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For the week 11/5-11/9
Obama is re-elected…now get to work
Barack Obama…50.5 percent [2008…Obama 53.0 / McCain 45.7]
Mitt Romney…48.0 percent
Romney 206 [Florida to be decided…29 votes]
New U.S. Senate
55 Democrats – 45 Republicans [including two independents who will caucus with the Democrats. Had been 53-47 Dems.]
New House of Representatives
234 Republicans – 193 Democrats with 8 still being contested. It’s assumed will end up around 235-200. [Had been 240-190 with five vacancies; essentially 242-193.]
Like my fellow Republicans, I was very depressed come late Tuesday night (though not as late as I thought it would take to come up with a winner). I think the way the Senate ended up bummed me out as much as the situation at the top. Some Republicans involved in the process for selecting the state nominees need to remember that the goal is to win! Not to have some kind of narrow moral purity, or whatever.
As in the cases of Indiana and Missouri, Mourdock and Akin…idiots for their comments on rape. Two years ago it was Delaware and Nevada, two seats that should have been in the elephants’ column and instead each state selected numbskulls and Republicans lost.
So why did President Obama win re-election. For starters, a superior organization, that much is clear. So much for all the polls showing how ‘unenthusiastic’ Democrats were. Yes, Obama received about eight million fewer votes than 2008 (while Romney received about 1.8 million less than McCain garnered), but Obama’s original coalition held.
Blacks, Hispanics, women (unmarried women) and 60% of those under 30.
But what other factors entered into the Obama victory?
Bill Clinton’s support; the timing of Hurricane Sandy and the Christie factor; Ben Bernanke and quantitative easing; the auto bailout; Romney’s flip-flopping; the selection of Paul Ryan; Obama successfully running out the clock on Benghazi; and the spring ad blitz by the Obama campaign demonizing Romney when he didn’t have the money to fight back (if he wanted to).
Any one of the above might have been worth a point, but let’s look at the Bernanke factor.
The whole purpose behind quantitative easing (bond-buying to keep interest rates artificially low) was to raise asset prices, including stocks. A higher stock market always helps with consumer confidence, higher consumer confidence leads to more confidence in the housing sector, which is helped big time by low mortgage rates, and a combination of the above did have enough of an impact on the overall economy, tepid as it has been, to lower the ‘official’ unemployment rate from a high of 10.0% to the current 7.9%. 7.9% still sucks, but the trend was in the president’s favor in terms of rising confidence (which on Friday by one barometer hit a 5-year high) and all the sentiment indicators have been headed in the right direction.
As for the auto bailout, 59% of Ohioans favored the bailout, according to exit polls on Tuesday. Ohio broke 50-48 for Obama.
Paul Ryan? Can you say ‘Should have been Marco Rubio’? Of course in hindsight Rubio was a better choice, assuming he didn’t say something incredibly stupid with the klieg lights on him. It certainly looks like Rubio would have delivered Florida and its 29 electoral votes.
But here’s the bottom line. Say Romney pulls out Florida and somehow overcame the margin in Ohio. He still loses. I mean all the other swing states – Iowa, Virginia, New Hampshire, Wisconsin, Colorado, and Nevada – that went Obama did so handily. Only Virginia was as close as three points.
No, as I said all year…and then some beginning with my trip to the Iowa State Fair in August 2011…this was an incredibly lousy Republican field, I never liked Mitt Romney (don’t like his wife either), he ran a god-awful campaign, no one knows what is in this guy’s soul, and as a result he lost to a president who had to deal with 8% unemployment and an approval rating below 50. It should have been a layup for the Republicans.
I have lots of opinion on the election down below but for now I’ll include these snippets. You’ll recognize how Ms. Parker’s thoughts mirror my own.
“Call me a grouch, but I’m basically sick of everybody. One more mention of ‘the ground game,’ and I was going to shave David Axelrod’s mustache. Give me a choice of company between the savviest political prognosticator and Jimbo at the bait shop, and I’ll take a carton of those worms, please.
“The morning after the worst presidential race in memory, we now know the true meaning of the peace that passeth all understanding.
“No matter which man you preferred, there is something unsatisfactory about the end of this race. Victory isn’t so much an uplifting story of hope or change but of survival. We The People weren’t so much participants in a great democratic experiment as we were spectators at a blood sport where everyone got hurt, none so much as our nation, exhausted and battered by cynicism and snark.
“Rather than elevating our spirits, this election diminished the currency of our aspirations….
“As for statesmen, our children will have to conjure their likeness as they do monsters. Greatness is not much apparent. The respective campaigns insulted our intelligence by making false promises and telling half-truths. They manipulated us by preying on our fears, prejudices and anxieties. They made little girls cry….
“As we begin the next leg of this journey, we might keep in the back of our minds the idea of a common enemy. For now, that enemy is our stubborn refusal to work together to solve our massive problems. If this election provided any mandate at all, it is that we set aside our special interests and work together before it’s too late.”
“Before Republicans conclude that they had an insufficiently conservative candidate, they should consider what happened in the Senate – a near wipeout. If the party goes hard right, selecting candidates even less appealing to women, minorities and an increasingly secularized society, it is hard to see how they will improve their standing.
“Republicans now will need to develop a strategy for addressing our fiscal problems with only one house of Congress in their possession. They will need to look at what the voters are telling them and who the voters are in the 21st century – fewer marrieds, more secular, more ethnically diverse.
“Conservatives are certainly glum. But politics is the ever-evolving debate of a diverse people about how they wish to conduct their affairs. It doesn’t end with one election.
“As for President Obama he’ll need to do what he didn’t in the first term: address our fiscal mess, reform entitlements and the tax code and deal with foreign threats in a responsible manner. As Americans we should hope he’s learned something and will surprise us with newfound moderation and courage. If not, we’re in for a very rocky time.”
So now the United States faces the “fiscal cliff,” the combination of automatic spending cuts and tax hikes that are to kick in on Jan. 1 if Congress and the White House can’t find agreement on a deficit-reduction plan to replace it. No doubt a grand deal or bargain is not in the cards for end of the year, but Wall Street needs to see an authentic framework for a deal that could then be enacted in the spring. If President Obama and Congress do reach a deal that is in the best interests of our nation, the financial markets will soar, around the world, and capital will come streaming into the U.S. If not, we crash.
