[Posted 7:00 AM ET]
The War on Terror
It’s incredible how irresponsible Wall Street strategists are. I’ve
been pounding the table the last few weeks in particular, let alone
the last six years, not to ignore the geopolitical scene. But since
our election in November and even through the Iraqi vote, Wall
Street hasn’t let any such concerns get in the way of its bullish
outlook. Complacency has been the watchword.
No doubt, my own tone last week was especially somber but I
imagine most of you saw the news of the past few days and
thought, that editor may not be so crazy after all. While no one
foresaw the horrific assassination of former Lebanese Prime
Minister Rafik Hariri, it certainly wasn’t surprising. And long-
time readers shouldn’t have been surprised at the congressional
testimony of the likes of CIA Director Porter Goss or FBI
Director Robert Mueller, though it was nonetheless disturbing.
Regarding the latter, yes, Goss, Mueller et al were engaged in a
bit of cover your butt rhetoric, but when Goss says “There is
sufficient (weapons-grade nuclear) material unaccounted for” in
Russia “so that it would be possible for those with know-how to
construct a nuclear weapon,” it’s a stark reminder of the world
we live in, even as some of us have been arguing for years that
there was no more important challenge in the world today than to
secure Russia’s weapons stockpiles. But let’s run through other
key developments on the week.
Iraq: The certified final tally on the election reveals the United
Iraqi Alliance (Ayatollah al-Sistani’s coalition) took 48% of the
vote and 140 of 275 seats in the national assembly. The Kurds
won a strong 26% and interim Prime Minister Ayad Allawi
captured a disappointing 14%. The assembly is charged with
writing a new constitution by August, a referendum on same is
held in October and general elections to select a permanent
government are to be in December. It’s an aggressive timetable
and for now Ibrahim al-Jaafari and Ahmad Chalabi are the
leading candidates to be prime minister, while the Kurds feel
they are entitled to the presidency. [Prime minister is #1 in
importance, followed by the president and his two vice-
presidents.]
Compromise is going to be the order of the day and as I wrote
last week, those assuming it’s a done deal that the new
government will be an Islamic toady of Iran are sadly mistaken.
Robert Kagan wrote the following in the Washington Post.
“Yes, the monolithically inclined journalists say, but didn’t a lot
of these (new) Iraqi leaders once live in Iran and seek Iranian
support? Indeed they did. When Saddam Hussein was in power,
murdering the Shiites by the tens of thousands and using
chemical weapons against the Kurds, while the United States,
Europe and the rest of the Arab world stood by and did nothing,
many Iraqis looked for help from the only nation that would
provide it. Does that mean now that Hussein is gone and they
have a chance to take part in governing their country that they
are stooges of Iran? Was George Washington a stooge of
France? Some may retain ties to onetime Iranian supporters, but
a better bet is that Iraqi Shiites will want to be just that: Iraqi
Shiites. Remember nationalism? And as scholars of Islam such
as Reuel Marc Gerecht point out, it’s probably the Iranian Shiite
leaders who are now worrying. In the end, Grand Ayatollah Ali
Sistani and his allies may prove to have more influence in Iran
than Iran does in Iraq.
“No one can know for sure, of course. But now is the time for a
little subtlety, a little discernment and a little patience. Above
all, it is time to abandon our inordinate fear of the Shiites.”
As for the post-election violence, I don’t mean to ignore it and
we all pray for the safety of our men and women in uniform in
Iraq, but the country is now taking two steps forward for every
one back, or better. I agree with Allawi, though, who told the
Post’s David Ignatius that his main fear is the country turns to
retribution and revenge instead of moving on. That’s what we
need to watch.
Syria / Lebanon: Rafik Hariri was prime minister of Lebanon 10
of the past 14 years following the end of the 1975-90 civil war.
A business tycoon, he was beloved by large segments of the
population and almost single-handedly rebuilt Beirut. But Hariri
resigned from government in October of last year over the policy
of pro-Syrian President Emile Lahoud, Damascus’ puppet.
Hariri was pushing to have Syria withdraw its 15,000 troops and
let Lebanon be Lebanon when he was assassinated.
While it’s not certain who perpetrated the act, I’ll go with a
combination of Syrian and Lebanese intelligence and not
necessarily the direct work of Syrian President Bashar Assad,
who isn’t the brightest bulb on the planet. Of course if it wasn’t
Assad’s doing, that’s almost as worrisome because who then is in
control?
Regardless of who did it, the killing of Hariri was one dumb
move. French President Jacques Chirac was a close friend of his
and Chirac attended the funeral, a risky gesture given the
explosive climate. While Washington continues to have major
problems with the French leader, including on the issue of
Hizbollah, there is a chance that the U.S. and France could reach
some real accommodation in helping get Syria out of Lebanon.
