Stocks and News
Home | Week in Review Process | Terms of Use | About UsContact Us
   Articles Go Fund Me All-Species List Hot Spots Go Fund Me
Week in Review   |  Bar Chat    |  Hot Spots    |   Dr. Bortrum    |   Wall St. History
Week-in-Review
  Search Our Archives: 
 

 

Week in Review

http://www.gofundme.com/s3h2w8

AddThis Feed Button

   

07/21/2012

For the week 7/16-7/20

[Posted 6:00 AM ET]

The Eurozone Crisis, continued

It was a horrible week for Planet Earth on so many levels; Syria’s descent into hell has spawned a new destabilizing refugee crisis, an Iranian-inspired terror attack on Israelis in Bulgaria for which Israel must respond, the mass shooting at a Colorado movie theater, and the still growing drought in this country with dour long-term forecasts and consequences.

But from an economic standpoint the eurozone crisis still commands center stage and the situation in Spain worsened considerably this week as the government of Mariano Rajoy pushed through another round of austerity programs that led to protests, many violent, in 80 Spanish cities, a calculation by the Bank of Spain that the nation’s banks have $191 billion in bad loans on their books, the release that second-quarter home prices fell 8.3% vs. year ago levels, the continuing flow of bank deposits out of the country, the fact that the banks borrowed a staggering $446 billion from the European Central Bank in June, accounting for 30% of the central bank’s lending, or $60 billion higher than in April because no one, especially traditional lenders such as Germany’s financial institutions wants to give Spain’s banks another euro. Needless to say, none of this is conducive to economic growth.

Then you had the request from one of Spain’s regions, Valencia, ground zero for the nation’s real estate bubble, for emergency loans because they can’t refinance their debt, ditto Catalonia, and the government now says that it needs 18 billion euro for an emergency loan package for the regions; about a third of which will come from tapping the lottery, while the other 12 billion euro has to be raised in the debt market in an increasingly dire interest rate environment.

If you wanted to be positive on Spain vs. Italy, defenders of the former would point to the fact Spain’s debt funding requirements were far less than Italy’s, 86 billion euro for 2012, specifically. Well make that 98 billion.

Is it any wonder then that even though the euro-17 finance ministers approved the 100 billion euro bailout for Spain’s banks on Friday, interest rates on Spanish paper soared? Like to 7.28% on their 10-year, this after it auctioned five-year paper at 6.45% and two-year scrip at 5.20%. [Compare that to the yield on the two-year in the U.S., a full 5% more.] Of course it also didn’t help when the country’s budget minister said the nation is running out of cash.

“There is no money in the public coffers. There’s no money to pay for public services.”

Spain’s stock market, duly stressed, crashed 6% on Friday (Italy’s was down 4.4%) as shares in Spanish banks collapsed anew.

But back to the actual bailout of Spain’s banks, earlier, German lawmakers voted 473-97 in favor of it after Finance Minister Wolfgang Schaeuble gave assurances Spain would remain liable for the aid and parliament will be consulted on each step of the rescue. Schaeuble told lawmakers that Spain faced “an emergency situation” and Germany has “a strong interest” to support the country’s austerity and restructuring plan by helping the banks, adding, “Spain is making the application, Spain is getting the money for bank recapitalization and the Spanish state must guarantee the funds.”

Schaeuble also said, “There’s doubt in the markets that the Spanish state can solve the problems in its banking sector without putting its own solvency at risk. That makes the problems in the Spanish banking sector a problem of the eurozone’s financial stability.”

But on a different matter, the European Stability Mechanism that is going to be the permanent bailout fund for the euro-17, Germany’s top court said it won’t rule on whether the idea is constitutional until Sept. 12, more than two months after it held a hearing on the ESM. As for Chancellor Angela Merkel, she isn’t budging on the idea of more control for Germany over member states and their finances. Without supervision, there is no solidarity, or potential joint burden-sharing.   But the new banking union, with the all-powerful supervisor, isn’t going to be finalized until 2013, it seems all too clear.  

For now, Spain is going to get the first 30 billion of the 100 billion euro bank recapitalization shortly, but how much goes where has to wait until mid-September and the release of the results from an audit of the banks.

Spain’s government also concluded that the nation’s economic recession will continue through 2013 as opposed to earlier forecasts of growth.

Separately, the International Monetary Fund updated its annual growth forecasts and continues to maintain the eurozone will contract 0.3% in 2012 while lowering its 2013 forecast from growth of 0.9% to growth of 0.7%. The IMF also warned that Europe could suffer a bout of deflation, and said the eurozone was “unsustainable” in its current form.

The IMF cut its global outlook a few ticks to 3.5% in 2012 and 3.9% in 2013 (2.0% and 2.3%, respectively, in the U.S. for 2012 and 2013), but this includes growth of 8.2% and 8.8% in China and 6.9% and 7.3% in India.

One other item on the eurozone, an MRB poll in Greece shows that three-quarters of the people want Prime Minister Samaras to insist on a renegotiation of the country’s bailout. Fat chance of that happening at this point given Spain’s new round of problems.

Turning to the U.S., Federal Reserve Chairman Ben Bernanke gave his semi-annual testimony to Congress and said, “The U.S. economy has continued to recover, but economic activity appears to have decelerated somewhat during the first half of this year,” adding manufacturing, household spending and business investment had all weakened. Only housing showed signs of life, but then later in the week we had a poor existing home sales report.

Bernanke’s comments kind of flew in the face of the Fed’s own report on regional economic activity, the “Beige Book,” which offered the economy “continued to expand at a modest to moderate pace in June and early July.”

Bernanke added, “Given that growth is projected to be not much above the rate needed to absorb new entrants to the labor force, the reduction in the unemployment rate seems likely to be frustratingly slow.”

Well, traders took all this to mean that the Fed will be announcing a new round of quantitative easing come the July 31-Aug. 1 meeting, with Bernanke himself saying the Fed stood ready to take further action if necessary.

But you’re nuts if at this point you think anything the Fed does can have a very positive impact with interest rates already at zero, but I grant you it might prevent a crash.

I’ve been forecasting an intense decline in our markets that will be precipitated by a refocus on our own fiscal train wreck and you’ve seen how an offshoot of that, the “fiscal cliff,” is certainly now at the forefront of conversation with everyone pegging their hopes on a lame duck session of Congress being able to come up with a satisfactory compromise, or grand bargain, to which I’d say no way. The question is, will the markets accept a few interim tweaks on both the revenue and spending side and then assume the grand bargain can be reached with a new Congress, and possibly president, in the first quarter.

But I’ve also said the market downdraft is coming soon…and I see no reason to change my opinion. You never know what the trigger will be. It could be a geopolitical event as much as something like a renewed debt-ceiling debate and debacle.

At the same time, you’ve seen with this week’s earnings reports that while some companies beat Wall Street’s expectations on the bottom line, revenue growth is virtually non-existent, especially in the financial sector. Oh, sure, the likes of Citigroup and Goldman Sachs may have earned more than analysts forecast, but the bottom line was far less than year earlier levels, virtually across the board when it comes to the banks, and the revenue comparisons are pathetic.

On the tech side, IBM once again handily beat on the bottom line but its revenues declined 3%. Intel lowered its guidance, and not just by a little, due to “softness” in both the U.S. and Europe, with results in China falling short. General Electric said conditions remained “challenging” as its profits fell 18% over year ago levels.

I have some earnings specifics down below but if you’re optimistic on the second half you really should visit your family doctor.

Oh, I know…we have an election coming up and that could generate some optimism as we get closer to it, but I suspect not.

PIMCO’s Bill Gross said the nation is “approaching recession when measured by employment, retail sales, investment and corporate profits.”

Bill’s colleague at PIMCO, Mohamed El-Erian, said in an op-ed for the Financial Times:

“(Further moves by the Fed) will not have a durable beneficial impact, especially if other policymakers remain missing in action. Indeed, the advantages of another round of unusual Fed activism are declining while the risk of both collateral damage and unintended consequences is material and growing.

“The Fed is stuck in a widening dichotomy between the need for a policy response and an increasingly impotent tool kit. I suspect that Bernanke and his colleagues recognize that their policy effectiveness is waning….

“In the meantime, too many politicians seem willing to maintain the myth that the Fed can lead the domestic economy out of its current malaise. It cannot. The best it can do is slow a de-leveraging that, in the absence of proper growth dynamics, eats away at the traditional resilience and entrepreneurship of the U.S. economy.”

Lastly, Richard Ravitch, a former lieutenant governor of New York, and Paul Volcker, former chairman of the Federal Reserve, issued their report out of the State Budget Crisis Task Force, warning:

“The ability of the states to meet their obligations to public employees, to creditors and most critically to the education and well-being of their citizens is threatened,” adding that services have been severely cut, even as “states and municipalities have promised an estimated $1 trillion in health benefits – that most have not started saving for – to their retirees.” [New York Times]

Street Bytes

--Stocks edged higher despite the lackluster news on the earnings front. Actually, it was more a case of no disasters vs. expectations, but at week’s end we were back to euro concerns dominating. The Dow Jones closed at 12822, up 0.4%, while the S&P 500 and Nasdaq rose 0.4% and 0.6%, respectively.

--U.S. Treasury Yields

6-mo. 0.14% 2-yr. 0.20% 10-yr. 1.46% 30-yr. 2.54%

Owing to the issues in Europe, the yield on the 10-year is back down near its all-time low of 1.44% set on 6/1, while the two-year is essentially at its record lows again. Some of the week’s economic reports weren’t exactly of the growth variety, either.

Retail sales for the month of June fell a greater than expected 0.5%, while industrial production for the month was up 0.4%. June housing starts were better, but existing home sales were not vs. expectations. The median home price on an existing home did hit $189,400, the highest level since October 2008, but this is because more high-end homes were sold, as well as a bit of seasonality. The bigger test will be for prices this coming fall and winter, though I agree we officially bottomed in the sector a few months ago. I’ll be doing some work on housing for my “Wall Street History” link this coming week as I do each quarter.

June consumer prices were unchanged, up 0.2% ex-food and energy. For the 12 months, the CPI is up 1.7%, 2.2% on core.

--The Chinese stock market, as measured by the Shanghai Composite, hit its lowest level since March 2009 on continuing fears of a hard landing. Premier Wen Jiabao warned, “It should be clearly understood that the momentum for a stable rebound in the economy has not yet been established,” though at the same time he offered that measures to stabilize growth are “bearing fruit.” Foreign direct investment for the month of June was down 6.9% from year ago levels.

But new home sales in June surged 41% from the previous month as homebuyers seemed to believe that after a year of austerity measures on the property front, the government was likely to relax them and prices would rise, so folks were trying to beat the punch. Home prices did rise slightly in Beijing and Shanghai compared to May. At week’s end, however, Wen reiterated there would be no relaxation of property curbs.

The Wall Street Journal reported that China’s labor market is very tight, with wage income for urban households rising 13% year-on-year in the first half. A labor ministry survey pointed to demand for workers outstripping supply by a record amount.

--A top economist at the IMF, Peter Doyle, resigned after 20 years and blasted the “tainted” leadership in a letter to the executive board, writing of “incompetence,” “failings” and “disastrous” appointments for the IMF’s managing director, stretching back 10 years.

“This fact is most clear in regard to appointments for managing director which, over the past decade, have all-too-evidently been disastrous.

“Even the current incumbent [Christine Lagarde] is tainted, as neither her gender, integrity, or elan can make up for the fundamental illegitimacy of the selection process.”

Doyle is seemingly alluding to the long-held criticism that the IMF head is always a European and the World Bank chief an American.

--The drought situation is only expected to get worse, with some forecasters saying there will be no sustained relief until November. The National Drought Mitigation Center says 61% of the country (not including Alaska and Hawaii) is in drought compared to 29% a year ago.

Iowa and Illinois are the top corn-producing states and while Iowa isn’t in good shape, Illinois’ situation is dire, as is the case in Indiana, fifth-largest. About 61% of Indiana’s corn crop is rated poor or very poor – the worst of any major corn-producing state. It’s the worst there since the 1988 drought.

Meanwhile, forecasters are predicting El Nino will develop over the next few months, the pattern of periodic warming of the tropical Pacific Ocean water that affects weather worldwide. Should this come to pass, it essentially kills the Atlantic hurricane season as a result of the strong upper-level winds and high wind shear that develop in the tropical Atlantic. 

After four named storms in May and June, July has seen not one as yet.

[In Ireland, the problem is rain…far too much of it, with crops rotting in the fields.]

--With the drought, corn and soybean prices hit record highs, while early wheat harvests in Russia and Ukraine are 40% below last year’s levels and sugar prices are soaring due to excessive rains in Brazil, which accounts for more than 50% of world sugar exports. So global food prices are headed higher rapidly.

--Bloomberg reports that Goldman Sachs and Morgan Stanley are among the financial firms that may bring lawsuits against their rivals in the Libor scandal. As one analyst said, Goldman and Morgan Stanley may be required to pursue restitution for their clients as much for their own potential claims. Traders at Deutsche Bank, HSBC and Credit Agricole are being examined for links to a former key Barclays employee, while UBS, Citigroup, JPMorgan Chase and Credit Suisse have said they are being investigated.

