[Posted 7:00 AM ET]
Bad Hair Day
Following North Korean dictator Kim Jong Il’s own
pyrotechnics on the Fourth of July, President George W. Bush
kept repeating the same thing over and over again.
“Diplomacy takes awhile. We’re working this issue hard…we’re
working the Iranian issue hard.”
One hears this and can’t help but think of the “Saturday Night
Live” take-off on Bush, “It’s hard work,” which will no doubt be
part of the show’s opening monologue come the new fall season.
In other words the president has become a caricature of himself,
which normally isn’t a good thing in the world of politics and
foreign affairs.
Of course Kim’s actions this week are but one topic taking up
space on the agenda at the White House these days. As the
editor of Foreign Policy told the Washington Post, “(the
administration) is a distracted government that has to take care of
too many things at the same time.”
Scholar Nicholas Eberstadt in an op-ed in the Wall Street
Journal:
“Back in 2000, during the final phase of the Clinton
administration’s ill-fated ‘peace offensive’ toward the North
Korean regime, Kim Jong Il personally assured an American
secretary of state that the 1998 test-firing of a ballistic rocket
‘was our first launch – and our last’ of the DPRK’s long-range
Taepodong-1. The ever-magnanimous Dear Leader is still true
to his word, as it were. For the long-range rocket launched this
week (along with six short-range missiles) was not a Taepodong-
1, but rather a Taepodong-2: North Korea’s new and improved
multistage intercontinental ballistic weapon.
“Wordplay and semiotics, however, cannot obscure the grim
significance of North Korea’s latest move. Without warning, it
shot off a missile it has been developing for the purpose of
striking the U.S. Lest there be any possible ambiguity about the
nature of the intended threat, North Korea’s National Defense
Commission (chaired by Kim Jong Il) timed the launch to
coincide with America’s Independence Day celebrations.
“By this provocation, Pyongyang has done more than simply
raise the stakes in its contest of wills with the Bush
administration. Much more ominously, the launch reveals that
the Dear Leader and his inner circle are ready to ratchet up their
confrontation with ‘the imperialists’ to a new and still more
dangerous level – and that North Korea’s masters are confident
that they hold the upper hand in this escalation….
“(North Korea’s) leaders seem to have concluded that the Bush
North Korea policy consists mainly of empty words – and that
oft-repeated admonitions and warnings need not be taken terribly
seriously. By more than one criterion, indeed, Pyongyang’s
strategic successes on the Bush watch outshine those from its
brinkmanship during the Clinton years. Apparently unwilling to
move against North Korea’s nuclear challenges by itself, and
evidently incapable of fashioning a practical response involving
allies and others, the Bush administration’s response to
Pyongyang’s atomic provocations is today principally
characterized by renewed calls for additional rounds of toothless
conference diplomacy.
“Having taken the measure of his American adversaries, Kim
Jong Il and his regime are now embarking on a perilous new
high-stakes gamble, one through which they may earn
unprecedented economic and strategic benefits. Ballistic
missiles are their instrument in this venture. These will be
wielded as like a strategic battering ram, with the aim of
shattering the U.S. security architecture in the Korean peninsula
and throughout northeast Asia.”
William Kristol, editor of the conservative Weekly Standard, on
the overwhelming concerns facing the Bush administration:
“North Korea is firing missiles. Iran is going nuclear. Somalia is
controlled by radical Islamists. Iraq isn’t getting better, and
Afghanistan is getting worse. I give the president a lot of credit
for hanging tough on Iraq. But I am worried that it has made
them too passive in confronting the other threats.” [Washington
Post]
The only thing saving the administration domestically when it
comes to both Iran and North Korea is the fact no one else has
stepped forward with a realistic solution and backbiting on both
sides of the political aisle has been fairly tame, for now.
As for yours truly, I told you years ago China loved to see the
United States sweat and that has never been more apparent than
today. Of course they can put an end to this lounge lizard act,
“Kim and The Generals,” anytime they want. Just cut off the
North’s oil, for starters, and North Korea’s war machine would
be a sitting duck. [Think Gulf War I.] As that’s all Kim has,
aside from his missiles and a few thousand artillery shells (albeit
very dangerous ones), the generals would immediately tell him to
tone it down.
And when it comes to South Korea, sorry to repeat myself but for
you new readers out there I was just in Seoul, and at the DMZ,
specifically, this past April 29. [“Week in Review” 4/29/06 and
5/6/06] Among my musings then:
“I saw firsthand how in a recent poll here, half of South Korea’s
young people would side with North Korea if the United States
attacked Kim Jong Il’s nuclear facilities. You’re reading that
right. In turn, just a fraction of those with memories of the war
and its depressing aftermath would….
“The elderly here understand just how wicked and dastardly the
North Korean regime is and how at a moment’s notice, Seoul
could be vaporized. The youth are like ‘whatever.’”
To be fair, though, I praised the South for some of its moves to
integrate economically with the North, but I concluded many,
particularly the youth again, were “hopelessly naïve.” Having
also seen some of the defenses the South has against an invasion,
however, this isn’t a viable option for the North.
Which leaves Kim with the artillery shells and a nuclear option.
Or rather it leaves his generals with this option, because at the
end of the day it’s still about the men behind the Porn King. Are
they nuts? No one has an answer to that one.
