[Posted 7:00 AM ET]
Wall Street
The Federal Reserve raised the funds rate another 25 basis points
to 2.75%, the 7th such increase since last June, but it rocked the
stock and bond markets in changing the language that
accompanies each decision on interest rates. While the Fed
continued to say “policy accommodation can be removed at a
pace that is likely to be measured,” it also had hawkish words on
the outlook for inflation.
“Though longer-term inflation expectations remain well
contained, pressures on inflation have picked up in recent months
and pricing power is more evident. The rise in energy prices,
however, has not notably fed through to consumer prices.”
Uh oh, thought the bond market as it promptly sold off, taking
the key 10-year Treasury to 4.65% before settling down at 4.59%
on the holiday-shortened week.
The Fed had the advantage of seeing the inflation data on
producer and consumer prices beforehand and it showed core
producer prices, ex-food and energy, up 0.1% in February with
the core CPI up a more worrisome 0.3%. Stripping out a few
other components and the data was even worse.
But despite the Fed’s warning, inflation is not a concern. At
least that’s my opinion. Sure, we could be in the midst of a final
spike in both prices and bond yields, but that brings us closer to
the day the global economy flips because we are so levered up,
including the federal government and all manner of other
categories that even a small change in rates can have a major
influence on, first, consumer spending, then housing, and finally
capital spending.
On the consumer front it doesn’t help that energy prices remain
stubbornly high and gasoline at the wholesale level reached an
all-time mark with higher prices at the pump ahead. [The BP
refinery blast that killed 15 in Texas City, TX, compounded
matters.]
As for real estate, yes, February housing starts amazed us all
once again, the strongest rise since 2000, but part of the surge
was undoubtedly purchasers trying to get ahead of rising
mortgage rates, now 6.20% on a 30-year fixed. And there can be
little doubt that speculation is getting way out of hand in some
parts of the country as an increasing number of articles are
pointing out, let alone the affordability issue as the ratio of
median home prices to per capita income nears a 30-year peak
across much of the land.
Meanwhile, Europe continues to do us no favors as the continent
still acts like one sick puppy, with consumer spending in France
falling 1% in February, business confidence in Germany taking a
surprising tumble and Italy reporting a negative figure for GDP
in the fourth quarter.
But if you’re looking for that ray of sunshine, the dollar staged a
nice rally, in part due to rising rates in the U.S. but also because
some Asian central banks said that while diversifying out of the
greenback is a prudent move, a headlong rush into the euro isn’t
necessarily the answer.
As for the U.S. equity market, from a technical standpoint it’s
amazing how quickly things have deteriorated after looking so
chipper just three weeks earlier. And it doesn’t help that a key
component, AIG, is under considerable scrutiny for its
accounting practices. Let me repeat what I wrote just one week
ago, 3/19.
“Oh, but all manner of Wall Street apologists rushed to defend
(Chairman Hank) Greenberg and his company. He is a captain
of industry, after all, a la Sandy Weill. Yet look where the stock
ended up on the week. [$59.75….off its 52-week high of $77.
(It then plunged another $4 this past week)] You know why?
Because a few smart folks are catching on to the fact this story
has legs. There could be a major restatement of AIG’s earnings
down the road, I imagine. I wonder what they’ll say of Hank
Greenberg then?”
Not bad, considering some of what was then written on Friday,
March 25. From the Wall Street Journal:
“Insurance giant American International Group Inc., under
regulatory scrutiny, is considering a move to clean up suspected
accounting mistakes that may total as much as $3 billion from as
many as 30 insurance transactions, according to people familiar
with the matter.
“The potentially problematic accounting now being examined is
far broader than was believed just a week ago…” [Not to me,
sports fans.]
From the New York Times:
“The American International Group used a much larger number
of questionable transactions than has previously been disclosed
…a discovery that is expected to lead to a significant restatement
…
“Yesterday, directors were told that a review of deals conducted
by AIG and its outside auditors uncovered at least a dozen
transactions with reinsurance companies that were used to dress
up the company’s financial position.”
