**Next WIR will not be posted until Sunday, noon ET**
[Posted 7:00 AM ET]
Wall Street
Let’s hope North Korea behaves over the next few weeks
because this skittish stock market can ill afford a true
geopolitical bombshell. As to this week’s action long-time
readers shouldn’t be too surprised. After all, Wall Street is a
casino and the hedge funds and program traders rule the day. I
would also add that there has undoubtedly been some selling on
behalf of the mutual fund industry that, true to form, marketed
the hot sectors of the day to the hilt, this time being commodities
and energy, right at the top. Of course this is reminiscent of the
final rush into tech funds, 1999-2000.
But in looking at the broader market and the economy, the bull /
bear debate is all about the ‘soft patch’ in the economy. Was it
just a March aberration? The data on April retail sales was well
above expectations, for example, and would lead one to believe
the economy is just fine. One Federal Reserve Governor said the
economic picture in April “improved dramatically” and he
dismissed any “soft patch” concerns. The trade deficit for March
itself narrowed, as well, and you’d have thought falling oil prices
would have helped set a positive tone for all except the energy
sector.
But the strong retail sales report had some worried it would help
make the Fed’s decision easier; as in it would continue to raise
rates beyond levels now currently thought. So that’s bad for the
bond market, right? No. Because these days it’s all about the
hedge funds and whether there’s a live bomb out there or just a
lot of noise.
The concern started over the General Motors trade, with hedge
funds having shorted GM shares in the expectation they would
keep going down, given the company’s long-term problems,
while simultaneously employing GM bonds as a hedge. But
when S&P downgraded GM debt to junk status, just as Kirk
Kerkorian was raising his stake in the company, the exact
opposite occurred….the stock went up and the bonds fell. Ergo,
anyone holding the first set of positions got spanked.
So the rumors started a week ago that not only were some hedge
funds hit hard, but also the banks that may have extended loans
or issued credit swaps…derivatives. It may take a while before
the losers fess up. However, this week attention also shifted to
the commodity sector and a play that had been working so
beautifully for a long period of time unwound with a vengeance.
SEC Chairman William Donaldson echoed Fed Chairman
Greenspan’s thoughts of recent vintage, that hedge funds
represented a potential “disaster” as they seek market-beating
returns, and he added that many players simply didn’t know what
they owned. I would have put it even less delicately (as I have
for years now). Many just aren’t that smart.
But there was another big story this week with a far longer shelf
life in terms of its impact on the retirement dreams of Americans,
that being the decision by a bankruptcy court judge to allow
UAL to dump its underfunded pension funds, totaling $6.6
billion, in the largest pension default in history. UAL was
permitted to do this in order to survive as a going concern.
Unfortunately, many of the 121,500 current & retired employees
face drastic cuts in their future benefits as the plans are now
picked up by the PBGC, the Pension Benefit Guaranty Corp.
PBGC, itself drastically underfunded and facing the prospects of
a taxpayer bailout at some point, pays a maximum $45,600 a
year at age 65, less if you retire before then. But in the case of
United (as well as other airlines) its pilots have to retire at age 60
so you begin to get a picture as to the coming pain.
The worry for all Americans who have a defined benefit plan,
particularly in the struggling airline and auto sectors, is that other
companies will just throw up their arms and say “we’ll never be
able to meet future obligations” and simply walk away, a la
UAL, thereby exacerbating PBGC’s liabilities at the same time.
In the case of UAL, however, it also now faces strikes by various
unions that would effectively mark its deathknell.
Street Bytes
–Thanks to a solid (but hardly spectacular) earnings report from
Dell, the Nasdaq avoided the losses of its large cap brethren in
eking out a 0.5% gain to 1976. Dell rose 2 ¾ on Friday after
reporting revenues were up 16% as it continues to gain market
share. But this was as expected and U.S. PC shipments were up
only 6.4%. While I love the company, I just got a kick out of the
sudden excitement. Earlier in the week Cisco reported revenues
had increased 10% for its April quarter and CEO John Chambers
was optimistic about the global outlook, but anyone telling you
they know what’s going to happen beyond the next two quarters
isn’t leveling with you.
