[Posted 7:00 AM ET]
It’s War
I wrote the following last Saturday, July 8.
“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.”
If you didn’t understand before why I’ve focused so much
attention on Lebanon in the past 1 ½ years, you know now.
Following the assassination of former Lebanese Prime Minister
Rafik Hariri in Feb. 2005, I felt compelled to travel to Beirut. I
planned to arrive a few days after Syria had pulled its last troops
out of the country, but I also wanted to leave before the four-
week election cycle began as I suspected there could be some
violence during this time. [There was.]
It’s important to rehash some of what I have written since then.
WIR…4/30/05
“The last of 14,000 (Syrian) troops departed on Tuesday and now
the UN is filing a report on both the assassination and any
residual Syrian presence, i.e., its intelligence agents who
terrorized large segments of the population. Undoubtedly, many
remain, either in the Hizbullah-controlled south, along the Israeli
border, or in safe houses in Beirut.
“But the democracy forces have already won some rounds and a
new interim government has been formed with Prime Minister
Mikati vowing to hold parliamentary elections by end of May.
Here’s where it gets very complicated. There are four main
political powers in Lebanon, which is roughly 70% Muslim and
30% Christian; the Sunnis, Shias, Druze (Muslims) and the
Maronite Christians. Each has its own tribes, neighborhoods and
towns….
“What does the new government do with Hizbullah? Not to
disarm it undermines the government’s credibility as you’d have
the Lebanese army and then Hizbullah. Who has the real
authority then? But if the government attempts to disarm
Hizbullah it risks almost certain confrontation and a renewal of
the civil war [1976-1990].
“Ironically, Syria’s presence in Lebanon over the years probably
helped some, in a perverted way, by damping down local
tensions that could now re-emerge. At this point it can still go
either way, but what transpires here will have a huge impact on
attempts to spread democracy across the entire region.”
WIR…5/7/05
“The people in Beirut, I would guess a slight majority, have a
generally favorable opinion of the United States because we
helped kick out Syria and gave the Lebanese back their country.
Rafik Hariri himself is viewed as a true martyr for the cause with
many, especially those in the lower classes, seeing him as a god.
But one of the insights I gained from my ride outside Beirut was
that I didn’t see Hariri’s picture in one shop window outside the
city proper….His image graced seemingly every store in Beirut
and hung from more than a few office towers, but not one picture
of him outside of town.
“That is but one example of the tribalism and factions in
Lebanon that have existed for centuries. The Sunnis have their
leader…the Shia have a number of disparate candidates, the
Maronite Christians have their own, the Druze have Walid
Jumblatt and then there is Hizbullah.
“Hizbullah does not represent all of the nation’s Shiites but I saw
firsthand just how popular it is among the lower classes. Yes,
Hizbullah does build schools and hospitals and while it’s difficult
for an American (let alone an Israeli constantly under threat from
Hizbullah and its growing missile arsenal) to understand this, it’s
a fact.
“But when it comes to the young people I encountered in Beirut,
I heard the following comment more than once. ‘We are free
now, we have an opinion’ and on May 29 they will be able to
express it….The election will be fascinating and, I imagine,
chaotic. The democracy advocates speak of the ‘Intifada of
Independence’ and ‘The Truth’ but this is an incredibly
complicated place and in the end I’m afraid the status quo will
prevail, which is not in the nation’s best interests….
“I don’t see Hizbullah being disarmed as they were to have been
back in 1989. And while the Lebanese army seems capable…the
threat of renewed civil war is still very real….
“(With) the situation deteriorating badly in Iraq these days, the
U.S. and its allies desperately need a political victory in
Lebanon. I’m hoping for the best, but my faith in a positive
outcome is shaky.”
[As it turned out, the election produced an incompetent
government and Hizbullah was given two cabinet seats.]
WIR…1/14/06
[The cabinet was in crisis.]
“The following account….is important in that Druze leader
Walid Jumblatt launched a blistering attack on Hizbullah,
questioning its determination to keep its arms forever.
“ ‘To those who hold the rifle today we say, “thank you, the
South is free.” (But) to whom is your allegiance now, Lebanon or
other countries?’
“ ‘We don’t want to be in the middle of an axis that starts in the
Mediterranean and ends in Tehran,’ referring to Shia-Hizbullah’s
relations with Syria and Iran.’”
[There were bombings and political assassinations in Beirut
during this time….Jumblatt continued.]
“ ‘There are ‘security islands’ that harbor a load of wired cars…
and as we all know, the state cannot investigate or interrogate
people in some of the areas inside these security islands.’”
[These are the areas Israel is attempting to bomb today.]
“Hizbullah MP Hassan Fadlallah decried Jumblatt’s statements.
It is necessary to refrain ‘from insulting institutions that enjoy
respect and admiration within a vast majority of the Lebanese.
No matter how stiff and tense the political situation gets, we will
maintain our national identity. No matter what happens, the
weapon of the resistance has one direction, and that is the Israeli
enemy.’”
WIR…4/22/06
[Lebanese Prime Minister Fouad Siniora had just traveled to
Washington to meet with President Bush.]
“Afterwards, Siniora said he was ‘really convinced’ that ‘Bush
and the United States will stand beside Lebanon to have Lebanon
remain a free, democratic, united and sovereign state.’”
Lebanon’s Daily Star editorialized.
“The significance of these words cannot be overstated, given the
enormous expectations that so many Lebanese held ahead of
Siniora’s controversial visit to the U.S. Many had hoped that the
premier would secure a promise from Bush to help end Israel’s
occupation of Lebanon’s Shebaa Farms, halt Israel’s incursions
into Lebanese territory and free Lebanese detainees from Israeli
prisons. Indeed, as he was setting out on his visit to America,
Siniora said that he intended to seek U.S. assistance in ‘enabling
it (Lebanon) to recover its occupied Lebanese territories.’
“So far Bush has not met any of the high expectations of the
Lebanese people. In a statement after his meeting with Siniora,
Bush merely reiterated what many consider empty words of
support for a ‘free and independent and sovereign Lebanon.’
Such words of support for Lebanon’s sovereignty are of little
value if they are not followed up with action. The people of the
region, particularly the Lebanese, are well aware of the fact that
through its annual aid packages to Israel, the U.S. holds
considerable sway over Israeli policy. But they also know that
the U.S. has rarely – if ever – used this influence to encourage
Israel to halt its aggression and behave like a civilized neighbor
….
“As a leader in a part of the world where resentment over U.S.
policy has reached unprecedented levels, Siniora has taken a
dangerous step by so openly allying with Bush. He has in effect
put his credibility and therefore his future as a politician in the
hands of an often clumsy U.S. president. If Bush now fails to
show genuine support for Lebanon’s sovereignty, he will not
only be once again disappointing the Lebanese, he will also be
terminating the career of a man who could have proven himself
to be a valuable U.S. ally.”
