Week in Review

[Posted Sat. from Hong Kong…5:00 AM ET]

 

 

So I’ve been in Hong Kong since last Saturday, based out of the airport hotel, the Regal, and you want to know what the fashion trend among young females here is these days? If they aren’t wearing jeans or short skirts, it’s hot pants. Now us older folk recall that hot pants were the craze in the early 1970s, including during the time of the ’73-’74 bear market, and they didn’t really disappear until later in the decade, so this is yet another bad sign for the global economy. But gosh darnit, there might as well at least be some pleasure among the suffering, right guys?

 

I’m 13 hours ahead of New York time so I sometimes saw the U.S. equity markets open at 10:30 p.m. local, and I got up for the close before 5:00 a.m., and one time I was doing a little work and I glanced over and there was Treasury Secretary Paulson, trying to explain why the troubled asset relief program, Tarp, had changed stripes again. Buying up mortgages, said the amateur birder, was “not the most effective way to use Tarp funds,” he offered, and that it was more important to inject capital into the financial system. No wonder by week’s end some members of Congress were furious, having realized they were sold a bill of goods when the $700 billion bailout plan was approved.

 

The “situation worsened…the facts changed,” said Stammerin’ Hank. It’s time to back those using credit cards, or applying for auto and student loans instead. To which there was a collective response, ‘Houston, we have a credibility problem.’

 

Oh, some of us said all along that any capital should be infused into the banking system, first, but then I said you needed to jack the recipients up against the wall and tell them to lend it out! We still aren’t seeing that. I’m on Congress’ side in this instance. Plus, as part of approving the bailout, there was to be independent oversight, as well as regular updates to Congress, and there is as yet no inspector general figure, nor have there been any formal reports as required. And as Bloomberg News pressed, where the heck is the transparency on the up to $2 trillion already in play when considering not just the approvals in Congress, but the numerous attempts by the Federal Reserve to inject liquidity, as well as the Treasury’s other gambits? 

 

As the G20 nations assemble in Washington, an event I’ll comment on next week after we learn if anything was really accomplished this weekend, there was President Bush pleading for the Nicholas Sarkozys and Gordon Browns of the world not to tinker too much with the free markets, even as this administration has been bailing out Fannie and Freddie, AIG, and now, perhaps, the auto industry. I’m not saying some of these moves weren’t warranted, but we can’t have it both ways. Who the heck can have any confidence when our leaders often resemble Krusty the Clown?

 

This week Freddie Mac and Fannie Mae reported third quarter losses in excess of $20 billion apiece and AIG received a new bailout package, tacking on another $20 billion plus, this as we still don’t have a clue what the assets in all three are really worth.

 

And now the big topic of discussion concerns what to do with Detroit and the now Three Little Pigs. Do they deserve a bailout? I’ve heard from a number of you on this topic and you are in agreement. No. 

 

Myself? These are far from normal times and this is not your normal global recession. Ordinarily, you’d let one outfit fail, the others would pick up the slack, and the negative impact would be short-term. 

 

Today, the depressing shock of immediately losing 2 to 3 million jobs, by most estimates, would ensure a depression, though we could yet be headed there regardless.

 

But before you get all ticked off at me, seeing as I haven’t given you my true conclusion, here is some selective opinion.

 

Thomas Friedman / New York Times

 

“How could these companies be so bad for so long? Clearly the combination of a very un-innovative business culture, visionless management and overly generous labor contracts explains a lot of it. It led to a situation whereby General Motors could make money only by selling big, gas-guzzling SUVs and trucks. Therefore, instead of focusing on making money by innovating around fuel efficiency, productivity and design, GM threw way too much energy into lobbying and maneuvering to protect its gas guzzlers.

 

“This included striking special deals with Congress that allowed the Detroit automakers to count the mileage of gas guzzlers as being less than they really were – provided they made some cars flex-fuel capable for ethanol. It included special offers of $1.99-a-gallon gasoline for a year to any customer who purchased a gas guzzler. And it included endless lobbying to block Congress from raising the miles-per-gallon requirements. The result was an industry that became brain-dead….

 

“Not every automaker is at death’s door. Look at this article that ran two weeks ago on autochannel.com: ‘Alliston, Ontario, Canada – Honda of Canada Mfg. officially opened its newest investment in Canada – a state-of-the-art $154 million engine plant. The new facility will produce 200,000 fuel-efficient four-cylinder engines annually for Civic production in response to growing North American demand for vehicles that provide excellent fuel economy.’

