[Posted 7:00 AM ET]
Iraq
As even the Bush administration would admit, these next few
months in Iraq are critical if it wants to convince the American
people real progress is being made. The past week wasn’t one to
put in the ‘+’ column. And for the life of me I don’t understand
if we are supposed to be looking to break the back of both al
Qaeda in Iraq and the insurgency, why aren’t we adding more
troops? Remember, when you read of 130,000 U.S. forces here,
less than a quarter of them are actually engaged in combat. And
so again, I also ask, if the generals are so “brilliant,” as Ret. Gen.
Barry McCaffrey likes to continuously say, why are we still in
the predicament we find ourselves in?
But in the coming days the Iraqi Government will announce its
plan for amnesty for the insurgents as long as they renounce
violence and lay down their arms, not that this will please
everyone.
“The Government will promise a finite, UN-approved timeline
for the withdrawal of all foreign troops from Iraq; a halt to U.S.
operations against insurgent strongholds; an end to human rights
violations, including those by coalition troops; and compensation
for victims of attacks by terrorists or Iraqi and coalition forces.
“It will pledge to take action against Shia militias and death
squads. It will also offer to review the process of ‘de-
Baathification’ and financial compensation for the thousands of
Sunnis who were purged from senior jobs in the Armed Forces
and Civil Service after the fall of Saddam.” [Ned Parker and
Tom Baldwin / London Times]
The purpose is to divide the insurgents from those linked to al
Qaeda. But the big issue facing not just the U.S. military, but the
American people as well, is the granting of amnesty to insurgents
who have killed U.S. soldiers. Let the debate begin; one that
could easily impact a few races come November.
Other important developments:
At least 12 American soldiers lost their lives in theater this week,
including the two whose bodies were mutilated by al Qaeda.
[The actual circumstances of their deaths, though, remains
unclear. They may have indeed been killed in combat along with
the third soldier, despite what the Pentagon first said.]
A third defense lawyer for Saddam Hussein was killed by Shia as
part of their effort to exact revenge.
One of the bodyguards for the Iraqi Trade Minister was
accidentally killed by Australian forces in Baghdad and the
minister immediately said he would penalize Australia in future
trade negotiations.
Two cases of murder were brought against U.S. forces.
Scores were abducted by militias donning police uniforms.
Japan is pulling its 600 troops, with Italy’s full complement out
by year-end, though in both cases the deployments were largely
symbolic and in the fourth year of operations it’s not unexpected.
A U.S. embassy cable from Iraq painted a grim description of life
there, especially for Iraqi employees inside the Green Zone who
have to hide the fact they work for the coalition out of fear of
retribution, i.e., death.
In one particularly heinous suicide attack, the “bomber exploded
his vehicle as it was being towed near a police checkpoint,
killing four civilians, said Capt. Rashid al-Samarie. He said the
bomber claimed his car had broken down and hired a tractor to
tow it while he rode inside.” [AP]
James Glanz of the New York Times reported on a disaster of a
different sort, an environmental one.
“In the heartland of Iraq’s northern Sunni-led insurgency, (there
is) a desperate move to dispose of millions of barrels of an oil
refinery byproduct called ‘black oil,’ the government pumped it
into open mountain valleys and leaky reservoirs next to the
Tigris River and set it on fire.
“The resulting huge black bogs are threatening the river and the
precious groundwater in the area….
“An Iraqi environmental engineer who has visited the area
described it as a kind of black swampland consisting of oil-
saturated terrain and large standing pools of oil.”
The problem is the heavy crude, which used to be exported to
facilities that can refine it, threatens to shut down much of Iraq’s
own refineries unless the stuff can be properly disposed of.
Lastly, of the $13.5 billion promised by various countries at a
donors conference for Iraq in Madrid back in October 2003,
according to an editorial in the Daily Star of Lebanon, only $3
billion has actually been disbursed. “Saudi Arabia, Kuwait,
Turkey, Jordan and the United Arab Emirates made generous
pledges at the conference, but have not yet fully honored their
commitments.”
Fouad Ajami, Arab affairs expert, commented on this and related
topics in an op-ed for the Wall Street Journal.
“In the aftermath of his surprise trip to Iraq, President Bush has
returned to an old theme: He has called on the Arabs, yet again,
to come to the aid of Iraq. On the face of it, this is the most
natural of requests, for the fire in Iraq, and a failure in Iraq, is
sure to spill into neighboring Arab lands. But here we are face-
to-face with the ways of the Arab world. No Arab cavalry shall
ride to Iraq’s rescue; no Arab development funds – in a region
wallowing in oil wealth – shall be committed to Iraq. The
foreign leaders who have visited Iraq were from Britain,
Australia, Poland, South Korea, Bulgaria, Denmark, Ukraine and
Spain. No Arab king or president has deemed it fit to turn up in
a show of solidarity with Iraq’s people. [A prime minister of
Jordan came to repair the breach between the two countries, but
prime ministers in Jordan come and go; political power is the
king’s prerogative.] The Arabs who cross into Iraq are jihadists,
and ‘mules’ who bring money to keep the insurgency alive. In
the main, Arabs are content to pronounce on Iraq’s ‘innate’
violence, and on the errors of the American war. No greater
sense of responsibility can be expected from the custodians of
political power in the Arab lands.
