Week in Review

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Week in Review

02/14/2015

For the week 2/9-2/13

Edition 827

Washington, Wall Street and a Foreign Policy in Flames

President Obama said he was heartbroken by the death of American hostage Kayla Mueller, who had been held by ISIS for more than a year. Not paying ransom is “as tough as anything I do,” Obama added, noting that Mueller was one of the hostages the United States sought in a failed rescue attempt last summer.

“The more people learn about her,” Obama said in an interview with BuzzFeed News, “the more they appreciate what she stood for – and how it stands in contrast with the barbaric organization that held her captive.”

Critics have said the administration hasn’t done all it could to secure hostages. The president replied, “We devoted enormous resources and always devote enormous resources to freeing captives or hostages anywhere in the world.”

Obama reiterated that the U.S. didn’t want to do anything to make Americans even greater targets for future kidnappings.

Watching Kayla Mueller’s friends and relatives speak about this awesome woman the day we learned she had died, like the president I too was heartbroken. I was also furious.

Historians will one day examine President Obama’s immense failure in handling the Syrian crisis in its early days and conclude it led directly to the deaths of at least 200,000 innocents, and counting, along with a shattered country and region.

So one more time I can’t help but take you back to what I wrote in this column, Sept. 8, 2012...2 ½ years ago.

“Syria: The killing continues, now estimated at anywhere from 23,000 to 26,000 in the civil war, with the UN pegging the official refugee figure at over 230,000 (the unofficial number far higher), which is destabilizing to neighbors Turkey, Iraq, Jordan and Lebanon, while there is a true humanitarian catastrophe developing in Syria itself as 1.2 million have been displaced and 2.5 million are in dire need of aid. I’ll just say this in terms of the political debate taking place in the U.S. One of the Democrats’ campaign slogans is ‘Bin Laden is dead and GM is alive.’ It needs to be pointed out that at least 20,000 of the Syrian deaths could have been prevented if the White House had taken coordinated humanitarian action with Turkey early on. Not a military invasion but just the establishment of safe havens and the Obama administration would have significantly reduced the human toll.

“It was the same situation in 2009 when President Obama missed an opportunity in Iran to support the Greens, but instead when the United States just sat back, the mullahs crushed the uprising and now look where we are there.

“It’s pathetic. It’s what infuriates me about how the president is getting a pass on his foreign policy.”

Long before then I was calling for the U.S. to work with Turkey on a no-fly zone. And now the president is heartbroken. Some of us have been heartbroken for years, as well as sickened by the unfolding tragedy that screamed out for leadership.

But like I’ve been writing ever since September 2012, it’s over. It’s been over. We are reaping the whirlwind. The world is forever changed, for worse.

“On Tuesday U.S. officials confirmed the death of Kayla Jean Mueller...in a statement President Obama blamed ‘unconscionable evil’ and promised to ‘find and bring to justice the terrorists who are responsible for Kayla’s captivity and death.’

“In a different context, however, the Commander in Chief was more equivocal. In an interview with the liberal Vox.com website, Mr. Obama explained that while terrorism is merely one danger among many such as climate change or cybersecurity, ‘It is entirely legitimate for the American people to be deeply concerned when you’ve got a bunch of violent, vicious zealots who behead people or randomly shoot a bunch of folks in a deli in Paris.’

“His choice of words was strange, given that the Charlie Hebdo assassins were explicit about their ideological and anti-Semitic reasons for targeting a kosher grocery. White House press secretary Josh Earnest on Tuesday didn’t help with his explanation: ‘The adverb that the President chose was used to indicate that the individuals who were killed in that terrible tragic incident were killed not because of who they are, but because of where they randomly happened to be.’

“The State Department’s Jen Psaki also refused to explore the motivations of the killers, adding that ‘there were not all victims of one background or one nationality.’ All the victims were Jewish.

“This is the confusion that arises among those who are unwilling to confront the character of America’s enemies.”

“His secretary of defense says, ‘The world is exploding all over.’ His attorney general says that the threat of terror ‘keeps me up at night.’ The world bears them out. On Tuesday, American hostage Kayla Mueller is confirmed dead. On Wednesday, the U.S. evacuates its embassy in Yemen, a country cited by President Obama last September as an American success in fighting terrorism.

“Yet Obama’s reaction to, shall we say, turmoil abroad has been one of alarming lassitude and passivity.

“Not to worry, says his national security adviser: This is not World War II. As if one should be reassured because the current chaos has yet to achieve the level of the most devastating conflict in human history. Indeed, insists the president, the real source of our metastasizing anxiety is...the news media.

“Russia pushes deep into eastern Ukraine. The Islamic State burns to death a Jordanian pilot. Iran extends its hegemony over four Arab capitals – Beirut, Damascus, Baghdad and now Sanaa.

“And America watches. Obama calls the policy ‘strategic patience.’ That’s a synonym for ‘inaction,’ made to sound profoundly ‘strategic.’....

“And whereby both the White House and State Department spend much of a day insisting that the attack on the kosher grocery in Paris had nothing to do with Jews. It was just, as the president said, someone ‘randomly shoot[ing] a bunch of folks in a deli.’ (By the end of the day, the administration backed off this idiocy. By tweet.)

“This passivity...is, above all, rooted in Obama’s deep belief that we – America, Christians, the West – lack the moral authority to engage, to project, i.e., to lead.

“Before we condemn the atrocities of others, intoned Obama at the National Prayer Breakfast, we shouldn’t ‘get on our high horse.’ We should acknowledge having authored the Crusades, the Inquisition, slavery, etc. ‘in the name of Christ.’

“In a rare rhetorical feat, Obama managed to combine the banal and the repulsive....

“And in deeply bad taste. A coalition POW is burned alive and the reaction of the alliance leader barely 48 hours later is essentially: ‘Hey, but what about Joan of Arc?’....

“If, during the very week Islamic supremacists achieve ‘peak barbarism’ with the immolation of a helpless prisoner, you cannot take them on without apologizing for sins committed a thousand years ago, you have prepared the ground for strategic paralysis.

Turning to the U.S. economy, it was a light week for economic releases with a report on January retail sales coming in worse than expected, -0.8%, 0-9.% ex-autos, though +0.2% ex-autos and gas, which was still less than economists expected.

So with this big savings at the pump, a nationwide average price for regular of $2.23 on Friday, according to AAA, vs. $3.68 in June, after edging up recently from the low of $2.03, why aren’t consumers spending more?

A story by Paul Davidson in Friday’s USA TODAY found, “Merchants selling small-ticket items, such as groceries, clothing and meals, are benefiting most from the gas bonanza because the savings are modest....

“Many consumers are banking the extra cash. About 45% of motorists said cheap gasoline has had no impact on their financial decisions, and nearly a third said they were saving the windfall or using it to reduce debt, according to a Conference Board survey conducted Jan. 29-31. Just 20% said they were spending more on other things.

“Nearly three-quarters of those surveyed by the Conference Board said they expect gas prices to increase by summer.

“ ‘People are still not feeling fully confident that this is for real,’ (Wells Fargo economist Eugenio) Aleman says.”

As for the price of oil these days, it’s been volatile and settled Friday for a second consecutive week back over $50 at $52.78.

There are all kinds of crosscurrents, with 28% fewer wells drilled in the U.S. in January than June, though the amount of oil pumped is only 8.5% less, according to one survey, while the Energy Information Agency said this week the U.S. pumped about 9.2 million barrels per day in January, still an increase over the prior month, but the increase is at a slower rate of growth. It’s all about the efficiencies of shale drilling over conventional rigs. It’s the latter rigs that are being laid down, which is why production can rise even as Baker Hughes issues its weekly report on Friday that showed a 10th consecutive decline in the rig count. But eventually this has to affect production, which given a steady economy is also good for oil prices. At least that’s a reason for the recent rally.

In its annual report, the International Energy Agency said the supply buildup we’ve been experiencing around the world will grind to a halt by July; predicting non-OPEC oil supply will grow at an annual average of 570,000 b/d to 2020, significantly lower than the 1m b/d pace of the past five years and record growth of 1.9m b/d in 2014.

“Total oil growth from the U.S. and Canada will slow to about 500,000 b/d per year through to 2020 compared with average growth of 1.1m b/d in the last four years, but it will remain the backbone of non-OPEC supply growth.” [Anjli Raval / Financial Times]

The IEA also added lower oil prices will not “provide as strong a boon to oil demand growth as might be expected,” in lowering its demand growth forecasts to an annual 1.2 percent over the next six years to around 99.1m b/d by 2020. The pre-recession growth rate was 1.9 percent from 2001-07.

Then you have Iraq, Iran, Saudi Arabia and other OPEC players cutting prices for their March crude deliveries to Asia in the battle to maintain market share.

