Week in Review

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Week in Review

05/16/2015

For the week 5/11-5/15

Edition 840

Wall Street and Washington

Just a few key economic releases this week. Retail sales were unchanged for the month of April when a gain of 0.3% was expected. Not good. And industrial production for last month, expected to be flat, fell a fifth consecutive month, down 0.3%, as drilling for oil was the main culprit, down 14.5% in April over March. Consumer confidence also hit an eight-month low, as measured by the University of Michigan.

The Wall Street Journal released its latest survey of economists and they now see first-quarter GDP being revised down from up 0.2% to a contraction of minus 0.3%, owing to economic releases that have come out since the flash GDP was published end of April.

But the economists see growth of 2.8% in the current quarter and 3% for the second half, though add it all up and it means that for 2015, growth would be 2.2% vs. their April estimate of 2.7% for the year.

Further, the Atlanta Fed’s proprietary GDPNow indicator that nailed the first quarter number is calling for growth in the second quarter of only 0.7%, far less than the Journal survey is projecting.

Meanwhile, it started out as a tough week on the trade front for President Obama as a Senate vote on a procedural motion to begin debating the Trans-Pacific Partnership, the largest trade accord in a generation, fell eight short of passage and thus denied the president “trade promotion authority,” or TPA.

The big hang-up is some Democrats are demanding a crackdown on currency manipulation, which is strongly opposed by Japan and Malaysia, two of the 12 nations negotiating the pact.

Democrats are also concerned a deal would lead to a loss in American jobs and they want greater protections and assurances that our trading partners operate under the rules.

“This is not a game,” said a frustrated Senate Majority Leader Mitch McConnell (R-Ky.). “This is about trying to pass something important to the country – that happens to be a priority of the president.”

But the president brought a lot of this on himself, and in an interview with Yahoo News following a trade promotion speech at Nike headquarters, Obama was asked about Senator Elizabeth Warren’s (D-Mass.) contention that the trade deal could undermine financial regulation. Obama called her “absolutely wrong,” and then as the Wall Street Journal editorialized, talked of himself.

“ ‘I passed it. Think about the logic of that, right? The notion that I had a massive fight with Wall Street...and then I sign a provision that would unravel it? I’d have to be pretty stupid.’

“Mr. Obama added with his special condescension that ‘the truth of the matter is that Elizabeth is, you know, a politician like everybody else. And, you know, she’s got a voice that she wants to get out there. I understand that.’ We agree with Mr. Obama on the merits, but the point is that Presidents are supposed to work toward consensus through argument and persuasion, not ad hominem insults toward lesser political species. No wonder his nominal allies defied his trade instructions on Tuesday.”

Well, Senate leaders reached an agreement Wednesday to revive the bill as Senator McConnell allowed a separate vote on a bill on currency manipulation, which in all likelihood allows the Senate to pass the fast-track bill next week, though the House remains a problem.

“That free trade is advantageous to both sides is the rarest of political propositions – provable, indeed mathematically....

“Nor is this abstract theory. We’ve lived it. The free-trade regime created after World War II precipitated the most astonishing advance of global welfare and prosperity the world has ever seen. And that regime was created, overseen, guaranteed and presided over by the United States.

“That era might be coming to a close, however, as Democratic congressional opposition to free trade continues to grow....

“Fast-track authority allows an administration to negotiate the details of a trade agreement and then come to Congress for a non-amendable up-or-down vote. In various forms, that has been granted to every president since Franklin Roosevelt. For good reason. If the complex, detailed horse-trading that is required to nail down an agreement is carried out in the open – especially with multiple parties – the deal never gets done.

“Like all modern presidents, Obama wants a deal. But he has utterly failed to bring his party along. It’s not just because for six years he’s treated all of Congress with disdain and prefers insult to argument when confronted with opposition, this time from Democrats such as Elizabeth Warren. It’s also because he’s expended practically no political capital on the issue. He says it’s a top priority. Has he given even a single televised address?

“The trade deal itself will likely pass the Senate eventually... The problem is the House. Very few House Democrats will vote yes. House passage will require Republican near-unanimity. And it’s not there.

“One group of GPO opponents are traditional protectionists of the Pat Buchanan paleoconservative school of autarky. The others are conservatives so reflexively anti-Obama that they oppose anything he proposes, especially anything that appears to give him more authority....

“As for the merits, the TPP is a boon for America. It reduces tariff barriers to vast Asian markets and strengthens protection for intellectual property, America’s forte. To be sure, any trade deal, while a net plus overall, produces winners and losers. But the TPP will be accompanied by so-called Trade Adjustment Assistance, training and subsidies to help those negatively affected.

“Moreover, the overall gain is more than just economic. In our deadly serious competition with China for influence in the region, the TPP would anchor our relations with Pacific Rim nations. If we walk away, they will inevitably gravitate to China’s orbit. The question is: Who is going to write the rules for the global economy – America or China?...

“I wouldn’t mind seeing Obama sunk by his own arrogance in intraparty fratricide over trade. But the issue is bigger than Obama. In 20 months, he will be gone. Asia will not. And it will get away from us if Republicans don’t step up and step in where Obama and the Democrats have failed.”

Europe and Asia

Eurostats released its flash estimate of eurozone GDP in the first quarter and it came in up 0.4%, Q1 over Q4, a little better than expected and a tick up from Q4’s 0.3% pace. So on an annualized basis, GDP in the first quarter was 1.6%. The European Commission is forecasting the eurozone economy will grow 1.5% in 2015 and 1.9% next year.

Germany’s flash GDP estimate for the first quarter was just 0.3% vs. 0.7% in the fourth quarter, though the German government is forecasting 1.8% growth for 2015. [The EC sees 1.9%.]

France, up 0.6% in Q1 over Q4 (which was unchanged) was stronger than expected and the best pace in two years. [The EC sees the French economy growing 1.1% this year.] Consumer spending in France was strong the first three months of 2015 largely due to lower oil prices.

Spain’s economy surged 0.9% in the first quarter, while Italy’s rose 0.3%, better than expected and compared with the fourth quarter’s flat pace. Portugal’s GDP rose 0.4%, same as Q4’s rate.

So except for Germany, all of the above is good. And compare it with the U.S. economy, which when the final data is tallied will have probably contracted.

But while Europe’s economy, including the U.K. (up 0.3% in Q1 over Q4), is generally improving, it needs far better than 1.5%-2.0% growth to begin to put a real dent in unemployment in the likes of Greece, Spain, Portugal, Italy and France.

Speaking of Greece, it was one of the downers in Eurostats’ report. First-quarter GDP fell 0.2% after a 0.4% decline in the fourth, so it’s back into recession for them. 

