outside Iran, in order to deal a strong blow to our country. Fortunately, these steps failed.” [More on the spy issue in a bit.]

Meanwhile, the U.S., U.K. and Canada imposed new sanctions on Iran, including measures to restrict the central bank, though only Britain said it would cut all financial ties, including to the Central Bank of Iran, while the U.S. stopped short of actually banning dealings with Iranian banks. U.S. Treasury Sec. Timothy Geithner did offer:

“If you are a financial institution and you engage in any transaction involving Iran’s central bank or any other Iranian bank operating inside or outside Iran, you are at risk of supporting Iran’s illicit activities,” activities which include “its pursuit of nuclear weapons, its support for terrorism, and its efforts to deceive responsible financial institutions and evade sanctions.”

Boy, that’s harsh, Timothy.

Editorial / Washington Post

“The Obama administration pledged that Iran would suffer painful consequences from plotting to assassinate the Saudi ambassador in Washington and for refusing to freeze its nuclear program. Key European allies and Congress – not to mention Israel – are ready for decisive action. But on Monday the administration unveiled another series of half-steps. Sanctions were toughened on Iran’s oil industry, but there was no move to block its exports. The Iranian banking system was designated ‘a primary money laundering concern,’ a step U.S. officials said could prompt banks and companies around the world to cease doing business with the country. But the administration declined to directly sanction the central bank.

“The result is that President Obama is not even leading from behind on Iran; he is simply behind….

“The administration’s slowness to embrace crippling sanctions is one of several persistent flaws in its Iran policy. Another is its continued insistence on the possibility of ‘engagement’ with a regime that has repeatedly rejected it while plotting murder in Washington. ‘The United States is committed to engagement,’ Sec. of State Hillary Clinton asserted on Monday. Some European officials say they are concerned by the concessions the administration appears prepared to offer Tehran if there are new talks.

“By now it should be obvious that only regime change will stop the Iranian nuclear program….Sanctions that stop Iran from exporting oil and importing gasoline could deal a decisive blow to (Supreme Leader Ayatollah Khamenei’s) dictatorship, which already faced an Arab Spring-like popular revolt two years ago. By holding back on such measures, the Obama administration merely makes it more likely that drastic action, such as a military attack, eventually will be taken by Israel, or forced on the United States.”

As for Russia and China, both condemned the new round of sanctions, saying it exacerbated the crisis and would make renewing negotiations virtually impossible.

Finally, the brother of a leading Revolutionary Guard Corps commander killed in a Nov. 12 blast said the commander, Gen. Moqadam, was at a test of an experimental intercontinental ballistic missile when it failed. 20 others were killed. At his funeral, Moqadam was called the “founder” of Iran’s missile program. This doesn’t mean the CIA or Mossad couldn’t have still sabotaged the test.

Syria: In an exclusive interview with the Sunday Times of London, President Bashar al-Assad said, “The conflict will continue and the pressure to subjugate Syria will also continue. However, I assure you that Syria will not bow down and that it will continue to resist the pressure being imposed on it.”

Assad claims he began the reform process six days after the start of protests in Syria, but, “After eight months the picture is clear to us…It is not a question of peaceful demonstrations but an armed operation.”

Assad went on to warn that any attack on Syria would be an earthquake that would shake the entire Middle East.

After an attack on a bus carrying Turkish pilgrims in Syria on Monday, though, Turkish Prime Minister Erdogan addressed Assad, “You can remain in power with tanks and cannons only up to a certain point. The day will come when you’ll also leave.”

The next day, for the first time Erdogan directly called on Assad to step down.

“Without spilling any more blood, without causing any more injustice, for the sake of peace for the people, the country and the region, finally step down.”

Pakistan: In a still breaking development that could have major consequences for U.S.-Pakistani relations, Pakistan is claiming at least 26 of its soldiers were killed when NATO helicopters fired on an army checkpoint in the northwest, Friday night. Its immediate response has been to close a key border crossing used by the coalition to supply its troops in Afghanistan. 

Lebanon: In a big blow for the CIA, several informants have been arrested in Beirut this year, the agency was forced to concede. “Beirut station is out of business,” a source told the Los Angeles Times. Up to a dozen informants have been compromised, according to the source. U.S. officials say, however, that the number is not accurate, nor are the stories of sloppy work involving meetings held at a local Pizza Hut. The source maintains that the CIA station chief in Lebanon was too trustful of his Lebanese contacts.

Lebanon’s security service was able to identify the informants by analyzing cellphone records and using software to help identify quick calls, especially those made near an embassy.

Former CIA officers told the AP that the agency has suffered an erosion of “tradecraft,” especially with the focus on fighting terrorists rather than traditional counterintelligence.

Back in June, Hizbullah leader Sheikh Nasrallah said “The U.S. Embassy…is a nest of spies recruiting [spies] to serve Israel.”

As to the fate of those whose covers have been blown, former senior CIA officer Robert Baer told ABC News: “If they were genuine spies, spying against Hizbullah, I don’t think we’ll ever see them again. These guys are very, very vicious and unforgiving.”

Meanwhile, Hizbullah continues to prepare for war with Israel, though its primary immediate concern, talking weeks, is the fate of the Assad regime in Syria. Longer-term, it is just assumed that should Israel strike Iran’s nuclear facilities, Hizbullah will fill the role of Iran’s proxy in launching a massive missile strike on Israel, while its terror cells in Latin America are activated against Jewish interests there and possibly the United States.

Iraq: As the U.S. prepares to withdraw by yearend, three bombs went off in a popular market in Basra on Thursday. The first two drew in Iraqi security forces and then the third caused all the fatalities, at least 19 dead. What’s disturbing about this particular attack is Basra is where many foreign oil companies have offices and it’s the center of Iraq’s energy sector.

Yemen: Once again, Yemeni President Ali Abdullah Saleh said he would step down as he signed a deal to relinquish power in Saudi Arabia, an agreement with the opposition brokered by Saudi King Abdullah. But thousands of demonstrators then took to the streets over the deal’s promise of immunity from prosecution for both Saleh and his family. Pro-Saleh supporters proceeded to kill at least five of the demonstrators. After 33 years of rule, many just don’t believe Saleh is finally history, but he is slated to come to the U.S. for medical treatment.

Regardless, the agreement for handing over power is a complicated one, including the new power-sharing arrangement, and I wouldn’t get too bullish about Yemen’s prospects; like don’t waste your time discussing this over Christmas dinner. 

Libya: Members of one of the 25 militias in Libya captured Muammar Gaddafi’s son, Saif, but as of this writing have not turned him over to the interim government, which wants to try him, or extradite him to The Hague. Said a leader of the militia, “If you ask to take him to Tripoli, it is like you are saying it is a different country. We have the same courts here. We could put him on trial here – why not?”

Oh yeah, this is another winner.

Bahrain: King Hamed conceded his security forces used torture and excessive force against mostly Shiite Muslim protesters during the March uprising in which at least 35 were killed. After a five-month investigation outlined a series of abuses, Hamed said those responsible would be punished and indeed charges against security force members have been filed. The inquiry also said Iran’s involvement was nil, but on this Hamed insisted, “Iran’s propaganda fueled the flames of sectarian strife.”

China/Taiwan: Worrisomely, Taiwanese President Ma’s popularity is sliding as the island gears up for an election on Jan. 14. [I admit to not seeing the extent of the slide coming.] Should he somehow lose to neophyte Tsai Ing-wen, it would be a huge blow for China-Taiwan relations and guaranteed to raise tensions, even as Tsai tries to reassure both China and the West that she will continue many of the policies that have led to better relations between the two. The problem that Ma has is the emergence of a second China-friendly candidate that could siphon votes away from Ma, a la some of America’s past third party candidacies.

Ma is facing trouble because last month he strongly hinted he wanted to sign a peace treaty with China within the next decade, the first time he has ever given a timetable for negotiating this most sensitive issue. [On this I correctly informed you at the time.] Tsai’s focus is on social welfare and the weakening global economy can only help her candidacy.

Regarding U.S.-China relations, President Obama met on the sidelines of an Asian summit with Chinese Premier Wen Jiabao, a meeting requested by Wen after the Chinese leader was upset over the summit’s focus on the South China Sea, with both Obama and Sec. of State Clinton warning China to curb its aggression, thus enraging Beijing. Wen defended China’s stance on the sea and said it is not a topic for multinational gatherings, as the U.S. wants it to be.

But the fact is 16 of the 18 nations present at the summit brought up maritime security, all insisting on a multilateral resolution.

Chinese government mouthpieces responded in editorials, such as from Chinese-language Xinhua.

“The aim of America’s strategic move east is in fact to pin down and contain China and counterbalance China’s development.”

China Daily accused the United States of “scaremongering,” and declared, “East Asia not U.S. playground.”

Russia: The populace is tiring of Prime Minister Vladimir Putin, just as he gears up to return to the presidency next spring. His approval rating is still a high 60%, but this is down from 78%, while the number disapproving is rising rapidly. In fact, Putin was booed at a martial arts fight in Moscow, an unheard of occurrence and an event broadcast live on Russian television. Following the fight, Putin went into the center of the ring to congratulate the winner and was immediately drowned out in a chorus of cat-calls. His image-makers certainly didn’t plan on this happening. 

But on the issue of NATO’s anti-missile shield, Russian President Medvedev followed his boss’ comments of the week before in warning the U.S. to take into account Russia’s objections to the current plans for the shield, repeating a 2007 threat to deploy cruise missiles in Russia’s Kaliningrad, aimed at NATO missile batteries. So nice reset, Barack!

Next Sunday, Dec. 4, is the date of Russia’s parliamentary elections and it appears Putin and Medvedev’s United Russia party’s popularity is plunging. This is going to be exceedingly interesting. How badly will the vote be rigged? You just know the Kremlin is furiously prepping officials at the polling places. An outrageous outcome, one that is clearly suspect, could lead to sweeping demonstrations and I’m not so sure the Kremlin is prepared for this. I’m also as convinced as ever of my theory there could be a coup orchestrated by a shadowy third force within the next year.