I then concluded on April 22, 2006:
“This is sad. I continue to maintain the fate of Lebanon is just as
important as that of Iraq in the long run because of the influence
Syria has over the land as the well as the presence of Hizbullah.
Lebanon can break apart at a moment’s notice.”
And so we come to today. Violence has spiraled out of control,
though not necessarily as I expected. Israel is waging war on
two fronts, Hamas and Hizbullah are receiving aid from both
Syria and Iran, and at any minute it could escalate further.
But some of us are screaming, just where has the Bush
administration been? Lebanon is such a fragile country, but a
majority of the new parliament was anti-Syrian and they were
crying for aid and a diplomatic effort. The U.S. had its chance to
play the role of honest broker on the issue of Shebaa Farms,
critical to Hizbullah’s credibility among its supporters, and
pressure Israel to give it up in exchange for a bolder UN
peacekeeping force. This would have then given Hizbullah zero
reason for remaining armed and the world community could have
finally held it, and Iran’s, feet to the fire. But Bush was clueless.
Secretary of State Condoleezza Rice was clueless.
So on Wednesday, taking its orders from Tehran, Hizbullah
struck and all hell broke loose. Israeli Prime Minister Ehud
Olmert said “The events this morning are not terror attacks but
actions of a sovereign state that attacked Israel for no reason.
The Lebanese government, of which Hizbullah is a member, is
trying to undermine regional stability. Lebanon is responsible
and it will bear responsibility.”
Ehud Olmert. Not Ariel Sharon.
Oh, how Sharon is missed by some of us. Many in Israel,
though, would say Sharon brought all of this on, beginning with
the risky disengagement from Gaza, but you can be sure Sharon
would have addressed the ensuing problems there far quicker
than Olmert has, plus Israel had to deal with a lengthy election
and transition period following Sharon’s incapacitation. I
wonder if Iran and Hizbullah would have risked testing Sharon,
especially with his history in Lebanon?
Think about it, Israel is fighting two wars and both Olmert and
Defense Minister Amir Peretz have zero command experience.
Not a big deal in Canada, perhaps, but critical in Israel. So I ask,
just who is calling the shots in Israel?
And so for this week, I have just tried to remind everyone where
we’ve been, and how this unfolding conflict is also not one of
America’s great moments. But what to do now?
Russia is offering no help, nor the European Union as of today.
Incredibly, about the only player that did speak up against
Hizbullah, save the U.S., was Saudi Arabia. Many who don’t
understand Lebanon were wondering why the Kingdom blamed
“elements” of the Lebanese government on Thursday, i.e.,
Sheikh Nasrallah’s Hizbullah. You need to know your history to
understand this one. [Regular readers of this space do.]
Saudi Arabia was Rafik Hariri’s major supporter. Hariri, with
generous Saudi donations, was making great strides in his effort
to rebuild Beirut when he was cut down. The Saudis are seeing
their investment go up in smoke.
The Saudis are also 84% Sunni, as are the Egyptians. Jordan is
93% Sunni.
Iran is 90% Shia. Iraq is 60% Shia. Lebanon is 34% Shia (the
most of the four major groups there).
Editorial in the Washington Post:
“(Even) if Hizbullah is punished politically at home for its wild
irresponsibility, the underlying problem – its benefactors in Iran
and Syria remains. That’s where American and allied diplomacy
and influence should be focused. Tehran should be called to
account in the UN Security Council not only for its program to
enrich uranium but also for its support of Hizbullah. Damascus,
which hosts Hizbullah and Hamas, should also come under
renewed international pressure, including sanctions. In all the
diplomacy, the false lure of ‘evenhandedness’ must not be
allowed to obscure the fact that Hizbullah and its backers have
instigated the current fighting and should be held responsible for
the consequences.”
Michael Young, editor of Lebanon’s Daily Star, in an op-ed for
the New York Times:
“While the United Nations has been ineffective in its efforts
toward Middle East peace, it may be the right body to intervene
here, if only because it has the cudgel of Security Council
Resolution 1559, which was approved in 2004 and, among other
things, calls for Hizbullah’s disarmament.
“The five permanent Security Council members, perhaps at this
weekend’s Group of 8 meeting, should consider a larger
initiative based on the resolution that would include: a proposal
for the gradual collection of Hizbullah’s weapons; written
guarantees by Israel that it will respect Lebanese sovereignty and
pull its forces out of the contested Lebanese land in the Shebaa
Farms; and the release of prisoners on both sides. Such a deal
could find support among Lebanon’s anti-Syrian politicians,
would substantially narrow Hizbullah’s ability to justify retaining
its arms, and also send a signal to Syria and particularly Iran that
the region is not theirs for the taking.”
It all sounds pretty easy when put this way, doesn’t it? But as I
wrote last week there are no Churchills these days. I didn’t even
recognize the guy the White House finally sent to the region on
Thursday.
The Daily Star editorialized on Thursday:
“Lebanese civilians, who have absolutely no control over the
events that are unfolding, and who once again find themselves in
the eye of the storm, are now bracing for the very worst. Their
darkest fear is that as they helplessly repeat the act of watching
history unfold on their land, this time the promise of Lebanon’s
resurrection will itself become history.”
Meanwhile, Iran and Syria sit back, mission already partially
accomplished. Chaos takes the focus off Iran’s nuclear program,
at least temporarily, while Syria’s President Bashar Assad
doesn’t have to worry about a faltering UN investigation into the
Hariri assassination. As of now, Israel is not expected to venture
further beyond Lebanon.
Finally, I watched Israel bomb Beirut’s airport with dismay. I
arrived in Beirut just ten weeks after Hariri’s assassination. My
hotel room overlooked the bomb crater. I ate some of my meals
just a few hundred feet from it. I visited Hariri’s shrine and
observed the crying women at his coffin. Tourism had quickly
dried up following the car bomb and those who served me
couldn’t have been more appreciative. They were back to work!
But Lebanon’s economy, which had begun to rebound, will now
suffer through years of distress even if the violence were to end
tomorrow. I understand that Israel wanted to stop Iranian flights
from rearming Hizbullah, but Israel killed Lebanon in cutting off
this vital artery.
The airport meant something else for me, however. One day I
took a long walk along the coast to a place called Pigeon Rocks.
The weather was gorgeous and I found the restaurant I was
looking for, high on a cliff and with a spectacular view of the
Mediterranean.
You could also almost touch the airplanes as they glided in for a
landing just three miles from my location further down the coast.
As I soaked it all in, of course I also couldn’t forget where I was.
‘Boy, it would be easy to take out a plane with a shoulder-fired
missile,’ which is one reason why the State Department didn’t
allow U.S. flag carriers to use Beirut International. That’s
Lebanon.
