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08/26/2012

For the week 8/20-8/24

[Posted 6:00 AM ET, Sunday, from Lahinch, Ireland]

So…I have prided myself in taking all of one week off in over 13 ½ years of doing this column, but now you can call this week two. I humbly apologize, dear readers. I’m on my 20th trip to Ireland since 1989, at a golf event at my club here, Lahinch, and let’s just say I have not gotten a lot of sleep. Something about the pints after a round, you understand. When I travel by myself it’s easy to do the column but any time I’m here with friends it’s a whole different story.

Actually, it wasn’t a bad week to take off as there was little news. It’s the coming few weeks that are vitally important…beginning with Federal Reserve Chairman Ben Bernanke’s speech on Friday in Jackson Hole, Wyoming, where he is expected, by the markets at least, to spell out the latest Fed policy; including QE3, or the latest iteration of quantitative easing.

Then the following week the European Central Bank meets on Sept. 6 (finance ministers of the eurozone a few days before), where it is expected ECB President Mario Draghi will spell out details on his bond-buying program that he has promised for over a month now.

And on Sept. 12 you have a German supreme court ruling on the constitutionality of the eurozone’s permanent bailout fund as well as a critical election in the Netherlands where the anti-euro supporters are expected to make big gains.

For now, Greece continues to scramble in its efforts to remain a member of Club Euro. The government is trying to enact another round of austerity measures, to the tune of 11.5 billion euro, in the hopes it will pave the way for the latest 31.5 billion installment as part of Greek Bailout II. Greece did pay back a 3.1 billion euro loan payment the other day after selling 4 billion in 3-month paper at 4.43%. I imagine some of you would love that kind of interest rate on your savings only you wouldn’t be able to sleep at night because it is just a matter of time before Greece goes kaput.

So that’s it for now, sports fans. Again, I apologize for this week’s effort. Don’t abandon me! I’ll be back next time with another 30-page stemwinder and, on Oct. 15, I’m launching an online nightly newscast…initially Monday thru Thursday…that some of you might enjoy. Far more on this as I get closer to the date.

Street Bytes

--Stocks took it on the chin this week, with both the Dow Jones and S&P 500 snapping six-week winning streaks. The Dow fell 0.9% to 13157 and the S&P lost 0.5%.

--On Monday, shares in Apple rose from a previous Friday’s close of $648 to $665 and in doing so, Apple became the most valuable company in the world – ever. At $600 billion+, it is about $200 billion more than the world’s second-biggest company, Exxon Mobil. Microsoft had the previous record, established at the height of the dot.com bubble in December 1999.

But then at week’s end a jury ruled that Samsung had ripped off the technology Apple used to produce the iPhone and iPad.  Samsung has to pay out $1.05 billion, though an appeal is expected.

--U.S. Treasury Yields

6-mo. 0.13% 2-yr. 0.27% 10-yr. 1.69% 30-yr. 2.80%

Bonds rallied on hopes the Federal Reserve will initiate further easing measures, as well as a renewed feeling the euro debt crisis isn’t going away anytime soon.

--A flash estimate on growth in the eurozone for the third quarter by Markit has the region contracting 0.5% to 0.6% which, should this pan out, officially puts the currency bloc back into recession. Germany’s PMI fell to 47.0…not good.

--HSBC’s flash estimate for manufacturing in China for the month of August is an abysmal 47.8, down from July’s 49.3.

China’s July housing data showed prices rose from a month earlier in 49 of the 70 cities tracked by the government, the largest number in 14 months. Buyers seem to have been buoyed by two interest-rate cuts since June, but this means the government could impose new tightening measures as they are still concerned prices are too high.

Cotton consumption in China may decline 11% this year, according to the mainland’s largest cotton-textile maker, Weiqiao Textile Co. The chairman said, “The Chinese economy is only at the beginning of a harsh winter. China now is facing a situation where everything from coal to steel inventories are piling up.” Others, like Goldman Sachs, however, foresee a second-half rebound as the government seeks to stimulate activity.

--Japan’s exports declined 8.1% in July vs. July 2011, a much greater fall than anticipated. Exports to the EU plunged 25%. [Recall, China’s exports rose just 1% in July.] Japan’s exports to China fell 11.9% from a year earlier. Exports to the U.S. rose a less than expected 4.7%.

--Many energy consumers in Britain are going to see their bills rise 9% on average in mid-October. This is a big deal…especially at a time when wages are stagnant, if not falling. Not real conducive to growing an economy.

--More than 20% of mortgage holders in Ireland are technically in default.

--The Irish “drinks market” is off 25% from the 2007 peak during the boom. Sales of Guinness are flat year-over-year.

--Thailand reported better than expected growth for the second quarter, up 3.3% vs. the first quarter, double expectations. The government has been focused on boosting domestic demand after last year’s devastating floods.

--Various agencies within the United Nations weighed in on the drought picture the other day and they concluded that climate change is likely to make droughts more common and more intense across the globe. July marked the 329th consecutive month in which global temperatures were above the 20th century average, according to the U.S. National Oceanic and Atmospheric Administration. Perhaps the worst drought in the world is in western Africa, Niger, where many have resorted to eating wild leaves, according to the World Food Organization.

--Dell drastically reduced revenue expectations for the third-quarter to down 2% to 5% over second-quarter levels. For the second, Dell fell short on revenues but beat on the bottom line. The personal computer maker warned of a “challenging” second half due to the “uncertain economic environment.” Dell shares closed the week at a low, $11.25.

--Facebook shares had another rough week, trading under $19 (the 50% decline mark from the $38 IPO price) as it was learned Peter Thiel, a director at Facebook, sold more than 20m shares the prior week at an average price of $20, or more than $400 million worth. Thiel had sold 16m shares with the IPO. Thiel was criticized in some circles for the timing of his latest share-dump, though he does still have 7m shares according to filings. Facebook ended the week at $19.40.

--According to the U.S.-based Fair Labor Association (FLA), Foxconn, Apple’s main manufacturer in China, has improved working hours and conditions and was ahead of schedule in implementing the FLA’s recommendations. Apple had asked the FLA to investigate worker conditions.

--Danish wind turbine firm Vestas announced plans to cut another 1,400 workers as it forecasts a further drop in business in 2013. Earlier in the year, the company announced it would lay off over 2,300 this year. 55% of the new round of job cuts will take place in Europe.

--Electronics retailer Best Buy Co. continued to struggle as profits collapsed for the latest quarter, with same-store sales declining 3.2% (1.6% in the U.S., 8.2% internationally) and the company suspending its stock-buyback program. The shares tumbled to a nine-year low as founder Richard Schulze continues to make waves about taking the company private, though the board, and shareholders, remain skeptical he can put together the financing.

--Barnes & Noble had a decent sales report for a change with same-store sales at its flagship bookstores up 4.6% and overall revenue up 2.5%, though it still reported a substantial loss for the three months ending July 28. B&N’s CEO cited the continued benefit from strong sales of the “Fifty Shades…” series. The trilogy has sold 25 million copies in the United States.

--Dawn Kopecki of Bloomberg News had a piece titled “Wall Street Leaderless in Rules Fight as Dimon Diminished,” referring to JPMorgan Chase & Co. CEO Jamie Dimon who has lost more than a bit of stature owing to the various investigations the bank has had to deal with.  Gallup also recently did a poll showing the percentage of Americans saying they had a “great deal” or “quite a lot” of confidence in banks dropped to 21% in June from 41% in 2007 and more than 60% in 1980.

