[Posted 7:00 AM ET]
Iraq
With the constitution having been approved, despite an
unsurprising amount of ballot stuffing and other election
chicanery, the Bush administration has achieved a victory it
deserves credit for. But now it’s up to the Iraqi people and
government leaders who heretofore have done a lousy job. They
must step up and, with U.S. and coalition help, begin to deliver
basic services such as electricity and water, for starters. Bold
action is required of those who have been far too timid. What
we’ve learned since the spring is there are no Iyad Allawis
among this bunch.
And the further reality of the day is that 18 provinces are being
reduced to three states; the oil-rich Kurds in the north, the
equally energy-rich Shia in the south, and the resource-deprived
Sunnis in the middle. Somehow these three must not only work
together but share at least some of the wealth, while the Sunnis
also have to pin their hopes on December’s parliamentary
elections and increased representation in a new assembly in order
to maintain some influence in government affairs.
Columnist George Will, though, had the following for the White
House and its “strained analogies between Iraq today and
America at its constitutional founding.”
“When America’s Constitution was ratified in 1789, federalism
was an unfinished fact. [It still is, but today’s adjustments of
states’ rights and responsibilities are minor matters.] If the
federal government of 1789 had not grown in strength, relative to
the states, far more than most ratifiers of the Constitution
anticipated or desired, the United States probably would not have
remained united. So the question today, which will be answered
in coming years by the political process framed by Iraq’s new
constitution, is whether that constitution ‘stands up’ a nation, or
presages the partitioning of it, perhaps by the serrated blade of
civil war.”
And then you have the Saddam trial. Watching it the other day I
couldn’t help but think ‘boy, this better be over quickly or many
in the community will begin to rally behind him in a big way,’
much to the detriment of our nation-building effort. Like all of
you I also thought the five judges have more than a little guts,
only to learn a few days later that one of the defendants’ lawyers
had been kidnapped and killed.
Now, however, the trial has been adjourned until Nov. 28 and
assuming just the normal level of internecine strife among Iraqis
in the interim, there is a far bigger story in the region these
days…
Syria: The heroic German prosecutor Detlev Mehlis has issued
his preliminary report in the assassination of former Lebanese
Prime Minister Rafik Hariri last February 14, and for Syrian
President Bashar Assad the initial conclusion couldn’t have been
worse. [Mehlis was granted an extension until Dec. 15 in order
to tie up some loose ends.]
“There is converging evidence pointing at both Lebanese and
Syrian involvement in this terrorist act,” the report concluded.
“Given the infiltration of Lebanese institutions and society by the
Syrian and Lebanese intelligence working in tandem, it would be
difficult to envisage a scenario whereby such a complex
assassination plot could have been carried out without their
knowledge.
“There is probably cause to believe that the decision to
assassinate former Prime Minister Rafik Hariri could not have
been taken without the approval of top-ranked Syrian security
official [sic] and could not have been further organized without
the collusion of their counterparts in the Lebanese security
services.”
Specifically, Mehlis points the finger at Assad’s brother-in-law,
and military intelligence chief, as being one of the ring leaders,
while the fate of current Lebanese President Emile Lahoud hangs
by a thread because the UN-sponsored report found Lahoud had
received a phone call from one of the many pro-Syrian suspects
just minutes before Hariri and 20 others were killed by the
massive car bomb.
Lebanon is now under a state of emergency as release of the
findings potentially opens up the floodgates for a series of terror
attacks and assassinations as Syria, now backed into a corner,
responds in the only manner it knows… with brute force.
Assad’s boys have been smuggling operatives into Lebanon as
well as arming the Palestinian refugees that people Beirut’s
suburbs. Meanwhile, in preparation for Mehlis’s findings, Syrian
media has been blasting the current Lebanese government and its
prime minister, Siniora. As for Assad, he says his government is
innocent.
For their part, the United States, France and Britain are preparing
a number of resolutions for introduction to the Security Council
next week that are intended to further isolate Assad. Even his
Arab allies are pulling back at light speed.
But remember, Assad’s fall is not necessarily the best outcome.
There are no legitimate successors as of today that would be
acceptable to both the West and the Syrian people. [Not that any
will necessarily emerge.] As for thoughts of military
intervention by the U.S., outside of border incursions, forget it.
But if the French want to regain some of their lost glory, I’d be
more than happy to let them move in; President Chirac having
been a best friend of Hariri.
Wall Street
For years now we’ve heard stories of outsourcing and the whole
idea of globalization’s impact on our way of life and the lives of
billions around the world. But this is a week we may look back
on and say the theory was crystallized in our memory.