 

“The blame for this travesty not only belongs to the auto executives, but must be shared equally with the entire Michigan delegation in the House and Senate, virtually all of whom, year after year, voted however the Detroit automakers and unions instructed them to vote. That shielded General Motors, Ford and Chrysler from environmental concerns, mileage concerns and the full impact of global competition that could have forced Detroit to adapt long ago….

 

“…I am as terrified as anyone of the domino effect on industry and workers if GM were to collapse. But if we are going to use taxpayer money to rescue Detroit, then it should be done along the lines proposed by The Wall Street Journal on Monday by Paul Ingrassia, a former Detroit bureau chief for that paper.

 

“ ‘In return for any direct government aid,’ he wrote, ‘the board and the management [of GM] should go. Shareholders should lose their paltry remaining equity. And a government-appointed receiver – someone hard-nosed and non-political – should have broad power to revamp GM with a viable business plan and return it to a private operation as soon as possible. That will mean tearing up existing contracts with unions, dealers and suppliers, closing some operations and selling others and downsizing the company…. Giving GM a blank check…would be an enormous mistake.’”

 

John Gapper / Financial Times

 

“(Before) the cash starts flowing to Detroit, here are three reasons this bailout is a bad idea.

 

“First, it will reward failure….while Detroit often pledges to change and periodically shows progress, one thing is unchanged in two decades. It is still overpromising and underdelivering against Japanese and South Korean rivals….

 

“Second, it will preserve chronic overcapacity. For years, the Detroit car companies have pumped up U.S. sales to 16mm or 17mm units a year with financial incentives in order to keep their factories going. They made it so cheap to buy a new car that the average age of cars on the road has steadily fallen….

 

“Third, a Detroit bailout will harm the U.S. auto industry as a whole because it will benefit the least efficient companies, while the most efficient ones – Asian companies that build vehicles at non-unionized plants in southern states – will face subsidized competition….

 

“Having said all of this, a Detroit bailout is going to happen anyway, so how can the U.S. get the most from its investment?

 

“One condition Washington should insist on is that GM takes over Chrysler and reduces Detroit’s big three to two….

 

“It might cost $10 billion to close plants and dismiss half of Chrysler’s 66,000 employees but the U.S. would get a smaller and stronger industry and Detroit’s competitors would be less crowded out by the U.S. taxpayer. For the struggling economy, it would be painful but bearable.”

 

I agree with both Friedman and Gapper. But there are more than a few other issues, aside from the obvious one that Rick Wagoner has to go regardless. As Barack Obama previously said, there can be only “one president at a time,” yet he has interjected himself into the debate, not that he had a choice, and President Bush is against a bailout. Obama (and the Democratic leadership) wants one, though with stringent strings attached, including government taking equity stakes in return as well as rules on executive compensation and an agreement on strict rules aimed at building “green and clean” automobiles.

 

But just where does any money come from (Tarp?), and how will the unions respond to massive job cuts, which Michigan’s legislators, for starters, would seek to limit? They will undoubtedly strike (which would hardly win them any friends outside Detroit, I hasten to add).

 

The other alternative, bankruptcy, creates problems of a different sort, such as who wants to buy a car from a company in Chapter 11? I sure as hell wouldn’t, and previously conducted surveys echo this sentiment.

 

Of paramount importance, though, is the fact there will be serious short- to medium-term pain, no matter what the eventual solution is, but we are rapidly running out of time to do anything that will be remotely positive, even as the debate continues.

 

Meanwhile, we have this global recession to deal with. Speaking of cars, auto sales in October plunged 50 and 40 percent, respectively, in Ireland and Spain, and Indian car sales are off for the first time in ages. More importantly, the eurozone officially entered recession, as Germany joined the above two plus Britain. The Baltics are a mess, Hong Kong joined Singapore in recession, and growth in China is slowing dramatically.

 

Here in Hong Kong there was an annual meeting of private-equity leaders and Carlyle Group’s David Rubenstein said the “U.S. recession will be the deepest since ’82 and will last two to three years.”

 

JPMorgan Chase’s Jamie Dimon said at a separate banking conference, “We think the economy could be worse than the capital markets crisis.” Merrill Lynch’s John Thain added, “The U.S. economy is contracting very rapidly,” not that you didn’t already know this.

 

The International Monetary Fund continues to ratchet down its forecasts, seemingly weekly these days, and now says developed countries will see their economies decline 0.3% in 2009 vs. an earlier forecast of slight growth. Overall GDP, including emerging markets, will be just 2.2% next year. Believe me, that’s not as good as it looks at first glance.

 

In the U.S., electronics retailer Best Buy rocked the Street when its CEO said he saw “seismic changes” in consumer behavior, while Intel lowered its current quarter forecast for revenues by a whopping 10% as it noted “significantly weaker” demand. Customers worldwide were “aggressively” chopping orders.

