Week in Review

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Week in Review

02/07/2015

For the week 2/2-2/6

Edition 826

Washington and Wall Street

Stocks staged a stirring rally for what reason I have no freakin’ clue. I mean the best news was on Friday with the January jobs report, but it proved to be the only down day of the week in terms of the Dow Jones.

U.S. nonfarm payrolls in January rose a seasonally adjusted 257,000, better than expected, while November and December’s figures were revised upward a combined 147,000, with November’s reading hiked to 423,000 and December’s to 329,000, both terrific.

The unemployment rate ticked up in January, however, to 5.7% because the labor force grew as more Americans searched for jobs, which is good, while U6, the broader look at ‘underemployment,’ which includes those in part-time positions looking for full-time work, ticked up to 11.3% from 11.2% in December. The labor participation rate was 62.9%, up two-tenths though still near a three-decade low.

But the big news to moi was average hourly wages rose 0.5% from December and they are now up 2.2% over the past year, still very sluggish but a significant pickup from prior months.

This is what I’ve been calling for, sports fans, and the significance is that a rate hike in June by the Federal Reserve is suddenly back on the table, with Wall Street rushing to revise its forecasts amid a growing consensus, at least for today, that the Fed will change the language at its March meeting to take out the word “patience” as part of a move to give the markets a heads-up that they’ll finally raise rates, albeit just fractionally, in June (June 17, to be exact).

Of course all manner of things can still happen between now and then, especially regarding Europe and geopolitical developments, i.e., Russia and the desires of Vlad the Impaler.

But back to jobs, at least for now the negatives of the collapse in oil prices (which has reversed a bit at least in the short run), in terms of layoffs, has been more than offset by gains elsewhere.

In response to the above, the yield on the benchmark 10-year Treasury soared to 1.96%...up from last Friday’s close of 1.64%. The 30-year, which had closed a week ago at an all-time low yield of 2.22%, finished Friday at 2.53%.

Earlier this week, figures on personal income and consumption for December were released, up an expected 0.3% on the former, and down 0.3% for the latter, spending, which while not a surprise is not good.

Figures on December construction spending, up 0.4%, and factory orders, down 3.4%, were both worse than forecast.

Then you had the January ISM figure on manufacturing, 53.5, less than expected, and services, 54.2, up from December’s 53.3.

Earnings continued to roll in and the likes of Exxon Mobil and Disney beat the Street, but in looking ahead at the first and second quarters, Bloomberg now has earnings for the S&P 500 falling 2.1% in Q1 and 1.1% in Q2. On 12/31, the forecast had been for earnings growth of 3% in the first half of 2015. It’s largely about the impact of the dollar on multinationals.

But now much attention is going to be focused on the March 17-18 Fed meeting, with all the data beforehand being picked apart perhaps a little more than usual, with one eye also on Greece and its crisis.

There is a sleeper issue; a potential lockout between west coast dockworkers and employers within days as negotiations on a new contract are going nowhere amidst a union slowdown. [If this sounds familiar, you’re right.]

Jonathan Gold, head of the National Retail Federation, said a study commissioned last year found a five-day lockout would reduce GDP by $1.9bn daily, up to $2.5bn daily for a 20-day lockout.

The Pacific Maritime Association, representing employers, presented its “all-in” offer to the International Longshore and Warehouse Union after nine months of contract talks (the familiar part).

The employers’ offer would increase port average annual salaries from $147,000 to $162,000, maintain their generous healthcare plans and provide annual pensions of up to $88,800. [Robert Wright / Financial Times]

On a different topic, regarding President Obama’s budget proposal, when it comes to taxing U.S. companies’ overseas profits, some Republicans are calling it constructive. Obama wants a 14% one-time tax on the money stockpiled overseas, which he would then use for infrastructure. Republicans are at 8% so there’s a chance at compromise there, as part of a bigger tax reform package, I hasten to add...and that’s the stumbling block.

“Mr. Obama’s guiding principle seems to be ‘never enough.’ The White House budget office expects federal outlays and revenues to rise to altitudes well above historical norms, yet the average estimated deficit over 10 years of $567 billion is higher than in any administration since World War II. Mr. Obama has to keep raising taxes because it’s the only way he can keep the deficit from exploding given his spending demands.

“The federal budget shop predicts revenues will boom in 2016 to a new federal record of $3.53 trillion, which is a 16.7% increase over $3.02 trillion in 2014 and 67.5% (!) more than 2009. The one-year revenue increase alone is 11%. How many people do you know who are getting an 11% raise this year? Mr. Obama wants that much more for the political class to redistribute....

“Mr. Obama needs all this cash because he is proposing to spend $3.99 trillion in 2016. The budget gnomes must have been told that, whatever you do, keep the top line below $4 trillion....

“Mr. Obama is also trying to entice Republicans with an opening bid on taxing corporate foreign profits, suggesting that the $2.12 trillion U.S. companies currently have parked overseas could be repatriated at a 14% rate, and 19% on future overseas profits. That’s an improvement on the 35% statutory rate if Apple or Intel bring those profits home....

“But such a temporary fix would do little to change the long-term incentives to keep profits abroad or help U.S. tax competitiveness. The revenue windfall would be better used to support a larger corporate tax reform that permanently lowers rates.

“The great unmentionables in Mr. Obama’s budget are entitlements, which roll on largely untouched.” [By 2020, “mandatory” annual appropriations climb to 16.6% of GDP.]

The thing is none of the budget forecasts take into consideration what happens if we have to really ramp up defense spending. Both the White House and Republicans want to nullify the 2011 sequestration cuts when it comes to the Pentagon, and no doubt they will compromise on a significant increase, but the potential is there for far larger sums given the multitude of security concerns we face.

And I’m looking at the Congressional Budget Office report and, yes, the deficit picture appears to be sanguine this year and the two following ones, but then the deficits explode anew, without any crisis spending. Plus heaven forbid we ever have truly normalized interest rates. For example, the CBO forecasts the rate on the 10-year will increase from 2.60% in 2015 to 4.60% in 2020 and subsequent years. Good luck. Yes, many of us have been wrong on the rate front the past few years. But our day will come.

Europe and Asia

New Greek Prime Minister Alexis Tsipras and his Finance Minister Yanis Varoufakis ran around the continent in a diplomatic push for debt relief and easing on austerity. But by week’s end, Germany had rebuffed the new leadership team and the European Central Bank, save for one move, was far from accommodating.

Tsipras, however, at least for now, is receiving support back home for his vow to stick to his anti-bailout campaign pledges, with the prime minister giving a major speech on Sunday at the opening of a three-day parliamentary debate leading up to a confidence vote to confirm his new government.

German Finance Minister Wolfgang Schaeuble, who met with both Tsipras and Varoufakis, said after meeting the latter on Thursday, “We agreed to disagree.” Varoufakis countered, “We didn’t even agree to disagree from where I’m standing.” [Bloomberg]

Varoufakis said he appealed to Germany’s sense of morality, drawing a parallel to Greece’s problems and those of Germany in the 1930s.

“I think that the German nation is the one nation in Europe that can understand us better than anyone else,” he said.

Schaeuble said that other European countries, including Germany, should not have to foot the bill for Athens: “Yes we must respect Greek voters, but we must also respect the voters of other European countries.”

European Union Economic Commissioner Pierre Moscovici told reporters, “The results of these elections have to be respected. On the other hand, it’s also true that commitments have been made by the previous government not only on its own behalf but in the name of the country itself and of the state.”

The bottom line from all the negotiations this week is that it doesn’t look good for Greece and its attempts to negotiate new, easier terms for its bailout loans ($274 billion / 240bn euro) and bankruptcy and an exit from the eurozone are still very much in play. Time is of the essence. The bailout expires at the end of the month* and if Athens doesn’t implement the reforms and budget cuts that are part of the bailout agreement, the final $8 billion installment won’t be forthcoming, desperately needed funds for the government.

*The EU/ECB is now demanding Greece put forward a plan by Feb. 16, so as to have enough time to examine it before the Feb. 28 deadline.

Tsipras and Varoufakis have been pleading for a bridge financing arrangement to buy time until May but this has not been forthcoming.

Most seem to think Greece can meet debt repayments due in March, but certainly not when it comes to redemptions due in July and August. For starters, if Greece is to avoid a liquidity crisis next month, it must collect some taxes.

But the European Central Bank will allow the Greek Central Bank to provide as much as $68 billion in emergency funding for the country’s lenders, even as the ECB restricted loans to its financial system, which is a huge blow, in saying Greek government securities would no longer be eligible to use as collateral in ECB operations as of Feb. 11. These had been eligible only as long as Greece was in an agreed to bailout program. [The Greek Central Bank, however, can accept Greek bonds as collateral. Sorry if this all makes your head hurt. Mine does.]

