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12/03/2011

For the week 11/28-12/2

[Posted 6:00 AM ET]

Europe, Washington and Wall Street

Last week, in patting myself on the back for being spot on with my yearend predictions for equities and commodities, as of that point, I added:

“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.”

Well, we sure got our rally, spurred by events in Europe (and also China) that were precipitated by just how awful the financial crisis had become across the pond. Make sense? It shouldn’t, but then financial markets aren’t always rational.

Talk about the wild and wacky, the week actually began with a little note from Greece that pretty well sums up just how nuts things have become there.

Andreas Georgiou is the head of Elstat, Greece’s new independent statistics agency, and he faces life in prison for, get this, allegedly inflating the scale of the country’s fiscal crisis. Georgiou told the Financial Times:

“I am being prosecuted for not cooking the books. We would like to be a good, boring institution doing its job. Unfortunately, in Greece statistics is a combat sport.” Georgiou is to appear in court on Dec. 12 to answer the charges and the life in prison possibility hangs over him if he’s convicted of “betraying the country’s interests.”

As reported by the Financial Times’ Kerin Hope:

“The investigation follows a public dispute over the 2009 budget deficit figure. Under Mr. Georgiou, the figure was revised upwards from 13.4 percent to 15.8 percent of gross domestic product – a record for a eurozone member state. The revised figure was accepted without reservation by Eurostat, the Brussels statistical service.

“The prosecutor cites a claim by professor Zoe Georganta, a senior statistician who was sacked along with other members of Elstat’s board by Evangelos Venizelos, the finance minister, earlier this year. According to Ms. Georganta, the 2009 deficit was exaggerated by Elstat ‘so it would become larger than that of Ireland and Greece would be forced to adopt painful austerity measures.’”

The thing is, according to revised Eurostat data, Greece would have failed to gain admission to the eurozone in 2001 in the first place because its deficit was too large, but back then the Greeks did nothing but lie about the books which is why they were let in.

So all the political parties are now blaming Georgiou for the harsh austerity programs they face, even though they’d face them anyway if, say, he was off by a percent or two. It’s nuts. But then this is Europe and the southern tier of the eurozone, be it Greece, Portugal, Italy or Spain, all played with the books in one form or another. They all did nothing, in essence, but lie, and/or put their heads in the sand as debt levels exploded. 

So because of the acts of these nations (Ireland’s situation is somewhat different in nature, a pure banking/real estate crisis, but go ahead and lump them in with the other miscreants if you want), you have the likes of Sir Mervyn King, governor of the Bank of England, warning this week that eurozone woes have created “an exceptionally threatening environment” that threatens to “spiral” into a systemic financial crisis.

“The crisis in the euro area is one of solvency not liquidity. And the interconnectedness of major banks means the banking systems and economies around the world are all affected. Only the governments directly involved can find a way out of this crisis,” he said.

Only Germany, that is. One of the more extraordinary statements of the week came from Poland’s Foreign Minister Radoslaw Sikorski, delivered in the shadow of the Brandenburg Gate.

Sikorski declared that the biggest threat to his nation’s security was not terrorism, or German tanks, or even Russian missiles, but “the collapse of the eurozone.”

“I demand of Germany that, for your own sake and for ours, you help it survive and prosper. You know full well that nobody else can do it. I will probably be the first Polish foreign minister in history to say so, but here it is: I fear German power less than I am beginning to fear German inactivity. You have become Europe’s indispensable nation.”

Sikorski backed Germany’s drive for deeper integration, “deeper integration or collapse,” he said. Of course this is exactly what German Chancellor Angela Merkel seeks. Or, as the Washington Post editorialized during the week:

“The choice is between a truly desperate future and a merely bleak one. It’s up to Germany.”

And so it was that Merkel, speaking before the Bundestag on Friday, confirmed that she and French President Nicolas Sarkozy would meet in Paris on Monday, Dec. 5, to go over a reform plan that would aim to create a “stability union” of the 17 eurozone nations, with far stricter budget rules, stricter surveillance of national budgets, and tougher penalties for non-compliance, which is what the eurozone was supposed to have in the first place since formation of the union. The day before, Sarkozy echoed these themes.

Merkel said the euro’s future was “inseparable from the future of European unity,” noting how much Germans had benefited from the common currency. “Too much is at stake, precisely for Germany and the Germans,” she said, adding that German unification and European unity were “two sides of the same coin…We will never forget that.”

But Merkel once again poured cold water on the idea of joint euro-area bonds, adding the European Central Bank (ECB) cannot be relied upon to resolve the crisis because of its statutory limitations that make it different from the Federal Reserve or the Bank of England. Euro bonds were thus “unthinkable,” said the chancellor, who was once freaked out when then President George W. Bush approached her from behind and put his hands on her shoulders, but I digress.

Earlier, Sarkozy warned his fellow euro-zone leaders that they must accept a tighter union bound by enforceable fiscal rules or face dire consequences.

“There cannot be a single currency without economic convergence. Or the eurozone will explode.”

But while Chancellor Merkel said that for its part the ECB couldn’t resolve the crisis, the ECB is indeed a huge key, and to that end ECB President Mario Draghi signaled he was prepared to ramp up the bank’s role in supporting the likes of Italy and Spain if eurozone governments took the tough steps, such as deficit reduction, that Merkel is talking of. Heretofore, the ECB’s bond buying program has been relatively minimal and, as a result, hasn’t had the impact the bank sought to have. But at week’s end, Draghi was talking as if the ECB was preparing to step up in a big way.

So you begin to see the workings of the deal that Merkel, Sarkozy and the ECB will be working on and then presenting, next week, culminating in the Dec. 9 EU summit.

Now some of you might be thinking, hey, editor, you’re leaving some important elements out in terms of the week’s action and the huge rally in equities. Indeed I have, but before I get into them, understand that all of the above doesn’t in any way resolve the growth crisis on the Euro continent, and how the massive austerity programs currently being launched, or about to be (i.e., Italy and Spain) will in no way lead to the needed growth in the short to intermediate term. But it will, eventually, if governments have the guts to stick to their guns and the people accept the pain, one day lead to a much brighter future. This, though, is where leadership comes in and we all know that has been in short supply across the globe.

It’s because of a current crisis of confidence, and a freeze up at the bank funding level, that we also saw a bazooka fired at Europe’s financial institutions in the form of a massive, coordinated global central bank infusion of unlimited amounts of each country’s money at a reduced interest rate. The action on the part of the U.S. Federal Reserve, the ECB, and the central banks of Britain, Canada, Japan and Switzerland, pumped dollars into the troubled eurozone’s banks.* Investors had stopped lending money to these institutions, fearing the huge exposures the banks had to the sovereign debt of troubled euro nations and the banks needed dollars to fund their daily operations, for starters, amidst a classic credit squeeze (that in turn is leading to a continent wide credit crunch that is killing small businesses in particular at the worst possible time).

*As most easily explained in a London Times piece, “There is a shortage of dollars because European banks have many outstanding loans, investments and market positions denominated in the American currency, but only limited supplies of dollar deposits.” Traditionally, U.S. money market funds have filled the gap but in recent months these funds have significantly slashed their European exposure, thus cutting off the flow of greenbacks.

Again, however, the move on the part of the central banks, which led to Wednesday’s stupendous rally (including a rise in the Dow Jones of 490 points) in no way addressed the actual crisis in Europe, which is about massive debt and zero growth. It only addressed a symptom, which is why some of us say the week’s action wasn’t entirely rational but let the bulls have some fun, especially since I’m not ‘short.’

In fact, Republican presidential candidate Ron Paul was correct in saying of the massive liquidity injection, “Rather than calming markets, these arrangements should indicate just how frightened governments around the world are about the financial crisis.”

And remember the European Financial Stability Facility, or EFSF; the 440-billion euro rescue fund (with less than 250 billion still available) that was to be increased to at least 1 trillion euros in order to attempt to combat the issues facing Italy and Spain? 1 trillion was never going to be enough, but you can stop worrying about it because it seems Europe’s leaders, at least for this week, gave up trying to boost the fund. As the Financial Times editorialized, “Turning the (remaining 250 billion euro) into 1 trillion or more would require a degree of financial engineering that the slickest bond trader would have struggled to flog in the boom years.”

Instead, eurozone ministers are working on credit protection for new sovereign bond issues, early details of which aren’t worth getting into for this space. 

But here’s something to ponder, if you’re of the mind that the euro crisis is nearing a solution, though why you would think that I’ll never know. Aside from the growth and austerity conundrum, Europe’s banks and governments will be borrowing about $2 trillion next year; $400 billion or more involving Italy alone ($200 billion, Spain). So while the ECB, through its bond purchases this past week was successful in bringing down, for example, the yield on the Italian 10-year bond from 7.30% to about 6.50%, and Spain’s a record 100 basis points, who is going to continue to buy this stuff (assuming the ECB doesn’t just fall asleep with its head pressed against the ‘Buy’ button)? We’re talking it’s easy to paint a picture for 2012, for starters, where we’re still just lurching from one bond auction to the next in terms of influencing market sentiment. The likes of Italy and Spain would eventually have to default over time unless rates stabilize at levels much lower than even today. And the banks? Nationalization is a solution, such as with France, but that bears its own huge costs, especially, again, when there’s no growth!

Just a few other tidbits on the topic.

--The other week I told you that for its part, the IMF had only $400 billion in funds to use on its various missions, hardly enough to help the eurozone further in any sizable way, especially with other obligations around the world, plus existing commitments to Greece, Portugal and Ireland, the three already having formally accepted bailouts. So, Christine Lagarde is going begging amongst the G-20 nations for further funding.

--The Organization for Economic Cooperation and Development, in its twice-yearly report on the global economic outlook, expects the eurozone to contract by 1% at an annualized rate in the current quarter and by 0.4% in the first three months of 2012, or the definition of a recession, albeit a mild one. We should be so lucky.

[For the OECD’s 34 members, it is calling for growth of just 1.6% in 2012, down from its May forecast of 2.8%. The OECD expects the U.S. to grow by 2% in 2012.]

--Britain suffered its worst work stoppage in a generation as the trains were halted and schools shut, though the airports remained open with few delays. An estimated 1.5 million public workers walked out to protest the Cameron government’s draconian austerity program and pension cuts, but it could have been worse. Chancellor of the Exchequer (Treasury Secretary) George Osborne said Britain would remain resolute after sailing into “a debt storm,” as Osborne conceded growth would be less than 1% this year and next.

--The Institute for Fiscal Studies (IFS) in the U.K. estimates that British families are suffering through a squeeze in living standards that will have them no better off in 2016 than they were in 2002. But, and this gives you a sense of the real problem across the continent (and in the U.S.), the called for reductions in pensions “would still leave public sector workers with a far more generous package than their private sector counterparts. And (the IFS) added that public sector employees enjoyed an average pay premium of 7.5 percent over the private sector.” Nonetheless, what the public employees only see is Osborne’s plans to cut spending on the sector by 16.2 percent, the largest rolling back of the State since World War II. [Anushka Asthana / London Times.]

--Greece did finally receive its 8 billion euro tranche of aid from Bailout I, so it will be able to meet its payrolls and pension obligations for a spell.

--One reading on manufacturing activity in the eurozone had the PMI at 46.4 for November vs. 47.1 the prior month, or below the 50 dividing line between growth and contraction. In non-euro U.K., the figure was 47.6.

Washington and Wall Street

Stocks soared, with the Dow Jones up 7.0% and the S&P 500 up 7.4%, the best week for the latter since March 2009.  The spring ’09 comparison is a good one because if you believe that Europe is finally getting its act together (I obviously don’t), it was Monday, March 9, 2009 that markets around the world bottomed and by week’s end, in the case of the Dow Jones, stocks had risen 9.0% (10.6% for Nasdaq). That started a six-week winning streak for the Dow, nine weeks for Nasdaq. So that’s what the bulls are pinning their hopes on in terms of market history.

As noted above, the main catalyst for the U.S. move was Europe. What’s funny, though, is that Friday morning’s employment report, showing a gain of 120,000 for November, as expected, with upward revisions to prior months and an unemployment rate falling from 9.0% to 8.6%, had zero impact on stocks as by day’s end the major averages were flat. Why would this be so? First off, the 8.6 figure was viewed skeptically by many seeing as it is partly a result of 315,000 leaving the labor force, i.e., they quit looking for a job. That’s not good. Plus the underemployment rate, while coming down, is still 15.6% and, importantly, average hourly earnings fell 0.1% in the month.

But 8.6% looks great in the headlines compared to the 9% plus we’ve been dealing with and I imagine President Obama feels like Old Man Fezziwig (at least a slimmed down version), who enjoyed a party come holiday time with the best of them. On Thursday night I had dinner with a friend and we were talking about Obama, 2012, and unemployment rates and I offered that if it’s 8.4% come next November, Obama is re-elected. Mark thought we’d struggle to get below 9%. At least for one month he owes me a beer, even as most everyone is in agreement the 8.6% will be adjusted upward before we see 8.5% or better.