Morgan Stanley economist Stephen Roach has long touted one of
the chief benefits of globalization, that being lower inflation
pressures; though this also means that when it comes to the wage
component for the average American, you can kiss thoughts of
big raises goodbye. [Hopefully, your company is doing so well
you receive big bonuses and stock instead.]
This all came home to roost this week with the announcement
that General Motors had reached a landmark deal with the United
Autoworkers to reduce GM’s healthcare costs by $1 billion a
year, as it also plans to cut 25,000 positions, mostly hourly
workers, by 2008. Ford and DaimlerChrysler are demanding the
same treatment from the UAW.
This piggybacked off of auto parts supplier Delphi’s earlier
announcement that it was seeking to reduce wages for its
assembly line workers from $27 to just $10 an hour. Delphi,
now reorganizing under Chapter 11, has a profitable Chinese
operation, after all, where the average wage is but $3 an hour.
And on a related issue, Delta Airlines, also under Chapter 11
protection, became the latest to win court approval on slashing
pension fund contributions, though in the case of its pilots it
hasn’t sought to terminate the entire plan as yet.
Back to Delphi, worker Bill Wineland was quoted in the New
York Times as saying “Who’s going to afford to buy these cars?
Nobody making $10 or $12 an hour can afford a $30,000
automobile.” Yes, it’s a far cry from the days when Henry Ford
hiked wages so that his employees could buy one of the very
vehicles they were producing.
Economist Robert Samuelson opined in the Washington Post:
“Since 1948, the UAW and GM, Ford and Chrysler have crafted
contracts that turned the companies into mini-welfare states,
providing above-average hourly wages…rich fringe benefits and
strong job security. For example, laid-off UAW workers
essentially get full salary and benefits indefinitely. With limited
competition, companies could pass along common labor costs to
consumers and compete on styling and performance. No more.
The protected market has given way to imports and foreign firms
with non-unionized U.S. plants. Price competition is fierce…
“But one giant unknown clouds everything: China. Until now,
its booming U.S. exports have mostly displaced exports from
other countries. As China modernizes – moves into more
advanced industries – this could change dramatically. The
combination of low wages, a huge market and an artificially low
currency confers staggering competitive advantages. They
constitute a powerful magnet for foreign investment in many
sectors, whose output could subsequently be exported. Unless
the currency rises substantially, the United States could lose
many industries that, by all other economic logic, it shouldn’t.
Therein lies the real threat of extinction or something close to it.”
In other words, what happens to the middle class? If you thought
education was important in the past, it’s ten times more so today.
Speaking of China, the government formally announced third
quarter GDP came in at a 9.4% clip. Of course it’s averaged
9.5% the past two decades. I’ve said it countless times before
but China’s reporting is a joke, while at the same time it’s clear
that despite my calls for a China bust, the economy here just
keeps rolling along. I do have to elaborate again on the initial
point, however. Much of China’s numbers come from provincial
governors who ask their lackeys for input, who then ask their
lackeys, and so on down the line. Then it all comes right back up
the chain and presto…9-9.5%!
Now think about it. Under their still totalitarian system, would
you want to be the one to report 7% when everyone else is at
9.5%? Not too long ago you’d probably be executed for poor
performance.
But whereas a few years ago I believed the University of
Pittsburgh professor (whose name escapes me) who had the
theory China’s actual numbers were far below those advertised,
today China could be growing more than 9.5%, for all we know.
It’s just at some point, with fixed investment continuing to speed
along at a 26% rate, it will end, and end badly.
Meanwhile, for Wall Street it was another week of noise and
crosscurrents. On the economic front, the Fed released its survey
of regional activity and concluded it remained at a “moderate or
gradual pace,” while the producer price index soared 1.9%,
though still only 0.3% when stripping out food and energy. And
speaking of energy, crude oil slumped to below $60, before
finishing the week at $60.63, as gasoline futures tumbled and
natural gas traded down as well on the heels of continued signs
of weakening demand and improved inventory levels.
Federal Chairman Alan Greenspan offered his own thoughts on
energy in a speech in Tokyo.
“Although the global economic expansion appears to have been
on a reasonably firm path through the summer months, the recent
surge in energy prices will undoubtedly be a drag from now on….
“(And while) investment is rising, the significant portion of oil
revenues invested in financial assets suggests that many
governments perceive that the benefits of investing in additional
capacity to meet rising world oil demand are limited. Moreover,
much oil revenue has been diverted to meet the perceived high
priority needs of rapidly growing populations.”
