Week in Review

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Week in Review

12/19/2015

For the week 12/14-12/18

 [Posted 11:00 PM ET, Friday]

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Edition 871

Washington and Wall Street

As expected, on Wednesday the Federal Reserve hiked interest rates for the first time in nearly a decade (2006), but strong global demand for U.S. Treasuries actually pushed down yields post-announcement, with the yield on the 10-year falling from 2.30% to 2.20% by the end of the week after the move.  Just another example of how Chair Janet Yellen and her band of merry pranksters can only control the shortest end of the yield curve, let alone the fact it is dealing with central banks around the globe with increasingly divergent policies.  Mexico, for example, raised its policy rate on Thursday, while the European Central Bank, People’s Bank of China, and the Bank of Japan continue to pursue easing policies.

The Fed announced via its policy statement, which was adopted unanimously: “The Committee judges that there has been considerable improvement in labor market conditions this year, and it is reasonably confident that inflation will rise over the medium term to its 2 percent objective.” The Fed made clear that the rate hike was a tentative beginning to a “gradual” tightening cycle, and, “In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal.  The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate.”

The Fed projects unemployment will fall to 4.7 percent next year with economic growth of 2.4 percent.

Also, as part of its accompanying statement, the Fed expects the funds rate to creep up to 1.375% by the end of 2016, according to the median projection of 17 officials, to 2.375% by the end of 2017 and 3.25% in three years.  This implies four quarter-point interest rate increases next year, for starters, but, as usual, it will be data dependent.

“We do need to monitor inflation very carefully,” Yellen said.  If it doesn’t pick up, “we would need to take further action to reconsider the outlook and to put in place appropriate policy.”

In a press conference afterwards, Chair Yellen said: “The Fed’s decision today reflects our confidence in the US economy.  We believe we have seen substantial improvement in labor market conditions and while things may be uneven across regions of the country, and different industrial sectors, we see an economy that is on a path of sustainable improvement.”

Rick Rieder, portfolio manager at BlackRock Inc., summed up the feelings of many now that the Fed has finally moved.

“In waiting as long as it has to begin rate normalization; the central bank may have allowed this process to reach a point where domestic growth appears to have potentially crested as we head into the hiking cycle.”  [Jon Hilsenrath / Wall Street Journal]

In Washington, the House and Senate passed spending and tax cut legislation that funds the government through September, in the case of the former, spending, while extending items like the Child Tax Credit and Earned Income Tax Credit for low-income workers, and delaying taxes that help pay for ObamaCare (such as a suspension for two years of a tax on medical device manufacturers).

The House had to split the spending and tax measures into two to appease the bases of both parties, while the Senate took on the entire package.

The House voted 318-109 to provide $622 billion in tax breaks for businesses, families and individual taxpayers, while the $1.1 trillion spending package, which passed by a surprisingly large 316-113 margin (150 Republicans and 166 Democrats supporting it) increased defense and nondefense spending above the caps set by the 2011 Budget Control Act.  [Sequestration is history.]

The Senate then approved the package by a 65-33 vote and President Obama signed it this afternoon. 

Supporters said the legislation would help create jobs and boost the economy. Opponents said it will explode the deficit.

It was the first big budget compromise negotiated under new House Speaker Paul Ryan, but we’ll learn early on in 2016 if his triumph in bringing enough people together for passage is just part of a post-Boehner honeymoon, or whether old intra-party animosities will carry the day.

While Republicans were able to extract an end to a 40-year-old ban on exports of U.S. crude oil, which could boost domestic oil production by as much as 500,000 barrels a day, Democrats gained five-year extensions of wind and solar tax breaks.

But as Rush Limbaugh and other hardline conservatives would tell you, despite a majority in the House and Senate, Republicans failed to secure significant curbs on President Obama’s policy initiatives, including environmental regulations.  And Republicans were unable to add new restrictions on abortions.

Ryan, though, is receiving credit for opening up the appropriations process and being more honest with the conservative wing than Boehner apparently was.  Democratic Senate Minority Leader Harry Reid has even been extremely complementary of Ryan’s leadership thus far, which could be the kiss of death for the speaker but the warm feelings are in keeping with the holiday season, right, sports fans?

In the Senate, Majority Leader Mitch McConnell (R-Ky.) hailed the vote as a major accomplishment fulfilling his 2014 campaign pledge to get the institution back on track if voters gave Republicans control.

“We’re proving you can actually enact significant, long-term reforms, achieve conservative policy goals, and get them signed into law.”

Incidentally, as you’d expect, Republican Senators, and presidential candidates, Ted Cruz and Rand Paul voted no, while Sen. Marco Rubio was the only presidential candidate to miss the vote.  On the Democratic side, Bernie Sanders voted no as well.

As to the market reaction to all the above, especially the Fed decision, Wall Street staged a nice rally the first three days of the week, with the Dow Jones advancing 480 points in anticipation of the rate hike and the end to some of the uncertainty in the markets, but then oil resumed its slide and questions on economic growth re-emerged as the Dow lost 620 points on Thursday and Friday, including Friday’s 367-point swoon.  Oil finished the week at $34.55 for West Texas Intermediate, down 17% in just the past three weeks.

Europe and Asia

There was some economic news of import for the eurozone. A flash composite reading for December issued by Markit was 54.0 vs. 54.2 in November, with manufacturing at 53.1, a 20-month high.  [50 being the dividing line between growth and contraction.]

The flash reading breaks down France and Germany as well, and France’s Dec. composite was 50.3 vs. 51.0 last month, owing to the PMI on services falling to 50.0 (the Paris attacks having something to do with this), while manufacturing rose to 51.6, a 21-mo. high.

Germany’s Dec. comp was 54.9, with manufacturing at 53.0.

Chris Williamson, Chief Economist at Markit:

“The eurozone economy enjoyed a comfortably solid end to 2015, though policymakers are likely to remain disappointed by the relatively modest pace of expansion and lack of inflationary pressures, given the stage of the recovery and the amount of stimulus already in place...

“The survey data suggest GDP growth picked up in Germany during the fourth quarter, rising to 0.5% (quarter-on-quarter) as strong domestic demand and increasing exports drove a broad-based upturn in manufacturing and services.  It’s a different story in France, however, where the survey points to a mere 0.2% GDP rise at best in the fourth quarter, and a further slowing to near-stagnation in December bodes ill for the coming year – especially in the stalling service sector.”

Separately, the annualized inflation rate in the euro area was up 0.2% in November, vs. 0.1% in October.  France was at an annualized 0.1%, Germany 0.3% and Italy 0.2%; all well below the European Central Bank’s 2.0% target.

Eurobits:

--Greece’s unemployment rate fell to a three-year low of 24% in the third quarter, better than expected, even as Greek GDP contracted 0.9% year-on-year in the third quarter.

--Home prices in the (non-euro) UK rose 7% in October year-on-year, according to the Office for National Statistics, up 10.3% in Northern Ireland.  November retail sales rose a better than expected 1.7%, ex-fuel, after a 0.8% decline in October, as consumers held off for Black Friday specials last month; this seemingly becoming a bigger deal in parts of Europe than the U.S.

--Big election in Spain this weekend, as Prime Minister Mariano Rajoy could yet pull it out.  Rajoy, who was sucker-punched in a nasty incident at a campaign rally the other day, had the lead in all five major voter surveys published this week as he has shunned two nationally televised debates.

Rajoy could lose his majority in parliament, but it is expected he would gain a second term in a coalition government.

The big question is just how well Rajoy is treated at the polls after years of austerity measures that he applied during a deep recession.  He created a lot of jobs in four years, but the unemployment rate is still 21%, plus many of the new jobs are temporary or part-time positions. 

--Finally, you have the critical issue of Britain and their demands for EU reforms, including tougher rules for migrant workers, as Brits debate whether to leave the European Union, or ‘Brexit.’  Chancellor Merkel said: “We know that the task to find a solution here [at an EU summit on the British question] is very demanding.”

British Prime Minister David Cameron gained nothing this week, but both he and Merkel know the ‘horse-trading’ will take place next year, with the next planned gathering of EU leaders in February.

There’s going to be lots of tension over this issue in 2016, with Cameron having promised his people a referendum by 2017...a simple ‘in or out’ question.

George Soros / Financial Times

“As Britain approaches a crucial vote on whether to leave or remain in the EU, there is no doubt about how far-reaching the consequences could be for future generations. While some may be reluctant to be drawn into the debate, I believe the stakes are simply too high to remain silent.