“We should be under no illusions about Iraq’s Arab neighbors:
They are content to see America bleed, and they see this great
struggle as a contest between American power and the region’s
laws of gravity. True cynics, pessimists through and through,
they see the American mission in Iraq as one of extravagant
optimism and hubris. The mere claim that the Shiite step-
children and the Kurdish highlanders can find a way out of
darkness galls them. The Arab ruling elites are invested in the
insurgents and the jihadists in Iraq. The more these forces of
mayhem engage American power, the more time they buy for the
entrenched order. There is no ‘Arab solution’ for Iraq, as there
was none for Lebanon in its long Syrian captivity. The Iraqis
understood the great Arab silence which attended the death of
Zarqawi. A clerical leader of Najaf, Sadr al-Din Qabanji, noted
the sorrow with which the men of Hamas responded to the
hunting down of Zarqawi. Addressing neighboring Arabs,
Qabanji asked the question: ‘Why do you accept the shedding of
our blood?’….
“(But despite all this), President Bush took with him to Baghdad
the right message: a reaffirmation of the American commitment
mixed with a reminder that Iraq’s salvation lies in the hands of
its new government. The Arabs nearby will say, as they have,
that the American leader traveled into an occupied country, that
he did not venture beyond the Green Zone, that the place he
visited was more his domain than Nuri al-Maliki’s. But
President Bush called on an elected government, a rare plant in
Arab soil. This new government should be strengthened by the
promise of American resolve. But it should also take to heart
that it is reckoning-time for Iraq’s leaders, that it is their country,
and their history, that lies in the balance.”
Iran
The Iranian government said it would wait until August before it
responded to the offer by the United States and the five other
parties to shelve its uranium enrichment program in return for
concessions. President Bush said that was too long and the U.S.
is pressing for the issue to come before the UN Security Council
by July 1.
But the big development of the week was Iranian President
Ahmadinejad’s statement after talks with Russia and China, as
part of the Shanghai Cooperation Organization (SCO) meeting in
Shanghai.
“The SCO could ward off the threats of domineering powers to
use their force against and interfere in the affairs of other states.”
In other words, back off U.S. And in keeping with this theme, a
joint declaration from the summit read:
“Differences in cultural traditions, political and social systems,
values and models of development formed in the course of
history should not be taken as pretexts to interfere in other
countries’ internal affairs.”
In case you desire to be optimistic about the fate of Iran’s nuclear
weapons effort, understand Iran is seeking a formal alliance with
Russia and China, based on the surface on energy but lying
beneath something far more sinister…a true security pact.
Any effort to exact sanctions against Iran in the Security Council
is bound to fail, vetoed by Russia, China or both.
North Korea
Frankly, my analysis here has been spot on thus far. I came back
from my trip to South Korea telling you the majority of folks
there are hopelessly naïve about their cousin to the north and
Kim Jong il’s threat to conduct a long-range ballistic missile test,
after pledging to freeze such actions in 2002, only confirms this.
Kim is a certifiable nut case. But as I’ve also said countless times
in the past, the real mystery is not how he gets his hair to do what
it does, but rather just who are the generals that back him? With
Kim’s succession plans in doubt, is Kim acting because he feels
he has to give an example of his manhood before he himself is
taken out in a coup? I suspect this is the case, and if so, it’s why
this little game of chicken could still escalate out of control.
President Bush, though, praised China for its efforts to pressure
Pyongyang not to go forward, and Russia’s foreign ministry
office called in the North Korean ambassador to upbraid him, but
this is largely for show. China in particular loves to see the U.S.
sweat. Of course it could put an end to these shenanigans in a
heartbeat if it so desired, but think about all the intelligence both
Russia and China are gathering as they watch U.S., Japanese and
South Korean maneuvers; especially for China, which seeks
maritime domination in the Pacific. It might as well string this
along a while, right?
But what of the idea, as put forward by two former Clinton
defense officials, Assistant Sec. of Defense Ashton Carter and
Defense Secretary William Perry, that the United States should
take out the Taepodong-3 while it’s on the launch pad? Or, how
about attempting to destroy it once launched with our nascent
missile defense program?
I vote against blasting it while on the pad for the simple reason
that it seems to me we better line up our ducks in a row,
diplomatically, before attempting such a maneuver and there is
little time for that.
But if launched, certainly we are in our rights to do what we can
to knock it down. Should we fail, we learn a ton about the NMD
program and where we need to spend more resources to perfect
it. Should it on the other hand succeed, that would be a
tremendous victory and act as a huge deterrent in the future.
