[Posted 7:00 AM ET]
Note: For those of you who print this out, it’s possibly the
longest ever. In writing my history of the decade, I just felt there
were some issues worth covering in more depth than usual this
week.
Iraq
As expected, Prime Minister Nouri al-Maliki unveiled his plan of
reconciliation, including amnesty, but the language was vague as
it failed to differentiate between resistance and terrorist groups.
The wording reads in part: “To adopt a credible national dialogue
in dealing with all the different views and political positions that
are opposing the views and positions of the Government and the
political powers…”
Last weekend on the Sunday talk shows, Democrats gleefully
took the opportunity to say there is no way “amnesty” for
terrorists who kill Americans will be acceptable; a position that
allows one to have been against the war from the start, but still
act like a hardliner.
Later, Maliki said those who have launched attacks on the U.S.
will in no way be eligible for a pardon, nor, he added, those who
killed Iraqi soldiers or police officers. But I guess if you blew up
a bunch of innocents in a mosque that’s OK.
Of course I’m being a bit facetious, but you see the bind Maliki
is in. The fact is he is going to have to make some distasteful
moves to achieve any kind of stability and Americans will tire of
trying to micro-manage the process.
Overall, as noted in a Washington Post / ABC News poll, 51% of
us oppose setting a deadline for withdrawal, while 47% are in
favor of one. In a USA Today / Gallup survey, 57% say
Congress should outline a withdrawal plan, while 50% support
withdrawing within 12 months.
As for the actual situation on the ground, 46 Iraqis and at least
one American soldier died in violence on Thursday alone, but the
national news telecast I watched didn’t mention a word of it.
Instead, it was all about flooding on the East Coast, not that this
wasn’t worthy of the coverage. The truth is many of the
networks are pulling back some of their resources, for various
reasons (including, yes, vacations), so there’s no telling what
American attitudes will be come the fall.
What is clear, though, is Maliki’s crackdown in Baghdad has
been largely ineffective. [As I go to post, word is coming in that
over 40 were killed in a Baghdad bombing Saturday morning.]
And since I have been one saying we should have had more, not
less, troops in theater following the death of Zarqawi to press any
advantage, let alone help with the critical Baghdad mission, Max
Boot wrote an op-ed in the Los Angeles Times on Wednesday
buttressing this position.
“For the last three years, the Bush administration has pursued a
policy of wishful thinking in Iraq, operating under the hope that
some dues ex machine – either elections or the capture of
insurgent leaders – would salvage a deteriorating situation. Well,
Iraq has now had three successful nationwide ballots. Saddam
Hussein has been captured. Abu Musab Zarqawi has been killed.
And still violence continues to intensify in Baghdad and the
Sunni provinces to the west and north.
“The situation is particularly dire in Iraq’s capital. In May,
according to the Los Angeles Times, 2,155 homicides occurred
in Baghdad, 85% of the national total….
“In a June 6 cable reprinted in the Washington Post, (U.S.
Ambassador Zalmay Khalilzad) reported that local embassy
employees were finding it difficult to function outside the Green
Zone amid rampant crime, fundamentalism and sectarianism.
“Prime Minister Nouri Maliki has launched Operation Forward
Together in an attempt to regain control of his own capital….
“No extra American (or Iraqi) soldiers have been sent into
Baghdad. Former viceroy L. Paul Bremer reported that Lt. Gen.
Ricardo Sanchez told him in 2004 that with two extra divisions,
‘I’d control Baghdad,’ but those extra divisions – 35,000 to
40,000 soldiers – have never been forthcoming.
“Instead, news leaked out this weekend that a drawdown of U.S.
forces may take place starting in the fall….The message is that
the Pentagon is more concerned with finding an exit strategy
than a winning strategy: precisely the charge that Republicans
level at Democrats….
“By now it should be obvious that the ‘light footprint’ approach
has not worked. It has increased, not decreased, resentment of
the United States because Iraqis are aggrieved by the breakdown
of law and order. Yet there appears to be no serious rethinking
of this flawed strategy at either the Pentagon or the White House.
“The administration may think it doesn’t have any more troops to
send. It’s true that the armed forces are overstretched and need
to be enlarged, but there are still just 150,000 U.S. troops in
Afghanistan and Iraq out of 2.6 million in the active-duty ranks,
reserves and National Guard. More soldiers could be found to
police Baghdad if this were deemed a top priority….
“The fact that the administration continues to ‘stay the course’
with a losing strategy suggests the need for a change of
strategists. The president needs a new secretary of Defense –
and possibly new generals – who would be more focused on
finding a way to win rather than to withdraw.”
Three other notes:
Remember when I wrote a few weeks ago about the Tamil
rebels, the world’s leading terrorists when it comes to methods,
and their employment of a bicycle bomb? I saw this week, for
the first time in my memory, where a suicide attacker in Iraq
used a bicycle, killing 15. Which means since these ideas have
been exported by the Tamil Tigers for a generation now, expect
to hear of a bus hitting two claymore mines dangling from a tree
branch in Baghdad or Mosul; because this also happened in Sri
Lanka a few weeks ago.
And I couldn’t help but notice this item in Parade magazine, of
all places.
“The U.S. and Britain have gone ballistic over Iran’s purchase of
800 high-caliber sniper rifles that can penetrate body armor or a
Humvee from a mile away and even shoot down a helicopter.
Iran says the rifles – made by Steyr Mannlicher, an Austrian firm
– are for use against drug smugglers, but U.S. officials fear
they’ll end up being fired at our troops in nearby Iraq.” [Or used
to assassinate an Arab leader, I’d add.]
And why are the Austrians selling to Iran? “Steyr Mannlicher
offered this excuse: ‘Half of Europe is supplying weapons to
Iran.’”
Lastly, Russian President Vladimir Putin told his special forces
to go into Iraq and “kill” those responsible for the execution of
four Russian diplomats. What’s a little different here is that the
lower house of Russia’s parliament blamed the “occupying
powers” for the deaths, i.e., the United States.
Israel
Sometimes I wonder why I bother even writing about the
situation here, but we’re building an historical record and even
though the more things change, the more they stay the same
in the Middle East, and specifically the Israeli-Palestinian
conflict, for obvious reasons it can’t be ignored.
Last week I wrote of how Israeli Prime Minister Ehud Olmert
had a decent first meeting with Palestinian President Mahmoud
Abbas as the two worked on an agenda for more formal talks
down the road. Then 24 hours later, Hamas launched an attack
on an Israeli army position along the Gaza border by using a
tunnel, and in the process Hamas killed two soldiers and
kidnapped another.
The kidnapping then led to the stalemate we find ourselves in as
I go to post. Israel arrested 64 Hamas lawmakers, knocked out
the main electrical plant for all of Gaza, thus sparking a huge
humanitarian crisis, and even buzzed Syrian President Assad’s
summer home for good measure.
At the same time, Hamas was also in the process of agreeing to a
plan adopted by Palestinian prisoners held in Israeli jails that
calls for a two-state solution; the creation of a Palestinian state in
Gaza, the West Bank and East Jerusalem, while also recognizing
Israel’s right to exist. Of course Hamas’ charter calls for the
destruction of Israel by force, so on one hand you could say this
was a sign of progress. But then you wake up from your dream
and think otherwise. For the record, on Friday Palestinian Prime
Minister Haniya, a member of Hamas, said Israel was using the
kidnapping as a “premeditated” way of bringing down the Hamas
government. Many of us wouldn’t cry were that to be the result.
I would just add that bombing the power plant was a big mistake
by Israel. Targeted assassinations are one thing, and they’ve
been largely accepted by the West going back to Ariel Sharon’s
positive reception at the UN last fall.
But the Palestinians in Gaza now have no running water or
electricity and the power plant could take months to repair.
Maybe I’m wrong, but it strikes me as a public relations
nightmare as the news coverage is likely to be dominated by both
the Palestinian suffering and cries from the Arab world for
revenge.
Then again, who knows what the next week will bring?