The dearth of leadership on Wall Street now is “really problematic,” said Harvard Professor Rakesh Kurana. “Businesses and their leaders are no longer seen as trustworthy. When an institution or industry loses its legitimacy, it loses the benefit of the doubt.”

So this gives me an excuse to tease a topic I’ll be addressing next week. Talk about “waiting 24 hours,” I have waited what is now over two months to tell my story about how JPMorgan has treated me in an escrow issue involving a merger in which I held some shares. Let’s just say Mr. Dimon and his associates are being put on notice. They won’t like what I have to say.

--A 1968 Ford GT40 racer sold for $11 million at the classic car auction in Monterey, Calif., last weekend, a record for any American auto at auction. The car had been raced by Jacky Ickx (I have a photo of him in my office) at Daytona and Le Mans trials in 1968 and later used as the camera car in Steve McQueen’s 1971 film “Le Mans.”

--In TV land…and out of nowhere (not that I follow this stuff closely), former New York Giant Michael Strahan is reportedly getting Regis Philbin’s slot opposite Kelly Ripa on “Live! With Kelly.” The new co-host is being introduced Sept. 4. Seeing as it is on at 9:00 a.m. in my area, I’m so bored with the market and CNBC, maybe I’ll watch that to become a better rounded person. Should the pick really be Strahan, that means he beat out Seth Meyers, who was the most rumored choice out of 59 that tried out. [59 being Jack Ham’s number…just a little shout-out to my Steelers fans readers as we approach the start of the NFL season.]

And in a big move that shakes up the late-night lineup, ABC is moving Jimmy Kimmel to the 11:35 pm time slot opposite David Letterman and Jay Leno. I don’t stay up anymore for the late-night programming, but this will be interesting to follow. Just this week, Leno was forced to lay off up to two dozen staffers (out of a total of 200), and cut his own salary to save other jobs. Addressing the topic up front on Monday, Leno said: “Welcome to the Tonight Show, or as Comcast calls us, ‘The Expendables.’ We’ve consistently been No. 1 in the ratings, and if you know anything about our network, that kind of thing is frowned upon.”

Foreign Affairs

Israel/Iran: It’s certainly a sign of the times that the debate in Israel these days seems to be as much about how many Israelis will die in retaliatory strikes once Israel attacks Iran’s nuclear program as much as anything else. 300? 500? Those are two figures being bandied about by those close to Prime Minister Benjamin Netanyahu.

There is also a fierce debate between Netanyahu, who is talking like he wants to go it alone (the heck with the White House) and President Shimon Peres, who said the other day, “It is clear that we cannot do it on our own. We can delay it, but we realize we have to proceed together with America. There are questions of cooperation and of timetables, but as severe as the danger is, at least this time we’re not alone.”

This is the view of General Martin Dempsey, the chairman of the Joint Chiefs of Staff, who at best said Israel could only set back Iran’s program a year or so.

Netanyahu was furious and talked of Peres’ historic mistakes, such as “when he thought the Oslo Accords would bring a new Middle East,” as the prime minister put it.

But the real shocker was Dempsey publicly saying Israel couldn’t deal a lethal blow, which was interpreted among Israeli hawks as being an attempt to rein them in. There is an American election, after all.

Meanwhile, when it comes to the effectiveness of the sanctions against Iran, the New York Times had a story talking about how Iraq is aiding Iranian financial institutions in circumventing the sanctions, with many Iraqi government officials, including those close to Prime Minister Maliki, profiting directly.

“Maliki’s government is right in the middle of this,” said one former senior American intelligence official who now does business in Iraq, according to the Times.

Basically, Iranian customers move their money through Iraqi banks and then on to Dubai, UAE, or Jordan and from there into the international banking system.  Trade between Iran and Iraq has grown to an estimated $11 billion a year.

Syria: In a totally embarrassing performance at an impromptu press briefing, President Barack Obama said that any Syrian use of its chemical or biological weapons would be a “red line” for the U.S. and that the Pentagon had contingency plans.

“We cannot have a situation in which chemical or biological weapons are falling into the hands of the wrong people.”

I’m guessing some of them already have, though whether those taking possession have the knowledge on how to use them is a totally different story. It’s not that simple. Plus the joke of Obama’s statement is that as I told you last week, most experts believe it would take “tens of thousands” of troops to secure Syria’s vast stockpile and you well know, not only is the U.S. not prepared to put such a force on the ground, especially before the election, but outside of perhaps one or two players, such as Turkey, no NATO ally is about to help out at this time. I’m not saying there wouldn’t be military conflict should Bashar Assad choose to use chemical weapons on his own people, such as NATO airstrikes, but actually securing the weapons isn’t going to happen at this particular time.

You also had a situation this week where Turkey admitted that it can take in only so many more refugees. The Turks are sheltering about 70,000 in camps near the border and Turkey said its limit is 100,000.

Lebanon: The violence in neighboring Syria continues to spread into Lebanon and Israeli sources have also said Syria is providing Hizbullah with Scud missiles, an escalation long feared by the Israelis. The Scuds could deliver chemical weapons, which is leading to a big rise in gas mask sales in Israel. A Scud-D missile has a range of 430 miles, making it as grave a threat as Israel has faced.

In Tripoli, Lebanon’s second-biggest city, armed supporters and opponents of Bashar Assad fought with five dead and more than 70 wounded. At least ten Lebanese soldiers were among the wounded.

But amid the gathering storm in Lebanon, guess who is arriving next month? Pope Benedict XVI. That’s going to be interesting.

Egypt: Israel has to be concerned with Egypt’s move to introduce tanks and aircraft into the Sinai to fight terrorists, even though it’s not known if Israel green-lighted the move, for now. Remember, it is technically in contravention of the 1979 Israeli-Egypt peace treaty. Egypt’s new military leadership has vowed to go after the Bedouin and Islamist terrorists responsible for the recent death of 16 Egyptian soldiers in lawless Sinai. According to longtime Middle East troubleshooter Dennis Ross, Egyptian President Morsi did not tell Israel it was moving heavy weaponry into the territory.

Afghanistan: There have been at least 32 green-on-blue attacks this year vs. 13 all of 2011, resulting in at least 39 NATO deaths, 24 Americans.  Despite the predominant feeling, NATO believes only two or three of the attacks are directly attributable to the Taliban; rather they are blamed on cultural misunderstandings or perceived slights, as reported by the New York Times. One Afghan commander told the paper that many of the attacks can be blamed on soldiers from rural areas whose customs clash deeply with those of the Americans.

“They do not know anything else except religion and their traditional codes,” he said. “They see attitudes of foreign forces alongside themselves which are not compatible to what they understand. That causes spite and resentment among them.”

Meanwhile, three more New Zealand soldiers were killed here, victims of a roadside bomb, bringing the total to five in just the past few weeks. The other two were shot and killed by an Afghan soldier. New Zealand’s government said it would probably speed up its withdrawal from the country, originally slated to be pulled by October 2013.