In other words, hopefully the oil-producing nations spend their
largesse wisely, and there are signs some are, but for the rest of
us energy prices will remain at relatively high levels as long as
there is growth and in times when growth slows (including
during recessions), prices will drop until they reach a level where
demand begins to ramp up anew and the cycle begins all over.
See how I gleaned that much out of him? Actually, I was
going to write the above regardless of what Mr. Bubble said.
But we’re also in the midst of earnings season and the stock
market’s lackluster performance on the week was due in no small
part to some disappointing reports and guidance from the likes of
Intel, eBay, Pfizer and Caterpillar; a fairly good cross-section
you’d have to agree. GM and Ford reported large losses, while
Google once again shattered expectations and helped allow
Nasdaq to finish up, even as the Dow and S&P 500 were down.
Lastly, your bird flu update. What should scare everyone is the
lack of information from the likes of Indonesia, Russia and
China, where the H5N1 strain has been incubating before
moving on elsewhere, including parts of Europe. And despite
what you hear, Roche’s Tamiflu is not the cure-all it is propped
up to be, witness the increasing stories of humans who are
resistant to it.
But I need to repeat a point first made awhile back. If we can
escape the next two years, we may survive this particular bout
because by then a viable vaccine should have been produced in
sufficient numbers. In the meantime, the virus is cooking and the
world is unprepared. And remember, also, that if we make it
through the next few months without the virus mutating, don’t
get too smug because in the spring the infected flocks of
migratory birds return to spread it all over again. All we can
hope is that they wash their feet on a regular basis.
Street Bytes
–The Dow and S&P 500 fell for a third consecutive week, off
0.7% and 0.6%, respectively. But thanks to Google, Yahoo and
a handful of lesser known names such as Sandisk, Nasdaq was
higher by 0.8%.
This week marked the 18th anniversary of the Crash of ’87 and a
study on program trading on the NYSE was released showing
57% of this year’s volume being of the program variety. But
many are saying today’s program trading is nowhere near as
volatile as that of ’87, which in large part precipitated the crash.
[That and a careless comment from then Treasury Secretary
James Baker.] Bunk, I say. The right conditions just haven’t
lined up, not that you and I want them to, but that day will come.
–U.S. Treasury Yields
6-mo. 4.15% 2-yr. 4.21% 10-yr. 4.38% 30-yr. 4.60%
Despite the worrisome PPI number, other disconcerting inflation
data and scary Fed talk, the bond market took it all in stride
because it’s catching on to what your editor has long said. There
is no long-term inflation issue, that is as long as you come over
to my ‘flip camp’ in terms of the global economy. And if I seem
a little smug in this regard, it’s because with 10 weeks to go in
the year my 10-year rate forecast of 4.30% is looking pretty darn
good. [I know I shouldn’t have written that…smug
prognosticators being more susceptible to bird flu than others…
or so legend has it.]
–Refco: People have been wondering why the collapse of this
large futures brokerage firm hasn’t had more of an impact in the
financial markets. It actually has in some of the activity we’ve
seen, including the unwinding of trades as investors look to take
their business elsewhere (if they can). Refco filed for Chapter 11
bankruptcy protection and the vultures are circling over the parts
as at least two bids have emerged for the most attractive asset,
the futures business.
But some well-known Wall Street figures, such as hedge fund
operator Jimmy Rogers, have substantial assets of their own tied
up in the courts and in unpeeling the layers of this scandal there
are a number of other players, unknown before now to me, who
are receiving scrutiny. For example, who is Tone Grant, a
former executive that supposedly pocketed $507 million from
last August’s IPO? [I’m assuming he’s no relation to Tone Loc,
who had the 1989 R&B hit “Funky Cold Medina.”] And why
did a former CFO receive a $46 million severance package in
Oct. 2004 when, as the New York Post points out, he stood to
make far more in the upcoming IPO?
And on a related matter, as the Journal notes, why are Goldman
Sachs and its alums connected to Refco in every possible way; as
underwriter, bankruptcy adviser and potential acquirer? Why
too, taking it a step further, are Goldman employees and alums
connected in every way with the NYSE and the Archipelago
merger? Why is another Goldman alum, and current U.S.
senator, often dining in a restaurant right below my office?
OK, that last one’s a stretch in relation to its impact on Refco,
seeing as Jon Corzine probably has no connection whatsoever,
but wait another 24 hours the way this thing is going.