Iran
Supreme Leader Ayatollah Khamenei said “We will not
negotiate with anyone over our unalienable right to access and
use nuclear technology.” Various Iranian officials, including
President Ahmadinejad, reiterated that Iran will not respond to
the six party offer on the table until August, while G-8 foreign
ministers said Iran must respond by July 5, ahead of the St.
Petersburg summit starting on July 15.
Graham Allison, a leading expert on nuclear weapons matters out
of Harvard’s John F. Kennedy School of Government, had an op-
ed in the Daily Star of Lebanon.
“(The) current approach to Iran is predicated on the largely
unexamined assumption that its overt enrichment program at
Isfahan and Natanz is the problem and that a deal to freeze or
dismantle the centrifuge facility constitutes a solution. The
strategy doesn’t address what U.S. Secretary of Defense Donald
Rumsfeld calls ‘known unknowns.’ – gaps in knowledge that
have been recognized but not filled.
“How good is U.S. intelligence about nuclear facts on the ground
in Iran?….
“Could the unanimity of American intelligence [that Iran will not
have the bomb for at least five years] be ‘déjà vu all over again,’
only the reverse of the Iraq WMD fiasco?….
“Consider that members of the U.S. Central Intelligence Agency
have described the agency’s covert action abilities inside Iran
from 2000 through 2004 as ‘unchanged: they’re zero.’ Might
Western intelligence services have underestimated Iran’s nuclear
program? The judgment that Tehran is five to 10 years away
from a bomb focuses primarily on its overt enrichment program
at Isfahan and Natanz. The dog that hasn’t barked is Iran’s
covert programs for acquiring nuclear weapons.
“Four huge ‘unknown unknowns’ lie at the heart of judgments
about the threat posed by Iran: First, is success in Iran’s overt
effort a necessary condition for success in its covert programs?
Bush and his European colleagues operate on the assumption that
it is. Otherwise their operational objective – a moratorium on
research activities at Isfahan and Natanz – would be beside the
point. Second, have Iranian nuclear scientists and engineers
already learned enough at Natanz about assembling and
operating a cascade of centrifuges that they can now
independently build and run such a cascade? Have they passed
what has previously been called a ‘point of no return?’ Third,
has Iran bought highly enriched uranium from former Soviet
stockpiles, Pakistan or elsewhere? Are they clandestinely
building nuclear bombs using Chinese warhead designs acquired
from A.Q. Khan, the father of the Pakistani nuclear program? If
so, engaging the U.S. in bargaining about enrichment activity at
Natanz could be a way to distract attention and buy time. Fourth,
has Iran purchased actual nuclear warheads from the former
Soviet arsenal or from Pakistan to mate with its Shahab-3
missile?”
Allison’s solution, believe it or not, given current frosty relations
between the U.S. and Russia, is for Bush to ask Putin a favor:
Russian and U.S. intelligence experts should be assigned to
produce a joint assessment of Iran’s nuclear program. Iran,
remember, has the most knowledge as it’s been working on the
construction of Iran’s first civilian nuclear reactor at Bushehr,
giving it a working relationship with Iran’s nuclear scientists.
And Russia also ought to know about any attempts to secret out
nuclear material and warheads from the former Soviet republics.
But, as Allison puts it, “In negotiating with Iran, the U.S. and its
allies should be wary of the conjurer’s trick: distracting the
viewer with one hand while the other pulls a rabbit from a hat.”
However, I would say it’s already too late for this. Remember
before the Iraq war when I said the United States needed to cut
dirty deals with both France and Russia for the purposes of
handling both Iraq and Iran? France and Russia had commercial
interests in the region that the U.S. could guarantee, while overall
stability was our primary concern. Wasn’t such a bad idea now,
was it?
[And as an aside, another respected nuclear arms expert, former
weapons inspector David Albright, said this week that Iran could
have a nuclear weapon within three years.]
Lastly, Richard Perle, neo-con and former assistant secretary of
defense, blasted the administration in an op-ed for the
Washington Post.
“President Mahmoud Ahmadinejad of Iran knows what he wants:
nuclear weapons and the means to deliver them; suppression of
freedom at home and the spread of terrorism abroad; and the
‘shattering and fall of the ideology and thoughts of the liberal
democratic systems.’
“President Bush, too, knows what he wants: an irreversible end
to Iran’s nuclear weapons program, the ‘expansion of freedom in
all the world’ and victory in the war on terrorism.
“The State Department and its European counterparts know what
they want: negotiations.
“For more than five years, the administration has dithered. Bush
gave soaring speeches, the Iranians issued extravagant threats
and, in 2003, the State Department handed the keys to the
impasse to the British, French and Germans (the ‘EU-3’), who
offered diplomatic valet parking to an administration befuddled
by contradiction and indecision. And now, on May 31, the
administration offered to join talks with Iran on its nuclear
program.
“How is it that Bush, who vowed that on his watch ‘the worst
weapons will not fall into the worst hands,’ has chosen to beat
such an ignominious retreat?
“Proximity is critical in politics and policy. And the geography
of this administration has changed. Condoleezza Rice has
moved from the White House to Foggy Bottom, a mere mile or
so away. What matters is not that she is further removed from
the Oval Office; Rice’s influence on the president is
undiminished. It is, rather, that she is now in the midst of – and
increasingly represents – a diplomatic establishment that is
driven to accommodate its allies even when (or, it seems,
especially when) such allies counsel the appeasement of our
adversaries.
“The president knows that the Iranians are undermining us in
Iraq. He knows that the mullahs are working to sink any
prospect of peace between the Israelis and the Palestinians,
backing Hamas and its goal of wiping Israel off the map. He
knows that for years Iran has concealed and lied about its nuclear
weapons program. He knows that Iran leads the world in support
for terrorism. And he knows that freedom and liberty in Iran are
brutally suppressed….
“Twenty years ago, I watched U.S. diplomats conspire with their
diffident European counterparts to discourage President Ronald
Reagan from a political, economic and moral assault on the
Soviet Union aimed at, well, regime change. Well-meaning
diplomats pleaded for flexibility at the negotiating table, hoping
to steer U.S. policy back toward détente. But Reagan knew a
slippery slope when he saw one. At the defining moments, he
refused the advice of the State Department and intelligence
community and earned his place in history.
“It is not clear whether Bush recognizes the perils of the course
he has been persuaded to take….
“The failure of successive U.S. administrations, including this
one, to give moral and political support to the regime’s
opponents is a tragedy. Iran is a country of young people, most
of whom wish to live in freedom and admire the liberal
democracies that Ahmadinejad loathes and fears. The brave men
and women among them need, want and deserve our support….
“In his second inaugural address, Bush said, ‘All who live in
tyranny and hopelessness can know: The United States will not
ignore your oppression, or excuse your oppressors. When you
stand for liberty, we will stand for you.’….
“I know it is not too late for us, not too late to give substance to
Bush’s words, not too late to redeem our honor.”
Well, if the goal was to stop Iran from obtaining the bomb, it is
too late. And if regime change was ever a serious goal with this
White House, you’d have a hard time proving it.
Wall Street
Stocks rallied strongly following the Federal Reserve’s 17th
consecutive rate hike, another ¼-point on the Fed Funds rate to
5.25%. So what did investors find so super about this? Beats the
heck out of me.
Following is part of the statement accompanying the rate move.
“Recent indicators suggest that economic growth is moderating
from its quite strong pace earlier this year, partly reflecting a
gradual cooling of the housing market and the lagged effects of
increases in interest rates and energy prices.
“Readings on core inflation have been elevated in recent months.
Ongoing productivity gains have held down the rise in unit labor
costs, and inflation expectations remain contained. However, the
high levels of resource utilization and of the prices of energy and
other commodities have the potential to sustain inflation
pressures.
“Although the moderation in the growth of aggregate demand
should help to limit inflation pressures over time, the Committee
judges that some inflation risks remain.”
The FOMC then goes on to say it will weigh the data before
making its next move.
Immediately after, the majority of market mavens said, “Ah ha!
The Fed is finished.” I’m sorry, but there is absolutely no way to
deduce that.
