Investors face another Washington deadline

NEW YORK (Reuters) - Investors face another Washington-imposed deadline on government spending cuts next week, but it's not generating the same level of fear as two months ago when the "fiscal cliff" loomed large.

Investors in sectors most likely to be affected by the cuts, like defense, seem untroubled that the budget talks could send stocks tumbling.

Talks on the U.S. budget crisis began again this week leading up to the March 1 deadline for the so-called sequestration when $85 billion in automatic federal spending cuts are scheduled to take effect.

"It's at this point a political hot button in Washington but a very low level investor concern," said Fred Dickson, chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon. The fight pits President Barack Obama and fellow Democrats against congressional Republicans.

Stocks rallied in early January after a compromise temporarily avoided the fiscal cliff, and the Standard & Poor's 500 index <.spx> has risen 6.3 percent since the start of the year.

But the benchmark index lost steam this week, posting its first week of losses since the start of the year. Minutes on Wednesday from the last Federal Reserve meeting, which suggested the central bank may slow or stop its stimulus policy sooner than expected, provided the catalyst.

National elections in Italy on Sunday and Monday could also add to investor concern. Most investors expect a government headed by Pier Luigi Bersani to win and continue with reforms to tackle Italy's debt problems. However, a resurgence by former leader Silvio Berlusconi has raised doubts.

"Europe has been in the last six months less of a topic for the stock market, but the problems haven't gone away. This may bring back investor attention to that," said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.

OPTIONS BULLS TARGET GAINS

The spending cuts, if they go ahead, could hit the defense industry particularly hard.

Yet in the options market, bulls were targeting gains in Lockheed Martin Corp , the Pentagon's biggest supplier.

Calls on the stock far outpaced puts, suggesting that many investors anticipate the stock to move higher. Overall options volume on the stock was 2.8 times the daily average with 17,000 calls and 3,360 puts traded, according to options analytics firm Trade Alert.

"The upside call buying in Lockheed solidifies the idea that option investors are not pricing in a lot of downside risk in most defense stocks from the likely impact of sequestration," said Jared Woodard, a founder of research and advisory firm condoroptions.com in Forest, Virginia.

The stock ended up 0.6 percent at $88.12 on Friday.

If lawmakers fail to reach an agreement on reducing the U.S. budget deficit in the next few days, a sequester would include significant cuts in defense spending. Companies such as General Dynamics Corp and Smith & Wesson Holding Corp could be affected.

General Dynamics Corp shares rose 1.2 percent to $67.32 and Smith & Wesson added 4.6 percent to $9.18 on Friday.

EYES ON GDP DATA, APPLE

The latest data on fourth-quarter U.S. gross domestic product is expected on Thursday, and some analysts predict an upward revision following trade data that showed America's deficit shrank in December to its narrowest in nearly three years.

U.S. GDP unexpectedly contracted in the fourth quarter, according to an earlier government estimate, but analysts said there was no reason for panic, given that consumer spending and business investment picked up.

Investors will be looking for any hints of changes in the Fed's policy of monetary easing when Fed Chairman Ben Bernake speaks before congressional committees on Tuesday and Wednesday.

Shares of Apple will be watched closely next week when the company's annual stockholders' meeting is held.

On Friday, a U.S. judge handed outspoken hedge fund manager David Einhorn a victory in his battle with the iPhone maker, blocking the company from moving forward with a shareholder vote on a controversial proposal to limit the company's ability to issue preferred stock.

(Additional reporting by Doris Frankel; Editing by Kenneth Barry)

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BBC Portrayed as Top-Heavy, Bickering and Dysfunctional

LONDON — A senior press officer for the British Broadcasting Corporation darkly volunteers to “drip poison” to discredit a BBC reporter he suspects of having leaked embarrassing information. The woman in charge of the corporation’s news divisions accuses Newsnight, a public-affairs program she oversees, of being out of touch and “sneery” toward rival BBC shows.

And, as investigators seek to uncover why the corporation canceled a Newsnight broadcast alleging that a once-beloved BBC personality who had recently died had in fact been a serial pedophile who preyed on vulnerable girls, everyone involved is scrambling to deflect blame onto someone else.

These and other unflattering details about the inner workings of Britain’s public broadcaster emerged Friday when the BBC released some 3,000 pages of internal documents — e-mails, memos and transcripts of interviews — from an external investigation into why the program, about the BBC presenter Jimmy Savile, had been canceled.