Meanwhile, the Dow Jones lost 2% on the week to close at
10140 while the S&P 500 fell 1.5% to 1154. Energy stocks got
slammed and it”s worth noting that in the case of the major oil-
related indexes, much of the parabolic gain that occurred the first
nine weeks of the year has been lost; in the case of the OSX, the
oil-service index, all but two points of it. [12/31/04: 123…
5/13/05: 125] You can make the same statement for virtually all
commodities that had spectacular starts to 2005 after equally
stunning gains for much of ’04. Back to oil, though, inventories
are now at a 6-year high in the U.S. You can talk all you want
about the long-term supply vs. demand scenario, but short-term
we are awash in crude, particularly if demand growth from China
begins to slow as some experts now say.
–U.S. Treasury Yields
6-mo. 3.12% 2-yr. 3.60% 10-yr. 4.13% 30-yr. 4.49%
Interest rates tumbled (bonds rallied) on the flight to quality /
hedge fund scare, as well as the belief that despite the current
good news on the economic front, tougher times will follow; the
last bit helped along by another sour reading on consumer
sentiment.
This coming week will see data on producer and consumer prices
for the month of April and the Fed will be looking for further
confirmation of the upward trend it has witnessed in labor costs,
though at the same time one can’t help but concur with a
Financial Times study that shows ‘real’ wages (less inflation)
falling at the fastest rate in 14 years. So where are the wage
pressures some seem so concerned about?
What all market participants can agree on, however, is that the
Fed’s margin of error is slim. It can easily take its current hiking
regimen too far. Personally, since I’m in the deflation, not
inflation, camp when looking out to 2006, and with the action in
commodities auguring trouble ahead in this regard, the Fed is
playing with fire if it raises rates beyond the June meeting.
–Looking at the global economy, while Germany and France are
showing faint signs of life, Italy is back in recession and
consumer spending in the UK is slowing owing to a suddenly
stagnating housing market (another sign of coming attractions in
the U.S.). The Bank of England is now contemplating lowering
interest rates. But over in China, the big story this summer could
be power shortages, with Shanghai, for example, facing severe
outages due to a lack of generating capacity.
–Early in the week, before Wal-Mart and Target released their
earnings, I was perusing the latest issue of Crain’s New York
Business and a story about how Wal-Mart has been continually
chased away from New York’s five boroughs, while Target has
opened five stores in the City with no problems. One reason
Wal-Mart has such a bad image in the Big Apple is because New
York tends to be peopled with liberals who view Wal-Mart with
disgust, especially its employment practices. Target, on the other
hand, has done a masterful job of working on its advertising and
public relations message, plus it simply has a reputation for being
more fashionable.
So then the big picture took shape as both announced earnings.
Wal-Mart disappointed, Target exceeded expectations as the
former’s same-store sales were up 2.9% and the latter’s increased
6.2%. Of course Target is far smaller than Wal-Mart with sales
of $10 billion for the quarter vs. Wal-Mart’s $71 billion, but
Target is also clearly gaining market share.
–Real Estate Update: [Data from the National Association of
Realtors and the Star-Ledger.]
The median price of a single-family home in America rose 9.7%
to $188,800 in the first quarter vs. a year ago. In my New York
metropolitan area it’s up 18% to $435,200. But check out the top
ten markets nationwide, year-over-year.
Bradenton, FL…45.6% increase
Sarasota, FL…36.0%
W. Palm Beach / Boca Raton / Delray Beach, FL…35.9%
Riverside / San Bernardino, CA…32.6%
Ft. Lauderdale / Hollywood / Pompano Beach, FL…31.8%
Las Vegas, NV…29.4%
Melbourne / Titusville / Palm Bay, FL…29.3%
Orlando, FL…28.7%
Miami / Hialeah, FL…28.4%
Ocala, FL…27.0%
Goodness gracious. Calm down, Floridians. Some of you are
going to get burned, big time.
–I could not agree more with an editorial in Friday’s Wall Street
Journal concerning Big Sugar, which threatens to scuttle the
whole Central American Free Trade initiative over its ridiculous
demands that it continue to be protected, much to the detriment
of not just relations with our key neighbors but the American
consumer as well who is paying far more for the product than he
should be. Of course the sugar lobby is the most powerful in the
land, but it’s time to put a stop to all this sweetness. As the
Journal opines:
“Sugar is a classic case of what Milton Friedman once called the
Law of the Few – that in a democracy the intense interests of a
few can often trump the diffuse costs spread among many. If
Little Big Sugar kills Cafta, the gains for the Fanjuls (Florida’s
sugar kingpins) would be dwarfed by the loss of potential new
export markets for U.S. meats, grains, fruit, beans, potatoes,
poultry and eggs, fertilizers, dairy products and feed. The
American Farm Bureau Federation estimates that market at $1.5
billion a year.”
