[Posted 7:00 AM ET]
Iraq
Almost four months after the December vote for a permanent
parliament that was to then form a new government, the full
legislature has met for all of 30 minutes and the selection of a
cabinet and prime minister is still in question. The United States
and Britain continued to apply pressure on interim Prime
Minister Jaafari to step down this week, but as of this writing he
refuses to do so and now the ruling Shiites are increasingly upset
at the U.S. for “interfering” in the political process.
John Podhoretz / New York Post:
“The realists say that Iraq can’t transform itself because it lacks
the right established institutions and traditions, and because
Islam and democracy simply can’t mix. But that analysis
presupposes that the people of Iraq simply aren’t ready or able or
capable of governing themselves as we in the West do – the
message of the (Condoleezza) Rice-(Jack) Straw trip is actually
something entirely different.
“The problem in Iraq isn’t that the masses want and need a
strongman or a religious dictator to take charge of them, or that
the masses want something other than democracy.
“The people of Iraq have done their part.
“They voted, at great personal risk, in overwhelming numbers on
three separate occasions in 2005 – culminating in the December
balloting in which an astounding 80 percent of those eligible
took part, with even the Sunni Arabs turning out.
“The Iraqis voted in a slate of candidates to draft a constitution,
then they voted to ratify that constitution – and then they voted
for parliamentary candidates whose job it is to represent them.
“And what has come from it? The astounding dereliction of
Iraq’s elites, the supposed leaders and future leaders of the
country.”
Reuel Marc Gerecht / Wall Street Journal:
“If Baghdad remains a killing zone, where Iraq’s leaders can
safely gather only under U.S. protection, then the prognosis for
the Iraqi national identity, which has always had Baghdad at its
center, is poor. Lasting political compromises will probably be
impossible if the increasingly vicious sectarian strife in Baghdad
and its environs intensifies. Within a year, at most two, Iraq
could become Algeria….
“We are now in the unenviable position of having to confront
radicalized, murderous Shiite militias, who have gained broader
Shiite support because of the Sunni-led violence and the
lameness of U.S. counterinsurgency operations. The Bush
administration would be wise not to postpone any longer what it
should have already undertaken – securing Baghdad. This will
be an enormously difficult task: Both Sunnis and Shiites will
have to be confronted, but Sunni insurgents and brigands must be
dealt with first to ensure America doesn’t lose the Shiite majority
and the government doesn’t completely fall apart. Pacifying
Baghdad will be politically convulsive and provide horrific film
footage and skyrocketing body counts. But Iraq cannot heal
itself so long as Baghdad remains a deadly place. And the U.S.
media will never write many optimistic stories about Iraq if
journalists fear going outside. To punt this undertaking down the
road when the political dynamics might be better, and when the
number of American soldiers in Iraq will surely be less, perhaps
a lot less, is to invite disaster.
“The Iraqis and the Americans will either save or damn Iraq in
the coming months. Quite contrary to the purblind charges of
Michigan’s Democratic Sen. Carl Levin, the Iraqis really are
doing their part – better than what anyone historically could have
expected. The real question is, will Gen. Abizaid and Defense
Secretary Donald Rumsfeld do theirs?”
Speaking of Rumsfeld, a national embarrassment and a blot on
President Bush’s legacy, he made an incredible statement this
week disputing Secretary of State Rice’s statement in the UK
that “thousands” of tactical errors had been made in conducting
the Iraq war.
“The enemy watches what you do and then adjusts to that, so you
have to constantly change your tactics.”
The New York Times’ Thomas Friedman commented on
Rumsfeld’s remark, Friday. [Friedman has the above quote a
little different from what I obtained from another source.]
“Where does one even begin? First of all, Secretary Rice is
wrong that the Bush team’s mistakes in Iraq were purely tactical.
Under Mr. Rumsfeld’s direction, it made a monumental strategic
error in not deploying enough troops to control Iraq’s borders
and fill the security vacuum we created by bringing down
Saddam – a vacuum that has since been filled by looters and
scores of head-chopping sectarian militias and gangs.”
Appearing on “Meet the Press,” Retired Gen. Anthony Zinni was
incredulous Rumsfeld has yet to be fired. In discussing why
Bush has failed to act, Zinni commented “integrity is more
important than loyalty.”
On Friday, three suicide bombers blew themselves up at a Shiite
mosque in Baghdad, killing over 70. Earlier Iraqi security forces
had issued a warning that seven car bombings were planned,
amidst fears that militias had infiltrated the Interior Ministry;
which they have.