For starters, it’s time the UN Security Council showed some
backbone and forced Syria to comply with Security Council
Resolution 1559 which demanded last fall that all foreign troops,
read Syria, exit Lebanon immediately. Syria hasn’t budged. The
U.S. may be currently preoccupied militarily, but others could
help enforce 1559. As it is today, we are heading towards a new
Lebanese civil war as Hariri’s supporters seek revenge.
Iran: By mid-week Syria and Iran had announced the formation
of a “common front” to address mutual threats and challenges.
Earlier, an Iranian foreign ministry spokesman addressed the
assassination of Hariri.
“An organized terrorist structure such as the Zionist regime has
the capacity for such an operation whose aim is to undermine the
unity of Lebanon. Iran vigorously condemns the terrorist action
…which cost the life of Rafik Hariri. (Lebanon should be
vigilant) to prevent the Zionist regime from carrying out its
sinister and expansionist projects in the region.” [BBC News]
Yes, I think that sums up why we need regime change in Tehran.
On the nuclear weapons front, the mullahs once again thumbed
their nose at the Euro-3, Britain, France and Germany, which had
demanded Iran trade in its heavy-water nuclear reactor for a
light-water one, the latter less conducive to bomb-making.
But then our good friend Russian President Vladimir Putin,
feeling snubbed, said Russia would start shipping nuclear fuel to
Iran in three months. The U.S. has been vehement Russia not do
this as the fuel can be used for both the making of dirty bombs as
well as nukes.
As for its existing nuclear capability, I have been saying Iran
would test by mid-year. This week Israeli Foreign Minister
Silvan Shalom said “The question is not if the Iranians will have
a nuclear bomb in 2009, 10 or 11, the main question is when are
they going to have the knowledge to do it. We believe that in six
months from today they will end all the tests and experiments
they are doing to have that knowledge.” [Reuters]
North Korea: Here, with the North refusing to re-enter the six-
party talks, the U.S. refuses to engage in direct dialogue,
continuing to rely on China to exert its weight. In the meantime,
the Bush administration is looking to choke off any remaining
sources of income. But one move that is really going to have an
impact on the North economically comes from Japan. The
Japanese are imposing an embargo on all fishing vessels, North
Korean or otherwise, that don’t have insurance. Last year just
2.5% of the North’s boats had it and this is a huge blow to
Pyongyang.
Meanwhile, deputy secretary of state nominee Robert Zoellick
said it’s possible the North Koreans are bluffing, thereby backing
the position of South Korea. No way. Kim Jong Il has the
bomb. But what Zoellick’s statement does point out is the bind
the U.S. finds itself in on the credibility front thanks to our
failure to properly identify the WMD threat in Iraq. As for
China, they don’t want any problems in their backyard, but they
also don’t mind seeing the U.S. sweat a little.
Wall Street
Despite a hiccup this week owing to tensions in the Middle East,
the complacency I wrote of above is still rampant on the Street.
At least Federal Reserve Chairman Alan Greenspan, in his semi-
annual testimony to Congress, ratcheted up the level of debate
even if the congressmen questioning him were a total
embarrassment (the senators behaved more admirably).
Greenspan said he remained sanguine on inflation and that the
economy would grow at a solid 3.5-4% clip for 2005. He saw
“lingering caution” on behalf of CEOs and capital spending and
offered there was a need to “remain vigilant against
complacency” in the financial markets overall. Ah ha!
Greenspan also weighed in on Social Security (that’s all
Congress really wanted to discuss), saying he was in favor of
private accounts but the amount of debt that would be required to
fund the transition was potentially destabilizing. Medicare, he
added, is “several levels more difficult than Social Security.”
I’m not going to say anymore on this topic (if you’re new to the
site, trust me, I wore it out long ago) only to add that in an NBC
News / Wall Street Journal survey, by a 51-40 margin Americans
believe it is a “bad idea” to change Social Security.
Instead, let’s focus on Greenspan’s labeling recent bond market
behavior a “conundrum.” This reminded me of Winston
Churchill, speaking of the Soviet Union in October 1939.
“I cannot forecast to you the action of Russia. It is a riddle
wrapped in a mystery inside an enigma.”
But I digress. Greenspan’s own bemusement is quite simple.
The Fed has been steadily raising short-term interest rates and
the long end of the yield curve has been coming down; opposite
of what you’d expect and, no, Greenspan is not smart enough to
have foreseen this as one or two pundits idiotically offered up
this week.
What does give then? Since I forecast a 10-year yield of 4.30%
myself for year end, it really isn’t much of a mystery or enigma
to me. Forget Friday’s producer price index core reading of
0.8% for January, to me an anomaly. I just believe inflation, the
official variety the Fed watches, is not an issue and I still
maintain we will be talking deflation by December (for 2006 and
beyond).