Harvard economist Kenneth Rogoff on the need to get on the right path as soon as possible.
“What we’re really talking about here is this: Is it going to take us four or five years to dig our way out? Or 10 or 12 years? Nothing is going to have us out of this in a year or two. That would really be a miracle. But good policy can make it happen faster.”
Erskine Bowles…of Simpson-Bowles fame / Washington Post
“The American people spoke on Tuesday, and they voted for a continuation of divided government. With President Obama at the helm for four more years and a strengthened Democratic majority in the Senate, and with the Republicans decidedly in control of the House of Representatives, both sides may now feel emboldened to pursue their party’s preferences. Rarely has it ever been this clear, however, that elected leaders from across the political spectrum need to come together to address our nation’s rising federal debt.
“Unlike previous times, when there may have been many months or even years for officials to continue fighting longstanding policy battles, important decisions need to be made in the next two months to address the ‘fiscal cliff.’ In a way we have never seen before, both sides will have to move beyond contentious electoral politics and come together in the spirit of good governance to replace the abrupt and mindless spending cuts and tax increases set to take effect Jan. 1 with a gradual and intelligent deficit reduction plan.
“Though there seems to be broad agreement that we should replace the fiscal cliff with something better, many partisans on both sides seem to think they have the upper hand in the negotiation. Democrats see the threat of large defense cuts and massive tax increases as a way to force tax increases for the rich. Republicans see large domestic spending cuts, tax increases on poor and middle-income Americans and the need to increase the debt ceiling as their own leverage points.
“There has even been talk of going over the fiscal cliff to potentially strengthen each side’s bargaining position. Going over the cliff, though, would mean betting the country on the hope that the other side will back down before it is too late. That’s a bet we shouldn’t take. The risk is simply too high.”
“So much for the post-election honeymoon. The financial markets took a header Wednesday on (take your pick) the return of European troubles, the risk of a Beltway breakdown over the looming tax cliff, or the greater prospect of a major tax increase arriving in 2013. The most important question now is how a re-elected President Obama is going to deal with this economic policy mess.
“Specifically, is he going to consider his re-election to be a mandate to repeat his first-term record of rejecting all GOP ideas and insisting on his priorities? Or is he going to show some magnanimity in victory and give Republican Speaker John Boehner something he can sell to his own re-elected majority?....
“On January 1, Washington faces both a huge tax increase and an automatic spending cut known as the ‘sequester.’ Our sources say that to get past these immediate deadlines, Mr. Boehner will ask Mr. Obama to maintain the Bush tax rates for at least another year, ease the sequester for defense in particular, and in return GOP House leaders will be open to giving the President new revenue. Then the two sides can negotiate the bigger tax and entitlement questions next year….
“There’s little doubt that Mr. Obama has the political whip hand for the moment. The tax increases and defense spending cuts will automatically take effect if Congress and the President fail to act. Mr. Obama could bludgeon Republicans to accept a deal on his terms, then if they balk simply pocket the tax increases as a revenue windfall, while blaming Republicans if there’s a recession.
“What that strategy won’t do is solve the real problems he’s inheriting from his own first term. The deficit is growing by $1 trillion a year and another U.S. credit-rating downgrade beckons as entitlement spending escalates. Above all, the economy is growing too slowly to raise incomes or raise enough revenue for the government.
“The question is whether Mr. Obama wants to solve these problems – or continue demonizing Republicans while getting nothing done.”
This week the Congressional Budget Office said that failure to prevent the fiscal cliff and sequester would lead to recession and a 9.1% unemployment rate by end of 2013. The debate is just beginning as Speaker John Boehner and President Obama laid out their talking points at week’s end.
As you know, I believe Obama will also be overwhelmed by foreign policy issues going forward.
“The lazy take on the U.S. elections says nothing much has changed. Barack Obama is in the White House, Republicans control the House and Democrats the Senate. Washington is heading back to gridlock as usual. Oh, and the economy is running at stall speed. As for the multitudes of Obama supporters around the globe, they will probably be disappointed again.
“The trouble with analyses such as this is the presumption that we live in a steady state world. Mr. Obama’s re-election has changed the dynamics of American politics. Given the economic backdrop and the force of his opponents’ rage, it was a momentous victory. America’s first black president can leave behind the fear, ever present during the past four years, that his place in history would carry the footnote that he had served only one term….
“The rest of the world will not wait on budget talks in Washington. The pace of global change has never been so tumultuous. Whether it’s the political awakening in the Middle East, a new leadership in China or austerity politics in Europe, it is a fair bet that many of today’s assumptions will be overturned during Mr. Obama’s second term.
“There are some things he cannot change. U.S. power is increasingly contested. The quality or otherwise of the U.S. relationship with China will in the future be the hinge of international security. As for the Middle East, it will be harder to escape its treacherous conflicts than many in Washington hope….
“Mr. Obama, I suspect, wants to recast the U.S. as a selective superpower – backing, say, the popular clamor for democracy in the Arab world, but declining to commit U.S. blood and treasure to the cause. This is not going to be easy in the face of murderous regimes such as that of Syria’s Bashar al-Assad.
“The president has laid his own trap over Iran. A promise to prevent Tehran from securing a nuclear capability is a promise no president can keep. Bombing nuclear sites could delay things, but at the cost of a war no one (save Israel’s Benjamin Netanyahu) wants. Tehran will ultimately make its own decision about the bomb. The route to a non-nuclear Iran has to start with an offer of everything-on-the-table talks.
“The strategic challenge from Xi Jinping’s China resides in containing collisions. What little is known about Mr. Xi suggests he will be tough in asserting China’s rights and interests. So far, Mr. Obama’s policy has been to engage and hedge – to strengthen co-operation while reviving U.S. alliances across East Asia….
“Plenty of other points of crisis can be added to such a checklist – Afghanistan, Pakistan and Israel-Palestine among them. Vladimir Putin has to be managed; Europeans encouraged to fix the euro….
“Most important, though, will be the manner in which Mr. Obama deploys U.S. power – the strategic signals he sends to allies and adversaries alike about global order.”
Ben Macintyre of the Times of London quotes Defense Secretary Leon Panetta…good advice for these times.
