Week in Review

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Week in Review

03/09/2013

For the week 3/4-3/8

[Posted 12:00 AM ET]

Wall Street...New Highs...and Washington

Two weeks ago, Federal Reserve Chairman Ben Bernanke gave his semi-annual congressional testimony to both the House and Senate and left it unequivocally clear that the Fed is not about to raise interest rates, nor end its bond-buying program for a long time to come. Since then the U.S. stock market and many bourses around the world have not looked back.

Speaking at a conference last Friday night in San Francisco, Bernanke then reinforced Fed policy.

“Premature rate increases would carry a high risk of short-circuiting the recovery, possibly leading – ironically enough – to an even longer period of low long-term rates...

“At the present time the major industrial economies apparently cannot sustain significantly higher real rates of return. In that respect, central banks – so long as they are meeting their price stability mandates – have little choice but to take actions that keep nominal long-term rates relatively low.”

Bernanke did concede there were risks to financial stability caused by sustained low long-term interest rates.

“The balance here is not an easy one to strike. While the recent crisis is vivid testament to the costs of ill-judged risk-taking, we must also be aware of constraints posed by the present state of the economy.”

He added: “In light of the moderate pace of the recovery and the continued high level of economic slack, dialing back accommodation with the goal of deterring excessive risk-taking in some areas poses its own risks to growth, price stability, and, ultimately, financial stability.” [Financial Times]

Federal Reserve Vice Chairman Janet Yellen said in a speech in Washington on Monday:

“Turning to the potential costs of the Federal Reserve’s asset purchases, there are some that definitely need to be monitored over time. At this stage, I do not see any that would cause me to advocate a curtailment of our purchase program.”

“At this stage, there are some signs that investors are reaching for yield, but I do not now see pervasive evidence of trends such as rapid credit growth, a marked buildup in leverage, or significant asset bubbles that would clearly threaten financial stability.”

“Ending asset purchases before observing a substantial improvement in the labor market might also create expectations that the amount of accommodation provided would not be sufficient to sustain the improvement in the economy. Moreover, a weakening of the economic environment could also create significant financial stability risks.”

On Friday, we then had the employment report for February and nonfarm payrolls came in with a gain of 236,000...246,000 in the private sector...with the unemployment rate falling from 7.9% to 7.7%, the lowest since December 2008. Granted, the employment rate dropped in part because the labor market shrank as more Americans stopped looking for work, and January’s number was revised downward to a paltry 119,000, but a positive trend is firmly in place. The weekly jobless claims figures have been confirming this as well.

“Unfortunately, the job reports (in coming months) will not shed light on the most important counterfactual: namely, how fast would the U.S. be growing if Congress had transitioned from being a headwind to providing a tailwind to the country’s gradually-healing economy. This is regrettable given the urgent need to encourage Congress to embark on a more responsible path and, more generally, the importance of established political orders responding properly to the wave of popular dissatisfaction with the status quo that is spreading throughout the West.”

Speaking of which, President Obama had dinner with a dozen Republican senators on Wednesday and lunch with Republican Congressman Paul Ryan (and his Democratic budget counterpart Chris Van Hollen) the next day as part of a new outreach program.

There will not be any immediate breakthroughs but the optics look good and those Republicans involved thus far called the respective meetings constructive and spoke of sincere discussion.

It’s going to take months to put together a long-term deficit reduction plan, if one can be crafted, and both Ryan and Tennessee Republican Sen. Bob Corker (a Wednesday attendee), have said they believe this all comes to a head this summer. As Ryan added, it’s about saving “this country from a fiscal train wreck that’s coming.”

Obama pointedly skipped Republican leaders Mitch McConnell and John Boehner, though he’ll see both as a part of larger gatherings on Capitol Hill next week.

Some Republicans wonder just how sincere the sudden outreach is. Another dinner attendee, Oklahoma Senator Tom Coburn, said:

“He’s never spent any time reaching out. The question is, is it starting to change because there are bad poll numbers, or is it because he really decided he’s going to lead and solve some of the problems in the country?”

“Signs of Republican weakness are plentiful. At the recent winter meeting of the National Governor’s Association, in Washington, D.C., Republicans didn’t invite their congressional leadership to address them. Instead, several GOP governors went on television to criticize the leadership for failing to sit down with Obama and work out a compromise. In other words, GOP governors were running away from the Republican members of Congress.

“Some GOP congressmen also are distancing themselves from their party’s leadership. South Carolina Sen. Lindsey Graham is pitching his own compromise to Obama with $600 billion in new revenue for entitlement cuts. Obama says he is willing to reduce social programs, even if this angers his own party. But ever the fox, he refuses to reveal specifics....

“Obama, one of the most gifted bare-knuckled politicians in memory, welcomes this instability. After all, he has gone out of his way to create more of it. The president is trying to dash the GOP against the rocks of public opinion in advance of the 2014 midterm elections. What he’s doing may seem underhanded, but all that matters to this gifted brawler is that it works.”

Meanwhile, the House approved a six-month spending bill by a 267-151 margin (53 Democrats for, 14 Republicans against) which provides for enough to fund the government through Sept. 30. Both chambers must agree to a final version to avert a government shutdown March 27.

This coming week, though, both the House and the Senate are to unveil budgets for the fiscal year beginning October 1st, with Paul Ryan offering a plan to balance the budget in 10 years. Revamping Medicare is a major key and many Republicans are now balking at the pain Ryan’s plan would inflict.

Senate Budget Committee Chairwoman Patty Murray, D-Wash., has indicated Democrats will target tax loopholes to raise revenue, protect entitlement benefits and echo Obama’s fairness theme in paying down the debt. It will be the first time Senate Democrats produce and approve a budget since 2009.

As Bloomberg News put it, overall, it seems whatever solution the two parties come up with will be nothing more than the status quo, “the pain of economic austerity without the gain of addressing the long-term budget gap.”

“Amid the sequester noncrisis, President Obama is attempting to revive political appetites for a grand budget bargain – and this time he’s even calling Republicans on the phone and asking for support. Maybe he’s finding that berating them in public as moral cretins doesn’t inspire trust. That’s progress, but what hasn’t changed is that the deal he’s offering as fair and ‘balanced’ is neither grand nor a bargain.

“Mr. Obama says he can support $930 billion in spending cuts over the next decade as long as Republicans reverse the sequester’s $1.2 trillion in cuts and raise taxes by another $680 billion. In other words, he is proposing to ratify the fiscal status quo with only token spending cuts and no major entitlement reform and selling it as the gift of the century.

“If trimming $930 billion from the $46 trillion 10-year budget sounds less than impressive when Washington is running an annual $845 billion deficit despite a 17% surge in revenue this year, the details are even less of a concession....

“If Mr. Obama is serious about a grand bargain, he’ll offer more than notional entitlement reforms and a grab bag of things his administration ought to be doing anyway. There’s no harm in Republicans listening, but his actual proposals show he’s more interested in posing as a budget reformer than reforming the budget.”