Speaking of my own forecast, every 6-8 weeks I feel compelled
to lay it out for the new readers, from my 12/31/04 review. Sure,
much of it will prove embarrassing as the year unfolds but,
unlike the Street’s strategists who just keep changing their tune,
mine goes into the archives, to torment me until the end of time.
So I am looking for the China bubble to burst by 12/05, along
with the bubble in real estate, though on this second point I have
been saying it’s going to be more of a stagnating market than a
collapsing one because historically low mortgage rates continue
to buck it up.
I see the rate of consumer spending falling due to excessive
personal debt levels and capital spending remaining punk.
I also see earnings decelerating at a faster pace than expected…
and this market is not cheap to begin with.
I said the major equity indexes would be down 5% for the year.
The wild cards are the geopolitical hot spots, energy prices and
the dollar. On the greenback I said there will be “no dollar
crisis” in 2005. The hot spots you should know about by now,
let alone the impact of a terror attack on U.S. soil or a major
world capital. As for energy, if we stay at or above existing
levels on the price of crude (I don’t think we will), it has to limit
growth worldwide. It already has in many spots. Heck, I just
received my gas bill for January and it had to be an all-time high,
even though I have the thermostat way down the 12 hours I’m
normally not at home. I mean for crying out loud, no premium
beer for this guy. I’m pinching pennies.
Bottom line, I have my doubts on the economy, worldwide. Just
last week I questioned Japan’s recovery and sure enough the
government announced it was back in recession (though it
remains optimistic on 2005). Germany and Italy exhibited
negative growth rates in the fourth quarter. But on the plus side
the Bank of England upped its ’05 forecast to 2.7% for GDP and
China appears to be at least another few quarters from tipping
over. Australian resource giant BHP, the leading supplier to
China, said this week it remains very optimistic.
Here in the U.S. this week, housing starts in January hit a 21-year
high. Stupendous. And retail sales, ex-autos, were up a solid
0.6%.
Overall, however, consumer spending continues to rise far more
than wages and that trend not only can’t continue much longer,
in this increasingly levered economy of ours it’s outright
dangerous.
Leverage and debt are clearly on Alan Greenspan’s mind, too.
Last week I mentioned the $7 trillion+ national debt and how it
represented about 70% of the overall economy. I want to take a
moment to tighten this up.
The national debt, what you and I in effect owe as citizens, is
over $7.65 trillion while the total size of the U.S. economy is
$11.97 trillion, so the debt is 64%, not 70% of GDP. Frankly, I
was relying on memory and not factoring in the better than
expected economic growth of the past few quarters, thus that part
of the equation leads to a lower figure.
But in discussing the federal budget deficit, to be fair I should be
talking about “on-budget deficit” and “off-budget surplus;” the
latter, for now, meaning the Social Security surplus that is
promptly spent by Congress.
For example, in fiscal 2005 the on-budget deficit was actually
$589 billion and the off-budget surplus $162 billion. Ergo, 589 –
162 equals the $427 billion deficit we all hear bandied about.
But, again, the deficit was really $589 billion. Confused? The
White House sure hopes so. Optimistic about our financial
future? If you are, you’ll be in an increasing minority. Pin Alan
Greenspan down and I can virtually guarantee he’s not as
sanguine as he attempts to appear to be. Finally, aside from the
potential for a currency crisis down the road because we rely to
an increasing extent on foreigners to finance this ballooning load,
when you hear that the interest expense on the national debt will
be in the neighborhood of $315 billion by 2010, is this the best
use of our capital, our resources? Of course not. If you earn
$50,000 in income but you pay $2,000 in credit card interest, is
that the most efficient use of those dollars? Bottom line, we
could be headed towards a long era of Japan-like stagnation.
Street Bytes
–The major averages finished fractionally lower with the Dow
Jones losing just 11 points, 0.1%, to close at 10785. The S&P
500 lost 0.3% to 1201 and Nasdaq had its second straight
decline, 0.9% to 2058. The markets are closed Monday for
Presidents Day.
The big story on the week, aside from Greenspan’s testimony
and market reaction to it, was Friday’s late-breaking news that a
FDA panel of advisers favored keeping the popular Cox-2
inhibitor pain killers, Celebrex, Bextra and Vioxx on the market,
though with severe warning labels addressing the very real risks
of heart trouble. Shares in Merck and Pfizer surged with Merck
tacking on $3.75 to $32.60. Merck had taken Vioxx off the
market last fall and will most likely bring it back. Don’t expect a
lot of frilly advertising from the manufacturers, though. That’s
out of the question. As for the class-action lawsuits making their
way into the courts, these will be exceedingly difficult to win
with the FDA panel’s ruling. All in all, it appears the medical
folks did a thorough and thoughtful job. But given the lack of
time to research the decision thoroughly, I reserve the right to
revise and extend my remarks next week.