[Just one aside concerning Russia. Due to sanctions, Russia, says the IEA, faces a “perfect storm of collapsing prices, international sanctions and currency depreciation,” and will likely emerge as the oil industry’s “top loser,” from cheap oil. The IEA is forecasting Russia will produce only 10.4m b/d by 2020, vs. 10.9m b/d last year.]

Finally, Citigroup’s Edward Morse, head of commodity research, said the recent surge in prices is a “head-fake” and that oil could plunge anew to as low as $20 a barrel. The market is oversupplied and storage tanks are topping out, says he.

As for the Federal Reserve and interest rates, Chair Janet Yellen is giving her semiannual monetary-policy testimony to Congress on Feb. 24-25, and then you have the Fed’s two-day FOMC meeting March 17-18, at which time many believe the Fed will change the language to strongly hint at a rate hike in perhaps June.

Europe and Asia

We’ll start out with some good news for the eurozone for once. A flash estimate for fourth quarter GDP, as put out by Eurostat, the official statistics arm of the European Union, has growth up 0.3%, quarter on quarter, among the EA18 and by 0.4% in the EU28, both better than expected.

For the eurozone, the annualized rate of growth was 1.4%, solid compared to recent history.

Germany led the way, up 0.7%, a 2.7% annualized pace, ditto Spain (0.7%, 2.7%), though France was up only 0.1% for Q4, 0.3% ann., and Italy was unchanged on both.

[For 2014, Germany had growth of 1.6%, France 0.4%. Italy contracted 0.4%, though the Bank of Italy is forecasting 0.5% growth for 2015, 1.5% in 2016.]

Greece came in with a negative number, -0.2%, or -0.7% annualized, which isn’t good.

Separately, December industrial production was flat compared with November, down 0.2% for the euro area vs. December 2013.

And in Spain, home sales rose 2.2% in 2014, the first annual increase since 2010. House prices keep falling but in January were down 2.7% from a year earlier, the smallest decline since 2008.

That said home prices in Spain are still down 40% from the peak in 2007.

As for the Greek crisis and negotiations over its bailout terms and humongous debt, once again the issue has been kicked down the road, to Monday, at least, when it is now assumed Greece will be given some kind of extension that enables it to meet its shorter-term obligations while Euro finance ministers and the European Central Bank get to examine the reforms proposed by new Greek Prime Minister Alexis Tsipras.

Last Sunday, speaking before Parliament for the first time as prime minister, Tsipras said “This government isn’t justified in seeking an extension... The bailout has failed.” He said Greece would “pursue a new agreement with our partners, a bridge agreement until June” that would provide a breathing space to negotiate “a stable and balanced arrangement...that would not condemn us to further austerity.”

But later he softened his tone, as did his finance minister.

Greece is running out of cash and while withdrawals from Greek banks haven’t surged in the past week, they are still at an amount that is more than cause for concern, like 200m-300m euro a day, according to the Financial Times. The ECB extended another 5bn euro in emergency loans to the banks to ensure proper funding.

A big issue, as the government announced on Thursday, is that tax revenues were 20% below target, a shortfall of about 1bn euro – heightening concerns the country won’t be able to meet 4.1bn euro of debt repayments in the next six weeks unless it accepts an extension of its bailout at the end of the month, which means it has to accept the bailout terms that Tsipras and his fellow Socialists campaigned against. [A huge political problem for a government a few weeks old.]

Regarding tax collection, the new government had abolished the property tax, but said the final two installments due in January and February still had to be paid. [Greeks being Greeks, they choose not to.]

But the key player in all this remains Germany and as I go to post, the two sides seem to be showing a willingness to compromise on items such as the size of Greece’s required budget surplus and conditions to sell off state assets, which Tsipras has said in the past were being sold off at far below fair value just to raise cash.

Greece is apparently willing to hold to two-thirds of its bailout promises, focusing on improving tax collection and fighting corruption to win German backing. German Chancellor Angela Merkel cited Europe’s ability to compromise as one of its strengths.

But it’s still touch and go. Negotiations with Euro finance ministers, particularly between Germany’s Wolfgang Schaeuble and his Greek counterpart, Yanis Varoufakis, have been heated. Earlier in the week, Varoufakis told Parliament the country needs to move away from its “disastrous bailout agreement.” Schaeuble responded he wouldn’t give Greece more time. 

Well you put all the above together, guarded optimism on Greece, a better GDP report for the eurozone and EU as a whole, and a cease-fire in Ukraine (cough cough), and investors have chosen to be optimistic, taking European stocks to fresh seven-year highs on Friday.

Turning to China, consumer prices rose at an annualized pace of just 0.8% in January, a five-year low, while factory-gate/producer prices, fell 4.3% last month, year on year, also the lowest since 2009. [Food prices, critical here, were up only 1.1% in January, a good thing.]

Exports fell a surprising 3.3% in January, while imports cratered 19.9%, yoy. Exports were expected to rise 6.3%. But it’s January/February, remember, time for the Lunar New Year holiday, which distorts numbers. Last year the Lunar New Year fell in January and this year it’s February so we’ll see how things shake out in four weeks and take an average for the two months.

Bottom line, investors and business owners in China are calling for more stimulus, though there was a report on Friday that new credit had rebounded in January.

Street Bytes

--Stocks rallied a second straight week, ostensibly on Europe, rightly or wrongly. We do have to celebrate a new record high on the S&P 500, up 2.0% this week to 2096, its first new high since Dec. 29 and already up 5.1% in February after a 3.1% decline in January.

The Dow Jones gained 1.1% to 18019, 34 points shy of its record close, and Nasdaq surged 3.1% on the heels of Apple and Cisco Systems and at 4893 is now just 155 points shy of its 3/10/00 record of 5048. That will be amazing. It could happen next week, for all we know.

Bloomberg reports that with 2/3s of the companies in the S&P 500 having reported, earnings are up 4.1%, with revenues up only 1.4%, the same old story.

And speaking of Apple, this week it became the first U.S. company to ever have a market cap of $700 billion, finishing the week at $740 billion as the stock hit one new high after another. Good for its shareholders, of which I’ve never been one...and boy do I wish like the rest of you I had. Also, kudos to much-maligned CEO Tim Cook. Or as they used to do on “Hee-Haw,” “Saa-lute!”

--U.S. Treasury Yields

6-mo. 0.06% 2-yr. 0.64% 10-yr. 2.05% 30-yr. 2.65%

In just two weeks, the yield on the 10-yr. has risen from 1.64% to 2.05%, while the 30-yr. has increased 43 basis points, from a record-low of 2.22%.

The Treasury Department said the budget deficit for January stood at $17.5 billion compared with $10.3 billion a year ago. For the first four months of the budget year that began in October, the deficit widened to $194.2 billion from $182.8 billion during the same period last year. The Congressional Budget Office forecast a deficit of $468 billion for the full fiscal year. Thus far, revenues are up 8.7% from a year ago to $1.05 trillion, but spending is also up, 8.3%, at $1.24 trillion.

--Halliburton Co. said it is cutting as much as 8% of its global workforce of more than 80,000, or 6,400, amid the collapse in oil prices; continuing a trend that has included similar reductions at Schlumberger, Baker Hughes and Weatherford International.

--French energy giant Total SA plans to eliminate 2,000 jobs by 2017 as it adapts to lower prices. Total is aiming to turn a profit with an oil price of $70 a barrel. Earlier, it reported a $5.66 billion loss for the fourth quarter.

--As Bloomberg has been tracking, the number of job losses in the energy sector, globally, has now climbed well above 100,000.

But a recent Bloomberg piece focused on the likes of Australia, which has already been decimated by the slowdown in other commodities, and now oil and gas, while Mexico, having changed its Constitution to begin allowing more foreign investment, has vowed to protect the jobs of 153,000 working for Petroleos Mexicanos despite the rout in crude, but this just isn’t possible if oil stays in its current low range.

And in Norway, where 11,500 jobs have been cut related to North Sea drilling projects, another 30,000 could face pink slips.

--Separately, the unemployment rate in Australia rose to 6.4% from 6.1%, the statistics bureau announced; the worst since August 2002.

--The House passed legislation approving the Keystone XL pipeline by a 270-152 margin. Earlier the Senate passed it as well.

The bill will now be sent to President Obama the week of Feb. 23, at which time he’ll veto it. Then it would take 2/3s in both the House and Senate to override it and Republicans don’t have the votes.

But they will attempt to add it to a vital spending bill later in the year that Obama would have to sign...at least that is the latest thinking.