If, on the other hand, Kim went ahead with a launch and it struck
something of value, like Japan, Guam or the U.S. coast, well,
friends, it’s war.
It’s been a common theme of this column, long before 9/11, that
your editor sleeps with one eye open out of fear that a North
Korean bottle rocket may one day be launched by the man with
the bad hair. While there’s a chance in this instance he may yet
back down, the real concern lies in who stands behind him. One
thing is for sure in this regard, our intelligence apparatus hasn’t a
clue.
Wall Street
There’s little to say about the market in terms of developments
over the past week, but it’s the coming one that promises
fireworks, as well as it being the end of the quarter, so I’ll
reserve a lot of commentary for next week’s review, including
taking a look at just how I’m doing with my 2006 predictions.
For now, equities continued to behave in a rather lethargic
manner after the volatility of the week ending June 9 when the
major averages suffered their 3% declines. Solid earnings from
the likes of Federal Express and Morgan Stanley offered some
support on Wednesday, but then Bed Bath & Beyond’s less than
stellar report on Thursday was somewhat instrumental in stocks
giving up much of the gains.
There was little of consequence on the data front, with housing
starts rising in May, but an index of homebuilder confidence was
down to an 11-year low.
But it is all about the Federal Reserve and as another Fed
governor expressed his concern that inflation measures were
“bothersome,” Ben Bernanke and his Wrecking Crew will be
hiking another 25 basis points (1/4 percent) come Thursday.
There are even a few voices speaking of a half point increase.
Either way we’ve reached the tipping point, as future economic
data will confirm, particularly by August. The Fed has been
talking of an economy in transition, with emphasis on high oil
prices and a weakening housing market. Further action on its
part will only speed the process up.
Finally, I want to end this segment with another look at the
“haves vs. the have nots.”
I was in Crawfordsville, Indiana, this week, a pleasant town of
about 15,000 some 45 miles west of Indianapolis. I was there
doing a little research at the Lew Wallace Museum and Study,
Wallace having written “Ben-Hur,” and afterwards I mused
about life while having a beer in the hotel bar.
This girl, who seemed to be in her late 20s, came in for a job
interview with the bartender and the two went off to the side
where I could still hear the conversation. The candidate seemed
to have her act together, had a pleasant personality, but the five
minute conversation resulted in her being rejected and she was
crestfallen. She clearly needed the position and you couldn’t
help but feel sorry for her.
I don’t intend to draw any great conclusions from this little tale
that plays out about a million times a day in America, I imagine,
and no doubt this woman will find a job, probably something
better. But when some wonder why President Bush’s approval
rating on his handling of the economy is still so poor despite
solid economic growth, you’d have to be a moron not to
understand that for the average American it’s not easy making
ends meet these days.
While we live in an era of amazing wealth, the Labor
Department’s own figures show that income disparity has never
been greater, with wages for middle- and lower-income
individuals, adjusted for inflation, actually declining over the
past seven years, while those at the top have more than kept
pace.
According to the Conference Board, only 17% of Americans
expect their income to rise over the next six months. This loss of
confidence is tough to overcome, and obviously from a political
standpoint offers the Democrats a real opportunity to make hay
come November, let alone 2008. [Of course they first have to
get their own act together and come up with a plan.]
And while I myself have no solutions, I won’t hesitate to
comment on this rich vs. poor debate, especially when I see
ridiculous defenses of programs like the “backdating” of stock
options by the likes of the Wall Street Journal’s Holman Jenkins
Jr., who in an op-ed this week called backdating “sensible.”
Give me a freakin’ break. In most cases it’s outright fraud.
But such is the mindset these days. I see it all the time in the
sometimes over the top wealth displayed in the community
where I grew up and now have my office. Believe me, going out
to places like Crawfordsville and getting a shot of old-fashioned
hospitality, as well as reality, is something I look forward to from
time to time.
I guess what really irks me this week, though, is the Journal’s
front page story on Friday, as reported by Ellen E. Schultz and
Theo Francis.
Titled “As Workers’ Pensions Wither, Those for Executives
Flourish,” it’s the tale of how executives’ pensions at many large
U.S. corporations account for a grossly disproportionate share of
the overall obligation. For example, at Exxon Mobil the top
executives’ pension liability is 12% of the total, same as at
Pfizer.
Or, take General Motors and its much-publicized pension woes.
As Schultz and Francis report:
“(There’s) a twist to the automaker’s pension situation: The
pension plans for its rank-and-file U.S. workers are overstuffed
with cash, containing about $9 billion more than is needed to
meet their obligations for years to come.
“Another of GM’s pension programs, however, saddles the
company with a liability of $1.4 billion. These pensions are for
its executives.”
More:
“David Dorman was chief executive of AT&T Corp. from 2002
until its merger with SBC Communications in November. He
left in January. His total of five years at AT&T earned him a
yearly pension of $2.1 million. That will replace 60% of his
annual salary and bonus in his final three years.