–U.S. Treasury Yields
6-mo. 2.89% 2-yr. 3.43% 10-yr. 4.27% 30-yr. 4.65%
Before we begin, let me throw out the following weekly closes
for the yield on the 10-year Treasury.
11/12…4.19…11/19…4.20…11/26…4.24…12/3…4.25
12/10…4.15…12/17…4.20…12/24…4.22…12/31…4.22
1/7…4.27…1/14…4.21…1/21…4.14…1/28…4.13
2/4…4.08…2/11…4.09…2/18…4.27
In other words, I hope you understand why I haven’t felt
compelled to comment extensively the past few months, other
than to state the obvious. These low rates have been great for
housing and it’s a big reason why the U.S. economy continues to
perform better than many expected a few quarters ago.
The question now is what does the Fed do in terms of further rate
increases? The bond market finally lost some steam the second
half of the week and it’s telling you that there are at least two
more rate hikes in the offing. The inflation numbers will supply
the final answer.
–In his congressional testimony, Fed Chairman Greenspan
warned again on the size of government-sponsored mortgage
giants Fannie Mae and Freddie Mac. The two now pose a
“substantial risk” to the economy. The chairman added:
“Given no limits on what they can put in their portfolios, they
can, by merely their initiative, create an ever larger increase in
portfolio, which, given the low levels of capital, means they have
to engage in very significant dynamic hedging to hedge interest
rate risks.” [Edmund L. Andrews / New York Times]
In other words, it’s all about Fannie and Freddie’s derivatives;
ticking time bombs.
–In a huge victory for the Bush administration, the House
approved a measure previously passed by the Senate that would
transfer most large, multi-state class action lawsuits to federal
court; thus helping prevent lawyers from targeting friendly state
courts as they have in the past. The act, signed by the president
on Friday, should cut back significantly on frivolous claims.
This is a great start on the tort reform front, though I can’t help
but add, ‘It’s about time!’
Of course many Democrats aren’t too fired up by the action as
they receive a large portion of their campaign dollars from trial
lawyers.
[For the record, if fewer than one-third of the plaintiffs are from
the same state as the primary defendant, the case would be
handled in the federal system.]
–Energy: It’s estimated the oil industry needs to spend $3 trillion
by 2030 on exploration and development to meet future demand,
or $105 billion a year. Non-conventional sources such as
Canada’s tar sands will be a big beneficiary though the oil
companies probably need prices consistently above $30 (which it
certainly appears they will be) before sinking a ton of money into
these kinds of projects that, today, remain far costlier than
deepwater drilling, for example.
Meanwhile, in the shorter-term, Saudi Arabia said it would
address the capacity issue by doubling the # of rigs operating in
the country, with a goal of lifting output to 12.5 million barrels
per day from its current 10-11 figure. The announcement was
greeted with skepticism by some who believe Saudi Arabia is
already largely tapped out in terms of what it can squeeze out.
–Russian energy giant Gazprom is looking to cut some deals on
the liquefied natural gas front with American companies. This is
good, assuming political relations between the two countries are
passable.
–Exxon Mobil surpassed G.E. on Friday as the largest stock in
terms of market value, $383 billion to $379 billion.
–The Euro-12 nations saw growth of just 0.2% in the fourth
quarter of 2004.
–Consumer spending in China was up a whopping 16% from last
year’s pace for the Lunar New Year.
–According to Jim Hopkins of USA Today, Google employees
gave $207,000 to federal candidates in 2004, 98% of which went
to Democrats. [Microsoft workers, by contrast, sent 60% of their
contributions to Dems.] What the Google data shows is that with
all the newfound wealth on its campus, the Democratic Party has
a significant future source of donations that one would expect
will increase exponentially.
–Mexico’s economy grew at a 4.4% clip in 2004, same as the
U.S.
–Verizon will acquire MCI for $6.7 billion, thus beating out
Qwest, though the latter is still submitting a sweetened offer.
This marks the 3rd monster telecom deal in the past six months,
the others being SBC / AT&T and Sprint / Nextel. Verizon said
7,000 jobs would be cut from the combined workforce of
250,000. I would venture to guess it will be more like 25,000
over the next three years. [Yes, I’m assuming the Qwest
proposal is turned down.]
–Nice going, AIG. Last Friday it announced on a conference
call with analysts that an internal probe looking into
improprieties beyond the insurance bid-rigging scandal found
nothing. Then we learn later the company was served with
subpoenas from the SEC and New York Attorney General’s
office the same day because of an ongoing investigation into
insurance products AIG created for others with the sole purpose
of manipulating earnings.