–Late on Friday, the White House re-imposed quotas on
Chinese-made cotton trousers, cotton knit shirts and underwear
in an attempt to save jobs. Shipments of clothing and textiles
from China are up 54% in the first three months of the year vs.
the same period a year ago. But once again, an administration
that favors free trade, as do I, has stuck it to the American
consumer because we’ll all be paying higher prices. It’s not
known, as I write this, whether China will retaliate but you all
know how trade wars end….in pain.
–More and more evidence is emerging that AIG’s efforts to
smooth earnings went well beyond one or two senior executives
and the Journal is reporting that one such individual is singing to
authorities in exchange for immunity.
–Russian prosecutors are going to file new charges against
former Yukos CEO Mikhail Khodorkovsky rather than sentence
him Monday. So much for Putin’s plans for a more business-
friendly nation. This is an outrage.
–Here’s a tidbit on the airline industry I didn’t know about,
courtesy of Susan Todd at the Star-Ledger.
“A flight attendant who asks the pilot for some water pressure to
make a cup of coffee has to realize turning on an auxiliary power
unit – a small jet engine attached to a generator that produces
electricity and water pressure when the jet’s own engines aren’t
running – requires about 300 pounds of jet fuel an hour. At that
rate…the coffee ends up costing a steep $20 a cup.”
So if you’re sitting in first class and ask for coffee before take-
off, don’t bite the flight attendant’s head off when they say they
can’t serve it until they are airborne. Then again, if the cost of
fuel remains high, expect the airlines to begin to pass out coffee-
flavored toffee instead.
–E*Trade announced an unsolicited bid for Ameritrade, though
Ameritrade’s board says it wants to stay independent for now.
Of any discussed merger I’ve ever seen, across all industries,
none has ever made more sense than this one.
–Then again, the Duke Energy / Cinergy merger that came to
fruition this week makes a heck of a lot of sense as well, bringing
together utilities in the Southeast and Midwest.
–The average 401(k) balance is $40,000. [In 2002 it had
declined to $28,300.] For those 65 and older, 39% of their
income is derived from Social Security. [Investment News]
–Investment News also commented on a study of mutual fund
fees. While assets in stock and bond funds have risen from $550
billion in 1989 to $6.2 trillion today, the average fund fee (ex-
institutional offerings) is 0.96% vs. 0.94% in ’89. The reason, as
I know all too well from my past experience in this industry, is
the middleman, your brokerage firm, who is demanding 0.20% to
0.40% for ‘shelf space’ and ‘renting the sales force,’ as they are
so fond of saying. But also left out of the fee discussion is the
plethora of client services that have been added over the past 15
years by the fund companies. This doesn’t come cheaply.
–American Michael Glazer, who owns the NFL’s Tampa Bay
Buccaneers, is now a most unpopular figure in Britain as he
gained control of Manchester United for the bargain basement
price of $1.5 billion. [If I recall correctly, the New York
Yankees would fetch about $1 billion these days.] Glazer bought
out the shares (ManU is publicly traded) of two Irish tycoons to
up his stake to 62%, thereby making the two Irishmen equally
unpopular among the football club’s fans. Glazer will now buy
up the rest of the shares and de-list the company. Fans are most
upset because they now expect Glazer to hike ticket prices big
time to help pay for the takeover. For his part, Glazer believes
Manchester United can be a big hit in the U.S.
–Movie box office receipts are down 6% thus far in 2005.
Actual attendance at theatres is off 8%.
–A study by the Transportation Development Foundation
(funded in part by the construction industry) reveals that travel
delays cost the economy $63 billion, with a big reason being
roads simply aren’t being built fast enough. For example, since
1982 miles traveled have increased 74%, but road lane mileage is
up only 6%.
–NASCAR is increasingly concerned about the woes of the Big
Three automakers and their commitment to the sport. Each
spends about $125 million a year on NASCAR and some critics
would say the costs aren’t worth it. The Big Three, though,
argue that they need NASCAR for marketing. Meanwhile,
Toyota will be moving up to the top level of the sport in a few
years. No problem there for yours truly, but I might be a bit
disturbed if my favorite driver was in a Hyundai down the road.