“Whether the question is seen as an economic one, centering on what Britain gets out of being in Europe, or whether it is the more profound issue of how to maintain security and strength in an increasingly uncertain world, the case is more compelling than it has ever been.

“Britain already has the best of all possible deals with Europe.  It has access to the single market, where nearly half of all UK exports go, while it is not weighed down by the burden of being a member of the eurozone....

“The Leave campaign has tried to convince the British public that it is safer to stay out of the single market than to be part of it. It has had the field to itself because the government wants to give the impression that it is holding out for the best deal from the EU.  Taking advantage of these constraints, the Leave campaign has deliberately misled the public.

“My pro-European views on the British referendum have been greatly influenced by my personal experiences.  The year when the Nazis marched into Hungary, 1944, was the formative experience of my life.  If my father had not secured false identities for his family, my chances of survival would have been rather slim.

“The main lesson I learnt from my father is that it is better to confront harsh reality than to close your eyes to it.... I came to see what became the EU as the embodiment of the open society and became its life-long supporter.

“That does not mean that I have closed my eyes to its weaknesses and shortcomings.  On the contrary, I recognize them completely.  Europe cannot afford to be complacent about its security, and neither can Britain.

“It would be a strategic mistake of epic proportions to underestimate the ambitions and the intent of President Vladimir Putin’s Russia.  Europe’s leaders may comprehend the scale of this threat, but so far their response has been characterized more by confusion than by coherence.  They must understand that, until their energy dependency is addressed, Russia will not be afraid to use its petro-power to threaten both eastern and western Europe.

“Today Europe is under attack on many fronts.  If Britain were to leave, Europe would be fighting for its very survival.  Those of us who feel passionately have an obligation to make our voices heard, and argue more confidently that Britain is stronger, safer and better off in the EU than it would be out on its own.

“The EU is imperfect but it is preferable to a Europe dominated by Mr. Putin’s Russia.  Europe’s very imperfection is the reason we must endeavor to improve it....

“I strongly support Britain staying in the EU, not only for economic but even more for political reasons.”

On the migrant crisis, German Chancellor Merkel described it as “an historic test” for Europe. Speaking at an annual party conference of the Christian Democrats, she said the German government now expects more than a million refugees to have come into the country by the end of the year.  In appeasing her critics who have decried her decision to welcome refugees fleeing Syria’s civil war, Merkel told the conference the influx would be “noticeably reduced,” though she later repeated her rejection of a limit on the numbers.

Merkel told her fellow party members: “The war in Syria, the barrel bombings by Assad, the spread of IS in Syria and Iraq, the fact that Libya has no functioning government, the situation in Afghanistan – all that is no longer far away but has come to us.”

On Thursday, German police arrested a Syrian refugee suspected of links to ISIS, highlighting the security risks posed by Merkel’s open-door policy.

Meanwhile, authorities in Greece are struggling mightily to deal with a renewed influx of migrants as the Balkan nations block entry to their own countries.  20,000 recently arrived in Athens, on top of scores already there.  [Why would anyone want to holiday in Athens these days  and have to deal with this horde?]

And in Denmark, not only has the government cut social benefits for refugees by up to 50% in an ongoing effort to keep migrants out, but the country is debating a rather extreme piece of legislation that would allow authorities to confiscate jewelry from refugees entering the country, and it seems the proposal is almost certain to pass Parliament.  The goal is to find assets (authorities would have the power to search clothes and luggage of asylum seekers) that would cover expenses.

The law would also impact those refugees already in the country.  Parliament takes it up in January.  [Washington Post]

Turning to Asia, the Chinese Academy of Social Sciences, a leading government-sponsored think tank, is now forecasting GDP growth will slow to 6.6% to 6.8% next year from the current 6.9% pace.

The CASS forecast consumer-price inflation would accelerate to 2.1% next year, while factory-gate deflation (producer prices) would extend its record stretch to more than four years.

In a survey of 50 manufacturers in various cities by the National Bureau of Statistics, the bureau found that local manufacturers were grappling with worsening business conditions.

According to China Economic Weekly, a magazine affiliated with the Communist Party’s mouthpiece People’s Daily:

“Overcapacity, weaker demand at home and abroad, falling factory prices and rising labor and financing costs have put huge barriers in the way of business development,” the magazine cited the bureau as saying.

“Manufacturers must urgently transform and upgrade to move up the value chain.”  [South China Morning Post]

Separately, Chinese home prices have gone from deflation to stabilization to outright gains in the space of just a few months, according to the NBS.

The 70-city home price index rose an average 0.9% year-on-year in November, after a 0.1% increase in October.  In March and April prices were deflating at a record pace of 6.1%, the biggest drop since the data series started in 2011.

In November, prices rose in 33 of 70 cities, on a monthly basis, up from 27 a month before.

Shanghai prices actually rose 13.1% from a year ago, while prices in Beijing rose 7.7%.

Lastly, of 22 big emerging markets tracked by JPMorgan, 21 of them have seen their 2016 consensus growth forecasts cut in the past three months, with the lone exception being the Czech Republic, which has seen no change to a 2.7% growth outlook next year.

Brazil, as I note below, is expected to see further contraction in ‘16 rather than meager growth, while Greece’s GDP is expected to decline at a 1.2% pace rather than remaining flat.

Even Chile, long held up as an example for other emerging markets, has seen its consensus growth forecast cut from 3.0% to 2.3% in 2016.  [Steve Johnson / Financial Times]

Street Bytes

--The Dow Jones is now -3.9% for the year with eight trading days to go, while the S&P is -2.6% and Nasdaq is +4.0%.

--U.S. Treasury Yields

6-mo. 0.45%  2-yr. 0.95%  10-yr. 2.20%  30-yr. 2.92%

The consumer price index for November was released and the rate was unchanged, up 0.2% ex-food and energy.  But while the CPI is now up 0.5% the last 12 months, the core figure is up 2.0%, the Fed’s target, though not its preferred benchmark.

Also on the economic front, November housing starts came in a little better than expected, while industrial production for the month was down 0.8%.

--A week after two high-yield funds announced they would shutter and another barred withdrawals (funds managed by Third Avenue and Lucidus), investment grade bond funds in the US have been hit by a record wave of redemptions, $5.1bn from mutual funds and exchange traded funds purchasing investment grade bonds – those rated BBB minus or higher by one of the major rating agencies, according to fund flows tracked by Lipper and the Financial Times.

The withdrawals are the largest since Lipper began tracking flows in 1992, this after another week of $3bn-plus withdrawals from junk bond funds.

Analysts and portfolio managers have warned that defaults are likely to climb in 2016, thanks to the slide in commodities markets, notably the oil and gas sector which issued gobs of paper in this easy money environment.

Bank of America Merrill Lynch’s high yield index saw its yield eclipse 9% this week.

As reported by the Financial Times’ Eric Platt: “Leverage has risen rapidly over the past five years as US companies issued debt to fund acquisitions, raise dividends and buy back stock.  While banks have largely repaired their balance sheets since the financial crisis, the corporate debt burden in the US has climbed to $5.6 trillion, up 59% from December 2010, according to Barclays Indices.”

--Natural-gas prices dropped to the lowest level since 1999, $1.72 a million British thermal units at one point on Friday, before closing at $1.77.  On an inflation-adjusted basis it is now at a record low.  About half of U.S. households use natural gas as their primary heating source.

Crude oil prices approached, and in some cases surpassed, 2008 lows amid a worsening glut of supply as production from Iran starts to come on stream next year with the lifting of sanctions.  It didn’t help that a US government report showed crude stocks unexpectedly jumped last week by the widest margin since October, with the Department of Energy reporting oil inventories rose by 4.8m barrels, far outpacing estimates of a 600,000-barrel draw.  Inventories remain at 80 year highs for this time of year, according to the DoE. Saudi Arabia increased exports to the US by a third in the past month while Iraq doubled shipments to the country.

Stocks on the US Gulf Coast, where most of the Middle East crude arrives, have jumped to a record 251m barrels, 30% higher than this time last year.

David Hufton at London-based broker PVM: “The (recent) OPEC meeting has removed any last hopes of a reprieve for oil and it has added another layer of downside sentiment to commodities in general.  The dam has collapsed and prices are in free fall with devastating consequences for investment and jobs.”  [Financial Times]

The huge fall in prices has hammered stock and bond prices of energy companies.  Chesapeake Energy Corp. saw its bonds tumble to about 30 cents on the dollar ahead of a debt-swap deadline, while the company’s shares are down 80% so far this year (as of early this week).