–Moody’s placed General Motors on “negative” outlook because
of costs associated with GM’s ending of its alliance with Fiat,
about $2 billion. GM’s healthcare costs, like that of all of
Corporate America, are skyrocketing; in 2004 some $5.2 billion
or, get this, $1,525 per vehicle.
However, when one looks at GM’s balance sheet you can’t
ignore its cash hoard of $23 billion. It’s just that this could be
whittled down quickly in a recession, thus Moody’s concern.
–Office Max’s accounting scandal continued to claim more
victims; this time it was the CEO himself. The CFO had
previously been canned, along with others, following claims
Office Max falsified vendor documents and rebates.
–A few weeks ago I reported on the proposed merger between
Federated Department Stores and May, assuming it would go
through. Talks then broke off (I was remiss in not reporting this
at the time), but now they are evidently back on.
–Mutual fund giant American Funds has been charged by the
NASD with offering illegal kickbacks to a slew of brokerage
firms; $100 million worth in directed commissions over a
number of years in exchange for promoting its products.
This has always been American’s modus operandi since I got
into the fund business eons ago and for its part they claim
everything was properly disclosed. One thing you can’t argue
about is the fact any long-term investor has generally been well-
served in these investments.
–The Wall Street Journal reports that the CEOs of Merrill
Lynch, Goldman Sachs, Morgan Stanley and Lehman Brothers
saw their compensation for 2004 increase 33% on average
(a range of $22mm to $33mm for each), far in excess of the
return on the company stock.
–The fiasco involving information broker ChoicePoint Inc. is
unbelievable. In case you didn’t know, and hopefully you
haven’t received a letter, scammers opened up 50 bogus accounts
with ChoicePoint, allowing them to then access data, including
Social Security #s, on up to 500,000 individuals. As of this
writing, at least 700 have had their identity stolen. [The
information ChoicePoint collects is used for pre-employment
background checks and public records searches.]
–Inflation Watch: This one comes from John K. Tuition at
Lehigh University is going up another 7% for the 2005-2006
academic year. Poor John has two daughters there right now,
gulp, at $40,000+ each.
–Kentucky Fried Chicken continues to be the target of protests
by both PETA and some African-American groups over the
company’s treatment of its birds that are supposedly “often fully
conscious when their throats are cut.” [Chicken Jack: “Gee, I
wonder whose home I’m going to…doh!”] McDonald’s, fearful
of a consumer attack on it, agreed to increase the living space for
its chickens. Haven’t heard if this includes flat panel screens and
free cable.
–The NFL now has its first African-American owner. The
Minnesota Vikings are being sold by Red McCombs for about
$600 million to Reggie Fowler. McCombs purchased the
Vikings in 1998 for $246 million, a nice investment.
As for Fowler, he played briefly in both the USFL and NFL in
the early 1980s before founding Spiral Inc., a company that
sells food containers to buyers like supermarkets. You’ve gotta
love it, a classic American success story.
–This week marked the start of the Kyoto Treaty for those
nations that are signatories, so to mark the occasion a number of
Greenpeace protesters decided to pay the International Petroleum
Exchange in London a visit. I appreciate those of you who
passed the Times of London account on to me.
As it turns out, the Greenpeace folks “bit off more than we could
chew,” in the words of one. “They were just Cockney barrow
boy spivs. Total thugs. I’ve never seen anyone less amenable to
listening to our point of view.”
Basically, they had the crap beat out of them. But before you
feel sympathy for the Greenpeace victims, and before you write
me, understand the following as reported by Laura Peek and Liz
Chong.
“When a trader left the building shortly before 2pm, using a
security swipe card, a protester dropped some coins on the floor
and, as he bent down to pick them up, put his boot in the door to
keep it open.
“Two minutes later, three Greenpeace vans pulled up and another
30 protesters leapt out and were let in by the others.
“They made their way to the trading floor, blowing whistles and
sounding fog horns, encountering little resistance from security
guards. Rape alarms were tied to helium balloons to float to the
ceiling and create noise out of reach. [Ed. that’s clever!] By
making so much noise, the protesters hoped to paralyze trading.”
The traders then entered the fray. Now discuss amongst
yourselves.
–My portfolio: I purchased a little more of my carbon fiber play.
Speaking of greenies, this is really my “Clear Skies” investment.
A large application of carbon fiber is for windmills. And for
those of you following along at home, and knowing I can’t
identify individual positions for legal and ethical reasons, of the
five stocks I sold off over the past three months, three are down
from where I exited, one is about flat, and the other is way up
(the Aussie resources play). And yes, I’m still kicking myself for
not having more in the energy sector as these stocks continue to
rocket higher.