China: Gu Kailai, the wife of disgraced Communist Party leader Bo Xilai, was handed a suspended death sentence for the killing of British businessman Neil Heywood. Some say Gu may only serve about seven years, even though the sentence is technically for life in prison. The focus now turns to how the government will handle Bo amidst a once-in-a-decade leadership change currently taking place. Bo had been a candidate for the all-powerful Politburo Standing Committee until all hell broke loose when it was discovered the Heywood murder had been covered up for four months.

Bo’s name wasn’t mentioned during Gu’s trial, which many believe means he will not be implicated, but he could have his party membership revoked. Bo’s former right-hand man, Wang Lijun, the fellow who fled to the U.S. consulate to spill the beans on the Heywood cover-up, may have implicated his boss, Bo, in other crimes that could prevent him from making a comeback, as so many other Chinese Communist Party leaders have done over the years.

But Bo and his many supporters may have the goods on China’s top leadership. It’s fascinating. Just wish we had the details.

Separately, last week I wrote that the situation in the East China Sea between China and Japan appeared to have been defused when Japan deported 14 Chinese activists from Hong Kong who had landed on a disputed island.

Well, hours later it flared up anew as Japan sent a flotilla to the Diaoyu (or Senkaku in Japan). Immediately after, China stopped exporting crucial rare earth minerals to Japan, while anti-Japanese protests hit a number of Chinese cities. [I cover this in more detail in my “Hot Spots” column.]

This bears watching…just how far will China feel compelled to play the nationalism card? And how much pressure will the Japanese government feel from its far right that doesn’t think the government is standing up to China enough when it comes to disputes in the East and South China Seas.

Russia: The backlash from the Pussy Riot sentencing (two years in prison for “hooliganism”) continues.

Gideon Rachman / Financial Times

“The Putin government may try to pretend that it does not care about the outrage of musicians and intellectuals in the west. But it has spent many millions hiring western public relations firms to burnish Russia’s image. Any one of these hired guns could have warned Mr. Putin that the Pussy Riot sentence is an unqualified PR disaster.

“The danger for Putin is that bashing the Russian government may now become cool…

“The conviction of Pussy Riot will do much to boost Mr. Putin’s reputation as a thug. In the process, it may draw much wider attention to many other unattractive features of Putin’s Russia – from widespread corruption to its protection of brutal regimes such as Syria and the frequent unpunished murders of government critics….

“The Russian government will insist that Mr. Putin is far more representative of the Russian people than some avant-garde musicians from Moscow. There may be some truth in that. Russia is a socially conservative place and there are certainly many religious people in Russia who were genuinely offended by Pussy Riot’s performance….

“Now, however, the conviction of Pussy Riot has re-energized the Russian opposition and inflicted a grave blow to Mr. Putin’s international image. Even some former Putin loyalists are concluding that the president is now an international embarrassment and a hindrance to Russia’s modernization. There are signs that the Kremlin realizes it has made a mistake with Pussy Riot – and may seek to get the band released early. However, the damage to the president’s standing is done. Pussy Riot is going to prison. But the band still has the power to rock the Kremlin.”

Ecuador/Britain: Julian Assange emerged from hiding at the Ecuadorean embassy in London on Sunday and promptly blasted the United States and the Obama administration. Ecuador’s President Rafael Correa had granted Assange asylum as he remains out of reach of British authorities who want to detain and deport him to Sweden, where he would stand trial on sexual assault charges.

Assange said in part: “I ask President Obama to do the right thing. The United States must renounce its witch hunt against WikiLeaks. The United States must dissolve its FBI investigation. The United States must vow that it will not seek to prosecute our staff or our supporters.”

Assange added that in purportedly targeting WikiLeaks, the U.S. risks “dragging us all into a dark, repressive world in which journalists live under fear of prosecution.”

Assange also praised Pfc. Bradley Manning, the U.S. soldier who is awaiting trial on charges of aiding the enemy by passing secret files to WikiLeaks.

“If Bradley Manning really did as he is accused, he is a hero, an example to us all, and one of the world’s foremost political prisoners.”

Oh shut up, you creep. Unfortunately, Assange has become a major thorn for the British government, which has had its missteps in what it has said it could or would do with Assange, even though he is under diplomatic protection. It also didn’t help when a British parliamentarian, George Galloway, claimed that a rape allegation against Assange had no basis because having sex with a woman when she is asleep is not rape.

Hungary: In a disturbing scene, during a soccer match between Hungary and Israel in Budapest last Wednesday, it has emerged that a sizable number of the home crowd shouted anti-Semitic slurs, including during the Israeli national anthem and throughout the entire contest, according to a director at The Simon Wiesenthal Center and the Jerusalem Post.

“Such anti-Semitic hooliganism is a reflection of the growing anti-Semitism in Hungary which is constantly being encouraged by the ultra-nationalist Jobbik party which denies Hungarian complicity in Holocaust crimes and is in sympathy with Iranian views on Israel,” said Efraim Zuroff of the Wiesenthal Center.

This is totally consistent with everything I have been reading over the past few years, and obviously emblematic of what I have been discussing during the same period, the rise of the Far Right across Europe, with immigrants and Jews the easy scapegoats during times of economic duress.

Random Musings

--The latest AP-GfK poll has Barack Obama with a 47-46 lead over Mitt Romney among registered voters, compared to 47-44, Obama, in June, so hardly a bounce for Romney post-Paul Ryan being put on the ticket. Ryan has a 38% favorability rating vs. 34% unfavorable among adults, 40-34 among registered voters. The balance means a quarter of the voters still don’t know who he is.

In terms of who they trust to handle the economy, Romney leads 48-44 (46-27 among independents).

Obama has a 52-35 advantage on social issues, and a 48-42 lead on Medicare. [49-44 for those who believe Medicare is an extremely important issue.]

Obama’s overall approval rating is 49%, which continues to spell trouble.

35% say the country is headed in the right direction, up from 31% in June.

--In a Washington Post/ABC News poll, Paul Ryan received a 41% favorable rating, 37% negative. Vice President Joe Biden was 43% favorable, 43% unfavorable.

--A Wall Street Journal/NBC News survey of registered voters gave Obama a 48-44 lead over Romney. 2/3s felt the country was headed in the wrong direction.

As to the Ryan selection, 22% said it may make them more likely to vote for the Republican ticket, 23% said it made them less likely, and 54% said it made no difference. A wash.

In the same WSJ/NBC poll, Congress received a 12% approval rating. 12%! 82% disapproved. [Earlier, a Gallup poll reported Congress’ approval rating was 10%.] When it comes to likability, 42% view the Democrats positively, 40% negatively, while Republicans receive a highly worrisome 36-45, positive-negative split.

--But then Todd Akin popped up. The Missouri Republican, who was expected to defeat incumbent Democratic Senator Claire McCaskill in November and perhaps be the difference in whether or not the Republicans took control of the Senate, said, when asked about his opposition to abortion, even if a woman becomes pregnant after being raped:

“If it’s a legitimate rape, the female body has ways to try to shut that whole thing down,” adding that even if the woman became pregnant, “the punishment ought to be of the rapist and not attacking the child.”

Akin defended the incendiary comment by saying he wasn’t talking about rapists being legitimate, but rather “false claims” of rape. He said he meant to say “forcible rape.”

Later, Akin said, “I misspoke one word in one sentence in one day. I haven’t done anything that’s morally and ethically wrong.”