In all, the documents painted a picture of a highly dysfunctional, top-heavy organization divided into discrete, rival factions, and weighed down by mistrust, poor communication, buck-passing and internecine squabbling.

There were no startling revelations; all those came out in the so-called Pollard report into the Savile affair, which was published in December and which concluded that there were deep structural problems in the BBC. But the supporting documents released Friday shed light on just what Nick Pollard, who prepared the report, meant by his scathing critique, said John Whittingdale, chairman of the House of Commons culture and media committee.

“It demonstrates the extent of unhappiness within the BBC structure, the frustration at the bureaucratic nature of the management, and the generally poor state of morale,” Mr. Whittingdale said in a television interview.

Referring to the fact that material in some of the newly released documents was blacked out, apparently because of concerns that it might give rise to lawsuits, Mr. Whittingdale added: “The fact that so much of the evidence can’t be published, because we are told the lawyers have advised it could be defamatory, in a sense tells its own story.”

Large portions of the testimony of Jeremy Paxman, a blunt-talking Newsnight host who is known for his testy and combative interview style, for instance, are blacked out in places where it appears he is about to make personal remarks about other people.

And in an annoyingly tantalizing instance, Peter Horrocks, director of global news, declares: “It is no secret that ...” What follows has been redacted, however, so that it is in fact a secret.

Lord McAlpine, a former Tory cabinet minister who, in another debacle at Newsnight, was unjustly accused of being a pedophile in a report that was broadcast, said that the BBC should not have left out any material. “The BBC is not the Secret Service, for Christ’s sake,” he told The Daily Telegraph.

But the BBC defended the redactions. Tim Davie, the acting director general, said that “97 percent plus of all the thousands of pages are out there.”

In an interview with an off-camera interlocutor that was broadcast on the BBC Web site, Mr. Davie continued: “We are not redacting or taking out material that is embarrassing or uncomfortable to the BBC. We have simply taken out stuff that external lawyers saw as a clear risk.”

He did not make himself available for interviews with other news organizations on Friday — indeed, no one from the BBC did. That strategy was roundly ridiculed by the broadcaster’s rivals.

On Twitter, Ben de Pear, editor of Channel 4 News, said that over his career he had successfully coaxed interviews out of Robert Mugabe of Zimbabwe and Mahmoud Ahmadinejad of Iran. “We are still trying for Tim Davie,” he said.

Much of the material focused on who said what to whom, and when, during Newsnight’s investigations into the allegations against Mr. Savile — and during the subsequent decision to cancel the broadcast. But there were also general interviews with many key figures in the corporation about what was wrong and how to fix it.

The testimony of Lord Patten, chairman of the BBC Trust, was particularly sharp, as he described the chaotic flow of information, the preponderance of high-ranking officials (the BBC had “more senior leaders than China,” he said) and the general mistrust within the corporation. “Is a lesson I should take from this that I can’t believe it when I’m told things by the next director general, that I have to query everything he says or the director of news says to me or whatever?” he asked rhetorically.

No, he said in response. “With the next director general I won’t — or his senior colleagues — I won’t begin every conversation on the assumption that he or she or they may not be telling me the whole truth,” he said. “I will want to be more convinced that there is a structure in place which ensures that the truth is being told.”

Lark Turner contributed reporting from London, and Matthew Purdy from New York.

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Courtney Lopez: Gia Thinks Our Dog Is Having a Baby

Mom & Babies
Celebrity Baby Blog

02/22/2013 at 01:00 PM ET

Denise Truscello/Wireimage

Mario Lopez is a man of his word.

Following a December wedding, the EXTRA host declared he and wife Courtney would get to work expanding their family immediately — and he wasn’t kidding.

In January, the couple discovered they were indeed expecting.

“Mario and I are so excited to add to our family! I found out a month ago and surprised Mario with the good news at breakfast,” Courtney tells PEOPLE.

But the proud parents aren’t the only ones gearing up for a new addition. Big sister Gia Francesca, 2, already has babies on the brain.

“Gia kind of understands that there is a baby in my belly,” Courtney notes. “She also told me our dog Julio has a baby in his belly — so who knows!”

Despite a bumpy start — “I had a rough couple of weeks when I first found out,” she shares — the mom-to-be is feeling better and already sporting quite the blossoming belly. “I am showing so much faster this time around,” she says.