--Cisco Systems Inc. reported revenue growth of 7% in its second fiscal quarter, an excellent performance, while forecasting growth of 3% to 5% in the current quarter. The company reported earnings that were 2 cents better than expected and boosted its dividend. Good for them. I like CEO John Chambers and the networking equipment giant has reemerged after its big slump. Chambers said on Wednesday, “Cisco has never, ever been better positioned.”

Significantly, Cisco is seeing stronger demand out of Europe; up 17% in the United Kingdom and up 20% in southern Europe.

But sales in China were down 19%, though here Cisco faces Chinese competitors.

--Qualcomm, the chipmaker for cellphones, settled a long-running pricing dispute with Chinese regulators for $975 million, and the company agreed to new royalty rates for its patents in China (phone makers using its 3G and 4G technology). China comprises about half of Qualcomm’s revenues.

Some analysts thought Qualcomm made out relatively easy, but far from it. Now customers worldwide will look for similar deals, wondering why they are paying more than China.

But in China itself, it’s yet another example of why foreign companies should think twice before investing there. For starters, China is stealing Qualcomm’s technology and its own companies will swallow up the market shortly, of this you can be sure. [See Cisco Systems.]

--Coca Cola Company’s revenues fell 2% in the last quarter, though this was slightly better than expected, as consumers continue to eschew sodas and sugary drinks. The company said currency fluctuations hit its bottom line hard.

Over the past year Coke has been diversifying its beverage portfolio by becoming the largest shareholder in Keurig Green Mountain, and it paid $2 billion for a stake in energy drink maker Monster.

--Tesla Motors shares fell about 6% after the automaker reported sales that fell short of expectations. Actually, the company said it built as many Model S sedans during the quarter as planned, 11,000, but it only sold about 9,850 of them, so revenues were well below expectations.

CEO Elon Musk and his associates then proceeded to make all kinds of excuses, like the weather, as to why they fell so far short, including why it reported a loss when a profit was expected.

Then Musk talked about the huge sums the company would be spending, including on the new battery factory, like $1.5 billion this year on capital projects overall, and some analysts drastically lowered their target prices. Tesla closed the week at $203.75. I’ll say it hits $80 before it sees $300.

I like Elon Musk, but it’s time to concede this particular story is incredibly overblown, particularly if we are in a new pricing era for oil.

--Ford reported record sales in China for the month of January while General Motors saw a decline. Ford’s were up 19% from a year ago, while GM’s fell 2.4% from 2014, though their sales were up 12.4% for all of last year.

Ford has been trying to play catchup with GM in China, Ford selling 112,600 vehicles last month; GM and its joint ventures selling 339,800.

--The National Highway Traffic Safety Administration announced that the auto industry recalled 64 million vehicles last year, a record. The total exceeded the previous three years combined.

--Continuing with the China theme, you had the story of Chinese hackers hijacking the Forbes website, looking to “target thousands of computers linked to blue-chip companies, including U.S. defense contractors and banks, in one of the most brazen cyber espionage campaigns apparently launched by Beijing-linked groups so far.

“During a four-day period from November 28 to December 1 last year, any visitor to the Forbes website would have been infected by the Chinese attack, according to the cyber security company iSight Partners, which detected the intrusion on some of its clients’ networks, among them a top-tier U.S. arms manufacturer.” [Sam Jones, Hannah Kuchler / Financial Times]

“Chinese authorities have consistently denied they sponsor such attacks, but western security agencies insist Beijing is involved.” [FT]

The news of the Forbes hack came the same day Twitter’s CFO had his Twitter account hacked, and hackers sympathetic to ISIS took over Newsweek’s Twitter feed, broadcasting threats to President Obama’s family.

--Goldman Sachs CEO Lloyd Blankfein, frustrated his bank’s stock isn’t outperforming his competitors, told investors at a conference in Miami that Goldman was producing better and more stable returns than Bank of America, Citigroup, JPMorgan Chase and Morgan Stanley. It was rare for him to kind of lash out in this fashion as he pointed to “a track record of lower earnings volatility than our peers.”

--Former Goldman Sachs CEO John Whitehead passed away last weekend. He was a giant in the industry and led Goldman’s international expansion. Whitehead worked there for 38 years before President Reagan named him deputy secretary of state in 1985. He served in the Navy in World War II and by all accounts was a man of integrity.

--Credit Suisse Group AG announced profits that beat expectations with net revenue rising 8%, though the results reflect a period before the Swiss National Bank’s surprise decision to let the franc abruptly gain in value, which Credit Suisse said would hit profit by 3%.

In response the bank is initiating extensive cost cuts and slashing bonuses paid to top executives. The Street cheered the moves.

--McDonald’s Corp. reported continuing problems in many of its markets in January. Same-store sales fell globally 1.8%, worse than expected, with sales in the U.S. up 0.4%, but down 13% in the company’s Asia-Pacific, Middle East and Africa region. The company said a piece of vinyl found in a chicken nugget in Japan exacerbated its issues there, while business in China hasn’t recovered from last summer’s scandal involving meat suppliers that were accused of intentionally selling product past its expiration date to restaurants. Sales in Europe rose 0.5%.

--Desert Sunlight Solar Farm, a 550-megawatt farm that is the largest on public lands, began operating near Joshua Tree National Park in California. It will provide enough energy to power more than 160,000 average California homes annually. Pacific Gas & Electric Company and Southern California Edison are among those agreeing to purchase power from Desert Sunlight for the next two decades. First Solar developed the project.

--Researchers from NASA and Cornell and Columbia universities warned the American Southwest could be in store for a “megadrought” that will grip the region for decades, according to a new study. The drought would be nothing like the area is currently experiencing and could lead to monster wildfires. The megadrought would be about ten times as long as a normal three-year drought.

Researchers using climate models predict there is an 80% chance of an extended drought striking between 2050 and 2099, unless actions are taken to mitigate climate change. [Darryl Fears / Washington Post]

--CBS Corp. reported a better-than-expected 3% rise in fourth-quarter revenue, owing mainly to the addition of NFL games on Thursday, as well as the midterm elections. CBS has also been the most-watched network in prime time for six years running.

While CEO Leslie Moonves publicly denies it, many believe CBS will get back together with Viacom, which it split from in 2006; as long as Moonves could gain control of both. [Viacom’s Sumner Redstone is on his last legs.]

--In a report from the Federal Reserve Bank of Chicago, farmland prices in its district, encompassing Illinois, Indiana, Iowa, Michigan and Wisconsin, were down 3% for 2014, the first yearly decline since 1986. “However, farmland values in the fourth quarter of 2014 remained largely the same as in the third quarter.”

Bumper crops for both corn and soybeans has led to lower prices, with corn prices in December about 14% lower than a year ago, 45% lower than two years ago. Soybean prices in December 2014 were, on average, 21% lower than a year ago and 28% lower than two years ago. 

So it’s about lower prices leading to lower farmland values, but this is far from a disaster. Importantly, thus far there are no serious credit issues. Tighter standards, yes, but “only 1.4% of (survey respondents’) farm customers with operating credit in 2014 were not likely to qualify for new operating credit in 2015.”

[Interesting report, by the way...just go to the Federal Reserve Bank of Chicago’s web site.]

--Yahoo Inc. is cutting between 100 and 200 employees in Canada, or roughly 1% of world-wide staff of 12,500.

--Interesting figures out of Atlantic City for the month of January. Revenues at the eight remaining casinos were up 19% compared with a year ago and even when you add in the four that were closed in 2014, revenue was still up 1%.

Internet gambling, which has been a huge disappointment thus far, was up from $10.7 million in December to $11.5 million in January.

So is the worst over? I’d say it is. Now if sports gambling would ever be allowed....

--The Korean Air former vice president who ordered a plane in New York to return to its gate after becoming furious over how she was served macadamia nuts has been sentenced to one year in prison by a Seoul court. Heather Cho was ticked that her nuts were served in a sealed pouch rather than on a plate.

The case was dubbed “nut rage” in South Korea and was seen to be highlighting the privileged, the few families, chaebol, who dominate South Korea’s economy.

Personally, I take my nuts either way, with a little domestic on the side.

--Global gold demand fell 4% last year to its lowest level since 2010, with China’s anti-corruption campaign having a “strong impact,” according to the World Gold Council. Demand in China fell 38%.

Conversely, despite government import restrictions, jewelry demand in India hit a record in 2014, as India surpassed China to become the world’s largest consumer; the two combining for 54% of consumer gold demand last year, up from 33% in 2005. [Henry Sanderson / Financial Times]

--I admit it...I buy a few Powerball tickets whether the pot is $40 million or $560 million such as it was on Wednesday. But I also follow the tables on the site as an economic indicator, or at least an indicator of interest in lotteries in general and clearly, despite the addition of California to Powerball over a year ago, interest has been waning. It takes far longer for pots to grow...but once they get to about $300 million word gets out to the masses and the pot can still explode.   Heck, Wednesday’s jackpot was supposed to rise to $480 million and suddenly it was over $560 million.