Unless, of course, the economic data over the next five weeks,
before the Aug. 8 Fed meeting, reveals the economy to be
slowing even faster than some believe it is and our little inflation
scare to be over. But while I’ve been looking forward to a big
second half drop in economic activity (well, you know what I
mean), it’s likely the inflation indicators will still reveal a
worrisome picture. So the Fed will weigh both the plusses and
minuses and come up with………something.
One thing is for sure, though, which the Fed can’t possibly
ignore even though the equity market did this past week, and
that’s the fact we are suddenly back up to $74 on oil and $2.20
on gasoline futures. [And you’ll recall from our little lesson a
few weeks ago that $2.20 gasoline translates into about $3.00 on
average at the pump…ergo, no relief in sight it would appear.]
The Fed under Ben Bernanke has continuously voiced concerns
over energy prices so it’s hardly likely it will just look the other
way if by August we’re still at the $70 and $3 levels.
And it’s highly likely that we’ll see $70 for the rest of the
summer because of two factors…Iran and the weather.
As detailed above, the Iranian situation is likely to come to a
head over the coming weeks, but it is a huge leap of faith to see it
being something of a positive nature because that would mean
Russia and China are going along with the EU-3 and the U.S.
Ain’t gonna happen.
As for hurricane season, heck, we’re really not even in it, yet, but
a little rainstorm in the Gulf recently caused a small oil spill and
suddenly four refineries were barely operating because a ship
channel was shut down for the cleanup and supplies couldn’t get
through. And just when you were hearing stories that gasoline
demand was stagnating due to $3 prices at the pump, demand
began to rise anew as we all hit the road to do whatever it is we
do come summer.
Sure, we still have ample reserves of just about everything
energy related, but it’s a very thin line we’re walking and the
slightest disruption of any kind results in much tighter supplies.
At the end of the day, then, it’s the fear of an ornery Iran (let
alone the shock of an actual missile test down the road) and/or
another Katrina that keeps oil around $70 and not $50.
Meanwhile…as to the rest of the economy, two measures of
consumer confidence were actually pretty solid, but personal
consumption continued to weaken while the national savings rate
was negative for a 12th consecutive month. Manufacturing
indicators were soft, reflecting slower economic activity, and the
housing data was mixed.
Regarding the latter, new home sales were up in May, but the
median price was down 4% from April, while existing home
sales were down, but the median price, year over year, was up, as
were inventories. Put it all together and to me it’s just further
confirmation we’ve hit a wall. Now it’s all about how hard we
crumple to the ground and whether most American households
can withstand the shock….meaning, the reality that the value of
their #1 asset is actually declining, while at the same time the
interest rate on their adjustable rate mortgage is rising.
Globally, the world’s central banker, the Bank for International
Settlements, warned its clients that central banks must confront
the re-emergence of inflation with a vengeance. Asset prices, it
offered, were allowed to surge for too long.
No doubt the European Central Bank will continue to hike rates
as business leaders across the continent are increasingly
optimistic. [Why, I don’t know.] And the Bank of Japan is
clearly another step closer to actually raising its key benchmark
as consumer prices keep inching up with overall activity pretty
solid there.
Then you have China, where its central bank is forecasting
growth will come in at 10.3% for the first half, with just a slight
drop off in the second. I’ve given up attempting to get this one
right.
Street Bytes
–The Dow Jones rose 1.5% to 11150, with the S&P 500 gaining
2.1% and Nasdaq 2.4%. In all three cases the bulk of the gain
was on Thursday, the day of the Fed’s announcement.
The week started off with a slew of merger announcements,
including Phelps Dodge’s $40 billion offer for both Inco and
Falconbridge. Inco and Falconbridge had already agreed to a
merger of their own in October. So, seeing as Phelps Dodge is
the world’s #1 copper producer without the two, this would
create quite a player…a monopoly. But other parties are
threatening to muck up the works so we’ll see what transpires
next.
Elsewhere, #1 steel producer Mittal is finally going through with
its merger of #2, Arcelor, as shareholders approved a sweetened
bid. So there’s a pattern here, it would seem. Resources and
materials are king…….right before the global slowdown!
Lastly on Monday, Johnson & Johnson paid far too much to
acquire the consumer products division of Pfizer, a whopping
$16 billion for brands like Listerine, Rolaids, and Sudafed. What
was J&J thinking? I know $16 billion isn’t a lot to Warren
Buffett, but for a bunch of stuff where you can get generics for
far less? I don’t think so. [Executives at Pfizer, on the other
hand, are partying hard this holiday weekend.]
And then on Friday, the Dow Jones was helped by the
announcement Renault and Nissan Motor were interested in
acquiring a minority stake in General Motors, as GM investor
Kirk Kerkorian said he believed this was in GM’s best interests.
In a letter to the board, Kerkorian wrote an alliance could help
GM “realize substantial synergies and cost savings and thereby
enhance shareholder value.”
GM shares rose over $2 on the news, thus limiting the Dow’s
losses for the day.
As for the quarter just finished, this week’s rally helped limit the
S&P’s loss to less than 2%, but Nasdaq’s decline was still a
whopping 7%.
Year to date, though, the Dow Jones is up 4%, the S&P up 1.8%
and Nasdaq is down 1.5%. My forecast for 2006 is for a 7%
decline in the Dow, a 5% loss for the S&P, and a 3% one for
Nasdaq. I guess most of you would prefer me to be wrong
anyway.
What I have gotten right thus far in ’06 is housing, writing on
12/31/05:
“The U.S. housing market will continue to stagnate in the first
two quarters, with some regions seeing slight declines in value,
but then things really begin to get dicey in the second half. I
would call for an outright crash, with values down 20% or more
in many areas, were it not for the fact that long-term interest rates
will remain at benign levels for much of the year.”
I’ll stick with this.
But other predictions have not panned out, like my expectation
for a geopolitical crisis by April, and my continuing fixation with
deflation, not inflation. Oh well, the economy hasn’t flipped yet,
but it will!
–U.S. Treasury Yields
6-mo. 5.23% 2-yr. 5.15% 10-yr. 5.14% 30-yr. 5.19%
Bonds rallied on the belief that the economy was slowing as well
as the Fed’s seemingly dovish statement. Since I forecast a 10-
year of 3.99%…ahem ahem….cough cough….by year end, oh, I
don’t really know what to say. But if I had to revise it, I’d only
raise the forecast to 4.50-4.75; once economic reality begins to
hit everyone in the face over the coming months. Yes, by year
end the Fed will also be backpedaling.
–The latest data from the Commerce Department shows that the
U.S. has a net debt to the world of $2.69 trillion. Basically,
Americans hold $10.01 trillion in overseas stocks, bonds,
factories and other assets, while foreigners hold $12.70 trillion in
American assets. The difference is the net debt.
Michael M. Phillips had a simple explanation in the Wall Street
Journal.
“In a sense, the country is like a consumer with a platinum card.
Big bills aren’t a problem as long as there is enough income to
service them. For a consumer, that means a reliable and
sufficient paycheck. For a country, that means economic growth
that is fast enough to generate the returns those foreigners are
looking for when they lend it money or build a plant that is
effectively a claim on future U.S. production.
“The problems come if growth in the U.S. slows relative to other
countries, and foreigners look elsewhere for returns.”
And in that case it could spell rising interest rates to support a
plunging dollar; a concern of some for what seems decades.
–As oil and gasoline futures rallied this week, the House passed
a bill that would end a ban on domestic offshore drilling outside
of the western and central Gulf of Mexico. The Senate has yet to
vote on a more limited package. Regardless, even if Congress
did decide to lift the ban, just as in the case of the Arctic National
Wildlife Refuge you wouldn’t see any production for at least five
years. We’ve jerked around for decades and yet everyone
wonders why we still have supply issues.
Supply remains tight in Norway, too, the third-largest oil
exporter which is seeing continuing declines in its output. The
government’s oil ministry announced it will do all it can to
increase production over the coming decade, but one problem it
faces is a tight rig market as demand for mobile platforms, the
kind needed in the North Sea, for example, outweighs supply.
So as alluded to above in my opening “Wall Street” remarks, it’s
still all about supply and demand and the inability of government
to come up with alternatives, at least until now.
