Are We Regulating Ourselves Back Into Recession?

"Let us put an end to self-inflicted wounds," President Gerald Ford told Congress in 1975. "And let us remember that our national unity is a most priceless asset." While Ford was talking about the scars from the Vietnam War, his words seem relevant today. Our nation grapples with not one divisive issue, but a basket of them, each pulling and undermining our already battered confidence, while testing our resolve and straining the limits of logic.
What are we doing to ourselves, America?
In just two short weeks, instead of closing the books after a bruising election, we've not only kept the rancor alive but have doubled down on it. In this morning's papers alone, I easily counted a dozen different areas of discourse before growing tired of it all. As my colleague Mike Santoli and I discuss in the attached video, with so much going on — and with so much wrong — is it any wonder stocks are moving in reverse at a fast clip since the second quarter correction.
"It feels like a particularly heavy round of one of these anti-business — or at least calling business to task — moments," Santoli says in the face of my long and growing list of negatives, which include higher taxes, the fiscal cliff, the Benghazi aftermath, turnover at the CIA, federal probes of FedEx and UPS over mail-order medicine, BP's record fine, further investigation into banks for money laundering, as well as another round of mandatory stress testing.
Before you go off and call me some kind of zero-regulation advocate or pessimist, all I am saying is that it strikes me as slightly counterproductive to be building up and and tearing down the banks at the same time. And Santoli seems to agree, saying that it is alarming to see how much banks have to spend on compliance, legal and regulatory issues, calling it a "massive weight."
As much as we had recently been gaining some degree of comfort over the economy, housing and jobs, it suddenly seems as if we're doing everything wrong.
''Is it ever going to be a good time to cinch up tax rates?" Santoli questions. Obviously the answer is no, and yet the markets cling to the belief that our elected officials will break ranks and reach some sort of last-minute grand bargain solution.
Maybe I am just being cynical, but I am of the mind that no major changes will emerge without first going through a period of calamity. Santoli is a smidge more optimistic, however, clinging to a ''residual hope'' that the President has a ''Nixon-to-China moment" and that his second term is not about fighting individual, ideological fight. "That is the distant hope you have to hold," he says.
How about you? Have you given up hope in the face of so much negativity?

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Earnings from McDonald's, Microsoft sink stocks

NEW YORK (AP) -- Poor earnings reports from three companies in the Dow Jones industrial average — Microsoft, General Electric and McDonalds — sent indexes down sharply Friday, marking a sour end to an otherwise strong week in the stock market.
McDonald's led a broad drop in the Dow, falling 3 percent. The Dow was down 151 points at 13,397 shortly after noon.
"I'm concerned about corporate earnings, but I'm not alarmed yet," said Doug Cote, chief market strategist at ING Investment Management in New York.
Cote cautions that it's still early in reporting season, but what's worrying is that companies have reported an overall drop in earnings so far. "And once you get one quarter of negative earnings, it's a precursor," he said. "It's the cockroach theory: if you find one, there's probably many more."
The Standard & Poor's 500 sank 17 points to 1,440 and the Nasdaq composite dropped 52 points to 3,020. All 10 industry groups in the S&P 500 fell, led by materials and technology stocks.
McDonald's profit sank as a strong dollar hurt international results, which account for two-thirds of its business. The fast-food giant's stock lost $3.51 to $89.35.
Microsoft's income fell 22 percent as PC sales took a dive and as troubles in Europe took their toll. Its stock lost 67 cents to $28.82.
General Electric, another economic bellwether, fell 3 percent. The company reported stronger profits early Friday but its revenue missed Wall Street's expectations. Orders for new equipment and services sank, mainly because wind turbine orders have fallen because a key U.S. federal subsidy for wind power expires at the end of the year.
GE's stock lost 60 cents to $22.21.
Analysts currently expect companies in the S&P 500 to post their worst earnings results since the third quarter of 2009, according to S&P Capital IQ. Banks and consumer discretionary companies are projected to report the best growth. Analysts expect companies dealing in metals and other materials to report the worst results, followed by energy companies.
But it's technology companies like IBM, Intel and Google whose weak results have grabbed the most attention so far.
Weak earnings from Google and a rise in claims for unemployment benefits helped pull the stock market lower Thursday. That snapped a four-day run of gains for the Dow. Google fell again Friday, giving up $14.14 to $680.86.
The Dow is still up 0.6 percent for the week. The S&P 500 up is up 0.8 percent.
In other Friday trading, the yield on the 10-year Treasury note slipped to 1.77 percent from 1.83 percent late Thursday.
Among other stocks making big moves, Chipotle Mexican Grill plunged 14 percent after the burrito chain forecast that revenue growth would slow sharply next year. The stock had been a favorite among investors thanks to super-fast growth in recent years. The stock fell $41.32 to $244.61.