To yours truly it was a week of smoke and mirrors in Europe. After all, the eurozone economy is not getting better, as opposed to the economy in the U.S., but equity markets were up across-the-board. That doesn’t bother me, though. What does were some of the pronouncements by European Central Bank chief Mario Draghi and the ill-informed reaction to them.

As expected, the ECB left its benchmark interest rate at 0.75%, a record low, and Draghi, in his press conference, offered some of the following:

“Later in 2013 economic activity should gradually recover, supported by a strengthening global backdrop and our accommodative policy stance.”

But the ECB predicted the 17-nation eurozone will shrink 0.5% this year, more than the 0.3% contraction forecast three months ago. The estimate for 2014 growth was also reduced to 1% from 1.2%.

Draghi also said at one point during his press conference:

“Much of the fiscal adjustment Italy went through will continue (running) on automatic pilot. All this happens in a general environment where we have many signs that confidence in the financial markets of the euro area is returning.”

But you also have the chaos caused by the Italian election, the fallout from which gets worse every day.  

Pier Luigi Bersani, who has the most seats in the lower house but is far from a needed majority in the Senate, said on Tuesday that he pledged to reverse the country’s harsh budget:

“The vicious link between austerity and recession puts representative democracy at risk and renders it ungovernable.”

So he’s reversing his backing for Prime Minister Mario Monti’s budget policy in order to try and gain Beppe Grillo’s supporters. Thus Bersani’s reversal leaves only Monti and his fourth-place centrists backing the EU’s favored austerity program.

Bersani, Berlusconi and unfunny comedian Grillo all want to dump the plan favored by Brussels, Germany...and Draghi!

Then on Thursday, Silvio Berlusconi was sentenced to a one-year jail sentence for publishing illegally obtained wiretaps going back to a bank acquisition in 2006. Berlusconi said he was stunned by the verdict and repeated claims he was the victim of a witch-hunt orchestrated by the left-wing courts.

“It is really impossible to tolerate judicial persecution of this kind which has been going on for 20 years and which reemerges every time there are complex moments in the political life of our country.”

Berlusconi won’t be serving any time as he has two appeals that can stretch things out for quite a bit, but his supporters have threatened “rebellion” against the courts.

So despite all this, Draghi said confidence was returning to the euro area, even with the chaos in Italy. “Markets understand that we live in democracies. Fragmentation is not worsening, it’s actually improving, it’s receding.”

He’s nuts. But short term the lemmings are following his words. The yield on Italy’s 10-year bond fell to 4.53% from 4.90% on Feb. 26, while Spain’s 10-year hit a two-year low at 4.88% from 5.59% that same day. [Then, after the market closed on Friday in Europe, Fitch downgraded Italian debt, with a ‘negative outlook,’ and in the aftermarket, Italian bonds were getting hit.]

At least Draghi did note one truth at his presser in talking of the labor picture in the region.

“Unemployment is a tragedy and youth unemployment is an even bigger tragedy.”

On another topic, Germany’s big election is no longer so far away, September, and Chancellor Angela Merkel’s center-right government is not about to start making concessions when it comes to the eurozone and bailouts.

To wit, the European Stability Mechanism, the eurozone’s bailout fund, still isn’t effective following a June 2012 agreement to formalize it and Germany remains adamant that national governments whose banks receive ESM aid would retain final liability for any losses on the ESM’s investment.

Mario Draghi and the ECB, however, want the ESM to be utilized for direct capital injections into the banks that would keep the debt off of sovereign balance sheets.

But the ESM is backed by taxpayers of all euro members, with German taxpayers footing the largest bill, and direct capital injections get the individual government off the hook. So this critically important issue is far from being resolved and if contagion hit again, for any number of reasons, you have another crisis.

I’ve also been writing of the credit crisis in southern Europe and the March 9 issue of The Economist has the following:

“The bad news is that banks still have lots of reasons to lend less (even setting aside subdued demand). Under heavy regulatory pressure to raise their capital ratios, the obvious response for many lenders is to reduce their loan books. Rising amounts of bad debt make lenders more risk-averse. European state-aid rules mean that banks that have been bailed out have to slim down. Others can find it hard to fill the gap for practical reasons: big banks in Spain say that taking on customers of the cajas, the savings banks that are now being shrunk, is complicated by borrowers not having proper documentation.

“A recent paper by Luis Garicano and Claudia Steinwender of the London School of Economics looked at the impact of financial constraints in Spain. By comparing firms that are foreign-owned, and therefore have access to other forms of financing, with those that are domestic, and so rely on local banks, the authors can see what uncertainty about financial access did to their decision-making after the 2008 crisis. The Spanish-owned firms cut investment by 19% more than the foreign-owned companies, and reduced employment by 6% more.

“If the drought continues southern Europe will be hard-pressed to grow.”

And now a look at some of the raw data on the week. The reading for euro-area services for February fell to 47.9 from 48.6 in January, though better than the flash estimate. Last week’s manufacturing PMI was also 47.9, recession numbers. [50 being the dividing line between growth and contraction.]

Euro-area exports for the fourth quarter fell for the first time in more than three years. A Bloomberg News survey of economists has the eurozone contracting for a fourth straight quarter in the first three months of 2013.

In Germany, despite rising business confidence, factory orders fell 1.9% in January from December while industrial production in January was unchanged; both figures worse than expected.

In the U.K., February retail sales rose 2.7% from year earlier levels, a positive, but then an independent study by the House of Commons revealed that between Q3 2010 and Q3 2012, real wages (minus inflation) fell 3.2% in Britain, the same as Portugal. Not good for the Cameron government.

At the National People’s Congress, the government set a GDP target of 7.5% for this year, same as 2012, though GDP ended up coming in at 7.8%. Premier Wen Jiabao, delivering his final report after 10 years in power, said, “We should unswervingly take expanding domestic demand as our long-term strategy for domestic development.” The key to that change, he said, is to “enhance people’s ability to consume.”

Beijing is clearly looking to shift the economy away from a reliance on exports to one driven more by domestic consumption. So the central government seeks to raise incomes and improve the safety net, with a 27% increase in the health-care budget to almost $42 billion.

Wen also promised migrant workers will receive broader protections, including farmers’ land rights.

China is also once again taking steps to bring house prices back in line, such as higher down payments and interest rates in regions where there is bubble type price action. But leaders are doing little to address the fundamental cause of the property bubble; that being limited alternative investment options for households and local government reliance on land sales as a source of revenue. If China can’t handle the bubble and it pops, the impact will be felt on everything from steel to furniture. Commodity exporters (see Australia, Braizl) would suffer as well.

So staying on the topic, last Sunday, many of you saw an excellent “60 Minutes” piece on China’s “ghost cities.” Huge areas with empty shopping centers and apartment buildings, a fact short-seller Jim Chanos has been pounding the table on for years.

But former Morgan Stanley Asia chairman Stephen Roach, now at Yale and a man whose opinions I have always valued, blasted the “60 Minutes” piece, saying it distorted housing’s impact on the overall economy, as in it is just 5% of GDP, which is not going to bring China down.

