With record highs in sight, stocks face roadblocks

NEW YORK (Reuters) - If Wall Street needs to climb a wall of worry, it will have plenty of opportunity next week.

Major U.S. stock indexes will make another attempt at reaching all-time records, but the fitful pace that has dominated trading is likely to continue. Next Friday's unemployment report and the hefty spending cuts that look like they about to take effect will be at the forefront.

The importance of whether equities can reach and sustain those highs is more than Wall Street's usual fixation on numbers with psychological significance. Breaking through to uncharted territory is seen as a test of investors' faith in the rally.

"It's very significant," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.

"The thinking is, there's just not enough there for an extended bull run," he said. "If we do break through (record highs), then maybe the charts and price action are telling us there's something better ahead."

Flare-ups in the euro zone's sovereign debt crisis and next Friday's report on the U.S. labor market could jostle the market, though U.S. job indicators have generally been trending in a positive direction.

Small- and mid-cap stocks hit lifetime highs in February. Now the Dow Jones industrial average <.dji> and the S&P 500 <.spx> are racing each other to the top. The Dow, made up of 30 stocks, is about 75 points - less than 1 percent - away from its record close of 14,164.53, which it hit on October 9, 2007. The broader S&P is still 3 percent away from its closing high of 1,565.15, also reached on October 9, 2007.

The advantage may be in the Dow's court. So far in 2013, it has gained 7.5 percent, beating the S&P 500 by about 1 percent.

THE RALLY AND THE REALITY CHECK

The Dow's relative strength owes much to its unique make-up and calculation, as well as to investors' recent preference for buying value stocks likely to generate steady reliable gains, rather than growth stocks.

But the more defensive stance illustrates how stock buyers are getting concerned about this year's rally. While investors don't want to miss out on gains, they're picking up companies that are less likely to decline as much as high-flying names - if a market correction comes.

The Russell Value Index <.rav> is up 7.6 percent for the year so far, outpacing the Russell Growth Index's <.rag> 5.7 percent rise. Within the realm of the S&P 500, the consumer staples sector led the market in February, gaining 3.1 percent.

There is some concern that growth-oriented names are being eclipsed by defensive bets, said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research in Cincinnati.

"This isn't a be-all and end-all sell signal by any means, but we would feel much more comfortable if some of the more aggressive areas, like technology and small caps, would start to gain some leadership here," Detrick said.

Signs that investors are becoming concerned about the rally's pace is evident in the options market, where the ratio of put activity to call activity has recently shifted in favor of puts, which represent expectations for a stock to fall.

"We are seeing some put hedging in the financials, building up for the past month," said Henry Schwartz, president of options analytics firm Trade Alert in New York.

The put-to-call ratio representing an aggregate of about 562 financial stocks is 1:1, when normally, calls should be outnumbering puts.

Investors have no shortage of reasons to crave the relative safety of blue chips and defensive stocks. Although markets have mostly looked past uncertainty over Washington's plans to cut the deficit, fiscal policy negotiations still pose a risk to equities.

The $85 billion in spending cuts set to begin on Friday is expected to slow economic growth this year if policymakers do not reach a new deal. Markets so far have held firm despite the wrangling in Washington, but tangible economic effects could pinch stock prices going forward.

The International Monetary Fund warned that full implementation of the cuts would probably take at least 0.5 percentage point off U.S. growth this year.

EASY MONEY AND TEPID HIRING

Investors will also take in a round of economic data at a time when concerns are percolating that the market is being pushed up less by fundamentals and more by loose monetary policy around the world.

The main economic event will be Friday's non-farm payrolls report for February. The U.S. economy is expected to have added 160,000 jobs last month, only a tad higher than in January, in a sign the labor market is healing at a slow pace. The U.S. unemployment rate is forecast to hold steady at 7.9 percent.

While lackluster data has been a catalyst in the past for stock market gains as investors bet it would ensure continued stimulus from the Federal Reserve, that sentiment may be wearing thin.

Markets stumbled last week following worries that the Fed might wind down its quantitative easing program sooner than expected.

"It shows the underpinning of the market is being driven at this point by monetary policy," Hellwig said.

With investors questioning what is behind the rally, it will make a run to record highs even more significant, Hellwig added.

"There's smart people that are in the bull camp and the bear camp and the muddle-through camp," Hellwig said. "The fact that you can statistically, using historical evidence, make a case for going higher, lower, or staying the same makes this number very important this time around."

(Wall St Week Ahead runs every Friday. Comments or questions on this column can be emailed to: leah.schnurr(at)thomsonreuters.com)

(Reporting by Leah Schnurr; Additional reporting by Doris Frankel in Chicago; Editing by Jan Paschal)

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Pistorius bought, collected guns in Olympic year

JOHANNESBURG (AP) — In his Olympic year, Oscar Pistorius steadily became an avid firearms collector, joining a gun-collecting club and purchasing a collection of firearms that included a .500 Magnum pistol dubbed by its manufacturer as "the most powerful production revolver in the world" and a civilian version of a military assault rifle.

At the end of 2012, in the first blush of his romance with Reeva Steenkamp, the model he later shot and killed, Pistorius got deeper into his hobby. It was known that Pistorius liked guns but only now, from Associated Press interviews with other collectors, is it becoming clear the extent to which he became a dedicated firearms aficionado in the 12 months before he shot Steenkamp.

The track star not only applied for licenses to own more guns, but actually bought them, too, according to John Beare, vice chairman of the Lowveld Firearm Collectors Association which accepted Pistorius as a paid-up member last April. He and Pistorius were introduced at a Johannesburg hotel in January 2012, and it was there that Beare first explained to the athlete and some of his friends how to become certified collectors.

Had he not become a collector, Pistorius would under South African law have been limited to a maximum of four firearms for self-defense, of which only two could have been handguns, according to Johannesburg attorney Martin Hood, who specializes in firearms law.

