Beyonce Inks $50 Million Deal With Pepsi
Label: LifestylePepsi is back in business with Beyonce Knowles, and it only cost them $50 million!
The Super Bowl XLVII half-time headliner, 31, will be featured in a new Pepsi commercial and several appearances for the brand, The New York Times reports, but in addition, the company will also be involved in a few of Beyonce's creative projects.
Pepsi will promote Queen B's tour next year as well as the release of her new album in 2013.
RELATED PIC: Beyonce to Perform at Super Bowl Half-Time Show
This isn't the first time Beyonce and Pepsi have worked together. Check out the pop princess' 2003 commercial, below:
Smokers celebrate as Wash. legalizes marijuana
Label: HealthSEATTLE (AP) — The crowds of happy people lighting joints under Seattle's Space Needle early Thursday morning with nary a police officer in sight bespoke the new reality: Marijuana is legal under Washington state law.
Hundreds gathered at Seattle Center for a New Year's Eve-style countdown to 12 a.m., when the legalization measure passed by voters last month took effect. When the clock struck, they cheered and sparked up in unison.
A few dozen people gathered on a sidewalk outside the north Seattle headquarters of the annual Hempfest celebration and did the same, offering joints to reporters and blowing smoke into television news cameras.
"I feel like a kid in a candy store!" shouted Hempfest volunteer Darby Hageman. "It's all becoming real now!"
Washington and Colorado became the first states to vote to decriminalize and regulate the possession of an ounce or less of marijuana by adults over 21. Both measures call for setting up state licensing schemes for pot growers, processors and retail stores. Colorado's law is set to take effect by Jan. 5.
Technically, Washington's new marijuana law still forbids smoking pot in public, which remains punishable by a fine, like drinking in public. But pot fans wanted a party, and Seattle police weren't about to write them any tickets.
In another sweeping change for Washington, Gov. Chris Gregoire on Wednesday signed into law a measure that legalizes same-sex marriage. The state joins several others that allow gay and lesbian couples to wed.
The mood was festive in Seattle as dozens of gay and lesbian couples got in line to pick up marriage licenses at the King County auditor's office early Thursday.
King County and Thurston County announced they would open their auditors' offices shortly after midnight Wednesday to accommodate those who wanted to be among the first to get their licenses.
Kelly Middleton and her partner Amanda Dollente got in line at 4 p.m. Wednesday.
Hours later, as the line grew, volunteers distributed roses and a group of men and women serenaded the waiting line to the tune of "Chapel of Love."
Because the state has a three-day waiting period, the earliest that weddings can take place is Sunday.
In dealing with marijuana, the Seattle Police Department told its 1,300 officers on Wednesday, just before legalization took hold, that until further notice they shall not issue citations for public marijuana use.
Officers will be advising people not to smoke in public, police spokesman Jonah Spangenthal-Lee wrote on the SPD Blotter. "The police department believes that, under state law, you may responsibly get baked, order some pizzas and enjoy a 'Lord of the Rings' marathon in the privacy of your own home, if you want to."
He offered a catchy new directive referring to the film "The Big Lebowski," popular with many marijuana fans: "The Dude abides, and says 'take it inside!'"
"This is a big day because all our lives we've been living under the iron curtain of prohibition," said Hempfest director Vivian McPeak. "The whole world sees that prohibition just took a body blow."
Washington's new law decriminalizes possession of up to an ounce for those over 21, but for now selling marijuana remains illegal. I-502 gives the state a year to come up with a system of state-licensed growers, processors and retail stores, with the marijuana taxed 25 percent at each stage. Analysts have estimated that a legal pot market could bring Washington hundreds of millions of dollars a year in new tax revenue for schools, health care and basic government functions.
But marijuana remains illegal under federal law. That means federal agents can still arrest people for it, and it's banned from federal properties, including military bases and national parks.
The Justice Department has not said whether it will sue to try to block the regulatory schemes in Washington and Colorado from taking effect.
"The department's responsibility to enforce the Controlled Substances Act remains unchanged," said a statement issued Wednesday by the Seattle U.S. attorney's office. "Neither states nor the executive branch can nullify a statute passed by Congress."