Fact is, though, Powerball sales were down a whopping 35% in 2014 over 2013, according to data from the North American Association of State and Provincial Lotteries. Not good for state governments, which have relied to a great extent on lottery revenues to help balance their budgets, and/or pay for education programs.

But, as noted in the Wall Street Journal, despite Powerball sales being down big, overall lottery sales in America were up 1.4% last year.

Foreign Affairs

Russia / Ukraine: At the start of the week, Ukrainian President Petro Poroshenko continued to ask for military support, defensive equipment, arguing, “The stronger our defense, the more convincing is our diplomatic voice.”

The U.S. said it was considering sending such weapons. German Chancellor Angela Merkel, though, said she could not “imagine any situation in which improved equipment for the Ukrainian army leads to President Putin being so impressed that he believes he will lose militarily.”

This as NATO’s top commander, U.S. Air Force General Philip Breedlove, told reporters that Western allies should not “preclude out of hand the possibility of the military option.”

President Obama said Russia had violated “every commitment” made in the failed Minsk agreement from last September. But after meeting with Chancellor Merkel at the White House on Monday, the two stuck to their respective positions on defensive arms for the Kiev government, as Merkel briefed the president on the renewed Minsk peace initiative 48 hours hence.

Then, Wednesday/Thursday, after 16-hour marathon negotiations between the leaders of Ukraine, Russia, France and Germany, an agreement to end the fighting in Ukraine, as of Sunday, was reached, though it stopped short of offering a long-lasting and fundamental solution.

Russian President Vladimir Putin said after, “It was not the best night of my life. But it’s a good morning because despite all the difficulties of the negotiation process, we have managed to agree on the main issues,” he said. Putin was smiling. Ukrainian President Poroshenko was not. He knows the cease-fire is a sham, just as last September’s proved to be.

But for the record, it goes into effect Sunday, followed by the withdrawal of heavy artillery to create a security (buffer) zone up to 140 kilometers wide. All prisoners are to be released. All foreign fighters to be withdrawn from Donetsk and Luhansk (stop laughing).

The point of measurement for Kiev’s forces is the current frontline, while Russia’s proxy army is to measure the movement of arms from the demarcation line established in the Minsk memorandum of last fall.

The Ukrainian government will only regain full control of its eastern border, however, after a “comprehensive political settlement” involving “constitutional reform” that will cede control to Russia’s lackeys in the likes of Luhansk and Donetsk, though Poroshenko said this would not include autonomy for them and he refused to switch to a federal system of governance (reality will probably dictate otherwise). This is to occur by the end of 2015.

So, again, assuming this worked as planned (which of course it won’t), Ukraine wouldn’t gain control of their own border until the end of the year. All that time, you know what will be coming across.

One other item. Putin and the other three leaders reaffirmed their “full respect for the sovereignty and territorial integrity of Ukraine,” which has already been breached...see Crimea.

Dmitry Trenin, director of the Moscow Carnegie Center, saw the agreement as paving the way for another frozen conflict in the post-Soviet sphere.

“I don’t see the Donbass [Ed. the east] being integrated back into Ukraine and I don’t see [control of] the border with Russia being returned to the Ukrainian government.

“What I see is something between Transnistria [a breakaway state of Moldova since the early 1990s that hosts Russian troops] and Nagorno-Karabakh,” he said, referring to the landlocked unrecognized state in the South Caucasus over which Azerbaijan and Armenia fought a war that ended via Russian mediation in 1994. [Ivan Nechepurenko / Moscow Times]

If the artillery is pulled back, then the likes of Donetsk and Luhansk would be safe from shelling so eventually somewhat normal economic activity would resume, albeit under rebel control.

The cease-fire is to be monitored by the Organization for Security and Cooperation in Europe’s observer mission in Ukraine.

So after the cease-fire deal was announced, fighting immediately increased as both sides attempted to consolidate their positions ahead of Sunday’s deadline. On Friday morning the Kiev government announced at least eight soldiers were killed and 34 wounded overnight, with much of the fighting taking place around the strategic transport hub of Debaltseve, where armored columns of Russian-speaking soldiers with no insignia have been pouring in. [Separately, 19 other soldiers were killed in the hours leading up to the cease-fire. The death toll in the war now stands at 5,500. A staggering 263 civilians were killed in the conflict zone between Jan. 31 and Feb. 5.]

“The last time the Kremlin signed an agreement to end the war in Ukraine – as recently as September – it promised to withdraw ‘military equipment as well as fighters and mercenaries’ from the war zone, ban offensive operations and abide by an immediate cease-fire. In exchange the Ukrainian government granted unprecedented political autonomy to its rebellious eastern regions.

“Moscow and its proxy militias in Ukraine have been violating the so-called Minsk Protocol ever since. Russian troops and equipment have poured across the Ukrainian border to support the separatists. Together they have seized an additional 200 square miles of territory, rained deadly rocket fire on the port city of Mariupol and encircled thousands of Ukrainian troops defending a strategic railway link in the village of Debaltseve.

“So what better time for Vladimir Putin to agree to another cease-fire that consolidates his military gains, extracts additional political concessions from Kiev, puts off further Western sanctions, and gives President Obama another diplomatic alibi not to supply Ukraine’s demoralized and ill-equipped military with desperately needed defensive weapons?....

“All of this gives the Kremlin the benefits of establishing a de facto satrap without having to foot the costs of sustaining it or assume political responsibility. It turns eastern Ukraine into another of Russia’s ‘frozen conflicts,’ akin to those it has with Moldova over Transnistria or Georgia over Abkhazia, with an option of taking the conflict out of the freezer at will. Merely the threat of doing so will give Mr. Putin a whip hand over Kiev should it continue to seek closer ties to the European Union and NATO.

“Then again, nobody should be surprised if this cease-fire collapses as quickly as the last one did. The eagerness with which France and Germany proved willing to renegotiate a cease-fire that Mr. Putin had already broken only shows that future violations will carry no real price. So he will continue to alternate between brute force and fake diplomacy, as his political needs require....

“Mr. Putin will consolidate his latest victory, survey the European landscape for weak spots, and make another move before America gets a new President who might do more to resist his conquests.”

“It was far from clear Thursday if a new accord on Ukraine would last long enough for the implementation of its first and most tangible provision, a cease-fire set to begin Sunday. If it does, Ukrainians may be spared, at least temporarily, the deaths of more soldiers and civilians and the loss of more territory to Russian aggression. However, the deal brokered by German and French leaders with Russia’s Vladimir Putin does little to restrain his ambition to create a puppet state in eastern Ukraine that could be used to sabotage the rest of the country. In fact, in the unlikely event that its terms are fully carried out, the pact would enable his project.

“The result...reflected the imbalance between a Kremlin ruler in the midst of using military force and European leaders who not only are unready to respond but who are also trying to prevent Ukraine from obtaining the means to defend itself. In exchange for the promise of a ‘de-escalation’ that was their overriding goal, the European leaders induced Mr. Poroshenko to accept terms that give Mr. Putin a veto over any final political settlement in eastern Ukraine – and permission to continue violating the country’s sovereignty in the meantime.

“Most significantly, control over the border between Russia and Ukraine would not be returned to Kiev until the end of the year – and then only after a ‘constitutional reform’ acceptable to Moscow and its surrogates grants powers to Russian-controlled regions. Without border control, Ukraine cannot prevent Russian forces, supplies and agents from flowing across. While the deal promises a withdrawal of ‘foreign armed formations’ from Ukraine, there is no deadline – and Mr. Putin’s contention is that NATO has ‘legions’ in the country but Russia does not....

“By going along with the Europeans’ desperate diplomatic gambit, (Putin) ensured that not even minor sanctions would be adopted at a European Union summit Thursday. He also provided President Obama with reason to overrule those in his administration seeking to supply arms to Ukraine. Mr. Putin can resume military aggression at will, while the push for new sanctions or weapons could take weeks or months to regain momentum.

“Mr. Obama was content to stand back while Germany and France struck the deal, and the State Department quickly endorsed it. The administration rightly said that it would consider easing existing sanctions on Russia only when the agreement is ‘fully implemented,’ including ‘the withdrawal of all foreign troops and equipment from Ukraine [and] the full restoration of Ukrainian control of the international border.’ But without additional economic and military pressure, Mr. Putin will never meet those terms.”

Meanwhile, the Kiev government did receive a positive piece of news. The IMF agreed to a $17.5 billion loan to Ukraine as part of a new economic reform program. The Extended Fund Facility is designed to lend some semblance of stability to the economy and restore growth. Other funding could be made available if Ukraine carries out very difficult reforms.