Now it’s important to note that any restatements might actually
involve adjusting income upward, not just down for various
periods, which makes sense because the questionable
transactions were clearly intended to “smooth” earnings in order
to meet the Street’s expectations.
The bottom line, though, is this will prove to be fraud, pure and
simple. This week, AIG fired two top executives for failure to
cooperate in the investigation and should Chairman Greenberg
(he was forced to give up his CEO title two weeks ago) invoke
his Fifth Amendment right against self-incrimination over the
coming days, he’ll be booted by the board faster than you can say
Bernard Kerik for Director of Homeland Security. [As I go to
post, there is word he could be out by Monday.]
Oh yeah, this baby does have legs and it’s not good for the rest of
the Street. But to those who still defend the company and its
long-time leader I say but one word, “paper.” That’s all this
company is about….paper. They aren’t making widgets you can
count, after all. It’s paper…and when you throw a bunch of
crooked folks in a room with incentives to play with the books
(more paper) because of stock options and other incentives, it’s
no mystery to me this stuff happens. As The New York Times’
Gretchen Morgenson pointed out last Sunday, the quality of
earnings in corporate America is as bad as it ever was. We take
so much of what we’re fed as gospel it’s pitiful. But the average
schlep has but little choice than to accept it.
It’s a sad commentary, I grant you, but despite all this the United
States is still probably the best game in town, which isn’t saying
a heck of a lot about investing in the rest of the world, is it?
Street Bytes
–Stocks suffered their third straight weekly decline as the Dow
Jones has now lost 500 points since hitting a multi-year high of
10940 on March 4. This past week the Dow was off 1.8% to
close at 10442, while the S&P 500 lost 1.5% to 1171 and Nasdaq
fell 0.8% to finish at 1991.
There is no doubt that, aside from questions on the fundamentals
and rising interest rates, hedge funds are roiling both the stock
and bond markets. The fast money is flying around, seeking new
opportunities, and as yet it hasn’t found them…unless on the
‘short’ side. While hedge fund activity and ‘program trading’ are
not necessarily one and the same, they both are symptomatic of a
casino and that’s what Wall Street is…perhaps 50% based on
fundamentals, the other 50% solely on the whims of traders
whose last interest is long-term investing. If they’re successful,
well good for them; but should one or two top players have
difficulties as their portfolios are blowing up, then it can impact
the rest of us in a nanosecond.
On the company specific front, General Electric issued a positive
update on its first quarter earnings outlook but it kept its overall
guidance for the year, meaning the stock is still trading at about
20 times ’05 earnings…not exactly cheap by any standard.
–U.S. Treasury Yields
6-mo. 3.14% 2-yr. 3.85% 10-yr. 4.59% 30-yr. 4.84%
After a one week respite, interest rates rose again on the
aforementioned inflation worries following the Fed’s action.
Next Friday’s employment report has the potential to rock both
stocks and bonds anew, particularly if it’s stronger than expected.
–Matthew Lynn of Bloomberg News had a story on the
growing links between hedge funds and the investment banks
and the increasing need for the funds to perform because of the
impact on the banks’ bottom line.
Lynn points out the conflicts of interests on the fee front.
“When hedge funds submit to those kinds of fees, how many
bankers will ask tough questions? Will they pause to examine
loans? Will they create a fuss if a fund is trading too
aggressively, or using derivatives to take highly leveraged
positions?
“Not likely. It takes guts to be rude to a client generating
millions a year in fees.
“Then think about the closeness of some of the relationships that
are being created.
“ ‘It has become a very incestuous relationship between the
banks and hedge funds,’ said Tim Price, senior investment
strategist at London-based Ansbacher & Co…. ‘They are selling
hedge funds, managing hedge funds, lending to them, and
competing with them through their own trading desks. In effect,
Wall Street has found a way of trading with itself.’”
