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06/23/2012

For the week 6/18-6/22

[Posted 7:30 a.m. ET from Halsey, Oregon]

The European Debt Crisis, continued…

Let’s start off with the topic that had everyone on pins and needles last weekend, the latest attempt by the Greeks to have an election that resulted in a stable government and one that wanted to remain in the eurozone.

Last May, pro-bailout parties New Democracy and Pasok garnered 19 and 13 percent of the vote, respectively, and couldn’t form a working coalition as anti-bailout, leftist Syriza picked up 17 percent in finishing second.

Last week, New Democracy emerged triumphant with 30 percent to Syriza’s 27 and Pasok’s 12. Because of the crazy rule that the party that finishes first gets a 50-seat bonus, New Democracy and Pasok combined for 162 seats (129 and 33) in the 300-seat parliament, while Syriza has a strong 71 seats in opposition.

It was funny how in the hours after the vote the heads of the European Council and European Commission issued a statement that said in part, “The Greek people have spoken. We salute the courage and resilience of the Greek citizens, fully aware of the sacrifices which are demanded from them to redress the Greek economy and build new, sustainable growth for the country.”

To which I scratched my head and thought, you know, only 42% of the Greek people actually voted for the bailout and austerity.

New Democracy’s Antonis Samaras thus becomes the country’s fourth prime minister in eight months. But understand New Democracy and Socialist Pasok have not only alternated holding power for decades, they are normally bitter enemies and there is zero guarantee that this latest attempt at a coalition will even work. Coupled with a smaller party that joined these two, Pasok and the other player have refused to place any of their members in Samaras’ cabinet.

Samaras ran this time with the understanding that should his party win, while he wants to remain in the eurozone he would seek to renegotiate the terms of Greece’s second bailout, 130 billion euro established earlier this year on top of the initial 110 billion euro it received in 2010.

But will the Germans, who have the final say on what transpires with the Greek bailout, allow the bailout terms to be tweaked so Greece can add more growth elements, which would then require Greece receive more funding because they would be extending their bailout targets two years? German politicians say no way will they kick in any more funds (with any further funding beyond the initial 240 billion euro requiring the approval of the German parliament). Most German politicians argue that it is unfair to grant Greece new concessions when Ireland and Portugal are implementing their bailout promises.

The thing is, revenues in Greece are collapsing at a much faster rate than anticipated just a few months ago and the country is on the verge of running out of money. So despite the vote last week, things remain incredibly dicey and fluid as the EU prepares for another big summit, June 28-29. German chancellor Angela Merkel has already said no one should expect any grand bargains even though the need for structural reforms and the outline of a fiscal union, leading to a political union, is greater than ever, let alone what is needed most in the short term, a deposit insurance scheme.

Stephen King / Financial Times

“In the midst of the euphoria (over the Greek vote) that will doubtless dominate financial markets in the days ahead, a few choice facts will be conveniently pushed to one side. New Democracy was, arguably, the party that got Greece into its current mess in the first place, having been in office between 2004 and 2009. Pasok was the party in charge of putting things right between 2009 and 2011. During that period, the Greek economy collapsed, too many austerity promises were broken and the Germans and French eventually ran out of patience, warning Greece that, if it didn’t behave, its days in the euro were numbered. And Greece has no real history of cozy coalition politics: it may just be possible to form a government…but how long it will last is another matter altogether.”

And as for the extremist elements in Greece, Golden Dawn, the neo-Nazis, picked up 7% of the vote and 18 seats in parliament.

Aristides Hatzis / Financial Times

“Ten days before Greece’s elections, a member of Golden Dawn repeatedly hit a female candidate of the communist party while appearing live on a television show and threw water over a female candidate of the radical left Syriza. The communist had just called him a ‘bloody fascist’ and he addressed her as a ‘commie.’ Greek elites (journalists, intellectuals, politicians) condemned his violence almost unequivocally. Yet the ugliest part of this incident was the readiness of many lay people to defend him, even cheer him, while the neo-Nazis rose in the polls.

“Unfortunately this episode was not isolated. Despite the narrow victory of a centrist party in Sunday’s vote, almost every day extremist violence breaks out in Athens and beyond. Neo-Nazis against immigrants, anarchists and leftists. Anarchists, ultra-leftists and other fringe groups of the nationalist-populist camp against riot police, mainstream politicians, journalists, liberal intellectuals, even artists. Add to this a surge in crime and rising tolerance of violence and you have a clearer picture of today’s Athens. Does it remind you of anything?

“That’s right. Greece’s situation recalls the Weimar Republic. Violence (and its banalization), hate, rage, polarization, fear, despair and resignation. As for the police, it has already taken sides: neo-Nazis won by a landslide in polling stations where officers were assigned to vote.”

Turning to Spain, the country is simply too big to fail. While the EU et al has already approved a 100 billion euro rescue for Spain’s troubled banks, an independent audit showed the banks need 62 billion ($78 billion). For starters.

The audit was based on a worst case scenario whereby the Spanish economy fell 4% in 2012 and 2% in 2013, with home prices declining 19.9% in 2012 and another 4.5% in 2013. It’s on this last item, housing, that I’m guessing the auditors are way too sanguine.

But by week’s end, Spain’s debt picture had improved somewhat, but only compared to the miserable numbers earlier in the week.

No doubt, Spain was able to raise the funds it needed, but at interest rates far higher than previous auctions, like a 5.1% rate for 12- and 18-month paper and 6.0% for the 5-year. Such figures are simply unsustainable. The 10-year yield finished the week at 6.38%, but this was off a record 7.30% just a few days earlier. The decline was based on the optimistic view that Spain will get its 100 billion euro for the banks and everything will be hunky-dory.

But this is a total crock. For starters, the actual mechanism of funding the Spanish banks is still in question, as in what fund to use and how it is to be routed, plus the European Central Bank is talking about accepting far lower quality collateral than it has in the past, which the Germans are balking at big time. It’s partly their money after all that is being lent out. What kind of collateral will be accepted? The ECB says something like, well, we’ll take BBB paper instead of a minimum A or AA (just using this as an example…it’s very close), but as we’ve all learned AAA was once thought to be sacrosanct when it comes to mortgages and it turned out to be garbage in more than one instance. What is BBB in Spain?

Supposedly this will all get settled next week; just know that Angela Merkel and her cohorts won’t put up with any shenanigans.

In Italy you have a good example of the problem of the relationship between banks and governments these days on the continent.

Italian banks’ holdings of government bonds are up 59% in 12 months, but across the eurozone, interbank relations are generally awful. There is zero trust, similar to the height of the financial crisis in 2008. French loans to Spanish banks, for example, were down 34% in the fourth quarter compared with the third. [New York Times]

This cries out for the need for unified banking regulation to help break the negative feedback loop but as I’ve written ad nauseum these things take time…time Europe doesn’t have.

At least Chancellor Merkel did find the votes in parliament to approve the new fiscal compact and European Stability Mechanism (ESM), supposedly, with the actual voting taking place next week, as in the case of the ESM, Germany will be contributing 27% to the 500 billion euro permanent fund, 21.7 billion euro in cash plus guarantees. Now you get a better picture of why these issues are so important to the Germans.

Meanwhile, in France, President Francois Hollande achieved the parliamentary majority he sought in the elections that concluded last weekend, with the Socialists gaining a historic majority in both houses which allows Hollande to pursue his agenda of adding 60,000 teachers while taxing those making more than 1 million euro ($1.25 million) at a top rate of 75%. 

But will he really do this? Britain, for one, is saying to France’s wealthiest, come to London. Hollande needs to raise revenues to stick to his agenda, but he also pledged to reduce the deficit.

France’s 10-year bond trades with a record low yield of 2.60%, but this is more about Hollande’s honeymoon than actual facts…the French economy being stuck in the water with zero percent growth.

Finally, as for the eurozone economy itself, a combined measure of the service and manufacturing sectors came in at 46 for June, same as May (again, 50 being the dividing line between growth and contraction), while the manufacturing measure alone was 44.8, a 3-year low, and just 44.7 in Germany.

Washington and Wall Street

The news out of the United States certainly didn’t help any with the gloomy global outlook. The figures on housing were so-so (more below), while the number on the weekly jobless claims front was poor yet again, 387,000, for a 4-week average that is the highest of the year. And a key regional manufacturing data point out of Philadelphia was putrid.

[On a different facet of the jobs picture, job openings in the U.S. decreased in April by the most in four years, which is not good. The number of open positions actually dropped by 325,000, the biggest decline since September 2008.]

Then you had the Federal Reserve, which in extending “Operation Twist” through December (selling $267 billion in short-term securities and buying longer-term Treasuries in a further attempt to keep rates at historical lows to boost housing and get corporations to invest), also offered that it was lowering its growth forecast for the U.S. this year from a range of 2.4% to 2.9%, as was the forecast just last April, to 1.9% to 2.4%. The Fed also reaffirmed “exceptionally low” interest rates would be necessary until at least the end of 2014 and that it didn’t see any marked improvement in the unemployment rate.

What’s infuriating is that these clowns are never right in their forecasts. Never. And they have the best tools.

Of course stock traders aren’t any better. They were upset the Fed didn’t offer more other than an extension of Operation Twist. They wanted the Fed to expand its balance sheet further, which would only bring us ever closer to Armageddon….you do know we have to pay the piper for all this free money at some point, don’t you? [By the way, just who is the Piper? I’m hoping it’s a fatherly looking figure like Warren Buffett, rather than, say, Christopher Walken, not that I don’t appreciate this fine actor’s work.]

Meanwhile, Moody’s downgraded 15 large banks, including Morgan Stanley, Citigroup, Bank of America, UBS, Credit-Suisse and JPMorgan Chase, but most would be in agreement that the majority of these institutions, as much as I believe they are far too big and should be chopped up, are in much better standing from a capital standpoint than they were following the 2008-09 crisis and the market treated Moody’s move with a bit of disdain with financials rallying after the fact. Moody’s, after all, first telegraphed the move four months ago. It is unlikely the downgrades will result in a higher cost of funding for the banks. At least not now.

As to the “fiscal cliff,” there isn’t a single person in America, at least those who are conversant on the topic, who believes anything will get done in Congress about the looming tax increases and budget cuts until after the election. So we might as well send Congress home until November 7. They aren’t going to do anything beforehand and I’m tired of looking at them.

But at the G20 summit, speaking about the overall state of the American economy, President Obama sought to reassure leaders that “The best thing the United States can do is to create jobs and growth in the short term even as we continue to put our fiscal house in order over the long term,” to which attendees coughed “bulls---“ into their hands.

Editorial / Washington Post…on the two presidential candidates and the deficit.

“In terms of the road ahead, the two differ dramatically on how government can best help achieve both economic growth and fiscal stability. Mr. Romney’s view is that the government should basically back off, slim down and let the private sector carry on. Mr. Obama’s prescription is for a more robust government role, investing in education, research and infrastructure.

“And this is where the bipartisan obfuscation comes in. Mr. Romney offers the bait of lowered tax rates without the painful hook of details about what popular tax preferences he would cut – the mortgage interest deduction, employer-sponsored health care, retirement savings? – to avoid adding trillions to the debt. He vows that ‘I’m going to go after the deficit’ without being clear about the painful cuts and threats to the safety net that will entail. The few specifics that Mr. Romney mentions, such as cutting the number of federal employees through attrition, are not nearly up to the magnitude of the cuts that would be required.

“Mr. Obama is obscure in his own way. As the president tells it, tackling the debt will require asking for sacrifice – but only from the wealthiest Americans. Scarcely mentioned: the simultaneous need to tackle entitlement spending.

“The president jabbed at politicians for ‘saying you really care about [the deficit] when somebody else is in charge, and then you don’t care [when] you’re in charge.’ But he has been in charge – and failed to be the fierce advocate for reform some hoped for.

“Voters might be forgiven for wondering whether, if they give the president a second term, he will be more passionate in pursuing it than he has been in the first. And they have reason to question, if they give Mr. Romney a shot, whether he will veer from the intransigence of the campaign trail to adopt the sort of balanced approach to dealing with the debt that the president has endorsed and that will be essential to any acceptable solution.”

Street Bytes

--Stocks finished mixed, with the Dow Jones losing 1.0% to 12640, while the S&P 500 dropped 0.6% and Nasdaq gained 0.7%. It didn’t help that the likes of FedEx, Procter & Gamble and Danone cut their forecasts, with Danone, the world’s biggest yogurt maker, saying the deterioration in Southern Europe had been “fast” and “significantly stronger than expected.”

It also didn’t help that HSBC’s flash PMI for Chinese manufacturing in June came in at 48.1, down from May’s 48.4.

--U.S. Treasury Yields

6-mo. 0.14% 2-yr. 0.30% 10-yr. 1.67% 30-yr. 2.76%

The longer end of the curve rose in yield despite the attempts of the Federal Reserve to talk it down.

--Some hedge funds have been targeting German bonds, or bunds, after the yield on the 10-year bund hit a low of 1.13% on June 1. It has climbed to 1.58% since on the expectation Germany will have to pony up far more than it already has in any euro rescue efforts, thus imperiling its creditworthiness.

Heck, this makes eminent sense given that the German economy is beginning to run on fumes as well, with business sentiment tumbling on top of the poor data I mentioned above.

--European Commission head Jose Manuel Barroso, in mounting a defense of the EU’s handling of the crisis thus far, responded to a Canadian journalist at the G20 who asked why North Americans should “risk their assets to help Europe,” to which Barroso replied: “Frankly, we are not here to receive lessons in terms of democracy and how to handle the economy. This crisis was not originated in Europe.”

Barroso was forced later to walk this back a bit. Readers of this column know that all you have to do is start with the humongous real estate bubbles in Ireland and Spain, as well as the massive corruption in Greece to know that it wasn’t just America’s fault, nor that we exported all the problems.