Foreign Affairs
Israel: Palestinian President Mahmoud Abbas declared that the
war is effectively over and, for now, he believes Hamas and
Islamic Jihad will respect the truce. For his part Israeli Prime
Minister Sharon reiterated he would crack down on his own
extremists. And if you thought my assassination talk of last
week was a bit over the top, NBC News had the same type of
story on Tuesday.
China: The FBI estimates that 3,000 companies in the United
States are collecting information for China, particularly in
Silicon Valley, with emphasis on acquiring military technology.
[Time magazine] Meanwhile, CIA Director Porter Goss is
increasingly concerned over China’s growing military and the
threats posed to both its neighbors and U.S. interests; Taiwan
obviously being the first and foremost potential target.
[While the China threat to the entire region should have already
been apparent to any educated person on the planet, the fact Goss
spoke of it so publicly is significant.]
And on the topic of Taiwan, over the weekend the U.S. and
Japan are going to formalize a joint agreement that makes
Taiwan a mutual security concern; another move by Japan to
counter China’s influence. [Remember my long sought supra-
alliance between the U.S., Britain, Australia, Japan and India? It
doesn’t look so far-fetched anymore, does it?]
But wait, there’s more. A bipartisan resolution was introduced in
the House this week demanding the resumption of diplomatic ties
between Washington and Taipei, cut off back in 1979 as the U.S.
opted to recognize the mainland instead.
Representative Tom Tancredo (CO) said “Our current ‘One
China’ policy is a fiction. Taiwan is a free, sovereign and
independent country that elects its own leaders. It is not, nor has
it ever been a local government of communist China – and
everyone knows that.”
Tancredo added it is time “to scrap this intellectually dishonest
and antiquated policy in favor of a little consistency and
honesty.”
“There is absolutely no good reason that the United States cannot
maintain the same kind of normal relationship with the
democratically elected government on Taiwan that it maintains
with the autocratic regime in Beijing.” [South China Morning
Post]
This resolution won’t get far but you can imagine how upset the
White House is, let alone Beijing. Good. I toast Congressman
Tancredo and the co-sponsors.
On the mainland this week, over 210 perished in the worst
mining disaster since 1949. Over 6,000 were killed in accidents
here in all of 2004.
Finally, the Communists arrested 5 Tibetan monks for writing
“political poems” in their newsletter.
Russia: 257,000 protesters in 70 cities took to the streets last
Saturday but this included 40,000 in Moscow marching in
support of President Putin. The rest were aligned against Putin’s
economic reforms and the benefits cuts.
As for those supporting the president, talk about a farce. Most
were bused in from the suburbs, strongly encouraged to
participate if you catch my drift, and many told reporters this was
the last thing they wanted to do on a Saturday. Of course only
this march received play on state television. None of the true
protest rallies were covered. But as I noted last week, watch
February 23, the day the Communists are trying to organize a
massive demonstration in support of the military but against
Putin.
Egypt: Two weeks ago, Egyptian President Hosni Mubarak was
in all his glory as he hosted the Sharm el-Sheikh summit between
Abbas and Sharon. But Mubarak is running unopposed for a
sixth term this fall and his son Gamal is the hand-picked
successor for when Mubarak finally exits stage left. So I can’t
help but note the following comment by Jackson Diehl in the
Washington Post.
“Bush, who in his State of the Union speech called on Egypt to
‘show the way’ toward democracy in the Middle East, will look
feckless and foolish if a regime so deeply dependent on U.S.
military and economic aid (up to $2 billion a year) stages another
fraudulent election while jailing the very politicians who support
his vision. But Mubarak is betting that this U.S. president, like
those who preceded him, won’t seriously confront him or
threaten his economic lifeline at a sensitive moment in the ‘peace
process.’”
Philippines: Al Qaeda surrogate Abu Sayef exploded three
bombs across the country on Monday, killing at least 7 while
announcing the attacks were a “Valentine’s gift” to President
Gloria Arroyo. Lovely.
Ukraine: In an interesting move bound to rile up the Kremlin
even further, President Viktor Yushchenko picked Russian
opposition figure and former Kremlin advisor Boris Nemtsov to
be an unpaid member of his staff with the mission of being a go-
between between Kiev and Moscow as well as to attract
investment. [This is more than I imagine 99% of you wanted to
know, but the reason Nemtsov is unpaid is because under
Ukraine’s constitution, a foreign national can’t be.]
Northern Ireland: The gig is up for Sinn Fein. As a series of
raids is conducted across the Irish Republic and Northern
Ireland, its fingerprints are all over the IRA’s December bank
robbery in Belfast. $4 million in cash was recovered at the home
of a prominent Cork businessman this week, and once the ties are
made, the world will know that Sinn Fein has been nothing more
than a front for criminal and terrorist activity.