Carvel Webb, chairman of the National Arms and Ammunition Collectors Confederation of South Africa, an umbrella group for the country's 2,000 approved private collectors including Pistorius, said that in the wake of Steenkamp's killing his group will now verify that Pistorius fulfilled the necessary requirements to be accepted as a collector and a decision in January to let him start collecting semi-automatic rifles.

"We will review all of those just to see if we are happy with it," Webb said.

Pistorius made no secret of his passion for firearms. Reporters who visited him at home in Pretoria, the capital, saw the pistol he kept by his bed and was licensed to own. He practiced at firing ranges both in South Africa and in Europe where he trained for the London Games. But apparently less well-known was his involvement with gun collectors to start building a firearms collection.

Beare said he twice observed Pistorius shoot at firing ranges and also at a clay pigeon shoot, but saw nothing to suggest he could be a menace with a gun.

"His safety was good," Beare told the AP. "He wouldn't do anything irrational with a firearm, because then I would have nailed him immediately."

Pistorius says he mistook his girlfriend Steenkamp for a home intruder and shot her while she was in his bathroom toilet, firing through the closed door. Pistorius' license for the 9 mm pistol was issued on Sept. 10, 2010, according to the South African Police Service's National Firearms Center. It was registered for self-defense

Prosecutors have charged Pistorius with premeditated murder for killing Steenkamp with three of four shots fired in the early hours of Feb. 14.

"I had no reason to believe that there was anything wrong, that he could have a dark side, that there could be something wrong," said Beare.

However, Roberto Siriu, president of the Tolmezzo shooting range in northeast Italy, said Pistorius did not seem to him to be well-trained with firearms.

"No, I don't think so. He didn't give me that impression," Siriu told the AP.

Pistorius shot at Tolmezzo during breaks from athletic training in the nearby town of Gemona. In November 2011, Pistorius posted a photo of himself firing a rifle at Tolmezzo, with the words: "Had a 96% headshot over 300m from 50shots! Bam!"

Last June, seven weeks before he made history by running at the London Games, Pistorius tweeted that he was going back to Tolmezzo to shoot vintage rifles, adding: "Amped to the max! Yeaaah boi!!"

Gun collecting is regulated by South Africa's stringent Firearms Control Act. Pistorius had to explain to his collecting association, both in writing and in interviews, what types of firearms he wanted to collect and why.

Beare said he and two other association members interviewed Pistorius in June or July 2012, shortly before he became the first double-amputee Olympic runner.

"He was still budding (as a collector) at that stage. He had done his research on it and he was interested in American firearms," Beare said.

The association certified Pistorius as a beginner collector, Beare said. Pistorius bought two Smith & Wesson revolvers and three shotguns and sent photos of the firearms and their serial numbers to the association, as required, Beare said.

But Pistorius couldn't take actual physical possession of his firearms because he didn't have police-issued licenses for them. So the weapons were kept for safekeeping by a gun dealer, Beare said. At firing ranges, Pistorius used other people's guns, he added.

Pistorius eventually applied for the licenses in January, according to the National Firearms Center. It listed his weapons as:

—A Smith & Wesson model 500. With a caliber of .500 Magnum, it is called "the most powerful production revolver in the world" by its manufacturer in Springfield, Massachusetts. "A hunting handgun for any game animal walking," the company's website says. Pistorius was "quite fascinated" with that particular weapon, Beare said.

—A Smith & Wesson .38-caliber revolver.

—Three shotguns: A Mossberg, a Maverick and a Winchester, all American makes.

—A Vektor .223-caliber rifle.

The current status of those applications is unclear. Firearms Center officials said after Pistorius killed Steenkamp that the six license applications were sent back to a Johannesburg police station to be refilled, but the reason for that wasn't given.

For civilian collectors, the Vektor is the closest they can get to the R-series assault rifles used by South Africa's military. For civilian use, the rifle is modified to make it only semi-automatic. Because it is classed as a restricted weapon in South Africa, Pistorius had to upgrade his status from a beginner to a more serious collector.

As part of that upgrading process, Pistorius was interviewed again by his collectors' club this January, Beare said. It accepted the runner's explanation that he wanted to collect weapons linked to South African military history, Beare said. He said that entitled Pistorius to start collecting not just South African firearms but also Russian-made guns that guerrilla groups have used over the years to fight South African forces.

Pistorius bought the Vektor around December, and sent the serial number and a photo to the association, Beare added.

Collecting firearms can be expensive. Vektors sell for US$1,100 to US$1,500 on South African gun-resale websites. Pistorius' athletic success and sponsorships have made him wealthy. Beare said he understood that Pistorius was planning to build on his collection over time.

"You start small and then you start growing," he said.

Some have questioned why Pistorius felt he needed such a variety of weapons and whether the association should have certified him.

Andre Pretorius, president of the Professional Firearm Trainers Council, a regulatory body for South African firearms instructors, said he struggles to see how pistols, shotguns and a semi-automatic rifle could be regarded as a coherent collection.

"The makes differ, the models differ and generally a collection needs to have a theme," said Pretorius. "I don't see there's a theme here."

But Webb, of the collectors' confederation, disagreed.

"There was a logic," Webb told the AP. "He's got three approved areas of interest."

___

AP Sports Writer Andrew Dampf in Rome contributed to this report.

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U.S. evolves on same-sex marriage

STORY HIGHLIGHTS

• The president and the nation have shifted perspectives on same-sex marriage


• Supreme Court ruling on California's same-sex marriage ban a critical test


• Growing public support for gay marriage give proponents hope for change

Washington (CNN) -- The nation's growing acceptance of same-sex marriage has happened in slow and painstaking moves, eventually building into a momentum that is sweeping even the most unlikely of converts.