--The inflation rate in the U.K., 5.2% last September, is already down to 2.8% for the month of May. This is good. As is the fact May retail sales rebounded 1.4% over April after slipping 2.3% that month largely due to the dreadful weather it was experiencing.

--Vehicle registrations (i.e. sales) in the European Union were down 7.7% for the first five months of 2012.

--Italians are refusing to pay the new real estate tax that was levied by Mario Monti. Isn’t that special?

--Air France announced it was cutting 5,000 positions by the end of 2013.

--China told the world at the G20 summit that it shouldn’t count on it to supply the growth the rest of the world is incapable of generating, though President Hu Jintao said he was confident.

“Facing a complex and grave external economic environment, China has taken targeted measures to strengthen and improve macroeconomic regulation, accelerate the shift of the growth model, adjust economic structure and build long-term mechanisms to boost domestic demand. We are confident that China will maintain steady and robust growth and thus make solid contributions to global economic growth.”

Former central bank adviser Li Daokui said the nation’s emphasis must be on greener manufacturing facilities.

“If you look carefully at the so-called accelerated approval of investment projects, I argue most will have long-term implications in driving out the polluting and inefficient existing production.” [Bloomberg]

China did please the International Monetary Fund with its actions this week, pledging $43 billion as part of the IMF’s latest fund-raising effort to boost its global firewall to $456 billion. Brazil, Russia, India and Mexico each pledged $10 billion while Turkey said it would kick in $5 billion. In return, the BRIC nations and the others expect to have more of a say in shaping where the IMF’s funds go in the future.

--Property prices in China fell further in May as the government’s efforts to curb speculation continue to bear fruit. But China’s restrictions on the number of homes one can own and higher required down-payments definitely have had an adverse impact on the overall economy, so did the government over-tighten?  

Possibly, but in Beijing, transactions actually rose 30% in May from the previous month after banks lowered mortgage rates for first-home buyers.

--China significantly lowered the barriers for foreign ownership of domestic stocks.

--Good news out of Japan. Exports in the month of May rose 10% from a year earlier, boosted by a 38% jump in deliveries to the U.S. Shipments to China also rose for the first time in eight months.

--Interesting tidbit from Francesco Guerrera of the Wall Street Journal.

“Once a primary source of dollar liquidity for European banks, money-market funds…have been paring back their dealings with the Old World.

“The good news is that their exposure to the eurozone is down by more than 60% from May of last year, according to Fitch Ratings. In the case of French banks, the exposure is down 81%.

“The not-so-good news is that a third of money-market funds’ assets, or around $420 billion, are still invested in Europe. At the end of April, the exposure to the eurozone was about 13%, meaning that more than one in eight dollars held by supposedly super-safe funds was sitting near the epicenter of this crisis.”

Don’t want to break the buck, a la 2008 and the Reserve Fund, sports fans.

--May housing starts came in less than expected, and existing home sales for May in the U.S. were basically on target, though down from April’s pace. The median home price did rise, however, to $182,600, the highest level since June 2010.

--California Gov. Jerry Brown and his democratic legislators reached a $92 billion budget deal that cuts social services further but leaves education unscathed (at least this go ‘round), though now voters need to approve tax increases of $8 billion, including a tax hike on the wealthy, come November or further cuts will be mandated.

--The Senate passed a farm bill that cuts subsidies by about $2 billion a year but largely protects sugar growers (incredible hypocrisy) and some 46 million food stamp beneficiaries. The 64-35 vote was surprising but the bipartisanship may not last in the House, where conservatives will take issue with the costs for food stamps, among other items.

--The average rate on a 30-year fixed mortgage, assuming you can get one, is down to another record low at 3.66%. For a 15-year mortgage, a popular refinancing option, it’s 2.95%.

--As a follow-up to my musings on the value of a college education last time, I note this bit from Kira Zalan of U.S. News Weekly.

“According to a Chamber of Commerce survey taken in 2009, 51% of manufacturers reported experiencing worker shortages in skilled production areas, across various industries. Last year, the new report states, there were 50,000 job openings in industrial engineering, welding, and computer-controlled machine tool operation. The Chamber says that ‘states need to focus on technical training’ and that employers must be willing ‘to offer pay premiums and to invest in corporate training to attract specialized workers.’”

Or as Jennifer Bradley of the Brookings Institution observed:

“Time after time, you hear anecdotal reports from Ohio, from Indiana, from Michigan, of companies needing people not with an electrical engineering B.A., but someone who has good math skills and has the training…If you’re operating a $100,000 piece of equipment, you’re a really important employee and you need to know what you’re doing. That’s not something that we teach in high school. We have not emphasized that sufficiently and now there’s this gap in the labor force.”

My guess is it’s changing already…far too many stories such as this. And just as attitudes are changing on the sport of football and the dangers inherent in it, I suspect attitudes about a college education in households across America are changing rapidly as well. Heck, I was at an affair last Saturday where there were some parents with soon-to-be college age children and this was the prime topic of conversation. “How do I come up with $40,000 a year these days…and how can I convince Beaver to think about another alternative to a standard four-year institution?”

The answer? At least in two instances community college is looking like a good alternative. Nothing at all wrong with that.

--Last June 2nd in this space I wrote that with regards to the price of crude (as measured by West Texas Intermediate) “I believe downside…from today’s levels [then $83] is limited, though you may want to wait until June 18 or so before placing any bullish bets” because “there is no doubt in my mind Iran’s nuclear facilities will be attacked.”

I very much stand by this opinion and so for the sake of my prediction, now that the Moscow talks are over, let’s say my starting point is $84 for this little prediction. We closed the week at $80 on global economic fears and declining demand. 

--Speaking of oil, the recent OPEC meeting was rather contentious, it has become increasingly clear, with various after-reports surfacing that Iran and Iraq are forming an alliance inside the cartel, which is concerning to the likes of Saudi Arabia as this could lead to major discord on the production quotas front and what is an acceptable price. Venezuela remains another pain in the butt as it looks to take increasingly political stances.

A Saudi official told the Financial Times, “We have to make sure that OPEC remains non-political. It is a business organization and politics should be avoided.”

Of course some politics can’t be avoided, like Iran being forced to shut in up to 1 million barrels of oil due to the European embargo taking effect July 1 (along with reductions in exports to some Asian countries as a result of Western pressure).

--Microsoft unveiled its tablet alternative, the Surface, which is an iPad with an actual keyboard and the ability to run Microsoft apps such as Word and Excel. So it has many of the features of a laptop.

But will it be able to compete with Apple when it comes to watching movies or playing games? We’ll find out later when the product actually comes out later in the year. And will it have the quantity and quality of apps to rival the iPad and Google’s Android system?

Surface is trying to be two things; a device for watching a movie and a device for creating content. But I like the comment of Apple CEO Tim Cook, his company arguing that tablets are separate from portable PCs.

“If you force them together, I think the PC is not as good as it can be, and I think the tablet is not as good as it can be.”

--Ryanair is making a bid for the remainder of Aer Lingus, with Ryanair currently holding 30% of the shares and the Irish government owning 25%.

But the move faces stiff competition fears from Brussels, because the combined airline would control about 80-90% of the Europe-Ireland capacity.

The Irish government has also said it wants to sell its stake to raise money to pay down its debt after the EU bailout, but it doesn’t want to sell to Ryanair, CEO Michael O’Leary not always being a crowd favorite in these parts.

--According to reservation processor Pegasus Solutions, owing to the European debt crisis, Spaniards have booked 15.5% fewer rooms to the U.S. this year, Greeks 41.3% fewer, and Italians 3.6% fewer.

But travel from the U.K., which is doing better economically, is up 2.6%. French bookings are 8.1% higher.

German bookings, though, are down 8.9%. What gives, Helmet?

--Regulators have closed 20 banks in South Korea in the past year for illicit lending and lax oversight and four bank executives from the institutions affected have committed suicide. More than $857 million in excess of insured levels has vanished at these and other banks in the country in the aftermath of the 2008 global financial crisis. The banks that have been shuttered were previously thought to be trustworthy. [Bloomberg]

--Facebook shares have been rallying off the post-IPO low, $25.50, to close the week at $33, helped in part by the comments of Coca-Cola and Ford which offered that Facebook gives them unique advertising opportunities; this after General Motors, pre-IPO, ended a $10 million campaign on the site because its paid ads didn’t impact consumer purchases.

Ford said it would spend more than 25% of its advertising budget on digital advertising this year, with the majority of that being on social media sites.

--Meanwhile, Morgan Stanley, lead underwriter on Facebook, is trying to deflect some of the criticism onto CNBC for over-hyping the IPO, which is rather ridiculous, except for one thing.

Jim Cramer. He did indeed say the day before the offering that if retail investors could get in at the IPO price, or even in the secondary market as high as $50 (it was priced at $38), it would be a “bargain.”

Of course once the stock acted as poor as it did the day it went public, Cramer reversed course.

Each week I’m tempted to write about Jim Cramer’s shameless flip-flopping, especially as it pertains to the Euro debt crisis, but then I think why bother. If you just follow him for a week you can see how his act is wearing thin (ratings for his “Mad Money” program are plunging) and I’m guessing he’s history by this time next year, much as the “Today” show’s Anne Curry is history there.

--We note the passing of veteran market analyst Dan Dorfman. He was 80. Back in the day, especially the early 1990s, there was no more important ‘tipster’ than Dorfman who truly had the power to move stocks by his reporting.  In 1994, the Washington Post reported that during an 18-month period, virtually every stock he recommended moved 13% within five minutes of his noon report on CNBC…while his ‘sell’ recommendations moved a like amount. Later, Dorfman ran into trouble over his alleged ties to a stock promoter who pleaded guilty to securities fraud. Dorfman was never formally accused of any wrongdoing himself. Way back in the late 1960s, he was writing the “Heard on the Street” column for the Wall Street Journal.

--This is huge. A suit has been filed against Hebrew National Meats (owned by Conagra) alleging the food isn’t Kosher. The suit says consumers overpay as a result while a third-party certifier has done nothing to correct problems and instead fired the employees or threatened to have those who were blowing the whistle transferred.

Unclean and unhealthy animals are often selected to be slaughtered for Kosher meats, the suit continues, but Conagra says there is “close rabbinical supervision.”

Well that is the last time I buy Hebrew National franks, that’s for sure. I always thought the intestines used were indeed Kosher!

--James Levine, the Metropolitan Opera’s music director, probably isn’t buying Hebrew National these days. He can afford top shelf wieners instead, seeing as he earned $2.1 million in 2010, up 39% from a year earlier, according to the Met’s tax returns. Not bad for a job requiring one to wave a little stick.

Actually, due to an injury, he conducted only 31 times in the 12 months ending July 2011.

But for those who are, or want to be, electricians, the Met’s master electrician, Paul Donahue, earned $516,577 in pay and benefits over the same period. As Ronald Reagan would have said: not bad, not bad at all. [Crain’s New York Business]

--Deflation Alert: the New York Jets have lowered the tickets prices on some 12,000 seats in the top rows from $95 and $105 to the $50 to $75 level.

--I find this a bit of a shocker. The Resorts World racino at Aqueduct in New York City is now tops in the nation in slot machine revenue, generating $57.5 million during May and thus surpassing Mohegan Sun casino in Connecticut, which took in $55.4 million. The Aqueduct facility (owned by Malaysia’s Genting) just opened in October.

So it’s proof of how New York City gamblers no longer have to go to Atlantic City (or Connecticut, whose Foxwoods casino is third in the nation), but you couldn’t pay me to go to Aqueduct, speaking as a Jersey resident.

In the meantime, New York Governor Andrew Cuomo continues to press for full-fledged casino gambling in his state.

Just gimme my sports betting, Gov. Chris Christie…as you are in the process of doing. A grateful citizenry applauds you…or at least 8% of us. [Pssst…take Wake Forest and the points vs. Clemson on Thurs., Oct. 25.]

--Oracle’s Larry Ellison, with nothing else to do with his $billions, is buying the Hawaiian island of Lanai from fellow billionaire David Murdock of Castle & Cooke fame. Lanai contains two world class resorts, some golf courses, and a few sexy hula dancers, I imagine, not having been there myself.

--Germany defeated Greece in the Euro 2012 football quarterfinals 4-2, giving the Greeks another reason to hate the Germans.

--Finally, the European Union issued a binding ruling on all member states that workers who fall sick during vacation time are entitled to take corresponding paid leave at a later date. Yes, that’s right. Now discuss amongst yourselves because you already know how I feel about such a farce.

Foreign Affairs

Iran: As expected, the third round of talks between the P5+1 (the U.S., Britain, France, Russia, China and Germany) and Iran over Tehran’s suspected nuclear arms programwent nowhere. After the initial rounds in Istanbul and Baghdad, the Moscow talks bogged down over the same issues. The P5+1 insists that Iran suspend its uranium enrichment program, relinquish the material already enriched to 20% (just a short process away from weapons grade), and close the underground facility at Qom.

The Iranians continue to say their nuclear program is an “inalienable right” and proclaim they wouldn’t possibly take any of the requested steps without a relaxation of the economic sanctions placed on it, including the European Union oil embargo due to take effect July 1.

The talks, if you can call them that, have been downgraded to a lower level and will resume at some point in Istanbul but it is clear Iran now intends to continue its brilliant stall game while it keeps enriching more uranium and growing its stockpile until after the U.S. presidential election in November.

Iran also doesn’t believe Israel will attack because of U.S. and European pressures not to do so this year. They are sadly mistaken.

Israel notes that the clock is ticking down towards possible action, with Defense Minister Ehud Barak continuing to reiterate that it won’t be a matter of weeks, but it also cannot be a matter of years before Israel acts.

“We cannot afford to spend another three rounds of this nature just to allow the Iranians to keep maneuvering,” he said.

President Shimon Peres:

“If the Iranians don’t heed the warnings, the calls and the economic sanctions, the world will look to other options.”