This week, Greece did make a 750m euro payment to the IMF as scheduled, needing to tap IMF reserves in its holding account to do so, while eurozone finance ministers met only briefly on Greece’s latest attempt at a reform plan necessary to secure its final scheduled bailout payment of 7.2bn. The ministers said in a statement “more time and effort are needed to bridge the gaps.”

German Finance Minister Wolfgang Schaeuble said he favored a Greek referendum on the country’s euro membership as a way to break the months-long impasse with Prime Minister Alexis Tsipras’ government.

“Greece can’t be thrown out of the euro,” Thomas Steffen, one of Schaeuble’s deputies, said during a discussion in Berlin. “The only thing remaining in the end would be if Greece said itself that it wants to leave the euro voluntarily.”

Schaeuble said earlier, “If the Greek government thinks it should hold a referendum, it should hold a referendum.”

Tsipras maintains he’s not considering leaving the euro currency bloc and that he is just trying to win the aid he needs to avoid a default, while German Chancellor Angela Merkel said it is her “political goal” to keep Greece in the euro.

But Tsipras still must submit a comprehensive program of reforms to win approval from creditor institutions and this would mean going back on his election promises.

54 percent of Greeks back the government’s negotiating strategy, according to a Marc poll, which compares with 82 percent in February. [54 percent would vote “yes” in a referendum on a deal with creditors calling for more austerity, whereas 37 percent would vote “no.”]

Tsipras’ Syriza party remains most popular with 36 percent to 21 percent for New Democracy, which headed the previous government.

The Greek government has asked for another finance ministers meeting on May 22.

The four-month Greek bailout extension expires June 30, but Greece has all manner of debt payments to make before then, let alone for government pensions and salaries.

So this slow-motion crisis just goes on and on and on...

“In almost every way, Syriza has brought the opposite of what it promised. It vowed an end to depression in Greece. Instead, growth has slumped. [Ed. this was written before word Greece was back in recession.] It pledged to end austerity politics in Europe, but has done more to embolden its advocates than any German could have hoped. It promised to jettison the bad habits of old parties, and seems instead to have acquired them. Back at the Athens museum, perusing a catalogue of his Philhellenic collection, (Director) Varkarakis is downbeat. ‘Two hundred years ago, everyone loved Greece,’ he says. ‘Now...’ His voice trails off.”

Meanwhile, European Central Bank President Mario Draghi warned of the risks inherent in aggressive monetary easing. In a speech to the International Monetary Fund, Draghi said:

“Because the use of these new instruments can have different consequences than conventional monetary policy, in particular with respect to the distribution of wealth and the allocation of resources, it has become more important that those consequences are identified, weighed and where necessary mitigated.” [Financial Times]

While Draghi defended his decision to launch quantitative easing (QE) in Europe, it was the first time he spoke of some of the concerns, while saying there was little to suggest there are current imbalances in the financial system.

Draghi also tried to reassure the markets that the ECB would not slow the pace of its 60bn euro per month asset purchase plan before the announced cut-off point of September 2016, as has been the talk in the markets recently.

“To that effect, we will implement in full our purchase program as announced and, in any case, until we see a sustained adjustment in the path of inflation.”

This week, the euro area bond market went nuts again, though calmed down by week’s end. The yield on the German 10-year Bund rose from 0.54% last Friday to a closing high of 0.72%, midweek, before finishing today at 0.62%. France’s 10-year hit a yield of 0.99% before ending at 0.90%. Intraday, the 10-year in Italy and Spain was over 2.00% at one point before finishing the week at 1.89% and 1.88%, respectively. Both are way over the yields prior to QE formally being introduced on March 9. [1.31% for Italy; 1.29% for Spain.]

I have an update on the eurozone bond market on my “Wall Street History” link.

--Industrial production in the eurozone for March was down 0.3% over February, up 1.8% year-over-year.

--Britain’s unemployment rate hit 5.5% in March, a multi-year low. Wages are rising solidly with zero percent inflation.

So speaking of Britain, Prime Minister David Cameron unveiled his new Cabinet for his second term on Monday and the key players remain the same: George Osborne is de facto deputy PM and finance minister, Theresa May remains interior minister, and Michael Fallon stays at defense.

But now with his resounding victory where the Conservatives won an outright majority in parliament, for Cameron it’s all about the referendum on EU membership he promised by 2017 if he won, and the possibility of the Scots breaking away. 

“Mr. Cameron has promised to support a greater devolution of power to Scotland but may find it hard to break the political momentum toward another independence vote. Meanwhile, he will have to manage a problem of his own making: a pledge to renegotiate the terms of Britain’s E.U. membership and hold an in-out referendum by the end of 2017. That will involve tough negotiations with European leaders, who will be reluctant to grant Mr. Cameron concessions on issues such as immigration, and with the Euro-skeptic wing of the Conservative Party....

“This inward focus and more cuts in the British military are likely to perpetuate what has been a slow deterioration of a U.S.-British alliance that has been critical to U.S. global leadership in the post-Cold War era. President Obama, who has overseen his own international retrenchment, may not be much troubled, but a successor who seeks to restore American power in the Middle East and elsewhere may have to find a way to do it without Britain.”

Finally, Europe is having to deal with another contentious issue. What to do with all the refugees. The UN estimates that 60,000 have already tried to cross the Mediterranean this year. More than 1,800 have died.

So the European Commission is proposing EU member countries take in refugees under a quota scheme.

Countries such as Germany, Italy, Malta and Austria are for quotas as “a question of fairness,” while the U.K. is against. Hungary, Slovakia and Estonia are also against quotas.

Turning to Asia, there has been a slew of data the past two weeks for China and a few items were released right after I posted last time so here goes.

Consumer prices for April were up 1.5%, year-over-year, with the government’s target at 3%. Food prices rose 2.7% (this is good).

But producer or factory-gate prices fell a record 38th consecutive month, down 4.6% yoy. Not good...not good at all.

April exports fell 6.4% in April, yoy, when they had been expected to rise. Imports declined 16.2%.

Does this look like an economy that is going to grow 7% this year. Hardly.

Fixed asset investment, a critical item that includes things like road-building, train lines, and airports – classic infrastructure spending – rose only 12% the first four months of 2015, the slowest pace since 2000. In boom times, this figure was normally 20%+.

Retail sales rose 10% in April, yoy, but this is not as robust as the past and down from March’s 10.2% pace.

Industrial production in April was up only 5.9%, down from the 6.4% pace of the first quarter and near a six-year low.

Rising debt has been endangering the expansion, but more easing is needed so the Central Bank cut its benchmark lending rate by 25 basis points on Sunday, the third cut since November. It has also relaxed banks’ reserve requirements for a fifth time in six months.

And Beijing is helping local governments restructure $trillions in debts, such as in a debt-for-bond swap program, whereby the central government will accept local bonds as collateral to make it easier for banks to lend.