Even though he said in 2008 that he could only support civil unions for same-sex couples, President Barack Obama nonetheless enjoyed strong support among the gay community. He disappointed many with his conspicuously subdued first-term response to the same-sex marriage debate.

Last year, after Vice President Joe Biden announced his support, the president then said his position had evolved and he, too, supported same-sex marriage.

So it was no small matter when on Thursday the Obama administration formally expressed its support of same-sex marriage in a court brief weighing in on California's Proposition 8, which bans same-sex weddings. The administration's effort was matched by at least 100 high-profile Republicans — some of whom in elections past depended on gay marriage as a wedge issue guaranteed to rally the base — who signed onto a brief supporting gay couples to legally wed.

Obama on same-sex marriage: Everyone is equal

Then there are the polls that show that an increasing number of Americans now support same-sex marriage. These polls show that nearly half of the nation's Catholics and white, mainstream Protestants and more than half of the nation's women, liberals and political moderates all support same-sex marriage.

According to Pew Research Center polling, 48% of Americans support same-sex marriage with 43% opposed. Back in 2001, 57% opposed same-sex marriage while 35% supported it.

In last year's presidential election, same-sex marriage scarcely raised a ripple. That sea change is not lost on the president.

"The same evolution I've gone through is the same evolution the country as a whole has gone through," Obama told reporters on Friday.

Craig Rimmerman, professor of public policy and political science at Hobart and William Smith colleges says there is history at work here and the administration is wise to get on the right side.

"There is no doubt that President Obama's shifting position on Proposition 8 and same-sex marriage more broadly is due to his desire to situate himself on the right side of history with respect to the fight over same-sex marriage," said Rimmerman, author of "From Identity to Politics: The Lesbian and Gay Movements in the United States."

"I also think that broader changes in public opinion showing greater support for same-sex marriage, especially among young people, but in the country at large as well, has created a cultural context for Obama to alter his views."

For years, Obama had frustrated many in the gay community by not offering full-throated support of same-sex marriage. However, the president's revelation last year that conversations with his daughters and friends led him to change his mind gave many in that community hope.

Last year, the Obama administration criticized a measure in North Carolina that banned same-sex marriage and made civil unions illegal. The president took the same position on a similar Minnesota proposal.

Obama administration officials point to what they see as the administration's biggest accomplishment in the gay rights cause: repealing "don't ask, don't tell," the military's ban on openly gay and lesbian members serving in the forces.

Then there was the president's inaugural address which placed the gay community's struggle for equality alongside similar civil rights fights by women and African-Americans.

"Our journey is not complete until our gay brothers and sisters are treated like anyone else under the law, for if we are truly created equal, then surely the love we commit to one another must be equal, as well," Obama said in his address after being sworn in.

In offering its support and asserting in the brief that "prejudice may not be the basis for differential treatment under the law," the Obama administration is setting up a high stakes political and constitutional showdown at the U.S. Supreme Court over a fast-evolving and contentious issue.

The justices will hear California's Proposition 8 case in March. That case and another appeal over the federal Defense of Marriage Act will produce blockbuster rulings from the justices in coming months.

Beyond the legal wranglings there is a strong social and historic component, one that has helped open the way for the administration to push what could prove to be a social issue that defines Obama's second term legacy, Rimmerman said.

The nation is redefining itself on this issue, as well.

Pew survey: Changing attitudes on gay marriage

The changes are due, in part, to generational shifts. Younger people show a higher level of support than their older peers, according to Pew polling "Millennials are almost twice as likely as the Silent Generation to support same-sex marriage."

"As people have grown up with people having the right to marry the generational momentum has been very, very strong," said Evan Wolfson, president of Freedom to Marry, a gay rights organization.

That is not to say that there isn't still opposition.

Pew polling found that most Republicans and conservatives remain opposed to same-sex marriage. In 2001, 21% of Republicans were supportive; in 2012 that number nudged slightly to 25%.

Conservative groups expressed dismay at the administration's same-sex marriage support.

"President Obama, who was against same-sex 'marriage' before he was for it, and his administration, which said the Defense of Marriage Act was constitutional before they said it was unconstitutional, has now flip-flopped again on the issue of same-sex 'marriage,' putting allegiance to extreme liberal social policies ahead of constitutional principle," Family Research Council President Tony Perkins said in a statement.

But there are signs of movement even among some high profile Republican leaders

Top Republicans sign brief supporting same-sex marriage

The Republican-penned friend of the court brief, which is designed to influence conservative justices on the high court, includes a number of top officials from the George W. Bush administration, Mitt Romney's former campaign manager and former GOP presidential candidate Jon Huntsman.

It is also at odds with the Republican Party's platform, which opposes same-sex marriage and defines marriage as a union between a man and a woman.

Still, with White House and high-profile Republican support, legal and legislative victories in a number of states and polls that show an increasing number of Americans support same sex-marriage, proponents feel that the winds of history are with them.

"What we've seen is accelerating and irrefutable momentum as Americans have come to understand who gay people are and why marriage matters," Wolfson said. "We now have a solid national majority and growing support across every demographic. We have leaders across the spectrum, including Republicans, all saying it's time to end marriage discrimination."

CNN's Peter Hamby, Ashley Killough and Bill Mears contributed to this report.

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Redflex execs out as scandal grows in red light camera firm

The president, chief financial officer and top lawyer for Chicago's red light camera company resigned this week amid an escalating corruption scandal that has cost Redflex Traffic Systems Inc. its lucrative, decadelong relationship with the city.

The resignations came as Redflex said it was winding down a company-funded probe into allegations of an improper relationship between the company and the former city transportation manager who oversaw its contract until 2011, a relationship first disclosed by the Tribune in October. A longtime friend of that city manager was hired by Redflex for a high-paid consulting deal.