So this week we were left to watch the Bush administration
largely flail away on the diplomatic front. Even the Japanese
were backing down on levying new sanctions against North
Korea as both Russia and China said they wouldn’t approve of
them. The point is not that sanctions would be anymore of a
threat to Kim than what is already in place, but at least it would
send a unified response. Instead, we have China’s diplomats
stating they are “seriously concerned” out of one side of their
mouth, while adding there is no need to disturb the “peace and
stability” out of the other.
At least as I go to post, South Korea has suspended food aid as
well as denying the North’s request for military talks, in a mild
sign that Seoul could be finally getting it.
Once again, though, what is increasingly apparent these days is
there are no Churchills, no Roosevelts, no Reagans, or even a
vintage Kissinger. Maybe one will eventually emerge. I just
hope he or she has at least been born. We’re running out of time.
Iran / Iraq / Israel
Baghdad’s central morgue took in 1,600 bodies in June (Zarqawi
was killed on June 7), the highest monthly total since February
and the attack on the Golden Mosque that led to the surge in
sectarian violence. Last weekend, 66 were killed in a single car
bomb in Sadr City, while a female Sunni lawmaker was
kidnapped along with 11 of her bodyguards.
And while this was going on, General Peter Pace, head of the
Joint Chiefs of Staff, was on “Today” Tuesday morning,
conceding that September was a “reasonable date” for possible
troop withdrawals. Democrats have every right to ask, “Just who
is talking of cutting and running and setting timetables?”
General George Casey, the vaunted ‘man on the ground’ who
President Bush reiterated on Friday would be the final arbiter,
already told us he’s looking to withdraw a sizable portion of the
forces by year end.
Yes, it’s all tied to our mid-term election and not necessarily the
actual security picture. You have a hard time convincing me this
administration will truly do the right thing; that is if the Iraqi
security forces aren’t ready we stay with the full existing
complement.
That said the new Iraqi government is being given a chance to
succeed. We’ll have a good idea whether they can establish
some kind of stability in just another six to eight weeks.
As for Iran, the mullahs were rejoicing over Kim Jong Il’s
demonstration, even if at the same time they had to be wondering
whether they were sold some damaged goods; i.e., the missiles
they received from the North last year.
We’ll also see how the G-8 summit in St. Petersburg goes in
terms of any new initiatives on the Iranian front, but it bears
repeating that Iran continues to play its cards beautifully.
President Bush’s “hard work” has allowed Iran for the past few
years in particular to speed up its weapons program, as well as
reinforce its skunk works against any possible attacks by the U.S.
or Israel (assuming either had a clue what to strike).
And then there is Israel and its incursions back into Gaza that
have turned deadly this week as Hamas and its acolytes stupidly
hold onto the kidnapped Israeli soldier.
What was of particular concern to Israel the other day, however,
was the rocket fired by Palestinian militants (one can assume
Hamas) that landed six miles into Israeli territory; a far greater
distance than the crude devices the Palestinians are normally
launching. One can never forget that Iran has been arming the
terrorists, particularly Hizbullah in Lebanon, and both Hamas
and Hizbullah have access to increasingly sophisticated
weaponry. It’s why Israel has to continue to bomb suspected
weapons factories and missile sites. Watch the Lebanese border
in particular over the coming weeks.
But on a slightly different topic, the impact the Palestinian crisis
is having on the Israeli economy, Bernard Avishai, author and
professor, had some of the following thoughts in an op-ed for
Barron’s.
“A continued stalemate is not a prescription for growth, but for a
catastrophic brain-drain….
“(Prime Minister) Olmert’s coalition does not fear radicalized
Palestinians, who can be isolated, as it should fear isolated
Israelis, who cannot eat algorithms. (Check Point CEO Gil)
Shwed also said, ‘People who think they are going to suffer here
for long will go live someplace else.’ Already, 750,000 Israelis
(including Olmert’s sons) live in the U.S. According to a 2004
poll, nearly half of Israel’s young people didn’t ‘feel connected’
to the state, and a quarter of them didn’t ‘see their future’ in the
country.
“Olmert’s first priority, and Israel’s best hope of holding onto its
best youth, is an advanced knowledge economy, which depends
on peace. But then sustaining peace will depend on this same
economy, which will spread science, management – and even
hope – to the West Bank and beyond.”
By the way, when you’re talking brain drain, there is none
greater these days than in Iraq.
Wall Street
After last week’s stemwinder, I’ll try to be mercifully brief.
Stocks finished down this week, though when it comes to the
Dow Jones the damage could have been far worse were it not for
the Florida Supreme Court reaffirming a lower court’s decision
to toss out a $145 billion punitive-damage award against the
tobacco industry. Shares in Dow component Altria Group
(the parent of Philip Morris) accounted for about 40 of the Dow’s
77-point gain on Thursday.
Overall, though, the Dow fell 60 points, 0.5 percent, to 11090,
while Nasdaq lost 1.9 percent to 2130. The market had a rough
go of it on Friday and in this instance Dow component 3M’s
earnings warning was the chief culprit, losing 9 percent or $7.
[And accounting for about 60 of the Dow’s 134-point loss that
day.]