Turning to the eurozone economy, final figures for January manufacturing were released, 51.0 for the EA-19, up from December’s 50.6 (50 being the dividing line between growth and contraction).

Germany came in at 50.9, Italy 49.9, France 49.2 (8-month high), Greece 48.3 (15-month low), Spain 54.7 (2-month high) and, separately, non-euro U.K. came in at 53.0.

There were also eurozone figures on retail sales. Markit comes up with a retail PMI and for January it fell from 47.6 in December to 46.6, the lowest in four months, not good. Below 50 means falling sales in eight of the past nine months. Germany was at 52.3, but France was 44.0 and Italy 41.2; four- and five-month lows, respectively, for these two.

Eurostat released a figure for retail sales in December, up 0.3% compared with November.

Separately, industrial production in Germany rose for a fourth month in December, up 0.1% from November, though down 0.7% from a year earlier.

And despite all the above, the European Commission upgraded its growth forecasts for the eurozone, saying low oil prices and a declining euro (better exports) and aggressive monetary policy will have the euro economy growing 1.3% this year and 1.9% in 2016. Three months ago these two figures were 1.1% and 1.7%.

“There are three crises afflicting Europe. Two are on the borders of the EU: a warlike Russia and an imploding Middle East. The third emergency is taking place inside the EU itself – where political, economic and diplomatic tensions are mounting.

“The past month has seen all three crises facing Europe intensify. The terrorist attacks in Paris heightened fears about the potential spillover of violence and religious tensions from the Middle East. Russian-backed separatists have renewed their offensive in Ukraine. And Syriza’s victory in Greece means that – for the first time since the euro crisis broke out – a radical left party has won an election in an EU country.

“The problems in Russia, the Middle East and the eurozone have very different roots. But, as they worsen, they are beginning to feed on each other.

“The economic slump in much of the EU has encouraged the rise of populist parties of the right and left. The sense of insecurity on which the populists feed has been further encouraged by the spillover from the conflict in the Middle East – whether in the form of terrorism or mass illegal migration. In countries such as Greece and Italy, the inflow of migrants from (or through) the Middle East has heightened the atmosphere of social crisis, making immigration almost as controversial as austerity.

“Meanwhile, Russia’s military intervention in Ukraine presents the EU with its biggest foreign policy challenge since the Cold War. Mishandled, it could lead to military conflict....

“One emotion that seems to unite the far-left and the far-right in countries such as Greece, Germany and France is a soft spot for Vladimir Putin’s Russia. The far-right likes Mr. Putin’s social conservatism, his emphasis on the nation state, his authoritarianism and his hostility to America and the EU. The extreme left seems to have retained its traditional affinity for Moscow....

“Worryingly, none of Europe’s three crises look like they are improving. In the Middle East, Syria and Libya are in a state of near-collapse and the situation is also bleak in Yemen and Iraq. Russia’s behavior is becoming more, not less, threatening. And although optimists continue to argue that it is inevitable that Greece and the EU will strike a debt deal, the early signs are unpromising – and confrontation is looming.

“All of this looks like a formula for a further fracturing of the political center in Europe. Loose parallels are being made with the politics of the 1930s when economic depression, combined with an unstable international political environment, led to the rise of political extremism – and, ultimately, war.

“Fortunately, comparisons with the interwar years still seem far-fetched....

“Modern Europe has an economic and political resilience, as well as a bedrock of wealth, that was simply not there in the 1930s. All the same, the current atmosphere in the continent is as unstable and unpredictable as anything that I can remember in my adult lifetime.”

Just a few notes on China and Japan. HSBC’s final reading on January manufacturing for China came in at 49.7 vs. 49.6 in December. The government’s figure was 49.8 (50.1 in Dec.) The HSBC service sector reading for last month was 51.8, down from 53.4 in December.

Separately, the country’s central bank moved on Wednesday to stimulate growth by cutting reserve requirements for commercial banks in the hopes it will stimulate more lending.

Japan’s manufacturing PMI for January was 52.2 vs. 52.0 in December, the sixth month in a row with an increase.

Street Bytes

--The Dow Jones staged its biggest rally since January 2013, up 3.8% to 17824 and is now up a single point for the year. The S&P rose 3% and Nasdaq 2.3%. Both of these are now also essentially unchanged for 2015.

--U.S. Treasury Yields

6-mo. 0.08% 2-yr. 0.64% 10-yr. 1.96% 30-yr. 2.53%

The two-year yield jumped the most Friday on a one-day basis since 2009, while the 10-year posted its biggest one-day increase since November 2013, up 13 basis points.

--Health insurance giant Anthem Inc. said this week hackers had breached its computer system and the personal information of tens of millions of customers is at risk. Anthem has more than 37 million members in California and 13 other states. But the company is also holding Blue Cross Blue Shield data on patients from all 50 states. While the suspicious activity was first noticed Jan. 27, the unauthorized access apparently goes back to Dec. 10. [Los Angeles Times] To its credit, Anthem notified the FBI immediately and retained cybersecurity firm Mandiant.

Hackers could easily have access to everything...names, date of birth, Social Security numbers, addresses, employment information, etc. Anthem does not believe specific medical information has been compromised.

Thursday, investigators began to point to Chinese state-sponsored hackers. As Bloomberg’s Michael Riley reported, “The attack appears to follow a pattern of thefts of medical data by foreigners seeking a pathway into the personal lives and computers of a select group – defense contractors, government workers and others, according to a U.S. government official familiar with a more than year-long investigation into the evidence of a broader campaign....

“In the past year, Chinese-sponsored hackers have taken prescription drug and health records and other information that could be used to create profiles of possible spy targets, according to Adam Meyers, vice president of intelligence at Crowdstrike, an Irvine, California-based cybersecurity firm. He declined to name any of the companies affected.

“ ‘This goes well beyond trying to access health-care records,’ Meyers said. ‘If you have a rich database of proclivities, health concerns and other personal information, it looks, from a Chinese intelligence perspective, as a way to augment human collection.’ He cautioned that it’s also possible that hackers who work for China during the day are moonlighting for criminal purposes on the side.”

The latest is that the private data of up to 80 million may have been accessed because it includes former as well as current members and employees of Anthem.

Ben Johnson, a security strategist, told the Washington Post that “Health-care records are the new credit cards. If someone gets your credit card number, you cancel it. If you have HIV, and that gets out, there’s no getting that back.”

Medical information includes key details that could be used to create a “fake patient” that could fraudulently bill programs such as Medicaid, experts told the Washington Post.

Joel Brenner, a former top U.S. counterintelligence official, told the Post, “The more information the Chinese have about large segments of the American population, the easier it is for them to penetrate our military and intelligence agencies.”

--U.S. crude oil supplies hit their highest level in 80 years this week, but after a 9% drop on this news, Wednesday, oil resumed its rally and closed the week over $50 ($51.69) for the first time in five weeks.

Prior to Wednesday, and then after, crude prices had been rising with each announcement by a major oil and services company that the capital expenditures budgets were being cut and employees laid off, thus leading to tighter future supplies and, ergo, higher prices.

But when talking about supply and demand, you still have the demand side of the equation and there are zero signs, globally, that demand is going to pick up in a sizable way. Hopefully it does, but not today.

--Meanwhile, Russia’s state-controlled Gazprom joined the list of those slashing capital expenditures, in its case by $8 billion to $30 billion, from a peak of almost $44 billion a year between 2010 and 2013.

--BP slashed projected capital spending by about 20% for this year to $20 billion from an earlier expectation of $24bn-$26bn.

--Exxon Mobil Corp.’s profit declined 21% in the fourth quarter, though it came in better than expected. Revenues fell to $87.28 billion from $110.86 billion in the year-ago quarter. 

Exxon doesn’t release its capital spending plans until next month, though any cuts aren’t expected to be as severe as those of smaller players. [Exxon had significantly reduced spending over the past year to begin with.]

--Weatherford International, one of the biggest oil-field services companies in the world, is laying off 5,000 employees during the first quarter, or 9% of its global workforce.

--Natural-gas prices have slumped to 2 ½-year lows. It’s a simple story of oversupply. U.S. gas production hit records in 11 consecutive months and prices have fallen 42% since November. According to the U.S. Energy Information Administration, inventories are up 24% from a year ago and are more than enough to meet any severe freezes the rest of winter.

--Auto sales in the U.S. were up a hefty 13.7% in January from the same month a year earlier, according to Autodata Corp., with automakers on track to sell at least 17 million vehicles this year.

GM’s U.S. sales rose 18.3% in the month compared with January 2014. Ford posted a 15.6% gain. Fiat Chrysler’s rose 14% to 145,000 vehicles, its best since 2007.

Toyota Motor’s gained 15.6%. Honda saw its sales rise 11.5% to a record. [I rolled over a Honda Accord in January myself.] Nissan’s grew 15.1%.