“By contrast, former AT&T accountant Ralph Colotti’s $28,800
annual pension replaces 33% of his final pay. He was at the
company for 33 years.”
Of course a poster boy for the excess is Pfizer chairman and
CEO Hank McKinnell, who will receive an annual pension of
$6.5 million, which happens to replace 100% of his current
salary and bonus.
Edward Whitacre, chairman and CEO of AT&T Inc., turns 65 in
November, upon which he will be entitled to $5.4 million a year
for life, plus an $18.8 million lump sum. “For this, AT&T’s
liability today is $84.4 million, according to an actuarial estimate
done for the Journal.”
And it goes on and on. This isn’t stock and/or options we’re
talking about…just the pension.
It comes down to simple fairness, nothing more than that. You
can’t legislate it, but a society whose leadership looks the other
way while average workers see their benefits slashed, year after
year, is heading for hard times.
At the risk of offending more than I probably already have, I just
have to quote a passage from this rare book I perused at the Lew
Wallace museum. Titled “The Life and Words of Christ” by
Cunningham Geikie, it’s an 1877 work that Wallace relied on to
a certain extent in his writing of “Ben-Hur.” I stumbled on this
and had to jot it down.
“In the train of scarcity of money comes the usurer, who alone is
prosperous, speedily increasing his capital five or even ten times.
This state of things is constantly assumed in the Gospels, and it
grew worse and worse through the whole life of our Lord,
culminating in a great financial crisis, throughout the empire, a
few years after the Crucifixion.”
Street Bytes
–Stocks were down slightly on the week, with the Dow Jones
declining 0.2% to 10989, while Nasdaq lost another 0.4% to
2121. Nasdaq is now down 3.8% for the year.
But the big news was in the oil patch, as Anadarko Petroleum
Corp. agreed to purchase Kerr-McGee and Western Gas
Resources in separate all-cash deals totaling $21 billion and at
hefty premiums on both. Kerr McGee’s shares rose 36% in
response and Western’s up a whopping 45%. Which means one
thing; incredibly, insiders must have kept this quiet.
The deal is about consolidation in an industry where finding new
resources is limited, let alone having to deal with some rather
shady characters. As Fahnestock’s Fadel Gheit told the Journal,
“There aren’t too many places left. It’s like beach-front
property.”
–U.S. Treasury Yields
6- mo. 5.26% 2-yr. 5.26% 10-yr. 5.22% 30-yr. 5.25%
Now that’s a flat yield curve.
Rates continued their roller coaster ride of the past few weeks,
though, after a long period of stability. The yield on the 10-year
is suddenly at a 4-year high. As noted above, the bond market
increasingly believes the Fed is going higher than another ¼-
point and there is even talk that we will see a 6% Fed Funds rate,
up from its current 5%, when Bernanke deems his mission
accomplished and inflation dead.
–For the fifth consecutive week, investors pulled money out of
emerging market stock funds, some $2 billion worth, for a total
over this period of $15.4 billion. Coupled with share price
declines, through June 21 the funds’ net assets are down 25
percent from the peak established on May 10. [Bloomberg News
/ Emerging Portfolio Fund Research]
Emerging market bonds are also taking it on the chin.
Incredibly, Turkey issued a 30-year bond last January with a
yield of just 6.87%. Turkey! Today the yield has risen to a more
realistic 8.72%, nonetheless a huge increase in such a short
period of time. [You can buy default insurance for 2.8%, in case
you’re interested.] I just bring this up because that has been the
mindset for far too long. Risk? What risk? Only lately have
investors paid the piper.
–In a complicated transaction, China’s state-owned oil company
Sinopec will acquire a 49% stake in a joint Russian-BP
Petroleum venture whereby Russia’s Rosneft will hold the other
51%, as Russia and China tighten their strategic energy
partnership.
–“If serious hurricanes hit the U.S. this fall, as predicted, they
could batter the stock market. That’s because insurance
company stocks are expected to supply an outsize portion of the
earnings growth predicted for S&P 500 companies this year. The
stocks of property-and-casualty and multi-line insurers make up
just 3% of the index’ value. But given insurers’ low earnings a
year ago, they may supply nearly one-fourth of the 15% earnings
growth analysts expect for the index in the third quarter,
according to Thomson Financial.” [David Henry / Business
Week]
–The SEC is investigating the practices of some hedge funds
whereby selected clients receive preferential treatment, such as in
being granted portfolio details or given more flexible redemption
terms. And in another development I give little credence to as of
the moment, the New York Times reported the SEC is looking
into the operations of Pequot Capital Management, one of the
largest hedge funds in existence, for possible insider trading. But
if there is truly a case here, it may have more to do with the
charges of a SEC whistleblower that someone at the agency
blocked his own investigation when he sought to interview
Morgan Stanley CEO John Mack, who had briefly been
chairman of Pequot but, more germane to the investigation, is
also a major fund-raiser for President Bush.