But when one focuses on this war and the carnage, I also tend to
think about the brain drain. You’ve all seen the stories of how
even the doctors are fleeing, as they themselves have become
targets for kidnapping and assassination. Knowing the nation’s
best and brightest are needed to lead Iraq out of the morass if
security is ever restored, who will be left, outside of a few
corrupt officials who are eager to divvy up the oil revenues?
Iran
The Washington Post reported that the mullahs are prepared to
unleash a reign of terror should the West launch a preemptive
strike on suspected nuclear facilities, including the use of
Hizbullah. Israeli military officials also believe that Iran has set
up a sophisticated intelligence-gathering operation in Lebanon to
identify targets in northern Israel. Senior Israeli commanders
told the UK’s Daily Telegraph that Hizbullah has established a
network of control towers and monitoring stations along the
border, many just 100 yards from Israeli army positions.
Meanwhile, Iran held war games and issued one announcement
after another about new sophisticated weapons systems. U.S.
and Israeli intelligence discounted most of their claims, but the
report of a new torpedo does add credence to the belief that Iran
could easily shut down the Strait of Hormuz, the most important
chokepoint for the flow of oil in the world, by taking out a tanker
or two, as well as a warship protecting same.
And then you had Iran’s ambassador to the United Nations,
Javad Zarif, state in an op-ed for the New York Times:
“The controversy over Iran’s peaceful nuclear program has
obscured one point in particular: There need not be a crisis. A
solution to the situation is possible and eminently within reach.
“Lost amid the rhetoric is this: Iran has a strong interest in
enhancing the integrity and authority of the Nuclear
Nonproliferation Treaty. It has been in the forefront of efforts to
ensure the treaty’s universality. Iran’s reliance on the
nonproliferation regime is based on legal commitments, sober
strategic calculations and spiritual and ideological doctrine….
“We are party to all international agreements on the control of
weapons of mass destruction. We want regional stability….
“Pressure and threats do not resolve problems. Finding solutions
requires political will and a readiness to engage in serious
negotiations. Iran is ready. We hope the rest of the world will
join us.”
I cut the ambassador a break in how I edited his piece. This is
nonetheless laughable.
Israel
From the Jerusalem Post:
“Newly-installed Palestinian Authority Foreign Minister
Mahmoud Zahar on Sunday reiterated Hamas’s desire to
eliminate Israel and replace it with an Islamic state….
“His statements (to Chinese news agency Xinhua) stand in sharp
contrast with Hamas’s attempt to project a conciliatory and
pragmatic image following the movement’s landslide victory in
last January’s parliamentary election.”
But later in the week, Zahar hinted Hamas may be amenable to a
two-state solution if that is what the Palestinian people desire,
while he still refused to accept Israel’s right to exist. Prime
Minister Haniyeh also has yet to recognize Israel, a minimal first
step Hamas must take before Israel would contemplate holding
any kinds of talks, let alone cough up back duties owed it.
Hamas also won’t see any money from both the U.S. and
European Union as they announced they will channel funds to
UN aid agencies, not directly to the Palestinian government.
Wall Street
For years some have warned about the current account deficit,
the broadest measure of trade. Personally, I’ve been more
focused on issues like real estate, but it would appear the
chickens may finally be coming home to roost when it comes to
our debts.
Chicago Federal Reserve President Michael Moskow issued a
warning this week:
“An economy the size of the United States cannot run large
current account deficits indefinitely,” he told an economics
forum in London on Thursday. Eventually countries investing in
the United States, such as China, Japan, developing East Asian
nations and major oil exporters, “will reach their desired
allocations of U.S. assets. They’re going to want to invest in
their own countries,” though as always the timing of such a trend
is hard to estimate. [Reuters]
Mohamed El-Erian, formerly of PIMCO and now head of
Harvard’s endowment as well as an expert on emerging markets
and debt issues, told Bloomberg News that the accumulation of
reserves by poorer countries and their decision to use much of
the money to finance the U.S. budget deficit through the
purchase of Treasury securities is “highly unusual.” El-Erian
calls it a “stable disequilibrium” which helps explain how long-
term rates have remained so low even as the deficits grew.
“The poor countries are funding the rich country,” El-Erian said.
“At some point – and the big question is at what point – the
disequilibrium will dominate the stability.”
The situation has remained stable because it is “in the interest of
the countries involved,” El-Erian said. For the U.S., running a
deficit enables it to consume, while the creditor nations are
enabling the consumption that is fueling their exports.