France: President Sarkozy’s poll numbers are improving ahead of next spring’s election, with one French polling agency having him at 29%, vs. 32% for the Socialist candidate Francois Hollande, while National Front candidate Marine Le Pen is at 19%.   A month ago, the same survey had Hollande leading 39-23. In a runoff, however, Hollande would still defeat Sarkozy handily, though the gap is down to 16 from 28.

For her part, Le Pen is calling for France to abandon the euro and no telling where sentiment on this issue will be six months from now. She is still very much capable of pulling off an upset and getting into the run-off.

Mexico: This country is gearing up for a presidential election next year as President Felipe Calderon cannot run for another term. There is growing concern narco-terrorists will disrupt the election in a big way, threatening poll workers and telling people how to vote.

Separately, soldiers in a well-to-do neighborhood in Tijuana searched a car and found $15.3 million in cash, believed to belong to the country’s most wanted drug lord, Joaquin ‘Shorty’ Guzman, of the Sinaloa cartel.

And in the once placid city of Guadalajara (Mexico’s second-largest), 26 bound and gagged bodies were found Thursday in abandoned vehicles, another sign of the still escalating drug violence. Each of the dead had been shot in the head. 24 hours earlier, the charred remains of 16 were found in Sinaloa state. The two incidents could be tied. Poor Guadalajara is hosting an international book fair, billed as the largest in the Spanish-speaking world, this weekend with an expected 600,000 visitors. I will not be attending.

Random Musings

--Polls

Reuters/Ipsos national survey of registered Republicans:

Newt Gingrich 24%
Mitt Romney 22%
Herman Cain 12%
Rick Perry 10%

Magellan Strategies survey of New Hampshire Republicans. [Survey not noted as most reliable, however.]

Mitt Romney 29%
Newt Gingrich 27%

A more respected Bloomberg News survey has Romney at 40% in New Hampshire, followed by Ron Paul at 17% and Gingrich at 11%.

In Iowa, the American Research Group poll has Gingrich now at 27%, Romney 20% and Paul at 16%.

--I loved Tuesday’s Republican presidential debate on CNN. The New York Post’s Michael A. Walsh shares some of my thoughts.

“In the crispest debate since the series began back in May, everyone was on his or her game. There were no gaffes, no flubs, no disastrous memory losses. The candidates – almost any one of whom would have a real chance of unseating President Obama…were all smooth and polished, sticking to their well-staked-out issues.

“Indeed, they’ve become like characters in a long-running sitcom, with each one slickly playing his or her assigned role.

“There’s Ron Paul, the wacky libertarian who believes in a kind of international Golden Rule: do unto other nations as you would have them do unto you. There’s Michele Bachmann, consistently assailing Obama. And Rick Santorum, the bright kid who always complains he’s not getting enough attention from the teacher.

“But there was one big difference last night: This was the first debate in which Mitt Romney, the eternal but generally unloved front-runner, was just another figure on stage, looking nervously over his shoulder not just at the man standing next to him, Rick Perry (who had his best debate performance to date) but at the man who’s supplanting him atop the polls, Newt Gingrich.

“True, Newt couldn’t score any cheap points by going after the moderator, as ‘Blitz’ (as Herman Cain delightfully called him) kept the tone elevated. But this kind of forum plays to Gingrich’s strengths – a firm grasp of both foreign and domestic issues and how they relate, married to a newfound consistency of purpose that allows him to talk straight and play to the crowd….

“Will the Gingrich boomlet last? His famous ‘baggage’ would make him an easy target for Obama, but his formidable intellect would counter that in the head-to-head presidential debates.”

A different take…Jennifer Rubin / Washington Post

“The foreign policy debate Tuesday night was a surprise on many counts. It was lively and serious, which many debates haven’t been. Rep. Michele Bachmann exceeded expectations. Rick Santorum showed personal restraint (not complaining about the lack of attention) and displaying his depth of knowledge. As one might imagine, Herman Cain was perhaps the least comfortable man on the stage while Mitt Romney was the most at ease. Texas Gov. Rick Perry had some moments but some rather bad ones as well. The big surprise was Newt Gingrich, who not only failed to impress but created some problems for himself. [Ed: i.e., his answers on immigration.]”

I was just surprised how Rubin went on to slam Gingrich further, while being effusive in her praise for Bachmann, “who was poised, informed and knowledgeable throughout. She made clear that Obama’s lack of leadership is responsible for Iran’s progress on a nuclear weapon. She defended aid to Pakistan which is in our national security interest. She made an excellent point about sending our dollars to China, which in effect builds up its military at the expense of ours. She pivoted on an energy question to chide Obama for delaying on the Keystone pipeline. If she performs this well in future debates, look for her to make progress.”

And this from the New York Daily News’ Thomas Defrank and Alison Gendar.

“Mitt Romney fibbed about his real first name in a bid for laughs…and immediately fed criticism he’ll say anything to get elected.

“CNN moderator Wolf Blitzer opened the debate by asking candidates to introduce themselves. ‘Here’s an example of what I’m looking for: ‘I’m Wolf Blitzer and yes, that’s my real name.’’

“Romney couldn’t help himself in going for a quick laugh. ‘I’m Mitt Romney and yes, Wolf, that’s also my first name,’ he said to dead silence from the audience.

“That wasn’t the worst of it: Romney’s real first name is Willard – Mitt is his middle name.”

But Romney had a good week, all in all, in picking up South Dakota Sen. John Thune’s endorsement which could help in neighboring Iowa. [Too bad Thune isn’t running for president as I’ve seen this field develop. A Romney-Thune ticket is definitely a possibility as of today, however.]

--The New York Post’s Michael Goodwin, on Mayor Michael Bloomberg’s incoherent stance on Occupy Wall Street, which the mayor took two months to clear from Zuccotti Park.

“As the NYPD was battling mobs trying to shut down lower Manhattan, the mayor was in Midtown arguing to business leaders that the protesters have an important message.

“ ‘We’re coming to a point where Occupy Wall Street is just the beginning, the Tea Party is just the beginning,’ he said, according to a Times report. ‘The public is getting scared. They don’t know what to do, and they’re going to strike out, and they don’t know where.’

“Even the incoherence of the movement, Bloomberg insisted, ‘tells you what the problem is. They just know the system isn’t working, and they don’t want to wait around.’

“Lenin is said to have coined the phrase ‘useful idiots’ to describe ignorant Westerners who sympathized with his totalitarian state. There is no better description for people like Bloomberg who, having succeeded wildly under democracy and capitalism, offer any support to the socialist mobs who aim to destroy both.”

For his part, on a different matter, Bloomberg blasted Barack Obama for his failure to lead on the deficit. Accusing Congress of “political cowardice” for helping to bring about a “disaster for the country,” Bloomberg then went on to say this about the president:

“The executive branch must do more than submit a plan to a committee – and then step aside and hope the committee members take action. That’s not how any CEO would run a business.”

But a Bloomberg third party candidacy, if that’s where he’s headed, or a Ron Paul one, which to some looks increasingly likely, would hand the election to Obama.

--Candice M. Giove / New York Post

“Hell no, we won’t go – unless we get goose down pillows.

“A key Occupy Wall Street leader and another protester who leads a double life as a businessman ditched fetid tents and church basements for rooms at a luxurious hotel that promises guests can ‘unleash [their] inner Gordon Gekko,’ The Post has learned.

“The $700-per-night W Hotel Downtown last week hosted both Peter Dutro, one of a select few OWS members on the powerful finance committee, and Brad Spitzer, a California-based analyst who not only secretly took part in protests during a week-long business trip but offered shelter to protesters in his swanky platinum-card room.

“ ‘Tents are not for me,’ (Spitzer) confessed when confronted in the sleek black lobby of the Washington Street hotel where sources described him as a ‘repeat’ guest….

“Meanwhile, Dutro, 35, one of only a handful of OWS leaders in charge of the movement’s $500,000 in donations, checked in on Wednesday, the night after police emptied Zuccotti Park.

“While hundreds of his rebel brethren scrambled to find shelter in church basements, Dutro chose the five-star, 58-story hotel, with its lush rooms and 350-count Egyptian cotton sheets. He lives only a short taxi ride away in Carroll Gardens, Brooklyn.

“ ‘I knew everything was going to be a clusterf—k in the morning,’ he told The Post, alluding to Occupy’s own disruption plans. ‘How would I get over the bridge when they were shutting it down?’”

Dutro told The Post he paid for his room with his American Express card.

“It is an expensive hotel. Whatever,” he said.

To the whole OWS movement, I offer my own… “Whatever.”

--But while I dismiss OWS, oh, I want a revolution, that’s for sure. Just not the kind OWS wants. Case in point, New Jersey Democratic Congressman Rob Andrews. Now this guy appears on CNBC from time to time and he’s one arrogant a-hole.

So last Sunday, the Star-Ledger’s Matt Friedman had a front-page story on the primo jerk. To wit.

“A three-night stay at a five-star hotel in Edinburgh, Scotland, for a wedding: $7,725.

“A set of china from Bloomingdale’s for the bride and groom: $463.

“Cab rides, meals, tips and airline baggage fees: $953.

“Expensing it to your campaign account: Priceless.

“In June, U.S. Rep. Rob Andrews (D-1st Dist.) and his family visited Edinburgh for a wedding – part of a larger European vacation. There, Andrews, his wife and two teenage daughters stayed at the Balmoral Hotel in the center of town, which bills itself as a ‘luxury hotel in the true sense of the word.’ The price was indeed five-star: Two rooms for three nights cost $7,725….

“In all, Andrews and his family spent more than $9,000 on the Edinburgh leg of the trip. Rather, his congressional campaign did.”

Andrews claims the expense was legit because the wedding was for a key donor and volunteer adviser, allowing him to call it a political event.

So stay in a freakin’ Holiday Inn.

But while Andrews then continued his defense with the paper, the Ledger reported further:

“Also in June, Andrews’ campaign spent more than $10,000 on a party at his Haddon Heights home to celebrate his 20 years in Congress and his daughter’s high school graduation. And his campaign has made tens of thousands of dollars in donations to Philadelphia theaters – sometimes within months of another daughter appearing in one of their productions.”