The Central Bank said in a statement on Sunday, “Currently, the pace of domestic economic restructuring is quickening and the fluctuation of external demand is relatively big. China’s economy is still facing relatively big downward pressure.”

With the economy weighed down by a weak property market and slackening growth in manufacturing and investment, further easing measures are expected the balance of the year.

Street Bytes

--Stocks rose in a quiet week, with the Dow Jones picking up 0.4% to 18272, just 16 points shy of its all-time high, while the S&P 500 hit new records on Thursday and Friday, adding 0.3% to 2122. Nasdaq tacked on 0.9% to close at 5048, 42 points shy of its recent record of 5092.

--U.S. Treasury Yields

6-mo. 0.08% 2-yr. 0.54% 10-yr. 2.14% 30-yr. 2.93%

After a volatile week that saw the 10-year yield hit 2.34% intraday, Treasuries finished largely unchanged for the five days.

--Royal Dutch Shell Plc won approval to resume oil exploration off Alaska’s Arctic coast. Environmentalists howled over the decision. But the Interior Department endorsed Shell’s plan to have two rigs drill up to six exploratory wells in the Chukchi Sea as long as the energy giant abides by safety conditions imposed and keeps its ships at least 4 miles away from any walruses.

Shell had an accident in the Arctic in 2012 that forced a halt in its work when a drilling rig ran aground and was lost. Environmentalists believe Shell’s 2015 plans are even riskier and dirtier.

Franz Matzner of the Natural Resources Defense Council said, “No company deserves a license to despoil our last pristine ocean and spew massive amounts of carbon pollution into our atmosphere. Any major Arctic Ocean spill would be impossible to clean up.”

The Interior Department, though, has looked at Shell’s plans extensively and said drilling at the site would have no significant environmental impact.

I have no opinion re the Shell decision as I don’t know the specifics, but I would offer the biggest threat in that region is drilling by Russian oil companies; the Russian government not having anywhere near the environmental restrictions and oversight the U.S. has.

--A Saudi official told the Financial Times in Riyadh that his country’s strategy of squeezing high-cost rivals such as U.S. shale producers is succeeding as Saudi Arabia seeks to reassert itself as the dominant force in the global oil market. 

Saudi production hit a record 10.3m barrels a day in April and it is unlikely the kingdom is going to reverse course at next month’s OPEC meeting in Vienna.

The International Energy Agency said the number of rigs running in the U.S. plunged by 60 percent in response to lower oil prices, while U.S. shale oil production had “buckled” in April, “bringing a multiyear winning streak to an apparent close.”

However, the IEA added it would be “premature” to suggest OPEC had “won the battle for market share.”

And a story in the Wall Street Journal noted, “U.S. shale-oil companies say they are ready to bring rigs back into service” if U.S. prices hold at recent levels, around $60 on West Texas Intermediate.

Of course you’d then think this would put a cap on the rally since oil bottomed around $44 in March.

--Verizon acquired AOL for $4.4 billion, with Verizon saying it was most interested in AOL’s “ad tech platform.” AOL CEO Tim Armstrong has been focusing on this aspect almost since he took the reins in 2009. 

AOL trails only Google and Facebook in the number of people who view its online videos, according to ComScore, while AOL is the No. 4 producer of online video ads. 

John Stratton, Verizon’s president of operations, pointed to the unsexy mobile ad tools as the deal’s prime driver. “For us, the principal interest was around the ad tech platform,” Stratton said.

Of course Verizon’s move was a reminder of AOL’s $165 billion merger with Time Warner. Until reading a Wall Street Journal article this week on the Verizon move, I forgot about Time Warner then spending $850 million on the social network Bebo – which was eventually sold back to the founder for $1 million years later.

Are we in the same kind of bubble today? That statement/question has nothing to do with Verizon’s action, which seems sound, but what of today’s valuations in the social media space?

Armstrong sure has done a great job resurrecting AOL, whose valuation was about $2.5 billion in 2009 when Time Warner spun it off. AOL’s stock price was up almost 150% since Armstrong took over.

[By the way, 2.2 million people still pay for AOL dial-up service. If all you want is email and access to a few sites, nothing wrong with only paying $60 a year for it.]

“Verizon is not buying AOL for its legacy dialup business or its middlebrow content operations. It wants AOL’s ad- and video-delivery platform to advance, as the Journal reports, ‘the telecom giant’s growth ambitions in mobile video and advertising.’

“Why on earth does Verizon have such ambitions? Verizon is primarily a supplier of telecommunications services, mostly its No. 1 wireless business, plus its FiOS fixed-line business and a legacy landline business that it has steadily jettisoned.

“Verizon is only the fifth biggest pay TV provider, with its FiOS TV package, which like all such TV businesses is increasingly a low-margin or even profitless sweetener for its connectivity business.

“Verizon has a big enough job spending billions on spectrum and cell towers to meet the insatiable demand of its wireless customers, yet Verizon is rushing toward video content and the advertising business for the same reason AT&T is buying DirecTV’s obsolescing satellite TV business, for the same reason that Comcast pursued its foiled merger with Time Warner Cable....

“Though you hear the opposite from know-nothings in Washington, broadband is a competitive market and becoming more so as fixed and wireless converge. The question raised by Verizon-AOL is whether players count too much on loss-leading video sweeteners to give them a leg up. Are they overestimating video’s ability to save them from becoming low-margin dumb pipes?....

“(If) Verizon’s ambitions sound crazy to some of us, they also show how utterly absurd Tom Wheeler, the head of the Federal Communications Commission, has become. Like a man stuck in 2005, he claimed at last week’s cable conference that the industry’s ‘challenge is to resist the temptation to use your predominant position in broadband to protect your traditional cable business.’....

“Mr. Wheeler has the world upside-down. Broadband operators increasingly cling to TV to fight for broadband customers in an increasingly competitive broadband market. Mr. Wheeler should be welcoming this evolution rather than trying to regulate it as a 1930s monopoly.”

--Cisco Systems reported a 12 percent increase in profits from a year earlier in the three months to April 25, with sales rising a solid 5 percent, both in line with the Street’s expectations. Departing CEO John Chambers said:

“Our customers feel the pace of change and disruption in every industry and market, and know their success depends on digitizing their business. Whether they are the disruptor or the incumbent, they are coming to Cisco as their strategic partner.”

Chuck Robbins, as previously announced, is taking over for Chambers on July 26, with Chambers assuming the role of executive chairman.

--Retailer Macy’s reported disappointing first-quarter results, with sales falling 0.7%, below expectations, and earnings missing as well, with the company blaming West Coast port strike delays and the unusually cold weather in the northeast, as well as the strong dollar that impacted spending by international tourists, especially at its flagship Macy’s and Bloomingdale’s stores in New York. The company expects total sales growth in fiscal 2015 of just 1 percent.