[Formula One flashback for true racing fans. Because of my
older brother’s obsession with the sport I was a big fan myself in
the 1960s and I used to love Honda’s entry, driven by Richie
Ginther. You know, Honda was a laughingstock back then, but
not now!]
–For those of you watching Jim Cramer’s “Mad Money”
program, did you know he predicted Dow 12500 this year? I
have been catching his opening bit a fair amount recently and
you’d be nuts to try and follow his advice unless you are literally
a day trader.
–I received a call the other day from “Adware Software
International” asking for my fax #. “I don’t think so!” Click.
Geezuz, I hope Eliot Spitzer puts all these crooks out of business.
Foreign Affairs
Iraq: Prime Minister al-Jaafari finally filled the cabinet but then
one of the Sunni members immediately dropped out; this as the
killing continued with over 400 dead in the two weeks since the
government was formed. And for the life of me, will someone
explain why our military finally decided to launch a full-scale
offensive against the border transit points for the insurgents
coming from Syria? I’m glad we’re acting, but as I’ve spelled
out countless times before in similar instances (and as I’ll
elaborate on below) we should have done this in the summer of
2003 when it was clear what we were up against in Iraq. We
knew where the foreign fighters were coming from then and
outside of one or two relatively minor operations it took us until
now to do more. You’ll have to forgive me if in the last few
weeks I’m losing faith.
I keep writing of the issue of support, or lack thereof, among the
American people for this whole Iraq mission because the day of
reckoning is approaching, and by most accounts it’s as soon as
yearend. Appearing on “This Week” last Sunday, Democratic
Senator Carl Levin said it’s basically about the adoption of a new
constitution. We’ll know by January if Iraq really wants to be a
country and if it’s still a mess at that time, then the United States
will have to “rethink our presence.” Republican Senator Chuck
Hagel concurred. Yes, both the House and the Senate approved
the $82 billion supplemental for Iraq and Afghanistan but I won’t
be in the least bit surprised if this is basically the last of it.
Lebanon: And the condition of the above is all the more reason
why we have to pray that this nation can pull off peaceful,
democratic elections on May 29. This week saw the return of
General Michel Aoun, a Maronite Christian (remember, labels
matter here) and the former commander of the Lebanese Army.
Aoun was defeated by the Syrians at the end of the civil war and
had spent the last 15 years in exile. He remains popular, though,
among a slice of the population and he has vowed to be part of
the election process. But what received little press is that in the
crowd of 20,000 that greeted him last weekend in Martyrs’
Square was a Syrian who was arrested with his finger on the
trigger of a gun.
Meanwhile, Hizbollah said it won’t disarm until Israel no longer
poses a threat to the country, and if you didn’t get the message at
week’s end Hizbollah and Israel were exchanging fire across the
border.
Lastly, the U.S. has been increasing its aid to Lebanon’s army
and not a moment too soon. Pentagon officials are impressed
with the behavior of the military.
Iran: The mullahs threatened early in the week to resume their
nuclear activities, including enriching uranium, at a disputed
facility, but the Euro 3 – Britain, France and Germany – has
taken a surprisingly harsh line in negotiations, with British Prime
Minister Tony Blair stating that he would support taking Iran to
the UN Security Council should it break its obligations to the
International Atomic Energy Agency, the long held U.S.
position. France and Germany co-signed a letter warning of the
consequences. So now Iran is rethinking its stance, though I
have no doubt work is proceeding at a myriad of other locations
where Iranian scientists are squirreled away.
North Korea: The official news agency proclaimed the country
was successful in removing 8,000 spent fuel rods from a key
reactor and is “taking measures to enhance its nuclear arsenal.”
For its part, China blasted the U.S. this week for Washington’s
personal attacks against Kim Jong il, thus destroying, in China’s
mind, any chance of a diplomatic solution.
You know, sports fans, I have consistently said that it is not in
China’s interest to see a successful resolution of this crisis just
yet because Beijing feels it must jerk the United States around
some more, and this week China ruled out economic or political
sanctions against the North.
But I am also of the opinion that at this point direct, low-level
discussions between Pyongyang and Washington certainly can’t
make an already bad situation any worse. That said, I remain
convinced North Korea is going through with a test, soon.