You get the picture...it was a terrific month, though year to year comparisons are undeniably skewed by last January’s ‘polar vortex’ that limited sales.

Separately, with plunging prices at the gas pump, sales of electric and hybrid vehicles have been falling considerably, or, in the case of Tesla, flat at best.

--General Motors Co. posted a profit that beat expectations, up 91% for the fourth quarter vs. a year ago, though revenue fell a bit. In CEO Mary Barra’s first year, global market share was flat and profits were hit to the tune of $2.8 billion due to recall costs.

Losses on GM’s European operations widened to $393 million from $363 million, much of this attributed to Russia. For all of 2014, the automaker lost $1.37 billion in Europe, well above 2013’s $869 million shortfall.

GM did announce on Wednesday that it would boost its dividend 20% and that 48,400 U.S. hourly employees would receive profit-sharing bonuses of as much as $9,000, which is to be celebrated.

--Ford said it would add 1,550 new jobs at four plants in the United States to increase production of its top-selling F-series pickup. Ford sold 54,000 full-size pickups in January, a 12-percent increase from the same month in 2014.

--Toyota announced it was raising its full-year profit outlook by 6.5% to another record-high, $18.1 billion for the fiscal year ending in March. Japanese Prime Minister Shinzo Abe is no doubt urging the automaker to pass some of this on to workers in the form of higher wages.

--The death toll in the dramatic crash of a TransAsia Airways turboprop in Taipei is 32, with 11 missing, last I saw. A distress signal had been issued: “May day. May day. Engine flameout.” Video appeared to confirm the engine issue. Then analysis of the black box data revealed both engines failed, but that the flight crew tried to restart one of them to no avail. 

31 of the 58 passengers were mainland Chinese tourists. This was TransAsia’s second crash in just over six months; a domestic flight went down July 23, killing 48. But before that July accident, the last deadly commercial accident on Taiwan overall was 2002.

As for the large number of major Asian airline crashes the past year or so, they’re all different. I see zero ties, just a bad coincidence. [Admittedly, I do not know the cause of the first TransAsia incident.]

--Six were killed in a horrific commuter train crash; a Metro-North train that originated in Grand Central Station in New York City slamming into an SUV that got stuck across the tracks. By week’s end officials were able to determine it was most likely just a tragic accident. 

--Ebola cases showed their first rise in 2015 the week ended Feb. 1...124 in Guinea, Liberia and Sierra Leone. This bears watching.

Separately, a study by the U.N. Office for the Coordination of Humanitarian Affairs that tracked international donations showed only around 40% of the funds pledged to fight Ebola by the end of 2014 had actually reached affected countries. Pathetic. The death toll now exceeds 8,800.

--In reporting another terrific quarter, Disney noted that theme park revenue grew by 9 percent (even with the measles situation at Disneyland...more on this below). Overall revenue also rose 9 percent to $13.4 billion compared to last year.

--Amy Paschal is stepping down from her role as co-chairman of Sony Pictures, following the hacking scandal and leaked emails. She will now head a production company that will keep her at Sony headquarters, though she will no longer be responsible for the studio’s creative output.

Sony Corp. surprised investors with an upside surprise, saying the company would post an operating profit for the year ending March 31, after previously predicting a loss, due to strong sales of products such as PlayStation 4 and smartphones. Sony said the financial effects of the hack attack weren’t material.

--Shares in Twitter rose sharply as the company reported fourth-quarter revenue climbed 97%, while earnings were double what the Street expected ($0.12 vs. $0.06).

But active-user growth fell to just 1%, quarter over quarter. Nonetheless, investors chose to believe company executives who promise a return to robust growth in this category in 2015.

Twitter has 288 million monthly users, which compares to Facebook’s 1.39 billion and Instagram’s 300 million.

--Siemens AG plans to lay off 7,800 workers, or 2 percent of its global workforce. Europe’s biggest engineering company will slash 3,300 jobs at Siemens’ German operations. Problems at the company’s energy division are a prime cause of Siemens’ ongoing restructuring efforts. Back in Sept. 2013, Siemens laid off 15,000 in a separate cut.

--Gaming revenue in Macau fell for the eighth straight month in January, a whopping 17.4% from a year ago; though this was better than December’s 30.4% decline. For all of 2014, revenues fell 2.6%. Macau continues to get hit by Beijing’s anti-corruption crackdown.

--GoPro beat Wall Street’s highest forecasts for its fourth quarter, with revenues of $634 million and earnings of 96 cents, but shares were slammed after the company guided below expectations for 2015.

--PIMCO’s Total Return Fund suffered a 21st consecutive month of withdrawals in January, $11.6 billion, as assets have now plunged 54% from its peak of $293 billion in April 2013 to $134.6 billion at the end of the month. Since Bill Gross’ departure for Janus, however, the fund has beat 82% of its peers and its benchmark, according to Morningstar Inc. Gross’ Janus Global Unconstrained Bond fund has beat 55% of its peers; the two funds following different strategies.

--I was very depressed to see that Staples Inc. has agreed to buy Office Depot Inc. in a $6.3 billion deal, though it’s not a certainty the combination will win approval from regulators, even if it should be a no-brainer to let them do so.

The world is so different from 18 years ago when the same combination was turned down by the Federal Trade Commission. But even while the two are losing out to online suppliers and the likes of Wal-Mart it’s far from clear this merger will be approved. Staples will pay Office Depot $250 million if antitrust concerns scuttle the deal.

Both companies are already in the process of closing duplicative or unprofitable locations among their more than 4,000 stores, combined.

I’m just upset because I’m the number one individual customer at the Staples location I use, once a week, and I’ve noticed they have already been scrimping on their rewards program. [Sorry, in the office supplies category it’s all about me.]

--Another favorite of mine, RadioShack Corp., filed for Chapter 11 bankruptcy, with a deal in the works to sell about half its store leases to Standard General, which will co-brand some of them with Sprint Corp., and close the rest. The chain traces its roots back to 1921, but has struggled mightily the past decade in particular.

--Yum! Brands, parent of KFC, Taco Bell and Pizza Hut, said same-store sales in China fell 16% in the fourth quarter, which while better than forecast, were still dismal; China comprising more than half of Yum’s overall sales last year.

--U.S. Federal Communications Commission Chairman Tom Wheeler, in an article published Wednesday on Wired.com, addressed the issue of ‘net-neutrality.’

“The Internet must be fast, fair and open,” wrote Wheeler. “That is the message I’ve heard from consumers and innovators across this nation. That is the principle that has enabled the Internet to become an unprecedented platform for innovation and human expression.”

As Bloomberg’s Todd Shields put it, “The agency is seeking to settle a decade of debate about whether the Internet is to be a highway offered to all on equal terms, or whether broadband providers can levy fees and restrict access.”

--Standard & Poor’s announced it had settled with the Justice Department and 19 state attorneys general and the District of Columbia for $1.37 billion on accusations it inflated ratings of mortgage investments ahead of the 2008 financial crisis. S&P reached a separate agreement with the California Public Employees’ Retirement System to the tune of $125 million.

--I was at a retirement dinner last weekend for a good friend and invariably the conversation turned to Burger King vs. McDonald’s. OK, it was part of a cocktail chat I was having with the locals and I conceded I felt like an idiot in not writing in my columns that when I complained about the local McDonald’s service, I wasn’t noting that as the economy improves, it would get a lower caliber of worker.

But that doesn’t have anything to do with attitude, and my local Burger King workers have an excellent one. I went on Thursday (Madison location, Jimbo) and all the customers in line seemed to know the workers’ names. Now that’s cool. And of course the workers at least wore a happy face.

So I bring this topic up again because Kate Bachelder in the Wall Street Journal had the following, which involves McDonald’s new ad campaign that many of you have seen.

“The McDonald’s Egg McMuffin is a venerable American tradition, a glimmer of hope that the low-fat, gluten-free, everything-will-kill-you diet fanatics have not yet triumphed, a reminder that something so simple as an egg, cheese and Canadian bacon on an English muffin, served with a crispy hash brown, can be reliably delicious. And when you walk into a McDonald’s, you know what to expect.

“At least that’s what I thought, when early on Monday morning I paid a visit to the Golden Arches while traveling through Union Station in Washington, D.C.   After a moment’s wait I placed my order with an enthusiastic cashier, and started to pay.

“Suddenly the woman began clapping and cheering, and the restaurant crew quickly gathered around her and joined in. This can’t be good, I thought, half expecting someone to put a birthday sombrero on my head. The cashier announced with glee, ‘You get to pay with lovin’!’ Confused, I again started to try to pay. But no.

“I wouldn’t need money today, she explained, as I had been randomly chosen for the store’s ‘Pay with Lovin’’ campaign, the company’s latest public-relations blitz....