Time to tear the House down.

--This is a story to discuss over the dinner table. Country duo Sugarland, some of you may recall, were the feature act at the Indiana State Fair on Aug. 13 when a wicked storm blew through, wind gusted to 60 mph, the stage rigging collapsed onto spectators, and seven were killed, another 40 injured. Sugarland would have taken the stage about five minutes later.

But they are being sued, along with producers, stage riggers and others, by at least 20 law firms.

I can understand producers and those associated with the stage for being named, but Sugarland?

Well, it seems their contract specified that they had the final say on whether to cancel the concert due to weather, according to plaintiffs’ attorneys.

“Unfortunately, the tragedy could have been prevented if the responsible parties had been concerned about the concertgoers that night,” one attorney told the AP.

Bottom line, read the fine print on some contracts. Sugarland shouldn’t be blamed, but, just this cursory explanation has to make you think twice. It’s a shame, but the law is the law.

[The state and fair are involved in a totally separate series of suits.]

--According to the U.S. National Snow and Ice Data Center, the level of sea ice in the Arctic shrank this year to its second-smallest size since 1979. Further, according to a study published in the journal Nature, “The loss of sea ice in the Arctic at the end of the 20th Century is ‘unprecedented’ in the past 1,450 years in its duration and magnitude.” [Bloomberg]

So when you have sea ice, 80% of the sunlight striking it is reflected back to space. But when the ice melts, 90% of the light actually heats the water, which can profoundly influence climate patterns.

--Meanwhile, get this. A week ago, Thursday, Fairbanks, Alaska, hit a record-low temperature, in mid-November, of 41 degrees below zero. That beat the record low set two days earlier of 40 below. It’s about the jetstream, people; always has been, always will. And my friend Mark R.’s sunspots. As for the above sea ice issue, I don’t discount this affects the weather as well.

--Barack Obama is lucky he is a lock to win New York in 2012 because this coming Wednesday, he’s going to get a lot of heat in the Big Apple for scheduling a bunch of fund-raisers on the same night as the Rockefeller Center Christmas tree lighting, the mother of all traffic gridlocks. As Jeff Spicoli of “Fast Times at Ridgemont High” fame would have said of Obama’s scheduling, “What a…..” Oops, we’re talking the president. Can’t finish this one off out of respect for the office.

--In his television ads for NBC Nightly News, Brian Williams is full of gravitas. “This is a very personal business for me.” A day later I’m watching Williams talk about an upcoming segment featuring two kids spreading flour on the living room floor, no doubt prodded by the mother with her video-camera, “and it got people talking today.”

Oh brother. Number one; only idiots would call their friends and tell them to catch the YouTube video of this fraud. But there it was, 90 seconds of precious nightly news time, the serious stuff.

Of course then the Today Show compounded matters by having the family in the following morning for “an exclusive.”

Yes, friends, yet another sign of the apocalypse.

--Tom Wicker died. He was 85. Among his many achievements, Wicker wrote what I consider the most balanced portrayal of Richard Nixon, “One of Us.”

 --Great news from space, maybe. Remember the troubled Russian Mars mission, the one where the spacecraft got stuck in earth orbit when some engine burns, that would have shot it into outer space, failed?

Well contact was finally made with it as a tracking station in Perth, Australia, picked up a signal.

“Good day, Mate. You okay?”
“Nyet.”
“Can we help you get out of that orbit?”
“Nyet.”

Russian spacecraft have limited vocabularies, as does your editor.

[Evidently only a few days remain for the Russkies to work on uploading new commands or else it could come crashing down on any one of you.]

--Finally, NASA is set to launch the world’s biggest extraterrestrial explorer, perhaps as early as today. A six-wheeled, one-armed Mars rover that is due to reach the red planet in eight months. It’s nicknamed Curiosity and is the size of a car. I hope the battery isn’t lithium, witness the Chevy Volt experience of batteries catching fire now under investigation.

---

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

God bless America.
---

Gold closed at $1683
Oil, $96.77

Returns for the week 11/21-11/25

Dow Jones -4.8% [11231]
S&P 500 -4.7% [1158]
S&P MidCap -4.5%
Russell 2000 -7.4%
Nasdaq -5.1% [2441]

Returns for the period 1/1/11-11/25/11

Dow Jones -3.0%
S&P 500 -7.9%
S&P MidCap -10.4%
Russell 2000 -15.0%
Nasdaq -8.0%

Bulls 47.4
Bears 32.6 [Source: Chartcraft / Investors Intelligence]

Have a great week. I appreciate your support.

Brian Trumbore

*Don’t forget the new iPad app. Tavern approved!



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Week in Review

11/26/2011

For the week 11/21-11/25

[Posted 6:00 AM ET]

Europe, Washington and Wall Street

It was another dreadful week for world markets as fears of a second global recession carried the day yet again, this time precipitated not just by further European inaction in coming up with a solution to attack both the sovereign debt crisis as well as recapitalize the banks, but an unbelievably bad German bond (bund) auction, whereby the Germans tried to auction off 6 billion euro in 10-year paper and only 3.6 billion was scooped up by private investors. The German 10-year shot up to 2.26%, above Britain’s 2.19% yield for like maturity, a first. [By week’s end Germany was still at 2.26%, but the U.K. was at 2.29%.]

The obvious conclusion being if the one country that is supposed to somehow save the continent and the eurozone, the healthiest economy to boot, can’t find buyers for its quality bonds, who the heck is going to step up and buy all the crappola hitting the market in the next few years? And this while the European economy is tanking and by virtually every expert already in recession.

So the one issue that keeps coming up is this. The European Central Bank has to be the lender of last resort and somehow save the PIIGS [Portugal, Ireland, Italy, Greece and Spain] for starters, as well as the big banks with a huge exposure to all of them, but this is an impossible task. Reminder, the original European Financial Stability Facility (or Fund)…EFSF…was for 440 billion euro but has only about 235bn left. That was nonetheless supposed to be enough to backstop Greece, Ireland and Portugal, the three countries already being bailed out. But then contagion set in, in the case of Italy and Spain. The EFSF, then, per an Oct. 26 agreement, was to be leveraged up to perhaps 1.4 trillion, but Italy’s sovereign debt alone is 1.9 trillion euro. And we aren’t talking about what to do with the banks that need 100s of billions of euro in new capital themselves.

But throughout the latest round of discussions between German Chancellor Angela Merkel and French President Nicolas Sarkozy, Merkel continued to make it exceedingly clear that she would not accept a greatly expanded role for the ECB whereby, perhaps with IMF help (though that outfit has limited resources of its own at this stage), it could just print 4 trillion in euro and paper the world with it…end of crisis! 

There is another EU summit on Dec. 9 and this is a new target date to watch. I mean, folks, this all started in the spring of 2010 and could have been nipped in the bud back then. But for now, Merkel insists there is no bazooka, no “big bang,” as she said.

“We have frittered away political trust in the euro,” the chancellor added. “That is why I deeply believe that you can’t restore this confidence with purely financial means, but that only a coherent political response can create this confidence.”

Well, heck, Angela, let’s start with the fact that if you are looking for political solutions, both Greece and Italy are now being run by unelected technocrats!

At least Spain, in electing Mariano Rajoy last weekend, has a politician to deal with the many issues his nation faces.

“Hard times lie ahead,” Rajoy told supporters. “We are going to govern in the most delicate situation Spain has faced in 30 years.”

As to the ever present idea of eurobonds and greater ECB involvement in bailing out troubled economies, Merkel is concerned that joint bonds would reduce pressure on member states to stick to their austerity programs and reduce their debt loads (let alone that existing EU treaties prevent the ECB from buying bonds as the lender of last resort).

Editorial / Financial Times…on the eurobond concept.

“Peripheral countries would benefit disproportionately, thereby helping to ease overall debt burdens. The weighted average of the eurozone’s borrowing costs is 4.7%. Greece could cut its interest bill by 15% of GDP in this way, according to Capital Economics. Germany’s interest bill would rise proportionately, of course – by some 2.5 percent of GDP. What’s not to like?

“Moral hazard, for starters. By offering the likes of Greece or Italy such rewards, eurozone bonds could remove these countries’ incentive to regain lost competitiveness. Nor would these bonds reduce the stock of existing debt. Unless there was a degree of fiscal union and budgetary enforcement in the eurozone that trampled on national sovereignty, investors would rightly be skeptical about buying such instruments. If the yield on eurozone bonds was to become significantly higher than that on debt of the bloc’s triple A states, the project would crumble.

“And then there is the clinching argument – that Germany will not accept them. An ersatz form of eurozone bond issued by the European Financial Stability Facility already exists. Anything more ambitious is a non-starter until the crisis has abated.”

Mohamed El-Erian / Financial Times

“Just when you think the European crisis cannot get much worse, Wednesday’s shunned Bund auction showed that it can. With this, the risks for the global economy as a whole, and for virtually every country, increase materially.

“Given this week’s developments, there should be no doubt in anyone’s mind that what started out as a dislocation in the periphery of the eurozone has now decisively breached the firewalls protecting the outer core and is seriously threatening the inner core. Unless this is countered quickly, European policymakers will find it even harder to catch up with the crisis, let alone get ahead of it.

“Europe must still stabilize its sovereign debt situation. But this is now far from sufficient. Policymakers must also move quickly to contain banking sector frailties, and do so using a more coherent approach to the trio of capital, asset quality and liquidity.

“In the eyes of the markets, the capital cushion of Europe’s banking system as a whole is no longer sufficient to support its balance sheet. This concern is not limited to the markets. Judging from their eagerness to dispose of assets, bank managements also believe that balance sheet delevering is key to the institutions’ survival and wellbeing….

“Problems in the banking sector have a nasty habit of accelerating and amplifying crises. Indeed, they significantly increase the risk of policymakers losing control. It is therefore critical for Europe to add this policy challenge to an already long ‘to do’ list.”

By the way, this week Belgium’s debt rating was cut, and Portugal’s and Hungary’s were cut to junk status.