And so Akin decided to stay in the race, vowing to rally conservatives to a campaign focused on abortion, the last thing Republicans want to do this year in trying to defeat Barack Obama and take back the Senate.

Every leading Republican, from Mitt Romney on down, was adamant in their denunciation of Akin. ‘Get out!’ The Republican National Committee and Senatorial Committee will withhold all funding for Akin’s campaign. It’s a nightmare. It’s potentially catastrophic for Republicans nationwide.

As Alex Castellanos, a Republican strategist, told Maureen Dowd of the New York Times, “Next we’ll be trying to take away the vote from women. How can we be the party of cool and make the generational leap forward when we have these recidivist ideas at the very core of our base?”

While one deadline passed, there is still another, Sept. 25, where Akin could petition the courts to remove his name from the ballot and replace it with another Republican, who would be selected by party leaders.

--And then there was Kansas Republican Congressman Kevin Yoder, who we just learned a year ago went skinny dipping in the Sea of Galilee, where the Bible says Jesus walked on water. Yoder was part of a large congressional trip in August 2011, with others going in the water but Yoder was the only one, apparently, to go sans clothing. Yoder said this week, “It’s certainly not an incident that I’m proud of.”

--Niall Ferguson / Newsweek…on why Barack Obama must go.

“In his inaugural address, Obama promised ‘not only to create new jobs, but to lay a new foundation for growth.’ He promised to ‘build the roads and bridges, the electric grids, and digital lines that feed our commerce and bind us together.’ He promised to ‘restore science to its rightful place and wield technology’s wonders to raise health care’s quality and lower its cost.’ And he promised to ‘transform our schools and colleges and universities to meet the demands of a new age.’ Unfortunately the president’s scorecard on every single one of those bold pledges is pitiful.

“In an unguarded moment earlier this year, the president commented that the private sector of the economy was ‘doing fine.’ Certainly, the stock market is well up (by 74 percent) relative to the close on Inauguration Day 2009. But the total number of private-sector jobs is still 4.3 million below the January 2008 peak. Meanwhile, since 2008, a staggering 3.6 million Americans have been added to Social Security’s disability insurance program. This is one of many ways unemployment is being concealed….

“Unemployment was supposed to be 6 percent by now. It has averaged 8.2 percent this year so far. Meanwhile real median annual household income has dropped more than 5 percent since June 2009. Nearly 110 million individuals received a welfare benefit in 2011, mostly Medicaid or food stamps.

“Welcome to Obama’s America: nearly half the population is not represented on a taxable return – almost exactly the same proportion that lives in a household where at least one member receives some type of government benefit. We are becoming the 50-50 nation – half of us paying the taxes, the other half receiving the benefits.

“And all this despite a far bigger hike in the federal debt than we were promised.”

Ferguson blisters Obama on foreign policy, covering topics I have extensively commented on in the past, and he expresses the same exasperation I have over the president’s term.

“Remarkably the president polls relatively strongly on national security. Yet the public mistakes his administration’s astonishingly uninhibited use of political assassination for a coherent strategy. According to the Bureau of Investigative Journalism in London, the civilian proportion of drone casualties was 16 percent last year. Ask yourself how the liberal media would have behaved if George W. Bush had used drones that way. Yet somehow it is only ever Republican secretaries of state who are accused of committing ‘war crimes.’’

--Robert J. Samuelson / Washington Post

“Overlooked in the furor surrounding Paul Ryan’s Medicare proposal – a plan, it should be recalled, that wouldn’t start until 2023 and even then would affect only new beneficiaries – is a just-published study in The Journal of the American Medical Association (JAMA) suggesting that, well, Ryan might be right. The study finds that a voucher-type system might noticeably reduce costs compared to ‘traditional’ fee-for-service Medicare. Three Harvard economists did the study, including one prominent supporter of President Obama’s health-care overhaul….

“The central issue…is whether the runaway costs of the health sector, comprising nearly one-fifth of the economy, can be controlled without eroding medical quality. Almost everyone agrees that the delivery system – the amalgam of hospitals, clinics, doctors and nurses – should be reorganized to lower costs and eliminate unneeded care. The question is how….

“Limits must be imposed on the health sector. There are no pleasing ways to do this. Still, the increasing evidence from large-scale experience is that market mechanisms offer the best chance of reconciling Americans’ desire for personal choice with cost control. If there are better ideas, let’s hear them. Otherwise, we shouldn’t reject the obvious merely because it’s unfamiliar.

“Voucher plans are not right-wing, extremist ideas. They enjoy support in both parties. Ryan would permit continuation of fee-for-service; if it’s more efficient and effective, it would survive. If not, its decline would be no great loss. The Ryan plan’s greatest defect may be that it doesn’t start for a decade. We can’t wait that long.”

--Someone tell Paul Ryan to stop wearing those goofy golf shirts with the short sleeves. We know you’re in good shape, Paul. But wear shirts with the sleeve near the elbow, or a rolled up long-sleeved shirt. Ryan’s wardrobe reminds me of golfer David Love III, who looks like a dweeb in his outfits.

--Just when the Royal Family was on a terrific roll, Prince Harry screws up in Vegas. Though who are these a-holes that insist on posting embarrassing stuff, even though it could be a friend, or in the case of the New York Giants the other day, a teammate?! But as you can imagine Harry’s actions are all the talk here in Ireland and The Times of London summed it up as well as anyone.

“Although he may ape their lifestyle, the Prince is not a celebrity: he is a Windsor. His family is defined by – and beloved for – its acceptance of a shared duty. Playing sleazy games with naked girls in hotel rooms, and being idiotic enough to allow the proceedings to be photographed, is a monumental breach of that contract. It reflects poorly upon the Prince, and undermines all the work that his family and their advisers have done to refurbish the monarchy for the modern age. For their sake and his own, the revels must now be ended.”

--Unless Congress reaches a new budget deal for 2013, the National Park Service will see its budget slashed 8%, which would cut 218 full-time jobs, or 763 seasonal employees; this at the worst possible time as our national parks are already under severe stress. Juliet Eilperin of the Washington Post had a good piece on the topic the other day. I’ve always said we can’t scrimp on our parks but if the 8% cut goes into effect, as many as 150 could be closed.

But there is one partial solution. The administration’s fiscal 2013 budget includes $59 million for parkland acquisition. As Republican Rep. Rob Bishop of Utah said, “Why don’t we prioritize and realize the federal government cannot print money fast enough to do everything that needs to get done?” So eliminate all new land acquisitions to focus on critical upkeep and infrastructure instead.

---

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

God bless America.
---

Gold closed at $1673…up $55 on the week
Oil, $96.15

Returns for the week 8/20-8/24

Dow Jones -0.9% [13157]
S&P 500 -0.5% [1411]
S&P MidCap -0.8%
Russell 2000 -1.3%
Nasdaq -0.2% [3069]

Returns for the period 1/1/12-8/24/12

Dow Jones +7.7%
S&P 500 +12.2%
S&P MidCap +10.3%
Russell 2000 +9.2%
Nasdaq +17.8%

Bulls 47.3
Bears 24.7 [Source: Investors Intelligence]

Have a great week. I appreciate your support. Next time back to normal.