China / Taiwan: Talk about just “wait 24 hours.” Early in the
week some supporters of Taiwan’s President Chen Shui-bian
were concerned Chen had compromised too much in expressing
hopes for reconciliation with Beijing. Others said he was just
being the island’s equivalent of Richard Nixon, a hardliner who
bridged the gap. But mid-week, China suddenly announced it
would block Taiwan’s admittance to the World Health
Organization even as just two weeks prior President Hu Jintao
had promised Kuomintang / opposition leader Lien Chan that
China would stop blocking membership in such groups as an act
of good faith.
Then, at week’s end, another Taiwanese opposition leader, James
Soong Chu-yu, said he had brokered a deal with Beijing whereby
instead of “One China, two systems” the new phrase would be
“two sides, one China.” Beijing promised there would be no
“military confrontation” if Taipei promised not to take steps
towards independence. [South China Morning Post]
Well, if Chen was ready to compromise a week earlier he isn’t
now. A senior official of the policy-making Mainland Affairs
Council said the Hu-Soong deal was out of bounds.
“The so-called ‘two sides, one China’ basis is actually the ‘three
tier’ theory of the ‘one-China’ principle.” The “three-tier
theory,” which I have to admit I never heard of, is that there is
only one China, Taiwan and the mainland are part of China, and
its sovereign and territorial status cannot be separated. Bottom
line, like everything else China does these days on the diplomatic
front, it’s a trap.
Russia: NBC’s David Gregory described the sight of President
Bush and Russian President Vladimir Putin sitting next to each
other during the V-E Day commemoration as “awkward theatre”
as Bush was forced to watch goose-stepping soldiers on Red
Square. But Bush could not have done anything but play the
perfect guest, regardless of the symbolism and widening
divisions between the two that threaten U.S.-Russian relations.
Bush, during the rest of his trip, certainly set the right tone.
A Russian affairs expert, Michael McFaul, wrote in an op-ed for
the Los Angeles Times that Russia is “backsliding,” the only
major country to do so during Bush’s time in office, and the
president needs to “signal clearly and boldly whose side he is
on.” The two can cooperate on terror and WMD, as McFaul
writes, but it’s Bush who must foster democracy, following the
tone he set in his second inaugural address.
Well, President Bush did just that, starting out with his speech in
Riga, Latvia, where he said “All nations that border Russia will
benefit from the spread of democratic values, and so will Russia
itself. Stable, prosperous democracies are good neighbors,
trading in freedom and posing no threat to anyone….All free and
successful countries have some common characteristics –
freedom of worship, freedom of the press, economic liberty, the
rule of law and the limitation of power through checks and
balances.” [Elisabeth Bumiller / New York Times]
Needless to say Vladimir Putin was none too pleased with this
kind of talk, nor his stirring appearance in Georgia the day
following the Moscow celebration. The same day, Putin was
meeting with the European Union and while agreements were
reached on a number of issues here, the bitter feelings over the
Soviet Union’s post-World War II domination were still
apparent.
Putin, in particular, was upset with new EU member Latvia,
which has yet to sign a border agreement with Russia since it
became independent in 1991.
“We are ready to sign an agreement on borders. …We hope they
will not be accompanied by idiotic – in terms of their content –
demands of a terrible nature,” Putin said.
But in a declaration by the EU it said “We remember as well the
many millions…for whom true freedom was only to come with
the fall of the Berlin Wall.” [Moscow Times]
Israel: Prime Minister Sharon is losing support again for the
Gaza withdrawal plan so, in an attempt to appear tough, he
announced Israel won’t release more prisoners until Palestinian
President Abbas dismantles the terrorists, a move that totally
embarrassed Abbas because the prisoner release had showed he
was getting something out of the Israelis. Meanwhile, Hamas
gained in local elections but a larger vote for seats in parliament
is slated for July. The cease-fire is hanging by a thread.
France: The referendum on the new European Union constitution
is slated for May 29 (the Netherlands’ is June 1) and in an
interview with the Financial Times, Italy’s foreign minister,
Gianfranco Fini, had the following comments.
Fini is holding out hope that the French vote Yes, but offered that
even a No vote should not deter the EU from embracing
Turkey…Turkey being the key issue here as I’ve long said.
“Politically speaking, this would be difficult. But Italy is a
supporter of Turkey’s accession.
“In order to join, Turkey has made radical changes, including in
terms of human rights.
“Turkey is already part of NATO. It’s a pillar of stability in its
region. It’s a major Muslim country.
“If, after all the tests and all the changes that Turkey has been
asked to face, Europe says No, what would happen?