The lion’s share of the economic data this week was
disappointing. The Institute of Supply Management’s
manufacturing and service sector indices both came in below
expectations, construction spending was down in May (the
biggest drop here in two years thanks to slowing housing
activity), and major retailers reported June sales that were rather
tepid. An index of 56 of the big boys revealed overall sales gains
of 2.6 percent for the month, vs. an average of 4.3 percent for the
first five months of the year. Wal-Mart came in at just 1.2
percent and is only forecasting 1-3 percent for July. [Target and
J.C. Penney, though, were better…4.8 and 4.3 percent,
respectively.]
But the big story was on the jobs front. On Wednesday, a report
out of ADP showed explosive growth in June so everyone
assumed that Friday’s government labor report would be far
above the expectation for 165,000 new jobs. Wrong. It came in
at 121,000 instead.
However, the average hourly wage component rose more than
expected and is now at a 12-month rate of 3.9%. Good for all of
you receiving this, or more, but not necessarily good if you want
the Federal Reserve to stop hiking interest rates.
For Friday, though, the bond market chose to focus on the
week’s evidence that the economy is slowing and thus by the
time the Fed reconvenes on Aug. 8, perhaps it will decide to hold
the line after all. Of course a rapidly slowing economy would
also inevitably lead to disappointing earnings, with more 3Ms the
norm.
But I was reading Crain’s New York Business and if you wanted
a real life example of how the Fed’s previous moves have begun
to impact business, be it small, medium or large, here is a snippet
from a report by Tom Fredrickson.
“Emilia Fabricant, who designs stylish maternity wear for
celebrities like Angelina Jolie, has hit the jackpot, with demand
for her fashions soaring in the past year.
“Unfortunately, so have the costs of financing the larger
inventory she needs to keep up with demand.
“ ‘We’re getting killed on our cash flow,’ says Ms. Fabricant,
founder of Manhattan-based clothier Cadeau. Interest charges at
the clothier are up tens of thousands of dollars this year – a result
of the double-whammy of larger borrowings and soaring interest
rates.”
It’s all about a 9% prime rate, or higher. Yup, it’s biting. [And,
look, I haven’t even brought up the impact on adjustable rate
mortga………doh!]
Finally, while Americans like to believe it’s all about us most
of the time, these days it’s also about Europe and Japan, or more
specifically the Bank of Japan and the European Central Bank.
A key index of business confidence in Japan rose smartly and
while the government remains split on the idea of finally raising
interest rates here for the first time in six years, chances are it
will do just that next week. Sure, they’ll still be close to zero,
but it’s the trend (and the continued unwinding of the ‘carry
trade’) that will be worrisome to world markets.
And in Europe, the 12-nation Euro-zone is seeing its highest
inflation in five years, with the ECB set to hike its benchmark
rate on August 3.
What does it all mean? The U.S., and its stock and bond market,
is far from the only game in town, which wouldn’t really matter
except we have all these deficits to service, see, and we need
folks all around the world to love us; well, maybe not exactly
love us, since most really don’t, but at least love our bonds, for
crying out loud!
Street Bytes
–U.S. Treasury Yields
6-mo. 5.28% 2-yr. 5.17% 10-yr. 5.13% 30-yr. 5.17%
Following the strong labor report from ADP, which from here on
will be viewed with far greater skepticism I imagine, yields
soared with the 10-year back up to 5.23%. But then sanity
returned on Friday, bonds rallied, and PIMCO’s Bill Gross
reiterated his position that the bear market in bonds is over.
–Chile, the world’s leading copper producer, is looking to invest
an additional $16 billion through 2010 to expand production
from its current 5.3 million tons to 6.4 million, which is expected
to equate to about 32 percent of the world’s total output by that
time, down from 35.5 percent in 2005. [Separately, the price of
copper is back to the $3.50 level as labor issues in Chile and
elsewhere have led to a ‘slowdown.’]
–But while it is relatively easy to increase mineral production, it
is far more difficult to find and produce more energy. Most
projects take 8-10 years before a barrel of oil is brought to
market, for example, and there are so many environmental and
logistical roadblocks to deal with.
Norway is but one example of the latter. Last week I noted it is
seeing continuing declines in output as it has the immediate issue
of finding rigs that can operate in the North Sea.
This week the Wall Street Journal had a story titled “Oil Rigs
Stage Exodus From Gulf of Mexico.” As Mike Spector starts off
in his report, “The biggest long-term threat to oil and natural-gas
production in the Gulf of Mexico isn’t hurricanes. It is the
dwindling supply of drilling equipment.”
Whether it’s for deep-water (like the North Sea) or shallow-water
projects (like the Persian Gulf), rig operators are going where
they’ll receive the highest rate for their equipment; not,
necessarily, where the oil and gas are.
And while the oil service industry is accelerating its rig-building,
most of these won’t be available until 2009 at the earliest.
For now, the bottom line is oil hit a new high this week, $75.78
on an intraday basis before closing at $74.
–Continuing with the above topic, though, if you believe that all
these new oil wells will one day produce gushers and that supply
handily meets, and exceeds, demand, and that there are no
hurricanes and that the mullahs turn into monks, making nothing
more powerful than beer and wine, I have to remind you where
the average price of West Texas Intermediate stood for the
period 1986-1999…$14.40 to $24.50. [Source: British
Petroleum] But then you’d have to be an idiot to believe all that.