Other euro bits…in no particular order…

Merkel and Sarkozy at week’s end were talking about EU treaty changes in time for the Dec. 9 summit but this is insane. It’s normally a years-long process. No way they can just ram them through, especially since they involve greater oversight of national budgets and statistics, as well as create debt limits for governments, while trying to reach consensus in the eurozone on pension ages and tax levels.

The U.K. and Germany each reported third quarter GDP rose 0.5% over the second quarter. This is good, right? It’s irrelevant, is what it is. Fourth quarter GDP should be flat at best, most likely negative.

A joint services/manufacturing index for the EU came in at 47.2 for November vs. 46.5 in October, still putrid, while a reading on industrial orders for the eurozone in Sept. over Aug. fell 6.4% (Germany down 4.4%, France down 6.2% and Italy off 9.2%).

Italy’s borrowing costs soared, with the two-year nearing 8% while the three-year bond peaked at 8.13%. The key 10-year hit 7.60% before finishing the week around 7.30%. Six-month bills carried yields of 6.50%!

Belgium, not one of the PIIGS but always on the periphery, saw its 10-year hit a yield of 5.85% on Friday, up from 4.79% on Monday. Belgium deserves it as the country hasn’t had a government since native Eddy Merckx was winning the Tour de France.

Things are not going well for Britain and Prime Minister David Cameron. A poll for the London Times showed that 79% of voters believe the country will fare ‘badly’ over the next year against 18% who think it will do ‘well.’

Chinese vice-premier Wang Wishan, responsible for overseeing the financial sector, said this week:

“Right now the global economic situation is extremely serious and in a time of uncertainty the only thing we can be certain of is that the world economic recession caused by the international crisis will last a long time.”

Which leads me into a discussion of…

Washington…yuck

The supercommittee failed to come up with the $1.2 trillion in deficit reduction it was charged with doing and so now sequestration kicks in, $1.2 trillion in automatic cuts over ten years, half from defense, but not starting until 2013. President Obama faulted congressional Republicans, saying they “refused to listen to the voices of reason and compromise” during the debt talks. Obama also warned that he would veto any attempt to unwind the automatic spending cuts. There will be “no easy off-ramps on this one,” he said.

Republican committee member Pat Toomey, senator from Pennsylvania, countered: “Unfortunately, our Democratic colleagues refused to agree to any meaningful deficit reduction without $1,000bn in job-crushing tax increases.”

Peter Peterson, the long-time advocate for balancing the federal budget, called the panel’s failure “deeply disappointing.”

“A divided government cannot succeed until elected officials choose to lead the country toward solutions instead of relentlessly defending their own political ideology.”

Politicians from both sides, as well as many a pundit, said it’s now about the 2012 election, as if this is going to change things. It won’t.

I’ve been telling you for months what will happen, though. Once the two parties couldn’t come up with a substantial, $4 trillion deficit-reduction package this summer, I’ve been calling for a Crash next year, one that will be related to the feeling hitting the markets all at once that we are indeed no different than Europe. Our leaders’ failure, particularly the president’s, to enact a legitimate plan that markets would have rejoiced over seals our fate in 2012. I told you a few weeks ago that next year could look a lot like 1860 (a theme CNBC’s Jim Cramer began to pick up on this past week, not that I ever want to be associated with him). The political debate will be as ugly as any in our lifetime.

The Wall Street Journal’s John Bussey interviewed Erskine Bowles and Alan Simpson of Simpson-Bowles fame and just a reminder as to the extent of the mess.

Erskine Bowles:

“I think we face the most predictable economic crisis in history. It’s as clear as the nose on my face that the fiscal path they are on here in Washington is not sustainable. And worse yet, I know every member of that fiscal commission knows it, too.

“The economics is very clear. The politics, very difficult. I’ll give you one little simple arithmetic example. If you take 100% of the revenue that came into the country last year, every single dime of it was consumed by our mandatory spending and interest on the debt. Mandatory spending in English is basically the entitlement programs. Medicare, Medicaid and Social Security. That means every single dollar we spent last year on these two wars, on national defense, homeland security, education, infrastructure, high value-added research – every single dollar was borrowed, and half of it was borrowed from foreign countries.

“That’s a formula for failure in anybody’s book. And this is not a problem that we can solely grow our way out of.”

John Bussey asked the two about President Obama’s non-reaction to their report when they released it in December, and how the president then didn’t even mention it in the State of the Union, my own big issue at the time.

Bowles:

“I negotiated the budget for President Clinton. And every investment banker will tell you the key to success is knowing your client and defining success up front. So, I knew what success was on his part, and I could go in there and negotiate the deal.

“I did not know President Obama, and neither did Alan. So we spend a tremendous amount of time with him and his economic team up front defining success. And we negotiated a deal that got a majority of Republicans to vote for it, so he had plenty of cover on the other side. It also exceeded every single one of the goals that he had given us.

“I fully expected them to grab hold of this. If it had been President Clinton, he would have said, ‘God, I created this, this is wonderful. It was all my idea.’

“So we were really surprised. My belief is that most of the members of the economic team strongly supported it. Like every White House, there’s a small cabal of people that surround the president that he trusts and works with, and I believe it was those Chicago guys, the political team that convinced him it would be smarter for him to wait and let Paul Ryan go first, and then he would look like the sensible guy in the game.

“We then expected, before the State of the Union, that when he did the stimulus, that that would be a great time to say not only, look, we’re going to do this to get the economy moving forward, but we have to do it within the context of long-term fiscal reform and responsibility. And he didn’t.”

Robert Samuelson / Washington Post

“From 2005 to 2035, (the cost of entitlements) will nearly double as a share of national income, projects the Congressional Budget Office. How big a government do we want? What’s the balance of fairness between young and old? How much should other programs be reduced or taxes raised? Many Democrats duck the fundamental policy questions and reject any benefit cuts.

“Only President Obama can start such a debate. He has the bully pulpit, but he hasn’t used it. Here’s an exchange between ABC White House correspondent Jake Tapper and the president, at a July 15 news conference, that captures Obama’s calculated obscurity.

“Tapper: ‘In the interest of transparency, leadership and also showing the American people that you have been negotiating (with Republicans) in good faith, can you tell us one structural reform that you are willing to make to one of these entitlement programs that would have a major effect on the deficit? Would you be willing to raise the retirement age? Would you be willing to means test Social Security or Medicare?’

“Obama: ‘We’ve said that we are willing to look at all these approaches. I’ve laid out some criteria in terms of what would be acceptable. So, for example, I’ve said very clearly that we should make sure that current beneficiaries as much as possible are not affected. But we should look at what can we do in the out-years, so that over time some of these programs are more sustainable. I’ve said that means testing on Medicare, meaning people like myself, if – I’m going to be turning 50 in a week. So I’m starting to think a little bit more about Medicare eligibility.(Laughter). Yes, I’m going to get my AARP card soon – and the discounts. But you can envision a situation where for somebody in my position, me having to pay a little bit more on premiums or co-pays or things like that would be appropriate.’

“Noncommittal gibberish. There is no leadership from the nation’s ‘leader.’ Space precludes running all his rambling response; the excerpt above was about half. Tapper followed up.

“Tapper: ‘And the retirement age?’
“Obama: ‘I’m not going to get into specifics.’

“Well, there you have it. The president won’t talk specifics, but government consists of specifics. The reason we cannot have a large budget deal is that Americans haven’t been prepared for one. The president hasn’t educated them, and so they can’t support what they don’t understand. Left or right, there are no comfortable positions. No one relishes curbing Social Security or Medicare benefits. But without changes, taxes will go way up, the rest of government will shrink dramatically or huge deficits will persist.”

You know who would have been effective these days, in his prime? Ross Perot. Call him what you will (I proudly voted for him in ‘92), but he was ahead of his time when it came to deficits.

Charles Krauthammer / Washington Post…on how some Republicans, such as Sen. Tom Coburn (Ok.) have actually supported increased tax revenue, as did supercommittee member Sen. Pat Toomey, let alone House Speaker John Boehner as part of the grand bargain with President Obama that fell through last summer.

“So why does the myth of the (Grover) Norquist controlled anti-tax monolith persist? You might suggest cynicism and perversity. Let me offer a more benign explanation: thickheadedness – the inability to tell the difference between tax revenue and tax rates.

“In deficit reduction, all that matters is tax revenue. The holders of our national debt care not a whit what tax rates yield the money to pay them back. They care about the sum.

“The Republican proposals raise revenue, despite lowering rates, by opening a gusher of new income for the Treasury in the form of loophole elimination. For example, the Toomey plan eliminates deductions by $300 billion more than the reduction in tax rates ‘cost.’ Result: $300 billion in new revenue.

“The Simpson-Bowles commission – appointed by President Obama and endorsed by Coburn – used the same formula. Its tax reform would lower tax rates at a ‘cost’ of $1 trillion a year while eliminating loopholes that deprive the Treasury of $1.1 trillion a year. This would leave the Treasury with an excess – i.e., new tax revenue – of $100 billion a year or $1 trillion over a decade.

“Raising revenue through tax reform is better than simply raising rates, which Democrats insist upon with near religious fervor. It is more economically efficient because it eliminates credits, carve-outs and deductions that grossly misallocate capital. And it is more fair because it is the rich who can afford not only the sharp lawyers and accountants who exploit loopholes but the lobbyists who create them in the first place.

“Yet the Democrats, who flatter themselves as the party of fairness, are instead obsessed with raising tax rates on the rich as a sign of civic virtue.”

Editorial / Washington Post

“That the lawmakers were…unable to reach agreement does not bode well for future negotiations. The 2012 election may produce a change in the occupant of the White House and control of one or both houses of Congress, but it is not likely to produce a clear mandate for either party’s vision of debt reduction. The compromise that proved elusive for the supercommittee will remain necessary. Perhaps it can be achieved in the action-forcing context of the trigger and expiring tax cuts. Working on deficit reduction, after all, requires a triumph of hope over experience.”

Batten down the hatches, folks. You ain’t seen nuthin’ yet.