Roach cited the fact that the central government has been aggressive in moving preemptively to reduce the risks from a bubble bursting, and as he says regarding talk of ghost cities, you have to build cities in advance of the people continuing to migrate from the farms to the urban areas. You don’t have to agree with this, but Roach has spent a ton of time in China and knows the leaders in government, as opposed to Chanos who’s never been there by his own admission.

It comes down to Roach’s statement, “The Chinese think strategically, we think reactively.” I’m going to continue to give him the benefit of the doubt. My attitude is also colored by my own travel to China. There is so much to do in terms of infrastructure. Skeptics talk of too many new roads and high-speed rail lines, but if the economy grows at a respectable pace, like 7.5%, and more and more continue to move into the middle class (the economic miracle of the world the last 20 years), any projects, including housing, built today will eventually be utilized.

Just a few final economic notes. February imports fell 15.2% year over year, while exports rose 21.8% for the month.

But the Lunar New Year celebration was the second week of February as compared to last year when it was in January so there are serious distortions in the numbers. For example, since the factories are generally closed for a full week, fewer raw materials would be imported.

When you combine January and February, a better though far from perfect way of looking at things, you come up with exports up 23.6% for the two months and imports up 5%.

And this just in as I go to post....China’s consumer price index for February rose 3.2% from a year earlier, a 10-month high and hotter than expected. Producer prices fell 1.6%, the 12th straight decline. 

Once again, the Lunar New Year holiday may have impacted the data. Food prices jumped 6% in the month. Further data on industrial production and retail sales is due out whilst I am asleep.

Street Bytes

--With the Fed not about to take away the punch bowl, and with the economy showing signs of life, and with nary a concern about geopolitics or a dysfunctional eurozone, stocks roared higher, with the Dow Jones hitting four consecutive new all-time highs, finishing the week up 2.2% to 14397, besting the previous Oct. 9, 2007 high of 14164. The S&P 500 also added 2.2% to 1551, just 14 points shy of its record mark, while Nasdaq gained 2.3% to 3244.

I’m throwing everything at you but the kitchen sink next time on the issue of the rally and an extensive list of ‘what is going right’ and ‘what could go wrong.’

--U.S. Treasury Yields

6-mo. 0.11% 20yr. 0.25% 10-yr. 2.06% 30-yr. 3.25%

Yields rose on the long end as money flowed back into equities from Treasuries. You also had a very solid ISM reading on the service sector for the month of February, 56.0, while January factory orders, off 2.0% as expected, were actually up, ex- the highly volatile transportation sector.

By week’s end, PIMCO’s Bill Gross was also revising upwards their outlook for U.S. growth in 2013 to 3% instead of 2%.

--Japan returned to growth in the fourth quarter, up 0.2% on an annualized basis compared with a preliminary calculation of a 0.4% contraction, thus providing a boost to Prime Minister Shinzo Abe’s pledge to end 15 years of deflation and promote growth through an aggressive monetary policy. Exporters such as Toyota have been raising their profit forecasts as the yen slides, currently to a 3 ½-year low against the dollar.

Tokyo’s Nikkei stock index has had a startling run of gains 16 of the last 17 weeks and now sits at 12283, a level not seen since August 2008.

--Australia’s economy expanded at its fastest pace in 5 years in 2012, up 3.6%, the best since 2007’s 4.7%. Very impressive, though there was a distortion I won’t bore you with the details on.

--HSBC’s monthly purchasing managers index for the economies of 16 leading emerging markets (including Brazil, China, India and Russia) came in at 52.3 in February, down from 53.8 in January and the lowest since August.

--The major banks passed the Federal Reserve’s annual “stress test,” with the biggest firms weathering a severe adverse scenario, including a stock market crash, repeat of the housing bust, 12% unemployment and a global slump. We’ve learned the last five years that such a scenario is plausible.

17 of the 18 passed (auto lender Ally Financial failed, and then said the Fed’s test was “fundamentally flawed”) with Fed Gov. Daniel Tarullo saying, “Significant increases in both the quality and quantity of bank capital during the past four years help ensure that banks can continue to lend to consumers and businesses, even in times of economic difficulty.”

So now the banks are looking for approval to increase dividend payments and share buybacks, though those with large trading operations such as Goldman Sachs and Morgan Stanley may still find it hard to win regulatory approval to distribute more funds to shareholders.

--Earlier Attorney General Eric Holder told a Senate panel Wednesday that some financial institutions have become “too large” and that makes it “difficult for us to prosecute them.”

Republican Senator Charles Grassley asked Holder at a Senate hearing why British bank HSBC hadn’t been charged with crimes even after it acknowledged laundering money for Mexican drug lords and parties in Libya and Iran.

Instead, the government settled with HSBC for $1.9 billion, leading some to say the big banks were “too big to jail.”

Holder offered: “I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them. If you do prosecute, it will have a negative impact on the national or perhaps even the world economy, and I think that is a function of the fact that some of these institutions have become too large.”

To be continued...but, yes, the big banks need to be broken up.

--The communications director of troubled Italian bank Monte dei Paschi di Siena (MPS) apparently committed suicide. David Rossi was among several MPS employees whose homes and offices were searched by police last month – though no charges were brought against him, even as MPS, the world’s oldest surviving bank, is at the center of a massive fraud and corruption investigation. Hundreds of millions of euros have gone missing amid risky derivatives bets.

--According to the Federal Reserve, net worth for U.S. households increased $1.17 trillion in the fourth quarter to $66.1 trillion, the highest level since Q4 2007. Rising home values are helping, as well as the soaring stock market, which should lead to an even greater increase in the figures this quarter.

--Related to the above, CoreLogic reports that U.S. home prices rose 9.7% in January from a year earlier, the biggest increase since 2006. Prices rose about 12% in the Southern California area, exceeded only by Phoenix, up 22.7%. [20% overall for the entire state of Arizona. Up 17.4% in Nevada.]

And noted housing analyst Ivy Zelman, who properly called the bubble in 2005 and then the housing bottom, said this week she’s never been more bullish on the outlook for the sector.

--Richard Sylla, professor of financial history at New York University’s Stern School of Business, notes that when it comes to the market making new highs, “People could be fooled if they don’t pay attention to inflation.”

To wit, Sylla notes that the Dow appears to be roughly 140 times its level of 100 years ago, pretty darn good. “But removing price increases and counting only real gains, the Dow is roughly seven times its level of 100 years ago, a good gain but far from what it appears.” [Wall Street Journal...their quote, not Sylla’s.]

--According to Lipper, investors pulled $126 billion out of U.S. stock funds in 2012, but plowed $22 billion back in the first 8 weeks of this year.

--Michael Dell’s move to take his company private through a private equity buyout continues to meet roadblocks, the latest being short-seller Jim Chanos, who said he is betting against the takeover. Chanos believes the $13.65-a-share offer will fall apart, citing problems with the balance sheet and cash flow statement for a business still heavily dependent on PCs, the market for which continues to fall.

--Microsoft was fined $730 million by the European Commission for failing to promote a range of web browsers, rather than just Internet Explorer, to users in the European Union.