Brian Trumbore



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Week in Review

08/26/2012

For the week 8/20-8/24

[Posted 6:00 AM ET, Sunday, from Lahinch, Ireland]

So…I have prided myself in taking all of one week off in over 13 ½ years of doing this column, but now you can call this week two. I humbly apologize, dear readers. I’m on my 20th trip to Ireland since 1989, at a golf event at my club here, Lahinch, and let’s just say I have not gotten a lot of sleep. Something about the pints after a round, you understand. When I travel by myself it’s easy to do the column but any time I’m here with friends it’s a whole different story.

Actually, it wasn’t a bad week to take off as there was little news. It’s the coming few weeks that are vitally important…beginning with Federal Reserve Chairman Ben Bernanke’s speech on Friday in Jackson Hole, Wyoming, where he is expected, by the markets at least, to spell out the latest Fed policy; including QE3, or the latest iteration of quantitative easing.

Then the following week the European Central Bank meets on Sept. 6 (finance ministers of the eurozone a few days before), where it is expected ECB President Mario Draghi will spell out details on his bond-buying program that he has promised for over a month now.

And on Sept. 12 you have a German supreme court ruling on the constitutionality of the eurozone’s permanent bailout fund as well as a critical election in the Netherlands where the anti-euro supporters are expected to make big gains.

For now, Greece continues to scramble in its efforts to remain a member of Club Euro. The government is trying to enact another round of austerity measures, to the tune of 11.5 billion euro, in the hopes it will pave the way for the latest 31.5 billion installment as part of Greek Bailout II. Greece did pay back a 3.1 billion euro loan payment the other day after selling 4 billion in 3-month paper at 4.43%. I imagine some of you would love that kind of interest rate on your savings only you wouldn’t be able to sleep at night because it is just a matter of time before Greece goes kaput.

So that’s it for now, sports fans. Again, I apologize for this week’s effort. Don’t abandon me! I’ll be back next time with another 30-page stemwinder and, on Oct. 15, I’m launching an online nightly newscast…initially Monday thru Thursday…that some of you might enjoy. Far more on this as I get closer to the date.

Street Bytes

--Stocks took it on the chin this week, with both the Dow Jones and S&P 500 snapping six-week winning streaks. The Dow fell 0.9% to 13157 and the S&P lost 0.5%.

--On Monday, shares in Apple rose from a previous Friday’s close of $648 to $665 and in doing so, Apple became the most valuable company in the world – ever. At $600 billion+, it is about $200 billion more than the world’s second-biggest company, Exxon Mobil. Microsoft had the previous record, established at the height of the dot.com bubble in December 1999.

But then at week’s end a jury ruled that Samsung had ripped off the technology Apple used to produce the iPhone and iPad.  Samsung has to pay out $1.05 billion, though an appeal is expected.

--U.S. Treasury Yields

6-mo. 0.13% 2-yr. 0.27% 10-yr. 1.69% 30-yr. 2.80%

Bonds rallied on hopes the Federal Reserve will initiate further easing measures, as well as a renewed feeling the euro debt crisis isn’t going away anytime soon.

--A flash estimate on growth in the eurozone for the third quarter by Markit has the region contracting 0.5% to 0.6% which, should this pan out, officially puts the currency bloc back into recession. Germany’s PMI fell to 47.0…not good.

--HSBC’s flash estimate for manufacturing in China for the month of August is an abysmal 47.8, down from July’s 49.3.

China’s July housing data showed prices rose from a month earlier in 49 of the 70 cities tracked by the government, the largest number in 14 months. Buyers seem to have been buoyed by two interest-rate cuts since June, but this means the government could impose new tightening measures as they are still concerned prices are too high.

Cotton consumption in China may decline 11% this year, according to the mainland’s largest cotton-textile maker, Weiqiao Textile Co. The chairman said, “The Chinese economy is only at the beginning of a harsh winter. China now is facing a situation where everything from coal to steel inventories are piling up.” Others, like Goldman Sachs, however, foresee a second-half rebound as the government seeks to stimulate activity.

--Japan’s exports declined 8.1% in July vs. July 2011, a much greater fall than anticipated. Exports to the EU plunged 25%. [Recall, China’s exports rose just 1% in July.] Japan’s exports to China fell 11.9% from a year earlier. Exports to the U.S. rose a less than expected 4.7%.

--Many energy consumers in Britain are going to see their bills rise 9% on average in mid-October. This is a big deal…especially at a time when wages are stagnant, if not falling. Not real conducive to growing an economy.

--More than 20% of mortgage holders in Ireland are technically in default.

--The Irish “drinks market” is off 25% from the 2007 peak during the boom. Sales of Guinness are flat year-over-year.

--Thailand reported better than expected growth for the second quarter, up 3.3% vs. the first quarter, double expectations. The government has been focused on boosting domestic demand after last year’s devastating floods.

--Various agencies within the United Nations weighed in on the drought picture the other day and they concluded that climate change is likely to make droughts more common and more intense across the globe. July marked the 329th consecutive month in which global temperatures were above the 20th century average, according to the U.S. National Oceanic and Atmospheric Administration. Perhaps the worst drought in the world is in western Africa, Niger, where many have resorted to eating wild leaves, according to the World Food Organization.

--Dell drastically reduced revenue expectations for the third-quarter to down 2% to 5% over second-quarter levels. For the second, Dell fell short on revenues but beat on the bottom line. The personal computer maker warned of a “challenging” second half due to the “uncertain economic environment.” Dell shares closed the week at a low, $11.25.

--Facebook shares had another rough week, trading under $19 (the 50% decline mark from the $38 IPO price) as it was learned Peter Thiel, a director at Facebook, sold more than 20m shares the prior week at an average price of $20, or more than $400 million worth. Thiel had sold 16m shares with the IPO. Thiel was criticized in some circles for the timing of his latest share-dump, though he does still have 7m shares according to filings. Facebook ended the week at $19.40.

--According to the U.S.-based Fair Labor Association (FLA), Foxconn, Apple’s main manufacturer in China, has improved working hours and conditions and was ahead of schedule in implementing the FLA’s recommendations. Apple had asked the FLA to investigate worker conditions.

--Danish wind turbine firm Vestas announced plans to cut another 1,400 workers as it forecasts a further drop in business in 2013. Earlier in the year, the company announced it would lay off over 2,300 this year. 55% of the new round of job cuts will take place in Europe.

--Electronics retailer Best Buy Co. continued to struggle as profits collapsed for the latest quarter, with same-store sales declining 3.2% (1.6% in the U.S., 8.2% internationally) and the company suspending its stock-buyback program. The shares tumbled to a nine-year low as founder Richard Schulze continues to make waves about taking the company private, though the board, and shareholders, remain skeptical he can put together the financing.

--Barnes & Noble had a decent sales report for a change with same-store sales at its flagship bookstores up 4.6% and overall revenue up 2.5%, though it still reported a substantial loss for the three months ending July 28. B&N’s CEO cited the continued benefit from strong sales of the “Fifty Shades…” series. The trilogy has sold 25 million copies in the United States.