For its part, the International Atomic Energy Agency, which has been rebuffed in its requests to send inspectors to the disputed military site at Parchin, says the latest satellite imagery shows stepped up activity there, with the IAEA’s chief making the significant statement, Iran is “undertaking quite important activities.”

Meanwhile, a panel of experts told the House Armed Services Committee this week that the United States hasn’t issued a credible threat of military action against Iran yet, and needs to do so; visible actions such as supplying Israel with hundreds of new bunker-busting bombs that send a clear message to the mullahs.

William Kristol and Jamie Fly / The Weekly Standard

“Isn’t it time for the president to ask Congress for an Authorization for Use of Military Force against Iran’s nuclear program?

“Instead of running away from it, administration officials could be putting the military option front and center and ensuring it is seen as viable. And if the administration flinches, Congress could consider passing such an authorization anyway. While any commander in chief has the constitutional authority to take urgent action to protect Americans and their interests, such legislation would give weight to the president’s commitment to preventing Iran from acquiring nuclear weapons. It would strengthen the president’s hand. It would show Tehran that America’s policy of preventing an Iranian nuclear weapon is a credible one….

“Surely it is time for a concentration of congressional opinion and force capable of lifting our efforts to the level of emergency. The Obama administration may be committed to leading from behind, but Congress can choose to lead from the front.”

Syria: As the civil war raged on, with reports the CIA is helping steer weapons to the rebels across the border with Turkey (weapons supplied by the likes of the Saudis and Qatar), there were conflicting reports that Russian President Vladimir Putin had finally decided it was time for Bashar Assad to go. British Prime Minister David Cameron said as much after he met with Putin in Mexico at the G20, but Russian Foreign Minister Sergei Lavrov vehemently denied this, saying Putin’s position had not changed; that Assad’s removal would only lead to a wider war.

Nonetheless, the stories persist that Putin would allow Assad to go to Geneva for talks with the opposition, including the five permanent members of the U.N. Security Council (the above noted P5), but there is zero reason to believe Assad himself would want to leave for Geneva for a number of reasons, not the least of which is his safety (forget assassination, he could be arrested), but he could also face a coup by leaving, not that he doesn’t already.

Separately, in a significant move, a Syrian fighter pilot took his jet to Jordan and the Jordanians immediately granted him asylum, the speed of which I must say I admire greatly. No screwing around by the Jordanians.

Back to Russia and Putin, there are persistent rumors the Russians have prepared a force of 300 elite Marines to defend their naval base in Syria at Tartus, as well as to protect and extract Russian citizens in the country, of which there are as many as 10,000. Tartus is home to Russia’s only naval base outside the former Soviet Union and dominates the Kremlin’s thinking on Syria in general. They do not want to lose it.

Separately, the U.N. suspended its 300-strong observer mission due to the increasing violence that was threatening their lives as well. Atrocities, incidentally, are being committed by both sides, not just Assad’s regime.

As a story in the Sunday Times of London points out, not only are jihadists flooding into Syria, but “The foreign fighters are responding to fatwas issued by religious authorities in Saudi Arabia and elsewhere. ‘We will retaliate against the attacks launched by Bashar al-Assad and his associates by sending our dearest sons to inflict on him the harshest punishment,’ said Abu Muhammad al-Tahawi, a prominent Jordanian cleric.”

Another cleric was more direct. “We will chop you up and feed you to the dogs.”

The Times reports: “One Tunisian couple found out their student son, Hussein Mars, had heeded the call to jihad only when they received a perfunctory message. ‘We got an anonymous call telling us he’d been martyred – just three words,’ said his brother Mokhtar, a teacher. His parents had thought he was studying in Libya.”

Oh, and by the way, President Obama declared this week that Assad had “lost all legitimacy.”

I admire our president for his strength and courage sooo much. Don’t you? 

Fouad Ajami / Wall Street Journal

“The ordeal of Syria has been a rebuttal of the diplomacy Barack Obama once promised and stood for. It is largely forgotten now that Syria and Iran were the two regimes in the Greater Middle East that Mr. Obama had promised to ‘engage.’

“Back when he was redeemer in chief, Mr. Obama had been certain that the regime in Damascus would yield to his powers of persuasion. He cut Damascus a wide swath, stepped aside when the Syrian regime all but laid to waste the gains of the 2005 Cedar Revolution in Lebanon, assassinating and terrorizing its way back into its smaller neighbor.

“When the storm that broke upon the Arabs in early 2011 hit Syria, the flaws of the Obama approach were laid bare. It took five months of hesitation and wishful thinking before Mr. Obama called on the Syrian ruler to relinquish power. That call made, he had hoped that the storm would die down, that the world’s attention would drift from the sorrows of Syria….

“The Obama policy rests on a blissful belief that Syria will burn out without damage to American interests, and that the president himself can stay aloof from this crisis. By his lights, he has kept his compact with his progressive base – he liquidated the war in Iraq and has kept out of the conflict next door in Syria. It suffices that Osama bin Laden was killed, and drone attacks on al Qaeda continue apace.

“The wider forces at play in the Greater Middle East do not detain this president. His political advisers have not walked into the Oval Office reporting that he’ll win re-election if only he takes a more assertive stance toward the dictators in Damascus or Tehran. The world can wait – Syria has twisted for 15 months, and it is only five months until the election. And the amazing thing of it all is that Mr. Obama’s Republican rival, Mitt Romney, cedes him the foreign policy domain, allowing him to pose as though all is well in the world beyond our shores.”

This last point, as long-time readers know, is what drives me up the wall about Mr. Romney. He needs to pick up his game on the foreign policy front. President Obama’s track record is beyond dismal, but aside from John McCain, the Republicans have allowed Obama to play us like a bunch of fools.

[As for the late news that Syria shot down a Turkish fighter jet, as I go to post, Turkey is admitting its pilot may have strayed into Syrian airspace.]

Egypt: The Muslim Brotherhood claims that its presidential candidate, Mohammed Morsi, defeated the military’s hand-picked choice, Ahmed Shafiq, 51.7 to 48.3 percent in the run-off last weekend. Shafiq and his supporters said this wasn’t the case; that the vote was essentially the other way around.

The Supreme Council of the Armed Forces (Scaf) said it would announce an official winner on Thursday and then postponed the decision, claiming it first needed to investigate 400 alleged cases of voter fraud.

It was on Sunday night, after the polls closed, that Scaf issued a constitutional decree assuming the power to issue laws, Scaf having previously dissolved parliament before the election, while also declaring it would control the budget, have the right to declare war and write a new constitution, the constitution writing body having also been dissolved. Plus it reimposed martial law

Why Scaf is going to be a bunch of busy beavers, don’t you think?

Meanwhile, the condition of former President Hosni Mubarak’s health dominated conversation for a spell as it was reported he had suffered a heart attack and a number of strokes and was “clinically dead.”

But a day later, his lawyer said Mubarak had fallen in a prison bathroom and was treated for a blood clot in his neck. Thank god he had Life Alert! With the press of a button, the Life Alert team sprang into action. From the Egyptian translation: “I’ve fallen and I can’t get up!” “We’ll be right there, Mr. Mubarak.”

Anyway, as I go to post Hosni is either being embalmed or he’s checking out the Open rough at The Olympic Club.

The bottom line, though, is that whoever is selected president of Egypt hardly has broad support from the people, let alone any real power. The Obama administration also has a rather large decision to make once this all shakes out. What to do about the $1.3 billion+ in aid (most of it of the military variety) that we give Egypt annually.

Afghanistan: An American service member was killed and several others injured in the latest attack by individuals posing as Afghan security forces, who in this case turned their guns on the Americans. The three Afghan shooters fled. At least 20 have died this year alone from insider attacks. Last year, 35 coalition service members were killed in this fashion. The number wounded is substantial. At first, officials didn’t report this last bit until the AP noted the omission in a story.

So speaking of not telling the full story, there was a June 1 attack on a U.S. outpost near the Afghanistan-Pakistan border that at the time was dismissed in a one-paragraph statement, with the military saying U.S. and Afghan forces “successfully repelled the attack and secured the base.”

Nothing about casualties, nor that there was a truck bomb. What really happened?

Two Americans were killed, but also three dozen troops were seriously wounded. 100 other U.S. troops suffered minor injuries. 14 insurgents were killed, many wearing suicide vests.

It is pathetic that the U.S. military at first attempted to cover up the seriousness of this attack.

The White House, however, used the attack to blast Pakistan for not taking stronger action against the Haqqani network.

I’m sick of the Army’s top brass. I have a further story below that will make your stomach churn. Officials said they did not try to play down the severity of the attack.

Meanwhile, at least three other American soldiers died in an attack by a suicide bomber, with an interpreter and 17 Afghan soldiers dying in the same incident.

And on Thursday, the Taliban attacked a lake resort outside Kabul, mostly used for wedding receptions and private parties, killing 20 before the seven attackers were killed. The Taliban said they did it because alcohol was on the premises and there was prostitution.

Pakistan: Relations continue to go from bad to worse between Washington and Islamabad. Our diplomats on the scene are being increasingly harassed, as are aid workers, and the government itself appears increasingly on the verge of collapse as it battles it out with the Supreme Court while the military waits in the wings.

This week the top court dismissed the prime minister, Gilani, from office for failing to investigate President Zardari for corruption; Gilani having claimed the charges against Zardari not only dated back to the 1990s, and were never proved, but that the president had executive immunity. The court, though, ruled Gilani in contempt. In dismissing him it was in effect a judicial coup.

Then Zardari picked another fellow to replace Gilani and he was arrested the day after being nominated because of his alleged links to a drug deal involving the illegal importation of ephedrine while he was health minister, a charge he denies.

Editorial / Wall Street Journal

“Pakistan can ill afford this political wrangling as the economy falters and terrorist groups gain strength. Public confidence in democratic institutions, shaky to begin with, is in free fall, and the middle class continues to emigrate. Pakistan has defied predictions of failed statehood before, but testing its luck again with another undemocratic transition is foolhardy.”

Israel: As if the Israelis didn’t already have enough problems on their hands, a string of attacks along the Sinai border with Egypt claimed at least seven lives as infiltrators from Egypt targeted various military-related facilities and vehicles. There has been a total lack of security in the Sinai since the revolution went down.

Saudi Arabia: Crown Prince Nayef, heir to the Saudi throne, died. He was the country’s chief enforcer against dissent and led the crackdown against terrorists in the wake of 9/11. He was interior minister for four decades. [Oh, the secrets he kept.]

But Nayef’s death threw into question who would replace 88-year-old King Abdullah (or is it 89, I saw both ages), who could himself die at any minute, Abdullah not being in the best of health, let alone you’d think 88 or 89 would fall under some kind of term limits.

Well, the Saudis, or rather the Al Saud family that rules the kingdom, selected Prince Salman to be the new heir, not to be confused with King Salmon, but I digress. Mr. Salman is 76, but a sprightly lad who is said to be a bit more liberal, and until the United States is truly energy independent, I have no problem with a bunch of hardliners ruling Saudi Arabia, as long as they keep producing that black gold, know what I’m sayin’? I mean, better the House of Saud than the House of Terror like they have over across the Persian Gulf in Iran.

The Wall Street Journal, in an op-ed by Karen Elliott House, did have some interesting tidbits about the House of Wax, along with former Journal publisher Ms. House’s own opinions.

“The kingdom faces multiple problems: Unemployment is 40% among 20- to 24-year-olds, 40% of Saudis live on less than $1,000 a month, the kingdom’s one-dimensional economy earns nearly 80% of its revenues from oil, and 90% of all workers in its private sector are foreigners. Moreover, the senior Al Saud rulers have an average age exceeding 80 while 60% of the country’s population is below 20 years of age….

“Clearly, a growing number of frustrated Saudis no longer either respect or fear their leaders. Saudis are not demanding democracy; only transparent, efficient, honest government. They want a leader who can make the sclerotic system function better. Yet, much like the Soviet Union in its final years when power passed from one old man to another – Brezhnev to Andropov to Chernenko – in quick succession, the Saudi royal family continues to pass the crown from one aged son of the founder to the next.

“Recall, the Soviet Union was widely assumed to be stable. In the end, it proved brittle. Saudi succession looks very much like a movie we’ve seen before.”

Turkey: Foreign affairs expert Walter Russell Mead, in an op-ed for the Wall Street Journal:

“(The) euro crisis has reinforced Turkey’s decision to drop its long courtship of Europe and become an independent actor. Europe looks less and less to the Turks like a model to imitate and more and more like a fate to avoid. Turkey in any case would like to replace the EU as a major political and economic force in the Arab world, and it is likely to use this period of European introspection and preoccupation to advance its agenda.”

Mr. Mead also says the euro crisis could lead to instability in the Balkans. Gee, where else have you seen that?

China: First, Philippine President Benigno Aquino ordered two of his navy’s ships to pull out from a disputed shoal in the South China Sea (Scarborough Shoal…not to be confused with Scarborough Fair), and this pleased China greatly.

“The Chinese side has been urging the Philippine side to take measures to de-escalate the situation,” a Chinese embassy spokesman said in a statement, China claiming the territory as its own.

But also related to the South China Sea, Vietnam’s legislature just passed a law, long debated, claiming sovereignty over two other bunches of rocks, the Paracel and Spratly Islands, which China says are indisputably theirs as well. China basically says everything in the South China Sea is theirs.

And then the Philippines said, hold on a minute…we removed our ships from Scarborough Shoal, but China hasn’t removed theirs, which was part of the agreement (China wanting to pillage the waters for more seafood), so the Philippines said it might send its warships back.

Separately, China has offered some economic sweeteners to Taiwan, specifically pledging about $90 billion in credit to Taiwanese companies looking to move some of their operations to the mainland. Fujian province, which my moribund specialty chemical company holding calls home, would be a prime target…which is a major reason why I invested in the company in the first place, because of the geography!

