Week in Review

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Week in Review

09/17/2011

For the week 9/12-9/16

Europe, Washington and Wall Street

Another week, little done, when it comes to the European debt crisis, save for providing Europe’s banks with needed liquidity to stave off a possible run on a bank, which is still conceivable. First some broad comments, then the specifics.

World Bank leader Robert Zoellick blasted the 17 nations of the Eurozone for not thinking through worst case scenarios when the union was formed, let alone the failure to take action now. Zoellick said those who either couldn’t compete on the global trading stage and those burdened by debt never should have been admitted in the first place. Consequently:

“The global economy has entered a new danger zone with little running room as European countries resist difficult truths about the common responsibilities of a common currency.”

A Greek default would crush many European banks, said Zoellick.

Billionaire investor George Soros weighed in again, warning that if Europe doesn’t act soon, and decisively, the continent faces another Great Depression. Writing for the New York Review of Books and Reuters, Soros said:

“It appears the authorities have reached the end of the line with their policy of ‘kicking the can down the road.’ 

“Even if a catastrophe can be avoided, one thing is certain: the pressure to reduce deficits will push the euro zone into prolonged recession. This will have incalculable political consequences.”

Soros calls for guaranteeing bank deposits to prevent runs on the institutions, while the entire banking system needs to be recapitalized and placed under European, rather than national, supervision. Government bonds of deficit countries would have to be protected.

“All this would cost money. There is no alternative but to give birth to the missing ingredient: a European treasury with the power to tax and therefore to borrow.”

Of course this requires a new European Union treaty but that would take forever to implement, having seen how Euro officials have been moving like molasses amidst the current crisis.

Soros also blasted the German public for believing it has a choice whether to support the euro or abandon it.

“The euro exists and the assets and the liabilities of the financial system are so intermingled on the basis of a common currency that a breakdown of the euro would cause a meltdown beyond the capacity of the authorities to contain.

“The longer it takes for the German public to realize this, the heavier the price they and the rest of the world will have to pay.”

IMF chief Christine Lagarde weighed in that the global economy is facing a crisis of confidence worsened by “policy indecision and political dysfunction.” 

The euro banks still need more capital, while “weak growth and weak balance sheets – of governments, financial institutions and households – are feeding negatively on each other. This vicious cycle is gaining momentum and, frankly, it has been exacerbated by policy indecision and political dysfunction.”

One proposed solution, euro bonds, was refloated this week by European Commission President Jose Manual Barroso but German Chancellor Angela Merkel, who faces stiff opposition on a number of fronts domestically, including from her own Cabinet, said ‘no’ to euro bonds and the idea of guaranteeing the debt of the weak sisters in the union.

“In order to bring about common interest rates, you need similar competitiveness levels, similar budget situations. You don’t get them by collectivizing debts.”

Opponents to the concept add that euro bonds are an incentive for debt-ridden Greece and Italy, for example, not to fix their public finances.

European Central Bank policymaker Lorenzo Bini Smaghi said:

“Without stringent constraints, euro bonds risk favoring fiscal policies that, on average, are more expansionary, and a higher debt, whose cost is also shared among the more disciplined countries.”

Again, even if euro leaders out of nowhere adopted the euro bond concept, implementation would take forever, and time’s a wastin’.

So it’s back to Greece and after a conference call between Merkel, French President Sarkozy and Greek Prime Minister Papandreou, Merkel and Sarkozy were “convinced” Greece will stay in the euro bloc. Papandreou told them that his government was committed to meeting the deficit-reduction targets demanded as a condition for further bailout assistance, specifically another 8 billion euro, or $11 billion, which would enable the Greek government to meet its interest payments, salaries and pensions.

Greece needs this money soon, because it is running out of cash and said just this week it had enough to take it, maybe, until mid-October.

But then the troika – the European Commission, the European Central Bank and the International Monetary Fund – said Greece hadn’t met its deficit-reduction requirements yet, but, Greece would be allowed to tap a short-term lending facility until it proved in the next week or so that it was worthy of the bailout installment. Earlier in the week, the Greek government imposed a new property tax to cover a budget shortfall in the required targets; a tax collected through monthly electricity bills, at the same time the finance minister said the economy would contract by 5.3% this year, worse than an initial forecast of 3.9%. Heck, 5.3% would be good considering it contracted by over 7.5% in the first half!

Yet Greece needs growth, not a slowing in the contraction, and, for that matter, the entire European continent needs growth, and none is forthcoming. The EU reduced its GDP forecast for the region to just 0.2% in the third quarter and 0.1% in the fourth. 

As Christine Lagarde and others have said, including when it comes to the U.S. economy, you have this endless negative feedback loop and a double-dip global recession can easily become a self-fulfilling prophesy. It’s why you get statements like that from Angela Merkel that you must keep the euro area together politically “because we would very quickly face a domino effect.”

But in the case of Greece it needs a continued flow of cash totaling an estimated $300 billion over the coming years! It’s why in Germany, for one, 53% of the people oppose further aid for Athens and its all-too-real ruins.

Which brings us to the European banks. German banks hold the most Greek bond debt, over $14 billion, while France holds $13.4 billion; $6 billion of which is held by BNP Paribas, though it was two other French banks, Credit Agricole and Societe Generale, which were downgraded by Moody’s this week over not just their exposure to Greece, but also Portugal and Ireland. Until a rally this week, many European banks had lost half of their share value in just the last three months.

So as the crisis has unwound this summer, the Euro banks faced an increased short-term funding crisis of their own as a main pillar of support for their cash needs, U.S. money market funds, have been reducing their exposure to same. It was beginning to look like shades of 2008, and that is one ghost of crises past that needs to be avoided.

Enter the cavalry in the form of the ECB, the Federal Reserve, the Bank of England, the Bank of Japan and Swiss National Bank (funny how the little watchmakers are so critical to global solvency these days) which instituted a dollar lending facility for the banks that will carry them through the end of the year in terms of liquidity and meeting their daily cash needs. The banks can borrow unlimited dollars, similar to a step taken in 2008. The news reassured investors and bank shares regained a bit of their losses.

But this is hardly a long-term solution and the Euro banks have the same exposures should Greece end up defaulting. At least it was a concerted response and all five parties celebrated with mugs of spiked Swiss Miss Hot Chocolate.

As I go to post then this is where we stand, though a meeting of Euro finance ministers in Poland is ongoing so further announcements could be made this weekend. Thus far, nothing good has come out of it and U.S. Treasury Secretary Timothy Geithner was an unwelcome observer who, by his own admission, lacked credibility when offering suggestions on dealing with debt.