“If the ‘Pay with Lovin’’ scenario looks touching on television, it is less so in real life. A crew member produced a heart-shaped pencil box stuffed with slips of paper, and instructed me to pick one. My fellow customers seemed to look on with pity as I drew my fate: ‘Ask someone to dance.’ I stood there for a mortified second or two, and then the cashier mercifully suggested that we all dance together. Not wanting to be a spoilsport, I forced a smile and ‘raised the roof’ a couple of times, as employees tried to lure cringing customers into forming some kind of conga line, asking them when they’d last been asked to dance.

“The public embarrassment ended soon enough, and I slunk away with my free breakfast, thinking: Now there’s an idea that never should have left the conference room.”

For sure I am not going to a McDonald’s until this ad campaign is over.

--For those of you buying herbal supplements at the likes of GNC, Target, Walgreens and Walmart, be advised the New York State attorney general’s office accused these four of selling fraudulent and potentially dangerous supplements. An investigation found that “four out of five of the products did not contain any of the herbs on their labels. The tests showed that pills labeled medicinal herbs often contained little more than cheap fillers like powdered rice, asparagus and houseplants, and in some cases substances that could be dangerous to those with allergies.”

For example, “At Walmart, the authorities found that its ginkgo biloba, a Chinese plant promoted as a memory enhancer, contained little more than powdered radish, houseplants and wheat – despite a claim on the label that the product was wheat- and gluten-free.” [Anahad O’Connor / New York Times]

Heck, you might as well fill the capsules with Fruit Loops or Frosted Flakes if you’re going to issue fake product, know what I’m sayin’?

Dr. Pieter Cohen, a professor at Harvard Medical School, said, “If this data is accurate, then it is an unbelievably devastating indictment of the industry.”

--On the drought watch scene...after one of the driest Januarys on record in California, forecasters believe the next three months will see above normal rainfall, beginning with the storms pounding the state the next few days. This is encouraging.  The snowpack is pitifully low in most spots, even after those heavy storms of December.

--The U.S. Postal Service said on Friday that revenue grew a record 4.3% for the holiday quarter to $18.7 billion, however, USPS recorded a loss of $754 million, compared with a loss of $354 million in 2013’s Q4. $1.4 billion was a prepayment to the Retiree Health benefits fund, which Congress mandates it do to the tune of $5.5 billion each year.

--New York City saw record numbers of tourists in 2014, 56.4 million, up 4% from 2013, and included 44.2 million domestic and 12.2 million international. Tourism created $61.3 billion in economic impact and sustained 359,000 tourism-related jobs, according to NYC & Company.

Officials, though, seem to be in a state of denial when they say the rising dollar won’t impact 2015.

--Inflation Watch: Girl Scout councils in Southern California are raising the price of a box of cookies to $5 from $4, matching San Francisco’s increase last year.

--Revenues for bourbon and Tennessee whiskey in the U.S. rose by 9.6% last year to $2.7 billion. Overall sales of booze were up 4% to $23.1 billion.

But beer still has a market share of 47.8 percent, according to the Distilled Spirits Council’s annual report. Wine is at 17 percent.

--A Gauguin painting of two Tahitian girls has been sold from a Swiss private collection for close to $300 million, one of the highest prices ever paid for an artwork.

Can’t stand Gauguin. Greatly overrated. In fact years ago I went to a Gauguin museum in Tahiti itself and was totally unimpressed. But guess who has the last laugh? [Assuming he’s well-received up in Post-Impressionist heaven.]

--Finally, for the record, the Super Bowl television audience as you know by now was the largest ever, over 114 million viewers and 72% of the viewing public on average in the 56 markets measured by Nielsen.

NBC was able to charge $4.5 million for a 30-second spot and on Friday, CBS CEO Les Moonves, whose network has the game next year, told CNBC the bidding for spots will begin at $5 million.

Foreign Affairs

Russia / Ukraine: Thursday, German Chancellor Angela Merkel and French President Francois Hollande met with leaders in Kiev, prior to going to Moscow for talks with Vladimir Putin on Friday. Publicly, Russia said it welcomed the new European initiative, while a Foreign Ministry spokesman said any decision by the U.S. to give Ukraine lethal weapons would be viewed as a threat to Russia’s security.

The French-German plan seemed to be aimed at heading off such a U.S. delivery to Kiev, which Europeans fear could spark a wider conflict.

Russia accuses Kiev of using weapons in east Ukraine that were having an effect similar to weapons of mass destruction, according to FM spokesman Alexander Lukashevich, which is laughable.

Russia vehemently denies it is backing the rebels when all evidence points to the contrary, as Russian troops and heavy weapons continue to pour into the country. Fighting has been heavy, with scores killed, raising the death toll to over 5,300 since April.

A pro-Russian separatist leader, Alexander Zakharchenko, wants to build his rebel force to 100,000, seeking to totally push government troops out of Donetsk and Luhansk. Kiev has announced a major mobilization designed to bring the numbers in its armed forces to 200,000 this year.

U.S. Secretary of State John Kerry met with Ukrainian leaders on Thursday, saying, “Our choice is diplomacy,” in making no mention of providing Ukraine with lethal military aid. Kerry later told journalists Obama was considering this, though he would wait to see how Merkel and Hollande did with Putin. Kerry employed a term that will be increasingly used in describing the U.S. position. “We are not interested in a proxy war, our objective is to change Russia’s behavior.”

But then it appeared there was zero progress made in Moscow on Friday, with neither of the three parties choosing to make a statement after a four-hour meeting, though further talks may be in the offing. Before she left from Berlin, Merkel said at a press conference, “We don’t know if we will have long or short talks in Moscow or if these will be the last talks. We can only do what we can to resolve this conflict and especially to end the bloodshed.”

A spokesman for Merkel said, “There are no signs of a breakthrough,” a sentiment echoed by Vice President Joe Biden, during a visit with European Union leaders in Brussels.

“President Putin continues to call for new peace plans as his troops roll through the Ukrainian countryside and he absolutely ignores every agreement that his country has signed in the past and he has signed recently,” said Biden.

“Europe thinks it has a Ukraine problem. In truth, it has a Russia, or more precisely, a Vladimir Putin problem. Moscow’s war against Kiev is a fragment of a bigger picture. The Russian president’s revanchism reaches well beyond Ukraine. The bigger goal is to tear up the continent’s post-communist settlement.

“European hesitation about confronting Russia is readily explained. Economic self-interest, history, cultural affinity, and latent anti-Americanism have persuaded many Europeans to look at Mr. Putin as the leader they hoped for rather than the one who saw the fall of the Soviet Union as the geopolitical catastrophe of the 20th century.

“There is a seductive narrative for a west chastened by bungled intervention in the Middle East. If Mr. Putin’s demands are sometimes provocative – and, as in Georgia as well as Ukraine, can turn into outright aggression – the west should be mindful of the circumstances. Perhaps NATO had indeed broken promises about admitting former Soviet satellites? Maybe it had bent the rules when it bombed Serbia? As for the Iraq war, well, enough said.

“The annexation of Crimea and the march into Ukraine’s Donbass region should have dispelled the doubts. In the case of Angela Merkel this is what seems to have happened. Not a politician to prefer confrontation over negotiation, the German chancellor has been offered too many lies and broken promises....

“Mr. Putin’s litany of grievances – NATO’s ‘encirclement’ of Russia, a plan to humiliate Moscow, broken international rules – have been heard over and over. Occasionally there is a small truth hidden in the big lie, but the essential storyline never deviates. The west wants to destroy the power and dignity of Russia. So familiar are the charges that the implications are often discounted. Everyone has heard Mr. Putin pledge to roll back the frontiers, but few have really been listening....

“Mr. Putin is not the creation of western perfidy.  Throughout his career, from the office of the mayor of St. Petersburg to the top job in the Kremlin, he has been remarkably constant in his ambitions and in the ruthlessness he will deploy to achieve them.

“A collapsing oil price and the impact of sanctions have made him more dangerous: without oil and gas revenues, his domestic support now rests on his capacity to mobilize nationalist anger against the alleged attempt by NATO and the EU to subjugate ‘mother Russia.’ The west’s options are limited, but the beginning of wisdom is to understand that this is not just about Ukraine.”

“Mr. Obama’s foreign policy has suffered, among other things, from a mismatch between grandiose ends and timid means. In Ukraine he claims Russia is threatening the entire post-Cold War security system, yet he’ll send Kiev little more than meals ready to eat. Mr. Putin has escalated his attacks this winter precisely because he sees the lack of will behind Mr. Obama’s words. Now is the time to change Mr. Putin’s calculus about the cost of conquest by arming Ukraine.”