 

And then you had the worst figure for retail sales in history (or at least since this survey came into being), down 2.8% in the month of October, while the weekly figure on jobless claims came in at its worst level in 25 years, some 516,000.

 

The budget deficit picture? The 2009 fiscal year started off with a bang in October, a world record $237 billion in the red, as $136 billion was from the dispersal of the first Tarp funds and the bailouts of Fannie and Freddie. That’s for one month, sports fans. Heck, for all of F2008, it was a record $454 billion. Yessir, $1 trillion plus seems a certainty by next September, and if you were wondering about revenues for October, they were down a solid 7.5%, a trend that will only worsen.

 

If you were looking for the smallest ray of sunshine, though, at least oil and gasoline prices continued to plummet. Oil sits below $60 and if gasoline futures stabilize at existing levels, we will be talking under $2.00 at the pump in the not too distant future. The Energy Information Agency keeps lowering its demand outlook for 2009, while for this year, here in the States we’ve been responsible for the biggest decline in consumption since 1980.

 

But let’s move on to China, shall we? First, some statistics. Property sales in Beijing are off 55% and 39% in Shanghai, with the actual price in some areas down 50% just since late 2007/early 2008. Give China’s government credit. At least in this sphere they saw it coming and in 2005 began to mandate substantial down payments. 

 

Industrial production increased at a rate of growth of 8.2% in October, not only off the 17.8% pace this past March, but the first figure in single digits since 2001, while fixed investment, such as for infrastructure, was still at a solid 24.4% growth rate last month, though down from 29% in September.

 

There was good news on the pricing front. Inflation is coming down sharply, with the producer price index up 6.6% in October and consumer prices up 4.0% for the same period, both considerable improvements. For example, the CPI was running at an 8.7% pace in February.  [Food inflation over this same period has declined from a 23.3% pace to 8.5%.] Both trends enable the Chinese government to continue to loosen monetary policy and reduce interest rates.

 

And retail spending rose 22% in October, while car sales were actually up for the month, 8%, after a slight decline in September, though it needs to be added that car sales until recently had been accelerating at a 20% clip year over year.

 

You might read all the above and think, it looks like the bursting of a housing bubble, but not Armageddon. Well, the bottom line is China is slowing rapidly and even Premier Wen Jiabao was forced to admit the financial tsunami is “worse than expected.” The IMF is now forecasting GDP to rise at an 8.5% clip in 2009 and, quite frankly, the world would be thrilled were this to prove to be the case. Forget whether or not China’s numbers are accurate. They aren’t, but it’s the trends we need to concern ourselves with and they aren’t good.

 

Here’s what I saw in my trip to the mainland, the area near Fuzhou, capital of Fujian province. I passed a ton of textile and “knitting” plants that appeared to be closed, and it’s a fact that factories of all kinds that specialize in cheap exports, like toys, are shutting their doors at a rapid pace, thus Wen’s concern is warranted.

 

So, the government on Monday unveiled a sweeping $586 billion stimulus program, which in relative terms is about fifteen times what Congress is contemplating for Stimulus II in the U.S. The money is being earmarked for new airports, railways, subways, highways, nine nuclear plants, water treatment facilities, education and affordable housing in the most depressed communities. 

 

From afar, it’s easy to say many of the road projects, for example, aren’t needed, but on the ground you can quickly see they are. Sure, there are some stretches today that may be underutilized, but I was on a four-lane highway that could easily use another four, especially during the next economic boom, which will come.

 

You know how I always made fun of the likes of Al Gore for touting personal computers for Africa’s poor? It should be about good roads and clean water, first and foremost, I say. From all else progress flows. Well, the same can be said for China. They can’t have too much of both as far as I can see.

 

China also recognizes that it doesn’t want to be known for being the world’s sweatshop for junk, and, let’s face it, it has a huge image problem these days as a result of all the tainted products it’s been putting into the marketplace. James Fallows, who writes for The Atlantic and has lived in China the past two years, put it best recently.

 

“The damage China does to itself by its clumsy public presentation is obvious – though apparently not yet obvious enough to its leadership…(China) still has surprisingly little idea of how the world sees it.”

 

But it’s learning some hard truths and China saw how the world responded to its pollution issue in the run-up to the Beijing Olympics. You hit them over the head enough, they begin to get it.

 

I can’t begin to tell you how many “green tech” stories I read this week.  Premier Wen said his nation would focus on the environment, but that the world should share its green technology with his country. For this to happen, though, you’d have to overcome various technology transfer barriers, to which I’d tell Wen, if given the opportunity, it might behoove you to get your computer goons to lay off the cybersnooping of our government and corporations for a while as a sign of good faith. But when it comes to China and building a cleaner life for its people, the trend is in. It’s irreversible.