Japan: Last weekend the government announced it was restarting two nuclear reactors after warning of widespread power shortages this summer otherwise, which could undermine Japan’s economic recovery. Before all the nuclear power stations were shut down after the March 2011 chain of disasters, Japan received 30% of its electricity from nuclear reactors, but a poll taken by the Pew Research Center showed 70% of Japanese wanted nuclear power eliminated or reduced, while 80% were distrustful of the government to do the right thing and be candid about safety and environmental concerns. [Carol J. Williams / Los Angeles Times]

France: Back to the parliamentary election here, what a mess President Hollande has on his hands. Recall last week I noted that his current partner, 47-year-old Valerie Trierweiler, endorsed a candidate for parliament who was going up against Hollande’s former partner of 27 years, and mother of their four children, the 58-year-old Segolene Royal, a long-time left-wing politician of major standing who ran for president in 2007 and was considering running for president again before losing the party vote this election cycle.

Well Royal lost…to the Center Right candidate endorsed by Trierweiler. Here Royal thought she would become Speaker of parliament! Zut alors! [Holy blank!]

“I will continue to weigh upon national politics,” said the not so Royal afterwards. She also strongly hinted she will go after the job held by Martine Aubry, the current head of the Socialist Party.

While Segolene didn’t mention Valerie by name, let’s just say Francois has a little battle on his hands, including the report that his four children have cut off relations with Trierweiler.

Hollande has yet to make a public statement over the spat, preferring to revel in his overall party victory.

But as Ms. Royal added about her defeat, quoting Victor Hugo: “Traitors always pay for their treachery in the end.”

If I were Francois, I’d sleep with one eye open from here on. Trierweiler will obviously do the same.

One other note on the French election, Marine Le Pen, leader of the far-right National Front (or FN) lost her race for a seat in parliament, though she’s contesting the vote. But the FN picked up two seats for the first time since the 1980s, so Le Pen described the results as an “enormous success” for her party. One of the two victors is someone I suspect we’ll be hearing quite a bit from herself over the coming decades, Marion Marechal-Le Pen, Marine’s 22-year-old niece.

Nigeria: Just another week in this hellhole. Islamists Boko Haram, doing what they do best, attack Christian churches, did just that on Sunday, killing at least 16, which then unleashed a wave of revenge attacks that killed more than twice as many. 

By the way, Boko Haram, or al-Qaeda West, has killed more than 1,000 in attacks since July 2009.

Random Musings

--From late 2009 to 2011, Bureau of Alcohol, Tobacco, Firearms and Explosives officials allowed some 2,000 guns to “walk” from the U.S. to Mexico in what proved to be a failed sting operation. Normally, in such a gun op, the weapons would be swiftly interdicted, but ATF agents failed to do so this time and two of the weapons were later found near the place where Border Patrol agent Brian Terry was gunned down in a December 2010 shootout.

When queried by the House Oversight Committee, the Justice Department in Feb. 2011 at first denied what was called “Fast and Furious” even existed (as put forth in a letter by assistant Attorney General Ron Welch), then, ten months later, the Attorney General’s office conceded there was such an operation but AG Eric Holder has largely clammed up about the whole fiasco, though he claims his office has released thousands of pages of requested documents to Republican Darrell Issa’s committee, and indeed it has, but tens of thousands of pages have yet to be turned over.

The Republicans are now threatening to hold the AG in contempt of Congress and the oversight committee did vote 23-17 to do so, though Speaker John Boehner hasn’t decided yet whether to take the extraordinary step of bringing the action before the full House, this as President Obama has now claimed “executive privilege” at the behest of Mr. Holder.

The Wall Street Journal editorial board just wishes three questions could be asked.

“(1) Did White House officials know and approve Fast and Furious before it went awry, and did they advise the Justice Department on how to respond to Congress’ investigation into the operation’s failure? (2) How can the president invoke a privilege to protect documents he and the White House are supposed to have had nothing to do with? (3) And what is so damaging or embarrassing in those documents that Mr. Obama is now willing to invest his own political capital to protect it from disclosure – at least until after the election?”

--Robert Samuelson / Washington Post

“We pay our presidents for judgment, and President Obama committed a colossal error of judgment in making health-care ‘reform’ a centerpiece of his first term. Ahead of the Supreme Court’s decision on the Affordable Care Act (ACA) – and regardless of how the court decides – it’s clear that Obama overreached. His attempt to achieve universal health insurance coverage is a massive feat of social engineering that, by its sweeping nature, weakens the economic recovery and antagonizes millions of Americans.

“Let’s review why the ACA (‘Obamacare’) is dreadful public policy:

“(1) It increases uncertainty and decreases confidence when recovery from the Great Recession requires more confidence and less uncertainty: The ACA isn’t highly popular; the Kaiser Family Foundation finds that 44% of Americans now view it unfavorably and 37% favorably….

“(2) The ACA discourages job creation by raising the price of hiring. This is basic economics. If you increase the price of labor, companies will buy less of it….

“(3) Uncontrolled health spending is the U.S. system’s main problem – and the ACA makes it worse…..

“(4) Obama’s program also worsens the federal budget problem. Driven by Medicare and Medicaid, health care already exceeds one-fourth of the budget and is headed toward a third. It’s the crux of the problem….

“(5) The ACA discriminates against the young in favor of the old. Government policy already does this through payroll taxes that have young workers subsidizing Social Security and Medicare benefits….

“Cost control should have been Obama’s priority….

“To all the ACA’s substantive defects is now added a looming political and constitutional firestorm. Whether the Supreme Court upholds the whole law, strikes it all down or discards only parts, anger and outrage will ensue. The court may be accused of usurping legislative powers or of cowering before White House intimidation. The ACA has become an instrument of the political polarization that the president regularly deplores.”

--In the latest AP-GfK poll, only 3 in 10 say the country is headed in the right direction, while among registered voters, President Obama leads Mitt Romney 47-44, a statistical dead heat. Obama’s overall approval rating is 49%.

If ever there was a year when a viable third party candidate had a chance it was 2012.

--According to the Census Bureau, the country’s Latino population has increased from 35 million in 2000 to 50 million in 2010. But now President Obama is riding a wave of enthusiasm among this group because of his decision to let hundreds of thousands of illegal immigrants stay in the country and work, while Mitt Romney is tongue-tied on the issue; make that, Mr. Romney has been flat-out pathetic. Calling Obama’s move too short term isn’t enough. During the primary season he said he would veto the Dream Act giving legal status to some children of illegal immigrants, but now that Obama co-opted Republican Senator Marco Rubio’s idea on the topic, Romney has been flailing and flopping like a flounder that suddenly finds itself on dry land.

--Steven Camarota, a researcher with the nonprofit Center for Immigration Studies, told the Washington Post that the Obama administration was not taking into account his new measure’s “probable impact on competition for jobs at the low end of the economic scale, where chronic unemployment is highest. Among Americans with less than a high school education, he said, the jobless rate is 13%.”

“It doesn’t seem the administration is considering the cascading consequences,” Camarota said. “What does this mean for unemployed Americans who will be competing for jobs with a million-plus people who can now apply for work authorization? Is this really a good idea?” 

--I agree with those now saying that Chris Christie would be the perfect keynote speaker at the GOP convention. Must see TV. I’m not sold yet that he’s the best Veep selection, however, but the worse Romney looks, the more he’ll need Christie’s energy.

--Commerce Secretary John Bryson, he of the seizure that caused him to hit three cars and then leave the scene of the accidents, resigned, saying he “could be a distraction” to the president.

You were a distraction, Mr. Bryson, because no one had/has a freakin’ clue what exactly happened!

--From Kristin Davis / Army Times

“One unfortunate effect of the massive explosion that killed Marine Sgt. Daniel Angus in January 2010 was that his arm had been fused to his body at a 90-degree angle. Port Mortuary workers at Dover Air Force Base, Del., removed the Marine’s arm in order to fit him into a uniform without first seeking permission from his family.

“But the Anguses never planned to view the body, deciding before they got to Dover to have him cremated. They’d signed official paperwork to authorize it. No one mentioned that the arm had been removed until November (2011) – nearly two years later. The Anguses wanted to know why anyone had dressed their son in a uniform in the first place. And why they waited so long to tell them.

“Months later…the Anguses say they still have yet to receive an apology from anybody involved in the Dover scandal.

“What they do have to show for their grief from the Air Force is a thick binder detailing the things that had been done to Daniel at Dover – grisly details they say they could have done without.

“The Air Force had determined in May 2011 that no regulations or laws were broken when mortuary officials failed to seek permission from the Angus family before sawing off his arm. An independent federal agency, the Office of Special Counsel, castigated that conclusion, saying the service had stopped short of accepting accountability.”

Editorial / Army Times

“The Air Force offered explanations for how it so grossly mishandled this sacred mission. Senior officials, including Chief of Staff Gen. Norton Schwartz, appeared before the media to lament the mortuary’s missteps. They promised accountability and publicly punished those responsible.

“But Air Force leadership never apologized to the Angus family. They want that, and deserve that….

“If Air Force leaders thought about how they would feel if this had been their son, they just might call the Anguses to apologize.

“For refusing to do so, they should be ashamed.”

I have read, and passed on, too many stories like this in the last few years. It’s beyond disgraceful. This is not how a great country acts.

--More on the public-private sector debate…from Mort Zuckerman / U.S. News Weekly.

“Just think, in 2008, the average wage for the 1.9 million federal civilian workers was more than $79,000, compared to an average of slightly over $50,000 for the nation’s 108 million private sector workers (measured in full-time equivalents), even though most federal workers cannot bargain over their pay and benefits. Ninety percent of government employees receive lifetime pension benefits versus 18 percent of private employees, not to mention annual salary increases and earlier retirement with instant, guaranteed benefits paid for with the taxes of the very same private sector workers. About 84 percent of state and local government employees have access to defined-benefit plans that are no longer widely available in the private sector….

“There is no quick fix to deal with the legacy of billions in unfunded liabilities. But there must be a fundamental rethinking of the public workforce and how we negotiate their contracts. One solution would be to take labor negotiations out of the hands of vulnerable legislators and assign them to independent commissions. Americans cannot maintain their essential faith in government if there are two Americas and the private sector subsidizes disproportionate benefits for a public sector elite.”

--We note the passing of Rodney King, whose 1991 videotaped beating by LA cops touched off one of the nation’s worst race riots the following year upon the acquittals of the four officers involved; riots that lasted three days and left 55 people dead, and more than 2,000 injured. King, who suffered from his various demons the ensuing two decades, drowned in his own pool.

--Jerry Sandusky was convicted on 45 of 48 counts of child sex abuse.

--Asian-Americans are now the fastest-growing racial group and have a median household income of $66,000 compared with the U.S. median of $49,800, according to a report by the Pew Research Center. Said Paul Taylor, the center’s executive vice president, “These aren’t the poor, tired, huddled masses that Emma Lazarus described in that inscription on the Statue of Liberty.”

--This is a little disconcerting. According to new research out of the University of California, San Francisco, the use of CT scans has tripled since 1996 – “a concern, since CT devices tend to emit much more radiation than conventional X-rays in order to take detailed pictures of internal organs. For children, the risk may be especially high. A recently released study by a group of international researchers, which took place over 23 years, found that otherwise healthy children who received CT scans after falls or accidents or to diagnose infections were three times as likely to develop brain cancer and four times as likely to be diagnosed with leukemia as those who opted out of the scans.” [Alice Park / TIME]

--In a highly controversial study, researchers have identified five genetic changes that could allow the H5N1 bird flu virus to start a pandemic, though the virus needs to mutate to the point where it becomes airborne as opposed to it currently being passed on to humans only by close contact with an infected bird.

What’s controversial is that the U.S. government and others didn’t want the research published (in this case the journal Science) because they contend it gives terrorists a playbook for perfecting a virus of pandemic proportions, while researchers say this is improbable.

--WikiLeaks founder Julian Assange is seeking political asylum inside the Ecuadorian Embassy in London in another attempt to avoid extradition to Sweden over alleged sex crimes. Yoh, Julian…if you’re innocent, have the guts to face the charges. You see, folks, Mr. Assange, through his legal team, threatened me a few weeks back. Maybe when I return I’ll reveal some of the letter I received.

Ecuadorian President Rafael Correa, himself a major creep, has defended Assange which is why Assange feels he can convince the place to take him in.

However, Assange faces arrest for violating his bail terms in Britain.

--On a lighter note, I’ve returned to the Eugene, Oregon area for a third time in four years and second time for the U.S. Olympic Track and Field Trials. Halsey, where I’m staying, is about 25 miles north of Eugene.

And I’m staying at an interesting truck stop, though it seems some track fans like me have just checked in. There’s a 24-hour restaurant attached to the motel, and a separate bar, so guess where I’ll be spending some of my time?

Actually, I’ll be at the track a lot (Historic Hayward Field), as was the case Friday night. And I have already been using the local regional high school’s track for my exercise; a classic rural facility. The towns the school services are very small so the school is actually for seven grades, the Central Linn Cobras. Gotta get me a t-shirt. Great place to run…no one around, no sound except the birds. Mountains as your backdrop.   Very peaceful.

Far more on the Trials next time, including the power of Phil Knight of Nike fame.

---

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

God bless America.
---

Gold closed at $1566…now up just $1 on the year…disappointment over no QE3 from the Fed
Oil, $79.76…lowest weekly close since Sept. 30

Returns for the week 6/18-6/22

Dow Jones -1.0% [12640]
S&P 500 -0.6% [1335]
S&P MidCap -0.4%
Russell 2000 +0.5%
Nasdaq +0.7% [2892]

Returns for the period 1/1/12-6/22/12

Dow Jones +3.5%
S&P 500 +6.2%
S&P MidCap +4.2%
Russell 2000 +4.6%
Nasdaq +11.0%

Bulls 37.2
Bears 25.6 [Source: Investors Intelligence]

Have a great week. I’ll be coming to you again from Halsey next time.