“Put your arm around chaos. You better damn well do the tough stuff up front because if you think you can delay the tough decisions and tiptoe past the graveyard, you’re in for a lot of trouble.”
I thought this would be the crucial week for Greece and the eurozone; now it seems it’s next week, beginning with a budget vote on Sunday night in the Greek parliament.
For starters, Prime Minister Antonis Samaras deserves credit for coming up with the votes to pass another austerity package of 13 billion euro, mandated by the troika (European Commission, European Central Bank, and International Monetary Fund) before it will release the next installment on Greece’s bailout program, 31.2 billion euro which would prevent Greece from running out of cash by month’s end.
The vote was 153-128 (300-seat parliament…18 abstentions, one no-show…always one jerk) and it should be no surprise there was a 48-hour general strike leading up to Wednesday night’s ballot with 100,000 rioting in the streets of Athens. After all, the austerity legislation called for further public sector job cuts and salary reductions, a hike in the retirement age, pension cuts, taxes on fuel and cigarettes, and an end to pensioners’ Christmas and holiday bonuses.
Samaras said deputies were voting on “whether Greece would remain a member of the eurozone or return to international isolation, collapse into bankruptcy and go back to the drachma.”
OK, it passed and Greece, assuming parliament then approved the 2013 budget, should have been entitled to the troika’s blessing on Monday and the cash.
But with a five billion euro debt payment due next week (to Euro nations who ponied up the money for the bailout), the troika suddenly had major differences over just how much debt relief and actual progress Greece was making on its debt reduction plans before it was entitled to the latest installment of aid.
Specifically, the EC and IMF were at odds as the ECB said, you all settle it, we’ve done all we can already.
The IMF is very pessimistic that Greece can reduce its debt to the 120% of GDP target by 2020 (it’s headed up to 189% in 2013), plus Greece wants a two-year extension on its 2014 target to 2016, which would require further aid from the eurozone. How many parliaments, such as in Germany, Finland, Austria and the Netherlands do you think would be up for that?
Bottom line, some of the above countries would face losses on their existing bailout loans if Greece was cut a new deal, and remember, German Chancellor Angela Merkel faces a contentious election next year.
I mean the whole situation is so chaotic, on Wednesday, employees of the Greek parliament walked out when they discovered, ‘Hey, this austerity package they are voting on cuts our salaries too!’ [Parliament rescinded the cut.]
Meanwhile, Spain had a successful bond auction that appears to carry them through the year, but they still need a bailout, though Prime Minister Mariano Rajoy continues to jerk the eurozone and ECB around; saying his country may not need a bailout if Spain’s interest rates come down more, not realizing they are down from record highs because everyone thinks Spain will apply for the bailout and then the ECB’s bond-buying program kicks in, which would hold down rates (a la the Federal Reserve’s quantitative easing and its impact on Treasuries).
Turning to France, the central bank said the economy will likely contract in the fourth quarter, this as the IMF warned that France needs “a comprehensive program of structural reforms.”
With growth projected at just 0.4% next year, the IMF said France’s outlook was clouded by a “significant loss of competitiveness.”
“[It] could become more serious if the French economy does not adapt at the same pace as its principal commercial partners, notably Italy and Spain, which, after Germany, are engaged in profound reforms of their labor and service markets.”
The Hollande government has been reluctant to cut spending, to which the IMF said “the quality of budget adjustment would be improved” by deeper spending cuts, adding that big tax increases for 2012 and 2013 “further reduced incentives to work and invest and put France in a position of competitive disadvantages vis-à-vis its peers.”
Spot on. France will be a big story in 2013 for all the wrong reasons.
So with all the above in mind, the European Commission cut the 2013 growth forecast for the 17-nation eurozone to just 0.1%. Yuck. Germany’s growth prospects were cut from 1.7% to 0.8%. ECB President Mario Draghi said the eurozone’s difficulties are “starting to affect Germany’s economy” and this remark, which should have been no surprise to you readers as I’ve been discussing Germany’s dwindling prospects for months, helped contribute to Wall Street’s slide on Wednesday.
Data company Markit (sic) said the purchasing managers index for both manufacturing and the service sector was 45.7 for the eurozone in October, down from 46.1 and worse than expected. Markit says this is commensurate with an economy contracting 0.5% in the fourth quarter. Italy’s comp was 45.6. Germany’s 47.7 (50 being the dividing line between growth and contraction).
Yup, kids…the unending euro saga has a long ways to run.
Finally, a note on China. I discuss the first days of the Communist Party Congress down below, but in terms of the Chinese economy, an HSBC service sector reading for October came in at 53.5 vs. 54.3 in September, though the official government reading was 55.5 vs. September’s 53.7. Industrial production was a solid 9.6% in October over a year earlier. Retail sales for the month rose 14.5%, also solid. And October exports rose a stronger than expected 11.6% (imports up 2.4%). So the bottom seems to be in place.
Additionally, the consumer price index for October was up just 1.7%, with ever-important food prices rising only 1.8% (staple pork was down 15.8%).
--Stocks took it on the chin again with the Dow Jones losing 2.1% to 12815, its lowest weekly close in four months. The S&P 500 declined 2.4% and Nasdaq lost 2.6% to 2904. For Nasdaq, it was the fifth straight losing week, seven in eight, as the index has lost almost 10% over that period, coinciding with Apple’s big fall.
Market participants were not only not thrilled by the prospects of another four years of Obama, the Dow Jones also tanked 312 points the day after, Wednesday, because of the Greek issue, along with fears over tax policy; as in what are the capital gains and dividend rates going to be in 2013 and beyond?
--U.S. Treasury Yields
6-mo. 0.14% 2-yr. 0.26% 10-yr. 1.61% 30-yr. 2.74%
Treasuries rallied again on fears political gridlock will impede any hopes for a stronger recovery, along with the safe haven play.
--California Dem. Gov. Jerry Brown is on the cusp of a supermajority in the California legislature following Tuesday’s election (with Democrats expected to pick up some vacant Senate seats in special elections to be held in March). This would be the first such majority since 1933 in the California legislature as Brown also won approval for his tax plan, Proposition 30, which levies temporary income-tax increases on high earners and a quarter-cent surcharge on sales as part of a plan to reduce the budget deficit.