Prime Minister Arseniy Yatseniuk is seeking to fight corruption, first and foremost, and to cut state spending while reducing the bureaucracy.

Iraq / Syria / ISIS: President Obama asked Congress for new war powers to fight the Islamic State group, saying he doesn’t want to start another lengthy ground war in the Middle East, but that he also doesn’t want his hands tied in responding to an evolving threat.

“We need flexibility but we also have to be careful and deliberate,” Obama said in a brief afternoon address to the country on Wednesday that 14 people saw.

Obama called for a three-year “authorization for the use of military force” that would lock in those stipulations for his successor.

While the legislation is being debated, at least for now more Republicans are likely to grant the president their support than member of his own party, but this process has a long ways to go.

House Speaker John Boehner (R-OH) said: “Any authorization for the use of military force must give our military commanders the flexibility and authority they need to succeed and protect our people...I have concerns that the president’s request does not meet this standards.” [Wall Street Journal]

“Napoleon famously said that in warfare if you vow to take Vienna – take Vienna. President Obama’s version of that aphorism might be – on the way to Vienna stop to summer in Salzburg, only use air power, and if the fighting isn’t over in a couple of years call the whole thing off.

“How else to interpret the amazing draft of a resolution that Mr. Obama sent to Congress Wednesday requesting an authorization to use military force against Islamic State? The language would so restrict the President’s war-fighting discretion that it deserves to be called the President Gulliver resolution. Tie me down, Congress, please. Instead of inviting broad political support for defeating ISIS, the language would codify the President’s war-fighting ambivalence....

“(The) flaws in the half-hearted war strategy are already clear: ISIS continues to hold nearly all of the territory it did when Mr. Obama announced his plans in September. One exception is the town of Kobane in Syria, where Kurdish troops drove out the jihadists with U.S. bombing help. But Kobane now resembles Dresden after World War II – a bombed out, empty shell.

“Many ISIS commanders have been killed, and they have been forced to move more furtively. But they were still able to stage an attack on the Kurdish oil city of Kirkuk in the last month. And they are conducting widespread assassinations against Sunni tribal leaders who resist them and ought to be allies of the U.S.-led coalition.

“ISIS is also using its staying power against U.S. bombing to burnish its credentials as the jihadist vanguard. The Associated Press reported Tuesday that U.S. intelligence officials now say foreign fighters are joining Islamic State ‘in unprecedented numbers,’ including 3,400 from Western nations out of 20,000 from around the world.

“Rather than put shackles on his generals, Mr. Obama should be urging them to mount a campaign to roll back ISIS as rapidly as possible from the territory it holds.  That would be a genuine defeat – and the world would see it as one. It would also be a demonstration to potential ISIS recruits that if you join the jihad, you are likely to die, and soon.”

For all the talk of degrading ISIS by the White House, Islamic State militants launched an attack on a town in Iraq’s Anbar province, close to an airbase housing 300 U.S. Marines. The town of al-Baghdadi is just three miles from the Ain al-Asad base and Friday, 8 ISIS suicide bombers attacked the periphery of the camp but were repelled. The Marines weren’t involved, as of last report.

In Baghdad, a series of bombings last Saturday claimed at least 37 lives. Monday, more bombings in the capital killed 15. I did not see a claim of responsibility.

Separately, an online magazine put out by Islamic State published an interview with the French widow of a Paris hostage taker, Hayat Boumeddiene, the first official claim she is in ISIS territory. She said her husband, Amedy Coulibaly, had been an Islamic State supporter as he claimed.

As for Jordan, its country’s jet fighters conducted 56 bombing raids in the first three days of King Abdullah’s campaign against ISIS, though I haven’t seen the extent of the effort the last few. Jordan just doesn’t have the resources to sustain a major campaign. For starters it needs fuel, spare parts, night vision equipment and other weapons from the United States.

Meanwhile, Syrian President Bashar Assad, in an interview with BBC News, accused the U.S. of fomenting terrorism through its support of “moderate” groups seeking to overthrow him and that he would not bend to American demands.

“Whatever they say, [that] doesn’t mean for us to be puppets,” said Assad. “We’ll never be puppets who work against our interests for their interests.”

Assad added that the source of the terrorists threatening his regime “is the Wahhabis that are being supported by the royal family in Saudi Arabia.”

On the issue of coordination between Syrian forces and the U.S.-led coalition against ISIS, Assad said there was none, though he conceded messages were sometimes conveyed through third parties, including Iraq. [Patrick McDonnell / Los Angeles Times]

Assad also denied using “barrel bombs,” to which a member of the Syrian opposition told the BBC, “He is a systematic liar. I am pretty sure he is a psychopath.”

“Bashar Assad’s smugness in a series of recent interviews may be justified. As the Syrian president looks around him, he sees that several regional developments are going his way. Whether this means his regime is saved is another question, but for the first time in four years his barbaric policies appear to be paying off.

“Assad’s efforts in 2011 to depict the uprising against his rule as no more than the work of armed terrorist gangs has become a self-fulfilling prophecy. The Syrian regime helped assure that extremists would gain control of the revolt and turn it into a sectarian conflict. Today, even Arab countries opposed to Assad have made the campaign against ISIS a priority, undermining the primacy of the struggle against a brutal Syrian regime....

“Egypt’s new military regime re-established diplomatic relations with Damascus... President Abdel-Fattah al-Sisi has his own terrorism problem in Sinai, and this week he hosted one of Assad’s main backers, Russian President Vladimir Putin, who seeks to benefit from tensions between Cairo and Washington and is pushing his own peace plan for Syria.

“Assad must also be delighted with the very visible shift in American attitudes. While U.S. officials continue to mouth the line that ‘Assad must go,’ the reality is that the Obama administration prefers Assad to the unknown. Moreover, even if it will not admit it, the U.S. knows that ground forces are necessary as it tries to ‘defeat’ ISIS, and for better or worse that means Assad’s forces in certain areas of Syria.

“Beyond that Washington has increasingly adopted a position favorable to Iran in the Middle East, reassuring it that the United States does not intend to weaken Iranian allies in Iraq and Syria. To put it bluntly, the Americans prefer Qasem Soleimani and Hasan Nasrallah to Abu Bakr al-Baghdadi. [Ed. Soleimani is the Iranian Revolutionary Guards Corps (Quds Force) commander essentially running the military show in Iraq, Nasrallah leads Hizbullah, and al-Baghdadi is head of IS.] Even in Yemen the administration’s reaction to the Houthi takeover has been subdued, with the U.S. focused on pursuing its anti-terrorism operations against Al-Qaeda in the Arabian Peninsula....

“If Assad were to survive politically, it would rewrite international rules of behavior. Until recently many Western governments pompously declared that ‘there is no room’ for leaders who engage in the mass murder of populations. However, who can believe such nonsense when Assad has been engaging in widespread slaughter for almost four years, with no concerted reaction from the international community.

“If ISIS cruelty merits a military response – and it does – then the infinitely more numerous crimes of the Assad regime do as well. Rare are the atrocities that the regime has not committed, from slaughtering women and children to firing chemical weapons and ballistic missiles into civilian areas to using starvation tactics. But Assad has gotten away with all this, even as Obama has reassured Iran that the Syrian leader is safe.

“The injustice of this attitude will have repercussions. ISIS and the Nusra Front have perpetrated terrible atrocities, but the global indifference to Syrian suffering, alongside a prevailing sense in the region that a sectarian regime has been given free rein to crush Syria’s Sunnis, has proven a valuable recruitment tool for them. Only a blind man would fail to see the intrinsic link between Assad’s terror methods and the appeal of the jihadis.

“This means that even if Assad remains in office, the jihadis will retain significant mobilizing power. But the United States seems oblivious to this, so determined is Obama to avoid taking any position on Assad’s future....So, while Assad can be satisfied with the alignment of factors in his favor, Syria will remain unstable for a long time to come.”

Iran / Israel: Last Sunday, Iranian Foreign Minister Mohammed Javad Zarif, the chief nuclear negotiator, signaled his country was ready to reach an agreement on its nuclear program. The P5+1 and Iran must agree on the main points by the end of March, and then reach a comprehensive deal by June 30. Zarif told a group of diplomats at the Munich security conference that “we need to seize this opportunity. It may not be repeated.”

Zarif had two meetings with U.S. Secretary of State John Kerry on the sidelines of the conference.

For his part, Ayatollah Khamenei said in a meeting with Air Force commanders on Sunday:

“American officials say no deal is better than a bad deal.  I do agree [with such a statement]. No deal is better than a deal which contradicts national interests.”