Japan, for one, announced it will require all vehicles to run on an
ethanol-bio blend by 2030, while Brazil’s president talked up a
new hybrid fuel, “H-Bio,” that has been developed by state-
owned Petrobras. H-Bio mixes “refinery petroleum with oil
from soy, sunflower seeds, cotton and castor beans.” [Santiago
Times]
President Luiz da Silva said farmers who plant soy and other oil
seeds “now will sow petroleum.”
The new H-Bio fuel is different from bio-diesel, which is also
produced with vegetable oils but is blended into regular diesel by
fuel distributors, not at the refinery level. Petrobras said it would
produce the new fuel by 2007.
I just read about this on Friday and it was kind of funny since I
had earlier received a thoughtful note from Dave D. on this very
topic, turning our backyards into soybean farms, for example.
Dave, Brazil has long been ahead of us in this regard and they
are taking another big step.
One thing to remember, though, is that Brazil’s now-famous
ethanol industry is heavily subsidized and for America to make a
similar commitment to bio-fuels will require subsidies far greater
than we already give to the ethanol industry, as well as
substantially higher prices at the pump, at least initially.
–Prior to Friday’s development, General Motors announced
some 35,000 took advantage of its buyout offer and the
automaker expects to recognize some $5 billion in cost savings.
But sales are still iffy and incentives are once again being rolled
out with a vengeance.
Meanwhile, Ford had its debt rating cut yet again into the super
duper junk category as it conceded 2006 will prove more
difficult than initially thought. Ford’s high-margin SUVs just
aren’t as popular as they used to be in this era of $3.00 per gallon
gasoline.
Ford also announced it was abandoning its pledge to produce
250,000 hybrid vehicles after just nine months. Chairman Bill
Ford told employees in an e-mail that the target was “too narrow
to achieve our larger goals of substantially improving fuel
economy and CO2 performance.”
I can’t say I disagree with the move, since hybrids are not where
the industry will end up when all is said and done, it’s more
about “plant-derived ethanol,” as in the Brazil example, and
other innovations. Nonetheless Ford stumbled yet again in
having to backtrack so quickly.
–Last year, British Petroleum came under intense scrutiny for its
negligence in the area of safety following a fire at its huge Texas
City refinery that killed 15. Other BP operations around the
country were cited at that time as well.
But now BP is under investigation by the Commodities Futures
Trading Commission (CFTC) which filed a suit alleging BP
cornered the market in propane back in early 2004 for the
purposes of manipulating the price.
–But BP isn’t the only British outfit to be under the microscope.
As reported last week, British Airways is under investigation for
price-fixing. It turns out Virgin Atlantic turned BA in, but more
importantly for consumers the outcome could be more
competition in the Heathrow-to-America routes, thus lowering
prices.
–The White House is finally prepared to approve Russia’s bid
for membership to the World Trade Organization and an
agreement could be signed either before or at the G-8 summit in
St. Petersburg. Both Presidents Bush and Putin could trumpet it
as a sign of cooperation between the two.
However, Congress would still have to approve of the deal and
there are obvious political considerations; such as the Kremlin’s
crackdown on the press, freedom of religion, and the democracy
movement.
–Peru’s Congress ratified a free trade pact with the United
States, important because it had to be approved before the new
Congress and government of President-elect Alan Garcia is
sworn in July 28. While Garcia is for it, there is a large anti-free
trade opposition that will accompany him
–Real Estate, part XL…Noelle Knox had a piece in USA Today
on the plight of homeowners in San Diego County that dovetails
with work by reader Josh P. and the general topic of how many
in America are being priced out in a further example of the
“haves” and the “have nots.”
“Julaine Anton, an 80-year-old widow, was forced out of her
downtown apartment because the owner converted it to a condo.
Now, she’s facing that same threat in her new apartment. She
needs her savings to live on, not to buy real estate. ‘My medical
insurance, after Medicare, has gone up so much since I retired,’
Anton says. The $1,250 monthly rent for her two-bedroom
apartment takes up all but $150 of her Social Security check.
“One big risk is that the affordability crisis could accelerate the
growing chasm between rich and poor, making that gap harder to
cross. For most Americans, their home is their biggest asset, and
one of the surest ways to build wealth. Middle-class renters in
many areas could be forced to leave or see their financial
prospects eroded by a lifetime of renting.
“ ‘I don’t’ think we’re going to have a middle class’ in
California, says Edward Leamer, director of the economic
forecast at UCLA’s Anderson School of Management.
“Cities nationwide are losing their middle-class neighborhoods,
according to a study released last week by the Brookings
Institution. Middle-income neighborhoods as a proportion of all
metro neighborhoods fell to 41% from 58% between 1970 and
2000.”
–The New England Journal of Medicine issued a correction of
its controversial Vioxx study, only now it says the drug poses a
heart risk earlier than the originally stated 18 months of usage.
–Boston Scientific’s Guidant unit issued yet another recall of
pacemakers and defibrillators.
–Apple Computer acknowledged “irregularities” in its awarding
of stock options for the period 1997 to 2001, including some that
were granted to co-founder Steve Jobs. Apple claims, however,
that in his case they were canceled before they could be cashed
in. The company didn’t say whether backdating was involved or
the impact, if any, on reported earnings. But now the SEC is hot
on the trail.
–Microsoft announced it was postponing release of its next-
generation Office business software product, this on top of
previously announced delays in its new Windows version, Vista.
This is really growing old.
–The federal government is expanding its probe of Home Depot
and its waste disposal practices; an investigation that first started
in California. [New York Post]
–Investment News reports that PIMCO’s bond king Bill Gross
will renew his contract come next spring; important for investors
since Mr. Gross is now 62. PIMCO’s recent performance,
though, has been lagging. As for his current outlook, following
the 17th rate hike by the Fed, Gross is focusing on continuing
weakness in the housing market and is positioning the core
portfolio in shorter-term U.S. paper.
–Retailer J. Crew had a successful IPO this week, pricing its
shares above the expected $15-$17 range, at $20, and seeing a
first-day increase to $25.
–Maybe I should have known this…but I didn’t. And if I didn’t,
I figure one or two of you weren’t aware of it either.
From Andrea Kavanagh of the International Herald Tribune:
“(The) salmon-farming industry has grown from 55,000 tons
produced in 1985 to more than 1.5 million tons in 2003….But
while this increase in production has made it easy for consumers
to put cheap salmon on their plates, large salmon farms create
serious environmental problems.
“Waste from millions of captive salmon at fish farms empties
directly into the ocean, polluting the water with untreated
sewage, toxic chemicals, uneaten fish feed and other wastes. In
Canada alone, salmon farms discharge more than 10,000 tons of
uneaten food annually. Escaped salmon – about three million
globally per year, according to recent studies – interbreed with
and often compete for food with already endangered populations
of wild salmon. But perhaps most troubling is the impact that
current salmon-farming practices have on efforts to stabilize
depleted and endangered fish stocks around the globe.
[OK…following is what I really didn’t know.]
“Carnivorous by nature, farmed salmon need to eat wild fish and
shellfish such as sardines, mackerel, shrimp and krill. For every
pound of farmed salmon produced, the industry requires several
pounds of wild fish, normally in the form of a specially ground
fishmeal. In other words, the more farmed salmon produced, the
more sardines and other fish removed from the sea and from
dinner plates. Farmed salmon, thereby, not only directly
compete with other marine life for our diminishing valuable
marine resources, but also with people around the world as
well….
“The challenges facing our oceans from overfishing and
unsustainable aquaculture practices are nothing to laugh at. Over
the past several years, fishing fleets have annually removed more
than 180 billion pounds of fish worldwide, and scores of once
plentiful fish populations around the globe are being caught and
processed faster than they can reproduce.”
There are ways to farm salmon safely, using soy-based feeds, for
example, but we need to get crackin’.
–Adidas AG reports that sales of its Teamgeist soccer ball, used
at the World Cup and retailing for $113 to $138, will exceed 15
million when the initial forecast was for 10 million. Only 6
million were sold during the 2002 World Cup.