[Follow-up to last week: In the interest of fairness, the Summit,
NJ-based hedge fund that is tied to former Refco CEO Phillip
Bennett’s $430 million loan, Liberty Corner, said it is not a target
of the ongoing investigation. We’ll take their word for it, for
now.]
–No doubt about it, Google’s earnings for the quarter were
spectacular; net income of $381 million on adjusted revenue of
over $1 billion. And according to ComScore Networks Inc. (and
Bloomberg News), Google captured 56% of global Web queries
in August (the latest reporting date) vs. 21% for Yahoo and 11%
for MSN. As far as the number of users, Google has 403 million,
Yahoo 442 million and MSN 426 million, but Google is growing
twice as fast as Yahoo.
On a different subject, I totally oppose Google’s efforts to scan
millions of books and place them online, free of charge; a huge
issue a la other copyright cases that have arisen in our new world
such as music file-sharing and movie piracy. I just want people
to obey the law and for now the laws are pretty clear. Of course
over time the walls will be broken down.
–Yahoo said its online advertising revenue was up 46% in the
third quarter. I maintain online advertising’s run will end, at
least the paid search variety.
–Pfizer, suffering from shrinking revenues from its rapidly
expiring patents, saw sales decline 5% in the 3rd quarter as the
company lowered guidance for the 4th and withdrew it totally for
2006 and 2007; not exactly a reassuring move. In response, the
shares traded down to a 7-year low.
–Johnson & Johnson is backing off its original offer for heart
device maker Guidant, citing Guidant’s ongoing problems with
its stents and defibrillators. Guidant shares fell sharply, but it’s
expected this one will be reworked at a lower price.
–The New England Journal of Medicine, as respected a
publication of its kind as there is, reported on extensive data that
shows Genentech’s cancer drug Herceptin is a potential cure for
breast cancer.
–Nissan CEO Carlos Ghosn, one of the more refreshing
executives to come on the scene in recent years, noted that not
only have auto sales been awful thus far in October, but the U.S.
and China markets have hit a wall, with the “bonanza” in China
now over.
–General Motors’ net loss for the quarter was $1.63 billion;
Ford’s $284 million.
–Back to the GM healthcare benefit issue, according to the
agreement management worked out with the UAW, retirees, who
don’t currently pay premiums, will be responsible for $370 a
year for individuals and $752 a year for families. Active
workers’ benefits will remain free.
Note to the work and file of the UAW. You are idiots if you
don’t ratify this deal. Be thankful. Yes, it’s not the arrangement
you originally thought you had for life, but take a look around
and smell the coffee.
–Germany’s SAP raised guidance as its global share of the
business-software market is up to 60%. SAP continues to stomp
all over Oracle.
–College tuition at public universities rose 7.1% this fall and
5.9% at private schools; both lower than previous years.
[College Board / New York Times] And now the girl / guy ratio
on campus is 57 / 43. Goodness gracious, gentlemen.
–Shanghai has double the skyscrapers New York City has.
[David Barboza / New York Times]
–I love this take on the California real estate market by regular
reader, and fund executive, J. P.
“I just returned to Southern California to open the west coast
territory after spending three years in New York and I must say
the pending doom in the real estate market is palpable – I can
feel it coming. San Diego and the north county suburbs
(Carlsbad, San Marcos, Rancho Santa Fe, etc.) have all been
enjoying the real estate boom and many have seen their $500k
home spike to $900k, or their $800k to $1.3mm in just 2-3 years.
Most of these people bought the house fully levered or have
since taken a huge chunk out via a home equity loan.
“I just rented a 4,000 square foot home in a very nice
neighborhood in Carlsbad. But I kid you not; every 4th house in
my area is on the market. Average list price around $1.3 million.
In addition, when you look out the back of our place, we can see
500 brand new units being built from $700k-$1.5mm. Since I
moved in two months ago, I haven’t seen one house sell. It is not
like everyone here is making NY money. They probably scraped
and scrimped to get the $800k, so I can’t imagine who they
expect to buy the same place for $1.3mm.
“The bust is here…and in a BIG way. Resale home inventory is
way up and it now takes twice as long to sell as it did a year ago.
Should rates continue to rise, sooner or later they are all gonna
run for the exit at the same time.”
Josh also writes of nice hi-rise apartments in San Diego renting
for $3,800 where a standard mortgage payment, with 20% down,
would be $8,000. And that’s with 2,000 new luxury units
coming on stream in the next 24 months.
[And J.P., congratulations on getting out of Valero at $108.