 

Like other nations, China is also very anxious about how an Obama administration will treat it. From an editorial in the South China Morning Post:

 

“On Thursday (11/6), (Obama) made phone calls to Australia, Britain, Canada, France, Germany, Israel, Japan, Mexico and South Korea and on Friday to Egypt, Italy, Pakistan, Poland, Saudi Arabia and Spain. Surprisingly, despite the significance of China to the U.S. and the world, the conversation with President Hu Jintao came only on Saturday, the same day as a call to Russia’s head of state….

 

“China does not threaten the U.S., nor is it insignificant to U.S. relations. It is therefore somewhat disappointing that President Hu was left so far down the list of people contacted.”

 

Can’t argue with this stance, and on the policy front, China is additionally concerned about the potential for protectionist measures in the Obama administration, as well as opposing independence for Taiwan. In the meantime, you can see how important China has become for the global economy and prospects for a better future in the United States. Something about the level of Uncle Sam’s debt that they hold, you understand.

 

Lastly, it’s with good reason China is concerned with growth at home and tamping down social unrest. I was sitting in my interpreter’s office at the plant in Fuzhou on Tuesday and noticed some posters on the wall. I knew what they were about, but had to get it from him.

 

“What do they say?” I asked.

 

“Chinese Communist Party writings,” he replied.  “We are not free,” he then added.

 

I almost wish he hadn’t said that. I actually feared for his safety, let alone his job. It’s still China, after all.

 

Street Bytes

 

--It’s pretty tough to have a good week when shares in Google, $725 just last December, hit $280 at Thursday’s lows, while Citigroup was below $10, Intel hit a six-year low, GE was at one point below $15 and levels not seen since 1996, and GM shares traded below $3, which last occurred in 1943.

 

For the week, the Dow Jones lost 5% to 8497, the S&P 500, 6.2%, and Nasdaq, 7.9%. Nasdaq is now at 1516, a mere 3500+ points from its all-time peak of 5048.

 

This coming week sees a slew of new data, such as on industrial production, inflation and housing. But knowing already that Christmas is going to be dreadful, and with the warnings from the likes of Intel, it seems to yours truly that the earliest we will know we may have hit bottom and are perhaps turning the corner is mid-February. Intel, for example, reports on Jan. 15. We now know what they will say about the fourth quarter, and they won’t know in mid-January if the future is brighter, say for the second half of 2009. Ergo, get ready for a lot more darkness before the dawn, but it will get better at some point next year. Really. And it’s Asia that will lead us out of the doldrums.

 

--U.S. Treasury Yields

 

6-mo. 0.89% 2-yr. 1.18% 10-yr. 3.70% 30-yr. 4.20%

 

All you really need to know about the appetite for risk these days is the fact the 3-month T’bill is yielding 0.13%.

 

--The big news in these parts, aside from the overall health of the economy both in China and Hong Kong, was the doings over in Macau and Sheldon Adelson’s Las Vegas Sands company. Adelson was able to stave off bankruptcy in raising $2.1 billion on Friday, but he nonetheless was forced to shutter his massive new project in Macau involving a number of hotels, thus tossing 11,000 workers onto the street, including 4,000 from Hong Kong. [It is now expected Hong Kong will lose 20,000 Macau-related positions in the next few months.]

 

Shares of Adelson’s LVS have plunged from $144 in 2007 to about $6 on Friday (and it had to rally to reach that level), though he has now vowed to focus on completing a mammoth Singapore project as well as a casino in Bethlehem, Pennsylvania. As to when the Cotai Strip project on Macau will be restarted, it’s anyone’s guess. It could easily be years, if ever.

 

I went to Macau for a third time on Friday just to get a first hand look. The crowds on the boat were not nearly as bad as I’ve experienced in the past and the clearly slowing traffic numbers was on top of the fact I didn’t realize the four-day Macau Grand Prix is going on this weekend; a series of car and motorcycle races. The main grand stand was across from the ferry terminal and even though events were taking place while I was there (very cool to hear the roaring engines no matter where you were in town), I saw virtually no one in the stands. [As an aside, I see where Shanghai is looking to close out its Formula One contract in 2010 due to the economy and lack of interest. They are losing major money on the event.]

 

I went to the recently revamped Grand Hotel Lisboa, Stanley Ho’s landmark project, for lunch and the gaming floors were nowhere near as full as I’ve seen them.