Brian Trumbore



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-06/23/2012-      
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Week in Review

06/23/2012

For the week 6/18-6/22

[Posted 7:30 a.m. ET from Halsey, Oregon]

The European Debt Crisis, continued…

Let’s start off with the topic that had everyone on pins and needles last weekend, the latest attempt by the Greeks to have an election that resulted in a stable government and one that wanted to remain in the eurozone.

Last May, pro-bailout parties New Democracy and Pasok garnered 19 and 13 percent of the vote, respectively, and couldn’t form a working coalition as anti-bailout, leftist Syriza picked up 17 percent in finishing second.

Last week, New Democracy emerged triumphant with 30 percent to Syriza’s 27 and Pasok’s 12. Because of the crazy rule that the party that finishes first gets a 50-seat bonus, New Democracy and Pasok combined for 162 seats (129 and 33) in the 300-seat parliament, while Syriza has a strong 71 seats in opposition.

It was funny how in the hours after the vote the heads of the European Council and European Commission issued a statement that said in part, “The Greek people have spoken. We salute the courage and resilience of the Greek citizens, fully aware of the sacrifices which are demanded from them to redress the Greek economy and build new, sustainable growth for the country.”

To which I scratched my head and thought, you know, only 42% of the Greek people actually voted for the bailout and austerity.

New Democracy’s Antonis Samaras thus becomes the country’s fourth prime minister in eight months. But understand New Democracy and Socialist Pasok have not only alternated holding power for decades, they are normally bitter enemies and there is zero guarantee that this latest attempt at a coalition will even work. Coupled with a smaller party that joined these two, Pasok and the other player have refused to place any of their members in Samaras’ cabinet.

Samaras ran this time with the understanding that should his party win, while he wants to remain in the eurozone he would seek to renegotiate the terms of Greece’s second bailout, 130 billion euro established earlier this year on top of the initial 110 billion euro it received in 2010.

But will the Germans, who have the final say on what transpires with the Greek bailout, allow the bailout terms to be tweaked so Greece can add more growth elements, which would then require Greece receive more funding because they would be extending their bailout targets two years? German politicians say no way will they kick in any more funds (with any further funding beyond the initial 240 billion euro requiring the approval of the German parliament). Most German politicians argue that it is unfair to grant Greece new concessions when Ireland and Portugal are implementing their bailout promises.

The thing is, revenues in Greece are collapsing at a much faster rate than anticipated just a few months ago and the country is on the verge of running out of money. So despite the vote last week, things remain incredibly dicey and fluid as the EU prepares for another big summit, June 28-29. German chancellor Angela Merkel has already said no one should expect any grand bargains even though the need for structural reforms and the outline of a fiscal union, leading to a political union, is greater than ever, let alone what is needed most in the short term, a deposit insurance scheme.

Stephen King / Financial Times

“In the midst of the euphoria (over the Greek vote) that will doubtless dominate financial markets in the days ahead, a few choice facts will be conveniently pushed to one side. New Democracy was, arguably, the party that got Greece into its current mess in the first place, having been in office between 2004 and 2009. Pasok was the party in charge of putting things right between 2009 and 2011. During that period, the Greek economy collapsed, too many austerity promises were broken and the Germans and French eventually ran out of patience, warning Greece that, if it didn’t behave, its days in the euro were numbered. And Greece has no real history of cozy coalition politics: it may just be possible to form a government…but how long it will last is another matter altogether.”

And as for the extremist elements in Greece, Golden Dawn, the neo-Nazis, picked up 7% of the vote and 18 seats in parliament.

Aristides Hatzis / Financial Times

“Ten days before Greece’s elections, a member of Golden Dawn repeatedly hit a female candidate of the communist party while appearing live on a television show and threw water over a female candidate of the radical left Syriza. The communist had just called him a ‘bloody fascist’ and he addressed her as a ‘commie.’ Greek elites (journalists, intellectuals, politicians) condemned his violence almost unequivocally. Yet the ugliest part of this incident was the readiness of many lay people to defend him, even cheer him, while the neo-Nazis rose in the polls.

“Unfortunately this episode was not isolated. Despite the narrow victory of a centrist party in Sunday’s vote, almost every day extremist violence breaks out in Athens and beyond. Neo-Nazis against immigrants, anarchists and leftists. Anarchists, ultra-leftists and other fringe groups of the nationalist-populist camp against riot police, mainstream politicians, journalists, liberal intellectuals, even artists. Add to this a surge in crime and rising tolerance of violence and you have a clearer picture of today’s Athens. Does it remind you of anything?

“That’s right. Greece’s situation recalls the Weimar Republic. Violence (and its banalization), hate, rage, polarization, fear, despair and resignation. As for the police, it has already taken sides: neo-Nazis won by a landslide in polling stations where officers were assigned to vote.”

Turning to Spain, the country is simply too big to fail. While the EU et al has already approved a 100 billion euro rescue for Spain’s troubled banks, an independent audit showed the banks need 62 billion ($78 billion). For starters.

The audit was based on a worst case scenario whereby the Spanish economy fell 4% in 2012 and 2% in 2013, with home prices declining 19.9% in 2012 and another 4.5% in 2013. It’s on this last item, housing, that I’m guessing the auditors are way too sanguine.

But by week’s end, Spain’s debt picture had improved somewhat, but only compared to the miserable numbers earlier in the week.

No doubt, Spain was able to raise the funds it needed, but at interest rates far higher than previous auctions, like a 5.1% rate for 12- and 18-month paper and 6.0% for the 5-year. Such figures are simply unsustainable. The 10-year yield finished the week at 6.38%, but this was off a record 7.30% just a few days earlier. The decline was based on the optimistic view that Spain will get its 100 billion euro for the banks and everything will be hunky-dory.

But this is a total crock. For starters, the actual mechanism of funding the Spanish banks is still in question, as in what fund to use and how it is to be routed, plus the European Central Bank is talking about accepting far lower quality collateral than it has in the past, which the Germans are balking at big time. It’s partly their money after all that is being lent out. What kind of collateral will be accepted? The ECB says something like, well, we’ll take BBB paper instead of a minimum A or AA (just using this as an example…it’s very close), but as we’ve all learned AAA was once thought to be sacrosanct when it comes to mortgages and it turned out to be garbage in more than one instance. What is BBB in Spain?

Supposedly this will all get settled next week; just know that Angela Merkel and her cohorts won’t put up with any shenanigans.

In Italy you have a good example of the problem of the relationship between banks and governments these days on the continent.

Italian banks’ holdings of government bonds are up 59% in 12 months, but across the eurozone, interbank relations are generally awful. There is zero trust, similar to the height of the financial crisis in 2008. French loans to Spanish banks, for example, were down 34% in the fourth quarter compared with the third. [New York Times]

This cries out for the need for unified banking regulation to help break the negative feedback loop but as I’ve written ad nauseum these things take time…time Europe doesn’t have.

At least Chancellor Merkel did find the votes in parliament to approve the new fiscal compact and European Stability Mechanism (ESM), supposedly, with the actual voting taking place next week, as in the case of the ESM, Germany will be contributing 27% to the 500 billion euro permanent fund, 21.7 billion euro in cash plus guarantees. Now you get a better picture of why these issues are so important to the Germans.

Meanwhile, in France, President Francois Hollande achieved the parliamentary majority he sought in the elections that concluded last weekend, with the Socialists gaining a historic majority in both houses which allows Hollande to pursue his agenda of adding 60,000 teachers while taxing those making more than 1 million euro ($1.25 million) at a top rate of 75%. 

But will he really do this? Britain, for one, is saying to France’s wealthiest, come to London. Hollande needs to raise revenues to stick to his agenda, but he also pledged to reduce the deficit.

France’s 10-year bond trades with a record low yield of 2.60%, but this is more about Hollande’s honeymoon than actual facts…the French economy being stuck in the water with zero percent growth.

Finally, as for the eurozone economy itself, a combined measure of the service and manufacturing sectors came in at 46 for June, same as May (again, 50 being the dividing line between growth and contraction), while the manufacturing measure alone was 44.8, a 3-year low, and just 44.7 in Germany.

Washington and Wall Street

The news out of the United States certainly didn’t help any with the gloomy global outlook. The figures on housing were so-so (more below), while the number on the weekly jobless claims front was poor yet again, 387,000, for a 4-week average that is the highest of the year. And a key regional manufacturing data point out of Philadelphia was putrid.

[On a different facet of the jobs picture, job openings in the U.S. decreased in April by the most in four years, which is not good. The number of open positions actually dropped by 325,000, the biggest decline since September 2008.]

Then you had the Federal Reserve, which in extending “Operation Twist” through December (selling $267 billion in short-term securities and buying longer-term Treasuries in a further attempt to keep rates at historical lows to boost housing and get corporations to invest), also offered that it was lowering its growth forecast for the U.S. this year from a range of 2.4% to 2.9%, as was the forecast just last April, to 1.9% to 2.4%. The Fed also reaffirmed “exceptionally low” interest rates would be necessary until at least the end of 2014 and that it didn’t see any marked improvement in the unemployment rate.

What’s infuriating is that these clowns are never right in their forecasts. Never. And they have the best tools.

Of course stock traders aren’t any better. They were upset the Fed didn’t offer more other than an extension of Operation Twist. They wanted the Fed to expand its balance sheet further, which would only bring us ever closer to Armageddon….you do know we have to pay the piper for all this free money at some point, don’t you? [By the way, just who is the Piper? I’m hoping it’s a fatherly looking figure like Warren Buffett, rather than, say, Christopher Walken, not that I don’t appreciate this fine actor’s work.]

Meanwhile, Moody’s downgraded 15 large banks, including Morgan Stanley, Citigroup, Bank of America, UBS, Credit-Suisse and JPMorgan Chase, but most would be in agreement that the majority of these institutions, as much as I believe they are far too big and should be chopped up, are in much better standing from a capital standpoint than they were following the 2008-09 crisis and the market treated Moody’s move with a bit of disdain with financials rallying after the fact. Moody’s, after all, first telegraphed the move four months ago. It is unlikely the downgrades will result in a higher cost of funding for the banks. At least not now.

As to the “fiscal cliff,” there isn’t a single person in America, at least those who are conversant on the topic, who believes anything will get done in Congress about the looming tax increases and budget cuts until after the election. So we might as well send Congress home until November 7. They aren’t going to do anything beforehand and I’m tired of looking at them.

But at the G20 summit, speaking about the overall state of the American economy, President Obama sought to reassure leaders that “The best thing the United States can do is to create jobs and growth in the short term even as we continue to put our fiscal house in order over the long term,” to which attendees coughed “bulls---“ into their hands.

Editorial / Washington Post…on the two presidential candidates and the deficit.

“In terms of the road ahead, the two differ dramatically on how government can best help achieve both economic growth and fiscal stability. Mr. Romney’s view is that the government should basically back off, slim down and let the private sector carry on. Mr. Obama’s prescription is for a more robust government role, investing in education, research and infrastructure.

“And this is where the bipartisan obfuscation comes in. Mr. Romney offers the bait of lowered tax rates without the painful hook of details about what popular tax preferences he would cut – the mortgage interest deduction, employer-sponsored health care, retirement savings? – to avoid adding trillions to the debt. He vows that ‘I’m going to go after the deficit’ without being clear about the painful cuts and threats to the safety net that will entail. The few specifics that Mr. Romney mentions, such as cutting the number of federal employees through attrition, are not nearly up to the magnitude of the cuts that would be required.

“Mr. Obama is obscure in his own way. As the president tells it, tackling the debt will require asking for sacrifice – but only from the wealthiest Americans. Scarcely mentioned: the simultaneous need to tackle entitlement spending.

“The president jabbed at politicians for ‘saying you really care about [the deficit] when somebody else is in charge, and then you don’t care [when] you’re in charge.’ But he has been in charge – and failed to be the fierce advocate for reform some hoped for.

“Voters might be forgiven for wondering whether, if they give the president a second term, he will be more passionate in pursuing it than he has been in the first. And they have reason to question, if they give Mr. Romney a shot, whether he will veer from the intransigence of the campaign trail to adopt the sort of balanced approach to dealing with the debt that the president has endorsed and that will be essential to any acceptable solution.”

Street Bytes

--Stocks finished mixed, with the Dow Jones losing 1.0% to 12640, while the S&P 500 dropped 0.6% and Nasdaq gained 0.7%. It didn’t help that the likes of FedEx, Procter & Gamble and Danone cut their forecasts, with Danone, the world’s biggest yogurt maker, saying the deterioration in Southern Europe had been “fast” and “significantly stronger than expected.”

It also didn’t help that HSBC’s flash PMI for Chinese manufacturing in June came in at 48.1, down from May’s 48.4.

--U.S. Treasury Yields

6-mo. 0.14% 2-yr. 0.30% 10-yr. 1.67% 30-yr. 2.76%

The longer end of the curve rose in yield despite the attempts of the Federal Reserve to talk it down.

--Some hedge funds have been targeting German bonds, or bunds, after the yield on the 10-year bund hit a low of 1.13% on June 1. It has climbed to 1.58% since on the expectation Germany will have to pony up far more than it already has in any euro rescue efforts, thus imperiling its creditworthiness.

Heck, this makes eminent sense given that the German economy is beginning to run on fumes as well, with business sentiment tumbling on top of the poor data I mentioned above.

--European Commission head Jose Manuel Barroso, in mounting a defense of the EU’s handling of the crisis thus far, responded to a Canadian journalist at the G20 who asked why North Americans should “risk their assets to help Europe,” to which Barroso replied: “Frankly, we are not here to receive lessons in terms of democracy and how to handle the economy. This crisis was not originated in Europe.”

Barroso was forced later to walk this back a bit. Readers of this column know that all you have to do is start with the humongous real estate bubbles in Ireland and Spain, as well as the massive corruption in Greece to know that it wasn’t just America’s fault, nor that we exported all the problems.