[On Friday, a federal appeals court ruled the SEC lacks the
authority to regulate hedge funds, meaning that without
Congressional action, the SEC can’t force the funds to register.
They are, however, still treated like any other investor in
determining violations of securities laws.]
–U.S. and British investigators are looking into price fixing,
including in levying fuel surcharges, between such biggies as
British Airways, Virgin Atlantic, American Airlines and United.
–The co-CEO of Airbus parent EADS (European Aeronautic
Defense & Space Co.) is being investigated for insider trading
because he appeared to cash out some of his holdings prior to the
announcement of Airbus’ production delays. On top of last
week’s story that the A-380 superjumbo faces a myriad of
production issues, I would just add that I thought this was one of
the dumbest ideas in the history of aviation when it was first
introduced…a double-decker plane. And clearly Airbus hadn’t
thought through a rather important issue…the inability of many
current airports to support it. Buttressing this last point, the
chairman of the House aviation subcommittee, John Mica, on
Friday announced the estimated $1 billion cost to expand and
improve runways would not be borne by the federal government.
–Meanwhile, Boeing said its Dreamliner / 787 jet remains on
schedule. The production issue of bubbles in the fuselage has
apparently been resolved, as predicted. [Yup, the carbon fiber
story remains in tact.]
–More on real estate, this time the San Diego market, from our
onsite expert, Josh P.
“I was reading the real estate section in the local paper and a
builder had an ad where you can ‘trade in’ your current home for
credit on a new one. I wonder how they calculate the value?
The new builders are getting more and more aggressive and we
are starting to see ‘discounts’ showing up as builders try to blow
out product.”
And Josh noted the following from the Union Tribune.
“San Diego County’s home prices took their biggest tumble for
any spring on record last month…
“The median price of all homes sold in May was $490,000, down
$15,000 from April, although it was still slightly higher than a
year ago. Sales slowed for the 23rd straight month on a year-
over-year basis.”
San Diego has always been the canary in the mine when it comes
to the real estate sector.
Overall, the southern California market witnessed its slowest
sales for any May in seven years.
–The World Health Organization confirmed that Indonesia did
indeed have the first human-to-human transmission of bird flu
within that cluster of six that died a number of weeks ago.
–Moody’s and S&P cut GM’s debt rating even further into junk
status because of a new loan facility. But Ford is in even worse
shape.
However, shares in GM have been improving, as Ford’s decline,
because GM’s buyout offer is proving to be more successful than
first thought. Nearly 25% of its work force represented by the
United Auto Workers union has accepted the $35,000 to
$140,000 lump sum payments offered by GM. But to receive
full healthcare benefits as well, you needed to have been at the
automaker for 27 years.
–Brand name prescription drugs rose a staggering 3.9% in the
first quarter. That’s not annualized, just the straight increase.
It’s time to rein in all those commercials with fake actors and
rely on your doctor to recommend what’s best for you, period.
–When I was a kid growing up in the 1960s and early 70s,
doctors were perceived to be the highest paid individuals in our
society. Big athletes like Mickey Mantle or Willie Mays made
$100,000, but you’d often hear whispers that doctor so and so
down the street was earning far more. Doctors had the finest
homes in town, it seemed, unless you were chairman of a major
company, and that was at it should be. Everyone knew that
doctors went through intensive schooling, at great expense, and
few begrudged their riches.
I only bring this up because I was taken by a study that showed
the average doctor’s pay, after expenses like malpractice
insurance but before taxes, was $146,000 in 2003 (the latest
available data point), and actually declined 7% from 1995-2003,
adjusted for inflation. Of course our highest paid athletes now
earn over $10 million and while that’s what the market bears,
perhaps the most egregious salaries are paid to NBA ballplayers,
many of whom earn $6 million for riding the bench. [Then
again, I’m tainted by my proximity to the disaster that is the New
York Knicks, which had the league’s highest payroll last season
and won about three games. To compound matters, they just
fired the coach, Larry Brown, who is still owed $40 million on
his contract….but I digress.]
Anyway, there’s something screwed up, big time, about our
priorities…and at a time when many parts of the nation are in
desperate need of primary care physicians, and nurses, these
trends don’t bode well for our nation.
–Barron’s Mark Veverka reports that the issue of click fraud
“has only gotten worse, and threatens the credibility of paid-
search advertising (which) currently generates an estimated $5
billion a year in revenue for the sector. The search-engine
companies have tried to downplay the size and seriousness of the
problem by insisting that it affects only a fraction of its
advertisers. And there’s the rub: Nobody seems to have a handle
on how pervasive the fraud is.”
But advertisers are beginning to catch on and when they revolt,
as Veverka concludes (and I concur), “investors could get
socked.” [But Google’s back over $400! Whoopty-do!]