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Judge asks Hostess to mediate with union

WHITE PLAINS, N.Y. (AP) -- Twinkies won't die that easily after all.
Hostess Brands Inc. and its second largest union will go into mediation to try and resolve their differences, meaning the company won't go out of business just yet. The news came Monday after Hostess moved to liquidate and sell off its assets in bankruptcy court citing a crippling strike last week.
The bankruptcy judge hearing the case said Monday that the parties haven't gone through the critical step of mediation and asked the lawyer for the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, which has been on strike since Nov. 9, to ask his client, who wasn't present, if the union would agree to participate. The judge noted that the bakery union, which represents about 30 percent of Hostess workers, went on strike after rejecting the company's latest contract offer, even though it never filed an objection to it.
"Many people, myself included, have serious questions as to the logic behind this strike," said Judge Robert Drain, who heard the case in the U.S. Bankruptcy Court in the Southern District of New York in White Plains, N.Y. "Not to have gone through that step leaves a huge question mark in this case."
Hostess and the union agreed to mediation talks, which are expected to begin the process on Tuesday.
In an interview after the hearing on Monday, CEO Gregory Rayburn said that the two parties will have to agree to contract terms within 24 hours of the Tuesday since it is costing $1 million a day in overhead costs to wind down operations. But even if a contract agreement is reached, it is not clear if all 33 Hostess plants will go back to being operational.
"We didn't think we had a runway, but the judge just created a 24-hour runway," for the two parties to come to an agreement, Rayburn said.
Hostess, weighed down by debt, management turmoil, rising labor costs and the changing tastes of America, decided on Friday that it no longer could make it through a conventional Chapter 11 bankruptcy restructuring. Instead, the company, which is based in Irving, Texas, asked the court for permission to sell assets and go out of business.
It's not the sequence of events that the maker of Twinkies, Ding Dongs and Ho Ho's envisioned when it filed for bankruptcy in January, its second Chapter 11 filing in less than a decade. The company, who said that it was saddled with costs related to its unionized workforce, had hoped to emerge with stronger financials. It brought on Rayburn as a restructuring expert and was working to renegotiate its contract with labor unions.
But Rayburn wasn't able to reach a deal with the bakery union. The company, which had been contributing $100 million a year in pension costs for workers, offered workers a new contract that would've slashed that to $25 million a year, in addition to wage cuts and a 17 percent reduction in health benefits. But the bakery union decided to strike.
By that time, the company had reached a contract agreement with its largest union, the International Brotherhood of Teamsters, which urged the bakery union to hold a secret ballot on whether to continue striking. Although many bakery workers decided to cross picket lines this week, Hostess said it wasn't enough to keep operations at normal levels.
Rayburn said that Hostess was already operating on razor thin margins and that the strike was the final blow. The company's announcement on Friday that it would move to liquidate prompted people across the country to rush to stores and stock up on their favorite Hostess treats. Many businesses reported selling out of Twinkies within hours and the spongy yellow cakes turned up for sale online for hundreds of dollars.
Even if Hostess goes out of business, its popular brands will likely find a second life after being snapped up by buyers. The company says several potential buyers have expressed interest in the brands. Although Hostess' sales have been declining in recent years, the company still does about $2.5 billion in business each year. Twinkies along brought in $68 million so far this year.

