Week in Review

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Week in Review

05/28/2011

For the week 5/23-5/27

Wall Street, the American Mood, and Europe

Republicans lost a special House election in upstate New York this week that pretty well summed up the state of the country these days. Democrat Kathy Hochul came out ahead in a district that was one of only four John McCain won in 2008 by running a one-issue campaign against Wisconsin Republican Rep. Paul Ryan’s Medicare reform program. The outlook for 2012 and further Mediscare-dominated campaigns should depress most Americans, but as of today, most of us, while talking a good game about reducing our humongous deficits, don’t want their entitlements cut!!! I’ve said this many times in the past but it bears repeating that we’ve become a nation of wimps, and not much different than some of our European brethren who are now fighting against cuts to their cradle to grave social programs.

“Reformers can’t let Democrats separate Medicare from the larger issue of exploding debt and economic prosperity. Republicans will lose an entitlement debate every time if it’s only about austerity. They need to link Medicare reform, and spending cuts generally, to faster growth and rising incomes. The greatest threat to Medicare and Social Security is a debt-laden, slow-growth economy like the current 1.8% recovery….

“The tragedy of the modern entitlement state is that it has become too big to afford but also too entrenched to easily reform. (See Greece, riots in the street.) Republicans can’t give up the cause, but New York is a warning that they need to pursue it as part of a larger agenda that restores the American middle-class’s economic hope.”

No doubt, as I wrote when he first introduced it, Paul Ryan’s plan is flawed, but he had the courage to put something of substance on the table, while as noted in a Washington Post story, “The Democrats…are continuing to bash Ryan’s approach and are not proposing major, new ideas of their own.”

Even former president Bill Clinton urged his fellow Democrats not to “tippy-toe around” Medicare, warning them to be wary of using the topic solely for political gain, adding: “We’ve got to deal with these things.”

You know all of our former leaders, everyone now out of government, understands the gravity of the situation, but the average American, let alone many of their representatives in Washington, will not ‘get it’ until they are hit over the head with a 2 X 4. And that, friends, will come in the form of a market crash I increasingly see for some time in 2012. An event will trigger a total loss in confidence in the financial markets that the U.S. will ever be able to get its fiscal house in order, and, coupled with the ever-present existence of derivatives, flash-trading and such, it will be rather messy. 

As for the debt ceiling debate, it’s going down to the wire and the Aug. 2 deadline. I’ve told you that Congress and the White House will do just enough in terms of spending cuts to appease Republicans, but upon closer inspection the markets will realize it’s just like the last agreement to fund the government through the 2011 fiscal year (ending Sept. 30). Those “cuts” were a total sham. All of this fits into my 2012 scenario. If, on the other hand, enough congressmen and our president get a ‘courage’ booster and actually do the right thing, I’ll change my tune, and outlook, faster than Usain Bolt.

Finally, on this topic, Oklahoma Republican Sen. Tom Coburn, one of the few adults in Washington these days, had the following in a Bloomberg op-ed.

“(Many) Republicans believe they can secure additional spending cuts and help avert an economic meltdown without putting revenue on the table. I’m sympathetic to that argument. I’ve put holds on hundreds of bills that weren’t paid for, fought to eliminate countless earmarks sponsored by members of my own party, and proposed hundreds of amendments to cut spending.

“However, having worked to expose and cut waste, I’m convinced we will never reform entitlements without putting revenue on the table. To attempt otherwise would require a Republican supermajority that will never happen in our democracy. We’re much more likely to enter a depression first.

“Democrats have a similar problem. Many of them prefer to mislead the American people by claiming that Medicare, Medicaid and Social Security are fine, when they should be embracing the reforms that will protect those programs and the people who depend on them. By 2022, Medicare, Medicaid, Social Security and interest on the debt will consume the entire federal budget. Social Security, which Democrats say is secure until 2037, is already running deficits ($49 billion last year). These programs are ‘safe’ only while the international financial community agrees to lend us money – which may not be for long….

“The solution is obvious. Democrats have to accept the reality that structural entitlement reform is necessary. Republicans have to accept the reality that in order to get Democrats to make those changes we will have to agree to tax reform that will increase revenue but not rates. This solution isn’t a betrayal of either party’s values, but a defense of those values on behalf of future generations. Again, doing nothing would be the real act of betrayal that would lead to both higher taxes and the demise of entitlement programs for the poor and elderly.

“If our leaders fail to make these choices before the next election, voters will have no choice but to replace them with leaders who will.”

Of course when the topic is debt and entitlements and austerity, it’s also all about Europe. As the leaders of the G-8 gathered in France, some of the formal statements were almost comical, as well as typical of the pabulum that often accompanies these affairs.

Europe said it would tackle its fiscal issues with “determination,” while President Obama promised a “clear and credible” U.S. deficit-reduction program. A huge roar went up around the world! “The World is No. 1! The World is No. 1!”   [Which is why we really need to discover another Earth-like planet to provide us some competition. “Daddy, why do the Balonians kick our butt all the time?”]

European Union President Herman Van Rompuy told reporters, “We will do everything to avoid a default of credit event. We will do everything to maintain financial stability in the euro zone.”

Of course when it comes to Greece, the only way to avoid a restructuring or default (one and the same) is to maintain the existing Ponzi scheme and just keep throwing money into a Greek urn, which these days is the same thing as a chamber pot.

Former ECB Chief Economist Otmar Issing said this week that while it is “not physically impossible” for Greece to honor its obligations, repayment is unlikely.

For its part, the Greek government is looking to the gods, hoping against hope that as they accelerate their asset sale program, Zeus will threaten prospective buyers with lightning bolts unless they overpay.

What is easily apparent is that as some have warned, when the day of reckoning comes for the land of crumbling, pollution-wracked monuments and anarchists, that it will indeed be a catastrophe. And/or destabilizing. Take your pick.

German Finance Minister Wolfgang Schauble ought to know, seeing as how his country’s banks stand to get slaughtered. Default or restructuring “could lead to all debts coming due immediately, with the corresponding consequences for Greece’s solvency. If Greece were insolvent…the consequences could be more catastrophic than those after the collapse of Lehman Brothers.”

But Greece isn’t the only problem on the continent. S&P cut its credit outlook to negative on Italy, while both Fitch and S&P issued warnings on Belgium’s outlook, seeing as how the Flemish and Walloons haven’t been able to get together on a new government there since last June.