–The latest USA Today / CNN / Gallup survey reveals that 59%
of Americans think the economy is getting worse.
–Professor Jeremy Siegel noted the following as part of an op-ed
for the Wall Street Journal on trends in emerging markets.
“What we see happening in China and India is no blip on the
screen. By 2050 China is projected to have about 1.5 billion
people, nearly four times the 400 million inhabitants projected
in the U.S. If China were to achieve half the per capita income
of the U.S. by the middle of this century (putting it on the same
relative footing as Portugal and South Korea today), the Chinese
economy would be almost twice the size of the U.S. economy.
“Is this possible? Most certainly. Over the last 40 years, Japan
went from 20% of the U.S. per capita income to 96%, Hong
Kong from 16% to 70%, and South Korea from 11% to nearly
50%. China could reach 50% of the U.S. per capita income level
by 2050 with a productivity growth rate of 3% a year above the
U.S. Over the past 25 years, China has done much better than
this, achieving a per capita growth rate almost six percentage
points above the U.S. India can attain 50% of the U.S. per capita
income by the middle of this century by growing 4% per year
faster than the U.S., a rate I believe is well within its reach.”
–France finally relaxed the 35-hour work week that has been in
effect since 1998. Now workers will be allowed to work up to
48 hours, the maximum allowed by the European Union. This is
still laughable but at least Prime Minister Jean-Pierre Raffarin
said there was a need to restore the work ethic.
–Residential real estate prices in Tokyo and other metropolitan
areas in Japan rose for the first time in 17 years, when the bubble
burst in the late 1980s. Prices dropped in many locations an
astounding 80%. If they went down 20% in the U.S. (don’t
worry…not likely) we’d be talking depression.
[But Japan’s CPI fell 0.4% in February, meaning deflation is still
an issue here.]
–Talks between the United States and the E.U. broke down over
the issue of government subsidies for Airbus vs. Boeing’s tax
breaks (in essence the same thing). If not handled properly, this
dispute could yet escalate into something far bigger.
–The E.U. is formally allowing more flexibility in its long-stated
3% of GDP deficit target which is being done to appease
Germany and France, in particular, who have broken the limit
three straight years and without penalty as they should have been
under the rules. As I noted the other week this ticks off nations
like the Netherlands that have played by the rules while for their
part France and Germany argue they need to increase spending
(and thus the deficit) in order to combat punk economic growth.
–General Motors is finally beginning to address its myriad of
problems by slashing its white-collar workforce. But what it
really needs to do, aside from selling more cars and trucks, is to
start charging retirees for healthcare benefits. Right now,
though, the chances of the unions giving in on the issue are
virtually nil. The chances G.M. will survive in its current form
are also nil.
–The SEC fined Time Warner $300 million, the second-highest
ever next to WorldCom’s $750 million levy, for fraudulent
accounting practices on various acquisitions; this on top of
earlier announced penalties involving AOL.
–Ask Jeeves, the 4th-largest search engine, was acquired by
Barry Diller’s IAC / Interactive for $2 billion.
–Automaker, entrepreneur and drug dealer John DeLorean died
at a hospital just one mile from our headquarters here in New
Jersey. DeLorean will forever be known as the inventor of the
gull-winged car that he built at a plant in Northern Ireland before
going bust, having sold only 9,000 of the vehicles. A British
investigation into DeLorean’s activities, including the drug
angle, forced it to close his operations.
–All kinds of legal settlements on the mutual funds front as
Citigroup, American Express and J.P. Morgan Chase were
slapped around by the NASD for improper sales of ‘B’ and ‘C’
class shares. [Particularly at higher dollar levels, ‘A,’ front-end
load shares are far more appropriate.] Citigroup was also fined
for not properly disclosing its “shelf-space” arrangements with
various fund groups that resulted in conflicts of interest.