Looked at another way, the U.S. is soaking up 2/3s of global
savings in order to finance its consumption. [Spencer Jakab /
Wall Street Journal] But on Friday we had a whiff of a sentiment
change as there is growing consensus Japan is closer than
initially thought to raising their interest rates and, coupled with
the perception that wage pressures could mount in the U.S. as the
economy continues to create jobs, the bond market tanked, with
the 10-year Treasury finishing the week at 4.96%.
The battle has been joined. Global growth vs. rising interest
rates. As noted over the past few months, for its part Europe is
definitely on the rebound, too, further fueling demand for
commodities, for example, as items like gold, silver and copper
soar to new 20-year+ highs or all-time levels. Commodities are
the staple of the emerging markets and have thus generated the
huge cash flows addressed earlier, while the hedge fund
community has been increasing its own direct exposure to the
sector.
China has yet to slow down, either. GDP growth in Shanghai, for
instance, was at a 12% annualized rate in just the first quarter.
And then there’s the global bubble in real estate. Here in the
U.S., the National Association of Realtors issued a report that
lent further credence to the excessive speculation in our market,
as a full 28% of homes purchased in 2005 were for investment
purposes while an additional 12% were vacation homes. In other
words 40% were second homes. It used to be two cars in every
garage. Now you have room for four or five.
ISI’s Andrew Laperriere did a piece in the Weekly Standard on
real estate and talked of the price-to-income ratio being 8-1
today, double the average of the past 30 years, while the price-to-
rent ratio is totally out of whack as well. For example, in some
regions renting a condo is ½ the cost of a standard monthly
mortgage payment (all in and calculating for property taxes, the
income tax deduction, condo fees, etc.); yet so many keep buying
rather than renting.
So add it all up, throw in the “competition for the investment
dollar” angle (the higher rates go, the better the comparison
against stocks in looking at shorter-term paper and money
market instruments), and it’s increasingly hard to envision a soft
landing.
And to follow up on my story last time about Chile and the
average Chilean’s exploding credit card debt, a new experience
there, I have to make note of a headline I saw in the Star-Ledger
here in New Jersey.
“India embraces plastic…”
The meat of the article was actually about how an India-based
bank was going to clean up on fees and such, but also noted
“while the average Indian consumer once regarded debt as a
shameful burden, today India’s growing middle class perceives
plastic as a ‘status symbol.’”
Uh oh. Chile, India…soon China…all of whom help finance our
debts but will increasingly have problems taking care of their
own liabilities, thus leaving the U.S. out in the street, holding a
sign:
“Please buy our bonds”
Randall Forsyth wrote the following in the April 3 edition of
Barron’s, in discussing how the Bush administration appears
hell-bent on shoving Treasury Secretary John Snow out the door
because “he doesn’t communicate forcefully enough the good
news about the U.S. economy, for which the (administration) is
Johnny on the spot to take credit.” [As was again the case this
past Friday following another solid report on employment.]
Forsyth:
“Apparently what’s needed, in the estimation of incoming White
House Chief of Staff Joshua B. Bolten, is somebody who can
really trumpet the message out there. A man or woman who can
get up there and bang the pulpit: Hey, you, Mr. and Mrs.
America, unemployment is under 5%, better than when Bill and
Hill were in the White House. And, don’t you know that
inflation is only about 2%? Well, it is, the way the eco-
cognoscenti count it: personal consumption expenditures,
stripped of food and energy costs. Want to take advantage of
lower prices? Go buy a flat-screen TV or a digital camera, not
something frivolous like gasoline that’s up 10% since you last
filled the tank. Medical costs? Rising mortgage rates? Your job
and pension might be disappearing? Stop whining. You never
had it so good, but you just don’t know it. Boo-yah!”
Street Bytes
–It was a week where the three major averages were collectively
as close to unchanged as you’ll ever find. The Dow Jones was
up 11 points to 11120, while the S&P 500 picked up a point and
Nasdaq lost a fraction of one. Intra-day volatility, however, was
a constant factor and the market took it on the chin Friday thanks
to rising interest rates. The March employment report was solid,
but there are still concerns wage pressures will gain steam if the
jobs picture continues to improve. Thus inflation fears are
trumping the positives of a good economy, at least for today. All
manner of Fed speakers during the week, however, were once
again sanguine on prices.
–U.S. Treasury Yields
6-mo. 4.85% 2-yr. 4.88% 10-yr. 4.96% 30-yr. 5.04%
The other economic data for the week was actually mixed as the
leading measure of the service sector, as well as a reading on
construction were up, but retailers reported disappointing sales
figures for March. Meanwhile, gold hit the $600 level at one
point for the first time since 1981, thus helping to fan the
inflation fears.
As for mortgages, the rate on a 30-year fixed is suddenly up to
6.43% and will be higher still unless bonds rally.