--Dawn Kopecki of Bloomberg News had a piece titled “Wall Street Leaderless in Rules Fight as Dimon Diminished,” referring to JPMorgan Chase & Co. CEO Jamie Dimon who has lost more than a bit of stature owing to the various investigations the bank has had to deal with.  Gallup also recently did a poll showing the percentage of Americans saying they had a “great deal” or “quite a lot” of confidence in banks dropped to 21% in June from 41% in 2007 and more than 60% in 1980.

The dearth of leadership on Wall Street now is “really problematic,” said Harvard Professor Rakesh Kurana. “Businesses and their leaders are no longer seen as trustworthy. When an institution or industry loses its legitimacy, it loses the benefit of the doubt.”

So this gives me an excuse to tease a topic I’ll be addressing next week. Talk about “waiting 24 hours,” I have waited what is now over two months to tell my story about how JPMorgan has treated me in an escrow issue involving a merger in which I held some shares. Let’s just say Mr. Dimon and his associates are being put on notice. They won’t like what I have to say.

--A 1968 Ford GT40 racer sold for $11 million at the classic car auction in Monterey, Calif., last weekend, a record for any American auto at auction. The car had been raced by Jacky Ickx (I have a photo of him in my office) at Daytona and Le Mans trials in 1968 and later used as the camera car in Steve McQueen’s 1971 film “Le Mans.”

--In TV land…and out of nowhere (not that I follow this stuff closely), former New York Giant Michael Strahan is reportedly getting Regis Philbin’s slot opposite Kelly Ripa on “Live! With Kelly.” The new co-host is being introduced Sept. 4. Seeing as it is on at 9:00 a.m. in my area, I’m so bored with the market and CNBC, maybe I’ll watch that to become a better rounded person. Should the pick really be Strahan, that means he beat out Seth Meyers, who was the most rumored choice out of 59 that tried out. [59 being Jack Ham’s number…just a little shout-out to my Steelers fans readers as we approach the start of the NFL season.]

And in a big move that shakes up the late-night lineup, ABC is moving Jimmy Kimmel to the 11:35 pm time slot opposite David Letterman and Jay Leno. I don’t stay up anymore for the late-night programming, but this will be interesting to follow. Just this week, Leno was forced to lay off up to two dozen staffers (out of a total of 200), and cut his own salary to save other jobs. Addressing the topic up front on Monday, Leno said: “Welcome to the Tonight Show, or as Comcast calls us, ‘The Expendables.’ We’ve consistently been No. 1 in the ratings, and if you know anything about our network, that kind of thing is frowned upon.”

Foreign Affairs

Israel/Iran: It’s certainly a sign of the times that the debate in Israel these days seems to be as much about how many Israelis will die in retaliatory strikes once Israel attacks Iran’s nuclear program as much as anything else. 300? 500? Those are two figures being bandied about by those close to Prime Minister Benjamin Netanyahu.

There is also a fierce debate between Netanyahu, who is talking like he wants to go it alone (the heck with the White House) and President Shimon Peres, who said the other day, “It is clear that we cannot do it on our own. We can delay it, but we realize we have to proceed together with America. There are questions of cooperation and of timetables, but as severe as the danger is, at least this time we’re not alone.”

This is the view of General Martin Dempsey, the chairman of the Joint Chiefs of Staff, who at best said Israel could only set back Iran’s program a year or so.

Netanyahu was furious and talked of Peres’ historic mistakes, such as “when he thought the Oslo Accords would bring a new Middle East,” as the prime minister put it.

But the real shocker was Dempsey publicly saying Israel couldn’t deal a lethal blow, which was interpreted among Israeli hawks as being an attempt to rein them in. There is an American election, after all.

Meanwhile, when it comes to the effectiveness of the sanctions against Iran, the New York Times had a story talking about how Iraq is aiding Iranian financial institutions in circumventing the sanctions, with many Iraqi government officials, including those close to Prime Minister Maliki, profiting directly.

“Maliki’s government is right in the middle of this,” said one former senior American intelligence official who now does business in Iraq, according to the Times.

Basically, Iranian customers move their money through Iraqi banks and then on to Dubai, UAE, or Jordan and from there into the international banking system.  Trade between Iran and Iraq has grown to an estimated $11 billion a year.

Syria: In a totally embarrassing performance at an impromptu press briefing, President Barack Obama said that any Syrian use of its chemical or biological weapons would be a “red line” for the U.S. and that the Pentagon had contingency plans.

“We cannot have a situation in which chemical or biological weapons are falling into the hands of the wrong people.”

I’m guessing some of them already have, though whether those taking possession have the knowledge on how to use them is a totally different story. It’s not that simple. Plus the joke of Obama’s statement is that as I told you last week, most experts believe it would take “tens of thousands” of troops to secure Syria’s vast stockpile and you well know, not only is the U.S. not prepared to put such a force on the ground, especially before the election, but outside of perhaps one or two players, such as Turkey, no NATO ally is about to help out at this time. I’m not saying there wouldn’t be military conflict should Bashar Assad choose to use chemical weapons on his own people, such as NATO airstrikes, but actually securing the weapons isn’t going to happen at this particular time.

You also had a situation this week where Turkey admitted that it can take in only so many more refugees. The Turks are sheltering about 70,000 in camps near the border and Turkey said its limit is 100,000.

Lebanon: The violence in neighboring Syria continues to spread into Lebanon and Israeli sources have also said Syria is providing Hizbullah with Scud missiles, an escalation long feared by the Israelis. The Scuds could deliver chemical weapons, which is leading to a big rise in gas mask sales in Israel. A Scud-D missile has a range of 430 miles, making it as grave a threat as Israel has faced.

In Tripoli, Lebanon’s second-biggest city, armed supporters and opponents of Bashar Assad fought with five dead and more than 70 wounded. At least ten Lebanese soldiers were among the wounded.

But amid the gathering storm in Lebanon, guess who is arriving next month? Pope Benedict XVI. That’s going to be interesting.

Egypt: Israel has to be concerned with Egypt’s move to introduce tanks and aircraft into the Sinai to fight terrorists, even though it’s not known if Israel green-lighted the move, for now. Remember, it is technically in contravention of the 1979 Israeli-Egypt peace treaty. Egypt’s new military leadership has vowed to go after the Bedouin and Islamist terrorists responsible for the recent death of 16 Egyptian soldiers in lawless Sinai. According to longtime Middle East troubleshooter Dennis Ross, Egyptian President Morsi did not tell Israel it was moving heavy weaponry into the territory.

Afghanistan: There have been at least 32 green-on-blue attacks this year vs. 13 all of 2011, resulting in at least 39 NATO deaths, 24 Americans.  Despite the predominant feeling, NATO believes only two or three of the attacks are directly attributable to the Taliban; rather they are blamed on cultural misunderstandings or perceived slights, as reported by the New York Times. One Afghan commander told the paper that many of the attacks can be blamed on soldiers from rural areas whose customs clash deeply with those of the Americans.

“They do not know anything else except religion and their traditional codes,” he said. “They see attitudes of foreign forces alongside themselves which are not compatible to what they understand. That causes spite and resentment among them.”

Meanwhile, three more New Zealand soldiers were killed here, victims of a roadside bomb, bringing the total to five in just the past few weeks. The other two were shot and killed by an Afghan soldier. New Zealand’s government said it would probably speed up its withdrawal from the country, originally slated to be pulled by October 2013.