As former Republican legislative leader Jim Brulte told the L.A. Times:
“It’s a huge victory for Jerry Brown…In a state that had rejected the last eight tax increases on the ballot, Gov. Brown got the voters to support taxes even in difficult economic times.
“I don’t think you can underestimate the benefits to Jerry Brown of 30 passing. It means he’ll be dealing with much smaller budget problems in the next two years. And it will quiet the liberal Democratic base that has seen nothing but budget cuts during his first two years in office.”
--As noted in the Wall Street Journal, securities firms, commercial banks and the like donated $29.5 million to the Romney campaign (through individuals or political action committees affiliated with Wall Street), compared with $8.7 million to Obama. In 2008, Obama raised $22.7 million from Wall Street and Sen. John McCain took in $13.6 million, according to the Center for Responsive Politics.
--Shares in Apple fell heavily and at one point were down 25% from their all-time high of $705 set on 9/21 before rallying back to close the week at $547. Investors have expressed concerns about Apple’s ability to introduce new products to meet demand, as well as recent management changes and slower earnings growth.
Appearing on CNBC, bond guru Jeffrey Gundlach, who predicted Apple’s slide, said it could continue to fall to the $425 level and that he didn’t understand the “obsession” with the stock.
“The product innovator, as I’ve said over and over again, isn’t there anymore.”
Regarding the latest product from Apple, Gundlach observed:
“I’m really struck by this mini iPad thing, as if that’s any kind of a product innovation. Once you start just changing the size of your products, I really think you’re not exactly innovating. I’m wondering if you’re going to start coming out with the tutti-frutti iPad, where it comes out in different colors.”
Apple’s tablet market share has fallen to 50% from 60%, though first off, the tablet market itself grew 50% so it is only natural that with increased competition, Apple’s share would drop. Samsung now has 18% and Amazon 9% with its Kindle Fire.
--The era of CEO Don Thompson at McDonald’s is off to a more than rocky start as the fast-food giant reported same-store sales for October that were down 1.8%, globally, and a worse than expected 2.2% in the U.S. and Europe; the first monthly decline in sales since 2003.
Thompson, in a statement, said the results reflect “the pervasive challenges of today’s global marketplace” and that strategic adjustments “will build sales momentum and drive sustained, profitable growth.”
McDonald’s better do something. Not only is the share price down to $85 from a high of $102 in January, but some of its competitors, such as Burger King and Wendy’s, are beginning to grab a little market share. Wendy’s reported same-store sales in North America were up 2.7% in October, while Burger King previously announced its third-quarter sales rose 1.4%.
Heck, your editor, a longtime McDonald’s fan, specifically made a trip to Burger King for a Whopper and a gingerbread shake as a way of lessening the pain from Tuesday’s election results. Both items hit the spot.
[Pssst, kids…the gingerbread shake is available for a limited time only. Get your mom or dad to take you for one.]
--Another new CEO, Ron Johnson of JC Penney, is sucking wind in a big way. Penney reported a 26% fall in sales for the third quarter ending October. That’s not a misprint. This comes on the heels of a 21.7% decline in the previous quarter.
--Nationwide home prices fell 0.3% in September over August, according to CoreLogic, but are up 5.0% from year ago levels, the largest boost since July 2006.
--So, in keeping with the above, with a stabilizing housing market, Freddie Mac reported net income of $2.9 billion for the third-quarter after a year-earlier loss of $4.4 billion and marks the fourth consecutive quarterly gain for the mortgage-finance giant. But coupled with larger sibling Fannie Mae, the two still owe the U.S. Treasury, and taxpayers, $140 billion; having taken nearly $187 billion in aid while returning $47 billion in dividends.
--I never did much business with Stifel Nicolaus in my former career but the firm has doubled through acquisitions since 2007. This week Stifel announced it is acquiring New York investment bank KBW. Always liked Stifel CEO Ronald Kruszewski, at least from what I see in interviews.
--Shares in AOL rose to a new 52-week high on the heels of flat revenue, which was a major improvement after seven straight years of declining sales. Ad revenues rose 7%.
--Microsoft is ditching its Windows Live Messenger for Skype’s messaging tool by March.
--ING is slashing 2,350 jobs alongside a sharp drop in third-quarter profits.
--British Airways/IAG’s Iberia unit is cutting 4,500 jobs as it is reducing capacity by 15%.
--Thanks to Hurricane Sandy and this week’s northeaster, over 22,000 flights were cancelled.
--Groupon reported results that once again fell short of expectations and the stock slid anew, all the way to $2.75 with the company announcing it would cut the work force by 80.
--Need a job? Canada is looking for those with experience in the construction and transport sectors. Recently the immigration minister appealed to Poles living in Ireland and the U.K., with some 200,000 in Ireland alone, “many with highly advanced skills in the trades needed in Canada’s labor market,” according to Minister Jason Kenney.
--Sign of the Apocalypse: Wal-Mart, already open in many locations on Thanksgiving Day, is offering “special” holiday promotions beginning at 8 p.m. Our society is so screwed up. Even I take Thanksgiving Day off! [Most of it….OK…six hours…enough for a good meal and three beers…make that four.]
--Back to Sandy and the recovery. I told you all that I expected to lose power for a week based on past experience with big storms in my area. Turns out my power stayed on but all around me lost theirs for a week…or more. Including my parents, who are staying at my place for a tenth night!
JCP&L is our utility and they couldn’t suck more. Then again, there are nothing but complaints concerning many of the area utilities. LIPA, Long Island’s power authority, sounds like they are the very worst. One Virginia company, up on the Island to help out, told a local WNBC-TV reporter that all he saw LIPA crews doing was cutting tree branches. In my area, the only trucks I saw were from Ohio Edison and Duke Energy.
We really do have a Third World power grid in America. In so many respects we remain vastly overrated.
Syria: In an interview with Russia Today TV, President Bashar Assad said, “I am not a puppet, I was not made by the West for me to go to the West or any other country. I am Syrian, I am made in Syria, and I will live and die in Syria.”
Warning against intervention, Assad, speaking in English, said:
“I don’t think the West is headed in this direction. But if it does, nobody can predict the consequences.”