As part of a prior settlement, Microsoft introduced a Browser Choice Screen pop-up, but the company dropped the feature in a Windows 7 update in February 2011. Microsoft said the omission had been the result of a “technical error.”

I couldn’t care less about this issue but the thing is, it went on for 14 months and Microsoft should have done a better job of at least assuring the EC it not only knew of the problem, it was fixing it immediately. Instead, it appears that Microsoft continued to say it was complying with the original agreement when it wasn’t.

--Tuition at U.S. public colleges jumped 8.3% last year, the biggest jump on record, according to data compiled by the State Higher Education Executive Officers Association. The average state funding per student fell by more than 9%.

The median tuition rise is 4.5%, with the numbers being skewed by California, which slashed funding per student by 14.3% last year.

--J.C. Penney CEO Ron Johnson is fighting for his job as the retailer fires 1,500 store-level department managers and merchandising positions, the latest carnage at its 1,100-store chain. In January 1,000 receptionists at is salons were let go. In February, 300 positions at headquarters in Plano, Texas.

As the stock continued to crater this week (to $15 from $22.50 on Feb. 22), it didn’t help that the second largest shareholder, Vornado Realty, had sold off 40% of its stake.

--Travel group Thomas Cook announced it was laying off 2,500 in the UK and closing more than 200 stores. For its most recent financial year, the company lost about $750 million. Operations were severely impacted by the Arab Spring, especially in Egypt.

--We have a “Jerk of the Year” candidate. Prince Alwaleed bin Talal, who complained that he was being shortchanged $9.6 billion in terms of Forbes’ annual list of billionaires. Forbes pegs his net worth at $20 billion and he says it’s $29.6 billion. Forbes notes that Alwaleed’s main position, Kingdom Holding, which houses his investments in assets such as the Four Seasons hotel group, seems to rise and fall “based on factors that, coincidentally, seem more tied to the Forbes billionaires list than fundamentals.” The stock jumps around publication time. 

The magazine added that no other billionaire lobbies it as hard as the prince does in an effort to affect his or her ranking.

--Want an example of the economic impact of the war in Syria on its neighbors? Retail sales in Lebanon fell 12% last year, despite the huge inflow of Syrian refugees; many of these folks not exactly being in spending mode.

--“Jacob Zuma, South Africa’s president, has warned western companies they must change their old ‘colonial’ approach to Africa or risk losing out even more to the accelerating competition from China and other developing powers.” [Alec Russell / Financial Times]

--As an example of sequester hysteria, the Agriculture Department wanted us to believe that thousands of meat inspectors would be immediately laid off which would have led to meatpacking facility shutdowns and thus sky-high meat prices.

But this week Agriculture Secretary Tom Vilsack confessed, “We are looking at a several-month period before furloughs can be implemented.”

--John Paulson told his hedge fund clients that his gold fund is down over 25% thus far in 2013, having dropped 18% in February. The culprit is a derivative position that is a levered bet on gold. But he continues to believe in it.

--Google is shedding 1,200 employees from its Motorola Mobility hardware unit, or more than 10%.

Google is also facing potential issues in China, with Beijing saying this week that China’s smartphone industry is over-reliant on Google’s Android operating system, while accusing Google of discriminating against local companies.

Wow, I had no idea of this... “Android’s market share has ballooned from just 0.6 percent in 2009 to 86.4% last year, according to the China Academy of Telecommunication Research.” [Kathrin Hille / Financial Times]

--Google shares continue to hit new all-time highs, closing the week at $831 after trading at $844, while shares in Apple hit a new cycle low of $419 before closing at $431. Apple was $705 last September.

--Chinese internet giant Sohu.com may become the latest Chinese company to delist from the U.S. equity market as the South China Morning Post reports it is looking to go private due to it being unhappy with the valuation being accorded the shares.

Of course if investors believed the financials reported by Chinese companies the situation would be different. Ever since the Sino-Forest disaster, it’s been curtains for Chinese equities traded here. Sadly, I know from first-hand experience.

--Facebook announced a revamp of its news feed that puts a central focus on photos, graphics and video, as the company seeks to attract new advertisers. The redesign could benefit those looking to make a splash with eye-catching advertising. The shares finished the week at $28...still far below the initial public offering price of $38, but well off the low of $17.50.

--Time Warner announced it was spinning off its magazine division, Time Inc., as an independent, publicly traded company. Time Warner will thus focus entirely on its television networks, film and TV production businesses. The move makes total sense. The publishing unit,  including magazines and related websites, is 12% of revenue and has been a laggard.

--This is unbelievable, though hardly surprising. In New York City, there is a rail project called the East Side Access that is to connect the Long Island Rail Road to Grand Central Terminal. This week State Comptroller Thomas DiNapoli announced that not only is the project, which began 12 years ago, now 10 years late, but it is $4.4 billion over the initial estimate of $3.85 billion budgeted. Plus, the Metropolitan Transportation Authority has not been including the cost of new rail cars, which boosts the total price tag to $8.76 billion.

Foreign Affairs

Syria: Russian Foreign Minister Sergei Lavrov said there is “absolutely” no chance Moscow will tell President Bashar al-Assad to step down, saying Russia was not in the “regime-changing game.”

And there has been much comment about the United States’ decision to supply Syria’s rebels with $60 million in non-lethal assistance. Senator John McCain said, “To say that we’re really going to change the equation with non-lethal aid is not going to do it. And I think we have written a shameful chapter in American history.”

Francis Fukuyama, the Stanford political scientist best known for his book “The End of History,” described the American response as “terrible.”

“Obama clearly does not want to get involved in any more wars in the Middle East,” he said. “He’s been dragged into Syria in a kind of minimal way, kicking and screaming. They should have jumped into this thing at least six to nine months ago because by not arming the anti-Assad forces they gave up a lot of potential leverage.”

General Salim Idris, chief of staff of the Syrian opposition’s supreme military council, reacted with dismay to American inaction and dismissed the “non-lethal” aid as pointless.

“We don’t want food and drink, and we don’t want bandages. When we’re wounded, we want to die. The only thing we want is weapons.”

So this week the U.N. said the number of Syrian refugees who have registered with the United Nations officially hit 1 million. The Zaatari camp in Jordan I’ve written of has exploded from 500 tents in August to 146,000.

On Monday, the U.N. said that only 20% of the promised aid money from an appeal in December has been received. 20% of $1.5 billion...$300 million. Again, that was Monday.

“Washington also claims it has previously provided $385 million in humanitarian aid to Syrians but none directly to the rebels. This is a lie. Even the U.N. has said on many occasions that the gap between promises of aid and actual delivery of same is wide.”

Needless to say I more than stand by my claim the administration continues to distort the truth.

Andrew Harper, the representative for the U.N. High Commissioner for Refugees in Jordan, said, “This is nothing short of a perfect storm.” For example, the U.N. children’s agency there said just 9% of its budget has been met, meaning it is forced to scale back daily food rations in Zaatari nearly by half.

The refugee population in Lebanon has soared to the point it now represents 10% of the total population. That is simply unsustainable without major violence breaking out, especially in this sectarian mess of a nation.