The legal question is whether the establishment of a regulated marijuana market would "frustrate the purpose" of the federal pot prohibition, and many constitutional law scholars say it very likely would.
That leaves the political question of whether the administration wants to try to block the regulatory system, even though it would remain legal to possess up to an ounce of marijuana.
Alison Holcomb is the drug policy director of the American Civil Liberties Union of Washington and served as the campaign manager for New Approach Washington, which led the legalization drive. She said the voters clearly showed they're done with marijuana prohibition.
"New Approach Washington sponsors and the ACLU look forward to working with state and federal officials and to ensure the law is fully and fairly implemented," she said.
___
Johnson can be reached at https://twitter.com/GeneAPseattle
Wall St Week Ahead: "Cliff" worries may drive tax selling
Label: BusinessNEW YORK (Reuters) - Investors typically sell stocks to cut their losses at year end. But worries about the "fiscal cliff" - and the possibility of higher taxes in 2013 - may act as the greatest incentive to sell both winners and losers by December 31.
The $600 billion of automatic tax increases and spending cuts scheduled for the beginning of next year includes higher rates for capital gains, making tax-related selling even more appealing than usual.
Tax-related selling may be behind the weaker trend in the shares of market leader Apple , analysts said. The stock is down 20 percent for the quarter, but it's still up nearly 32 percent for the year.
Apple dropped 8.9 percent in the past week alone. For a stock that gained more than 25 percent a year for four consecutive years, the embedded capital gains suddenly look like a selling opportunity if one's tax bill is going to jump sharply just because the calendar changes.
"Tax-loss selling is always a factor (but) tax-gains selling has been a factor this year," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.
"You have a lot of high-net-worth individuals in taxable accounts, and that could be what's affecting stocks like Apple. If you look at the stocks that people have their largest gains in, they seem to be under a little bit more pressure here than usual."
Of this year's top 20 performers in the S&P 1500 index, which includes large, small and mid-cap stocks, all but four have lost ground in the last five trading sessions.
The rush to avoid higher taxes on portfolio gains could cause additional weakness.
The S&P 500 ended the week up just 0.1 percent after another week of trading largely tied to fiscal cliff negotiation news, which has pushed the market in both directions.
A PAIN PILL FROM THE FED?
This week's Federal Reserve meeting could offer some relief if policymakers announce further plans to help the lackluster U.S. economy. The Federal Open Market Committee will meet on Tuesday and Wednesday. The policy statement is expected at about 12:30 p.m. EST on Wednesday after the conclusion of the meeting - the Fed's last one for the year.
Friday's jobs report showing non-farm payrolls added 146,000 jobs in November eased worries that superstorm Sandy had hit the labor market hard.
"After the FOMC meeting, I think it's going to be downhill from there as worries about the fiscal cliff really take center stage and prospects of a deal become less and less likely," said Mohannad Aama, managing director of Beam Capital Management LLC in New York.
"I think we are likely to see an escalation in profit-taking ahead of tax rates going up next year," he said.
MORE VOLUME AND VOLATILITY
Volume could increase as investors try to shift positions before year end, some analysts said.
While most of that would be in stocks, some of the extra trading volume could spill over into options, said J.J. Kinahan, TD Ameritrade's chief derivatives strategist.
Volatility could pick up as well, and some of that is already being seen in Apple's stock.
"The actual volatility in Apple has been very high while the market itself has been calm. I expect Apple's volatility to carry over into the market volatility," said Enis Taner, global macro editor at RiskReversal.com, an options trading firm in New York.
Shares of Apple, the largest U.S. company by market value, on Friday registered their worst week since May 2010. In another bearish sign, the stock's 50-day moving average fell to $599.52 - below its 200-day moving average at $601.38.
"There's a lot of tax-related selling happening now, and it will continue to happen. Apple is an example, even (though) there are other factors involved with Apple," Aama said.
If tax rates are going up, an investor would sell now to book gains and pay lower capital gains taxes, according to Aama. But if an investor has capital losses, then "you take losses and have them count against capital gains or regular income if you do not have any offsetting capital gains.
