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12/31/2011

For the week 12/26-12/30

[Posted 6:00 AM ET]

2011 and 2012

Let’s jump right into it with my major predictions for 2011 and see how I did.

WIR 1/1/2011

“I believe stocks will finish down 5-7% in 2011.” [meaning the three major averages]

As of 11/25, with five weeks to go, the Dow Jones was down 3.0% and the S&P 500 and Nasdaq were down 8.0%. Not bad.

As of 12/16, two weeks to go, the S&P 500 was down 3.0%, Nasdaq down 8%, though the Dow was up 2.5%. Still pretty darn good. But not good enough.

And then we finished 2011 with the following:

Dow Jones +5.5%
S&P 500 unchanged
Nasdaq -1.8%

So much happens at yearend, much of which has nothing to do with fundamentals, especially when traders have closed their books and the computers, a k a the casino, take over full bore. But I came close, saving for the Dow, and almost nailed it.

Point two. WIR 1/1/2011

“I believe the European debt crisis is with us well into 2012 and I can guarantee you that Ireland’s role is far from over.”

Can’t argue with me here. Ireland, by the way, is going to be a big story again in 2012. Obviously, everyone knows that Europe will continue to call the tune on the global economy (but very few were saying that a year ago), influencing both the U.S. and China among the other major engines.

Heck, back on 6/5/10 in this space, I wrote:

“So you have a European continent that could be stuck in neutral, at best, for years, nay decades.”

No reason to change that 1 ½ years later.

Point three. All first quarter last year, I said the CRB Index of 19 commodities would finish down for 2011, having closed 2010 at 332.80. Even when it was at 360, and then a high of 370, as everyone and their mother was talking about commodities shooting to the moon, I maintained we would finish in negative territory for this key benchmark, citing massive speculation that would eventually be wrung out. It was. The CRB finished the year at 305.30. I’m as proud of this call as just about any I’ve made.

For 2012, I see the three major U.S. stock indices falling 10%, and it is going to be one wild year, controlled by the flash traders and computer program trading (two different things) more so than ever. Stocks could be up big, like 15% to 20%, and then crash.

I draw your attention to something I wrote on 3/5/11, which I’m quoting at length because I still believe every word of it.

“Speaking of the U.S. and its deficit dilemma, Congress avoided a government shutdown for two weeks with yet another short-term funding deal but this can’t go on forever. Eventually it has to face up to its obligations, including a decision on raising the debt ceiling.

“For all the talk of who is to blame for our current mess, though, there is only one man who stands above the rest in terms of responsibility and that is Barack Obama. He is the one who has to now lead. He is the one who has to give an address or two from the Oval Office and give Americans the facts on our looming entitlement calamity. Obama is the one who has to tell Americans it’s time to sacrifice.

“But the president and his advisers are convinced they can play their game of chicken until after the 2012 election and I’m here to tell you that unless the financial markets, including those overseas, believe the United States has come to grips with its deficits, Jan. 2013 will be too late. We will meet our Waterloo at some point in 2012.

“The president had his chance to begin to lay out the facts to the American people with his State of the Union address and instead he virtually cemented his legacy as one of the worst presidents in our history. Obama can still turn things around, but there is little reason to believe he will do so and, no, growth in the economy will not bail us out of a looming debt-to-GDP ratio of 100% with exploding spending to come in the mighty triad; Social Security, Medicare and Medicaid – the latter two powered by Obamacare in the out years. Until the American people hear the truth, you will continue to get absurd poll #s like we had this week with the latest NBC News/Wall Street Journal survey wherein when asked if cuts to Medicare were necessary to ‘significantly reduce’ the deficit, 18% said yes, while 54% said no.

“Warren Buffett was on CNBC this week and said you ‘can’t stop this country.’

“Wrong, Warren. Debt can stop this country, just like debt stopped many an individual and corporation during the financial crisis and has stopped Greece and Ireland.”

A few months after writing the preceding, I began to talk about a crash in 2012, a 30% decline in a short period of time that will be fueled by our Greece- or Italian-like moment. The fiscal numbers between the U.S. and those nations may not match up, but something will trigger a severe change in sentiment, which in turn may finally force our policymakers to act. No, the president won’t be able to just employ a four corners stall game until November. The markets won’t let him.

Which brings me to foreign affairs and the hot spots. Last year I held back on issuing any bold predictions on this front, outside of the usual concern about Pakistan, Lebanon and China; economics, mostly, regarding the last one. I said of China on 1/1/2011 that I was more uncertain than ever and I still am. I believe the government can engineer a soft landing without massive unrest, but I’m not 100% sure of this.

Here’s what I am certain of. 2012 is going to be one of the more memorable years of the last 250 years of civilization. At times, President Obama is going to outwardly appear overwhelmed. Even he won’t be able to play Joe Cool when confronted with some of the issues he’ll be handed.

One I already told you of, going back months, is going to be largely of his own doing. Iran. I have already spelled out how Obama can lose the election on this single issue if, say, after Labor Day, Iran were to explode even a crude nuclear device. The Republican nominee would have a field day with this. “This happened on your watch, Mr. President!”

So if there is even a 30% chance of Iran having a full nuclear capability in another nine months (given our admittedly shoddy intel), it’s too great a risk. Obama has to act sooner and I’m convinced it’s sometime no later than May. He’ll need time to repair the damage, which could be considerable in terms of retaliatory attacks, Hizbullah going full bore on Israel, Syria stepping in…you get the picture.

Iran can’t get the bomb, and President Obama knows this. Will Iran give the U.S. and its allies an excuse to move through some dumb action of theirs in the Strait of Hormuz? I don’t think so. But the mullahs may make a dumb move elsewhere.

Of course Iran will be gaining increasing influence in Iraq, but you already know that by now. The United States lost the war and we aren’t going back, abandoning the country yet again. [Imagine being an interpreter who helped U.S. soldiers and now having to watch your back the rest of your life. You’d have to flee with your family to avoid being taken out in the dead of night.]

Israel will not only have to deal with probable war with Hizbullah and possibly Syria and/or Egypt, but, and I hesitate to write this but I have to, an assassination will occur, courtesy of Israel’s own extremist element, a la the assassination of Yitzhak Rabin in 1995.

Egypt’s new parliament after the last round of voting will be 65 to 70 percent either Muslim Brotherhood or Salafists. They are supposed to be charged with writing a new constitution. The military will fight back. A presidential election is to be held by yearend but I’m doubtful this happens. All I know is this will be a powderkeg virtually all of 2012. [Al-Qaeda and its offshoots will be a cause of some of the chaos.]

There will be a military coup in Pakistan. This is a layup. Concerns over the security of its nuclear weapons then will be a huge issue for the world to deal with. At first, India will not act, but Prime Minister Singh will be faced with massive internal problems of his own and any terrorism in India will no doubt be blamed on Pakistan. There will come a time when we’ll be watching with fear over a war between the two that could go nuclear within 48 hours.

Russia will see waves of terrorism in Moscow and elsewhere. Putin and his goons will pull out all the stops to stay in power, including the March presidential election. I don’t believe, however, that come Dec. 31, 2012, it’s Putin still standing.

Europe will be convulsed in riots, as the people in Britain, France and Italy reject their government’s austerity programs. For Britain, this will be a real problem with the 2012 London Summer Olympics. Many will be cancelling their plans to attend.

France’s presidential election in April will be tumultuous. I just don’t see how Sarkozy gets in a run-off, especially after France loses its AAA rating, as is inevitable. The Socialists will prevail. Marine Le Pen will make things interesting by gaining the run-off over Sarko.

As for North Korea and new leader Kim Jong Un, I’m holding off. No one knows, or can really hazard a guess. One just hopes that the leaders of South Korea, Japan and the United States, in particular, have gamed out all the scenarios and are prepared as much as one can be for anything Kim and his Orcs throw at the civilized world.

China’s transition to a new leader, Xi, will go relatively smoothly, but there will be several instances of major unrest as the economy slows further and many homeowners suffer huge losses on their purchases at the top of the bubble. If the unrest gets out of hand, however, China could play the nationalism card and create an issue in the South China Sea. I do not see the U.S. and China having more than a war of words.  As spelled out below, though, Jan. 14 is a key date for the region; Taiwan’s presidential election. Here’s hoping it is a rare positive for 2012.

Christians will continue to suffer, worldwide, as I spell out later.

And, yes, there will be a serious cyberattack on a major U.S. utility or urban infrastructure that will be but a sign of things to come. I’m just not prepared to say this is the year we see the financial markets taken down because of one. 

Through all the above, as if it isn’t enough, the eurozone crisis will continue unabated. So let’s move on…

Europe, Washington and Wall Street

If ever there was a headline that summed up the state of the European continent these days, it was this:

“Another chunk falls off Colosseum as restoration delay drags on”

Ah, yes, dithering. The Wall Street Journal had a story, an ‘in-depth’ piece on the euro crisis that merely stated the obvious, like what every second-grader in America knows by now. There isn’t any leadership, anywhere in the world these days, least of all Europe. Angela Merkel of Germany? Nicolas Sarkozy of France? Not by my definition. But the Journal piece talked of what I have the last 20 months, a eurozone that’s been dithering. And so here is but a perfect example of the Euro mentality, as told by AFP:

“The Colosseum lost another piece on Tuesday as Rome’s most famous monument deteriorates further ahead of a long-delayed restoration funded by an Italian billionaire now scheduled to start in March.

“The chunk of volcanic tuff fell from one of the iconic arches of the nearly 2,000-year-old structure – just two days after a similar incident reported by a group of concerned tourists on Christmas Day put local staff on alert.”

What idiots. It’s a matter of economics, my Italian friends. The Colosseum and the Vatican are your meal tickets. The Vatican knows how to take care of its treasures. So take care of the Colosseum! 

Get this. “The number of visitors to the site has gone from around one million visitors a year to around six million over the past decade – thanks mainly to Ridley Scott’s epic film Gladiator starring Russell Crowe.”

Well, citizens of Italy. If the Colosseum keeps crumbling, a la Pompeii, incidentally, that’s six million potential visitors who may choose to go elsewhere and who are you then going to sell your little trinkets to? More importantly, how many hotels and restaurants will go out of business? How many airline employees will lose their jobs as flights are cut back? Do you ever think of this, Italians? Obviously not.

But at the same time, you stupidly expect us, or your European brethren, or fellow banks, to buy your debt? You have 1.9 trillion euro of it. I’ve listed these figures ad nauseum but after an unsuccessful 10-year bond auction this week (more on this in a second), you are coming to market with some 200 billion euro of debt in just the first four months of 2012. At least 440 billion, overall, next year. And you’ll be competing with another 1.560 trillion of sovereign and European bank debt being rolled over in ’12.

So the Italians float a 10-year piece of crappola, the yield goes off at 6.98%, and the media calls it a success. I mean all we have been told is that 7.00% is the magic number. Above that and eventually you end up requiring a bailout; a la Greece, Ireland and Portugal. But 6.98% was deemed good because it was less than the previous 7.48%. The 10-year ended up finishing the year at 7.01%.

So you can see why some of us are a bit cynical, knowing the only way the euro crisis gets solved is after a messy crash. Like the horrific chain collision in New Orleans the other day, where on Interstate-10, the taillights you saw in front of you suddenly disappeared, amid either a fog bank or a cloud of smoke. It just went black. Amazingly, last I saw only two were killed but over 60 were injured. That’s what Europe is headed for. It will all just turn black. Eventually the curtain will then rise, the ambulances will be able to make it in, the survivors will be whisked away and the dead buried. After a period of mourning, life will resume. Europe needs to bury its dead. I wish they’d hurry up and do so. I’m tired of writing about this topic, especially when Americans are looking at our own future.

You want further proof of the sad state of Italy? Remember how about a month ago I wrote of how I couldn’t believe more people weren’t concerned about the slide in democracy in Europe? How Greece and Italy are now being run by unelected technocrats?

You know this guy now leading Italy, Mario Monti? You know how some in the media, as well as fellow technocrats, think he’s Mr. Wonderful? Following are bits of a report by the Financial Times’ Guy Dinmore and Giulia Segreti:

“Italy has saved itself ‘from the edge of the precipice,’ Mario Monti declared yesterday, defending the record of his six-week-old government while calling on the European Union to deliver a coherent response to the eurozone debt crisis by substantially increasing its bail-out fund….

“Mr. Monti said that under ‘normal conditions’ – which he declined to specify – Italy would not need more austerity measures along the lines of the 30 billion euro package approved by parliament last week intended to balance the budget by 2013.

“The government’s next focus, he said, would be a package of measures to regain lost competitiveness by liberalizing the economy…

“Reforms were needed to the system of labor contracts that virtually guarantees a job for life for some privileged workers while providing little security for others, especially young workers on short-term contracts, Mr. Monti said. However, he evaded a question on whether the government intended to challenge trade unions opposed to changing Article 18 of the workers’ statute. They oppose making it easier for companies with more than 15 employees to fire workers. 

“Mixing his metaphors, the former professor of economics and EU competition commissioner said Italy had been ‘on the edge of the precipice without a railing’ and had been moving ‘very close to Greece’ in a south-easterly direction.

“Italy had braced itself and was now moving with the winds behind it ‘to the north-west towards Brussels and far from Greece.’

“ ‘But the turbulence is absolutely not over,’ he said."

Eegads. I’d ask the Italian people, ‘How did you ever elect this guy?’ But they didn’t. 

That’s just one example of what’s happening in Europe these days. The treasures, the only reason to go to Europe (I can drink beer anywhere, after all), are crumbling, as are the economies, and you have people running some countries that no one voted for.

Meanwhile, over in Hungary, you have a maniacal crackpot, Viktor Orban, who is an elected official but turning into a little dictator. The first thing the parliament has done is pass legislation controlling the central bank. Now the likes of Ron Paul would like to do away with central banks, but that’s a different matter. Orban thinks that by taking over Hungary’s monetary authority and setting interest rates low to spur growth, that then investors will come in and refinance Hungary’s massive debt load. Good lord. This is 2011. Not 1342, when people had one eye and the grog was often poisonous. It’s a global economy, Viktor. It’s not a make believe kingdom.

So let me try and summarize this week in Europe. The banks are flooding the European Central Bank with their cash, at 0.25% interest, and not reinvesting the huge amounts they just borrowed from the ECB, at 1%, into Euro sovereign debt, which is the gamble the ECB was taking, whether they want to say so or not. Ergo, the banks are like Scrooge, in the presence of the Ghost of Christmas Yet to Come. They are petrified. Paralyzed. Unable to lend. Small businesses are dying.

“I am not the bank I was,” they plead in unison. “I will not shut out the lessons of Greece.”

Let’s just say that unlike Scrooge, however, the banks aren’t close to dancing a jig and buying the biggest goose in the window. There is no happy ending, at least that I see.

Lastly, Ireland is going to be a big story again in 2012. While Angela Merkel has labeled the Irish the poster child for how to suck it up and move on, the fact is the country, save for some in the export sector, is dead. As some in Ireland are now claiming, though, they must declare default, or at least threaten it, in order to get out from under the massive bank debt the government vowed to honor. Ireland’s back in recession (unofficially) and will not be able to meet its stringent targets as established by the ECB, IMF and EC (European Commission). This is where an increased European Financial Stability Facility (EFSF) may have helped, but Merkel refuses to allow this. Ireland needs a break on interest rates. It’s time for the placid Irish to rise up. Prime Minister (Taoiseach) Enda Kenney said Ireland also needs more time to pay back the billions borrowed to fix the banks.

While in Spain, new Prime Minister Rajoy already seems paralyzed. The budget deficit, he’s learned, is far worse than he was told (I could have told him that…I wrote a year ago that the big problem in Spain was a lack of transparency with banks and the autonomous ‘regions.’) He’s proposing $billions in cuts, but isn’t really spelling out how, just yet, beyond freezing public salaries. The markets, though, are at least giving him a chance to get his sea legs in his new position. But you know what one of Spain’s main problems is? Try 700,000 unsold homes, let alone 23% unemployment.