Meanwhile, in a bizarre story and tale of how the Syrian civil war is spreading, 48 Syrian soldiers were ambushed in Iraq, where they had sought refuge, adding weight to stories the Iraqi regime is quietly aiding Bashar Assad. It also points out probable cooperation between al-Qaeda in Iraq and its allies now fighting in Syria.

Iraqi Prime Minister Nouri al-Maliki told the AP last week he feared a victory for rebels in Syria would create a new extremist haven and further destabilize the region. It’s Sunni vs. Shiite. Assad is backed by Iran, a Shiite nation, whereas the rebels are predominantly Sunnis, fighting a regime dominated by Alawites, an offshoot of Shiite Islam.

Iraq’s government is dominated by Shiites and faces increasing protests from Sunni Muslims over perceived discrimination.

And in another example of how the war in Syria is seeping across its borders, Syrian rebels seized a U.N. convoy of Filipino observers monitoring the 1974 ceasefire between Israel and Syria on the Golan Heights. As of this writing, the 21 hostages remain under the control of a group calling itself the “Martyrs of Yarmouk” brigade, who are demanding Syrian government forces withdraw from a village a mile east of the ceasefire line with the Israeli Golan.

Iran: Nine out of 10 Americans view Iran unfavorably, according to a Gallup survey released Thursday. [Israel is viewed favorably by 66% of Americans.] Such attitudes could be important down the road if the White House needs to build support for military action against Tehran.

This week, International Atomic Energy Director General Amano called for Iran to allow access to a military base suspected of having housed nuclear weapon-relevant research, specifically, suspected nuclear trigger tests at Parchin.

“I request Iran once again to provide access to the Parchin site without further delay, whether or not agreement has been reached on the structured approach,” Amano said. “Providing access to the Parchin site would be a positive step which would help to demonstrate Iran’s willingness to engage with the agency on the substance of our concerns. Iran is not providing the necessary cooperation to enable us to provide credible assurance about the absence of undeclared nuclear material and activities.”

Israel: At the American Israel Public Affairs Committee’s annual conference in Washington, Israeli Prime Minister Benjamin Netanyahu, speaking by satellite because he is still trying to form a new government, said, “Diplomacy has not worked.” Iran is “running out the clock. It has used negotiations, including the most recent ones, in order to buy time to press ahead with its nuclear program.”

While Iran has not crossed the “red line” Netanyahu laid out in a speech to the U.N. last September, “We have to stop its nuclear enrichment program before it’s too late.”

In Paris, French President Hollande hosted Israeli President Shimon Peres and stated that the international community, and not Israel, would take responsibility for preventing Iran from developing nuclear weapons.

“Iran is not a danger only to Israel, it is a danger to the Gulf states, to Europe and to the whole world.”

Back to the coalition building front, it appears Netanyahu will be finalizing a new government early this week, facing a March 16 deadline and an upcoming visit from President Obama. Yesh Atid leader Yair Lapid has agreed to become finance minister, allowing Netanyahu to retain Avigdor Lieberman as foreign minister. Bayit Yehudi leader Naftali Bennett is slated for Labor Trade and Industry Minister, with expanded authority to tackle the income inequality issue that is so big in Israel these days.

The haredi will also be drafted into civil service, per Yesh Atid’s request. Boy, do I want to comment on this topic...but I’ll bite my tongue. Let’s just say I totally agree with Yair Lapid.

Egypt: An Egyptian court threw the timetable for parliamentary elections into confusion Wednesday, ordering the cancellation of President Mohamed Morsi’s decree calling the vote for April (lasting into June) and forcing a likely delay. The Administrative Court referred Egypt’s electoral law to the Supreme Constitutional Court for review.

Meanwhile, violence continues in Port Said with at least six dead in clashes between anti-Morsi protesters and the police since Sunday. The police in turn say they have had enough and are tired of being blamed for deadly crackdowns on protesters, accusing Morsi of using them to fight his enemies. 

So the police are increasingly going on strike and have disobeyed orders to secure Morsi’s motorcade route from his palace to his home in Cairo. They also are refusing to guard Muslim Brotherhood headquarters in the capital.

On the issue of the United States handing Morsi $250 million in aid, I agree with the thoughts of the Washington Post’s Charles Krauthammer:

“(Despite the hue and cry in these days of sequestration), Nonetheless, we should not cut off aid to Egypt. It’s not that we must blindly support unfriendly regimes. It is perfectly reasonable to cut off aid to governments that are intrinsically hostile and beyond our influence. Subsidizing enemies is merely stupid.

“But Egypt is not an enemy, certainly not yet. It may no longer be our strongest Arab ally, but it is still in play. The Brotherhood aims to establish an Islamist dictatorship. Yet it remains a considerable distance from having done so.

“Precisely why we should remain engaged. And engagement means using our economic leverage....

“Now in power, (the Islamists) begin to bear responsibility for Egypt’s miserable conditions – a collapsing economy, rising crime, social instability. Their aura is already dissipating.

“There is nothing inevitable about Brotherhood rule. The problem is that the secular democratic parties are fractured, disorganized and lacking in leadership. And are repressed by the increasingly authoritarian Morsi....

“Our interest is in a non-Islamist, non-repressive, nonsectarian Egypt, ruled as democratically as possible. Why should we want a vibrant economy that maintains the Brotherhood in power? Our concern is Egypt’s policies, foreign and domestic.

“If we’re going to give foreign aid, it should be for political concessions – on unfettered speech, on an opposition free of repression, on alterations to the Islamist constitution, on open and fair elections.

“We give foreign aid for two reasons: (a) to support allies who share our values and our interests, and (b) to extract from less-than-friendly regimes concessions that either bring their policies more in line with ours or strengthen competing actors more favorably inclined toward American objectives.

“That’s the point of foreign aid. It’s particularly important in countries like Egypt, whose fate is in the balance. But it will only work if we remain clear-eyed about why we give all that money in the first place.”

However, Krauthammer doesn’t discuss my main point the past few weeks. The opposition in Egypt shouldn’t boycott the upcoming election, whenever it’s held. It should embrace it, and if it’s a total fraud, the world will see it as such.

[One little disgusting tidbit from The Economist, regarding Egypt and the Gaza Strip: “Worse for the Gazans, Egypt’s government recently took unusually severe measures to stop goods, including all the strip’s fuel needs and much of its material for building, being transported through tunnels under its border. Since late January, Egyptian army engineers have flooded the warren of tunnels with sewage, demolishing dozens of them.”]

North / South Korea: Early in the week, a senior South Korean official said North Korea “can explode another nuclear device at any time and some activities have been detected around the other tunnel” at the site of the Feb. 12 nuke test. 

Tuesday, Pyongyang vowed to cancel the 1953 ceasefire that ended the Korean War, citing a U.S. push for more sanctions.

Thursday, the U.N. Security Council voted 15-0 to impose tougher sanctions on North Korea for conducting the nuclear test in violation of its previous prohibition. This as Pyongyang’s foreign ministry office issued a statement on the official news agency:

“Since the United States is about to ignite a nuclear war, we will be exercising our right of preemptive nuclear attack against the headquarters of the aggressor in order to protect our supreme interest....