And with warmer weather on the way, Courtney will be swathing her bump in floor-length frocks — but plans on foregoing a few fashion ensembles from her past.

“I love being pregnant in the summer! I live in maxi dresses,” she says. “Looking back at my first pregnancy, there are certain things that I wore and I have no idea why. I looked horrible and I won’t do that again!”

Originally from Pittsburgh, the expectant mama is thrilled to have settled down with her growing family on the West Coast. Her only wish? That her children will one day enjoy a winter wonderland.

“I don’t miss the East Coast at all — especially the humidity,” she explains. “The one thing I do want my children to experience from an early age is snow. There is nothing like being a kid playing in the snow.”

– Anya Leon

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U.S., Japan agree on approach to Trans-Pacific Partnership talks

WASHINGTON (Reuters) - The United States and Japan on Friday agreed on language aimed at giving Japanese Prime Minister Shinzo Abe political cover to bring the world's third-largest economy into negotiations on a U.S.-led free trade agreement in the Asia Pacific region.

In a carefully worded statement following Abe's meeting with President Barack Obama, the two countries reaffirmed that "all goods would subject to negotiation" if Japan joins the talks with the United States and 10 other countries.

At the same time, the statement leaves open a possible outcome to the Trans-Pacific Partnership, or TPP, talks where the Japan could still protect its rice sector and the United States could keep duties on Japanese autos.

"Recognizing that both countries have bilateral trade sensitivities, such as certain agricultural products for Japan and certain manufactured products for the United States, the two governments confirm that, as the final outcome will be determined during the negotiations, it is not required to make a prior commitment to unilaterally eliminate all tariffs upon joining the TPP negotiations," the statement said.

Jeffrey Schott, a senior fellow at the Peterson Institute for International Economics, called the joint statement "a big step forward" in the process of determining whether Japan will join TPP talks, which members hope to finish this year.

"The United States and Japan agreed that the deal has to be comprehensive, but you don't commit to the final terms before you even get into the negotiations," Schott said.

But Representative Sander Levin, the top Democrat on the powerful House of Representatives Ways and Means Committee, called the statement "worrisome" and warned any agreement that includes Japan would not pass Congress unless it truly pries open that country's farm and automotive markets.

Abe, who is on his first trip to Washington since taking office in December, has vowed to revive Japan's economy with an expansive monetary policy, big spending and structural reform.

Joining the TPP talks could help with the third task by exposing Japanese companies and farmers to more competition.

But Japanese rice and other farmers who have long enjoyed high tariff protections are opposed to Tokyo entering the talks, and Abe curried their favor during his campaign last year by promising not to unilaterally agree to eliminate tariffs on certain sensitive products.

The current TPP members - United States, Canada, Mexico, Australia, New Zealand, Chile, Peru, Singapore, Malaysia, Vietnam and Brunei - have pledged to negotiate an agreement that eliminates tariffs in as many areas as possible.

To accomplish that goal they have agreed not to exclude any sectors or products from the negotiations.

That stance also worries Ford Motor Co and the United Auto Workers, which have pressured the Obama administration not to allow Japan into the talks until Tokyo makes reforms to open its market to more auto imports.

Although Japan already has no auto tariffs, Ford and the UAW argue that the country relies on regulatory and other non-tariff barriers to keep out auto imports.

The U.S.-Japan joint statement said the two governments would continue their discussions on the possibility of Japan joining the TPP talks.

"While progress has been made in these consultations, more work remains to be done," in areas such as autos and insurance, the joint statement said.

A final decision to allow Japan into the negotiations would have to be made by all the current TPP members.

Additionally, the White House would have to give Congress 90 days notice before starting talks with Japan.

(Additional reporting by Mark Felsenthal; Editing by David Brunnstrom and Eric Walsh)

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Embezzlement Scandal Threatens Spain’s Royal Family

Josep Lago/Agence France-Presse — Getty Images

The Duke of Palma, a former Olympic handball player named Iñaki Urdangarin, is scheduled to testify on Saturday before an investigating judge over allegations that he embezzled millions of euros.

MADRID — The Web site of the Spanish royal family features pictures of the king, Juan Carlos I, in a blue sash, his bejeweled wife, Queen Sofía, and the couple’s three glamorous children. But most of the photographs of the dashing Duke of Palma, the king’s son-in-law, were scrubbed from the site last month.