Khamenei said Tehran has acted logically in the course of the negotiations, while the other side seeks to blackmail Iran. [Tehran Times]

Israeli Prime Minister Benjamin Netanyahu reiterated he was going ahead with his speech to the U.S. Congress prior to the Israeli elections.

“At the time that there are those who are dealing with protocol or politics, there is a bad deal developing in Munich with Iran that will endanger the existence of Israel. It is my obligation to do everything I can in order to prevent it.

“Therefore, I am determined to travel to Washington to represent the position of Israel before the members of Congress and the American people. This is not a political issue; it’s an existential issue. That is how I see it,” he said.

As to strained relations with the Obama administration, Netanyahu told a Likud party audience: “Since the establishment of the State of Israel until today, there have been disagreements on essential issues between Israel and the U.S. The relationship has remained stable. And so it will this time too.” [Jerusalem Post]

The address is still slated for March 3, just two weeks before Israelis go to the polls.

“Iran appears to be getting everything it wants from the United States, anxious to conclude a deal on the nuclear program. The deadlines for making progress in the talks, in March and in June of this year, pale in significance to the only deadline that matters – Barack Obama’s quest for his first foreign policy achievement before he leaves office in 2016, in the form of a reconciliation with Iran.

“Thus, the White House is sailing full-steam ahead on a policy of appeasing the Islamic Republic, with the violent and destructive repercussions for the Arab world surface over the following years and decades – conveniently after Obama and his team are no longer public officials.”

Yemen: The U.S. shut its embassy in Yemen as Houthi rebels, aligned with Iran, took control of the capital, Sanaa. Demonstrations and violence grew by week’s end as the country appeared on the verge of a civil war; none of which helps the United States’ anti-terrorism efforts. Once the U.S. announced it was leaving the country, the U.K., France, Germany and Italy followed suit.

Embarrassingly, some U.S. Embassy officials reportedly left their cars at the VIP entrance of Sanaa airport with their keys in the ignition, the departure was that hasty.

State Department spokeswoman Jen Psaki said after being questioned about the vehicles then begin confiscated: “Clearly, it is unacceptable, and we would reiterate that in order to return to Sanaa, respect for property, respect for our facilities is an essential component of that. So, we certainly are requesting they be returned.”  [Wall Street Journal]

Really, she said this. At the same time the Marines left their weapons at the airport, saying they were destroyed (literally using sledgehammers) as they were leaving on a commercial aircraft and couldn’t take them onboard.

Egypt: An Islamic State-linked group beheaded 10 men accused of spying for Israel and Egypt, the bodies dumped on a road in the northern Sinai. The group, Welayat Sinai [Supporters of Sinai], made the accused confess on camera before they were beheaded that they were collaborators with Mossad and Egypt.

On Sunday, at least 25 soccer fans were killed in a confrontation with police at the gates of a stadium. For three years, teams have been forced to play in virtually empty stadiums because officials were worried about deadly brawls, such as one in February 2012 in Port Said that killed at least 70.

So for this contest, they allowed the sale of 5,000 tickets to the public and before the start of the game, thousands of ticketless fans tried to enter the stadium. Apparently many of the victims died in a stampede.

Then there was Russian President Putin’s two-day visit to Egypt as President al-Sisi and Putin agreed to expand military and trade cooperation.

“Vladimir Putin’s visit to Egypt this week just pulled Cairo deeper into Moscow’s sphere of influence.

“While the Obama team tilts at windmills, the Russian president is well on his way to reversing a decades-old triumph of U.S. diplomacy – and shifting the region’s balance of power his way.

“Putin landed Monday night in Cairo for a two-day state visit. He was greeted warmly by President Abdel Fattah al-Sisi, who received a personal gift from the guest: an AK-47 rifle. Then the two went off to the opera for some culture....

“(That) Kalashnikov wasn’t the only weapon Putin’s sending Sisi’s way: The $3 billion deal Russia reportedly signed late last year with Egypt includes Russian attack helicopters and MiG-29 fighter jets.

“And on Tuesday the two inked an agreement for Russia to build Egypt’s first nuclear power plant. (Hey, the whole Middle East needs to prepare for the future, as U.S.-led talks will at best leave Iran on the verge of being a nuclear power.)

“Wait, how did Sisi all of a sudden become the Kremlin’s BFF? The ex-general rose up the ranks of an Egyptian army that was almost exclusively backed by America. Sisi was even a fellow at the U.S. Army War College in the early 1990s.

“Simple: America no longer wants the friendship of a man who, according to his detractors, has reversed Egypt’s progress toward democracy.

“To make that point, President Obama suspended for a while the annual $1.5 billion U.S. aid package to Egypt. He also held up deliveries of military hardware like U.S.-made attack helicopters, which Sisi desperately needs to fight ISIS and other Islamist terrorist in the Sinai.

“Because, though Washington doesn’t seem to care, Sisi is also practically the only Mideast leader to stand up to the Islamist jihadis.

“(But) in a December speech at Cairo’s al Azhar University, the prominent Sunni religious center, Sisi called for a sweeping revolution across the Muslim world.

“It’s inconceivable, he noted, that the Koran ‘that we hold most sacred should cause the entire Islamic world to be a source of anxiety, danger, killing and destruction for the rest of the world.’

“No other Arab leader dares to so challenge his fellow Muslims. Meanwhile, most Western leaders, led by Obama, arrogantly pretend that the current wave of global violence has nothing to do with Islam.

“So we need someone like Sisi, on that side of the world, to call it as it is. Yet he constantly gets the back of our hand.

Lebanon: Today, Feb. 14, marks the 10-year anniversary of the assassination of former prime minister Rafik Hariri in a horrific car bombing in Beirut. His son, also a former prime minister, Saad Hariri, said his father was his anchor and that the assassination was merely a “physical” one.

“They did not succeed in assassinating his project [for Lebanon],” said Saad. “We all know the Lebanese want what Rafik Hariri wanted for them; they want development, reconstruction and a decent living. They want to live....

“The Lebanese are entrusted with this project. Only the Lebanese can resuscitate their country.”

I went to Beirut weeks after the assassination and my hotel room at the Phoenicia looked down on the bomb crater. I’m still amazed, looking back, how little was done at that time to secure the site. Evidence was tainted.

China: A study by the Washington-based Ocean Conservancy and the University of California, Santa-Barbara, found that 20 countries account for more than 83% of the waste in the world’s oceans. The findings, published in the journal Science, estimate China is responsible for nearly one-third of the plastic polluting the oceans, 2.4 million tons of plastic waste into the seas each year. The other worst polluters are Indonesia, the Philippines, Vietnam, Sri Lanka, Thailand, Egypt, Malaysia, Nigeria and Bangladesh. The U.S. was ranked No. 20.

Meanwhile, President Xi Jinping has accepted President Obama’s invitation for a U.S. summit in September. I’d put Chinese hacking at the top of the agenda, though of course Obama will want to trumpet another climate change agreement between our two sides, especially seeing as the summit would come three months before a U.N.-sponsored event on same in Paris.

At the same time there were more stories this week on how China’s Education Minister, Yuan Guiren, warned educational institutions “of the threat of foreign ideas on the nation’s college campuses, calling for a ban on Western textbooks and forbidding criticism of the Communist Party’s leadership in the classroom,” as reported by Dan Levin of the New York Times.

Lastly, a top Chinese businessman, billionaire Liu Han, who built an investment empire that includes natural resources businesses around the world, was executed on Monday, along with four associates, including his younger brother, on charges of running a criminal enterprise that bribed and extorted its way to riches.

North Korea; Pyongyang claimed it has test-fired a new anti-ship missile ahead of U.S.-South Korea war games in the area.

Japan: In a major speech to Parliament, Prime Minister Shinzo Abe called for rewriting the nation’s pacifist Constitution.

“Isn’t it time to hold deep debate about revising the Constitution? For the future of Japan, shouldn’t we accomplish in this Parliament the biggest reform since the end of the war?”

Specifically, Abe and his supporters want to rewrite Article 9, which bars Japan from maintaining its own armed forces. [Martin Fackler / New York Times]

Prime Minister Abe has also been invited to the White House for a state visit, but this will come only after successful completion of a vast trade agreement between the two and about ten other countries on either side of the Pacific.

Nigeria: Boko Haram was all over the place this week.

“Boko Haram Militants Attack Chad Troops in Nigerian Town”

But Chad claimed its troops killed 109 Boko Haram fighters in one battle.

Meanwhile, Nigeria postponed the February 14 presidential election by six weeks over security concerns. Officials from the opposition party accused the military of forcing the electoral commission into the delay to help the struggling campaign of President Goodluck Jonathan. The United States and business leaders were also critical of the move. The government said it needs time to clear Boko Haram out of the northern part of the country, but the insurgency has been going on since 2009 and now, suddenly, authorities say they can do it in six weeks? It’s a joke.