One thing is for sure, however. The U.S. is by some measurements, like manufacturing, performing better than any developed (or developing) nation on earth, hard as that might be to believe. Our own national ISM reading on manufacturing for November came in at 52.7. It fell to 49.0 in China (more on this later). The Chicago Purchasing Managers Index came in at a far better than expected 62.6. A reading on October construction spending, up 0.8%, was better. The economy grew at 2% in the third quarter and seems likely to do just as well, if not a little better, in the current one. The Federal Reserve’s Beige Book on regional economic activity showed the economy “increased at a slow to moderate pace” in 11 of 12 regions (St. Louis being the exception). And the White House, or Congress, had absolutely nothing to do with this! We’ve gone through a huge retrenchment, slashed our debt, stopped paying our mortgages in many cases…yes, it’s twisted but that’s available cash for major purchases…and you add it all up and it’s a recipe for slow growth.

But speaking of mortgages, the housing sector is still dead in the water, especially in terms of prices, as the latest S&P/Case-Shiller data for September (these guys are slow data collectors) showed that prices in the 20-city index fell 0.6% over August and 3.6% from year ago levels. Still very tight lending standards, foreclosures and an ever-looming inventory overhang will keep prices down and many an American underwater.

A few other items of note.

--Auto sales, as noted further below, were strong in November.

--Sales at the big-box retailers, though, were only so-so, up 3.1% year over year for the same month despite all the Black Friday hoopla you read about, or were a participant in, with sales that day up 6.6% over 2010, according to ShopperTrak, while Cyber Monday sales rose about 24%, this according to IBM. So how do you only get 3.1% then? Discounting…lots and lots of discounting…with more to follow. But if stocks were to continue to rally into Christmas that will only help consumer confidence, which has been improving, and thus spending.

Finally, as Britain’s Osborne talked about his country’s “debt storm,” we of course have one of our own, with record budget deficits each of the last three fiscal years. As I begin to think about what I’ll predict for 2012, I have zero reason to change my early call of a debt-related Crash.

I also have begun thinking heavily about international affairs and what could go wrong next year that in some cases could have a heavy bearing on sentiment and, boy, catch up on your sleep now because I can tell you already, either avoid my year end missive, posted Dec. 31, or read it at your own risk because I’m looking at a year with some awful potential flashpoints; massive civil unrest in Europe over austerity programs being but a mild one, though I have a month to fine tune things. Now who wants a beer?

Street Bytes

--As I alluded to above, aside from the central banks firing a bazooka (or more aptly a flamethrower) to unfreeze the Euro banks’ short-term funding issues, the stock market also benefited on Wednesday from China’s lowering of its banks’ reserve requirements for the first time in three years, which should allow for more lending to spur growth. Most were surprised by the move, but you, dear readers, were told the following just last week in this space.

“China is slowing. The central government knows this. One leading banking official…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.”

You can never read enough.

Alas, China did report its November PMI reading on manufacturing fell below the critical 50 line at 49.0, the first contraction since February 2009. When the government releases a slew of data on Dec. 9, exports are expected to have plummeted in November as well. UBS is now projecting China’s growth rate will slow to 7.7% in the first quarter, year over year. No doubt the housing sector, some 16% of the economy, is sliding.

Others in the region are suffering a similar fate. South Korea’s PMI hit 47.1 last month; Taiwan’s just 43.9; and Australia’s 47.8. India’s is still above 50 at 51, but this was down over October. India’s third quarter GDP also came in at 6.9%, a far cry from the 8% plus pace of the past few years. Lastly, Japan’s unemployment rate rose from 4.1% in September to 4.5% in October, a worrisome development for them. Panasonic and TDK have announced a collective 28,000 job cuts.

--U.S. Treasury Yields

6-mo. 0.04% 2-yr. 0.25% 10-yr. 2.03% 30-yr. 3.02%

At one point on Friday, the 10-year Treasury traded with a yield up to 2.16%, from the prior week’s 1.96% close, but then just as the stock rally petered out on the realization all is still not hunky-dory in Europe, Treasuries rallied as the euro slipped.

--S&P cuts its ratings on 15 banks, including the long-term credit rating on the likes of Bank of America, Citigroup, Goldman Sachs, Morgan Stanley and JPMorgan Chase.

--Massachusetts Attorney-General Martha Coakley filed suit against the five biggest mortgage companies in the U.S., accusing them of massive fraud in seizing borrowers’ homes because they were not the actual holders of those mortgages, among other accusations. Coakley added the banks “had no legal right to conduct the foreclosure,” and the failure of Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial to follow proper procedures “has adversely impacted titles to hundreds, if not thousands, of properties.” [Financial Times]

Coakley’s suit threatens to disrupt ongoing discussions between various state and federal agencies and the five lenders to settle other allegations, including the “robo signing” scandal.

--Manhattan Federal Judge Jed Rakoff blasted SEC chief Mary Schapiro for taking the easy way out in a regulatory action against Citigroup, after the SEC had sued Citi over its dumping $1 billion in doomed toxic mortgage product on unwitting customers, while bank executives were betting that half the assets would decline in value. Rakoff told Schapiro she’ll have to rework the agency’s $285 million settlement wherein Citi wasn’t forced to admit wrongdoing.   [Instead agreeing to the outrageous boilerplate language of ‘neither admitting nor denying guilt.’]

“As a matter of law, an allegation that is neither admitted nor denied is simply that, an allegation.”

Judge Rakoff said the two sides will have to settle their differences before a jury next summer unless they can agree on whether Citi was actually in the wrong. Most everyone agrees Citi originally got away with a slap on the wrist.

--According to an analysis by the Wall Street Journal of filings with U.S. banking regulators, some 2,500 banks cut their work forces in the third quarter by a combined 20,300 jobs, in an examination of smaller banks, a further sign of deepening retrenchment for the industry.

This is a key. “Banks that cut jobs in the third quarter outnumbered those that added jobs by 605…That was a big swing from the second quarter, when 659 more banks grew than shrank and the industry added 14,434 jobs, adjusted for mergers.” [Dan Fitzpatrick / Wall Street Journal]

--In a total non-surprise, AMR Corp., the parent of American Airlines, filed for bankruptcy protection though the flying public generally has little to worry about except for a few scrapped flights and still lousy service. American will now try to slash its massive debt load and restructure contracts, particularly with its pilots. That’s the negotiation that promises to be messy.

[What American decides to do with its pension fund is another potential mess, with liabilities currently exceeding assets by an estimated $10 billion.]

--U.S. auto sales for November were the best in a year, rising at an annualized pace of 14 million, up from 12.3 million a year ago. Chrysler led the way, up 45%, while Nissan’s rose 19%, Ford’s 13% and GM’s 7% over year ago levels. Toyota, still recovering from the March Japanese earthquake, showed its first increase for the year, up 6.7% for the month. But Honda’s declined 6.4%.

Others: BMW up 15%, Daimler’s Mercedes-Benz unit saw a 55% increase over a year ago, Volkswagen jumped 41% and Hyundai’s rose 22%.

Lastly, GM said it expects to fall short of its goal of selling 10,000 Chevy Volts in 2011, but maintains it will do so in early 2012; the Volt being under investigation over concerns its lithium-ion battery pack could pose a fire risk.

However, GM also said it would buy Volts back from any new owner who is concerned over perceived risks in order to keep customers happy. CEO Dan Akerson said that the automaker is prepared to recall all 6,000 now on the road pending the outcome of the federal inquiry.

--The trustee in the MF Global bankruptcy wrote in a briefing document distributed to Congress, “The trustee has determined that even if he could recover everything that is at U.S. depositories, there will be a shortfall in what MF Global management should have segregated at U.S. depositories,” estimating the customer shortfall at $1.2 billion.

The latest bottom line is it appears MF Global was dipping into client funds for a much longer time than first thought, weeks instead of just a few days before its failure.

In a Senate hearing, Gary Gensler, chairman of the Commodity Futures Trading Commission, was sharply criticized for recusing himself from the MF investigation because he had been a colleague of former MF CEO Jon Corzine. “Looks to me like you’re trying to avoid the heat,” said Republican Senator Mike Johanns of Nebraska.

And speaking of avoiding heat, Corzine has yet to be seen but on Friday was issued a subpoena to appear before a Dec. 8 House hearing of the Agriculture Committee, one of three now seeking Corzine’s testimony between Dec. 8 and Dec. 15.

--According to the S&P/Case-Shiller Index, the 3-year declines in housing prices for some of the major metropolitan areas they monitor are as follows:

Washington, D.C. -1.02%
New York -11.34%
Phoenix -28.31%
Las Vegas -36.13%

--According to a study out of Rutgers University, “just 7 percent of those who lost jobs after the financial crisis have returned to or exceeded their previous financial position and maintained their lifestyles.” [Motoko Rich / New York Times]

--My favorite China indicator, casino revenues in Macau, rose 32.9% in November, the slowest pace this year, or $2.9 billion, down from October’s record $3.4 billion. So it looks like we’re headed into the 20s, which I said was my own worry level.

--China’s grain output hit a record this year, 571 million tons and up 4.5% from a year earlier. China is the second-largest corn consumer and produced a record 191 million tons of that, up 8.2% year over year; a much larger than expected total. This should help ease food inflation. Imports of corn should also be expected to fall.

--Since the start of Ireland’s recession in 2008, it is estimated almost 47,000 businesses have gone under; hardest hit being construction and real estate.

As a result of the above, the collapsing housing market, etc., 75,000 are expected to emigrate from Ireland next year, according to the Economic and Social Research Institute, which is on top of 35,000 leaving in 2011. Unemployment is still expected to average 14.5% in 2012.

--According to an annual report from Transparency International, focusing on the role of corruption, New Zealand has the world’s cleanest government, followed by Finland and Denmark. Others in the top ten are Sweden, Singapore, Norway, the Netherlands, Australia, Switzerland and Canada. 

As for the United States, we are ranked No. 24. “We’re 24! We’re 24!” Behind Qatar and Chile, and one ahead of France. Britain is No. 16. Germany and Japan are tied at 14. China is No. 75.

Meanwhile, at the bottom are Myanmar and Afghanistan, tied for 180, and the last two are Somalia and North Korea. Iraq is No. 175.

--According to a survey of Wall Street pay by the major firms, compensation is expected to drop 27% to 30% this year to the lowest level since the 2008 financial crisis. So the average American’s reaction might be, ‘Good.’ But if you’re a New York City worker you better be smart enough to think, ‘Uh oh,’ because this means much lower tax revenues for Gotham, sports fans.

--Facebook is looking at the second quarter for its IPO, at least that is the word this week, and the company is being given a valuation of $100 billion, or over 40 times possible 2012 earnings, which may seem a bit outrageous but, hey, the company is indeed growing rapidly. And compared to Amazon, whose P/E is back over 100, Facebook would be cheap. 

--Broadway ticket receipts were up a whopping 32% during Thanksgiving week over a year ago, with attendance up 5.5%. Wicked remains the top grosser, with The Lion King second.

--Editorial / Wall Street Journal…on the pending retirement of Massachusetts Democratic Congressman Barney Frank:

“Few House Members have made a bigger legislative mark, and arguably no one so expensively. Mr. Frank deserves to be forever remembered – and we’ll help everyone remember him – as the nation’s leading protector of Fannie Mae and Freddie Mac before their fall. For years Barney helped block meaningful reform of the mortgage giants while pushing an ‘affordable housing’ agenda that helped to enlarge the subprime mortgage industry.

“ ‘I do think I do not want the same kind of focus on safety and soundness that we have in OCC [Office of the Comptroller of the Currency] and OTS [Office of Thrift Supervision],’ Mr. Frank said on September 25, 2003, in one of his many legendary rhetorical hits. ‘I want to roll the dice a little bit more in this situation towards subsidized housing.’ The dice came up snake-eyes for the housing market and U.S. economy.”

Editorial / New York Post

“Just before the nation’s financial collapse, (Frank) boasted that Fannie and Freddie were ‘fundamentally sound financially.’

“Well, both survived, but only after being taken over by Washington and given billions in federal bailouts, a move called ‘one of the most sweeping government interventions in private financial markets in decades.’ The rest is a sad history – for which Americans are still paying the price.”

Foreign Affairs

Iran: In 1979, as part of the Iranian Revolution, students stormed the U.S. Embassy, seizing 52 hostages that they then held for 444 days. This week, in the most serious offensive against a foreign embassy since then, thugs from the Basiji military police as well as representatives of the Iranian Revolutionary Guard stormed the British Embassy and a separate consulate facility in Tehran, which led to British diplomats exiting Iran, while the British government kicked Iran out of their embassy in London.

British Foreign Secretary William Hague said: “The idea that the Iranian authorities could not have protected our embassy, or that this assault could have taken place without some degree of regime consent, is fanciful.”