“Would we not be pushing them towards fundamentalism?…
“We can’t say No just because they are Muslim. The accession
of Turkey would be a sign of the full compatibility of Islam with
democracy.”
I couldn’t agree more with the foreign minister’s conclusions,
but the reality of the situation on the ground speaks otherwise.
French President Jacques Chirac, for example, is promising the
French people that they will be able to vote in a separate, future
referendum on the issue of Turkey and the EU if they will just
vote Yes on the constitution. [Tony Barber and Brian Groom /
Financial Times]
But switching gears a bit, I forgot to note my own impressions of
France last week, as picked up through observation at De Gaulle
Airport as I made my connections on my trip to Lebanon.
Accepting the fact an airport is a microcosm of society, I never
saw an uglier group of people (in the true sense of the word…
mean looking) then what I witnessed there. I’ve also spent a
good amount of time in Paris itself the last five years. This
nation is in deep trouble and there is no doubt the Right will gain
a large percentage of the vote in the next national elections. The
clash of civilizations, to use this term loosely, is occurring right
here and the native Frenchmen are upset as they see their old
way of life disappear before their eyes. Of course I’m not
saying that old way was necessarily good. It certainly couldn’t
survive because as in the rest of Europe the economies will
totally tank unless there is immigration. Enough said….for now.
Turkey: Related to the above, a European Court on Human
Rights has ruled that the 1999 trial of Kurdish rebel leader
Ocalan was unfair. Ocalan’s PKK was involved in a 15-year war
with Turkey that claimed 30,000 lives and he is now serving a
life sentence, Turkey having abolished the death penalty in 2002
as one of many steps it had to take to further its EU candidacy.
While the government in Ankara put its best face on a retrial and
the prospects of having to free Ocalan beforehand, an
increasingly nationalistic society is not likely to be so passive
and it’s incumbent upon the United States to keep the Kurds on
the border in Iraq under control.
Uzbekistan: Yes, it’s far, far away and known by about 2% of
the American people, but the sudden violence in this central
Asian nation of 26 million bears watching as it’s another case of
a former Soviet hardliner, in this case Karimov, having to deal
with an Islamist movement.
Random Musings
–I have been tough on the leadership of the U.S. military and I
recognize some may not totally understand where I’m coming
from. I would just note that historian Victor Davis Hanson had
an op-ed in the Wall Street Journal on Monday wherein as part of
a discussion of World War II he noted “Pleasant mediocrities
like Mark Clark were sometimes promoted; scary authentic
military geniuses such as George Patton were occasionally
ostracized.” They aren’t all brilliant, in other words, as Iraq is
proving. And regarding my opinion of former commander
Tommy Franks, last Sunday on “Meet the Press” former CIA
officer Gary Schroen confirmed that Franks has not been telling
the truth on the issue of Osama bin Laden and Tora Bora. I stand
by my take on the man.
–Newsweek magazine reported that US personnel at
Guantanamo Bay, on more than one occasion, desecrated the
Koran by flushing it “down the toilet” as a way of rattling
suspected terrorists being held there. Pakistan immediately
launched a protest and by week’s end there was extensive rioting
over the issue in Afghanistan as well as public outcry in Saudi
Arabia. The story is spreading like wildfire and it’s incredibly
dangerous.
This is absolutely unbelievable and, again, where the heck is our
military leadership? What could they possibly be thinking to
allow this? Are they pure idiots? Do they read history? Do they
have any respect for other cultures?
I went back and read what I wrote in this column on the topic of
Abu Ghraib, 5/8/04. That particular week I had been in
Singapore and then wrote the piece from Shanghai.
“I must say, it wasn’t a great week to be traveling around the
world as an American. It didn’t create any particular problems
for me, but as I took a ferry on Tuesday from Singapore to
Batam, Indonesia, and as the only Yank on board, it was a bit
unsettling to see the locals reading newspapers with screaming
headlines and photos of prisoner abuse in Iraq….
“It is absolutely sickening and as one who has commented as
extensively as anyone the past 5+ years on the global scene and
the big picture, I am furious at some in our chain of command
who allowed this to take place.
“I have written in the past that it is a big mistake to think that the
U.S. military is loaded with brilliant people at the top, and I
know I raised more than a few eyebrows with these comments,
but now any doubters know where I’ve been coming from.
“It was a failure in leadership for not moving on to places like
Fallujah after the fall of Baghdad. It was a failure in leadership
in not recognizing that manpower shortages would severely
impede the reconstruction effort. And it was obviously a
massive failure of leadership of disastrous proportions in
allowing some Iraqi prisoners to be mistreated the way they
were.