The company recently acknowledged it improperly paid for thousands of dollars in trips for the former city official, the latest in a series of controversial revelations that have shaken Redflex from its Phoenix headquarters to Australia, the home of parent company Redflex Holdings Ltd.

Mayor Rahm Emanuel's administration banned the company from competing for the upcoming speed camera contract and went further last month by announcing that Redflex would lose its red light contract when it expires in June. The Chicago program, with more than 380 cameras, has been the company's largest in North America and is worth about 13 percent of worldwide revenue for Redflex Holdings. Since 2003 it has generated about $100 million for Redflex and more than $300 million in ticket revenue for the city.

In an email addressed to all company employees, Redflex Holdings CEO and President Robert T. DeVincenzi announced the resignations of three top executives in Phoenix: Karen Finley, the company's longtime president and chief executive officer; Andrejs Bunkse, the general counsel; and Sean Nolen, the chief financial officer. Their exits follow those of the chairman of the board of Redflex Holdings, another Australian board member and the company's top sales executive who Redflex has blamed for much of its Chicago problems.

"Today's announcement of executive changes follows the conclusion of our investigation in Chicago and marks the dividing line between the past and where this company is headed," said DeVincenzi, who took over as CEO of the Phoenix company. "This day, and each day going forward, we intend to be a constructive force in our industry, promoting high ethical standards and serving the public interest."

The company also held town hall meetings in Arizona to unveil reforms, including new requirements to put all company employees through anti-bribery and anti-corruption training, hiring a new director of compliance to ensure that employees adhere to company policies and establishing a 24-hour whistle-blower hotline.

The resignations and a second consecutive halt to public trading of the company's stock are the latest in a string of events that followed Tribune reports last year regarding 2-year-old internal allegations of corruption in the Chicago contract that the company previously said were investigated and discounted.

The scandal now enveloping the company centers on its relationship to former Chicago transportation official John Bills, who retired in 2011 after overseeing the company's contract since it began in 2003.

A whistle-blower letter obtained by the Tribune said Bills received lavish vacations directly on the expense report of a company executive and raised questions about improper ties between Bills and a Redflex consultant who received more than $570,000 in company commissions.

Bills and the consultant, a longtime friend, have denied wrongdoing.

The company told the Tribune in October that its investigation into the 2010 letter found only one instance of an inadvertent expenditure for Bills, a two-day hotel stay at the Arizona Biltmore expensed by the executive. Redflex lawyer Bunkse told the newspaper that the company responded by sending the executive to "anti-bribery" training and overhauling company expense procedures.

But after additional Tribune reports, the company hired a former Chicago inspector general, David Hoffman, to conduct another investigation. Hoffman made an interim report of his findings to company board members this month. That report prompted the company officials to acknowledge a much deeper involvement with Bills, including thousands of dollars for trips to the Super Bowl and White Sox spring training over many years.

The chairman of the company's Australian board of directors resigned, trading on company stock was temporarily suspended and the company acknowledged that it is sharing information with law enforcement.

Trading was halted again this week pending more details about the company's latest actions.

dkidwell@tribune.com

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Stock index futures signal mixed start to March

LONDON (Reuters) - Stock index futures pointed to a mixed open on Wall Street on Friday, with futures for the S&P 500 up 0.3 percent, while Dow Jones and Nasdaq 100 futures were broadly flat at 0956 GMT.

Overnight equity market performance has been mixed, with Tokyo shares edging higher <.n225>, while European bourses were hit by economic growth concerns <.fteu3>.

China's factory growth cooled to multi-month lows in February as domestic demand dipped, weighing on firms already hit by slack foreign sales and underlining the patchiness of the country's economic recovery.

Euro zone manufacturing activity appeared no closer to recovery last month, when a dire performance in France offset a return to growth in Germany, PMI data showed. British manufacturing, meanwhile, shrank unexpectedly.

Absent a highly unlikely last-ditch deal, the $85 billion in cuts across federal government agencies start on Friday after the White House and Republicans failed to reach a deal. The measures are expected to shave at least 0.5 percent off U.S. economic growth.

Groupon Inc fired Andrew Mason as chief executive officer on Thursday, sending its shares up as much as 8 percent in after-hours trade, ousting a co-founder who failed to stop a gradual erosion of its main daily deals business.

Boeing Co will cut hundreds of jobs at a South Carolina plant that makes 787 Dreamliners over the course of this year, but the move has nothing to do with the recent grounding of the troubled jetliner, the Wall Street Journal reported on Thursday.

U.S. government-run mortgage finance provider Freddie Mac earned $11.0 billion last year, the first annual increase in its net income since 2006, the year the nation's housing bubble peaked.

Bank of America Corp BAC.N said in a securities filing on Thursday that the New York State Attorney General was investigating the bank over its purchase, securitization and underwriting of home loans.

Gap Inc's fourth-quarter profit beat estimates, helped by higher comparable store sales in North America and the apparel retailer raised its dividend for this year by 20 percent to 60 cents.

Salesforce.com Inc reported better-than-expected quarterly sales of $835 million on Thursday, as its cloud-based services continued to sell well despite an uncertain macroeconomic picture. Its shares gained 4.9 percent after hours to $177.50.

Paulson & Co, the largest shareholder of MetroPCS Communications Inc , said it will vote against the wireless service provider's proposed merger with T-Mobile USA, a unit of Deutsche Telekom AG , unless the companies sweeten the deal.

Best Buy Co ended talks with founder Richard Schulze over a deal in which he and a group of buyout firms were proposing to take a minority stake in the firm in exchange for three seats on the board, the Wall Street Journal reports, citing people familiar with the matter.

Friday's bumper data calendar features PCE inflation data for January alongside the Thomson Reuters/University of Michigan sentiment index and the Institute for Supply Management's manufacturing index for February.