Hague called the attacks a grave violation of the Vienna Convention, which requires host nations to protect diplomats and embassies: “This is a breach of international responsibilities of which any nation should be ashamed.”

For Iran, this was an incredibly stupid act by an incredibly stupid, albeit highly dangerous, regime. I have written in this space all year that, hard as it may be to believe, wacko President Mahmoud Ahmadinejad is preferable to the man who really holds all the power, Supreme Leader Ayatollah Khamenei (aka Son of Satan, or son of the Father of the Revolution, Ayatollah Khomenei). You saw the perfect example of this in the taking of the British Embassy, fully sanctioned by Khamenei and his lieutenants, and not so by Ahmadinejad, who, as of this posting, has been quiet on the matter.

Ali Larijani, the parliamentary speaker and close ally of Khamenei, said the attacks reflected popular anger at Britain and were caused by “decades of domineering moves by the British in Iran.”

In response, the European Union ramped up sanctions against the regime, the financial and transport sectors, as well as against any entity that may be aiding Tehran’s nuclear program. The only other issue is whether to prohibit oil imports and on that, the EU said they cannot act unless such a move has the backing of all 27 EU member states. The EU imports 450,000 barrels per day of Iranian oil, or roughly 20% of Iran’s exports.

Editorial / London Times

“It is scant consolation that Iran continues to overestimate Britain’s power, blaming the U.K. for so many of its problems, rather than its own aggressive isolationism and economic failure. Ayatollah Ali Khamenei has previously called Britain Iran’s ‘greatest enemy.’ Memories are long.

“It seems that the Iranian Government no longer respects the work of foreign diplomats in their country, while it continues to demand respect for their own. Britain is simply not a sufficiently lawless and belligerent country to exact reciprocity in this instance by having the Iranian Embassy invaded by the many groups who would dearly like to do so. That is what is meant by civilization.”

Meanwhile, the U.S. Senate voted 100-0 to back crippling sanctions, far stronger than what the White House has been advocating, the latter fearing higher oil prices.

Further, on the nuclear front, there was a second blast in as many weeks at an atomic or missile facility in Iran, the latest being at Isfahan with unknown casualties; the first outside Tehran having claimed the lives of 30, including Gen. Moghaddam, head of the country’s missile program.

So who is behind this obvious effort to severely disrupt Iran’s drive for nuclear weapons? Israeli Defense Minister Ehud Barak said: “We are not happy to see the Iranians move ahead on this [program], so any delay, be it divine intervention or otherwise, is welcome.” Barak added Israel “has no intention of acting for the moment” in regard to a direct military attack.

Syria: The UN and its human rights officials have formally upped the death toll in the Syrian crackdown to 4,000 and, owing to the growing number of army defectors, are now labeling the action in Syria a full-blown civil war. [A report by the UN Human Rights Council found that at least 256 children were killed by government forces between mid-March and early November, some of them tortured to death.]

Our ever helpful Russian friends (see below) have reportedly delivered anti-ship cruise missiles to Syria, according to Interfax news agency as Moscow speaks out against further sanctions imposed by Western and Arab League states. The contract, going back to last year, was worth an estimated $300 million and Russia would say they were merely fulfilling it. Russian newspaper Izvestia also said earlier that Russia planned to send an aircraft carrier and other ships to Syria.

Conversely, the leader of Syria’s main opposition group, Burhan Ghalioun, said if there was a change in government, he would cut Damascus’ military ties with Iran and end arms supplies to the likes of Hizbullah and Hamas.

On the Arab League, it is very encouraging that 19 of the 22 member nations approved a series of tough punishments, including cutting off transactions with the Syrian central bank, and halting funding for projects in Syria, with the sanctions to take effect immediately.

Syria’s economy is expected to contract 5% this year and could shrink another 10% in 2012 if the sanctions are enforced and President Assad remains in power.

Lastly, neighbor Turkey initiated its own harsh sanctions as Turkish Foreign Minister Ahmet Davutoglu said: “Every bullet fired, every bombed mosque has eliminated the legitimacy of the Syrian leadership and has widened the gap between us. Syria has squandered the last chance that it was given.”

It was earlier that Turkish Prime Minister Erdogan, once a friend of Assad’s, said of his counterpart in Damascus:

“If you want to see someone who has fought until death against his own people, just look at Nazi Germany, just look at Hitler, at Mussolini, at Nicolae Ceausescu in Romania.”

Maybe we’ll all catch a break and Assad will meet Ceausescu’s fate; the Romanian dictator, you’ll recall, having been executed on Christmas Day, 1989, along with his wife. We could then toast the Syrian opposition as we gathered for our holiday feast, a useful poli-sci lesson for the little ones as well.

Egypt: After the first of three rounds of voting in Egypt’s parliamentary election, it appears the Muslim Brotherhood took about 40% and, very worrisomely, the extremist Islamists, the Salafis, up to 25%. Or a combined 65%. As one analysis put it, the 1/3 of the provinces that took part are also the most liberal so in the remaining 2/3s, you might expect the Islamist percentage to move even higher. Not good for the United States and Israel, to say the least.

Pakistan: I noted as I went to post last time that there was a late-breaking development here, the NATO attack on a Pakistani army base that killed 24 soldiers, and it is as bad for future U.S.-Pakistan relations as it seemed at first blush. Pakistan closed its border to Afghanistan, freezing hundreds of oil tankers and trucks filled with supplies for NATO forces in Afghanistan, while Pakistan demanded the U.S. stop using an airbase inside its territory for CIA-directed drone attacks. At this point, it doesn’t matter one whit as to how it all started and if Pakistan deserves to share some of the blame. The severe damage is done and it strengthens the hand of Pakistan’s military chief, Gen. Kayani, who led the public mourning of the soldiers and could very well take over in a coup, by my estimation.

China’s People’s Daily, looking to exploit the situation, editorialized:

“The United States and NATO have violated international law and international norms…

“This shows that at crucial moments, the United States will not show the slightest hesitation to violate the sovereignty of another nation to ensure its ‘absolute security.’”

On a different matter, 70-year-old U.S. aid expert, Warren Weinstein, was kidnapped by armed men in the city of Lahore nearly four months ago. The other day, al-Qaeda leader Ayman al-Zawahiri said his group was holding Weinstein and wouldn’t release him until the U.S. stopped air strikes in Afghanistan and Pakistan, as well as Somalia and Yemen. We can only hope Zawahiri meets the same fate as bin Laden very shortly.

Israel: The government ended a monthlong freeze of $100 million in Palestinian tax revenue as Palestinian President Mahmoud Abbas came under increasing pressure without the funds. Israel has long collected customs and value-added taxes on behalf of the Palestinian Authority and Israeli security chiefs approved of restoring the money because it ensured cooperation with Palestinian security services.

Iraq: As the U.S. pulls out its last troops, at least 56 Iraqis were killed in a string of bombings over an 8-day period. In 2012, this becomes the norm.

Yemen: Out of nowhere, President Ali Saleh, who was to go from Saudi Arabia to New York for further medical treatment after signing an agreement yielding his powers to his deputy, arrived back in Yemen. Feb. 21 is the date set for the election of an interim president after 30+ years of Saleh’s rule but who the heck knows what will happen now.

Russia: Editorial / Wall Street Journal…on the latest reaction to the long-planned missile defense shield in Europe.

“One of the foreign policy priorities of the Obama Administration was to ‘reset’ relations with Russia. How’s that working out?

“Dmitry Medvedev, the placeholder for Vladimir Putin in the presidency, gave one indication last week. He declared that Russia may deploy ‘strike forces’ and aim mid-range Iskander missiles in Europe. He also threatened to pull out of the 2010 New Start arms accord, which is supposed to be the hallmark achievement of the ‘reset.’….

“Seen rationally, the Russian obsession with the imaginary enemy to the west is strange. Russia’s security challenges loom larger from the Islamic south and the Chinese east. America and Europe would be the natural partners for a less paranoid and less repressive Russia.

“But the Kremlin is preoccupied with its own political survival, especially with elections coming. So it plays the nationalism card….

“What’s probably bothering the regime more is declining public support at home. Putin’s decision to take the presidency back, announced in September, hasn’t gone as smoothly as he hoped.”

Russian voters go to the polls to elect a new parliament on Sunday and Putin’s United Russia is estimated by one news service to get only about 53% of the vote, compared to 64% in 2007. Voters are tired of the party’s inability to curb corruption. 36% of respondents in a poll by the independent Levada center said United Russia represents “the party of thieves and fraudsters,” while 45% disagree with this view.

How dangerous is the situation in Russia these days? The Moscow Times reports that “Campaign ads by opposition parties have been banned on state television by order of the head of the Central Elections Commission, who has no authority to do so, Vedomosti reported.”

Separately, new evidence has emerged that Hermitage Capital lawyer Sergei Magnitsky was beaten to death by prison guards in 2009. Authorities have long claimed he died of natural causes.

And I can’t help but note the following.

I post, as you can see above, very early Saturday morning. Last week I wrote in part, “In fact, Putin was booed at a martial arts fight in Moscow, an unheard of occurrence and an event broadcast live on Russian television.”

Monday night, 2 ½ days later, CNN International, with all its vast resources, ran a report where, according to the Moscow Times, “A confused CNN anchor mistakenly declared that Prime Minister Vladimir Putin was booed by supporters at the United Russia party convention, rather than by fans at a mixed martial arts fight.”

In fact, the anchor, again, 2 ½ days after I wrote about it, said:

“I want to show the video that we got from the party convention this weekend. It is not widely covered in international media. This is real amateur video of those who booed Putin as he was nominated for president.”

Memo to CNN: The editor of StocksandNews.com could singlehandedly replace your research staff, saving the network $10s of millions, minimum.

China: No one is more upset over the United States’ overtures in Myanmar (Burma) than China. Secretary of State Hillary Clinton made her historic visit and met with opposition leader Aung San Suu Kyi in a most public setting, itself a sign the new military-dominated government is in reform mode, which is not what Beijing wants to see. 

[Separately, Clinton sought assurances from Burma’s leaders that they are not receiving nuclear technologies from North Korea, even as there are increasing military contacts between Burma and Pyongyang.]

Speaking of North Korea, officials there reported swift progress in building a new nuclear reactor, while ramping up its effort to produce enriched uranium. Pyongyang did not say the new facility was for generating fuel for nuclear weapons.

France: In a story that is getting buried amid all the other news out of Europe, but one that nonetheless threatens the reelection bid of President Nicolas Sarkozy, there is growing evidence that Dominique Strauss-Kahn, one-time presumptive presidential nominee of the Socialists and long-time rival of Sarkozy, was set up by allies of the president during last spring’s incident in a New York hotel.

DSK’s main U.S. lawyer, William Taylor, has video showing a hotel employee and an unidentified man performing a bizarre celebratory dance moments after learning the maid accused Strauss-Kahn of sexually assaulting her. Said Taylor: “We know [the maid] isn’t telling the truth, but now we have to wonder whether the hotel and the French government are telling the truth.” [New York Post]

And, in a report by the London Times, “Friends allege that Strauss-Kahn…suspected his BlackBerry had been hacked by his political enemies….

“Before he was arrested in New York…Strauss-Kahn had been warned by a friend in the French diplomatic corps that efforts would be made to derail his campaign with a scandal.

“An article in next month’s New York Review of Books alleges that he had been warned on the day of his arrest that a researcher at the UMP headquarters had come across a private email he had sent to his wife. The article claims unusual behavior by the hotel’s security staff and delays in informing the New York police.”

This is a perfect story for “60 Minutes” and you can imagine what will be running on French television in the lead up to the presidential election there next spring.

For one, do not forget that National Front candidate Marine Le Pen could still upset Sarkozy and gain the run-off against the Socialist pick, Francois Hollande, if this story has the legs it appears to have.

Balkans: I have long warned to always keep an eye on developments here and they just got hairier as Serbs battled NATO peacekeeping troops in Kosovo, with dozens injured, as the Serbs in the north of the little, newly independent country, refuse to allow the ethnic-Albanian central government to extend control to its area. Dozens were injured, and, ironically, this comes as the European Union is about to rule on whether to grant Serbia candidate status in its bid to join the EU. Serbia itself refuses to recognize Kosovo’s independence and provides backing to Serb communities in northern Kosovo.

These people hate each other more than just about any other groupings in the world (perhaps only exceeded by relations between some tribes in the Congo, in all seriousness). I certainly saw that firsthand traveling in Albania in 2010.

Also, keep an eye on Bulgaria, the poorest country in the EU trading bloc, which had its largest protests over the government’s austerity efforts that include a hike in the retirement age. As a new member, the people feel like they’ve already gone through wrenching changes to be admitted to the EU in the first place and have a hard time, a la Slovakia and Romania, in understanding why they have to go through a second round of it.