—
North Korea
Remember this one? Too bad we can’t forget it, because what is
developing has as much to do with China, Japan and South
Korea and their mud-slinging as resolving the true crisis at hand.
China has accused Japan of overreacting, South Korea has
blasted Japan, and Japan has accused South Korea of
appeasement.
China refused to accept Japan’s attempt to pass a UN resolution
calling for stiff sanctions on Pyongyang. South Korea’s
President Roh, who has been strangely silent in commenting on
the North, called Japan’s resolution a “shrill” response. A
presidential spokesman added, “There is no reason to fuss over
this from the break of dawn like Japan, but every reason to do the
opposite.”
When a Japanese cabinet minister spoke of pre-emptive strikes
on North Korea’s missile bases, the same South Korean
presidential spokesman said:
“(South Korea) will strongly react to the Japanese political
leaders’ arrogance and outrageous rhetoric that further intensifies
the crisis on the Korean Peninsula with dangerous and
provocative rhetoric such as ‘pre-emptive strike.’”
Of course there are some in Japan (as well as your editor) who
feel it’s long time for Japan to carry its share of the load in the
region, militarily.
Tetsuo Maeda, a professor of defense studies in Tokyo, said:
“The Japanese people are very angry and very worried and, right
now, they will accept any government plan for the military. In
the short term, there will be more Patriots and Aegis destroyers
in the Sea of Japan, but I think that will change soon as Shinzo
Abe becomes prime minister.”
Ah yes, the replacement for Koizumi in September. Mr. Abe is
going to be fun to watch…at least fun for some of us. He’s a
hardliner and will seek to steer his nation to become a nuclear
power. That’s going to be a helluva debate, and destabilizing at
first.
At the least, as another Japanese professor of international
relations said, “Japan should have cruise missiles that we can use
to attack the launch sites before North Korea can fire them.”
[Sources: South China Morning Post, Financial Times]
But as for the little guy with the bad hair, isn’t it interesting how
the White House has suddenly changed its rhetoric. Now,
President Bush is acting like North Korea may not even have a
nuclear weapons capability. “How do you know they do?” he
asked a White House reporter the other day who was herself
inquiring about the number of nukes Kim had. Just about every
expert on weapons proliferation believes North Korea has
enough enriched uranium for anywhere from 5 to 13 bombs at
this point. It could be 30, for all we know….because we don’t
know squat! Bush must feel these kinds of statements take the
heat off him and perhaps he’s thinking, ‘I can’t leave Iran, Iraq
and North Korea for the next administration…let alone that new
issue that sprang up the other day…but maybe I can leave two of
‘em.’
The Weekly Standard’s William Kristol [written before the
events in Lebanon]:
“The red lines, pink lines, and mauve lines of U.S. foreign policy
seem increasingly to be written in erasable ink. What was
‘unacceptable’ to President Bush a week ago (a North Korean
missile launch) has been accepted. In retrospect, according to a
draft Security Council resolution, the missile launch turns out
merely to have been ‘regrettable.’ Our assistant secretary of state
for East Asian and Pacific Affairs, Christopher Hill, visited
China at the end of last week, where he was rebuffed by Beijing
on sanctions for Pyongyang. He settled for an agreement that we
should all return to the six-party talks.
“China, it bears emphasizing, has refused to use its leverage to
change Pyongyang’s behavior (North Korea continues to
function only because China provides most of its energy). Yet
President Bush praised China last Friday as ‘a good partner to
have at the table with us.’ Japan, with a ringside seat for the
missile launches, looks on in horror, seemingly alone in actually
being provoked by the North Korean ‘provocation.’
“Meanwhile, in the Middle East, at the center of our global war
against jihadist terrorists, Iran, perhaps the prime state sponsor of
terror, is sitting pretty. The pursuit of nuclear weapons by the
clerical regime in Iran has also been deemed ‘unacceptable’ by
the president. Yet, as the Iranian regime has resumed uranium
enrichment, threatened to obliterate other nations, and scorned
offers to negotiate, it has been rewarded with gestures by us that
certainly seem to be concessions. Now, watching North Korea,
the mullahs must be feeling even less intimidated. And despite
Syrian and Iranian complicity in killing U.S. soldiers in Iraq…
neither has paid a price….
“A few weeks ago, Michael Rubin lamented in this magazine
that Bush’s second term foreign policy had taken a Clintonian
turn. But to be Clintonian in a post-9/11 world is to invite even
more danger than Clinton’s policies did in the 1990s. The real
choice isn’t Kim Jong Il’s. It’s President Bush’s.”
Iran / Iraq: Iran said a while back it was going to wait until Aug.
22 to respond to the West’s nuclear proposal and by gosh it will.
I hardly think the G-8 will come up with anything new in St.
Petersburg.
As for Iraq, you just can’t make this stuff up. The esteemed
General George Casey, President Bush’s “man in Baghdad,” said
on Wednesday that, gee, we just may need to interject more
troops into the capital. If you’ve been doubting the veracity of
my comments on America’s military leadership the past few
years, you should be getting the picture by now.
Of course we need more troops in Baghdad. What was that
policy of ours? “Clear and hold?” We never tried it in the very
capital of the country! It doesn’t matter if 90% of the land mass
is peaceful if you still can’t secure Baghdad.
And Ret. Gen. Barry McCaffrey, who has called all of these
same generals “brilliant,” now concedes we have a full-blown
civil war on our hands.
Wall Street
This week was but another example of why you can never ignore
the hot spots, and why I’d like to think this column can add some
value from time to time. At the end of the quarter I was listening
to the comments of a market veteran, Michael Metz, who when
asked by CNBC about geopolitics and whether or not there were
any outside concerns, said there’s nothing you can do about
them.
Well I’ve always liked Mr. Metz because he’s been a bit of an
iconoclast over the years, but that was about the stupidest thing
I’d ever heard and others of his ilk continuously say the same
thing, even today.
“Stocks for the long run…you can’t do anything about external
events…you have to go on living your life, after all!”
Bull. I disproved that theory long ago. Of course Iran, Iraq,
Israel, North Korea, Russia, China and countless others do
matter. [I wonder what Mr. Metz would say to CNBC today,
incidentally. “Mr. Chairman, I’d like to revise and extend my
remarks,” I hope.]
So what do you do if you feel a bit queasy? You go to cash,
that’s what. Or if you’re a real stock jock, you go ‘short.’ I’m
not comfortable doing the latter so I hide out in the greenback.
And with money market and CD rates at around 4.50 percent or
higher, you’re finally getting paid to worry; which in turn is kind
of comforting.
This particular week the major market-related concern, tied
directly to the Middle East conflict, was the price of oil which hit
$78 before closing the week at $77. So it’s time to get out the
piggy bank before you take that road trip. The price of gasoline
will be $3.50 in some spots before long; $4.00 if oil trades much
above $80.