Brilliant, my friend. You deserve premium beer for that one,
that’s for sure!]
–Speaking of beer, this trend bears watching. Heineken is
shelving its television advertising program in the U.K., choosing
to focus more on point-of-sale promotions. As the Times of
London’s Dominic Walsh reported:
“Rob Marijnen, managing director of Heineken UK, said that a
number of factors had prompted it to put its money elsewhere,
including the rising cost of buying airtime and the advent of Sky
Plus, which enables viewers to skip ads.
“ ‘The enormously cluttered environment in TV ads makes it
difficult to make standout ads,’ he said. ‘It’s also very expensive
and it’s questionable as to its effectiveness.’”
–I’m not one to praise Democratic Congressman Henry Waxman
(CA), but I hope his look at the Carnival Cruise Lines contract
with Homeland Security reveals the truth; that being this is just
another instance where the American public is screwed by a
corrupt bureaucracy. Carnival’s 6-month deal to house hurricane
refugees and reconstruction workers is for $236 million when
evidently normal revenue for this time period is closer to $150
million.
–Canada / U.S. trade: When I was up north last week, the big
debate in the Canadian papers was over Prime Minister Paul
Martin’s talk of cutting off the oil spigot to the United States
unless Washington gives in on the disputed softwood lumber
issue. I don’t purport to be an expert on this one, but basically
the Bush administration is saying Canada unfairly subsidizes its
lumber business to the detriment of U.S. competition. But a
NAFTA panel recently ruled this isn’t the case (let’s face it,
Americans are big time hypocrites when it comes to subsidies in
general) and that the U.S. owes Canada $5 billion in collected
tariffs. The U.S. is appealing the ruling, of course, but keeping
the rhetoric down, seeing as the administration has far bigger
concerns these days, while for his part Martin is rattling the cage
for political consumption.
According to him, Canada “has choices who to sell to” and
pointed to his nation’s new partnership in the energy field with
the likes of China and India.
Well, this is a ridiculous debate, though I’ve also surmised in the
past that Washington ignores what’s going on up north when it
comes to oil and gas at its own peril.
Here are some other thoughts from Andrew Coyne of Canada’s
National Post.
“The Natural Resources Minister, John McCallum, is quoted
claiming China could be importing 400,000 barrels of oil a day
in seven years.
“This sounds like good news, especially if one is willing to
overlook, as it seems nearly everyone is, China’s appalling
record on human rights, the massive network of spies it
maintains in Canada, its escalating threats against Taiwan, and
the broader security challenge it presents to the West. Viewed
strictly in trade terms, what’s good for China is good for Canada,
and if the federal government favors selling oil to China, so do I.
“Of course, it’s a little hard to square with the same
government’s constant proclamations that China, India and other
economic powers are in some sort of life-or-death, winner-take-
all competition with Canada – as opposed to Chinese companies
competing with their Canadian counterparts, which is to our
benefit as much as theirs – but never mind: Expanded trade is
always good policy, with China or anyone else.
“But then I read this: ‘The government’s new strategy of pitching
oil to China is widely seen as a pressure tactic against
Washington after its refusal to comply with the NAFTA
softwood ruling.’ Huh? What does selling oil to Beijing have to
do with selling lumber to Washington? Are we to suppose that,
were it not for the softwood dispute, Canada would not be
interested in selling oil to China? That the only reason we’re
pushing sales to China is to tick off the Yanks?”
Bottom line, to Mr. Martin I have some advice. Ask yourself,
“Who’s your daddy?” And to President Bush, sit down and work
this out.
–The Bush administration’s tax reform panel began circulating
its proposals and there is no way they fly. For starters they aren’t
bold enough, with the top bracket remaining far too high,
particularly for corporations, while you can’t fiddle with the
mortgage interest deduction as the commission has planned. In
fact, I can’t even say it’s a good start. Instead, try starting over.
True, the #1 item that has to addressed, the elimination of the
alternative minimum tax, is on the table but that means replacing
$1.3 trillion in lost revenue over the next decade. I just think the
plans go about it the wrong way, especially since reducing
federal spending has to be part of any package that has to purport
to be revenue neutral to win both congressional and public
support.
–It’s been a mystery where the Russian government placed
former Yukos chairman Mikhail Khodorkovsky following his
recent conviction, but now we’ve learned he will be spending the
remaining years on his prison term (two years having already
been served out of 8) in a Siberian prison camp; contaminated by
a uranium mine and 7 hours by car from the nearest city. One
day we’ll learn he died of bird flu.