Turning to Washington and Wall Street, the International Council of Shopping Centers said pre-Xmas sales ending Dec. 24 were up 4.5%, while the National Retail Federation was calling for a 3.8% gain for November and December. I went shopping myself on Tuesday and Wednesday and feel like I got a lot of it done for Christmas 2012. [Don’t tell my brother it’s going to be another lean one.]

Meanwhile, the Chicago Purchasing Managers Index for December came in at a strong 62.5, and better than expected, while the figure on weekly jobless claims was solid.

But next week we’ll get the December employment report, as well as various manufacturing data, including from overseas, and it is likely to be market-moving. The following two weeks, earnings will start rolling in.

As for 2012, the Fed sees an economy growing 2-2.5%, while the consensus among economists is in the 2-3.0% range. Fourth quarter GDP is expected to come in at 3%.

We did see a report on housing from S&P/Case-Shiller for October and prices were 3.4% lower, year over year, in the 20 major metropolitan areas, with Atlanta down the most for 12 months, 11.7%.   Prices in Atlanta, Cleveland, Detroit and Las Vegas are lower today than they were in Jan. 2000.

But an AP/GfK poll says 78% of Americans are hopeful about the year their family will have in 2012. I don’t want to be the one to break it to you all, but you are sadly mistaken.

I mean for starters, there’s Washington. It’s not going to be good when they return after the holidays. They still have to extend the sham payroll tax holiday for all of 2012, and extend unemployment benefits further as well.

And then there is the issue of the debt ceiling, which President Obama postponed for the time being, though due to the Aug. 2 Budget Control Act, this will not be up for debate again until after Nov. 2012 (most likely).

The thing is, overall, the debate remains the same. How to raise taxes and tackle entitlements? Or, how not to raise taxes and just ignore entitlements?

As Oklahoma Republican Sen. Tom Coburn said recently, “Washington is kind of like Las Vegas. It brings out the worst in everybody….it all comes back to leadership. There is none right now in this country, either Republican or Democrat.”

Former Senator Alan Simpson, of Simpson-Bowles fame, said, “This next year is going to be chaos. Absolute chaos,” citing Europe, for one.

Democratic Senator Kent Conrad of North Dakota said, “the American people still don’t believe you need to make hard choices…They believe you should balance the budget, but when it comes down to doing the things that need to be done to accomplish that, they don’t support them. Until the American people believe we need to change some things, it’s unlikely we’re going to accomplish them here.” [Washington Post]

Boy, that’s nice and depressing.

Street Bytes

--Due to the timing of this column, there isn’t time to go into a lot of yearend numbers, but it is a convenient end to the year in other respects. For the week, however, the Dow Jones and S&P 500 lost 0.6% and Nasdaq declined 0.5%. And I did see that according to Bloomberg and the Financial Times, about $6.3 trillion in market cap was erased from global markets this year, about 12%. Many European and Asian markets did far worse than the U.S., to say the least.

McDonald’s, by the way, was the best performer in the Dow, up 31%, while Bank of America was the worst, down a sickening 58%. 

--U.S. Treasury Yields

12/31/10

6-mo. 0.18% 2-yr. 0.59% 10-yr. 3.29% 30-yr. 4.33%

12/31/11

6-mo. 0.06% 2-yr. 0.24% 10-yr. 1.88% 30-yr. 2.89%

If you nailed this one for 2011, step to the head of the class. [I stayed out of the prediction game when it came to Treasuries.]

Holdings of U.S. Treasuries by foreign central banks fell a record amount this month, according to the Federal Reserve; $69 billion worth, which obviously didn’t hurt the Treasury market any. To be fair, however, Japan’s buying dollars and selling yen during the past few months aided the Treasury market greatly, so the drop in foreign holdings would have been far more pronounced had it not been for our buddies who gave us Godzilla and Mothra.

--Hong Kong’s Hang Seng Index finished the year down 20%. China’s Shanghai Composite was down 21.7%. HSBC’s estimate of China’s PMI for Dec. is 48.7, a second straight month of contraction. The government’s official reading comes out Jan. 1.

--Japan’s industrial production fell 2.6% in November over October, with retail sales down 2.1%. Consumer prices also fell, 0.2%, from a year ago. Deflation is once again part of the discussion here.

--I do have to add regarding Italy, one massive problem Mario Monti faces is tax evasion, a la Greece. So he’s trying to cut down on the use of cash, severely limiting the maximum allowed to be used for big ticket items, for example. Italians don’t use credit cards like we do because merchants give them discounts on cash purchases, which they can then hide from their books.

--The best jobs program the Obama administration has come up with was the just completed agreement to sell 84 top-of-the-line F-15SA fighter jets to Saudi Arabia, as well as refurbishing 70 F-15s currently in the kingdom’s fighter fleet. According to U.S. officials, the production of the Boeing built F-15s will support 50,000 American jobs.

Do you ever just stop to wonder about the global defense industry? Isn’t it kind of amusing? Heaven forbid true world peace ever broke out. Some countries would go spiraling into depression.

[Check out my current “Hot Spots” column…a speech by Sen. John McCain addressing the current state of affairs with defense spending in this country.]

--Shares of Sears Holdings were at $94.80 on Feb. 17. This week they finished at $31.80.

James Covert of the New York Post summed it up:

“If you think Sears and Kmart stores look depressing, check out the stock price of the company that owns them.”

Sears announced that same-store holiday sales dropped over 5% and that it would close 120 locations. The day of the announcement, Tuesday, shares dropped 27%, the biggest plunge since the company was formed in 2005, when hedge-fund billionaire Eddie Lampert merged Sears with Kmart. Famed investor Bruce Berkowitz’ Fairholme Fund owned 14.5 million shares, as of Aug. 31, at an average price of $79.80. Yuck.

I know I haven’t been into either store in quite awhile. I think I was in a Kmart in Spearfish, South Dakota, about four years ago. But that’s it. A key going forward is how vendors treat the stores. If they stop shipping or start insisting on cash up front, that could spell an end to both and it would happen rapidly.

You know what I’ve discovered, though…Dollar Tree. I didn’t even know there was one nearby until a friend suggested I buy some supplies there for my recent high school reunion. I mean this week I got 100 tea bags for $1. Picture frames for a $1 each that would cost me $9 to $12 at Bed, Bath & Beyond or CVS, two of my regular haunts. Bathroom/shower cleaner for $1 that would have set me back $5 or $6 elsewhere…and the stuff really works! And a can of beef stew for a $1 that costs far more at the grocery store. Granted, I haven’t tried the stew yet, and I did see on the label it had enough salt in it to take care of most major roads in my area during the next snowstorm, but still, not bad. [I’m told it will snow again…really.]

Oh, by the way…shares in Dollar Tree finished the year at $83, off the 52-week high of $84.35 set this week and up from the low of $48. Quite a contrast to Sears. And guess what? I did eat the stew tonight. [The column is put together in pieces, you see.] I put dollops of Tabasco Sauce in it and for a $1, it was highly edible. Six hours later I feel fine…no signs of botulism, diphtheria or whooping cough, for starters, though I can’t tell what the 42 pounds of salt is doing to my system.

--Depending on your television market, this time of year many of us are bombarded with a certain car commercial. Christopher Caldwell had a funny take in the Financial Times.

“For the past couple of years, Lexus has run television ads suggesting ways for people to give their loved ones cars for Christmas. There is something obscene about these spots, which promote something called the December to Remember Sales Event. (Why it’s not called the Grind-the-Faces-of-the-Poor Sales Event is anyone’s guess.) The giving of the gift usually involves some elaborate consumer goods equivalent of a striptease or treasure hunt to heighten the atmosphere of materialism. Someone gets the present of a smart phone, for instance, which has the picture of a new car programmed on to it. Maybe next year, the cars will come with GPS directions to a newly bought country estate. Just an idea.”

--Speaking of car sales, during the peak for the auto industry, 1999-2006, there were about 17 million vehicles sold each year in the U.S. At the depths of the recession that then dropped to a 10.6 million vehicle pace, but at least this year should come in around 13 million and do better in 2012, perhaps 14 million.

--College still pays off…according to ConvergEx Group’s Sarah Millar (and the Los Angeles Times), “The average take-home pay of college graduates is nearly twice that of their high school counterparts - $38,950 vs. $21,500…(but)…

“Students shelled out an average of $73,500 in tuition payments over the last four years. And when considering that a young person could have earned a cumulative $84,500 straight out of high school over four years, the college graduate is $158,000 in the hole. Add in the interest on student loans, and the student’s deficit can top $200,000.”

--Libya’s state oil operation said it is pumping “more than a million” barrels a day, not far from the 1.6 million pace back in January, before the uprising began. I have to admit this is better than I would have believed.

--Monday was Boxing Day in Britain, the biggest shopping day of the year, and prices of many items were reduced 75%. I’m no Einstein, but that can’t be great for margins. 

--There are about 4.7 million people in Ireland. Knowing that, consider this…from Craig Hughes of the Irish Independent:

“More than 100,000 heavily indebted people are being forced to use legal moneylenders, who charge exorbitant interest rates, in order to obtain lending as other financial institutions continue to turn them away.

“Internal documents obtained by the Sunday Independent from one of Ireland’s largest moneylenders show the company has more than 100,000 customers nationwide – and with 46 other licensed moneylenders in the business, the overall figure is much higher.”

So I read and reread and reread the following:

“Many legal moneylenders charge a maximum interest rate of 157.3 percent APR and many of them are making huge profits.”

Ya think? As noted in my opening, Ireland is far from out of the woods. I have some friends over there I’m now wondering about in a totally different light. I know they are in trouble. I just hope not this bad.

--A good friend of mine, who needs to go initial-less, writes investment reports for money managers, many of whom significantly underperformed the market this year. So a popular phrase my friend said he’d be using is “macro issues trumped underlying fundamentals” in explaining away a year that was the height of blowdom. OK, that last one is mine, but you are welcome to use it, kids.

--Morgan Stanley will be shedding 580 of a previously announced cut of 1,600 jobs in New York City.

--San Francisco’s minimum wage will rise to $10.24 an hour on Jan. 1, the highest in the country and the first to mandate double-digit hourly wages for its lowest-paid workers.  The federal minimum, however, is $7.25 and many of San Fran’s smallest businesses say the extra amount will force them to lay off workers, particularly in the restaurant industry.

--According to an analysis of congressional disclosure forms by the Washington Post:

“Between 1984 and 2009, the median net worth of a member of the House more than doubled, from $280,000 to $725,000 in inflation-adjusted 2009 dollars, excluding home equity.

“Over the same period, the wealth of an American family has declined slightly, with the comparable median figure sliding from $20,600 to $20,500, according to the Panel Study of Income Dynamics from the University of Michigan.”

--You’ve gotta love the New York Post. From Josh Kosman and Kaja Whitehouse:

“A horny Mark Hurd – who tried again and again to bed a buxom Hewlett-Packard contractor – forked over more than $1 million of his personal fortune to keep the sordid details under wraps, The Post has learned.

“The size of the payout, which hadn’t been previously known, comes as Hurd lost a legal battle to keep an explosive letter detailing his advances toward the contractor, Jodie Fisher, under court seal.

“ ‘So, you’ll stay the night, right?’ the randy former HP chairman and CEO begged Fisher while sitting on a love seat in her Ritz-Carlton hotel room during a 2007 business trip. ‘You’ll stay?’

“According to the letter, a shocked and horrified Fisher shot back at the married-with-kids executive, ‘Absolutely not. I barely know you and you are my boss.’”

Hurd is now co-president at Oracle and the women there are terrified…just my guess. Of course this same guy is also one of the more overrated executives on the planet.

--The U.S. commercial airline industry has not experienced a passenger death in four of the last five years; the exception being the Colgan Air disaster near Buffalo on 2/12/09 that left 50 dead (and was a case of gross pilot error and negligence).

--Online gamblers (of which I am not one because I already gamble in the stock market) are raising a toast this New Year’s to the Obama Justice Department for reversing a long-held policy and potentially opening up opportunities for states to legalize Internet poker and other forms of online gambling. There’s still a long ways to go as the states now have to form compacts with one another to allow bets between them. But the door is open.

--Gold is down 19% from its Sept. 6 intraday high of $1,923 an ounce. Silver is down 44% from its high of $49.84 on April 25.   To a large extent the slides in both are about investors selling to make up for losses elsewhere and concerns over sustainability of demand in India and China, as well as the dollar/euro machinations that influence commodities in general. That said, gold finished up in 2011 for an 11th straight year, advancing 10%, while silver lost 10%.

--“Incredibly Stupid Research Statement of the Year Award” goes to Goldman Sachs. In a report on emerging markets, specifically the BRICs – Brazil, Russia, India and China – Goldman projects that economic growth in these four “may fall to about 4 percent by 2050 as working-age populations dwindle,” as reported by Bloomberg. 2050?! Why the heck would anyone pay the least bit attention to a forecast for 2050? Oh well, whoever is responsible is at least employed and helping pump up the economy.

--In one of the dumber corporate moves of the year, Verizon Wireless attempted to charge customers a $2 “convenience fee” for those who pay their bills online. Rival AT&T charges customers who use a representative to handle a payment by phone or in stores, which makes sense (I guess), but there is no charge for paying online or through an automated pay system over the phone.

But after a 24-hour uproar, Verizon backed down, its tail between its legs. “Bad Wireless Provider. Bad Provider.” And then you take the responsible exec’s nose and rub it on a computer screen so that he learns never to do this again.

--Hollywood ticket sales are expected to finish the year down 4% from 2010. In terms of domestic attendance, the year will see about 1.28 billion, down from 2002’s peak of 1.6 billion. [Attendance is actually at its lowest level since 1995] I haven’t been to a movie since the last ‘Lord of the Rings’ flick, and I bet my next one will be when “The Hobbit” is released in December. [I buy a lot of movies, though. Think I’m gonna watch “Rise of the Planet of the Apes” on New Year’s.]

The box office in China, however, is skyrocketing, up more than 30% in 2011, as China is now the world’s third-biggest movie market behind the U.S. and Japan. [Rentrak Corp. / Los Angeles Times] The most popular flicks in China were all U.S. productions, with the highest grossing being “Transformers: Dark of the Moon.”

--Book sales were down 9% in 2011, according to Nielsen BookScan, compared to a drop of 4% in 2010, and 3% in 2009. Sales of mass market paperbacks fell 23%. Adult hardcover books were down 10%, very bad because this is the most profitable category.

But, no word on e-book sales, which offer some hope for the industry. [Crain’s New York Business…still one of the best weekly publications around.]

--To drive a taxi cab in New York City, you need a medallion, which is a metal plate attached to the hood. They can be pricey. How pricey? Try $1 million, according to the latest auction. And as noted by the New York Post’s Paul Tharp, the price of one is up 400% the last decade, medallions going for $199,000 in 2001. The S&P 500, on the other hand, is at the same level it was in October of 1999.

--Oh baby…Wendy’s is adding foie gras burgers to the menu. A fast food chain after my own heart. Only one thing…this is only for its reintroduction in Japan after leaving the country in 2009. Well, I could use some of my stash of frequent flyer miles and jet over there for a few “Japan Premium” sandwiches, selling for $16, but that may be a bit over the top, like Christopher Caldwell’s comments on the Lexus ads.

--Inflation Alert: Americans who are not members of the New York Road Runners will see their New York City Marathon fee rise from $195 to $255 in 2012. The NYRR cites rising costs, like for closing the streets and providing medical care. NYRR members will also see a $60 rise to $216. 

--Michael Hiltzik / Los Angeles Times:

“I don’t ‘hate the iPad,’ like the sizable cadre of bloggers given to proclaiming their distaste online. I’m merely indifferent to its supposed virtues, as I am to many other cultural phenomena I’m expected to find fascinating, like Ryan Seacrest and Pippa Middleton.” 

Hiltzik’s issues “fall into three categories: its poor screen resolution, its lack of a decent input mechanism and Apple’s totalitarian approach to its App Store.” I take issue with his dissing of Pippa.

--For CNBC viewers…Claire Atkinson / New York Post:

“Out with the old, in with the new. CNBC’s been saying goodbye to a lot of staff in the last few months. CNBC Europe chief Mike Buckley, who’s been on the job for the past eight years, is exiting, as is London correspondent Guy Johnson [Ed. he was good], who’s joining Bloomberg TV.