 

Macau’s casino revenues dropped 10% from just the second to the third quarter and the local government is dependent to a great extent on the mainland’s relaxing travel restrictions from next door Guangdong province. Residents there are allowed just one trip (for up to 7 days) every three months.

 

--I’m struck by the seeming optimism of some concerning the travel industry in the U.S. The trade group for same said its survey showed 73% will keep their holiday plans for this season. That may be so, but travel across the board will be off drastically in the first quarter. I can’t think of a major business that isn’t reducing it in some shape or form, and we have already seen the impact of the recession on the likes of Las Vegas.

 

--Thanks to the sharp fall in oil prices, as well as the financial crisis, worldwide investment in clean energy companies and new clean energy capacity fell sharply in the third quarter compared with the previous one in the U.S. Venture capital and private equity investment was down 24%.

 

--Local story here on the mishandling of scrap metal, specifically, medical waste, like scanners, that are then recycled. Radioactivity is showing up in items from elevator buttons to beer kegs. Due to my intake of the latter, I may set off a security alarm when I go through the checkpoints on Sunday.

 

--Last week, Fidelity announced it would lay off 1,300. This week they said make that 3,000. Something tells me employees there are feeling a bit queasy.

 

--Sun Microsystems slashed another 6,000 jobs. I didn’t realize anyone still worked there. I mean since the tech bubble burst, it seems every time you look up Sun has reduced payroll by like amounts.

 

--DHL is drastically scaling back its U.S. operations and laying off over 9,000.

 

--So I’m perusing the local real estate section and there is an ad for apartments across from the National Stadium in Beijing; the ones used by foreign journalists during the Olympics. The rent on a 3-bedroom duplex apartment, “suitable for business and living” and just 500-meters from the Stadium, is about $2,200 a month, in case you are interested. 

 

--Speaking of the Olympics, the minister in Britain in charge of the London Games in 2012 said, “Had we known what we know now would we have bid for the Olympics? Almost certainly not.” Tessa Jowell is vowing, though, not to hold “austerity Games. We want to show London off to the world.” I’m thinking it could instead be quite Dickensian. 

 

--This was easy to see…and I did. Dubai’s six-year property boom is officially over as home prices in the luxury sector fell 19% in October from the previous month. 

 

--Back in the States, the man who helped create the mortgage securities business, Lew Ranieri, saw his Franklin Bank Corp. taken over by the FDIC. Ranieri avoided the subprime debacle, but instead was burned by loans to developers in California, Arizona, Florida and Michigan.

 

--You want some good news? AstraZeneca’s cholesterol drug Crestor has been shown to sharply lower the risk of heart attacks among apparently healthy patients. The findings were released at the annual scientific meeting of the American Heart Association and could reshape how statins are used. The study, called Jupiter, found that Crestor (not to be confused with Crest toothpaste, which reduces plaque buildup on teeth, as opposed to plaque in your arteries), reduced the risk of heart-related death, heart attacks and other serious cardiac problems by 44% compared with those given placebos. [Bloomberg] As always, consult your doctor and leave my name out of it.

 

--The NFL, in response to the economy, is reducing playoff ticket prices by around 10%.

 

--My portfolio: For the few of you remaining with me in the biodiesel/specialty chemical company, I went to see the progress on the new plant and was pleased to see construction proceeding at a feverish pace, or so it seemed. There are 65 workers there with the foreman in a military uniform. At least when I waved at them all and shook a few hands, the workers smiled. [I kept checking to see if it was just a Hollywood set, put in place for my visit.]

 

That said, this project, which will have ten times the capacity to produce biodiesel and specialty chemicals as the existing operation, is in no way going to be completed before the third quarter of ‘09.  That’s the frustrating thing with this company. They are always 6-9 months behind.

 

I’ll also say that I was right all along to worry about the weather. The former CFO was not truthful with me concerning the impact of the typhoons and the new location was hit hard this past summer as one storm after another rolled through, suspending work for weeks on end it now appears. Once the plant is complete, though, the impact won’t be as severe. It’s pretty tough to pour concrete in mud and expect it to take, to put it another way.

 

I was very impressed on the infrastructure at the industrial park which is next to a modern port facility and, as noted previously, this is the closest point to Taiwan. It was also nice that the day I was in Fuzhou, the company announced it was renewing production of biodiesel due to a more favorable pricing environment.

 

Bottom line, I’m holding. It’s going to be dicey the next few quarters, and I don’t expect any good news out of Monday’s earnings release (though I actually had a good dream about it…which is actually scary that my brain works this way), but when China turns around sometime in 2009, this company’s fortunes should as well.

 

--Finally, some further thoughts on Hong Kong.