The duke’s official biography was also banished from the site. And for more than a year, the royal family has barred the duke, a former Olympic handball player named Iñaki Urdangarin, from attending official family functions.

With a multitude of graft cases undermining Spaniards’ faith in just about every institution of government, an intensifying investigation aimed at Mr. Urdangarin has placed the palace under siege as well, and left the nation’s aging monarch and his aides struggling to quell the crisis.

Mr. Urdangarin, 45, who is married to the king’s youngest daughter, Cristina, 47, is scheduled to testify on Saturday before an investigating judge over allegations that he embezzled millions of euros after leveraging his blue-blood connections to gain inflated, no-bid contracts from regional politicians for his nonprofit sports foundation, Instituto Nóos.

The royal family has tried mightily to distance itself from the investigation. Officially, the palace has insisted that the king knew nothing about the foundation activities of Mr. Urdangarin, who has pledged to prove his innocence. It publicly maintains that Juan Carlos ordered his son-in-law to abandon the troubled foundation in 2006, a year before dubious financial dealings surfaced.

But last weekend, the duke’s former business partner, Diego Torres, who is also under investigation, told a judge that the duke made no move without palace approval, and he turned over nearly 200 e-mails to support his claim. Many of those e-mails have now surfaced in the Spanish news media. Others were provided to The New York Times by a person close to the legal process who did not want to be identified for fear of retribution.

The e-mails suggest that the palace was concerned about what was going on at the sports charity well before it has acknowledged, and began pressuring Mr. Urdangarin to leave it at a time when investigators now say he and his partner were involved in inflating contracts and moving money offshore. Despite the palace’s insistence that the king had little to do with his son-in-law, the e-mails show that the king was monitoring his affairs. They include boasts by Mr. Urdangarin about the king’s backing of sponsorships for events he was organizing.

The e-mails do not indicate any wrongdoing by the king. But they have brought the scandal to the palace doorstep, further tarnishing a monarchy that has come under scrutiny as Spaniards suffer through an economic downturn and as corruption cases — including envelopes of cash handed out to top politicians — stoke their resentment over the privileges and special connections that have insulated Spain’s elite from the same pain.

Meanwhile, the king and his courtiers have been working aggressively at damage control. Over the past 10 days, the king, his attendants and the Spanish intelligence service have been pressuring the suspected sources of leaks and approaching top newspaper executives to tone down coverage of the investigation, according to people with ties to the palace and some of Spain’s leading newspapers.

Top editors at leading newspapers like El País and ABC, a loyal supporter of the monarchy, have denied being pressured.

The e-mails obtained by The Times suggest that the worries over potential harm to the palace are not new. Some show the palace searching relentlessly for a way to steer Mr. Urdangarin away from the sports foundation, scouring for a new job for him through a blue-chip network of contacts in 2004, two years before it has publicly acknowledged.

As the hunt extended into 2005, the duke complained about mounting pressures to avoid conflicts of interest. “We have been suffering a permanent surge of press releases, not always precise concerning our professional and private lives,” he wrote in stilted English in an e-mail to an associate, Corinna Sayn-Wittgenstein.

Ms. Sayn-Wittgenstein, a German princess through a former marriage, has described her role as an unpaid adviser and friend of the king, dismissing reports in the Spanish news media that they had a romantic relationship.

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Cirque Du Soleil Announces New Michael Jackson-Themed Show in Las Vegas

By Mark Gray

02/21/2013 at 09:15 PM EST

The logo

Courtesy Cirque du Soleil

The King of Pop will live in Vegas!

The long-rumored Cirque Du Soleil show based on the music of Michael Jackson was formally announced Thursday afternoon.

Premiering June 29 at Las Vegas's Mandalay Bay, the show, Michael Jackson ONE, will run 90 minutes and will feature more than 60 dancers and aerialists performing to Jackson's best known music.

Executives say the show will be different from the current Cirque Du Soleil show Immortal, which features Jackson's music.

Jackson friend and choreographer Jamie King said, "Everything [Jackson] does is with a childlike heart. For Michael, every day was fresh, every day was new, every day had to be bigger and better than the last one."

Tickets for the general public go on sale March 7.

Which Jackson song are you most excited to see performed in the show? Sound off in the comments below!

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APNewsBreak: Govs to hear Oregon health care plan

SALEM, Ore. (AP) — Oregon Gov. John Kitzhaber will brief other state leaders this weekend on his plan to lower Medicaid costs, touting an overhaul that President Barack Obama highlighted in his State of the Union address for its potential to lower the deficit even as health care expenses climb.