"In essence, higher capital gains tax rates will give your losses a higher value next year than this year as the income tax shield will be worth more in 2013. So if you have no capital gains this year, you are better off holding off on selling your losers in 2012 and waiting till 2013," he said in an email.
While investors may be selling stocks to avoid higher taxes in 2013, companies may continue to announce special and accelerated dividend payments before year end. Among the latest, Expedia
To be sure, the big sell-off in stocks following the November 6 election was likely related to tax selling, making it hard to judge how much more is to come.
Even with stocks' recent declines, the three major U.S. stock indexes are still up for the year. The Dow Jones industrial average <.dji> is up 7.7 percent for 2012 so far, while the benchmark Standard & Poor's 500 index <.spx> is up 12.8 percent and the Nasdaq Composite Index <.ixic> is up 14.3 percent for the year to date.
Bruce Zaro, chief technical strategist at Delta Global Asset Management in Boston, said there is a decent chance that the market could rally before the year ends.
"Even with little or spotty news that one would put in the positive bucket regarding the (cliff) negotiations, the market has basically hung in there, and I think it's hung in there in anticipation of something coming," he said.
(Wall St Week Ahead runs every Sunday. Questions or comments on this column can be emailed to: caroline.valetkevitch(at)thomsonreuters.com)
(Reporting by Caroline Valetkevitch; Editing by Jan Paschal; Multimedia versions of Reuters Top News are now available for:; 3000 Xtra: visit Reuters Top News; BridgeStation: view story .134; For London stock market outlook please click on <.l>; Pan-European stock market outlook <.eu>; Tokyo stock market outlook <.t>)
Egypt's opposition scorns Mursi's concession
Label: WorldCAIRO (Reuters) - A concession offered by President Mohamed Mursi failed to placate opponents who accused him on Sunday of plunging Egypt deeper into crisis by refusing to postpone a vote on a constitution shaped by Islamists.
Islamists say they see the referendum as sealing a democratic transition that began when a popular uprising toppled Hosni Mubarak 22 months ago after three decades of military-backed one-man rule.
Their liberal, leftist and Christian adversaries say the document being fast-tracked to a vote could threaten freedoms and fails to embrace the diversity of Egypt's 83 million people.
More protests were planned near Mursi's palace, despite tanks, barbed wire and other barriers installed last week after clashes between Islamists and their rivals killed seven people.
Mursi had given some ground the previous day when he retracted a fiercely contested decree giving himself extra powers and shielding his decisions from judicial review.
But the president insisted the constitutional referendum go ahead next Saturday and the Muslim Brotherhood, from which he sprang, urged the opposition to accept the poll's verdict.
Ahmed Said, a liberal leader of the main opposition National Salvation Front, described the race to a referendum as "shocking" and an "act of war" against Egyptians.
The Front has promised a formal response later on Sunday.
Egypt is torn between Islamists, who were suppressed for decades, and their rivals, who fear religious conservatives want to squeeze out other voices and restrict social freedoms. Many Egyptians just crave stability and economic recovery.
Brotherhood spokesman Mahmoud Ghozlan said the scrapping of Mursi's decree had removed any reason for controversy.
"We ask others to announce their acceptance of the referendum result," he said on the group's Facebook page, asking whether the opposition would accept "the basics of democracy".
The retraction of Mursi's November 22 decree, announced around midnight after a "national dialogue" boycotted by almost all the president's critics, has not bridged a deep political divide.
Prime Minister Hisham Kandil, a technocrat with Islamist leanings, said the referendum was the best test of opinion.
"The people are the makers of the future as long as they have the freedom to resort to the ballot box in a democratic, free and fair vote," he said in a cabinet statement.
"CONSTITUTION WITHOUT CONSENSUS"
But opposition factions, uncertain of their ability to vote down the constitution against the Islamists' organizational muscle, want the document redrafted before any vote.
"A constitution without consensus can't go to a referendum," said Hermes Fawzi, 28, a protester outside the palace. "It's not logical that just one part of society makes the constitution."
Egypt tipped into turmoil after Mursi grabbed powers to stop any court action aimed at hindering the transition. An assembly led by the Muslim Brotherhood and other Islamists then swiftly approved the constitution it had spent six months drafting.