And is this enough to finally begin to dampen consumers’
spirits? By some measurements, such as Wal-Mart’s numbers
and retail sales in general, it already has. Plus you have a rapidly
softening housing market (full discussion below) and the
distressing geopolitical picture, the latter leading directly to
reduced capital spending because CEOs are paid to worry (at
least the good ones …the crooked ones just get paid regardless).
None of the above is good for earnings and that was a major
concern of its own this week. Software king SAP’s warning of
lighter than expected sales may have been the most significant
announcement on this front, while the likes of EMC, Alcoa and
Dell didn’t exactly light it up with their own talk of weaker than
expected future revenues, or, in the case of Dell, price cuts.
GE’s tepid forecast for the current quarter didn’t do much to
increase investor confidence either.
But for now, much of this is irrelevant. Events in the Middle
East will drive market averages, both up and down though I have
a hard time envisioning too many scenarios leading us up in the
short run.
Some other items of note. The Bank of Japan raised interest
rates for the first time in over six years, from zero to 0.25
percent. What’s significant is the BoJ is telling you Japan’s
recovery is solid and deflation is a thing of the past. Bank
lending is also at its highest level in five years.
But now the question becomes, how far do they go? And at what
point are assets, in a sizable amount, repatriated back home from,
say, the United States? Some of this has already occurred, but if
there is a rush to the door look out below. Or maybe the issue is
did the Bank of Japan act too soon in not allowing another few
quarters of growth before making this important, if largely
symbolic, move? Because Japan’s economy is still subject to the
whims of consumers in the U.S. and China.
Regarding China, Japan still has little to worry about here in
terms of the flow of goods between the two slowing down
overnight. China’s second quarter GDP is going to come in at
10.9%, on top of 10.3% growth in the first. This is staggering.
The government, after all, desires 8%, which is generally
accepted as the figure necessary to keep the people happy.
[Below that, you could have net job losses.]
China’s auto sales are expected to rise 74% this year, for those of
you hoping to see gasoline demand fall. And fixed investment,
like for infrastructure projects, was up another 35% in the first
five months. Goodness gracious.
But bank lending actually plummeted 22% in the month of June
and the rest of the world, particularly Europe and the U.S.,
simply can’t ignore China’s exploding trade surplus. It will be
impossible to control the flows of capital during a financial
crisis.
For some good news, though, the Bush administration would like
you to focus on the budget deficit, which the White House
announced would come in at $296 billion for the fiscal year
(ending 9/30), which is an improvement on 2004 ($412 billion)
and 2005 ($318 billion).
I’ve been a supporter of the tax cuts (except that on dividends,
which of all the tax incentives in the world truly only benefits the
rich) since day one, but the White House can’t crow too much
about the revenues generated in these best of times. They are,
after all, still just back to 2000’s level and a full $300 billion
below the projected take in the very first budget this
administration came up with (before the cuts). [Washington
Post]
So while they deserve credit for the improving picture on one
hand, the fact is the national debt has still increased to a
frightening $8.3 trillion and the administration has done virtually
nothing to slow the rate of discretionary spending, let alone
entitlements; except in this last instance to add a new one in the
form of the drug benefit. And then there is always the fact this
president has yet to issue one veto. But don’t get me started on
that one.
Street Bytes
–It was a horrible week for stocks and the Dow Jones, off 3.2%,
is now basically even on the year. The S&P 500 lost 2.3% and is
down 1% for ’06, while Nasdaq’s 4.4% loss brought its year-to-
date decline to 7.6%.
–U.S. Treasury Yields
6-mo. 5.25% 2-yr. 5.09% 10-yr. 5.07% 30-yr. 5.12%
Nothing mysterious here. Bonds rallied in a classic flight to
quality move, helped as well by the growing feeling the economy
may be slowing quick enough to allow the Federal Reserve to
pause when it meets next month. But this coming week it’s
about the producer and consumer price indices.
–Rosneft, Russia’s state oil company, raised $10.4 billion in the
world’s sixth-largest initial public offering, giving the company
an overall value of some $80 billion. Vladimir Putin gets $8.5
billion from the offering to hand out to his buddies. [More on
Russia and energy security below.]
–Brazilian President Luiz Inacio Lula Da Silva, in an op-ed for
the Wall Street Journal:
“The sharp rise in international oil prices, political instability in
producing regions and the environmental impact of fossil fuels
have combined to evoke a growing interest in alternative energy
sources. In this context, the Brazilian experience with ethanol
fuel has been a noteworthy success story over the last 30 years.
And the success is now expanding to biodiesel and H-Bio. I
expect that our experience will be of interest during the G-8
summit in St. Petersburg.”
Lula is one of those side visitors to the summit, including
China’s Hu Jintao. I would suggest he watch his back because
the last thing Russia wants is a rush to alternative sources of
energy.
–Thoughts on housing:
One of the nation’s largest homebuilders, D.R. Horton, issued an
earnings warning for the just completed quarter as sales came in
at 14,316 homes, down from 14,980 a year ago. It’s the same old
story we’re hearing from around the country; rising inventories
as demand slackens off along with higher cancellation rates.
In New Jersey, inventories are 69% higher than a year ago.
As for the southern California market, Josh P. passed along more
great stuff.
From the Union-Tribune:
“San Diego County’s once blistering housing market moved into
negative territory for the first time in 10 years as overall prices
declined 1 percent last month from June 2005.”
Home sales have now fallen 24 consecutive months and as Josh
has been advising us, 4th quarter year-over-year comparisons are
going to paint an even uglier picture. Heck, the median price on
new homes and condos are already down 8 percent in this region
from June ‘05’s levels. [The one percent figure above includes
existing homes.]
And the Washington Post reports that “The flattening of the
housing economy might be good news for some taxpayers but
poses challenges for local governments. A six-year windfall in
property tax revenue, generated by soaring assessments, has
enabled many localities to both increase spending and cut tax
rates – although the reductions have seldom been enough to
offset tax bill increases.”
This is the domino effect. The housing sector, broadly defined,
was responsible for a lion’s share of the jobs growth in this
country. Now you’ll begin to see the flipside, not just in the
construction and mortgage sectors, but also in city and state
employment. Plus, as Josh was reminding me, the ATM window
is closing in terms of home equity loans so all manner of
consumer spending is bound to be impacted.
Incidentally, home sales in Fairfax County, Va., are off 20
percent for the first five months of 2006.
And we’re dealing with a global bubble, as I’ve noted on more
than one occasion. Here’s a little item from Bloomberg News
about South Korea’s situation.
“Buyers…have caused mortgage debt to almost double in four
years and home prices to increase 40 percent, prompting
President Roh to raise taxes to curb speculation….
“The nation’s highest interest rates in three years are dragging on
an economy already restrained by near-record oil prices and a
rising currency….South Korean homeowners are saddled with a
record $212 billion in mortgage debt….