China

I guess I should change my heading above from “Europe, Washington and Wall Street” to include China, because it obviously impacts market sentiment almost as much as Europe some days, such as when HSBC released their preliminary purchasing managers’ index (PMI) on manufacturing for China in November, 48, or off the 50 dividing line between growth and contraction, this after a 51 reading in October was bullish for being better than expected.

China is slowing. The central government knows this. One leading banking official, chairman Jiang Jianqing of the Industrial & Commercial Bank of China, said China would nonetheless maintain its tight monetary policy over inflation fears.

But that doesn’t mean Beijing can’t play with bank reserve requirements, which is what they are already doing with some rural banks to help small businesses. I also think China will lower interest rates because inflation is going to come down sharply from here.

The problem is exports are slowing precipitously, with 1/5th going to Europe. In Guangdong, for example, 450 small factories have closed (those making toys and clothing, primarily), as the World Bank warned China’s growth will decline to 8.4% next year. Hong Kong warned that a full third of its 50,000 factories in China could shut down over the coming months.

[Another economic report I read from a Chinese government mouthpiece said growth in 2012 will still be 9.2%.]

Meanwhile, you have the property bubble and how quickly does that deflate? What’s the impact on the smaller banks in particular? This is where I’m convinced the government will not let the situation get out of hand. I have written in this space in the past few months that Beijing will have no problem letting small banks fail that have been irresponsible. But it will protect the larger institutions and thus prevent a systemic crisis, assuming Europe’s recession doesn’t evolve into a depression.

Street Bytes

--Stocks had another miserable week with the Dow Jones losing 4.8% to close at 11231, down exactly 1,000 points in four weeks and now down 3.0% for the year. The S&P 500 lost 4.7%, while Nasdaq declined 5.1%, its fourth-straight weekly loss. Both the S&P and Nasdaq are now down 8% in 2011. For very selfish reasons I wish the year ended now. I’d be spot on with my yearend forecast of the major averages finishing down 5% to 7%. Plus the CRB Index of 19 commodities is at 305.45, down from the 12/31/10 level of 332.80, so my prediction there is good.

But five weeks is an eternity these days and I wouldn’t be the least bit surprised to see a big rally before yearend. No one said it has to be a rational one.

--U.S. Treasury Yields

6-mo. 0.06% 2-yr. 0.27% 10-yr. 1.96% 30-yr. 2.92%

The debate over deficit reduction didn’t shake the Treasury market as Europe’s turmoil led to a further flight to quality, at least the U.S. being perceived as the best kid on a sleazy planet. Back on Aug. 5, when S&P downgraded the U.S. credit rating, the benchmark 10-year Treasury was at 2.56%. Today it sits at 1.96%, after hitting 1.67% on Sept. 23, and 1.87% on Nov. 23.

--The Federal Reserve is putting the 31 largest banks (with assets over $50 billion) through another stress test, this one where GDP would decline 6.9% based on a euro recession, with 13% unemployment and locusts; the point being to measure capital levels in times of crisis.

I don’t know if a stress test is necessary, I would just raise bank capital requirements above where they are now, almost to draconian levels, to kill any thought of excessive risk-taking and return them to what they were supposed to be doing in the first place. Lend to businesses and homeowners (with a mandatory 20% down). Boring stuff. I love to be bored.

--Speaking of housing, October existing home sales were a little better than expected, but the median home price was down to $162,500. The July 2006 peak was $230,300. The Feb. 2011 low was $156,000.

--Tokyo’s Nikkei index is at its worst level since the March 2009 lows.

--It’s staggering to think that AT&T will have to take $4 billion in charges in the year’s final quarter as a result of its seemingly failed $39 billion acquisition of T-Mobile USA, as the Federal Communications Commission announced it would seek a trial-like hearing on the merger, one that would cause countless delays, which then led AT&T and T-Mobile parent Deutsche Telekom AG to pull their application for FCC approval in order to focus on the Justice Department, which is also seeking to block the acquisition.

The two agencies say that a merger of the No. 2 and No. 4 wireless carriers would damage competition. AT&T needs approval from both to proceed.

The thing is, AT&T agreed to a breakup fee of $3 billion with Deutsche Telekom for the latter to go along with the deal and to turn over valuable spectrum if the deal wasn’t approved (estimated cost another $1 billion). Obviously, AT&T didn’t anticipate such fierce opposition from the feds.

--An estimated 200,000 jobs have been lost this year in the financial services sector, worse than the 174,000 in 2009, as compiled by Bloomberg. This is more than just Wall Street’s traditional cyclical moves; over-hiring at the top, slashing too much at the bottom. It is indeed a permanent shrinking of the industry. An economist at Moody’s predicted the Street wouldn’t regain these jobs until 2023.

So tell your kids that are in high school and about to go off to college to focus on engineering. 

--The U.K.’s High Pay Commission has recommended that top executives be restricted to a basic salary plus a single performance element instead of three or four that are commonplace in order to halt the spiraling bonuses that are “corrosive” to the economy “and threaten to create the type of inequalities last seen in the Victorian era,” as the Financial Times put it.

For example, John Varley, Barclay’s top executive in 2010, earned 169 times the earnings of an average British worker, whereas in 1980 Barclays’ top pay was just 13 times the average.

At BP, “the boss earned 63 times the company’s average, while the 1980 multiple was 16.5.” [Brian Groom/FT]

--According to ComScore, online holiday shopping was up by 14% over last year in the first 20 days of November. The growth is owed to record numbers prowling the Internet on enhanced smartphones and tablet computers, even when they are in bricks-and-mortar stores. ComScore is expecting online sales to rise 15% for both November and December. In 2010, ecommerce grew by 12% over the previous year.

--What a mess. Kaja Whitehouse / New York Post:

“Folks who got stuck with bum checks from Jon Corzine’s defunct brokerage firm MF Global are getting bounced a second time.

“This time, it’s by the MF Global trustee’s claims process….

“The (process) allows those with accounts to recover 60 percent of the $5.5 billion in MF’s accounts frozen after it emerged that $1.2 billion* was missing from accounts that should have been segregated, and therefore safe.

“But folks who cashed out of their MF brokerage accounts leading up to the Wall Street firm’s Halloween collapse – and received checks from MF for their account balance, only to see them bounce – are not addressed by the claims process, The Post has learned.

“Potentially hundreds of people with an estimated $50 million in claims are in this limbo.”

*It was discovered this week that the shortfall in customer funds had doubled from previous estimates. Jon Corzine is slated to testify on Dec. 15 before the House Financial Services Subcommittee on Oversight and Investigations, which might be the first time we finally see the guy, he having disappeared from sight. Maybe he’s in Bimini?

--Further evidence of contagion from Europe as Australian banking officials say the sovereign debt crisis in the former is threatening to become a full-fledged credit crisis impacting the Aussie housing market as banks stop lending to each other. Roughly a third of the funding for Australian mortgages comes from overseas bond markets; so that’s a third of the big banks’ sources of capital potentially drying up, which will lead to price drops, as reported by the Sydney Morning Herald.

--And further evidence of Ireland’s housing crash. The Irish Independent used the example of a property in Dublin, where a father bought his ideal family home for 65,000 euro. The same three-bedroom house was going for 380,000 when he first looked at it. The previous owner couldn’t sell it during this time and finally went to auction.

The number of mortgages in arrears more than three months in Ireland has grown to 63,000 as of Sept. 2011 from 26,200 at the end of Sept. 2009. An Irish Central Bank study also found that four out of 10 households in mortgage arrears are actually behind by a year or more. As I told you from my last trip to Ireland in October, the anecdotal evidence I picked up is beyond scary. In all honesty, it’s a topic I think of every day, knowing some of the folks in deep trouble.

[By the way, Canada is clamoring for Irish workers to fill needs in industries such as fisheries, mining, and oil and gas. Some 10,000 Irish have relocated to Canada in just the past two years. In turn, the Canadian government is increasing the quotas on work visas for the Irish.]

--Sticking to the real estate theme, the Wall Street Journal reported that in my native New Jersey, “100,000 homeowners are dealing with foreclosures that are stalled in court and another 48,000 are way behind on mortgage payments.” This is going to be a drag on home prices for years to come, but, at the same time, these are people actually ‘saving’ a ton of money and the impact on consumer spending cannot be discounted. Heck, I know a guy who hasn’t made a mortgage payment in at least 18 months and he’s spending at least as much as he always did. Part of the issue in his case is his mortgage kept being bounced around with all the bank mergers that took place during the peak of the crisis and with each merger, let alone the robo-signing scandal, the clock on the foreclosure process and/or workout would start anew.

--Automakers GM, Honda and Volkswagen expect China passenger-car sales to rise as much as 10% next year, faster than China’s current 6% pace for the first ten months of 2011. Well this kind of flies in the face of every other prediction on a slowing China due to the Euro crisis. The car folks, though, tout still extremely low ownership levels and rising incomes for their bullishness.

--According to the Labor Department, the jobless rate dropped in 36 states in October, while payrolls increased in 39, led by Illinois which added 30,000 jobs, and California with 25,700. [Wisconsin lost 9,700, and New York, 8,300.]   North Dakota continues to have the lowest unemployment rate, 3.5%, while Nevada still has the highest, 13.4%.

--Nokia Siemens Networks is cutting a whopping 17,000 employees worldwide as part of a massive restructuring to focus the telecom equipment maker on more profitable broadband operations. The 17,000 figure is almost a quarter of its 74,000 workforce.

--With the European Union in full crisis mode, I got a kick out of the European Parliament and Commission’s request for a 5% hike in its budget next year. It had to settle for a 2% increase. They just don’t get it.

The real problem, however, is that the EC has made financial commitments to its newer and poorer members that it may not be able to honor, such as farm subsidies and regional development funding.

--Ohhh Ca-na-daaa! I’m packin’ my bags for theeee…

You see, kids, Canada’s debt to GDP ratio is but 35% vs. a Group of Seven average of 80%. And the beer is all premium. Plus, in my case, I’d become a hockey fan again after shunning the sport for about 15 years. And Tim Hortons is even better than Dunkin’ Donuts. Only thing is you have to wear long underwear in Canada for up to 350 days a year.