“(Russian) warmongering is clearly aimed at the West, which is considering new sanctions, including cutting Russia out of the SWIFT banking system, something that could have a devastating impact on the economy. Dmitry Medvedev, Mr. Putin’s prime minister, has warned that this would trigger unrestricted retaliation – and not just economically. The danger is not that Russia declares war on NATO, but that its recklessness could have unintended consequences. There is also a risk that Ukraine, a country of 45m people with a will of its own, despite what Mr. Putin thinks, could be provoked into full-scale war.

“All this may make the situation in some ways even more perilous than in the Cold War. Igor Ivanov, a former foreign minister, has even suggested, one hopes with some exaggeration: ‘In the absence of political dialogue, with mutual mistrusts reaching historical highs, the probability of unintended accidents, including those involving nuclear weapons, is getting more and more real.’”

Regarding the Russian economy, inflation hit 15% in January. This was announced just days after the Central Bank lowered its main lending rate from 17% to 15%, which had many analysts warning this was the wrong thing to do as it was risking further inflation. Everyone seems taken aback by the speed. A month earlier the rate was 11.4%.

“(Russian leaders) face a crisis of their own making....

“Under these circumstances, there is a serious danger of social tension. In Russia today, 110 persons, including Mr. Putin’s cronies, control 35% of the country’s wealth while 50% of adults have total household wealth of $871 or lower....

“If the economic situation in Russia continues to worsen, many Russians may come to see that the Ukrainian model of a peaceful and spontaneous rebellion against a corrupt regime can have relevance for them. It was because of the potential power of the Ukrainian example for Russia that Mr. Putin began the war in Ukraine in the first place.

“The cost of the fighting has been hidden from Russians but, as the death rate climbs, the war may soon become less popular. The Russian authorities state officially that there are no Russian troops fighting in Ukraine but the movement of thousands of troops is impossible to hide and it is similarly impossible to hide soldiers’ funerals....

“The pyramid of power in Russia is very unstable. Capital flight is reaching epic proportions ($63.7 billion in the first quarter of 2014, according to the U.S. State Department) and thousands of Russian officials have made contingency plans to escape with their money to the West.

“Mr. Putin and his cronies will not take aggressive action if they fear that they could as a result lose their hold on power. This is why the time for maximum deterrence on the part of the West is now.”

Lastly, a 2008 study from a Pentagon think tank, obtained by USA TODAY, theorizes that Vladimir Putin has Asperger’s syndrome, “an autistic disorder which affects all of his decisions.”

Putin’s “neurological development was significantly interrupted in infancy,” wrote Brenda Connors, an expert at the U.S. Naval War College in Newport, R.I. Studies of his movements, Connors wrote, reveal “that the Russian President carries a neurological abnormality.”

The report cites autism specialists as backing the study’s assessment. I don’t see it.

Iraq / Syria / ISIS:

ISIS released a video showing Jordanian pilot Moaz al-Kasasbeh being burned alive in a cage. Jordan’s King Abdullah II cut short his visit to the United States and his regime immediately executed two convicted terrorists, including the failed female suicide bomber, in response.

Jordan had sought to secure Lt. Kasasbeh’s release in a swap with the female, but it is believed ISIS killed him a month earlier.

The BBC noted, “For all its multi-billion-dollar intelligence-gathering agencies, its satellites in space, and its highly trained special operations teams, Washington has been unable to mount a successful hostage rescue mission in IS territory.”

IS appeared to string Jordan along as part of an effort to foster doubt among Jordanians over its role in a U.S.-led coalition.

King Abdullah said the response “will be severe.” The Jordanian military vowed an “earth-shattering” response.

Israeli Foreign Minister Avigdor Liberman, in sending his condolences to King Abdullah, said:

“The citizens of Israel, who have been dealing with cruel terror of every kind for 66 years, identify with (Jordan’s) pain and support the harsh and decisive Jordanian response to the event,” after Jordan executed the two terrorists in response.

“King Abdullah must be praised on his quick and powerful response to this despicable terror....

“Terror cannot be defeated with words and declarations, but rather with harsh actions.”

But, sadly, we learned on Friday the American woman being held hostage, Kayla Mueller, had died. ISIS claims a bomb from a Jordanian aircraft had hit a building in which the aid worker was being held, though, strangely, she was the only one in the building. ISIS is lying. She was probably killed earlier like Lt. Kasesbeh.

“Islamic State militants are selling abducted Iraqi children at markets as sex slaves, and killing other youth, including by crucifixion or burying them alive, a United Nations watchdog said on Wednesday.

“Iraqi boys aged under 18 are increasingly being used by the militant group as suicide bombers, bomb makers, informants or human shields to protect facilities against U.S.-led air strikes, the U.N. Committee on the Rights of the Child said.

“ ‘We are really deeply concerned at torture and murder of those children, especially those belonging to minorities, but not only from minorities,’ committee expert Renate Winter told a news briefing.

“Children from the Yazidi sect or Christian communities, but also Shiites and Sunnis, have been victims, she said.

“ ‘We have had reports of children, especially children who are mentally challenged, who have been used as suicide bombers, most probably without them even understanding,’ Winter told Reuters.”

“Why did they do it? What did the Islamic State think it could possibly gain by burning alive a captured Jordanian pilot?

“I wouldn’t underestimate the absence of logic, the sheer depraved thrill of a triumphant cult reveling in its barbarism. But wouldn’t overestimate it either. You don’t overrun much of Syria and Iraq without having deployed keen tactical and strategic reasoning.

“So what’s the objective? To destabilize Jordan by drawing it deeply into the conflict.

“At first glance, this seems to make no sense. The savage execution has mobilized Jordan against the Islamic State and given it solidarity and unity of purpose.

“Yes, for now. But what about six months hence? Solidarity and purpose fade quickly. Think about how post-9/11 American fervor dissipated over the years of inconclusive conflict, yielding the war fatigue of today. Or how the beheading of U.S. journalists galvanized the country against the Islamic State, yet less than five months later, the frustrating nature of that fight is creating divisions at home.

“Jordan is a more vulnerable target because, unlike the U.S., it can be destabilized. For nearly a century Jordan has been a miracle of stability – an artificial geographic creation led by a British-imposed monarchy....

“Compared to Lebanon, Syria and Iraq, similarly created, Jordan is a wonder. But a fragile one. Its front-line troops and special forces are largely Bedouin. The Bedouin are the backbone of the Hashemite monarchy, but they are a minority. Most of the population is non-indigenous Palestinians, to which have now been added 1.3 million Syrian refugees, creating major social and economic strains.

“Most consequential, however, is the Muslim Brotherhood with its strong Jordanian contingent – as well as more radical jihadist elements, some sympathetic to the Islamic State. An estimated 1,500 Jordanians have already joined the Islamic State in Iraq and Syria. Others remain home, ready to rise when the time is right.

“The time is not right today. Jordanian anger is white hot. But the danger is that as the Jordanians attack...they risk a drawn-out engagement that could drain and debilitate the regime, one of the major bulwarks against radicalism in the entire region.”

“The burning alive of a Jordanian pilot reminds us how a few months ago many people, while acknowledging the savagery of ISIS, were also praising the cleverness of its leadership. Today that conclusion appears less persuasive.

“The strength of groups such as ISIS is that when they are expanding, they generate momentum that draws in the undecided in countries that the group seeks to affect or take over. This was the message in the rapid ISIS advances in Syria and Iraq last summer. The group’s successes built on, and profited from, the alienation felt by Iraq’s Sunnis toward a state led by a man openly favoring the Shiite community.

“The success of insurgent movements is often based on their ability to exploit existing social contradictions and cleavages. However, ISIS soon forgot how central this had to be to its strategy, and instead highlighted its sheer brutality. Violence can be a valuable tactic to sow fear among foes; but there is a stage at which it has a contrary effect. It unites previously divided adversaries; it provokes outrage and dread that makes resistance much more bitter; and it may define a group at the expense of the more important image it seeks to project....

“The inhumaneness of ISIS has made its enemies more determined to fight back, as we apparently saw when the group tried to take control of the Deir al-Zor military base last December. Whereas the group had seemed unstoppable in eastern Syria, it was unable to triumph this time around.

“Much the same can be said of the ISIS offensive against Kobani, which proved to be the group’s great blunder. While the town’s strategic significance was limited, its symbolic importance was immense: it was a battle that the U.S., ISIS and the Kurds could not afford to lose. Ultimately, coalition aircraft were able to inflict far heavier losses on ISIS than was sustainable and the group was obliged to withdraw....

“(Another) error of ISIS was to allow itself to be characterized by its violence, when the ultimate aim of its leader, Abu Bakr al-Baghdadi, is to set up a caliphate that will draw Sunnis toward him. Yet aside from psychopathic terror groups, who really wants to rally to such a repulsive, pathological entity whose sustainability is in greater doubt by the day, and whose only attribute is an ability to concoct barbaric ways to kill people?....