On to Washington…and this discussion is far easier because when it comes to President Obama’s $447 billion American Jobs Act, outside of the payroll tax cut and extended unemployment benefits, it’s dead in the water with Republicans even as the president runs around the country like a chicken without his head, squawking “Pass this bill!” This as some Know Nothings in the audience invariably shout the same without having any clue that his bill is larded with all manner of tax increases that even many Democrats in Congress are now questioning.

Meanwhile, the bipartisan supercommittee that is supposed to find $1.2 trillion in new deficit cuts by Nov. 23, after which Congress needs to vote yeah or nay by Dec. 23, has started working in earnest and the political posturing has begun.

“Mr. Obama said last week that he wants $240 billion in new tax incentives for workers and small business, but the catch is that all of these tax breaks would expire at the end of next year. To pay for all this, White House budget director Jack Lew also proposed $467 billion in new taxes that would begin a mere 16 months from now.   The tax list includes limiting deductions for those earning more than $200,000 ($250,000 for couples), limiting tax breaks for oil and gas companies, and a tax increase on carried interest earned by private equity firms. These tax increases would not be temporary.

“What this means is that millions of small business owners had better enjoy the next 16 months, because come January 2013 they are going to get hit with a giant tax bill….

“January 2013 is also the same month that Mr. Obama wants the Bush-era tax rates to expire on Americans earning more than $200,000. That would raise the highest individual income tax rate to about 42%, including deduction phaseouts, from 35% today….

“The White House economic logic seems to be that it’s new spending and temporary tax cuts will so fire up investment and hiring in the next 16 months that the economy will be growing much faster in 2013 and could thus absorb a leap off the tax cliff. But this requires its own leap of faith.

“The White House also predicted a similar economic takeoff from the 2009 stimulus that was supposed to make a tax hike possible in 2011. Then last December Mr. Obama proposed new tax incentives only for 2011 because the economy was supposed to be cooking by 2012. Now it wants to extend those tax breaks so the economy will be cruising in 2013.

“All of this assumes that American business owners aren’t smart enough to look beyond the next few months. They can surely see the new burdens they’ll face in 2013, and they aren’t about to load up on new employees or take new large risks if they aren’t sure what their costs will be in 16 months.”

Lastly, despite all the above, Wall Street rallied on what some said was better news out of Europe, like the bank liquidity gig, and a story earlier that China was looking into making large investments in Italian companies and bonds. The latter was then largely debunked and the former is hardly a panacea.

But the Street is entitled to a rally now and then after all the pain, though the economic news on the week was hardly rosy as retail sales were unchanged in August when a small gain was expected, while manufacturing data was decidedly mixed for the month. Plus the weekly release on jobless claims hit 428,000…the biggest figure since June and hardly the stuff of an improving labor picture.

Separately, economists for the National Alliance of Business Economics lowered their U.S. GDP forecast to 1.7% in 2011 after projecting 2.8% just last May. Why these guys are good!

And the housing picture darkened a bit more as mortgage default notices surged 33% in August, a sign that banks are finally speeding up the foreclosure process after the “robo-signing” scandal that brought it to a virtual stop. The good news in this, though, is that we may be getting closer to finally clearing the banks’ inventory which has impeded them in their desire to hand out new mortgages. It also helps us reach a true bottom in home prices.

The big stories of the coming week will be follow through on Greece, if any, and the Federal Reserve’s two-day meeting in which it is expected Chairman Ben Bernanke will unveil some new way to save the world, like targeting the long end of the yield curve.

Street Bytes

--The Dow Jones rallied 4.7% to 11509 in cutting its losses for the year to just 0.6%, while the S&P 500 had its third best week since 2009, up 5.3%, and Nasdaq surged 6.2%. Just four weeks until the next earnings wave and insight into the rest of the year and early 2012.

Yields on the long end rose some, more because of a return to equities (and out of bonds) then fear over the inflation data which was worse than expected, with the consumer price index for August up 0.4%, 0.2% ex-food and energy. For the last 12 months the CPI is up 3.8% with the core figure up 2.0%.

--There seems little doubt that Republicans have a big campaign issue with the failed solar-panel maker Solyndra, which recently filed for bankruptcy after receiving $535 million in federal loans as part of the Obama administration’s first stimulus program through the Energy Department. House Republicans called hearings and released e-mails suggesting that the loan was rushed in September 2009 despite warnings the company was not on sound financial footing. It seems clear to anyone reading the e-mails that the process was expedited, due to a groundbreaking event organized at Solyndra’s facilities by the White House that Vice President Biden attended to tout the success of the $787 billion stimulus program and how it was putting people back to work. Now 1,100 are out of work instead.

Yet an Office of Management and Budget staffer wrote just days before the groundbreaking that the Solyndra deal should be “notched down” because of a lack of firm performance data on the company’s solar panels and “weakening world market prices for solar generally.”

“We would prefer to have sufficient time to do our due diligence reviews and have the approval set the date for the announcement rather than the other way around,” said one e-mail from an unnamed OMB aide to Biden’s office.

The event nonetheless went as planned with Biden, Energy Secretary Stephen Chu and California’s then-governor Arnold Schwarzenegger in attendance. President Obama later visited Solyndra, hailing it as a green energy project that would lead America’s economy to the promised land, by god.

But two days after Solyndra filed for bankruptcy, Sept. 6, the FBI raided its offices amid suspicions of fraudulent activity. Taxpayers are on the hook for the $535 million, because you see, kids, it’s kind of tough to pay back a loan if you don’t have the cash! [The actual total could end up being $527 million, for the sake of accuracy.]

Whoever the Republican presidential nominee is can have a field day during the debates against Obama on this single debacle. I’m already looking forward to it.

Like just 3,545 jobs created after doling out half the allocated amount in the Energy Department’s stimulus efforts.

“A $38.6 billion loan guarantee program that the Obama administration promised would create or save 65,000 jobs has created just a few thousand jobs two years after it began, government records show.”

The Energy Department is countering that it “saved” 33,000 jobs at Ford Motor Co. when it guaranteed loans of $5.9 billion, allowing Ford to upgrade plants in five states to build more energy-efficient vehicles. Josh Lerner, a Harvard Business School professor, told the Post, “I always take these job estimates with a big grain of salt. There tends to be a lot of fuzzy math when it comes to calculating these benefits.”

--And in what is bound to be another 2012 campaign issue, writ large, the U.S. Census Bureau said median household income fell 2.3% in 2010, while the number in poverty hit 15.1% vs. 14.3% in 2009.