Sec. of State Kerry said in a statement that “political interference with the Independent National Electoral Commission is unacceptable.”

Polls show Jonathan is tied with Gen. Muhammadu Buhari, a former dictator.

Australia: Prime Minister Tony Abbott survived a no-confidence vote among his Liberal party parliamentarians but the margin, 61 to 39, suggests he faces further challenges in the weeks ahead.

Argentina: An Argentine prosecutor has asked a federal judge to open a probe into President Cristina Fernandez de Kirchner over allegations she helped cover up Iranian links to a deadly 1994 bombing of a Jewish community center that killed 85. Iran denies being involved. 

The prosecutor, Gerardo Pollicita, inherited the case from Alberto Nisman, who was found dead in his apartment under mysterious circumstances, the day before he was to testify in the bombing case to a congressional committee. The judge will now have to decide whether to authorize new investigations to prove the president’s involvement.

Random Musings

--Ashton Carter was confirmed to replace Chuck Hagel as defense secretary by a vote of 93 to 5. Good luck dealing with the White House, Sec. Carter.

--Needless to say, chaos has reigned at the offices of NBC News the past ten days as the network struggled with what to do with anchor Brian Williams, whose lies and exaggerations threatened a franchise that brings in $200 million a year in ad revenue. Reading an account of what transpired by Emily Steel in the New York Times, it appears NBC executives did the best they could with a situation that resulted in Mr. Williams being suspended for six months without pay; in essence a $5 million fine, seeing as his annual pay was a reported $10 million.

For starters, when Williams acknowledged in an interview with Stars and Stripes that he had exaggerated his account of a helicopter journey in Iraq, issuing an apology in the process, none of his superiors knew about it. It was rapidly downhill from there.

Steve Burke, NBC Universal chief executive, said in a memo: “By his actions, Brian has jeopardized the trust millions of Americans place in NBC News. His actions are inexcusable and this suspension is sever and appropriate.”

“NBC’s belated decision to suspend Brian Williams won’t go over well with the Queen of Hearts crowd, who’d rather lop off his head now and get the facts later. Nor will it sit well with friends who’ve tried to minimize the tarnished anchorman’s lies.

“But it was the right call, one that takes Williams off the air, where he had become a liability, while the network’s investigation figures out what he actually did – and why he was able to get away with it for so long....

“Williams’ original reporting was accurate, which separates him from a rogue’s gallery of lying journalists, who’ve been caught writing fiction. But news anchors, who are the symbol of their networks’ credibility, don’t get to lie about their work in any context, and Williams is further damaged by his assertion that he simply ‘conflated’ events, which raises doubts about whether he grasps the significance of his mistake.

“That transgression alone is enough to justify his six-month, unpaid suspension. But it fits a broader pattern running through the allegations against him: that he exaggerates his own role in events, after the fact....

“Williams, meanwhile, will have to live in limbo, like a suspect awaiting trial. That’s a humiliating tumble for a network star, but one that he brought on himself.”

Other tidbits on Williams we’ve learned of the past few days. New York magazine reports he lobbied for Jay Leno’s job once Leno announced he was stepping down. “Brian wants to be a late-night comedian,” said a former colleague.

From the New York Post: “Critics said Williams had taken on too much of a celebrity role recently, appearing in regular ‘Tonight’ sketches with (Jimmy) Fallon, including ‘Slow Jam the News.’

“ ‘You can’t escape Brian Williams. He’s showing up in prime time,’ another former colleague told New York magazine. ‘He’s hosting SNL, his daughter [Allison Williams] is Peter Pan. She’s on HBO in the hit series ‘Girls.’

“In 2006, Williams upset a delegation at a Congressional Medal of Honor Society event in Boston when he ducked out early to appear on ‘SNL,’ according to the Boston Herald.

“Williams agreed to be the master of ceremonies at the Boston event but told members when he arrived that he had a ‘pressing engagement.’”

“Brian Williams, this job is for you! No, not that stuffy old anchor chair you got bounced out of yesterday. I’m talking about Jon Stewart’s chair.

“Stewart, as you surely know, is walking away from Comedy Central. He didn’t give a date, other than sometime this year. Can you say, ‘Perfect’?

“The timetable dovetails nicely with your six-month suspension from NBC for making up stuff. Your gift of gab got you in hot water, but, if you play your cards right, it now could be the key to your next job.

“I’m not usually given to conspiracy theories, but the timing of Stewart’s announcement and your suspension is too loaded to be a coincidence. Stewart could have dropped his bombshell at any time, so the fact that he did it, oh, at about the exact time NBC was dropping the bomb on you, well, that means something.

As for Jon Stewart, he shocked Comedy Central honchos by announcing he was leaving “The Daily Show” later this year after 16 years at the helm. Fake news was big business and Stewart won the Emmy for outstanding variety series 10 years in a row.

Comedy Central previously had to deal with the departure of Stephen Colbert, who is taking over for David Letterman, as well as John Oliver, who left last year to host his own hit on HBO.

One final thought on Mr. Williams, via the New York Post’s Kyle Smith:

“Part of Williams’ self-delusion is that he’s some sort of ordinary Joe in touch with the real America. He nudges profiles to describe him as a ‘blue-collar Jersey guy.’ His dad was an executive, not a coal miner. He fancies himself as in turn with the working men as he collects $10 million a year for successfully looking ‘troubled’ or ‘sincere’ or ‘amused’ while reading 20 minutes of script off a prompter.

“NBC, which had several other employees on the Chinook who apparently narked on Williams because nobody can stand this classic self-promoting ass (‘He’s a real pompous piece of s—t,’ a longtime colleague told Page Six), warned him from the beginning not to embellish the truth, and a source told Variety with pride that Williams’ tall tale was never featured on an NBC News program.

“So he peddled his yarn elsewhere, gradually making himself sound more devil-may-care, to the point where, in a 2013 appearance on ‘Late Show’ that Williams apparently timed for the 10th anniversary of his Iraq stint so he’d have an excuse to talk about it, he didn’t contradict David Letterman’s description of him as a ‘war hero.’

“We should have known he was lying then; actual heroes hate being called heroes.”

--And then there’s the shooting at Chapel Hill, N.C. I watched Wolf Blitzer’s coverage on CNN Wednesday afternoon and I tweeted that Wolf shouldn’t jump to conclusions, as he was clearly ‘steering’ his reporters to a conclusion it was a ‘hate attack’ rather than letting them report the story.

“As soon as the news broke Tuesday evening, anyone near a TV, radio or computer heard that three Muslim students were murdered near the University of North Carolina.

“My immediate thought was, ‘Oh, my God, not Muslims.’

“That very same day, we had gotten confirmation that 26-year-old American hostage Kayla Mueller, who had been abducted by the Islamic State was, indeed, dead. The last thing we need to do is create an impression for the Islamic State or any other terrorist group that we are as bad as they are.

“My second thought was: ‘Wait a minute. Why are they telling me the North Carolina victims were Muslim? Why is this information in headlines too numerous to count?’ It is highly unlikely that any mention would have been made of the victims’ religion had they been Christian, Jewish, Hindu or some other, unless they were in the midst of a religious ceremony at the time of the attack.

“By implication, many initial reports (and some that followed) created and sustained the impression that anti-Muslim animus motivated the attacks, which may or may not have been the case. Wouldn’t it have been better not to incite that riot from the get-go? Wouldn’t the headline, newscast or social media blurt have been more accurate had it simply reported that three students were murdered? Later in the story was the place to mention that the students were Muslims of Arab descent, as part of a neutral biography.

“One can only conclude that the mention of their faith was simply to juice the story. When the Islamic State is beheading hostages and burning one alive, the world doesn’t need juice.”

Well, as the story developed on Wednesday, authorities came forward with the belief a parking dispute in the apartment complex led to the killings, but the media, in reporting the findings of the preliminary investigation, kept using phrases like “amid fears that the victims were targeted” and “in a dispute that sparked Muslim outcry.”

Ms. Parker: “The Muslim outcry might not have occurred had the story been reported more responsibly.”

We’ll learn over the coming days whether avowed atheist Craig Stephen Hicks intentionally targeted the Muslim students. But as Ms. Parker concludes: “The least we can do is keep our bellows away from sparks.”

--In an extensive report on Wisconsin Republican Gov. Scott Walker’s college days by the Washington Post’s David Fahrenthold, you have the mystery of why Walker dropped out spring of his senior year from Marquette University. That was 1990. Today, with Walker never having gone back to finish, his own explanation, in Fahrenthold’s words, is “He got a job. He meant to go back. But he just never found the time.”