--Oh to have been a shareholder of Pharmasset Inc., which was acquired by Gilead Sciences for $11 billion, or $137 in cash; this being a company with no products on the market and a stock that traded as low as $20 in the past year. But they have a pill in late-stage testing that could be a treatment for hepatitis C, which analysts expect to become a bigger health problem due to the aging baby boomer population, seeing as it is spread by intravenous drug users, among other ways, and can take years to emerge once you have picked up the virus.

--Meg Whitman, Hewlett-Packard’s new CEO, had her first earnings report card and in the process lowered fiscal 2012 guidance to $4 per share vs. $4.88 in the year just finished. Wall Street expectations were for $4.60. Whitman promised “No more surprises,” but then said the company would no longer provide revenue guidance, just earnings, which was a surprise.

--People still send holiday cards. According to Hallmark, 1.5 billion are mailed for Christmas, followed by Valentine’s Day (144 million), Mother’s Day (133 million) and Father’s Day (94 million). It seems the greeting card industry has weathered the Internet storm and is making a comeback. Hallmark and American Greetings control 82% of the market. No word on Festivus sales.

--Shares in Groupon, the largest Internet daily-deal site, closed the week at $16.75, or already below the IPO price of $20 on Nov. 4. Of course anyone buying that first day paid substantially more than $20, like between $26 and $31, and is thus at a rather sizable loss already. Your editor said he wouldn’t touch this one.

--We note the passing of legendary financier Ted Forstmann. He was 71. Forstmann was chairman of IMG Worldwide, the largest sports and entertainment management firm of its kind, but earned his fame and fortune as the founder of the modern leveraged buyout, or LBO, though what distinguished Forstmann was that he did his deals with as little debt as possible, blasting what would become a bubble in junk bond financed deals in the 1980s. Forstmann expressed his open contempt for Wall Street’s hustlers at congressional hearings, telling the SEC that the investment banking heads of the day were like street walkers. “They are the hookers who make $1 million a night, but pretty soon, what have you got? Eleven hookers.”

In Forstmann’s fight with rival Henry Kravis over RJR Nabisco, Forstmann accurately predicted the junk bond debt would kill the company, coining the phrase “barbarians at the gate.”

Eventually, after making $15 billion in profits for his investors, he turned away from Wall Street and acquired IMG, which was struggling at the time, turning it back into a true powerhouse.

Forstmann was a big philanthropist, giving an estimated $440 million to help poor kids, and led the charge for school voucher programs in the 1990s.

--This story hit a week ago and I wasn’t able to get it into the review, but 28 waiters at Smith & Wollensky, the Capital Grille and other New York area restaurants were charged with copying customers’ credit cards and then passing them on to a crime ring. The crimes allegedly took place between April 2010 and this month and involved at least 50 American Express account holders. The crime ring bought luxury goods, including from Chanel, Bloomingdale’s and Bergdorf Goodman, showing they had good tastes.

--So I get this envelope in the mail and it says ‘payment enclosed’ and I’m thinking, what’s this? Found money? A relative I didn’t know I had leaving me some funds for premium beer?

Nope, I received $53.86 for damages in a class action suit involving American Express and foreign transaction fees! So my extensive travel really paid off.

--My portfolio: I had dinner with my CFO friend of the China company in Fujian province. I’m not expecting any miracles, though confident in what they are doing. [I have no idea if their acquisition of the feedstock company for $13 million was a fair price or not. That would be a little arrogant of me to think I did.]   It’s just all about the global, and China, economies, as well as the still dreadful sentiment towards China small caps. After the holidays I might hit the road with them for a day or two in the U.S., depending on our schedules. I really can’t say more at this time.

--Finally, a real Street Byte, the passing of Gregory Papalexis, the owner of the Sabrett hot dog trademark. He was 86.

Ah yes, the Sabrett tube steak. Many was the day when I was starting out in the business world, working for an insurance brokerage firm in Manhattan, that I could only afford two Sabrett dogs for $2 at a local pushcart. They were/are pretty nasty, but gotta hand it to Mr. Papalexis, who formed Marathon Enterprises in 1964 and acquired a number of competitors, including Sabrett Food Products later on, selling hot dogs and other items from a pushcart brand called House O’ Weenies.

His daughter, a company executive, “said her father gave great detail to the buns his company sold, insisting they be ‘light, airy and fluffy.’ His reasoning was simple: If customers filled up on the bun, they won’t have room for a second hot dog.” [Crain’s New York Business]

Foreign Affairs

Egypt: Following a week of demonstrations, a second revolution by all appearances, this time against the ruling Military Council, the generals agreed to form a new “national salvation” government, with former prime minister Kamal Ganzouri at the head, but protesters vowed to continue with their demands that the army quit power. At least 40 have been killed in Cairo and elsewhere.

The thing is, multi-stage parliamentary elections (lasting weeks) are slated to begin on Monday and the military has said they will proceed as scheduled. How can they? The generals did make a major concession in saying they would now hold presidential elections by next June, rather than 2013, as their latest shifting calendar had called for, but the opposition says that’s not good enough.

If I were them, I’d accept the new timetable, which it appears the Muslim Brotherhood is ready to do…not that I’m giving them my campaign dollars.

Iran: The government said it had arrested 12 spies with ties to the CIA, though wouldn’t say anything as to their nationalities. An official said, “The U.S. and Zionist regime’s espionage apparatuses were trying to use regional intelligence services, both inside and outside Iran, in order to deal a strong blow to our country. Fortunately, these steps failed.” [More on the spy issue in a bit.]

Meanwhile, the U.S., U.K. and Canada imposed new sanctions on Iran, including measures to restrict the central bank, though only Britain said it would cut all financial ties, including to the Central Bank of Iran, while the U.S. stopped short of actually banning dealings with Iranian banks. U.S. Treasury Sec. Timothy Geithner did offer:

“If you are a financial institution and you engage in any transaction involving Iran’s central bank or any other Iranian bank operating inside or outside Iran, you are at risk of supporting Iran’s illicit activities,” activities which include “its pursuit of nuclear weapons, its support for terrorism, and its efforts to deceive responsible financial institutions and evade sanctions.”

Boy, that’s harsh, Timothy.

Editorial / Washington Post

“The Obama administration pledged that Iran would suffer painful consequences from plotting to assassinate the Saudi ambassador in Washington and for refusing to freeze its nuclear program. Key European allies and Congress – not to mention Israel – are ready for decisive action. But on Monday the administration unveiled another series of half-steps. Sanctions were toughened on Iran’s oil industry, but there was no move to block its exports. The Iranian banking system was designated ‘a primary money laundering concern,’ a step U.S. officials said could prompt banks and companies around the world to cease doing business with the country. But the administration declined to directly sanction the central bank.

“The result is that President Obama is not even leading from behind on Iran; he is simply behind….

“The administration’s slowness to embrace crippling sanctions is one of several persistent flaws in its Iran policy. Another is its continued insistence on the possibility of ‘engagement’ with a regime that has repeatedly rejected it while plotting murder in Washington. ‘The United States is committed to engagement,’ Sec. of State Hillary Clinton asserted on Monday. Some European officials say they are concerned by the concessions the administration appears prepared to offer Tehran if there are new talks.

“By now it should be obvious that only regime change will stop the Iranian nuclear program….Sanctions that stop Iran from exporting oil and importing gasoline could deal a decisive blow to (Supreme Leader Ayatollah Khamenei’s) dictatorship, which already faced an Arab Spring-like popular revolt two years ago. By holding back on such measures, the Obama administration merely makes it more likely that drastic action, such as a military attack, eventually will be taken by Israel, or forced on the United States.”

As for Russia and China, both condemned the new round of sanctions, saying it exacerbated the crisis and would make renewing negotiations virtually impossible.

Finally, the brother of a leading Revolutionary Guard Corps commander killed in a Nov. 12 blast said the commander, Gen. Moqadam, was at a test of an experimental intercontinental ballistic missile when it failed. 20 others were killed. At his funeral, Moqadam was called the “founder” of Iran’s missile program. This doesn’t mean the CIA or Mossad couldn’t have still sabotaged the test.

Syria: In an exclusive interview with the Sunday Times of London, President Bashar al-Assad said, “The conflict will continue and the pressure to subjugate Syria will also continue. However, I assure you that Syria will not bow down and that it will continue to resist the pressure being imposed on it.”

Assad claims he began the reform process six days after the start of protests in Syria, but, “After eight months the picture is clear to us…It is not a question of peaceful demonstrations but an armed operation.”

Assad went on to warn that any attack on Syria would be an earthquake that would shake the entire Middle East.

After an attack on a bus carrying Turkish pilgrims in Syria on Monday, though, Turkish Prime Minister Erdogan addressed Assad, “You can remain in power with tanks and cannons only up to a certain point. The day will come when you’ll also leave.”

The next day, for the first time Erdogan directly called on Assad to step down.

“Without spilling any more blood, without causing any more injustice, for the sake of peace for the people, the country and the region, finally step down.”

Pakistan: In a still breaking development that could have major consequences for U.S.-Pakistani relations, Pakistan is claiming at least 26 of its soldiers were killed when NATO helicopters fired on an army checkpoint in the northwest, Friday night. Its immediate response has been to close a key border crossing used by the coalition to supply its troops in Afghanistan. 

Lebanon: In a big blow for the CIA, several informants have been arrested in Beirut this year, the agency was forced to concede. “Beirut station is out of business,” a source told the Los Angeles Times. Up to a dozen informants have been compromised, according to the source. U.S. officials say, however, that the number is not accurate, nor are the stories of sloppy work involving meetings held at a local Pizza Hut. The source maintains that the CIA station chief in Lebanon was too trustful of his Lebanese contacts.

Lebanon’s security service was able to identify the informants by analyzing cellphone records and using software to help identify quick calls, especially those made near an embassy.

Former CIA officers told the AP that the agency has suffered an erosion of “tradecraft,” especially with the focus on fighting terrorists rather than traditional counterintelligence.