–Citing “declining tops,” long-time market technician Joe
Granville recently wrote “the market appears to be headed for a
crash.” More than a few of you are probably thinking, ‘that
guy’s still alive?’
–My portfolio: You’d all do me a big favor if you’d go out and
put a wind farm on your property, which in turn supports my
carbon fiber play. Or buy a big Boeing jet. [Granted, some of
you may be short on space…so you’re excused.]
Foreign Affairs
Iran: The mullahs vow to block intrusive inspections of their
nuclear facilities, but I imagine the Iranians are as curious to see
how the whole Syria / Lebanese situation plays out as the rest of
us are. It could speak volumes on the level of future cooperation
down the road.
That said, Secretary of State Condoleezza Rice was in Moscow
this week to try and convince the Kremlin to back an IAEA-
based referral to the UN Security Council and the Russians said
“nyet.” To be continued.
Israel: Early in the week, three Israelis were killed in drive by
shootings on the West Bank and as Israel placed new restrictions
on movements by Palestinians, the Palestinian Authority said it
wouldn’t disarm terrorist groups like Hamas.
So then Palestinian leader Mahmoud Abbas met with President
Bush on Thursday and Bush said “We expect all parties to adhere
to the road map and we’re holding people to account on the
pledges that both the Palestinians and the Israelis have made.”
Bush added, “The Palestinian Authority must earn the confidence
of its neighbors by rejecting and fighting terrorism.”
For his part Abbas declared he wanted Hamas in the political
process, with parliamentary elections slated for January, while
Bush wants Hamas barred from the vote. At least Abbas issued
strong statements during the week that Palestinian refugees
living in Lebanon must abide by Lebanese law. Then again, few
listen to Abbas so why should this impress me?
China…and the Far East: The Communist Party of China (CPC)
issued its first ever white paper on democracy, explaining why
communist rule was good for the people. For example:
“The leadership of the CPC is a fundamental guarantee for the
Chinese people to be masters in managing the affairs of their
own country.”
“The CPC’s leadership and rule is needed for uniting hundreds of
millions of people to work in concerted efforts in building a
beautiful future.”
But…
“Without social stability, smooth economic development cannot
be expected.”
“Because situations differ from one country to another, the paths
the people of different countries take to win and develop
democracy are different.”
Message received: Leave us alone.
The above was released as Donald Rumsfeld was making his
first trip to China as defense secretary. Rumsfeld lectured the
Chinese government about its “non-transparent” military buildup
and raised questions about China’s intentions with its exploding
levels of spending on its armed forces. Rumsfeld also
commented specifically on China’s expanding ballistic missile
program.
“(The) advances in China’s strategic strike capability give cause
for concern, particularly when there is an imperfect
understanding among others about such developments.
“As a result, a number of countries with interests in the region
are asking questions about China’s intentions.” [See Taiwan.]
To which a Foreign Ministry spokesman defended the expansion.
“It’s right for China to enhance its justified defense capabilities.”
Defense from whom? mon frere.
Both President Hu Jintao and Defense Minister Cao raised the
issue of Taiwan themselves.
“I hope the U.S. will properly and prudently handle the question
(of China’s sovereignty over the island). They should not send
the wrong signal to the Taiwan independence forces.”
I’ve been writing I’m increasingly concerned that in order to win
China’s support in the nuclear weapons talks with North Korea,
the Bush administration may send out an all-too clear signal it
would look the other way if China orchestrates a coup on
Taiwan. The 600 missiles facing Taiwan needn’t be put to use
for Beijing to achieve its objective. Your first clue as to how it
will all end is President Hu’s trip to Pyongyang next week.
Meanwhile, Japan’s Prime Minister Koizumi once again stirred
things up with yet another visit to the Yasukuni war shrine where
among the 2.5 million honored dead are 14 war criminals.
Beijing labeled it “outrageous.” Taipei urged Japan to “face
history.” The Chinese ambassador to Japan called it a “serious
provocation.” South Korea’s foreign minister said the visits
remain “the biggest stumbling block to South Korea – Japan
relations.”
And in Hong Kong, pro-democracy organizers are gearing up for
another large demonstration in December to protest the latest
election reform plan that still leaves the people without a direct
say in who governs them. Beijing will continue to basically
handpick the election committee that in turn chooses a chief
executive.