Opponents, including minority Christians, had already quit the assembly in dismay, saying their voices were being ignored.
A leftist group led by defeated presidential candidate Hamdeen Sabahy demanded the referendum be deferred until a consensus could be reached on a new draft, saying there could be "no dialogue while blood is being spilled in the streets".
After the dialogue hosted by Mursi, a spokesman announced that the president had issued a new decree whose first article "cancels the constitutional declaration" of November 22. He said the referendum could not be delayed for legal reasons.
The decree ignited more than two weeks of sometimes bloody protests and counter-rallies in Egypt. Mursi's foes have chanted for his downfall. Islamists fear a plot to oust the most populous Arab nation's first freely elected leader.
The April 6 movement, prominent in the anti-Mubarak revolt, derided the result of Saturday's talks as "manipulation and a continuation of deception in the name of law and legitimacy".
Islamists reckon they can win the referendum and, once the new constitution is in place, a parliamentary poll about two months later. The Islamist-led lower house elected this year was dissolved after a few months by a court order.
Investors appeared relieved at Mursi's retraction of his decree, sending Egyptian stocks 4.4 percent higher on Sunday. Markets are awaiting approval of a $4.8 billion IMF loan later this month designed to support the budget and economic reforms.
The military, which led Egypt's transition for 16 turbulent months after Mubarak fell, told feuding factions on Saturday that only dialogue could avert "catastrophe". But a military source said these remarks did not herald an army takeover.
(Additional reporting by Edmund Blair and Yasmine Saleh; Editing by Stephen Powell)
Software guru McAfee did not have heart attack: lawyer
Label: TechnologyGUATEMALA CITY (Reuters) – Software pioneer John McAfee did not have a heart attack in Guatemala as originally thought, but is suffering from stress and hypertension, his lawyer Telesforo Guerra said on Thursday.
“He never had a heart attack. Nothing like that,” Guerra said in Guatemala City. “I’m not a doctor. I’m just telling you what the doctors told me. He was suffering from stress, hypertension and tachycardia (an abnormally rapid heartbeat).”
After being rushed to a hospital in an ambulance on Thursday, McAfee, 67, was later spirited out of the building out of sight of reporters and into a police patrol car, Guerra said.
McAfee, who is fighting deportation from Guatemala, was detained on Wednesday after crossing illegally into the country from neighboring Belize. Police in Belize want to question McAfee in connection with his neighbor’s murder.
Earlier, Guerra said McAfee had suffered two mild heart attacks in the morning.
(Reporting by Lomi Kriel; Editing by Stacey Joyce)
Internet News Headlines – Yahoo! News
How They Pulled Off 'The Impossible'
Label: LifestyleThe true story of the devastating 2004 tsunami that consumed the coast of Phuket, Thailand -- and how one family survived it -- is reenacted by Naomi Watts and Ewan McGregor in The Impossible. Watch the video to go behind the scenes...
Video: Tsunami Survivor Petra Nemcova Reacts to Latest Disaster in Japan
In theaters December 21, The Impossible finds Naomi as Maria and Ewan as her husband Henry, who are enjoying their winter vacation in Thailand with their three sons. On the day after Christmas, their relaxing holiday in paradise becomes an exercise in terror and survival when their beachside hotel is pummeled by an extraordinary, unexpected tsunami.
Video: Watch the Trailer for 'The Impossible'
The Impossible tracks just what happens when this close family and tens of thousands of strangers must come together to grapple with the mayhem and aftermath of one of the worst natural catastrophes of our time.
Smokers celebrate as Wash. legalizes marijuana
Label: HealthSEATTLE (AP) — The crowds of happy people lighting joints under Seattle's Space Needle early Thursday morning with nary a police officer in sight bespoke the new reality: Marijuana is legal under Washington state law.
Hundreds gathered at Seattle Center for a New Year's Eve-style countdown to 12 a.m., when the legalization measure passed by voters last month took effect. When the clock struck, they cheered and sparked up in unison.
A few dozen people gathered on a sidewalk outside the north Seattle headquarters of the annual Hempfest celebration and did the same, offering joints to reporters and blowing smoke into television news cameras.