 

Hong Kong’s economy officially entered recession on Friday as the government reported GDP contracted 1.4% in the third quarter after a 0.5% decline in the second. Yet unemployment is a still low 3.4%. It’s just that retail sales have ground to a halt, or, rather, try a 30% decline in October over a year ago, and having been through a number of shopping malls here, activity in the stores was clearly minimal at best.

 

I read a number of stories on property prices in HK and one gauge said the housing category is down 19% since peaking in March, with most forecasting a further 15% price decline next year.

 

I went to Hong Kong Disneyland on Thursday, ostensibly to check out the crowd numbers. For a weekday, it was a decent-sized assemblage, though far from packed. There were zero lines to get pictures taken with the characters (hope mine with Minnie Mouse turned out), and the resort itself continues to struggle from all I’ve read on the financing over the years. 

 

On the climate front, my three previous trips here were in April or May, which is about the worst time to come because the air is thickening up for the coming rainy season. As I’ve noted before, in 12 previous days in Hong Kong, I saw the sun for about a total of five minutes.

 

But now I see why they say November is a great time to be here. It was sunny every day, including brilliant blue sky a few times when the wind was blowing from the north, though as I glance out the window on Saturday afternoon, the haze has just reappeared with a vengeance. [It was beautiful this morning.]

 

In terms of global warming, October was the hottest since they started keeping records here in 1884; this on top of June being the wettest month ever. In all the surveys, Hong Kong is generally listed No. 1 in terms of economic competitiveness, but more than a few experts say the territory will lose out in the future unless something is done about the air quality. It’s increasingly difficult to attract talent when they’ve heard the horror stories, like what I’ve witnessed here before.

 

Foreign Affairs

 

Iran/Iraq: Barack Obama’s timetable may make it easier to obtain a Status of Forces Agreement with the Iraqi government, while an Obama presidency certainly leads many in Tehran to believe regime change there is off the table.

 

North Korea: The commies are closing the border with South Korea on December 1, while China has been increasing its troop levels at key border crossings with the North should a collapse in the regime in Pyongyang lead to an influx of refugees fleeing into China.

 

Meanwhile, the North says it wants to negotiate with Obama, while calling the South’s conservative President Lee “despicable human scum.”

 

As to who is calling the shots in North Korea these days, if it isn’t Kim Jong-il, it’s his brother-in-law, Chang Sang Taek, who officially runs the secret police, which means he’s assured of receiving three square meals a day, no doubt.

 

Taiwan: Former President Chen Shui-bian became the first man to hold the island’s top post to be handcuffed and sent to prison, where at last word he was in the midst of a hunger strike. [Though the paper reported that he did eat his first meal of “deep fried yam balls, bacon with collards, minced pork with seasonal vegetables and, for desert, tapioca balls. I could have done without the yam balls, myself.]

 

The controversial pro-independence Chen stepped down just last May after serving two four-year terms and was arrested over allegations of embezzlement, bribes and money laundering involving other members of his family.

 

To many in Taiwan, Chen remains a folk hero for fighting for international recognition, though this upset the Bush administration to no end as it sought to walk the tightrope that is the relationship between Washington, Taipei, and Beijing. Today, relations have rapidly warmed between Taiwan and China with new President Ma spearheading efforts for closer ties. This remains a highly charged topic, though, because there is still a vocal minority on the island who feel Ma is moving too fast. Yet by a 56 to 17 margin, the Taiwanese people support the recent trade agreements between the two. When asked if the agreements hurt Taiwan’s sovereignty, 28% say ‘yes’ and 42% say ‘no.’ 59% do not support the protests against closer ties.

 

Russia: 20 died on a nuclear submarine, suffocated by a Freon gas accident. We have been assured it had nothing to do with a nuclear leak of any kind.

 

Indonesia: The government showed real guts in executing three involved in the 2002 Bali bombings that killed 202, including 88 Australians. It would have been easier to just keep them in prison, rather than shooting them through the heart.

 

Pakistan: Another U.S. aid worker was killed in Peshawar. The victim, like all the others of his ilk, are far braver than I’ll ever be and always deserving of our respect and admiration.

 

Britain: According to a leaked intelligence report, secret enclaves of al-Qaeda extremists based in London and Birmingham are planning mass-casualty attacks in Britain. Thousands, according to the report, are active.

 

Random Musings

 

--I see that the Senate recounts in Georgia, Alaska and Minnesota continue and, suddenly, there is an outside chance the Democrats could get their 60-vote, filibuster-proof margin after all. Minnesota could take quite a while to wind through the courts as Al Franken and his supporters try to steal it from Norm Coleman, but there is going to be a run-off in Georgia’s senate race on December 2, one day after Alaska is to certify its contest, at which time we get to see if convicted felon Ted Stevens is returned to Washington, which would then set in motion his possible expulsion from that body and, dare we say, the elevation of Mrs. Palin.