[Sources for all the above: South China Morning Post, Peoples
Daily, Financial Times]
Lastly, the U.S. general in charge of forces in South Korea, Leon
LaPorte, told reporters that the two Koreas have benefited from
the engagement policy adopted by the Seoul government and that
the number of military provocations against U.S. and South
Korean troops had declined considerably over the past 12 to 18
months.
But among the issues facing the U.S. and South Korea are the
continued reduction in U.S. forces and that of control. As Jay
Solomon writes in the Wall Street Journal, “Seoul currently
maintains the command, but under rules drafted after the 1950-
53 Korean War, it would revert to a U.S. general should
hostilities break out.”
Now this is something to chew on. I’ll have more comment
down the road.
Pakistan: The tragedy here will easily surpass that of the tsunami
when the final history is written. It’s staggering what the
Musharraf government and the international community face
with a death toll evidently now exceeding 79,000 and an
estimated 3 million homeless, just as the Himalayan winter is
about to set in.
As I wrote last week, the danger for the rest of the civilized
world is that Musharraf himself becomes a casualty as the
extremists use the excuse of government incompetence in
handling the crisis to bring down his regime.
Russia: Chechen warlord Shamil Basayev admitted the Nalchik
attacks were a failure. It appears Russian security forces were
hot on the trail of the militants and, cornered, they chose to
attack before originally planned and were thus routed.
Colombia: A court ruled President Alvaro Uribe can run for a
second term in 2006 even though the constitution currently
prohibits this. [The constitution will thus have to be amended…
if I have this right.] This could be one of the more important
events in our hemisphere over the coming years. Uribe is a
staunch ally of the United States, a man who has already
survived 18 assassination attempts, and we not only need his
efforts to quash the rebels who insist on waging civil war, but
also to stand up to his neighbor, President Hugo Chavez of
Venezuela.
Netherlands: Seven suspected terrorists were arrested as part of a
plot to assassinate conservative members of parliament. This
nation has changed greatly over time and it’s become a real
flashpoint in Europe on the issue of immigration, as best
exemplified by the assassination of political firebrand Pim
Fortuyn and the murder of conservative filmmaker Theo van
Gogh. I’ll be over here to offer a little perspective in a few
weeks.
Germany: I said it from day one, the new grand coalition will be
a mess and already Angela Merkel’s broad-ranging tax cuts have
become a victim of the power-sharing, thus ensuring further
stagnation for this vital member of the world community.
Random Musings
–President Bush received another failing grade in the polls, this
one the USA Today / CNN / Gallup survey that shows him with
a 39% overall approval rating. [The third such reading from
three different outfits.] But while 84% of Republicans still give
Bush high marks, and just 8% of Democrats, he has only a 32%
approval rating among independents.
–Bill O’Reilly told Katie Couric on “Today” that “ideologues on
both sides don’t like (Harriet Miers).” Once again, Bill, I don’t
exactly call myself an ideologue but I don’t like the choice
either. As I noted last week it’s “appalling.”
My opinion has zero to do with how Harriet would vote on the
litmus test issue of abortion and I concur with Democratic
Senator Patrick Leahy of the Judiciary Committee, who
described some of her answers on the committee questionnaire as
“insulting.” Most Americans should be insulted at the president’s
total lack of respect for all of us with this nomination. And as
the editorial board of the Wall Street Journal offered on Friday:
“(It) now seems clear – even well before her Senate hearings –
that this selection has become a political blunder of the first
order.”
–Then you have the CIA leak case. As I go to post, Special
Prosecutor Patrick Fitzgerald has yet to state his conclusions but
this much is clear. New York Times columnist Judith Miller is a
“real piece of work,” as Washington Post columnist Eugene
Robinson put it. [In the past, I fell for much of Ms. Miller’s
reportage…but I clearly wasn’t alone.]
But not knowing any more than the rest of you in this strange
case, I leave you with the thoughts of Post columnist Jim
Hoagland.
“An even larger threat to a reasoned and comprehensive debate
on the American agenda is emerging from the misuse of the
Plame affair as a weapon of political and bureaucratic warfare in
Washington. The leak case is becoming one more stand-in for a
‘smoking gun’ needed to show that Bush and Vice President
Cheney knew that there were no weapons of mass destruction in
Iraq and that they based the war on lies.
“This would deny that there were ever serious questions about
Iraq’s compliance with obligations to show the United Nations
that it had destroyed those weapons, about whether the despot
Saddam Hussein should be left in place without sanctions to
continue to murder Kurds and Shiites, or about the role Iraq
played in regional and global terrorism.