"I feel like a kid in a candy store!" shouted Hempfest volunteer Darby Hageman. "It's all becoming real now!"
Washington and Colorado became the first states to vote to decriminalize and regulate the possession of an ounce or less of marijuana by adults over 21. Both measures call for setting up state licensing schemes for pot growers, processors and retail stores. Colorado's law is set to take effect by Jan. 5.
Technically, Washington's new marijuana law still forbids smoking pot in public, which remains punishable by a fine, like drinking in public. But pot fans wanted a party, and Seattle police weren't about to write them any tickets.
In another sweeping change for Washington, Gov. Chris Gregoire on Wednesday signed into law a measure that legalizes same-sex marriage. The state joins several others that allow gay and lesbian couples to wed.
The mood was festive in Seattle as dozens of gay and lesbian couples got in line to pick up marriage licenses at the King County auditor's office early Thursday.
King County and Thurston County announced they would open their auditors' offices shortly after midnight Wednesday to accommodate those who wanted to be among the first to get their licenses.
Kelly Middleton and her partner Amanda Dollente got in line at 4 p.m. Wednesday.
Hours later, as the line grew, volunteers distributed roses and a group of men and women serenaded the waiting line to the tune of "Chapel of Love."
Because the state has a three-day waiting period, the earliest that weddings can take place is Sunday.
In dealing with marijuana, the Seattle Police Department told its 1,300 officers on Wednesday, just before legalization took hold, that until further notice they shall not issue citations for public marijuana use.
Officers will be advising people not to smoke in public, police spokesman Jonah Spangenthal-Lee wrote on the SPD Blotter. "The police department believes that, under state law, you may responsibly get baked, order some pizzas and enjoy a 'Lord of the Rings' marathon in the privacy of your own home, if you want to."
He offered a catchy new directive referring to the film "The Big Lebowski," popular with many marijuana fans: "The Dude abides, and says 'take it inside!'"
"This is a big day because all our lives we've been living under the iron curtain of prohibition," said Hempfest director Vivian McPeak. "The whole world sees that prohibition just took a body blow."
Washington's new law decriminalizes possession of up to an ounce for those over 21, but for now selling marijuana remains illegal. I-502 gives the state a year to come up with a system of state-licensed growers, processors and retail stores, with the marijuana taxed 25 percent at each stage. Analysts have estimated that a legal pot market could bring Washington hundreds of millions of dollars a year in new tax revenue for schools, health care and basic government functions.
But marijuana remains illegal under federal law. That means federal agents can still arrest people for it, and it's banned from federal properties, including military bases and national parks.
The Justice Department has not said whether it will sue to try to block the regulatory schemes in Washington and Colorado from taking effect.
"The department's responsibility to enforce the Controlled Substances Act remains unchanged," said a statement issued Wednesday by the Seattle U.S. attorney's office. "Neither states nor the executive branch can nullify a statute passed by Congress."
The legal question is whether the establishment of a regulated marijuana market would "frustrate the purpose" of the federal pot prohibition, and many constitutional law scholars say it very likely would.
That leaves the political question of whether the administration wants to try to block the regulatory system, even though it would remain legal to possess up to an ounce of marijuana.
Alison Holcomb is the drug policy director of the American Civil Liberties Union of Washington and served as the campaign manager for New Approach Washington, which led the legalization drive. She said the voters clearly showed they're done with marijuana prohibition.
"New Approach Washington sponsors and the ACLU look forward to working with state and federal officials and to ensure the law is fully and fairly implemented," she said.
___
Johnson can be reached at https://twitter.com/GeneAPseattle
Wall Street Week Ahead: "Cliff" worries may drive tax selling
Label: BusinessNEW YORK (Reuters) - Investors typically sell stocks to cut their losses at year end. But worries about the "fiscal cliff" - and the possibility of higher taxes in 2013 - may act as the greatest incentive to sell both winners and losers by December 31.
The $600 billion of automatic tax increases and spending cuts scheduled for the beginning of next year includes higher rates for capital gains, making tax-loss selling even more appealing than usual.