“Anchors Melissa Francis, Erin Burnett and Trish Regan all departed this year after running headlong into the glass ceiling known as Maria Bartiromo, the longtime anchorwoman.

“Some former staffers are dubbing the changes a ‘brain drain’ and speculating that CNBC’s grizzled M&A reporter, David Faber, might be ready for a new challenge.”

I like Faber. I’m switching stations if he leaves.

--My portfolio: USA TODAY had a number of articles this week on the issue of China companies listing in the United States and the lack of success, coupled with fraud, in some cases. Some of us believe that when the story goes so mainstream (though one of the articles was very well done…Kevin McCoy and Kathy Chu the reporters, if you want to look it up), we are certainly at or near the bottom for those legitimate operations that have been thrown out with the bath water…or in the case of China, toxic milk. It’s going to be a very interesting year on this front, especially for moi. Will the good companies finally rise anew given the uncertainty concerning the overall Chinese economy? And when will the articles finally come out recognizing the legitimate Chinese stock stories? I’m not aware of a single one on this front, at least from the mainstream press.

Foreign Affairs

North Korea: With the official period of mourning for Kim Jong Il finally over, the National Defense Commission issued a statement.

“The veritable sea of tears shed by the army and people of the DPRK will turn into that of retaliatory fire to burn all the group of traitors to the last one. The DPRK will have no dealings with the Lee Myung Bak group of traitors forever.”

Very nice, commies. A classy statement, in speaking of South Korean President Lee and his government.

As for the pudgy one, Kim Jong Un, he appeared in the middle of all the key shots the past few days, but now the real guessing game begins. How quickly can he win over the allegiance of the North’s key military leaders, the only power group that matters? The last sentence of the official statement said Pyongyang “closely rallied behind the dear respected Kim Jong Un.” [North Korea is also slated to release its New Year statement Jan. 1, while President Lee addresses his people on Jan. 2]

Since the time of Kim Jong Il’s death, the state has made sure the world knows that the main ideology is “songun,” or “military first.” We all just wait to see if the 20-something leader feels compelled to prove his manhood at the expense of the South, or by firing a rocket or two over Japan. Plus, despite the signs of stability, there are undoubtedly tensions behind the scenes among the key players in Pyongyang.

Kim, by the way, picked up the names of “supreme commander,” “supreme leader of the revolutionary armed forces” and “great successor” this week. “Supreme leader” is the one that will stick; as the little sadist (according to some intelligence reports) is placed in charge of the ruling party, military and people.

Iran: The official Iranian news agency IRNA quoted Iran’s First Vice President Mohammed Reza Rahimi as saying, “If they [the West] impose sanctions on Iran’s oil exports, then even one drop of oil cannot flow from the Strait of Hormuz,” through which about one-fifth of the world’s oil transits (a third of all seaborne oil). “Our enemies will give up on their plots against Iran only if we give them a firm and strong lesson,” he added.

Were the Strait to be shut for more than a few days, the world would almost immediately be thrown into Depression. But it’s a smokescreen, set up by Iran to divert attention from Tehran’s non-compliance with U.N. resolutions to cease and desist with its uranium enrichment efforts and to open up to U.N. nuclear inspectors and investigators.

For their part, EU officials are to decide, possibly in January, whether to take the 450,000 barrels per day of Iranian oil, about 18% of Iran’s exports, much of which go to China and India.

But Iran itself would suffer immensely economically if it attempted to seal off the Strait, and such a move could spark revolution in the streets (yippee!).

As for the U.S., the Pentagon made it clear that Iran shouldn’t try closing it, with a spokesperson saying that for its part, “The U.S. Navy is a flexible, multi-capable force committed to regional security and stability, always ready to counter malevolent actions to ensure freedom of navigation.”

Of course the big risk at this moment is that Iran miscalculates, such as if its naval vessels harassed U.S. or NATO warships and accidentally (or intentionally) fired on them.

Editorial / Wall Street Journal

“The Hormuz flap should also underscore the strategic damage that would result if Iran does get the bomb. Fortified by a nuclear threat, the mullahs would be more willing to blackmail their neighbors and press for regional dominance. Would the U.S. dare resist Iranian aggression if it meant putting American forces at risk of a nuclear reprisal? Better to act now to stop Iran before we have to answer that terrible question.”

Syria: The Arab League sent its observer mission to the country, drawing out tens of thousands of protesters who felt emboldened by the monitors’ presence, but then the head of the observers in the violence-torn city of Homs described the situation there as “nothing frightening”! You can’t make this stuff up. It turns out international human rights groups had questioned the selection of the guy, a former Sudanese military intelligence chief, and for good reason. What a disgrace. I mean it was Sudan, after all, that defied an international war crimes tribunal so how was this character (Gen. Mohammed Ahmed al-Dabi) expected to take a tough stance against Bashar al-Assad?

So far only 60 of 500 expected observers have traveled to the country, while the killing in Homs, and elsewhere around the country, including in Damascus, continued. [Another two dozen were apparently killed on Friday with hundreds of thousands taking to the streets.]

Egypt: In a totally outrageous and despicable act, Egyptian police raided the offices of more than a dozen human rights organizations in Cairo on Thursday, including two leading American groups; the National Democratic Institute and the International Republican Institute, both funded by the Democratic and Republican parties. The State Department responded that the $1.3 billion in annual military aid the U.S. gives to Egypt could be in jeopardy. 

The ruling military council has blamed the rights groups for the political turmoil that has rocked the country since President Mubarak was overthrown. While no arrests were made, police took away computers and boxes of files.

Editorial / Washington Post

“Thursday’s raid consequently represents a frontal provocation by the ruling military council to the Obama administration, which has waffled between supporting a transition to democratic civilian rule in Egypt and appeasing the generals. The military is attempting to rally waning domestic support by blaming domestic disorder on sinister ‘foreign hands’; it is also seeking to destroy liberal, pro-democracy groups that have resisted its attempts to perpetuate its power indefinitely.

“The campaign against foreign funding is a startling example of the military’s illogic and breathtaking arrogance. The premise is that civilian groups that receive a few million dollars in U.S. or European funding are traitorous – while the military is justified in accepting $1.3 billion in annual U.S. subsidies. Also unquestioned is the substantial funding that reportedly flows from Saudi Arabia, Qatar and other Arab states to the Muslim Brotherhood and other Islamic groups, which mounted by far the best-organized campaigns in this month’s elections.

“The Obama administration may have inadvertently encouraged the military council to believe it could get away with this repression by stoutly resisting initiatives in Congress to link U.S. military aid to a democratic transition….

“(It) is past time for the administration – and Congress – to stop treating aid to the Egyptian military as inviolate and related only to peace with Israel. The military must get the message that continued funding will depend on whether a full transition to civilian democratic rule takes place in the coming year. That means, among other things, an immediate end to the harassment of pro-democracy and human rights groups.”

With all of the above, is it any wonder Egypt’s economy is dead in the water? Tourism fell 10.4% and manufacturing shrank 3.3% in the quarter ended Sept. 30. Regarding the former, laughably, Egypt expects tourism revenues to rebound by more than a third in 2012.

Iraq: Military Times published its final casualty statistics for Operation Iraqi Freedom / New Dawn, as the last U.S. combat troops exited.

March 19, 2003-Dec. 21, 2011

Killed: 4,474
Wounded in action: 32,336
Defense Department civilian deaths: 13

[Afghanistan’s toll is 1,843 killed as of Dec. 21 (at least three more died since then), with 15,138 wounded. Britain lost its 393rd serviceman over the holidays. That’s no small number for our great friends.]

Military Times [which is Army Times, Navy Times, Air Force Times, and Marine Corps Times] conducted an online survey of those who had deployed to Iraq in the last nine years for a final assessment of the war:

“We stayed for the right amount of time” 11%
“We’re leaving too soon” 21%
“We stayed too long” 26%
“We should not have gone to war in Iraq” 42%

As for the crisis facing Prime Minister Nouri al-Maliki and the potential dissolution of the government, radical Shiite Moqtada al-Sadr called for new polls, as the Sunni-dominated provinces seek greater autonomy from the central government.

Meanwhile, Turkey botched an air strike aimed at Kurdish militants near the country’s border with Iraq, killing 35 civilians. At least the Ankara government immediately admitted it was a mistake, saying the victims were smugglers, not terrorists.

Pakistan: President Zardari said Tuesday that his countrymen need to guard against what he called anti-democratic conspiracies, a reference to the tensions between the government and the military. Tuesday was the fourth anniversary of the assassination of Zardari’s wife, Benazir Bhutto. Pakistan is still being roiled by a secret memo Zardari allegedly backed that asked for Washington’s help in stopping a military coup in the wake of the raid that took out Osama bin Laden.

National elections are not due until 2013 but one politician is starting to see his support soar, a former cricket superstar, Imran Khan. Khan has been a politician for some time but never captured the imagination of the masses, though he’s now riding a wave of disillusionment. The thing is no one knows what the heck he stands for, though he recently called for a halt to U.S. drone attacks on militants inside Pakistani territory.

Israel: The Palestinian Authority is riven with dissension. Some members want the Palestinians to cancel agreements signed between the PLO and Israel, while others are miffed at Palestinian President Mahmoud Abbas for agreeing to incorporate Hamas into the PLO. Worrisomely, Egypt’s Muslim Brotherhood leader Mohammed Badei (we will undoubtedly get to know this name better) warmly embraced Hamas Prime Minister Haniyeh in Cairo. Haniyeh said in his formal statement there:

“The Islamic resistance movement of Hamas, by definition, is a jihadist movement by the Muslim Brotherhood, Palestinian on the surface, Islamic at its core and its goal is liberation.” [Jerusalem Post]

Israel, though, has its hands full these days with its own ultra-Orthodox extremists, who have been clashing with police in the town of Beit Shemesh, near Jerusalem. Secular Jews and ultra-Orthodox men are coming to blows over the latter’s strict gender segregation and ‘modest’ dress for women. I really have to bite my tongue on this one. 

Libya: Despite the solid news on the oil front mentioned above, if you think the transition to democratic rule in Libya is proceeding swimmingly, just understand that Saif al-Islam, Colonel Gaddafi’s son, is still being held by the local militia that captured him, they being unwilling to turn him over to the central government.

Russia: 50-60,000 protested in Moscow on Christmas Eve (our Christmas Eve, Russians celebrate Orthodox Christmas Jan. 7), a continuation of the demonstrations calling for free elections and an end to Prime Minister Vladimir Putin’s 12-year rule. Many shouted “We are the Power!” The protest was said to be far better organized than the one held two weeks earlier following the fraudulent Duma vote of Dec. 4. Former Soviet leader Mikhail Gorbachev, now 80, said on a Moscow radio station, “I’m happy that I have lived to see the people waking up. This raises big hopes.” Gorby is calling on Putin to give up power as he did on Dec. 25, 1991, peacefully.

But there remains no central leadership for the protesters, nor is there a candidate who poses a serious challenge to Putin in the March presidential election.

In response to the Saturday protest, Putin at first dismissed calls for a review of the Dec. 4 vote, telling supporters, “The elections are over. The parliament has started its work and a speaker has been elected. There can be no talk of any review.”

But the next day he said “dialogue must take place. In what form? I will think about it.” However, he quickly added, “(The opposition) have no common platform, there is no one to talk to.”

If you think that the protesters will eventually carry the day, think again. From a piece by Alexander Golts in the Moscow Times:

“Russian Railways president Vladmir Yakunin sent a strong message of support last week to Russia’s leaders through the company’s newspaper Gudok: ‘On behalf of the entire management of Russian Railways, we support the course of democratic development in Russia, and we consider it impossible not to respond to the unprecedentedly shameless campaign to discredit the Russian state…The filth that has been poured on the state and its leaders [from various opposition groups] has no connection with democracy. Moreover, it is a direct threat to the sovereignty of our country.’”

The not too veiled message being, if you want our goons to help in controlling the demonstrators, we are at your service. Goons from all over will be all too happy to do Putin’s bidding at the appropriate time.

China/Taiwan: It’s suddenly just two weeks away…Taiwan’s crucial presidential election and a sleeper issue for 2012. President Ma Yaing-jeou is vying for a second four-year term and his first term saw significant gains in the island’s relations with the mainland, opening more doors between the two economies.

But the last poll has Ma leading Tsai Ing-wen, 41-35 (in a multi-candidate race), so it’s still tight. Madame Tsai’s pro-independence Democratic Progressive Party is not a favorite of both Washington and Beijing, and if she pulled off an upset, I wouldn’t be in the least bit surprised to see some saber-rattling on the part of China, let alone a pullback on the economic gains between the two.

In other matters, China declared its intention to land an astronaut on the moon, making this official policy, though probably not until after 2020. The last time an astronaut set foot on the moon was 1972, Apollo 17.

On the issue of last July’s Wenzhou high-speed train disaster that killed 40 and cost over $30 million, the government issued a blistering report, much to the surprise of many, citing “primary leadership responsibility for the accident” rests with top Railway Ministry officials. [54 have been disciplined, with some facing criminal charges.]

The senior railway minister, since removed on corruption charges, was blamed for a focus on “speed of the railway project construction and neglect of safety management.” What’s encouraging is the openness of the report.

Lastly, the next president of China, current Vice President Xi Jinping, is coming to the United States late February. This is good. I’m anxious to see the guy myself, for a rather selfish reason. He was formerly governor of Fujian, where my investment is, and I’m convinced management in one shape or form knows him. [Let’s just say I’ve seen clues in my visits there.] That can’t help but be a plus, albeit maybe just a minor one for the time being. The one word we want to see attached to Xi when he gets here is “pragmatist.” I’d also like to see a sense of humor.

India: Prime Minister Manmohan Singh is 79 years of age and is clearly not the one to be leading his nation at a critical time in its history. He is simply being overwhelmed as his championing of free-market, anti-corruption policies suffer one setback after another. Corruption allegations in his own cabinet triggered massive protests earlier in the year, and then on Friday he failed to gain passage of his anti-graft bill in parliament (lower house approved it, upper rejected it). Additionally, the government has not been able to tame inflation, while a reversal on foreign investment has sapped confidence in his leadership.

Bottom line, India becomes a far bigger issue this coming year, with national elections still another two years away.

Yemen: The White House is in a bind over whether to allow President Ali Abdullah Saleh to enter the U.S. for medical treatment. It appears the administration will let Saleh in, but only for “legitimate” care. Saleh has been a longtime ally, though now he’s responsible for the deaths of hundreds of protesters and the situation is being compared to 1979, when an ailing shah of Iran was allowed to fly to the United States for treatment, which led to his overthrow and the storming of the U.S. Embassy.

Bosnia: I’ve said to keep an eye on the Balkans but for once there was a bit of good news. Muslim, Croat and Serb leaders agreed on the formation of a central government after 14 months of crisis. Since elections in October 2010, Bosnia hasn’t had a government. The agreement thus allows the country to press ahead with membership talks with the European Union and NATO.

100,000 died here during the Balkan Wars of the mid-1990s, and it’s still a deeply divided place; two semi-autonomous entities. Hopefully the new set-up works. [I’d be shocked if it did.]

Nigeria: As Pope Benedict XVI was issuing his annual plea for peace as part of his traditional Christmas address, Muslim extremists here were bombing a Catholic church, striking after worshippers celebrated Mass. 35 were killed. A year ago, the same Islamists killed 32 during a Christmas Eve bombing. The Vatican later called the attack a sign of “cruelty and absurd, blind hatred” that shows no respect for human life.

Hundreds of Christians later fled two Nigerian cities in the wake of the violence. Sound familiar? [Nigeria is 50% Muslim, 48% Christian.]

More broadly, it’s time for the 3/4s of Americans who are Christian to speak out more against the Islamist terror, for which I feel like I’ve done my own small part.

Benny Avni / New York Post

“In this year of vast Middle East transformation, the region where Jesus was born is rapidly losing Christians.

“Yes, tourists will continue to flood Bethlehem for the foreseeable future to experience Christmas where the original nativity took place. But if current trends persist, in a decade or less no more Christians will be living in that famous little town – where a few decades ago they made up some 80 percent of the population….