–Moscow is now the world’s most expensive city, according to
the latest survey, with Seoul at #2 (recall my $16 pint of
Guinness there this spring) and Tokyo #3.
–Hank Paulson was confirmed as Treasury Secretary in a voice
vote this week.
–Andrea Schwartz, the Brazilian “bombshell” (New York Post,
not me) who was running an upscale brothel, disclosed the name
of a second figure this week. Last time we learned of “sugar-
daddy” #1, Time Warner CFO Wayne Pace. Now she says there
is a second gentleman, a 68-year-old money manager at Barrett
Associates, Robert Voccola.
From the New York Post:
“Outside his home (in Montclair, N.J.), the accused john looked
sheepish and was ushered inside by his angry wife, Judith, before
he could comment.”
Yup, you can bet there will be fireworks in that household this
holiday weekend, and not of the romantic variety.
–Goat meat products are up 57% in the last five years. But goat
producers are still trying to figure out how to initiate a viable
national ad campaign. “Trash-fed goat…for a healthier you.”
–Landon Thomas Jr. of the New York Times had a terrific piece
the other day on the case of former New York Stock Exchange
Chairman Dick Grasso and his ongoing tussle with New York
State Attorney General Eliot Spitzer over Grasso’s
“unreasonable” compensation, considering the fact the NYSE is
a not-for-profit body.
Mr. Thomas explored thousands of pages of depositions. Recall
that by 2003, Grasso had accumulated $140 million in his
pension plan (helped by annual compensation that totaled $11.3
million to $30.5 million from 1999-2002) and the controversy
that resulted in his ouster was a result of his seeking to take a
lump sum payment before he retired.
Grasso claimed the compensation committee approved of his
plan, while some members said they weren’t aware of the
decision until it was too late.
But I want to just note a few of the more personal issues that
back up my long-held claim that Mr. Grasso was one of the great
dirtballs of the Bubble Era, as I so stated in this space
immediately after 9/11.
“While many board members have said they were unaware of his
accumulated savings, depositions show that Mr. Grasso kept a
close eye on the amount. Soo Jee Lee, his executive assistant,
said in a deposition that Mr. Grasso received regular updates
about his mounting benefits from the exchange’s human
resources department. In fact, when it came to his personal
finances, few items escaped Mr. Grasso’s attention.
“According to his deposition, he cashed out at least a week of
unused vacation time each year and once expensed a $759 pair of
eyeglasses that he said he bought to limit glare during on-camera
interviews. Flowers for his secretaries, favorite restaurant
hostesses and even for Mr. Langone [best buddy and NYSE
board member, Ken] and his wife were billed to the Big Board.”
–My portfolio: According to my back of the beer coaster
calculations, and using a conservative money market rate of
3.5% for the year thus far (the benchmark Merrill Lynch account,
as noted in Barron’s, is currently at 4.36%), my recommendation
of 80% cash and 20% equities, the latter represented by the S&P
500, is up 1.6% vs. 1.8% for the S&P, though the S&P figure
doesn’t include dividends. But I’d be ahead were it not for
Thursday’s rally. Which actually brings up a good point for
those who invest in stocks. If you market time, you often miss
the best days and three or four can account for the lion’s share of
the gains in any one year. [Personally, though, I am not against
timing if you have a feel for the markets.]
As for my individual stock selections, I continue to hold my
carbon fiber play and in the first six months it has gone from $9
to $39, down to $21, and back up to $29. Ergo, it’s still premium
lager for the kid.
–Last, but not least, we have the case of Warren Buffett and his
$37 billion donation to various charities, including $31 billion to
the Bill and Melinda Gates Foundation, thus doubling their own
assets to $60 billion. To put this in perspective, the next largest
is the Ford Foundation with about $11 billion. Heck, the United
Nations spends only $12 billion on its programs, while President
Bush recently submitted a request for $23.7 billion in U.S.
foreign aid, a budget request that will be scaled back to the $22
billion mark or thereabouts.
In their joint news conference, the jocular Buffett conceded it’s
not easy coming up with the right projects when spending your
charitable dollars, but “you can bat 1.000 and do nothing
important,” ergo, you can’t be afraid to try new things and fail
from time to time.
The humorless Gates said “We want to show you can do good
and still have fun,” though he seldom looks like he is.
I’ve been trying to figure out why these two get along as well as
they do. Maybe it’s more about Melinda Gates, who strikes me
as a closet partier.
Anyway, is this the start of a new era of philanthropy and the
wealthy seeking to aid projects that truly benefit humanity
instead of the more common vanity fare?
Driving around in the New York area, you often hear radio spots
such as: “The Komansky children’s center of the Cornell Weill
Medical Center”; David Komansky having been the former
chairman of Merrill Lynch and Sandy Weill the former Citigroup
kingpin.
Yeah, yeah…I know it’s all about the children, but this is a
typical vanity effort. Or putting your name on a recital hall, as
Weill has also done. Or having a business school named after
yourself. Most are worthy in their own regard, but at the end of
the day how many lives have they touched?
For this reason I greatly admire what Buffett is doing. But if my
tone is a little bitter, understand that here in my New Jersey
neighborhood a leading medical center is under investigation for
Medicare fraud to the tune of over $500 million.
Foreign Affairs
Afghanistan: The Washington Post reported President Hamid
Karzai is rapidly losing the support of the people. The
government is perceived to be corrupt and the security situation
is worsening.
North Korea: Let’s face it…we don’t have a clue what’s going
on here; least of all President Bush and Japanese Prime Minister
Junichiro Koizumi. In their joint talks this week in Washington,
prior to Koizumi’s trip to visit the shrine of his idol, Elvis,
Koizumi threatened to stop ferry service and other trade with
North Korea if Pyongyang launches whatever is sitting on the
pad.
“Should they ever launch the missile, that will cause various
pressures – we would apply various pressures.”
Almost sounds like a massage. The White House isn’t any
better.
But as I keep mentioning, it’s all about the generals standing
behind Kim Jong il. Who are they and what the heck are they up
to?
China: President Hu Jintao tightened his grip on power by
promoting ten senior officers to the full rank of general in the
People’s Liberation Army. Seven of the ten come from political
departments that oversee party ideology and discipline, thus
enhancing cohesion in the ranks. Some China experts see the
move as a key one ahead of the 17th Party Congress next year.
[Meanwhile, Taiwan’s President Chen Shui-bian survived a
recall vote, even as corruption charges continue to swirl around
his cabinet and family.]
Syria / Lebanon:
Michael Young had the following thoughts in Lebanon’s Daily
Star.
“Credit Bashar Assad with seeing, early on, the advantages of
being Iran’s water boy in the Middle East. Syria has slipped
under the American radar as the Bush administration prepares to
haggle with Iran over its nuclear program….
“The Syrian president likes that just fine. He has recently been
mobilizing his comrades in Lebanon, even as the parliamentary
majority stumbles under the combined weight of Saad Hariri’s
political limitations and the destructive small-mindedness of the
Aounists, motivated principally by loathing for the Future
Movement. Meanwhile, Hizbullah, sitting at the nexus of the
Syrian-Iranian relationship, refuses to disarm, maintains a
dangerous alliance with Palestinian groups, keeps Lebanon’s
other communities in line by way of street intimidation,
consolidates its state within the state, and tries to convert
Lebanon into a bastion of ‘resistance,’ mainly in the service of
the party’s sponsors in Tehran….
But Young adds, “this is hardly an injunction to drive American
tanks into Damascus” …
“What the Arab states still refuse to address is that Syria’s
inherent instability increases their own. Iranian influence in
Damascus is a byproduct of the Assads’ decline, and nothing
suggests this decline won’t get worse and prove calamitous when
the ruling family can no longer hold on to power. It’s better to
start preparing now for a makeover, so that any movement
toward a new Syria can be a stable one. For once, Washington
may be able to find that its Arab friends are useful.”
From Defense News, on the same topic:
“Recent skirmishes along Lebanon’s borders are symptoms of a
cold-war-by-proxy that pits Iran and Syria against U.S.-led
Western powers,” writes Riad Kahwaiji.