–As if it wasn’t already a disaster, Internet telephony operator
Vonage has been sued by Verizon for patent infringement. Just a
few weeks ago Vonage’s IPO came to market at $17. It closed
Friday at $8.75.
–Nokia and Siemens AG are combining their telecom-equipment
units in a joint venture valued at $30 billion.
–So, did you ever wonder what weight-loss queen Jenny Craig
Inc. was worth? Nestle SA, the world’s biggest food producer,
just shelled out $600 million for it. Jenny had sales of $400
million over the past 12 months.
–I just saw a blurb in the July 3 edition of Business Week. If
you have a federal student loan, on July 1 your interest rate is
going up 2% (if I’m reading this right). But the president just
signed a bill allowing students and parents to consolidate their
loans with any lender to lock in one fixed rate. So kids, bug your
parents to let you piggyback off that third mortgage of theirs.
You can shop around by checking out
consolidationcomparison.com. [Danna Cook / BW]
–Deflation Watch: Gasoline at two service stations in
Crawfordsville, Indiana, $2.49 regular. Hey, that’s price
collusion!
–For those of you who watch CNBC or have seen Fidelity’s
commercial with rocker Rick Derringer, you may be interested to
know he was the lead singer of The McCoys of “Hang on
Sloopy” (Billboard #1, 9/65) and “Fever” (#7, 11/65) fame. But
I was surprised to find that the song in the commercial, “Rock
And Roll, Hoochie Koo,” only peaked at #23 in the spring of ’74.
We now continue with our regularly scheduled commentary…..
–The New York Post had a salacious cover story concerning
Time Warner’s CFO, Wayne Pace, and his alleged relationship
with a rather outrageous Brazilian, Andrea Schwartz, who claims
Mr. Pace was her “sugar daddy.” Time Warner launched an
internal investigation.
But if you want to be a sugar daddy, or if you’re looking for one,
Ms. Schwartz said the place to go is the Four Seasons bar in New
York.
–My portfolio: I haven’t made any changes recently and I will
stick with my 80 / 20, cash / equities split to beat the market (as
represented by the S&P 500). But I’ll have more details next
week as the quarter ends.
Foreign Affairs
Afghanistan: The Taliban massacred a family of 30 this week,
while four U.S. soldiers were killed here, bringing the total since
9/11 to 310 (along with about 90 other coalition forces). Osama
bin Laden’s right hand man, al-Zawahiri, urged the Taliban to
take back their country and defeat the foreign occupiers. Afghan
President Hamid Karzai, though, is increasingly frustrated at the
way the coalition is waging the war. Karzai has long said the
only way towards stability in Afghanistan is by coming down
hard on Pakistan. Should Karzai be assassinated one day,
Pakistan’s hands could be all over it.
Israel: Prime Minister Ehud Olmert met with Palestinian
President Mahmoud Abbas, their first meeting since Olmert
became prime minister. By all accounts it was a good start and
the two laid out plans for a future, more substantive meeting in
the coming weeks. Olmert apologized for the civilian deaths
over the past week, but not the Gaza beach attack. Separately,
King Hussein of Jordan and Egyptian President Hosni Mubarak
pressed the Palestinians to stop their infighting.
Russia: Washington Post columnist Jackson Diehl writes of how
President Vladimir Putin has weathered the storm of criticism,
including Vice President Cheney’s May speech where he spelled
out “the case against Putin: his embrace of dictators in Belarus
and Uzbekistan, his use of energy supplies as a tool of political
blackmail, his elimination of independent voices in Russia.”
Putin will be firmly in control of things when he hosts the G-8
meeting in St. Petersburg in just three weeks time.
Jackson Diehl:
“Cheney’s speech, meanwhile, produced a backlash not just from
Moscow but also in Western Europe, where the vice president
was roundly criticized as too provocative. As for Russian neo-
imperialism: Administration officials say they are still seeking to
put Georgia and Moldova on the agenda of a pre-summit foreign
ministers’ meeting next week, but they don’t expect to succeed.
‘We’re dead in the water,’ says Bruce Jackson, a conservative
close to many in the administration who heads the Project on
Transitional Democracies. ‘Russia is playing a more aggressive,
thought-out game, and they are outplaying us.’
[I would have put it slightly differently. They’re playing us for
chumps.]
Diehl:
“Putin’s strongest move was his agreement to participate in a
pending Western bid to freeze Iran’s nuclear program. In
exchange for its support Russia won the postponement of a UN
Security Council resolution that would have ordered an end to
the program; it also delayed a looming rift between Russia and
the West over sanctions against Tehran. As long as Moscow is
nominally on board with its most important foreign policy
initiative, the Bush administration is constrained from pressing
the issues raised by Cheney – though officials insist that they
haven’t been dropped.”
Ukraine: Finally, three months after the election, Ukraine has a
government; a new coalition that has as its prime minister an old
face, former prime minister Yulia Tymoshenko, the rather
unstable personality who nonetheless forced President Viktor
Yushchenko’s hand. But while this resurrects the old Orange
Revolution forces of 2004, there are no winners, except for
Tymoshenko. For starters, it looks likely the nation will hold a
referendum on Yushchenko’s pet project, NATO membership.