PIMCO’s Bill Gross recently commented in his piece for
pimco.com on the current environment.
“When one can buy a U.S. agency guaranteed FNMA mortgage
at a higher yield than almost all emerging market debt, then there
exists an irrational pricing of credit. In general, almost all risk
and associated ‘premia’ are now trading at illogically low levels
and as Alan Greenspan warned just months ago, history has not
dealt kindly with the aftermath of protracted periods of low risk
premiums. ‘Periods of relative stability,’ in fact, ‘often engender
unrealistic expectations of permanence and at times lead to
financial excess and economic stress,’ he said.”
–As is their wont, the Federal Reserve just released transcripts of
its deliberations from 2000 and it’s clear they totally missed the
tech bust.
For example, Federal Reserve Governor William Poole
commented in October of that year after some leading companies
in the sector began to warn of tougher times ahead. “Is there
something there that those companies are seeing that we’re not
seeing?”
Then, according to the transcripts, Alan Greenspan offered,
“There is nothing terribly significant going on in the economy
excluding energy.”
As Greg Ip of the Wall Street Journal points out, the Fed was
reluctant to cut interest rates even as the slowdown became
apparent, having last raised them that May. “They thought tight
labor markets and high energy prices threatened to raise
inflation.”
Finally, in December 2000, Greenspan acknowledged that
growth had “unambiguously moved down dramatically.” The
Fed cut rates shortly thereafter but it was already too late to stop
the slide.
So the obvious question is will history repeat itself? Will the Fed
again go too far? Of course it will; it always does.
–Venezuela continues to jerk foreign energy companies around,
this week demanding France’s Total and Italy’s ENI renegotiate
prior agreements to better the Chavez government’s share of the
profits.
–China’s CNOOC began pumping natural gas from a disputed
field in the East China Sea. Japan admits the well is in Chinese
waters but the issue is China drawing from Japanese fields?
–The German government approved a $1 billion loan package
for Russia’s Gazprom while Gerhard Schroeder was still
chancellor; four weeks before he left office and six weeks before
he accepted a top position with them to oversea a North
European gas pipeline project. Schroeder is under intense
pressure to quit the job, while for his part he offers that the
pipeline is in Germany’s best interest, as most current members
of the government would agree.
–Auto sales for domestic manufacturers were once again dismal
in March; GM’s fell a whopping 14% and Ford’s 4.6%.
DaimlerChrysler’s rose slightly while Toyota’s were up a solid
6.9% as it continues to take away market share from the Big
Three.
But the Journal reports most hybrid models, except for the
Toyota Prius and Honda Civic Hybrid, are not selling after an
initial splash. Consumer Reports said “only two of six hybrids it
studied recovered the price premium after five years and 75,000
miles.”
–Delta pilots are scheduled to go on strike April 17, in what
could be the final death-knell for the airline.
–Shares in Apple Computer went ballistic, rising $10 at one
point on news the company was going to offer a software patch
allowing Mac users to access Windows XP for the first time.
According to early reviews the patch works like a dream and the
move opens up Apple to potentially millions of new buyers.
Separately, in a long-running court case involving trademark
infringement, according to a 2000 conversation with Neil
Aspinall of Apple Corp., Apple Computer’s Steve Jobs admitted
he took the Apple name after the Beatles’ music label.
–A jury found Merck liable in one of two Vioxx cases, ruling the
drug was decisive in a heart attack suffered by a plaintiff. Merck
will have to pay $4.5 million plus punitive damages, to be
determined shortly, while harboring new doubts about its
strategy of contesting hundreds, if not thousands, of other Vioxx
cases.
–Bird flu continues to simmer with official word the H5N1 virus
has spread to Britain, while it appears to be spreading in
Germany.
–Interesting note on Hong Kong, related to the above story on
Shanghai’s continuing growth. Hong Kong is now worried about
being marginalized due to mainland development. I can’t say
I’ve ever thought about this, but it’s a distinct possibility.
–ExxonMobil is now #1 in revenues, according to the latest
Fortune 500 list which ranks U.S. companies on sales; $350
billion in 2005 to Wal-Mart’s $315 billion. Since 1954, only
Exxon, Wal-Mart and General Motors have held the top slot.
–Speaking of GM, it sold a 51% interest in its financing arm,
GMAC, for $14 billion but the deal is already getting panned
because the buyer, private equity kingpin Cerberus Capital
(whose vice chairman is Dan Quayle), has the opportunity to pull
the plug if GM debt continues to get downgraded.