Morocco: The Justice and Development Party, Islamists, achieved victory in Morocco’s parliamentary elections, taking 107 of 395 seats, twice as many as the second party. Known by its French initials, PJD is not viewed as a threat to Morocco’s King Mohammed VI, who still holds virtually all the power, even as he acquiesced some in response to the Arab Spring in allowing early elections and a bit more say in governance.

Random Musings

--In a national Rasmussen survey of 1,000 likely Republican voters, Newt Gingrich polled 38% to Mitt Romney’s 17%...just staggering. [According to a separate Rasmussen survey, Gingrich leads President Obama, 45-42, in a hypothetical matchup, though the former speaker trails in all other national polls.]

--In a poll of likely Republican voters in Florida, Gingrich led Romney 50-19! As Peggy Noonan writes in her Wall Street Journal piece this weekend, “If you’ve seen this week’s poll numbers…you know it doesn’t look like an increase in (Gingrich’s) support but an eruption. It is as if something that had been kept down had quietly been gathering energy, and suddenly burst through its bonds. The entire Washington journo-political complex has been taken by surprise by something that not only wasn’t predicted but couldn’t have been.”

--So now Republicans and strategists are asking, ‘Has Mitt Romney been too cautious in allowing Newt Gingrich to gain traction?’ A Rasmussen survey in New Hampshire has Romney at 34% but Gingrich surging to 24%. Ron Paul is at 14%, while Jon Huntsman cracked double digits for the first time at 11%.

No doubt, Gingrich will pick up more of Herman Cain’s supporters than Romney will as Cain is said to be exiting the race later today after another woman came forward, this one, Ginger White, alleging a 13-year affair. Cain was forced to admit he hadn’t told his wife about his financial support of Ms. White.

Back to Newt, his campaign in New Hampshire was bolstered by the endorsement of the influential Union Leader newspaper, though it doesn’t have a great track record in picking winners.

The Union Leader is, however, a conservative outlet and it said of Romney: “We don’t back candidates based on popularity polls or big-shot backers. We look for conservatives of courage and conviction who are independent-minded, grounded in their core beliefs about this nation and its people, and best equipped for the job.”

--Maureen Dowd of the New York Times doesn’t pull any punches in her dislike of Gingrich in her latest Times op-ed, but the following is pretty funny:

“(Next) to Romney, Gingrich seems authentic. Next to Herman Cain, Gingrich seems faithful. Next to Jon Huntsman, Gingrich seems conservative. Next to Michele Bachmann and Rick Perry, Gingrich actually does look like an intellectual. Unlike the governor of Texas, he surely knows the voting age. To paraphrase Raymond Chandler, if brains were elastic, Perry wouldn’t have enough to make suspenders for a parakeet.”

--Speaking of Perry, he was at New Hampshire’s Saint Anselm’s College, Tuesday, when he asked the college students in the crowd who will be 21 by Nov. 12 to support his bid for the presidency.

Good lord. Not only is the voting age 18, but the election is to be held on Nov. 6, 2012. [The New Hampshire primary is Jan. 10.]

I mean if you wanted to play around with the numbers/dates he used you still can’t make an excuse for him.

--Michael Goodwin / New York Post

“The words cut like a knife. ‘What the hell are we paying you for?’ Gov. Chris Christie asked of President Obama.

“The New Jersey Republican has a gift for getting to the heart of things, and his broadside against the president over the debt bomb is Exhibit A. His assertion, framed as a question, makes the case against Obama better than anything heard from the actual candidates.

“Christie’s decision not to run remains a disappointment, but he is a valuable player who can help sharpen the fuzzy aim of Mitt Romney, the man he supports. Christie’s consistent theme is that Obama has defaulted on the responsibility to provide presidential leadership during a national crisis.

“On Monday, the GOP heavyweight called Obama ‘a bystander in the Oval Office’ for ducking the congressional committee charged with finding $1.2 trillion in deficit reductions over 10 years.

“ ‘I was angry this weekend, listening to the spin coming out of the administration about the failure of the supercommittee, and that the president knew it was doomed for failure, so he didn’t get involved,’ Christie said. ‘Well, then, what the hell are we paying you for? ‘It’s doomed for failure so I’m not getting involved?’ Well, what have you been doing, exactly?’

“The questions are rhetorical in that we know what the president has been doing and why. He plays golf and campaigns. Governing is beneath him.

“He doesn’t talk much to members of Congress or his own Cabinet. They’re beneath him.

“His connection to the public consists of speeches before large crowds, and he ducks behind the curtain and into the security bubble as soon as he’s finished. The people are beneath him.

“Warped by a sense of entitlement and self-aggrandizement, Obama refuses to take responsibility for finding practical solutions to problems. He prefers the glory of transformation rather than the roll-the-sleeves-up work of reform….

“But there are no hiding places in the Oval Office and, after three years, it’s clear who the problem is.”

--President Obama came to New York on Wednesday for some fundraising on the absolute worst night of the year in terms of traffic because of the Rockefeller Center Christmas tree-lighting.

“This really sucks, it’s aggravating,” griped Rob Vam, 49, to the New York Post. “Keep the president out of the city.”

“I’m totally screwed getting home,” fumed Celeste Gold, 30, who was struggling to walk home to Hells Kitchen. “I’ll be directed the whole way by police.”

Pretty funny, as long as you didn’t have to deal with it. I mean Obama’s main stop was at a hotel just a few blocks from Rockefeller Center and so the entire area was blocked off. 

--Uh oh. Democratic New York Gov. Andrew Cuomo is beginning to waffle on taxes. The man who just last October said, “You are kidding yourself if you think you can be one of the highest-taxed states in the nation, have a reputation for being anti-business – and have a rosy economic future,” now says he hasn’t decided on an economic program for the state, “part of which will be how do you use the tax code to create jobs,” as he put it this week. Whatever decision he reaches could have a lot to say about his 2016 presidential prospects.

--Robert Samuelson / Washington Post

“Even had it succeeded, the supercommittee would have failed. Ultimately, the only way to control federal spending and deficits is to suppress the upward spiral of health costs. These are already the budget’s largest single expense (27 percent in 2010, compared with 20 percent for defense), and their continued rapid growth, combined with the scheduled introduction of Obamacare, will soon bring them to nearly one-third. The supercommittee didn’t have the time or staff to solve a problem as contentious and complex as health care….

“As societies grow wealthier, people want – and can afford – more health care. Still, U.S. health spending (about $7,960 per person in 2009) is in a league of its own. It’s 50 percent higher than Norway’s ($5,352), the next costliest. U.S. spending is more than double Britain’s ($3,487), France’s ($3,978) and the OECD average ($3,233).

“Despite this, Americans aren’t notably healthier than people in other advanced countries, (a study from the OECD in Paris) reports. Life expectancy in the United States (78.2 years) lags behind Japan’s (83 years) and the OECD average (79.5 years). It roughly equals Chile’s and Czech Republic’s, says Mark Pearson of the OECD….

“There are some bright spots. Cancer care is one area of superior performance; the five-year survival rate for breast cancer in the United States is 89.3 percent, while the OECD average is 83.5 percent. But the treatment of chronic illnesses such as diabetes and asthma may be worse.”

--How much does an F-35 full mission simulator cost? Try $20 million. Just sayin’. [Defense News]

--It is absolutely unbelievable that the man who tried to assassinate President Ronald Reagan, now 56-year-old John Hinckley, could be released for greater periods of time than his current limited ‘outings.’ But government lawyers argued before a judge this week that the rules of Hinckley’s detention should not be relaxed, claiming he had lied about his activities on previous trips from the mental hospital where he is kept. Hinckley’s lawyer argues his client poses no danger to himself or society. He asked Hinckley be allowed to leave the hospital for longer periods of two or three weeks to facilitate his return to society.

--As noted in a Star-Ledger (N.J.) editorial:

“Officials estimate statewide accrued sick and vacation time at $825 million.

“Here’s the problem: Democrats still want to give public workers a going-away present. Their proposed sick and vacation pay cap – down from $15,000 – is now $7,500. But it won’t eliminate the Brinks truck payouts, because the cap would apply only to new hires.

“So, a 25-year-old police officer could keep banking time for the next 20 years or so, then hand you the tab when he (or she) retires. What sense does that make? If Democrats concede this practice is wrong, why would they let it continue? Are they representing the public worker unions, or the taxpayer? Is this their attempt to kiss and make up with the unions after the fight over pension and health reform?

“Gov. Chris Christie wants to stop this now. Under his plan, a cop would get what he or she has accumulated, but earn nothing more. He’s absolutely right. Why should taxpayers be forced to pay for benefits that far exceed anything they get themselves? Sick days should be just that: Days to use when you’re actually sick.

“Democrats already have backpedaled from $15,000 to $7,500. They should keep going – to zero.”

--Sign of the Apocalypse: From Larry Celona, Helen Freund and Jeane MacIntosh / New York Post.

“The store didn’t open fast enough for them – so they came up with their own door-buster.

“A group of rabid shoppers, angry at having to wait for trendy Hollister clothing chain’s New York flagship in SoHo to open yesterday, crashed through its doors – and treated themselves to a looting spree, cops and witnesses said.

“The renegade bargainhunters – among about 100 people waiting in a line since midnight outside the store, wrongly thinking it opened then – broke inside about 1:15 a.m. and snatched up armfuls of sweatshirts, sweaters and other clothing.

“They managed to bolt with their illicit haul before store security could shut down the greedy grab-fest.”

--It’s been five weeks since the freak snowstorm hit the New York/New Jersey/Connecticut area and in my community of Summit, N.J., it’s amazing how much debris remains to be cleaned up. Landscapers here say they’ll be working on it all winter and now that the leaves are off, when you look up in any direction it’s as if not one big tree went without damage (and with many large, broken branches hanging precariously…capable of going at any moment). The other day, a second Summit man died of injuries suffered in the storm. This 42-year-old attorney was clearing a branch from his parents’ Summit home when a tree fell on him. Heaven help us if we get a big ice storm this winter.

But then you see what happened out west this week and to my friends in California, Colorado and Nevada, you have my sympathy.

--I had my 35th high school reunion last Saturday night here in Summit. I totally understand how some just aren’t into these deals, but I had a terrific childhood and loved growing up here. I’m also super fortunate to still have some great friends from my class and so it was no problem for me to be the prime organizer of the event. [Keeping it casual and not a sit-down dinner is a key, by the way.]

To those who don’t go to their respective reunions, I would just urge you to rethink it next time you have the opportunity. I saw some folks last week I literally hadn’t seen in 35 years and it was super. 

It’s interesting, though, how some are almost a little sheepish about what they are doing with their lives, such as their occupation. When they told me I had but one answer. “Great!” Work is good. Be proud of what you do.

But I was also haunted by something I overheard one old friend from all the way back to elementary school tell another friend of mine as she was saying goodbye to Jim. 

“Will I ever see you again?”

Geezuz, it was touching, especially if you saw the way she said it.

A few days before the reunion I went over to the local diner to see a classmate of mine who had worked there for basically the entire 35 years since high school. I told Sandra she needed to come, and she could be my guest.

Five years earlier I did the same thing, Sandra came, and she had a great time. But last Saturday she didn’t show and I was kind of surprised.

A few days later I learned why. Saturday she had a heart attack and as of yesterday was said to be on life support.

--More than 2 million troops have deployed in support of the wars in Iraq and Afghanistan, and about 4 million have served on active duty since 2001. Yet, only 10 Medals of Honor have been approved over this time.

“That is a significantly lower rate than any other American war of the past century – 0.25 Medals of Honor for every 100,000 troops who served. The rate was about 2.8 in the Vietnam War era and about 2.9 for World War II.”

The reason given by the military for the disparity is that today’s soldiers aren’t facing the enemy the way they used to in past conflicts. Rep. Duncan Hunter, R-Calif., says, “I can’t disagree more with that explanation, knowing what our military has done and continues doing. And now they’re confident that the process is working, even though commanders say differently and the numbers show a significantly lower number of awards for Iraq and Afghanistan.” [Army Times]

Along these lines I’ve got to get back to Arlington and Section 60.

---

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

God bless America.
---

Gold closed at $1751
Oil, $100.96

Returns for the week 11/28-12/2

Dow Jones +7.0% [12019]
S&P 500 +7.4% [1244]
S&P MidCap +8.4%
Russell 2000 +10.3%
Nasdaq +7.6% [2626]

Returns for the period 1/1/11-12/2/11

Dow Jones  +3.8%
S&P 500 -1.1%
S&P MidCap -2.9%
Russell 2000 -6.2%
Nasdaq -1.0%

Bulls 44.2
Bears 30.5 [Source: Chartcraft / Investors Intelligence]

Have a great week. I appreciate your support.

Note: Next week from Kiawah, S.C., an abbreviated column.

*Dr. Bortrum has a new posting.

**And don’t forget the new iPad app for StocksandNews. Four out of 17 dentists surveyed recommend it for their patients who chew gum or tobacco.