Separately, Putnam was fined $40 million by the SEC for similar
shelf-space issues in not properly disclosing its deals. In their
case, Putnam was paying the brokerage firms out of trading
commissions, a big-time no-no.
But leviathan American Funds has decided to fight the State of
California and Attorney General Bill Lockyer’s efforts to exact
tribute for American’s own shelf-space games, with American
arguing Lockyer has no jurisdiction in such matters; only the
SEC does.
–Back to Citigroup, it caught a break this week when German
regulators dropped a criminal probe of Citi’s bond-trading
activities, saying it couldn’t prove “market manipulation.” The
investment bank is still being investigated by other European
agencies.
–Britain has a new consumer price index benchmark which is
comprised of 650 goods in its inflation “shopping basket.” One
of the new items is hamsters. Yes, since many Brits live in flats
too small for a dog or cat, hamsters are the pet of choice. But did
I ever tell you of the time when as a kid my older brother asked
me to care for his hamster while he was away for a weekend and
I forgot? It didn’t end well for Mr. Hamustro, as it’s known in
Slovakia.
–China has a growing water shortage that could spell disaster for
the economy. [The lack of water was also a major issue in the
downfall of said hamster, in case you didn’t figure it out yet.]
–My portfolio: No moves. Still roughly 85% cash, which hasn’t
been a bad deal recently. And when I say cash, I mean cash…no
bonds.
–My brother and I are still best friends, incidentally.
Foreign Affairs
Iraq: It isn’t always in the headlines these days, a good thing.
But another week has passed without formation of a government,
this despite the pleadings of the country’s most influential
presence, Ayatollah Sistani. The Shias and Kurds can’t seem to
reach agreement on what the Kurds get to keep, including
disputed Kirkuk and its oil riches.
Marking the two-year anniversary of the start of the war,
Secretary of Defense Rumsfeld hit the airwaves and when asked
what went wrong he blamed the Turks for not letting coalition
forces approach Baghdad from the north which then helped fuel
the insurgency. Rumsfeld forgot that U.S. diplomacy failed in
the lead-up to the war as this was when some administration
members were at their height of arrogance.
I don’t defend what Turkey did in not allowing the troops access
at the time but I do understand their concerns over a pseudo-
independent Kurdistan on its border, fearing the drive for
independence will spread to its own Kurdish bloc. And as
Defense News reports, it is a bit disconcerting that over the past
few months Turkey and Russia have mapped out a new level of
cooperation on the defense front as both share concerns over
U.S. influence in the region; Russia feeling cornered by the
continuing breakup of its old empire with the democracy
movement in Georgia and Ukraine.
Syria / Lebanon: A U.N. investigation has concluded Syrian
President Bashar Assad threatened former Lebanese Prime
Minister Rafik Hariri “with physical harm” but fell short of
pinning Hariri’s assassination on him.
What the report does is offer details of Hariri’s final meeting in
Damascus as he was pleading with Assad not to unilaterally
extend the term of President Emil Lahoud. Assad is supposed to
have said to Hariri that Lahoud should be viewed as his personal
representative in Lebanon and “opposing him is tantamount to
opposing Assad himself,” adding he “would rather break
Lebanon over the heads of Hariri and (Druze leader Walid)
Jumblatt than see his word in Lebanon broken.” [Financial
Times]
China: Last week I touched on the ongoing issue of corruption
and how the population is increasingly restive over the trampling
of their legal rights. According to David Barboza of The New
York Times, 25 have been sentenced to death in the last four
years with hundreds more serving prison terms. And despite
China’s economic boom there is a lack of confidence on the part
of investors, witness the sliding equity markets here. The
banking sector, loaded with bad loans, is a major hindrance in
this regard.
But then there is Taiwan and as I go to post up to one million are
expected to demonstrate in Taipei against China’s recently
enacted anti-secession law that spells out conditions for an attack
by the mainland. As I’ll illuminate further below, China’s policy
is backfiring big time.