While in Spain, the ruling Socialist Party got its butt kicked in local elections last weekend, the worst defeat for it in 30 years, and the fear here is now two-fold; first, facing increasing protests over the austerity program amidst 21% unemployment (a youth rate of 45%), that Spain will backslide on its efforts, and, second, that the new regional governments will discover that the municipal finances, already acknowledged to be in a shambles due to the real estate crash and reduced property tax revenues, are actually in even worse shape…that new piles of debt will be discovered, hidden so as not to rile up voters further. To be fair, though, it’s not likely Spain’s leaders will backslide, but it’s very possible the debt picture is even worse because few, as I warned back in 2005, understood just how big Spain’s housing bubble was. [For you new readers out there, I gathered my intelligence in pubs across Europe. When everyone I met was telling me they had a vacation home in Spain, that set off alarm bells for yours truly.]

And in Ireland, despite President Obama’s pep talk in Dublin, the OECD (Organization for Economic Cooperation and Development) forecast a fourth year of zero, or negative, growth in 2011 (flat for this year) vs. the government’s forecast of 2.3% growth.   The OECD interestingly added Ireland may have to water down its austerity program.

Lastly, the G-8 pledged $20 billion to Arab countries that have thrown out autocrats such as in Tunisia and Egypt. But typical of this kind of effort, as reported by the AP’s Greg Keller:

“It is unclear what the money would go for, or whether the figure includes money already promised for the region. U.S. and European officials had said that it’s too early to come up with firm dollar figures but that they would come up with a general plan to encourage investment and growth.”

So they threw out $20 billion, anyway, and then they all looked at each other, shrugged, and said, “What’s next on the agenda?”

Just a word on commodities, specifically the American farmer. The CRB Index of 19 diversified commodities rose over one percent this week as the dollar weakened and with fears that the crucial corn and wheat crops will be less than already lowered forecasts owing to excessive rain in some parts of the U.S. and drought in Texas and Oklahoma, as well as parts of Louisiana (despite the flooding you are seeing). I didn’t have a chance last time to throw in some telling statistics from the Agriculture Department. As of about ten days ago, farmers in Ohio had planted only 7% of the corn crop vs. an average of 70% this time of year (again early- to mid-May, not today), while nationwide, 63% had been planted vs. an average of 75%. I would just emphasize that the picture can change quickly but, yes, you do have to get the crop in the ground first…they say that helps.

So I want to share a note I received about ten days ago from my farmer friends in the Oklahoma Panhandle (northwest of Woodward), Gene and Karalee.

It was about ten years ago I called the Oklahoma Dept. of Agriculture and asked to be put in touch with a family in the Panhandle that might be struggling a bit, I was directed to a church, and then Gene and Karalee, at which point I went out to see them; their home at the time being literally less than a mile from the spot of the famous Dust Bowl pictures of the 1930s. You can imagine what was going through their mind when I pulled up in the driveway. ‘What the heck is this all about?’ It’s not the first time I’ve done something like this, however, and it’s a pretty simple deal I have with them. I’ll help you if you help me understand your problems and issues. 

Wouldn’t you know…soon after their luck changed and they’ve been doing well; hogs, dairy cows and wheat, mostly.

But a few weeks ago when I read a Times article on a town west of them in the Panhandle that had seen a ¼-inch of rain in over 200 days (you’re reading that right), I called Gene and Karalee in a panic. They’re always out so when I got the voicemail I told Karalee to call or write. So she wrote and I know she wouldn’t mind me sharing a little of it.

“Yes it is dry but if you can believe it the wheat is not as bad as they are saying. Some fields that got planted early so they could get some grazing and grain didn’t do so well – most have had to plow them up due to the lack of moisture – cattle got some grazing but too stressed for grain. We got ours planted late and then we were blessed with two rains. One about a month ago around an inch, 1 ½, came down really slow and every bit went into the ground (perfect) and another surprise this past Wed. We got a shower of about 2/3-3/4 and once again it came slow and steady, lasting about 3-4 hours. The head of the grain is up and the rain came at the time the head is filling when moisture is needed the most. Hope the grain price stay’s up!”

What Karalee doesn’t know is that I check the radar almost every day and remembered these two rains she described. It seemed like they missed getting the big precip that hit Oklahoma City and points east this week, though, as one thing I’ve learned is that the weather is drastically different between where they are and OKC, even though it’s only about a 3 ½-hour drive.

But if I leave you with anything from the above it’s the line it’s “not as bad as they are saying.” And it’s also the tremendous optimism you need to be a farmer. They are great people. Easily the best of America.

Street Bytes

--The Dow Jones fell for a fourth straight week, losing 0.6% to 12441, amid growing concerns on the health of the U.S. economy as well as others overseas, including China. The second report on first quarter GDP came in at an unrevised 1.8%, and durable goods for the month of April were down a bigger than expected 3.6%. A reading on pending home sales was also dismal. Next Friday’s jobs report for May will be key.

--U.S. Treasury Yields

6-mo. 0.10% 2-yr. 0.48% 10-yr. 3.07% 30-yr. 4.24%

Treasuries rallied further on the weak economic data and the Euro debt crisis. The average 30-year fixed rate mortgage fell to 4.60% this week, the lowest since mid-December, but it obviously hasn’t helped the housing market.

Separately, RealtyTrac reports that in 10 states, the average foreclosure discount in the first quarter ran more than 35% below the average prices of non-distressed homes, as noted by Julie Schmit of USA TODAY. Foreclosed homes in Ohio and Illinois drew the largest discounts, averaging 41%, but to be fair in some of the states the percentage of foreclosure sales is relatively small so the impact on non-distressed home prices isn’t as great. In Nevada, foreclosures were 53% of first-quarter sales but the average discount was less than 18%. Overall, discounts are larger when homes have gone back to the bank.

--For the first time in 25 months, consumer prices rose in Japan in April, 0.6% from a year earlier, but Fitch downgraded its outlook on Japan’s overwhelming debt to negative from stable.

--Japan is also going to feel potential severe power shortages this summer as the Fukushima Daiichi disaster has led to a wave of other nuclear plant shutdowns over safety concerns. So parts shortages in many industries could continue far longer than currently anticipated. The city of Tokyo itself could be hit hard as many of the inoperable plants service it.

[And as if things aren’t already bad enough, Typhoon Songda has exited the Philippines and is on a track, as I go to post, that would take it over the Fukushima nuke plant. Keep your fingers crossed.]

--Sony reported its widest net loss in 16 years as the earthquake and a wide-scale hacker attack, the second-largest online data breach in U.S. history, hit revenues hard. 

--Ricoh, the Japanese copier and printer maker, announced it would cut 9 percent of its workforce over the next three years, a total of 10,000, as it fights off competition from Xerox and Canon, among others.