–Employees of the State Bank of India, which serves 30 percent
of the country’s bank customers, went on strike Monday
demanding higher pensions; so now tens of millions can’t access
their accounts.
–Dan L. sent me a note the other day, musing how an old friend
of ours, Harry Bingham, must be smiling up in heaven. I’ve
mentioned this before but back when I was with PIMCO (where
Dan also worked), Harry was manager of our precious metals
fund and as national sales manager I was its leading proponent.
But as soon as I left, PIMCO shut it down due to lack of assets as
gold was out of favor. Oh, how the wholesalers must wish they
had it in their quiver these days.
–According to the Employee Benefit Research Institute’s annual
retirement confidence survey, 68 percent of American workers
are confident about having adequate funds for a comfortable
retirement. At the same time, however, more than half of all
workers say they’ve saved less than $25,000 toward retirement.
Even among workers 55 and older, four in 10 have retirement
savings under $25,000. [Eileen Alt Powell / AP]
–It’s kind of amazing, but the 1991 “60 Minutes” piece extolling
the health benefits of drinking moderate amounts of wine is still
credited with having a big impact on wine sales in the U.S.,
according to vintners. Incidentally, two out of every three bottles
sold in the U.S., including foreign producers, comes from
California.
–My portfolio: I’m sticking with my roughly 80% cash / 20%
equity split. While the S&P 500 was up 3.7% for the first
quarter, I calculated the 80/20 allocation yielded about 1.4%;
using the S&P for the equity portion and an average rate on the
cash position based on a Merrill Lynch money market fund, as
listed weekly in Barron’s. I’ll be keeping track of this
throughout the year.
Foreign Affairs
India: Congress began hearings on the agreement between the
United States and India regarding the transfer of nuclear
technology. It would appear there is cause for optimism that
Congress will approve of the deal after all, a good thing as I’ve
tried to spell out the past few weeks.
Democratic Senator Joseph Biden said, “It comes down to a
simple bet we’re making. It’s a bet that India appreciates, as
much as we do, that the two nations have the potential to be the
anchors for stability and security in the world going into the 21st
century.”
Republican Senator Richard Lugar, while expressing concerns
about the expansion of India’s nuclear stockpile, praised the plan
for allowing more inspections of India’s facilities (though not the
ones responsible for weapons production). The central question,
according to Lugar, chairman of the Senate Foreign Relations
Committee, is “How important is India?” Very. Secretary of
State Rice told the Senate that India “could be a pillar of stability
in a rapidly changing Asia.”
Former Clinton-era Defense Secretary William Cohen had the
following in an op-ed for the Wall Street Journal:
“Some argue that carving out an exception (to the Nuclear
Nonproliferation Treaty) for India in the civilian nuclear sphere
sets a bad precedent by rewarding India for developing its own
nuclear weapons. Critics would liken India’s behavior to Iran’s
or North Korea’s and suggest that this agreement will encourage
bad behavior by others.
“The moral equivalency argument fails a crucial reality test. Iran
signed the NPT and then covertly used loopholes in the treaty to
pursue its goal of developing nuclear weapons. North Korea,
having cheated on its past agreements, has now completely
withdrawn from the NPT. Moreover, both Iran and North Korea
are known proliferators. India, by contrast, developed its nuclear
program outside of the NPT. Importantly, it has not shared or
distributed its nuclear material or technology to other nations or
rogue groups….
“(While the agreement is not perfect), fundamentally upgrading
the U.S.-India relationship represents one of the most important
strategic innovations in American foreign policy since the end of
the Cold War. Congress should recognize and consider carefully
this reality during its deliberations on the civilian nuclear
agreement. It is time for two great countries to set aside
historical misunderstandings, resolve differences, and move
forward with a mutual commitment in promoting democracy, and
establishing free and open markets.”
Of course left unsaid from most of the comments this week was
the real key…blocking China.
Defense Analyst Kaushik Kapisthalam wrote the following in
Defense News:
“Some may say that by helping India, America is sending
dangerous signals to China. But the burden of strategic clarity
lies equally with China, which has been sending threatening
messages to India with its nuclear and missile proliferation,
opaque ties with Indian neighbors and a refusal to discuss
nuclear matters with New Delhi.
“India’s nuclear weapon status, endorsed by the United States, is
therefore likely to encourage moderate elements in Beijing’s
leadership to move toward transparency and accommodation.
Equal access to nuclear power is also likely to abate the rising
prospects of Sino-Indian resource tussles….