“If (the West’s) priority is, figuratively speaking, Assad’s head, the supporters of such approach must realize that the price for that will be lives of the Syrians, not their own lives. Bashar Assad isn’t going anywhere and will never leave, no matter what they say. He can’t be persuaded to take that step.”
Lavrov also said this week that he was confident Syria would abide by its promises not to mount chemical weapons attacks on opposition fighters. “We have received appropriate assurances,” he said.
But on the issue of the shoulder-fired stinger missiles that are prevalent in the region, especially after the Libyan revolution, Lavrov said rebels have obtained 50 of them to hit regime jet fighters, adding, “You know perfectly well what Stingers are intended for, all the more so that the leaders of the (rebel) Syrian Free Army have repeatedly said that civilian planes will be a legitimate target.”
On another front, Turkey has requested patriot missile defense systems from NATO to effectively create a no-fly zone to help safeguard the hundreds of thousands of refugees in Turkey and Jordan and prevent Syrian bombers from flying over the areas.
UN-Arab League envoy Lakhdar Brahimi said, “The situation in Syria is very dangerous. I believe that if the crisis is not solved…there will be the danger of Somalization. It will mean the fall of the state, rise of warlords and militias,” while the war risks “exploding outward” into Lebanon, Turkey and Israel.
[Three Syrian tanks this week entered the demilitarized zone in the Golan Heights, according to Israel; the first such incursion in 40 years. The situation was handled in a low-key fashion with Israel complaining to UN troops in the area.]
Separately, the UN is warning the humanitarian crisis in Syria is only going to get far worse, with 700,000 fleeing to neighboring countries by early 2013 from the current total of around 400,000, while at the same time 2.5 million are in need of assistance inside Syria. A UN appeal for $348 million in aid to provide food, water and other humanitarian assistance for those inside had received only $157 million thus far.
Iran: On Thursday, a Pentagon spokesman said a pair of Iranian jets tried to shoot down an American Predator surveillance drone operating in international airspace over the Gulf but missed.
Spokesman George Little said the incident, which was November 1, was hushed up due to an ongoing “classified mission.”
So we’re all wondering why this was conveniently brought up just two days after the election and not before?!
Mr. Little said the U.S. warned Tehran (through Swiss authorities representing U.S. interests there) that it was prepared to safeguard its forces and would continue operating unmanned surveillance missions over the Gulf.
Typical of this White House, when asked as to the timing of the disclosure of the incident, Little said details were only revealed because there had been an “unauthorized” disclosure. Administration officials also played down the episode as not being a precursor to a military confrontation with Iran. Regardless, it’s disturbing on a number of levels.
Meanwhile, a story that could get a lot of traction is the tragic tale of Iranian blogger Sattar Beheshti, 35, who was arrested by Iranian authorities on charges of “actions against national security on social networks and Facebook.”
A day or two later, his family was told to pick up his body. Despite appeals from France and the U.K., Tehran has provided zero details.
As for the nuclear issue, delegates from the P5+1 and Iran are not expected to meet again until early next year.
But with the re-election of Barack Obama, some in Israel think the president will give Prime Minister Benjamin Netanyahu the cold shoulder for the latter’s seeming desire to influence the U.S. election with his embrace of Mitt Romney.
Netanyahu, prior to the vote, told Israel’s equivalent of “60 Minutes” that he would attack Iran’s nuclear facilities “if necessary.”
“I hope that that will not be the case. In the final reckoning, the responsibility rests with the Prime Minister and as long as I am Prime Minister, Iran will not have the atomic bomb.”
[The news program also disclosed Netanyahu and Defense Minister Ehud Barak argued for an attack on Iran in 2010 but the heads of Mossad and the IDF (Israel Defense Forces) were against the idea.]
In response to Obama’s re-election, Iranian judiciary head Sadeq Larijani (one of the Larijani boys) said:
“After all this pressure and crimes against the people of Iran, relations with America cannot be possible overnight and Americans should not think they can hold our nation to ransom by coming to the negotiating table.”
But of course Obama is a known quantity to the mullahs. They had to be more fearful of a Romney presidency.
Lebanon: French President Francois Hollande made a quick visit to Beirut last Sunday and pledged to protect Lebanon against threats of destabilization caused by the fallout of the conflict in neighboring Syria.
“We are committed in this critical time in which Syria is in a state of war to give all guarantees for Lebanon’s security and stability….Everything should be done to protect (Lebanon). This is France’s stance.”
China: The Communist Party’s 18th Congress opened on Thursday and President Hu Jintao gave his final major policy address.
“We must not take the old path that is closed and rigid, nor must we take the evil road of changing flags and banners.”
Hu also warned that “the party, even the country, could perish” if the anti-corruption campaign is not successful.
On the economic front, Hu set a goal of doubling per capita income by 2020, which is rather ambitious but basically requires 7% growth over the 8-year period. [China grew at an average annual rate of 10.6% during Hu’s tenure, starting 2002.]
And as Hu prepares to hand over the Communist Party boss title to Xi Jinping, Hu said China must speed up the “policy of expanding domestic demand,” noting economic development remains “unbalanced, uncoordinated and unsustainable.”
Xi gets the party title next week and then becomes president probably in March. Hu will retain control of the armed forces for now, probably into the spring as well.
Finally, according to a congressionally mandated panel, the U.S.-China Economic and Security Review Commission, the Chinese military is “on the cusp of attaining a nuclear triad of land-based intercontinental ballistic missiles, submarine-launched ballistic missiles, and air-dropped nuclear bombs.”
China is within two years of fielding nukes on its submarines, according to the panel. [Global Security Newswire]
Japan: While China undergoes its historic leadership change, Japan’s defense minister said it wants to revise its security alliance with the United States to place more of an emphasis on the threat posed by China to Japan’s interests in the East China Sea, such as the contested Senkaku islands (Diaoyu in China).
Russia: President Vladimir Putin dismissed both his defense minister and armed forces chief over a scandal involving the sale of defense ministry assets at prices below market value.
The former defense chief, Anatoly Serdyukov, spearheaded unpopular reforms for the past five years, including this factoid. Russia has one officer for every 2.5 soldiers. Serdyukov was trying to bring the ratio down to one officer for every 15 soldiers, while cutting 200,000 jobs overall by 2016.