Separately, many of these institutions announced they will be cutting jobs further.   According to a survey by the Wall Street Journal, Bank of America, Citigroup, Wells Fargo, Goldman and Morgan Stanley together have cut over 30,000 positions in the past 12 months. Goldman announced it would be laying off more experienced employees in favor of junior investment-bankers or “campus hiring.”

--According to a U.S. Senate committee, HSBC provided a conduit for “drug kingpins and rogue nations,” including Iran and Syria. The bank said it was in the process of closing 20,000 accounts in the Cayman Islands. HSBC accepted more than $15 billion in cash from subsidiaries in Mexico, Russia and other countries at high risk of money laundering but failed to monitor these bulk cash transactions. The Mexican subsidiary, HBMX, was warned on at least two occasions by Mexican authorities that drug money was probably being laundered through its accounts.

No doubt, the banking industry is going through a rather rough stretch as its reputation hits rock bottom.

--Ireland’s big banks – AIB, EBS, Bank of Ireland, Ulster Bank and Permanent TSB – are going to be closing one in four branches within two years, about 200 of 840, which will leave hundreds of towns without a bank, let alone thousands of job losses. One big problem is Ireland has dreadful broadband service, which makes the situation even worse as in many towns online banking isn’t an option.

--In writing off the value of some of its online advertising business, Microsoft reported its first quarterly loss in its history, $492 million compared with a profit of $5.9 billion a year ago. Ex- the special charges, it exceeded earnings estimates though revenues, up 4%, were just inline. For the company, though, it’s all about Windows 8, which is launching in October and for which there are high expectations it will lead a new wave of tech spending, with the operating system working on tablet computers, an area where Microsoft is also introducing its own product, the Surface. And…it’s releasing a new version of the Office system later in the year as well.

--Google reported revenue that was up 35% in the quarter, to $12.2 billion, even though it continues to make less money on click-throughs. Ad inventory is the difference, up 42%.   The second-quarter earnings at $10.12 per share beat the Street.

--Yahoo poached Google’s Marissa Mayer in naming her the company’s new chief executive. Mayer, well known in the sector, was one of Google’s first hires and Yahoo is looking to her to reinvigorate the brand and improve morale. Ms. Mayer is already gaining publicity because of the fact she is six months pregnant, which makes for interesting timing…just sayin’.

With 700 million users, Yahoo still draws one of the largest audiences on the Web, with Yahoo Sports and Yahoo Finance among the leaders in their categories. But Yahoo has been losing out on ad spending to the likes of Facebook. The company reported that revenue for the second-quarter was flat and net income fell 4% from the same quarter a year ago.

Ms. Mayer has been credited with shaping Google’s “look and feel” and was recently in charge of such areas as Google Maps.

--Shares in Facebook fell after a report from Capstone Investments said the number of users declined over the past six months in the U.S., while overseas usage was little changed or down in 14 of 23 nations.

--President Obama, in an op-ed for the Wall Street Journal, on the threat from cyberterror.

“So far, no one has managed to seriously damage or disrupt our critical infrastructure networks. But foreign governments, criminal syndicates and lone individuals are probing our financial, energy and public safety systems every day. Last year, a water plant in Texas disconnected its control system from the Internet after a hacker posted pictures of the facility’s internal controls. More recently, hackers penetrated the networks of companies that operate our natural-gas pipelines. Computer systems in critical sectors of our economy – including the nuclear and chemical industries – are being increasingly targeted….

“Taking down vital banking systems could trigger a financial crisis. The lack of clean water or functioning hospitals could spark a public health emergency. And as we’ve seen in past blackouts, the loss of electricity can bring businesses, cities and entire regions to a standstill.

“This is the future we have to avoid. That’s why my administration has made cybersecurity a priority, including proposing legislation to strengthen our nation’s digital defenses. It’s why Congress must pass comprehensive cybersecurity legislation….

“It’s time to strengthen our defenses against this growing danger.”

--According to a report by S&P Dow Jones Indices, corporate and public pension funds are underfunded by an estimated $578 billion, meaning they only had 70% of the money needed to meet retirement obligations, as reported by Marc Lifsher of the Los Angeles Times.

--A disturbing situation in India this week as workers at one of its auto factories, a Maruli Suzuki plant, rioted, attacking supervisors and setting a fire that killed one company official while injuring scores more. The workers’ union had demanded the reinstatement of a worker who had been suspended for beating up a supervisor.

--Peregrine Financial Group Inc.’s founder, Russ Wassendorf, said he spent most of the money he embezzled, with investigators still trying to figure out what happened to $215 million in allegedly missing customer funds. Wassendorf said he started using client funds as far back as 1993, adding in statements since his arrest that deceiving regulators was “relatively simple.”

--Gretchen Morgenson of the New York Times had a piece on the looming home-equity loan disaster.  Many borrowers who took them down during the boom times now face the later years of their loans when they have to begin paying down principal. Those that haven’t begun to do so beforehand could face a shock. As a report by the Office of the Comptroller of the Currency noted, “almost 60% of all home equity line balances would start requiring payments of both principal and interest between 2014 and 2017,” as Morgenson notes. She goes on to say:

“The amounts owed…climb significantly in coming years. While $11 billion in home equity lines are starting to require principal and interest payments this year, the amount jumps to $29 billion by 2014, the office said. That is followed by a surge to $53 billion in 2015 and $73 billion in 2017. For 2018 and beyond, it’s $111 billion.”

Of course refinancing is a problem for many of the properties underlying the loans with tumbling values and negative equity.

--We note the passing of Stephen R. Covey, 79, author of the 1989 book “The Seven Habits of Highly Effective People: Restoring the Character Ethic” which sold more than 25 million copies worldwide, and also became the first audiobook to sell more than a million copies. Sadly he died of complications from a bicycle accident three months ago.

Covey’s seven nuggets of knowledge natural laws are:

1. Be proactive
2. Begin with the end in mind
3. Put first things first
4. Think “win-win”
5. Seek first to understand, then to be understood
6. Synergize
7. Sharpen the saw; that is, undergo frequent self-renewal. [Douglas Martin / New York Times]

--And long-time Wall Street strategist and hedge-fund operator Barton Biggs died. He too was 79. As the Wall Street Journal aptly put it, Biggs “typified a class of Wall Street investment strategists who seemed smarter, wittier and more creative than anyone else in the room,” others including Byron Wien and Elaine Garzarelli, who would move markets, particularly in the 1980s and 1990s, with their weekly commentaries.

--Deflation Alert: As the Wall Street headlined, “Lobster Glut Slams Prices.”

“Prices at the dock (in Maine) have fallen to as low as $1.25 a pound in some areas – roughly 70% below normal and a nearly 30-year-low for this time of year.”

I feel for the lobstermen, who like farmers in the Midwest this year are questioning whether they can continue in the business, but for lobster lovers, it’s enough to make you want to take a special trip to Maine and just stuff your face.

Foreign Affairs

Syria: As U.S. Secretary of Defense Leon Panetta said following the bombing of a Syrian government security council meeting that practically decapitated the Syrian regime, the situation is “spinning out of control.” The defense minister, the head of the crisis cell, Bashar al-Assad’s brother-in-law (the effective No. 2) and the intelligence chief were all killed. It’s still unclear whether the bomb(s) was planted (some say literally in a flower arrangement and a box of chocolates) or it was a suicide attack but to say the least, Assad and his remaining inner circle can’t trust anyone. This was incredibly well-planned and perfectly timed, with various groups claiming responsibility though they may have been acting in tandem.

By the time you read this, who knows what the situation will be, especially regarding Assad, who was shown swearing in the new defense minister on state TV and then disappeared. Government forces do appear to have beaten back the rebels in parts of Damascus as of Friday in intense fighting that has claimed hundreds of lives.

One thing is certain, though. Concerns over Syria’s chemical weapons stockpile are even greater today than they were before the blast. Some say the weapons had been distributed among 45 sites and they’ve been weaponized in aerial bombs, artillery shells and missile warheads including for use with Scuds.

As the Washington Post editorialized:

“Israel understandably sees the chemical weapons and missiles in Syria as a serious threat. But any Israeli intervention could inflame an already deteriorating situation. One reason for the United States and others to begin planning now for what to do with Syria’s chemical weapons is to keep Israel from acting unilaterally. But the larger reason is to head off a nightmare scenario, when an artillery shell filled with sarin goes missing in the middle of a civil war.”

[Israeli Defense Minister Ehud Barak on Friday said, “I have instructed the military to increase its intelligence preparations and prepare what is needed so that (if necessary)…we will be able to consider carrying out an operation,” specifically should Syria hand the weapons over to Hizbullah.]

As for the United Nations’ efforts, once again Russia and China vetoed another resolution that would impose global sanctions on the Assad regime unless it swiftly implemented Kofi Annan’s peace plan which includes an immediate ceasefire.

Sergei Lavrov, Russia’s foreign minister, said, “Instead of calming the opposition, some partners are fostering a further escalation. It is a dead-end policy to support the opposition. Assad will not go on his own and our Western partners don’t know what to do about it.”

Michael Young of the Daily Star (Beirut) wrote of the occupant of the White House:

“Obama has written himself out of the script, a distant apparition alien to the peoples of the Middle East. But the region remains critical, no matter what the president believes, and it can still bite the world in the rear end. When that happens, the Americans cannot afford to lead from behind. They need to be up front, knowing precisely what they want.”

Douglas J. Feith / Wall Street Journal

“In the 16 months since the revolt began, the Obama administration has neither promoted humanitarian ‘safe zones’ on Syria’s Turkish border, nor provided arms to the rebels. It has not helped establish a no-fly zone, nor has it supported NATO military strikes against Assad’s forces.

“At first, Mr. Obama vainly called for Assad to behave humanely. Eventually, he vainly exhorted Assad to relinquish power.

“All the while, Mr. Obama has looked to the U.N. for answers.”

I’ve argued for over a year now we should have taken the simple step of creating the “safe zones” in coordination with the Turks. Now you have a situation where tens of thousands of refugees, 30,000 alone into Lebanon on Wednesday and Thursday, are further destabilizing the entire region. 

[One note for the record: The “massacre” in Tremseh, where initially 220 were said to have been killed by government forces, increasingly looks like a clash between the army and rebels and not a massacre. The death toll might also be closer to 100.]

Iran: According to an Iranian dissident group, the Revolutionary Guards, the elite forces under the control of Ayatollah Khamenei, the supreme leader, are overseeing a massive expansion of the country’s nuclear weapons program “in an attempt to bring forward the date when the regime can produce its first warhead,” as reported by Con Coughlin of the Daily Telegraph.

“A specialist team of 60 nuclear scientists has been seconded to a unit called the New Defense Research Organization which answers directly to the Revolutionary Guards.”

Amid the increasing tensions in the Persian Gulf, the U.S. military continues to ramp up its forces and is also building a new missile-defense radar station in Qatar, as first reported by the Wall Street Journal.

Egypt: I have a lot on Secretary of State Hillary Clinton’s travels and tenure down below, but her trip this week to Egypt was a joke. Clinton met with President Mohammed Morsi and military council leader Field Marshal Tantawi, with both essentially ignoring her, at least anything she said. 

Clinton told Morsi she supported a “full transition” to civilian rule and that resolving the impasse between Morsi of the Muslim Brotherhood and the generals “requires dialogue and compromise, real politics.”

Yeah, yeah, both Morsi and Tantawi said. Now just why are you here?

Actually, Morsi did say, “We are very, very keen to meet you and happy that you are here.”

Of course the joke of it all is that the Obama White House, and other prior U.S. administrations, closely aligned themselves with Hosni Mubarak even as he suppressed the Brotherhood, so it was no great surprise that Clinton was met with protests in Cairo and Alexandria; from both Mubarak supporters who felt abandoned and from the Brotherhood.

The most recent Pew poll in Egypt found that 76% have an unfavorable view of the Obama administration, while 60% want the laws of their government to “strictly” follow the Koran. Christians are protesting the closer relations sought by Washington with Morsi. They fear an Islamist government will curtail Christians’ civil liberties.

As for Tantawi, hours after his discussions with Clinton he said the armed forces will not allow a “certain group” to dominate the country.

“Egypt will never fall. It belongs to all Egyptians and not to a certain group – the armed forces will not allow it. The armed forces will not allow anyone, especially those pushed from outside, to distract it from its role as the protector of Egypt. The army will never commit treason and will continue to perform its duties until Egypt reaches the shores of safety.” [USA TODAY / AP]

This was Tantawi’s harshest tone since Morsi’s inauguration.

As for the $1.3 billion in aid the United States sends Egypt each year, almost all of it for the military, look for that to continue.

Israel: Sec. of State Clinton went to Israel from Egypt for her first trip there since 2010 where she conferred with the likes of Israeli Prime Minister Netanyahu on the many issues in the region, including Iran, Syria and Egypt. Clinton supposedly hadn’t returned to Israel in two years because she didn’t want to until there was more progress on the Palestinian front, but there are far more important items these days, at least to Netanyahu, who the day after Clinton left faced a crisis when his coalition partner of just 70 days, Shaul Mofaz and his Kadima party, left the government over the issue of drafting ultra-orthodox Jews into the defense forces. Netanyahu still has a majority of 66 seats in the 120-seat Knesset, but now he’ll be pulled back to the far right to appease this part of his coalition and one thing you can look for is acceleration of settlements in the West Bank; ergo, so much for a two-state solution.