“On the rugged hills along Lebanon’s frontier with Syria,
armored Lebanese battalions have set up scattered bases in the
wake of reports that Iranian arms have been smuggled across the
border to Hizbullah….
“To the south, where Lebanon meets Israel, the border is
patrolled by lightly armed Lebanese troops aided by UN
peacekeepers. But moving freely along the border as well are
Iranian-armed fighters with Lebanon’s Islamic Resistance
Movement (Hizbullah)….
“Analysts said Iran and Syria have different approaches to
dealing with Lebanon. Tehran wants to keep things calm so
Hizbullah and Palestinian Islamic factions can pressure Israel or
the United States. Damascus wants chaos to disrupt the UN
investigation (into the death of former Lebanese Prime Minister
Rafik Hariri) and force the West to relax its isolation of Syria.”
India: The Bush administration attained a major victory this
week with the approval in both houses of Congress of the nuclear
cooperation agreement between the U.S. and India. The Senate
foreign relations committee voted to approve, 16-2, and its
House counterpart voted 37-5. This is good, though it’s
important final legislation not be delayed beyond the November
elections and that it’s not watered down to the point where the
Indian government quashes it.
Mexico: As the nation goes to the polls on Sunday in what is
shaping up to be a battle royal between the left-wing populist
Andres Manuel Lopez Obrador and the conservative Felipe
Calderon, Washington Post columnist/economist Robert J.
Samuelson writes of the current state of Mexico’s economy.
“It’s not that Mexico has made no progress. Its economy was
once crisis-prone, inflation-ridden and heavily insulated from
foreign trade. Now it has quelled inflation (about 4 percent,
down from 17 percent in the late 1990s), controlled government
spending and opened up to trade….In recent years its economy
has grown almost 4 percent annually.
“But that growth – fine for an advanced country such as the
United States – doesn’t suffice for a poor country whose
population is increasing by more than 1 percent a year. In China,
economic growth averages 9 to 10 percent annually; in India, 6
to 8 percent. Mexico isn’t in the same league.
“Economies advance through the adoption of better technologies
and business methods. Production and efficiency improve.
Prices go down or incomes go up….Either way, people can buy
more – more old stuff (say, food or housing); or more new stuff
(say, Internet connections or iPods). In Mexico, this process is
weak. To simplify slightly: Its economy consists of two vast
sectors, each slow to adopt better technology and business
practices….
“An extreme case in point is Pemex, the state-owned monopoly
oil company. Without competitors or complaining shareholders,
its operations are lax. In 2004 Pemex had $69 billion in sales
and 137,722 employees, according to its Web site; in the same
year, Exxon Mobil had $291 billion in revenue and 85,900
employees.”
And due to the fact Pemex has been loath to accept foreign
investment, production of oil is declining dangerously; just
another example of the global supply/demand conundrum.
Spain: Prime Minister Zapatero said his government will begin
talks with separatist group Eta. While a majority of Spaniards
support talks, a sizable minority is against them in accusing the
prime minister of abetting terrorism.
Argentina: Here’s a little story to tuck in the back of your brain
for future reference. Argentina is making waves over the
Falkland Islands, which the Argentines invaded unsuccessfully in
1982, leaving the territory in Britain’s hands. The government of
Nestor Kirchner is up for reelection in 2007 and there has been a
bit of saber-rattling as Argentina seeks to reopen the issue of
sovereignty. For its part, Britain won’t address the topic, and
hold serious talks, until the islanders say they want to be part of
Argentina. [I would…the food is bound to be better under
Argentine rule…not sure of the beer, though…but I digress…]
Argentina says there is no right to self-determination…what’s
rightfully theirs is theirs.
Britain: Meanwhile, lawmakers are going to debate later this year
whether or not to replace aging Trident missile-carrying
submarines that form Britain’s nuclear arsenal. Don’t give ‘em
up, ol’ chaps. We may need that deterrent in the Persian Gulf
some day.
Netherlands: What a mess. The government collapsed as a tiny,
but crucial member of the ruling coalition withdrew its support
over the handling of former lawmaker Ayaan Hirsi Ali’s efforts
to remain in the country. [Hirsi Ali, you’ll recall, led the
opposition to Islamic fundamentalism and helped in Theo Van
Gogh’s documentary that got him killed.] The D66 party called
for the resignation of Immigration Minister “Iron Rita” Verdonk,
and with D66’s withdrawal, Prime Minister Balkenende was
forced to resign as new elections will have to be called soon. But
at least Balkenende recently got to see the White House as well
as Camp David.
Ukraine: If you had Ukraine forming a government within three
months after its election…you lost! The opposition continues to
block a new coalition that had been formed in the past few weeks
because it wants representation on important legislative
committees.
Which is why, sports fans, just as in the case of the Netherlands,
parliamentary forms of government often, err, fall short, shall we
say. But as I detail below, our two-party system certainly has its
own limitations.
Which is also why at StocksandNews, we like the idea of a
monarchy and we’ll back the heirs of George Washington in any
attempt to assume power…………………………just kidding.
Random Musings
–The U.S. Supreme Court dealt a big blow to President Bush’s
efforts to try prisoners at Guantanamo Bay by ruling the
administration’s military tribunals violated both U.S. law and the
Geneva conventions on the treatment of prisoners. But while the
Court, by a 5-3 vote (Chief Justice Roberts recused himself),
rejected the structure of the military commissions, it did say the
administration could work with Congress to establish tribunals
that would adhere to U.S. law and the conventions. Regardless,
no one is about to be released because of the ruling, while Justice
Antonin Scalia in dissent said, “The Court takes on a new role as
active manager of the details of military conflict.” Bush’s
opponents, though, both here and abroad, will have a field day.
–And then we have the issue of the disclosure in the New York
Times, Wall Street Journal and Los Angeles Times of a program
that the Treasury Department was spearheading to monitor the
finances of suspected terrorists through international banking
channels. Rather than participate in the often shrill debate,
following are some excerpts from editorials that appeared in the
three papers defending their decision to publish.
New York Times Editorial
“The Swift [ed. a highly-secretive international banking
consortium] story bears no resemblance to security breaches, like
disclosure of troop locations, that would clearly compromise the
immediate safety of specific individuals. Terrorist groups would
have had to be fairly credulous not to suspect that they would be
subject to scrutiny if they moved money around through
international wire transfers. In fact, a United Nations group set
up to monitor al Qaeda and the Taliban after Sept. 11
recommended in 2002 that other countries should follow the
United States’ lead in monitoring suspicious transactions handled
by Swift….
“But any argument by the government that a story is too
dangerous to publish has to be taken seriously. There have been
times in this paper’s history when editors have decided not to
print something they knew….
“Our news colleagues [ed. there is a wall between the news and
opinion operations at the Times, just as there is at other papers]
work under the assumption that they should let the people know
anything important that the reporters learn, unless there is some
grave and overriding reason for withholding the information.
They try hard not to base those decisions on political
calculations, like whether a story would help or hurt the
administration….
“From our side of the news-opinion wall, the Swift story looks
like part of an alarming pattern. Ever since Sept. 11, the Bush
administration has taken the necessity of heightened vigilance
against terrorism and turned it into a rationale for an
extraordinarily powerful executive branch, exempt from normal
checks and balances of our system of government. It has created
powerful new tools of surveillance and refused, almost as a
matter of principle, to use normal procedures that would
acknowledge that either Congress or the courts have an oversight
role.
Los Angeles Times / Editor Dean Baquet
“We sometimes withhold information when we believe that
reporting it would threaten a life. In this case, we believed,
based on our talks with many people in the government and on
our own reporting, that the information on the Treasury
Department’s program did not pose that threat. Nor did the
government give us any strong evidence that the information
would thwart true terrorism inquiries….
“In the end, we felt that the legitimate public interest in this
program outweighed the potential cost to counterterrorism
efforts….
“We are not out to get the president….
“But we also have an obligation to cover the government, with
its tremendous power, and to offer information about its
activities so citizens can make their own decisions. That’s the
role of the press in our democracy.
“The founders of the nation actually gave us that role, and
instructed us to follow it, no matter the cost or how much we are
criticized….