Brian Trumbore



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Week in Review

12/03/2011

For the week 11/28-12/2

[Posted 6:00 AM ET]

Europe, Washington and Wall Street

Last week, in patting myself on the back for being spot on with my yearend predictions for equities and commodities, as of that point, I added:

“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.”

Well, we sure got our rally, spurred by events in Europe (and also China) that were precipitated by just how awful the financial crisis had become across the pond. Make sense? It shouldn’t, but then financial markets aren’t always rational.

Talk about the wild and wacky, the week actually began with a little note from Greece that pretty well sums up just how nuts things have become there.

Andreas Georgiou is the head of Elstat, Greece’s new independent statistics agency, and he faces life in prison for, get this, allegedly inflating the scale of the country’s fiscal crisis. Georgiou told the Financial Times:

“I am being prosecuted for not cooking the books. We would like to be a good, boring institution doing its job. Unfortunately, in Greece statistics is a combat sport.” Georgiou is to appear in court on Dec. 12 to answer the charges and the life in prison possibility hangs over him if he’s convicted of “betraying the country’s interests.”

As reported by the Financial Times’ Kerin Hope:

“The investigation follows a public dispute over the 2009 budget deficit figure. Under Mr. Georgiou, the figure was revised upwards from 13.4 percent to 15.8 percent of gross domestic product – a record for a eurozone member state. The revised figure was accepted without reservation by Eurostat, the Brussels statistical service.

“The prosecutor cites a claim by professor Zoe Georganta, a senior statistician who was sacked along with other members of Elstat’s board by Evangelos Venizelos, the finance minister, earlier this year. According to Ms. Georganta, the 2009 deficit was exaggerated by Elstat ‘so it would become larger than that of Ireland and Greece would be forced to adopt painful austerity measures.’”

The thing is, according to revised Eurostat data, Greece would have failed to gain admission to the eurozone in 2001 in the first place because its deficit was too large, but back then the Greeks did nothing but lie about the books which is why they were let in.

So all the political parties are now blaming Georgiou for the harsh austerity programs they face, even though they’d face them anyway if, say, he was off by a percent or two. It’s nuts. But then this is Europe and the southern tier of the eurozone, be it Greece, Portugal, Italy or Spain, all played with the books in one form or another. They all did nothing, in essence, but lie, and/or put their heads in the sand as debt levels exploded. 

So because of the acts of these nations (Ireland’s situation is somewhat different in nature, a pure banking/real estate crisis, but go ahead and lump them in with the other miscreants if you want), you have the likes of Sir Mervyn King, governor of the Bank of England, warning this week that eurozone woes have created “an exceptionally threatening environment” that threatens to “spiral” into a systemic financial crisis.

“The crisis in the euro area is one of solvency not liquidity. And the interconnectedness of major banks means the banking systems and economies around the world are all affected. Only the governments directly involved can find a way out of this crisis,” he said.

Only Germany, that is. One of the more extraordinary statements of the week came from Poland’s Foreign Minister Radoslaw Sikorski, delivered in the shadow of the Brandenburg Gate.

Sikorski declared that the biggest threat to his nation’s security was not terrorism, or German tanks, or even Russian missiles, but “the collapse of the eurozone.”

“I demand of Germany that, for your own sake and for ours, you help it survive and prosper. You know full well that nobody else can do it. I will probably be the first Polish foreign minister in history to say so, but here it is: I fear German power less than I am beginning to fear German inactivity. You have become Europe’s indispensable nation.”

Sikorski backed Germany’s drive for deeper integration, “deeper integration or collapse,” he said. Of course this is exactly what German Chancellor Angela Merkel seeks. Or, as the Washington Post editorialized during the week:

“The choice is between a truly desperate future and a merely bleak one. It’s up to Germany.”

And so it was that Merkel, speaking before the Bundestag on Friday, confirmed that she and French President Nicolas Sarkozy would meet in Paris on Monday, Dec. 5, to go over a reform plan that would aim to create a “stability union” of the 17 eurozone nations, with far stricter budget rules, stricter surveillance of national budgets, and tougher penalties for non-compliance, which is what the eurozone was supposed to have in the first place since formation of the union. The day before, Sarkozy echoed these themes.

Merkel said the euro’s future was “inseparable from the future of European unity,” noting how much Germans had benefited from the common currency. “Too much is at stake, precisely for Germany and the Germans,” she said, adding that German unification and European unity were “two sides of the same coin…We will never forget that.”

But Merkel once again poured cold water on the idea of joint euro-area bonds, adding the European Central Bank (ECB) cannot be relied upon to resolve the crisis because of its statutory limitations that make it different from the Federal Reserve or the Bank of England. Euro bonds were thus “unthinkable,” said the chancellor, who was once freaked out when then President George W. Bush approached her from behind and put his hands on her shoulders, but I digress.

Earlier, Sarkozy warned his fellow euro-zone leaders that they must accept a tighter union bound by enforceable fiscal rules or face dire consequences.

“There cannot be a single currency without economic convergence. Or the eurozone will explode.”

But while Chancellor Merkel said that for its part the ECB couldn’t resolve the crisis, the ECB is indeed a huge key, and to that end ECB President Mario Draghi signaled he was prepared to ramp up the bank’s role in supporting the likes of Italy and Spain if eurozone governments took the tough steps, such as deficit reduction, that Merkel is talking of. Heretofore, the ECB’s bond buying program has been relatively minimal and, as a result, hasn’t had the impact the bank sought to have. But at week’s end, Draghi was talking as if the ECB was preparing to step up in a big way.

So you begin to see the workings of the deal that Merkel, Sarkozy and the ECB will be working on and then presenting, next week, culminating in the Dec. 9 EU summit.

Now some of you might be thinking, hey, editor, you’re leaving some important elements out in terms of the week’s action and the huge rally in equities. Indeed I have, but before I get into them, understand that all of the above doesn’t in any way resolve the growth crisis on the Euro continent, and how the massive austerity programs currently being launched, or about to be (i.e., Italy and Spain) will in no way lead to the needed growth in the short to intermediate term. But it will, eventually, if governments have the guts to stick to their guns and the people accept the pain, one day lead to a much brighter future. This, though, is where leadership comes in and we all know that has been in short supply across the globe.

It’s because of a current crisis of confidence, and a freeze up at the bank funding level, that we also saw a bazooka fired at Europe’s financial institutions in the form of a massive, coordinated global central bank infusion of unlimited amounts of each country’s money at a reduced interest rate. The action on the part of the U.S. Federal Reserve, the ECB, and the central banks of Britain, Canada, Japan and Switzerland, pumped dollars into the troubled eurozone’s banks.* Investors had stopped lending money to these institutions, fearing the huge exposures the banks had to the sovereign debt of troubled euro nations and the banks needed dollars to fund their daily operations, for starters, amidst a classic credit squeeze (that in turn is leading to a continent wide credit crunch that is killing small businesses in particular at the worst possible time).

*As most easily explained in a London Times piece, “There is a shortage of dollars because European banks have many outstanding loans, investments and market positions denominated in the American currency, but only limited supplies of dollar deposits.” Traditionally, U.S. money market funds have filled the gap but in recent months these funds have significantly slashed their European exposure, thus cutting off the flow of greenbacks.

Again, however, the move on the part of the central banks, which led to Wednesday’s stupendous rally (including a rise in the Dow Jones of 490 points) in no way addressed the actual crisis in Europe, which is about massive debt and zero growth. It only addressed a symptom, which is why some of us say the week’s action wasn’t entirely rational but let the bulls have some fun, especially since I’m not ‘short.’

In fact, Republican presidential candidate Ron Paul was correct in saying of the massive liquidity injection, “Rather than calming markets, these arrangements should indicate just how frightened governments around the world are about the financial crisis.”

And remember the European Financial Stability Facility, or EFSF; the 440-billion euro rescue fund (with less than 250 billion still available) that was to be increased to at least 1 trillion euros in order to attempt to combat the issues facing Italy and Spain? 1 trillion was never going to be enough, but you can stop worrying about it because it seems Europe’s leaders, at least for this week, gave up trying to boost the fund. As the Financial Times editorialized, “Turning the (remaining 250 billion euro) into 1 trillion or more would require a degree of financial engineering that the slickest bond trader would have struggled to flog in the boom years.”

Instead, eurozone ministers are working on credit protection for new sovereign bond issues, early details of which aren’t worth getting into for this space. 

But here’s something to ponder, if you’re of the mind that the euro crisis is nearing a solution, though why you would think that I’ll never know. Aside from the growth and austerity conundrum, Europe’s banks and governments will be borrowing about $2 trillion next year; $400 billion or more involving Italy alone ($200 billion, Spain). So while the ECB, through its bond purchases this past week was successful in bringing down, for example, the yield on the Italian 10-year bond from 7.30% to about 6.50%, and Spain’s a record 100 basis points, who is going to continue to buy this stuff (assuming the ECB doesn’t just fall asleep with its head pressed against the ‘Buy’ button)? We’re talking it’s easy to paint a picture for 2012, for starters, where we’re still just lurching from one bond auction to the next in terms of influencing market sentiment. The likes of Italy and Spain would eventually have to default over time unless rates stabilize at levels much lower than even today. And the banks? Nationalization is a solution, such as with France, but that bears its own huge costs, especially, again, when there’s no growth!

Just a few other tidbits on the topic.

--The other week I told you that for its part, the IMF had only $400 billion in funds to use on its various missions, hardly enough to help the eurozone further in any sizable way, especially with other obligations around the world, plus existing commitments to Greece, Portugal and Ireland, the three already having formally accepted bailouts. So, Christine Lagarde is going begging amongst the G-20 nations for further funding.

--The Organization for Economic Cooperation and Development, in its twice-yearly report on the global economic outlook, expects the eurozone to contract by 1% at an annualized rate in the current quarter and by 0.4% in the first three months of 2012, or the definition of a recession, albeit a mild one. We should be so lucky.

[For the OECD’s 34 members, it is calling for growth of just 1.6% in 2012, down from its May forecast of 2.8%. The OECD expects the U.S. to grow by 2% in 2012.]

--Britain suffered its worst work stoppage in a generation as the trains were halted and schools shut, though the airports remained open with few delays. An estimated 1.5 million public workers walked out to protest the Cameron government’s draconian austerity program and pension cuts, but it could have been worse. Chancellor of the Exchequer (Treasury Secretary) George Osborne said Britain would remain resolute after sailing into “a debt storm,” as Osborne conceded growth would be less than 1% this year and next.

--The Institute for Fiscal Studies (IFS) in the U.K. estimates that British families are suffering through a squeeze in living standards that will have them no better off in 2016 than they were in 2002. But, and this gives you a sense of the real problem across the continent (and in the U.S.), the called for reductions in pensions “would still leave public sector workers with a far more generous package than their private sector counterparts. And (the IFS) added that public sector employees enjoyed an average pay premium of 7.5 percent over the private sector.” Nonetheless, what the public employees only see is Osborne’s plans to cut spending on the sector by 16.2 percent, the largest rolling back of the State since World War II. [Anushka Asthana / London Times.]

--Greece did finally receive its 8 billion euro tranche of aid from Bailout I, so it will be able to meet its payrolls and pension obligations for a spell.

--One reading on manufacturing activity in the eurozone had the PMI at 46.4 for November vs. 47.1 the prior month, or below the 50 dividing line between growth and contraction. In non-euro U.K., the figure was 47.6.

Washington and Wall Street

Stocks soared, with the Dow Jones up 7.0% and the S&P 500 up 7.4%, the best week for the latter since March 2009.  The spring ’09 comparison is a good one because if you believe that Europe is finally getting its act together (I obviously don’t), it was Monday, March 9, 2009 that markets around the world bottomed and by week’s end, in the case of the Dow Jones, stocks had risen 9.0% (10.6% for Nasdaq). That started a six-week winning streak for the Dow, nine weeks for Nasdaq. So that’s what the bulls are pinning their hopes on in terms of market history.

As noted above, the main catalyst for the U.S. move was Europe. What’s funny, though, is that Friday morning’s employment report, showing a gain of 120,000 for November, as expected, with upward revisions to prior months and an unemployment rate falling from 9.0% to 8.6%, had zero impact on stocks as by day’s end the major averages were flat. Why would this be so? First off, the 8.6 figure was viewed skeptically by many seeing as it is partly a result of 315,000 leaving the labor force, i.e., they quit looking for a job. That’s not good. Plus the underemployment rate, while coming down, is still 15.6% and, importantly, average hourly earnings fell 0.1% in the month.

But 8.6% looks great in the headlines compared to the 9% plus we’ve been dealing with and I imagine President Obama feels like Old Man Fezziwig (at least a slimmed down version), who enjoyed a party come holiday time with the best of them. On Thursday night I had dinner with a friend and we were talking about Obama, 2012, and unemployment rates and I offered that if it’s 8.4% come next November, Obama is re-elected. Mark thought we’d struggle to get below 9%. At least for one month he owes me a beer, even as most everyone is in agreement the 8.6% will be adjusted upward before we see 8.5% or better.