--Swiss banking giant UBS was hit with a $2 billion loss from a rogue trader, 31-year-old Kweku Adoboli, who placed unauthorized derivatives bets on exchange-traded funds, evidently going back to October 2008. Here we’ve had a raft of new regulations and super-computer systems designed to monitor traders and flag illegal activity before such humongous losses can occur, yet obviously UBS has some serious issues in its risk-management operation. Late Friday, Adoboli was charged on three counts of fraud and false accounting.

--Bank of America issued an official statement on further layoffs, another 30,000 over the coming years on top of the 6,000 cut in 2011. BofA is looking to save $5 billion annually through the cost-cutting measures by 2014 as it seeks to restore investor confidence.

--The U.S. Postal Service, bleeding profusely, is looking to shut down more than half its mail processing centers in a move that would add a day to the time it takes to deliver most first-class letters. Postmaster General Patrick Donahoe said the mail processing changes could save $3 billion a year, mostly in labor costs. The Postal Service does not require congressional approval to close the centers as it does for other cuts it may propose. 35,000 jobs would be impacted. The USPS is on the hook for a $5.5 billion payment to its retiree health care trust fund by Sept. 30 but should gain some kind of leeway from Congress on this.

--China’s central bank said that inflation, which fell in August from a three-year high, is still too high for monetary policy to be loosened, with the bank saying in a formal statement that “stabilizing overall price levels remains the top priority of macro-economic policy.”

Meanwhile, exports rose for the month of August by 24.5%, while imports hit a record high of $155.6 billion, or up 30.2%, far greater than expectations. Noted an economist with Mizuho Securities Asia, Shen Jianguang:

“Strong import growth is driven by China’s strong demand for consumer goods, luxury items, iron ore, crude oil, soy as well as corn.” [Financial Times]

All of this implies the Chinese economy is still going strong, though export growth has slowed from a 37.7% peak in January. Exports to the U.S. actually rose 12.5% in August vs. July’s 9.5% rate.

Separately, foreign direct investment in the country rose a solid 11.1% in August from year earlier levels. 

Then you have the pork crisis. Wholesale prices for the staple have climbed by more than 60% this year due to tight supplies. As David Pierson of the Los Angeles Times noted, “Basic stir-fry meat costs about $2.50 per pound, or about one-sixth a laborer’s daily wage. Even Premier Wen Jiabao told state media, “Stabilizing pork prices is the government’s unavoidable responsibility.”

The Chinese consume twice as much pork as Americans, and there are 460 million pigs, or seven times more than in the United States, the world’s second-largest producer. The government is so concerned it has a strategic frozen pork reserve of 200,000 tons but the nation consumes 100,000 tons of pork daily.

Turning to gambling, Steve Wynn’s Wynn Resorts has accepted terms for a new land concession in Macau where he will build another billion-dollar casino.

--In a survey of Americans by the German Marshall Fund, by a 51-38 margin, we believe Asia is more important to our interests than Europe, a big reversal from past such polls.

--India’s industrial production grew in July at the slowest pace in almost two years as consumer demand moderated. Output rose 3.3% from a year earlier, following an 8.8% gain in June.

--What a disastrous earnings report for Research in Motion, maker of the BlackBerry smartphones, as the company missed analyst expectations on both earnings and revenues. Plus, most disconcertingly, it shipped just 200,000 of its PlayBook tablets for its fiscal second quarter vs. the 500,000 it shipped in the previous quarter. Sacre bleu! By comparison, Apple shipped 9.2 million iPads in its last quarter. RIM has just started to roll out a new series of BlackBerry phones but the market is telling you they are not impressed. The company’s shares tanked 20% following the desultory news.

--Shares of Netflix are now down over 40% from mid-July levels. After raising prices, one million subscribers left. As reported by Martin Peers of the Wall Street Journal:

“The bear thesis on Netflix is playing out. Entertainment companies that control popular video content have realized their own businesses would be undercut if they license recent movies and TV shows for Netflix’s streaming service. Witness the recent decision by Liberty Media’s Starz cable channel to cut off a crucial supply of recently released movies for Netflix’s streaming offering. That protected Starz’s lucrative deals with nervous cable and satellite operators.”

--The International Energy Agency cut its demand forecasts again for 2011/2012 owing to the slowing global economy, but supply constraints will keep prices high. The IEA does not expect Libyan production to get back up to speed until late 2012, while OPEC believes it will only take six months.

--John Mack is standing down as chairman at Morgan Stanley at year end. Mack led the investment bank from 1993 to 2001 and, as reported by the Financial Times, the shares rose 700% during that time, this being the ultimate benchmark. He then went to Credit Suisse, 2002-2004, and those shares lost a third of their value. Then he returned to Morgan Stanley and before turning over the CEO reins to James Gorman, Morgan Stanley’s shares lost 25%. So all in all, the last ten years he was incredibly ineffective.

--Facebook has delayed its projected IPO date from April 2012 to late in the same year as CEO Mark Zuckerberg wants employees to stay focused on product development rather than payout. Meanwhile, Groupon said its IPO was back on, after delaying it the other week.

--One in seven drivers in the U.S. is uninsured according to the Insurance Research Council. The most recent data, 2007, shows that those of us who have insurance shelled out a collective $10.8 billion for those who don’t. Auto insurance is compulsory in every state except New Hampshire. The rate of uninsured motorists varies from 4% in Massachusetts to 28% in Mississippi.

--Good lord…Costco has had Christmas merchandise out since Sept. 1 and Home Depot is stocking its shelves with it Sept. 19; Wal-Mart by month’s end.

--Barclays Capital projects U.S. ad spending will grow only 1.4% this year, 4% in 2012. It had been calling for growth of 2.9% and 5.2%, respectively. Many are increasingly concerned about next year though spending on the Summer Olympics and the 2012 elections will help. During the recession (the official one, that is), ad spending fell 16%.

--In yet another sign of Ireland’s economic difficulties, the Irish Independent had a story on one of Dublin’s best-known pubs, John Doyle’s, which went on the market for 850,000 euro. In 2006 it was sold for 4.2 million.

--Forgot to note something last time from the Wall Street Journal that is telling. As reported by E.S. Browning:

“More Americans are reaching their 60s with so much debt they can’t afford to retire.

“Most people used to pay off their debts before retiring. But as wages have barely kept up with rising prices over the past 35 years Americans have pushed debt higher, living beyond their means. Now, people are postponing retirement, cutting living standards or both.

“All kinds of debt held by this age group have risen, but the big problem is mortgages. Thirty-nine percent of households with heads aged 60 through 64 had primary mortgages in 2010 and 20% had secondary mortgages, including home-equity lines, according to research group Strategic Business Insights’ MacroMonitor. That was up from just 22% and 12%, respectively, in 1994.”