But it seems he was involved in a love triangle and his mistress, an official in charge of property sales, had her apartment raided by police, looking for incriminating evidence.
The daughter of Viktor Zubkov, chairman of the board of natural gas giant Gazprom, was married to Serdyukov, but he made no secret of the fact he was messing around with this other woman, Yevgenia Vasilyeva. [I think I have this right.]
[Can you say David Petraeus? Actually, won’t comment otherwise on this startling development. I’ll wait 24 hours…more next review.]
Thoughts on the Election…all sides
“(The) real measure of Mr. Obama’s success, and the ultimate assessment of his presidential tenure, will be in whether, in a second term, he can fulfill some of the promise that made Americans so excited about his candidacy four years ago. Will an Obama second term allow him to transcend the ideological divides that he vowed to bridge but instead found so daunting?
“That is a tough order in a partisan age and with a divided, gridlocked Congress; there is no indication that the intransigence Mr. Obama encountered from the opposition party will diminish. But Mr. Obama has had four years of seasoning; one question is whether he can demonstrate the political canniness and legislative finesse that too often eluded him during the first term.
“Perhaps more important is whether Mr. Obama will demonstrate more willingness – more bravery, actually – to take on issues he ducked the first time around: reforming entitlements, particularly Medicare, and reducing the unsustainable debt. Mr. Obama’s promise of a balanced, long-term combination of spending cuts and tax increases is the correct one. He will have to bring his own party along on entitlement reform, and persuade a dug-in Republican Party of the need for increased tax revenue based on the wishful assumption of faster economic growth.
“There are other important pieces of unfinished business, here and abroad. At the top of the list are comprehensive immigration reform, an enterprise that Republicans would be wise to join if they hope not to be made obsolete by changing demography, and climate change, whose toll may be revealing itself in the extreme weather patterns of recent years. Overseas, the Iranian nuclear program will pose a fateful challenge, possibly within months. Mr. Obama will have to ensure that gains in Afghanistan and Iraq are not erased in the aftermath of U.S. troop withdrawals. His dithering in Syria as 30,000 civilians have been massacred is a particular blot on his first-term record, one for which he could begin to make amends in the second.”
“Barack Obama’s election in 2008 made history. He became the first African American to win the presidency, and he posted the largest margin of victory in 20 years.
“Obama’s narrower win Tuesday is also historic, but for less impressive reasons. He is the first president since World War II to be returned to office by a smaller margin than his original win. And he won despite the highest unemployment rate on the eve of an election in 64 years of Labor Department estimates: 7.9%.
“The president’s re-election against stiff economic headwinds might well be credited to two risky but successful moves: one in 2009 to save GM and Chrysler, while also forcing them into a painful restructuring; the other in 2011 to approve a daring raid to take out Osama bin Laden.
“The auto bailouts, which worked better than even administration economists thought they would, helped Obama with blue-collar voters in key Midwestern states, particularly Ohio and Michigan. And bin Laden’s demise was a singular achievement that deprived Republicans of a typical line of attack, that Democrats are weak on national security.
“Obama also piled up huge majorities among black and Hispanic voters, outweighing Republican Mitt Romney’s advantage among white voters.
“A second term gives Obama an opportunity to separate himself from one-termers such as Jimmy Carter and George H.W. Bush, and go down as the type of president whose name is etched onto buildings. But this is merely an opportunity, hardly a guarantee. The recent history of second terms has been one of scandal or failure.”
“To say the obvious: Democrats own an amazing victory. Not only did they hold the White House despite a still-troubled economy, in a year when their Senate majority was supposed to be doomed, they actually added seats.
“Nor was that all: They scored major gains in the states. Most notably, California – long a poster child for the political dysfunction that comes when nothing can get done without a legislative supermajority – not only voted for much-needed tax increases, but elected, you guessed it, a Democratic supermajority.
“But one goal eluded the victors. Even though preliminary estimates suggest that Democrats received somewhat more votes than Republicans in Congressional elections, the GOP retains solid control of the House thanks to extreme gerrymandering by courts and Republican-controlled state governments. And Representative John Boehner, the speaker of the House, wasted no time in declaring that his party remains as intransigent as ever, utterly opposed to any rise in tax rates even as it whines about the size of the deficit.
“So President Obama has to make a decision, almost immediately, about how to deal with continuing Republican obstruction. How far should he go in accommodating the GOP’s demands?
“My answer is, not far at all. Mr. Obama should hang tough, declaring himself willing, if necessary, to hold his ground even at the cost of letting his opponents inflict damage on a still-shaky economy. And this is definitely no time to negotiate a ‘grand bargain’ on the budget that snatches defeat from the jaws of victory.”
“Barack Obama presides over an America more divided than at any time in 50 years. A country that was riven back then along racial lines gathered itself in 2008 to elect its first black president. That president has spent four years dividing the country on the basis of economic status. The campaign revealed no evidence that Mr. Obama will close the chasm he has created between his voters and those he attacked and vilified.
“It may be true that Mitt Romney failed to respond adequately to the $100 million advertising assault the Obama campaign waged on his years at Bain Capital and in private equity. Maybe a response would have turned some voters. But could it overcome the four-year assault waged not by campaign surrogates, but by the president himself, on bankers, Wall Street, the oil companies after the Gulf spill, insurance companies and the ‘millionaires’ whose family income starts at $250,000?...
“Yes, Republicans have proven across two presidential elections that there are political limits to how crudely one can argue an issue like illegal immigration. Blowing up the party is only fun if you thought watching Tuesday’s results was fun….
“The Republicans’ self-inflicted wounds, however, pale against the willingness of an American president to use his office to blow up the country itself. That, too, has a price. Drill down inside the details of that electoral map and its votes, and you find a nation severely divided.
“With every election, the southern and central states drift further from the coastal sophisticates obsessed with social issues, and from the heavily unionized industrial states around the Great Lakes. But open up those Obama states and you’ll discover divisions: Their big-vote city centers sit like blue moats of minorities and comfy singles who are surrounded by red counties of married couples trying to cope. California’s passage of Proposition 30, which jacks up state taxes to subsidize the moats, is a harbinger. More red voters (and companies) will move out, deepening the divide.
“There’s that famous saying: Is this a great country or what? With the way Barack Obama achieved his re-election, that’s a good question: Or what?”