“We gravely warn that at a time when we cannot avoid a second Korean War, the U.N. Security Council, which served as the U.S. puppet in 1950 and made Korean people harbor eternal grudges against it, must not commit the same crime again,” it said.

The new sanctions target “illicit activity” by North Korean diplomats, bulk transfers of cash by North Koreans, and banks and companies that may be funneling cash or materials to support the country’s ballistic missile and nuclear weapons programs.

China is promising to inspect all cargoes bound to or from North Korea, which threatens Pyongyang’s most important channel of trade; including the export of counterfeit money, drugs and weapons...all major sources of revenue for Kim and his Orcs.

And, as nuclear weapons expert Siegfried Hecker of Stanford University noted, North Korea has smuggled much of the technology and materials for its nuke program through “the enormous and ill-controlled Chinese industrial sector.”

After the U.N. Security Council levied the new sanctions, the North said it would sever its main hotline with the South and scrap non-aggression agreements. One of the North’s top generals also claimed his country was ready to launch nuclear-tipped intercontinental ballistic missiles. Said the three-star, “If we push the button, they will blast off and their barrage will turn Washington, the stronghold of American imperialists and the nest of evil, and its followers, into a sea of fire.”

South Korean President Park Geun-hye warned of firm retaliation should the North be so stupid as to attack following Pyongyang’s belligerent pronouncements.

The thing is you just can’t ignore North Korea’s threats. In 2009 it said it “will not guarantee the legal status’” of five South Korean islands close to the disputed inter-Korean border in the Yellow Sea. Then in late 2010, it shelled one of them, killing four.

South Korea was criticized at the time for an inadequate response but this time warned it would target Pyongyang directly.

At least the new round of sanctions, the fourth against the North, does appear to signal a level of understanding between the U.S. and China. President Xi Jinping has said he seeks a stable relationship with the U.S., but I wouldn’t go too far just yet. China does not want the U.S. to have a large presence in Asia, period, but it also has a lot to lose unless North Korea cools it.

Once Xi is totally in charge, let’s see what he says and does, both regarding North Korea and the dispute in the East China Sea between China and Japan. 

China: Premier Wen Jiabao gave his final speech after a disappointing 10-year run as the country’s second in command behind President Hu Jintao. By the end of the 12-day National People’s Congress, Wen and Hu give way to Xi Jinping and new Premier Li Keqiang.

A year ago, Wen made a bold pronouncement that “without successful political structural reform, it is impossible for us to fully institute economic reform.” But in his 100-minute swansong, there was zero talk of reform. Wen no longer has the power to do so. It’s also not as if Xi is giving off reform signals.

On the issue of cybersecurity, Congressman Mike Rogers, who has accused China of widespread spying aimed at stealing intellectual property from U.S. companies, said the topic should be at the top of any discussion between the two nations over trade.

“We have to deal with it now or we’re going to have a horrible problem. If they want to be great international players in the international global economic market, you can’t act like a thief.”

[On Saturday in Beijing, Chinese Foreign Minister Yang Jiechi said articles blaming China’s government for hacking are on “shaky ground” and added China is opposed to turning cyberspace into a “new battlefield.”]

One other item. As part of the release of China’s budget for 2013, we learned military spending will increase 10.7% this year to $115 billion, while the domestic security budget will rise 8.7% to a $122 billion. The dollar figures for both also end up being far greater than the government first says.

Venezuela: According to the government’s official version, Hugo Chavez’ last words were “Please don’t let me die,” uttered because, officials said, he so desperately wanted to continue serving the Venezuelan people.

And so the veneration of the man begins, Chavez dying this week at the age of 58 after 14 years of running his country into the ground. After Friday’s state funeral attended by some 33 heads of state, his embalmed body will be permanently displayed in a glass casket so that “his people will always have him,” according to acting president Nicolas Maduro.

Chavez died after a years-long battle with cancer. He might have championed the poor but he didn’t help them...he held them down. Chavez had easily won reelection to a six-year term last October and his death is devastating to the millions who relied on subsidized food and free health clinics.

Meanwhile, Chavez wasted his huge oil assets, the largest reserves in the world.

President Obama said America “reaffirms its support for the Venezuelan people...As Venezuela begins a new chapter in its history, the United States remains committed to policies that promote democratic principles, the rule of law, and respect for human rights.”

Ed Royce, Republican chairman of the House Foreign Affairs Committee said: “Hugo Chavez was a tyrant who forced the people of Venezuela to live in fear. His death dents the alliance of anti-U.S. leftist leaders in South America. Good riddance to this dictator.”

“There is no denying the impact of the charismatic ex-paratrooper, a plotter and survivor of coups who demolished Venezuela’s political power structure, won three elections with wide support and used the wealth from the world’s largest oil reserves to advance, across the Andes and beyond, his home-brewed ideology of ‘Bolivarian socialism.’

“How long that incoherent ideology will survive its creator is an open question....

“Seismic political upheaval in Venezuela, however, is neither imminent nor desirable. Not only are 20 out of 23 governorships in the hands of Chavez supporters (many of them former military officers), but over the course of his dozen years in power he built up a 125,000-strong militia, of whom 30,000 could be considered armed combatants. Having them pour out into the streets is in nobody’s best interests.”

The constitution says an election must be held in 30 days and with Maduro, Chavez’ hand-picked successor, clearly a heavy favorite over likely opposition candidate Henrique Capriles, there is no reason not to hold an election to ‘legitimize’ Maduro’s rule. But I imagine the actual vote will be more like two months from today than one. Whether or not Maduro can then earn the support of his country’s poor and the military is anyone’s guess at this point.

From William Neuman and Ginger Thompson of the New York Times:

“In the weeks leading up to his mentor’s death, Vice President Nicolas Maduro’s imitations of President Hugo Chavez became ever more apparent.

“He has taken on many of Mr. Chavez’ vocal patterns and speech rhythms, and has eagerly repeated the slogan ‘I am Chavez’ to crowds of supporters. He has mimicked the president’s favorite themes – belittling the political opposition and warning of mysterious plots to destabilize the country, even implying that the United States was behind Mr. Chavez’ cancer.

“He has also adopted the president’s clothes, walking beside his coffin in an enormous procession on Wednesday wearing a windbreaker with the national colors of yellow, blue and red, as Mr. Chavez often did.

“But now that Mr. Chavez is gone, the big question being raised here is whether Mr. Maduro, his chosen successor, will continue to mirror the president and his unconventional governing style – or veer off in his own direction.

“ ‘He can’t just stand there and say ‘I am the Mini-Me of Chavez and now you have to follow me,’’ said Maxwell A. Cameron of the University of British Columbia in Vancouver.”

Meanwhile, Iranian President Ahmadinejad declared a national day of mourning for his buddy Chavez and wrote in a condolence letter to Venezuela that Chavez would be resurrected with Jesus Christ and Imam Mahdi – Shiite Islam’s prophesied redeemer – to save humanity and bring justice to the world, as reported by the Wall Street Journal’s Farnaz Fassihi.