The issue of the ultra-orthodox, the Tal Law, is one of the most contentious in Israeli domestic politics as it exempts thousands of them from compulsory military service and was declared unconstitutional by the High Court in February.

It is due to expire on August 1 and Mofaz was hoping a new draft law would remove the exemption, which was a major reason why he joined the coalition on May 8.

Israelis are required to serve three years in the military after finishing high school and the vast majority of Jews say the ultra-orthodox should be no different. [Of course they shouldn’t.]

Netanyahu offered a bill that in the eyes of your editor is kind of stupid; half of all ultra-orthodox or Haredi men would have to enlist, between ages 18 and 23, and the other half could delay their service until ages 23 to 26.

So picture Clinton showed up on Monday, Kadima left the coalition on Tuesday, and then on Wednesday you had the terror attack, blamed on Hizbullah, in Bulgaria that killed seven, including five Israeli tourists (along with a Bulgarian tour guide and the bus driver).

Netanyahu announced: “This is an Iranian terror attack that is spreading across the world. Israel will react strongly to Iran’s terror.”

The Bulgarian attack came on the 18th anniversary of the bombing of the Jewish center in Buenos Aires that killed 85.

Afghanistan: Eltaf Najafizada / BloombergBusinessweek

“Afghan central bank inspector Fahim Satari stands in Kabul International Airport in front of a local businessman headed for Dubai, counting by hand the stack of $100 bills police found the passenger carrying to the gate. Satari declares the cash to be under the $20,000 per passenger limit imposed to stem the flood of money leaving through the terminal. In the year to March, $4.6 billion fled via the airport, a sum equal to almost one-quarter of the country’s gross domestic product. The year before, $2.3 billion in cash left via the airport.

“The lost billions are undercutting U.S. efforts to stabilize the country as it prepares to withdraw its troops by 2014. ‘The money leaving the country shows that Afghans fear the war will escalate after NATO troops leave,’ says Saifuddin Saihoon, an economics professor at Kabul University.”

China: Japan recalled its ambassador to China, temporarily, to discuss how to respond to recent developments in the East China Sea and some disputed islands. Tokyo is looking to buy four of the Diaoyu islands from their private Japanese owner but China claims sovereignty over them.   China has had patrol boats in the area, confronting Japanese naval vessels.

In a separate dispute in the South China Sea involving the Philippines, a Chinese warship ran aground on a shoal claimed by both but was safely extricated, defusing that one; until a day later when China sent a fleet of 30 fishing vessels to the Spratly Islands in the South China Sea, an oil-rich archipelago China claims for its own but which other nations in the region seek a part of.

And activist Ai Weiwei lost his tax evasion appeal of a $2 million fine. Ai lashed out against the government.

“Every time they turn us down, they make themselves look ridiculous. In a way it is good. It will remind everyone of the need to rebel and make people think again about the complete absence of justice.”

North Korea: Kim Jong-un gave himself the title of marshal, state media reported, the highest military rank which would cement his control over the army. This came after the army chief Ri Yong-ho, who was a vice-marshal, was removed, officially “due to illness,” which no outside observer believes. Ri is 69 so it’s really just viewed as a changing of the guard to a younger generation. It’s also a sign to those who made their careers under Kim Jong-il that under his son, no one is safe.

Chinese defense experts believe North Korea is developing compact nuclear weapons that could be employed in EMP (electromagnetic pulse) attacks where the bomb is detonated high above the Earth in an effort to disable rivals’ electronic weapon systems, this according to a story in the Washington Times and Global Security Newswire.

Given Pyongyang’s failures on the ballistic missile testing front, ordinarily I would kind of scoff at this report, but South Korean airplanes have suffered recent disruptions in their GPS capabilities and this has been linked to activities of the North Korean military.

As a Chinese analysis stated, “Once North Korea achieves the actual war deployment of EMP weapons, the power of its special forces would doubtlessly be redoubled.”

And this just in…on Friday, North Korea announced it had no other option but to “re-examine” its nuclear weapons effort due to an antagonistic U.S. policy towards it. This is a little different than the standard bluster, I think, especially given Kim’s moves. Worth paying attention to.

Britain: What a mess…the lead-up to the London Olympic Games. There have been all kinds of security concerns, starting with the failure of security contractor G4S to deliver the promised 10,400 guards to secure the venues, which has necessitated adding 3,500 more army personnel, and now U.K. border officials have threatened to stage a 24-hour strike the day before the opening ceremony this coming Friday.   Some 5,000 Border Agency staff say they will take part in the action Thursday in response to their budget being cut 20% by 2015 as part of the Cameron government’s austerity program.

And a train union said it would strike for three days during the Games unless the government accedes to its demands over pay and job cuts.

On the weather front, The Times of London editorialized, “Enough is enough. It must stop raining.”

Russia: In light of the devastating floods over a week ago that killed at least 170 in the Black Sea town of Krymsk, there were reports an unprecedented number of volunteers has descended on the region, which is a great sign, but it also points to the failures of the government and the deep mistrust the people have for it as the Kremlin continues its recent campaign of increasing control over the Internet, media and foreign-funded NGOs (nongovernmental organizations that now need to register as “foreign agents”).

Editorial / The Times of London

“Russia is going backwards. Mere months after returning to the presidency in a clumsily and needlessly rigged landslide election, Vladimir Putin is cracking down on dissent in a manner reminiscent in both tone and technique of his country’s unhappy tyrannical past….

“Mr. Putin’s wide-ranging response, already criticized by the United States, betrays a backwards-looking mindset that foolishly considers authoritarianism a viable alternative to reform. His brazen support for the brutalities of Bashar al-Assad in Syria is best understood as something similar.

“But Russia has modernized, and seems increasingly ill-minded to be tyrannized. From the super-rich to the middle classes, Russians today have broad horizons. A return to the isolation of the Cold War – when news from the West was samizdat and ideas themselves could be suppressed – is a ludicrous notion. At most, Mr. Putin can smear his opponents with the tar of treachery and render their lives deeply uncomfortable. This he seems intent upon doing. It is an unconfident and ultimately unstable regime that feels the need.”

The maximum penalty for defamation was just increased to $150,000…I kid you not. Six months ago, former President Dmitri Medvedev decriminalized libel.

Japan: According to a study published in the journal Energy & Environmental Science, radiation from the Fukushima nuclear plant could result in as many as 1,300 cancer deaths, far more than previously thought. A co-author of the report said the projected number of cancer cases would have been at least 10 times greater if the radiation hadn’t mostly fallen in the sea.

[A crowd estimated at anywhere from 75,000 to 170,000 protested against nuclear power in Tokyo on Monday, urging the government not to restart reactors.]

Flash-flooding in southwest Japan this week killed at least 27 people, with rainfall falling at 3.5 inches per hour in some areas.

France: There are some French officials suggesting that the country dismantle its nuclear weapons armaments as a cost-saving measure, seeing as it would save $19.7 billion per year. While few are taking such talk seriously, one-time French Defense Minister Paul Quiles said, “[The] nuclear weapon is an expensive absurdity.”

Of course you can only make this statement when you have an ally like the United States that is backstopping you. That said, France probably can safely reduce its force significantly.

Random Musings

--In the latest CBS News/New York Times poll, Mitt Romney has a 47-46 lead over President Obama among registered voters and Republicans can take heart that 60 percent in this survey say Romney’s experience at Bain Capital will not influence their decision. And while one in five voters say Bain and Romney’s personal wealth will make them less likely to support Romney, that’s kind of meaningless given that other polls have shown that all but about ten percent of the public has made up their mind already.

Romney gets the edge over Obama on handling the economy, 49-41, but Obama is seen as doing more to help the middle class by a 52-38 margin.

Overall, Obama’s approval rating is 44 percent. That’s low, sports fans.

--I totally agree with Republican commentators and operatives like George Will, Matthew Dowd and Peggy Noonan who are encouraging Mitt Romney to release another year or two of his tax returns. It’s a simple point; those still on the fence no doubt can think ‘What are you hiding?’

Editorial / Washington Post

“For most Americans, income tax returns are a private matter, and federal law protects that privacy. For those who would be president, a different standard applies. The modern presidency demands so much of one individual – decisions of immense complexity, consequence and difficulty – that the candidates’ characters must be thoroughly examined.

“The exploratory process is often unpleasant for candidates, especially when it is stimulated or exploited by their opponents. But it is essential for voters….

“This is why, as we said months ago, Mitt Romney’s tax returns are important. He has described himself as a successful capitalist who took risks and created wealth, a laudable credential. Voters would benefit by seeing and evaluating the details of that story, including through his tax records….

“On Tuesday, Mr. Romney brushed off demands to make public more tax returns, saying they would be used by the Obama campaign’s opposition research. ‘And I’m simply not enthusiastic about giving them hundreds or thousands of more pages to pick through, distort and lie about,’ he said. Given both sides’ campaign so far, his expectation of distortion may be realistic.

“But Mr. Romney surely is capable of responding to any distortions.”

He better be.

--Editorial / Wall Street Journal

“The Presidential election has a long way to go, but the line of the year so far is President Obama’s on Friday (7/13): ‘You didn’t build that.’ Rarely do politicians so clearly reveal their core beliefs.

“Speaking in Roanoke, Virginia, Mr. Obama delivered another paean to the virtues of higher taxes on the people he believes deserve to pay even more to the government. ‘There are a lot of wealthy, successful Americans,’ he observed, and many of them attribute their wealth and success to their own intelligence and hard work. But the self-made man is an illusion: ‘There are a lot of smart people out there,’ he explained. ‘Let me tell you something – there are a whole bunch of hard-working people out there.

“ ‘If you were successful, somebody along the line gave you some help,’ he continued. ‘There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business – you didn’t build that. Somebody else made that happen.’….

“The President who says he wants to be transformational may be succeeding – and subordinating to government the individual enterprise and risk-taking that underlies prosperity. The question is whether this is the America that Americans want to build.”

Editorial / New York Post

“Betcha President Obama wishes he could reel it back. You know – his clueless, incredibly revealing take on business success in America.

“ ‘If you’ve been successful, you didn’t get there on your own,’ he told supporters in Roanoke, Va., adding: ‘If you’ve got a business, you didn’t built that – somebody else made that happen.’

“By ‘somebody else,’ it was clear he was talking about government – which Obama sees as the principal creator of wealth.

“And that is so wrong.

“The Soviet Union never lacked for government – and its citizens were as poor as the proverbial church mouse. Indeed, if government can create wealth, explain Zimbabwe.

“But New York business owners – most of whom succeed in spite of government – have a contrary message for Obama.

“ ‘You take second mortgages, lines of credit, extend yourself personally on credit cards,’ corporate marketer Gia-Marie Vacca, a Democrat, told The Post.

“Indeed, she said, she and other business owners don’t rely on other people – ‘There are other people relying on you.’….

“There are no guarantees, of course.

“But without risks, there are few rewards – just the sterile, cosseted existence that passes for paradise in Obamaworld.

“Of course, the president also implies that if government creates most of the wealth, then government is perfectly justified in clawing back as much of it as it sees fit….

“Barack Obama has danced around his contempt for a vibrant market economy – and for successful business people, too.

“This has been true all along, of course.

“But now it’s completely in the open.”

Charles Krauthammer / Washington Post

“Government, (according to Obama)…built the roads you drive on. It provided the teacher who inspired you. It ‘created the Internet.’ It represents the embodiment of ‘we’re in this together’ social solidarity that, in Obama’s view, is the essential origin of individual and national achievement.

“To say that all individuals are embedded in and the product of society is banal. Obama rises above banality by means of fallacy: equating society with government, the collectivity with the state. Of course we are shaped by our milieu. But the most formative, most important influence on the individual is not government. It is civil society, those elements of the collectivity that lie outside government: family, neighborhood, church, Rotary club, PTA, the voluntary associations that Tocqueville understood to be the genius of America and source of its energy and freedom….

“Obama compounds the fallacy by declaring the state to be the font of entrepreneurial success. How so? It created the infrastructure – roads, bridges, schools, Internet – off which we all thrive.

“Absurd…Everyone drives the roads, goes to school, uses the mails. So did Steve Jobs. Yet only he created the Mac and the iPad.

“Obama’s infrastructure argument is easily refuted by what is essentially a controlled social experiment. Roads and schools are the constant. What’s variable is the energy, enterprise, risk-taking, hard work and genius of the individual. It is therefore precisely those individual characteristics, not the communal utilities, that account for the different outcomes.”

--Marc Thiessen / Washington Post

“Here is the state of the presidential race in a nutshell: The Obama campaign charges that Mitt Romney might have committed a felony by misrepresenting his position at Bain Capital to the Securities and Exchange Commission. Outraged, Romney fires off this response:

“ ‘He sure as heck ought to say he’s sorry.’

“Ward Cleaver, call your office.