Separately, Wells Fargo warned of “stresses” in its energy portfolio, while last week, Bank of America CEO Brian Moynihan noted that some energy loans had moved to “classified” status – and thus in danger of default.

--America’s dirtball, Martin Shkreli, a former hedge fund manager and current pharmaceutical entrepreneur who has been widely criticized for drug price gouging, was arrested Thursday morning by federal authorities and charged with securities fraud. 

Robert Capers, US attorney for the eastern district of New York, said: “Martin Shkreli engaged in multiple schemes to ensnare investors in a web of lies and deceit.  His plots were matched only by efforts to conceal the fraud, which led him to operate his companies...as a Ponzi scheme, where he used assets of [his drug company, Retrophin] to pay off debts from [his hedge fund, MSMB].”

Editorial / New York Post

“If you want to play the big free-market bad boy, don’t have a dirty past: That looks to be the lesson of Martin Shkreli’s fall.

“Turing Pharmaceuticals CEO Shkreli won infamy for boosting the price of a key anti-AIDS drug into the stratosphere – then bragging about it. But on Thursday, the Securities and Exchange Commission had him arrested for securities fraud.

“The US Attorney alleges the 32-year-old Brooklynite used profits from his old firm Retrophn Inc. as a ‘personal piggy bank’ to pay investors in his hedge fund.

“The feds will have to make their case, but much of America will be happy to see Shkreli behind bars.  In September, word broke that he’d hiked the per-pill price for Daraprim – a 62-year-old drug now used to fight AIDS – from $13.50 to $750.  That may have been legal, but it sure was dumb.

“Shkreli’s shameless huckstering and self-promotion only stoked the rage.  Hillary Clinton, Bernie Sanders et al naturally rushed to make this jerk the face of the pharmaceutical industry, or capitalism itself.

“Yet capitalism was riding to the rescue: Other firms were rushing cheaper generics to the market.

“He’s now charged for activity that predates the Daraprim affair. The allegations, if proven true, show that he’s not just greedy and slimy, but a crook.

“If so, let Shkreli rot in prison. For once, left and right will unite – in cheers.”

Shkreli resigned from his CEO post at Turing on Friday, replaced on an interim basis by the chairman.

--IMF chief Christine Lagarde said she plans to appeal a decision to send her to trial over a 400m euro payment made to French businessman Bernard Tapie in 2008.

This case has popped up from time to time since, Lagarde being French finance minister in ‘08, and she has always said she acted appropriately.

After four years of investigation, a prosecutor in September argued the case against her should be dropped, but the Court of Justice of the Republic, a special court for trials of government ministers, has decided she has a case to answer.

Lagarde became IMF chief in 2011, taking over for the disgraced Dominique Strauss-Kahn.

As for Tapie, a flamboyant magnate and TV star, he had sued French bank Credit Lyonnais for its handling of the sale of his majority stake in sportswear company Adidas in the mid-1990s.

With Lagarde’s approval, an arbitration panel ruled he should receive 400m euro in compensation, including interest; a deal seen by critics as a sign of a too-close relationship between the corporate and political elite.

Tapie was close to then-President Nicolas Sarkozy, who was Lagarde’s boss.  [Irish Independent]

--Brazil was stripped of its investment grade status by two major credit rating agencies, Fitch and S&P. Fitch downgraded Brazil to BB+, with a negative outlook, citing the worsening economic picture and growing political crisis.

Fitch also downgraded the debt of Petroleo Brasileiro (Petrobras), the state energy company, to BB+.

It’s still amazing to think this nation will host the 2016 Summer Olympics.

--Laura Noonan and Martin Arnold / Financial Times: “Big banks in Europe and the US announced almost 100,000 new job cuts this year, and thousands more are expected from BNP Paribas and Barclays early next year.

“The 2015 cuts – excluding the impact of major asset sales – amount to more than 10 percent of the total workforce across the 11 large European and US banks that announced fresh layoffs, according to analysis by the Financial Times.”

US banks and insurers cut almost 400,000 jobs in the first five years of the financial crisis, according to US census data.

Friday, Citigroup announced it planned to cut 2,000 jobs starting next month, while earlier, Morgan Stanley said it would reduce its workforce by 1,200, though this is part of an annual performance-based cull, with Goldman Sachs doing something similar.

--FedEx shares rose after the company posted a bigger-than-expected increase in quarterly profits, while adding it is seeing a “record number of holiday shipments” flowing through its system, “fueled by the steady rise of e-commerce,” according to CEO Frederick Smith.

The company also reaffirmed its guidance for 2016, despite sluggishness in the industrial sector.  But the shares lost all their gains in Friday’s big selloff.

--I wrote a few weeks ago that I was dismayed that Alibaba and its CEO Jack Ma were rumored to be acquiring Hong Kong’s great independent English-language newspaper the South China Morning Post.  Monday, it became official.

One reporter at the paper, who requested anonymity, told the Wall Street Journal: “People see this as a possible threat, because the South China Morning Post is kind of neutral at the moment.”

Hong Kong residents believe their city’s media freedom is under siege.  But the independence that so characterizes Hong Kong’s press has been under siege for a while, with smaller papers having been snapped up by Chinese tycoons, which taints the coverage of any issue that may affect the owners’ business interests.

SCMP, though, has been a beacon of freedom.

Jonathan Kaiman / Wall Street Journal:

“After the announcement, Alibaba Executive Vice Chairman Joe Tsai said that while the company would not interfere with the newspaper’s editorial decisions, it hoped the deal would help offset ‘biased’ Western media reports about China and would burnish the country’s reputation abroad.”

“ ‘Some have suggested that ownership by Alibaba will compromise the SCMP’s editorial independence,’ he said in a statement.  ‘This criticism reflects a bias of its own, as if to say newspaper owners must espouse certain views, while those that hold opposing views are ‘unfit.’’”

The anonymous reporter at the paper told the Journal: “The general impression for everybody is that what Joe Tsai said is not very reassuring,” he said.  “And his explanations were a bit fake – or it’s not clear, actually, what he wanted to say. All we can do is just hope for the best.”

From a separate story in the Journal, by Gillian Wong: “Alibaba Group’s purchase of Hong Kong’s South China Morning Post newspaper marks the latest in a string of moves that align Jack Ma’s e-commerce giant with China’s political priorities.”

Editorial / Washington Post

“Perhaps it’s true that Mr. Ma really does intend to risk annoying his home country’s authorities, who have not hesitated to arrest and imprison mightier personages than he. Perhaps he does intend to produce untrammeled reportage about government and business in China, the better to draw attention to his e-commerce business and, perhaps, stir the cause of reform in China.

“On the other hand, it may well be that the South China Morning Post is about to be molded into a pseudo-private instrument of the Chinese state’s ‘soft power,’ much as Alibaba itself has helped launder Beijing’s image and co-opt potential foes through a splashy stock offering in the United States.  This would represent another step in China’s march not only to control the news that people in China can see but also, through media ownership, visa denials and other methods, to limit free debate about China throughout the world.”

This is, as I first said, a huge loss for democracy in Hong Kong.  And I have said from day one that when it came to Alibaba, I would not trust it on anything, especially transparency.  I don’t care how good Jack Ma’s personal story is.  He claims independence from Beijing, but that’s a bunch of bull.

[Remember, China already blocks many foreign news organizations inside the country, including the New York Times and the Wall Street Journal.]

--According to a Credit Suisse report issued to clients on Tuesday, Apple faces a “subdued iPhone cycle for the next few quarters.”  The stock fell on the news as investors are also seeing weakening results from some of Apple’s suppliers.  For example, Dialog Semiconductor, a key smartphone supplier, took down revenue guidance for the quarter by 11% on Tuesday, potentially a harbinger of things to come in terms of iPhone demand.

Morgan Stanley said this week it expects iPhone unit sales to fall about 6 percent in fiscal 2016.

The company’s shares are off 21% from the April highs.

[Apple did win an exclusive streaming deal with Taylor Swift to show a concert film from her world tour that was built around her latest album, “1989.”  The tour finished up on Saturday with more than $240 million in gross ticket sales.  Ms. Swift turned 26 last Sunday.]

--Volkswagen lost more market share last month in Europe as it continues to reel from revelations of cheating in emissions tests, with up to 12m vehicles affected in regions across the world.

In the US, sales of VW-brand cars fell 25% last month, although that was partly because the carmaker had stopped selling certain vehicles affected by illegal software. 