But the company hiked its dividend and raised its share buyback program.

--Shares of Kohl’s Corp. plunged 13% on Thursday after the company missed on revenues for its fiscal first quarter. Same-store sales were up 1.4% over a year ago. Earnings actually beat estimates, but the Street is not optimistic about the guidance.

--JC Penney reported same-store sales would rise between 4 and 5 percent this year, after the first-quarter figure was 3.4 percent (total sales rising 2 percent). The retailer’s net loss narrowed to $167 million, better than expected.

--Shares in Netflix surged nearly 5% on Friday with various reports saying the company has initiated talks with online streaming networks in China about taking its content into the world’s second-largest economy.

--High-flying U.S. burger chain Shake Shack reported same-store sales rose 11.7 percent from a year earlier and the company estimated such a pace would continue. Revenue rose 56% from a year earlier in the first quarter.

But boy, the valuation on this stock is more than a bit frothy, with the shares rising even further Friday.

--Activist investor Nelson Peltz lost his high-profile attempt to win a board seat at DuPont, with Peltz’ Trian Fund Management failing to secure the backing of shareholders for the four nominees it put up for election.

DuPont’s main tactic against the kind of hedge fund activism that has been successful recently was to challenge the activists’ plans as short-termist. CEO Ellen Kulman had offered Trian one seat on the board, but not to Peltz himself.

--General Motors’ compensation fund announced it had approved the 100th death claim tied to faulty ignition switches; far exceeding the original 13 victims we were first told by the automaker would be the max. This is likely to be the second deadliest safety issue in automotive history, next to the 270 people killed in Ford Explorers equipped with Firestone tires in the late 1990s and early 2000s.

The problem with the GM case is that it was hidden for a decade.

Kenneth Feinberg, the independent compensation expert overseeing the settlement program, said more than 4,300 claims have been filed, with another 37 death claims under review.

--PIMCO’s troubles continue. Now it is abandoning its efforts on the active manager equity front as the firm’s chief investment officer for equities, Virginie Maisonneuve, is stepping down after less than two years on the job.

PIMCO will focus on hedge fund-like equity strategies and bond and equity hybrid products instead of traditional equity offerings.

--Ice-cream maker Blue Bell Creameries LP announced it would have to lay off 1,450 employees, 37% of its workforce, to recover from a sweeping recall of all its products due to a listeria outbreak. Another 1,400 were put on partially paid furlough.

Cleaning and improving its four production plants is taking longer than expected. The outbreak resulted in three deaths and numerous illnesses.

--Consumer price inflation in Russia was at a 16.4 percent pace in April after hitting a 13-year high of 16.9 percent in March, according to state statistics service Rosstat. The government’s ban on food imports from the West – a response to Western sanctions over Ukraine – as well as a steep devaluation of the Russian ruble, has been a killer.

According to a survey by Nielsen, nearly one-fifth of Russians say they can now afford only the basics.

--New car sales in Russia fell 41.5 percent year-on-year in April, the steepest drop for the month in a decade, according to the Automobile Manufacturers Committee.

Russia’s economy is expected to shrink by up to 5 percent this year, though as the statistics office said on Friday, the first-quarter decline was 1.9 percent from a year earlier, better than expected.

[Ukraine’s economy plunged a sickening 17.6 percent year-on-year in the first quarter, as announced by the state statistic service on Friday, worse than the 15 percent predicted by the central bank just last month. Inflation is running at 61 percent, owing in large part to sharp utility hikes, which were a key condition for securing a $17.5 billion IMF loan earlier in the year.]

--In keeping with all the above, Russia’s beer market dropped 9 percent in the first three months of the year compared to a year ago, according to the country’s biggest beer brand, Baltika, a division of Carlsberg. [Baltika is very tasty...a premium ‘authoritarian’ beer....when you want something with, err, authority.]

Baltika has about 38 percent of the Russian beer market. Carlsberg closed two of its Russian breweries at the start of the year due to declining sales and difficult macroeconomic conditions in the region. [Moscow Times]

--Honda announced it is recalling 4.9 million vehicles equipped with airbags made by Japanese supplier Takata, a day after Toyota and Nissan announced similar recalls.

Honda said none of this batch of vehicles was sold in the U.S., but said the largest number was in Japan.

More than 35 million cars and trucks containing the potentially dangerous airbags have now been subject to recall. Honda is Takata’s largest customer.

Six deaths and more than 100 injuries thus far have been linked to the issue.

--Smartphone shipments to the world’s biggest market, China, contracted for the first time in six years, according to market research firm IDC. The number shipped fell 4% in the first quarter over a year ago.

For this business, China is no longer an emerging market, and as an IDC analyst said, the key is convincing existing users to upgrade to new smartphones.

Apple now accounts for 14.7% of the market here, compared with 13.7% for Xiaomi, as Apple overtook its Chinese competitor in Q1. [BBC News]

--6,000 employees of a Chinese direct sales company, Tiens Group, were treated to a holiday in France and Monaco to celebrate its 20th anniversary. While French retailers and hoteliers welcome the revenue, for others this would be a nightmare.

And then another Chinese company, Infinitus China, also in direct sales, said it is sending 12,700 employees on a Thai holiday.

Yes, the logistics for both groups were rather overwhelming.

--A painting by Picasso sold for a record $179.4 million (including fees) on Monday night at Christie’s in New York, while a sculpture by Alberto Giacometti sold for $141.3 million, another record, as the buyers chose to remain anonymous.

These sales came a week after an unidentified Asian collector paid $66.3m for a Van Gogh, painted in 1888 shortly before he sliced off his ear, at rival Sotheby’s spring auction.

Sotheby’s auction of Impressionist and modern art raised $368.3m, the second-highest in Sotheby’s history for any sale of similar works.

But Christie’s sale on Monday took in $705.9m, and then successive sales pushed its week to $1 billion, a first for the art world.

--Finally, I’m a wait 24 hours guy and we still don’t know why the engineer on the Amtrak train that derailed in Philadelphia hit the curve at twice the speed limit, let alone why the train accelerated from 70 to 100+ in the final minute. Our thoughts and prayers go out to the victims, including those critically injured, and their families.

Foreign Affairs

Saudi Arabia/Gulf Cooperation Council/Iran: President Obama met with leaders of six Persian Gulf countries, including Saudi Arabia, at Camp David this week in an attempt to strengthen backing for Arab allies, in return for their support over a potential nuclear deal with Iran. But the summit was undermined by the absence of Saudi Arabia’s king.

A joint statement released after the summit said: “A comprehensive, verifiable deal that fully addresses the regional and international concerns about Iran’s nuclear program is in the security interests of GCC member states” and the U.S.