It seems that Iran’s leadership is none too pleased with Ahmadinejad for such pronouncements, seeing as how Imam Mahdi and the resurrection is seldom discussed when referring to mortal souls returning with him.

And it’s not as if the countries have a lot in common, except that they are oil states. But Iran has invested billions in Venezuela over the eight years Ahmadinejad has been in office. So with Chavez’ death....now what?

Mali: French President Francois Hollande announced his troops will begin pulling out of Mali in April following a last push to flush out the militants from mountains on the border with Algeria. A fourth French soldier was killed in an ambush this week, while Chadian forces appear to be performing well in working together with the French. At least 130 terrorists had been killed as of Wednesday in fighting this week. Chad reported losses of about 25.

As for the fate of terror leaders Abou Zeid and Mokhtar Belmokhtar, both said to be killed by Chadian forces, there is still no official confirmation the two were taken out; Belmokhtar being the mastermind of January’s hostage raid on an Algerian natural gas plant that claimed the lives of at least 38 employees.

Malaysia: In a conflict that sprang up out of nowhere, 200 people from the southern Philippines arrived in a remote coastal area of eastern Malaysia and announced that they were members of a royal army in service of the Sultanate of Sulu, which ruled the southern Philippines for centuries.

After initially being received peacefully, violence broke out when they refused requests to return home. The area known as Sabah on the island of Borneo has now become a battlefield and Malaysian security forces killed 31 Filipino gunmen this week after losing eight police officers earlier. In all, at least 60 have died over the past month. Malaysia rejected calls by the U.N. for a ceasefire saying the rebels must surrender unconditionally.

Random Musings

--Osama bin Laden’s spokesman and son-in-law was captured by the United States in Jordan last week, Abu Ghaith, in what is being called a “very significant victory” in the fight against al-Qaeda. He is expected to face terror charges in a federal court in New York, though, which is causing some consternation among Republicans, such as House Intelligence Chairman Mike Rogers, who said al-Qaeda suspects should not be prosecuted in federal courts because “we should treat enemy combatants like the enemy.”

Abu Ghaith was caught while passing through Jordan, shortly after leaving Turkey. He was initially captured in Turkey, but released when officials there decided he had no committed any crime in that country and released him.

--This week on Capitol Hill, Kentucky Republican Senator Rand Paul dominated the news as he carried out an old-fashioned 13-hour filibuster over the issue of a potential drone strike on an American, tied to the confirmation process of CIA nominee John Brennan.

“Mr. Paul and his followers are distracting attention from the real issues raised by the administration’s secret warfare.

“Mr. Paul’s filibuster was triggered by the response of Attorney General Eric H. Holder Jr. to the question of whether the president ‘has the authority to order lethal force, such as a drone strike, against a U.S. citizen on U.S. soil, and without a trial.’ Mr. Holder’s unremarkable answer was that the administration had no intention of ever using such force but that ‘in an extraordinary circumstance,’ such as the attacks of Sept. 11, 2001, it would be ‘necessary and appropriate’ for the president to order military action inside the United States.

“From that answer, Mr. Paul and allies such as Sen. Ted Cruz (R-Tex.) somehow concocted the absurd notion that Americans ‘sitting quietly in cafes’ could be blasted by Hellfire missiles. No, they couldn’t be, as Mr. Holder made clear in a letter to Mr. Paul on Thursday. But the reality is that Americans who become combatants for forces with which the United States is at war, such as al-Qaeda, are legitimate targets. If one such enemy combatant attempted to crash an airliner into the Capitol, the president would be at fault if he did not deploy the Air Force in defense.

“But...The White House has devised a process for adding names to a target list for drone strikes [ed. such as in Pakistan and Yemen] but has never revealed even its outlines. Instead, it insists on its righteousness and invites Americans to trust that its decisions are justified.

“That is not how a democracy should operate. As we have previously argued, there is no cause for most of the secrecy in which the drone operations are shrouded....the administration could greatly increase the legitimacy and sustainability of the strikes by openly laying out the criteria under which they can be carried out and by seeking congressional authorization.”

“Politicians have much to learn from the amazing scene in the U.S. Senate on Wednesday, when Kentucky’s Rand Paul took over the floor and spent 13 hours discussing unmanned drone attacks and U.S. foreign policy.

“The lesson: Do interesting, unexpected things and you can highlight issues important to you, advance policy goals you think are critical for the future of the country and elevate your own standing to the level of a national figure....

“The risks are substantial, but the rewards are outsized if done well. Perhaps the foremost example of it in the past few years was the rise of Paul Ryan – a wonky young congressman of no particular standing who decided to become his party’s foremost expert on the budget.

“It was hard labor, and intellectual and fiscal honesty required Ryan to go places long considered toxic. Yet he put his ideas forward, and opened up a national discussion on entitlement reform vital to the nation’s future....

“Like Ryan, (Rand Paul) did it with supreme confidence.

“I watched six hours of his 13-hour marathon filibuster, and the clarity, calm and sangfroid with which he spoke was so literally exceptional it was a sad demonstration of just how bad most politicians are when it comes to making an elementary case about anything.

“You could see, on Twitter and elsewhere, how instantly galvanizing Paul’s stunt was – so much so that as the day passed, more and more members of his party showed up to show support and ask him questions so that he could relax for a moment.

“And yet, while Paul’s brilliant advocacy and command of the public stage were remarkable, in the end it is his opinions that matter. And they are highly problematic at best and genuinely worrisome at worst....

“Moreover, the logic of Paul’s view is that the United States is the aggressor in the war on Islamist terror rather than a bystander unwillingly drawn into a battle that has not yet been won.

“Rand Paul, who turned 50 this year, is one of the most talented politicians of his generation. And one of the most dangerous.”

“It’s hard to recall many more wonderful moments on the floor of the United States Senate than the filibuster mounted Wednesday night by Sen. Rand Paul against President Obama’s nominee to the CIA....

“It doesn’t mean that Paul is right to oppose Brennan; it’s hard to see where Obama has run off the constitutional rails so far in the drone warfare.

“But it’s not hard to see that the constitutional points are important.

“Those questions deserved to be pressed and debated out in the open, particularly because our president hasn’t deigned to make a public case for what he has been doing – neither for the drone warfare nor for his failure to seek a vote in the Congress before launching a war in Libya.

“So Paul deserved an answer to the question he put to the Justice Department. He was comfortably within his prerogatives. And it’s outrageous for Sen. Lindsey Graham to assert – as he did yesterday – that Paul’s question is somehow offensive.

“Paul asked the question because he wanted to know the answer. The offender is the Justice Department, which had treated his query in a condescending fashion. Yesterday, it finally answered that no, the president does not have the right to use a ‘weaponized drone to kill an American not engaged in combat on American soil.’ Chalk one up for Sen. Paul.”

“(Those) conservative hawks who didn’t want to identify with or aid Paul’s effort made a mistake. Here, distinctions are also worth making. You don’t have to support him for president in 2016.  You don’t have to agree with his world view. You don’t have to agree with him on Iraq. You don’t have to agree with his skepticism of drone use overseas. But to refuse to either agree with his effort to stand up to administration stonewalling or to establish any lines on use of lethal force is a mistake.