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Soccer-FIFA reforms to go under the microscope

BERNE, Jan 11 (Reuters) - European soccer chiefs will meet this month to discuss proposed reforms to present to the sport's governing body FIFA, including an age limit for the president and a restriction on the number of mandates he can serve.
A working group which was set up to revise the FIFA statutes has proposed setting an age limit of 72 for the FIFA president and executive committee members at the time of their election, re-election or nomination.
It has also proposed limiting their mandates to two four-year terms.
Other matters under discussion for possible reform include the make-up of the International Football Association Board (IFAB), which makes decisions on changes to the rules of the game.
The IFAB currently consists of four members from FIFA and one each from the four British associations.
UEFA, European soccer's governing body, said in a statement that it would host a meeting of the presidents of its 53 members associations on Jan. 24 to analyse the proposals.
"UEFA wants to ensure that the FIFA reform process maintains its good governance objectives and this has been made clear to our members in a clear and transparent way, to enable them to make their position clear," said UEFA secretary general Gianni Infantino. "We now need our members to put forward their views."
FIFA was hit a string of corruption cases in 2010 and 2011.
Three members of its 24-man executive committee were sanctioned for corruption, including former presidential candidate Mohamed Bin Hammam who was banned for life, and another two resigned amid allegations of wrongdoing.

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Soccer-Legal settlement agreed with former owners, say Liverpool

LONDON, Jan 11 (Reuters) - Liverpool said on Friday that a settlement between former owners Tom Hicks and George Gillett and directors involved in the sale of the Premier League soccer club had been agreed following a long-running legal battle.
Fenway Sports Group (FSG) completed their takeover in Oct. 2010, bringing to an end the acrimonious reign of Hicks and Gillett who tried to block the sale by RBS bank.
"As a consequence of that sale, Thomas Hicks and George Gillett (being the former owners of Liverpool FC) made a number of allegations and claims against Sir Martin Broughton, Christian Purslow and Ian Ayre (being the company directors responsible for the sale of Liverpool FC to the Fenway Sports Group). Those allegations and claims were denied by Messrs Broughton, Purslow and Ayre," Liverpool said in a statement on their website (www.liverpoolfc.com).
"The allegations, claims and denials resulted in legal proceedings being commenced.
"The parties have now agreed a settlement (the terms of which are confidential). All claims and allegations made against Messrs Broughton, Purslow and Ayre have been withdrawn by Messrs Hicks and Gillett and all legal proceedings between the parties concluded.
"The parties will not be making any further statement to the press."
The legal battle began after Liverpool was sold by RBS to Fenway - headed by American businessman John W. Henry - in a 300-million-pound ($483.21-million) deal in October 2010.
Hicks and Gillett alleged that the club had been sold at a "substantial undervalue", terming the sale an "epic swindle".

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Soccer-United's Rooney out of Liverpool clash

LONDON, Jan 11 (Reuters) - Manchester United striker Wayne Rooney will miss Sunday's Premier League clash against north-west rivals Liverpool after failing to recover from a knee injury, manager Alex Ferguson said on Friday.
Rooney injured a knee ligament in training and missed United's holiday fixtures against Newcastle United, West Bromwich Albion and Wigan Athletic as well as their FA Cup draw at West Ham United.
"Wayne Rooney is still out," Ferguson told reporters. "I am hoping he will start training today actually, in which case he won't be far away. I don't think it is an issue, but we need to guide him along.
"In terms of the injury he had, it's quite straightforward so if he starts today, I assume he will be available for Wednesday's replay (against West Ham)."
United winger Nani and midfielder Anderson will both return to the squad for Liverpool's visit to Old Trafford.
"Nani is back in training and will be included in the squad for Sunday.
"Anderson has been back training for 10 days now so he will be in the squad for Sunday. All in all it is quite a positive situation. It's good to have them back."
United lead the Premier League by seven points from local rivals Manchester City after 21 games, while Liverpool are 14 points further adrift in eighth place.
The fixture, however, remains as important as ever, according to Ferguson.
"The derby game against Liverpool never changes," he said. It's always an immensely important game - intense, emotional. We are going into the game in reasonable form.