But Saudi Foreign Minister Adel al-Jubeir said: “We don’t know if the Iranians will accept the terms they need to accept.”

At a news conference after the summit, Obama said, “The purpose of security cooperation is not to perpetuate any long-term confrontation with Iran or even to marginalize Iran. A key purpose of bolstering the capacity of our GCC partners is to ensure that our partners can deal with Iran politically, diplomatically from a position of confidence and strength.”

Even as the summit was taking place, Iran provided an illustration of why the GCC is so concerned, as Iranian naval vessels fired at a Singapore-flagged tanker sailing through international waters in the Persian Gulf. Jubeir said it was a “clear violation of international law, and the Iranians should not be allowed to get away with it.” [Wall Street Journal]

Meanwhile, Saudi Arabia said earlier it would match Iran’s nuclear technologies.

A senior Iranian official said this week that Saudi King Salman was a traitor to Islam and equated the Gulf state’s military assault on Iranian-allied fighters in Yemen with Israeli actions against Palestinians, as reported by the Jerusalem Post.

Alaeddin Boroujerdi, head of Iran’s national security and foreign policy committee, speaking from Damascus, reiterated Tehran’s “support for Syria – government and nation.” He added, “God would take revenge” against the Saudi monarch for serving what he called U.S.-Israeli interests in the war against the Houthis. Saudi Arabia’s leaders “will have to expect heavenly revenge,” said Boroujerdi.

On the Iranian nuclear talks front, the House approved legislation that will provide congressional review of any deal, following almost unanimous support in the Senate. The measure, once opposed by Obama, will now receive his signature, as it gives lawmakers 30 days to review any final deal.

On another matter, a missile defense expert with the Center for Strategic and International Studies, or CSIS, told Defense One that if Iran launched a ballistic missile in the Middle East, nuclear or not, Arab states would have as little as four minutes to act before impact.

Ideally, the launch would be detected and an interceptor missile would blast off to take it out as it re-entered the Earth’s atmosphere.

But the problem is, while America’s allies have sophisticated American-made missile defense systems, the equipment in one country does not talk to the equipment in another. This was no doubt a topic of conversation at Camp David because you have to picture that if Iran fires a  missile at Saudi Arabia, it would first travel over UAE, Qatar or Kuwait.

Finally, back to Saudi King Salman’s absence from Camp David, the government said one of the main reasons why he skipped the summit was because it overlapped with a five-day humanitarian cease-fire in Yemen, where a Saudi-led coalition is waging a bombing campaign against Iranian-backed Houthi rebels. [The king of Bahrain, by the way, was also a no-show.]

Iraq/Syria/ISIS: Islamic State issued an audio recording purported to be leader Abu Bakr al-Baghdadi, calling on supporters around the world to join the fight in Syria and Iraq or to take up arms wherever they live.

It was Baghdadi’s first message since he was reportedly wounded earlier this year in Iraq, though some wonder if this was ever the case.

Baghdadi’s chilling message contained in part: “There is no excuse for any Muslim not to migrate to the Islamic State.

“Joining (its fight) is a duty on every Muslim. We are calling on you either to join or carry weapons (to fight) wherever you are.”

Baghdadi also tells the rulers of Saudi Arabia that “their end is near,” adding Gulf rulers “have lost their so-called legitimacy...when they felt that their masters, the Crusaders and the Jews, have replaced them with the Rafeda they launched their so-called war against Rafeda in Yemen,” using a derogatory term for Shiite Muslims.”

Baghdadi: “They claim that they are defending the Sunnis...they are lying. It is a desperate attempt to deter Muslims from joining the Islamic State.”

In Iraq, ISIS has recaptured some key parts of Ramadi, the capital of Anbar province, just 70 miles from Baghdad.

At the same time, ISIS fighters are attacking Syrian troops near the ancient Roman site of Palmyra, one of the world’s finest set of classical ruins; thus raising fears for its future. Over 70 members of Syria’s army have died in fighting nearby, with at least 40 ISIL militants killed as well.

Irina Bokova, Unesco’s head, said, “Cultural cleansing is being used as a tactic to terrify people. It is a war crime.”

Separately, insurgents have been advancing towards the province of Latakia, a stronghold of President Assad. The various militant groups, ex-ISIS, have been increasingly cooperating in the war against the Syrian leader. Hizbullah continues to offer Assad key support, while the Syrian army keeps dropping barrel bombs on civilians in places like Aleppo, where a busy bus depot was hit by one this week, killing at least 28 people, activists said. Another group said 50 died in this single attack.

Amnesty International said barrel bombs in Aleppo killed over 3,000 civilians there last year.

“That the Syrian president has not thought beyond his own political survival reveals the hollowness of Assad rule. He has shown no concern for reinforcing his power by anchoring it in a diversity of domains that can balance, and neutralize, each other. That may sound absurd given how his regime has engaged in mass murder. But Syria’s war has also led to great fatigue, and Assad has not bothered to exploit this to his advantage. He is as recklessly inflexible today as he was in 2011.

“Assad must be careful. At some stage his allies in Tehran and Moscow, realizing they can build nothing solid on the back of this Syrian president, may search for alternatives. That won’t be easy, but unless Assad’s backers feel he has a good chance of resurrecting his authority they will begin hesitating before pouring more money and lives into a lost cause. There are Alawites reportedly willing to take on the president’s role.

“Hafez Assad spent much of his career perfecting mechanisms to consolidate his power. In the space of 11 years Bashar has destroyed his father’s sinister, if solid, edifice. There is nothing to regret there, except that in wanting to defend this legacy, Bashar has killed over 200,000 people. Good health, in the sense of crime, means not having to engage in slaughter; a threat alone should be sufficient to maintain order. But Assad is not in good health, nor is his regime. Iran is investing in spoiled goods, and woe to Assad when it finally admits this.”

In desperation, look for Assad to step up his use of chemical arms following news investigators in Syria have discovered new traces of the chemical sarin and VX nerve agents at a previously undisclosed military research site, as reported by the Wall Street Journal, which also editorialized:

“This is the latest blow to the credibility of the 2013 U.S.-Russia deal to remove chemical weapons from Assad’s hands. The finding, first reported by Reuters, is the clearest sign that Damascus lied about the size and whereabouts of its existing stockpiles.”

Previously, the Organization for the Prohibition of Chemical Weapons (OPCW) found weaponized chlorine gas has been used “systematically and repeatedly” against civilians in northern Syria.

And as the Journal opines, if the White House couldn’t get this right, it “casts doubt on (its) ability to hold Iran’s leaders to the terms of any deal they might strike over their nuclear program.”