“ISIS will remain with us, but it’s fair to say it has created a perfect storm of animosity and opposition, which means its ability to extend its authority has been decisively curtailed. Rather than pick its battles carefully, the group roused myriad enemies simultaneously. Opening new fronts can be useful when on the upswing, but ISIS has done so lately mainly to limit its losses. Baghdadi’s ambitions may have gotten the better of him and now the shortcomings are visible.”

Separately, fighting picked up in and around Damascus this week, with over 70 killed Thursday alone in anti-government attacks, as well as government rocket strikes on rebel-held districts outside the city. Nationwide on Thursday alone, over 240 were killed, mostly by Assad’s forces. There are reports heavy fighting continued into Friday, with more barrel bombs on the civilian population. It was the worst violence since last September.

Back in Iraq, over the past few days two mass graves of Yazidis have been discovered containing 43 bodies; the work of ISIS.

Iran: While the current extension of the interim agreement on Iran’s nuclear program runs through June 30, March 24 is a key deadline by which time the two sides are supposed to have hammered out a broad agreement, final details of which would be resolved by July.

“As the Obama administration pushes to complete a nuclear accord with Iran, numerous members of Congress, former secretaries of state and officials of allied governments are expressing concern about the contours of the emerging deal. Though we have long supported negotiations with Iran as well as the interim agreement the United States and its allies struck with Tehran, we share several of those concerns and believe they deserve more debate now – before negotiators present the world with a fait accompli....

“First, a process that began with the goal of eliminating Iran’s potential to produce nuclear weapons has evolved into a plan to tolerate and restrict that capability.

“Second, in the course of the negotiations, the Obama administration has declined to counter increasingly aggressive efforts by Iran to extend its influence across the Middle East and seems ready to concede Tehran a place as a region power at the expense of Israel and other U.S. allies.

“Finally, the Obama administration is signaling that it will seek to implement any deal it strikes with Iran – including the suspension of sanctions that were originally imposed by Congress – without seeking a vote by either chamber. Instead, an accord that would have far-reaching implications for nuclear proliferation and U.S. national security would be imposed unilaterally by a president with less than two years left in his term....

“Where it once aimed to eliminate Iran’s ability to enrich uranium, the administration now appears ready to accept an infrastructure of thousands of Iranian centrifuges. It says its goal is to limit and monitor that industrial base so that Iran could not produce the material for a warhead in less than a year. As several senators pointed out during the hearing, the prospective deal would leave Iran as a nuclear threshold state....

“A related problem is whether Iran could be prevented from cheating on any arrangement and acquiring a bomb by stealth....

“(And regarding Iran’s activities in the region), Mr. Obama appears ready to concede Iran a place in Iraq, Syria, Lebanon and beyond – a policy that is viewed with alarm by Israel, Saudi Arabia, Jordan and Turkey, among others....

“While presidents initiate U.S. foreign policies, it is vital that major shifts win the support of Congress and the country; otherwise, they will be unsustainable.”

Yet, again, the administration has no plans to seek it.

“Such a unilateral course by Mr. Obama would alienate even his strongest congressional supporters. It would mean that a deal with Iran could be reversed within months of its completion by the next president. It’s hard to escape the conclusion that Mr. Obama wishes to avoid congressional review because he suspects a bipartisan majority would oppose the deal he is prepared to make. If so, the right response to the questions now being raised is to seek better terms from Iran – or convince the doubters that a deal that blesses and preserves Iran’s nuclear potential is better than the alternatives.”

Meanwhile, hardliners in Iran are far from keen about the deal that is taking shape. President Rouhani is playing the part of Obama, while opponents believe Iran is giving up too much.

But the one voice that really matters, that of Ayatollah Khamenei, will be heard if and when an agreement is reached. Khamenei has publicly supported the negotiations and restrained the hardliners, but that in no way means he fully supports the efforts of Rouhani and his chief nuclear negotiator, Zarif. In the past Khamenei has said Iran should not give up any of its centrifuges.

Israel: Editorial / Washington Post

“The Post’s William Booth witnessed a chilling event in the Gaza Strip on Thursday: thousands of youths lined up ‘in crisp military fashion’ for a ‘graduation ceremony’ after a week of training by the armed wing of the Hamas movement. Even as thousands of Gazan families struggle to survive amid the rubble of last summer’s war with Israel, and children are reported to be dying from exposure, Hamas is once again investing its resources in preparing for another unwinnable battle....

“An Israeli official told Mr. Booth that Gazan workshops were ‘assembling new rockets as fast as they can’ and that the strip’s militias would be fully rearmed and trained within months. Sadly, that is likely to be the next time the world pays heed to Gaza – when war with Israel again erupts.”

Yemen: The Houthis announced a full takeover of the country on Friday and parliament was dissolved, a move that finalizes the Shiite rebels’ months-long power grab. This is not good for the U.S. and its counterterrorism efforts against al-Qaeda.

There was no word on the fate of former President Hadi, a U.S. ally, who has been under house arrest since being forced to resign in January. Score another victory for Iran....and another defeat for Barack Obama.

Egypt: An Egyptian court sentenced 183 people to death over the killing of 15 policemen in violence during the time of the 2013 ouster of Islamist President Morsi.

Pakistan: This received little press but a Sunni terrorist group claimed responsibility for a suicide bomb attack on a Shia mosque that killed more than 60, the largest such attack on Pakistan’s religious minorities since May 2010.

Japan: The nation was saddened and outraged by news journalist Kenji Goto was beheaded by ISIS.

Goto’s mother told reporters: “Kenji has died, and my heart is broken. Facing such a tragic death, I’m just speechless.”

Prime Minister Abe said, “Japan will never give in to terrorism. We will further expand our humanitarian assistance in the Middle East in areas such as food and medical care.”

China: Shares in a large bank, Minsheng, fell sharply after it wsa reported the president of the institution was taken away as part of China’s anti-graft investigation. Minsheng, founded in 1996, is the country’s first private lender. Among its major investors is an insurance firm, Anbang, which acquired New York’s Waldorf Astoria hotel. The Committee on Foreign Investment in the United States (CFIUS) approved the deal, coincidentally, on Monday.

A new study by Greenpeace and Peking University has found that air pollution kills more people in China than smoking in many cities on the mainland. The scale of the problem is even worse because cities in the most polluted province, Hebei, were not included in the survey.

Last year, a study in the “The Lancet” medical journal said air pollution was responsible for 1.2 million premature deaths in 2010 alone.

Pro-democracy protesters returned to the streets of Hong Kong for the first time since last year, though the size of the crowds was considerably less. Many shop owners and retailers have become antagonistic towards the demonstrators.

Nigeria: Fighting has been fierce on many fronts in Nigeria and Cameroon as Boko Haram claimed it killed 70 people in an attack on a Cameroonian town on the border with Nigeria, while a day earlier, Chadian troops, part of a regional force put together to confront Boko Haram, said it killed more than 200 militants in another town near the border.

Australia: Prime Minster Tony Abbott is facing a leadership challenge from MPs. His party lost recent elections in Queensland and he was criticized for his decision on Australia Day to award a knighthood to Prince Philip, the Duke of Edinburgh, which doesn’t seem like much to an outsider but it was proof, according to his critics, of his disconnection with the people. A key Liberal Party meeting will be held this coming Tuesday...at least that is my understanding.

Argentina: This nation continues to be rocked by the death of prosecutor Alberto Nisman, who was investigating the 1994 bombing of a Jewish center in Buenos Aires. A draft of a warrant for the arrest of President Cristina Fernandez de Kirchner was found...found in the garbage at Mr. Nisman’s apartment. The 26-page document also requested the arrest of the foreign minister. Both have denied they tried to reach a secret deal with Iran to lift international arrest warrants for Iranian officials wanted in connection with the bombing.

Nisman was found dead at his home of a gunshot wound to the head, a day before he was scheduled to provide details before Congress about his accusations against the president.

So Fernandez was traveling in China last week when she apparently disparaged the Chinese accent in Spanish on her Twitter account by making a joke in which she substituted r’s for l’s.

Fernandez wrote of an event she was attending for Chinese and Argentine businessmen: “Perhaps they are all from La Campola, and they only came for lice and petloleum,” referring to a pro-government youth group. [Financial Times]

Brazil: Talk about a region engulfed in scandal, in Brazil, it’s about energy giant Petrobras, which this week saw the CEO and five other executives resign amidst a massive corruption investigation. Petrol stations were allegedly laundering money, with some funds finding their way into the coffers of President Dilma Rousseff’s party.

Venezuela: President Nicolas Maduro’s administration seized over 30 stores in a supermarket chain, accusing the company of hoarding goods in a plot to destabilize the government; another step in Maduro’s crackdown on the private sector as the economy literally implodes, with hours-long lines just to get basics.