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Could Alex Jones's "revolution" actually happen?

Piers Morgan had it easy. Radio show host and author Alex Jones threatened the rest of us with a "revolution" if the government decides to confiscate guns from the homes and glove compartments of law-abiding Americans. It's almost too easy to dismiss Jones as a fringe figure, especially since fringe ideas make their way into the mainstream with (exciting? alarming?) frequency these days. So let's take him seriously.
Let's accept his premise. Actually, let's dismiss it first but then turn around and accept it for the sake of argument. The government has not the means nor the mechanism nor the credibility to confiscate 100,000 guns, much less 600,000,000. And those in the government doing the confiscating would be neighbors and relatives of the confiscatory victims: police officers, national guard members, Army reservists. Of course, Jones might say that their intent is bad enough. But "they" -- the Obama administration, I assume -- have no such intentions, and never did.
But OK. Let's say that the government tries to confiscate guns and "the people" attempt to revolt.  No doubt that civil disobedience can spring up rather spontaneously and even be organized very quickly, but if rioting were to somehow break out in American cities, it would be isolated and theoretically containable. Organizing a "revolt" would require extensive planning, including the massive transportation of citizens from their homes to wherever the rally points were, a communications infrastructure, and leaders. The same Open Source culture that would make it difficult for the government to plan a confiscation in secret makes it just as unlikely for citizens to plan a feasible response to that confiscation in secret.
One of Jones's obsessions, which, I confess, I share, is the militarization of the American homeland, and he is not promulgating a conspiracy here. The military has expanded its presence on American soil, and crucially, has expanded the way it is organized to respond to mass contingency events of any kind, including natural disasters and rioting. The U.S. Northern Command does receive intelligence briefings about domestic disturbances from the FBI and DHS, so commanders would be somewhat prepared to deploy troops. Thousands would come from the standing Army, but the bulk would be drawn from state National Guard detachments. It is exceedingly difficult to picture weekend warriors following blind orders en masse to detain or harm U.S. citizens when local police resources are stretched. The government has the power of command and control, but the people have the power of fellow-feeling. The government's response to any real revolt would probably be quite restrained. There'd be too much attention paid to every movement of every tank to act harshly. The strategy to contain any "revolt" might therefore depend on a period of people letting out their energies and then returning to their normal business.
Ah, but what if the government controls the communication nodes?  Well, corporations do; I assume Jones would have them immediately bend to a secret executive order shutting down serves and clouds and services like Twitter, but even if corporations agreed to do this, together, it would take days to get even a fraction of the telecom infrastructure offline. Maybe the government would order a mass power outage. But that's why so many Americans have generators in the first place!  Although government "boards" comprising major telecom and infrastructure executives do exist, the most they've ever contemplated doing is to shut down a narrow slice of an infected communications node. These days, they're focused on the cyber threat.  In the early days of civil defense planning, when there were a few television networks an AT&T had its monopoly, the threat of a government takeover of TV, radio and telephones was technically feasible. Today it is not. Actually, it does not make sense. What's turned on really cannot be turned off.
But wait. if Jones's "revolution" is to succeed, he needs to take over the government, because he'd need to dominate communications as well, unless he assumes that his movement would be organic and immune to arguments from elected officials asking for stability and calm.
An objective of anyone who wants to take over the government would be a seizure of the Emergency Broadcast System, which allows the President to speak to the nation through almost any mechanism of communication at any time. The EBS lives at Mt. Weather, the massive FEMA bunker in Virginia, but it can be activated and controlled from at least a dozen other places, including the briefcase of the Emergency Actions officer who travels with the President.  A coordinated violent action to seize control of this key portal would require an incredible amount of prior planning.
Assuming even that the government's response to isolated-turned-mass rioting is uneven, the President would be able to address Americans anytime he wants. In theory, Jones's followers could try to take over every broadcast entity in America, or could try and jam the broadcasts using sophisticated electronic warfare technology available to the military, but once again, the practicalities are not possible.
Because there will be no revolt over gun control, because there will not be and cannot be a mass confiscation of guns, playing with these ideas is fanciful and fodder for a sequel to Seven Days in May. Heck, we haven't even addressed the FEMA concentration camps (which don't exist).  But that isn't to say that nothing discussed above will ever be relevant. It is much easier to imagine a small-scale revolt, a series of pre-planned violent protests against the powers that be, perhaps because the political system seems so non-responsive to the worries of people who listen to Alex Jones.  It would not take much to make Americans nervous about the government's ability to restore law and order. And that frission itself is probably the most unknowable of all these factors.
Patriotic citizens aren't supposed to speculate about these extremely unlikely events, but the government certainly thinks about them. So maybe we should too.