Israel: Benjamin Netanyahu began his fourth term as Israel’s prime minister without a foreign minister, as the rest of the cabinet was sworn in on Thursday. He is using the post as bait to enlarge his fragile coalition that controls just 61 of 120 seats in the Knesset. Moshe Ya’alon remains as defense minister, while Netanyahu will serve as foreign minister until he fills the post with another.

Meanwhile, the Vatican said it would recognize Palestinian statehood after reaching agreement on a treaty between the two, lending a powerful signal of legitimacy to the efforts of Palestinian Authority President Mahmoud Abbas, while upsetting Israel.

Russia: NATO’s military chief, Gen. Philip Breedlove, said Russia was irresponsibly stepping up its nuclear rhetoric in a bid to rattle the west.

“This discussion of nukes and the possibility of moving nukes into certain areas or employing nukes if something had not gone correctly in Crimea and all these other things, which have been put out there – this is not responsible language from a nuclear nation,” Breedlove said at a NATO foreign ministers meeting in Antalya, Turkey.

NATO is forced to rethink its nuclear doctrine in light of Moscow’s threats and pattern of aggression.

A group of Russian activists released a report compiled from notes left by murdered opposition leader Boris Nemtsov, detailing evidence of Russia’s complicity in Eastern Ukraine.

According to the document, Moscow is supporting the separatists fighting in Ukraine with arms and troops “to create an advantageous negotiating position with Western countries.”

The Kremlin could then act as if it is agreeing to end hostilities in order to get the sanctions imposed against it lifted.

Nemtsov and his colleagues found that at least 220 Russian soldiers have been killed in Ukraine and that the war has cost Russia at least $1 billion. [Of course the Kremlin denies these ‘facts.’]

U.S. Secretary of State John Kerry met with Russian President Vladimir Putin and Foreign Minister Sergey Lavrov in Sochi for marathon talks. Afterwards, Kerry said:

“Sanctions will remain in place (against Russia) in an effort to secure the peace that everybody needs in Ukraine,” he said. “If and when (the ceasefire agreements are) fully implemented, it is clear that the United States and European sanctions can begin to be rolled back.”

“Mr. Kerry appears to have given up even asking that Russia exit from eastern Ukraine, much less reverse last year’s illegal seizure and annexation of Crimea. Barely a year ago President Obama invoked the ghosts of World Wars I and II to warn in Brussels that ‘casual indifference’ to Russia’s takeover of Crimea ‘would ignore the lessons that are written in the cemeteries of this continent.’

“More than 6,000 people have since died fighting in eastern Ukraine. Casual indifference is official policy.

“Mr. Kerry also failed to bring up Russia’s sale of the S-300 air-defense system to Iran....

“The Ukrainians must be thrilled to see Mr. Kerry volunteering their territory for the sake of America’s Middle East interests. Western Europeans will conclude that Americans won’t object when they ease sanctions, while Estonians, Moldovans, Poles and other Eastern Europeans will wonder if their territory is also negotiable.

“As for Mr. Putin, the lesson is that he can grab what he wants, wait out the faux outrage and sanctions, and then consolidate his gains in return for more promises of peace.”

On Thursday, NATO foreign ministers, meeting in Turkey, linked arms and sang “We Are the World.” Thankfully, Sec. Kerry had left Turkey early and missed the post-meeting sing-a-long or he no doubt would have joined the group, who looked like total fools, and incredibly insensitive given the plight of the Ukrainians.

Finally, the ruling United Russia party will form neighborhood patrols, vigilante groups, in essence, to maintain order and thwart petty crime on the streets of Moscow, the Kommersant newspaper reported Wednesday.

“The patrol teams, which will be comprised of three to four individuals with ‘athletic builds,’ will be expected to monitor the capital’s neighborhoods (and) crack down on petty crime, illegal parking and drug trafficking, and humiliate violators of public order.”

Oh brother. The patrollers will be given uniforms and will upload evidence of the mischief to an online “wall of shame.”

The United Russia vigilantes will be competing with the Cossack brigades, members of a quasi-military group that was mobilized to hunt down draft dodgers in Moscow.

[Note: I posted Vladimir Putin’s “Victory over Europe” speech from last Saturday on my “Hot Spots” link. Read it.]

Pakistan: A splinter group of the Pakistani Taliban claimed responsibility for an attack on a busy carrying Shia Muslims in Karachi, resulting in at least 43 deaths.

Afghanistan: At least 15 were killed in a Taliban attack on a Kabul hotel filled with foreigners awaiting a concert. One victim was a U.S. citizen. Gunmen reportedly went room to room seeking foreigners and the attack lasted five hours.

China: An annual U.S. Defense Dept. report to Congress on China’s military capabilities concludes China has the most rapidly growing space program in the world, and continues to develop lasers, satellite jammers and other weapons aimed at its adversaries’ space-based assets.

By October last year, the report said China had launched 16 spacecraft that expanded its communications and surveillance capabilities. Much of this was covered in a recent “60 Minutes” report that was more than a bit disconcerting.

At the same time, U.S. officials said this week that China is dramatically expanding its construction of man-made islands in the South China Sea. You know how last week I mentioned the environmental cost to the fragile area? When you see the photos of how China is carving up the shallow ocean bottom, you get an idea of just how destructive they’ve been, let alone all the oil and other chemicals that are just spilling into the water.

American officials believe China has expanded its artificial islands in an area known as the Spratlys by as much as 2,000 acres, a far greater increase than previously reported.

So in response the U.S. military plans to send aircraft and Navy ships to the disputed area to test Chinese territorial claims on behalf of its allies. Chinese officials were not happy.

A foreign ministry spokeswoman, Hua Chunying, said: “We always uphold the freedom of navigation in the South China Sea. But the freedom of navigation definitely does not mean the military vessel or aircraft of a foreign country can willfully enter the territorial waters or airspace of another country. The Chinese side firmly upholds national sovereignty and security.” [Wall Street Journal]

And this just in on Friday...Penn State University disclosed that Chinese hackers have been rifling through the computers of its engineering school for more than two years.

Penn State develops sensitive technology for the U.S. Navy and school President Eric Barron said, “This was an advanced attack against our College of Engineering by very sophisticated threat actors.” In a letter to professors and students, Barron said, “This is an incredibly serious situation, and we are devoting all necessary resources to help the college recover as quickly as possible.”

The FBI notified the university of the breach in November 2014, spawning a months-long investigation that eventually found two separate groups of hackers stealing data, as reported by Bloomberg.

Other U.S. engineering schools such as MIT, Cal Tech, and Carnegie Mellon have been among top targets of Chinese hacking.

North Korea: The government claimed it had successfully tested a submarine-launched missile, which if confirmed would be a significant boost for its missile program. At first some thought the picture that was released, showing Kim Jong-un looking on, was photo-shopped. But whether or not he was there as pictured, later on, experts said the launch itself appeared authentic, though it’s believed Pyongyang is far from having the sophisticated guidance technology for bringing a warhead back down and on target.