One thing is for sure, however. The U.S. is by some measurements, like manufacturing, performing better than any developed (or developing) nation on earth, hard as that might be to believe. Our own national ISM reading on manufacturing for November came in at 52.7. It fell to 49.0 in China (more on this later). The Chicago Purchasing Managers Index came in at a far better than expected 62.6. A reading on October construction spending, up 0.8%, was better. The economy grew at 2% in the third quarter and seems likely to do just as well, if not a little better, in the current one. The Federal Reserve’s Beige Book on regional economic activity showed the economy “increased at a slow to moderate pace” in 11 of 12 regions (St. Louis being the exception). And the White House, or Congress, had absolutely nothing to do with this! We’ve gone through a huge retrenchment, slashed our debt, stopped paying our mortgages in many cases…yes, it’s twisted but that’s available cash for major purchases…and you add it all up and it’s a recipe for slow growth.

But speaking of mortgages, the housing sector is still dead in the water, especially in terms of prices, as the latest S&P/Case-Shiller data for September (these guys are slow data collectors) showed that prices in the 20-city index fell 0.6% over August and 3.6% from year ago levels. Still very tight lending standards, foreclosures and an ever-looming inventory overhang will keep prices down and many an American underwater.

A few other items of note.

--Auto sales, as noted further below, were strong in November.

--Sales at the big-box retailers, though, were only so-so, up 3.1% year over year for the same month despite all the Black Friday hoopla you read about, or were a participant in, with sales that day up 6.6% over 2010, according to ShopperTrak, while Cyber Monday sales rose about 24%, this according to IBM. So how do you only get 3.1% then? Discounting…lots and lots of discounting…with more to follow. But if stocks were to continue to rally into Christmas that will only help consumer confidence, which has been improving, and thus spending.

Finally, as Britain’s Osborne talked about his country’s “debt storm,” we of course have one of our own, with record budget deficits each of the last three fiscal years. As I begin to think about what I’ll predict for 2012, I have zero reason to change my early call of a debt-related Crash.

I also have begun thinking heavily about international affairs and what could go wrong next year that in some cases could have a heavy bearing on sentiment and, boy, catch up on your sleep now because I can tell you already, either avoid my year end missive, posted Dec. 31, or read it at your own risk because I’m looking at a year with some awful potential flashpoints; massive civil unrest in Europe over austerity programs being but a mild one, though I have a month to fine tune things. Now who wants a beer?

Street Bytes

--As I alluded to above, aside from the central banks firing a bazooka (or more aptly a flamethrower) to unfreeze the Euro banks’ short-term funding issues, the stock market also benefited on Wednesday from China’s lowering of its banks’ reserve requirements for the first time in three years, which should allow for more lending to spur growth. Most were surprised by the move, but you, dear readers, were told the following just last week in this space.

“China is slowing. The central government knows this. One leading banking official…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.”

You can never read enough.

Alas, China did report its November PMI reading on manufacturing fell below the critical 50 line at 49.0, the first contraction since February 2009. When the government releases a slew of data on Dec. 9, exports are expected to have plummeted in November as well. UBS is now projecting China’s growth rate will slow to 7.7% in the first quarter, year over year. No doubt the housing sector, some 16% of the economy, is sliding.

Others in the region are suffering a similar fate. South Korea’s PMI hit 47.1 last month; Taiwan’s just 43.9; and Australia’s 47.8. India’s is still above 50 at 51, but this was down over October. India’s third quarter GDP also came in at 6.9%, a far cry from the 8% plus pace of the past few years. Lastly, Japan’s unemployment rate rose from 4.1% in September to 4.5% in October, a worrisome development for them. Panasonic and TDK have announced a collective 28,000 job cuts.

--U.S. Treasury Yields

6-mo. 0.04% 2-yr. 0.25% 10-yr. 2.03% 30-yr. 3.02%

At one point on Friday, the 10-year Treasury traded with a yield up to 2.16%, from the prior week’s 1.96% close, but then just as the stock rally petered out on the realization all is still not hunky-dory in Europe, Treasuries rallied as the euro slipped.

--S&P cuts its ratings on 15 banks, including the long-term credit rating on the likes of Bank of America, Citigroup, Goldman Sachs, Morgan Stanley and JPMorgan Chase.

--Massachusetts Attorney-General Martha Coakley filed suit against the five biggest mortgage companies in the U.S., accusing them of massive fraud in seizing borrowers’ homes because they were not the actual holders of those mortgages, among other accusations. Coakley added the banks “had no legal right to conduct the foreclosure,” and the failure of Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial to follow proper procedures “has adversely impacted titles to hundreds, if not thousands, of properties.” [Financial Times]

Coakley’s suit threatens to disrupt ongoing discussions between various state and federal agencies and the five lenders to settle other allegations, including the “robo signing” scandal.

--Manhattan Federal Judge Jed Rakoff blasted SEC chief Mary Schapiro for taking the easy way out in a regulatory action against Citigroup, after the SEC had sued Citi over its dumping $1 billion in doomed toxic mortgage product on unwitting customers, while bank executives were betting that half the assets would decline in value. Rakoff told Schapiro she’ll have to rework the agency’s $285 million settlement wherein Citi wasn’t forced to admit wrongdoing.   [Instead agreeing to the outrageous boilerplate language of ‘neither admitting nor denying guilt.’]

“As a matter of law, an allegation that is neither admitted nor denied is simply that, an allegation.”

Judge Rakoff said the two sides will have to settle their differences before a jury next summer unless they can agree on whether Citi was actually in the wrong. Most everyone agrees Citi originally got away with a slap on the wrist.

--According to an analysis by the Wall Street Journal of filings with U.S. banking regulators, some 2,500 banks cut their work forces in the third quarter by a combined 20,300 jobs, in an examination of smaller banks, a further sign of deepening retrenchment for the industry.

This is a key. “Banks that cut jobs in the third quarter outnumbered those that added jobs by 605…That was a big swing from the second quarter, when 659 more banks grew than shrank and the industry added 14,434 jobs, adjusted for mergers.” [Dan Fitzpatrick / Wall Street Journal]

--In a total non-surprise, AMR Corp., the parent of American Airlines, filed for bankruptcy protection though the flying public generally has little to worry about except for a few scrapped flights and still lousy service. American will now try to slash its massive debt load and restructure contracts, particularly with its pilots. That’s the negotiation that promises to be messy.

[What American decides to do with its pension fund is another potential mess, with liabilities currently exceeding assets by an estimated $10 billion.]

--U.S. auto sales for November were the best in a year, rising at an annualized pace of 14 million, up from 12.3 million a year ago. Chrysler led the way, up 45%, while Nissan’s rose 19%, Ford’s 13% and GM’s 7% over year ago levels. Toyota, still recovering from the March Japanese earthquake, showed its first increase for the year, up 6.7% for the month. But Honda’s declined 6.4%.

Others: BMW up 15%, Daimler’s Mercedes-Benz unit saw a 55% increase over a year ago, Volkswagen jumped 41% and Hyundai’s rose 22%.

Lastly, GM said it expects to fall short of its goal of selling 10,000 Chevy Volts in 2011, but maintains it will do so in early 2012; the Volt being under investigation over concerns its lithium-ion battery pack could pose a fire risk.

However, GM also said it would buy Volts back from any new owner who is concerned over perceived risks in order to keep customers happy. CEO Dan Akerson said that the automaker is prepared to recall all 6,000 now on the road pending the outcome of the federal inquiry.

--The trustee in the MF Global bankruptcy wrote in a briefing document distributed to Congress, “The trustee has determined that even if he could recover everything that is at U.S. depositories, there will be a shortfall in what MF Global management should have segregated at U.S. depositories,” estimating the customer shortfall at $1.2 billion.

The latest bottom line is it appears MF Global was dipping into client funds for a much longer time than first thought, weeks instead of just a few days before its failure.

In a Senate hearing, Gary Gensler, chairman of the Commodity Futures Trading Commission, was sharply criticized for recusing himself from the MF investigation because he had been a colleague of former MF CEO Jon Corzine. “Looks to me like you’re trying to avoid the heat,” said Republican Senator Mike Johanns of Nebraska.

And speaking of avoiding heat, Corzine has yet to be seen but on Friday was issued a subpoena to appear before a Dec. 8 House hearing of the Agriculture Committee, one of three now seeking Corzine’s testimony between Dec. 8 and Dec. 15.

--According to the S&P/Case-Shiller Index, the 3-year declines in housing prices for some of the major metropolitan areas they monitor are as follows:

Washington, D.C. -1.02%
New York -11.34%
Phoenix -28.31%
Las Vegas -36.13%

--According to a study out of Rutgers University, “just 7 percent of those who lost jobs after the financial crisis have returned to or exceeded their previous financial position and maintained their lifestyles.” [Motoko Rich / New York Times]

--My favorite China indicator, casino revenues in Macau, rose 32.9% in November, the slowest pace this year, or $2.9 billion, down from October’s record $3.4 billion. So it looks like we’re headed into the 20s, which I said was my own worry level.

--China’s grain output hit a record this year, 571 million tons and up 4.5% from a year earlier. China is the second-largest corn consumer and produced a record 191 million tons of that, up 8.2% year over year; a much larger than expected total. This should help ease food inflation. Imports of corn should also be expected to fall.

--Since the start of Ireland’s recession in 2008, it is estimated almost 47,000 businesses have gone under; hardest hit being construction and real estate.

As a result of the above, the collapsing housing market, etc., 75,000 are expected to emigrate from Ireland next year, according to the Economic and Social Research Institute, which is on top of 35,000 leaving in 2011. Unemployment is still expected to average 14.5% in 2012.

--According to an annual report from Transparency International, focusing on the role of corruption, New Zealand has the world’s cleanest government, followed by Finland and Denmark. Others in the top ten are Sweden, Singapore, Norway, the Netherlands, Australia, Switzerland and Canada. 

As for the United States, we are ranked No. 24. “We’re 24! We’re 24!” Behind Qatar and Chile, and one ahead of France. Britain is No. 16. Germany and Japan are tied at 14. China is No. 75.

Meanwhile, at the bottom are Myanmar and Afghanistan, tied for 180, and the last two are Somalia and North Korea. Iraq is No. 175.

--According to a survey of Wall Street pay by the major firms, compensation is expected to drop 27% to 30% this year to the lowest level since the 2008 financial crisis. So the average American’s reaction might be, ‘Good.’ But if you’re a New York City worker you better be smart enough to think, ‘Uh oh,’ because this means much lower tax revenues for Gotham, sports fans.

--Facebook is looking at the second quarter for its IPO, at least that is the word this week, and the company is being given a valuation of $100 billion, or over 40 times possible 2012 earnings, which may seem a bit outrageous but, hey, the company is indeed growing rapidly. And compared to Amazon, whose P/E is back over 100, Facebook would be cheap. 

--Broadway ticket receipts were up a whopping 32% during Thanksgiving week over a year ago, with attendance up 5.5%. Wicked remains the top grosser, with The Lion King second.

--Editorial / Wall Street Journal…on the pending retirement of Massachusetts Democratic Congressman Barney Frank:

“Few House Members have made a bigger legislative mark, and arguably no one so expensively. Mr. Frank deserves to be forever remembered – and we’ll help everyone remember him – as the nation’s leading protector of Fannie Mae and Freddie Mac before their fall. For years Barney helped block meaningful reform of the mortgage giants while pushing an ‘affordable housing’ agenda that helped to enlarge the subprime mortgage industry.

“ ‘I do think I do not want the same kind of focus on safety and soundness that we have in OCC [Office of the Comptroller of the Currency] and OTS [Office of Thrift Supervision],’ Mr. Frank said on September 25, 2003, in one of his many legendary rhetorical hits. ‘I want to roll the dice a little bit more in this situation towards subsidized housing.’ The dice came up snake-eyes for the housing market and U.S. economy.”

Editorial / New York Post

“Just before the nation’s financial collapse, (Frank) boasted that Fannie and Freddie were ‘fundamentally sound financially.’

“Well, both survived, but only after being taken over by Washington and given billions in federal bailouts, a move called ‘one of the most sweeping government interventions in private financial markets in decades.’ The rest is a sad history – for which Americans are still paying the price.”

Foreign Affairs

Iran: In 1979, as part of the Iranian Revolution, students stormed the U.S. Embassy, seizing 52 hostages that they then held for 444 days. This week, in the most serious offensive against a foreign embassy since then, thugs from the Basiji military police as well as representatives of the Iranian Revolutionary Guard stormed the British Embassy and a separate consulate facility in Tehran, which led to British diplomats exiting Iran, while the British government kicked Iran out of their embassy in London.

British Foreign Secretary William Hague said: “The idea that the Iranian authorities could not have protected our embassy, or that this assault could have taken place without some degree of regime consent, is fanciful.”