As for North Korea, China is urging it to return to the six-party
talks, but Pyongyang is now saying it wants Japan out because its
presence “makes things worse” as a leading state-sponsored
news organ put it.
Israel: The “road-map” for peace, which Washington and others
still insist should be the guide for negotiations between Israel and
the Palestinians, explicitly says Israel should halt construction on
all settlements. But nothing ticks off some of us more than to see
Israel continually snub its nose at both the Palestinians and the
Bush administration by going ahead and expanding the
settlements anyway.
As it pulls out of one place on the West Bank, Israeli Prime
Minister Sharon adds to another. This week the government said
it was expanding the largest settlement east of Jerusalem by
some 3,500 homes, with others in the surrounding area also
slated for new construction. A leading Palestinian negotiator
said, “This sabotages all efforts seeking to get the peace process
back on track.”
Two U.S. envoys and Secretary of State Rice objected to the
latest announcement but as is the case in all of these matters
nothing will happen. I’ve said it before and it bears repeating at
times like this. President Bush should threaten to cut off aid to
Israel unless the Sharon government complies with our wishes.
European Union: As previously noted, France holds its
referendum on the E.U. constitution May 29 but the latest
opinion poll suddenly has a majority rejecting it, thanks in large
part to rising unemployment and the militancy of the trade
unions. Unless the pro-constitution forces rally, the treaty is
dead, finis. And this isn’t the only issue roiling the E.U. these
days. British Prime Minister Tony Blair and French President
Jacques Chirac got into a real pissing contest over an E.U. rebate
for Britain negotiated by Margaret Thatcher two decades ago.
But the biggest item on the docket recently is the arms
embargo with China. Secretary of State Rice best summed up
the U.S. attitude in emphasizing why the Bush administration
doesn’t want it lifted. “It’s the United States, not Europe, that is
defending the Pacific.” Right on, Madame Secretary.
Where China itself may have blown it is in taking its hard line
against Taiwan which has given many European leaders pause,
as in ‘Maybe the U.S. is right. Why should we sell arms to
China when it threatens democratic Taiwan?’ The Green Party,
an unintentional bedfellow of the U.S. on this matter and a thorn
in the side for German Chancellor Gerhard Schroeder, offers that
China still has not sufficiently improved its human rights record.
In the end, though, debate over the embargo hurts the E.U.’s
image since it can’t come up with a unified foreign policy, a
raison d’etre behind the whole idea of a new constitution and
governing arrangement in the first place.
Russia: Human Rights Watch slammed the European Union for
not acting against Russia on Chechnya, saying “enforced
disappearances (have) reached the level of a crime against
humanity.”
But on the business front, what a strange 24 hours it proved to be
between Wednesday and Thursday. First, the Interior Minister
issued a statement that 500 large enterprises are under the control
of organized crime; specifically, 116 criminal organizations with
some 4,000 members. To which reformers said, well, if you
know this much why don’t you do something about it?
Then the next day President Vladimir Putin met with the
oligarchs and held out an olive branch, pledging to back off on a
review of all privatizations and distribution of property in the
Yeltsin era. While this is a positive for business and stocks
rallied with the suddenly fading fears of renationalization, Putin
didn’t exactly grant full amnesty and it would behoove
Westerners looking to invest here to sit on the sidelines for a
while and just observe.
Lastly, Putin lost another ally with the fall of the government in
Kyrgyzstan. President Akayev was forced to flea on Thursday in
a lighting fast change of power as the police just melted away
and allowed protesters (demonstrating against alleged fraud in
February’s parliamentary elections) to storm the presidential
palace. First Georgia, then Ukraine, Moldova (in some eyes) and
now here. But before you book your trip to Bishkek, at least wait
until they clean up the rubble from the heavy looting that has
taken place.