“Now, as Arab Springers seek a better future for the region’s young Muslim and secular multitudes, Christians tremble with fear….

“(While) getting rid of tyrants can’t be a bad thing on balance, the region’s minorities remain skeptical, to say the least. Sure, Christians suffered from discrimination under the old rulers, but they also enjoyed benefits, especially in countries where minority sects held power….

“The grim picture [Ed. such as in Iraq] is repeated across the Mideast whenever Islamists gain strength as the old Arab order ends.

“In Egypt, at the heart of the Arab rebellion, Salafis and other Islamists attacked Coptic churches all year, leaving dozens dead. The Copts are 10 percent of the population, Egyptians since before the birth of Islam. Now those who can pack up and leave….

“It’s a bad omen: Tolerance of Christianity is a test. Only when we see signs that religions can live side by side in the Arab world can we start hoping that women, gays or even Jews will find their footing in the awakening region.

“Put it another way: As long as Christians (and other minorities) feel they need to run for dear life, spring will remain a distant dream for all Arabs.”

New York Archbishop Timothy Dolan / op-ed New York Post

“According to the International Conference on the Freedom of Religion…Christians have become the most persecuted followers of any religion in the world today….

“According to the Frankfurt-based International Society for Human Rights, which describes itself as a ‘secular’ group, 80% of the acts of religious intolerance in the world today are directed against the followers of the One whose birthday we celebrate Sunday.

“As respected international journalist John Allen notes, ‘The threat doesn’t just come from growing Islamic extremism, but a bewildering variety of forces: the rise of Hindu radicalism in India; the policies of officially atheistic regimes in China and North Korea; old tribal and ethnic rivalries in parts of Africa…(And, he adds hauntingly, ‘even secular prejudice against any religious faith in parts of Europe and North America.’)

“Governments stand idly by. Just ask one of the more than 300 Christians injured, or the families and friends of the 27 massacred in Cairo on Oct. 9, in what John Allen calls the Christian Kristallnacht in Egypt, as soldiers not only failed to protect the Christians, but actually participated in the binge of violence.”

[Pope Benedict, health willing, is due in Cuba in March, which could be rather dramatic and potentially regime changing.]

*Last time I said I’d get into Britain and David Cameron. I’m running out of time today. Next week.

Random Musings

--With just a few days to go before the Iowa caucuses, a CNN/Time/ORC poll of likely Iowa caucus-goers was a mini-bombshell:

Mitt Romney 25 percent
Ron Paul 22
Rick Santorum 16
Newt Gingrich 14
Rick Perry 11
Michele Bachmann 9

[A follow on CNN/Time poll had Santorum at 15%, Gingrich at 13%.]

A month ago in the same survey, Gingrich was at 33 vs. Romney’s 20. Santorum only had 5. So terrible news for the former speaker (whose campaign also screwed up royally in not getting on the Virginia primary ballot, especially given it’s his home state), while Santorum basked in the late glow of the media spotlight. Heck, the guy deserves it. No one has worked the state harder and by my admittedly fickle thinking, should he finish where the above poll has him, and can hang in there another 6-8 weeks, if nothing else he has put himself in the veep sweepstakes. Seriously, he’s not a bad match with Romney. Santorum has the Washington experience Romney lacks, could be a decent go-between with Congress, has foreign policy experience, and if something happened to a President Romney, Santorum is just as qualified to be the nation’s leader as any of the others we’ve had since Bush 41. [I know…that’s not saying much.]

NBC/Wall Street Journal…Iowa

Romney 23
Paul 21
Santorum 15
Gingrich 13

Michele Bachmann’s campaign was roiled by the defection of her two main staffers, including her Iowa state chair, Kent Sorenson, who defected to the Paul camp. Bachmann said Sorenson was bought off and that he told her so in a phone conversation. Sorenson said the conversation never happened and that no money was exchanged. The timing was awful and at this point I’ll be shocked if she gets 7% and moves on to New Hampshire.

--CNN/Time/ORC poll…New Hampshire:

Romney 44
Paul 17
Gingrich 16
Huntsman 9

New Hampshire Survey Center poll:

Romney 39
Gingrich 17
Paul 17
Huntsman 11

--Nationally, a Rasmussen Reports survey had Romney topping Obama 45 to 39 percent. But just a week earlier, Romney trailed Obama 44-41, so not sure about this one. [Actually, I’m not keen on the Rasmussen surveys, period.]

--I hope I’ve made it clear I don’t have a personal favorite yet in the presidential race. I was interested in Herman Cain for a week or two, thought Perry was intriguing for an equal amount of time just as he showed up in Iowa when I was there in August, and am glad the likes of Santorum and Ron Paul are in the race to make it interesting. Speaking of Paul, Stephen F. Hayes of The Weekly Standard:

“(When likely Iowa caucusgoers) were asked to pick the most important issue from a list of 12, 35 percent said ‘jobs and the economy,’ 24 percent said ‘the size and role of the federal government,’ and 21.5 percent said ‘national debt and the deficit.’ Asked the most important quality they were seeking in a candidate, more voters answered ‘takes a strong stand’ (32 percent) than anything else.

“Is there a candidate in the race who has taken stronger stands than Paul? Who has focused more directly and consistently on those top three issues than Paul? How has Paul overcome his often-wacky, sometimes indefensible foreign policy views? In a state that historically has some strong non-interventionist tendencies, it doesn’t take much….

“(If) Paul were to win the Iowa caucuses, he would likely do so with something like a quarter of the vote. He won’t be the nominee. But a quarter of Iowa caucus voters will have rewarded a traditional grassroots campaign and a message of aggressive free-market solutions to our problems, and will at the same time have chosen to send a message about the weakness of the rest of the field. If they do this, why couldn’t one say the Republicans of Iowa are doing their job?”

--As for Ron Paul and a third-party bid, Karl Rove notes the following in his “Predictions for 2012” column for the Wall Street Journal.

“After failing to win the GOP presidential nomination, Ron Paul will not run as a third-party candidate because that would put his son, Rand Paul, in an untenable position: Does the Republican senator from Kentucky support his father and effectively re-elect Mr. Obama, or back his party and defeat him?”

--But as another piece in the Journal points out this week, if Paul doesn’t run as a Libertarian, former New Mexico Gov. Gary Johnson is expected to seek that party’s nomination, while the nonpartisan group Americans Elect is now on 13 state ballots, including Florida and Ohio, two key swing states, and supposedly will have completed paperwork to get on 30 ballots by the end of this week. Which begs the obvious question; does Donald Trump go this route? It’s largely an online affair. He wouldn’t have to shake any hands, an act he detests.

--I always get a kick out of the polls that say a majority of Americans view President Obama as “likeable,” regardless of whether they approve of his performance. What cracks me up is that he doesn’t like people. We had another example of this in an article by Helene Cooper of the New York Times this week.

“Air Force One had just landed in Manchester, N.H., on a brisk Tuesday morning last month when President Obama made an admission to Valerie B. Jarrett, his close friend and senior adviser.

“ ‘I just called Reggie,’ Mr. Obama said. It was his first domestic trip without Reggie Love, the former Duke University basketball player who had been his constant companion and presidential ‘body man’ until he left in November to study for his M.B.A. full time. ‘I miss him,’ the president confessed.

“More noteworthy than Mr. Obama’s spending the short flight calling his longtime aide is what he did not do: schmooze with Washington politicians. No one from the New Hampshire Congressional delegation traveled with Mr. Obama on the plane, a perk that presidents often offer to lawmakers to foster good will.

“Mr. Obama, in general, does not go out of his way to play the glad-handing, ego-stroking presidential role…he keeps Congress and official Washington at arm’s length, spending his down time with a small – and shrinking – inner circle of aides and old friends….

“His relationship with Washington insiders is described by members of both parties as ‘remote,’ ‘distant’ and ‘perfunctory.’….

“ ‘It’s about building relationships,’ said Gerald Rafshoon, a television producer who was President Jimmy Carter’s communications director. ‘Some people are saying he’s a recluse. You don’t want that reputation. He needs to show that he likes people.’”

Don’t agree? Reminder…I noted some thoughts of Michael Goodwin / New York Post, in my 10/15/2011 WIR on this very topic:

“The reports are not good, disturbing even. I have heard basically the same story four times in the last 10 days, and the people doing the talking are in New York and Washington and are spread across the political spectrum.

“The gist is this: President Obama has become a lone wolf, a stranger to his own government. He talks mostly, and sometimes only, to friend and adviser Valerie Jarrett and to David Axelrod, his political strategist.

“Everybody else, including members of his Cabinet, have little face time with him except for brief meetings that serve as photo ops. Secretary of State Hillary Rodham Clinton and Treasury Secretary Tim Geithner both have complained, according to people who have talked to them, that they are shut out of important decisions.

“The president’s workdays are said to end early, often at 4 p.m. He usually has dinner in the family residence with his wife and daughters, then retreats to a private office. One person said he takes a stack of briefing books. Others aren’t sure what he does.”

--According to a survey by the Pew Hispanic Center, Obama leads Romney by 68 percent to 23 percent, even as Hispanic adults disapprove with the way the administration is handling deportations of illegal immigrants, by 59 percent to 27 percent. His job approval rating among Hispanic voters is at 54 percent, nine points lower than last year. [The latest Washington Post/ABC News poll had Obama’s overall job approval at 49 percent.] The latest Gallup Poll has Obama’s approval rating among Hispanics at 60 percent. In 2008, Obama won the Hispanic vote over John McCain by a 67-31 margin. [Peter Wallstein / Washington Post]

--Democratic Sen. Ben Nelson, 70, announced his retirement in heavily Republican Nebraska, giving the GOP another opening. Nelson joins fellow conservative Democratic senators Jim Webb (Va.) and Kent Conrad (N.D.) in bowing out, as the Republicans have a great shot at picking up the four seats they need to get back in the majority. [Nelson would have been vulnerable due to his vote for Obamacare.]

--The other week I was talking about how the United States needs to drastically reduce its troop strength in Europe, some 52,000 strong (of which 40,000 are in the Army). In 2012, the U.S. is indeed reducing its troop level to the lowest since before the Cold War, cutting 4,000 or so.

On another topic I’ve discussed before, reducing the ranks of generals and admirals, Craig Whitlock of the Washington Post reports:

“Pentagon officials said they have eliminated 27 jobs for generals and admirals since March, the first time the Defense Department has imposed such a reduction since the aftermath of the Cold War, when the collapse of the Soviet Union prompted the military to downsize.

“The cuts are part of a broader plan to shrink the upper ranks by 10 percent over five years, restoring them to their size when the country was last at peace, before the attacks of Sept. 11, 2001.”

Good…we have former Sec. of Defense Robert Gates to thank for setting this in motion. But far more needs to be done. As Vice Adm. William E. Gortney, director of the Joint Staff at the Pentagon and appointed by Gates to review the number of top officers, said, “If 10 years of combat have taught us anything, it’s that flat is faster.” It’s not just about saving a few dollars, it’s about being more nimble. Sen. Lindsey Graham (R-S.C.) is among those supporting the Pentagon’s efforts in this area. But others have said the Pentagon isn’t moving fast enough

Craig Whitlock notes: “Benjamin Freeman, a national security analyst…said the number of generals and admirals on active duty stood at 970 as of Sept. 30. That represented an increase of six active-duty positions from March, when Gates ordered the cuts.”

I get so sick of this crap, and while Freeman expressed deep disappointment, I find it depressing more Americans don’t know or give a damn about their bloated and deeply corrupt Pentagon.

[Again, check out my “Hot Spots” link on the topic.]

--I have to admit I cracked a smile upon hearing that the hacker-network, Anonymous, stole thousands of credit card numbers from the U.S. intelligence outfit, Stratfor, because I don’t respect Stratfor’s work. Just an opinion, but it’s highly overrated, as is, quite frankly, the CIA, as they have proved time and time again. Remember when the CIA said Fidel Castro was near death and your editor wrote “Castro will not die” on 12/30/06, referring to 2007?

Of course at the same time, it would be highly disturbing if Anonymous released stolen emails that compromised various sources Stratfor has, even if many of these same folks are worthless.

--New York City Mayor Michael Bloomberg was able to brag about the past decade being New York’s safest ever, in terms of fire deaths and murders, both near record lows, though I wish he’d wait until New Year’s Day to tout the statistics (I’m superstitious, you see). As of Dec. 28, 64 people had died in fires this year, second only to last year’s record-low 62, so the mayor can rightfully say response time hasn’t been hurt despite some high-profile budget cuts. In 1969, by comparison, 310 people died in fires.

And on the murder front, there were 500 through Dec. 27, compared to 523 last year. Back in the crack epidemic years, before Rudy Giuliani took over, there were over 2,000.

--Howard Bryant / ESPN The Magazine, on the horrible year in college sports:

“The NCAA – under assault from its college football programs that are bigger than it, fearful that its basketball programs will realize the same, facing its long-standing hypocrisy of generating billions at the expense of its athletes – knows its empire is collapsing. Now the child sexual abuse scandals at Penn State and Syracuse have destroyed another previously impervious front: the myth of coach as great moral influence….

“Like the rest of the NCAA foundations that have proven to be fraudulent, there’s no believing in the coach-as-guide ideal anymore. The lie of it has been exposed, the rot setting in, as the game’s biggest, richest names run from perhaps the most damaging crisis in the history of college athletics, counting their money, staying quiet, nervously checking the headlines in the hopes that their program isn’t next.”

--And now my selection for “Week in Review Person of the Year.” For my purposes it must go to a political figure; the consequences of governance, or lack thereof, being central to what we explore in this column. As you can see below, if there is no obvious choice, I’m not naming one. I also stretched the definition a little in naming Gen. Petraeus (and Bernanke), but his position was as political as they come. I also readily admit, in hindsight, that these selections may have peaked the year chosen.

2001 – George W. Bush
2002 – no one…citing “unfinished business in Iraq”
2003 – George W. Bush, Tony Blair, John Howard
2004 – Hamid Karzai
2005 – Ariel Sharon
2006 – no one
2007 – Gen. David Petraeus and Defense Sec. Robert Gates
2008 – Gen. Petraeus and Sec. Gates
2009 – Ben Bernanke
2010 – David Cameron
2011 – no one…let me explain…

I stare at a big world map on the wall across from my desk all day and spent some good time scouring it for ideas this year. All of the above were deemed to have made positive contributions. For the life of me, I can’t find one national figure who fits the bill for 2011.   If I wanted, I could be cute and name Andrew Cuomo and Chris Christie as two governors who got things done in 2011, thus proving leadership matters, but their spheres of influence are too small.

So, sorry…I know this is wimpy…but I’ve been decrying the lack of leadership in the world for years. 2011 proves it.

As for “Dirtball of the Year,” this is given to the person(s) who has most negatively impacted the lives of millions.

2000 – Robert Mugabe
2001 – Osama bin Laden
2002 – Mugabe
2003 – Saddam Hussein and bin Laden
2004 – Abu Musab al-Zarqawi
2005 – Zarqawi
2006 – Mahmoud Ahmadinejad
2007 – Mugabe
2008 – Mugabe
2009 – Ahmadinejad
2010 – Kim Jong Il
2011 – Muammar Gaddafi and Bashar al-Assad…thankfully, the former is now dead. A bullet between the eyes of the latter would be quite appropriate.

---

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

God bless America.
---

Gold closed at $1566…up $145 on the year despite the recent decline
Oil, $98.83

Returns for the week 12/26-12/30

Dow Jones -0.6% [12217]
S&P 500 -0.6% [1257]
S&P MidCap -0.6%
Russell 2000 -0.9%
Nasdaq -0.5% [2605]

Returns for 2011

Dow Jones +5.5%
S&P 500 -0.00%
S&P MidCap -3.1%
Russell 2000 -5.4%
Nasdaq -1.8%

Bulls 50.5
Bears 29.5 [Source: Chartcraft / Investors Intelligence]

Don’t forget the StocksandNews iPad app…recommended by both AA and AAA.

I will be posting a slew of yearend #s on my “Wall Street History” link on or about Jan. 2.

Happy New Year! Next week from Manchester, New Hampshire.