–Last week I mentioned Russia’s World Trade Organization bid
and how it was likely it would be wrapped up either before or
during the G-8 summit in St. Petersburg. This week President
Vladimir Putin threatened to stop implementing some trade rules
Russia was adhering to, regardless of its WTO status, unless a
deal was signed. The U.S. is demanding Russia “allow foreign
banks to open directly owned branches, rather than having to set
up Russian subsidiaries.” [Financial Times]
The reason why WTO status is so important at this moment is the
issue of Gazprom’s massive Shtokman gas field, with U.S.
companies vying to be among the partners.
–June was another terrible month for domestic automakers as
General Motors’ sales were down a whopping 26%, Ford’s 7%,
and DaimlerChrysler’s off 15%. But Toyota once again bucked
the trend, up 14%. GM and Nissan are slated to hold talks next
week on the proposed alliance that includes Renault.
[By the way, I’m already tired of those “Dr. Z” commercials for
DaimlerChrylser. Lee Iacocca he’s not.]
–This isn’t good. Prime Minister Manmohan Singh of India has
put his nation’s privatization plans on hold to appease some of
his leftist coalition partners. Some of these same folks could also
hinder the nuclear technology deal between Washington and
New Delhi unless the U.S. Congress acts quickly to approve it.
–In a sign of just how well the airlines are doing these days,
Continental’s domestic load factor in June was 86.7 percent. In
other words, that’s a lot of people sitting in the middle seat,
thereby making the other two totally miserable as well.
[International traffic for Continental, incidentally, was up a
strong 18.5 percent, year-over-year. That’s also a lot of jet fuel.]
–According to consultants Milliman and Watson Wyatt
Worldwide, the average annual health-care costs for a family of
four rose an additional 9.6% in 2006 vs. 2005; with the average
employer picking up 62% of the cost [Milliman] while at the
same time 14% of companies surveyed said they plan to
eliminate benefits for future retirees over age 65, with another
6% eliminating it for current retirees [Watson Wyatt].
–Computerized / program trading accounted for 59% of the
overall volume on the New York Stock Exchange in the second
quarter.
–And now…another real estate update.
The average sale price of a Manhattan apartment rose 6.6% in
the second quarter, over the first quarter, to a new record…
$1.386 million.
But before you go “A-ha! So much for your pricked bubble talk,
Mr. Editor,” understand this was greatly influenced by Wall
Street’s humongous bonuses. What’s more important in gauging
the market is inventory and actual sales, with the former up and
the latter down in Manhattan.
Josh P. also passed along the latest from the San Diego market,
courtesy of ziprealty.com. As he put it, “It’s like right before a
tsunami hits, when you see all the water get sucked back and
then, boom, here comes the 30-foot wave.”
In other words, while the median price in this instance is still
stable, inventory is up almost 40% just since January and houses
are selling at about 80% of last year’s best levels.
Finally, for those of you trying to pick the bottom in homebuilder
stocks, the sector having taken quite a beating this year, the
Journal had a reminder; don’t forget the value of the land on their
books. Reporters Michael Corkery and Ian McDonald note:
“Parcels are valued at their purchase price on companies’ books,
so there isn’t any way of determining the land’s true market
value until they sell houses on it. Older purchases are likely
worth far more than their listed value on balance sheets, but
newer land buys are probably worth less.”
–Where have I been? Sure, I know of energy drinks like Red
Bull (never had one, though), but I never knew there was “energy
beer” until I saw that SABMiller is acquiring McKenzie River
Corp.’s Sparks and Steel Reserve caffeine-laced energy beers.
So this week I just may have to field test some of these. I’ve
been feeling kind of tired, anyway, these days.
–Speaking of the beverage industry, three folks, including an
employee of Coca-Cola, were charged with stealing trade secrets
in an attempt to sell information on a new Coke product to Pepsi.
But upon receiving a glass vial containing a sample of it, as well
as related documents, Pepsi officials turned the discovery back
over to Coke, who then brought it before the U.S. attorney. The
FBI completed a sting operation to nab the idiots after putting
$30,000 in a Girl Scout cookie box. Personally, I have but two
questions.
Do Girl Scout cookies still contain trans fats? And does anyone
know if that vial wasn’t simply someone’s drug test?
–AOL has lost 850,000 subscribers to high-speed Internet
providers in just the first quarter of this year, with the future of
dial-up looking even bleaker (I’m the last one using it, I think),
so AOL is now considering a plan to offer its services for free to
anyone with a high-speed connection; thereby hoping to make up
the revenue loss with increased ad dollars, as well as reduced
costs.
Actually, I didn’t realize high-speed usage is already up to 72%
of all Web users in the U.S.
[By the way, I have good reasons for using dial-up…I think…
but I only stay at hotels offering high-speed when I’m on the
road, lest you think I’m a total dinosaur. I’m more like a hybrid.]
–Henry Paulson received a nice parting gift from Goldman
Sachs, $18.7 million cash for his efforts the first half of this year
before he moved on to head up the Treasury Department.