We also learned this week via South Korea’s spy agency, the NIS, that North Korea’s defense minister, Hyon Yong-chol, was executed for disloyalty to Kim...reportedly killed by firing squad employing an anti-aircraft gun.

His main transgression was apparently dozing off during a recent military event presided over by Kim, while Hyon had also challenged Kim’s authority on several occasions.

An audience of hundreds was supposedly forced to watch the grisly execution.

Nigeria: Government and civilian vigilante forces beat back a Boko Haram attempt to storm a key military barracks, with unknown casualties suffered on both sides. But while the military has had some recent successes against the terror group, the massive assault was evidence Boko Haram is still strong.

Bangladesh: A third blogger was hacked to death in as many months. The first two were killed by Islamists. It’s assumed they were responsible for this latest attack.

Philippines: A fire in a slipper factory killed at least 72 as workers in the building’s second floor were trapped as windows had iron grills, preventing their escape.

Liberia: The World Health Organization declared Liberia free of Ebola, making if the first of the three hardest-hit West African countries (the others being Guinea and Sierra Leone) to bring a formal end to the epidemic. Among the 4,700 who died here, 189 were health care workers.

Guinea and Sierra Leone each reported nine new cases of the disease last week (week ending 5/8).

Random Musings

--Boston Marathon bomber Dzhokhar Tsarnaev was sentenced to death by a Boston jury on Friday. Seven women and five men deliberated for three days. It’s unlikely Tsarnaev will die anytime soon, though, which is a shame. 

--In what really is an egregious omission for a broadcaster of his stature, ABC News host and former Clinton White House staffer George Stephanopoulos is in serious hot water for failing to disclose $75,000 in donations to the Clinton Foundation before he interviewed author Peter Schweizer on Stephanopoulos’ “This Week” program a few weeks ago.

Stephanopoulos had the first network interview with the “Clinton Cash” author and I watched it that Sunday morning. He was hard-hitting and tough on Schweizer, I thought, but I like Stephanopoulos and despite his past conflict of interest, have always believed him to be largely fair in interviewing Republicans and conservatives.

But to not make the disclosure about his donations was pathetic. Stephanopoulos apologized this week, saying he should have made an on-air disclosure, telling Politico, which broke the story, “I thought that my contributions were a matter of public record; however, in hindsight, I should have taken the extra step of personally disclosing my donations to my employer and to the viewers on air during the recent news stories about the foundation. I apologize.”

He has since pulled out of moderating a GOP presidential debate. ABC, thus far, said it stands by him.

Schweizer accused Stephanopoulos of a “massive breach of ethical standards.” It was.

--Republican presidential candidate Marco Rubio outlined his foreign policy, vowing to restore a “moral clarity” to it, while criticizing President Obama’s “disregard for our moral purpose.”

Rubio vowed to use American power to oppose violations of international waters, including the “chaos caused by disruptions in chokepoints such as the South China Sea or the Strait of Hormuz.”

Rubio’s focus would be on three pillars: promoting American strength, protecting the U.S. economy in a globalized world, and “moral clarity regarding America’s core values.”

“Russia, China, Iran, or any other nation that attempts to block global commerce, will know to expect a response from my administration,” Mr. Rubio said. “Gone will be the days of debating where a ship is flagged or whether it is our place to criticize territorial expansionism. In this century, businesses must have the freedom to operate around the world with confidence.”

Rubio, speaking at the Council on Foreign Relations, said: “Just as Reagan never flinched in his criticisms of the Soviet Union’s political and economic repressions, we must never shy away from demanding that China allow true freedom for its 1.3bn people.” [Demetri Sevastopulo / Financial Times]

--Speaking of Republican presidential candidates and foreign policy, Jeb Bush likes to say he is his “own man,” while at the same time praising his brother and father.

But on Monday, appearing on Megyn Kelly’s Fox News show, Bush told her that knowing what history has since shown about intelligence failures, he still would have authorized the 2003 invasion of Iraq.

Tuesday, calling in to Sean Hannity’s syndicated radio show, Bush said he had misunderstood Kelly’s question.

“I interpreted the question wrong, I guess,” Jeb said. “I was talking about, given what people knew then.”

But Jeb went out of his way to absolve his brother for ordering the invasion: “Mistakes were made, as they always are in life.”

So on Wednesday he was repeatedly asked how he was different from George W. and his father and Jeb said, “Of course I have differences with every previous president,” without then offering any.

Many Republicans simply don’t understand how Jeb Bush could have been so unprepared for questions on Iraq and his brother’s policies.

“Knowing what we know now, would we have urged President George W. Bush to invade Iraq, as we did at the time? A version of this question was put to Jeb Bush by Fox News’ Megyn Kelly the other day, and, well, oh dear.

“The former Florida Governor and presumptive Republican presidential candidate told Ms. Kelly Monday that he would have authorized an invasion, adding ‘and so would have Hillary Clinton’ – a reminder that the Democratic frontrunner is the only person in the 2016 race who cast a vote for the war. But Mrs. Clinton long ago recanted that vote, and Mr. Bush recanted his answer, too, telling an Arizona audience on Thursday that he would not have invaded ‘knowing what we know now.’....

“The right answer to the question is that it’s not a useful or instructive one to answer, because statesmanship, like life, is not conducted in hindsight....

“The better question, and one that would better address Mr. Bush’s fitness as a potential Commander in Chief, is what lessons he would draw from Iraq that would inform his own decision-making confronted with similar circumstances.

“Plainly one lesson would be that Presidents cannot take the claims of their intelligence agencies as conclusive. George W. Bush took the country to war in the sincere belief that Iraq’s possession of weapons of mass destruction was a ‘slam dunk’ case, as then-CIA Director George Tenet believed....

“One other lesson is that, just as there are unintended consequences to military action, there are also consequences to inaction. By 2008 al Qaeda in Iraq was a spent force, demoralized and defeated even according to its own internal communications. It came back and transmogrified into the Islamic State only after President Obama had squandered the gains of the surge by withdrawing all U.S. forces from Iraq, against the wishes of his senior advisers, including then-CIA director Leon Panetta and, yes, Mrs. Clinton.

“The media love easy retrospective judgments – we specialize in shooting the wounded – and so do political candidates who want to score easy points. But we suspect voters are smarter than to credit the breezy claims of ex-post-facto wisdom by Mr. Bush’s GOP competitors.

“What voters should care about is that the next President will have to confront the new global disorder bequeathed by this Administration. The ultimate lesson of Iraq is that there are no easy calls in foreign policy, and that intelligence of the sort generated by spooks can never substitute for the judgment required of statesmen.”