Hague called the attacks a grave violation of the Vienna Convention, which requires host nations to protect diplomats and embassies: “This is a breach of international responsibilities of which any nation should be ashamed.”

For Iran, this was an incredibly stupid act by an incredibly stupid, albeit highly dangerous, regime. I have written in this space all year that, hard as it may be to believe, wacko President Mahmoud Ahmadinejad is preferable to the man who really holds all the power, Supreme Leader Ayatollah Khamenei (aka Son of Satan, or son of the Father of the Revolution, Ayatollah Khomenei). You saw the perfect example of this in the taking of the British Embassy, fully sanctioned by Khamenei and his lieutenants, and not so by Ahmadinejad, who, as of this posting, has been quiet on the matter.

Ali Larijani, the parliamentary speaker and close ally of Khamenei, said the attacks reflected popular anger at Britain and were caused by “decades of domineering moves by the British in Iran.”

In response, the European Union ramped up sanctions against the regime, the financial and transport sectors, as well as against any entity that may be aiding Tehran’s nuclear program. The only other issue is whether to prohibit oil imports and on that, the EU said they cannot act unless such a move has the backing of all 27 EU member states. The EU imports 450,000 barrels per day of Iranian oil, or roughly 20% of Iran’s exports.

Editorial / London Times

“It is scant consolation that Iran continues to overestimate Britain’s power, blaming the U.K. for so many of its problems, rather than its own aggressive isolationism and economic failure. Ayatollah Ali Khamenei has previously called Britain Iran’s ‘greatest enemy.’ Memories are long.

“It seems that the Iranian Government no longer respects the work of foreign diplomats in their country, while it continues to demand respect for their own. Britain is simply not a sufficiently lawless and belligerent country to exact reciprocity in this instance by having the Iranian Embassy invaded by the many groups who would dearly like to do so. That is what is meant by civilization.”

Meanwhile, the U.S. Senate voted 100-0 to back crippling sanctions, far stronger than what the White House has been advocating, the latter fearing higher oil prices.

Further, on the nuclear front, there was a second blast in as many weeks at an atomic or missile facility in Iran, the latest being at Isfahan with unknown casualties; the first outside Tehran having claimed the lives of 30, including Gen. Moghaddam, head of the country’s missile program.

So who is behind this obvious effort to severely disrupt Iran’s drive for nuclear weapons? Israeli Defense Minister Ehud Barak said: “We are not happy to see the Iranians move ahead on this [program], so any delay, be it divine intervention or otherwise, is welcome.” Barak added Israel “has no intention of acting for the moment” in regard to a direct military attack.

Syria: The UN and its human rights officials have formally upped the death toll in the Syrian crackdown to 4,000 and, owing to the growing number of army defectors, are now labeling the action in Syria a full-blown civil war. [A report by the UN Human Rights Council found that at least 256 children were killed by government forces between mid-March and early November, some of them tortured to death.]

Our ever helpful Russian friends (see below) have reportedly delivered anti-ship cruise missiles to Syria, according to Interfax news agency as Moscow speaks out against further sanctions imposed by Western and Arab League states. The contract, going back to last year, was worth an estimated $300 million and Russia would say they were merely fulfilling it. Russian newspaper Izvestia also said earlier that Russia planned to send an aircraft carrier and other ships to Syria.

Conversely, the leader of Syria’s main opposition group, Burhan Ghalioun, said if there was a change in government, he would cut Damascus’ military ties with Iran and end arms supplies to the likes of Hizbullah and Hamas.

On the Arab League, it is very encouraging that 19 of the 22 member nations approved a series of tough punishments, including cutting off transactions with the Syrian central bank, and halting funding for projects in Syria, with the sanctions to take effect immediately.

Syria’s economy is expected to contract 5% this year and could shrink another 10% in 2012 if the sanctions are enforced and President Assad remains in power.

Lastly, neighbor Turkey initiated its own harsh sanctions as Turkish Foreign Minister Ahmet Davutoglu said: “Every bullet fired, every bombed mosque has eliminated the legitimacy of the Syrian leadership and has widened the gap between us. Syria has squandered the last chance that it was given.”

It was earlier that Turkish Prime Minister Erdogan, once a friend of Assad’s, said of his counterpart in Damascus:

“If you want to see someone who has fought until death against his own people, just look at Nazi Germany, just look at Hitler, at Mussolini, at Nicolae Ceausescu in Romania.”

Maybe we’ll all catch a break and Assad will meet Ceausescu’s fate; the Romanian dictator, you’ll recall, having been executed on Christmas Day, 1989, along with his wife. We could then toast the Syrian opposition as we gathered for our holiday feast, a useful poli-sci lesson for the little ones as well.

Egypt: After the first of three rounds of voting in Egypt’s parliamentary election, it appears the Muslim Brotherhood took about 40% and, very worrisomely, the extremist Islamists, the Salafis, up to 25%. Or a combined 65%. As one analysis put it, the 1/3 of the provinces that took part are also the most liberal so in the remaining 2/3s, you might expect the Islamist percentage to move even higher. Not good for the United States and Israel, to say the least.

Pakistan: I noted as I went to post last time that there was a late-breaking development here, the NATO attack on a Pakistani army base that killed 24 soldiers, and it is as bad for future U.S.-Pakistan relations as it seemed at first blush. Pakistan closed its border to Afghanistan, freezing hundreds of oil tankers and trucks filled with supplies for NATO forces in Afghanistan, while Pakistan demanded the U.S. stop using an airbase inside its territory for CIA-directed drone attacks. At this point, it doesn’t matter one whit as to how it all started and if Pakistan deserves to share some of the blame. The severe damage is done and it strengthens the hand of Pakistan’s military chief, Gen. Kayani, who led the public mourning of the soldiers and could very well take over in a coup, by my estimation.

China’s People’s Daily, looking to exploit the situation, editorialized:

“The United States and NATO have violated international law and international norms…

“This shows that at crucial moments, the United States will not show the slightest hesitation to violate the sovereignty of another nation to ensure its ‘absolute security.’”

On a different matter, 70-year-old U.S. aid expert, Warren Weinstein, was kidnapped by armed men in the city of Lahore nearly four months ago. The other day, al-Qaeda leader Ayman al-Zawahiri said his group was holding Weinstein and wouldn’t release him until the U.S. stopped air strikes in Afghanistan and Pakistan, as well as Somalia and Yemen. We can only hope Zawahiri meets the same fate as bin Laden very shortly.

Israel: The government ended a monthlong freeze of $100 million in Palestinian tax revenue as Palestinian President Mahmoud Abbas came under increasing pressure without the funds. Israel has long collected customs and value-added taxes on behalf of the Palestinian Authority and Israeli security chiefs approved of restoring the money because it ensured cooperation with Palestinian security services.

Iraq: As the U.S. pulls out its last troops, at least 56 Iraqis were killed in a string of bombings over an 8-day period. In 2012, this becomes the norm.

Yemen: Out of nowhere, President Ali Saleh, who was to go from Saudi Arabia to New York for further medical treatment after signing an agreement yielding his powers to his deputy, arrived back in Yemen. Feb. 21 is the date set for the election of an interim president after 30+ years of Saleh’s rule but who the heck knows what will happen now.

Russia: Editorial / Wall Street Journal…on the latest reaction to the long-planned missile defense shield in Europe.

“One of the foreign policy priorities of the Obama Administration was to ‘reset’ relations with Russia. How’s that working out?

“Dmitry Medvedev, the placeholder for Vladimir Putin in the presidency, gave one indication last week. He declared that Russia may deploy ‘strike forces’ and aim mid-range Iskander missiles in Europe. He also threatened to pull out of the 2010 New Start arms accord, which is supposed to be the hallmark achievement of the ‘reset.’….

“Seen rationally, the Russian obsession with the imaginary enemy to the west is strange. Russia’s security challenges loom larger from the Islamic south and the Chinese east. America and Europe would be the natural partners for a less paranoid and less repressive Russia.

“But the Kremlin is preoccupied with its own political survival, especially with elections coming. So it plays the nationalism card….

“What’s probably bothering the regime more is declining public support at home. Putin’s decision to take the presidency back, announced in September, hasn’t gone as smoothly as he hoped.”

Russian voters go to the polls to elect a new parliament on Sunday and Putin’s United Russia is estimated by one news service to get only about 53% of the vote, compared to 64% in 2007. Voters are tired of the party’s inability to curb corruption. 36% of respondents in a poll by the independent Levada center said United Russia represents “the party of thieves and fraudsters,” while 45% disagree with this view.

How dangerous is the situation in Russia these days? The Moscow Times reports that “Campaign ads by opposition parties have been banned on state television by order of the head of the Central Elections Commission, who has no authority to do so, Vedomosti reported.”

Separately, new evidence has emerged that Hermitage Capital lawyer Sergei Magnitsky was beaten to death by prison guards in 2009. Authorities have long claimed he died of natural causes.

And I can’t help but note the following.

I post, as you can see above, very early Saturday morning. Last week I wrote in part, “In fact, Putin was booed at a martial arts fight in Moscow, an unheard of occurrence and an event broadcast live on Russian television.”

Monday night, 2 ½ days later, CNN International, with all its vast resources, ran a report where, according to the Moscow Times, “A confused CNN anchor mistakenly declared that Prime Minister Vladimir Putin was booed by supporters at the United Russia party convention, rather than by fans at a mixed martial arts fight.”

In fact, the anchor, again, 2 ½ days after I wrote about it, said:

“I want to show the video that we got from the party convention this weekend. It is not widely covered in international media. This is real amateur video of those who booed Putin as he was nominated for president.”

Memo to CNN: The editor of StocksandNews.com could singlehandedly replace your research staff, saving the network $10s of millions, minimum.

China: No one is more upset over the United States’ overtures in Myanmar (Burma) than China. Secretary of State Hillary Clinton made her historic visit and met with opposition leader Aung San Suu Kyi in a most public setting, itself a sign the new military-dominated government is in reform mode, which is not what Beijing wants to see. 

[Separately, Clinton sought assurances from Burma’s leaders that they are not receiving nuclear technologies from North Korea, even as there are increasing military contacts between Burma and Pyongyang.]

Speaking of North Korea, officials there reported swift progress in building a new nuclear reactor, while ramping up its effort to produce enriched uranium. Pyongyang did not say the new facility was for generating fuel for nuclear weapons.

France: In a story that is getting buried amid all the other news out of Europe, but one that nonetheless threatens the reelection bid of President Nicolas Sarkozy, there is growing evidence that Dominique Strauss-Kahn, one-time presumptive presidential nominee of the Socialists and long-time rival of Sarkozy, was set up by allies of the president during last spring’s incident in a New York hotel.

DSK’s main U.S. lawyer, William Taylor, has video showing a hotel employee and an unidentified man performing a bizarre celebratory dance moments after learning the maid accused Strauss-Kahn of sexually assaulting her. Said Taylor: “We know [the maid] isn’t telling the truth, but now we have to wonder whether the hotel and the French government are telling the truth.” [New York Post]

And, in a report by the London Times, “Friends allege that Strauss-Kahn…suspected his BlackBerry had been hacked by his political enemies….

“Before he was arrested in New York…Strauss-Kahn had been warned by a friend in the French diplomatic corps that efforts would be made to derail his campaign with a scandal.

“An article in next month’s New York Review of Books alleges that he had been warned on the day of his arrest that a researcher at the UMP headquarters had come across a private email he had sent to his wife. The article claims unusual behavior by the hotel’s security staff and delays in informing the New York police.”

This is a perfect story for “60 Minutes” and you can imagine what will be running on French television in the lead up to the presidential election there next spring.

For one, do not forget that National Front candidate Marine Le Pen could still upset Sarkozy and gain the run-off against the Socialist pick, Francois Hollande, if this story has the legs it appears to have.

Balkans: I have long warned to always keep an eye on developments here and they just got hairier as Serbs battled NATO peacekeeping troops in Kosovo, with dozens injured, as the Serbs in the north of the little, newly independent country, refuse to allow the ethnic-Albanian central government to extend control to its area. Dozens were injured, and, ironically, this comes as the European Union is about to rule on whether to grant Serbia candidate status in its bid to join the EU. Serbia itself refuses to recognize Kosovo’s independence and provides backing to Serb communities in northern Kosovo.

These people hate each other more than just about any other groupings in the world (perhaps only exceeded by relations between some tribes in the Congo, in all seriousness). I certainly saw that firsthand traveling in Albania in 2010.

Also, keep an eye on Bulgaria, the poorest country in the EU trading bloc, which had its largest protests over the government’s austerity efforts that include a hike in the retirement age. As a new member, the people feel like they’ve already gone through wrenching changes to be admitted to the EU in the first place and have a hard time, a la Slovakia and Romania, in understanding why they have to go through a second round of it.