--China’s economy is no doubt slowing some but it’s all relative. The unofficial HSBC purchasing managers index for May is at 51.1, barely in growth mode, and China (including Hong Kong) is facing its worst power shortages since 2004, though most experts are only lowering China’s GDP for 2011 to the 9% range.

--China has been exporting U.S. corn with the Dept. of Agriculture saying 116,800 metric tons of it were just bought for August delivery. Traders believe China is going to be a buyer anytime the price drops. China’s rolling drought, which seems to hit a different region every few months, is of obvious concern.

--China is cornering the rare earth metals market and the cost of components used in goods such as cellphones has soared, three to five-fold this year, as reported by the Financial Times. China currently produces over 90 percent of the world’s total output and is clamping down on smuggling and levying new export quotas. But the market is changing rapidly and new sources will be coming on stream. I have my own investment in the sector…a mine in Kyrgyzstan once operated by the Soviet Union.

--Microsoft CEO Steve Ballmer said that rampant piracy in China will lead to revenue there being only 5% of what it is in the U.S., even though PC sales are similar in both. Copies of Windows and Office are available for $2 or $3 on Chinese street corners.

[Separately, hedge fund manager David Einhorn called on Ballmer to resign for lack of performance. Einhorn made other news of his own when he acquired a $200 million minority interest in the New York Mets.]

--A European Union Chamber of Commerce survey in China found that 43% of European-based companies with offices on the mainland said they view the country’s regulatory practices as having declined in fairness over the past two years. Last year, 33% expressed discontent.

--The Financial Times reported that Libya’s sovereign wealth fund suffered $billions in losses through equity and currency derivatives trades with the likes of France’s Societe Generale, as well as JPMorgan, Credit Suisse and BNP Paribas. The U.S. and Britain have frozen an estimated $55 billion in Gaddafi’s assets, but another $100 billion is said to be floating around, a good example of how the west courted the Libyan dictator.

--Iranian President Ahmadinejad will not be attending next month’s OPEC meeting as first planned, Ahmadinejad being acting oil minister after he pushed out the former one. Instead, a lower level minister will attend which will likely forestall any significant change in production quotas or price targets for the cartel.

--The U.S. Commodity Futures Trading Commission charged a U.S. oil trading firm and two individuals with manipulating the oil price in 2008. The CFTC alleged two traders at Parnon Energy (and its affiliates) with amassing large positions in the physical market, creating the impression of a shortage that pushed up futures prices.

“They wanted to lull market participants into believing that supply would remain tight,” the CFTC said. “They knew that as long as the market believed that supply was tight and getting even tighter, there would be upward pressure on the prices of [West Texas Intermediate] for February delivery relative to March delivery, which was their goal.”

Supposedly, those accused made $50 million+ from the scheme.

--AIG had its first new stock offering since its near-collapse in the fall of 2008 and of the 300 million shares priced at $29, 200 million was held by the federal government, which picked up $5.8 billion and lowered the taxpayers’ stake in the company from 92% to 77%. But the profit was only $60 million; disappointing as the shares at one point earlier in the year traded at more than $50. [Break-even for the stock held by the Treasury Dept. is $28.70]

--Chrysler formally paid off most of its U.S. and Canadian government loans, $7.6 billion in total.

--The recovered black boxes of the Air France Airbus A330 that crashed into the Atlantic two years ago, claiming all 228 onboard, now shows failed external sensors fed inaccurate airspeed readings, which then led to a shutdown in the auto-pilot function and pilot error in the midst of terrible weather. The error was the crew accidentally inducing a stall from which the plane couldn’t recover even though the engines were working. For three minutes all had to be in a sheer state of terror as the plane pitched and plunged over 37,000 feet.

--Thankfully, flight disruptions from Iceland’s latest volcanic eruption were limited to a day or so in parts of Europe, nothing like last year’s mess.

--Dr. Bortrum and I have long argued the fish you buy is not what you think it is, particularly in restaurants, and a New York Times piece by Elisabeth Rosenthal begins thusly:

“Scientists aiming their gene sequencers at commercial seafood are discovering rampant labeling fraud in supermarket coolers and restaurant tables: cheap fish is often substituted for expensive fillets, and overfished species are passed off as fish whose numbers are plentiful.

“Yellowtail stands in for mahi-mahi. Nile perch is labeled as shark, and tilapia may be the Meryl Streep of seafood, capable of playing almost any role.

“Recent studies by researchers in North America and Europe harnessing the new techniques have consistently found that 20 to 25 percent of the seafood products they check are fraudulently identified, fish geneticists say.”

--Tiffany & Co. reported first-quarter profit rose 25% on higher revenue, both far above analysts’ expectations and the stock soared. A good sign the luxury sector continues to sizzle. [I refuse to add a superfluous Gingrich joke here…but will comment on his tastes below.]

“Researchers have set a new record for the rate of data transfer using a single laser: 26 terabits per second.

“At those speeds, the entire Library of Congress collections could be sent down an optical fiber in 10 seconds.”

--One Chinese company after another has had accounting issues which needless to say doesn’t help my own investment there. After reporting strong earnings for the first quarter, it’s stuck in the mud.

Foreign Affairs

Israel: Last time I wasn’t able to discuss in any great detail President Obama’s policy speech on the Middle East from May 19, so I posted his comments on the Israeli-Palestinian issue on my “Hot Spots” column. Obama called for the creation of a Palestinian state based on the pre-1967 lines with mutually agreed land swaps. When asked in a poll sponsored by the Jerusalem Post whether they saw the Obama administration as being more pro-Israel, more pro-Palestinian or neutral, just 12% of Israeli Jews surveyed said more pro-Israel, while 40% said more pro-Palestinian. [34% were neutral and 13% had no opinion.] Back in May 2009, the same survey had Obama being pro-Israel over pro-Palestinian, 31-14.

At the same time, this particular survey found that the Israeli public overwhelmingly thought Prime Minister Benjamin Netanyahu’s trip to Washington, highlighted by the tension convention in the Oval Office, was a success by a 47-10 margin. [And on the question of who is more fit to be prime minister, Netanyahu bested his rival Tzipi Livni, 37-28.]

But while President Obama was traveling in Europe this week, Netanyahu addressed the U.S. Congress, Tuesday, in what was viewed by many as a soaring triumph.

“While Israel will be ever vigilant in its defense, we will never give up on our quest for peace.

“Israel wants peace. Israel needs peace. We’ve achieved historic peace agreements with Egypt and Jordan that have held up for decades.

“I remember what it was like before we had peace. I was nearly killed in a firefight inside the Suez Canal. I battled terrorists along both banks of the Jordan River. Too many Israelis have lost loved ones. I know their grief; I lost my brother.