Back in June, Hizbullah leader Sheikh Nasrallah said “The U.S. Embassy…is a nest of spies recruiting [spies] to serve Israel.”

As to the fate of those whose covers have been blown, former senior CIA officer Robert Baer told ABC News: “If they were genuine spies, spying against Hizbullah, I don’t think we’ll ever see them again. These guys are very, very vicious and unforgiving.”

Meanwhile, Hizbullah continues to prepare for war with Israel, though its primary immediate concern, talking weeks, is the fate of the Assad regime in Syria. Longer-term, it is just assumed that should Israel strike Iran’s nuclear facilities, Hizbullah will fill the role of Iran’s proxy in launching a massive missile strike on Israel, while its terror cells in Latin America are activated against Jewish interests there and possibly the United States.

Iraq: As the U.S. prepares to withdraw by yearend, three bombs went off in a popular market in Basra on Thursday. The first two drew in Iraqi security forces and then the third caused all the fatalities, at least 19 dead. What’s disturbing about this particular attack is Basra is where many foreign oil companies have offices and it’s the center of Iraq’s energy sector.

Yemen: Once again, Yemeni President Ali Abdullah Saleh said he would step down as he signed a deal to relinquish power in Saudi Arabia, an agreement with the opposition brokered by Saudi King Abdullah. But thousands of demonstrators then took to the streets over the deal’s promise of immunity from prosecution for both Saleh and his family. Pro-Saleh supporters proceeded to kill at least five of the demonstrators. After 33 years of rule, many just don’t believe Saleh is finally history, but he is slated to come to the U.S. for medical treatment.

Regardless, the agreement for handing over power is a complicated one, including the new power-sharing arrangement, and I wouldn’t get too bullish about Yemen’s prospects; like don’t waste your time discussing this over Christmas dinner. 

Libya: Members of one of the 25 militias in Libya captured Muammar Gaddafi’s son, Saif, but as of this writing have not turned him over to the interim government, which wants to try him, or extradite him to The Hague. Said a leader of the militia, “If you ask to take him to Tripoli, it is like you are saying it is a different country. We have the same courts here. We could put him on trial here – why not?”

Oh yeah, this is another winner.

Bahrain: King Hamed conceded his security forces used torture and excessive force against mostly Shiite Muslim protesters during the March uprising in which at least 35 were killed. After a five-month investigation outlined a series of abuses, Hamed said those responsible would be punished and indeed charges against security force members have been filed. The inquiry also said Iran’s involvement was nil, but on this Hamed insisted, “Iran’s propaganda fueled the flames of sectarian strife.”

China/Taiwan: Worrisomely, Taiwanese President Ma’s popularity is sliding as the island gears up for an election on Jan. 14. [I admit to not seeing the extent of the slide coming.] Should he somehow lose to neophyte Tsai Ing-wen, it would be a huge blow for China-Taiwan relations and guaranteed to raise tensions, even as Tsai tries to reassure both China and the West that she will continue many of the policies that have led to better relations between the two. The problem that Ma has is the emergence of a second China-friendly candidate that could siphon votes away from Ma, a la some of America’s past third party candidacies.

Ma is facing trouble because last month he strongly hinted he wanted to sign a peace treaty with China within the next decade, the first time he has ever given a timetable for negotiating this most sensitive issue. [On this I correctly informed you at the time.] Tsai’s focus is on social welfare and the weakening global economy can only help her candidacy.

Regarding U.S.-China relations, President Obama met on the sidelines of an Asian summit with Chinese Premier Wen Jiabao, a meeting requested by Wen after the Chinese leader was upset over the summit’s focus on the South China Sea, with both Obama and Sec. of State Clinton warning China to curb its aggression, thus enraging Beijing. Wen defended China’s stance on the sea and said it is not a topic for multinational gatherings, as the U.S. wants it to be.

But the fact is 16 of the 18 nations present at the summit brought up maritime security, all insisting on a multilateral resolution.

Chinese government mouthpieces responded in editorials, such as from Chinese-language Xinhua.

“The aim of America’s strategic move east is in fact to pin down and contain China and counterbalance China’s development.”

China Daily accused the United States of “scaremongering,” and declared, “East Asia not U.S. playground.”

Russia: The populace is tiring of Prime Minister Vladimir Putin, just as he gears up to return to the presidency next spring. His approval rating is still a high 60%, but this is down from 78%, while the number disapproving is rising rapidly. In fact, Putin was booed at a martial arts fight in Moscow, an unheard of occurrence and an event broadcast live on Russian television. Following the fight, Putin went into the center of the ring to congratulate the winner and was immediately drowned out in a chorus of cat-calls. His image-makers certainly didn’t plan on this happening. 

But on the issue of NATO’s anti-missile shield, Russian President Medvedev followed his boss’ comments of the week before in warning the U.S. to take into account Russia’s objections to the current plans for the shield, repeating a 2007 threat to deploy cruise missiles in Russia’s Kaliningrad, aimed at NATO missile batteries. So nice reset, Barack!

Next Sunday, Dec. 4, is the date of Russia’s parliamentary elections and it appears Putin and Medvedev’s United Russia party’s popularity is plunging. This is going to be exceedingly interesting. How badly will the vote be rigged? You just know the Kremlin is furiously prepping officials at the polling places. An outrageous outcome, one that is clearly suspect, could lead to sweeping demonstrations and I’m not so sure the Kremlin is prepared for this. I’m also as convinced as ever of my theory there could be a coup orchestrated by a shadowy third force within the next year.

France: President Sarkozy’s poll numbers are improving ahead of next spring’s election, with one French polling agency having him at 29%, vs. 32% for the Socialist candidate Francois Hollande, while National Front candidate Marine Le Pen is at 19%.   A month ago, the same survey had Hollande leading 39-23. In a runoff, however, Hollande would still defeat Sarkozy handily, though the gap is down to 16 from 28.

For her part, Le Pen is calling for France to abandon the euro and no telling where sentiment on this issue will be six months from now. She is still very much capable of pulling off an upset and getting into the run-off.

Mexico: This country is gearing up for a presidential election next year as President Felipe Calderon cannot run for another term. There is growing concern narco-terrorists will disrupt the election in a big way, threatening poll workers and telling people how to vote.

Separately, soldiers in a well-to-do neighborhood in Tijuana searched a car and found $15.3 million in cash, believed to belong to the country’s most wanted drug lord, Joaquin ‘Shorty’ Guzman, of the Sinaloa cartel.

And in the once placid city of Guadalajara (Mexico’s second-largest), 26 bound and gagged bodies were found Thursday in abandoned vehicles, another sign of the still escalating drug violence. Each of the dead had been shot in the head. 24 hours earlier, the charred remains of 16 were found in Sinaloa state. The two incidents could be tied. Poor Guadalajara is hosting an international book fair, billed as the largest in the Spanish-speaking world, this weekend with an expected 600,000 visitors. I will not be attending.

Random Musings

--Polls

Reuters/Ipsos national survey of registered Republicans:

Newt Gingrich 24%
Mitt Romney 22%
Herman Cain 12%
Rick Perry 10%

Magellan Strategies survey of New Hampshire Republicans. [Survey not noted as most reliable, however.]

Mitt Romney 29%
Newt Gingrich 27%

A more respected Bloomberg News survey has Romney at 40% in New Hampshire, followed by Ron Paul at 17% and Gingrich at 11%.

In Iowa, the American Research Group poll has Gingrich now at 27%, Romney 20% and Paul at 16%.

--I loved Tuesday’s Republican presidential debate on CNN. The New York Post’s Michael A. Walsh shares some of my thoughts.

“In the crispest debate since the series began back in May, everyone was on his or her game. There were no gaffes, no flubs, no disastrous memory losses. The candidates – almost any one of whom would have a real chance of unseating President Obama…were all smooth and polished, sticking to their well-staked-out issues.

“Indeed, they’ve become like characters in a long-running sitcom, with each one slickly playing his or her assigned role.

“There’s Ron Paul, the wacky libertarian who believes in a kind of international Golden Rule: do unto other nations as you would have them do unto you. There’s Michele Bachmann, consistently assailing Obama. And Rick Santorum, the bright kid who always complains he’s not getting enough attention from the teacher.

“But there was one big difference last night: This was the first debate in which Mitt Romney, the eternal but generally unloved front-runner, was just another figure on stage, looking nervously over his shoulder not just at the man standing next to him, Rick Perry (who had his best debate performance to date) but at the man who’s supplanting him atop the polls, Newt Gingrich.

“True, Newt couldn’t score any cheap points by going after the moderator, as ‘Blitz’ (as Herman Cain delightfully called him) kept the tone elevated. But this kind of forum plays to Gingrich’s strengths – a firm grasp of both foreign and domestic issues and how they relate, married to a newfound consistency of purpose that allows him to talk straight and play to the crowd….

“Will the Gingrich boomlet last? His famous ‘baggage’ would make him an easy target for Obama, but his formidable intellect would counter that in the head-to-head presidential debates.”

A different take…Jennifer Rubin / Washington Post

“The foreign policy debate Tuesday night was a surprise on many counts. It was lively and serious, which many debates haven’t been. Rep. Michele Bachmann exceeded expectations. Rick Santorum showed personal restraint (not complaining about the lack of attention) and displaying his depth of knowledge. As one might imagine, Herman Cain was perhaps the least comfortable man on the stage while Mitt Romney was the most at ease. Texas Gov. Rick Perry had some moments but some rather bad ones as well. The big surprise was Newt Gingrich, who not only failed to impress but created some problems for himself. [Ed: i.e., his answers on immigration.]”

I was just surprised how Rubin went on to slam Gingrich further, while being effusive in her praise for Bachmann, “who was poised, informed and knowledgeable throughout. She made clear that Obama’s lack of leadership is responsible for Iran’s progress on a nuclear weapon. She defended aid to Pakistan which is in our national security interest. She made an excellent point about sending our dollars to China, which in effect builds up its military at the expense of ours. She pivoted on an energy question to chide Obama for delaying on the Keystone pipeline. If she performs this well in future debates, look for her to make progress.”