Walker just loved politics and has spent all this time since those days on rising through the ranks in Wisconsin. An astounding streak: “Since 1993, he has run 11 races for state legislature, county executive and governor – including a highly unusual recall election in 2012 – and he has won them all.”

At Marquette he was all politics, too, involving himself in student government (where he eventually lost an ugly race for student body president sophomore year), at the expense of his studies.

Fahrenthold’s piece is certainly not ‘devastating’ and there is no reason not to like Walker because of it...you either still do or never did. 

Look, the guy is running for president. It is a story worth telling. Some of his supporters need to chill out with the criticisms of the piece.

--According to a nonpartisan government watchdog group, the Sunlight Foundation, New Jersey Republican Gov. Chris Christie was on the road nearly one out of every three days of 2014 fundraising. As chairman of the Republican Governors Association last year, he did indeed help raise a record-breaking $106 million for the group in attending 109 fundraisers, but still....people in New Jersey, for one, are not impressed. He was actually out of state 137 days in 2014, as reported by the Star-Ledger.

“Looking for a progress report on Chris Christie’s campaign for president? Picture the wicked witch in the Wizard of Oz after Dorothy threw water on her.

“Yes, our governor is melting into a puddle of goo as his glorious power seeps away. His friends and enemies alike are watching, astonished at the speed of the decline.

“ ‘It’s about the worst 30 days I’ve seen of any candidate,’ says Ed Rollins, a former aide to Ronald Reagan and a GOP campaign strategist. ‘In his first couple of years, he had a lot of promise. But people who a year ago thought he was viable now say he’s not.

“ ‘He’ll be the Tim Pawlenty of this election cycle.’

“For those who don’t remember, Pawlenty was the former Minnesota governor who became the first major Republican to ditch the 2012 race.

“That view of Christie is gaining momentum after a disastrous run that began with his goofy, jumpy hug of Dallas Cowboys owner Jerry Jones on national TV, and ended with him snarling at reporters in London after his amazingly dumb suggestion that parents should have more ‘choice’ over whether to vaccinate their children for measles.”

Oh there’s a lot more. I’ve told you for years now that the governor has done a lousy job in my state. Or, as Tom Moran put it this week:

“As a Jersey guy watching this national race, it drives me nuts that so little attention has focused on Christie’s abysmal record as governor. But that day will come if he makes it deep into the race....

“He then will have to stand on his record. And what exactly is his signature achievement?

“The bipartisan pension reform that put him on the national map exploded when he broke his promise to make hefty payments into the fund. On jobs, New Jersey is way behind neighboring states and the nation.

“And the guy who promised to clean up the red ink in Trenton has made it worse. The state’s credit rating has dropped on his watch, and is now the second-lowest in the country, behind Illinois.

“ ‘If this gets into a real race, they’re going to look at New Jersey,’ (former Gov. Tom) Kean says. ‘They’re going to look at that bond rating. And there are going to be opponents with a lot of money to do negative ads if they like.’

“You begin to understand why so many people are writing Christie off.”

And why yours truly started doing so years ago for the exact reason Gov. Kean is giving.

[Related to the above, Mark Di Ionno of the Star-Ledger had a piece last weekend on living in Jersey, the state with the nation’s top property tax burden. Here in my hometown of Summit, the average is $16,419. In neighboring Millburn (Short Hills), it’s $21,706. Many of you will think this is a misprint, depending on where you live. But you see why so many want to leave the state, and why many corporations have to think twice about relocating here.]

And this just in...a new Rutgers-Eagleton Poll released on Friday shows that Gov. Christie’s job approval and overall favorability has dropped to an all-time low among New Jersey voters. 53% now view the governor unfavorably, and 52% give him a negative job approval rating. His travel outside the state is really ticking residents off, let alone his “arrogance” and “rudeness,” as the voters told pollsters.

--In a poll for YouGov and MoveOn.org and Democracy for America, Mass. Democratic Sen. Elizabeth Warren leads Hillary Clinton in Iowa 31-24 percent, and 30-27 in New Hampshire.

The poll of likely Democratic voters also revealed 79 percent would like to see Warren enter the race, while the groups conducting the survey readily concede they hope the results will encourage Warren to change her current stance and opt to run.

--Oregon Democratic Gov. John Kitzhaber resigned Friday amid a crisis that included a criminal investigation of the role that his fiancée played in his administration. Just last November, Kitzhaber, 67, won an unprecedented fourth term as governor.

But with charges and questions swirling around him about his live-in, Kitzhaber began to lose support among his fellow Democrats and then acted bizarrely in a meeting with Democratic secretary of state, Kate Brown, who now takes over.

--In a study published in the New England Journal of Medicine on the dangers of smoking, a new study that followed nearly a million people for ten years has found at least five new categories that result in an additional 60,000 deaths a year, beyond the nearly half a million deaths each year in this country that come from lung cancer, artery disease, heart attacks, chronic lung disease and stroke.

Researchers have now found smoking was linked to significantly increased risks of infection, kidney disease, intestinal disease caused by inadequate blood flow, and heart and lung ailments not previously attributed to tobacco. [Denise Grady / New York Times]

--Talk about pathetic, the Chicago-based Jackie Robinson West team was stripped of its U.S. championship by Little League Baseball, the coach suspended, after an investigation showed the team used players who lived outside the geographic area the team represents.

The organization found the team used a falsified boundary map and essentially built a superteam with players from neighboring Little League districts.

Of course this isn’t the first time fraud has occurred in this sport. Many of us of a certain age remember watching the Little League World Series final on ABC’s “Wide World of Sports” as Taiwan kicked our butts, year after year, using players that seemed like they were 22.

But while in the case of the Jackie Robinson West team everyone rightfully blames the parents and other adults, you can’t tell me some of the kids on the team didn’t know what was going on as well. Hopefully they learned a valuable life lesson, but I doubt it.

--With more snow on the way, I feel for those in the Boston area who have had to deal with a record 72 inches of the stuff that fell in 30 days (during which time it also had a record 40 inches in seven days). Especially for those having to deal with a broken down mass transit system that is reportedly $5.5 billion in debt, let alone serious roof issues.

--What a terrible tragedy on the streets of Manhattan Wednesday as veteran CBS News and “60 Minutes” reporter Bob Simon lost his life in a car crash.  

But what a terrific career Simon had. A reporter’s reporter who covered every war since Vietnam. Our condolences to his family and co-workers. Simon was 73. [As an aside, there is a lesson to be learned in this tragedy...wear a seatbelt when riding in a taxi or limo. Simon wasn’t wearing one.]

--Thursday then saw the death of New York Times media columnist, David Carr, at the age of 58; Carr dropping dead in the newsroom. His column was always must-reading; like Bob Simon a real truth teller. 

Yes, including the stories of Brian Williams and Jon Stewart, an extraordinary, as well as sad, week in the media world.

--After I wrote about Harper Lee and the discovery of her old manuscript titled “Go Set a Watchman” that is going to be published, a slew more articles were written on whether she was mentally capable of making a decision on going ahead with it. While the majority, at least this go ‘round, said she was, I’m guessing she isn’t.

But we’ll never know. Ms. Lee will pass away soon, the book will be a huge hit (pre-orders already make it No. 1 on Amazon), and Tonja Carter, HarperCollins and maybe one or two others will reap the rewards. Hopefully, for its readers, it’s a good one.

--Finally, this column marks 16 years of StocksandNews and “Week in Review.” 16 years. 827 columns. Nearly 1,750 “Bar Chats”. Good lord. 

About six months after I started in February 1999, having left my 16-year career on Wall Street (uh oh...symmetry alert...), I was approached by another new site, BuyandHold.com, to see if I was willing to share some of my columns with them. After a few months we worked out a deal and for the next 15 years I had a super relationship with them. Frankly, we were good for each other.

Well this week, ironically, marks the end of their site, the accounts being folded into another operation.

So I just want to thank Trevor, and Manny, for their support and loyalty and wish them continued success.

Moi? Edition 828 next week.

Pray for the men and women of our armed forces...and Kayla Mueller.

Gold closed at $1227
Oil $52.78

Returns for the week 2/9-2/13

Dow Jones +1.1% [18019]
S&P 500 +2.0% [2096]
S&P MidCap +1.7%
Russell 2000 +1.5%
Nasdaq +3.1% [4893]

Returns for the period 1/1/15-2/13/15

Dow Jones +1.1%
S&P 500 +1.8%
S&P MidCap +3.5%
Russell 2000 +1.5%
Nasdaq +3.3%

Bulls 52.5
Bears 15.2 [Source: Investors Intelligence]

*We all could use a good laugh these days. Don’t forget to catch SNL’s 40th anniversary show, Sunday night, on NBC.

Brian Trumbore

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