--The inflation rate in the U.K., 5.2% last September, is already down to 2.8% for the month of May. This is good. As is the fact May retail sales rebounded 1.4% over April after slipping 2.3% that month largely due to the dreadful weather it was experiencing.

--Vehicle registrations (i.e. sales) in the European Union were down 7.7% for the first five months of 2012.

--Italians are refusing to pay the new real estate tax that was levied by Mario Monti. Isn’t that special?

--Air France announced it was cutting 5,000 positions by the end of 2013.

--China told the world at the G20 summit that it shouldn’t count on it to supply the growth the rest of the world is incapable of generating, though President Hu Jintao said he was confident.

“Facing a complex and grave external economic environment, China has taken targeted measures to strengthen and improve macroeconomic regulation, accelerate the shift of the growth model, adjust economic structure and build long-term mechanisms to boost domestic demand. We are confident that China will maintain steady and robust growth and thus make solid contributions to global economic growth.”

Former central bank adviser Li Daokui said the nation’s emphasis must be on greener manufacturing facilities.

“If you look carefully at the so-called accelerated approval of investment projects, I argue most will have long-term implications in driving out the polluting and inefficient existing production.” [Bloomberg]

China did please the International Monetary Fund with its actions this week, pledging $43 billion as part of the IMF’s latest fund-raising effort to boost its global firewall to $456 billion. Brazil, Russia, India and Mexico each pledged $10 billion while Turkey said it would kick in $5 billion. In return, the BRIC nations and the others expect to have more of a say in shaping where the IMF’s funds go in the future.

--Property prices in China fell further in May as the government’s efforts to curb speculation continue to bear fruit. But China’s restrictions on the number of homes one can own and higher required down-payments definitely have had an adverse impact on the overall economy, so did the government over-tighten?  

Possibly, but in Beijing, transactions actually rose 30% in May from the previous month after banks lowered mortgage rates for first-home buyers.

--China significantly lowered the barriers for foreign ownership of domestic stocks.

--Good news out of Japan. Exports in the month of May rose 10% from a year earlier, boosted by a 38% jump in deliveries to the U.S. Shipments to China also rose for the first time in eight months.

--Interesting tidbit from Francesco Guerrera of the Wall Street Journal.

“Once a primary source of dollar liquidity for European banks, money-market funds…have been paring back their dealings with the Old World.

“The good news is that their exposure to the eurozone is down by more than 60% from May of last year, according to Fitch Ratings. In the case of French banks, the exposure is down 81%.

“The not-so-good news is that a third of money-market funds’ assets, or around $420 billion, are still invested in Europe. At the end of April, the exposure to the eurozone was about 13%, meaning that more than one in eight dollars held by supposedly super-safe funds was sitting near the epicenter of this crisis.”

Don’t want to break the buck, a la 2008 and the Reserve Fund, sports fans.

--May housing starts came in less than expected, and existing home sales for May in the U.S. were basically on target, though down from April’s pace. The median home price did rise, however, to $182,600, the highest level since June 2010.

--California Gov. Jerry Brown and his democratic legislators reached a $92 billion budget deal that cuts social services further but leaves education unscathed (at least this go ‘round), though now voters need to approve tax increases of $8 billion, including a tax hike on the wealthy, come November or further cuts will be mandated.

--The Senate passed a farm bill that cuts subsidies by about $2 billion a year but largely protects sugar growers (incredible hypocrisy) and some 46 million food stamp beneficiaries. The 64-35 vote was surprising but the bipartisanship may not last in the House, where conservatives will take issue with the costs for food stamps, among other items.

--The average rate on a 30-year fixed mortgage, assuming you can get one, is down to another record low at 3.66%. For a 15-year mortgage, a popular refinancing option, it’s 2.95%.

--As a follow-up to my musings on the value of a college education last time, I note this bit from Kira Zalan of U.S. News Weekly.

“According to a Chamber of Commerce survey taken in 2009, 51% of manufacturers reported experiencing worker shortages in skilled production areas, across various industries. Last year, the new report states, there were 50,000 job openings in industrial engineering, welding, and computer-controlled machine tool operation. The Chamber says that ‘states need to focus on technical training’ and that employers must be willing ‘to offer pay premiums and to invest in corporate training to attract specialized workers.’”

Or as Jennifer Bradley of the Brookings Institution observed:

“Time after time, you hear anecdotal reports from Ohio, from Indiana, from Michigan, of companies needing people not with an electrical engineering B.A., but someone who has good math skills and has the training…If you’re operating a $100,000 piece of equipment, you’re a really important employee and you need to know what you’re doing. That’s not something that we teach in high school. We have not emphasized that sufficiently and now there’s this gap in the labor force.”

My guess is it’s changing already…far too many stories such as this. And just as attitudes are changing on the sport of football and the dangers inherent in it, I suspect attitudes about a college education in households across America are changing rapidly as well. Heck, I was at an affair last Saturday where there were some parents with soon-to-be college age children and this was the prime topic of conversation. “How do I come up with $40,000 a year these days…and how can I convince Beaver to think about another alternative to a standard four-year institution?”

The answer? At least in two instances community college is looking like a good alternative. Nothing at all wrong with that.

--Last June 2nd in this space I wrote that with regards to the price of crude (as measured by West Texas Intermediate) “I believe downside…from today’s levels [then $83] is limited, though you may want to wait until June 18 or so before placing any bullish bets” because “there is no doubt in my mind Iran’s nuclear facilities will be attacked.”

I very much stand by this opinion and so for the sake of my prediction, now that the Moscow talks are over, let’s say my starting point is $84 for this little prediction. We closed the week at $80 on global economic fears and declining demand. 

--Speaking of oil, the recent OPEC meeting was rather contentious, it has become increasingly clear, with various after-reports surfacing that Iran and Iraq are forming an alliance inside the cartel, which is concerning to the likes of Saudi Arabia as this could lead to major discord on the production quotas front and what is an acceptable price. Venezuela remains another pain in the butt as it looks to take increasingly political stances.

A Saudi official told the Financial Times, “We have to make sure that OPEC remains non-political. It is a business organization and politics should be avoided.”

Of course some politics can’t be avoided, like Iran being forced to shut in up to 1 million barrels of oil due to the European embargo taking effect July 1 (along with reductions in exports to some Asian countries as a result of Western pressure).

--Microsoft unveiled its tablet alternative, the Surface, which is an iPad with an actual keyboard and the ability to run Microsoft apps such as Word and Excel. So it has many of the features of a laptop.

But will it be able to compete with Apple when it comes to watching movies or playing games? We’ll find out later when the product actually comes out later in the year. And will it have the quantity and quality of apps to rival the iPad and Google’s Android system?

Surface is trying to be two things; a device for watching a movie and a device for creating content. But I like the comment of Apple CEO Tim Cook, his company arguing that tablets are separate from portable PCs.

“If you force them together, I think the PC is not as good as it can be, and I think the tablet is not as good as it can be.”

--Ryanair is making a bid for the remainder of Aer Lingus, with Ryanair currently holding 30% of the shares and the Irish government owning 25%.

But the move faces stiff competition fears from Brussels, because the combined airline would control about 80-90% of the Europe-Ireland capacity.

The Irish government has also said it wants to sell its stake to raise money to pay down its debt after the EU bailout, but it doesn’t want to sell to Ryanair, CEO Michael O’Leary not always being a crowd favorite in these parts.

--According to reservation processor Pegasus Solutions, owing to the European debt crisis, Spaniards have booked 15.5% fewer rooms to the U.S. this year, Greeks 41.3% fewer, and Italians 3.6% fewer.

But travel from the U.K., which is doing better economically, is up 2.6%. French bookings are 8.1% higher.

German bookings, though, are down 8.9%. What gives, Helmet?

--Regulators have closed 20 banks in South Korea in the past year for illicit lending and lax oversight and four bank executives from the institutions affected have committed suicide. More than $857 million in excess of insured levels has vanished at these and other banks in the country in the aftermath of the 2008 global financial crisis. The banks that have been shuttered were previously thought to be trustworthy. [Bloomberg]

--Facebook shares have been rallying off the post-IPO low, $25.50, to close the week at $33, helped in part by the comments of Coca-Cola and Ford which offered that Facebook gives them unique advertising opportunities; this after General Motors, pre-IPO, ended a $10 million campaign on the site because its paid ads didn’t impact consumer purchases.

Ford said it would spend more than 25% of its advertising budget on digital advertising this year, with the majority of that being on social media sites.

--Meanwhile, Morgan Stanley, lead underwriter on Facebook, is trying to deflect some of the criticism onto CNBC for over-hyping the IPO, which is rather ridiculous, except for one thing.

Jim Cramer. He did indeed say the day before the offering that if retail investors could get in at the IPO price, or even in the secondary market as high as $50 (it was priced at $38), it would be a “bargain.”

Of course once the stock acted as poor as it did the day it went public, Cramer reversed course.

Each week I’m tempted to write about Jim Cramer’s shameless flip-flopping, especially as it pertains to the Euro debt crisis, but then I think why bother. If you just follow him for a week you can see how his act is wearing thin (ratings for his “Mad Money” program are plunging) and I’m guessing he’s history by this time next year, much as the “Today” show’s Anne Curry is history there.

--We note the passing of veteran market analyst Dan Dorfman. He was 80. Back in the day, especially the early 1990s, there was no more important ‘tipster’ than Dorfman who truly had the power to move stocks by his reporting.  In 1994, the Washington Post reported that during an 18-month period, virtually every stock he recommended moved 13% within five minutes of his noon report on CNBC…while his ‘sell’ recommendations moved a like amount. Later, Dorfman ran into trouble over his alleged ties to a stock promoter who pleaded guilty to securities fraud. Dorfman was never formally accused of any wrongdoing himself. Way back in the late 1960s, he was writing the “Heard on the Street” column for the Wall Street Journal.

--This is huge. A suit has been filed against Hebrew National Meats (owned by Conagra) alleging the food isn’t Kosher. The suit says consumers overpay as a result while a third-party certifier has done nothing to correct problems and instead fired the employees or threatened to have those who were blowing the whistle transferred.

Unclean and unhealthy animals are often selected to be slaughtered for Kosher meats, the suit continues, but Conagra says there is “close rabbinical supervision.”

Well that is the last time I buy Hebrew National franks, that’s for sure. I always thought the intestines used were indeed Kosher!

--James Levine, the Metropolitan Opera’s music director, probably isn’t buying Hebrew National these days. He can afford top shelf wieners instead, seeing as he earned $2.1 million in 2010, up 39% from a year earlier, according to the Met’s tax returns. Not bad for a job requiring one to wave a little stick.

Actually, due to an injury, he conducted only 31 times in the 12 months ending July 2011.

But for those who are, or want to be, electricians, the Met’s master electrician, Paul Donahue, earned $516,577 in pay and benefits over the same period. As Ronald Reagan would have said: not bad, not bad at all. [Crain’s New York Business]

--Deflation Alert: the New York Jets have lowered the tickets prices on some 12,000 seats in the top rows from $95 and $105 to the $50 to $75 level.

--I find this a bit of a shocker. The Resorts World racino at Aqueduct in New York City is now tops in the nation in slot machine revenue, generating $57.5 million during May and thus surpassing Mohegan Sun casino in Connecticut, which took in $55.4 million. The Aqueduct facility (owned by Malaysia’s Genting) just opened in October.

So it’s proof of how New York City gamblers no longer have to go to Atlantic City (or Connecticut, whose Foxwoods casino is third in the nation), but you couldn’t pay me to go to Aqueduct, speaking as a Jersey resident.

In the meantime, New York Governor Andrew Cuomo continues to press for full-fledged casino gambling in his state.

Just gimme my sports betting, Gov. Chris Christie…as you are in the process of doing. A grateful citizenry applauds you…or at least 8% of us. [Pssst…take Wake Forest and the points vs. Clemson on Thurs., Oct. 25.]

--Oracle’s Larry Ellison, with nothing else to do with his $billions, is buying the Hawaiian island of Lanai from fellow billionaire David Murdock of Castle & Cooke fame. Lanai contains two world class resorts, some golf courses, and a few sexy hula dancers, I imagine, not having been there myself.

--Germany defeated Greece in the Euro 2012 football quarterfinals 4-2, giving the Greeks another reason to hate the Germans.

--Finally, the European Union issued a binding ruling on all member states that workers who fall sick during vacation time are entitled to take corresponding paid leave at a later date. Yes, that’s right. Now discuss amongst yourselves because you already know how I feel about such a farce.

Foreign Affairs

Iran: As expected, the third round of talks between the P5+1 (the U.S., Britain, France, Russia, China and Germany) and Iran over Tehran’s suspected nuclear arms programwent nowhere. After the initial rounds in Istanbul and Baghdad, the Moscow talks bogged down over the same issues. The P5+1 insists that Iran suspend its uranium enrichment program, relinquish the material already enriched to 20% (just a short process away from weapons grade), and close the underground facility at Qom.

The Iranians continue to say their nuclear program is an “inalienable right” and proclaim they wouldn’t possibly take any of the requested steps without a relaxation of the economic sanctions placed on it, including the European Union oil embargo due to take effect July 1.

The talks, if you can call them that, have been downgraded to a lower level and will resume at some point in Istanbul but it is clear Iran now intends to continue its brilliant stall game while it keeps enriching more uranium and growing its stockpile until after the U.S. presidential election in November.

Iran also doesn’t believe Israel will attack because of U.S. and European pressures not to do so this year. They are sadly mistaken.

Israel notes that the clock is ticking down towards possible action, with Defense Minister Ehud Barak continuing to reiterate that it won’t be a matter of weeks, but it also cannot be a matter of years before Israel acts.

“We cannot afford to spend another three rounds of this nature just to allow the Iranians to keep maneuvering,” he said.

President Shimon Peres:

“If the Iranians don’t heed the warnings, the calls and the economic sanctions, the world will look to other options.”