Morocco: The Justice and Development Party, Islamists, achieved victory in Morocco’s parliamentary elections, taking 107 of 395 seats, twice as many as the second party. Known by its French initials, PJD is not viewed as a threat to Morocco’s King Mohammed VI, who still holds virtually all the power, even as he acquiesced some in response to the Arab Spring in allowing early elections and a bit more say in governance.

Random Musings

--In a national Rasmussen survey of 1,000 likely Republican voters, Newt Gingrich polled 38% to Mitt Romney’s 17%...just staggering. [According to a separate Rasmussen survey, Gingrich leads President Obama, 45-42, in a hypothetical matchup, though the former speaker trails in all other national polls.]

--In a poll of likely Republican voters in Florida, Gingrich led Romney 50-19! As Peggy Noonan writes in her Wall Street Journal piece this weekend, “If you’ve seen this week’s poll numbers…you know it doesn’t look like an increase in (Gingrich’s) support but an eruption. It is as if something that had been kept down had quietly been gathering energy, and suddenly burst through its bonds. The entire Washington journo-political complex has been taken by surprise by something that not only wasn’t predicted but couldn’t have been.”

--So now Republicans and strategists are asking, ‘Has Mitt Romney been too cautious in allowing Newt Gingrich to gain traction?’ A Rasmussen survey in New Hampshire has Romney at 34% but Gingrich surging to 24%. Ron Paul is at 14%, while Jon Huntsman cracked double digits for the first time at 11%.

No doubt, Gingrich will pick up more of Herman Cain’s supporters than Romney will as Cain is said to be exiting the race later today after another woman came forward, this one, Ginger White, alleging a 13-year affair. Cain was forced to admit he hadn’t told his wife about his financial support of Ms. White.

Back to Newt, his campaign in New Hampshire was bolstered by the endorsement of the influential Union Leader newspaper, though it doesn’t have a great track record in picking winners.

The Union Leader is, however, a conservative outlet and it said of Romney: “We don’t back candidates based on popularity polls or big-shot backers. We look for conservatives of courage and conviction who are independent-minded, grounded in their core beliefs about this nation and its people, and best equipped for the job.”

--Maureen Dowd of the New York Times doesn’t pull any punches in her dislike of Gingrich in her latest Times op-ed, but the following is pretty funny:

“(Next) to Romney, Gingrich seems authentic. Next to Herman Cain, Gingrich seems faithful. Next to Jon Huntsman, Gingrich seems conservative. Next to Michele Bachmann and Rick Perry, Gingrich actually does look like an intellectual. Unlike the governor of Texas, he surely knows the voting age. To paraphrase Raymond Chandler, if brains were elastic, Perry wouldn’t have enough to make suspenders for a parakeet.”

--Speaking of Perry, he was at New Hampshire’s Saint Anselm’s College, Tuesday, when he asked the college students in the crowd who will be 21 by Nov. 12 to support his bid for the presidency.

Good lord. Not only is the voting age 18, but the election is to be held on Nov. 6, 2012. [The New Hampshire primary is Jan. 10.]

I mean if you wanted to play around with the numbers/dates he used you still can’t make an excuse for him.

--Michael Goodwin / New York Post

“The words cut like a knife. ‘What the hell are we paying you for?’ Gov. Chris Christie asked of President Obama.

“The New Jersey Republican has a gift for getting to the heart of things, and his broadside against the president over the debt bomb is Exhibit A. His assertion, framed as a question, makes the case against Obama better than anything heard from the actual candidates.

“Christie’s decision not to run remains a disappointment, but he is a valuable player who can help sharpen the fuzzy aim of Mitt Romney, the man he supports. Christie’s consistent theme is that Obama has defaulted on the responsibility to provide presidential leadership during a national crisis.

“On Monday, the GOP heavyweight called Obama ‘a bystander in the Oval Office’ for ducking the congressional committee charged with finding $1.2 trillion in deficit reductions over 10 years.

“ ‘I was angry this weekend, listening to the spin coming out of the administration about the failure of the supercommittee, and that the president knew it was doomed for failure, so he didn’t get involved,’ Christie said. ‘Well, then, what the hell are we paying you for? ‘It’s doomed for failure so I’m not getting involved?’ Well, what have you been doing, exactly?’

“The questions are rhetorical in that we know what the president has been doing and why. He plays golf and campaigns. Governing is beneath him.

“He doesn’t talk much to members of Congress or his own Cabinet. They’re beneath him.

“His connection to the public consists of speeches before large crowds, and he ducks behind the curtain and into the security bubble as soon as he’s finished. The people are beneath him.

“Warped by a sense of entitlement and self-aggrandizement, Obama refuses to take responsibility for finding practical solutions to problems. He prefers the glory of transformation rather than the roll-the-sleeves-up work of reform….

“But there are no hiding places in the Oval Office and, after three years, it’s clear who the problem is.”

--President Obama came to New York on Wednesday for some fundraising on the absolute worst night of the year in terms of traffic because of the Rockefeller Center Christmas tree-lighting.

“This really sucks, it’s aggravating,” griped Rob Vam, 49, to the New York Post. “Keep the president out of the city.”

“I’m totally screwed getting home,” fumed Celeste Gold, 30, who was struggling to walk home to Hells Kitchen. “I’ll be directed the whole way by police.”

Pretty funny, as long as you didn’t have to deal with it. I mean Obama’s main stop was at a hotel just a few blocks from Rockefeller Center and so the entire area was blocked off. 

--Uh oh. Democratic New York Gov. Andrew Cuomo is beginning to waffle on taxes. The man who just last October said, “You are kidding yourself if you think you can be one of the highest-taxed states in the nation, have a reputation for being anti-business – and have a rosy economic future,” now says he hasn’t decided on an economic program for the state, “part of which will be how do you use the tax code to create jobs,” as he put it this week. Whatever decision he reaches could have a lot to say about his 2016 presidential prospects.

--Robert Samuelson / Washington Post

“Even had it succeeded, the supercommittee would have failed. Ultimately, the only way to control federal spending and deficits is to suppress the upward spiral of health costs. These are already the budget’s largest single expense (27 percent in 2010, compared with 20 percent for defense), and their continued rapid growth, combined with the scheduled introduction of Obamacare, will soon bring them to nearly one-third. The supercommittee didn’t have the time or staff to solve a problem as contentious and complex as health care….

“As societies grow wealthier, people want – and can afford – more health care. Still, U.S. health spending (about $7,960 per person in 2009) is in a league of its own. It’s 50 percent higher than Norway’s ($5,352), the next costliest. U.S. spending is more than double Britain’s ($3,487), France’s ($3,978) and the OECD average ($3,233).

“Despite this, Americans aren’t notably healthier than people in other advanced countries, (a study from the OECD in Paris) reports. Life expectancy in the United States (78.2 years) lags behind Japan’s (83 years) and the OECD average (79.5 years). It roughly equals Chile’s and Czech Republic’s, says Mark Pearson of the OECD….

“There are some bright spots. Cancer care is one area of superior performance; the five-year survival rate for breast cancer in the United States is 89.3 percent, while the OECD average is 83.5 percent. But the treatment of chronic illnesses such as diabetes and asthma may be worse.”

--How much does an F-35 full mission simulator cost? Try $20 million. Just sayin’. [Defense News]

--It is absolutely unbelievable that the man who tried to assassinate President Ronald Reagan, now 56-year-old John Hinckley, could be released for greater periods of time than his current limited ‘outings.’ But government lawyers argued before a judge this week that the rules of Hinckley’s detention should not be relaxed, claiming he had lied about his activities on previous trips from the mental hospital where he is kept. Hinckley’s lawyer argues his client poses no danger to himself or society. He asked Hinckley be allowed to leave the hospital for longer periods of two or three weeks to facilitate his return to society.

--As noted in a Star-Ledger (N.J.) editorial:

“Officials estimate statewide accrued sick and vacation time at $825 million.

“Here’s the problem: Democrats still want to give public workers a going-away present. Their proposed sick and vacation pay cap – down from $15,000 – is now $7,500. But it won’t eliminate the Brinks truck payouts, because the cap would apply only to new hires.

“So, a 25-year-old police officer could keep banking time for the next 20 years or so, then hand you the tab when he (or she) retires. What sense does that make? If Democrats concede this practice is wrong, why would they let it continue? Are they representing the public worker unions, or the taxpayer? Is this their attempt to kiss and make up with the unions after the fight over pension and health reform?

“Gov. Chris Christie wants to stop this now. Under his plan, a cop would get what he or she has accumulated, but earn nothing more. He’s absolutely right. Why should taxpayers be forced to pay for benefits that far exceed anything they get themselves? Sick days should be just that: Days to use when you’re actually sick.

“Democrats already have backpedaled from $15,000 to $7,500. They should keep going – to zero.”

--Sign of the Apocalypse: From Larry Celona, Helen Freund and Jeane MacIntosh / New York Post.

“The store didn’t open fast enough for them – so they came up with their own door-buster.

“A group of rabid shoppers, angry at having to wait for trendy Hollister clothing chain’s New York flagship in SoHo to open yesterday, crashed through its doors – and treated themselves to a looting spree, cops and witnesses said.

“The renegade bargainhunters – among about 100 people waiting in a line since midnight outside the store, wrongly thinking it opened then – broke inside about 1:15 a.m. and snatched up armfuls of sweatshirts, sweaters and other clothing.

“They managed to bolt with their illicit haul before store security could shut down the greedy grab-fest.”

--It’s been five weeks since the freak snowstorm hit the New York/New Jersey/Connecticut area and in my community of Summit, N.J., it’s amazing how much debris remains to be cleaned up. Landscapers here say they’ll be working on it all winter and now that the leaves are off, when you look up in any direction it’s as if not one big tree went without damage (and with many large, broken branches hanging precariously…capable of going at any moment). The other day, a second Summit man died of injuries suffered in the storm. This 42-year-old attorney was clearing a branch from his parents’ Summit home when a tree fell on him. Heaven help us if we get a big ice storm this winter.

But then you see what happened out west this week and to my friends in California, Colorado and Nevada, you have my sympathy.

--I had my 35th high school reunion last Saturday night here in Summit. I totally understand how some just aren’t into these deals, but I had a terrific childhood and loved growing up here. I’m also super fortunate to still have some great friends from my class and so it was no problem for me to be the prime organizer of the event. [Keeping it casual and not a sit-down dinner is a key, by the way.]

To those who don’t go to their respective reunions, I would just urge you to rethink it next time you have the opportunity. I saw some folks last week I literally hadn’t seen in 35 years and it was super. 

It’s interesting, though, how some are almost a little sheepish about what they are doing with their lives, such as their occupation. When they told me I had but one answer. “Great!” Work is good. Be proud of what you do.

But I was also haunted by something I overheard one old friend from all the way back to elementary school tell another friend of mine as she was saying goodbye to Jim. 

“Will I ever see you again?”

Geezuz, it was touching, especially if you saw the way she said it.

A few days before the reunion I went over to the local diner to see a classmate of mine who had worked there for basically the entire 35 years since high school. I told Sandra she needed to come, and she could be my guest.

Five years earlier I did the same thing, Sandra came, and she had a great time. But last Saturday she didn’t show and I was kind of surprised.

A few days later I learned why. Saturday she had a heart attack and as of yesterday was said to be on life support.

--More than 2 million troops have deployed in support of the wars in Iraq and Afghanistan, and about 4 million have served on active duty since 2001. Yet, only 10 Medals of Honor have been approved over this time.

“That is a significantly lower rate than any other American war of the past century – 0.25 Medals of Honor for every 100,000 troops who served. The rate was about 2.8 in the Vietnam War era and about 2.9 for World War II.”

The reason given by the military for the disparity is that today’s soldiers aren’t facing the enemy the way they used to in past conflicts. Rep. Duncan Hunter, R-Calif., says, “I can’t disagree more with that explanation, knowing what our military has done and continues doing. And now they’re confident that the process is working, even though commanders say differently and the numbers show a significantly lower number of awards for Iraq and Afghanistan.” [Army Times]

Along these lines I’ve got to get back to Arlington and Section 60.

---

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

God bless America.
---

Gold closed at $1751
Oil, $100.96

Returns for the week 11/28-12/2

Dow Jones +7.0% [12019]
S&P 500 +7.4% [1244]
S&P MidCap +8.4%
Russell 2000 +10.3%
Nasdaq +7.6% [2626]

Returns for the period 1/1/11-12/2/11

Dow Jones  +3.8%
S&P 500 -1.1%
S&P MidCap -2.9%
Russell 2000 -6.2%
Nasdaq -1.0%

Bulls 44.2
Bears 30.5 [Source: Chartcraft / Investors Intelligence]

Have a great week. I appreciate your support.

Note: Next week from Kiawah, S.C., an abbreviated column.

*Dr. Bortrum has a new posting.

**And don’t forget the new iPad app for StocksandNews. Four out of 17 dentists surveyed recommend it for their patients who chew gum or tobacco.

Brian Trumbore