“A strong and unshackled India, with its economic, military and,
cultural influence in regions of Sino-Indian interest, gives China
a choice between moderation and overextension of its
geopolitical power. This will be an invaluable asset to the
United States. But India and the United States, unlike China,
share a commitment to democracy, free enterprise and
counterterrorism, which means that the Indo-U.S. relationship is
unlikely to turn antagonistic if and when the threat from China
abates.”
Russia: Appearing on “Meet the Press” Sunday, Senator
John McCain fulfilled my wishes from last WIR to continue to
stand tough on Russia in light of President Bush’s own ongoing
support of Russian President Vladimir Putin. The U.S. should
“probably boycott” the G-8 in St. Petersburg, McCain said,
noting that Putin seeks the “restoration of the Russian Empire”
and that “Putin is an autocrat seeking consolidation of power
with his old buddies in the KGB.”
On the energy front, Putin and his KGB cronies running
Gazprom are tripling the rates charged Belarus, cashing in on
their support of President Lukashenko in his recent campaign,
but it’s all really about the fact 20 percent of Russia’s gas exports
and 50 percent of its oil transits through Belarus. Gazprom has
long been seeking control of Belarussian pipeline monopoly
Beltransgaz and it will be interesting to watch developments here
over the coming year or so.
Finally, Russian Foreign Minister Sergei Lavrov responded to
growing criticism of the Kremlin’s policies toward human rights
groups and its use of the oil card as a political weapon.
“We often hear from some countries that Russia is becoming
strong and unpredictable. But this is not the case. In the 1990s,
when the Commonwealth of Independent states was
disintegrating and there were fears of Russia breaking up too,
some people in the West said they wanted a strong and united
Russia. Now we are here. They should be grateful.”
[International Herald Tribune]
China / Taiwan: Chinese President Hu Jintao is going to be in
the U.S. from April 18-22. Aside from his time in D.C., Hu will
be visiting Boeing and having dinner with Microsoft’s Bill
Gates. Mr. Gates will bring up the issue of piracy and Hu will
undoubtedly offer to purchase more Windows operating systems.
Additionally, representatives from over 100 Chinese companies
are said to be lining up deals with counterparts in 13 U.S. states,
including in the areas of agriculture, autos, and electrical
products aside from the aforementioned aerospace and software.
But while this is good short-term, it does little to ameliorate
longer-term concerns on the trade front.
And then there’s Taiwan. Taiwan’s President Chen Shui-bian
once again addressed the growing missile count across the
Taiwan Strait.
“The number of ballistic missiles targeting Taiwan has topped
787 from 200 in the year 2000….Is this goodwill or part of its
preparations for invading Taiwan?
“They have come up with a three-stage timeframe of using force
against Taiwan. They plan to beef up their emergency warfare
capabilities by next year, and large-scale warfare capabilities
against Taiwan by 2010 and capabilities to have a military
showdown with Taiwan by 2015, according to the information
we have collected.”
I don’t know what information Chen is referring to, but he has to
know China could decapitate the Taipei government at a
moment’s notice.
Ukraine: Little has happened since the March 26 parliamentary
vote and the structuring of a governing coalition has yet to come
to fruition. President Viktor Yushchenko, whose Our Ukraine
party finished a dismal third, now wants to reform the Orange
Revolution team with the woman he canned as prime minister
just last year, Yulia Tymoshenko. Tymoshenko won’t agree to
this, however, unless she is renamed prime minister.
But I just want to finish last week’s piece concerning the opinion
of former Czech President Vaclav Havel.
“As Ukraine so clearly showed, the process of self-liberation
from communism was by definition associated with a gigantic
privatization program. Naturally, members of the old
establishment, with their inside knowledge and connections,
gained much of the privatized property. This ‘inevitable’ process
poisoned political life and the media, which led to a strange state
of limited freedom and a mafia-like environment. The shadings
differed from country to country in the post-communist world,
but the new generations rising in these societies now seem fed up
with it.
“Ukraine’s Orange Revolution and Georgia’s Rose Revolution
confirm this. While revolutions in the late 1980s and early 1990s
were directed against totalitarian communist regimes, nowadays
they aim to get rid of this mafia-type post-communism….
“Some of Russian President Vladimir Putin’s statements seem to
recall the Soviet era with nostalgia. Indeed, he recently called
the disintegration of the Soviet Union a tragic mistake. But
Soviet nostalgia has far more to do with Russia’s traditional great
power ambitions than with communism. Russia, I believe,
should clearly say – and the international community should
clearly say to Russia – that it has defined borders that will not be
questioned, because disputed borders lie at the core of most
conflicts.
“On the other hand, I don’t want to demonize Putin….