The Oregon Democrat leaves for Washington, D.C., on Friday to pitch his plan that changes the way doctors and hospitals are paid and improves health care coordination for low income residents so that treatable medical problems don't grow in severity or expense.

Kitzhaber says his goal is to win over a handful of other governors from each party.

"I think the politics have been dialed down a couple of notches, and now people are willing to sit down and talk about how we can solve the problem" of rising health care costs, Kitzhaber told The Associated Press in a recent interview.

Kitzhaber introduced the plan in 2011 in the face of a severe state budget deficit, and he's been talking for two years about expanding the initiative beyond his state. Now, it seems he's found people ready to listen.

Hospital executives from Alabama visited Oregon last month to learn about the effort. And the U.S. Department of Health and Human Services announced Thursday that it's giving Oregon a $45 million grant to help spread the changes beyond the Medicaid population and share information with other states, making it one of only six states to earn a State Innovation Model grant.

Kitzhaber will address his counterparts at a meeting of the National Governors Association. His talk isn't scheduled on the official agenda, but a spokeswoman confirmed that Kitzhaber is expected to present.

"The governors love what they call stealing from one another — taking the good ideas and the successes of their colleagues and trying to figure out how to apply that in their home state," said Matt Salo, director of the National Association of Medicaid Directors.

There's been "huge interest" among other states in Oregon's health overhaul, Salo said, not because the concepts are brand new, but because the state managed to avoid pitfalls that often block health system changes.

Kitzhaber persuaded state lawmakers to redesign the system of delivering and paying for health care under Medicaid, creating incentives for providers to coordinate patient care and prevent avoidable emergency room visits. He has long complained that the current financial incentives encourage volume over quality, driving costs up without making people healthier.

Obama, in his State of the Union address this month, suggested that changes such as Oregon's could be part of a long-term strategy to lower the federal debt by reigning in the growing cost of federally funded health care.

"We'll bring down costs by changing the way our government pays for Medicare, because our medical bills shouldn't be based on the number of tests ordered or days spent in the hospital — they should be based on the quality of care that our seniors receive," Obama said.

The Obama administration has invested in the program, putting up $1.9 billion to keep Oregon's Medicaid program afloat over the next five years while providers make the transition to new business models and incorporate new staff and technology.

In exchange, though, the state has agreed to lower per-capita health care cost inflation by 2 percentage points without affecting quality.

The Medicaid system is unique in each state, and Kitzhaber isn't suggesting that other states should adopt Oregon's specific approach, said Mike Bonetto, Kitzhaber's health care policy adviser. Rather, he wants governors to buy into the broad concept that the delivery system and payment models need to change.

That's not a new theory. But Oregon has shown that under the right circumstances massive changes to deeply entrenched business models can gain wide support.

What Oregon can't yet show is proof the idea is working — that it's lowering costs without squeezing on the quality or availability of care. The state is just finishing compiling baseline data that will be used as a basis of comparison.

One factor driving the Obama administration's interest in Oregon's success is the president's health care overhaul. Under the Affordable Care Act, millions more Americans will join the Medicaid rolls after Jan. 1, and the health care system will have to be able to absorb the influx of patients in a logistically and financially sustainable way.

The federal government will pay 100 percent of the costs for those additional patients in the first three years before scaling back to 90 percent in 2020 and beyond.

"There are a lot of governors who are facing the same challenges we're facing in Oregon," Kitzhaber said. "They recognize that the cost of health care is something they're going to have to get their arms around."

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Wall Street ends lower on growth worries

NEW YORK (Reuters) - U.S. stocks fell for a second straight day on Thursday and the S&P 500 posted its worst two-day loss since November after reports cast doubt over the health of the U.S. and euro-zone economies.

But a late-day rally helped stocks erase some of their losses with most of the pullback concentrated in the technology- heavy Nasdaq. The move suggested investors were still willing to buy on dips even after the sharp losses in the last session.

In Europe, business activity indexes dealt a blow to hopes that the euro zone might emerge from recession soon, showing the downturn across the region's businesses unexpectedly grew worse this month.

"The PMI numbers out of Europe were really a blow to the market," said Jack De Gan, chief investment officer at Harbor Advisory in Portsmouth, New Hampshire. "The market was expecting signs that recovery is still there, but the numbers just highlighted that the euro-zone problem is still persistent."