And this from the New York Daily News’ Thomas Defrank and Alison Gendar.

“Mitt Romney fibbed about his real first name in a bid for laughs…and immediately fed criticism he’ll say anything to get elected.

“CNN moderator Wolf Blitzer opened the debate by asking candidates to introduce themselves. ‘Here’s an example of what I’m looking for: ‘I’m Wolf Blitzer and yes, that’s my real name.’’

“Romney couldn’t help himself in going for a quick laugh. ‘I’m Mitt Romney and yes, Wolf, that’s also my first name,’ he said to dead silence from the audience.

“That wasn’t the worst of it: Romney’s real first name is Willard – Mitt is his middle name.”

But Romney had a good week, all in all, in picking up South Dakota Sen. John Thune’s endorsement which could help in neighboring Iowa. [Too bad Thune isn’t running for president as I’ve seen this field develop. A Romney-Thune ticket is definitely a possibility as of today, however.]

--The New York Post’s Michael Goodwin, on Mayor Michael Bloomberg’s incoherent stance on Occupy Wall Street, which the mayor took two months to clear from Zuccotti Park.

“As the NYPD was battling mobs trying to shut down lower Manhattan, the mayor was in Midtown arguing to business leaders that the protesters have an important message.

“ ‘We’re coming to a point where Occupy Wall Street is just the beginning, the Tea Party is just the beginning,’ he said, according to a Times report. ‘The public is getting scared. They don’t know what to do, and they’re going to strike out, and they don’t know where.’

“Even the incoherence of the movement, Bloomberg insisted, ‘tells you what the problem is. They just know the system isn’t working, and they don’t want to wait around.’

“Lenin is said to have coined the phrase ‘useful idiots’ to describe ignorant Westerners who sympathized with his totalitarian state. There is no better description for people like Bloomberg who, having succeeded wildly under democracy and capitalism, offer any support to the socialist mobs who aim to destroy both.”

For his part, on a different matter, Bloomberg blasted Barack Obama for his failure to lead on the deficit. Accusing Congress of “political cowardice” for helping to bring about a “disaster for the country,” Bloomberg then went on to say this about the president:

“The executive branch must do more than submit a plan to a committee – and then step aside and hope the committee members take action. That’s not how any CEO would run a business.”

But a Bloomberg third party candidacy, if that’s where he’s headed, or a Ron Paul one, which to some looks increasingly likely, would hand the election to Obama.

--Candice M. Giove / New York Post

“Hell no, we won’t go – unless we get goose down pillows.

“A key Occupy Wall Street leader and another protester who leads a double life as a businessman ditched fetid tents and church basements for rooms at a luxurious hotel that promises guests can ‘unleash [their] inner Gordon Gekko,’ The Post has learned.

“The $700-per-night W Hotel Downtown last week hosted both Peter Dutro, one of a select few OWS members on the powerful finance committee, and Brad Spitzer, a California-based analyst who not only secretly took part in protests during a week-long business trip but offered shelter to protesters in his swanky platinum-card room.

“ ‘Tents are not for me,’ (Spitzer) confessed when confronted in the sleek black lobby of the Washington Street hotel where sources described him as a ‘repeat’ guest….

“Meanwhile, Dutro, 35, one of only a handful of OWS leaders in charge of the movement’s $500,000 in donations, checked in on Wednesday, the night after police emptied Zuccotti Park.

“While hundreds of his rebel brethren scrambled to find shelter in church basements, Dutro chose the five-star, 58-story hotel, with its lush rooms and 350-count Egyptian cotton sheets. He lives only a short taxi ride away in Carroll Gardens, Brooklyn.

“ ‘I knew everything was going to be a clusterf—k in the morning,’ he told The Post, alluding to Occupy’s own disruption plans. ‘How would I get over the bridge when they were shutting it down?’”

Dutro told The Post he paid for his room with his American Express card.

“It is an expensive hotel. Whatever,” he said.

To the whole OWS movement, I offer my own… “Whatever.”

--But while I dismiss OWS, oh, I want a revolution, that’s for sure. Just not the kind OWS wants. Case in point, New Jersey Democratic Congressman Rob Andrews. Now this guy appears on CNBC from time to time and he’s one arrogant a-hole.

So last Sunday, the Star-Ledger’s Matt Friedman had a front-page story on the primo jerk. To wit.

“A three-night stay at a five-star hotel in Edinburgh, Scotland, for a wedding: $7,725.

“A set of china from Bloomingdale’s for the bride and groom: $463.

“Cab rides, meals, tips and airline baggage fees: $953.

“Expensing it to your campaign account: Priceless.

“In June, U.S. Rep. Rob Andrews (D-1st Dist.) and his family visited Edinburgh for a wedding – part of a larger European vacation. There, Andrews, his wife and two teenage daughters stayed at the Balmoral Hotel in the center of town, which bills itself as a ‘luxury hotel in the true sense of the word.’ The price was indeed five-star: Two rooms for three nights cost $7,725….

“In all, Andrews and his family spent more than $9,000 on the Edinburgh leg of the trip. Rather, his congressional campaign did.”

Andrews claims the expense was legit because the wedding was for a key donor and volunteer adviser, allowing him to call it a political event.

So stay in a freakin’ Holiday Inn.

But while Andrews then continued his defense with the paper, the Ledger reported further:

“Also in June, Andrews’ campaign spent more than $10,000 on a party at his Haddon Heights home to celebrate his 20 years in Congress and his daughter’s high school graduation. And his campaign has made tens of thousands of dollars in donations to Philadelphia theaters – sometimes within months of another daughter appearing in one of their productions.”

Time to tear the House down.

--This is a story to discuss over the dinner table. Country duo Sugarland, some of you may recall, were the feature act at the Indiana State Fair on Aug. 13 when a wicked storm blew through, wind gusted to 60 mph, the stage rigging collapsed onto spectators, and seven were killed, another 40 injured. Sugarland would have taken the stage about five minutes later.

But they are being sued, along with producers, stage riggers and others, by at least 20 law firms.

I can understand producers and those associated with the stage for being named, but Sugarland?

Well, it seems their contract specified that they had the final say on whether to cancel the concert due to weather, according to plaintiffs’ attorneys.

“Unfortunately, the tragedy could have been prevented if the responsible parties had been concerned about the concertgoers that night,” one attorney told the AP.

Bottom line, read the fine print on some contracts. Sugarland shouldn’t be blamed, but, just this cursory explanation has to make you think twice. It’s a shame, but the law is the law.

[The state and fair are involved in a totally separate series of suits.]

--According to the U.S. National Snow and Ice Data Center, the level of sea ice in the Arctic shrank this year to its second-smallest size since 1979. Further, according to a study published in the journal Nature, “The loss of sea ice in the Arctic at the end of the 20th Century is ‘unprecedented’ in the past 1,450 years in its duration and magnitude.” [Bloomberg]

So when you have sea ice, 80% of the sunlight striking it is reflected back to space. But when the ice melts, 90% of the light actually heats the water, which can profoundly influence climate patterns.

--Meanwhile, get this. A week ago, Thursday, Fairbanks, Alaska, hit a record-low temperature, in mid-November, of 41 degrees below zero. That beat the record low set two days earlier of 40 below. It’s about the jetstream, people; always has been, always will. And my friend Mark R.’s sunspots. As for the above sea ice issue, I don’t discount this affects the weather as well.

--Barack Obama is lucky he is a lock to win New York in 2012 because this coming Wednesday, he’s going to get a lot of heat in the Big Apple for scheduling a bunch of fund-raisers on the same night as the Rockefeller Center Christmas tree lighting, the mother of all traffic gridlocks. As Jeff Spicoli of “Fast Times at Ridgemont High” fame would have said of Obama’s scheduling, “What a…..” Oops, we’re talking the president. Can’t finish this one off out of respect for the office.

--In his television ads for NBC Nightly News, Brian Williams is full of gravitas. “This is a very personal business for me.” A day later I’m watching Williams talk about an upcoming segment featuring two kids spreading flour on the living room floor, no doubt prodded by the mother with her video-camera, “and it got people talking today.”

Oh brother. Number one; only idiots would call their friends and tell them to catch the YouTube video of this fraud. But there it was, 90 seconds of precious nightly news time, the serious stuff.

Of course then the Today Show compounded matters by having the family in the following morning for “an exclusive.”

Yes, friends, yet another sign of the apocalypse.

--Tom Wicker died. He was 85. Among his many achievements, Wicker wrote what I consider the most balanced portrayal of Richard Nixon, “One of Us.”

 --Great news from space, maybe. Remember the troubled Russian Mars mission, the one where the spacecraft got stuck in earth orbit when some engine burns, that would have shot it into outer space, failed?

Well contact was finally made with it as a tracking station in Perth, Australia, picked up a signal.

“Good day, Mate. You okay?”
“Nyet.”
“Can we help you get out of that orbit?”
“Nyet.”

Russian spacecraft have limited vocabularies, as does your editor.

[Evidently only a few days remain for the Russkies to work on uploading new commands or else it could come crashing down on any one of you.]

--Finally, NASA is set to launch the world’s biggest extraterrestrial explorer, perhaps as early as today. A six-wheeled, one-armed Mars rover that is due to reach the red planet in eight months. It’s nicknamed Curiosity and is the size of a car. I hope the battery isn’t lithium, witness the Chevy Volt experience of batteries catching fire now under investigation.

---

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

God bless America.
---

Gold closed at $1683
Oil, $96.77

Returns for the week 11/21-11/25

Dow Jones -4.8% [11231]
S&P 500 -4.7% [1158]
S&P MidCap -4.5%
Russell 2000 -7.4%
Nasdaq -5.1% [2441]

Returns for the period 1/1/11-11/25/11

Dow Jones -3.0%
S&P 500 -7.9%
S&P MidCap -10.4%
Russell 2000 -15.0%
Nasdaq -8.0%

Bulls 47.4
Bears 32.6 [Source: Chartcraft / Investors Intelligence]

Have a great week. I appreciate your support.

Brian Trumbore

*Don’t forget the new iPad app. Tavern approved!