“Maybe they were embarrassed. After all, Sen. John McCain (R-Ariz.), for example, could have conducted an actual talking filibuster to stop Chuck Hagel and/or to get information on Benghazi. Instead he huffed and puffed and then folded his tent, claiming some obligation of deference to the president. Maybe he should have showed the same tenacity as Paul.

“The dividing line in the GOP, I would suggest, is not so much ideological these days. There is a generational shift between the old guard and the new. It is about a willingness to pick fights at opportune moments (not destructively, or when there is no good alternative) and use all the tools of old and new media to grab the public’s attention. It is about breaking out of strictly partisan lines and about relating to voters via popular culture. (Notice how many times Sen. Marco Rubio cited ‘The Godfather’ and Jay-Z?) And of course it is about pushing back on a president who has overreached on rhetoric and policy.”

As for Paul himself, when he finally got a response to his questions from Attorney General Holder, he said, “I’m quite happy with the answer. Through the advise and consent process, I’ve got an important answer.”

The vote on John Brennan then proceeded and he prevailed 63-34.

I saw Rand Paul in January 2012 during my trip to New Hampshire to check out the Republican primary campaign there and I noted at the time how impressed I was with the man. He’ll certainly make 2016 interesting.

--Sen. Carl Levin (D-Mich.) became the latest to announce he would not seek reelection in 2014. Levin, 78, is chairman of the powerful Armed Services Committee. He thus becomes the seventh senator to announce his retirement, including Jim DeMint (R-S.C.), who resigned in January.

--He’s baaaack! Mitt Romney...and Ann. He gave a wide-ranging interview for Fox News, blasting President Obama for playing politics with the sequester. I would prefer him to leave the stage to those who represent the Republican Party’s future, so that we can forget the past.

--Former Florida Gov. Jeb Bush basically declared he is a candidate for the 2016 Republican presidential nomination when he appeared to flip-flop on immigration reform, moving to the right to prepare for primary battles to come. But he muddled his message on various news outlets, saying he did not favor a path to citizenship, and then the next day saying he didn’t have an objection to it as long as there is no incentive for others to come here illegally. Bush is trying to position himself, it seems, to the right of fellow contender Sen. Marco Rubio, who is working on a bipartisan immigration reform proposal that has a path to citizenship. 

“Will this have any lasting impact on the debate? Probably not. But it is a lesson for the former governor, who left office in 2007. The news cycle is faster, more exacting and more treacherous, especially on the hottest of the hot button issues. If he is going to run in 2016, I have no doubt he’ll be better prepared after this incident.”

--How stupid does President Obama look for flat-out lying about the sequester in saying Capitol Hill janitors and security guards will get their pay cut immediately? And how dumb does the administration look for cancelling White House tours, blaming the sequester, while the president uses a 20-car motorcade to go to dinner on Wednesday? [Let alone the number of Secret Service resources used when he goes golfing.]

--From Philip Messing and Chuck Bennett / New York Post

“An undercover TSA inspector with an improvised explosive device stuffed in his pants got past two security screenings at Newark Airport – including a pat-down – and was cleared to get on board a commercial flight, sources told The Post yesterday.

“The breach took place Feb. 25, when the Transportation Security Administration’s special operations team – the agency’s version of internal affairs – staged a mock intrusion at the airport.

“ ‘This episode once again demonstrates how Newark Airport is the Ground Zero of TSA failures,’ a source said.”

It was at Terminal B, for those who regularly travel through Newark.

“The ‘bomber’ was part of the four-person ‘Red Team’ that posed as ticketed passengers...

“With the inert ‘bomb’ stashed somewhere in his pants, he got through the magnetometer undetected at around 11:00 a.m. He was then pulled aside for a physical screening, and a TSA agent failed to discover the IED and allowed the ‘bomber’ to go to his gate.

“ ‘He did have a simulated IED in his pants,’ the source said. ‘They did not find it.’”

A female agent ‘carrying a simulated IED inside her carry-on that was inside a child’s doll,’ was stopped. It had ‘wires sticking out’ and was obviously suspicious.

--To say the Roman Catholic Church is a mess as it prepares to select a new pope would be an understatement; the latest example of which being the revelation that the most senior cleric in Britain, Scottish Cardinal Keith O’Brien, admitted his “sexual conduct” had fallen far below the standard expected. This came a week after he stepped down as Archbishop of Edinburgh and announced he would stay away from the conclave, which we learned Friday starts this coming Tuesday.

--In the above-referenced Gallup poll on American attitudes towards other countries, Canada and the UK receive the highest favorable ratings at 91% and 88%, respectively. Iran’s unfavorable at 87% was followed by North Korea (84%) and Pakistan (81%). Of course Pakistan is supposed to be an ally, so this figure is kind of unsettling for a number of reasons.

--A study in the journal Science concludes that global temperatures were higher in the past decade than over most of the previous 11,300 years – a balmy period known as the Holocene that began after the last major ice age ended. The study points to human activity as the cause.

Shaun Marcott of Oregon State, lead author of the paper, said, “What’s different is the rate of change. What we’ve seen over the past 150 years is much greater than anything we saw in the past 11,000 years.”

Well, to say the least, trying to gauge what the weather was like that long ago is rather difficult, and any findings controversial.

Nonetheless, David M. Anderson, who heads the paleoclimatology program at the U.S. National Oceanic Atmospheric Administration, said, “This paper throws down the gauntlet by showing that Earth is on its way to being warmer. By 2100, it will be a heck of a lot warmer than it was 11,000 years ago.”

--And I could be dead because I really like bacon and now a new study in the journal BMC Medicine has concluded that sausages, ham, bacon and other processed meats increase the risk of dying young, per a study of half a million people across Europe.

A diet high in processed meats was linked to cardiovascular disease, cancer and early deaths. What’s new is the study’s finding that processed meat was linked directly to heart disease.

Those eating two sausages and a slice of bacon a day, the Irish breakfast, for example, were 44% more likely to die over a typical follow-up time of 12.7 years than those eating about one slice of bacon.

Stopping smoking, though, is still far more important than reducing one’s intake of sausage or ham.

And, importantly, “homemade burgers using fresh meat” are not classified as processed meat so this is OK. [BBC News]

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

God bless America.

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Gold closed at $1577
Oil, $91.85

Returns for the week 3/4-3/8

Dow Jones +2.2% [14397]
S&P 500 +2.2% [1551]
S&P MidCap +3.0%
Russell 2000 +3.0%
Nasdaq +2.3% [3244]

Returns for the period 1/1/13-3/8/13

Dow Jones +9.9%
S&P 500 +8.8%
S&P MidCap +10.9%
Russell 2000 +11.0%
Nasdaq +7.4%

Bulls 44.2
Bears 21.1 [Source: Investors Intelligence...bear number hasn’t changed significantly in two months]

Nightly Review schedule: Monday thru Thursday. Accessible through home page or iPad app.

Brian Trumbore

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