“Not surprisingly, President Obama brushed off Romney’s request and continued to hammer him over the weekend. Obama is playing by the brass-knuckle rules of Chicago politics. Rather than calling for apologies, Romney needs to grab a bottle, break it on the bar and start fighting back….

“Instead of trying to win, (Romney) seems to be waiting for Obama to lose. When the Supreme Court declared the individual mandate a tax, instead of barnstorming the country to hammer Obama for enacting a massive tax increase on the middle class, Romney went jet-skiing on Lake Winnipesaukee. While Romney has been largely running positive ads, Obama has spent nearly $100 million in battleground states on mostly negative ads about Romney’s tenure at Bain – declaring him a ‘pioneer of outsourcing’ who is running for ‘outsourcer-in-chief.’ Obama’s ad buy has dwarfed Romney’s by a margin of at least 4-1. Result: Only 18 percent of swing state voters see Romney’s business experience positively while 33 percent viewed it negatively. Obama is taking Romney’s greatest asset – his business experience – and turning it into a liability.

“Not to worry, says Team Romney. They point out that despite the attacks, their candidate is running even with Obama in the polls and is out-fund-raising a sitting president by a significant margin.

“The problem is: It shouldn’t be a tie. Obama is coming off of the worst three months of an incumbent president during an election year in recent memory. Consider the litany of blunders and bad news he has suffered – from his declaration that ‘the private sector is doing fine,’ to his ugly fight with Catholic leaders over his Health and Human Services mandate, to the controversy over his intelligence leaks, to his decision to invoke executive privilege in the ‘Fast and Furious’ scandal, to the string of bad jobs reports that show we are in the weakest recovery since the Great Depression. Yet despite the endless stream of bad news, the president is running even with Romney….

“Framed this way, the picture for Romney does not look so pretty.”

--The Los Angeles Times has a scenario whereby Barack Obama and Mitt Romney tie with 269 electoral votes apiece.

Obama carries most of the states he won in 2008, including Colorado and Virginia.

Romney holds the states that John McCain won last time, while taking Indiana, North Carolina, Florida, Ohio, New Hampshire, Iowa and Nevada.

--From an AP story by Matthew Lee and Bradley Klapper:

“When her plane touches down at Andrews Air Force Base outside Washington early Tuesday morning, (Sec. of State Hillary Clinton) will have completed an epic 13-day journey of 27,000 miles – about 2,000 miles more than the circumference of the Earth – through and over Europe to Asia and then doubling back to the Middle East….

“Despite the mind- and body-numbing time zone hopping, Clinton joked that she was ready for more.

“ ‘I appreciate being here, I am only sorry that I have to leave,’ she told reporters on her last stop Monday, in Israel.

“ ‘My traveling team is anxious to get home. I’d like to be hanging out in Jerusalem, but, you know, I have to do my duty,’ she said with a sigh.

“Since becoming secretary of state in 2009, Clinton has logged 351 days on the road, traveled to 102 countries and flown a whopping 843,839 miles, according to the State Department. While some previous secretaries may have flown more miles – mainly due to shuttling back and forth to the Mideast on peace missions – none has visited more nations.”

Oh brother. For 3 ½ years I’ve argued our position in the world is decidedly worse and that the past year, Republicans have failed miserably in convincing the American people of this.

How many news stories have you seen of Hillary Clinton making a tough statement, and the networks glorifying it as if anything she has said actually made a difference? 

I give her major kudos in one instance…Burma. The rest of her tenure (and of course by extension the president’s) has been a gigantic waste of time and in many arenas has set us back big time…dangerously so.

Meanwhile, the Wall Street Journal’s Bret Stephens chimes in.

“Suddenly we’re supposed to believe that Hillary Clinton is a great secretary of state.

“Eric Schmidt of Google calls her ‘the most significant secretary of state since Dean Acheson.’ A profile in the New York Times runs under the headline ‘Hillary Clinton’s Last Tour as a Rock-Star Diplomat.’ Another profile in the current issue of Foreign Policy magazine is titled, wishfully, ‘Head of State.’ The two articles are so similar in tone, choice of anecdote and the absence of even token criticism that you’re almost tempted to suspect one was cribbed from the other….

“No doubt she’s been a hard-working and well-briefed secretary. But that isn’t saying much…

“What would make Mrs. Clinton a great secretary of state is if she had engineered a major diplomatic breakthrough, as Henry Kissinger did. But she hasn’t. [Ed. This is where I differ in citing Burma/Myanmar.] Or if she dominated the administration’s foreign policy, the way Jim Baker did. But she doesn’t. Or if she had marshaled a great alliance (Acheson), or authored a great doctrine (Adams) or a great plan (Marshall), or paved the way to a great victory (Shultz). But she falls palpably short on all those counts, too.

“Maybe it’s enough to say Mrs. Clinton is a good secretary of state. But she isn’t that, either….

“Mrs. Clinton is…given high marks for her pragmatism. But pragmatism can only be judged according to the result. Is the reset with Russia improving Moscow’s behavior vis-à-vis Syria? Has a ‘pragmatic’ approach to China moderated its behavior in the South China Sea? Is the administration’s willingness to intervene on humanitarian grounds in Libya but not Syria a function of pragmatism or election-year opportunism?

“What about the rest of the record? It would be nice to give Mrs. Clinton full marks for the Libya intervention, except she was an early skeptic of that intervention. It would be nice to give her marks for championing the Syrian opposition, except she has failed to persuade Russia, China or Mr. Obama to move even an inch against Bashar al-Assad. It would be nice to give her marks for helping midwife a positive transition in Egypt. But having fecklessly described Hosni Mubarak as a ‘friend of my family’ in 2009, it’s no wonder Egyptians take a dim view of the Obama administration.

“Then there’s Iran. In the administration’s fairy tale/post-facto rationalization, the U.S. was getting nowhere internationally with Iran under George Bush. Then Mr. Obama cunningly offered to extend his hand to the mullahs, knowing that if they rejected it the U.S. would be in a better position to act internationally.

“Nearly everything about that account is false. The Bush administration was able to win three U.N. Security Council votes sanctioning Iran, against only one for this administration. The ‘crippling’ sanctions Mr. Obama now likes to brag about were signed against his wishes under political duress late last year. Since then, the administration has spent most of its time writing waivers for other countries. Even now, negotiations with Tehran continue: They serve the purposes of a president who wants to get past November without a crisis.   They also serve the mullahs’ purposes to gain time.

“Now Iran is that much closer to a bomb and the possibility of a regional war is that much greater. The only real pressure the administration has exerted thus far has been on Israel, whose prime minister is the one foreign leader Mrs. Clinton has bawled out….

“Ultimately, Mrs. Clinton cannot be held accountable for the failures of a president she understood (earlier and better than most) as a lightweight. But the choice to serve him was hers, and the administration’s foreign policy record is hers, too. It’s a record that looks good only because it is set against the backdrop that is the Obama presidency in its totality.”

--The Star-Ledger here in New Jersey had an extensive story on Newark Mayor Cory Booker and his travels.

“Booker’s travel isn’t all about the city…He is also earning speaking fees while drawing a salary from taxpayers.

“In 2011, Booker gave at least 26 speeches from Boston to Atlanta to San Francisco. Neither the mayor nor his talent agency, the Greater Talent Network, would disclose how much he charged. 

“But in 2009, it was disclosed that the College of New Jersey paid him $10,000 for a commencement address. Speaker-Mix, an online clearinghouse of event planners and booking agents, lists Booker’s fee between $20,000 and $40,000.

“That would mean, by conservative estimates, Booker made $260,000 on the speaking circuit in 2011 – roughly twice his City Hall salary for the year. According to the fees listed on SpeakerMix, he took in more than $500,000.

“ ‘I’m a full-time councilman. I took a pay cut to be a councilman and I struggle to pay my bills,’ said West Ward Councilman Ron Rice, once among Booker’s staunchest allies on the council. ‘The mayor points to his own example by saying: ‘I cut my salary.’ But when he’s able to make $260,000 or $500,000, that’s not a big cut.’

“According to Newark’s city charter, Booker must appoint an acting mayor, ‘Whenever the mayor shall be prevented by absence from the municipality.’

“Of his 89 out-of-state days in the past 12 months, Booker left the city without a mayor for at least 47 days.”

Booker counters that often his trips aren’t overnights.

On a different topic, his tweeting is often out of control. Oh well…the networks love him.

--I loved this comment in Parade Magazine by George H.W. Bush:

“Who the hell is Grover Norquist, anyway?” My sentiments, totally.  

Republican Senator Tom Coburn of Oklahoma / New York Times:

“My colleagues have repeatedly rejected Mr. Norquist’s demand that Republicans walk away from any grand bargain on the deficit that includes even a penny of new revenue. Speaker of the House John A. Boehner, who calls Mr. Norquist ‘some random person,’ offered to trade revenue increases for entitlement reform in talks with the White House last summer. Republicans on the National Commission on Fiscal Responsibility and Reform made a similar offer, as did Senator Pat Toomey, Republican of Pennsylvania, during last year’s deficit supercommittee negotiations. My colleagues, by and large, know that doing nothing to confront our fiscal challenges would mean an automatic tax increase and a cut to entitlement programs….

“What unifies Republicans is not Mr. Norquist’s tortured definition of tax purity but the idea of a Reagan- or Kennedy-style tax reform that lowers rates and broadens the tax base by getting rid of loopholes and deductions. It’s true that Republicans would prefer to lower rates as much as possible, and it’s true that Republicans believe smart tax reform will generate more, not less, revenue for the federal government. But Republicans would not walk away from a grand bargain on entitlements and tax reform that would devote a penny of revenue to deficit reduction instead of rate reduction.”

--I’ve written on this topic extensively over the years, but TIME reported since 2001, about 700 more U.S. soldiers have committed suicide than have died in the war in Afghanistan.

That said, I look at the death toll in Afghanistan every week and, as of 7/11, according to Army Times it is over 2,020. 16,780 wounded. 

--Mortimer B. Zuckerman / U.S. News Weekly…on the American jobs picture.

“Here now is the worse news: America is adding to the length of unemployment lines in the future by falling behind today in skill areas where global competition has become so intense. Too few of our younger people are benefiting from what is called STEM education. STEM stands for science, technology, engineering, and mathematics, the human capital at the core of any productive economy.

“America has long been a STEM leader. We have dominated the world in innovation over two centuries but most recently in computer and wireless power, the development of the Internet, and cellphones, and with those innovations came well-paying jobs. But out leadership is at risk.

“A stunning illustration of how far America has started to lag in training its youth is that we are only one of three countries in the 34-member Organization for Economic Cooperation and Development where the youngsters are not better qualified than their fathers and mothers. Men and women ages 55 to 64 have the same or better education than the 25-to-34 generation. The younger workers in most other OECD countries are much better educated than those nearing retirement.

“This is an astonishing commentary on the limits of, and the deterioration of, America’s system of public education. The National Academies warned years ago that the United States would continue to lose ground to foreign economic rivals unless the quality of its science education improved. In a 2010 report by the academies, an advisory group on science and technology, the United States ranked 27th among 29 wealthy countries in the proportion of college students with degrees in science and engineering. In a larger study conducted by the OECD in 2009, American 15-year-olds were 31st in math and 23rd in science.…

“Astonishingly, according to recent studies, about 30 percent of high school math students and 60 percent of those in the physical sciences are taught by instructors who either did not major in the subject or are not certified to teach it. How in the world can we expect our students to master science and technology when their teachers may not have mastered it?”

--According to a poll conducted by the Miami Herald, 65% of Florida voters support the state’s 7-year-old “Stand Your Ground” law, which allows use of deadly force if people believe they are in grave danger. But only 44% believe George Zimmerman was “legitimately defending himself under ‘Stand Your Ground,’” 40% believe he was not, and 16% are not sure.

--The New York Post reported that Russia has been in talks with Los Angeles-based American Apparel for a deal to design its clothing for the 2014 Games. It seems they don’t want anything made in China. Doh!

--According to a study in the journal Lancet, lack of exercise is causing nearly one in ten deaths worldwide, killing as many people as smoking.

“Lack of exercise is tied to worldwide killers such as heart disease, diabetes and breast and colon cancer. If just a quarter of inactive adults got enough exercise, more than 1.3 million deaths could be prevented worldwide annually….Half an hour of brisk walking five times a week would do the trick.” [Emily Alpert / Los Angeles Times]

Last week we learned we shouldn’t sit as much as we do…not the couch potato argument, sitting while working instead of standing.

Granted, none of this is earth shattering and should have always been self-evident, but sometimes we need to be reminded. 

---

Pray for the men and women of our armed forces and all the fallen. Our thoughts and prayers are with the victims and their families of the theater shooting in Aurora, Colorado.

God bless America.
---

Gold closed at $1583
Oil, $91.54…all about Iran, in my mind…

Returns for the week 7/16-7/20

Dow Jones +0.4% [12822]
S&P 500 +0.4% [1362]
S&P MidCap -0.3%
Russell 2000 -1.2%
Nasdaq +0.6% [2925]

Returns for the period 1/1/12-7/20/12

Dow Jones +4.9%
S&P 500 +8.3%
S&P MidCap +6.9%
Russell 2000 +6.8%
Nasdaq +12.3%

Bulls 43.6
Bears 24.5 unchanged third straight week [Source: Investors Intelligence]  

Have a great week. I appreciate your support.