“History has taught us that the government is not always being
honest when it cites secrecy as a reason not to publish. No one
believes, in retrospect, that there was any true reason to withhold
the Pentagon Papers, although the government fought vigorously
to keep them from being published by the New York Times and
the Washington Post. As Justice Hugo Black put it in that case:
‘The guarding of military and diplomatic secrets at the expense
of informed representative government provides no real security
for our Republic.’
“I don’t expect all of our readers to agree with my call. But
understand that it was one taken with serious reflection and
supported by much history.”
Wall Street Journal Editorial
“President Bush, among others, has…assailed the press for
revealing the program, and the Times has responded by wrapping
itself in the First Amendment, the public’s right to know and
even The Wall Street Journal. We published a story on the same
subject on the same day, and the Times has since claimed us as
its ideological wingman….
“The Times decided to publish [ed. despite pleas from then
Treasury Secretary John Snow, 9/11 Commission co-chairs Tom
Kean and Lee Hamilton, Director of National Intelligence John
Negroponte and Democratic Congressman John Murtha not to do
so] (and) agreed to delay publishing by a day to give (Treasury) a
chance to bring the appropriate official home from overseas….
(But since Treasury felt the Times) had about 30% of it wrong,
(the) Administration decided that, in the interest of telling a more
complete and accurate story, they would declassify a series of
talking points about the program….
“Around the same time, Treasury contacted Journal reporter
Glenn Simpson to offer him the same declassified information.
Mr. Simpson has been working the terror finance beat for some
time, including asking questions about the operations of Swift,
and it is a common practice in Washington for government
officials to disclose a story that is going to become public
anyway to more than one reporter. Our guess is that Treasury
also felt Mr. Simpson would write a straighter story than the
Times, which was pushing a violation-of-privacy angle…
“Some argue that the Journal should have still declined to run the
anti-terror story. However, at no point did Treasury officials tell
us not to publish the information. And while Journal editors
knew the Times was about to publish the story, Treasury officials
did not tell our editors they had urged the Times not to publish.
What Journal editors did know is that they had senior
government officials providing news they didn’t mind seeing in
print. If this was a ‘leak,’ it was entirely authorized.
“Would the Journal have published the story had we discovered
it as the Times did, and had the Administration asked us not
to?….probably not. Mr. Keller’s [Bill Keller, editor of the
Times] argument that the terrorists surely knew about the Swift
monitoring is his own leap of faith. The terror financiers might
have known the U.S. could track money from the U.S., but they
might not have known the U.S. could follow the money from,
say, Saudi Arabia. The first thing an al Qaeda financier would
have done when the story broke is check if his bank was part of
Swift.
“Just as dubious is the defense in a Times editorial this week that
‘The Swift story bears no resemblance to security breaches, like
disclosure of troop locations, that would clearly compromise the
immediate safety of specific individuals.’ In this asymmetric
war against terrorists, intelligence and financial tracking are the
equivalent of troop movements. They are America’s main
weapons….
“The current political clamor is nonetheless a warning to the
press about the path the Times is walking. Already, its partisan
demand for a special counsel in the Plame case has led to a
reporter going to jail and to defeats in court over protecting
sources. Now the politicians are talking about Espionage Act
prosecutions. All of which is cause for the rest of us in the media
to recognize…that sometimes all the news is not fit to print.”
Washington Post Editorial
[The Post not being part of the troika that initially disclosed the
story.]
“The decision on whether to publish information that
government officials assert would damage national security is
one of the gravest choices a newspaper can face….
“Justice Potter Stewart stated (the) trade-off well in a concurring
opinion in the Pentagon Papers case 35 years ago. ‘In the
absence of the governmental checks and balances present in
other areas of our national life, the only effective restraint upon
executive policy and power in the areas of national defense and
international affairs may lie in an enlightened citizenry – in an
informed and critical public opinion which alone can here protect
the values of democratic government,’ he wrote. ‘For this
reason, it is perhaps here that a press that is alert, aware, and free
most vitally serves the basic purpose of the First Amendment.
For, without an informed and free press, there cannot be an
enlightened people.’….
“The reactions of President Bush and, even more, Vice President
Cheney have been only slightly less chilling. Mr. Cheney
assailed news organizations who ‘take it upon themselves to
disclose vital national security programs, thereby making it more
difficult for us to prevent future attacks against the American
people.’
“All administrations jealously guard secrets, often for important
reasons. But this administration, more than any since the one
that prosecuted the Pentagon Papers case, has resisted disclosure
and effective oversight, whether by Congress or the press. This
across-the-board aversion to scrutiny makes it all the more
difficult for responsible media organizations to separate the
legitimate claims of national security from the overblown.
“Those who complain about disclosures assert that the war on
terrorism has changed the calculus of risk. They would prefer a
media meekly obeying official demands for secrecy. But in the
end, as Justice Stewart understood, the nation stands to benefit
far more than it could lose from a press that is ‘alert, aware and
free.’”
New York Post Editorial
“The New York Times has again put its institutional arrogance
and contempt for the duly elected current administration ahead of
the security of the nation….
“So let’s be clear. Such stories give aid and comfort to the
enemy in time of war.”
Well here are my own brief thoughts. The Swift operation was
not illegal. The administration, and its overseas allies, have made
great strides in breaking up the network that finances the
terrorists; the evidence points to this.
But all you really need to know is that powerful Democrats Lee
Hamilton and John Murtha (of all people these days), supported
keeping the program secret and took the time to personally
appeal to the Times to do so.
It is thus the height of arrogance, and a further example of the
institutional anti-Bush bias at the Times, for it to nonetheless
proceed with the story.
At the same time, while the Times took a mighty leap of faith in
having us believe they couldn’t have possibly jeopardized any
operation because the terrorists had to have already known all the
details, the mere fact the administration then took Journal
reporter Glenn Simpson under its wing probably tells you the
uproar is as much political as operational.
That said, the bottom line is the American people gained nothing
by having the Swift program revealed. No one would have been
hurt by it being kept secret. I don’t need to know everything that
goes on in this war on terror. I don’t expect to know.
But, let’s face it, the Bush White House, particularly the Office
of the Vice President, isn’t without blame in this mess due to its
own past transgressions.
–U.S. News & World Report’s Gloria Borger captures my
sentiments exactly in opining on the coming congressional races.
“(It’s) kind of startling that, according to a recent CBS News /
New York Times poll, about half of all Americans still like their
own congressman. Given what’s going on in Washington, the
question comes to mind: Why? As each party strives to take
fecklessness to new heights, concentrating on little more than job
survival, why not hold members responsible for their lack of
achievement? If each of us accomplished as much on our jobs,
we’d be out of work. So here’s an idea. Fire incumbents….
“I am not a Congress basher by profession. Yet, sad to say, I’ve
come to believe that the institution may be even more corrupt
than we suspect…But we’ve been focusing on sleaze as if it’s
just a narrowly defined slice of overt political scandal – stories
about lobbyists gone wrong like Jack Abramoff, or congressional
pork barrel favors steered to friends in exchange for personal
gain. That’s shady, to be sure – and members of Congress
should have been scared into reform. They weren’t.
“All of which points to a much broader swath of corruption
infiltrating Capitol Hill – a stench that stems from arrogance.
Not just the arrogance of the majority, which is, admittedly,
breathtaking. But there’s an arrogance of incumbency that
comes from safely drawn districts and a 98 percent re-election
rate and a sense of entitlement to wealth and power. When that
same conceit infects the boardroom, Congress is always full of
outrage, the first in line to call for corporate responsibility and
reform. This is, of course, the same Congress that can’t organize
its own House ethics committee, much less police – and reform –
itself in any meaningful way.”
–Three opinion surveys were released this week. President Bush
received an overall approval rating of 38% in the Washington
Post / ABC News survey, 37% in USA Today / Gallup, and 41%
in the Los Angeles Times / Bloomberg poll. But while the last
one had Democrats with a 49-35 advantage when registered
voters were asked which party they intended to support in
congressional races come November, if Iraq is to be such a key
issue, the Bush administration can take some solace in the
Washington Post / ABC finding that the percentage of people
who feel the Democrats are best able to handle the situation there
has declined from a 14-point lead to a 47-41 advantage.