“Mr. Obama owes his victory to many factors, including a superior ground organization, an improving economy and the fact that Mr. Romney spent the primaries alienating every rapidly growing demographic group in the U.S. – from Hispanics to single women with college degrees….
“In 2008, the white electorate made up 74% of all voters. This time it was 72%. If Republicans are to forestall a generation of exile, they must embrace immigration again. Mr. Obama can dangle the carrot of redemption to leverage comprehensive reform. On climate change, his climb will be much steeper. Americans hate high energy prices. But his response to Superstorm Sandy played a big role in the last few days of the campaign. It also reminded voters that extreme weather events are becoming a normal feature of everyday life. If Mr. Obama wants a shot at greatness, this will be it.”
“Barack Obama is one of the greatest politicians in American history. After a historic national election in 2008 based on a vague message of hope and change, he has just shifted gears and won a second term with a tough-minded, hard-grinding state-by-state get-out-the-vote effort that overcame this fundamental fact: He shouldn’t have won at all….
“First, this election (unlike 1992, with the presence of Ross Perot) presented voters with a simple binary choice. It wasn’t just Barack Obama; it was Barack Obama vs. Mitt Romney, and clearly the president was a more persuasive advocate.
“It was his task to remind Americans how dire the straits were that his predecessor had sailed the nation into – so dire that it was too much to expect him to get us out of them in four years.
“He also had to make the case that he had worked hard to make things better, even though the two biggest things he did as president (the $860 billion stimulus and his health-care bill) were and are pretty unpopular….
“But not just competence. They turned out key chunks of the population that supported Obama by overwhelming margins – young people, African-Americans, Hispanics and (the killer app of 2012) single women.
“Obama’s coalition would have consigned him to the political margins as little as 12 years ago, but the nation’s demographic changes are moving far more quickly than most Republicans anticipated….
“(Republicans) will have to find a way to shuffle the demographic deck to get themselves back in the game – and that will be a challenge, because the set of issues that speaks most directly to the party’s core are self-evidently unattractive to the new voters they need to attract.
“Still, one must stand in awe of Barack Obama, who really pulled a rabbit out of the hat and magicked himself up four more years. Bravo.
“I fear very much what he is going to do to the country, but you have to admire this political master and his amazing handicraft.”
“They lose and immediately the chorus begins. Republicans must change or die. A rump party of white America, it must adapt to evolving demographics or forever be the minority.
“The only part of this that is even partially true regards Hispanics. They should be a natural Republican constituency: striving immigrant community, religious, Catholic, family-oriented and socially conservative (on abortion, for example).
“The principal reason they go Democratic is the issue of illegal immigrants. In securing the Republican nomination, Mitt Romney made the strategic error of (unnecessarily) going to the right of Rick Perry. Romney could never successfully tack back.
“For the party in general, however, the problem is hardly structural. It requires but a single policy change: Border fence plus amnesty. Yes, amnesty. Use the word. Shock and awe – full legal normalization (just short of citizenship) in return for full border enforcement….
“(Many) Hispanics fear that there will be nothing beyond enforcement. So, promise amnesty right up front. Secure the border with guaranteed legalization to follow on the day the four border-state governors affirm that illegal immigration has slowed to a trickle.
“Imagine Marco Rubio advancing such a policy on the road to 2016. It would transform the landscape. He’d win the Hispanic vote. Yes, win it. A problem fixable with a single policy initiative is not structural. It is solvable….
“Romney is a good man who made the best argument he could, and nearly won. He would have made a superb chief executive, but he could not match Barack Obama in the darker arts of public persuasion.
“The answer to Romney’s failure is not retreat, not aping the Democrats’ patchwork pandering. It is to make the case for restrained, rationalized and reformed government in stark contradistinction to Obama’s increasingly unsustainable big-spending, big-government paternalism.
“Republicans: No whimpering. No whining. No reinvention when none is needed. Do conservatism but do it better. There’s a whole generation of leaders ready to do just that.”
“President Obama did not lose, he won. It was not all that close. There was enthusiasm on his side. Mitt Romney’s assumed base did not fully emerge, or rather emerged as smaller than it used to be. He appears to have received fewer votes than John McCain. The last rallies of his campaign neither signaled nor reflected a Republican resurgence. Mr. Romney’s air of peaceful dynamism was the product of a false optimism that, in the closing days, buoyed some conservatives and swept some Republicans. While GOP voters were proud to assert their support with lawn signs, Democratic professionals were quietly organizing, data mining and turning out the vote. Their effort was a bit of a masterpiece; it will likely change national politics forever. Mr. Obama was perhaps not joyless but dogged, determined, and tired….
“It is and has been a proud Republican assumption – a given, a faith – that we are a center-right country and, barring extraordinary circumstances, will tend to return to our natural equilibrium. That didn’t happen this time, for reasons technical, demographic and I think attitudinal: The Democrats stayed hungry and keenly alive to the facts on the ground. The Republicans worked hard but were less clear-eyed in their survey of the field. America has changed and is changing, culturally, ethnically – we all know this. Republican candidates and professionals will have to put aside their pride, lose their assumptions, and in the future work harder, better, go broader and deeper.
“We are a center-right country, but the Republican Party over the next few years will have to ponder again what center-right means….
“The outcome was not only a re-election but on some level and to some degree a rejection.
“Some voted for Mr. Obama because he’s a Democrat and they’re Democrats, some because he is of the left and they are of the left. But some voters were saying: ‘See the guys we don’t like that much, the one presiding over an economy we know is bad and spending policies we know are damaging? The one who pushed through the health-care law we don’t like, and who can’t handle Washington that well? Well, we like that guy better than you.’
“That’s why this election is a worse psychic blow for Republicans than 2008, when a confluence of forces – the crash, dragged-out wars, his uniqueness as a political figure – came together to make Barack Obama inevitable….
“Yes, Mitt Romney was a limited candidate from a limited field. Yes, his campaign was poor. It’s also true that the president was the first in modern history to win a second term while not improving on his first outing. He won in 2008 by 9.5 million votes. He won Tuesday night, at last count, by less than three million.
“When America is in a terrible economic moment and the political opposition can’t convince people that change might be improvement, then something’s not working.”