“More than 80 percent of mortgages track moves in the yield of
three-month certificates of deposit, which rose to 4.62 percent,
the highest since April, 2003.”
See? Adjustable rate mortgages are a curse everywhere.
–From USA Today:
“The cost of a cancer drug prescription rose nearly 16% last year,
compared with 3% for other prescriptions.”
The former editor of The New England Journal of Medicine told
reporter Liz Szabo, “It’s really exploiting the desperation of
people with a life-threatening illness.”
–Sycamore Networks is one of more than 50 companies that are
involved in the still burgeoning backdating of options scandal.
An internal memo has emerged that shows a wide range of
employees were involved, but that some also questioned the
legality.
The Wall Street Journal reported that Stephen Landry, a former
human-resources director, contends he was terminated because
he told executives of employees attempting to hide the
backdating from auditors.
Meanwhile, Bloomberg News has some details concerning
UnitedHealth Group Inc. Chairman William McGuire.
“On Oct. 13, 1999, (McGuire signed) a new, five-year
employment contract….It happened to contain options to buy 8
million shares, his largest grant ever.
“The date of the contract also coincided with the day shares of
the No. 2 U.S. health insurer closed at their lowest level of the
year. That became the strike price.”
However, “The story of McGuire’s contract began with a Sept.
16, 1999, press release that highlighted the promotion of Stephen
J. Hemsley to president….A single phrase said that McGuire,
who’s also CEO, had ‘entered into’ a new contract. Details
weren’t disclosed.
“Six months later, the contract was made public in a 10-K filing
with the SEC. The report said the date the contract went into
effect….was set in October, almost a month after the
announcement and after the stock had dropped by more than a
third.
“It also said that McGuire had the power to set the dates of his
option grants, although it wasn’t specific about whether he, or
the board, had chosen Oct. 13, 1999.”
UnitedHealth admitted in May of this year that it had a
“significant deficiency” in its procedures for granting options,
and that an eventual restatement could cut earnings $286 million.
In the above particular example, changing the date allowed
McGuire, a billionaire, to earn an additional $39 million on just
this one grant.
Separately, Bloomberg reports that investigations of options
manipulation have cost 19 corporate officers their jobs thus far,
including four CEOs.
Yet backdating still has its defenders, namely Holman Jenkins,
Jr. of the Wall Street Journal’s editorial board. In his column
this week, Jenkins offers:
“You (have) to ask yourself a simple question: Companies have
not been averse to showering large compensation on their
executives. Why assume executives would resort to subterfuge
to add a few dollars to the pile when other explanations of
backdating are available?”
Each case is different, no doubt, and I for one have to rely on the
reporting for accurate descriptions, but here’s the bottom line. In
many instances it is coming to light that shareholders were
deceived in what was reported in required filings. As in the case
of Sycamore above, many employees knew at the time they were
acting illegally but they did it anyway. In these cases it’s fraud,
pure and simple. Plus if a company didn’t properly account for
the options as a compensation expense, they understated their
taxes. What doesn’t Jenkins understand?
For that matter, why does the Journal’s editorial board feel
compelled to defend every corporate practice until the weight of
the evidence finally convinces them otherwise?
Of course the reason why all of this is important is because it just
adds to the perception that this nation is increasingly one in
which it is the very rich versus everyone else, with the former
accumulating wealth at a rate never before reached in human
history when weighed against the average worker.
Consider this data from a Washington Post study of the D.C.-
area’s highest-paid executives.
“The median total compensation for the 100 highest-paid
executives at local public companies rose 21.2 percent in 2005,
to $6.4 million from $5.2 million the year before. While the
median salary for that group increased 4 percent, bonuses
climbed nearly 14 percent, the value of the typical stock option
grant went up by more than 25 percent, and other forms of long-
term compensation leapt by a third.”
For private-sector workers nationwide, total compensation rose
by an average of 2.9 percent last year. [David S. Hilzenrath and
Derek Willis]
But if you’re still not convinced there is something wrong with a
system that allows executives to run roughshod over the rest of
us, consider the following argument by economist Robert J.
Samuelson, columnist for the Washington Post.
“The controversy over CEO pay is not just an accounting matter.
Love them or hate them, corporate chief executive officers
preside over a vast segment of America’s wealth. How they
manage or mismanage it enriches or impoverishes their
shareholders and the entire nation. CEOs are often unfairly
stereotyped as heartless because they shut plants and cut jobs –
unpopular actions that are often necessary. Still, the public
pounding of CEOs for their lavish pay packages is amply
justified.
“Any tally of CEO pay suggests jarring disproportion….
“The minority of CEOs who deserve massive payouts (because
they contributed uniquely to a company’s success) or whose pay
is properly restrained are tainted by their peers. The Business
Roundtable, a group of 160 CEOs, argues that a few huge pay
packages create a distorted picture. Not really. Consider a
Business Roundtable study, using data that Mercer Human
Resource Consulting collected on 350 major companies. The
idea was to examine median CEOs – those in the middle – as
typical. Here’s what the study found:
“From 1995 to 2005 median CEO compensation at these
companies rose 151 percent, from $2.7 million to $6.8 million
(the figure included base salary, bonuses, stock options and other
‘incentives’ – but not pensions).
“In the same period, the median sales of these companies
increased 51 percent, to $7.6 billion, and the median profits 126
percent, to $591 million.
“By contrast, the median pay increase for full-time, year-round
workers ages 25 to 64 in these years was only 32 percent, to
$38,223 (that’s all workers, not just those at the study’s firms).
“Remember, these are run-of-the-mill CEOs, not just the
superstars or the supergreedy. Even they seem to regard being a
multimillionaire as an entitlement befitting their position. From
1995 to 2005 their pay rose five times faster than the typical
worker’s. In 1995, median CEO pay was 94 times median
worker pay; by 2005 it was 179 times as much….
“(Today’s CEOs) have contrived a moral code that exempts them
from self-control – a moral code that justifies grabbing as much
as they can. They unduly enrich themselves at shareholders’
expense and set a bad leadership example. Because almost
everyone else sees their code as self-serving and selfish, CEOs
have undermined their moral standing and their ability to be
taken seriously on other issues. They are slowly becoming a
threat to the very system they claim to represent.”
–And this just in…Broadcom is taking a non-cash charge of
$750 million and restating five years of financials for…stock
options chicanery. Holman Jenkins sees no problem.
–And what do the ultra-rich do with their money? Well, some of
it ends up in private-equity funds. Blackstone Group just raised
a record $15.6 billion for global takeovers. An increasing
problem, though, is finding investments that will pay off.
Private-equity fund efforts are expected to raise about $300
billion this year alone. May I suggest buying cement and asphalt
companies in the Middle East, based on this week’s news.