“So no one in Israel wants a return to those terrible days. But the peace agreements with Egypt and Jordan are not enough. We must also find a way to forge a lasting peace with the Palestinians. Two years ago, I publicly committed to a solution of two states for two peoples: a Palestinian state alongside the Jewish state.

“I am willing to make painful compromises to achieve this historic peace. As the leader of Israel, it is my responsibility to lead my people to peace.

“This is not easy for me. I recognize that in a genuine peace, we will be required to give up parts of the Jewish homeland. In Judea and Samaria, the Jewish people are not foreign occupiers. This is the land of our forefathers, the Land of Israel, to which Abraham brought the idea of one God, where David set out to confront Goliath and where Isaiah saw a vision of eternal peace. No distortion of history can deny the 4,000-year-old bond between the Jewish people and the Jewish land.

“But there is another truth: The Palestinians share this small land with us. We seek a peace in which they will be neither Israel’s subjects nor its citizens. They should enjoy a national life of dignity as a free, viable and independent people in their own state.

“We’ve already seen the beginnings of what is possible. In the last two years, the Palestinians have begun to build a better life for themselves. The Palestinian economy is booming. It’s growing by more than 10 percent a year.

“Palestinian cities look very different today than they did just a few years ago. They have shopping malls, movie theaters, restaurants, banks. They even have e-businesses.

“This is all happening without peace. Imagine what could happen with peace. Peace would herald a new day for both peoples. It would make the dream of a broader Arab-Israeli peace a realistic possibility.

“So now here is the question: If the benefits of peace with the Palestinians are so clear, why has peace eluded us? All six Israeli prime ministers since the signing of the Oslo accords agreed to establish a Palestinian state, myself included.

“So why has peace not been achieved? Because so far, the Palestinians have been unwilling to accept a Palestinian state – if it meant accepting a Jewish state alongside it.

“You see, our conflict has never been about the establishment of a Palestinian state. It has always been about the existence of the Jewish state.

“In 1947, the United Nations voted to partition the land into a Jewish state and an Arab state. The Jews said yes. The Palestinians said no.

“In recent years, the Palestinians twice refused generous offers by Israeli prime ministers to establish a Palestinian state on virtually all the territory won by Israel in the Six-Day War. They were simply unwilling to end the conflict.

“And I regret to say this: They continue to educate their children to hate. They continue to name public squares after terrorists. And worst of all, they continue to perpetuate the fantasy that Israel will one day be flooded by the descendants of Palestinian refugees.

“My friends, this must come to an end. President Mahmoud Abbas must do what I have done. I stood before my people and I said: ‘I will accept a Palestinian state.’ It is time for President Abbas to stand before his people and say: ‘I will accept a Jewish state.’

“Those six words will change history. They will make clear to the Palestinians that this conflict must come to an end. That they are not building a state to continue the conflict with Israel, but to end it. They will convince the people of Israel that they have a true partner for peace.

“With such a partner, the people of Israel will be prepared to make a far-reaching compromise. I will be prepared to make a far-reaching compromise.” [New York Post]

“Every Arab-Israeli negotiation contains a fundamental asymmetry: Israel gives up land, which is tangible; the Arabs make promises, which are ephemeral. The long-standing American solution has been to nonetheless urge Israel to take risks for peace while America balances things by giving assurances of U.S. support for Israel’s security and diplomatic needs.

“It’s on the basis of such solemn assurances that Israel undertook, for example, the Gaza withdrawal. In order to mitigate this risk, President George W. Bush gave a written commitment that America supported Israel absorbing major settlement blocs in any peace agreement, opposed any return to the 1967 lines and stood firm against the so-called Palestinian right of return to Israel.

“For 2 ½ years, the Obama administration has refused to recognize and reaffirm these assurances. Then last week in his State Department speech, President Obama definitively trashed them. He declared that the Arab-Israeli conflict should indeed be resolved along ‘the 1967 lines with mutually agreed swaps.’

“Nothing new here, said Obama three days later. ‘By definition, it means that the parties themselves – Israelis and Palestinians – will negotiate a border that is different’ from 1967.

“It means nothing of the sort. ‘Mutually’ means both parties have to agree. And if one side doesn’t?   Then, by definition, you’re back to the 1967 lines….

“”Three times the Palestinians have been offered exactly that formula, 1967 plus swaps…Every time, the Palestinians said no and walked away.

“And that remains their position today: The 1967 lines. Period. Indeed, in September the Palestinians are going to the United Nations to get the world to ratify precisely that – a Palestinian state on the ’67 lines. No swaps.”

And you have the so-called “right of return” issue that would flood Israel with millions of Arabs and destroy the Jewish state.

“No matter. ‘The status quo is unsustainable,’ declared Obama, ‘and Israel too must act boldly to advance a lasting peace.’

“Israel too? Exactly what bold steps for peace have the Palestinians taken? Israel made three radically conciliatory offers to establish a Palestinian state, withdrew from Gaza and has been trying to renew negotiations for more than two years. Meanwhile, the Gaza Palestinians have been firing rockets at Israeli towns and villages. And on the West Bank, Palestinian President Mahmoud Abbas turns down then-Israeli Prime Minister Ehud Olmert’s offer, walks out of negotiations with Benjamin Netanyahu and now defies the United States by seeking not peace talks but instant statehood – without peace, without recognizing Israel – at the United Nations. And to make unmistakable this spurning of any peace process, Abbas agrees to join the openly genocidal Hamas in a unity government, which even Obama acknowledges makes negotiations impossible.

“Obama’s response to this relentless Palestinian intransigence? To reward it – by abandoning the Bush assurances, legitimizing the ’67 borders and refusing to reaffirm America’s rejection of the right of return.

“The only remaining question is whether this perverse and ultimately self-defeating policy is born of genuine antipathy toward Israel or of the arrogance of a blundering amateur who refuses to see that he is undermining not just peace but the very possibility of negotiations.”

“Netanyahu’s skillful address to Congress touched every Mideast base with conviction and facts. He made a compelling case for his approach to the Palestinians, including Hamas, and was so well-received by both Democrats and Republicans that Obama is left looking foolish and isolated.

“The president was fortunate to be in Europe, if only because time and distance spared him immediate embarrassment. His ideas for the ‘peace process’ have been shredded beyond salvaging. Even a top fellow Democrat, Senate Majority Leader Harry Reid, rebuked Obama in a Monday night address. …

“(Netanyahu) made it clear where Israel stands with a series of striking declarations, such as:

“ ‘Israel is not what’s wrong in the Middle East. Israel is what’s right.’