Many of you might be surprised to know the majority of
Ukrainians don’t want to be part of the club.
But the biggest immediate concern has to do with Tymoshenko’s
remark that Ukraine’s gas deal with Russia’s Gazprom must be
revisited, which the Kremlin immediately blasted, saying
Ukraine, because of its transit location, simply wants to steal the
gas that then moves on to much of Western Europe.
The real bottom line, though, is that Ukraine remains stuck in the
mud. I met a Ukrainian woman at an investment conference this
week and we talked of my trip to Kiev back in March. She is
discouraged over the corruption that plagues her country. It will
take a real heavyweight to rid the place of most of the stench and
there are clearly none to be found in today’s Ukraine. For his
part, Yushchenko has been a huge disappointment.
India: Distressingly, it appears that Congress will delay action on
the U.S.-India nuclear agreement until after the November
elections, at which point India itself could shelve it. Vice
President Cheney correctly called it “one of the most important
strategic foreign policy initiatives of our government,” but some
in the House and Senate are concerned it will lead to nuclear
arms proliferation in the region. Idiots.
India is willing to play by the rules and allow inspectors in from
the International Atomic Energy Agency, while maintaining
secrecy at some of its weapons facilities.
But how often do we have to say this. If this historic agreement
breaks down, India will just get its advanced civilian nuclear
technology from someone else and, in the case of weapons
proliferation in places like Pakistan and Iran, they’re obviously
already moving ahead, with both having received aid from either
Pakistan’s own A.Q. Khan or from China.
The world should want India to have a vibrant nuclear power
program rather than a reliance on fossil fuels with the damage
this does to the environment, plus we need India as a wedge
against the Islamists in the region.
Taiwan: President Chen Shui-bian, in a televised address to the
nation, gave his own rendition of then Senator Richard Nixon’s
“Checkers Speech” in offering to resign if his wife had indeed
accepted gift vouchers in return for lobbying favors.
Mexico: Three police officers were beheaded in the resort town
of Rosarito Beach. Witnesses said they were kidnapped by a
gang of 100 dressed as Mexican federal agents. 100! And these
aren’t the first ones to be beheaded in Mexico. It’s depressing as
hell, and it’s right there on our border. And can you imagine
being a police officer and trying to do the right thing? Why
bother? More on this below.
Separately, Mexico’s presidential election, slated for July 2, is
too close to call.
Random Musings
–A Harris survey of European attitudes finds 36% identify U.S.
foreign policy as being a greater threat to global stability than
Iran, 30%, or China, 18%. Super.
But at least when President Bush faced the press the other day in
Vienna, Austrian Chancellor Wolfgang Schuesel rushed to his
defense as Bush was questioned on U.S. policy.
“I think it’s grotesque to say that America is a threat to the peace
in the world compared with North Korea, Iran, a lot of
countries.”
Schuesel reminded the audience how America saved the
continent just 60 years ago, but he did go on to stress that the
U.S. and Europe must accept common values, a dig at the
president over items such as Guantanamo.
–Immigration reform is dead for this year, as Republicans have
opted to first hold public hearings in lieu of having to actually
exercise some leadership.
The issue is a pretty simple one. Secure the borders! You know
that Mexico story above? That’s what we increasingly have to
look forward to as gang members from groups such as MS-13
and their acolytes continue to infiltrate America.
–In just a few weeks, we’ve now learned of home-grown terror
plots in both Canada and the United States. Obviously, Congress
(and Canada’s parliament) must add increasing funds to domestic
terror prevention efforts. But if it’s any consolation, those
fellows in Miami don’t appear to be the brightest bulbs on the
planet. Bet they know their rap lyrics, however.
–The Bush administration has been tracking terrorists’ funding
in part by accessing a massive data base of international financial
transactions. Using broad subpoena power, the Treasury
Department could technically be accessing your own records, but
if you aren’t doing anything wrong, and haven’t been consorting
with al Qaeda types, what do you care?
–Former White House aide David Safavian pleaded guilty to
obstructing justice in the ongoing scandal involving lobbyist Jack
Abramoff. Expect Safavian’s mug to be part of every
Democrat’s campaign spot this fall, and to be fair I’d use it if I
were them.
Meanwhile, the Senate Indian Affairs Committee is close to
nabbing Congressman Bob Ney (R-OH), as well as pretty boy
Ralph Reed and Republican activist Grover Norquist.
Hey, I’m a Republican, but the quicker we rid ourselves of these
dirtballs the better we’ll all be.
–Authorities arrested over 30 in Chicago that are tied to the bad
heroin that has claimed at least 130 lives in multiple states.
Included in the group is a new gang to worry about, the “Mickey
Cobras.”