It’s mostly about the crash in housing and the plight of negative equity. Plus we’re dipping into our retirement accounts increasingly to pay down debt.

--No particular reason why I’m in Carlisle, Pa., except for the fact I was on the road a lot of hours already on Thursday, needed to start working on this column, and didn’t feel like driving another 3 hours or so home.

So I’m staying at a nice place at the entrance to the Pennsylvania Turnpike where there are swarms of truckers taking breaks with huge parking lots and services for them. I went out for something to eat (my hotel not having a restaurant) and ended up at a dive bar attached to a Howard Johnson’s where I ordered fish and chips and some domestic. This one guy starts talking to me, he’s a trucker, and then another trucker got involved in our conversation, and an ex-Marine who served in Desert Storm (very impressive individual…Russian specialist), and the four of us talked about everything under the sun. 

But one thing that should scare you all. The two truckers admitted to working way over the limit allowed by law. Like multi-hours over. Not that you didn’t already know this, but I was still kind of floored. They weren’t proud of it, but often it’s just a matter of being in Pittsburgh in the morning, making a delivery to New Jersey, and then, get this, driving all the way back to Pittsburgh so they could be with their family. But, man, that’s a brutal day. So give them lots of room on the road and hope they do the same for you.

[I should note that the one trucker who was continuing on after a bite at the bar was not drinking alcohol.]

Foreign Affairs

Israel: As heads of state convene in New York City for the U.N. General Assembly, anti-Israel sentiment is rising rapidly across the Middle East. After violence forced the evacuation of the Israeli embassy in Cairo, Israeli Prime Minister Benjamin Netanyahu, increasingly under siege on a number of fronts, including domestically, said Israel would continue to adhere to its peace treaty with Egypt.

It turns out the situation was even more dangerous than first thought when the mob laid siege to the embassy as six Israeli security guards were behind a metal door, undiscovered, and thus didn’t have to fire on the mob, which you can imagine would not have made for good headlines across the region. Egyptian commandos extracted them and the embassy staff. Netanyahu also thanked President Obama for his help in defusing the crisis, though it needs to be noted that Egyptian authorities didn’t arrest any of the protesters.

The U.S., France, Great Britain and Germany were among those strongly condemning the attack.

“The Middle East is going through a historic earthquake. Maybe we can compare it to what happened almost 100 years ago at the end of World War I. Facing these huge changes we have to act coolly, reasonably and responsibly, and we have to understand that the things are happening because of strong undercurrents.”

Separately, Egypt tightened visa restrictions that will severely impact tourism further as now, unless you are with an organized tour group, you will be required to go through the Egyptian embassy in your country as opposed to obtaining a visa once you arrived in Cairo. The interim government’s military council is stirring up xenophobia, claiming all protests against the regime are being directed from outside, thus the clampdown on visitors.

Zvi Mazel, former Israeli ambassador to Egypt, in an op-ed for the Jerusalem Post:

“Egypt finds itself at a crossroad. Mass demonstrations and the toppling of Hosni Mubarak have brought no breakthrough for the country’s social and economic problems.

“The Supreme Military Council ruling the country has been exposed in all its weakness; it has been unable to show the people a road map leading to the drafting of a new constitution, the election of new parliamentary institutions and much needed social and economic reforms.

“The situation is going from bad to worse. There were no liberal parties ready to guide the revolution and work for the establishment of a democratic regime able to enforce the respect of human rights and the rights of women, as well as those of the Coptic minority.

“Instead, the Muslim Brothers and the ultra-nationalist movements, long repressed by the previous regime, are controlling the street and dictating their will to the army – while each is fighting to shape the country their way.

“The naïve and fearless youngsters who took to the streets on January 25 to demand change and better conditions have lost.

“Hatred towards Israel is the only common ground for the deeply divided forces battling for control of Egypt.”

Meanwhile, there is rising anti-Israel sentiment in Jordan, the other nation with a peace treaty with the Israelis. And Turkey continues its belligerence. The Arab Spring is turning into a giant fall protest against Israel.

Historian Josef Joffe in an op-ed for the Wall Street Journal:

“I wasn’t alone, but the mea culpa is all mine. Like many, I thought that dawn was finally breaking over the Arab world when those nice, middle-class crowds thronged Cairo’s Tahrir Square chanting ‘freedom’ and ‘democracy’ without burning American and Israeli flags. What a miracle, I mused: The dogs of hate are not barking. And what a wondrous moment of transcendence! Free the people, and they will free themselves from the obsession of anti-Americanism and anti-Semitism their overlords had implanted to distract them from misery and oppression.

“It was a false dawn – and not only because of the sacking of the Israeli embassy in Cairo last week. On my desk sits a Reuters’ photo dated May 13; the caption reads: ‘People burn an Israeli flag during a demonstration on Tahrir Square.’ There were no such symbols of ‘Arab rage’ when the protests erupted in late January.

“The demons of yore are back and presumably they have never left….

“(The) sad trajectory of the Egyptian revolution, going toxic only after a few weeks, confirms the depth of the loathing. Acceptance of the ‘Other’ who is the Jew (or even a Copt) is not a pillar of Islamic culture. But the opposite – abhorrence – is such superb cement for societies rent by myriad conflicts: between sects, classes, tribes and nationalities, between modernity and tradition, city and country, devout and secular. To serve as target and unifier has been the fate of Jews in Europe, and it remains their fate in Arabia.”

For the record, your editor was never lulled into the sense of optimism Mr. Joffe was with the first strains of the Arab Spring.

Meanwhile, to add fuel to the fire you have the Palestinian statehood bid at the U.N. and tensions between the two parties are sky high as the White House desperately tries to get the Palestinians to pull back and accept renewed peace talks instead. It’s probably too late.

I warned you months ago about the U.N. General Assembly that commences this week and the potential for explosive action, both inside and outside. 

Palestinian Authority officials in the West Bank have called for mass demonstrations in cities and towns in support of the initiative, while the Israeli army and police announced they are ready for any rushes towards the border or attacks on settlements. I assume the NYPD is also prepared.

This is going to be an unmitigated disaster for American standing in the Middle East which will be harmed by the inevitable U.S. veto on Palestinian statehood. The P.A. receives $500 million in economic assistance from Washington each year but now congressional opposition is building and the funding is in jeopardy as well. 

So to summarize, the Palestinian Authority will take the move for statehood to the U.N. Security Council, the U.S. will issue its veto, blocking statehood, but then the Palestinians can appeal to the General Assembly, where no single nation can block action and where the Palestinians have overwhelming support. The General Assembly can’t ratify actual statehood, but the Palestinians would be upgraded to “non-member state,” whereupon they can join U.N. bodies and conventions, as well as pursue claims against Israel in the International Criminal Court. The entire process could take weeks, or months, however.