Random Musings

“President Obama has never been one to go easy on America.

“As a new president, he dismissed the idea of American exceptionalism, noting that Greeks think their country is special, too. He labeled the Bush-era interrogation practices, euphemistically called ‘harsh’ for years, as torture. America, he has suggested, has much to answer given its history in Latin America and the Middle East.

“His latest challenge came Thursday at the National Prayer Breakfast. At a time of global anxiety over Islamist terrorism, Obama noted pointedly that his fellow Christians, who make up a vast majority of Americans, should perhaps not be the ones who cast the first stone.

“ ‘Humanity has been grappling with these questions throughout human history,’ he told the group, speaking of the tension between the compassionate and murderous acts religion can inspire. ‘And lest we get on our high horse and think this is unique to some other place, remember that during the Crusades and the Inquisition, people committed terrible deeds in the name of Christ. In our home country, slavery and Jim Crow all too often was justified in the name of Christ.’

“Some Republicans were outraged. ‘The president’s comments this morning at the prayer breakfast are the most offensive I’ve ever heard a president make in my lifetime,’ said former Virginia governor Jim Gilmore (R). He has offended every believing Christian in the United States. This goes further to the point that Mr. Obama does not believe in America or the values we all share.’....

“ ‘There is a tendency in us, a sinful tendency, that can pervert and distort our faith,’ he said at the breakfast.

“But many critics believe that the president needs to focus more on enemies of the United States.”

The president’s comments were disgraceful and came a day after he met with Muslim leaders at the White House, who, get this, “feel their community has faced unfair scrutiny in the wake of terrorist attacks overseas.” [Eilperin]

Last fall I cited a Pew Research Center survey that found half of Americans think the Islamic religion is more likely than others to encourage violence, while 39 percent said it does not.

“One reason politics is so interesting is you can’t possibly know which issues are going to flare up out of nowhere, infect the national conversation and reveal uncomfortable things about politicians you like, politicians you find intriguing – and politicians you fear.

“So it was this week for Chris Christie and Rand Paul on an issue that shouldn’t be an issue: vaccination.

“Traveling in London, Christie* responded to a simple question with an answer carefully designed to serve as a dodge – an answer politicians have been using for years to inoculate themselves from getting swarmed by legions of highly passionate, hysterical, irrational and irresponsible voters.

“Christie said he had made sure his children were vaccinated, which should demonstrate that he feels vaccines are an ‘important part of making sure we protect their health and the public health.’

“But some innate politician’s instinct led him to add this: ‘I also understand that parents need to have some measure of choice in things as well. So that’s the balance that the government has to decide.’

“For these words – which have the same cadence as statements made by Barack Obama and Hillary Clinton in 2008 – Christie found himself the focal point of a blizzard of outrage for suggesting immunization represented a gray moral area requiring a balance between private parental rights and the public weal.

“In 2008, Obama and Clinton (and John McCain) hemmed and hawed because of a national outbreak of illiterate hysteria about how vaccines supposedly generate autism....

“The ‘vaccines cause autism’ nonsense was led by leftist icons like Robert Kennedy Jr. and by medical con artists trumpeting fake studies offering support to the tort bar.

“It turned out that many of the nation’s more affluent leftist communities fell prey to the notion that evil was being visited upon them by monstrous Big Pharma and so they were not only within their rights to opt out but would be doing a deeply moral thing as well.

“The result: the re-emergence of diseases like measles long thought nearly snuffed out....

“(Your) supposed ‘right’ not to vaccinate your child actually impinges on my child’s right to the promise in the Declaration of Independence of ‘life, liberty and the pursuit of happiness.’

“If my infant hasn’t yet been immunized and gets measles or mumps or whooping cough from your toddler, whom you chose not to immunize, he has been placed at unnecessary risk of loss of life.

“You’d only choose not to immunize your child because you thought the risk to your child outweighed the possible good.

“But in doing so, you’d be committing an act of thievery of a kind – stealing the herd immunity of others to secure the health of your child without doing a thing to extend it to others.”

As for Rand Paul, he made the statement, “For the most part, [vaccination] ought to be voluntary,” which Podhoretz notes “has to be considered one of the most irresponsible remarks ever uttered by a major American politician.”

*Christie was once again a total ass. He had agreed to hold two question-and-answer sessions with reporters his last day in London but because he blew it on Sunday, he refused to do so.

“Is there something you don’t understand about, ‘no questions?’” Christie bristled, according to an account in the Star-Ledger, when he was asked if the threat of ISIS attacks in the U.S. and Britain came up during discussions with British officials.

“Flashback: Galileo is under house arrest pondering the unyielding ignorance of The Church for refusing to consider his heliocentric proposition that the Earth circled the sun.

“We find this historical anecdote preposterous today, but people were persecuted for lesser heresies in Galileo’s time. Though we are now centuries removed from such dim-wittery, we find ourselves in a not-dissimilar pickle.

“After decades free of many crippling and deadly diseases thanks to the miracle of vaccines, some people are skeptical. Parents fearful of side effects, often on account of anecdotal evidence or discredited studies, are reluctant to vaccinate their children....

“On the bright side, the far left and the far right finally have found common ground. They’d rather let their children risk illness – and their country an epidemic – than contaminate their offspring’s pristine bodies with antibodies.

“One wonders what public tortures Jonas Salk might have encountered had he presented his polio vaccine today rather than in the 1950s. One crucial difference is that polio left visual reminders of its assault on the human body. The 1952 epidemic affected nearly 58,000 people, more than 3,100 of whom died and some 21,000 were left disabled.

“Most Americans under the age of 50, including doctors, have never seen measles. Now, after decades of being a virtually measles-free nation, we have 100 cases spread across at least 14 states [Ed. now 110 and 15] and the potential for more as stubborn purists resist common sense. Science and experience overwhelmingly support vaccines, and the single study to the contrary, suggesting a connection to autism, has been thoroughly discredited.”

“According to the Centers for Disease Control and Prevention, ‘Measles is so contagious that if one person has it, 90% of the people close to that person who are not immune will also become infected.’ This is why states have passed laws mandating vaccination for children attending public schools (although 17 states, including California, scene of the outbreak at Disneyland, have waivers for personal beliefs, and 48 have waivers for religious beliefs).

“Both (Chris Christie and Rand Paul) seem to be suggesting that it is fine for parents to avoid vaccinations for their children. But is this really a matter of individual rights? Liberty does not confer the right to endanger others – whether at a school or Disneyland or anywhere else.”

“Government doesn’t ‘force’ parents to vaccinate children. The states impose penalties (such as barring attendance in public schools) on those who pose a risk to public health by refusing vaccinations against infectious disease. This strikes us as a legitimate use of state ‘police powers’ under the Constitution. It is also a reasonable and small sacrifice of liberty to prevent the potentially fatal infection of unsuspecting infants at Disneyland....

“The not-so-great measles vaccine debate of 2015 is one of those events that makes us wonder if there is such a thing as human progress. But then we live in America, so we know there’s hope.”

--The latest Des Moines Register/Bloomberg poll of likely Republican caucus-goers had Wisconsin Gov. Scott Walker leading at 15%, followed by Sen. Rand Paul, 14%, and former Gov. Mike Huckabee, 10%. Mitt Romney was at 13% but this was before he announced he wasn’t running. Ben Carson is at 9%. Jeb Bush polled 8%. Chris Christie took just 4%.

--As for Mitt Romney’s departure from a race he had just announced he was thinking of entering, Dan Balz and Philip Rucker of the Washington Post noted some of the following:

“The past three weeks reminded Romney of just how grueling and potentially damaging another nomination contest could be, confidants said. From the time he announced that he was seriously considering another campaign, he became the target of criticism from inside the GOP, from Democrats and from others.

“ ‘It’s been all trained on him, and I think that would continue to be the case for the next year,’ said Tagg Romney, the former governor’s eldest son, in an interview. ‘His hope is that someone else can come out and catch fire.’

“Another Mitt Romney adviser said, ‘He went into it intellectually knowing he would have to earn it again – not that he’d forgotten it. But memory had blurred some of those sharp edges and it came into sharp relief.’”

--Back to the Des Moines Register/Bloomberg poll, on the Democratic side, potential caucus-goers for the donkeys have Hillary Clinton the first choice for 56%, 40 points ahead of Sen. Elizabeth Warren who polled 16%.

--Last Friday I was watching “NBC Nightly News” with Brian Williams and he had this story of a long friendship he had had with an Iraq War veteran who had recently retired; Williams taking him to a New York Rangers game where the team honored the soldier for his service and his coming to Williams’ aid when the latter’s helicopter was shot down in 2003.

Well that’s a nice story, I mused, though I also thought, I don’t remember that one. I mean my whole world the last 16 years is the news, and I’m a long-time NBC Nightly News viewer.