“ ‘The conflict has never been about the establishment of a Palestinian state. The conflict has been about the existence of a Jewish state.’

“ ‘The Palestinian refugee problem will be solved outside the borders of Israel.’

“ ‘We will not negotiate with a Palestinian government backed by the Palestinian version of al Qaeda.’….

“Obama’s flawed approach, stemming from his belief that America must show more respect for Muslims, is more than a tactical blunder. He has so badly misjudged the issues and the players that there is zero chance of serious negotiations. And without the hope of talks, the chance of war increases and the power of Islamic fundamentalists grows.”

“Obama’s policy move ensured the whole world would be watching Bibi as he [addressed Congress], and Netanyahu responded with what can only be called the speech of his life.

“He was interrupted 29 times – 29 times! – for standing ovations, and 55 times overall for applause….

“ ‘My friends, you don’t need to do nation-building in Israel. We’re already built. You don’t need to export democracy to Israel. We’ve already got it. You don’t need to send American troops to defend Israel. We defend ourselves. You’ve been very generous in giving us tools to do the job of defending Israel on our own. Thank you all, and thank you President Obama, for your steadfast commitment to Israel’s security. I know economic times are tough. I deeply appreciate this.’”

Yes, masterful. Long ago I said Netanyahu was the smartest man in the world (not that I agree with him all the time), and once again he proved it this past week.

[Two other items. Egypt permanently reopened the border with Gaza, thus giving Hamas a more open route to receive its weapons, while Defense Secretary Gates expressed concern that Hizbullah can tip its warheads with chemical or biological agents.]

Iraq: Moqtada al-Sadr’s Mahdi Army turned out 70,000 strong the other day to rally against a continued U.S. troop presence beyond the yearend deadline for withdrawal (burning U.S. and Israeli banners for good measure), and last Sunday there were more than a dozen bomb blasts in Baghdad, killing at least 21. In his final policy speech as Defense Secretary, Robert Gates said it would be a “good thing” for some American troops to remain to counter Iran. Commenting on al-Sadr specifically, Gates said it was debatable “how much of (his sentiment is) the Sadrists and how much of that is the Iranians behind the Sadrists.”

Syria: For the 89th time, President Bashar Assad told a group of religious leaders that reform is coming. Then Assad’s goons gunned down at least 35 more pro-democracy protesters in the ongoing crackdown.

Iran: Josh P. passed along a piece by Tyler Durden addressing a long held position of mine, that being Iran’s growing presence, including through proxy Hizbullah, in Venezuela. I could take you back to at least 2005 on this issue, but now there is growing evidence of an agreement between Caracas and Tehran to build a missile base on Venezuelan soil. Ergo, Cuban Missile Crisis II coming to a theater near you in the next year or so would be my guess. While it’s not exactly clear just how good Iran’s long-range missile capability is, I wouldn’t discount it. Obviously North Korea and Iran have been sharing ballistic-missile secrets for years.

Separately, last Saturday, Iran announced it had detained 30 individuals who were allegedly part of a purported “espionage and sabotage network” managed by the CIA, as reported by the Los Angeles Times. Iran says it uncovered 42 additional people tied to the group that the CIA was said to have run through U.S. embassies in Malaysia, Turkey and the UAE, according to the Iranian Intelligence Ministry.

Pakistan: While the U.S. tries to repair its relationship, post-bin Laden, and as Pakistan is allowing U.S. experts to go into bin Laden’s compound for forensic work, the government and military itself were once again humiliated as the result of a Taliban siege on a major naval base in the heart of Pakistan’s biggest city, Karachi. It took 17 hours to put down the attack staged by all of six Taliban fighters, armed with RPGs, explosives and automatic rifles. The six managed to destroy two P-3C Orion aircraft, costing an estimated $36 million, which had been delivered by the United States a year ago. At least 10 Pakistani forces were killed. [Four of the militants were killed, and two escaped…though other reports say the four killed were the only attackers.]

If there was any doubt the Taliban could carry out a similar attack on the central government, the above should have dispelled such thoughts once and for all. It would only require one or two key insiders, which is likely what the Taliban had in taking on such a heavily fortified facility.

Meanwhile, the star witness in a trial related to the 2008 Mumbai massacre that killed more than 160, said in a Chicago court that the Pakistani government directly supported Lashkar-e-Taiba, the terrorist group that carried out the attack, directly fingering the ISI, Pakistan’s intelligence service.

Afghanistan: Thursday was a devastating one for the United States as nine American soldiers lost their lives, eight in a single bomb attack in Kandahar. About a week ago, four had been killed by a single bomb, showing the increasing power of the Taliban’s devices. As of today, at least 190 coalition forces have been killed this year in Afghanistan.

Libya: President Obama and British Prime Minister David Cameron vowed to step up the fight to oust Moammar Gaddafi, who is reportedly running from hospital to hospital to keep from being targeted, but French President Nicolas Sarkozy said the U.S. isn’t doing enough. The coalition did use 28 bunker-busting bombs near the Gaddafi compound Tuesday morning.

But then on Friday, President Obama evidently got Russian President Medvedev to lend a hand in easing Gaddafi out of power, the Kremlin having good relations with Libya. Developing…

[As for the rebels, the Washington Post ran a story on how they are increasingly guilty of reprisal attacks, raising questions about the character of any post-Gaddafi government and whether it will follow basic democratic tenets.]

Egypt: Mohamed ElBaradei, the potential presidential candidate and former head of the International Atomic Energy Agency, said Egypt’s economy, post-revolution, “is bust” and the country is “disintegrating” socially. “Politically it’s like a black hole. We do not know where we are heading.” The citizenry, not feeling safe with zero police presence, is arming themselves.

Tourism, the key to Egypt’s economy, has plunged over 60% from year ago levels.

But this week the government announced that former President Hosni Mubarak and his two sons are to be tried for the deaths of anti-government protesters and could face the death penalty.

Yemen: The nation is essentially in a civil war as of this week as fighters from Yemen’s powerful tribes attacked government buildings on Tuesday, with at least 38 killed on both sides. Dozens more were then killed in fighting on Thursday, while at least 28 were killed in an explosion at an arms storage depot. The Arab mediation effort to get President Saleh to step down failed and Yemen’s capital of Sanaa has been turned into a no-man’s land.

North Korea: It was funny how last Friday a train crossed from North Korea into China and everyone thought leader-in-waiting Kim Jong-un was onboard, but then it turned out it was the elder Kim Jong-il on the train, who on Wednesday reportedly met with Chinese President Hu Jintao in Beijing amid efforts to reinvigorate the six-party nuclear arms talks. It is Kim’s third trip here in the past year, highlighting his desperate needs for aid. Meanwhile, no sign of the chubby kid who seeks to have control of his daddy’s nukes someday.