Brian Trumbore



AddThis Feed Button

-07/21/2012-      
Web Epoch NJ Web Design  |  (c) Copyright 2016 StocksandNews.com, LLC.

Week in Review

07/21/2012

For the week 7/16-7/20

[Posted 6:00 AM ET]

The Eurozone Crisis, continued

It was a horrible week for Planet Earth on so many levels; Syria’s descent into hell has spawned a new destabilizing refugee crisis, an Iranian-inspired terror attack on Israelis in Bulgaria for which Israel must respond, the mass shooting at a Colorado movie theater, and the still growing drought in this country with dour long-term forecasts and consequences.

But from an economic standpoint the eurozone crisis still commands center stage and the situation in Spain worsened considerably this week as the government of Mariano Rajoy pushed through another round of austerity programs that led to protests, many violent, in 80 Spanish cities, a calculation by the Bank of Spain that the nation’s banks have $191 billion in bad loans on their books, the release that second-quarter home prices fell 8.3% vs. year ago levels, the continuing flow of bank deposits out of the country, the fact that the banks borrowed a staggering $446 billion from the European Central Bank in June, accounting for 30% of the central bank’s lending, or $60 billion higher than in April because no one, especially traditional lenders such as Germany’s financial institutions wants to give Spain’s banks another euro. Needless to say, none of this is conducive to economic growth.

Then you had the request from one of Spain’s regions, Valencia, ground zero for the nation’s real estate bubble, for emergency loans because they can’t refinance their debt, ditto Catalonia, and the government now says that it needs 18 billion euro for an emergency loan package for the regions; about a third of which will come from tapping the lottery, while the other 12 billion euro has to be raised in the debt market in an increasingly dire interest rate environment.

If you wanted to be positive on Spain vs. Italy, defenders of the former would point to the fact Spain’s debt funding requirements were far less than Italy’s, 86 billion euro for 2012, specifically. Well make that 98 billion.

Is it any wonder then that even though the euro-17 finance ministers approved the 100 billion euro bailout for Spain’s banks on Friday, interest rates on Spanish paper soared? Like to 7.28% on their 10-year, this after it auctioned five-year paper at 6.45% and two-year scrip at 5.20%. [Compare that to the yield on the two-year in the U.S., a full 5% more.] Of course it also didn’t help when the country’s budget minister said the nation is running out of cash.

“There is no money in the public coffers. There’s no money to pay for public services.”

Spain’s stock market, duly stressed, crashed 6% on Friday (Italy’s was down 4.4%) as shares in Spanish banks collapsed anew.

But back to the actual bailout of Spain’s banks, earlier, German lawmakers voted 473-97 in favor of it after Finance Minister Wolfgang Schaeuble gave assurances Spain would remain liable for the aid and parliament will be consulted on each step of the rescue. Schaeuble told lawmakers that Spain faced “an emergency situation” and Germany has “a strong interest” to support the country’s austerity and restructuring plan by helping the banks, adding, “Spain is making the application, Spain is getting the money for bank recapitalization and the Spanish state must guarantee the funds.”

Schaeuble also said, “There’s doubt in the markets that the Spanish state can solve the problems in its banking sector without putting its own solvency at risk. That makes the problems in the Spanish banking sector a problem of the eurozone’s financial stability.”

But on a different matter, the European Stability Mechanism that is going to be the permanent bailout fund for the euro-17, Germany’s top court said it won’t rule on whether the idea is constitutional until Sept. 12, more than two months after it held a hearing on the ESM. As for Chancellor Angela Merkel, she isn’t budging on the idea of more control for Germany over member states and their finances. Without supervision, there is no solidarity, or potential joint burden-sharing.   But the new banking union, with the all-powerful supervisor, isn’t going to be finalized until 2013, it seems all too clear.  

For now, Spain is going to get the first 30 billion of the 100 billion euro bank recapitalization shortly, but how much goes where has to wait until mid-September and the release of the results from an audit of the banks.

Spain’s government also concluded that the nation’s economic recession will continue through 2013 as opposed to earlier forecasts of growth.

Separately, the International Monetary Fund updated its annual growth forecasts and continues to maintain the eurozone will contract 0.3% in 2012 while lowering its 2013 forecast from growth of 0.9% to growth of 0.7%. The IMF also warned that Europe could suffer a bout of deflation, and said the eurozone was “unsustainable” in its current form.

The IMF cut its global outlook a few ticks to 3.5% in 2012 and 3.9% in 2013 (2.0% and 2.3%, respectively, in the U.S. for 2012 and 2013), but this includes growth of 8.2% and 8.8% in China and 6.9% and 7.3% in India.

One other item on the eurozone, an MRB poll in Greece shows that three-quarters of the people want Prime Minister Samaras to insist on a renegotiation of the country’s bailout. Fat chance of that happening at this point given Spain’s new round of problems.

Turning to the U.S., Federal Reserve Chairman Ben Bernanke gave his semi-annual testimony to Congress and said, “The U.S. economy has continued to recover, but economic activity appears to have decelerated somewhat during the first half of this year,” adding manufacturing, household spending and business investment had all weakened. Only housing showed signs of life, but then later in the week we had a poor existing home sales report.

Bernanke’s comments kind of flew in the face of the Fed’s own report on regional economic activity, the “Beige Book,” which offered the economy “continued to expand at a modest to moderate pace in June and early July.”

Bernanke added, “Given that growth is projected to be not much above the rate needed to absorb new entrants to the labor force, the reduction in the unemployment rate seems likely to be frustratingly slow.”

Well, traders took all this to mean that the Fed will be announcing a new round of quantitative easing come the July 31-Aug. 1 meeting, with Bernanke himself saying the Fed stood ready to take further action if necessary.

But you’re nuts if at this point you think anything the Fed does can have a very positive impact with interest rates already at zero, but I grant you it might prevent a crash.

I’ve been forecasting an intense decline in our markets that will be precipitated by a refocus on our own fiscal train wreck and you’ve seen how an offshoot of that, the “fiscal cliff,” is certainly now at the forefront of conversation with everyone pegging their hopes on a lame duck session of Congress being able to come up with a satisfactory compromise, or grand bargain, to which I’d say no way. The question is, will the markets accept a few interim tweaks on both the revenue and spending side and then assume the grand bargain can be reached with a new Congress, and possibly president, in the first quarter.

But I’ve also said the market downdraft is coming soon…and I see no reason to change my opinion. You never know what the trigger will be. It could be a geopolitical event as much as something like a renewed debt-ceiling debate and debacle.

At the same time, you’ve seen with this week’s earnings reports that while some companies beat Wall Street’s expectations on the bottom line, revenue growth is virtually non-existent, especially in the financial sector. Oh, sure, the likes of Citigroup and Goldman Sachs may have earned more than analysts forecast, but the bottom line was far less than year earlier levels, virtually across the board when it comes to the banks, and the revenue comparisons are pathetic.

On the tech side, IBM once again handily beat on the bottom line but its revenues declined 3%. Intel lowered its guidance, and not just by a little, due to “softness” in both the U.S. and Europe, with results in China falling short. General Electric said conditions remained “challenging” as its profits fell 18% over year ago levels.

I have some earnings specifics down below but if you’re optimistic on the second half you really should visit your family doctor.

Oh, I know…we have an election coming up and that could generate some optimism as we get closer to it, but I suspect not.

PIMCO’s Bill Gross said the nation is “approaching recession when measured by employment, retail sales, investment and corporate profits.”

Bill’s colleague at PIMCO, Mohamed El-Erian, said in an op-ed for the Financial Times:

“(Further moves by the Fed) will not have a durable beneficial impact, especially if other policymakers remain missing in action. Indeed, the advantages of another round of unusual Fed activism are declining while the risk of both collateral damage and unintended consequences is material and growing.

“The Fed is stuck in a widening dichotomy between the need for a policy response and an increasingly impotent tool kit. I suspect that Bernanke and his colleagues recognize that their policy effectiveness is waning….

“In the meantime, too many politicians seem willing to maintain the myth that the Fed can lead the domestic economy out of its current malaise. It cannot. The best it can do is slow a de-leveraging that, in the absence of proper growth dynamics, eats away at the traditional resilience and entrepreneurship of the U.S. economy.”

Lastly, Richard Ravitch, a former lieutenant governor of New York, and Paul Volcker, former chairman of the Federal Reserve, issued their report out of the State Budget Crisis Task Force, warning:

“The ability of the states to meet their obligations to public employees, to creditors and most critically to the education and well-being of their citizens is threatened,” adding that services have been severely cut, even as “states and municipalities have promised an estimated $1 trillion in health benefits – that most have not started saving for – to their retirees.” [New York Times]

Street Bytes

--Stocks edged higher despite the lackluster news on the earnings front. Actually, it was more a case of no disasters vs. expectations, but at week’s end we were back to euro concerns dominating. The Dow Jones closed at 12822, up 0.4%, while the S&P 500 and Nasdaq rose 0.4% and 0.6%, respectively.

--U.S. Treasury Yields

6-mo. 0.14% 2-yr. 0.20% 10-yr. 1.46% 30-yr. 2.54%

Owing to the issues in Europe, the yield on the 10-year is back down near its all-time low of 1.44% set on 6/1, while the two-year is essentially at its record lows again. Some of the week’s economic reports weren’t exactly of the growth variety, either.

Retail sales for the month of June fell a greater than expected 0.5%, while industrial production for the month was up 0.4%. June housing starts were better, but existing home sales were not vs. expectations. The median home price on an existing home did hit $189,400, the highest level since October 2008, but this is because more high-end homes were sold, as well as a bit of seasonality. The bigger test will be for prices this coming fall and winter, though I agree we officially bottomed in the sector a few months ago. I’ll be doing some work on housing for my “Wall Street History” link this coming week as I do each quarter.

June consumer prices were unchanged, up 0.2% ex-food and energy. For the 12 months, the CPI is up 1.7%, 2.2% on core.

--The Chinese stock market, as measured by the Shanghai Composite, hit its lowest level since March 2009 on continuing fears of a hard landing. Premier Wen Jiabao warned, “It should be clearly understood that the momentum for a stable rebound in the economy has not yet been established,” though at the same time he offered that measures to stabilize growth are “bearing fruit.” Foreign direct investment for the month of June was down 6.9% from year ago levels.

But new home sales in June surged 41% from the previous month as homebuyers seemed to believe that after a year of austerity measures on the property front, the government was likely to relax them and prices would rise, so folks were trying to beat the punch. Home prices did rise slightly in Beijing and Shanghai compared to May. At week’s end, however, Wen reiterated there would be no relaxation of property curbs.

The Wall Street Journal reported that China’s labor market is very tight, with wage income for urban households rising 13% year-on-year in the first half. A labor ministry survey pointed to demand for workers outstripping supply by a record amount.

--A top economist at the IMF, Peter Doyle, resigned after 20 years and blasted the “tainted” leadership in a letter to the executive board, writing of “incompetence,” “failings” and “disastrous” appointments for the IMF’s managing director, stretching back 10 years.

“This fact is most clear in regard to appointments for managing director which, over the past decade, have all-too-evidently been disastrous.

“Even the current incumbent [Christine Lagarde] is tainted, as neither her gender, integrity, or elan can make up for the fundamental illegitimacy of the selection process.”

Doyle is seemingly alluding to the long-held criticism that the IMF head is always a European and the World Bank chief an American.

--The drought situation is only expected to get worse, with some forecasters saying there will be no sustained relief until November. The National Drought Mitigation Center says 61% of the country (not including Alaska and Hawaii) is in drought compared to 29% a year ago.

Iowa and Illinois are the top corn-producing states and while Iowa isn’t in good shape, Illinois’ situation is dire, as is the case in Indiana, fifth-largest. About 61% of Indiana’s corn crop is rated poor or very poor – the worst of any major corn-producing state. It’s the worst there since the 1988 drought.

Meanwhile, forecasters are predicting El Nino will develop over the next few months, the pattern of periodic warming of the tropical Pacific Ocean water that affects weather worldwide. Should this come to pass, it essentially kills the Atlantic hurricane season as a result of the strong upper-level winds and high wind shear that develop in the tropical Atlantic. 

After four named storms in May and June, July has seen not one as yet.

[In Ireland, the problem is rain…far too much of it, with crops rotting in the fields.]

--With the drought, corn and soybean prices hit record highs, while early wheat harvests in Russia and Ukraine are 40% below last year’s levels and sugar prices are soaring due to excessive rains in Brazil, which accounts for more than 50% of world sugar exports. So global food prices are headed higher rapidly.

--Bloomberg reports that Goldman Sachs and Morgan Stanley are among the financial firms that may bring lawsuits against their rivals in the Libor scandal. As one analyst said, Goldman and Morgan Stanley may be required to pursue restitution for their clients as much for their own potential claims. Traders at Deutsche Bank, HSBC and Credit Agricole are being examined for links to a former key Barclays employee, while UBS, Citigroup, JPMorgan Chase and Credit Suisse have said they are being investigated.