Venezuela: The government seized a large British-owned cattle
farm that had been in operation for decades for the purposes of
redistributing the land to peasants. Where have you heard
something like this before? Try Zimbabwe and its President
Robert Mugabe. Oh yeah, that set Zimbabwe on the right path.
Venezuelan President Hugo Chavez is nonetheless all too eager
to adopt policies from the world’s losers.
Secretary of Defense Donald Rumsfeld appropriately blasted
Chavez this week for his nation’s huge arms purchase of 100,000
Kalashnikovs from Russia, while Colombia complained of
further border incursions by Chavez’s military.
You know, I used to talk of how some thought Colombia could
become another Vietnam for the U.S. as it helped the
government fight the drug cartels / militias in Colombia. But
perhaps it’s time to shift the focus to increased direct U.S.
involvement here to combat Chavez’s messianic designs.
Chavez knows he has Washington over a barrel in terms of our
dependence on Venezuelan crude, but some day we may be
forced to show him who’s really boss in these parts.
Malaysia: I was perusing the South China Morning Post and saw
that Malaysia has a severe labor shortage that it plans on
addressing by importing 100,000 Pakistanis. The government is
concerned, though, that it may also import a few terrorists in the
process. But I got a kick out of the following.
“Some employers and labor experts also say the temperament of
Pakistanis is not well suited to back-breaking jobs that pay low
wages.
“ ‘They are too independent-minded to be wage earners and
prefer being their own boss doing small business like selling
carpets and opening food stalls,’ said housing contractor Kenneth
Lam.
“ ‘What we need is a docile and uncomplaining workforce
willing to slog hard for low wages and save to send home.’”
Now who thinks someone could get away with saying that here?
[Speaking of Pakistan, the Bush administration has approved the
previously announced sale of F-16s to Islamabad, thus riling
India. More on this next week.]
Random Musings
–The trustees for Social Security and Medicare released their
annual reports and the crossover point for Social Security
(benefits paid exceeding taxes received) is now 2017, with the
(non-existent) “trust fund” slated for depletion in 2041. Both
figures are subject to drastic revisions depending on growth in
the economy, the size of the labor force, life expectancy, etc.
More importantly, Medicare is now slated to go bust in 2020.
I’ve said my piece on Social Security. Freeze benefits for all,
for one year, use a more realistic cost of living barometer for
future adjustments and raise the retirement age per Senator
Hagel’s proposal. The problem would be solved and we could
then go about addressing the more wide-ranging savings issue,
including the active promotion of what we already have in place,
i.e., IRAs, 401(k)s and the like. Of course since a “freeze” is a
cut, Congress would never have the guts to act on it. But what
should be apparent to all is the fact Medicare is going to
bankrupt us far earlier than Social Security ever would.
–I started out as a big fan of Condoleezza Rice at the start of the
Bush administration then soured at the time of the Iraq war
because of some disingenuous remarks of hers on the WMD
front. But I’m constantly reassessing around here and her early
performance at State has been superb. Whether it’s her case for
democratic rights or religious freedom, as the Washington Post
opined the other day, “Ms. Rice is a powerful speaker – and so
far, she is choosing her words well.”
–According to the latest USA Today / CNN / Gallup poll,
President Bush’s approval rating has suddenly slipped to 45%,
the lowest point of his presidency after it was 52% just last week.
The negative reaction is blamed to a great extent on Congress’s
and the White House’s interference in the Terri Schiavo case.
[Sorry, no comment on Ms. Schiavo. I don’t know the facts and
it wouldn’t be prudent for me to voice an opinion in this space.]
–U.N. Secretary General Kofi Annan proposed a sweeping
reform agenda, including enlargement of the Security Council
from 15 to 24 members, with Japan, Germany, Brazil and India
all clamoring for permanent seats. But Annan doesn’t address
the paramount issue for the Council; that being the veto power
granted to the five permanent members of today which can kill
any resolution. That has to change.