Venezuela: The good news is the government of Hugo Chavez
resolved a dispute with ConocoPhillips. The bad news is it’s still
purchasing 100,000 Kalashnikovs, along with some military
helicopters, from Russia.
Paraguay: I can’t believe it was just two months ago I was down
here. It seems like a year in some respects. But there was an
interesting article in Thursday’s New York Times concerning
author Lily Tuck. Ms. Tuck won a 2004 National Book Award
for “The News From Paraguay” and I read it on my trip. It’s
basically about the horrific war Paraguay fought in the 1860s
against Brazil, Argentina and Uruguay that resulted in the deaths
of 90% of Paraguay’s adult males.
Well, it turns out Lily Tuck had never been to Paraguay before
she wrote the book and only in the last few weeks completed her
first trip there as the government feted her. Oh, but many in the
nation were not happy to see her. You see, “The News From
Paraguay” had a lot of plain old hard porn in it and I’m glad I
wasn’t the only one who felt that way. And even though the
dictator from that era, Francisco Solano Lopez, took the country
under and is portrayed as an idiot (it’s a little more complex than
that), many in Paraguay still worship the guy; granted, hard for
an outsider to understand.
But the Times report, as our own Dr. Bortrum pointed out to me,
said nothing about the crime wave I touched on while there.
Sadly, the topic is front and center again this week with the
discovery of the body of the 32-year-old daughter of a former
president, Raul Cubas. Cubas had paid $800,000 in ransom a
number of months ago and she was still killed (with signs of
torture). This is just the latest in a series of high-profile
kidnappings / killings of children of big politicos and
businessmen here.
What’s even more troubling in this particular case are the ties the
killers may have to FARC, the leftist militants fighting the
Colombian government for over 40 years. This is a first and an
incredibly dangerous development.
And who has been providing haven for FARC? Venezuela’s
Hugo Chavez. It’s easy to connect the dots, now let’s see if
Washington and its allies in the region do anything about it. One
thing is for sure, Colombia’s President Alvaro Uribe deserves
our unstinting support.
Random Musings
–Ambassador John Negroponte was named the first National
Director of Intelligence. Good luck, sir.
–According to the NBC News / Wall Street Journal survey,
President Bush’s overall job approval rating is still only 50%,
despite all the favorable press he’s received from the vote in Iraq
and being front and center at both his Inauguration and the State
of the Union. In other words, what bounce? His approval rating
was 49% last October, for example. [The highest of his
presidency is 88%, Nov. 2001, while the low is 45%, June 2004.]
–A Senate subcommittee now estimates that the head of the UN
oil-for-food program, Benon Sevan, not only blocked a UN audit
in 2001 but he may have siphoned off up to $1.2 million for his
own use, far more than originally estimated. Investigators are
still combing through Secretary General Kofi Annan’s
documents and e-mails to ascertain what he knew about son
Kojo’s involvement.
–Last Sunday was the 60th anniversary of the firebombing of
Dresden and to mark what was supposed to be a solemn occasion
and day of remembrance, 4,000 neo-Nazis assembled, the largest
such show of strength since World War II.
–Democratic gubernatorial candidate Eliot Spitzer’s approval
rating in New York is 59% vs. 43% for Governor George Pataki
who is contemplating a run for a fourth term in 2006. Pataki
would get creamed.
–The NHL became the first professional sports league to shut
down for an entire season. Blame global warming for melting
the ice…….but what’s this? There is another meeting today?
Does anyone really care?
–The “Today” show had a few segments on cleanliness this
week. Guess what? Wash your hands! At StocksandNews you
must do so at least ten times a day…it’s part of the employee
handbook, err, manual.
–The American Council on Education says twice as many black
women as black men now attend college.
–The gang violence exploding in our inner cities claimed another
high profile victim the other day. Fernando Correa was the star
of his Bronx high school football team but he refused to join the
Bloods. 16-year-old Quindel Francis, either a Blood or a Blood
wannabe, gunned Correa down to impress his buddies. This stuff
is sickening.
–In the latest development on the Jon Corzine for governor front,
the senator proposed “ethics reform,” saying the “state’s
reputation was at stake.” This from a man who outspent his
opponent in 2000 by $63.5 million to $6 million and who has
been plying every county and church leader with gobs of cash to
ensure their support this fall. Said New Jersey Republican
chairman Tom Wilson:
“Jon Corzine talking about reducing the influence of money in
politics is like Vito Corleone talking about reducing the influence
of the mob.” [Star-Ledger]
–A new virulent strain of the AIDS virus has been found in New
York City, one resistant to 19 of 20 drugs on the market,
combinations of which make up the successful drug cocktail. So
the region has to be concerned about a new epidemic, especially
since the man found to have had the new strain had “unprotected
sex with hundreds” of men. Unbelievable.