Paulson had a choice of going for Monty Hall’s cash box or the
curtain where Carol Merrill stood; the latter starting off with a
year’s supply of Good Humor Whammy Sticks. Paulson
obviously chose wisely.
–Finally, former Enron Chairman Ken Lay died just six weeks
after being convicted for his role in the company’s collapse. But
due to a quirk in the law, because he was never actually
sentenced the case could be expunged, “as if he had never been
indicted or convicted,” according to a 2004 ruling in a U.S. court
of Appeals. This then calls into question all of the civil suits
launched against him in the hope he’d have to fork over his
remaining assets. Which kind of sucks.
Foreign Affairs
Afghanistan: Five British soldiers have been killed here in the
past two weeks, while at least ten interpreters for the U.S. have
been killed by the Taliban for cooperating with the coalition.
[Washington Post]
The Brits are debating their role, as outlined in an editorial for
the London Times.
“Years after the Taliban were supposed to have been defeated,
the 3,300 British soldiers in Afghanistan are reporting eight
‘contacts’ – some fully fledged gun battles – with them daily.
Last month three British soldiers, four Americans and a
Romanian were killed. Overnight, five American soldiers, two
Canadians and three civilian contract workers were injured by a
Taliban rocket attack on a base in Kandahar.
“The resurgence of the Taliban is causing deep concern in
Downing Street, which describes the situation as ‘very
dangerous’ and wants allied governments to wake up to the
importance of securing victory. Yet only two months ago John
Reid, then defense secretary, was offering the hope that British
soldiers could leave without firing a shot. As Liam Fox, the
shadow defense secretary, puts it: ‘This mission is turning out to
be far more dangerous than the public and backbenchers have
been led to believe.’
“So it is. The question is whether we should have expected
anything else. Three Anglo-Afghan wars should have told
anyone with a passing acquaintance with military history that the
Afghans have always been formidable opponents. Yet British
commanders appear taken aback by the ferocity of the resistance
they encounter. Did they really expect fighters to run away?
The Soviet experience of a 10-year occupation, more than 15,000
Russian deaths and retreat in 1989 revealed yet again that this is
a country that does not take kindly to foreign intervention.”
Russia: As Vladimir Putin prepares to host the G-8, there
certainly is no shortage of topics on the table, including Iran and
North Korea.
Others include energy security. This week even the International
Energy Agency blasted Russian natural gas behemoth Gazprom,
as IEA chief Claude Mandil accused the company of wasting
vast amounts of gas each year “by denying independent
producers access to its distribution network or paying them so
little for their gas that they burn it instead – a practice Mandil
called ‘absurd.’” [Judy Dempsey / International Herald Tribune]
Mandil added:
“Gazprom has not invested enough in developing new fields or
enhancing recovery in existing fields to offset the decrease in its
three major oil fields. And it has not invested enough in
improving the reliability of the transport grid. That means we
are not sure there will be enough gas for the commitments it has
taken.”
The IEA estimates Gazprom needs to spend $11 billion a year to
meet production goals, and what hurts the IEA and others who
rely on good data is Gazprom’s lack of transparency.
Of course while the IEA is calling for reform and investment, the
facts are the Kremlin has continued to place more restrictions on
foreign investment. The Russians talk of a free market while at
the same time they’re closing it.
Which means one thing. If you want to play with Gazprom and
its oil partner Rosneft (which is about to come to market in a
giant IPO), you better be prepared to do some dirty dealing.
Many Western companies will choose to look elsewhere rather
than take on both the political and financial risks.
And then there is the topic of securing Russia’s nuclear stockpile
and weapons of mass destruction, still the #1 security issue in the
world in the opinion of your editor.
From Jeff Bliss / Bloomberg News:
“Almost 15 years after the U.S. launched its program to help
strengthen controls on the world’s largest nuclear stockpile,
Russian guards are still patrolling storage sites with unloaded
guns, propping open doors that should be locked and turning off
intrusion detectors to avoid false alarms, according to a report by
Harvard University’s Project on Managing the Atom.”
Almost half of Russian buildings containing nuclear material
have yet to be fully upgraded.
Senator Richard Lugar notes that with Russia’s newfound clout
as the world’s No. 2 oil producer, “They want to point out at the
outset, ‘We’re not supplicants, we’re rich,’ he said.
But as expert Matthew Bunn of Harvard notes, many of Russia’s
facilities could not stand up to an attack by, for example, a group
of Chechen terrorists.
[On a somewhat related topic, Saturday’s Washington Post is
reporting the U.S. and Russia are about to sign a civilian nuclear
cooperation agreement. But this would create a firestorm in
Congress and I’ll have far more on the topic next week.]
Lastly, Peter Finn of the Washington Post reported on Friday that
Russia has been shutting down the Voice of America and Radio
Free Europe / Radio Liberty wherever it’s being aired.
So, the chances of a tension convention in St. Petersburg are still
rather high, I think you’d agree.
[As for the episode of President Putin lifting up the five-year-old
boy’s shirt and kissing him on the stomach, I didn’t write of it
the first chance I had because I didn’t think it was a story. But
after hearing his explanation in an interview with the BBC the
other day, all I can say is this guy is getting increasingly creepy.]