“The promise of Western integration is one reason that conflict
seems impossible, for it is a question of geography as much as
shared values and culture. Ukraine belongs to a united European
political entity; the values that Ukraine endorses and that are
embedded in its history are European to the core. The Czech
experience shows that implementing all of the European Union’s
norms so as to be ready to qualify for membership takes some
time. But in principle, Ukraine can succeed as well.”
Thailand: What a bizarre and rather unsettling situation here.
Prime Minister Thaksin won his snap election with 57 percent,
but after conferring with the revered king, Thaksin opted to step
aside because of the large protest vote and the fact the leading
opposition parties boycotted the election.
However, the billionaire businessman turned politico also said he
would stay in parliament and continue to lead his party which has
a solid majority. So has anything really changed?
Richard Lloyd Parry wrote in the London Times:
“Mr. Thaksin is no uniformed strongman or crude kleptocrat, and
contemporary Thailand is a world away from the Southeast
Asian dictators ousted in the late 20th century. His fall is a
murky affair, fraught with troubling ironies and risky
precedents….
“Thais know perfectly well what is said about Mr. Thaksin but
they voted for him anyway. A massively popular leader called
an election; a minority opposition first boycotted it, then drove
him from power.
“Their tools were twofold: street protests led by an urban elite;
and the intervention of an unelected monarch. How can such
actions be justified in a democracy? The worst answer came
from Chamlong Sriumuang, leader of the anti-Thaksin mob.
‘They don’t have enough information,’ he says of the Prime
Minister’s supporters. ‘Otherwise they’d act the same way as we
do.’”
Australia: First, Australia announced it had signed a series of
agreements to supply China with uranium, Australia having 40%
of global reserves. So to some this was a bit disturbing. But
then a few days later, Taiwan confirmed it had signed contracts
with Aussie uranium producers as well.
Philip Bowring of the International Herald Tribune weighed in
on the bigger issue for now.
“(How) far can Australia go with its China relationship without
upsetting the United States and Japan? In all the euphoria over
deals with China, it is sometimes forgotten here that Japan is still
by far Australia’s largest export market, with America second.
And despite the minerals boom, Australia has a trade deficit with
China. With the China-Japan relationship shaping up as the most
dangerous medium- to long-term threat in East Asia, Australia
may at some stage be forced to choose between its old ally, the
Japan-aligned United States, or attempt a neutrality that could be
dangerous for a nation with many resources, including uranium
and natural gas, but few people – and no nuclear weapons….
“So though it may be nice for Australia to be visible on the
global stage for reasons other than sports, it might have been
more comfortable remaining a prosperous, medium-sized nation
that the world was happy to ignore. Resources can be a curse as
well as a blessing.”
France: With each video of protesters in the streets of Paris, this
time over the “first job contract” labor law just signed by
President Jacques Chirac, though with modifications to be
worked out, you’ve got to believe another tour group is rerouting
away from the place.
Italy: Prime Minister Silvio Berlusconi is in the fight for his
political life, slashing and burning on the campaign trail and
calling left-wing voters…heck, I can’t even use the term. Voting
begins Sunday.
Kuwait: Women voted in council elections for the first time here
and in 2007 they will cast ballots in full legislative elections;
solid progress.
Random Musings
–According to the latest AP-Ipsos survey, President Bush’s
overall approval rating is at its lowest level ever for this
particular poll…36 percent. Just 35 percent of the public
approves of Bush’s handling of Iraq, another low. And in
another bad sign for the White House, by a 49-33 margin the
public favors Democrats over Republicans when asked which
party should control Congress.
–Republicans certainly aren’t helped by the resignation of
former House Majority Leader Tom DeLay, either. While
DeLay, wrapped up in the Jack Abramoff scandal, would argue it
was best for the party that he leave now and give a Republican
alternative a shot at winning the race for his district, the fact is
the Abramoff trials and indictments will extend through
November and DeLay will undoubtedly be prominently featured
in Democratic television spots across the country regardless of
his move.
I’m on record, though, as saying Tom DeLay was an immensely
talented figure and that he wrote some of the best speeches on
foreign policy I’ve ever read. Where he deserves scorn, though,
in addition to his possible misdeeds, is the fact he lorded over the
entire appropriations process and as a result is directly
responsible in large part for the budget mess we find ourselves
in.
–I’m invoking my “24 hour” rule with regards to the revelation
President Bush authorized leaking of sensitive intelligence on
Iraq as a means of blocking claims put forward by former
ambassador Joseph Wilson in 2003. But no doubt statements
made by Bush that year about the leak of the identity of Wilson’s
wife, former CIA operative Valerie Plame, will come back to
haunt him.