Separately, many of these institutions announced they will be cutting jobs further.   According to a survey by the Wall Street Journal, Bank of America, Citigroup, Wells Fargo, Goldman and Morgan Stanley together have cut over 30,000 positions in the past 12 months. Goldman announced it would be laying off more experienced employees in favor of junior investment-bankers or “campus hiring.”

--According to a U.S. Senate committee, HSBC provided a conduit for “drug kingpins and rogue nations,” including Iran and Syria. The bank said it was in the process of closing 20,000 accounts in the Cayman Islands. HSBC accepted more than $15 billion in cash from subsidiaries in Mexico, Russia and other countries at high risk of money laundering but failed to monitor these bulk cash transactions. The Mexican subsidiary, HBMX, was warned on at least two occasions by Mexican authorities that drug money was probably being laundered through its accounts.

No doubt, the banking industry is going through a rather rough stretch as its reputation hits rock bottom.

--Ireland’s big banks – AIB, EBS, Bank of Ireland, Ulster Bank and Permanent TSB – are going to be closing one in four branches within two years, about 200 of 840, which will leave hundreds of towns without a bank, let alone thousands of job losses. One big problem is Ireland has dreadful broadband service, which makes the situation even worse as in many towns online banking isn’t an option.

--In writing off the value of some of its online advertising business, Microsoft reported its first quarterly loss in its history, $492 million compared with a profit of $5.9 billion a year ago. Ex- the special charges, it exceeded earnings estimates though revenues, up 4%, were just inline. For the company, though, it’s all about Windows 8, which is launching in October and for which there are high expectations it will lead a new wave of tech spending, with the operating system working on tablet computers, an area where Microsoft is also introducing its own product, the Surface. And…it’s releasing a new version of the Office system later in the year as well.

--Google reported revenue that was up 35% in the quarter, to $12.2 billion, even though it continues to make less money on click-throughs. Ad inventory is the difference, up 42%.   The second-quarter earnings at $10.12 per share beat the Street.

--Yahoo poached Google’s Marissa Mayer in naming her the company’s new chief executive. Mayer, well known in the sector, was one of Google’s first hires and Yahoo is looking to her to reinvigorate the brand and improve morale. Ms. Mayer is already gaining publicity because of the fact she is six months pregnant, which makes for interesting timing…just sayin’.

With 700 million users, Yahoo still draws one of the largest audiences on the Web, with Yahoo Sports and Yahoo Finance among the leaders in their categories. But Yahoo has been losing out on ad spending to the likes of Facebook. The company reported that revenue for the second-quarter was flat and net income fell 4% from the same quarter a year ago.

Ms. Mayer has been credited with shaping Google’s “look and feel” and was recently in charge of such areas as Google Maps.

--Shares in Facebook fell after a report from Capstone Investments said the number of users declined over the past six months in the U.S., while overseas usage was little changed or down in 14 of 23 nations.

--President Obama, in an op-ed for the Wall Street Journal, on the threat from cyberterror.

“So far, no one has managed to seriously damage or disrupt our critical infrastructure networks. But foreign governments, criminal syndicates and lone individuals are probing our financial, energy and public safety systems every day. Last year, a water plant in Texas disconnected its control system from the Internet after a hacker posted pictures of the facility’s internal controls. More recently, hackers penetrated the networks of companies that operate our natural-gas pipelines. Computer systems in critical sectors of our economy – including the nuclear and chemical industries – are being increasingly targeted….

“Taking down vital banking systems could trigger a financial crisis. The lack of clean water or functioning hospitals could spark a public health emergency. And as we’ve seen in past blackouts, the loss of electricity can bring businesses, cities and entire regions to a standstill.

“This is the future we have to avoid. That’s why my administration has made cybersecurity a priority, including proposing legislation to strengthen our nation’s digital defenses. It’s why Congress must pass comprehensive cybersecurity legislation….

“It’s time to strengthen our defenses against this growing danger.”

--According to a report by S&P Dow Jones Indices, corporate and public pension funds are underfunded by an estimated $578 billion, meaning they only had 70% of the money needed to meet retirement obligations, as reported by Marc Lifsher of the Los Angeles Times.

--A disturbing situation in India this week as workers at one of its auto factories, a Maruli Suzuki plant, rioted, attacking supervisors and setting a fire that killed one company official while injuring scores more. The workers’ union had demanded the reinstatement of a worker who had been suspended for beating up a supervisor.

--Peregrine Financial Group Inc.’s founder, Russ Wassendorf, said he spent most of the money he embezzled, with investigators still trying to figure out what happened to $215 million in allegedly missing customer funds. Wassendorf said he started using client funds as far back as 1993, adding in statements since his arrest that deceiving regulators was “relatively simple.”

--Gretchen Morgenson of the New York Times had a piece on the looming home-equity loan disaster.  Many borrowers who took them down during the boom times now face the later years of their loans when they have to begin paying down principal. Those that haven’t begun to do so beforehand could face a shock. As a report by the Office of the Comptroller of the Currency noted, “almost 60% of all home equity line balances would start requiring payments of both principal and interest between 2014 and 2017,” as Morgenson notes. She goes on to say:

“The amounts owed…climb significantly in coming years. While $11 billion in home equity lines are starting to require principal and interest payments this year, the amount jumps to $29 billion by 2014, the office said. That is followed by a surge to $53 billion in 2015 and $73 billion in 2017. For 2018 and beyond, it’s $111 billion.”

Of course refinancing is a problem for many of the properties underlying the loans with tumbling values and negative equity.

--We note the passing of Stephen R. Covey, 79, author of the 1989 book “The Seven Habits of Highly Effective People: Restoring the Character Ethic” which sold more than 25 million copies worldwide, and also became the first audiobook to sell more than a million copies. Sadly he died of complications from a bicycle accident three months ago.

Covey’s seven nuggets of knowledge natural laws are:

1. Be proactive
2. Begin with the end in mind
3. Put first things first
4. Think “win-win”
5. Seek first to understand, then to be understood
6. Synergize
7. Sharpen the saw; that is, undergo frequent self-renewal. [Douglas Martin / New York Times]

--And long-time Wall Street strategist and hedge-fund operator Barton Biggs died. He too was 79. As the Wall Street Journal aptly put it, Biggs “typified a class of Wall Street investment strategists who seemed smarter, wittier and more creative than anyone else in the room,” others including Byron Wien and Elaine Garzarelli, who would move markets, particularly in the 1980s and 1990s, with their weekly commentaries.

--Deflation Alert: As the Wall Street headlined, “Lobster Glut Slams Prices.”

“Prices at the dock (in Maine) have fallen to as low as $1.25 a pound in some areas – roughly 70% below normal and a nearly 30-year-low for this time of year.”

I feel for the lobstermen, who like farmers in the Midwest this year are questioning whether they can continue in the business, but for lobster lovers, it’s enough to make you want to take a special trip to Maine and just stuff your face.

Foreign Affairs

Syria: As U.S. Secretary of Defense Leon Panetta said following the bombing of a Syrian government security council meeting that practically decapitated the Syrian regime, the situation is “spinning out of control.” The defense minister, the head of the crisis cell, Bashar al-Assad’s brother-in-law (the effective No. 2) and the intelligence chief were all killed. It’s still unclear whether the bomb(s) was planted (some say literally in a flower arrangement and a box of chocolates) or it was a suicide attack but to say the least, Assad and his remaining inner circle can’t trust anyone. This was incredibly well-planned and perfectly timed, with various groups claiming responsibility though they may have been acting in tandem.

By the time you read this, who knows what the situation will be, especially regarding Assad, who was shown swearing in the new defense minister on state TV and then disappeared. Government forces do appear to have beaten back the rebels in parts of Damascus as of Friday in intense fighting that has claimed hundreds of lives.

One thing is certain, though. Concerns over Syria’s chemical weapons stockpile are even greater today than they were before the blast. Some say the weapons had been distributed among 45 sites and they’ve been weaponized in aerial bombs, artillery shells and missile warheads including for use with Scuds.

As the Washington Post editorialized:

“Israel understandably sees the chemical weapons and missiles in Syria as a serious threat. But any Israeli intervention could inflame an already deteriorating situation. One reason for the United States and others to begin planning now for what to do with Syria’s chemical weapons is to keep Israel from acting unilaterally. But the larger reason is to head off a nightmare scenario, when an artillery shell filled with sarin goes missing in the middle of a civil war.”

[Israeli Defense Minister Ehud Barak on Friday said, “I have instructed the military to increase its intelligence preparations and prepare what is needed so that (if necessary)…we will be able to consider carrying out an operation,” specifically should Syria hand the weapons over to Hizbullah.]

As for the United Nations’ efforts, once again Russia and China vetoed another resolution that would impose global sanctions on the Assad regime unless it swiftly implemented Kofi Annan’s peace plan which includes an immediate ceasefire.

Sergei Lavrov, Russia’s foreign minister, said, “Instead of calming the opposition, some partners are fostering a further escalation. It is a dead-end policy to support the opposition. Assad will not go on his own and our Western partners don’t know what to do about it.”

Michael Young of the Daily Star (Beirut) wrote of the occupant of the White House:

“Obama has written himself out of the script, a distant apparition alien to the peoples of the Middle East. But the region remains critical, no matter what the president believes, and it can still bite the world in the rear end. When that happens, the Americans cannot afford to lead from behind. They need to be up front, knowing precisely what they want.”

Douglas J. Feith / Wall Street Journal

“In the 16 months since the revolt began, the Obama administration has neither promoted humanitarian ‘safe zones’ on Syria’s Turkish border, nor provided arms to the rebels. It has not helped establish a no-fly zone, nor has it supported NATO military strikes against Assad’s forces.

“At first, Mr. Obama vainly called for Assad to behave humanely. Eventually, he vainly exhorted Assad to relinquish power.

“All the while, Mr. Obama has looked to the U.N. for answers.”

I’ve argued for over a year now we should have taken the simple step of creating the “safe zones” in coordination with the Turks. Now you have a situation where tens of thousands of refugees, 30,000 alone into Lebanon on Wednesday and Thursday, are further destabilizing the entire region. 

[One note for the record: The “massacre” in Tremseh, where initially 220 were said to have been killed by government forces, increasingly looks like a clash between the army and rebels and not a massacre. The death toll might also be closer to 100.]

Iran: According to an Iranian dissident group, the Revolutionary Guards, the elite forces under the control of Ayatollah Khamenei, the supreme leader, are overseeing a massive expansion of the country’s nuclear weapons program “in an attempt to bring forward the date when the regime can produce its first warhead,” as reported by Con Coughlin of the Daily Telegraph.

“A specialist team of 60 nuclear scientists has been seconded to a unit called the New Defense Research Organization which answers directly to the Revolutionary Guards.”

Amid the increasing tensions in the Persian Gulf, the U.S. military continues to ramp up its forces and is also building a new missile-defense radar station in Qatar, as first reported by the Wall Street Journal.

Egypt: I have a lot on Secretary of State Hillary Clinton’s travels and tenure down below, but her trip this week to Egypt was a joke. Clinton met with President Mohammed Morsi and military council leader Field Marshal Tantawi, with both essentially ignoring her, at least anything she said. 

Clinton told Morsi she supported a “full transition” to civilian rule and that resolving the impasse between Morsi of the Muslim Brotherhood and the generals “requires dialogue and compromise, real politics.”

Yeah, yeah, both Morsi and Tantawi said. Now just why are you here?

Actually, Morsi did say, “We are very, very keen to meet you and happy that you are here.”

Of course the joke of it all is that the Obama White House, and other prior U.S. administrations, closely aligned themselves with Hosni Mubarak even as he suppressed the Brotherhood, so it was no great surprise that Clinton was met with protests in Cairo and Alexandria; from both Mubarak supporters who felt abandoned and from the Brotherhood.

The most recent Pew poll in Egypt found that 76% have an unfavorable view of the Obama administration, while 60% want the laws of their government to “strictly” follow the Koran. Christians are protesting the closer relations sought by Washington with Morsi. They fear an Islamist government will curtail Christians’ civil liberties.

As for Tantawi, hours after his discussions with Clinton he said the armed forces will not allow a “certain group” to dominate the country.

“Egypt will never fall. It belongs to all Egyptians and not to a certain group – the armed forces will not allow it. The armed forces will not allow anyone, especially those pushed from outside, to distract it from its role as the protector of Egypt. The army will never commit treason and will continue to perform its duties until Egypt reaches the shores of safety.” [USA TODAY / AP]

This was Tantawi’s harshest tone since Morsi’s inauguration.

As for the $1.3 billion in aid the United States sends Egypt each year, almost all of it for the military, look for that to continue.

Israel: Sec. of State Clinton went to Israel from Egypt for her first trip there since 2010 where she conferred with the likes of Israeli Prime Minister Netanyahu on the many issues in the region, including Iran, Syria and Egypt. Clinton supposedly hadn’t returned to Israel in two years because she didn’t want to until there was more progress on the Palestinian front, but there are far more important items these days, at least to Netanyahu, who the day after Clinton left faced a crisis when his coalition partner of just 70 days, Shaul Mofaz and his Kadima party, left the government over the issue of drafting ultra-orthodox Jews into the defense forces. Netanyahu still has a majority of 66 seats in the 120-seat Knesset, but now he’ll be pulled back to the far right to appease this part of his coalition and one thing you can look for is acceleration of settlements in the West Bank; ergo, so much for a two-state solution.