Back to the LA Times survey, 61% say the nation needed “to
move in a new direction.”
–Here in New Jersey, we have a senate race between Democratic
Senator Robert Menendez and Republican Thomas Kean Jr., son
of the former governor who was one of your editor’s all-time
favorites.
This past week Menendez, a real crook in the Robert Torricelli
mold, held two debates with Kean. I caught just snippets of each
and it was painful to watch; Kean is nowhere near ready for
prime time. In fact his performance was downright pitiful.
Months ago I said I would support Kean with a contribution and
in the interests of full disclosure I have yet to do so. He’ll
probably still receive my vote (I sure as hell am not voting for
Menendez), but I’m keeping my cash in my wallet for now.
–And since I’ve been bombarded at home with phone calls from
all sides concerning both Kean’s organization as well as the
congressional race in my district, I wonder what happened to the
“Do not call list”! Talk about a freakin’ farce. I received three
calls from Kean staffers in one three-hour period the other day. I
may have to send in a dollar just to attempt to shut them up.
–Former New York City Police Commissioner Bernard Kerik
reached a plea bargain in his bribery investigation. Kerik
admitted in court Friday to two misdemeanors in avoiding felony
charges. So while he won’t be spending any time in jail, the
dirtball label I long applied to him is still very much intact.
–Newark, New Jersey’s new mayor, Cory Booker, has his hands
full on the crime front. There were eight separate shooting
incidents, killing two, in the city last Sunday night. But if
Booker can have a positive impact on the exploding crime rate
here, he will deserve all the national attention some Democratic
Party officials have been clamoring for.
–A Chinese soccer commentator at the World Cup expressed his
disdain for Australia in its match with Italy, saying things like “I
hate Australia.” Very stupid, since Australia has so many of the
natural resources China’s economy is reliant on. He was forced
to apologize.
–Michael Daly, columnist for the New York Daily News, wrote
of a Jan. 2004 letter to the Department of Homeland Security
from Randy “Duke” Cunningham, then in Congress (now in
prison for accepting bribes).
Cunningham was writing on behalf of a convicted felon by the
name of Christopher Baker, head of a limo company, Shirlington
Limousine & Transportation, that was seeking a contract with
Homeland Security. Cunningham vouched for Baker’s integrity,
while failing to tell DHS that he was making the request at the
behest of a defense contractor that was bribing Cunningham.
Mr. Baker had been convicted for attempted robbery and car
theft, but DHS shelled out $3.8 million for a contract to provide
its personnel with shuttle service. A second contract was for
$21.2 million. So as Michael Daly wrote in a commentary he did
for U.S. News & World Report (both USN&WR and the Daily
News are owned by publisher Mort Zuckerman), DHS “was
paying $25 million to have its officials driven around town even
as the department resolved to cut counterterrorism money to New
York by 40 percent.”
Congressman Peter King of New York, chairman of the House
Homeland Security Committee, heard “secondhand that
Cunningham had helped Shirlington land the contracts and had
written a recommendation on Baker’s behalf.” King inquired as
to where the letter was, at which time he was told by DHS there
was no record of any such thing.
Rep. King kept asking different officials and he got the same
answer. “We have no record at all,” he recalled.
Finally, a Homeland Security official confessed she knew of an
e-mail that referred to the letter, “Yet the very day the committee
learned of the e-mail, Homeland Security again insisted
Cunningham had not written the agency on Shirlington’s behalf.”
But last Friday, DHS contacted King acknowledging a letter had
been found.
“They said some clerk was going through files, and it just
happened to turn up,” King said.
Michael Daly:
“That was the very day Homeland Security refused to accept
hand delivery of those 6,000 letters to (Michael) Chertoff from
Daily News readers outraged by the counterrorism funding cut.
“ ‘We can’t accept mail from people we don’t know,’ a
spokesman said.
“A letter from a corrupt congressman arrives at Homeland
Security and – presto! – a convicted felon has $25 million in
contracts.
“But thousands of letters from decent citizens who fear for their
families are deemed too much a potential threat to Chertoff even
to open.”
–Meanwhile, the Department of Veterans Affairs reported the
laptop with sensitive data on over 26 million veterans and
military personnel was recovered by the FBI, though no one is
saying how or who turned it in. Evidently none of the files were
accessed, but NBC News reported there may have been up to ten
other instances, officially unreported thus far, of loose data.
–Update: An Atlanta coalition of businesspeople and
philanthropists ended up purchasing Martin Luther King Jr.’s
historic papers from his children for the purpose of donating
them to Morehouse College, King’s alma mater. MLK’s kids
pocketed $32 million, but as the New York Times pointed out in
an editorial, “buying the documents may have been the easy
part.”
“The Atlanta group must still deal with Dr. King’s heirs, who
have historically wanted to have their cake and eat it too – by
continuing to exert undue control over the documents even after
selling them….
“For a look at how wrong things could go, consider the King
Center in Atlanta, which was set up to commemorate Dr. King’s
legacy and to serve as a repository for the main body of his
papers and others from the civil rights movement. In addition to
being run-down and in need of repair, the King Center has
suffered from shabby curatorial work and poorly conceived
exhibits that have jeopardized its holdings and stripped it of
significance as a civil rights history destination.”
Morehouse College doesn’t have the resources to do a good job
at preserving this important history.
And so we hereby nominate, collectively, the money-grubbing
King Family for “Dirtballs of the Year.”
–Whaling Debate Update: Mark my words, this issue is going to
get hot and it could impact U.S.–Japanese relations. After the
International Whaling Commission passed a nonbinding
resolution in favor of commercial whaling, one step removed
from rescinding a 20-year moratorium, the United States,
Australia, New Zealand and Britain are spearheading an effort to
ensure it remains in place.
I told you last week that going from a 33-32 vote to having 75%
of the commission approve the rescission was easier to
accomplish than it looked at first glance. This week Juliet
Eilperin of the Washington Post reported:
“Both sides (in the debate) engaged in serious lobbying during
the St. Kitts meeting. The United States, according to a senior
administration official who asked not to be identified for
diplomatic reasons, had encouraged anti-whaling Israel to join
the body and lobbied pro-whaling Guatemala to stay home.
Japan has recruited at least 19 countries, many from West Africa
and the Caribbean, to join the commission and back expanded
whaling.
“Japan’s delegate, Minoru Morimoto, who was elected vice chair
of the commission, said at the close of the meeting that the group
‘has now begun the process for bringing its functions back on
track as a resource-management organization that regulates and
monitors sustainable whaling.’”
I did not see if President Bush and Prime Minister Koizumi
discussed the issue this week, but for the first time in my life I
just may send a contribution to Greenpeace to aid in what is
going to be a battle royal. And remember, nations like Japan,
Norway and Iceland basically ignore the ban as it is…in the
name of “scientific research,” they would have us believe.
–The U.S. population was 200 million in 1967. This fall it will
hit 300 million.
–The surgeon general confirmed there is “indisputable” evidence
secondhand smoke is deadly.
–Those terror suspects in Miami were part of the “Moorish
Science Temple of America,” a sect that blends Christianity,
Judaism and Islam. Of course all this means is they were angling
for the maximum number of holidays possible.
–I’m thinking there’s still a chance Bill Gates morphs into
Ernest Blofeld one day, to the detriment of us all.
—
Pray for the men and women of our armed forces.
God bless America. And Happy Birthday!
—
Gold closed at $617
Oil, closed at $73.95
Returns for the week 6/26-6/30
Dow Jones +1.5% [11150]
S&P 500 +2.1% [1270]
S&P MidCap +3.2%
Russell 2000 +5.0%
Nasdaq +2.4% [2172]
Returns for the period 1/1/06-6/30/06
Dow Jones +4.0%
S&P 500 +1.8%
S&P MidCap +3.6%
Russell 2000 +7.6%
Nasdaq -1.5%
Bulls 37.4
Bears 36.3 [Source: Chartcraft / Investors Intelligence]
Have a good holiday. I appreciate the support.
🙂 _]
Brian Trumbore