--The Los Angeles Times’ Mark Z. Barabak had a good piece on the Latino vote and 2016. For example, Obama took 67% of it in 2008 and 71% in 2012. Among the few states expected to be competitive in 2016, Obama carried Nevada, Colorado, Virginia and Florida both times, thanks in large part to strong support from the growing Latino populations there. In Nevada, more than 90% of Nevada voters were white in 1994, but it was only 67% in 2012, while over the same period, the Latino share grew from 5% to 15%. [Nationally, Latinos accounted for 10% of the vote in 2012, a percentage that will just keep growing.]

Whit Ayres, a GOP pollster working for Sen. Rubio, believes the party’s eventual nominee will need to win more than 40% of the Latino vote to carry the White House. Only Ronald Reagan and George W. Bush approached this in the last 35 years.

Of course Rubio and Jeb Bush have built-in advantages among the Republican candidates for reaching out to this key segment (Ted Cruz far less so because of his immigration policies and his opposition to ObamaCare).

--According to a Bloomberg Politics/Saint Anselm New Hampshire Poll of prospective Democratic Party primary voters, 86% of Granite State Dems say they had either a “very favorable” or “somewhat favorable” opinion of Hillary Clinton, little changed from 88% in November, despite her recent controversies.

“New Yorkers got yet another reminder Wednesday of how police officers keep them safe – at repeated risks to their own lives: Two cops apprehended the hammer-wielding maniac who’d randomly attacked four people in Midtown over 48 hours.

“Spotting a man who fit the suspect’s description, Officers Lauren O’Rourke and Geraldo Casaigne started following him.

“Suddenly, he turned around and struck O’Rourke twice, once in the back of her neck, with the infamous hammer. Casaigne fired four shots, bringing down the suspect – possibly saving his partner’s life.

“This, in a week when the NYPD is scrambling to address a crime spike in Central Park and an even more troubling rise in shootings across the city – and Mayor de Blasio is off on a nationwide tour to bask in the admiration of his fellow progressives.

“Which is why New Yorkers support the cops a lot more than they do the mayor. In this week’s Quinnipiac poll, his approval sank to 44 percent; the NYPD’s stands at 56 percent.

“And backing for the police grows when people look at what’s actually happening on the streets. Do you approve of how cops in your neighborhood are doing their job? By 69 percent to 26 percent, the public says yes....

“The poll also shows firm backing (57 percent to 38 percent) for continued police targeting of low-level quality-of-life offenses – especially in their own neighborhoods. Again, that support includes black and Hispanic voters.”

--New York Gov. Andrew Cuomo has seen his job approval rating drop to its lowest mark since he took office in 2011, just 37%, according to a new Wall Street Journal/NBC 4 New York/Marist poll. This is down from 44% who believed Cuomo was doing a good or excellent job back in October. Both Cuomo and Mayor de Blasio are at 44% approval among New York City voters.

New York state’s massive level of corruption hurts Cuomo, the governor having campaigned on a pledge to clean up the mess in Albany.

--The House overwhelmingly passed a bipartisan bill, 338 to 88, that dials back a National Security Agency program that collects and stores data from phone lines (landline and cellphone) in the United States.

But GOP leaders in the Senate are backing a bill to renew the controversial initiative through 2020, with possibly minor amendments.

--In a Pew Research Center survey, 71% of Americans identify themselves as Christian (officially for 2014) vs. 78% in 2007.

In the same period, Americans identifying as having no religion grew from 16% to 23%. Pew interviews 35,000 for this study.

“To mark the 70th anniversary of the end of World War II...the Census Bureau has published some fascinating numbers that also throw light on the war’s larger historical meaning. They help explain why WWII remains our favorite war. Here’s an overview.

“They concern the share of Americans who served in the military. That was, Census reports, 16.1 million men. Of these, 6.1 million volunteered and 10 million were drafted. According to Census, 406,000 were killed and 671,000 others were wounded – a casualty rate of about 1 in 15 for all services.

“(These figures cover only men. Census also reported separately that 342,000 women served in World War II; 217 died.)

“At the war’s end, 12.1 million Americans were still in uniform. This compared with 3.1 million in 1970 at the height of the war in Vietnam and 1.5 million in 2011. In 1950, 28 percent of all men 18 and over were World War II veterans; today, the active-duty military (men and women) are less than 1 percent of the 18-and-older population, says Census.

“What these figures show is that, compared with World War II, we fight our wars today from our hip pocket. The Census numbers actually understate the wartime mobilization. Looking at just men ages 15 to 39 in 1940 (as I have), from 50 percent to 60 percent served in World War II. Presumably, the others were unfit, too old or exempted from service.

“This massive mobilization tells us that the triumph in World War II was a collective, democratic and unifying event, the likes of which we never experienced before (the Civil War in some respects rivaled the effect, but of course, it was also hugely divisive). It involved almost everyone. As soldiers, sailors and airmen, rich and the poor were tossed in together; so were North and South, urban and rural.

“The triumph was not the property of any group, region or class; the victory was national. It belonged to everyone. One of the war’s great emotional appeals, I think, is this emphasis on communal responsibility, obligation and reward. (Unsurprisingly, there are many exceptions to this, the most conspicuous being the continued segregation, even in fighting units, of African Americans.)

“It’s why we love World War II. It reminds us who we can be when we are at our best. There is much focus now on inequality, but the inequality is economic, measured in dollars and cents. World War II did not eliminate differences of income and wealth, but it did emphasize equality of duty and contribution. Patriotic commitment was not a function of bank accounts.”

--Finally, one of the biggest stories of the week was of course the four-game suspension handed down to New England Golden Boy quarterback Tom Brady for his role in the team’s illegal deflation of footballs. He was an idiot not to cooperate with the NFL’s investigation, and his a-hole agent, Don Yee, is only making things worse for his client in terms of Brady’s image and legacy.

And that’s a memo....

---

Pray for the men and women of our armed forces...and all the fallen, including the six Marines killed in the helicopter crash in Nepal while attempting to deliver aid to earthquake survivors.

Oil closed at $59.69...up a record ninth straight week.
Gold $1225

Returns for the week 5/11-5/15

Dow Jones +0.4% [18272]
S&P 500 +0.3% [2122]
S&P MidCap +0.8%
Russell 2000 +0.7%
Nasdaq +0.9% [5048]

Returns for the period 1/1/15-5/15/15

Dow Jones +2.5%
S&P 500 +3.1%
S&P MidCap +5.4%
Russell 2000 +3.3%
Nasdaq +6.6%

Bulls 47.5
Bears 15.8 [Source: Investors Intelligence]

**I’m launching a new initiative at some point over the coming days that I’ll explain in the next review. It’s about expansion.

Brian Trumbore

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