On Tuesday, European manufacturers body Acea released figures saying VW’s EU market share shrank from 26.6 percent in November 2014 to 24.3 percent last month. 

The VW brand did see its sales up 2.8 percent Europe-wide, but this compared with year-on-year growth at rival brands in the month: 17 percent for Peugeot, 18 percent at Opel, 19 percent for Renault and about 20 percent for Ford and Fiat.  [Andy Sharman /Financial Times]

--I was struck by this little blurb in the local press.  “The City of Summit and Uber are partnering for a special $5 flat rate for any ride that begins and ends in Summit from Wednesday, December 16, 2015 through Saturday, January 2, 2016.”

That’s terrific, and yet another sign of how powerful and wide-ranging Uber has become in such a short period of time.

--Shares in Valeant Pharmaceuticals surged as the company announced a new distribution deal with Walgreens.  The agreement will help to lower the prices of its branded prescription-based dermatological and ophthalmological products by 10 percent.

Valeant has faced harsh criticism as its share price tumbled nearly 75 percent for its practice of buying smaller drug developers, hiking drug prices and then slashing spending on research into new drugs.

--As part of Dell Inc.’s acquisition of EMC Corp., the now-privately-held company had to release its recent results and in the quarter ended in July, revenue declined by 6% year-over-year.  It’s the first time we’ve seen Dell’s results since late 2013, when the company went from public to private ownership.  For the fiscal year ended January 2015, however, revenues rose 5%, a better performance than competitors IBM and Hewlett-Packard.

--Chipotle Mexican Grill Inc. is pulling back on local ingredients due to a string of disease outbreaks. The company announced that after touting its use of local and fresh produce, it will centralize preparation of some vegetables in an attempt to shore up food safety.

Health officials still haven’t been able to identify the source of the E. coli outbreak but produce is the probable cause. Founder and co-CEO Steve Ells appeared on NBC’s “Today” show to apologize for the problems, including norovirus at one Boston location.  Chipotle has warned its fourth-quarter earnings would be heavily impacted by the negative news.

--International supermodel Bar Rafaeli and her mother are suspected of tax evasion by Israeli authorities, as announced Thursday.  The two allegedly failed to report millions of dollars in income earned abroad and on swag received at various celebrity affairs and from sponsors.  Rafaeli also supposedly did not pay taxes on a luxury apartment in Tel Aviv, where she lives.

Both the model and her mother have been barred from traveling abroad for six months without permission.

--I warned months ago that the ski business in the Northeast would suffer mightily amidst this wicked El Nino that has led to sky-high record temperatures.  I heard last week that only 11 of 50 major ski areas in the region are open (8 of 20 in Vermont).  New York state’s massive Hunter Mountain remains closed.  Last year Hunter opened on Nov. 21.  Several hundred seasonal jobs have not been filled at this single resort.  And of course you have a ripple effect on local businesses.

According to an official for Ski Vermont, there is $700 million in direct spending each year by skiers (for lift tickets, lodging and resort restaurants) and $700 million in indirect spending (gas and other purchases that support the ski industry).  [New York Post]

Of course a nice cold wave would go a long way towards bringing back some normalcy, but that’s certainly not in the immediate cards.

--Howard Stern signed a new contract with SiriusXM, ending speculation he might walk away from satellite radio and try his hand at Internet radio.  So he will host “The Howard Stern Show” on Sirius for another five years, while a 12-year-deal includes developing a video-streaming service with the help of his vast library.

Stern’s current contract is for $80 million a year and analysts believe his new deal is perhaps for $90 million, in salary.

SiriusXM now has 29 million subscribers.

--“Star Wars” fans were out in full force Thursday night, as “Star Wars: The Force Awakens” took in a record-smashing $57 million in ticket sales Thursday night in the US and Canada, topping the previous record holder, “Harry Potter and the Deathly Hallows – Part 2,” which grossed $43.5 million from Thursday shows in July 2011.

“Star Wars” is expected to take in up to $220 million through Sunday in its domestic opening weekend.  The record is $209 million set by “Jurassic World” in June.  [Los Angeles Times]

Foreign Affairs

Iraq/Syria/ISIS/Russia/Turkey: The UN Security Council unanimously approved a resolution on Friday calling for a cease-fire and political talks to help end the civil war in Syria, the measure being adopted 15-0.  It was the first time that Russia and the United States agreed on a road map for a political process.

Earlier, Russia made clear to Western nations that it has no objection to Syrian President Bashar al-Assad stepping down as part of a comprehensive peace process, which is a softening of its demand that Assad stay in power, but despite the happy talk in New York today, there are huge issues to be decided before any kind of deal can be implemented, including the determining of which of the rebel groups would participate in talks scheduled to begin next month, some of them already having said they would never participate without a guarantee of Assad’s exit.

And you also have to determine which groups are terrorist organizations and which are not.

I’m cynical because I told you in 2012 it was “over” and it was.  You will never put Syria back together.  It’s fractured, broken beyond repair.

But for now, Russia and Iran have long stated Assad’s fate should be decided in a nationwide vote, while the likes of Turkey, Saudi Arabia and others have reluctantly agreed to let Assad stay during any transition period, which gave Russia some wiggle room.

On the battle front, ISIS staged its most significant military operation in northern Iraq in more than five months, north and east of its base of Mosul, but it was beaten back by American and allied airstrikes (the US, Britain and France participating) and fierce fighting by Kurdish forces, the pesh merga.  Dozens of Kurds were reportedly killed, but also 180 ISIS militants.

Brig. Gen. Mark Odom, the senior American officer in northern Iraq, said, “I think their principal objective was probably to conduct a spoiling attack,” referring to the possibility it was intended to disrupt moves to encircle and eventually attack Mosul.

While this was a defeat for ISIS, Masrour Barzani, the chairman of the Kurdish region’s security council, said, “The last 24 hours are a grim reminder of why we should not underestimate ISIS and how badly the pesh merga need more ground support in addition to continued air support.”

About 300 ISIS fighters, in four coordinated attacks, participated in the operation, an indication of the challenges Iraqi forces face.  [Michael R. Gordon / New York Times]

Separately, Liz Sly / Washington Post:

“Aid agencies are warning of a worsening humanitarian crisis in northern Syria as sharply intensified Russian airstrikes paralyze aid supply routes, knock out bakeries and hospitals and kill and maim civilians in growing numbers.

“Air attacks have escalated significantly since Turkey shot down a Russian warplane along the Turkey-Syria border on Nov. 24, aid agencies say, with Russia responding to the incident by stepping up its effort to crush the anti-government rebellion in the insurgent-held provinces bordering Turkey....

“(Many aid agencies have been forced) to halt or curtail their operations (thus) deepening the misery for millions of people living in the affected areas, according to a report this month by the UN Office for the Coordination of Humanitarian Affairs.

“Hospitals and health facilities also have been struck, reducing the availability of medical care for those injured in the bombings.  According to the UN report, at least 20 medical facilities have been hit nationwide in Syria since Russia launched its air war on Sept. 30.”

Rae McGrath, a director with the American aid agency Mercy Corps, one of the largest providers of food aid in northern Syria, said, “We’re also seeing a huge increase in the number of civilian casualties... It’s hard to imagine that the conditions in Syria could have become worse than they already were, but they have.”

Then you have the Assad regime.  Government helicopter gunships launched a series of attacks against a suburb of Damascus under opposition control and killed at least 45 civilians, including a number of children.

At least the UN Security Council unanimously backed a US-Russian resolution calling for tougher measures to block ISIS from the international financial system, but it’s all about adoption, as US Treasury Secretary Jack Lew admitted.  “We need meaningful implementation, coordination and enforcement from each country represented here, and many others,” he noted.

Meanwhile, President Obama claimed in various forums this week, including in a visit to the Pentagon and his Friday yearend press conference, that US-led forces have stopped the Islamic State’s ground gains in Iraq and Syria, taken back swaths of territory, killed a number of key leaders, and are now putting “the squeeze” on ISIS-held cities such as Mosul and Raqqa.

But the president said nothing about ISIL’s rapidly growing presence in the likes of Libya and Yemen.

Plus, in a private session with selected reporters this week:

“Mr. Obama explained that his refusal to redeploy large numbers of troops to the region was rooted in the grim assumption that the casualties and costs would rival the worst of the Iraq war.  In such a scenario, he said, a renewed commitment could take up to $10 billion a month and leave as many as 500 troops wounded every month in addition to those killed, a toll he deemed not commensurate to the threat.