U.S. initial claims for unemployment benefits rose more than expected last week while the Federal Reserve Bank of Philadelphia said its index of business conditions in the U.S. mid-Atlantic region fell in February to the lowest in eight months.

Gains in Wal-Mart Stores Inc shares helped cushion the Dow. The shares gained 1.5 percent to $70.26 after the world's largest retailer reported earnings that beat expectations, though early February sales were sluggish.

The Dow Jones industrial average <.dji> fell 46.92 points, or 0.34 percent, to 13,880.62 at the close. The Standard & Poor's 500 Index <.spx> lost 9.53 points, or 0.63 percent, to 1,502.42. The Nasdaq Composite Index <.ixic> dropped 32.92 points, or 1.04 percent, to close at 3,131.49.

The two-day decline marked the U.S. stock market's first sustained pullback this year. The Standard & Poor's 500 has fallen 1.8 percent over the period and just managed to hold the 1,500 level on Thursday. Still, the index is up 5.3 percent so far this year.

The abrupt reversal in markets, which started on Wednesday after minutes from the Federal Reserve's January meeting suggested stimulus measures may end earlier than thought, looks set to halt a seven-week winning streak for stocks that had lifted the Dow and the S&P 500 close to all-time highs.

Wall Street will soon face another test with the upcoming debate in Washington over the automatic across-the-board spending cuts put in place as part of a larger congressional budget fight. Those cuts, set to kick in on March 1 unless lawmakers agree on an alternative, could depress the economy.

Semiconductor stocks ranked among the weakest of the day, pressuring the Nasdaq as the Philadelphia Semiconductor Index <.sox> fell 1.8 percent. Intel Corp fell 2.3 percent to $20.25 while Advanced Micro Devices lost 3.7 percent to $2.60 as the S&P 500's biggest percentage decliner.

The Dow also got a helping hand from personal computer maker Hewlett-Packard Co , which rose 2.3 percent to end the regular session at $17.10. The company was scheduled due to report first-quarter results after the closing bell.

Shares of Boeing Co rose 1.6 percent to $76.01 as a senior executive was set to meet with the head of the U.S. Federal Aviation Administration on Friday and present a series of measures to prevent battery failures that grounded its 787 Dreamliner fleet, according to a source familiar with the plans.

In other company news, shares of supermarket operator Safeway Inc jumped 14.1 percent to $22.97 after the company reported earnings that beat expectations.

Shares of VeriFone Systems Inc tumbled nearly 43 percent to $18.24 after the credit-card swipe machine maker forecast first- and second-quarter profits well below expectations.

Of the 427 companies in the S&P 500 that have reported results so far, 69.3 percent have exceeded analysts' expectations, compared with a 62 percent average since 1994 and 65 percent over the past four quarters, according to Thomson Reuters data through Thursday morning.

Fourth-quarter earnings for S&P 500 companies are estimated to have risen 5.9 percent, according to the data, above a 1.9 percent forecast at the start of the earnings season.

Berry Petroleum Co jumped 19.3 percent to $46.02 after oil and gas producer Linn Energy LLC said it would buy the company in an all-stock deal valued at $4.3 billion, including debt. Linn Energy shares advanced 2.8 percent to $37.68.

About two stocks fell for everyone that rose on the New York Stock Exchange and Nasdaq. About 7.64 billion shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, well above the 20-day moving average of around 6.6 billion shares.

(Editing by Jan Paschal)

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Egypts Floods Smuggling Tunnels to Gaza With Sewage

Hatem Moussa/Associated Press

A Palestinian clearing a tunnel of sewage in Rafah, between Egypt and the southern Gaza Strip.

GAZA —The Egyptian military is resorting to a pungent new tactic to shut down the smuggling tunnels connecting Sinai and Gaza: flooding them with sewage. Along with the stink, the approach is raising new questions about relations between Egypt’s new Islamist leaders and their ideological allies in Hamas who control the Gaza Strip.

“Awful,” said Abu Mutair Shalouf, 35, a Palestinian smuggler on the Gaza side, watching workers haul buckets of sewage-soaked soil from the shaft of a tunnel flooded by the Egyptian military 15 days ago. “I don’t know why they did this.”