The U.S. is in favor of Palestinian statehood, but only achieved through negotiation. But with Palestinian President Mahmoud Abbas’ move, the peace process is dead; maybe to be replaced by war.

Afghanistan: The Taliban launched an attack on the U.S. Embassy and NATO headquarters in Kabul that killed at least 11 Afghans, including security forces, and nine insurgents. It was the first such attack on the two locations and while no Americans were killed, it was a most worrisome development on a number of fronts. For starters, once again the Taliban had to have had inside help from both government and Afghan military sympathizers. Second, the attack was blamed on the Haqqani faction that hangs out in Pakistan. The U.S. said such a “safe haven” was totally “unacceptable” and the Pentagon has vowed to do something about it, relations with Pakistan be damned.

Afghan President Hamid Karzai said the attacks will not stop the transition of security from NATO to Afghan forces, alluding to the end of 2014 when all foreign troops are to have been withdrawn, but there isn’t anyone alive who believes the Afghans will be ready to protect themselves.

Pakistan: Former President Gen. Pervez Musharraf has vowed to return from exile by March 2012, which probably wouldn’t be helpful. He is wanted by an anti-terrorist court in Pakistan over accusations he failed to protect former Prime Minister Benazir Bhutto, who was assassinated in December 2007. Musharraf ruled for nine years until 2008. It was he who made the decision to align Pakistan with the U.S. against the Taliban that prior to 9/11 had been an ally.

Iraq: Fiery Shia cleric Moqtada al-Sadr called on his followers not to attack U.S. troops in order to ensure the United States leaves by the yearend deadline. But Sadr warned his Mahdi Army would go on the offensive if America doesn’t leave on time and that military operations would be “very severe.”

“Because of my eagerness to accomplish the independence of Iraq and have the invader forces withdraw from our holy land, it has become imperative for me to stop military operations…until the invader forces complete their withdrawal.”

No telling what Sadr will do if 3,000 or so U.S. forces remain behind for training purposes.

Libya: Ah yes…my adage of “wait 24 hours.” During the Gaddafi regime, Islamists were not welcomed as Gaddafi cracked down on them, viewing them as a threat. But now the Islamists, having played a key military role in the rebels’ victory, want a major say in the new government that emerges and the secularists who control matters today aren’t prepared to give it to them. So your guess is as good as mine as to who is controlling things say by next spring.

Actually, on Friday, Gaddafi loyalists forced the rebels to retreat after trying to dislodge Gaddafi’s troops from one of a handful of remaining strongholds.

Separately, U.S. General Carter Ham, who is in charge of Africa Command, became the latest to warn on Libya’s remaining chemical weapons capability in saying it must be quickly secured before falling into the hands of terrorists. Gen. Ham also warned about the use of shoulder-fired missiles that are floating around and seem destined for al-Qaeda, al-Shabab (Somalia) or Boko Haram (Nigeria).

Iran: President Ahmadinejad said he would ensure the two American hikers were freed, but the Iranian judiciary said once again “Not so fast, Mahmoud.” Ahmadinejad desperately wants the hikers released before he heads to New York for the U.N. General Assembly to help his P.R. campaign.

Syria: Russia is rejecting calls from the West for wider sanctions, while the U.N. estimates 2,600 have been killed in the protests. So much for quickly taking Assad down.

Turkey: The White House is considering Ankara’s request to base Predator drones in Turkey to aid their fight against the Kurdish rebels, the PKK, based in northern Iraq. Good for U.S.-Turkey relations but it increases Washington’s involvement further in the region. Heretofore, the Predators have been based in Iraq and the U.S. has shared surveillance video with Turkey, as reported by the Washington Post. But with the U.S. scheduled to leave Iraq, Turkey is a natural for the Predators to collect information throughout the region.

As for the PKK itself, it has never targeted U.S. interests, but their leader said awhile back, “If the U.S. gives Predator aircraft to Turkey (another option) and if we are hit by them, then we will hold the U.S. responsible. This would mean that the U.S. is directly involved in this war.”

Lastly, regarding the missile-defense radar installation that Turkey is allowing to be based on its soil, something I described as a real diplomatic achievement for the Obama administration, now we learn Ankara is very upset that the U.S. refused to rule out sharing real-time data with Israel, with tensions between Turkey and Israel already at a boil.

Russia: Neither President Medvedev nor Prime Minister Putin has announced their intentions regarding the presidential election next spring, though it is increasingly looking as if Medvedev isn’t interested.

One thing is for certain; there is a growing sense of despair in Russia. A poll by the respected Levada Center shows that 22% of Russia’s adult population would like to leave the country for good. This is a more than threefold increase from four years ago, when only 7% were considering it, and it’s the highest figure since the collapse of the Soviet Union. It’s also the students and entrepreneurs who most want to get out, not the poor and destitute. A World Bank study revealed that 77% of Russian science and engineering students studying in America will never go back to their homeland. The stagnation in the country is causing the most talented to just tune it all out. There is no planning for the future, which is at the heart of an entrepreneurial spirit. [See the above attitude of Mark Zuckerberg re: delaying the Facebook IPO.]

And here’s something scary. “34% of Russians ‘want to shoot’ those they blame for their troubles.”  [The Economist]

On a different front, Russia’s third-richest man, Mikhail Prokhorov, quit his Right Cause Party, claiming the Kremlin took over the, err, Kremlin creation. This is nothing more than farce, as I see it. Something’s fishy in this whole story as Prokhorov, in confronting the Kremlin, said he’s not afraid of suffering the fate of former Yukos oligarch Mikhail Khodorkovsky by speaking out, Khodorkovsky currently serving a second term in prison on trumped up charges. I just don’t know why Prokhorov (owner of the New Jersey Nets as well) would risk his business relationships in Russia, as the Kremlin has cut off other oligarchs in the past aside from Khodorkovsky. Some say Prokhorov was getting too independent of the Kremlin which is why the Kremlin moved in to install its own lackeys into the Right Cause leadership. It’s just that something isn’t right here. It can’t be this cut and dry.

Japan: One week after assuming office, Prime Minister Yoshihiko Yoda had his first embarrassment when his trade and industry minister was forced to resign over a bad joke. As reported by the Financial Times’ Jonathan Soble:

“Bantering with Japanese reporters on returning from a visit to areas near the damaged Fukushima Daiichi atomic plant last week, Mr. (Yoshio) Hachiro pretended to rub his sleeve against a reporter and said, ‘Watch it – radiation!’ The incident caused a public outcry when it was reported in the Japanese press.”