Brian Trumbore
 



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Week in Review

12/31/2011

For the week 12/26-12/30

[Posted 6:00 AM ET]

2011 and 2012

Let’s jump right into it with my major predictions for 2011 and see how I did.

WIR 1/1/2011

“I believe stocks will finish down 5-7% in 2011.” [meaning the three major averages]

As of 11/25, with five weeks to go, the Dow Jones was down 3.0% and the S&P 500 and Nasdaq were down 8.0%. Not bad.

As of 12/16, two weeks to go, the S&P 500 was down 3.0%, Nasdaq down 8%, though the Dow was up 2.5%. Still pretty darn good. But not good enough.

And then we finished 2011 with the following:

Dow Jones +5.5%
S&P 500 unchanged
Nasdaq -1.8%

So much happens at yearend, much of which has nothing to do with fundamentals, especially when traders have closed their books and the computers, a k a the casino, take over full bore. But I came close, saving for the Dow, and almost nailed it.

Point two. WIR 1/1/2011

“I believe the European debt crisis is with us well into 2012 and I can guarantee you that Ireland’s role is far from over.”

Can’t argue with me here. Ireland, by the way, is going to be a big story again in 2012. Obviously, everyone knows that Europe will continue to call the tune on the global economy (but very few were saying that a year ago), influencing both the U.S. and China among the other major engines.

Heck, back on 6/5/10 in this space, I wrote:

“So you have a European continent that could be stuck in neutral, at best, for years, nay decades.”

No reason to change that 1 ½ years later.

Point three. All first quarter last year, I said the CRB Index of 19 commodities would finish down for 2011, having closed 2010 at 332.80. Even when it was at 360, and then a high of 370, as everyone and their mother was talking about commodities shooting to the moon, I maintained we would finish in negative territory for this key benchmark, citing massive speculation that would eventually be wrung out. It was. The CRB finished the year at 305.30. I’m as proud of this call as just about any I’ve made.

For 2012, I see the three major U.S. stock indices falling 10%, and it is going to be one wild year, controlled by the flash traders and computer program trading (two different things) more so than ever. Stocks could be up big, like 15% to 20%, and then crash.

I draw your attention to something I wrote on 3/5/11, which I’m quoting at length because I still believe every word of it.

“Speaking of the U.S. and its deficit dilemma, Congress avoided a government shutdown for two weeks with yet another short-term funding deal but this can’t go on forever. Eventually it has to face up to its obligations, including a decision on raising the debt ceiling.

“For all the talk of who is to blame for our current mess, though, there is only one man who stands above the rest in terms of responsibility and that is Barack Obama. He is the one who has to now lead. He is the one who has to give an address or two from the Oval Office and give Americans the facts on our looming entitlement calamity. Obama is the one who has to tell Americans it’s time to sacrifice.

“But the president and his advisers are convinced they can play their game of chicken until after the 2012 election and I’m here to tell you that unless the financial markets, including those overseas, believe the United States has come to grips with its deficits, Jan. 2013 will be too late. We will meet our Waterloo at some point in 2012.

“The president had his chance to begin to lay out the facts to the American people with his State of the Union address and instead he virtually cemented his legacy as one of the worst presidents in our history. Obama can still turn things around, but there is little reason to believe he will do so and, no, growth in the economy will not bail us out of a looming debt-to-GDP ratio of 100% with exploding spending to come in the mighty triad; Social Security, Medicare and Medicaid – the latter two powered by Obamacare in the out years. Until the American people hear the truth, you will continue to get absurd poll #s like we had this week with the latest NBC News/Wall Street Journal survey wherein when asked if cuts to Medicare were necessary to ‘significantly reduce’ the deficit, 18% said yes, while 54% said no.

“Warren Buffett was on CNBC this week and said you ‘can’t stop this country.’

“Wrong, Warren. Debt can stop this country, just like debt stopped many an individual and corporation during the financial crisis and has stopped Greece and Ireland.”

A few months after writing the preceding, I began to talk about a crash in 2012, a 30% decline in a short period of time that will be fueled by our Greece- or Italian-like moment. The fiscal numbers between the U.S. and those nations may not match up, but something will trigger a severe change in sentiment, which in turn may finally force our policymakers to act. No, the president won’t be able to just employ a four corners stall game until November. The markets won’t let him.

Which brings me to foreign affairs and the hot spots. Last year I held back on issuing any bold predictions on this front, outside of the usual concern about Pakistan, Lebanon and China; economics, mostly, regarding the last one. I said of China on 1/1/2011 that I was more uncertain than ever and I still am. I believe the government can engineer a soft landing without massive unrest, but I’m not 100% sure of this.

Here’s what I am certain of. 2012 is going to be one of the more memorable years of the last 250 years of civilization. At times, President Obama is going to outwardly appear overwhelmed. Even he won’t be able to play Joe Cool when confronted with some of the issues he’ll be handed.

One I already told you of, going back months, is going to be largely of his own doing. Iran. I have already spelled out how Obama can lose the election on this single issue if, say, after Labor Day, Iran were to explode even a crude nuclear device. The Republican nominee would have a field day with this. “This happened on your watch, Mr. President!”

So if there is even a 30% chance of Iran having a full nuclear capability in another nine months (given our admittedly shoddy intel), it’s too great a risk. Obama has to act sooner and I’m convinced it’s sometime no later than May. He’ll need time to repair the damage, which could be considerable in terms of retaliatory attacks, Hizbullah going full bore on Israel, Syria stepping in…you get the picture.

Iran can’t get the bomb, and President Obama knows this. Will Iran give the U.S. and its allies an excuse to move through some dumb action of theirs in the Strait of Hormuz? I don’t think so. But the mullahs may make a dumb move elsewhere.

Of course Iran will be gaining increasing influence in Iraq, but you already know that by now. The United States lost the war and we aren’t going back, abandoning the country yet again. [Imagine being an interpreter who helped U.S. soldiers and now having to watch your back the rest of your life. You’d have to flee with your family to avoid being taken out in the dead of night.]

Israel will not only have to deal with probable war with Hizbullah and possibly Syria and/or Egypt, but, and I hesitate to write this but I have to, an assassination will occur, courtesy of Israel’s own extremist element, a la the assassination of Yitzhak Rabin in 1995.

Egypt’s new parliament after the last round of voting will be 65 to 70 percent either Muslim Brotherhood or Salafists. They are supposed to be charged with writing a new constitution. The military will fight back. A presidential election is to be held by yearend but I’m doubtful this happens. All I know is this will be a powderkeg virtually all of 2012. [Al-Qaeda and its offshoots will be a cause of some of the chaos.]

There will be a military coup in Pakistan. This is a layup. Concerns over the security of its nuclear weapons then will be a huge issue for the world to deal with. At first, India will not act, but Prime Minister Singh will be faced with massive internal problems of his own and any terrorism in India will no doubt be blamed on Pakistan. There will come a time when we’ll be watching with fear over a war between the two that could go nuclear within 48 hours.

Russia will see waves of terrorism in Moscow and elsewhere. Putin and his goons will pull out all the stops to stay in power, including the March presidential election. I don’t believe, however, that come Dec. 31, 2012, it’s Putin still standing.

Europe will be convulsed in riots, as the people in Britain, France and Italy reject their government’s austerity programs. For Britain, this will be a real problem with the 2012 London Summer Olympics. Many will be cancelling their plans to attend.

France’s presidential election in April will be tumultuous. I just don’t see how Sarkozy gets in a run-off, especially after France loses its AAA rating, as is inevitable. The Socialists will prevail. Marine Le Pen will make things interesting by gaining the run-off over Sarko.

As for North Korea and new leader Kim Jong Un, I’m holding off. No one knows, or can really hazard a guess. One just hopes that the leaders of South Korea, Japan and the United States, in particular, have gamed out all the scenarios and are prepared as much as one can be for anything Kim and his Orcs throw at the civilized world.

China’s transition to a new leader, Xi, will go relatively smoothly, but there will be several instances of major unrest as the economy slows further and many homeowners suffer huge losses on their purchases at the top of the bubble. If the unrest gets out of hand, however, China could play the nationalism card and create an issue in the South China Sea. I do not see the U.S. and China having more than a war of words.  As spelled out below, though, Jan. 14 is a key date for the region; Taiwan’s presidential election. Here’s hoping it is a rare positive for 2012.

Christians will continue to suffer, worldwide, as I spell out later.

And, yes, there will be a serious cyberattack on a major U.S. utility or urban infrastructure that will be but a sign of things to come. I’m just not prepared to say this is the year we see the financial markets taken down because of one. 

Through all the above, as if it isn’t enough, the eurozone crisis will continue unabated. So let’s move on…

Europe, Washington and Wall Street

If ever there was a headline that summed up the state of the European continent these days, it was this:

“Another chunk falls off Colosseum as restoration delay drags on”

Ah, yes, dithering. The Wall Street Journal had a story, an ‘in-depth’ piece on the euro crisis that merely stated the obvious, like what every second-grader in America knows by now. There isn’t any leadership, anywhere in the world these days, least of all Europe. Angela Merkel of Germany? Nicolas Sarkozy of France? Not by my definition. But the Journal piece talked of what I have the last 20 months, a eurozone that’s been dithering. And so here is but a perfect example of the Euro mentality, as told by AFP:

“The Colosseum lost another piece on Tuesday as Rome’s most famous monument deteriorates further ahead of a long-delayed restoration funded by an Italian billionaire now scheduled to start in March.

“The chunk of volcanic tuff fell from one of the iconic arches of the nearly 2,000-year-old structure – just two days after a similar incident reported by a group of concerned tourists on Christmas Day put local staff on alert.”

What idiots. It’s a matter of economics, my Italian friends. The Colosseum and the Vatican are your meal tickets. The Vatican knows how to take care of its treasures. So take care of the Colosseum! 

Get this. “The number of visitors to the site has gone from around one million visitors a year to around six million over the past decade – thanks mainly to Ridley Scott’s epic film Gladiator starring Russell Crowe.”

Well, citizens of Italy. If the Colosseum keeps crumbling, a la Pompeii, incidentally, that’s six million potential visitors who may choose to go elsewhere and who are you then going to sell your little trinkets to? More importantly, how many hotels and restaurants will go out of business? How many airline employees will lose their jobs as flights are cut back? Do you ever think of this, Italians? Obviously not.

But at the same time, you stupidly expect us, or your European brethren, or fellow banks, to buy your debt? You have 1.9 trillion euro of it. I’ve listed these figures ad nauseum but after an unsuccessful 10-year bond auction this week (more on this in a second), you are coming to market with some 200 billion euro of debt in just the first four months of 2012. At least 440 billion, overall, next year. And you’ll be competing with another 1.560 trillion of sovereign and European bank debt being rolled over in ’12.

So the Italians float a 10-year piece of crappola, the yield goes off at 6.98%, and the media calls it a success. I mean all we have been told is that 7.00% is the magic number. Above that and eventually you end up requiring a bailout; a la Greece, Ireland and Portugal. But 6.98% was deemed good because it was less than the previous 7.48%. The 10-year ended up finishing the year at 7.01%.

So you can see why some of us are a bit cynical, knowing the only way the euro crisis gets solved is after a messy crash. Like the horrific chain collision in New Orleans the other day, where on Interstate-10, the taillights you saw in front of you suddenly disappeared, amid either a fog bank or a cloud of smoke. It just went black. Amazingly, last I saw only two were killed but over 60 were injured. That’s what Europe is headed for. It will all just turn black. Eventually the curtain will then rise, the ambulances will be able to make it in, the survivors will be whisked away and the dead buried. After a period of mourning, life will resume. Europe needs to bury its dead. I wish they’d hurry up and do so. I’m tired of writing about this topic, especially when Americans are looking at our own future.

You want further proof of the sad state of Italy? Remember how about a month ago I wrote of how I couldn’t believe more people weren’t concerned about the slide in democracy in Europe? How Greece and Italy are now being run by unelected technocrats?

You know this guy now leading Italy, Mario Monti? You know how some in the media, as well as fellow technocrats, think he’s Mr. Wonderful? Following are bits of a report by the Financial Times’ Guy Dinmore and Giulia Segreti:

“Italy has saved itself ‘from the edge of the precipice,’ Mario Monti declared yesterday, defending the record of his six-week-old government while calling on the European Union to deliver a coherent response to the eurozone debt crisis by substantially increasing its bail-out fund….

“Mr. Monti said that under ‘normal conditions’ – which he declined to specify – Italy would not need more austerity measures along the lines of the 30 billion euro package approved by parliament last week intended to balance the budget by 2013.

“The government’s next focus, he said, would be a package of measures to regain lost competitiveness by liberalizing the economy…

“Reforms were needed to the system of labor contracts that virtually guarantees a job for life for some privileged workers while providing little security for others, especially young workers on short-term contracts, Mr. Monti said. However, he evaded a question on whether the government intended to challenge trade unions opposed to changing Article 18 of the workers’ statute. They oppose making it easier for companies with more than 15 employees to fire workers. 

“Mixing his metaphors, the former professor of economics and EU competition commissioner said Italy had been ‘on the edge of the precipice without a railing’ and had been moving ‘very close to Greece’ in a south-easterly direction.

“Italy had braced itself and was now moving with the winds behind it ‘to the north-west towards Brussels and far from Greece.’

“ ‘But the turbulence is absolutely not over,’ he said."

Eegads. I’d ask the Italian people, ‘How did you ever elect this guy?’ But they didn’t. 

That’s just one example of what’s happening in Europe these days. The treasures, the only reason to go to Europe (I can drink beer anywhere, after all), are crumbling, as are the economies, and you have people running some countries that no one voted for.

Meanwhile, over in Hungary, you have a maniacal crackpot, Viktor Orban, who is an elected official but turning into a little dictator. The first thing the parliament has done is pass legislation controlling the central bank. Now the likes of Ron Paul would like to do away with central banks, but that’s a different matter. Orban thinks that by taking over Hungary’s monetary authority and setting interest rates low to spur growth, that then investors will come in and refinance Hungary’s massive debt load. Good lord. This is 2011. Not 1342, when people had one eye and the grog was often poisonous. It’s a global economy, Viktor. It’s not a make believe kingdom.

So let me try and summarize this week in Europe. The banks are flooding the European Central Bank with their cash, at 0.25% interest, and not reinvesting the huge amounts they just borrowed from the ECB, at 1%, into Euro sovereign debt, which is the gamble the ECB was taking, whether they want to say so or not. Ergo, the banks are like Scrooge, in the presence of the Ghost of Christmas Yet to Come. They are petrified. Paralyzed. Unable to lend. Small businesses are dying.

“I am not the bank I was,” they plead in unison. “I will not shut out the lessons of Greece.”

Let’s just say that unlike Scrooge, however, the banks aren’t close to dancing a jig and buying the biggest goose in the window. There is no happy ending, at least that I see.

Lastly, Ireland is going to be a big story again in 2012. While Angela Merkel has labeled the Irish the poster child for how to suck it up and move on, the fact is the country, save for some in the export sector, is dead. As some in Ireland are now claiming, though, they must declare default, or at least threaten it, in order to get out from under the massive bank debt the government vowed to honor. Ireland’s back in recession (unofficially) and will not be able to meet its stringent targets as established by the ECB, IMF and EC (European Commission). This is where an increased European Financial Stability Facility (EFSF) may have helped, but Merkel refuses to allow this. Ireland needs a break on interest rates. It’s time for the placid Irish to rise up. Prime Minister (Taoiseach) Enda Kenney said Ireland also needs more time to pay back the billions borrowed to fix the banks.

While in Spain, new Prime Minister Rajoy already seems paralyzed. The budget deficit, he’s learned, is far worse than he was told (I could have told him that…I wrote a year ago that the big problem in Spain was a lack of transparency with banks and the autonomous ‘regions.’) He’s proposing $billions in cuts, but isn’t really spelling out how, just yet, beyond freezing public salaries. The markets, though, are at least giving him a chance to get his sea legs in his new position. But you know what one of Spain’s main problems is? Try 700,000 unsold homes, let alone 23% unemployment.