Meanwhile, Kofi’s son Kojo was reportedly the recipient of
$300,000 (not $200,000 as earlier stated) in the oil-for-food
scandal, according to an Italian business journal and the
Financial Times, while the Times of London reported that the
U.N. was going to use Iraqi oil money to help pay for the legal
defense of some high-ranking officials such as Sevan before
others in the U.N. said ‘no way.’ And on Friday, the Wall Street
Journal said the next report from the investigative panel headed
by former Federal Reserve Chairman Paul Volcker will directly
fault Kofi Annan for not policing his son’s activities. Kofi better
take advantage of his dinner party invites while he’s still on the
‘A List.’
–Crime on the Net continues to spiral out of control. Here in
New Jersey, for example, a 17-year-old from Edison was arrested
in what the FBI called the “worst denial of service attack we’ve
ever seen.” A fellow in Michigan who owned a retro sports
jersey company hired the kid to go after his competition but in
the process the kid crippled thousands of other businesses with
the FBI estimating losses at $2.5 million.
–And then we have the case of Jeff Weise, the deeply troubled
youth in Red Lake, Minnesota who was occupying his time
reading Nazi web sites. Weise then killed nine.
–But on the crime front I am increasingly concerned about the
exploding problem with gangs in America. Last week I wrote of
the arrest of 103 members of the Central American-based MS-13
group and the current edition of Newsweek has a story on this
scary outfit that has an estimated 8,000-10,000 members in the
U.S. The proliferation of new Asian, Russian and Latin
American based gangs, coupled with the long existing ones, is a
huge issue for this nation over the coming years. It is obviously
affecting all manner of communities, large and small, urban and
rural, and it’s sickening how many of our youth we are losing to
them.
But as much as you can talk about defects in our culture that lead
to this kind of behavior, at the end of the day it’s a law
enforcement matter and agencies like the FBI know all too well
the dangers, including terrorists being able to infiltrate the gangs
for far more nefarious purposes. The FBI, for example, has
labeled MS-13 its #1 priority in this area.
–We had a particularly tragic house fire in New Jersey this week
that claimed the lives of four children. The fire department had
been called at 8:30 PM with the report of smoke in the house but
they found nothing and left. Then five hours later the fire broke
out for real and it was too late. I bring this up because the cause
of the blaze was determined to be an overloaded circuit with the
washer / dryer and a refrigerator-freezer on a single hookup that
was drawing 26 amps when the maximum was 20. The overload
caused the wiring to degrade. Just a safety tip from your editor.
–Researchers estimate that only 71% of students graduate from
California high schools these days; nationally it’s 68%. The
incredibly low rates, at least to yours truly, are the result of more
than half of minority students failing to complete their education
according to a Harvard University study. In Los Angeles, just
39% of Latinos and 47% of African Americans graduate,
compared with 67% of whites and 77% of Asians. [Los Angeles
Times]
Well, here’s one potential reason for the miserable results. A
California high school agreed to pay $500,000 to settle claims
that it handed out worthless diplomas and wrongly taught
students the U.S. had 53 states.
The school at issue is California Alternative High School that for
$500 offered a 10-week course targeting Hispanic immigrants,
promising to give students a valid diploma upon completion.
Instead of textbooks, the school used a workbook that aside from
the above error “wrongly taught its students that the U.S.
Congress has one house for Democrats and a second for
Republicans and that the U.S. flag, which has 50 stars on it for
each state, wasn’t updated to include the addition of three extra
states: Alaska, Hawaii and Puerto Rico.”
The workbook included questions about Arthur Miller’s “Death
of a Travelling Salesman” (sic) and the philosopher Aristotale
(sic). [Bloomberg News / South China Morning Post]
–A study for the Pew Hispanic Center reveals there are 10.3
million undocumented immigrants in America, up from 8.4
million four years ago. 5.9 of the 10.3 are Mexicans. [And just
to show you what a non-event it was, I can’t think of anything to
report concerning President Bush’s meeting with Mexican
President Vicente Fox…let alone the discussions with Canadian
Prime Minister Paul Martin.]