–Democratic Senator Barack Obama of Illinois continues to
receive fawning press coverage. But while the Democratic Party
clearly needs some new faces as it gears up for 2008, thoughts
that this fellow is a legitimate presidential candidate are absurd.
–The New York Daily News had a story of how 165 Canada
geese were recently gassed after being deemed a hazard to air
traffic in and out of nearby LaGuardia Airport. So far in 2006,
32 planes have struck one of these illegals.
Speaking of which, we have this huge immigration problem in
America and no one brings up the Canada geese. They’ve been
streaming across the border for decades, but their supporters
claim that because we are now on our 20th generation of home-
grown geese, they should be allowed to stay. Or am I reading
too much into this?
Anyway, not one child should be going hungry in America with
this ready-made food source so close at hand. The same can be
said of deer.
–Sadly, Japan and other whaling nations are one-step closer to
overturning a ban on commercial whaling as by a 33-32 vote, the
International Whaling Commission found the 20-year prohibition
“no longer necessary.” Japan, Norway and Iceland now need
75% in a second vote before it’s officially lifted (far easier now
with the first affirmative ballot…it’s called arm-twisting), but as
it is, 2,000 whales are still being killed each year by either
ignoring the ban or using loopholes for “research.”
–But, there was some good news on the animal protection front
as India’s government gave its military the right to shoot
poachers on sight. The poachers are killing off the last of the
tigers and then smuggling the parts over the border with China
where there’s a ready market. Thus, activity is intense where the
Indian Army is already stationed.
So, yes, I do have my own ranking system when it comes to
God’s creatures. Geese and deer…out. [As well as gang
members.] Whales and tigers; do everything possible to protect
them. It’s only common sense, after all.
–Boy, if you are contemplating getting a tattoo, this ought to
make you think twice. From the Associated Press:
“A worrisome superbug seen in prisoners and athletes also is
showing up in people who get illegal tattoos, federal health
officials said yesterday.
“Forty-four tattoo customers in Ohio, Kentucky and Vermont
developed skin infections caused by methicillin-resistant
Staphylococcus aureus, according to the U.S. Centers for Disease
Control and Prevention.”
That’s flesh-eating disease, sports fans.
–Because so many students are plagiarizing their term papers,
many teachers and professors are abandoning them. As reported
by Terril Yue Jones of the Los Angeles Times, 30% of papers are
plagiarized, either totally or in part. But it’s far too time-
consuming to check each one out, thus the reason for shelving
them; even as the SAT has incorporated an essay segment into its
test.
[Hey, kids. Check out my “Hott Spotts” and “Wall Street
History” columns if you’ve been partying too hard and are
looking for a solid B / B+ quality work with little effort required
on your end!]
–My state of New Jersey has the highest high school graduation
rate, 84.5%! [Uh oh…there go the property taxes as teachers ask
for higher pay.] New Jersey beats out North Dakota, Iowa,
Vermont and Wisconsin…the next four. But South Carolina
brings up the rear, followed by Nevada, Georgia, New Mexico
and Florida in the bottom five.
–The government of Norway is spearheading a project described
as a “Doomsday” vault. In the coming years, researchers will put
together a large vault, to be buried in the Arctic permafrost, that
is to contain 10,000 years of agriculture; a catalogue of millions
of seed samples in the event of a global catastrophe. The project
is designed to ensure the survival of our most vital crops.
–Finally, we end on a super-positive note. From the BBC News:
“A U.S. dog has won an award for saving her owner’s life by
dialing a phone number that alerted emergency services to her
owner’s diabetic seizure.
“Belle the beagle triggered a call to an ambulance crew by biting
on her owner, Kevin Weaver’s, mobile phone.
“The dog was trained to detect potential diabetic attacks by
licking and sniffing Mr. Weaver’s nose to check his blood sugar
levels and pawing him.
“Belle resorted to dialing for help when Mr. Weaver fell
unconscious.
“The dog used her teeth to press the number nine key, which the
phone was programmed to interpret as a ‘911’ call to emergency
services.
“Ambulance workers answered the phone and, hearing nothing
but barking at the end of the line, rushed to the caller’s house in
the city of Ocoee in Florida.
“The dog is the first animal to receive the Vita Wireless
Samaritan Award.”
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $586
Oil, $70.84…it just doesn’t want to go down.
Returns for the week 6/19-6/23
Dow Jones -0.2% [10989]
S&P 500 -0.6% [1244]
S&P MidCap +0.1%
Russell 2000 -0.4%
Nasdaq -0.4% [2121]
Returns for the period 1/1/06-6/23/06
Dow Jones +2.5%
S&P 500 -0.3%
S&P MidCap +0.4%
Russell 2000 +2.5%
Nasdaq -3.8%
Bulls 35.6 [Yes, both the same…bull percentage continues to
decline to lowest levels since Oct. 2002, a key market bottom.]
Bears 35.6 [Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
Brian Trumbore