It’s a question of trust and credibility and a majority of the
American people are increasingly questioning whether the
president has been straight with them. This is as damaging as
any issue of guns or butter.
–Just a few more thoughts on the immigration debate. The
Senate came close to a compromise on a comprehensive bill,
before it was scuttled over the issue of amendments and thus we
remain a long ways from a final solution. Earlier, an AP-Ipsos
survey had 56% of Americans in favor of offering illegals some
kind of legal status, while by a 51-42 margin, people feel illegals
are good for society. As to the House proposal centered on
border security, first and foremost, it is favored by Republicans,
54-37, while Democrats oppose by a 59-35 margin. Personally,
I’ll admit I’m for strengthening the border first and reaching
compromise on the guest-worker issue in 2007, away from
election year politics.
But in my ongoing attempt to present all sides of the debate,
Barron’s Thomas Donlan addresses a key issue.
“Our current system doesn’t even give a decent welcome to the
best and the brightest would-be immigrants. The H-1B visa,
which is supposed to provide special consideration to engineers,
programmers and other highly productive workers in short
supply, is ridiculously capped at 65,000 visas per year. High-
tech companies hungry to hire burn through that quota in one
day, and then some Americans wonder why they locate factories
and research labs overseas.
“When foreign students come to this country’s great universities
to get a great American education, they get a diploma and the
bum’s rush simultaneously. If the current system were designed
better, the H-1B visa should be issued automatically to any
holder of a graduate degree who has a job waiting for him, and
anybody who graduates from an American university would have
the privilege of working in America.”
–The presidential candidacy of Massachusetts Republican Gov.
Mitt Romney may have received a huge boost with passage in
the state legislature of a comprehensive health care bill
mandating universal coverage, making Massachusetts the first
state in the union to do so. The catch is all residents must carry
it, just as everyone must have car insurance, and under the bill all
who file a state tax return will have to indicate they have health
insurance. Details to follow. Regardless, it’s groundbreaking
and definitely elevates Romney to the first tier of candidates.
–A painting by British artist JMW Turner sold at auction for a
record $35.8 million (including commission) for a British work.
But rather than being sold in the UK, it was put on the block in
New York because it’s here that hedge fund money has set the
entire art market on fire.
–An 1804 silver dollar sold at auction for $2,475,000. One of
the reasons why this particular coin is so hot is because it is
engraved with the year 1804 yet none were actually made then.
Only 15 are known to exist today, with seven of these being in
museums.
Which means one thing…before going to Coinstar to turn your
coins into hard cash, check the contents of your coffee cans
carefully.
–Remember our favorite klutz, Nick Flynn? He’s the man who
tripped in that Cambridge museum and knocked over a bunch of
vases from the Qing dynasty. A value was finally established at
$6.8 million and Flynn was actually arrested this week on
criminal charges after a lengthy investigation. Did Mr. Flynn, a
regular visitor, do it on purpose? The plot thickens.
–My friend Jimbo wrote in the other day to say he had just read
“Week in Review” on his BlackBerry during a break in his
daughter’s volleyball tournament. This could be a first, I must
say. But Jimbo’s suggestion I type up WIR on a BlackBerry
fell on deaf ears.
–Related to my seal story from last week, sea lions are wreaking
havoc with the salmon run in Oregon and according to KATU in
Portland could kill as much as 10 percent of the fish. So there’s
only one thing to do…take out the sea lions. At least that would
be my solution if I were county commissioner for a day. We
need salmon in our diets. We don’t eat sea lion fat.
–Finally, did you see the story about two “supermassive black
holes” that are heading for a collision? It will create “a single
super-supermassive black hole capable of swallowing material
equal to billions of stars,” according to researchers. [Robert Roy
Britt / Space.com]
So I’m thinking….this is how we get rid of Barry Bonds before
he breaks the home run record! After all, you need a
supermassive black hole to swallow his supermassive, steroid fed
head.
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $593…up $50 in four weeks
Oil, $67.46
Returns for the week 4/3-4/7
Dow Jones +0.1% [11120]
S&P 500 +0.1% [1295]
S&P MidCap -0.0%
Russell 2000 -1.2%
Nasdaq -0.0 [2339]
Returns for the period 1/1/06-4/7/06
Dow Jones +3.8%
S&P 500 +3.8%
S&P MidCap +7.3%
Russell 2000 +12.3%
Nasdaq +6.1%
*For the record, last week I listed the Dow Jones World index,
ex-U.S., performance thru 3/30. For the full quarter it was up
8.8%.
Bulls 49.5
Bears 27.8 [Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
Brian Trumbore