Tax-related selling may be behind the weaker trend in the shares of market leader Apple , analysts said. The stock is down 20 percent for the quarter, but it's still up nearly 32 percent for the year.
Apple dropped 8.9 percent in this past week alone. For a stock that gained more than 25 percent a year for four consecutive years, the embedded capital gains suddenly look like a selling opportunity if one's tax bill is going to jump sharply just because the calendar changes.
"Tax-loss selling is always a factor (but) tax-gains selling has been a factor this year," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.
"You have a lot of high-net-worth individuals in taxable accounts, and that could be what's affecting stocks like Apple. If you look at the stocks that people have their largest gains in, they seem to be under a little bit more pressure here than usual."
Of this year's top 20 performers in the S&P 1500 index, which includes large, small and mid-cap stocks, all but four have lost ground in the last five trading sessions.
The rush to avoid higher taxes on portfolio gains could cause additional weakness.
The S&P 500 ended the week up just 0.1 percent after another week of trading largely tied to fiscal cliff negotiation news, which has pushed the market in both directions.
A PAIN PILL FROM THE FED?
Next week's Federal Reserve meeting could offer some relief if policymakers announce further plans to help the lackluster U.S. economy. The Federal Open Market Committee will meet on Tuesday and Wednesday. The policy statement is expected at about 12:30 p.m. on Wednesday after the conclusion of the meeting - the Fed's last one for the year.
Friday's jobs report showing non-farm payrolls added 146,000 jobs in November eased worries that Superstorm Sandy had hit the labor market hard.
"After the FOMC meeting, I think it's going to be downhill from there as worries about the fiscal cliff really take center stage and prospects of a deal become less and less likely," said Mohannad Aama, managing director of Beam Capital Management LLC in New York.
"I think we are likely to see an escalation in profit-taking ahead of tax rates going up next year," he said.
MORE VOLUME AND VOLATILITY
Volume could increase as investors try to shift positions before year end, some analysts said.
While most of that would be in stocks, some of the extra trading volume could spill over into options, said J.J. Kinahan, TD Ameritrade's chief derivatives strategist.
Volatility could pick up as well, and some of that is already being seen in Apple's stock.
"The actual volatility in Apple has been very high while the market itself has been calm. I expect Apple's volatility to carry over into the market volatility," said Enis Taner, global macro editor at RiskReversal.com, an options trading firm in New York.
Shares of Apple, the largest U.S. company by market value, registered their worst week since May 2010. In another bearish sign, the stock's 50-day moving average fell to $599.52 - below its 200-day moving average at $601.38.
"There's a lot of tax-related selling happening now, and it will continue to happen. Apple is an example, even (though) there are other factors involved with Apple," Aama said.
While investors may be selling stocks to avoid higher taxes in 2013, companies may continue to announce special and accelerated dividend payments before year end. Among the latest, Expedia
To be sure, the big sell-off in stocks following the November 6 election was likely related to tax selling, making it hard to judge how much more is to come.
Bruce Zaro, chief technical strategist at Delta Global Asset Management in Boston, said there's a decent chance that the market could rally before year end.
"Even with little or spotty news that one would put in the positive bucket regarding the (cliff) negotiations, the market has basically hung in there, and I think it's hung in there in anticipation of something coming," he said.
(Wall St Week Ahead runs every Friday. Questions or comments on this column can be emailed to: caroline.valetkevitch(at)thomsonreuters.com)
(Reporting by Caroline Valetkevitch; Editing by Jan Paschal; Multimedia versions of Reuters Top News are now available for:; 3000 Xtra: visit Reuters Top News; BridgeStation: view story .134; For London stock market outlook please click on .L/O; Pan-European stock market outlook .EU/O; Tokyo stock market outlook .T/O; Wall St Week Ahead runs every Friday.)
Egyptian military says only dialogue can avert disaster
Label: WorldCAIRO (Reuters) - Egypt's military said on Saturday only dialogue could avert "catastrophe", stepping into a crisis pitting Islamist President Mohamed Mursi against opponents who accuse him of grabbing excessive power.
State broadcasters interrupted their programs to read out an army statement telling feuding factions that a solution to the upheaval in the most populous Arab nation should not contradict "legitimacy and the rules of democracy".