“Those were serious questions at the time. Getting the WMD
piece of it wrong is also a serious matter, which further
complicates the grave problems that U.S. forces face in Iraq. But
to then reduce the uncertainties and conflicts to chants of ‘liar,
liar’ now is a juvenile attempt to rewrite or ignore history. It
shifts attention from the policy changes and practical steps
needed today.”
–47% of returning Iraq vets saw someone wounded, killed or a
dead body. 1 in 4 have health issues. [USA Today]
–The FBI announced the nation’s murder rate is at its lowest
level in 40 years. Chicago led the decline, down 150 in 2004.
New York was rated the safest big city, a fact Mayor Michael
Bloomberg was only too happy to trumpet in his reelection bid.
It would appear his final margin of victory will be around 15%,
maybe higher.
–Two weeks ago, I wrote in relation to a piece on bird flu and
staying healthy:
“…wash your hands about 63,000 times a day, though be careful
with the antibiotic soap…”
This week the FDA announced it needed further study on how
“widespread use of antibacterial products for years…can lead to
the emergence of bacteria that resist antibiotics.”
Don’t worry. Go ahead and use it, but the bottom line is regular
soap works just as well.
–For my Aussie readers, I note the death of William Allan, 106,
the last Aussie vet to serve in World War I. Allan enlisted at 14
in the Royal Australia Navy and also served in WW II. Yup, I
imagine he had a few good stories. RIP.
–I thoroughly enjoyed my time last week in Charlottetown,
Prince Edward Island, in conjunction with my half marathon. I
ran like molasses, though, partially as a result of enjoying myself
too much. To the people of this place, you were terrific hosts.
And as any runner appreciates, you can’t pull these events off
without the support of race organizers and volunteers, so my
thanks to them as well.
–Uh oh…thanks to global warming and a reduced ice pack, 26
polar bears are wreaking havoc in the Nizhnekolymsky region of
eastern Siberia. Instead of feeding on ringed seals, they have
turned to menacing the inhabitants of the region.
Seeing as the World Wildlife Fund fears the polar bear could
become extinct because the Arctic ice is melting so fast, here’s
hoping the polar bears find sustenance.
In all seriousness, it’s estimated that in the Western Hudson Bay
of Canada, where the ice season has been shortened by three
weeks, the polar bear population is off 14% since 1995. Very
sad. [Source: Jeremy Page / Times of London]
–And finally, something a little different, and positive, for my
farmer friends out there. I was reading my High Plains Journal
and came across an item by John Schlageck of the Kansas Farm
Bureau. He talks of the ‘farmer’s creed’ that is passed down
through the generations.
“It goes something like this.
“A man’s greatest possession is his dignity and no calling
bestows this more abundantly than farming. Hard work and
honest sweat are the building blocks of a person’s character.
“Farming and ranching, despite its hardships and
disappointments, is the most honest and honorable way a man /
woman can spend days on this earth. The vocation of agriculture
nurtures the close family ties that make life rich in ways money
can’t buy.
“Children who are raised on a farm or ranch learn values that last
a lifetime that can be learned no other way. Farming and
ranching provides education for life and no other occupation
teaches so much about birth, growth and maturity in such a
variety of ways.
“Without question, many of the best things in life are free – the
splendor of a sunrise, the rapture of wide open spaces, the
exhilarating sight of the landscape greening each spring – true
happiness comes from watching crops ripen in the field,
watching children grow tall in the sun, seeing your whole family
feel the pride that springs from their shared experience living,
working and harvesting from the land.
“Farmers and ranchers believe that through their shared vocation
they are giving more to the world than they are taking from it –
an honor and privilege that does not come to all men or women.
Agricultural producers believe their lives will be measured
ultimately by what they have done for their fellow man / woman
and by this standard, fear no judgment.
“They believe when they grow old and sum up their days, they
will stand tall and feel pride in the life they’ve lived. Farmers
and ranchers believe in their vocation because it makes all of this
possible.”
Kind of makes you want to dig up the old yard and plant some
winter wheat, doesn’t it?
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $468
Oil, $60.63
Returns for the week 10/17-10/21
Dow Jones -0.7% [10215]
S&P 500 -0.6% [1179]
S&P MidCap +0.2%
Russell 2000 -0.1%
Nasdaq +0.8% [2082]
Returns for the period 1/1/05-10/21/05
Dow Jones -5.3%
S&P 500 -2.7%
S&P MidCap +2.9%
Russell 2000 -2.9%
Nasdaq -4.3%
Bulls 45.3
Bears 29.5 [Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
Brian Trumbore
🙂 _]