For its part, the International Atomic Energy Agency, which has been rebuffed in its requests to send inspectors to the disputed military site at Parchin, says the latest satellite imagery shows stepped up activity there, with the IAEA’s chief making the significant statement, Iran is “undertaking quite important activities.”

Meanwhile, a panel of experts told the House Armed Services Committee this week that the United States hasn’t issued a credible threat of military action against Iran yet, and needs to do so; visible actions such as supplying Israel with hundreds of new bunker-busting bombs that send a clear message to the mullahs.

William Kristol and Jamie Fly / The Weekly Standard

“Isn’t it time for the president to ask Congress for an Authorization for Use of Military Force against Iran’s nuclear program?

“Instead of running away from it, administration officials could be putting the military option front and center and ensuring it is seen as viable. And if the administration flinches, Congress could consider passing such an authorization anyway. While any commander in chief has the constitutional authority to take urgent action to protect Americans and their interests, such legislation would give weight to the president’s commitment to preventing Iran from acquiring nuclear weapons. It would strengthen the president’s hand. It would show Tehran that America’s policy of preventing an Iranian nuclear weapon is a credible one….

“Surely it is time for a concentration of congressional opinion and force capable of lifting our efforts to the level of emergency. The Obama administration may be committed to leading from behind, but Congress can choose to lead from the front.”

Syria: As the civil war raged on, with reports the CIA is helping steer weapons to the rebels across the border with Turkey (weapons supplied by the likes of the Saudis and Qatar), there were conflicting reports that Russian President Vladimir Putin had finally decided it was time for Bashar Assad to go. British Prime Minister David Cameron said as much after he met with Putin in Mexico at the G20, but Russian Foreign Minister Sergei Lavrov vehemently denied this, saying Putin’s position had not changed; that Assad’s removal would only lead to a wider war.

Nonetheless, the stories persist that Putin would allow Assad to go to Geneva for talks with the opposition, including the five permanent members of the U.N. Security Council (the above noted P5), but there is zero reason to believe Assad himself would want to leave for Geneva for a number of reasons, not the least of which is his safety (forget assassination, he could be arrested), but he could also face a coup by leaving, not that he doesn’t already.

Separately, in a significant move, a Syrian fighter pilot took his jet to Jordan and the Jordanians immediately granted him asylum, the speed of which I must say I admire greatly. No screwing around by the Jordanians.

Back to Russia and Putin, there are persistent rumors the Russians have prepared a force of 300 elite Marines to defend their naval base in Syria at Tartus, as well as to protect and extract Russian citizens in the country, of which there are as many as 10,000. Tartus is home to Russia’s only naval base outside the former Soviet Union and dominates the Kremlin’s thinking on Syria in general. They do not want to lose it.

Separately, the U.N. suspended its 300-strong observer mission due to the increasing violence that was threatening their lives as well. Atrocities, incidentally, are being committed by both sides, not just Assad’s regime.

As a story in the Sunday Times of London points out, not only are jihadists flooding into Syria, but “The foreign fighters are responding to fatwas issued by religious authorities in Saudi Arabia and elsewhere. ‘We will retaliate against the attacks launched by Bashar al-Assad and his associates by sending our dearest sons to inflict on him the harshest punishment,’ said Abu Muhammad al-Tahawi, a prominent Jordanian cleric.”

Another cleric was more direct. “We will chop you up and feed you to the dogs.”

The Times reports: “One Tunisian couple found out their student son, Hussein Mars, had heeded the call to jihad only when they received a perfunctory message. ‘We got an anonymous call telling us he’d been martyred – just three words,’ said his brother Mokhtar, a teacher. His parents had thought he was studying in Libya.”

Oh, and by the way, President Obama declared this week that Assad had “lost all legitimacy.”

I admire our president for his strength and courage sooo much. Don’t you? 

Fouad Ajami / Wall Street Journal

“The ordeal of Syria has been a rebuttal of the diplomacy Barack Obama once promised and stood for. It is largely forgotten now that Syria and Iran were the two regimes in the Greater Middle East that Mr. Obama had promised to ‘engage.’

“Back when he was redeemer in chief, Mr. Obama had been certain that the regime in Damascus would yield to his powers of persuasion. He cut Damascus a wide swath, stepped aside when the Syrian regime all but laid to waste the gains of the 2005 Cedar Revolution in Lebanon, assassinating and terrorizing its way back into its smaller neighbor.

“When the storm that broke upon the Arabs in early 2011 hit Syria, the flaws of the Obama approach were laid bare. It took five months of hesitation and wishful thinking before Mr. Obama called on the Syrian ruler to relinquish power. That call made, he had hoped that the storm would die down, that the world’s attention would drift from the sorrows of Syria….

“The Obama policy rests on a blissful belief that Syria will burn out without damage to American interests, and that the president himself can stay aloof from this crisis. By his lights, he has kept his compact with his progressive base – he liquidated the war in Iraq and has kept out of the conflict next door in Syria. It suffices that Osama bin Laden was killed, and drone attacks on al Qaeda continue apace.

“The wider forces at play in the Greater Middle East do not detain this president. His political advisers have not walked into the Oval Office reporting that he’ll win re-election if only he takes a more assertive stance toward the dictators in Damascus or Tehran. The world can wait – Syria has twisted for 15 months, and it is only five months until the election. And the amazing thing of it all is that Mr. Obama’s Republican rival, Mitt Romney, cedes him the foreign policy domain, allowing him to pose as though all is well in the world beyond our shores.”

This last point, as long-time readers know, is what drives me up the wall about Mr. Romney. He needs to pick up his game on the foreign policy front. President Obama’s track record is beyond dismal, but aside from John McCain, the Republicans have allowed Obama to play us like a bunch of fools.

[As for the late news that Syria shot down a Turkish fighter jet, as I go to post, Turkey is admitting its pilot may have strayed into Syrian airspace.]

Egypt: The Muslim Brotherhood claims that its presidential candidate, Mohammed Morsi, defeated the military’s hand-picked choice, Ahmed Shafiq, 51.7 to 48.3 percent in the run-off last weekend. Shafiq and his supporters said this wasn’t the case; that the vote was essentially the other way around.

The Supreme Council of the Armed Forces (Scaf) said it would announce an official winner on Thursday and then postponed the decision, claiming it first needed to investigate 400 alleged cases of voter fraud.

It was on Sunday night, after the polls closed, that Scaf issued a constitutional decree assuming the power to issue laws, Scaf having previously dissolved parliament before the election, while also declaring it would control the budget, have the right to declare war and write a new constitution, the constitution writing body having also been dissolved. Plus it reimposed martial law

Why Scaf is going to be a bunch of busy beavers, don’t you think?

Meanwhile, the condition of former President Hosni Mubarak’s health dominated conversation for a spell as it was reported he had suffered a heart attack and a number of strokes and was “clinically dead.”

But a day later, his lawyer said Mubarak had fallen in a prison bathroom and was treated for a blood clot in his neck. Thank god he had Life Alert! With the press of a button, the Life Alert team sprang into action. From the Egyptian translation: “I’ve fallen and I can’t get up!” “We’ll be right there, Mr. Mubarak.”

Anyway, as I go to post Hosni is either being embalmed or he’s checking out the Open rough at The Olympic Club.

The bottom line, though, is that whoever is selected president of Egypt hardly has broad support from the people, let alone any real power. The Obama administration also has a rather large decision to make once this all shakes out. What to do about the $1.3 billion+ in aid (most of it of the military variety) that we give Egypt annually.

Afghanistan: An American service member was killed and several others injured in the latest attack by individuals posing as Afghan security forces, who in this case turned their guns on the Americans. The three Afghan shooters fled. At least 20 have died this year alone from insider attacks. Last year, 35 coalition service members were killed in this fashion. The number wounded is substantial. At first, officials didn’t report this last bit until the AP noted the omission in a story.

So speaking of not telling the full story, there was a June 1 attack on a U.S. outpost near the Afghanistan-Pakistan border that at the time was dismissed in a one-paragraph statement, with the military saying U.S. and Afghan forces “successfully repelled the attack and secured the base.”

Nothing about casualties, nor that there was a truck bomb. What really happened?

Two Americans were killed, but also three dozen troops were seriously wounded. 100 other U.S. troops suffered minor injuries. 14 insurgents were killed, many wearing suicide vests.

It is pathetic that the U.S. military at first attempted to cover up the seriousness of this attack.

The White House, however, used the attack to blast Pakistan for not taking stronger action against the Haqqani network.

I’m sick of the Army’s top brass. I have a further story below that will make your stomach churn. Officials said they did not try to play down the severity of the attack.

Meanwhile, at least three other American soldiers died in an attack by a suicide bomber, with an interpreter and 17 Afghan soldiers dying in the same incident.

And on Thursday, the Taliban attacked a lake resort outside Kabul, mostly used for wedding receptions and private parties, killing 20 before the seven attackers were killed. The Taliban said they did it because alcohol was on the premises and there was prostitution.

Pakistan: Relations continue to go from bad to worse between Washington and Islamabad. Our diplomats on the scene are being increasingly harassed, as are aid workers, and the government itself appears increasingly on the verge of collapse as it battles it out with the Supreme Court while the military waits in the wings.

This week the top court dismissed the prime minister, Gilani, from office for failing to investigate President Zardari for corruption; Gilani having claimed the charges against Zardari not only dated back to the 1990s, and were never proved, but that the president had executive immunity. The court, though, ruled Gilani in contempt. In dismissing him it was in effect a judicial coup.

Then Zardari picked another fellow to replace Gilani and he was arrested the day after being nominated because of his alleged links to a drug deal involving the illegal importation of ephedrine while he was health minister, a charge he denies.

Editorial / Wall Street Journal

“Pakistan can ill afford this political wrangling as the economy falters and terrorist groups gain strength. Public confidence in democratic institutions, shaky to begin with, is in free fall, and the middle class continues to emigrate. Pakistan has defied predictions of failed statehood before, but testing its luck again with another undemocratic transition is foolhardy.”

Israel: As if the Israelis didn’t already have enough problems on their hands, a string of attacks along the Sinai border with Egypt claimed at least seven lives as infiltrators from Egypt targeted various military-related facilities and vehicles. There has been a total lack of security in the Sinai since the revolution went down.

Saudi Arabia: Crown Prince Nayef, heir to the Saudi throne, died. He was the country’s chief enforcer against dissent and led the crackdown against terrorists in the wake of 9/11. He was interior minister for four decades. [Oh, the secrets he kept.]

But Nayef’s death threw into question who would replace 88-year-old King Abdullah (or is it 89, I saw both ages), who could himself die at any minute, Abdullah not being in the best of health, let alone you’d think 88 or 89 would fall under some kind of term limits.

Well, the Saudis, or rather the Al Saud family that rules the kingdom, selected Prince Salman to be the new heir, not to be confused with King Salmon, but I digress. Mr. Salman is 76, but a sprightly lad who is said to be a bit more liberal, and until the United States is truly energy independent, I have no problem with a bunch of hardliners ruling Saudi Arabia, as long as they keep producing that black gold, know what I’m sayin’? I mean, better the House of Saud than the House of Terror like they have over across the Persian Gulf in Iran.

The Wall Street Journal, in an op-ed by Karen Elliott House, did have some interesting tidbits about the House of Wax, along with former Journal publisher Ms. House’s own opinions.

“The kingdom faces multiple problems: Unemployment is 40% among 20- to 24-year-olds, 40% of Saudis live on less than $1,000 a month, the kingdom’s one-dimensional economy earns nearly 80% of its revenues from oil, and 90% of all workers in its private sector are foreigners. Moreover, the senior Al Saud rulers have an average age exceeding 80 while 60% of the country’s population is below 20 years of age….

“Clearly, a growing number of frustrated Saudis no longer either respect or fear their leaders. Saudis are not demanding democracy; only transparent, efficient, honest government. They want a leader who can make the sclerotic system function better. Yet, much like the Soviet Union in its final years when power passed from one old man to another – Brezhnev to Andropov to Chernenko – in quick succession, the Saudi royal family continues to pass the crown from one aged son of the founder to the next.

“Recall, the Soviet Union was widely assumed to be stable. In the end, it proved brittle. Saudi succession looks very much like a movie we’ve seen before.”

Turkey: Foreign affairs expert Walter Russell Mead, in an op-ed for the Wall Street Journal:

“(The) euro crisis has reinforced Turkey’s decision to drop its long courtship of Europe and become an independent actor. Europe looks less and less to the Turks like a model to imitate and more and more like a fate to avoid. Turkey in any case would like to replace the EU as a major political and economic force in the Arab world, and it is likely to use this period of European introspection and preoccupation to advance its agenda.”

Mr. Mead also says the euro crisis could lead to instability in the Balkans. Gee, where else have you seen that?

China: First, Philippine President Benigno Aquino ordered two of his navy’s ships to pull out from a disputed shoal in the South China Sea (Scarborough Shoal…not to be confused with Scarborough Fair), and this pleased China greatly.

“The Chinese side has been urging the Philippine side to take measures to de-escalate the situation,” a Chinese embassy spokesman said in a statement, China claiming the territory as its own.

But also related to the South China Sea, Vietnam’s legislature just passed a law, long debated, claiming sovereignty over two other bunches of rocks, the Paracel and Spratly Islands, which China says are indisputably theirs as well. China basically says everything in the South China Sea is theirs.

And then the Philippines said, hold on a minute…we removed our ships from Scarborough Shoal, but China hasn’t removed theirs, which was part of the agreement (China wanting to pillage the waters for more seafood), so the Philippines said it might send its warships back.

Separately, China has offered some economic sweeteners to Taiwan, specifically pledging about $90 billion in credit to Taiwanese companies looking to move some of their operations to the mainland. Fujian province, which my moribund specialty chemical company holding calls home, would be a prime target…which is a major reason why I invested in the company in the first place, because of the geography!