[Pyongyang did just release an American being held for six months, and supposedly without any guarantees of food aid.]

China: In a case of domestic terrorism, car bombs and other explosions in the city of Fuzhou killed at least three on Thursday, though I hasten to note this is not the Fuzhou where my China investment is. I’m near Fuzhou, Fujian province. These attacks were in Fuzhou in neighboring Jiangxi. It was in making my reservations for my first trip to Fujian that I learned there are two Fuzhous. An alert travel agent picked up on this or I would have been landing in Jiangxi when my ride was waiting in Fujian. Oh yeah, that would have been a disaster. Anyway, the local government said the bomb attacks were the work of a disgruntled farmer unhappy over the handling of a dispute with local authorities. This kind of settling of scores is quite common in China.

On a different matter, the latest drought, this one impacting the Yangtze River, salt water is seeping into a key reservoir for Shanghai, potentially threatening the city’s drinking water (though I imagine it would be good for gargling). Seawater is not uncommon during the dry winter, but is rare in May.

And on the issue of Taiwan, 45 U.S. senators urged President Obama to honor a longstanding request for the sale of 66 F-16 fighter jets to the island. Yes, this is a tough call for the White House and I imagine Obama will try to stall for more time, possibly through next year’s presidential election in Taiwan.

[Taiwan’s intelligence agency this week asserted that China had fielded an additional ballistic missile unit in Guangdong province. Taiwanese analysts now believe China is targeting the island with 1,600 rockets, most of these in Jiangxi and Fujian.]

Georgia: The capital of Tbilisi was the scene of five days of demonstrations against President Saakashvili, with two being killed when hit by cars leaving the resultant clashes with police. Some of the protesters were severely beaten. Saakashvili, whose country fought a brief war with Russia in 2008, blamed them for the latest unrest.

“This day (Georgia’s independence day) was chosen as a target by our occupiers,” referring to Russia, which maintains thousands of troops in the disputed regions of South Ossetia and Abkhazia.

There is no doubt in my mind that should Vladimir Putin return to the presidency next year, he will target Georgia and the west will simply look away.

Russia: Speaking of the Kremlin, former Russian billionaire Mikhail Khodorkovsky lost an appeal to overturn a second conviction against him, though he and his business partner did get one year shaved off their sentence. Such a deal! This means the two will remain in prison until 2016, or a total of 13 years. At the hearing, Khodorkovsky called prosecutors and the judge “criminals.” “In what dusty cellar did they dig up that poisonous Stalinist spider who wrote this drivel? The authors of the verdict have shown both themselves and the judicial system of Russia in an idiotic light.”

Serbia: Europe’s most wanted war crimes suspect, former Bosnian Serb army chief Ratko Mladic, was arrested and will be extradited to The Hague to face trial after an anonymous tip led to his capture.

Serbian President Boris Tadic said: “We closed a chapter of our history that will bring us closer to reconciliation in the region.”

Easier said than done. The people in this region continue to hate each other as much as they have for hundreds of years. Tadic himself didn’t attend the G-8 summit because the president of newly-independent Kosovo was there and Serbia doesn’t recognize it.

As for Mladic, he was protected all this time by security forces still loyal to him until the support finally melted away. As commander of Bosnian Serb forces in the 1992-95 Bosnia war, Mladic was responsible for the massacre of 8,000 Muslim men and boys at Srebrenica, as well as the 1992-95 Siege of Sarajevo that killed an estimated 10,000. Overall, the Bosnian war claimed more than 100,000 lives and displaced 1.8 million.

Britain / Ireland: President Obama’s visits here were by all accounts a rousing success. In a toast, Queen Elizabeth II said:

“Your country twice came to the rescue of the free and democratic world when it was facing military disaster.”

Obama concluded with a quote from Shakespeare’s Richard III:

“To her Majesty the Queen, to the vitality of the special relationship between our peoples and in the words of Shakespeare, ‘to this blessed plot, this earth, this realm, this England.’”

Hey, this stuff works! The people there eat it up. And frankly it’s kind of amazing to me how the 85-year-old Queen seems to be hitting her stride the past year or two. As for Obama’s speech to parliament, it was widely praised as well.

When it comes to the Queen’s trip to Ireland, a staggering 95% of the Irish people thought she had won over the hearts of their fellow countrymen. One responded in an Irish Independent poll, “I’m a republican who voted Sinn Fein and I would say yes, most certainly, she won the hearts of the Irish people.”

A female respondent said, “It was a great moment for this country when the Queen addressed our nation in Irish at the opening of her speech, really wonderful,” one female respondent said.

Yup, the Queen rocks! This is Ireland, folks, and they now adore her. You have to have been here to understand just how powerful this is. I can guarantee you one thing…when the Queen passes from the scene, the Irish will be in mourning.

France: Meanwhile, across the English Channel, President Sarkozy slapped a new property tax on holiday homes in France, which impacts up to 200,000 Britons, who are now very ticked off at the little guy with the gorgeous wife (now officially with child). For Sarkozy it was a way to reduce the budget deficit ahead of next year’s election without alienating the electorate.

Mexico: Another gun battle between two rival drug gangs the other day in western Mexico claimed 28 lives. Hundreds were forced to flee.

Random Musings

--What more can you say about the destruction the Plains, Midwest and Southeast have suffered through this spring? It’s sickening. As I go to post, the death toll from the Joplin, Mo., tornado is 132, but with a still lengthy list of missing. Wednesday’s twisters killed another 14 or more in Kansas, Arkansas and Oklahoma. I saw film of a tornado hitting Shawnee, Oklahoma, and I couldn’t help but think back to the summer of 1978, when I spent three months (mid-May to mid-August) selling books door-to-door in Oklahoma and Kansas, including a stint in Shawnee. It was a summer of excessive heat (I recall at least 21 straight days where it hit 100…and I was walking) but never felt threatened by a tornado. As my territory shifted throughout the two states, I learned of twisters that had struck towns like Blackwell and Tonkowa, long before the advent of weather radar, and I learned the Indian legend that tornadoes don’t strike where there is a bend in the river, but it all seemed so far removed.

Today, though, and for the next few generations, Americans will have vivid memories, or hear their parents and grandparents tell them of the destruction of 2011, and names like Joplin and Tuscaloosa.

--As to the scientific reason for the overwhelming intensity of this year’s storms, as the Washington Post’s Brian Vastag and Ed O’Keefe report, the Joplin twister “was a rare destructive phenomenon known as a ‘multi-vortex,’ hiding two or more cyclones within the wider wind funnel.”