“It’s no secret (the) United States will be under the microscope
for years, possibly decades to come. As an American you can
complain about it but the reality is we have to be virtually perfect
in everything we do if we are to sustain the cooperation of our
global partners in the war on terror and to keep from further
inflaming tensions. This prisoner debacle has set us back in
ways we can only just begin to imagine, and I don’t buy this crap
in some circles that it’s only a handful at fault which in some
way excuses their behavior. Today, one is too many.”
That was one year ago. As I wrote on my recent experience in
Lebanon, trust me, nothing has changed since then and now this
incredibly stupid act at Guantanamo (and I can only assume the
report is true) is yet another disaster for our foreign policy.
Washington Post columnist Jim Hoagland wrote the following
this past week on the result of the military court’s actions in the
Abu Ghraib case.
“…the failure of the White House and Pentagon to fix any
responsibility at senior levels for the chaotic conditions and
pressures that allowed or encouraged prisoner abuse, other
misbehavior and theft in Iraq creates its own problems. Only by
observing high moral standards in its own conduct and
accountability can the administration justify demands on troops
abroad to do the same.”
Lastly, on the issue of teaching history, it was disclosed this
week that 81% of New York City 8th-graders flunked a basic
social studies exam in 2004. The problem isn’t just knowledge,
the kids can’t comprehend what they are reading.
And so here we are, in the still early days of a decades-long
struggle to survive by avoiding a true WMD attack that would
change our very way of life for generations after, and we seem
hellbent on raising a true band of idiots.
–Pulitzer Prize-winning author David McCullough is coming out
with a book on 1776 in two weeks. Thank heavens. It will
obviously be superb and in light of the above every child from
age 8 to 80 should be forced to read it.
–Last week I also brought up the issue of homeland security and
the lack of appropriate civil defense plans. On Monday, New
Jersey’s politicians were correctly complaining that due to a cut
in funds some incredibly dangerous operations, such as a
chlorine gas plant in Kearney, are not being protected anywhere
near as much as they should be. If this particular plant, or many
like it in my state and on the border down by Philadelphia, was
hit it could wipe out hundreds of thousands, if not millions. The
effect of the cloud would also be similar to that of the fallout
from a nuclear explosion. So, again, I ask, to those in this area
would you know how to respond? Would you know where to
go? Why hasn’t our government given us any guidance? I hate
to beat a dead horse, but that’s what we’ll all be.
–“60 Minutes” reporter Mike Wallace turned 87 this week…and
he is still able to spar with the best, as he did in his interview of
Vladimir Putin last Sunday.
–There is a plan in the works to build a casino resort just 1 ½
miles from Gettysburg. While the proposed site itself is not
militarily significant, I hope this doesn’t go through.
–Regarding the new image of King Tut, I say he looks like
Michael Stipe of REM.
–Back to our sad culture, can we finally put a stop to the asinine
news stories on eBay auctions? This past weekend our local
newscasts were filled with the story of the guy who etched an
image of the Runaway Bride on a piece of toast and put it up for
sale. Of course every one of these stories has the same ending
…the buyer reneges on the bid. But that doesn’t stop the
networks from sending out a reporter to do ‘man on the street’
interviews for reaction. Stop wasting our time, for crying out
loud.
–According to the World Wildlife Fund, ¼ of all salmon off
Norway are no longer “wild” due to the plethora of escapes from
fish-farms in that country and elsewhere. Here’s a tip for all you
fish farmers out there. If you see a salmon mindlessly bouncing
a baseball against the enclosure, that’s your clue an escape is in
the works.
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $420
Oil, $48.67
Returns for the week 5/9-5/13
Dow Jones -2.0% [10140]
S&P 500 -1.5% [1154]
S&P MidCap -1.7%
Russell 2000 -2.4%
Nasdaq +0.5% [1976]
Returns for the period 1/1/05-5/13/05
Dow Jones -6.0%
S&P 500 -4.8%
S&P MidCap -4.1%
Russell 2000 -10.7%
Nasdaq -9.1%
Bulls 46.2 [Normal split is 45 / 35]
Bears 28.0 [Source: Chartcraft / Investors Intelligence]
*Note: Next week’s review will not be posted until noon ET,
Sunday.
Have a great week. I appreciate your support.
Brian Trumbore