China: Gu Kailai, the wife of disgraced Communist Party leader Bo Xilai, was handed a suspended death sentence for the killing of British businessman Neil Heywood. Some say Gu may only serve about seven years, even though the sentence is technically for life in prison. The focus now turns to how the government will handle Bo amidst a once-in-a-decade leadership change currently taking place. Bo had been a candidate for the all-powerful Politburo Standing Committee until all hell broke loose when it was discovered the Heywood murder had been covered up for four months.

Bo’s name wasn’t mentioned during Gu’s trial, which many believe means he will not be implicated, but he could have his party membership revoked. Bo’s former right-hand man, Wang Lijun, the fellow who fled to the U.S. consulate to spill the beans on the Heywood cover-up, may have implicated his boss, Bo, in other crimes that could prevent him from making a comeback, as so many other Chinese Communist Party leaders have done over the years.

But Bo and his many supporters may have the goods on China’s top leadership. It’s fascinating. Just wish we had the details.

Separately, last week I wrote that the situation in the East China Sea between China and Japan appeared to have been defused when Japan deported 14 Chinese activists from Hong Kong who had landed on a disputed island.

Well, hours later it flared up anew as Japan sent a flotilla to the Diaoyu (or Senkaku in Japan). Immediately after, China stopped exporting crucial rare earth minerals to Japan, while anti-Japanese protests hit a number of Chinese cities. [I cover this in more detail in my “Hot Spots” column.]

This bears watching…just how far will China feel compelled to play the nationalism card? And how much pressure will the Japanese government feel from its far right that doesn’t think the government is standing up to China enough when it comes to disputes in the East and South China Seas.

Russia: The backlash from the Pussy Riot sentencing (two years in prison for “hooliganism”) continues.

Gideon Rachman / Financial Times

“The Putin government may try to pretend that it does not care about the outrage of musicians and intellectuals in the west. But it has spent many millions hiring western public relations firms to burnish Russia’s image. Any one of these hired guns could have warned Mr. Putin that the Pussy Riot sentence is an unqualified PR disaster.

“The danger for Putin is that bashing the Russian government may now become cool…

“The conviction of Pussy Riot will do much to boost Mr. Putin’s reputation as a thug. In the process, it may draw much wider attention to many other unattractive features of Putin’s Russia – from widespread corruption to its protection of brutal regimes such as Syria and the frequent unpunished murders of government critics….

“The Russian government will insist that Mr. Putin is far more representative of the Russian people than some avant-garde musicians from Moscow. There may be some truth in that. Russia is a socially conservative place and there are certainly many religious people in Russia who were genuinely offended by Pussy Riot’s performance….

“Now, however, the conviction of Pussy Riot has re-energized the Russian opposition and inflicted a grave blow to Mr. Putin’s international image. Even some former Putin loyalists are concluding that the president is now an international embarrassment and a hindrance to Russia’s modernization. There are signs that the Kremlin realizes it has made a mistake with Pussy Riot – and may seek to get the band released early. However, the damage to the president’s standing is done. Pussy Riot is going to prison. But the band still has the power to rock the Kremlin.”

Ecuador/Britain: Julian Assange emerged from hiding at the Ecuadorean embassy in London on Sunday and promptly blasted the United States and the Obama administration. Ecuador’s President Rafael Correa had granted Assange asylum as he remains out of reach of British authorities who want to detain and deport him to Sweden, where he would stand trial on sexual assault charges.

Assange said in part: “I ask President Obama to do the right thing. The United States must renounce its witch hunt against WikiLeaks. The United States must dissolve its FBI investigation. The United States must vow that it will not seek to prosecute our staff or our supporters.”

Assange added that in purportedly targeting WikiLeaks, the U.S. risks “dragging us all into a dark, repressive world in which journalists live under fear of prosecution.”

Assange also praised Pfc. Bradley Manning, the U.S. soldier who is awaiting trial on charges of aiding the enemy by passing secret files to WikiLeaks.

“If Bradley Manning really did as he is accused, he is a hero, an example to us all, and one of the world’s foremost political prisoners.”

Oh shut up, you creep. Unfortunately, Assange has become a major thorn for the British government, which has had its missteps in what it has said it could or would do with Assange, even though he is under diplomatic protection. It also didn’t help when a British parliamentarian, George Galloway, claimed that a rape allegation against Assange had no basis because having sex with a woman when she is asleep is not rape.

Hungary: In a disturbing scene, during a soccer match between Hungary and Israel in Budapest last Wednesday, it has emerged that a sizable number of the home crowd shouted anti-Semitic slurs, including during the Israeli national anthem and throughout the entire contest, according to a director at The Simon Wiesenthal Center and the Jerusalem Post.

“Such anti-Semitic hooliganism is a reflection of the growing anti-Semitism in Hungary which is constantly being encouraged by the ultra-nationalist Jobbik party which denies Hungarian complicity in Holocaust crimes and is in sympathy with Iranian views on Israel,” said Efraim Zuroff of the Wiesenthal Center.

This is totally consistent with everything I have been reading over the past few years, and obviously emblematic of what I have been discussing during the same period, the rise of the Far Right across Europe, with immigrants and Jews the easy scapegoats during times of economic duress.

Random Musings

--The latest AP-GfK poll has Barack Obama with a 47-46 lead over Mitt Romney among registered voters, compared to 47-44, Obama, in June, so hardly a bounce for Romney post-Paul Ryan being put on the ticket. Ryan has a 38% favorability rating vs. 34% unfavorable among adults, 40-34 among registered voters. The balance means a quarter of the voters still don’t know who he is.

In terms of who they trust to handle the economy, Romney leads 48-44 (46-27 among independents).

Obama has a 52-35 advantage on social issues, and a 48-42 lead on Medicare. [49-44 for those who believe Medicare is an extremely important issue.]

Obama’s overall approval rating is 49%, which continues to spell trouble.

35% say the country is headed in the right direction, up from 31% in June.

--In a Washington Post/ABC News poll, Paul Ryan received a 41% favorable rating, 37% negative. Vice President Joe Biden was 43% favorable, 43% unfavorable.

--A Wall Street Journal/NBC News survey of registered voters gave Obama a 48-44 lead over Romney. 2/3s felt the country was headed in the wrong direction.

As to the Ryan selection, 22% said it may make them more likely to vote for the Republican ticket, 23% said it made them less likely, and 54% said it made no difference. A wash.

In the same WSJ/NBC poll, Congress received a 12% approval rating. 12%! 82% disapproved. [Earlier, a Gallup poll reported Congress’ approval rating was 10%.] When it comes to likability, 42% view the Democrats positively, 40% negatively, while Republicans receive a highly worrisome 36-45, positive-negative split.

--But then Todd Akin popped up. The Missouri Republican, who was expected to defeat incumbent Democratic Senator Claire McCaskill in November and perhaps be the difference in whether or not the Republicans took control of the Senate, said, when asked about his opposition to abortion, even if a woman becomes pregnant after being raped:

“If it’s a legitimate rape, the female body has ways to try to shut that whole thing down,” adding that even if the woman became pregnant, “the punishment ought to be of the rapist and not attacking the child.”

Akin defended the incendiary comment by saying he wasn’t talking about rapists being legitimate, but rather “false claims” of rape. He said he meant to say “forcible rape.”