Mexico: By the time some of you read this, we’ll have a good
idea as to just how far leftist presidential candidate Andres
Manuel Lopez Obrador wants to protest the recent election as the
final tally showed him falling short of Felipe Calderon by just a
few hundred thousand votes. Lopez Obrador was calling for a
massive demonstration in Mexico City on Saturday as well as a
court challenge. For his part, Calderon sought reconciliation and
offered to put Lopez Obrador in his cabinet.
It’s a classic rich vs. poor scenario, with half of Mexicans living
below the poverty line. So far, though, it’s been a hopeful
exercise for Mexico’s democracy, but that can all change in a
flash….and in that case it would be “Honey, we’re going to
Disney World!”
China: Columnist Gabriel Rozenberg in the London Times on
China’s growing influence in Africa, which isn’t good for the
“Live 8” crowd seeking positive change.
“China makes the G-8 look like, well, a bunch of ageing
musicians reforming for one last gig. That weekend [of the ‘Live
8’ concert], as Pink Floyd sang ‘Wish You Were Here,’ a
Chinese company called Great Wall quietly announced it was to
blast Nigeria’s first communications satellite into space. Selling
Nigeria to investors is a tough job: insurgents, bandits and
corruption are endemic. But here is Mustafa Bello, head of the
Nigerian Investment Promotion Commission: ‘The U.S. will talk
to you about governance, about efficiency, about security, about
the environment,’ he says. ‘The Chinese just ask: ‘How do we
procure this license.’’
“Something extraordinary is going on in the developing world:
everywhere you look, there is China. Its foreign minister, Li
Zhaoxing, begins each year with a trip around Africa. It helps
that he speaks fluent Swahili, which isn’t, say, Margaret
Beckett’s [Britain’s foreign secretary] forte. Trade between
China and Africa grows at dizzying speed. Chinese firms are
drilling for oil, mining metals and logging timber across the
continent. They are also building everything from railways to
football stadiums, in an unorthodox mix of hard business logic,
soft loans and aid.”
And the same is happening in Latin America, though I’d add
some such as Brazil are increasingly impatient because China is
not real good about keeping its word.
Japan / South Korea: The two are still at loggerheads over the
disputed islands called Takeshima in Japan and Dokdo in Korea,
which lie roughly between them. Japan was upset South Korea
began a marine survey of the area, where both claim exclusive
natural resources and fishing rights. South Korea claimed
Japanese ships had entered South Korean waters without prior
consent.
United Kingdom: As Londoners reflected on the one-year
anniversary of the 7/7 bombings that killed over 50, a survey of
Britain’s Islamic community, some 1.6 million strong, reveals
that 13 percent see the bombers as “martyrs.” Prime Minister
Tony Blair blasted moderate Islamic leaders for not doing more
to condemn terrorism.
But on a lighter note, perhaps to some, Quentin Letts had the
following comments in an op-ed for the Journal after England’s
loss in the World Cup.
“English men have long prided themselves on a certain
resilience. It has been this way since at least 1815, when Lord
Uxbridge was hit by a cannon ball in the closing moments of the
Battle of Waterloo and said, in mild surprise: ‘By God, I’ve lost
my leg.’ To which his neighbor, the Duke of Wellington,
replied: ‘By God sir, so you have.’ Today’s England was,
therefore, a little surprised to switch on its TV sets last weekend
and find one of its best-known men [David Beckham] weeping
over the result of a soccer match….
“The England team was about to be eliminated from the World
Cup…and 31-year-old Mr. Beckham, a Conservative-supporting
father of two, was inconsolable. Tears rolled down his cheeks
like autumn raindrops. His eyes spouted like a garden sprinkler.
“When the final whistle blew a few minutes later the England
players, almost to a man, sat down and bawled…
“What on earth was happening to the country which bred Captain
Oates? Frostbitten Lawrence Oates was the polar explorer who
in 1912, not wishing to delay his comrades, stepped out of his
tent to certain death with the words: ‘I am just going outside and
may be some time.’ Now that was manly….
“One newspaper cartoon contrasted the football lamentations
with the quiet dignity displayed at last week’s 90th anniversary of
the Battle of the Somme. In the first day of the Somme alone
19,240 British soldiers died. Today, however, the British people
become emotional when even two servicemen are killed in
Afghanistan, as also happened last weekend….
“David Beckham’s sniveling about a mere soccer game is ripe
with comedy. The Pentagon, however, may want to bear in mind
that its main ally in the war against terror is no longer quite so
stoical in the face of adversity.”
Canada: The new government of Stephen Harper is hiking
defense spending to almost double 1998’s pace. Much of the
effort is to be directed towards better transport; such as
helicopters, planes and ships.
Separately, Prime Minister Harper was in Washington for talks
with President Bush and of great import to the Canadians is a
proposed law, to take effect in 2008, that would mandate
travelers crossing the U.S. / Canadian border carry passports or
similar identification. This could greatly impede both tourism
and trade and Canada’s frustration is they haven’t been told
exactly what kinds of documents they need to provide. It’s not
like you can just work it up overnight.
At least the two nations have agreed in principle on the
longstanding softwood lumber dispute.
Lebanon: The Druze are the smallest of the major players on the
political scene here but this week two Druze factions battled it
out, with at least one killed. Walid Jumblatt’s anti-Syrian group
went up against a pro-Syrian Druze element; not good.