The Dow Jones industrial average <.dji> fell 20.88 points, or 0.15 percent, to 14,054.49 on Thursday. The Standard & Poor's 500 Index <.spx> lost 1.31 points, or 0.09 percent, to 1,514.68. The Nasdaq Composite Index <.ixic> fell 2.07 points, or 0.07 percent, to end at 3,160.19.

(Reporting by Francesco Canepa and Toni Vorobyova; Editing by Catherine Evans)

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Identity politics after Lee's Oscar win

STORY HIGHLIGHTS

• Ang Lee's name beamed on building in Taiwan after Oscar win


• Lee, born in Taiwan, won award for best director for "Life of Pi"


• Lee's win created excitement in Taiwan and China, both claimed him as their own


• Ryan: "In some ways it feels like 'Linsanity' all over again"

Editor's note: Andrew Ryan is a host and producer at Radio Taiwan International, a government-owned station that broadcasts in several languages and countries. He first came to Taiwan in 1996 as a Fulbright scholar and has spent the last 16 years as a translator and observer of politics and culture.

Taipei (CNN) -- It's not every territory in the world that puts an Oscar-winning director's name up in lights on a towering building. But that's just the sort of thing that happens in Taiwan -- and it did on Monday night after Ang Lee picked up his second "Best Director" Oscar, this time for "Life of Pi."

The moment wasn't just celebrated in grand statements, but in small scenes played out in front of televisions across Taiwan when his name was announced.

I was at a TV station in Taipei that was broadcasting live coverage of the Oscars, working with a team of translators that was creating the subtitles for the rebroadcast. When Lee's name was announced the office erupted in applause. Down the hallway, more cheering could be heard.

READ: Oscar winners: Analysis of who won

I couldn't help but think back to the Athens Games in 2004, when Chen Shih-hsin won Taiwan's first ever Olympic gold medal (under the team name "Chinese Taipei"). Even veteran news anchors shed tears when the young taekwondo star defeated her Cuban rival.

It would be reductive to suggest that these displays of patriotism are simply the response of a small country that just doesn't crank out that many Oscar winners or Olympic golds. It also speaks of a place that has been largely marginalized in the international community.

Today, Taiwan has just 23 official diplomatic allies -- mostly other marginalized nations, in Central America and Africa. That's because China still sees Taiwan as part of its territory more than 60 years after the Chinese Nationalists retreated to the island at the end of a Civil War against the Communists. The Nationalists -- or Kuomintang -- are now the ruling party in a democratic Taiwan, which is officially called the Republic of China (ROC) -- not to be confused with the People's Republic of China on the Mainland.

Having lost its seat at the United Nations to the PRC in 1971, the ROC found itself with a diminished voice in the international community. It turned to manufacturing and technology in the 1980s, spurring on what is now referred to as an "economic miracle." Today, with its economy struggling to move past the global economic downturn, Taiwan has added the arts, sports, and even baking to its repertoire.

READ: Oscars 2013: Hollywood gets political

What's striking about Lee's win is that it's not just people in Taiwan who were quick to claim him as one of their own. In China, the state-run Xinhua news agency referred to him as "Chinese-American." While Taiwanese media latched onto the portion of Lee's acceptance speech when he thanked Taiwan and the central city of Taichung where much of the movie was filmed, Xinhua's main story included Lee's line of thanks to the 3,000 people who worked on the film for "believing this story and sharing this incredible journey with me."

In some ways it feels like "Linsanity" all over again, when Taiwan and China both claimed basketball star Jeremy Lin as their own, leaving the international media struggling to chart the dangerous waters of identity politics to correctly describe him.

VIEW: Photos from the red carpet

A very small voice at the fringe of the discussion wonders why it's important for people to know that Lin's paternal grandmother lives in Taiwan and referred to him as "a real Taiwanese," or that Lee grew up in Tainan and still loves to visit his favorite noodle shop there. Others in Taiwan question why a nation's confidence should be based on its success in the international community.

When Ang Lee's name was announced, the office erupted in applause. Down the hallway, more cheering could be heard.
Andrew Ryan

With China looming to the north, now the world's second biggest economy and wielding an influence that's verging on "superpower" status, the metaphor of Jonah and the whale comes to mind. The Taiwanese electorate is sharply divided on how it feels about the way ties with China have warmed ever since President Ma Ying-jeou first took office in 2008. The benefits are obvious, considering China is Taiwan's largest trade partner, but some worry that it could lead to a loss in autonomy.

INTERACTIVE: Oscars by numbers

The Ma administration has been mindful of the nationalistic rhetoric of the opposition, and although the president was born in Hong Kong, he has referred to himself in the past as "Taiwanese as well as Chinese." Ma was also quick to congratulate Lee following the Oscars, and to urge others to follow in the director's footsteps and "work hard at promoting Taiwan to the world."

Lee is just one name on a growing list of national heroes that both the government and the private sector have celebrated in recent years for putting Taiwan on the map: people like fashion designer Jason Wu, who moved to Canada from Taiwan and has created garments for U.S. First Lady Michelle Obama; master baker Wu Pao-chun, who beat the French patissiers at their own competition -- Les Masters de la Boulangerie in 2010; Yani Tseng, the world's number one female golfer; and even the humble vegetable seller-turned-philanthropist Chen Shu-chu, who was selected by Time Magazine as one of its heroes of 2010.

So what are people saying when they embrace these heroes as Taiwanese? They are saying "Taiwan may be small and diplomatically isolated, but it deserves to have a voice in the international community." While Lee may not speak about politics and no longer creates movies about Taiwan, he does have a voice and people do listen. And that's worth spreading in lights across the world's second-tallest building.

Follow us on Twitter @CNNOpinion.

Join us on Facebook/CNNOpinion.

The opinions expressed in this commentary are solely those of Andrew Ryan.