“Mr. Obama said that if he did send troops to Syria, as some Republicans have urged, he feared a slippery slope that would eventually require similar deployments to other terrorist strongholds like Libya and Yemen, effectively putting him in charge of governing much of the region.  He told the columnists that he envisioned sending significant ground forces to the Middle East only in the case of a catastrophic terrorist attack that disrupted the normal functioning of the United States.”  [Peter Baker and Gardiner Harris / New York Times]

I just want to scream.  Obama had his opportunity in 2012 and was more concerned about the election than doing the right thing and setting up a no-fly zone with Turkey.  Next week I’ll pick apart one of his replies to a question on Syria in Friday’s press conference.  Just don’t have the time today.

Editorial / Washington Post

“Russian planes are still bombing Western-backed forces in Syria every day and targeting hospitals, bakeries and humanitarian corridors.  Moscow is still insisting that blood-drenched dictator Bashar al-Assad remain in power indefinitely while trying to exclude opposition groups from proposed peace negotiations by claiming they are terrorists.

“Nevertheless, Secretary of State John F. Kerry insisted Tuesday after meeting with Vladimir Putin that the Russian ruler and the Obama administration see Syria ‘in fundamentally the same way.’  Unfortunately, that increasingly appears to be the case – and not because Mr. Putin has altered his position.

“For four years, President Obama demanded the departure of Mr. Assad, who has killed hundreds of thousands of his own people with chemical weapons, ‘barrel bombs,’ or torture and other hideous acts.  Yet in its zeal to come to terms with Mr. Putin, the Obama administration has been slowly retreating from that position.  On Tuesday in Moscow, Mr. Kerry took another big step backwards: ‘The United States and our partners are not seeking so-called regime change,’ he said.  He added that a demand by a broad opposition front that Mr. Assad step down immediately was a ‘non-starting position’ – because the United States already agreed that Mr. Assad could stay at least for the first few months of a ‘transition process.’

“Mr. Kerry’s rhetorical capitulation was coupled with the observation that the administration doesn’t ‘believe that Assad himself has the ability to be able to lead the future Syria.’  But he now agrees with Mr. Putin that the country’s future leadership must be left to Syrians to work out.  That’s a likely recipe for an impasse – especially as Mr. Assad is still saying he won’t even negotiate with any opponents who are armed or backed by foreign governments.  At the same time, the administration’s forswearing of ‘regime change’ sends a message to Mr. Putin and his Iranian allies: The power structure in Damascus that has granted Russia a naval base and served as a conduit for Iranian weapons to the Hizbullah militia in Lebanon can remain....

“If and when the Russian bombings cease, there will be more reason to share in Mr. Kerry’s sunny view that Russian and American views on Syria are converging.”

Separately, Saudi Arabia unveiled a “military alliance” of Muslim nations ready to fight “terrorism,” in another sign the Saudis are adopting an increasingly interventionist approach, a la its actions in Yemen where it is fighting a proxy war with Iran.  It is also concerned about the nuclear deal between its traditional western allies and Iran.  But....

Ariel Ben / Jerusalem Post

“The greatly hyped new Saudi-led Islamic coalition against terrorism is meant more for Western ears rather than actual action on the ground against Sunni jihadist groups Islamic State and al-Qaida.

“The expectation that Sunni Saudi Arabia is going to lead a 34-state coalition against fellow radical Sunni groups when it sees them as a bulwark against advancing Iranian and Shiite allies across the region, should not be great.

“Predictably, Shiite-ruled Iran and Iraq were not part of the new alliance, and of course Syria was also absent.

“The centuries-deep Sunni-Shiite divide is raging across the region and is much more important than any intra-Sunni rivalries or threats....

“Arab allies have pulled back from the US-led campaign, and one Pentagon official involved in the fight against Islamic State told the Washington Times in a report at the end of last month that the Saudis have not used their air force against the group in nearly three months.

“The official also said Jordan stopped flying missions against the group in August and UAE since March.

“It is more likely that attacks by the coalition, if it is even able to get off the ground, would target Shiite forces in the region, and less Sunni ones.”

And remember, Saudi Arabia is bogged down big time in Yemen, yet refuses to drop any of its bombs on al-Qaeda, which is part of the Army of Conquest there, including Islamist group Ahrar al-Sham, as reported by the Jerusalem Post.

Iran, part II: The UN Security Council’s Panel of Experts on Iran said in a confidential report, first reported by Reuters, that Iran violated a UNSC resolution in October by test-firing a missile capable of delivering a nuclear warhead, a team of sanctions monitors said.

But apparently the rocket test on Oct. 10 was not technically a violation of the July nuclear deal, though it gives President Obama’s critics ammunition, with calls from Congress for more sanctions on Tehran.

Tehran denied the missile was capable of delivering a nuclear warhead...cough cough.

Meanwhile, the UN’s International Atomic Energy Agency has completed its probe of Iran’s nuclear weapons program, concluding Iran has conducted no new work in this sphere since 2009, which now paves the way for the lifting of international sanctions on the country.

Mark Dubowitz, an expert on Iran sanctions at foreign policy group Foundation for Defense Democracies, who has criticized the nuclear agreement, said the IAEA’s action weakens the deal further.

“The international community has let Iran off the hook,” he told USA TODAY.  “Iran has learned that stonewalling and intransigence will be met with a feeble international response.”

Others say the removal of sanctions will give Iran a major financial incentive to stay compliant.  Dubowitz counters: “Removing sanctions makes it much harder because we’re losing leverage to get Iran to comply.”

Yemen: A missile strike by Iranian-backed Houthi rebels in southwestern Yemen claimed the lives of dozens of Saudi and pro-government forces, including senior Saudi and UAE commanders, according to the New York Times.

The strike was massive, with a spokesman for the Houthi rebels claiming 146 “enemy soldiers and mercenaries” were killed when a rocket struck the operations center in Taizz province.

The dead included a Saudi colonel, who just two days earlier was in photos showing him receiving a medal of courage.

Egypt: Investigators here claim they have no proof that terrorism caused a Russian jet to crash in the Sinai in October, killing 224 people.  Everyone else has concluded it was terrorism, with the ISIS affiliate in Sinai claiming responsibility.

Egypt is clearly trying to aid its vital tourism industry, which has been decimated as a result of the incident.

Saudi Arabia: Elections were held that allowed Saudi women to vote and run for office for the first time, with more than a dozen winning seats on local councils, though these councils have limited powers and females will comprise less than one percent of them.

The bottom line is Saudi women are still deprived of many basic rights, such as the ban on driving.

Russia, part II: President Putin gave his annual wide-ranging news conference, lasting three hours and seven minutes*, and he slammed Turkey over the shooting down of the Russian combat jet.

“The Turks,” he said, had “decided to lick the Americans in a certain place.”  [BBC News]

Yes, he said that.  Putin also said the shoot down was a “hostile act” and that Russia was “not the country” to run away.  He also saw “no prospect” of ties improving with Turkey under its current leaders.

[Russia expanded sanctions against Turkey this week, impacting the hospitality industry, among other sectors.]

Putin added there was a “creeping Islamization of Turkey that would have Ataturk rolling in his grave.”  [Good statement, Vladimir...really.]

On other issues, Putin denied, again, that Russian regular troops were deployed in rebel-held eastern Ukraine but said there could be “people there who were carrying out certain tasks including in the military sphere.”

And he said the Syrian people themselves must determine who rules the country.

He predicted economic growth in Russia in 2016 of 0.7%, rising to 1.9% in 2017.

*The record for a Putin news conference is 4 hours 40 minutes.

Ukraine: Russia suspended a free trade agreement with Ukraine beginning Jan. 1.  A few days later, Ukraine said it won’t repay $3 billion in bonds due to Russia, with Moscow having said a week earlier that it would take Ukraine to court if the payment was missed.  Russia had refused to join an $18 billion restructuring with commercial creditors this year, so tensions between Russia and Ukraine have just been ratcheted up another notch or two.

France: In the first round of voting in France’s regional elections, Dec. 6, the far-right National Front (FN) had the most votes in six of 13 regions and it was thought in the second round that they would gain control of up to four, with Marine Le Pen and her niece, Marion Marechal Le Pen, securing wins in their respective contests, thus giving FN control of a major office(s) for the first time since its founding in 1972.