And the alleged ringleader of an evolving plot to bomb the
PATH train tunnel which connects New Jersey to New York was
arrested in Beirut.
Ukraine: If you had Ukraine forming a government 3 ½ months
after its election…you lost! The fledgling coalition collapsed.
Random Musings
–My state of New Jersey has been in the news nationally
because of its budget crisis. New Democratic Governor Jon
Corzine proposed an increase in the state sales tax to 7% from
6%, as if six wasn’t already enough, and when the Assembly
speaker, a fellow Democrat, balked, Corzine shut the government
down, which included the casinos since they require constant
state supervision (by state employees who ogle the Borgata
Babes while getting free drinks, I imagine).
Well, just months into his governorship, Corzine is a most
unpopular fellow and while a friend of mine and I were
discussing this week that this had to be part of his plan to
eventually run for president (Corzine showing the world he could
make the tough decisions), here are the facts.
New Jersey is already the most overtaxed state in the nation next
to New York, by most measurements, with the highest property
tax burden. And as the Wall Street Journal opined in an
editorial, back when Corzine was running for the U.S. Senate
(after being booted out of Goldman Sachs during Henry
Paulson’s coup), Corzine said of a previous sales tax increase, “I
would not have raised the sales tax $1.5 billion, which I think
falls the most on those people who have the least ability to pay.”
So of course the tax he just proposed, and which is going to be
adopted after a resolution of the conflict on Wednesday, will cost
the average family another $260 to $275.
The agreement that was reached, though, also calls for half of the
penny increase to go towards property tax relief, something
Corzine had promised during his campaign but which until now
he had failed to address.
But back to Corzine’s political ambitions and how his move this
week will backfire, understand in New Jersey that state
government employment has exploded over the past 15 years,
under both Republican and Democratic administrations. Some
services are actually pretty good, but you’d have a hard time
convincing anyone but the very employees themselves that there
isn’t a ton of waste.
And with the rising level of government jobs has come an
increasing pension obligation that both Republicans and
Democrats have played around with using budget tricks that
would have made Harry Houdini envious.
But for the real answer to this week’s maneuverings, I turn to the
Star-Ledger’s Paul Mulshine.
“Without the sales tax, Corzine won’t be able to deliver on a
promised contribution to (the state employee unions’) pension
fund. Many were wearing T-shirts that read: ‘Every worker
deserves a secure pension.’
“A nice thought, but every worker doesn’t actually have a secure
pension. Pensions are being phased out in the private sector.
IBM just froze its pension plan….Microsoft never had one. And
when it comes to the mechanics, carpenters, cooks and other
everyday people who pay the taxes in this state, only a small
fraction have pension plans.
“Yet Corzine is demanding that all of these pensionless people
pay more taxes so that public workers can retire at much younger
ages than the people who pay their salaries. This is again a new
sort of blunder. Until Corzine came along, politicians generally
proclaimed that the purpose of new taxes was to do things for the
public. Corzine wants to raise taxes not to help the public but the
public employees. He made that clear two weeks ago in the
screaming speech before a union rally that has come to be known
as his ‘Howard Dean moment’ in memory of the outburst that
marked the demise of Democrat Dean’s presidential candidacy in
2004.
“Dean merely let out a loud yelp. But Corzine screamed to the
workers, ‘We’re gonna fight for a fair pension.’
“But if the governor’s fighting for the unions, then who’s
fighting for the taxpayers?”
Of course a big problem in not just New Jersey but most other
states these days is that to talk sense, as Mr. Mulshine is doing,
courts political suicide since state employees are by far the
largest single voting bloc.
–Meanwhile, on a different matter, but again involving my great
state (the “Garden State!”), Corzine has another issue that is
partially of his doing. He named this buffoon, Zulima Farber, to
be the state Attorney General and it seems that over Memorial
Day weekend she ‘may’ have intervened on behalf of her
boyfriend during a traffic stop.
According to the Star-Ledger:
“The investigation is centering on whether Farber or her State
Police driver did anything to get Fairview Borough police
officers to go easy on Hamlet Goore, who lives with the attorney
general in North Bergen, and whether the officers involved
behaved appropriately.
“Goore was stopped during a routine holiday ‘Click-it or Ticket’
seatbelt enforcement campaign, the attorney general said. When
officers told Goore the car would be impounded because its
registration had lapsed, he called Farber to unload the minivan of
clothes, laptops and bicycles he was driving to the Shore for their
weekend get-away.
“After Farber arrived in her state-owned vehicle driven by a
State Police trooper, the two court summonses that were to be
issued to Goore – for driving with a suspended license and
operating an unregistered vehicle – were voided by Fairview
(police).”
Corzine appointed this jerk. Now he’s been forced to tab an
independent counsel to investigate her.
–But with all the bad news in New Jersey, some of us are
praying that the new Democratic Mayor of Newark, Cory
Booker, succeeds in his efforts to reduce crime in this hellhole.
As I noted the other week, if he can do it he’ll be deserving of all
the national attention he can garner.
Newark is a city of less than 300,000, yet already over 50 have
been murdered this year. Following is a typical story from this
past week that is repeated far too often in many of America’s
major urban areas.