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Tax on pack of cigarettes sold in Chicago up $1 to $6.67

On the eve of a $1-per-pack Cook County cigarette tax increase, County Board President Toni Preckwinkle stood in the glow of X-rays showing damaged lungs, surrounded by some of Stroger Hospital's top pulmonary specialists as she discussed how smoking shortens people's lives.

The setting and talking points made clear the message Preckwinkle wanted to convey Thursday: This is a public health problem, one she plans to fight by giving smokers an incentive to quit and teens a reason not to start.

But the county's tax increase is more than just a campaign to protect people from emphysema and lung cancer. Preckwinkle is counting on $25.6 million this year from the move to help balance the budget. The history of cigarette tax increases suggests the county will be lucky to get that much in 2013 and should expect diminishing returns in the years ahead.

Smokes are a financial well that public officials have gone to repeatedly to shore up shaky finances at the local and state level. When the county tax increase takes effect Friday, a pack of cigarettes purchased in Chicago will come with $6.67 tacked on by the city, county and state. That's just behind New York City's nation-leading $6.86 in taxes per pack. It will also push the cost of a pack of cigarettes in Chicago to as much as $11.

Recent cigarette tax increases have had only a short-term benefit to the government bottom line. Some people quit, while others buy cigarettes online or outside the county or state.

When the county last raised the cigarette tax — by $1 per pack in 2006 — collections initially shot up by $46.5 million, hitting $203.7 million, county records show. But by 2009, the county collected $20.4 million less than it had in 2005.

Mayor Richard M. Daley bumped up the city of Chicago's share of the cigarette tax by 32 cents in 2005 and another 20 cents in 2006, to 68 cents per pack. He saw collections rise from $15.6 million in 2004 to $32.9 million in 2006, according to a city report. But city cigarette tax revenue fell to $28.4 million in 2007, and continued dropping to $18.7 million by 2011, records show.

At the state level, Quinn pushed through a $1-a-pack hike in June.

Before that, state lawmakers and Gov. George Ryan agreed on a 40-cent increase in 2002. Cigarette tax proceeds went up by more than $178 million in 2003, to $643.1 million, and rose to $729.2 million in 2004. The revenue then fell steadily to $549 million by 2010 before edging back up to $580 million last year, according to state records.

The county is preparing for the windfall from the $1 increase to be strong this year, then decline. County officials project that after bringing in $25.6 million for the remainder of this budget year, the increase will net about $29 million for 2014, $21 million in 2015, $15 million in 2016 and just $9 million in 2017.

Preckwinkle says that's OK with her.

"My hope would be that over the long run this is no longer a way in which governments look to raise money, because fewer and fewer people are smoking," she said. "So I would hope that we have the effect of reducing our revenue because more people quit."

The county could end up saving money as cigarette tax revenue falls because uninsured people with ailments related to smoking are such a heavy financial burden to the public hospital system, Preckwinkle said.

In the meantime, Preckwinkle pledged to hire more staff this year to crack down on stores selling untaxed packs and large-scale tobacco smuggling from surrounding states. "We anticipate that there may be some noncompliance, as there always is when you institute an increase like this," she said.

Preckwinkle also acknowledged that the higher tax rate will push some smokers into surrounding counties or Indiana to pick up their packs, but she predicted such cross-border runs will not last.

"While people may initially, when the prices rise, go to other states — Indiana, Wisconsin or wherever — over time that trek gets very tiresome and time-consuming, and they return to their former habits of buying their cigarettes nearby," Preckwinkle said.

But David Vite, president of the Illinois Retail Merchants Association, said he thinks the cigarette taxes in Cook County are now so high compared with surrounding areas that smokers will continue to make the longer drive, and Illinois stores near jurisdictions with lower taxes will struggle even more.

"You might see people return to their old patterns if we were talking about a slight disparity, say 25 cents a pack," Vite said. "But now we're talking about a difference of nearly $3 a pack compared to Indiana, almost $30 a carton. You're going to see guys working in factories saying, 'It's my week to make a run,' heading to Indiana and coming back with $1,500 worth of cigarettes for all their co-workers."

jebyrne@tribune.com

Twitter @_johnbyrne

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Taiwan ebullient over Ang Lee's Oscar

STORY HIGHLIGHTS

• Ang Lee's name beamed on building in Taiwan after Oscar win


• Lee, born in Taiwan, won award for best director for "Life of Pi"


• Lee's win created excitement in Taiwan and China, both claimed him as their own


• Ryan: "In some ways it feels like 'Linsanity' all over again"

Editor's note: Andrew Ryan is a host and producer at Radio Taiwan International, a government-owned station that broadcasts in several languages and countries. He first came to Taiwan in 1996 as a Fulbright scholar and has spent the last 16 years as a translator and observer of politics and culture.

Taipei (CNN) -- It's not every territory in the world that puts an Oscar-winning director's name up in lights on a towering building. But that's just the sort of thing that happens in Taiwan -- and it did on Monday night after Ang Lee picked up his second "Best Director" Oscar, this time for "Life of Pi."

The moment wasn't just celebrated in grand statements, but in small scenes played out in front of televisions across Taiwan when his name was announced.

I was at a TV station in Taipei that was broadcasting live coverage of the Oscars, working with a team of translators that was creating the subtitles for the rebroadcast. When Lee's name was announced the office erupted in applause. Down the hallway, more cheering could be heard.

READ: Oscar winners: Analysis of who won

I couldn't help but think back to the Athens Games in 2004, when Chen Shih-hsin won Taiwan's first ever Olympic gold medal (under the team name "Chinese Taipei"). Even veteran news anchors shed tears when the young taekwondo star defeated her Cuban rival.

It would be reductive to suggest that these displays of patriotism are simply the response of a small country that just doesn't crank out that many Oscar winners or Olympic golds. It also speaks of a place that has been largely marginalized in the international community.