Turning to Washington and Wall Street, the International Council of Shopping Centers said pre-Xmas sales ending Dec. 24 were up 4.5%, while the National Retail Federation was calling for a 3.8% gain for November and December. I went shopping myself on Tuesday and Wednesday and feel like I got a lot of it done for Christmas 2012. [Don’t tell my brother it’s going to be another lean one.]

Meanwhile, the Chicago Purchasing Managers Index for December came in at a strong 62.5, and better than expected, while the figure on weekly jobless claims was solid.

But next week we’ll get the December employment report, as well as various manufacturing data, including from overseas, and it is likely to be market-moving. The following two weeks, earnings will start rolling in.

As for 2012, the Fed sees an economy growing 2-2.5%, while the consensus among economists is in the 2-3.0% range. Fourth quarter GDP is expected to come in at 3%.

We did see a report on housing from S&P/Case-Shiller for October and prices were 3.4% lower, year over year, in the 20 major metropolitan areas, with Atlanta down the most for 12 months, 11.7%.   Prices in Atlanta, Cleveland, Detroit and Las Vegas are lower today than they were in Jan. 2000.

But an AP/GfK poll says 78% of Americans are hopeful about the year their family will have in 2012. I don’t want to be the one to break it to you all, but you are sadly mistaken.

I mean for starters, there’s Washington. It’s not going to be good when they return after the holidays. They still have to extend the sham payroll tax holiday for all of 2012, and extend unemployment benefits further as well.

And then there is the issue of the debt ceiling, which President Obama postponed for the time being, though due to the Aug. 2 Budget Control Act, this will not be up for debate again until after Nov. 2012 (most likely).

The thing is, overall, the debate remains the same. How to raise taxes and tackle entitlements? Or, how not to raise taxes and just ignore entitlements?

As Oklahoma Republican Sen. Tom Coburn said recently, “Washington is kind of like Las Vegas. It brings out the worst in everybody….it all comes back to leadership. There is none right now in this country, either Republican or Democrat.”

Former Senator Alan Simpson, of Simpson-Bowles fame, said, “This next year is going to be chaos. Absolute chaos,” citing Europe, for one.

Democratic Senator Kent Conrad of North Dakota said, “the American people still don’t believe you need to make hard choices…They believe you should balance the budget, but when it comes down to doing the things that need to be done to accomplish that, they don’t support them. Until the American people believe we need to change some things, it’s unlikely we’re going to accomplish them here.” [Washington Post]

Boy, that’s nice and depressing.

Street Bytes

--Due to the timing of this column, there isn’t time to go into a lot of yearend numbers, but it is a convenient end to the year in other respects. For the week, however, the Dow Jones and S&P 500 lost 0.6% and Nasdaq declined 0.5%. And I did see that according to Bloomberg and the Financial Times, about $6.3 trillion in market cap was erased from global markets this year, about 12%. Many European and Asian markets did far worse than the U.S., to say the least.

McDonald’s, by the way, was the best performer in the Dow, up 31%, while Bank of America was the worst, down a sickening 58%. 

--U.S. Treasury Yields

12/31/10

6-mo. 0.18% 2-yr. 0.59% 10-yr. 3.29% 30-yr. 4.33%

12/31/11

6-mo. 0.06% 2-yr. 0.24% 10-yr. 1.88% 30-yr. 2.89%

If you nailed this one for 2011, step to the head of the class. [I stayed out of the prediction game when it came to Treasuries.]

Holdings of U.S. Treasuries by foreign central banks fell a record amount this month, according to the Federal Reserve; $69 billion worth, which obviously didn’t hurt the Treasury market any. To be fair, however, Japan’s buying dollars and selling yen during the past few months aided the Treasury market greatly, so the drop in foreign holdings would have been far more pronounced had it not been for our buddies who gave us Godzilla and Mothra.

--Hong Kong’s Hang Seng Index finished the year down 20%. China’s Shanghai Composite was down 21.7%. HSBC’s estimate of China’s PMI for Dec. is 48.7, a second straight month of contraction. The government’s official reading comes out Jan. 1.

--Japan’s industrial production fell 2.6% in November over October, with retail sales down 2.1%. Consumer prices also fell, 0.2%, from a year ago. Deflation is once again part of the discussion here.

--I do have to add regarding Italy, one massive problem Mario Monti faces is tax evasion, a la Greece. So he’s trying to cut down on the use of cash, severely limiting the maximum allowed to be used for big ticket items, for example. Italians don’t use credit cards like we do because merchants give them discounts on cash purchases, which they can then hide from their books.

--The best jobs program the Obama administration has come up with was the just completed agreement to sell 84 top-of-the-line F-15SA fighter jets to Saudi Arabia, as well as refurbishing 70 F-15s currently in the kingdom’s fighter fleet. According to U.S. officials, the production of the Boeing built F-15s will support 50,000 American jobs.

Do you ever just stop to wonder about the global defense industry? Isn’t it kind of amusing? Heaven forbid true world peace ever broke out. Some countries would go spiraling into depression.

[Check out my current “Hot Spots” column…a speech by Sen. John McCain addressing the current state of affairs with defense spending in this country.]

--Shares of Sears Holdings were at $94.80 on Feb. 17. This week they finished at $31.80.

James Covert of the New York Post summed it up:

“If you think Sears and Kmart stores look depressing, check out the stock price of the company that owns them.”

Sears announced that same-store holiday sales dropped over 5% and that it would close 120 locations. The day of the announcement, Tuesday, shares dropped 27%, the biggest plunge since the company was formed in 2005, when hedge-fund billionaire Eddie Lampert merged Sears with Kmart. Famed investor Bruce Berkowitz’ Fairholme Fund owned 14.5 million shares, as of Aug. 31, at an average price of $79.80. Yuck.

I know I haven’t been into either store in quite awhile. I think I was in a Kmart in Spearfish, South Dakota, about four years ago. But that’s it. A key going forward is how vendors treat the stores. If they stop shipping or start insisting on cash up front, that could spell an end to both and it would happen rapidly.

You know what I’ve discovered, though…Dollar Tree. I didn’t even know there was one nearby until a friend suggested I buy some supplies there for my recent high school reunion. I mean this week I got 100 tea bags for $1. Picture frames for a $1 each that would cost me $9 to $12 at Bed, Bath & Beyond or CVS, two of my regular haunts. Bathroom/shower cleaner for $1 that would have set me back $5 or $6 elsewhere…and the stuff really works! And a can of beef stew for a $1 that costs far more at the grocery store. Granted, I haven’t tried the stew yet, and I did see on the label it had enough salt in it to take care of most major roads in my area during the next snowstorm, but still, not bad. [I’m told it will snow again…really.]

Oh, by the way…shares in Dollar Tree finished the year at $83, off the 52-week high of $84.35 set this week and up from the low of $48. Quite a contrast to Sears. And guess what? I did eat the stew tonight. [The column is put together in pieces, you see.] I put dollops of Tabasco Sauce in it and for a $1, it was highly edible. Six hours later I feel fine…no signs of botulism, diphtheria or whooping cough, for starters, though I can’t tell what the 42 pounds of salt is doing to my system.

--Depending on your television market, this time of year many of us are bombarded with a certain car commercial. Christopher Caldwell had a funny take in the Financial Times.

“For the past couple of years, Lexus has run television ads suggesting ways for people to give their loved ones cars for Christmas. There is something obscene about these spots, which promote something called the December to Remember Sales Event. (Why it’s not called the Grind-the-Faces-of-the-Poor Sales Event is anyone’s guess.) The giving of the gift usually involves some elaborate consumer goods equivalent of a striptease or treasure hunt to heighten the atmosphere of materialism. Someone gets the present of a smart phone, for instance, which has the picture of a new car programmed on to it. Maybe next year, the cars will come with GPS directions to a newly bought country estate. Just an idea.”

--Speaking of car sales, during the peak for the auto industry, 1999-2006, there were about 17 million vehicles sold each year in the U.S. At the depths of the recession that then dropped to a 10.6 million vehicle pace, but at least this year should come in around 13 million and do better in 2012, perhaps 14 million.

--College still pays off…according to ConvergEx Group’s Sarah Millar (and the Los Angeles Times), “The average take-home pay of college graduates is nearly twice that of their high school counterparts - $38,950 vs. $21,500…(but)…

“Students shelled out an average of $73,500 in tuition payments over the last four years. And when considering that a young person could have earned a cumulative $84,500 straight out of high school over four years, the college graduate is $158,000 in the hole. Add in the interest on student loans, and the student’s deficit can top $200,000.”

--Libya’s state oil operation said it is pumping “more than a million” barrels a day, not far from the 1.6 million pace back in January, before the uprising began. I have to admit this is better than I would have believed.

--Monday was Boxing Day in Britain, the biggest shopping day of the year, and prices of many items were reduced 75%. I’m no Einstein, but that can’t be great for margins. 

--There are about 4.7 million people in Ireland. Knowing that, consider this…from Craig Hughes of the Irish Independent:

“More than 100,000 heavily indebted people are being forced to use legal moneylenders, who charge exorbitant interest rates, in order to obtain lending as other financial institutions continue to turn them away.

“Internal documents obtained by the Sunday Independent from one of Ireland’s largest moneylenders show the company has more than 100,000 customers nationwide – and with 46 other licensed moneylenders in the business, the overall figure is much higher.”

So I read and reread and reread the following:

“Many legal moneylenders charge a maximum interest rate of 157.3 percent APR and many of them are making huge profits.”

Ya think? As noted in my opening, Ireland is far from out of the woods. I have some friends over there I’m now wondering about in a totally different light. I know they are in trouble. I just hope not this bad.

--A good friend of mine, who needs to go initial-less, writes investment reports for money managers, many of whom significantly underperformed the market this year. So a popular phrase my friend said he’d be using is “macro issues trumped underlying fundamentals” in explaining away a year that was the height of blowdom. OK, that last one is mine, but you are welcome to use it, kids.

--Morgan Stanley will be shedding 580 of a previously announced cut of 1,600 jobs in New York City.

--San Francisco’s minimum wage will rise to $10.24 an hour on Jan. 1, the highest in the country and the first to mandate double-digit hourly wages for its lowest-paid workers.  The federal minimum, however, is $7.25 and many of San Fran’s smallest businesses say the extra amount will force them to lay off workers, particularly in the restaurant industry.

--According to an analysis of congressional disclosure forms by the Washington Post:

“Between 1984 and 2009, the median net worth of a member of the House more than doubled, from $280,000 to $725,000 in inflation-adjusted 2009 dollars, excluding home equity.

“Over the same period, the wealth of an American family has declined slightly, with the comparable median figure sliding from $20,600 to $20,500, according to the Panel Study of Income Dynamics from the University of Michigan.”

--You’ve gotta love the New York Post. From Josh Kosman and Kaja Whitehouse:

“A horny Mark Hurd – who tried again and again to bed a buxom Hewlett-Packard contractor – forked over more than $1 million of his personal fortune to keep the sordid details under wraps, The Post has learned.

“The size of the payout, which hadn’t been previously known, comes as Hurd lost a legal battle to keep an explosive letter detailing his advances toward the contractor, Jodie Fisher, under court seal.

“ ‘So, you’ll stay the night, right?’ the randy former HP chairman and CEO begged Fisher while sitting on a love seat in her Ritz-Carlton hotel room during a 2007 business trip. ‘You’ll stay?’

“According to the letter, a shocked and horrified Fisher shot back at the married-with-kids executive, ‘Absolutely not. I barely know you and you are my boss.’”

Hurd is now co-president at Oracle and the women there are terrified…just my guess. Of course this same guy is also one of the more overrated executives on the planet.

--The U.S. commercial airline industry has not experienced a passenger death in four of the last five years; the exception being the Colgan Air disaster near Buffalo on 2/12/09 that left 50 dead (and was a case of gross pilot error and negligence).

--Online gamblers (of which I am not one because I already gamble in the stock market) are raising a toast this New Year’s to the Obama Justice Department for reversing a long-held policy and potentially opening up opportunities for states to legalize Internet poker and other forms of online gambling. There’s still a long ways to go as the states now have to form compacts with one another to allow bets between them. But the door is open.

--Gold is down 19% from its Sept. 6 intraday high of $1,923 an ounce. Silver is down 44% from its high of $49.84 on April 25.   To a large extent the slides in both are about investors selling to make up for losses elsewhere and concerns over sustainability of demand in India and China, as well as the dollar/euro machinations that influence commodities in general. That said, gold finished up in 2011 for an 11th straight year, advancing 10%, while silver lost 10%.

--“Incredibly Stupid Research Statement of the Year Award” goes to Goldman Sachs. In a report on emerging markets, specifically the BRICs – Brazil, Russia, India and China – Goldman projects that economic growth in these four “may fall to about 4 percent by 2050 as working-age populations dwindle,” as reported by Bloomberg. 2050?! Why the heck would anyone pay the least bit attention to a forecast for 2050? Oh well, whoever is responsible is at least employed and helping pump up the economy.

--In one of the dumber corporate moves of the year, Verizon Wireless attempted to charge customers a $2 “convenience fee” for those who pay their bills online. Rival AT&T charges customers who use a representative to handle a payment by phone or in stores, which makes sense (I guess), but there is no charge for paying online or through an automated pay system over the phone.

But after a 24-hour uproar, Verizon backed down, its tail between its legs. “Bad Wireless Provider. Bad Provider.” And then you take the responsible exec’s nose and rub it on a computer screen so that he learns never to do this again.

--Hollywood ticket sales are expected to finish the year down 4% from 2010. In terms of domestic attendance, the year will see about 1.28 billion, down from 2002’s peak of 1.6 billion. [Attendance is actually at its lowest level since 1995] I haven’t been to a movie since the last ‘Lord of the Rings’ flick, and I bet my next one will be when “The Hobbit” is released in December. [I buy a lot of movies, though. Think I’m gonna watch “Rise of the Planet of the Apes” on New Year’s.]

The box office in China, however, is skyrocketing, up more than 30% in 2011, as China is now the world’s third-biggest movie market behind the U.S. and Japan. [Rentrak Corp. / Los Angeles Times] The most popular flicks in China were all U.S. productions, with the highest grossing being “Transformers: Dark of the Moon.”

--Book sales were down 9% in 2011, according to Nielsen BookScan, compared to a drop of 4% in 2010, and 3% in 2009. Sales of mass market paperbacks fell 23%. Adult hardcover books were down 10%, very bad because this is the most profitable category.

But, no word on e-book sales, which offer some hope for the industry. [Crain’s New York Business…still one of the best weekly publications around.]

--To drive a taxi cab in New York City, you need a medallion, which is a metal plate attached to the hood. They can be pricey. How pricey? Try $1 million, according to the latest auction. And as noted by the New York Post’s Paul Tharp, the price of one is up 400% the last decade, medallions going for $199,000 in 2001. The S&P 500, on the other hand, is at the same level it was in October of 1999.

--Oh baby…Wendy’s is adding foie gras burgers to the menu. A fast food chain after my own heart. Only one thing…this is only for its reintroduction in Japan after leaving the country in 2009. Well, I could use some of my stash of frequent flyer miles and jet over there for a few “Japan Premium” sandwiches, selling for $16, but that may be a bit over the top, like Christopher Caldwell’s comments on the Lexus ads.

--Inflation Alert: Americans who are not members of the New York Road Runners will see their New York City Marathon fee rise from $195 to $255 in 2012. The NYRR cites rising costs, like for closing the streets and providing medical care. NYRR members will also see a $60 rise to $216. 

--Michael Hiltzik / Los Angeles Times:

“I don’t ‘hate the iPad,’ like the sizable cadre of bloggers given to proclaiming their distaste online. I’m merely indifferent to its supposed virtues, as I am to many other cultural phenomena I’m expected to find fascinating, like Ryan Seacrest and Pippa Middleton.” 

Hiltzik’s issues “fall into three categories: its poor screen resolution, its lack of a decent input mechanism and Apple’s totalitarian approach to its App Store.” I take issue with his dissing of Pippa.

--For CNBC viewers…Claire Atkinson / New York Post:

“Out with the old, in with the new. CNBC’s been saying goodbye to a lot of staff in the last few months. CNBC Europe chief Mike Buckley, who’s been on the job for the past eight years, is exiting, as is London correspondent Guy Johnson [Ed. he was good], who’s joining Bloomberg TV.