Random Musings

--There’s a long way to go in the presidential election campaign, sports fans. As Kenneth T. Walsh of U.S. News & World Report notes, “At this time in the ’08 cycle, former New York Mayor Rudy Giuliani was the front-runner. In September 2007, he was supported by 34% of Republicans and Republican-leaning independents, largely because of his commanding performance in dealing with the 9/11 terrorist attacks…and his widespread name recognition. Meanwhile, former Sen. Fred Thompson of Tennessee, an actor turned politician, garnered 22% after he jumped into the race in early September. Sen. John McCain seemed hopelessly behind at 15%. Fund-raising problems forced him to lay off key staff members and cut back on his campaigning.”

Well, you know how that one ended up. Meanwhile, on the Democratic side, a CNN/Opinion Research survey in September 2007 had Hillary Clinton leading Barack Obama, 48% to 23%.

“During his recent speech to Congress, President Obama gave Republicans this ideological glove to the face: ‘We all remember Abraham Lincoln as the leader who saved our Union…But in the middle of a Civil War, he was also a leader who looked to the future – a Republican president who mobilized government to build the Transcontinental Railroad, launch the National Academy of Sciences, set up the first land-grant colleges.’….

“This type of Republicanism is a challenge to Tea Party ideology, as Obama implied in his speech. Yet Obama still looks awkward in the stovepipe hat. Lincoln was an enthusiast for entrepreneurial capitalism. Government’s goal was to promote opportunity and social mobility, not to assure certain economic outcomes. Lincoln asserted a ‘harmony of interests’ between the working class and the wealthy, since the goal of the working class, in his view, was to become the wealthy. ‘We do not propose any war upon capital,’ he said. The objective is ‘to allow the humblest man an equal chance to get rich with everybody else.’

“But Obama’s largest economic failing comes on precisely the point where he praises Lincoln as a leader who looked to the future….

“An insatiable entitlement system, a burdensome tax code, a gridlocked political system and a broadly failing education system (apart from world-class universities) are leading many to suspect that America’s global standing is in relative decline.

“Yet Obama’s response to this extraordinary challenge was utterly ordinary. He pushed a typical Democratic stimulus plan, which mainly transferred funds to state and local governments and public-employee unions. He added a new health entitlement and argued for higher taxes on the wealthy. In Obama’s favor, his Race to the Top education reform was innovative. But he made the entitlement problem worse, ignored his own Simpson-Bowles deficit-reduction commission, directed attention away from meaningful tax reform and – with three years of budget deficits each exceeding $1 trillion – provoked a bitter national argument on the size and role of government. How could anyone have imagined that Obama’s tired, mid-century Keynesianism would reassure investors, creditors and consumers? And it didn’t….

“America has stumbled into the age of shoddy. Our deficits mount, our politicians squabble, our credit is downgraded, our firms can’t compete, our workers lose hope, our military is about to be hollowed out by massive cuts. Obama can rightly complain that he didn’t cause all of this. But he also didn’t muster much ideological creativity to fight it. He has been unable to think anew and act anew – and so fails the Lincoln test.”

--Republicans now have a 242-192 majority in the House (there is one vacancy) after two special elections on Tuesday were taken by Republicans, including Bob Turner’s upset win in a New York City district once held by Anthony Weiner. The other was in Nevada where Mark Amodei won handily.

Turner captured 54% of the vote in a heavily Democratic, Jewish district and his win was as much a repudiation of President Obama’s policies on Israel as anything else. It also didn’t help the Democrats that their candidate, David Weprin, was a dolt. 

--And now I need to clear the table on a recent hot topic…Social Security. In a USA TODAY/Gallup Poll, by a 37%-17% margin, Republicans predict Texas Gov. Rick Perry’s position on Social Security, calling it a “Ponzi scheme” for younger workers, will hurt rather than help his chances of being elected president. By a 32%-12% margin, independents who were polled say Perry’s stance makes them less likely to support him. 55% of Republicans and 53% of independents say Social Security needs changes, “but the most important thing is to protect the program.”

“As government programs go, Social Security is enormously popular, one supported by all presidents of both parties since its founding in 1935. It is the main reason that the percentage of seniors in poverty has dropped to roughly 10% from what many experts believe was more than 50% during the Great Depression. About 90% of voters of both parties say it has been very good or good for the country. The great bulk of Americans are no more interested in debating the utility and constitutionality of Social Security than they are in debating who won World War II or whether man really landed on the moon in 1969.

“All of which makes Texas Gov. Rick Perry’s views on Social Security both curious and troubling….

“Yes, Social Security has major funding problems. It pays out more in benefits than it takes in, and the gap will grow steadily worse as Baby Boomers retire. To that extent, Perry has a point. Congress, under both Republican and Democratic control, has been negligent in making necessary adjustments to bolster Social Security’s balance sheet for the long term. But the program’s problems are largely the result of people living longer, and therefore collecting more in benefits, rather than some inherent structural short-coming or constitutional failing.”

“The first step in fixing a problem is honestly admitting there is a problem. America’s goal must be to fix Social Security by making it more financially sound and sustainable for the long term. But Americans deserve a frank and honest discussion of the dire financial challenges facing the nearly 80-year-old program.

“As I said at the Reagan Library recently, Social Security benefits for current recipients and those nearing retirement must be protected. For younger workers, we must consider reforms to make Social Security financially viable.

“These are the hard facts: Social Security’s unfunded liability is calculated in the trillions of dollars. Last year, annual Social Security outlays exceeded annual revenues for the first time since 1983. The Congressional Budget Office projects that outlays will be roughly 5% greater than revenues over the next five years, worsening as more and more Baby Boomers retire.

“By 2037, retirees will only get roughly 76 cents back for every dollar that is put into Social Security unless reforms are implemented. Imagine how long a traditional retirement or investment plan could survive if it projected investors would lose 24% of their money?....

“We must have a frank, honest national conversation about fixing Social Security to protect benefits for those at or near retirement while keeping faith with younger generations, who are being asked to pay.”

Well no one can argue with either of the above, it’s obviously Perry’s use of Ponzi scheme that he is trying to backtrack from now that he understands how it plays with voters.

“Ponzi schemes are, by definition, fraud,” as an author on the subject, Mitchell Zuckoff, told Bloomberg. “Social Security is above board. We can argue about whether it’s a good system. But you can’t call it fraud.”

“Give Mr. Perry credit for addressing one of the third rails of American politics, but that doesn’t mean he has to invite electrocution. The problem with his hot rhetoric is that it can turn off many voters before they even get a chance to listen to his reform proposals, assuming he eventually offers some.

“He’s technically right that Social Security is a species of Ponzi scheme (if not a criminal enterprise) in the sense that young people today are putting more into the system than they can possibly get out in retirement.