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HTC says licensing agreement with Apple will lead to better devices in 2013

Apple (AAPL) and HTC (2498) signed a 10-year licensing agreement in November that covered all current, pending and future patents and ended the ongoing litigation between the two companies. It has been estimated that the company will pay Apple between $6 and $8 for every Android device shipped, however HTC CEO Peter Chao refuted the claim. Regardless of how much is being spent, HTC China president Ray Yam believes the deal will begin to benefit the company in 2013.
[More from BGR: ‘iPhone 5S’ to reportedly launch by June with multiple color options and two different display sizes]
“The settlement with Apple will start to pay off next year, and the fourth quarter of this year is still going at a set pace,” the executive said in an interview with the Economic Observer of China, according to Focus Taiwan. “The biggest benefit to us is that we can put more energy into innovation, which is more important than anything else for a technology company.”
[More from BGR: Nokia predicted to abandon mobile business, sell assets to Microsoft and Huawei in 2013]
Yam notes that HTC has wasted too many resources on lawsuits with Apple in the past and that the company is now encouraging employees to “take broader steps” when creating new and better products. The executive revealed that HTC has adjusted its product, sales and marketing strategies for 2013 in the wake of the settlement. He said that many of the company’s projects are now proceeding at a faster rate and it has also changed the way it negotiates with its telecom partners.
While the settlement will ensure that HTC’s devices will remain on sale in the U.S. and other markets, the company must still find a way to increase its dwindling market share as its struggles continue.

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Nokia’s Lumia 920 remains as expensive as Apple’s iPhone 5

One thing handset industry analysts are watching like hawks is the price graph of the most important Windows Phone 8 model in the European handset market. Nokia (NOK) priced the Lumia 920 very, very ambitiously for its November debut. How long can the model maintain a stiff premium? Was the early pricing just designed to skim high margins from the pool of eager Nokia/Windows Phone early adopters?
[More from BGR: ‘iPhone 5S’ to reportedly launch by June with multiple color options and two different display sizes]
Christmas is now over and the year 2013 has rolled in. But in the most important handset market in Europe, the Lumia 920 still costs as much as the 16 GB iPhone 5. At Phonehouse Germany, the price is 640 euros. At Handy Attacke, Ebay Germany, Amazon.de and other leading German phone retail sites, the price remains rock solid and notably uniform 650 euros. Most of these sites offer shipment within two to three days, so the price is no longer jacked up by lack of supply.
[More from BGR: Nokia predicted to abandon mobile business, sell assets to Microsoft and Huawei in 2013]
In comparison, the 16 GB iPhone 5 costs 630 euros at Ebay Germany, 650 euros at Notebooksbilliger and Handyschotte; and 670 euros at Telbay, Modeo and other sites.
Even as the unsubsidized price of Samsung’s (005930) Galaxy Note II is slipping below 510 euros in Germany, the Lumia 920 keeps levitating at the same price as the most expensive mass-market smartphone on the planet. Germany remains the biggest smartphone market in Europe, so this is going to be one key issue to keep an eye on as January price-cutting starts in earnest.

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Hagel nomination: Israelis ask 'what's the big deal?'