 

But, there is the Joe Lieberman factor and the Democratic leadership is supposedly deciding on Tuesday whether to allow him to continue caucusing with them. They could somehow squeak by in the above three races and get to 60, but then lose Lieberman to the Republicans.

 

Meanwhile, in the electoral college tally, Missouri’s 11 have yet to be decided, leaving President-elect Obama’s margin at 365-162.

 

--Speaking of Sarah Palin, where does one start? While I’ve been away I see I’ve missed her Magical Media Tour. So let me begin with an editorial from the Wall Street Journal.

 

“She could have a big political future, assuming she and the many Republicans now trashing her learn something from their recent misadventures….

 

“Her reform credentials and social conservatism inspired a GOP base that was angry with its wayward party and wary of Mr. McCain. The exit polls show that conservative turnout was strong, and Mrs. Palin deserves some credit for that.

 

“Yet Mrs. Palin was clearly thrust into the spotlight before she was prepared for the rigors of a national campaign….

 

“Mrs. Palin is of course responsible for her own campaign performance, and this was uneven at best….

 

“Only 44 years old, and now with a loyal conservative following, Mrs. Palin is nonetheless well-positioned to help shape the Republican future….

 

“As for Mrs. Palin’s Republican critics, they might consider if they can afford to write off a young leader with such natural political talent. We don’t see a large constellation of other GOP stars on the horizon.”

 

Oh, spare me. After cutting her a break early on, I just kept thinking, ‘Who is she supposed to represent?’ Is our nation so shallow these days (we are) that just because she’s female and a mother, she’s thus the torch-bearer for this entire class, even if she doesn’t know basic geography?

 

Recent quotations from Mrs. Palin. To Greata Van Susteren:

 

“(Not) me personally were those cheers for. But it was just for the representation of a woman on the ticket, a mom, somebody who loves this country so much, somebody very, very committed to policies that I believe will progress this country in the right direction.”

 

On the issue of why she wanted to break the rules and speak before McCain’s concession speech (which of course would have undone all the good McCain earned with his performance that night), Sarah said she wanted to introduce McCain and “ brag him up…and do what John McCain just can’t seem to do for himself, bless his heart.”

 

To CNN, and the Fox News reports she didn’t know whether Africa was a continent or country, as well as not knowing the three nations in Nafta:

 

“I think if there are allegations based on questions or comments that I made in debate prep about Nafta or about the continent versus the country when we talk about Africa there, then those were taken out of context, and that is cruel and mean-spirited, it’s immature, it’s unprofessional, and those guys are jerks.”

 

Call me a jerk, Sarah. Here is a letter that found its way into USA Today from Paul W. Stackpole Sr. of Tucson, in response to an editorial that was critical of Palin.

 

“The piece…failed to mention that she had an 80% approval rating in Alaska and challenged long-standing Republican Party stalwarts to earn her governorship.

 

“Palin proved to be feisty, personable, smart and articulate. She would have made a perfect first female vice president, second in command to a great and deserving American.”

 

Oh brother. Articulate? Smart? 

 

[Related to the above, I do of course agree that Joe Biden got a virtual free ride with his own gaffes during the campaign, and of all people, the Saturday Night Live writers deserve credit for being among the few who brought them up.]

 

--Needless to say, I also couldn’t agree more with the New York Times’ Nicholas Kristof that it is time to “step away from the anti-intellectualism” of Americans these days.

 

--I’ve always thought so many countries have really cool coins that are the equivalent of a dollar or two, but until reading an editorial in USA Today didn’t realize that by eliminating the dollar bill, up to $1 billion could be saved because “Dollar bills wear out, on average, in just 21 months and have to be replaced. Dollar coins last 30 years or more, compensating several times over for the higher cost of producing them in the first place.”

 

As the newspaper suggests, if Barack Obama is serious about going through the federal budget “line by line,” he can start here.  “Failure to go after the easy targets just sends the message that Congress isn’t serious about saving money.”

 

--For the first time, the number of smokers in the U.S. has dropped below 20%, though cigarettes still kill almost half a million people a year. What’s interesting is that 25% of those who never graduated high school smoke, but only 6% of those who do graduate.

 

--I read this AP wire service report by William J. Kole in a local Hong Kong paper.

 

“She was a stranger, and she kissed me. Just for being an American.