“Part of the problem is that current seniors get more than they put in thanks to the formula for increasing benefits over time. Eugene Steuerle and Stephanie Rennane of the Urban Institute estimate that a two-earner couple both earning an average wage who retire in 2010 will get $906,000 in benefits having paid $588,000 in payroll taxes. The same couple who retires in 2030 will get $1.23 million (in constant dollars) while having paid $796,000.

“Even a pyramid system such as this could be solvent if it took advantage of compound interest. But the overriding problem is that not a dime of the payroll contributions the government collects over a lifetime is saved and invested for a worker’s retirement. Social Security’s pay-as-you-go financing model means that 12.4% of all wages are transferred to current beneficiaries, the surplus dollars are spent by Congress on other things, and Social Security gets an IOU from the Treasury.

“In other words, the program is building up debt even as benefits become less sustainable as the baby boomers begin to retire and the ratio of workers to seniors shrinks. The feds will then have to pay out of other tax revenue to meet Social Security’s obligations. This is the long-range problem Mr. Perry should attempt to explain, and the danger is that his rhetoric will scare the elderly rather than reassure them that reform is necessary for the sake of their grandchildren. He’s now running to represent Republicans as their Presidential nominee, not hawking a book on conservative talk radio….

“The key point is that, unlike a Ponzi scheme, Social Security can be reformed and it will have to be if current workers are to receive any return on their current taxes.”

Back on Aug. 28, conservative Michael Barone wrote the following in an op-ed for the New York Post.

“Some of society’s most intractable problems come not from its failures but from its successes. Often you can’t get a good thing without paying a bad price. A prime example is Social Security, which has been completely successful in wiping out poverty among the elderly. Old ladies no longer have to eat cat food to survive. But we pay some prices for this.

“One is a lower savings rate. China has a humongous savings rate in part because it has no reliable old-age pension system. People have to save if they don’t want to starve. In the United States, we got out of the habit of saving. In the decade up to the financial crash of 2008, the U.S. savings rate fell below zero. We felt comfortable borrowing on the supposedly ever-increasing values of our houses to support current and sometimes lavish consumption. Now we’re paying the price.

“The longer-term price any society pays for a public old-age pension system is lower birth rates. Farmers had large families to provide added labor for their working years and sources of income for their dotage. So did factory workers a century ago.

“In Western Europe, birth rates have fallen below the rate needed to replace population – in some countries, far below. The U.S. birth rate has remained, barely, above replacement rate largely because of immigration. But immigration has slumped during the recession and may never return to the 1990-2008 level.

“Unfortunately, under Social Security, like most public pension systems, current pensions are paid for by current workers. As lifespans increase and birth rates fall, the ratio of pensioners to active workers falls toward one-to-one. That’s not enough to support the elderly in anything like the style to which they have been accustomed, unless tax rates are sharply increased. And sharply higher tax rates, as Western Europe has shown over the last three decades, reduce long-term economic growth.

“That’s the problem, often abbreviated as ‘entitlements,’ facing our political system….

“Today…we’ve had nothing in the way of presidential leadership on this issue. Barack Obama has been happy to play politics on entitlements. He blithely ignored the recommendations of his own commission headed by Erskine Bowles and Alan Simpson. He has said since he would take a look at raising the Medicare eligibility age – it’s now lower than the Social Security age. But anyone can take a look at a proposal. We pay presidents a good salary to lead, not just to look.

“So far, the GOP candidates haven’t done much leading on entitlements, either. They’ve tended to take a gingerly approach to Paul Ryan’s Medicare proposal, and Newt Gingrich even trashed it.

“The conventional wisdom is that this is simple political prudence: Don’t give the other side a juicy target.

“But we’re faced not only with a huge short-term budget problem but with the prospect of a Western European future of an enlarged government, ever higher taxes and lower growth. Is that really what American voters want?”

--The entire Northern Hemisphere saw the fifth-warmest summer temperatures in 132 years of record keeping and it was the 26th consecutive above-average summer (defined as the months of June, July and August), the National Climatic Data Center said. The Arctic’s sea ice shriveled to its second-lowest extent on record.

But there were some cool spots, like the U.S. West Coast, Alaska, Great Britain and parts of Russia.

Meanwhile, unfortunately for Texas the Climate Prediction Center is forecasting more of the same there for the months of October, November and December.

--Look out on Sept. 24, give or take, because a huge NASA satellite is out-of-control and slated to re-enter Earth’s atmosphere, shattering into a number of very large pieces that will not just burn up before reaching the surface. NASA places the odds of a fatality at 1 in 3,200.

--Dakota Meyer of Greensburg, Kentucky, became the third living recipient of the Medal of Honor on Thursday for his actions in a six-hour firefight with the Taliban two years ago. In awarding the nation’s highest military honor, President Obama said:

“Dakota, I know that you’ve grappled with the grief of that day, that you’ve said that your efforts were somehow a failure because your teammates didn’t come home. But as your commander in chief, and on behalf of everyone here today and all Americans, I want you to know it’s quite the opposite.

“You did your duty, above and beyond, and you kept the faith with the highest traditions of the Marine Corps that you love. Because of your honor, 36 men are alive today. Because of your courage, four fallen American heroes came home.”

Meyer saved the lives of 13 American and 23 Afghan soldiers on Sept. 8, 2009, as he provided cover for and rescued the troops caught in an ambush. Meyer was also credited with killing 8 Taliban despite being wounded in the arm. Time and time again he kept putting himself at risk in an absolutely extraordinary effort.

--I went to Shanksville, Penn., on Thursday for a second time. I was there years ago after the temporary memorial had opened and, as you saw the other day, a permanent one has taken shape for Flight 93, though there is much work that needs to be done to the surrounding grounds. The memorial itself is simple and the whole setting will be beautiful upon completion. The story is told on picture boards and then it is a long walk to the wall with the names of the victims, each with their own panel. The crash site/impact zone itself is designated by a large boulder and is clearly visible for all. I’m not sure if down the road the general public will be able to walk to it as family members can now, but hopefully that will be the case.

One thing the memorial site is going to need is more parking. The spots were all filled when I was there on a rainy day. Granted, it’s fresh in everyone’s mind after the 9/11 anniversary but this is going to be a big attraction.

Some advice…it’s about 25 minutes from the Somerset exit of the Pennsylvania Turnpike so you need to allow for 90 minutes total, or thereabouts, if you are planning on going as part of a drive through to other destinations. There are also zero dining facilities nearby, but ample ones right at Somerset. 

--A few final thoughts on the 10th anniversary of the attacks.