Advisers to the Egyptian president, Mohamed Morsi, a leader of the Muslim Brotherhood’s political arm, say the answer is simple: they are determined to shut the tunnels to block the destabilizing flow of weapons and militants into Sinai from Gaza — a vow Mr. Morsi made with evident passion in an interview five months ago.

And the more muted response from Hamas, a militant offshoot of the Brotherhood, is the strongest indication yet that its leaders are now pinning their hopes on their ideological allies in Cairo, even if at the moment they appear to be harming the interests of the citizens of Gaza. The tunnels remain a vital source of certain imports to Gaza and smuggling-tax revenue for Hamas, and when the former president, Hosni Mubarak, used far less effective methods to close the tunnels, Hamas screamed of betrayal.

After the sewage flooding, several Hamas officials instead emphasized Egypt’s right to protect its borders as it chose. “Egypt is a state of sovereignty and we do not impose on it anything,” said Salah al-Bardawil, a Hamas official in Gaza. “We address the Egyptian side about the issue and hope they will understand us and our needs,” he added. “We trust the Egyptian leadership that they will not leave the Palestinian people alone.”

Analysts offer many theories about the timing. At a moment of political and economic difficulties, with a financial aid package stalled in the United States Congress, Egypt’s Islamist-led government “is showing itself once more as a valuable ally,” speculated Yasser el-Shimy, Egypt analyst at the International Crisis Group. “It can do something like this, which, perhaps, promotes strategic interests.”

Or perhaps, Mr. Shimy said, Mr. Morsi’s government aimed to remind Israel that it, and not Egypt, still bore responsibility for Gaza’s poverty and problems. Or perhaps the Egyptian military was sending some domestic message of its own, either to the Brotherhood or other domestic constituents, about the generals’ independence from the Islamists.

Concern in Cairo about the tunnels spiked last August, when 16 Egyptian soldiers died in a militant attack on a military outpost in Sinai. The Egyptian government believes the attackers came through the tunnels.

Then, after Egypt helped broker a truce between Hamas and Israel to end a week of fighting in Gaza last November, Israel eased restrictions on imports over the border. Most notably, it began allowing in more construction material previously considered to have a potential military use, though Palestinians say the Israelis still block steel and other materials.

Essam el-Hadded, Mr. Morsi’s national security adviser, suggested this week that the loosened restrictions at the border crossing might have encouraged the crackdown on tunnels. “Now we can say that the borders are open to a good extent — it could still be improved — and the needs of the Gazan people are allowed in,” Mr. Hadded told Reuters.

Under Mr. Mubarak, Palestinians said, the Egyptians sometimes flooded tunnels with gas, which was easily remedied by pumping in air.

But around the beginning of February the Egyptian military began for the first time to use waste water instead, eventually flooding about two dozen of the 200-odd tunnels. (The Egyptian authorities say there are 225; Palestinians say 250.)

Mr. Shalouf, 35, who imported mainly gravel, said that before removing the buckets of dirt he had pumped out the water. Now he plans to lay down sand and sawdust and reinforce the ceiling. Repairs could take three weeks.

Palestinians say that so far the flooding has hurt individual livelihoods but not the total volume of goods moving below ground. On Wednesday, about two cargo trucks per minute were pulling out of the main smuggling zone inside Gaza, laden with cement, gravel, canned food, citrus and vegetables. Hamas customs officers kept a record of each truck and load.

Fares Akram reported from Gaza, and David D. Kirkpatrick from Cairo. Mayy El-Sheikh contributed reporting from Cairo.

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Baby Girl on the Way for Big Brother's Britney Haynes

Mom & Babies
Celebrity Baby Blog

02/20/2013 at 08:45 PM ET

Britney Haynes is expecting a little houseguest of her own!

“Halfway there and it’s definitely a GIRL!! She arrives in July; couldn’t be happier,” the Big Brother star Tweeted Wednesday.

Along with her tweet, Haynes, 25, posted a photo of herself holding sonogram photos of her baby girl.

The outspoken player competed as a houseguest on season 12 of the CBS reality show where she placed fourth before returning as a “coach” and eventually a player during season 14, where she placed eighth.

During season 14, Haynes often discussed missing her husband — high school sweetheart Nathan ‘Ryan’ Godwin, whom she married in between seasons in March 2012 — and expressed her desire to become a mother to fellow coach and new mom Janelle Pierzina, who’s currently expecting her second child in August.

Courtesy Britney Haynes

– Patrick Gomez

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