“A 15-year-old boy was gunned down in Newark while sitting on
a house porch with his friends, after a car slowed to a stop and
two people stepped out wearing T-shirts partially covering their
faces, police said.
“One of the assailants pulled out a handgun and opened fire on
the boy, Calvin Hill, hitting him repeatedly…As the seven other
friends scrambled to escape the bullets…the gunman turned and
fired on 15-year-old Andre Fuller, hitting him once in the thigh.”
Hill died in a neighborhood I’m familiar with through a past
association. And of course it was either the work of the Bloods
or Crips.
After about 35 years of particularly corrupt and totally inept
leadership in City Hall (two worthless pieces of garbage that
wore the title “mayor”), Booker has called for federal help in
focusing on gangs and guns. He’s being targeted himself by the
Bloods.
–The other big gang in America, MS-13, killed three innocents
at a Maryland housing complex in what appears to have been an
extortion scheme for protection.
–Interesting goings on in Connecticut, that’s for sure, as
Democratic Senator Joe Lieberman, a staunch defender of the
Iraq war, faces a stiff primary challenge. What makes it even
more intriguing is Lieberman’s vow to run as an independent
should he lose on Aug. 8. His fellow Democratic senators are
scared to death of the ramifications of this move. [Heh heh.]
But Aug. 8? Who the hell holds a primary on Aug. 8 in this
country? Geezuz, that’s stupid. Is it the citizens responsibility to
take the time to get an absentee ballot when so many of them are
going to be on vacation, like most normal Americans that time
of year?
–Great job of screening by the U.S. Army in the case of ex-
private Steven D. Green, whose actions in Iraq will single-
handedly result in countless deaths following his rape of an Iraqi
girl and the killing of her family. If found guilty he deserves the
death penalty, but it’s already too late. As for Haditha, we’re
going to be bombarded anew on this one. We had to fight the
perfect war in Iraq, as I noted from day one, and we haven’t.
–The verdict is in on NBC’s Brian Williams….he’s far more
biased than I thought he was. How could he justify airing former
Clinton ambassador Wendy Sherman the other night, who
bragged that when she met with Kim Jong Il she brought him a
basketball signed by Michael Jordan, “which he was completely
thrilled at receiving.” Later, Ms. Sherman conceded, “(Kim) can
also be stunningly brutal.” Just what kind of game was Sherman,
and her boss, Madeleine Albright, playing?
–Turning to lighter fare, barely, Australian Prime Minister John
Howard commented on his country’s version of the television
show “Big Brother.”
“I don’t like heavy-handed regulation but the business
community is always saying to me, ‘let us self-regulate.’ Well,
here’s a great opportunity for Channel Ten to do a bit of self-
regulation and get this stupid program off the air.”
If anyone has ever seen this tripe, either in the States or its
overseas versions, I wouldn’t need to explain further.
But the cause of Howard’s remark was an incident where two
male housemates were caught on video appearing to sexually
molest a woman. And of course it was streamed on the Internet,
because as we’ve all learned that’s the kind of thing the Net does
best. [London Times]
–Robinson Crusoe Island is a Chilean possession in the South
Pacific that is populated by just 600 residents. Lately, though, it
has become the scene of violence. Why? Abalone, which is
selling for such a high price these days that outsiders are showing
up in the waters of Robinson Crusoe where the delicacy is found
in abundance. Heck, it could mean war, sports fans….The
Abalone War.
–Big controversy at the Metropolitan Museum of Art in New
York. It seems the Met shelled out $45 million for a 14th-century
work titled “Madonna and Child” attributed to the artist Duccio
di Buoninsegna. [Never heard of the chap, who is said to be on
par with a more familiar figure, Giotto.]
But, alas, a Columbia University professor of art history claims
it’s a 19th-century forgery.
From Dalya Alberge of the London Times:
“Professor Beck pointed to the ‘low quality’ of the Met’s
painting – notably the Child’s raised arm and hand, ‘which
appears like a stump,’ and its ‘gourd-like head, which is quite at
odds with confirmed and documented paintings by Duccio.”
Well I looked up ‘gourd’ and the closest thing I come to when
matched with ‘head’ is Barry Bonds.
For its part, the Met sticks by its purchase. But what’s really
coming to light in just the past decade is the fact half of the stuff
you’re admiring is probably fake. They’re turned out by elves in
a Chinese sweatshop, you know.
–Finally, with all my traveling and taking in historic sites, it
never hit me that our nation doesn’t have a definitive
Revolutionary War Museum until I read a note that approval has
been granted to build one at Valley Forge, Pa. Good for Gov. Ed
Rendell and Sen. Rick Santorum for spearheading this project.
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $631
Oil, $74.09
Returns for the week 7/3-7/7
Dow Jones -0.5% [11090]
S&P 500 -0.4% [1265]
S&P MidCap -1.5%
Russell 2000 -2.1%
Nasdaq -1.9% [2130]
Returns for the period 1/1/06-7/7/06
Dow Jones +3.5%
S&P 500 +1.4%
S&P MidCap +2.1%
Russell 2000 +5.4%
Nasdaq -3.4%
Bulls 38.7
Bears 34.4 [Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
Brian Trumbore