–The great American diplomat George Kennan died last
weekend at the age of 101. I couldn’t believe how short some of
the obituaries were…but I honor his memory myself on my
current “Hott Spotts” link.
–Boy, I’m totally embarrassed by the performance of my alma
mater, Wake Forest, in the NCAA basketball tournament.
Throwing in “Go Deacs” at the end of this space last week
proved to be ill-conceived. I’m tired of Wake blowing it come
tourney time. You wanted me to jump off the bridge and I
finally jumped. You wanted to bring me down…….oops, out of
nowhere I’m lapsing into Barry Bonds!
–Speaking of Barry, Bill O’Reilly had a segment on him the
other day and commented, “I kind of feel sorry for him because I
know what he’s going through.” Spare me your persecution
complex, O’Reilly. There’s a little difference in your dalliance
with an intern and its impact on society (zero) and Barry Bonds’s
attempt to destroy what is sacred in America’s national pastime,
its record book. No, it’s not about you, O’Reilly, as much as you
always make it out to be; it’s about an entire sport that many of
us love and this scumbag Bonds, who does nothing but lie to the
fans as well as his family.
–Hey kids, looking for an exciting career? I was reading my
High Plains Journal and it seems there is a dearth of veterinarians
who care for large animals, including cows and sheep.
–But when working with any animals, remember to wash your
hands! What an awful situation we have in Florida these days as
at last word 15 children are seriously ill after going to petting
zoos. They just aren’t following proper hygiene procedures.
–Lastly, I was sitting in church on Thursday, thinking of the
pope. I had the opportunity to see him during a Consistory of the
Cardinals in 2001 as a guest of Cardinal Avery Dulles. But
rather than give you my own thoughts on John Paul II as he
endures the pain and suffering of his last days, I thought I’d share
what biographer George Weigel had to say in an op-ed for the
Washington Post.
“The world has missed a lot of Karol Wojtyla’s story in his 26
years as pope, because the world tries to understand him in
political terms, as another power player on the global stage.
There’s no doubt that John Paul II has been the most politically
influential pope in centuries. But that is not who he is, or what
he’s about, at his deepest level. His two recent hospitalizations
and his unembarrassed struggle to live out the commitment to
service that he made at his election in 1978 should remind
everyone that this man is, first and foremost, a Christian pastor
who is going to challenge us with the message of the cross – the
message of Good Friday and Easter – until the end.
“As Hanna Suchocka, the former Polish prime minister,
described the pope to me recently, ‘He is living his via cruces,’
his way of the cross. It’s not something the world has watched a
pope do for a very long time. We should recognize it for what it
is, and be grateful for the example.”
—
God bless the men and women of our armed forces.
President Bush said the following as part of his radio address last
Saturday.
“To all the brave members of our Armed Forces who have taken
part in this historic mission, and to your families, I express the
heartfelt thanks of the American people. I know that nothing can
end the pain of the families who have lost loved ones in this
struggle, but they can know that their sacrifice has added to
America’s security and the freedom of the world.”
God bless America.
Happy Easter
—
Gold closed at $424
Oil, $54.84
Returns for the week 3/21-3/25
Dow Jones -1.8% [10442]
S&P 500 -1.5% [1171]
S&P MidCap -1.2%
Russell 2000 -1.1%
Nasdaq -0.8% [1991]
Returns for the period 1/1/05-3/25/05
Dow Jones -3.2%
S&P 500 -3.3%
S&P MidCap -1.2%
Russell 2000 -5.6%
Nasdaq -8.5%
Bulls 53.6
Bears 27.8…ticking up recently [Source: Chartcraft / Investors
Intelligence]
Have a great week. As always, I appreciate your support.
Brian Trumbore