–When I was in Seoul, I wrote of a new business venture
between Korea and the Netherlands, LG Philips LCD, that
involved building a plant that would eventually employ 42,000,
both directly and indirectly, while churning out 90,000 flat panel
monitors a month. [WIR 4/29/06]
That was then. This is now. There is an incredible glut on the
world market for LCDs and prices are collapsing. LG Philips
reported a substantial loss for the second quarter and will now
slash production. Dreams are being put on hold.
–GM, Nissan and Renault have agreed to review a possible
alliance over the next 90 days.
–The European Union, in its long-running anti-trust case against
Microsoft, has fined Mr. Softie, proprietor of ‘bad software,’
$357 million. Which reminds me; make sure you’ve updated
your Windows software. Microsoft announced another five
security risks for which they’ve made a spiffy patch for all of us.
I want a Mets logo on mine.
–Halliburton’s KBR unit will have received over $15 billion for
its work in Iraq when its contract expires end of the year. But
now KBR has to resubmit a bid and it only makes sense, with all
the negative publicity the Pentagon has had to endure, that it
won’t win. From a profit standpoint, KBR really doesn’t earn
that much for Halliburton and 20 percent of KBR is being spun
off in an IPO this year with plans to divest the full holding
later…probably to some private-equity guys, eh?
–Merck won another Vioxx trial, as a New Jersey jury rejected
claims by a woman who survived a heart attack after taking
Vioxx for more than two years. While the jury said Merck
hadn’t appropriately warned her, it did find that the company
warned her doctor and that Vioxx was not a “substantial
contributing factor.”
–Mario Gabelli settled with the Justice Department in his civil-
fraud suit involving cellphone license auctions. While Gabelli
and his affiliates denied any wrongdoing (normal in these matters
or sadly a majority of these cases wouldn’t get settled), Mario
still had to shell out $130 million. In other words, he can deny
he did anything wrong, but we all know otherwise.
–Intel is laying off 1,000 managers. That’s 1,000 “good, high-
paying jobs,” as our president would say.
–My friend Jimbo had a good point following another earnings
warning from my neighbor Lucent, whose sales force is sitting
back, waiting to see who gets to keep their job in the merger with
France’s Alcatel instead of going out selling telecom equipment;
not that the customers would necessarily respond. They want to
know what’s going on, too. But in keeping with my irregular
Lucent lawn watch, Jimbo suggests I check Alcatel’s lawn at
HQ. Since my travel schedule is jammed up this fall, I hope one
of my readers in Paris will keep me informed.
–My portfolio: 80% cash doesn’t look too bad some weeks,
does it? As for the carbon fiber holding it was a lousy one. But I
was surprised to see a commercial for Goodyear during the All-
Star Game. In it the tire maker touts its use of c.f.
“Getting your fiber has never been so much fun!” the ad
exclaims.
And so some day, boys and girls, the whole world will consist of
carbon fiber; borders secured by it, carbon fiber bubble shields to
protect us from rogue missiles, and then peace will break out!
–Put this in the category of some things never change. As
reported by Barron’s Eric Savitz.
“The Vonage story just gets uglier and uglier. And there’s every
reason to think it will get uglier still.”
From its IPO in late May, shares have tumbled from $17 to
$6.50.
“Now, analysts from the firms that underwrote the offering are
weighing in with some intriguing research reports.
“Piper Jaffray’s Troy Jensen rated the shares as Market Perform,
with a price target of 9. UBS’ John Hodulik awarded a neutral
rating and a target of 10….
“Huh? It was only a few weeks ago that bankers at these firms
sold shares to the public at more than twice the current price.”
As Savitz notes, these “squirrelly” analysts knew all the adverse
issues they now write of before the company went public. Class-
action suits are flying.
–The Irish miracle continues. There are now 30,000 millionaires
in the country following a decade of spectacular growth. In just
that time, the personal net worth of the average Irish citizen has
more than tripled. It’s largely about soaring property values.
–Interesting tidbit in Crain’s New York Business. Following the
release of “The Da Vinci Code,” book sales dried up.
The movie was released May 19 and for the week ending May
21, mass market paperback sales were 115,000. For the week
ending July 2, they were down to 23,000. This isn’t the way it
was supposed to work. Ergo, the film must have sucked.
[I’ll catch it in 2028. Just watched “Lust for Life” 50 years after
it was made. How the heck did Kirk Douglas not get an Oscar
for his portrayal of Van Gogh, by the way! I mean he won the
Golden Globe award…..geezuz, this is upsetting.]
–Yul Brynner won Best Actor for “The King and I” in 1956. I
just had to save some of you time.
Foreign Affairs
Russia: Columnist Fred Hiatt / Washington Post:
“(When) President Vladimir Putin hosts the first summit of
Group of Eight leaders in Russia this week, the most notable
thing won’t be that his country has failed to become the
consolidated democracy that the G-7 countries expected when
they invited Russia to join a decade ago. What will be
remarkable – but has been little remarked on – is that Putin has
become a leader and an emblem of an active movement to
combat the spread of democracy.”
As Sen. Richard Lugar (R-Ind.) said, “What seems to be the case
is that governments that are authoritarian have decided to fight
back.”
I thought I’d take you back to my column of June 23, 2001,
following President Bush’s statement that he had looked into
Vladimir Putin’s soul. This is what I wrote.
“Regarding the president’s effusive statements following his first
meeting with Russian President Putin…opinion was decidedly
mixed. Actually, while yours truly strongly feels it’s important
to have some kind of personal chemistry between our two
leaders, I also don’t disagree with Republican Senator Jesse
Helms’s statement that ‘prematurely personalizing this
relationship only underscores the incentives (Putin) has to
reorient Russia’s domestic and foreign policy goals.’ Helms
added that Putin is stamping the ‘jackboot of repression’ on
Russia’s press. Democratic Senator Joe Biden said, ‘I don’t trust
Mr. Putin.’”
That was then. What about today? On Thursday, Russian
defense minister Sergei Ivanov “warned the west to stay out of
its internal affairs saying it would use its ‘military might’ as a
deterrent and a guarantor of its sovereignty.”
Writing in Izvestia, Ivanov added, as reported by the Financial
Times, that “some democratic states which criticized Russia for
its authoritarianism ‘were unhappy about an independent, strong
and confident Russia.’”
Of course Russia is newly confident because of oil. And it
should be added that Ivanov is a bad guy, by all accounts, and
remember he could yet succeed Putin should the latter opt to step
down in 2008.
Friends, the U.S.–Russian relationship today is awful.
Stuart Eizenstat, a former Carter and Clinton official, commented
in an op-ed for the Journal on the issue of energy security.
“As the G-8 prepares to meet this weekend in St. Petersburg, it is
now clear that the Yukos Affair, which began three years ago
this month with the arrest of Platon Lebedev in Moscow, has had
a much more far-reaching effect than could have been imagined.