But in the end, the mainstream parties formed a de facto alliance against the FN, pitched a shutout, and Ms. Le Pen and Marion were even defeated where they were favored, as the Socialist Party pulled out of some races, allowing the right party of the former president, Nicolas Sarkozy, to win.  So as has happened in the past in similar situations, in the second round, the left often votes for the right, and, where necessary, the right votes with the left, to block FN or other fringe parties.

Marine’s concession speech was hardly conciliatory, despite 70 percent of voters rejecting the party’s message.  The loss “revealed the fundamental lie on which has rested for decades the French political system,” she said.  What was “revealed with no possible ambiguity were the hitherto occult connections of those who claim to oppose each other but who, in reality, share power, without ever resolving your problems, and worse, lead the country, from one mandate to another, into submersion” by migrants “and into chaos.”

The National Front did triple the number of councilors who will sit on the country’s regional assemblies, to 358, which can be an effective way to carry the party’s message, and it scored a record number of votes – 400,000 more than in the 2012 presidential election.

But while Le Pen will still launch a vehement campaign for the 2017 presidential election, the FN faces the same barriers.  They’ll have trouble gaining more than 30 percent (which could still find her in a run-off with either President Hollande or Sarkozy, but then she’d be wiped out).

Working against her is the fact the economy will probably be in growth mode come spring 2017, even if still sluggish, but, frankly, she needs another high-profile terror incident in France, as awful as it is to write this, to gain further ground.

Bottom line: Marine lost the chance to govern a region and show the country, and the world, her party is serious.

[The final national vote tally had the Republicans (Sarkozy) with 40.6%, up from 26.7% in the first round; the Socialists with 29.1%; and FN with 27.7%.  Marine Le Pen secured 42.2% in her regional election, while Marion took 45.2%, both losing to the center-right.  The Republicans won seven mainland French regions and the Socialists five, with nationalists taking Corsica.]

Gideon Rachman / Financial Times

“The relative strengths of nationalism and internationalism were tested in France over the weekend.  And this time the internationalists came out ahead.  In Paris, Laurent Fabius, the foreign minister, was able to bring down his flashy green gavel and announce that almost 200 nations had agreed on a climate change deal.

 “The following day, the National Front, a nationalist anti-immigration party, failed to win control of any of France’s regions in elections.

“Marine Le Pen, the leader of the FN, had said that politics is increasingly a contest between nationalists and globalists. This weekend’s events show that the globalists are still just about in control.  But the margins of victory and defeat are narrowing.  In 2002, Jean-Marie Le Pen took 17 percent as the FN candidate in the second round of a French presidential election.  This time, his daughter and granddaughter (far-right politics is a family affair in France) scored well over 40 percent in regional contest.  On a national level, FN is now scoring less than 30 percent.

“The climate accord was an important success for the globalists who are decried by the National Front. At a time when Ms. Le Pen is painting a picture of a France that has ceased to matter in the world, calling for the closure of borders and the withdrawal from international agreements, this was a demonstration of a confident, internationally minded nation that is fully capable of playing a global role.  The fact that the conference took place in Paris weeks after the terror attacks was also an important symbol of French resilience....

“But the victory of internationalists over nationalists cannot be assumed.  On the contrary, nationalist forces are still gaining strength in Europe, Russia, the US and east Asia.  The forces that feed the nationalist narrative – economic stagnation, terrorism and the fear of immigration – are not going away.”

China: Another ‘red alert’ for pollution was issued in Beijing on Friday, after the first-ever such warning earlier this month.  Authorities say the capital will be shrouded in heavy pollution until next Tuesday.  Once again schools were closed.  Many parts of northern China are being hit with their worst pollution of the year.  And where is it eventually blown when the winds pick up?  Taiwan....and our own west coast over time.

Meanwhile, Guo Guangchang, the chairman of Chinese conglomerate Fosun International who went missing for four days because he was “assisting (an) investigation” by mainland judiciary authorities, suddenly showed up in New York on Thursday evening for a dinner.  [South China Morning Post]

And Australia has stepped up military surveillance flights over the South China Sea, sending a signal to Beijing the Aussie government does not agree with its territorial claims and the building of the artificial islands.  [Sydney Morning Herald]

Random Musings

--Election 2016:

I watched the entire debate Tuesday night and thought Wolf and Co. did a good job at CNN.  It was certainly lively, and at times substantive, but it would be tough to say there were one or two overwhelming winners.  What was clear, though, is that there are differences in the handling of the prime focus of the debate, foreign policy and keeping America safe.

Daniel Henninger / Wall Street Journal

“Who needs ‘Star Wars VII’?  We’ve got the Republican presidential competition.  As alternative universes go, this one has been hard to beat.

“Out of nowhere, Donald Trump (Is he Darth Vader?  Luke Skywalker?  Both?) landed in his celebrity starship to challenge and terrorize...the Establishment.  The genius of the American political system is that it has built-in reality checks.  The next one arrives in February with the start of 50 individual state primary elections or caucuses.  Opinion-poll politics gives way to voting-booth politics.

“Will Donald Trump, master of our alternative political universe, survive in the real-world primaries?  This question forced itself upon us toward the end of the Las Vegas debate, when Hugh Hewitt asked Mr. Trump about the ‘nuclear triad.’

“This excerpt conveys the gist of his answer: ‘But we have to be extremely vigilant and extremely careful when it comes to nuclear.  Nuclear changes the whole ballgame. Frankly, I would have said get out of Syria; get out – if we didn’t have the power of weaponry today. The power is so massive that we can’t just leave areas that 50 years ago or 75 years ago we wouldn’t care.  It was hand-to-hand combat.’

“That answer raises the recent Ben Carson question: How much does a candidate for the U.S. presidency actually need to know about anything in the real political world?”

Henninger contrasts Trump and Carson with “the fascinating, important exchanges between Sens. Marco Rubio and Ted Cruz.”

“If one, bloodless qualification for the GOP nominee is, very simply, who’d best compete with Hillary Clinton in the debates, it looks to me like Marco Rubio would demolish her equivocations.  We knew Mr. Rubio’s set-speech skills were impressive, but the mastery he routinely displayed in this debate of spontaneously compressing events and arguments into a coherent argument was impressive....

“(This) debate and the decline of Ben Carson suggests it’s time for Mr. Trump to up the substance of his game.  The politicians are starting to catch up with the starship.”

Editorial / Wall Street Journal

“Perhaps the most revealing exchange (during Tuesday’s debate) came on the powers of the National Security Agency, where Senator Marco Rubio and Ohio Governor John Kasich in particular squared off against Rand Paul and Ted Cruz.  Messrs. Paul and Cruz were among the few Senate Republicans to vote for the USA Freedom Act this summer that barred the bulk collection of telephone records.

“Mr. Rubio has been hitting Mr. Cruz’s vote on the campaign trail, and he rightly pointed out that ‘now the intelligence agency is not able to quickly gather records and look at them to see who these terrorists are calling. And the terrorist that attacked us in San Bernardino was an American citizen, born and raised in this country. And I bet you we wish we would have had access to five years of his records so we could see who he was working with.’

“Mr. Paul defended his vote with his familiar and principled libertarian suspicions about government, but Mr. Cruz wasn’t as forthright.  He justified his vote because he said it let the NSA focus on terrorists, not ‘millions of law-abiding citizens.’  But the reason broad data collection is necessary is because sometimes we don’t know, as in San Bernardino, who might not be law-abiding.

“As federal Judge William Pauley put it two years ago in his opinion upholding the legality of metadata collection, the point is to ‘detect relationships so attenuated and ephemeral they would otherwise escape notice’ to prevent attacks.  ‘This blunt tool only works because it collects everything,’ he added.  ‘Without all the data points, the Government cannot be certain it has connected the pertinent ones.’

“Our guess is that Mr. Cruz realizes that the vote he cast to appeal to Mr. Paul’s supporters has now become politically treacherous. So he is trying to limit the damage by making his previous calculation sound like hawkish principle.  This slipperiness has become part of his political method, and it is a character issue for a potential Commander in Chief as much as it is a substantive one.”

It’s Cruz’ slipperiness that has had me turning away from him since day one.

--John Podhoretz / New York Post

“Rubio likely got the better of the foreign-policy fight, but he certainly got the worse of the exchanges over his stance on immigration.

“Cruz ripped into the Florida senator for supporting a path to citizenship in the failed immigration-reform bill Rubio co-sponsored in 2013.

“Rubio tried to get Cruz to admit he supported a legalization path that same year – Cruz said exactly that during a Senate hearing on May 21, 2013 – but Cruz skillfully used slippery Clintonian language to evade Rubio’s charge.