“Anchors Melissa Francis, Erin Burnett and Trish Regan all departed this year after running headlong into the glass ceiling known as Maria Bartiromo, the longtime anchorwoman.

“Some former staffers are dubbing the changes a ‘brain drain’ and speculating that CNBC’s grizzled M&A reporter, David Faber, might be ready for a new challenge.”

I like Faber. I’m switching stations if he leaves.

--My portfolio: USA TODAY had a number of articles this week on the issue of China companies listing in the United States and the lack of success, coupled with fraud, in some cases. Some of us believe that when the story goes so mainstream (though one of the articles was very well done…Kevin McCoy and Kathy Chu the reporters, if you want to look it up), we are certainly at or near the bottom for those legitimate operations that have been thrown out with the bath water…or in the case of China, toxic milk. It’s going to be a very interesting year on this front, especially for moi. Will the good companies finally rise anew given the uncertainty concerning the overall Chinese economy? And when will the articles finally come out recognizing the legitimate Chinese stock stories? I’m not aware of a single one on this front, at least from the mainstream press.

Foreign Affairs

North Korea: With the official period of mourning for Kim Jong Il finally over, the National Defense Commission issued a statement.

“The veritable sea of tears shed by the army and people of the DPRK will turn into that of retaliatory fire to burn all the group of traitors to the last one. The DPRK will have no dealings with the Lee Myung Bak group of traitors forever.”

Very nice, commies. A classy statement, in speaking of South Korean President Lee and his government.

As for the pudgy one, Kim Jong Un, he appeared in the middle of all the key shots the past few days, but now the real guessing game begins. How quickly can he win over the allegiance of the North’s key military leaders, the only power group that matters? The last sentence of the official statement said Pyongyang “closely rallied behind the dear respected Kim Jong Un.” [North Korea is also slated to release its New Year statement Jan. 1, while President Lee addresses his people on Jan. 2]

Since the time of Kim Jong Il’s death, the state has made sure the world knows that the main ideology is “songun,” or “military first.” We all just wait to see if the 20-something leader feels compelled to prove his manhood at the expense of the South, or by firing a rocket or two over Japan. Plus, despite the signs of stability, there are undoubtedly tensions behind the scenes among the key players in Pyongyang.

Kim, by the way, picked up the names of “supreme commander,” “supreme leader of the revolutionary armed forces” and “great successor” this week. “Supreme leader” is the one that will stick; as the little sadist (according to some intelligence reports) is placed in charge of the ruling party, military and people.

Iran: The official Iranian news agency IRNA quoted Iran’s First Vice President Mohammed Reza Rahimi as saying, “If they [the West] impose sanctions on Iran’s oil exports, then even one drop of oil cannot flow from the Strait of Hormuz,” through which about one-fifth of the world’s oil transits (a third of all seaborne oil). “Our enemies will give up on their plots against Iran only if we give them a firm and strong lesson,” he added.

Were the Strait to be shut for more than a few days, the world would almost immediately be thrown into Depression. But it’s a smokescreen, set up by Iran to divert attention from Tehran’s non-compliance with U.N. resolutions to cease and desist with its uranium enrichment efforts and to open up to U.N. nuclear inspectors and investigators.

For their part, EU officials are to decide, possibly in January, whether to take the 450,000 barrels per day of Iranian oil, about 18% of Iran’s exports, much of which go to China and India.

But Iran itself would suffer immensely economically if it attempted to seal off the Strait, and such a move could spark revolution in the streets (yippee!).

As for the U.S., the Pentagon made it clear that Iran shouldn’t try closing it, with a spokesperson saying that for its part, “The U.S. Navy is a flexible, multi-capable force committed to regional security and stability, always ready to counter malevolent actions to ensure freedom of navigation.”

Of course the big risk at this moment is that Iran miscalculates, such as if its naval vessels harassed U.S. or NATO warships and accidentally (or intentionally) fired on them.

Editorial / Wall Street Journal

“The Hormuz flap should also underscore the strategic damage that would result if Iran does get the bomb. Fortified by a nuclear threat, the mullahs would be more willing to blackmail their neighbors and press for regional dominance. Would the U.S. dare resist Iranian aggression if it meant putting American forces at risk of a nuclear reprisal? Better to act now to stop Iran before we have to answer that terrible question.”

Syria: The Arab League sent its observer mission to the country, drawing out tens of thousands of protesters who felt emboldened by the monitors’ presence, but then the head of the observers in the violence-torn city of Homs described the situation there as “nothing frightening”! You can’t make this stuff up. It turns out international human rights groups had questioned the selection of the guy, a former Sudanese military intelligence chief, and for good reason. What a disgrace. I mean it was Sudan, after all, that defied an international war crimes tribunal so how was this character (Gen. Mohammed Ahmed al-Dabi) expected to take a tough stance against Bashar al-Assad?

So far only 60 of 500 expected observers have traveled to the country, while the killing in Homs, and elsewhere around the country, including in Damascus, continued. [Another two dozen were apparently killed on Friday with hundreds of thousands taking to the streets.]

Egypt: In a totally outrageous and despicable act, Egyptian police raided the offices of more than a dozen human rights organizations in Cairo on Thursday, including two leading American groups; the National Democratic Institute and the International Republican Institute, both funded by the Democratic and Republican parties. The State Department responded that the $1.3 billion in annual military aid the U.S. gives to Egypt could be in jeopardy. 

The ruling military council has blamed the rights groups for the political turmoil that has rocked the country since President Mubarak was overthrown. While no arrests were made, police took away computers and boxes of files.

Editorial / Washington Post

“Thursday’s raid consequently represents a frontal provocation by the ruling military council to the Obama administration, which has waffled between supporting a transition to democratic civilian rule in Egypt and appeasing the generals. The military is attempting to rally waning domestic support by blaming domestic disorder on sinister ‘foreign hands’; it is also seeking to destroy liberal, pro-democracy groups that have resisted its attempts to perpetuate its power indefinitely.

“The campaign against foreign funding is a startling example of the military’s illogic and breathtaking arrogance. The premise is that civilian groups that receive a few million dollars in U.S. or European funding are traitorous – while the military is justified in accepting $1.3 billion in annual U.S. subsidies. Also unquestioned is the substantial funding that reportedly flows from Saudi Arabia, Qatar and other Arab states to the Muslim Brotherhood and other Islamic groups, which mounted by far the best-organized campaigns in this month’s elections.

“The Obama administration may have inadvertently encouraged the military council to believe it could get away with this repression by stoutly resisting initiatives in Congress to link U.S. military aid to a democratic transition….

“(It) is past time for the administration – and Congress – to stop treating aid to the Egyptian military as inviolate and related only to peace with Israel. The military must get the message that continued funding will depend on whether a full transition to civilian democratic rule takes place in the coming year. That means, among other things, an immediate end to the harassment of pro-democracy and human rights groups.”

With all of the above, is it any wonder Egypt’s economy is dead in the water? Tourism fell 10.4% and manufacturing shrank 3.3% in the quarter ended Sept. 30. Regarding the former, laughably, Egypt expects tourism revenues to rebound by more than a third in 2012.

Iraq: Military Times published its final casualty statistics for Operation Iraqi Freedom / New Dawn, as the last U.S. combat troops exited.

March 19, 2003-Dec. 21, 2011

Killed: 4,474
Wounded in action: 32,336
Defense Department civilian deaths: 13

[Afghanistan’s toll is 1,843 killed as of Dec. 21 (at least three more died since then), with 15,138 wounded. Britain lost its 393rd serviceman over the holidays. That’s no small number for our great friends.]

Military Times [which is Army Times, Navy Times, Air Force Times, and Marine Corps Times] conducted an online survey of those who had deployed to Iraq in the last nine years for a final assessment of the war:

“We stayed for the right amount of time” 11%
“We’re leaving too soon” 21%
“We stayed too long” 26%
“We should not have gone to war in Iraq” 42%

As for the crisis facing Prime Minister Nouri al-Maliki and the potential dissolution of the government, radical Shiite Moqtada al-Sadr called for new polls, as the Sunni-dominated provinces seek greater autonomy from the central government.

Meanwhile, Turkey botched an air strike aimed at Kurdish militants near the country’s border with Iraq, killing 35 civilians. At least the Ankara government immediately admitted it was a mistake, saying the victims were smugglers, not terrorists.

Pakistan: President Zardari said Tuesday that his countrymen need to guard against what he called anti-democratic conspiracies, a reference to the tensions between the government and the military. Tuesday was the fourth anniversary of the assassination of Zardari’s wife, Benazir Bhutto. Pakistan is still being roiled by a secret memo Zardari allegedly backed that asked for Washington’s help in stopping a military coup in the wake of the raid that took out Osama bin Laden.

National elections are not due until 2013 but one politician is starting to see his support soar, a former cricket superstar, Imran Khan. Khan has been a politician for some time but never captured the imagination of the masses, though he’s now riding a wave of disillusionment. The thing is no one knows what the heck he stands for, though he recently called for a halt to U.S. drone attacks on militants inside Pakistani territory.

Israel: The Palestinian Authority is riven with dissension. Some members want the Palestinians to cancel agreements signed between the PLO and Israel, while others are miffed at Palestinian President Mahmoud Abbas for agreeing to incorporate Hamas into the PLO. Worrisomely, Egypt’s Muslim Brotherhood leader Mohammed Badei (we will undoubtedly get to know this name better) warmly embraced Hamas Prime Minister Haniyeh in Cairo. Haniyeh said in his formal statement there:

“The Islamic resistance movement of Hamas, by definition, is a jihadist movement by the Muslim Brotherhood, Palestinian on the surface, Islamic at its core and its goal is liberation.” [Jerusalem Post]

Israel, though, has its hands full these days with its own ultra-Orthodox extremists, who have been clashing with police in the town of Beit Shemesh, near Jerusalem. Secular Jews and ultra-Orthodox men are coming to blows over the latter’s strict gender segregation and ‘modest’ dress for women. I really have to bite my tongue on this one. 

Libya: Despite the solid news on the oil front mentioned above, if you think the transition to democratic rule in Libya is proceeding swimmingly, just understand that Saif al-Islam, Colonel Gaddafi’s son, is still being held by the local militia that captured him, they being unwilling to turn him over to the central government.

Russia: 50-60,000 protested in Moscow on Christmas Eve (our Christmas Eve, Russians celebrate Orthodox Christmas Jan. 7), a continuation of the demonstrations calling for free elections and an end to Prime Minister Vladimir Putin’s 12-year rule. Many shouted “We are the Power!” The protest was said to be far better organized than the one held two weeks earlier following the fraudulent Duma vote of Dec. 4. Former Soviet leader Mikhail Gorbachev, now 80, said on a Moscow radio station, “I’m happy that I have lived to see the people waking up. This raises big hopes.” Gorby is calling on Putin to give up power as he did on Dec. 25, 1991, peacefully.

But there remains no central leadership for the protesters, nor is there a candidate who poses a serious challenge to Putin in the March presidential election.

In response to the Saturday protest, Putin at first dismissed calls for a review of the Dec. 4 vote, telling supporters, “The elections are over. The parliament has started its work and a speaker has been elected. There can be no talk of any review.”

But the next day he said “dialogue must take place. In what form? I will think about it.” However, he quickly added, “(The opposition) have no common platform, there is no one to talk to.”

If you think that the protesters will eventually carry the day, think again. From a piece by Alexander Golts in the Moscow Times:

“Russian Railways president Vladmir Yakunin sent a strong message of support last week to Russia’s leaders through the company’s newspaper Gudok: ‘On behalf of the entire management of Russian Railways, we support the course of democratic development in Russia, and we consider it impossible not to respond to the unprecedentedly shameless campaign to discredit the Russian state…The filth that has been poured on the state and its leaders [from various opposition groups] has no connection with democracy. Moreover, it is a direct threat to the sovereignty of our country.’”

The not too veiled message being, if you want our goons to help in controlling the demonstrators, we are at your service. Goons from all over will be all too happy to do Putin’s bidding at the appropriate time.

China/Taiwan: It’s suddenly just two weeks away…Taiwan’s crucial presidential election and a sleeper issue for 2012. President Ma Yaing-jeou is vying for a second four-year term and his first term saw significant gains in the island’s relations with the mainland, opening more doors between the two economies.

But the last poll has Ma leading Tsai Ing-wen, 41-35 (in a multi-candidate race), so it’s still tight. Madame Tsai’s pro-independence Democratic Progressive Party is not a favorite of both Washington and Beijing, and if she pulled off an upset, I wouldn’t be in the least bit surprised to see some saber-rattling on the part of China, let alone a pullback on the economic gains between the two.

In other matters, China declared its intention to land an astronaut on the moon, making this official policy, though probably not until after 2020. The last time an astronaut set foot on the moon was 1972, Apollo 17.

On the issue of last July’s Wenzhou high-speed train disaster that killed 40 and cost over $30 million, the government issued a blistering report, much to the surprise of many, citing “primary leadership responsibility for the accident” rests with top Railway Ministry officials. [54 have been disciplined, with some facing criminal charges.]

The senior railway minister, since removed on corruption charges, was blamed for a focus on “speed of the railway project construction and neglect of safety management.” What’s encouraging is the openness of the report.

Lastly, the next president of China, current Vice President Xi Jinping, is coming to the United States late February. This is good. I’m anxious to see the guy myself, for a rather selfish reason. He was formerly governor of Fujian, where my investment is, and I’m convinced management in one shape or form knows him. [Let’s just say I’ve seen clues in my visits there.] That can’t help but be a plus, albeit maybe just a minor one for the time being. The one word we want to see attached to Xi when he gets here is “pragmatist.” I’d also like to see a sense of humor.

India: Prime Minister Manmohan Singh is 79 years of age and is clearly not the one to be leading his nation at a critical time in its history. He is simply being overwhelmed as his championing of free-market, anti-corruption policies suffer one setback after another. Corruption allegations in his own cabinet triggered massive protests earlier in the year, and then on Friday he failed to gain passage of his anti-graft bill in parliament (lower house approved it, upper rejected it). Additionally, the government has not been able to tame inflation, while a reversal on foreign investment has sapped confidence in his leadership.

Bottom line, India becomes a far bigger issue this coming year, with national elections still another two years away.

Yemen: The White House is in a bind over whether to allow President Ali Abdullah Saleh to enter the U.S. for medical treatment. It appears the administration will let Saleh in, but only for “legitimate” care. Saleh has been a longtime ally, though now he’s responsible for the deaths of hundreds of protesters and the situation is being compared to 1979, when an ailing shah of Iran was allowed to fly to the United States for treatment, which led to his overthrow and the storming of the U.S. Embassy.

Bosnia: I’ve said to keep an eye on the Balkans but for once there was a bit of good news. Muslim, Croat and Serb leaders agreed on the formation of a central government after 14 months of crisis. Since elections in October 2010, Bosnia hasn’t had a government. The agreement thus allows the country to press ahead with membership talks with the European Union and NATO.

100,000 died here during the Balkan Wars of the mid-1990s, and it’s still a deeply divided place; two semi-autonomous entities. Hopefully the new set-up works. [I’d be shocked if it did.]

Nigeria: As Pope Benedict XVI was issuing his annual plea for peace as part of his traditional Christmas address, Muslim extremists here were bombing a Catholic church, striking after worshippers celebrated Mass. 35 were killed. A year ago, the same Islamists killed 32 during a Christmas Eve bombing. The Vatican later called the attack a sign of “cruelty and absurd, blind hatred” that shows no respect for human life.

Hundreds of Christians later fled two Nigerian cities in the wake of the violence. Sound familiar? [Nigeria is 50% Muslim, 48% Christian.]

More broadly, it’s time for the 3/4s of Americans who are Christian to speak out more against the Islamist terror, for which I feel like I’ve done my own small part.

Benny Avni / New York Post

“In this year of vast Middle East transformation, the region where Jesus was born is rapidly losing Christians.

“Yes, tourists will continue to flood Bethlehem for the foreseeable future to experience Christmas where the original nativity took place. But if current trends persist, in a decade or less no more Christians will be living in that famous little town – where a few decades ago they made up some 80 percent of the population….