Mr. Lebedev, one of Russia’s wealthiest financiers, was Mikhail
Khodorkovsky’s business partner. Together, they controlled a
vast banking and natural resources empire including Yukos, then
Russia’s most efficient, transparent and profitable privately
owned oil company….
“Many of their most important business and philanthropic
ventures were designed to cement Russia’s integration into the
global economy. Once they were jailed, a good number of these
initiatives could never be realized, to the detriment not only of
Russia but also its G-8 partners in the West.”
Recall that at the time of their arrest, Lebedev and Khodorkovsky
were negotiating the sale of 25% of Yukos to a U.S. oil
company. “While they did not need the money, they decided that
their vision for a Western-looking Russia depended upon this
partnership. The sale would have thwarted the Kremlin’s plan to
retake control of the Russian oil industry as well as strengthened
economic ties between Russia, Western Europe and the U.S….
“The implications of the Yukos Affair must be viewed from this
perspective. The price of oil has given the Russian government
enormous new wealth, while the Kremlin’s unfettered control of
the country’s massive energy reserves has given Mr. Putin the
leverage to silence his opponents at home and threaten Russia’s
neighbors. Unless they are willing to challenge Mr. Putin’s
policies in St. Petersburg, the G-7 leaders risk giving Russia’s
president the impression that nothing stands in the way of a
further consolidation of his power.”
Regarding the Rosneft initial public offering, Eizenstat adds:
“Mr. Putin should also be put on notice that the Rosneft IPO,
which involves reselling assets illegally confiscated from
Yukos…. limits Russia’s prospects of being viewed as a member
in good standing of the world’s group of leading nations. Many
of these messages were contained in Vice President Cheney’s
speech two months ago in Vilnius, where he warned Russia
against using its energy resources to ‘blackmail’ its neighbors
and the Kremlin’s power to clamp down on enemies at home.
These same messages should be delivered again in St.
Petersburg. Otherwise, the Yukos affair and all it represents will
continue to cast a long and dark shadow over Russia’s relations
with the West.”
Daniel Yergin / Wall Street Journal:
“For Russia, energy security is about the state’s retaking control
of the ‘commanding heights’ of the energy industry and
extending that control downstream, over the critical export
pipelines that provide a substantial part of government revenues.
For Europe, today’s concerns center not on oil [Rosneft], but on
natural gas [Gazprom] and on the debate about dependence on
gas from Russia. For Japan, the question is quite different – how
to compensate, in running the world’s second largest economy,
for the absence of virtually any domestic resources. For China
and India, it is assuring that energy does not hold back the
economic growth they need for development and to avoid social
turbulence.”
One big positive for President Putin this week was the death of
Chechen terror leader Shamil Basayev, who was responsible for
thousands of deaths, including 330 at Beslan. Basayev was
killed (in an accident, it would appear) while preparing an attack
to divert attention from the summit.
I’ll have far more on Russia following the G-8.
India: It appears the terrorists who killed over 200 in a highly-
coordinated series of attacks on Mumbai’s commuter trains are
linked to the Kashmir conflict, though further links to al-Qaeda
are still unclear as I go to post.
But most worrisome is the Indian government’s accusation that
“elements” in Pakistan had a hand in it, similar to Saudi Arabia’s
use of the term in the case of Lebanon. Pakistan vehemently
denies this. It’s yet another instance where we need to ‘wait 24
hours.’ India’s government, however, doesn’t feel as if it can
afford to as the public demands answers, now.
Afghanistan: Talk about a forgotten war, especially in light of
this week’s other events. Britain is sending 900 more troops
after losing six the past few weeks. NATO has to step up further.
China: President Hu Jintao is slated to snub Japanese Prime
Minister Koizumi at the G-8 because of the ongoing disputes
involving textbooks and Koizumi’s visits to the war shrine.
Koizumi, though, leaves office in September and one last issue is
whether or not he visits the shrine on its anniversary, Aug. 15.
On the Web front, China has sentenced a journalist to two years
in prison for inciting subversion on overseas websites, which
means I’d probably receive ‘life’ if I lived there. The case of Li
Yuanlong is one of two involving Yahoo, which helped Chinese
authorities track the fellows down. The other gentleman is
appealing a 10-year sentence, according to a Hong Kong-based
human rights organization.
Mexico: Andres Manuel Lopez Obrador continues to contest the
presidential election that saw him lose by 244,000 votes on July
2. Lopez Obrador filed a challenge with the Federal Election
Tribunal seeking a complete recount of all 41 million ballots,
which some say is illegal for starters. The election commission
has up to two months to issue a ruling. Last week, votes in 6,500
of 130,000 polling stations were recounted and despite Lopez
Obrador’s claims of fraud, there appeared to be none.
But no matter, Lopez Obrador has called for another massive
demonstration on Sunday and has threatened worse if the tribunal
doesn’t rule in his favor. This is another bad man, sports fans.
Meanwhile, the winner, Felipe Calderon, has said he would
respect the tribunal’s decision.
But I have to note a statement by Bush spokesman Tony Snow.
It’s only natural that Calderon would say he opposes the building
of more walls on the U.S.-Mexico border. So Snow nonetheless
felt compelled to say “last time I checked, Calderon did not have
any official authority over the activities of the United States
government.”
Yoh, Tony. Try a little diplomacy, will ya? Just keep your
mouth shut. Calderon, who is clearly someone the U.S. can work
with, then felt compelled to reply, “President Bush’s spokesman
is someone who does not have the authority to tell me what I
should be saying.” [Manuel Roig-Franzia / Washington Post]
Mr. Snow needs to be reminded he is no longer in the employ of
Fox News.
Latin America: Michael Barone of U.S. News & World Report
reminds us that despite the talk of a shift to the left, at least in the
case of Colombia, Mexico, Chile and Brazil, a line in the sand
appears to have been drawn when it comes to Venezuelan
President Hugo Chavez’s quest for continent wide revolution.
Ukraine: Yulia Tymoshenko, the former prime minister who was
to return to office in a new coalition until that version fell apart,
has called the Yanukovich bloc, which is threatening to take over
parliament, a bunch of “communist oligarchs” that would drive
Ukraine “several centuries backwards.” This place is a mess and
Russia will do all it can to take advantage of the situation as the
Kremlin seeks to ensure its ally, Yanukovich, ultimately prevails.
Remember, the country itself is basically split 50/50 between
support for the West and Russia.
Poland: President Lech Kaczynski swore in his identical twin
brother, Jaroslaw, to be the prime minister. Really. So much for
having a double fill in while you’re playing on the Riviera, eh?