President Obama’s choice of Chuck Hagel for secretary of Defense, hotly contested by the American Jewish community, has received a muted response in Israel. While some echo concerns that the former Republican senator is dangerous or anti-Semitic, others here ask, “Who’s that?”
To be sure, the appointment of a man who is seen as soft on Iran and eager to talk to terrorist groups on Israel’s borders isn’t generally popular here.
Knesset Speaker Reuven Rivlin said today that Israel should be "concerned, but not afraid of Hagel's isolationist ideas." But he and other politicians, including candidates in Israel's Jan. 22 elections, have emphasized that US-Israel ties go deeper than any one personality and have expressed confidence that the two countries would remain strong allies.
“It’s none of our business, it’s America’s prerogative,” said Naftali Bennett of the right-wing HaBayit HaYehudi (The Jewish Home) party, whose popularity has surged in recent weeks. “Israel and America’s bond goes way beyond certain relationships between individuals.”
Mr. Bennett's shrug comes despite the fact that Hagel’s record diverges sharply from Bennett’s views on Iran, which he identifies as the most pressing foreign policy issue facing Israel. While representing Nebraska in the Senate, Hagel voted repeatedly against US sanctions on Iran and has expressed opposition to a military strike on Iran – a country seen by some Israelis as an existential threat to the Jewish nation.
[Recommended: Obama-Netanyahu tensions: Not as bad as 5 other US-Israel low points]
“Zionism was about creating a shelter, the most secure place on earth for Jews,” said Bennett, speaking at a foreign policy debate at Hebrew University of Jerusalem today. “By having a nuclear Iran, Israel by one fell swoop would turn into the most dangerous place for Jews.”
Obama has promised to prevent a nuclear Iran, but his appointment of Hagel signals to some that Obama may be more lenient than they feel comfortable with.
“[Hagel] is dangerous,” says Eliyahu Ben Haim, one of the few Jerusalemites out and about on a very stormy day. “He’s anti-Semite. He’s against attacking Iran, he’s against sanctions, and he wants us to talk to Hamas and Hezbollah.”
But in the same shopping area, Fred Sternberg says Hagel essentially shares Obama’s views on Iran and the Israeli-Palestinian conflict and thus his appointment would not trigger any major policy change. The bigger conflict is between Israeli Prime Minister Benjamin Netanyahu’s government and Obama, he says.
“The problem is that we don’t have a government that is very friendly toward Obama,” says Dr. Sternberg, who has lived here for 40 years. “I do not agree with the policy of the Israeli government. So I am not very far from Obama.”
Others on the political left here even go so far as to support Hagel’s nomination.
“I listened yesterday to some remarks that Mr. Hagel said – one was his critique about the behavior of Israel in the Palestinian issue. I share his views,” said Yaakov Peri, former director of Israel’s internal security service, the Shin Bet. He notes that Hagel supports a Palestinian state and thinks Israel “should go for it, initiate it.
“I rely on the president of the United States that Chuck Hagel is a responsible and capable guy to do his job and I share the view that the US and Israeli bond and relationship and cooperation will remain, and hopefully strengthen,” said Mr. Peri, a member of Yair Lapid’s Yesh Atid (There is a Future) party.
Isaac Herzog of the Labor Party, another participant in today’s foreign policy debate, said it’s fine for American officials to criticize Israel as long as they know the facts.
“After that, they can be a critical friend, because that’s what friends are for,” said Mr. Herzog, the son of former Israeli president Chaim Herzog.
Yitzhak Hanegbi of Mr. Netanyahu’s Likud-Yisrael Beitenu bloc joked during today’s debate that all of Israel’s friends, even tiny Micronesia, are critical friends. On a more solemn note, he added that part of being a friend is trying to understand Israel’s “fears and hopes,” and expressed gratitude to the US for striving to do just that – despite personal tensions between Obama and Netanyahu.
“We believe that the president feels for Israel,” he said. “Even though sometimes personal tensions do occur, it has nothing to do with the strategy and with the instincts of the US toward Israel.

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