“Now, as Arab Springers seek a better future for the region’s young Muslim and secular multitudes, Christians tremble with fear….

“(While) getting rid of tyrants can’t be a bad thing on balance, the region’s minorities remain skeptical, to say the least. Sure, Christians suffered from discrimination under the old rulers, but they also enjoyed benefits, especially in countries where minority sects held power….

“The grim picture [Ed. such as in Iraq] is repeated across the Mideast whenever Islamists gain strength as the old Arab order ends.

“In Egypt, at the heart of the Arab rebellion, Salafis and other Islamists attacked Coptic churches all year, leaving dozens dead. The Copts are 10 percent of the population, Egyptians since before the birth of Islam. Now those who can pack up and leave….

“It’s a bad omen: Tolerance of Christianity is a test. Only when we see signs that religions can live side by side in the Arab world can we start hoping that women, gays or even Jews will find their footing in the awakening region.

“Put it another way: As long as Christians (and other minorities) feel they need to run for dear life, spring will remain a distant dream for all Arabs.”

New York Archbishop Timothy Dolan / op-ed New York Post

“According to the International Conference on the Freedom of Religion…Christians have become the most persecuted followers of any religion in the world today….

“According to the Frankfurt-based International Society for Human Rights, which describes itself as a ‘secular’ group, 80% of the acts of religious intolerance in the world today are directed against the followers of the One whose birthday we celebrate Sunday.

“As respected international journalist John Allen notes, ‘The threat doesn’t just come from growing Islamic extremism, but a bewildering variety of forces: the rise of Hindu radicalism in India; the policies of officially atheistic regimes in China and North Korea; old tribal and ethnic rivalries in parts of Africa…(And, he adds hauntingly, ‘even secular prejudice against any religious faith in parts of Europe and North America.’)

“Governments stand idly by. Just ask one of the more than 300 Christians injured, or the families and friends of the 27 massacred in Cairo on Oct. 9, in what John Allen calls the Christian Kristallnacht in Egypt, as soldiers not only failed to protect the Christians, but actually participated in the binge of violence.”

[Pope Benedict, health willing, is due in Cuba in March, which could be rather dramatic and potentially regime changing.]

*Last time I said I’d get into Britain and David Cameron. I’m running out of time today. Next week.

Random Musings

--With just a few days to go before the Iowa caucuses, a CNN/Time/ORC poll of likely Iowa caucus-goers was a mini-bombshell:

Mitt Romney 25 percent
Ron Paul 22
Rick Santorum 16
Newt Gingrich 14
Rick Perry 11
Michele Bachmann 9

[A follow on CNN/Time poll had Santorum at 15%, Gingrich at 13%.]

A month ago in the same survey, Gingrich was at 33 vs. Romney’s 20. Santorum only had 5. So terrible news for the former speaker (whose campaign also screwed up royally in not getting on the Virginia primary ballot, especially given it’s his home state), while Santorum basked in the late glow of the media spotlight. Heck, the guy deserves it. No one has worked the state harder and by my admittedly fickle thinking, should he finish where the above poll has him, and can hang in there another 6-8 weeks, if nothing else he has put himself in the veep sweepstakes. Seriously, he’s not a bad match with Romney. Santorum has the Washington experience Romney lacks, could be a decent go-between with Congress, has foreign policy experience, and if something happened to a President Romney, Santorum is just as qualified to be the nation’s leader as any of the others we’ve had since Bush 41. [I know…that’s not saying much.]

NBC/Wall Street Journal…Iowa

Romney 23
Paul 21
Santorum 15
Gingrich 13

Michele Bachmann’s campaign was roiled by the defection of her two main staffers, including her Iowa state chair, Kent Sorenson, who defected to the Paul camp. Bachmann said Sorenson was bought off and that he told her so in a phone conversation. Sorenson said the conversation never happened and that no money was exchanged. The timing was awful and at this point I’ll be shocked if she gets 7% and moves on to New Hampshire.

--CNN/Time/ORC poll…New Hampshire:

Romney 44
Paul 17
Gingrich 16
Huntsman 9

New Hampshire Survey Center poll:

Romney 39
Gingrich 17
Paul 17
Huntsman 11

--Nationally, a Rasmussen Reports survey had Romney topping Obama 45 to 39 percent. But just a week earlier, Romney trailed Obama 44-41, so not sure about this one. [Actually, I’m not keen on the Rasmussen surveys, period.]

--I hope I’ve made it clear I don’t have a personal favorite yet in the presidential race. I was interested in Herman Cain for a week or two, thought Perry was intriguing for an equal amount of time just as he showed up in Iowa when I was there in August, and am glad the likes of Santorum and Ron Paul are in the race to make it interesting. Speaking of Paul, Stephen F. Hayes of The Weekly Standard:

“(When likely Iowa caucusgoers) were asked to pick the most important issue from a list of 12, 35 percent said ‘jobs and the economy,’ 24 percent said ‘the size and role of the federal government,’ and 21.5 percent said ‘national debt and the deficit.’ Asked the most important quality they were seeking in a candidate, more voters answered ‘takes a strong stand’ (32 percent) than anything else.

“Is there a candidate in the race who has taken stronger stands than Paul? Who has focused more directly and consistently on those top three issues than Paul? How has Paul overcome his often-wacky, sometimes indefensible foreign policy views? In a state that historically has some strong non-interventionist tendencies, it doesn’t take much….

“(If) Paul were to win the Iowa caucuses, he would likely do so with something like a quarter of the vote. He won’t be the nominee. But a quarter of Iowa caucus voters will have rewarded a traditional grassroots campaign and a message of aggressive free-market solutions to our problems, and will at the same time have chosen to send a message about the weakness of the rest of the field. If they do this, why couldn’t one say the Republicans of Iowa are doing their job?”

--As for Ron Paul and a third-party bid, Karl Rove notes the following in his “Predictions for 2012” column for the Wall Street Journal.

“After failing to win the GOP presidential nomination, Ron Paul will not run as a third-party candidate because that would put his son, Rand Paul, in an untenable position: Does the Republican senator from Kentucky support his father and effectively re-elect Mr. Obama, or back his party and defeat him?”

--But as another piece in the Journal points out this week, if Paul doesn’t run as a Libertarian, former New Mexico Gov. Gary Johnson is expected to seek that party’s nomination, while the nonpartisan group Americans Elect is now on 13 state ballots, including Florida and Ohio, two key swing states, and supposedly will have completed paperwork to get on 30 ballots by the end of this week. Which begs the obvious question; does Donald Trump go this route? It’s largely an online affair. He wouldn’t have to shake any hands, an act he detests.

--I always get a kick out of the polls that say a majority of Americans view President Obama as “likeable,” regardless of whether they approve of his performance. What cracks me up is that he doesn’t like people. We had another example of this in an article by Helene Cooper of the New York Times this week.

“Air Force One had just landed in Manchester, N.H., on a brisk Tuesday morning last month when President Obama made an admission to Valerie B. Jarrett, his close friend and senior adviser.

“ ‘I just called Reggie,’ Mr. Obama said. It was his first domestic trip without Reggie Love, the former Duke University basketball player who had been his constant companion and presidential ‘body man’ until he left in November to study for his M.B.A. full time. ‘I miss him,’ the president confessed.

“More noteworthy than Mr. Obama’s spending the short flight calling his longtime aide is what he did not do: schmooze with Washington politicians. No one from the New Hampshire Congressional delegation traveled with Mr. Obama on the plane, a perk that presidents often offer to lawmakers to foster good will.

“Mr. Obama, in general, does not go out of his way to play the glad-handing, ego-stroking presidential role…he keeps Congress and official Washington at arm’s length, spending his down time with a small – and shrinking – inner circle of aides and old friends….

“His relationship with Washington insiders is described by members of both parties as ‘remote,’ ‘distant’ and ‘perfunctory.’….

“ ‘It’s about building relationships,’ said Gerald Rafshoon, a television producer who was President Jimmy Carter’s communications director. ‘Some people are saying he’s a recluse. You don’t want that reputation. He needs to show that he likes people.’”

Don’t agree? Reminder…I noted some thoughts of Michael Goodwin / New York Post, in my 10/15/2011 WIR on this very topic:

“The reports are not good, disturbing even. I have heard basically the same story four times in the last 10 days, and the people doing the talking are in New York and Washington and are spread across the political spectrum.

“The gist is this: President Obama has become a lone wolf, a stranger to his own government. He talks mostly, and sometimes only, to friend and adviser Valerie Jarrett and to David Axelrod, his political strategist.

“Everybody else, including members of his Cabinet, have little face time with him except for brief meetings that serve as photo ops. Secretary of State Hillary Rodham Clinton and Treasury Secretary Tim Geithner both have complained, according to people who have talked to them, that they are shut out of important decisions.

“The president’s workdays are said to end early, often at 4 p.m. He usually has dinner in the family residence with his wife and daughters, then retreats to a private office. One person said he takes a stack of briefing books. Others aren’t sure what he does.”

--According to a survey by the Pew Hispanic Center, Obama leads Romney by 68 percent to 23 percent, even as Hispanic adults disapprove with the way the administration is handling deportations of illegal immigrants, by 59 percent to 27 percent. His job approval rating among Hispanic voters is at 54 percent, nine points lower than last year. [The latest Washington Post/ABC News poll had Obama’s overall job approval at 49 percent.] The latest Gallup Poll has Obama’s approval rating among Hispanics at 60 percent. In 2008, Obama won the Hispanic vote over John McCain by a 67-31 margin. [Peter Wallstein / Washington Post]

--Democratic Sen. Ben Nelson, 70, announced his retirement in heavily Republican Nebraska, giving the GOP another opening. Nelson joins fellow conservative Democratic senators Jim Webb (Va.) and Kent Conrad (N.D.) in bowing out, as the Republicans have a great shot at picking up the four seats they need to get back in the majority. [Nelson would have been vulnerable due to his vote for Obamacare.]

--The other week I was talking about how the United States needs to drastically reduce its troop strength in Europe, some 52,000 strong (of which 40,000 are in the Army). In 2012, the U.S. is indeed reducing its troop level to the lowest since before the Cold War, cutting 4,000 or so.

On another topic I’ve discussed before, reducing the ranks of generals and admirals, Craig Whitlock of the Washington Post reports:

“Pentagon officials said they have eliminated 27 jobs for generals and admirals since March, the first time the Defense Department has imposed such a reduction since the aftermath of the Cold War, when the collapse of the Soviet Union prompted the military to downsize.

“The cuts are part of a broader plan to shrink the upper ranks by 10 percent over five years, restoring them to their size when the country was last at peace, before the attacks of Sept. 11, 2001.”

Good…we have former Sec. of Defense Robert Gates to thank for setting this in motion. But far more needs to be done. As Vice Adm. William E. Gortney, director of the Joint Staff at the Pentagon and appointed by Gates to review the number of top officers, said, “If 10 years of combat have taught us anything, it’s that flat is faster.” It’s not just about saving a few dollars, it’s about being more nimble. Sen. Lindsey Graham (R-S.C.) is among those supporting the Pentagon’s efforts in this area. But others have said the Pentagon isn’t moving fast enough

Craig Whitlock notes: “Benjamin Freeman, a national security analyst…said the number of generals and admirals on active duty stood at 970 as of Sept. 30. That represented an increase of six active-duty positions from March, when Gates ordered the cuts.”

I get so sick of this crap, and while Freeman expressed deep disappointment, I find it depressing more Americans don’t know or give a damn about their bloated and deeply corrupt Pentagon.

[Again, check out my “Hot Spots” link on the topic.]

--I have to admit I cracked a smile upon hearing that the hacker-network, Anonymous, stole thousands of credit card numbers from the U.S. intelligence outfit, Stratfor, because I don’t respect Stratfor’s work. Just an opinion, but it’s highly overrated, as is, quite frankly, the CIA, as they have proved time and time again. Remember when the CIA said Fidel Castro was near death and your editor wrote “Castro will not die” on 12/30/06, referring to 2007?

Of course at the same time, it would be highly disturbing if Anonymous released stolen emails that compromised various sources Stratfor has, even if many of these same folks are worthless.

--New York City Mayor Michael Bloomberg was able to brag about the past decade being New York’s safest ever, in terms of fire deaths and murders, both near record lows, though I wish he’d wait until New Year’s Day to tout the statistics (I’m superstitious, you see). As of Dec. 28, 64 people had died in fires this year, second only to last year’s record-low 62, so the mayor can rightfully say response time hasn’t been hurt despite some high-profile budget cuts. In 1969, by comparison, 310 people died in fires.

And on the murder front, there were 500 through Dec. 27, compared to 523 last year. Back in the crack epidemic years, before Rudy Giuliani took over, there were over 2,000.

--Howard Bryant / ESPN The Magazine, on the horrible year in college sports:

“The NCAA – under assault from its college football programs that are bigger than it, fearful that its basketball programs will realize the same, facing its long-standing hypocrisy of generating billions at the expense of its athletes – knows its empire is collapsing. Now the child sexual abuse scandals at Penn State and Syracuse have destroyed another previously impervious front: the myth of coach as great moral influence….

“Like the rest of the NCAA foundations that have proven to be fraudulent, there’s no believing in the coach-as-guide ideal anymore. The lie of it has been exposed, the rot setting in, as the game’s biggest, richest names run from perhaps the most damaging crisis in the history of college athletics, counting their money, staying quiet, nervously checking the headlines in the hopes that their program isn’t next.”

--And now my selection for “Week in Review Person of the Year.” For my purposes it must go to a political figure; the consequences of governance, or lack thereof, being central to what we explore in this column. As you can see below, if there is no obvious choice, I’m not naming one. I also stretched the definition a little in naming Gen. Petraeus (and Bernanke), but his position was as political as they come. I also readily admit, in hindsight, that these selections may have peaked the year chosen.

2001 – George W. Bush
2002 – no one…citing “unfinished business in Iraq”
2003 – George W. Bush, Tony Blair, John Howard
2004 – Hamid Karzai
2005 – Ariel Sharon
2006 – no one
2007 – Gen. David Petraeus and Defense Sec. Robert Gates
2008 – Gen. Petraeus and Sec. Gates
2009 – Ben Bernanke
2010 – David Cameron
2011 – no one…let me explain…

I stare at a big world map on the wall across from my desk all day and spent some good time scouring it for ideas this year. All of the above were deemed to have made positive contributions. For the life of me, I can’t find one national figure who fits the bill for 2011.   If I wanted, I could be cute and name Andrew Cuomo and Chris Christie as two governors who got things done in 2011, thus proving leadership matters, but their spheres of influence are too small.

So, sorry…I know this is wimpy…but I’ve been decrying the lack of leadership in the world for years. 2011 proves it.

As for “Dirtball of the Year,” this is given to the person(s) who has most negatively impacted the lives of millions.

2000 – Robert Mugabe
2001 – Osama bin Laden
2002 – Mugabe
2003 – Saddam Hussein and bin Laden
2004 – Abu Musab al-Zarqawi
2005 – Zarqawi
2006 – Mahmoud Ahmadinejad
2007 – Mugabe
2008 – Mugabe
2009 – Ahmadinejad
2010 – Kim Jong Il
2011 – Muammar Gaddafi and Bashar al-Assad…thankfully, the former is now dead. A bullet between the eyes of the latter would be quite appropriate.

---

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

God bless America.
---

Gold closed at $1566…up $145 on the year despite the recent decline
Oil, $98.83

Returns for the week 12/26-12/30

Dow Jones -0.6% [12217]
S&P 500 -0.6% [1257]
S&P MidCap -0.6%
Russell 2000 -0.9%
Nasdaq -0.5% [2605]

Returns for 2011

Dow Jones +5.5%
S&P 500 -0.00%
S&P MidCap -3.1%
Russell 2000 -5.4%
Nasdaq -1.8%

Bulls 50.5
Bears 29.5 [Source: Chartcraft / Investors Intelligence]

Don’t forget the StocksandNews iPad app…recommended by both AA and AAA.

I will be posting a slew of yearend #s on my “Wall Street History” link on or about Jan. 2.

Happy New Year! Next week from Manchester, New Hampshire.

Brian Trumbore