“Rubio came out a bit bloodied.  But that was inevitable.  Immigration is his greatest weakness in the Republican primaries (and arguably his secret strength were he to be the party’s general-election candidate).  It was bound to become a major discussion point at some point, and it became so last night.

“The person with the most to gain from a successful Cruz assault on Rubio is Christie, since he is the only candidate with any momentum who might appeal to the GOP’s ‘somewhat conservative’ voters.

“These are the voters who will become the dominating force in the primaries once the race graduates from the small states and the South into the more populous and delegate-rich states.

“For Cruz to get himself into a head-to-head as the undisputed conservative against the more moderate ‘establishment’ choice, of course, Donald Trump will have to fade.

“There was little reason to think last night’s debate will hasten such a thing.  Trump was mostly subdued and only allowed himself to get rattled and nasty with Jeb Bush on two occasions.  Otherwise, he probably did himself no harm and maybe a little good.

“As for poor Jeb, he did the best he could – and the best he could isn’t going to do a thing to get his numbers up. He and his people are probably going to delude themselves into thinking his campaign renewed itself last night.

“It didn’t. Jeb is toast.”

Couldn’t agree more with Mr. Podhoretz.  Trump did fine.  Bush looks worse and worse to me each time I see him.  I’m just shocked how poorly he’s done.

I thought Kasich got back on track, though it’s too late (but he should be vying for the Veep slot, Ohio being rather important), and I was totally turned off by Carly Fiorina, while others seem to think she did well.

Ben Carson continues to amaze me for his total idiocy on foreign policy.  It must be driving his advisers nuts.

And regarding Chris Christie, voters around the nation don’t know the guy like a New Jersey resident does.  He’s immensely talented, but his record in my state is not that great, at all.  Plus Bridgegate did indeed kill him.

--Warren Buffett blessed Hillary Clinton’s tax plan on Wednesday, even though Clinton hasn’t really given any details just how she plans to tax the wealthiest Americans. 

It was in 2011 that Buffett wrote a New York Times op-ed arguing for higher taxes on the wealthy, saying that he and his “megarich” friends had been “coddled long enough by a billionaire-friendly Congress.”

So speaking from Omaha, and alongside Buffett, Clinton told an audience, “The Buffett Rule says that millionaires should pay at least 30% income-tax rates...and I want to go even further.  I want to be the president of the struggling, the striving and the successful.”

For his part, Buffett said wealthy Americans are “decent people” who have created jobs and “come up with products that you and I like.  They are good citizens.”  He added, though, that “the game has been stacked in their direction.  And that’s the primary reason that I’m going to be so delighted when Secretary Clinton takes the oath of office.”  [Wall Street Journal]

--I wasn’t going to catch any of the Democratic debate on Saturday night because, frankly, my Jets have a critical contest down in Dallas at Jerry’s place at the same time.

But now I just may watch the first 10-15 minutes to see what happens between Hillary Clinton and Bernie Sanders, the Vermont senator filing a lawsuit Friday evening in federal court against the Democratic National Committee, following the suspension of his campaign from the DNC’s voter database.

The lawsuit came hours after the DNC barred the Sanders folks from accessing the party’s voter file, as well as his campaign’s own data, after a Sanders campaign staffer obtained private data from the Clinton campaign.  That staffer was fired.

--In the polls....

Donald Trump led a Monmouth University national survey with 41%, up from 28% in a poll conducted by the same group in October.  Cruz 14% and Rubio 10% were the only others in double figures.  Carson received 9% and no one else topped 3%.

In a Washington Post/ABC News national poll, Trump took 38% to Cruz’ 15%.  Rubio and Carson were tied at 12%.  Jeb Bush is fifth with 5%.  [But Trump losses to Hillary 50-44 among registered voters in this one.]

And in a Wall Street Journal/NBC News survey, Trump leads the Republican field with 27%, Cruz is second at 22%, Rubio 15% and Carson 11% (Bush fifth with 7%).

In Iowa, a Des Moines Register/Bloomberg Politics poll gave Ted Cruz a surprising 10-point lead over Trump (31-21), with Carson at 13% and Rubio 10%, while a Quinnipiac University survey had Trump leading among likely Iowa caucusgoers, 28-27, with Rubio at 14% and Carson 10% (Jeb Bush 5%).  A Fox News poll had Cruz ahead 28-26 in the state.

A WBUR poll of likely Republican primary voters in New Hampshire has Trump ahead with 27%, but Chris Christie second at 12%.  Marco Rubio, 11%, and Ted Cruz 10%, are next.  Ben Carson has fallen from 17% to 6% in the same survey since September.

And in a Winthrop University poll of South Carolina prospective Republican primary voters, Trump leads Cruz 24-16, with Carson in third at 14% and Rubio next at 11%.

On the Democratic side, in the Des Moines Register/Bloomberg poll of Iowa voters, Clinton is the top choice for 48%, compared with Sanders at 39%.  Martin O’Malley receives 4%.  [No relation to former baseball player Tom O’Malley, that I know of.]

--Trump was hailed by President Vladimir Putin as the “absolute leader” in the US presidential contest, with Putin praising Trump’s talk of building a deeper relationship with Russia.  He is “a very colorful character and talented,” said Vlad the Impaler after concluding his annual press conference in Moscow.  Putin added, “He’s said that he wants to move to a new level of ties, closer and deeper ties with Russia.  How couldn’t we welcome that? Of course we welcome it.”

Trump responded, “It is always a great honor to be so nicely complimented by a man so highly respected within his own country and beyond.

“I have always felt that Russia and the United States should be able to work well with each other towards defeating terrorism and restoring world peace, not to mention trade and all of the other benefits derived from mutual respect.” [BBC News]

Ah, Donald?  You need to tidy this up a bit....maybe throw in something to tell people you know about Ukraine.

--Enrique Marquez, the friend of terrorist Syed Farook, was arrested in connection with the Dec. 2 massacre in San Bernardino, the feds announced on Thursday.  Marquez purchased two of the semi-automatic rifles that Farook and his wife, Tashfeen Malik, used in the attack.

About four or five years ago, Marquez began attending prayers at an Islamic center, standing out because of his Latino background.  Farook asked Marquez to purchase the firearms in 2011 and 2012 because Farook did not want them traced to him and doubted he could pass a background check. The two had plotted an earlier attack but the FBI believes they scrapped it after three men were arrested in the Inland Empire for plotting to kill Americans in Afghanistan.  [Los Angeles Times]

--A crudely written email threat to members of the Los Angeles Board of Education prompted officials to close L.A.’s entire school system, the second-largest in the nation, on Tuesday, sending parents scrambling to find day care, among other things.

But New York law enforcement said it was a hoax after they received an identical threat, New York Police Commissioner William Bratton having once held the title of Police Chief in Los Angeles.

To be fair, the threat hit the L.A. board members’ inboxes long before school started, supposedly Monday night, so it was technically easier to shut down the schools before the children actually arrived, while New York officials, who received the email at a similar time, though with three hours less to assess before school started, decided, in Commissioner Bratton’s words, it was “not a credible threat.”

Of course L.A. and the surrounding area are still reeling from the San Bernardino massacre that no doubt shaded decision making.

But Rep. Brad Sherman (D-Los Angeles), a senior member of the House Foreign Affairs committee, said the email lacked “the feel of the way the jihadists usually write.”  Still, he added the person did have a knowledge of Southern California and the threat could not be immediately discredited.

Initial reports that had the origin tied to Germany were probably incorrect.  It seems it was routed through there, but came from somewhere closer.

--In a new Washington Post/ABC News poll, 60% of Americans say Trump’s proposed ban on Muslims who are not U.S. citizens is the wrong thing to do, while 36% support it.

Republicans, though, endorse Trump’s proposal by a 59-38 margin; but only 38% of independents support it (17% of Democrats).

--Army Sgt. Bowe Bergdahl will face general court-martial in connection with his 2009 disappearance from his base in Afghanistan.

--Paris / U.N. climate meeting....or what will be known now as the Paris agreement, which for the first time requires virtually every country in the world to set out its plans to avert climate change every five years.

The main objective is to limit global warming to “well below 2C above pre-industrial levels” and “pursue efforts to limit the temperature increase to 1.5C.”

The draft says countries should aim to reach a “global peaking of greenhouse gas emissions” as soon as possible and “achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century.”