So it turns out some soldiers disputed Williams’ story about riding in a helicopter that took fire and on Wednesday, Williams recanted. For years he had been running with this story, including at least one appearance on “The Late Show” with David Letterman, but it turns out his Chinook was flying an hour behind the helicopter that did get hit.

Members of the 159th Aviation Regiment who rode in the helicopter that got hit, as well as a flight engineer riding in Williams’ chopper, pointed out the error to Stars and Stripes.

A flight engineer on the helicopter that did take fire, commented on the discrepancy on the “Nightly News” Facebook page.

“Sorry dude, I don’t remember you being on my aircraft,” he said. “I do remember you walking up about an hour after we had landed to ask me what had happened. Then I remember you guys taking back off in a different flight of Chinooks from another unit and heading to Kuwait to report your ‘war story’ to the Nightly News. The whole time we were still stuck in Iraq trying to repair the aircraft and pulling our own Security.”

Williams blamed “constant viewing of the video showing us inspecting the impact area” for distorting his memory of the incident.

“You are absolutely right and I was wrong,” Williams wrote in a Facebook comment on the video. “In fact, I spent much of the weekend thinking I’d gone crazy.”

This is a big deal. I mean in his Friday report, Williams said in part: “Our traveling NBC News team was rescued, surrounded and kept alive by an armor-mechanized platoon from the U.S. Army 3rd Infantry.”

This comes as NBC has been running an ad campaign for Williams’ 10th anniversary in the anchor chair, making him out to be his generation’s Walter Cronkite, in essence, and then he lies like this.

Williams concludes his Facebook apology: “I was and remain a civilian journalist covering the stories of those who volunteered for duty. This was simply an attempt to thank Tim, our military and Veterans everywhere – those who have served while I did not.”

Williams told Stars & Stripes in an interview: “I would not have chosen to make this mistake. I don’t know what screwed up in my mind that caused me to conflate one aircraft with another.”

“NBC Nightly News anchor Brian Williams dealt journalists everywhere a stunning blow Wednesday when he apologized for telling millions a tall tale about how he once rode in a military helicopter that got shot down by enemy fire in Iraq.

“To be clear, Williams...did not admit that he had lied, he simply apologized for making a ‘mistake.’...

“We’re talking about a rocket propelled grenade slamming into the side of a helicopter as it flies over a battlefield. So what if it was 12 years ago? I can remember getting hit in the head with a rock by a kid in third grade....

“As journalists, the truth is the only currency any of us have and Williams’ mea culpa was a pile of funny money.”

A report in the New York Post on Friday said Williams also lied about events in covering Hurricane Katrina, such as his tale in a 2006 interview that he saw dead bodies float past his window in the French Quarter, which was not flooded. He also talked of his hotel being “overrun with gangs, I was rescued in the stairwell of a five-star hotel in New Orleans by a young police officer. We are friends to this day.” This doesn’t appear to have been true either.

The New York Post also reports that Tom Brokaw has been calling for Williams to be fired, according to an NBC source, though Brokaw disputed this, slightly, saying it was up to NBC brass.

“When a top news anchor is caught in a big-time fib, audiences are right to distrust him. When his subsequent apology is almost as dishonest as the original fib, his network is well-justified in sacking him.

“And if the fib is about being in a helicopter hit by an enemy’s rocket-propelled grenade...well...let’s just say he should avoid bars where he might run into Vets who might not appreciate false claims about combat....

“If Brian Williams’ ‘apology’ raises as many doubts as what he was apologizing for, how can anyone trust the news he delivers?”

--In a Bloomberg Politics / Des Moines Register Iowa Poll, 53% of likely Republican caucus participants and 81% of Democrats said they believe Islam is inherently peaceful. Only 13% of likely Democratic caucus-goers said they view Islam as inherently violent, compared with 39% of likely Republican participants.

--I saw the following by Christine Rousselle in Townhall.com. A poll by Fusion dubbed the “Massive Millennial Poll” found 77% of those aged 18-34 were unable to name one of their home state’s senators. Only 10% of African-American millennials were able to name a senator from their home state.

--The publisher, Harper, announced it was publishing a second novel by reclusive Harper Lee, author of the bestselling novel “To Kill a Mockingbird,” sometime this summer.

The novel, titled “Go Set a Watchman,” was completed in the mid-1950s and is about Scout Finch, heroine of “To Kill a Mockingbird,” being all grown up and looking back on her childhood.

In a statement released by Harper, Ms. Lee, 88, said she wrote “Go Set a Watchman” first, but was asked by an editor to rework it and the result was “To Kill a Mockingbird,” which went on to sell 40 million copies globally. [The movie version is certainly in my top five all time.]

So we all know Harper Lee never published another book and in the statement the other day, she thought her first work had been lost or destroyed.

OK...this is the story we all heard on Monday and Tuesday.

But then on Wednesday, I’m reading this piece by Jay Reeves of the Associated Press and you can’t help but wonder what the heck is going on. To wit:

“Hometown friends and fans of author Harper Lee are struggling to reconcile a publisher’s sensational announcement – that her decades-old manuscript for a sequel had been rediscovered and will be released – with the image of the elderly writer at her sister’s recent funeral.

“Grieving, ill and seated in a wheelchair, Lee talked loudly to herself at awkward times during the service for her beloved older sister and attorney, Alice, according to two family friends who attended the November service. Lee mumbled in a manner that shocked some in attendance, said one of the friends.

“Both spoke on condition that they not be identified – one for fear of upsetting those handling the author’s affairs, the other not wanting to upset the family.

“That scene seemed at odds with Tuesday’s announcement by an arm of HarperCollins Publishers that included an eloquent statement attributed to Lee, 88, who spends her days in an assisted living center not far from where she grew up in this south Alabama town, the inspiration for “Mockingbird.”....

“Townspeople say it is common knowledge that Lee is deaf, blind and in poor health – she had a stroke some years ago.

“But publisher Jonathan Burnham said in a telephone interview Tuesday that he was ‘completely confident’ she was fully involved in the decision to release the book.”

Burnham acknowledged, however, that he had had no direct contact with Lee for eight years and said he “relied in part on reports from literary agent Andrew Nurnberg, who had found Lee ‘feisty’ and enthusiastic about the new book.” [Reeves]

Nurnberg released a statement on Wednesday that read in part:

“There will inevitably be speculation regarding Harper Lee... She was genuinely surprised at the discovery of the manuscript but delighted by the suggestion to publish what she considers to be the ‘parent’ to ‘Mockingbird.’ I met with her last autumn and again over two days in January; she was in great spirits and increasingly excited at the prospect of this novel finally seeing the light of day.”

One more...a local restaurateur who delivered soup to the Lee sisters every Thursday for years said he quit taking soup to them a couple of years ago “after receiving a note from Tonja Carter, an attorney who worked with Alice Lee, asking the man to stay away because of the poor condition of the author.”

--We note the passing of the great British historian Martin Gilbert, 78. I have three of his books myself on World Wars I and II, as well as a biography of Winston Churchill, Gilbert being the official biographer of Sir Winston.

I love this part from his obituary in the New York Times:

“(Gilbert) was renowned for his prodigious powers of archival research, and his books were correspondingly known for including seemingly everything he unearthed in every archive he visited.”

A man after my own heart, though critics said this could work against “readability of the finished product.”

Gilbert once told The Jerusalem Post in 1996, “I’m not a theoretical historian, seeking to guide the reader to a general conclusion. I’m quite content to be a narrative chronicler, a slave of the facts.”

“E-cigarettes generate toxic chemicals similar to those found in tobacco and may harm the lungs and immune system, new research suggests.

“The findings, from a study of mice, indicate that ‘vaping’ is far from being a safe alternative to smoking tobacco.

“In the experiments, mice exposed to e-cigarette fumes suffered mild damage to their lungs and became far more susceptible to respiratory infections....

“Scientists also found that e-cigarette vapor contained ‘free radical’ toxins similar to those found in cigarette smoke and air pollution.”

The research was headed up by scientists at Johns Hopkins University and was published in the online journal “Public Library of Science ONE.”

So much for the e-cigarette craze. Plus we learned the other day how dangerous they are in checked luggage.

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

Gold closed at $1234...down $44 on the week
Oil $51.69

Returns for the week 2/2-2/6

Dow Jones +3.8% [17824]
S&P 500 +3.0% [2055]
S&P MidCap +2.9%
Russell 2000 +3.4%
Nasdaq +2.3% [4744]

Returns for the period 1/1/15-2/6/15

Dow Jones +0.01% [single point]
S&P 500 -0.2%
S&P MidCap +1.7%
Russell 2000 +0.1%
Nasdaq +0.2%

Bulls 49.0
Bears 16.3 [Source: Investors Intelligence]

Have a great week. I appreciate your support.

Brian Trumbore

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