Today, Taiwan has just 23 official diplomatic allies -- mostly other marginalized nations, in Central America and Africa. That's because China still sees Taiwan as part of its territory more than 60 years after the Chinese Nationalists retreated to the island at the end of a Civil War against the Communists. The Nationalists -- or Kuomintang -- are now the ruling party in a democratic Taiwan, which is officially called the Republic of China (ROC) -- not to be confused with the People's Republic of China on the Mainland.

Having lost its seat at the United Nations to the PRC in 1971, the ROC found itself with a diminished voice in the international community. It turned to manufacturing and technology in the 1980s, spurring on what is now referred to as an "economic miracle." Today, with its economy struggling to move past the global economic downturn, Taiwan has added the arts, sports, and even baking to its repertoire.

READ: Oscars 2013: Hollywood gets political

What's striking about Lee's win is that it's not just people in Taiwan who were quick to claim him as one of their own. In China, the state-run Xinhua news agency referred to him as "Chinese-American." While Taiwanese media latched onto the portion of Lee's acceptance speech when he thanked Taiwan and the central city of Taichung where much of the movie was filmed, Xinhua's main story included Lee's line of thanks to the 3,000 people who worked on the film for "believing this story and sharing this incredible journey with me."

In some ways it feels like "Linsanity" all over again, when Taiwan and China both claimed basketball star Jeremy Lin as their own, leaving the international media struggling to chart the dangerous waters of identity politics to correctly describe him.

VIEW: Photos from the red carpet

A very small voice at the fringe of the discussion wonders why it's important for people to know that Lin's paternal grandmother lives in Taiwan and referred to him as "a real Taiwanese," or that Lee grew up in Tainan and still loves to visit his favorite noodle shop there. Others in Taiwan question why a nation's confidence should be based on its success in the international community.

When Ang Lee's name was announced, the office erupted in applause. Down the hallway, more cheering could be heard.
Andrew Ryan

With China looming to the north, now the world's second biggest economy and wielding an influence that's verging on "superpower" status, the metaphor of Jonah and the whale comes to mind. The Taiwanese electorate is sharply divided on how it feels about the way ties with China have warmed ever since President Ma Ying-jeou first took office in 2008. The benefits are obvious, considering China is Taiwan's largest trade partner, but some worry that it could lead to a loss in autonomy.

INTERACTIVE: Oscars by numbers

The Ma administration has been mindful of the nationalistic rhetoric of the opposition, and although the president was born in Hong Kong, he has referred to himself in the past as "Taiwanese as well as Chinese." Ma was also quick to congratulate Lee following the Oscars, and to urge others to follow in the director's footsteps and "work hard at promoting Taiwan to the world."

Lee is just one name on a growing list of national heroes that both the government and the private sector have celebrated in recent years for putting Taiwan on the map: people like fashion designer Jason Wu, who moved to Canada from Taiwan and has created garments for U.S. First Lady Michelle Obama; master baker Wu Pao-chun, who beat the French patissiers at their own competition -- Les Masters de la Boulangerie in 2010; Yani Tseng, the world's number one female golfer; and even the humble vegetable seller-turned-philanthropist Chen Shu-chu, who was selected by Time Magazine as one of its heroes of 2010.

So what are people saying when they embrace these heroes as Taiwanese? They are saying "Taiwan may be small and diplomatically isolated, but it deserves to have a voice in the international community." While Lee may not speak about politics and no longer creates movies about Taiwan, he does have a voice and people do listen. And that's worth spreading in lights across the world's second-tallest building.

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Join us on Facebook/CNNOpinion.

The opinions expressed in this commentary are solely those of Andrew Ryan.

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Chicago archdiocese to close 5 schools in cost-cutting move

Budget cuts announced Wednesday by the Archdiocese of Chicago signal that the area's Roman Catholics are entering a period of austerity when there will be less money for their parishes and schools.

The cuts, which were officially announced as Cardinal Francis George and other leaders of the church gathered at the Vatican to select a new pope, include closing five schools, eliminating 75 positions at the archdiocese's headquarters and placing a moratorium on loans to parishes from the archdiocese bank for three years. Other changes include creating stricter guidelines for local parishes applying for subsidies and reducing the number of the agencies in the archdiocese.

George, who spoke publicly about the cuts when asked by reporters in Rome, said they are needed to address the archdiocese's chronic financial problems. The archdiocese has run deficits of more than $30 million annually over the last four years, including being $40 million in the red for the fiscal year ending in June 2012.

All told, the measures will save tens of millions of dollars over the next few years, officials said.

“The expenses have gone up, and the income is pretty well flat,” George said after a news conference in Rome about Pope Benedict XVI's last audience Wednesday in St. Peter's Square. “We tried to ride out the recession without making any changes — and we can't do that. We're giving more grants to parishes and schools that need more money. The budget is not balanced. Not just layoffs, but a lot of other things being done, other ways to use the resources we have.”

The archdiocese sold $150 million in bonds in 2012 that helped it get through a cash-flow problem, but ultimately that wasn't enough, George said. He hopes the cuts will enable the archdiocese to balance its budget in two years.

Although the cardinal's announcement made headlines, the archdiocese's financial situation has been no secret to its priests. Several clergymen said they knew the archdiocese had planned to scale back loans to parishes.

“We have already made adjustments,” said the Rev. Dennis Ziomek of St. Barbara Parish in Chicago's Bridgeport neighborhood. “We have to be responsible stewards with the money.”

In a letter posted on the archdiocese website, the cardinal thanked parishioners for their generosity and asked them to pray for the employees now out of a paycheck.

At the archdiocese's Pastoral Center headquarters on Wednesday, people funneled in and out of the building during their lunch breaks but declined comment on the layoffs. Before the announcement, staffers received memos asking them to report to their desks early Wednesday.