Jack Hayes, director of the National Weather Service, said, “We have had more F4’s and F5’s than in past years,” and they’re obviously touching down in cities and not just farms and fields.

“An emerging body of research points to a cyclical drop in temperatures in the Pacific Ocean as part of the answer. Called La Nina, the cycle lasts at least five months and repeats every three to five years. This year La Nina is pushing a strong North American jetstream east and south, altering prevailing winds. The jetstream’s river of cool air high in the atmosphere pulls warmer, more humid air from the ground upwards, forming thunderstorm ‘super-cells.’”

But while warm air, moisture and wind direction are the ingredients for a tornado, it is far too soon for anyone to say that climate change is responsible for at least one of the factors in the equation.

Back to the Joplin disaster, in discussing the ‘multi-vortex’ nature of it, tornado experts say that not only does the huge funnel cloud hide within it two or more cyclones, but the “centers of such intense wind funnels become unstable, wobble, and spin out two to six smaller twisters from within. The short-lived but intense sub-twisters dance around the edge of the cloud, spinning up to 80 miles per hour faster than the wider mother funnel, said Ernest Agee, a tornado researcher at Purdue University.”

--I’ve been writing about the health issues our soldiers are facing in Iraq and Afghanistan. Here is another report, this one from Kelly Kennedy of Army Times.

“U.S. troops in Iraq, Kuwait and Afghanistan have inhaled microscopic dust particles laden with metals, bacteria and fungi – a toxic stew that may explain everything from the undiagnosed Gulf War illness symptoms lingering from the 1991 war against Iraq to high rates of respiratory, neurological and heart ailments among troops in the current wars, scientists say.

“ ‘From my research and that of others, I really think this may be the smoking gun,’ said Navy Capt. Mark Lyles, chairman of medical sciences and biotechnology at the Center for Naval Warfare Studies at the Naval War College in Newport, R.I. ‘It fits everything – symptoms, timing, everything.’

“Lyles and other researchers found that dust particles – up to 1,000 of which can sit on the head of a pin – gathered in Iraq and Kuwait contains 37 metals, including aluminum, lead, manganese, strontium and tin.

“The metals have been linked to neurological disorders, cancer, respiratory ailments, depression and heart disease, according to the Environmental Protection Agency. Researchers believe the metals occur both naturally and as a byproduct of pollution….

“Heavy military vehicles have also pounded the desert’s protective crust into a layer of fine silt, Lyles said, which troops breathe deeply into their lungs – along with all it carries.

“The dust contains 147 different kinds of bacteria, as well as fungi that could spread disease, Lyles found.

“Since the wars began in Iraq and in Afghanistan, the military has seen a 251 percent increase in the rate of neurological disorders per 10,000 active-duty troops, a 47 percent rise in the rate of respiratory issues and a 34 percent increase in the rate of cardiovascular disease, according to a USA TODAY analysis of Defense Department data from 2001 to 2010.”

Here’s the thing. The Department of Defense contends there are no health issues associated with the dust, which is a cover-up, at best. Here’s to Capt. Lyles for his efforts to get to the bottom of it all.

--Well, let’s see. I think it was last fall that I first listed my three personal favorites in the race for the Republican presidential nomination; Mitch Daniels, John Thune and Haley Barbour. Doh! I was bummed to see Gov. Daniels make it 3 of 3 on the losing end when he dropped out last weekend, saying:

“In the end, I was able to resolve every competing consideration but one, but that, the interests and wishes of my family, is the most important consideration of all. If I have disappointed you, I will always be sorry.”

Damn right you disappointed me, Governor. You’ve left us elephants with a pathetic lineup. You should have abandoned your family for the duration of the race and let them fend for themselves.

I also wish people would stop talking about Chris Christie. His time is not now. He is far from ready and he has major issues to take care of in New Jersey, as opposed to Daniels who has an established track record of success.

At this point, I’d like to see Texas Gov. Rick Perry give it a go, and he’s saying publicly he’s thinking about it.

--Speaking of the existing Republican field, you have former House Speaker and supreme dirtball, Newt Gingrich, attempting to defend the fact he ran up a $500,000 debt to Tiffany’s, saying he and his 3rd wife are frugal and live within their budget. What a jerk.

“Paul Newman’s famous line after bluffing his way to a big poker pot in ‘Cool Hand Luke’ was: ‘Sometimes nothing can be a pretty cool hand.’ That’s as good a description as any of the Senate Democratic strategy for attacking the $14.3 trillion federal debt. Do nothing.

“Lest voters forget, Democrats still run the Senate, or at least they do when they want to filibuster House Republican reform bills. When it comes to their core responsibility under the law of passing a budget resolution, they are A.W.O.L….

“Majority Leader Harry Reid has tried to change the subject to raising taxes on oil companies, but that also yields a pittance and even three members of his own caucus refused to go along….

“Both parties have dug the current fiscal hole, but the Democratic record during their four recent years of running Congress is truly calamitous….On their watch the national debt more than doubled and annual spending rose by a little under $1 trillion. In a mere four years.

“ ‘It would be foolish for us to do a budget at this stage,’ Mr. Reid told the Los Angeles Times last Thursday. And as if to prove the point about Senate fecklessness, he carved out time yesterday to force a meaningless floor vote on Mr. Ryan’s budget, which failed 40-57. Republicans then offered Mr. Obama’s budget, which lost 0-97. Voters might conclude that it’s foolish to keep electing Democratic Senators who won’t do their job.”

--Crain’s New York Business reports that right-wing talk radio hosts are suffering. “The just-out April Arbitron report shows Rush Limbaugh and Sean Hannity…stuck in a ratings slump that started back in November, right after the 2010 midterm elections.

“Top-rated Mr. Limbaugh has taken the biggest fall…a 33% slide from October and from last April. Mr. Hannity’s afternoon show was down 28% from its fall peak.” [Don Imus’ ratings were up.]

But, to be fair, many think the trend is just cyclical and that people wanted a break. The audience is likely to return in 2012.

--Boy, the last person I’m about to defend is Sarah Palin, but the ex-staffer, Frank Bailey, who just came out with a book titled “Blind Allegiance to Sarah Palin: A Memoir of Our Tumultuous Years,” is a sleazeball. The book is based on “tens of thousands of emails that Bailey said he kept during his time with Palin,” beginning with his work on her 2006 gubernatorial campaign and continuing through the presidential race. [AP] The state of Alaska is investigating whether Bailey is breaking ethics rules in using the emails. Of course he is. For this reason, I refuse to report on his book, even though it contains material I would normally relish forwarding on to you and getting down for the archives.