Later, Akin said, “I misspoke one word in one sentence in one day. I haven’t done anything that’s morally and ethically wrong.”

And so Akin decided to stay in the race, vowing to rally conservatives to a campaign focused on abortion, the last thing Republicans want to do this year in trying to defeat Barack Obama and take back the Senate.

Every leading Republican, from Mitt Romney on down, was adamant in their denunciation of Akin. ‘Get out!’ The Republican National Committee and Senatorial Committee will withhold all funding for Akin’s campaign. It’s a nightmare. It’s potentially catastrophic for Republicans nationwide.

As Alex Castellanos, a Republican strategist, told Maureen Dowd of the New York Times, “Next we’ll be trying to take away the vote from women. How can we be the party of cool and make the generational leap forward when we have these recidivist ideas at the very core of our base?”

While one deadline passed, there is still another, Sept. 25, where Akin could petition the courts to remove his name from the ballot and replace it with another Republican, who would be selected by party leaders.

--And then there was Kansas Republican Congressman Kevin Yoder, who we just learned a year ago went skinny dipping in the Sea of Galilee, where the Bible says Jesus walked on water. Yoder was part of a large congressional trip in August 2011, with others going in the water but Yoder was the only one, apparently, to go sans clothing. Yoder said this week, “It’s certainly not an incident that I’m proud of.”

--Niall Ferguson / Newsweek…on why Barack Obama must go.

“In his inaugural address, Obama promised ‘not only to create new jobs, but to lay a new foundation for growth.’ He promised to ‘build the roads and bridges, the electric grids, and digital lines that feed our commerce and bind us together.’ He promised to ‘restore science to its rightful place and wield technology’s wonders to raise health care’s quality and lower its cost.’ And he promised to ‘transform our schools and colleges and universities to meet the demands of a new age.’ Unfortunately the president’s scorecard on every single one of those bold pledges is pitiful.

“In an unguarded moment earlier this year, the president commented that the private sector of the economy was ‘doing fine.’ Certainly, the stock market is well up (by 74 percent) relative to the close on Inauguration Day 2009. But the total number of private-sector jobs is still 4.3 million below the January 2008 peak. Meanwhile, since 2008, a staggering 3.6 million Americans have been added to Social Security’s disability insurance program. This is one of many ways unemployment is being concealed….

“Unemployment was supposed to be 6 percent by now. It has averaged 8.2 percent this year so far. Meanwhile real median annual household income has dropped more than 5 percent since June 2009. Nearly 110 million individuals received a welfare benefit in 2011, mostly Medicaid or food stamps.

“Welcome to Obama’s America: nearly half the population is not represented on a taxable return – almost exactly the same proportion that lives in a household where at least one member receives some type of government benefit. We are becoming the 50-50 nation – half of us paying the taxes, the other half receiving the benefits.

“And all this despite a far bigger hike in the federal debt than we were promised.”

Ferguson blisters Obama on foreign policy, covering topics I have extensively commented on in the past, and he expresses the same exasperation I have over the president’s term.

“Remarkably the president polls relatively strongly on national security. Yet the public mistakes his administration’s astonishingly uninhibited use of political assassination for a coherent strategy. According to the Bureau of Investigative Journalism in London, the civilian proportion of drone casualties was 16 percent last year. Ask yourself how the liberal media would have behaved if George W. Bush had used drones that way. Yet somehow it is only ever Republican secretaries of state who are accused of committing ‘war crimes.’’

--Robert J. Samuelson / Washington Post

“Overlooked in the furor surrounding Paul Ryan’s Medicare proposal – a plan, it should be recalled, that wouldn’t start until 2023 and even then would affect only new beneficiaries – is a just-published study in The Journal of the American Medical Association (JAMA) suggesting that, well, Ryan might be right. The study finds that a voucher-type system might noticeably reduce costs compared to ‘traditional’ fee-for-service Medicare. Three Harvard economists did the study, including one prominent supporter of President Obama’s health-care overhaul….

“The central issue…is whether the runaway costs of the health sector, comprising nearly one-fifth of the economy, can be controlled without eroding medical quality. Almost everyone agrees that the delivery system – the amalgam of hospitals, clinics, doctors and nurses – should be reorganized to lower costs and eliminate unneeded care. The question is how….

“Limits must be imposed on the health sector. There are no pleasing ways to do this. Still, the increasing evidence from large-scale experience is that market mechanisms offer the best chance of reconciling Americans’ desire for personal choice with cost control. If there are better ideas, let’s hear them. Otherwise, we shouldn’t reject the obvious merely because it’s unfamiliar.

“Voucher plans are not right-wing, extremist ideas. They enjoy support in both parties. Ryan would permit continuation of fee-for-service; if it’s more efficient and effective, it would survive. If not, its decline would be no great loss. The Ryan plan’s greatest defect may be that it doesn’t start for a decade. We can’t wait that long.”

--Someone tell Paul Ryan to stop wearing those goofy golf shirts with the short sleeves. We know you’re in good shape, Paul. But wear shirts with the sleeve near the elbow, or a rolled up long-sleeved shirt. Ryan’s wardrobe reminds me of golfer David Love III, who looks like a dweeb in his outfits.

--Just when the Royal Family was on a terrific roll, Prince Harry screws up in Vegas. Though who are these a-holes that insist on posting embarrassing stuff, even though it could be a friend, or in the case of the New York Giants the other day, a teammate?! But as you can imagine Harry’s actions are all the talk here in Ireland and The Times of London summed it up as well as anyone.

“Although he may ape their lifestyle, the Prince is not a celebrity: he is a Windsor. His family is defined by – and beloved for – its acceptance of a shared duty. Playing sleazy games with naked girls in hotel rooms, and being idiotic enough to allow the proceedings to be photographed, is a monumental breach of that contract. It reflects poorly upon the Prince, and undermines all the work that his family and their advisers have done to refurbish the monarchy for the modern age. For their sake and his own, the revels must now be ended.”

--Unless Congress reaches a new budget deal for 2013, the National Park Service will see its budget slashed 8%, which would cut 218 full-time jobs, or 763 seasonal employees; this at the worst possible time as our national parks are already under severe stress. Juliet Eilperin of the Washington Post had a good piece on the topic the other day. I’ve always said we can’t scrimp on our parks but if the 8% cut goes into effect, as many as 150 could be closed.

But there is one partial solution. The administration’s fiscal 2013 budget includes $59 million for parkland acquisition. As Republican Rep. Rob Bishop of Utah said, “Why don’t we prioritize and realize the federal government cannot print money fast enough to do everything that needs to get done?” So eliminate all new land acquisitions to focus on critical upkeep and infrastructure instead.

---

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

God bless America.
---

Gold closed at $1673…up $55 on the week
Oil, $96.15

Returns for the week 8/20-8/24

Dow Jones -0.9% [13157]
S&P 500 -0.5% [1411]
S&P MidCap -0.8%
Russell 2000 -1.3%
Nasdaq -0.2% [3069]

Returns for the period 1/1/12-8/24/12

Dow Jones +7.7%
S&P 500 +12.2%
S&P MidCap +10.3%
Russell 2000 +9.2%
Nasdaq +17.8%

Bulls 47.3
Bears 24.7 [Source: Investors Intelligence]

Have a great week. I appreciate your support. Next time back to normal.

Brian Trumbore