The issue of the ultra-orthodox, the Tal Law, is one of the most contentious in Israeli domestic politics as it exempts thousands of them from compulsory military service and was declared unconstitutional by the High Court in February.

It is due to expire on August 1 and Mofaz was hoping a new draft law would remove the exemption, which was a major reason why he joined the coalition on May 8.

Israelis are required to serve three years in the military after finishing high school and the vast majority of Jews say the ultra-orthodox should be no different. [Of course they shouldn’t.]

Netanyahu offered a bill that in the eyes of your editor is kind of stupid; half of all ultra-orthodox or Haredi men would have to enlist, between ages 18 and 23, and the other half could delay their service until ages 23 to 26.

So picture Clinton showed up on Monday, Kadima left the coalition on Tuesday, and then on Wednesday you had the terror attack, blamed on Hizbullah, in Bulgaria that killed seven, including five Israeli tourists (along with a Bulgarian tour guide and the bus driver).

Netanyahu announced: “This is an Iranian terror attack that is spreading across the world. Israel will react strongly to Iran’s terror.”

The Bulgarian attack came on the 18th anniversary of the bombing of the Jewish center in Buenos Aires that killed 85.

Afghanistan: Eltaf Najafizada / BloombergBusinessweek

“Afghan central bank inspector Fahim Satari stands in Kabul International Airport in front of a local businessman headed for Dubai, counting by hand the stack of $100 bills police found the passenger carrying to the gate. Satari declares the cash to be under the $20,000 per passenger limit imposed to stem the flood of money leaving through the terminal. In the year to March, $4.6 billion fled via the airport, a sum equal to almost one-quarter of the country’s gross domestic product. The year before, $2.3 billion in cash left via the airport.

“The lost billions are undercutting U.S. efforts to stabilize the country as it prepares to withdraw its troops by 2014. ‘The money leaving the country shows that Afghans fear the war will escalate after NATO troops leave,’ says Saifuddin Saihoon, an economics professor at Kabul University.”

China: Japan recalled its ambassador to China, temporarily, to discuss how to respond to recent developments in the East China Sea and some disputed islands. Tokyo is looking to buy four of the Diaoyu islands from their private Japanese owner but China claims sovereignty over them.   China has had patrol boats in the area, confronting Japanese naval vessels.

In a separate dispute in the South China Sea involving the Philippines, a Chinese warship ran aground on a shoal claimed by both but was safely extricated, defusing that one; until a day later when China sent a fleet of 30 fishing vessels to the Spratly Islands in the South China Sea, an oil-rich archipelago China claims for its own but which other nations in the region seek a part of.

And activist Ai Weiwei lost his tax evasion appeal of a $2 million fine. Ai lashed out against the government.

“Every time they turn us down, they make themselves look ridiculous. In a way it is good. It will remind everyone of the need to rebel and make people think again about the complete absence of justice.”

North Korea: Kim Jong-un gave himself the title of marshal, state media reported, the highest military rank which would cement his control over the army. This came after the army chief Ri Yong-ho, who was a vice-marshal, was removed, officially “due to illness,” which no outside observer believes. Ri is 69 so it’s really just viewed as a changing of the guard to a younger generation. It’s also a sign to those who made their careers under Kim Jong-il that under his son, no one is safe.

Chinese defense experts believe North Korea is developing compact nuclear weapons that could be employed in EMP (electromagnetic pulse) attacks where the bomb is detonated high above the Earth in an effort to disable rivals’ electronic weapon systems, this according to a story in the Washington Times and Global Security Newswire.

Given Pyongyang’s failures on the ballistic missile testing front, ordinarily I would kind of scoff at this report, but South Korean airplanes have suffered recent disruptions in their GPS capabilities and this has been linked to activities of the North Korean military.

As a Chinese analysis stated, “Once North Korea achieves the actual war deployment of EMP weapons, the power of its special forces would doubtlessly be redoubled.”

And this just in…on Friday, North Korea announced it had no other option but to “re-examine” its nuclear weapons effort due to an antagonistic U.S. policy towards it. This is a little different than the standard bluster, I think, especially given Kim’s moves. Worth paying attention to.

Britain: What a mess…the lead-up to the London Olympic Games. There have been all kinds of security concerns, starting with the failure of security contractor G4S to deliver the promised 10,400 guards to secure the venues, which has necessitated adding 3,500 more army personnel, and now U.K. border officials have threatened to stage a 24-hour strike the day before the opening ceremony this coming Friday.   Some 5,000 Border Agency staff say they will take part in the action Thursday in response to their budget being cut 20% by 2015 as part of the Cameron government’s austerity program.

And a train union said it would strike for three days during the Games unless the government accedes to its demands over pay and job cuts.

On the weather front, The Times of London editorialized, “Enough is enough. It must stop raining.”

Russia: In light of the devastating floods over a week ago that killed at least 170 in the Black Sea town of Krymsk, there were reports an unprecedented number of volunteers has descended on the region, which is a great sign, but it also points to the failures of the government and the deep mistrust the people have for it as the Kremlin continues its recent campaign of increasing control over the Internet, media and foreign-funded NGOs (nongovernmental organizations that now need to register as “foreign agents”).

Editorial / The Times of London

“Russia is going backwards. Mere months after returning to the presidency in a clumsily and needlessly rigged landslide election, Vladimir Putin is cracking down on dissent in a manner reminiscent in both tone and technique of his country’s unhappy tyrannical past….

“Mr. Putin’s wide-ranging response, already criticized by the United States, betrays a backwards-looking mindset that foolishly considers authoritarianism a viable alternative to reform. His brazen support for the brutalities of Bashar al-Assad in Syria is best understood as something similar.

“But Russia has modernized, and seems increasingly ill-minded to be tyrannized. From the super-rich to the middle classes, Russians today have broad horizons. A return to the isolation of the Cold War – when news from the West was samizdat and ideas themselves could be suppressed – is a ludicrous notion. At most, Mr. Putin can smear his opponents with the tar of treachery and render their lives deeply uncomfortable. This he seems intent upon doing. It is an unconfident and ultimately unstable regime that feels the need.”

The maximum penalty for defamation was just increased to $150,000…I kid you not. Six months ago, former President Dmitri Medvedev decriminalized libel.

Japan: According to a study published in the journal Energy & Environmental Science, radiation from the Fukushima nuclear plant could result in as many as 1,300 cancer deaths, far more than previously thought. A co-author of the report said the projected number of cancer cases would have been at least 10 times greater if the radiation hadn’t mostly fallen in the sea.

[A crowd estimated at anywhere from 75,000 to 170,000 protested against nuclear power in Tokyo on Monday, urging the government not to restart reactors.]

Flash-flooding in southwest Japan this week killed at least 27 people, with rainfall falling at 3.5 inches per hour in some areas.

France: There are some French officials suggesting that the country dismantle its nuclear weapons armaments as a cost-saving measure, seeing as it would save $19.7 billion per year. While few are taking such talk seriously, one-time French Defense Minister Paul Quiles said, “[The] nuclear weapon is an expensive absurdity.”

Of course you can only make this statement when you have an ally like the United States that is backstopping you. That said, France probably can safely reduce its force significantly.

Random Musings

--In the latest CBS News/New York Times poll, Mitt Romney has a 47-46 lead over President Obama among registered voters and Republicans can take heart that 60 percent in this survey say Romney’s experience at Bain Capital will not influence their decision. And while one in five voters say Bain and Romney’s personal wealth will make them less likely to support Romney, that’s kind of meaningless given that other polls have shown that all but about ten percent of the public has made up their mind already.

Romney gets the edge over Obama on handling the economy, 49-41, but Obama is seen as doing more to help the middle class by a 52-38 margin.

Overall, Obama’s approval rating is 44 percent. That’s low, sports fans.

--I totally agree with Republican commentators and operatives like George Will, Matthew Dowd and Peggy Noonan who are encouraging Mitt Romney to release another year or two of his tax returns. It’s a simple point; those still on the fence no doubt can think ‘What are you hiding?’

Editorial / Washington Post

“For most Americans, income tax returns are a private matter, and federal law protects that privacy. For those who would be president, a different standard applies. The modern presidency demands so much of one individual – decisions of immense complexity, consequence and difficulty – that the candidates’ characters must be thoroughly examined.

“The exploratory process is often unpleasant for candidates, especially when it is stimulated or exploited by their opponents. But it is essential for voters….

“This is why, as we said months ago, Mitt Romney’s tax returns are important. He has described himself as a successful capitalist who took risks and created wealth, a laudable credential. Voters would benefit by seeing and evaluating the details of that story, including through his tax records….

“On Tuesday, Mr. Romney brushed off demands to make public more tax returns, saying they would be used by the Obama campaign’s opposition research. ‘And I’m simply not enthusiastic about giving them hundreds or thousands of more pages to pick through, distort and lie about,’ he said. Given both sides’ campaign so far, his expectation of distortion may be realistic.

“But Mr. Romney surely is capable of responding to any distortions.”

He better be.

--Editorial / Wall Street Journal

“The Presidential election has a long way to go, but the line of the year so far is President Obama’s on Friday (7/13): ‘You didn’t build that.’ Rarely do politicians so clearly reveal their core beliefs.

“Speaking in Roanoke, Virginia, Mr. Obama delivered another paean to the virtues of higher taxes on the people he believes deserve to pay even more to the government. ‘There are a lot of wealthy, successful Americans,’ he observed, and many of them attribute their wealth and success to their own intelligence and hard work. But the self-made man is an illusion: ‘There are a lot of smart people out there,’ he explained. ‘Let me tell you something – there are a whole bunch of hard-working people out there.

“ ‘If you were successful, somebody along the line gave you some help,’ he continued. ‘There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business – you didn’t build that. Somebody else made that happen.’….

“The President who says he wants to be transformational may be succeeding – and subordinating to government the individual enterprise and risk-taking that underlies prosperity. The question is whether this is the America that Americans want to build.”

Editorial / New York Post

“Betcha President Obama wishes he could reel it back. You know – his clueless, incredibly revealing take on business success in America.

“ ‘If you’ve been successful, you didn’t get there on your own,’ he told supporters in Roanoke, Va., adding: ‘If you’ve got a business, you didn’t built that – somebody else made that happen.’

“By ‘somebody else,’ it was clear he was talking about government – which Obama sees as the principal creator of wealth.

“And that is so wrong.

“The Soviet Union never lacked for government – and its citizens were as poor as the proverbial church mouse. Indeed, if government can create wealth, explain Zimbabwe.

“But New York business owners – most of whom succeed in spite of government – have a contrary message for Obama.

“ ‘You take second mortgages, lines of credit, extend yourself personally on credit cards,’ corporate marketer Gia-Marie Vacca, a Democrat, told The Post.

“Indeed, she said, she and other business owners don’t rely on other people – ‘There are other people relying on you.’….

“There are no guarantees, of course.

“But without risks, there are few rewards – just the sterile, cosseted existence that passes for paradise in Obamaworld.

“Of course, the president also implies that if government creates most of the wealth, then government is perfectly justified in clawing back as much of it as it sees fit….

“Barack Obama has danced around his contempt for a vibrant market economy – and for successful business people, too.

“This has been true all along, of course.

“But now it’s completely in the open.”

Charles Krauthammer / Washington Post

“Government, (according to Obama)…built the roads you drive on. It provided the teacher who inspired you. It ‘created the Internet.’ It represents the embodiment of ‘we’re in this together’ social solidarity that, in Obama’s view, is the essential origin of individual and national achievement.

“To say that all individuals are embedded in and the product of society is banal. Obama rises above banality by means of fallacy: equating society with government, the collectivity with the state. Of course we are shaped by our milieu. But the most formative, most important influence on the individual is not government. It is civil society, those elements of the collectivity that lie outside government: family, neighborhood, church, Rotary club, PTA, the voluntary associations that Tocqueville understood to be the genius of America and source of its energy and freedom….

“Obama compounds the fallacy by declaring the state to be the font of entrepreneurial success. How so? It created the infrastructure – roads, bridges, schools, Internet – off which we all thrive.

“Absurd…Everyone drives the roads, goes to school, uses the mails. So did Steve Jobs. Yet only he created the Mac and the iPad.

“Obama’s infrastructure argument is easily refuted by what is essentially a controlled social experiment. Roads and schools are the constant. What’s variable is the energy, enterprise, risk-taking, hard work and genius of the individual. It is therefore precisely those individual characteristics, not the communal utilities, that account for the different outcomes.”

--Marc Thiessen / Washington Post

“Here is the state of the presidential race in a nutshell: The Obama campaign charges that Mitt Romney might have committed a felony by misrepresenting his position at Bain Capital to the Securities and Exchange Commission. Outraged, Romney fires off this response:

“ ‘He sure as heck ought to say he’s sorry.’

“Ward Cleaver, call your office.

“Not surprisingly, President Obama brushed off Romney’s request and continued to hammer him over the weekend. Obama is playing by the brass-knuckle rules of Chicago politics. Rather than calling for apologies, Romney needs to grab a bottle, break it on the bar and start fighting back….