 

“It happened on the bus on my way to work in Vienna, a few hours after compatriots clamoring for change swept Barack Obama to his historic victory. I was on the phone, and the 20-something Austrian woman seated in front of me overheard me speaking English.

 

“Without a word, she turned, pecked me on the cheek and stepped off at the next stop. Nothing was said, but the message was clear: today, we are all Americans.

 

“For longtime U.S. expatriates like me – someone far more accustomed to being targeted over unpopular policies, for having my very Americanness publicly assailed – it feels like an extraordinary turnabout.”

 

What a total crock of merde. I challenge the veracity of this article. For starters, Germans and Norwegians speak better English than we do (as I told a Norwegian couple sitting next to me at a Billy Joel concert on Wednesday here in Hong Kong), so this girl couldn’t be sure Mr. Kole was indeed American.

 

Let me tell you my own experience while here in Asia. In all seriousness, I have come in personal contact with a few hundred people and not one…one!...has mentioned our election. I had to bring it up myself when I was on the mainland and still got no real reaction.

 

No doubt, though, the headlines around the world after our vote expressed heartfelt sentiments (and newspapers sold out in Hong Kong, too), but Mr. Kole’s further assertion on his Americanness being publicly assailed is another bunch of bull.

 

How many times have I told you in all my adventures the past ten years that I have never, once, been poorly mistreated because I was American? They hate President Bush, period. The vast majority of foreigners, though, still like Americans, as individuals, and the ideals our country represents, though thanks to the thieves on Wall Street this could be changing.

 

That said, there were literally thousands of Asian women I saw this week that I wish had pecked me on the cheek. Upon reading this, Sarah Palin would no doubt call me both a ‘jerk’ and a ‘sexist.’

 

--The local government in Hong Kong is concerned about Barack Obama for one reason, as a local paper put it. “If he came to Hong Kong, where would he speak?” You see, with the crowds in Chicago, Denver and Berlin, Hong Kong authorities bemoan the fact that for a world class city, the biggest venue is a sports stadium that holds a mere 40,000. 

 

--Whenever I board a plane, I always try and pick out the air marshal, assuming there is one on most of my flights. I of course have no clue whether I have nailed it, but it was kind of disturbing to see a front page report in USA Today on the problems with the air marshal program and some of the crimes committed by them since 9/11. It only takes one to really screw things up.

 

--On a somewhat related topic, what a disturbing story in San Diego concerning the four Marines who murdered a fellow soldier because the white Marine sergeant had married a black girl. That’s bad enough. What’s worse is that one of the suspects is thought to be a member of the Crips. You’ve seen these gangs infiltrating the military stories before and it’s scary what the consequences could be. Crips or Bloods in collusion with terrorists.

 

--On a lighter topic, we note the passing of the Phoenix Mars lander, which made history by finding definitive proof of water on the Red Planet. Phoenix hasn’t been heard from since November 2 and project scientists have essentially considered the mission over.

 

I’m thinking that Phoenix, which was launched in August of last year and touched down on May 25 after what we can safely call an arduous journey, is simply opting for some R&R. I expect it to check in again after the holidays.

 

--The first democratically-elected leader of the Maldives, Mohamed Nasheed, said he was going to begin searching for a home for his 300,000 people as the island chain faces extinction due to global warming and rising seas that by 2100 could inundate his essentially flat archipelago.

 

May I suggest Tucson, Mr. President. A similar climate much of the year and lots of vacant properties that you could get very cheap. For an additional $49.95, I’m sure you’d also be allowed to call it The Cliffs at Maldive.

 

--Lastly, I wish I had been there, but in ceremonies commemorating Armistice Day in London, three veterans were showered with tremendous applause.

 

Henry Allingham, 112, who was in the air service; Harry Patch, 110, the last British survivor of the trench war, and Royal Navy veteran Bill Stone, 108. God bless them all.

 

---

 

Pray for the men and women of our armed forces.

 

God bless America.

 

---

 

Gold closed at $745

Oil, $56.85

 

Returns for the week 11/10-11/14

 

Dow Jones -5.0% [8497]

S&P 500 -6.2% [873]

S&P MidCap -7.8%

Russell 2000 -9.7%

Nasdaq -7.9% [1516]

 

Returns for the period 1/1/08-11/14/08

 

Dow Jones -35.9%

S&P 500 -40.5%...still on track for worst year since 1931

S&P MidCap -42.0%

Russell 2000 -40.4%

Nasdaq -42.8%

 

Bulls 31.9

Bears 46.1 [Source: Chartcraft / Investors Intelligence]

 

Have a great week. I appreciate your support. Back to my normal routine next time, including renewing my pledge to do a weekly podcast.

 

Brian Trumbore