Of the 75 positions, 55 were full-time jobs. Sixty people were let go, while the remaining posts had been vacant. Those cuts are expected to save $11 million to $13 million annually by fiscal 2015, George wrote in his letter.

Employees who received pink slips will get job counseling, extended health benefits and generous severance packages.

“We're keeping up counseling for helping people find jobs, looking for places where they might look for jobs,” George said.

Along with the layoffs, the archdiocese will reduce the number of capital loans and grants it gives parishes, while creating “stricter criteria” for them to qualify for the financial assistance.

A Parish Transformation initiative in the works for at least two years will also try to save money by laying out measures to provide more financial stability, though the letter did not give details.

Those cuts are expected to save an additional $13 million to $15 million annually by fiscal 2015, the letter states.

By next year, the archdiocese will reduce its aid to Catholic schools by $10 million. It plans to give scholarships to children affected by the five school closings so they can attend nearby Catholic schools. Officials said low enrollment was a key factor for closing the schools: St. Gregory the Great High, St. Paul-Our Lady of Vilna Elementary and St. Helena of the Cross Elementary in Chicago, plus St. Bernardine in Forest Park and St. Kieran in Chicago Heights.

Now, Catholic schools will start relying on scholarships for student financial aid instead of grants from the archdiocese to make tuition affordable, Superintendent Sister Mary Paul McCaughey said.

She pointed to a new partnership with the Big Shoulders Fund, a charity supporting urban Catholic schools, that will help families pay for school with scholarships.

McCaughey did not expect tuition at other Catholic schools to immediately rise because grants from the archdiocese have been reduced. About two-thirds of schools already have posted their tuition rates for the upcoming school year, she added.

“Although things are challenged, I think (Chicago) is a Catholic community that's always supported its schools,” McCaughey said. “I think the support will be there.”

Outside of St. Bernardine Elementary in west suburban Forest Park, one of the schools that will close this summer, Maria Maxham said she was devastated when she heard last month that she'd have to send her children, one in second grade and the other in fourth grade, to a different school.

Maxham, who lives in Forest Park, said she is not sure the two will attend another local Catholic school because some lack what she thought was St. Bernardine's strength.

“There is so much diversity at St. Bernardine, and that's part of what makes it so fantastic,” Maxham said. “It was a special place and a second family for us.”

The school, which has been open since 1915, has about 100 students currently enrolled in its preschool-through-eighth-grade classrooms.

Administrators, teachers and parents were notified of the closing in January, when McCaughey led a meeting at the school and explained the large amount of money that the archdiocese needed to reduce from the schools budget, Principal Veronica Skelton Cash said.

One family left the school shortly after hearing the news, she added.

Cash, who joined the school in the fall, said there was much frustration among staff members afterward. Many believed they would have at least a few years to turn things around.

“I could see a lot of things changing for the better at this school,” Cash said. “The culture of the community is changing, and we were getting more and more inquiries about the school. There was momentum going forward.”

Current employees were given guidance on severance and benefits by the archdiocese's human resources officials, Cash said. Teachers without jobs will also be placed on a priority list for future employment with the archdiocese, she said.

“I'm incredibly disheartened,” said Daniel Kwarcinski, who hopes to find a job at another private school after teaching art for seven years at St. Bernardine. “There's a need for a school like this where we are at.”

In Rome, George said the decisions to let people go and reduce aid were not easy. But he reiterated that the archdiocese's financial situation drove the decision.

“We have to balance the budget, especially if it's precarious,” he said. “The growth being very slow means we can no longer ignore the kinds of deficit situations that have been imposed on us. We have to take action.”

Tribune reporter Manya A. Brachear reported from Rome, with Tribune reporters Bridget Doyle and Jennifer Delgado in Chicago.

mbrachear@tribune.com

bdoyle@tribune.com

jmdelgado@tribune.com

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Stock index futures signal mixed open

LONDON (Reuters) - Stock index futures pointed to a mixed Wall Street open on Wednesday, with futures for the S&P 500 and Nasdaq 100 indexes slipping 0.1 percent, while futures for the Dow Jones rose 0.1 percent by 0933 GMT.

U.S. durables goods and homes data due out at 1330 and 1500 GMT respectively should provide further clues on the health of the world's largest economy.

The Pentagon program chief for the F-35 warplane slammed its commercial partners Lockheed Martin and Pratt & Whitney on Wednesday, accusing them of trying to "squeeze every nickel" out of the U.S. government and failing to see the long-term benefits of the project.

Pratt & Whitney is 99 percent sure the fan blade problem that grounded the Pentagon's 51 new F-35 fighter jets was not caused by high-cycle fatigue, which could force a costly design change, according to two sources familiar with an investigation by the enginemaker.

Airbus parent EADS predicted higher profit this year on the heels of stronger than expected 2012 earnings and a clampdown on costs, with the development of its A350 jet remaining the biggest wild card in its bid to match rival Boeing .

Partner Communications , Israel's second-largest mobile phone operator, reported weaker-than-expected quarterly profit and said it could have weak earnings throughout 2013 due to fierce competition that has slashed calling rates.

The pan-European FTSEurofirst 300 index <.fteu3> was up 0.1 percent at 1,151.69 points by 1010 GMT on Wednesday while the euro zone's Euro STOXX 50 index <.stoxx50e> also advanced 0.1 percent, although concerns over Italy's political stalemate were likely to cap gains.

The Dow Jones industrial average <.dji> gained 115.96 points, or 0.84 percent, to 13,900.13 at the close on Tuesday. The Standard & Poor's 500 Index <.spx> rose 9.09 points, or 0.61 percent, to 1,496.94. The Nasdaq Composite Index <.ixic> advanced 13.40 points, or 0.43 percent, to close at 3,129.65.

(Reporting by Sudip Kar-Gupta; Editing by Susan Fenton)

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