Saturday, Obama said at the White House after spending the afternoon playing golf with World Bank President Jim Yong Kim [Washington Post]: “This agreement represents the best chance we’ve had to save the one planet we’ve got.  Together we’ve shown what’s possible when the world stands as one.”

Thomas L. Friedman / New York Times

“I had low expectations and it met all of them – beautifully.  I say that without cynicism.

“Any global conference that includes so many countries can’t be expected to agree on much more than the lowest common denominator. But the fact that the lowest common denominator is now so high – a willingness by 188 countries to offer plans to steadily and verifiably reduce their carbon emissions – means we still have a chance to meet what scientists say is our key challenge: to avoid the worst impacts of global warming that we cannot possibly manage and to manage those impacts that we can no longer avoid. That is a big, big deal....

“(This) keeps alive the hope of capping the earth’s warming to 2 degrees Celsius, or 3.6 Fahrenheit, above the level that existed at the dawn of the Industrial Revolution – the rough redline scientists have drawn beyond which ‘global weirding’ will set in and the weather will most likely get really weird and unstable.  We’re already almost halfway to passing that redline.

“The only important holdout in the world to this deal is the U.S. Republican Party....

“The G.O.P. should take the wise counsel of Andy Karsner, who was George W. Bush’s assistant energy secretary and one of his climate negotiators, and use the Paris deal to build a bridge back to constructive engagement on the subject.  The G.O.P. can plausibly argue, said Karsner, that it was Bush who, in 2007, created the ‘major economies’ strategy to address climate change through precisely the kind of market-enabled, voluntary national targets adopted in Paris.

“ ‘The price of getting this issue behind us may never again be this cheap,’ Karsner said of the G.O.P.  ‘Congressional leaders need to evaluate the opportunity they have to reconnect with mainstream voters, scientific, civic and business leaders, geopolitical strategists and most anyone under 35 years old who’s completed eighth-grade science.’”

George Will / Washington Post

“History, on the ‘right side’ of which Barack Obama endeavors to keep us, has a sense of whimsy. Proof of which is something happening this week: Britain’s last deep-pit coal mine is closing, a small event pertinent to an enormous event, the Industrial Revolution, which was ignited by British coal.

“The mine closure should not, however, occasion cartwheels by the climate’s saviors, fresh from their Paris achievement. The mine is primarily a casualty of declining coal prices, a result of burgeoning world energy supplies.  Thanks largely to the developing world, demand for coal is expected to increase for at least another quarter-century.

“The mine is closing immediately after the planet’s latest ‘turning point’ – the 21st U.N. climate change conference since 1995, each heralded as a ‘turning point.’  The climate conference, like God in Genesis, looked upon its work and found it very good.  It did so in spite of, or perhaps because of, this fact: Any agreement about anything involving nearly 200 nations will necessarily be primarily aspirational, exhorting voluntary compliance with inconsequential expectations – to ‘report’ on this and ‘monitor’ that.  A single word change brought the agreement to fruition: It replaced a command (nations ‘shall’ do such and such) with an entreaty (nations ‘should’ do such and such)....

“The Paris agreement probably occasions slight excitement among the planet’s billion people who lack electricity, and the hundreds of millions in need of potable water.  Historians, write Walter Russell Mead and Jamie Horgan of the American Interest, are likely to say that the Paris agreement ended climate change the way the 1928 Kellogg-Briand Pact ended war. But as the ink dries on the Paris gesture of right-mindedness, let us praise the solar energy source most responsible for the surge of human betterment that began with the harnessing of fossil fuels around 1800.

“The source is, of course, coal, a still abundant and indispensable form in which the sun’s energy has been captured from carbon-based life.  Matt Ridley, a member of a British coal-producing family and author of ‘The Rational Optimist,’ notes that the path of mankind’s progress, material as well as moral, has been from reliance on renewable but insufficient energy sources to today’s 85 percent reliance on energy from fossil fuels....

“And cheap coal produced the iron for new labor-saving machines. The environmental toll from burning coal (it emits carbon dioxide, radioactivity and mercury) has been slight relative to the environmental and other blessings from burning it.”

--NOAA reported this week that November 2015 was the warmest such month on record for the planet, exceeded only by the period when the Earth was a mass of molten lava.

November’s average temperature across land and ocean was an exceptional 1.75 degrees above the 20th century average, the second highest out of any month in NOAA’s 136-year period of record.  The highest, 1.79 degrees, was set in October.

Of course when it comes to the oceans, a very strong El Nino has a ton to do with water temperatures.

Through November, the average annual temperature of the planet was 1.57 degrees above average, ahead of last year’s record pace. [Angela Fritz / Washington Post]

--Speaking of El Nino, I almost succumbed to heat stroke in running a half-marathon in Kiawah, S.C., last Saturday, as it was very warm and humid.  It didn’t help I’m old and not in great shape.  But nurses revived me with beer and all was good soon after. 

[OK, the beer truck happened to be at the finish line and I was hallucinating, thinking there were nurses serving me the domestic.]

--A judge declared a mistrial in the criminal trial of William Porter, one of six Baltimore police officers charged in connection with the death of Freddie Gray in April.

The seven black and five white jurors were deadlocked on all four charges, including involuntary manslaughter.  The Circuit Judge felt he had no option other than to declare them “a hung jury” as they were dismissed.

Porter was the first of the six officers involved to stand trial and was expected to testify in some of the other trials.  Now, who knows where this will all go.  Prosecutors are being urged to retry Porter as soon as possible.

--In the latest Wall Street Journal/NBC News poll, Americans’ view of race relations is as grim as it has been in 20 years.  Only 34% of Americans believe race relations in the U.S. are fairly good or very good, down from a high of 77% in January 2009, after the election of Barack Obama.

This is staggering.  The 34% is the lowest since October 1995, after the acquittal on murder charges of O.J. Simpson, a racially polarizing event.

--The Centers for Disease Control and Prevention (CDC) released a report on Friday that showed drug overdose deaths in America climbed to more than 47,000 in 2014 – the most ever recorded in one year.  Holy Toledo.  The toll jumped 7% in just one year.

The CDC said 61% of the deaths involved some type of opioid, including heroin.

--I forgot to comment last week on TIME’s selection of German Chancellor Angela Merkel as “Person of the Year.”  This was a truly stupid pick.  It should have been Abu Bakr al-Baghdadi, the man TIME did have as No. 2.

If Donald Trump gains the Republican nomination, regardless of the Nov. 2016 result, he is next year’s selection, not this year, as many of his supporters complained.  I can’t believe TIME had him No. 3 for 2015.  He hasn’t done anything yet. 

And “Black Lives Matter” at No. 4?  Are you kidding me?  Caitlyn Jenner as No. 7?!  Good gawd.

On my list, Vladimir Putin would be No. 2 and China’s Xi Jinping No. 3.

Remember, TIME isn’t supposed to select the nicest person of the year; it’s supposed to be the person or group who had the most impact, for good or bad.  Neither Putin nor Xi are in TIME’s top seven.

And in the above few paragraphs I’ve revealed who will be my “Dirtball of the Year,” as released in two weeks.

--Finally, Treasury Secretary Jack Lew announced a decision on who would become the first woman on the $10 bill, replacing Alexander Hamilton, will be delayed until sometime in 2016 when it was to be decided by the end of this year.

I’m guessing that is good news potentially for skier Lindsey Vonn.  Then again, Lew being part of a Democratic administration, perhaps they are thinking of Sports Illustrated “Sportsperson of the Year” Serena Williams.  I have long given up on the selection of a superstar from my youth, figure skater Peggy Fleming.

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

God bless America.

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Gold closed at $1066
Oil $34.55

Returns for the week 12/14-12/18

Dow Jones  -0.8%  [17128]
S&P 500  -0.3%  [2005]
S&P MidCap  -1.0%
Russell 2000  -0.2%
Nasdaq  -0.2%  [4923]

Returns for the period 1/1/15-12/18/15

Dow Jones  -3.9%
S&P 500  -2.6%
S&P MidCap  -5.3%
Russell 2000  -7.0%
Nasdaq  +4.0%

Bulls  37.8
Bears  29.6  [Source: Investors Intelligence]

Folks, I don’t know how the next two weeks are going to shake out, seeing as Christmas and New Year’s Day are on a Friday, and I’d like to at least relax a few hours Christmas Eve with family and New Year’s Eve watching college football.  I’m thinking I may be posting very early Christmas morning, after Santa has been here and taken his Coors Light, which I leave out in lieu of milk and cookies. 

Brian Trumbore

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