“Instead of trying to win, (Romney) seems to be waiting for Obama to lose. When the Supreme Court declared the individual mandate a tax, instead of barnstorming the country to hammer Obama for enacting a massive tax increase on the middle class, Romney went jet-skiing on Lake Winnipesaukee. While Romney has been largely running positive ads, Obama has spent nearly $100 million in battleground states on mostly negative ads about Romney’s tenure at Bain – declaring him a ‘pioneer of outsourcing’ who is running for ‘outsourcer-in-chief.’ Obama’s ad buy has dwarfed Romney’s by a margin of at least 4-1. Result: Only 18 percent of swing state voters see Romney’s business experience positively while 33 percent viewed it negatively. Obama is taking Romney’s greatest asset – his business experience – and turning it into a liability.

“Not to worry, says Team Romney. They point out that despite the attacks, their candidate is running even with Obama in the polls and is out-fund-raising a sitting president by a significant margin.

“The problem is: It shouldn’t be a tie. Obama is coming off of the worst three months of an incumbent president during an election year in recent memory. Consider the litany of blunders and bad news he has suffered – from his declaration that ‘the private sector is doing fine,’ to his ugly fight with Catholic leaders over his Health and Human Services mandate, to the controversy over his intelligence leaks, to his decision to invoke executive privilege in the ‘Fast and Furious’ scandal, to the string of bad jobs reports that show we are in the weakest recovery since the Great Depression. Yet despite the endless stream of bad news, the president is running even with Romney….

“Framed this way, the picture for Romney does not look so pretty.”

--The Los Angeles Times has a scenario whereby Barack Obama and Mitt Romney tie with 269 electoral votes apiece.

Obama carries most of the states he won in 2008, including Colorado and Virginia.

Romney holds the states that John McCain won last time, while taking Indiana, North Carolina, Florida, Ohio, New Hampshire, Iowa and Nevada.

--From an AP story by Matthew Lee and Bradley Klapper:

“When her plane touches down at Andrews Air Force Base outside Washington early Tuesday morning, (Sec. of State Hillary Clinton) will have completed an epic 13-day journey of 27,000 miles – about 2,000 miles more than the circumference of the Earth – through and over Europe to Asia and then doubling back to the Middle East….

“Despite the mind- and body-numbing time zone hopping, Clinton joked that she was ready for more.

“ ‘I appreciate being here, I am only sorry that I have to leave,’ she told reporters on her last stop Monday, in Israel.

“ ‘My traveling team is anxious to get home. I’d like to be hanging out in Jerusalem, but, you know, I have to do my duty,’ she said with a sigh.

“Since becoming secretary of state in 2009, Clinton has logged 351 days on the road, traveled to 102 countries and flown a whopping 843,839 miles, according to the State Department. While some previous secretaries may have flown more miles – mainly due to shuttling back and forth to the Mideast on peace missions – none has visited more nations.”

Oh brother. For 3 ½ years I’ve argued our position in the world is decidedly worse and that the past year, Republicans have failed miserably in convincing the American people of this.

How many news stories have you seen of Hillary Clinton making a tough statement, and the networks glorifying it as if anything she has said actually made a difference? 

I give her major kudos in one instance…Burma. The rest of her tenure (and of course by extension the president’s) has been a gigantic waste of time and in many arenas has set us back big time…dangerously so.

Meanwhile, the Wall Street Journal’s Bret Stephens chimes in.

“Suddenly we’re supposed to believe that Hillary Clinton is a great secretary of state.

“Eric Schmidt of Google calls her ‘the most significant secretary of state since Dean Acheson.’ A profile in the New York Times runs under the headline ‘Hillary Clinton’s Last Tour as a Rock-Star Diplomat.’ Another profile in the current issue of Foreign Policy magazine is titled, wishfully, ‘Head of State.’ The two articles are so similar in tone, choice of anecdote and the absence of even token criticism that you’re almost tempted to suspect one was cribbed from the other….

“No doubt she’s been a hard-working and well-briefed secretary. But that isn’t saying much…

“What would make Mrs. Clinton a great secretary of state is if she had engineered a major diplomatic breakthrough, as Henry Kissinger did. But she hasn’t. [Ed. This is where I differ in citing Burma/Myanmar.] Or if she dominated the administration’s foreign policy, the way Jim Baker did. But she doesn’t. Or if she had marshaled a great alliance (Acheson), or authored a great doctrine (Adams) or a great plan (Marshall), or paved the way to a great victory (Shultz). But she falls palpably short on all those counts, too.

“Maybe it’s enough to say Mrs. Clinton is a good secretary of state. But she isn’t that, either….

“Mrs. Clinton is…given high marks for her pragmatism. But pragmatism can only be judged according to the result. Is the reset with Russia improving Moscow’s behavior vis-à-vis Syria? Has a ‘pragmatic’ approach to China moderated its behavior in the South China Sea? Is the administration’s willingness to intervene on humanitarian grounds in Libya but not Syria a function of pragmatism or election-year opportunism?

“What about the rest of the record? It would be nice to give Mrs. Clinton full marks for the Libya intervention, except she was an early skeptic of that intervention. It would be nice to give her marks for championing the Syrian opposition, except she has failed to persuade Russia, China or Mr. Obama to move even an inch against Bashar al-Assad. It would be nice to give her marks for helping midwife a positive transition in Egypt. But having fecklessly described Hosni Mubarak as a ‘friend of my family’ in 2009, it’s no wonder Egyptians take a dim view of the Obama administration.

“Then there’s Iran. In the administration’s fairy tale/post-facto rationalization, the U.S. was getting nowhere internationally with Iran under George Bush. Then Mr. Obama cunningly offered to extend his hand to the mullahs, knowing that if they rejected it the U.S. would be in a better position to act internationally.

“Nearly everything about that account is false. The Bush administration was able to win three U.N. Security Council votes sanctioning Iran, against only one for this administration. The ‘crippling’ sanctions Mr. Obama now likes to brag about were signed against his wishes under political duress late last year. Since then, the administration has spent most of its time writing waivers for other countries. Even now, negotiations with Tehran continue: They serve the purposes of a president who wants to get past November without a crisis.   They also serve the mullahs’ purposes to gain time.

“Now Iran is that much closer to a bomb and the possibility of a regional war is that much greater. The only real pressure the administration has exerted thus far has been on Israel, whose prime minister is the one foreign leader Mrs. Clinton has bawled out….

“Ultimately, Mrs. Clinton cannot be held accountable for the failures of a president she understood (earlier and better than most) as a lightweight. But the choice to serve him was hers, and the administration’s foreign policy record is hers, too. It’s a record that looks good only because it is set against the backdrop that is the Obama presidency in its totality.”

--The Star-Ledger here in New Jersey had an extensive story on Newark Mayor Cory Booker and his travels.

“Booker’s travel isn’t all about the city…He is also earning speaking fees while drawing a salary from taxpayers.

“In 2011, Booker gave at least 26 speeches from Boston to Atlanta to San Francisco. Neither the mayor nor his talent agency, the Greater Talent Network, would disclose how much he charged. 

“But in 2009, it was disclosed that the College of New Jersey paid him $10,000 for a commencement address. Speaker-Mix, an online clearinghouse of event planners and booking agents, lists Booker’s fee between $20,000 and $40,000.

“That would mean, by conservative estimates, Booker made $260,000 on the speaking circuit in 2011 – roughly twice his City Hall salary for the year. According to the fees listed on SpeakerMix, he took in more than $500,000.

“ ‘I’m a full-time councilman. I took a pay cut to be a councilman and I struggle to pay my bills,’ said West Ward Councilman Ron Rice, once among Booker’s staunchest allies on the council. ‘The mayor points to his own example by saying: ‘I cut my salary.’ But when he’s able to make $260,000 or $500,000, that’s not a big cut.’

“According to Newark’s city charter, Booker must appoint an acting mayor, ‘Whenever the mayor shall be prevented by absence from the municipality.’

“Of his 89 out-of-state days in the past 12 months, Booker left the city without a mayor for at least 47 days.”

Booker counters that often his trips aren’t overnights.

On a different topic, his tweeting is often out of control. Oh well…the networks love him.

--I loved this comment in Parade Magazine by George H.W. Bush:

“Who the hell is Grover Norquist, anyway?” My sentiments, totally.  

Republican Senator Tom Coburn of Oklahoma / New York Times:

“My colleagues have repeatedly rejected Mr. Norquist’s demand that Republicans walk away from any grand bargain on the deficit that includes even a penny of new revenue. Speaker of the House John A. Boehner, who calls Mr. Norquist ‘some random person,’ offered to trade revenue increases for entitlement reform in talks with the White House last summer. Republicans on the National Commission on Fiscal Responsibility and Reform made a similar offer, as did Senator Pat Toomey, Republican of Pennsylvania, during last year’s deficit supercommittee negotiations. My colleagues, by and large, know that doing nothing to confront our fiscal challenges would mean an automatic tax increase and a cut to entitlement programs….

“What unifies Republicans is not Mr. Norquist’s tortured definition of tax purity but the idea of a Reagan- or Kennedy-style tax reform that lowers rates and broadens the tax base by getting rid of loopholes and deductions. It’s true that Republicans would prefer to lower rates as much as possible, and it’s true that Republicans believe smart tax reform will generate more, not less, revenue for the federal government. But Republicans would not walk away from a grand bargain on entitlements and tax reform that would devote a penny of revenue to deficit reduction instead of rate reduction.”

--I’ve written on this topic extensively over the years, but TIME reported since 2001, about 700 more U.S. soldiers have committed suicide than have died in the war in Afghanistan.

That said, I look at the death toll in Afghanistan every week and, as of 7/11, according to Army Times it is over 2,020. 16,780 wounded. 

--Mortimer B. Zuckerman / U.S. News Weekly…on the American jobs picture.

“Here now is the worse news: America is adding to the length of unemployment lines in the future by falling behind today in skill areas where global competition has become so intense. Too few of our younger people are benefiting from what is called STEM education. STEM stands for science, technology, engineering, and mathematics, the human capital at the core of any productive economy.

“America has long been a STEM leader. We have dominated the world in innovation over two centuries but most recently in computer and wireless power, the development of the Internet, and cellphones, and with those innovations came well-paying jobs. But out leadership is at risk.

“A stunning illustration of how far America has started to lag in training its youth is that we are only one of three countries in the 34-member Organization for Economic Cooperation and Development where the youngsters are not better qualified than their fathers and mothers. Men and women ages 55 to 64 have the same or better education than the 25-to-34 generation. The younger workers in most other OECD countries are much better educated than those nearing retirement.

“This is an astonishing commentary on the limits of, and the deterioration of, America’s system of public education. The National Academies warned years ago that the United States would continue to lose ground to foreign economic rivals unless the quality of its science education improved. In a 2010 report by the academies, an advisory group on science and technology, the United States ranked 27th among 29 wealthy countries in the proportion of college students with degrees in science and engineering. In a larger study conducted by the OECD in 2009, American 15-year-olds were 31st in math and 23rd in science.…

“Astonishingly, according to recent studies, about 30 percent of high school math students and 60 percent of those in the physical sciences are taught by instructors who either did not major in the subject or are not certified to teach it. How in the world can we expect our students to master science and technology when their teachers may not have mastered it?”

--According to a poll conducted by the Miami Herald, 65% of Florida voters support the state’s 7-year-old “Stand Your Ground” law, which allows use of deadly force if people believe they are in grave danger. But only 44% believe George Zimmerman was “legitimately defending himself under ‘Stand Your Ground,’” 40% believe he was not, and 16% are not sure.

--The New York Post reported that Russia has been in talks with Los Angeles-based American Apparel for a deal to design its clothing for the 2014 Games. It seems they don’t want anything made in China. Doh!

--According to a study in the journal Lancet, lack of exercise is causing nearly one in ten deaths worldwide, killing as many people as smoking.

“Lack of exercise is tied to worldwide killers such as heart disease, diabetes and breast and colon cancer. If just a quarter of inactive adults got enough exercise, more than 1.3 million deaths could be prevented worldwide annually….Half an hour of brisk walking five times a week would do the trick.” [Emily Alpert / Los Angeles Times]

Last week we learned we shouldn’t sit as much as we do…not the couch potato argument, sitting while working instead of standing.

Granted, none of this is earth shattering and should have always been self-evident, but sometimes we need to be reminded. 

---

Pray for the men and women of our armed forces and all the fallen. Our thoughts and prayers are with the victims and their families of the theater shooting in Aurora, Colorado.

God bless America.
---

Gold closed at $1583
Oil, $91.54…all about Iran, in my mind…

Returns for the week 7/16-7/20

Dow Jones +0.4% [12822]
S&P 500 +0.4% [1362]
S&P MidCap -0.3%
Russell 2000 -1.2%
Nasdaq +0.6% [2925]

Returns for the period 1/1/12-7/20/12

Dow Jones +4.9%
S&P 500 +8.3%
S&P MidCap +6.9%
Russell 2000 +6.8%
Nasdaq +12.3%

Bulls 43.6
Bears 24.5 unchanged third straight week [Source: Investors Intelligence]  

Have a great week. I appreciate your support.

Brian Trumbore