Random Musings
–Columnist Robert Novak stepped forward finally to
acknowledge that Karl Rove was one of his sources in
identifying former CIA officer Valerie Plame, along with then-
CIA spokesman Bill Harlow and a third, still unidentified, high-
level administration official. Plame and husband Joe Wilson
then sued Vice President Cheney, Rove and former Cheney aide
Scooter Libby.
–The White House reversed course – following the recent
Supreme Court ruling that the military commissions President
Bush created to try prisoners at Guantanamo Bay contravened
both U.S. law and the Geneva Conventions – and has advised
military officers to prohibit inhumane treatment of prisoners in
keeping with Common Article 3. Back in February 2002, Bush
said “(Article 3) does not apply to either al-Qaeda or Taliban
detainees.”
As the Washington Post’s Thomas Ricks reports, U.S. military
leaders should be relieved at the change in policy “because it is a
reversion to U.S. military tradition. ‘I think commanders in the
field will see it positively – they see the value of complying with
the law of war,’ said Col. David Wallace, a West Point law
professor.”
–Star-Ledger columnist Paul Mulshine on New Jersey Gov. Jon
Corzine and his recent sales tax hike.
“(Last) week after he ordered states services shut down, the
governor seemed more concerned about the impact on the public
employees than the public. In a speech to legislators decrying
the effects of the shutdown, the governor proclaimed that ‘we
need to get the nearly 100,000 hard-working, innocent
bystanders out of the financial hole we’re digging for them
because we are failing to act.’
“A hundred thousand innocent bystanders? There were 8.5
million. Every resident of the state was being deprived of the
parks, beaches, motor vehicles offices and other suspended state
services that had been shut down by Corzine. His speechwriters,
however, seemed more concerned with the plight of unionized
employees.
“Many of Corzine’s detractors attribute this bizarre behavior to
Corzine’s relationship with former squeeze Carla Katz, the
Communications Workers of America boss whose mortgage was
paid off by Corzine. During the campaign, Corzine promised he
would ‘recuse’ himself from any negotiations with Katz’s union.
But the entire budgeting process was a great big negotiating
session between Corzine and the masses of union workers who
jammed the Statehouse halls pushing for that tax increase….
“But I don’t think it’s the love of Katz that the governor seeks so
much as the love of her minions. Public employee unions are the
single biggest force in the national Democratic Party. Any
Democrat who wants to be president has to grovel before them.
And Corzine, like several prior governors of this godforsaken
state, seems to see himself in the White House one day.”
Ain’t gonna happen.
–Headline in the Star-Ledger:
“Budget caps tuition hike for public colleges. 8% limit part of
higher ed cuts.”
This is what some of us don’t understand. 8% isn’t enough? At
the same time this is but another example of the kind of inflation
that government statistics understate.
–Zinedine Zidane went before the French people and addressed
his headbutting incident in the finals of the World Cup.
“It was inexcusable. I apologize. But I can’t regret what I did
because it would mean that (Italy’s Marco Materazzi) was right
to say all that.”
Zidane declined to say just what Materazzi said in supposedly
insulting his mother and sister. What’s incredible is the majority
of the French people support Zidane’s action.
This is pathetic. What about team and country?
I have stayed away from frivolous French-bashing over the
years, but this whole episode and the public’s response pretty
well defines them. As for Zidane, he’s an idiot, a jerk and a
dirtball…the triple crown. [Unprecedented, I might add.]
–After a collapse of tons of material from the ceiling of Boston’s
Ted Williams tunnel resulted in the death of a passenger,
inspectors have found at least 240 flaws related to loose bolts.
Boston’s “Big Dig” has cost $14.6 billion and is turning into the
crime of the century in some respects.
–So you wonder why I’ve been writing so much about youth
crime here in America the past year or so? Because it’s an
exploding issue, as the statistics are now bearing out. One major
reason for the surge, aside from the rap culture that is destroying
Black America, is the fact a generation of gang leaders are being
released from prison after their sentences have been served. As
one expert told Kevin Johnson of USA Today, the leaders are
then recruiting “youths to carry guns or deliver drugs to shield
older gang members from additional charges.”
Lovely. But on Friday, NBC News had one of its 30-second
“special reports” on the crime wave and of course didn’t mention
the influence of the gangsta rappers. That wouldn’t be politically
correct, after all. No, their solution was more money for
community programs.
–But you know who could yet emerge a real hero? Newark’s
new mayor, Cory Booker, who just so happened to help nab a
robbery suspect this week. He’s becoming a legend in just his
first few weeks. Go Cory!
–Barry Bonds is finally going to be indicted, probably this week.
I just wish it had happened before he got to 714. The whole
steroids issue is also about to explode all over again as baseball
fans face the reality that a majority of the players are still juicing
in one form or another.
–Reminder… ‘Hizbullah’ is the preferred spelling used by
Lebanon’s Daily Star and the Jerusalem Post; that’s why I
employ it.
And on the issue of The Times (of London), for years I’ve called
it the ‘London Times’ to distinguish it from The New York
Times. I know this must drive my British readers crazy, but as in
the case of Hizbullah it’s about the archives and attempting to
avoid confusion between London and New York’s ‘Times.’ If I
lived in London, I would use “The Times.” But I don’t.
–From Newsweek’s “Conventional Wisdom Watch”:
Kim Jong Il (down arrow). “Overgrown Chucky thumbs his
nose at the world by shooting his rockets. Oops – they blew up.
Try Viagra.”
–The National Climatic Data Center reported that the first half of
this year was the warmest on record….a whopping 3.4 degrees
above average for the 20th century. And not one state was cooler
than average for the period. I’m thinking it’s only a matter of
time before the dinosaurs return. Better reinforce the doors.
–Two new studies show that salmon helps prevent age-related
macular degeneration, which is why at StocksandNews we
continue to celebrate Salmon Sunday each and every week.
[Warning: StocksandNews is not responsible for any mercury
poisoning that its readers may suffer from as a result of this
health tip.]
–A German scientist, Wolfgang Rosenthal, has been studying
“rogue waves” and concluded “They are more frequent than we
expected.” In fact he estimates “that at any given moment 10 of
the giants are churning through the world’s oceans.” [William J.
Broad / New York Times] Rogue waves are generally 50 to 80
feet high. Just another reason not to go in the water.
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $668…up $80 in three weeks!
Oil, $77.03
Returns for the week 7/10-7/14
Dow Jones -3.2% [10739]
S&P 500 -2.3% [1236]
S&P MidCap -3.4%
Russell 2000 -4.0%
Nasdaq -4.4% [2037]
Returns for the period 1/1/06-7/14/06
Dow Jones +0.2%
S&P 500 -1.0%
S&P MidCap -1.4%
Russell 2000 +1.2%
Nasdaq -7.6%
Bulls 42.2
Bears 33.3 [Source: Chartcraft / Investors Intelligence]
Have a great week, even if large swaths of the world aren’t.
Brian Trumbore