–China has a big problem…a surging demand for toilet paper.
Wang Yuepin, vice-director of Shanghai Paper Trade
Association, said “I’m happy to see many young people adopt
paper tissues for the convenience.” [South China Morning Post]
Well, you know what I have to say to this. When traveling in
China as a tourist, wash your hands more than ten times a day.
–Finally, this week marks the 6th anniversary of StocksandNews.
Who wudda thunk it? I certainly didn’t expect to go this long.
When I left my cushy job at PIMCO Funds, and a ton of money
on the table, I thought this site would be a three year project.
Wrong. Within weeks I had created a monster and for six years,
seven days a week, I have striven to create the single best
archive in the world on the events of a must tumultuous period.
Thus far, mission accomplished.
So what will I do now? Beats the heck out of me. All I know is
I have thoroughly enjoyed the experience, though not always the
Fridays, and of course I’ve had the opportunity to travel the
world far more extensively than I ever thought I’d do. I’m
probably going to cut back on the international aspect this year,
by the way, but that is more a function of a new, golf-related
venture I’m going to be part of…and it’s not with Carlos Franco.
More late spring.
I was calculating how much I’ve written over the years, not just
for “Week in Review” but the other columns I’m responsible for
and, conservatively, it’s over 10,500 pages. Goodness gracious.
You want to know what my main fear is? That I forget how to
type. Seriously, I actually had my first nightmare to this effect
the other night.
I thought I’d take a moment to not only thank a few people but
also answer some questions you undoubtedly have.
Like why do I place the Nasdaq at the bottom of my tables down
below? Well, it’s because I thought it would stand out better and
I’ve been doing it that way for over 7 ½ years, including my stint
at PIMCO writing this piece, so why start now?
Why do I put “For the week 2/14-2/18” when a week is seven
days? Again, it started out that way and now I can’t change it.
You understand, don’t you?
How much time do I put into this column? A ton. After I go to
‘post’ on Saturday morning I take a brief break and literally
begin working on the next one. Sunday is a key day for me, not
just because of all the newspapers but I can’t miss some of the
talk shows, particularly “Meet the Press.” Nor “The Simpsons.”
I keep threatening to cut back some and I will need to with the
other links. Believe it or not, while I did extensive advertising
my first few years, including a radio blitz in the New York
market, I have done little since. I’ll be hitting the road shortly to
remedy this matter.
I would like to apologize to those I may have offended over the
years. This column is a one-man production…there is no
associate editor proofing my work. Invariably, about once a
quarter it seems, I cross the line. I lose readers each time I do
and I know immediately, within hours, I went too far.
Wrapping up, I want to thank Dr. Bortrum (aka my father…I
acknowledge this but once a year) for his terrific contributions
and my brother Harry for his brilliant cartooning, as well as the
support staff at Web Epoch.
I also have to thank a now defunct magazine, Online Investor, for
helping put me on the map when it named this site one of the top
picks for 1998-2000. It was quite an honor. And I want to thank
my friends at BuyandHold.com, with whom I now have a five-
year plus relationship. Many of you found me through this
Oppenheimer / Fahnestock-based operation. They’re good
people.
Finally, a little advice to those in college or just starting out in
the workplace who may entertain thoughts of a career on Wall
Street. Read, read, and read some more. Read as many good
newspapers as you can, read the op-ed pages, and read history.
During my career, particularly when I had to give a public
seminar, it was amazing how many little nuggets of information
you can cram into your brain and how you never know when
they may come in handy.
Thanks for sharing the ride with me, friends. If nothing else, I’ve
given you plenty to talk about at the dinner table. And that’s not
such a bad thing. God bless you all.
—
God bless the men and women of our armed forces. It was 60
years ago this day that the United States launched the battle for
Iwo Jima. Over 2,000 Marines were killed or wounded in just
the first 18 hours.
God bless America.
—
Gold closed at $428
Oil, $48.35
Returns for the week 2/14-2/18
Dow Jones -0.1% [10785]
S&P 500 -0.3% [1201]
S&P MidCap -0.2%
Russell 2000 -0.7%
Nasdaq -0.9% [2058]
Returns for the period 1/1/05-2/18/05
Dow Jones +0.02% [2 pts. above 12/31/04 close]
S&P 500 -0.9%
S&P MidCap -0.3%
Russell 2000 -3.3%
Nasdaq -5.4%
Bulls 56.6
Bears 21.2 [Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
Brian Trumbore