As for Palin’s potential presidential candidacy, we’ll learn a lot this weekend as she tours some of America’s historic sites from Gettysburg to New Hampshire. I can just imagine what the commentary would be if she had to ‘wing it.’

But while I said a while ago that Sarah’s extended 15 minutes is almost up, part of me wants her to run, as well as clone Michele Bachmann, because it would liven up the Iowa State Fair.

--Data from the U.S. Census Bureau reveals that the Hispanic population now tops 50 million, or 16.3% of the total population of 308 million. [More than 73% are U.S. citizens.]

--Jared Loughner, the Tucson shooter, was ruled not mentally competent to stand trial on charges he killed six people and wounded Congresswoman Gabby Giffords.

--On Wednesday I went over to my parents for a beer (I can always count on a few cold ones in their fridge) and by accident caught the last few minutes of Oprah’s exit. I probably watched all of two of her shows over the years, and both of those would have been because they were seen as important at the time, though I’ll be damned if I can remember why…which goes to show you how much of what we deem as important is really trivial…but how can you not respect the hell out of Oprah Winfrey and her success?! It’s a story as good as any and she is deserving of all the many accolades that have been accorded her.

I also can’t help but note her message to “connect, embrace, liberate, love somebody, just one person and then spread that to two and as many as you can.”

That’s really a message for handling the natural disasters that have been visited upon us. Try and help just one person, be they in Joplin, Tuscaloosa, or North Carolina.

--Finally, NASA’s Swift space observatory picked up a staggering discovery; an explosion of a huge star near the edge of the observable Universe that is probably the most distant single object yet spied by a telescope. As reported by the BBC, details to be published shortly in the Astrophysical Journal:

“Scientists believe the blast…occurred a mere 520 million years after the Big Bang.

“This means its light has taken a staggering 13.14 billion years to reach Earth.”

Scientists also believe the explosion is for a star 30 times the mass of our Sun.

But when it comes to the exploration of space, Apollo astronauts Neil Armstrong, Jim Lovell and Gene Cernan wrote an op-ed in USA TODAY, citing the 50th anniversary of one of President John F. Kennedy’s great speeches before a Joint Session of Congress, May 25, 1961.

“First, I believe that this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to the Earth. No single space project in this period will be more impressive to mankind, or more important for the long-range exploration of space; and none will be so difficult or expensive to accomplish.” --JFK

“Was President Kennedy a dreamer, a visionary, or simply politically astute? We may never know, but he had the courage to make that bold proposal 50 years ago Wednesday. The Soviet Union’s Yuri Gagarin had completed an orbit of the Earth the previous month and electrified the world. The United States had taken only one human, Alan Shepard, above 100 miles altitude and none into orbit. Americans, embarrassed by the successes of our Cold War adversary, were eager to demonstrate that we too were capable of great achievements in space.”

Kennedy called in the leaders of NASA, who concluded we could win the space war by landing a man on the moon.

“The president decided this was the right project, the right time, and the Americans were the right people.”

“Now it is time to take longer strides – time for a great new American enterprise – time for this nation to take a clearly leading role in space achievement, which in many ways may hold the key to our future on earth.

“…Let it be clear that I am asking the Congress and the country to accept a firm commitment to a new course of action, a course which will last for many years and carry very heavy costs.” --JFK

“A half century has passed since Kennedy challenged our citizenry to do what most thought to be impossible. The subsequent American achievements in space were remarkable: Mercury, Gemini, Apollo and Skylab. Our efforts enhanced international cooperation with Apollo-Soyuz, the space shuttle and the International Space Station. The compelling fascination of our space achievements among young people spurred their interest in education.

“By 2005, in keeping with President Kennedy’s intent and America’s resolve, NASA was developing the Constellation program, focusing on a return to the moon while simultaneously developing the plans and techniques to venture beyond, and eventually to Mars.”

But then President Obama canceled funding for Constellation, after nearly $10 billion had been invested in design and development.

“Obama’s advisers, in searching for a new and different NASA strategy with which the president could be favorably identified, ignored NASA’s operational mandate and strayed widely from President Kennedy’s vision and the will of the American people.”

“We intend to be first. In short, our leadership in science and in industry, our hopes for peace and security, our obligations to ourselves as well as others, all require us to make this effort, to solve these mysteries, to solve them for the good of all men, and to become the world’s leading space-faring nation.” --JFK

Congress tried to steer NASA’s work back towards Kennedy’s goal, authorizing work on a large rocket capable of carrying humans toward the moon and beyond. But Obama’s 2012 budget reduced funding further.

“On the other hand, the president’s budget had significantly increased funding over the congressional direction in the area of space technology research programs and the development of rockets and spacecraft by the commercial entrepreneurs….

“Entrepreneurs in the space transportation business assert that they can offer such service at a very attractive price – conveniently not factoring in the NASA-funded development costs. These expenditures, including funds to insure safety and reliability, can be expected to be substantially larger and more time consuming than the entrepreneurs predict….

“(Today), America’s leadership in space is slipping. NASA’s human spaceflight program is in substantial disarray with no clear-cut mission in the offing. We will have no rockets to carry humans to low-Earth orbit and beyond for an indeterminate number of years. Congress has mandated the development of rocket launchers and spacecraft to explore the near-solar system beyond Earth orbit. But NASA has not yet announced a convincing strategy for their use. After a half-century of remarkable progress, a coherent plan for maintaining America’s leadership in space exploration is no longer apparent.”

“We have a long way to go in this space race. But this is the new ocean, and I believe that the United States must sail on it and be in a position second to none.” --JFK

“For 50 years we explored the waters to become the leader in space exploration. Today, under the announced objectives, the voyage is over. John F. Kennedy would have been sorely disappointed.”

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

For Memorial Day…from an inscription inside a chapel at the American cemetery at Normandy.

Think not only upon their passing
Remember the glory of their spirit.

Gold closed at $1537….nice comeback
Oil, $100.59

Returns for the week 5/23-5/27

Dow Jones -0.6% [12441]
S&P 500 -0.2% [1331]
S&P MidCap +0.3%
Russell 2000 +0.9%
Nasdaq -0.2% [2796]

Returns for the period 1/1/11-5/27/11

Dow Jones +7.5%
S&P 500 +5.8%
S&P MidCap +9.1%
Russell 2000 +6.7%
Nasdaq +5.4%

Bulls 43.0
Bears 19.4 [Source: Chartcraft / Investors Intelligence]

Have a great week. I appreciate your support.

Brian Trumbore

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