“Not long after the second airliner hit the Twin Towers on 9/11, I said on NBC, ‘This is war,’ the most serious attack on the United States since Pearl Harbor, adding, ‘this will change us’ in ways we cannot yet imagine. And then it was back to the business of describing the terrifying chaos our viewers were seeing on the screen from lower Manhattan, the Pentagon and rural Pennsylvania.

“Where’s the president now and when will he be able to address the nation? Who were these deranged hijackers, using civilians as weapons? How many office workers and first responders were trapped in that colossal wreckage? What’s true and what’s not?

“When I finally returned home well after midnight, I poured a stiff drink and tried to respond to my earlier declaration. How will it change us? I know we’re stunned, angry and grieving, but now what?

“Looking for a distraction, I watched a video of ‘Band of Brothers,’ the superb production of Steven Spielberg and Tom Hanks based on the Stephen Ambrose book of a WWII infantry squadron. It was, in fact, not a distraction but a reminder of how ordinary Americans responded to a far greater challenge within my lifetime.

“In the days that followed, so many people came up to me and said, ‘This is our test.   Will we be the next Greatest Generation?’ – a reference to my book about the generation that survived the Great Depression and then made enormous sacrifices during WWII to do nothing less than save the world….

“In fact, at the beginning we did respond in similar fashion. The heroic actions of the first responders, surviving office workers, those at the Pentagon and the passengers aboard United flight 93 who went down fighting, were in the best tradition of the Greatest Generation….

“Then we lost our way. We left it to the all-volunteer military, representing less than 1 percent of the population, to do all the fighting and sacrificing in Iraq and Afghanistan. Partisan divisions re-emerged during debates about homeland security and civil liberties.

“More importantly, if you were not a military family, nothing was asked of you on the home front. Quite the opposite. We went on a national spending binge at the governmental and personal level that had nothing to do with the wars or terrorism.

“It was a massive exercise in self-indulgence and it led not to the Greatest Generation, but to the Great Recession. It was left to those in uniform to carry on the legacy of the Greatest Generation, which they still do 10 years later.

“They continue to pay a painful price, and so do the families who lost loved ones on that terrible day.

“Ten years later the rest of us must ask, ‘How will history record my role as a citizen, during a time of great challenge, to my country, and great loss for so many of my countrymen?’”

“Pearl Harbor clearly began something – U.S. participation in a world war that was already raging – whereas Sept. 11 was the fifth significant attack by radical Islamists on American targets. It followed those on the USS Cole in 2000, the East African embassies in 1998 and the Khobar Towers in 1996, and the 1993 attempt to topple the World Trade Center with a truck bomb. So what Sept. 11 actually began was the U.S. reaction, as muscular as it was belated, to the challenge of terrorism.

“The depleted armed forces that have been fighting these wars for a nation not conscripted into any notable inconvenience will eventually recuperate. For mostly oblivious civilians, the only recurring and most visible reminder of the post-Sept. 11 world is shoeless participation in the security theater at airports. It thus seems wildly incongruous that some Americans rushed to proclaim that 9/11 ‘changed everything.’

“The dozen years between the fall of the Berlin Wall and that of the twin towers featured complacent, self-congratulatory speculation about ‘the end of history.’ The end, that is, of a grand politics of clashes about fundamental questions of social organization. By the time 9/11 awakened the nation from such reveries, some Americans seemed to be suffering ‘1930s envy,’ a longing for the vast drama of global conflict with a huge ideological enemy.

“Ten years on from Sept. 11, national unity, usually a compensation for the rigors of war, has been a casualty of wars of dubious choices. Ten years after 1941, and in more recent decades, the nation, having lost 400,000 in the unavoidable war that Pearl Harbor announced, preferred to remember more inspiriting dates, such as D-Day.

“Today, for reasons having little to do with 9/11 and policy responses to it, the nation is more demoralized than at any time since the late 1970s, when, as now, feelings of impotence, vulnerability and decline were pervasive. Of all the sadness surrounding this anniversary, the most aching is the palpable and futile hope that commemoration can somehow help heal self-inflicted wounds.”

Finally, I saw the following in the Los Angeles Times, the 9/11 musings of the great Los Angeles Dodgers broadcaster, Vin Scully, a national treasure, as he reflected on the 10th anniversary following pregame ceremonies in San Francisco.

“We had a lead, gray morning, slowly burning off to a brilliant sunrise, making you think of that beautiful day in New York 10 years ago, Sept. 11, 2001. Certainly a day in which God must have wept, wept over man’s inhumanity to man. A day of heroes and a day of horror.

“And there are numbers we always talk about in baseball. We know of the total number of people who passed away that day. But I think of two particular numbers – 405 and 343. Four-hundred and five were the total number of first responders who died that day trying to help others. And the 343, all of those brave firemen who as most of those people who did escape were going down the stairs, 343 firemen were going up the stairs on the way to meet their destiny.

“Yes, it was a day to remember. We all take a promise now, we will never forget. But you know in retrospect, we’ve kind of forgotten Pearl Harbor. We’ve kind of forgotten D-Day and World War II. I guess it’s the tendency to try and push aside something that brings us so much pain.

“But it should also bring some honor for as we watch rising from the ashes of New York, like the Phoenix itself, the high-rises that will once again be a testimony to the heart and soul of this great country.

“I remember Ronald Reagan once said, ‘If we ever forgot that we were one nation under God, we will be one nation that goes under.’ And you might notice today, above all days, you will hear God’s name mentioned, and we hope, not in vain.

“So that’s the scene here at AT&T Park. We will do as we did 10 years ago. We will try and turn the page, at least for a couple of hours and concentrate on a child’s game called baseball. But all the while, each and every one of us should carry a small ache in our heart for what happened. And please, God, we will never forget what took place 10 years ago today. And with that, we’ll pause for this.”

The camera then panned to a scene outside the stadium where a banner read: ‘We will never forget 9/11.’

Pray for the men and women of our armed forces, and all the fallen.

Gold closed at $1814
Oil, $87.96…in a narrow range last six weeks.

Returns for the week 9/12-9/16

Dow Jones +4.7% [11509]
S&P 500 +5.3% [1216]
S&P MidCap +5.2%
Russell 2000 +6.0%
Nasdaq +6.2% [2622]

Returns for the period 1/1/11-9/16/11

Dow Jones -0.6%
S&P 500 -3.3%
S&P MidCap -4.5%
Russell 2000 -8.8%
Nasdaq -1.1%

Bulls 35.5
Bears 40.9 [Source: Chartcraft / Investors Intelligence…bear reading good sign if you’re a bull, as was apparent these past five days.]

Have a great week. I appreciate your support.

Brian Trumbore

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