“Republicans had a bad night on Tuesday, though it is worth remembering that there are different gradations of bad. At one level, there is the disappointing failure of Mitt Romney to win the presidency. At another, there is the professional malpractice that once again lost Republicans control of the Senate.
“The two deserve separation. Mr. Romney made his share of mistakes, though he was ultimately defeated by an Obama campaign that ground out a narrow turnout victory in battleground states. The National Republican Senatorial Committee, by contrast, lost everywhere, in states primed for a GOP victory, to middling Democratic candidates, and in the face of a decent night for the House GOP.
“Of the 23 Democratic Senate seats in play, Republicans won…one. The party further managed to lose three of its own seats – leaving it with just 45 members in the chamber. Not one Democratic incumbent lost a seat….
“The liberal line this week is that the Senate meltdown is more proof that voters rejected the GOP agenda. Nonsense. One untold story of Tuesday night was the continued Republican success at the gubernatorial level, where they held every seat up for re-election, and won North Carolina. They now hold 30 states – the biggest majority for a party in 12 years….
“It is true that Mr. Obama’s superior turnout operation made things harder for Republicans in hard-fought states such as Ohio and Florida. But the GOP’s bigger problem was a failure of candidates. In 11 states, the Republican Senate candidate underperformed Mr. Romney.”
--A record 20 of 100 in the U.S. Senate will be women; 16 Democrats, 4 Republicans. Democrat Mazie Hirono of Hawaii is the first Asian-American woman to be elected to the Senate, while Democrat Tammy Baldwin of Wisconsin is the first openly gay senator.
A record 81 of 435 members of the House will also be women, with a few still to be made official.
--Mitt Romney lost Hispanics in Florida by a 58-40 margin. In Virginia it was 66-31.
--Of the 55 members of the Tea Party caucus who ran for House seats, at least 51 will return.
--Hurricane Sandy made its mark on New Jersey when it came to Tuesday. Only 60% of registered voters went to the polls vs. a previous low of 70% set in 2000.
--Speaking of New Jersey, on Wednesday, Gov. Chris Christie said of those criticizing his embrace of Barack Obama after the storm, “My activity with President Obama was just another chapter in the leadership I’ve tried to show in this state, which is people care more about getting things done than they care about partisanship. And I’m going to continue to conduct myself that way.”
I heard a local political science professor on the radio the other day (I think she was from Rutgers) talk about Christie and the whole Obama deal and she said she’s followed the governor for a long time and he’s far and away the best “politician” she’s ever known. As in Machiavellian terms, he’s three or four steps ahead of everyone else. He knew full well what he was doing in terms of his political future.
--It’s pathetic that Rep. Jesse Jackson Jr. is being returned to Congress, Jackson not only having major medical issues, but he’s the target of two investigations; one federal for misuse of campaign funds, the other out of the House Ethics Committee.
--More from the The Atlantic article (Nov. 2012) by Thomas E. Ricks, author of a book “The Generals” on the performance of some of America’s military leaders in Iraq and Afghanistan. If you didn’t already do so, read the 11/3 WIR random musing that I selected from Ricks’ piece as well.
“If Afghanistan hinted at (General Tommy) Franks’ shortcomings, Iraq revealed them fully. Historically, thinking about war and then arriving at actionable conclusions has been the core task of generals. Yet Franks seemed to believe that thinking was something others did for generals. In his memoir, he refers to his military planners with a whiff of good-old-boy contempt, as ‘the fifty-pound brains.’
“Part of the problem was Franks’ personality. He was a military version of Donald Trump, both dull and arrogant. His memoir, with its evasions and omissions, is not reliable as a historical record, but it reveals the man well. In it, for example, Franks claims that the troubled aftermath of the Iraq invasion ‘was actually going about as I had expected – not as I had hoped, but as I had expected.’ Yet this assertion contradicted the formal planning documents produced by his subordinates before the war. For example, one classified PowerPoint briefing given shortly before the invasion started, under the heading ‘What to Expect After Regime Change’:
Most tribesmen, including Sunni loyalists, will realize that their lives will be better once Saddam is gone for good. Reporting indicates a growing sense of fatalism, and accepting their fate, among Sunnis. There may be a small group of diehard supporters that [are] willing to rally in the regime’s heartland near Tikrit – but they won’t last long without support.
“Not long before the invasion began, General Eric Shinseki, the Army chief of staff, expressed concern that the U.S. force lacked sufficient troops to occupy Iraq. When I asked Franks in August 2004 about Shinseki’s concerns, he dismissed the question, saying that Shinseki ‘didn’t provide anything that all of us didn’t already know.’ Lieutenant General Ricardo Sanchez, who took over the Iraq War from Franks, states in his own memoir that Franks told him in June 2003 that American forces would be out of Iraq later that year.”
“The West Nile virus epidemic of 2012, the worst in a decade, may be notorious for yet another reason: The virus, in some cases, is attacking the brain more aggressively than in the past, raising the specter that it may have mutated into a nastier form, say two neurologists who have extensive experience dealing with the illness.
“One doctor, Art Leis in Jackson, Miss., has seen the virus damaging the speech, language and thinking centers of the brain – something he has never observed before. The other, Elizabeth Angus in Detroit, has noticed brain damage in young, previously healthy patients, not just in older, sicker ones – another change from past years.”
So far this year, more than 5,000 cases have been reported with 228 deaths in 48 states; California, Texas, Illinois and Michigan having the most cases.
“Leis said it’s crucial to know whether the virus is mutating. ‘Otherwise,’ he said, ‘we might be unprepared to deal with it in the future.’”
That’s it. I’m never going outside again. I need to find a beer and Chex Mix delivery man.
Pray for the men and women of our armed forces…and all the fallen.
Gold closed at $1731
Returns for the week 11/5-11/9
Dow Jones -2.1% 
S&P 500 -2.4% 
S&P MidCap -1.8%
Russell 2000 -2.4%
Nasdaq -2.6% 
Returns for the period 1/1/12-11/9/12
Dow Jones +4.9%
S&P 500 +9.7%
S&P MidCap +10.3%
Russell 2000 +7.3%
Bears 27.7 [Source: Investors Intelligence…third straight week for ‘bear’ reading]
Have a great week. I appreciate your support.