Japan: Last weekend the government announced it was restarting two nuclear reactors after warning of widespread power shortages this summer otherwise, which could undermine Japan’s economic recovery. Before all the nuclear power stations were shut down after the March 2011 chain of disasters, Japan received 30% of its electricity from nuclear reactors, but a poll taken by the Pew Research Center showed 70% of Japanese wanted nuclear power eliminated or reduced, while 80% were distrustful of the government to do the right thing and be candid about safety and environmental concerns. [Carol J. Williams / Los Angeles Times]

France: Back to the parliamentary election here, what a mess President Hollande has on his hands. Recall last week I noted that his current partner, 47-year-old Valerie Trierweiler, endorsed a candidate for parliament who was going up against Hollande’s former partner of 27 years, and mother of their four children, the 58-year-old Segolene Royal, a long-time left-wing politician of major standing who ran for president in 2007 and was considering running for president again before losing the party vote this election cycle.

Well Royal lost…to the Center Right candidate endorsed by Trierweiler. Here Royal thought she would become Speaker of parliament! Zut alors! [Holy blank!]

“I will continue to weigh upon national politics,” said the not so Royal afterwards. She also strongly hinted she will go after the job held by Martine Aubry, the current head of the Socialist Party.

While Segolene didn’t mention Valerie by name, let’s just say Francois has a little battle on his hands, including the report that his four children have cut off relations with Trierweiler.

Hollande has yet to make a public statement over the spat, preferring to revel in his overall party victory.

But as Ms. Royal added about her defeat, quoting Victor Hugo: “Traitors always pay for their treachery in the end.”

If I were Francois, I’d sleep with one eye open from here on. Trierweiler will obviously do the same.

One other note on the French election, Marine Le Pen, leader of the far-right National Front (or FN) lost her race for a seat in parliament, though she’s contesting the vote. But the FN picked up two seats for the first time since the 1980s, so Le Pen described the results as an “enormous success” for her party. One of the two victors is someone I suspect we’ll be hearing quite a bit from herself over the coming decades, Marion Marechal-Le Pen, Marine’s 22-year-old niece.

Nigeria: Just another week in this hellhole. Islamists Boko Haram, doing what they do best, attack Christian churches, did just that on Sunday, killing at least 16, which then unleashed a wave of revenge attacks that killed more than twice as many. 

By the way, Boko Haram, or al-Qaeda West, has killed more than 1,000 in attacks since July 2009.

Random Musings

--From late 2009 to 2011, Bureau of Alcohol, Tobacco, Firearms and Explosives officials allowed some 2,000 guns to “walk” from the U.S. to Mexico in what proved to be a failed sting operation. Normally, in such a gun op, the weapons would be swiftly interdicted, but ATF agents failed to do so this time and two of the weapons were later found near the place where Border Patrol agent Brian Terry was gunned down in a December 2010 shootout.

When queried by the House Oversight Committee, the Justice Department in Feb. 2011 at first denied what was called “Fast and Furious” even existed (as put forth in a letter by assistant Attorney General Ron Welch), then, ten months later, the Attorney General’s office conceded there was such an operation but AG Eric Holder has largely clammed up about the whole fiasco, though he claims his office has released thousands of pages of requested documents to Republican Darrell Issa’s committee, and indeed it has, but tens of thousands of pages have yet to be turned over.

The Republicans are now threatening to hold the AG in contempt of Congress and the oversight committee did vote 23-17 to do so, though Speaker John Boehner hasn’t decided yet whether to take the extraordinary step of bringing the action before the full House, this as President Obama has now claimed “executive privilege” at the behest of Mr. Holder.

The Wall Street Journal editorial board just wishes three questions could be asked.

“(1) Did White House officials know and approve Fast and Furious before it went awry, and did they advise the Justice Department on how to respond to Congress’ investigation into the operation’s failure? (2) How can the president invoke a privilege to protect documents he and the White House are supposed to have had nothing to do with? (3) And what is so damaging or embarrassing in those documents that Mr. Obama is now willing to invest his own political capital to protect it from disclosure – at least until after the election?”

--Robert Samuelson / Washington Post

“We pay our presidents for judgment, and President Obama committed a colossal error of judgment in making health-care ‘reform’ a centerpiece of his first term. Ahead of the Supreme Court’s decision on the Affordable Care Act (ACA) – and regardless of how the court decides – it’s clear that Obama overreached. His attempt to achieve universal health insurance coverage is a massive feat of social engineering that, by its sweeping nature, weakens the economic recovery and antagonizes millions of Americans.

“Let’s review why the ACA (‘Obamacare’) is dreadful public policy:

“(1) It increases uncertainty and decreases confidence when recovery from the Great Recession requires more confidence and less uncertainty: The ACA isn’t highly popular; the Kaiser Family Foundation finds that 44% of Americans now view it unfavorably and 37% favorably….

“(2) The ACA discourages job creation by raising the price of hiring. This is basic economics. If you increase the price of labor, companies will buy less of it….

“(3) Uncontrolled health spending is the U.S. system’s main problem – and the ACA makes it worse…..

“(4) Obama’s program also worsens the federal budget problem. Driven by Medicare and Medicaid, health care already exceeds one-fourth of the budget and is headed toward a third. It’s the crux of the problem….

“(5) The ACA discriminates against the young in favor of the old. Government policy already does this through payroll taxes that have young workers subsidizing Social Security and Medicare benefits….

“Cost control should have been Obama’s priority….

“To all the ACA’s substantive defects is now added a looming political and constitutional firestorm. Whether the Supreme Court upholds the whole law, strikes it all down or discards only parts, anger and outrage will ensue. The court may be accused of usurping legislative powers or of cowering before White House intimidation. The ACA has become an instrument of the political polarization that the president regularly deplores.”

--In the latest AP-GfK poll, only 3 in 10 say the country is headed in the right direction, while among registered voters, President Obama leads Mitt Romney 47-44, a statistical dead heat. Obama’s overall approval rating is 49%.

If ever there was a year when a viable third party candidate had a chance it was 2012.

--According to the Census Bureau, the country’s Latino population has increased from 35 million in 2000 to 50 million in 2010. But now President Obama is riding a wave of enthusiasm among this group because of his decision to let hundreds of thousands of illegal immigrants stay in the country and work, while Mitt Romney is tongue-tied on the issue; make that, Mr. Romney has been flat-out pathetic. Calling Obama’s move too short term isn’t enough. During the primary season he said he would veto the Dream Act giving legal status to some children of illegal immigrants, but now that Obama co-opted Republican Senator Marco Rubio’s idea on the topic, Romney has been flailing and flopping like a flounder that suddenly finds itself on dry land.

--Steven Camarota, a researcher with the nonprofit Center for Immigration Studies, told the Washington Post that the Obama administration was not taking into account his new measure’s “probable impact on competition for jobs at the low end of the economic scale, where chronic unemployment is highest. Among Americans with less than a high school education, he said, the jobless rate is 13%.”

“It doesn’t seem the administration is considering the cascading consequences,” Camarota said. “What does this mean for unemployed Americans who will be competing for jobs with a million-plus people who can now apply for work authorization? Is this really a good idea?” 

--I agree with those now saying that Chris Christie would be the perfect keynote speaker at the GOP convention. Must see TV. I’m not sold yet that he’s the best Veep selection, however, but the worse Romney looks, the more he’ll need Christie’s energy.

--Commerce Secretary John Bryson, he of the seizure that caused him to hit three cars and then leave the scene of the accidents, resigned, saying he “could be a distraction” to the president.

You were a distraction, Mr. Bryson, because no one had/has a freakin’ clue what exactly happened!

--From Kristin Davis / Army Times

“One unfortunate effect of the massive explosion that killed Marine Sgt. Daniel Angus in January 2010 was that his arm had been fused to his body at a 90-degree angle. Port Mortuary workers at Dover Air Force Base, Del., removed the Marine’s arm in order to fit him into a uniform without first seeking permission from his family.

“But the Anguses never planned to view the body, deciding before they got to Dover to have him cremated. They’d signed official paperwork to authorize it. No one mentioned that the arm had been removed until November (2011) – nearly two years later. The Anguses wanted to know why anyone had dressed their son in a uniform in the first place. And why they waited so long to tell them.

“Months later…the Anguses say they still have yet to receive an apology from anybody involved in the Dover scandal.

“What they do have to show for their grief from the Air Force is a thick binder detailing the things that had been done to Daniel at Dover – grisly details they say they could have done without.

“The Air Force had determined in May 2011 that no regulations or laws were broken when mortuary officials failed to seek permission from the Angus family before sawing off his arm. An independent federal agency, the Office of Special Counsel, castigated that conclusion, saying the service had stopped short of accepting accountability.”

Editorial / Army Times

“The Air Force offered explanations for how it so grossly mishandled this sacred mission. Senior officials, including Chief of Staff Gen. Norton Schwartz, appeared before the media to lament the mortuary’s missteps. They promised accountability and publicly punished those responsible.

“But Air Force leadership never apologized to the Angus family. They want that, and deserve that….

“If Air Force leaders thought about how they would feel if this had been their son, they just might call the Anguses to apologize.

“For refusing to do so, they should be ashamed.”

I have read, and passed on, too many stories like this in the last few years. It’s beyond disgraceful. This is not how a great country acts.

--More on the public-private sector debate…from Mort Zuckerman / U.S. News Weekly.

“Just think, in 2008, the average wage for the 1.9 million federal civilian workers was more than $79,000, compared to an average of slightly over $50,000 for the nation’s 108 million private sector workers (measured in full-time equivalents), even though most federal workers cannot bargain over their pay and benefits. Ninety percent of government employees receive lifetime pension benefits versus 18 percent of private employees, not to mention annual salary increases and earlier retirement with instant, guaranteed benefits paid for with the taxes of the very same private sector workers. About 84 percent of state and local government employees have access to defined-benefit plans that are no longer widely available in the private sector….

“There is no quick fix to deal with the legacy of billions in unfunded liabilities. But there must be a fundamental rethinking of the public workforce and how we negotiate their contracts. One solution would be to take labor negotiations out of the hands of vulnerable legislators and assign them to independent commissions. Americans cannot maintain their essential faith in government if there are two Americas and the private sector subsidizes disproportionate benefits for a public sector elite.”

--We note the passing of Rodney King, whose 1991 videotaped beating by LA cops touched off one of the nation’s worst race riots the following year upon the acquittals of the four officers involved; riots that lasted three days and left 55 people dead, and more than 2,000 injured. King, who suffered from his various demons the ensuing two decades, drowned in his own pool.

--Jerry Sandusky was convicted on 45 of 48 counts of child sex abuse.

--Asian-Americans are now the fastest-growing racial group and have a median household income of $66,000 compared with the U.S. median of $49,800, according to a report by the Pew Research Center. Said Paul Taylor, the center’s executive vice president, “These aren’t the poor, tired, huddled masses that Emma Lazarus described in that inscription on the Statue of Liberty.”

--This is a little disconcerting. According to new research out of the University of California, San Francisco, the use of CT scans has tripled since 1996 – “a concern, since CT devices tend to emit much more radiation than conventional X-rays in order to take detailed pictures of internal organs. For children, the risk may be especially high. A recently released study by a group of international researchers, which took place over 23 years, found that otherwise healthy children who received CT scans after falls or accidents or to diagnose infections were three times as likely to develop brain cancer and four times as likely to be diagnosed with leukemia as those who opted out of the scans.” [Alice Park / TIME]

--In a highly controversial study, researchers have identified five genetic changes that could allow the H5N1 bird flu virus to start a pandemic, though the virus needs to mutate to the point where it becomes airborne as opposed to it currently being passed on to humans only by close contact with an infected bird.

What’s controversial is that the U.S. government and others didn’t want the research published (in this case the journal Science) because they contend it gives terrorists a playbook for perfecting a virus of pandemic proportions, while researchers say this is improbable.

--WikiLeaks founder Julian Assange is seeking political asylum inside the Ecuadorian Embassy in London in another attempt to avoid extradition to Sweden over alleged sex crimes. Yoh, Julian…if you’re innocent, have the guts to face the charges. You see, folks, Mr. Assange, through his legal team, threatened me a few weeks back. Maybe when I return I’ll reveal some of the letter I received.

Ecuadorian President Rafael Correa, himself a major creep, has defended Assange which is why Assange feels he can convince the place to take him in.

However, Assange faces arrest for violating his bail terms in Britain.

--On a lighter note, I’ve returned to the Eugene, Oregon area for a third time in four years and second time for the U.S. Olympic Track and Field Trials. Halsey, where I’m staying, is about 25 miles north of Eugene.

And I’m staying at an interesting truck stop, though it seems some track fans like me have just checked in. There’s a 24-hour restaurant attached to the motel, and a separate bar, so guess where I’ll be spending some of my time?

Actually, I’ll be at the track a lot (Historic Hayward Field), as was the case Friday night. And I have already been using the local regional high school’s track for my exercise; a classic rural facility. The towns the school services are very small so the school is actually for seven grades, the Central Linn Cobras. Gotta get me a t-shirt. Great place to run…no one around, no sound except the birds. Mountains as your backdrop.   Very peaceful.

Far more on the Trials next time, including the power of Phil Knight of Nike fame.

---

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

God bless America.
---

Gold closed at $1566…now up just $1 on the year…disappointment over no QE3 from the Fed
Oil, $79.76…lowest weekly close since Sept. 30

Returns for the week 6/18-6/22

Dow Jones -1.0% [12640]
S&P 500 -0.6% [1335]
S&P MidCap -0.4%
Russell 2000 +0.5%
Nasdaq +0.7% [2892]

Returns for the period 1/1/12-6/22/12

Dow Jones +3.5%
S&P 500 +6.2%
S&P MidCap +4.2%
Russell 2000 +4.6%
Nasdaq +11.0%

Bulls 37.2
Bears 25.6 [Source: Investors Intelligence]

Have a great week. I’ll be coming to you again from Halsey next time.

Brian Trumbore