That sounded like a swipe at protesters who have besieged the palace of the freely elected president and called for his removal, going beyond mainstream opposition demands for him to retract a decree that expanded his powers.
The statement also called for a "serious" national dialogue - perhaps one more credible than talks convened by Mursi on Saturday in the absence of opposition leaders. They insist he must first scrap his November 22 decree, defer next week's popular vote on a new constitution and allow the text to be revised.
Deep rifts have emerged over the destiny of a country of 83 million where the end of Hosni Mubarak's 30 years of military-backed one-man rule led to a messy army-led transition, during which the Muslim Brotherhood and its allies won two elections. Many Egyptians crave a return to stability and economic recovery.
The spokesman for the main Islamist coalition demanded that the referendum go ahead on time on the constitution drafted by an Islamist-led assembly from which liberals had walked out.
The army, which ran Egypt for months after Mubarak fell in February 2011, again cast itself primarily as the neutral guarantor of the nation. A military source said there was no plan to retake control of the country or its turbulent streets.
"DARK TUNNEL"
"The armed forces affirm that dialogue is the best and only way to reach consensus," the statement said. "The opposite of that will bring us to a dark tunnel that will result in catastrophe and that is something we will not allow."
The instability in Egypt worries the West, especially the United States, which has given Cairo billions of dollars in military and other aid since it made peace with Israel in 1979.
The army might be pushing the opposition to join dialogue and Mursi to do more to draw them in, said Hassan Abu Taleb of the Al Ahram Center for Political and Strategic Studies.
He discounted the chance of direct military intervention, adding: "They realize that interfering again in a situation of civil combat will squeeze them between two rocks."
However, the military did seem poised to take a more active role in security arrangements for the December 15 referendum.
A cabinet source said the cabinet had discussed reviving the army's ability to make arrests if it were called upon to back up police, who are normally in charge of election security.
According to the state-run daily al-Ahram, an expanded military security role might extend to the next parliamentary election and, at the president's discretion, even beyond that.
Mursi's office said the "national dialogue", chaired by the president, had begun with about 40 political and other public figures discussing "means to reach a solution to differences over the referendum...and the constitutional decree".
The army issued its statement while protesters were still camped out by the gates of the presidential palace.
The tens of thousands of Mursi foes who surged past tanks and barbed wire to reach the palace gates on Friday night had dispersed. But a hard core stayed overnight in a score of tents.
"LEAVE"
Some had spray-painted "Down with Mursi" on tanks of the elite Republican Guard posted there after clashes between rival groups killed at least seven people and wounded 350 this week.
Others draped the tanks with posters of Mursi and the word "Leave" scored across his face in red letters.
"We are no longer calling for scrapping the decree and delaying the referendum," Samir Fayez, a Christian protester at the palace, said. "We have one demand in five letters: leave."
Nearby, a Mursi supporter named Mohamed Hassan was quietly observing the scene. He suggested that the Muslim Brotherhood and its ultra-orthodox Salafi Islamist allies could easily overwhelm their foes if they chose to mobilize their base.
"The Brotherhood and Salafis by themselves are few but they have millions of supporters who are at home and haven't taken it to the streets yet," murmured the 40-year-old engineer.
The Muslim Brotherhood's supreme guide, Mohamed Badie, denounced opposition protests that have swirled around the walls of Mursi's palace, saying they "ruin legitimacy".
Badie said eight people, all of them Brotherhood members, had been killed this week and urged the interior minister to explain why police had failed to prevent assailants from torching the organization's headquarters and 28 other offices.
"Get angry with the Brotherhood and hate us as much as you like, but be reasonable and preserve Egypt's unity," he told a news conference. "We hope everyone gets back to dialogue."
The well-organized Brotherhood, which thrust Mursi from obscurity to power, remains his surest source of support, with over 80 years of religious and political struggle behind it.
In the referendum, due to be followed by a parliamentary election, Islamist proponents of the constitution may benefit from the votes of millions of Egyptians desperate for the country to move on and revive its crippled economy.
(Additional reporting by Edmund Blair, Omar Fahmy and Yasmine Saleh; Editing by Mark Trevelyan)
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